Do we get any advantage of investing in a non callable FD instead of a regular FD?
As an investor the biggest reason why you should consider investing in non callable fixed deposits is the higher rate of interest. The rate of interest in non callable fixed deposits is higher compared to callable fixed deposits for the same tenure. But since Callable fixed deposits allow you to liquidate or break your deposit within the tenure period at any point of time choose your investments carefully.
Non-callable fixed deposits have a lock in period. The amount that an investor invests in this product can’t be withdrawn prior to the date of maturity with the exceptions that include bankruptcy of the account holder, winding up of business, orders by court, in the case of death, etc. Also, the minimum amount for the deposits are supposed to be much higher when compared to callable deposits. They have a higher premium rate of interest since the funds are blocked for the period of maturity.
These schemes are more rewarding as the account holder is being paid higher rate of interest on their principal deposit amount.
There are disadvantages as well, which are as follows:
Under emergencies where you might be in dire need of the money, it is blocked. The extreme cases of emergencies occur rarely that do allow withdrawal, else the deposited money cannot be touched. Hence, this instrument can’t be liquidated.
Funds of the depositor are blocked for the predetermined period. If the depositor who bought this non-callable fixed deposit having a maturity period of 5 years found a better investment opportunity in the second year, the depositor can’t shift the investment.
Minimum amount of deposit is very high limiting the opportunity for many. Only a restricted class of people can deposit such a lump sum amount.
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