You must have definitely read these two words – callable and non-callable, while creating Fixed Deposits (FDs) in Banks. The rate of interest of both the deposits is also different. So what are these deposits – let’s understand in this article.
Callable Deposit
A Callable Deposit is a fixed deposit in which the customer is allowed to withdraw the money before the maturity date. If the deposit is closed before maturity, the bank may charge a penalty and pay interest as per its rules.
Example
Suppose you open a 5-year fixed deposit of ₹10 lakh. After 2 years, you need money for a medical emergency.
Since it is a callable deposit, you can close the FD before maturity and withdraw the money. However, the bank may deduct a penalty and pay a lower interest rate.
Non-Callable Deposit
A Non-Callable Deposit is a fixed deposit in which premature withdrawal is not allowed. The customer must keep the money with the bank until the maturity date.
Since the bank gets assured funds for the entire period, it generally offers a higher interest rate on non-callable deposits.
Example
Suppose you open a 5-year non-callable fixed deposit of ₹10 lakh. After 2 years, you need money urgently.
Since it is a non-callable deposit, you cannot withdraw the money before maturity. In return for this restriction, the bank offers a higher rate of interest than a callable deposit.
Difference Between Callable and Non-Callable Deposits
| Particulars | Callable Deposit | Non-Callable Deposit |
|---|---|---|
| Premature Withdrawal | Allowed | Not Allowed |
| Liquidity | High | Low |
| Interest Rate | Lower | Higher |
| Access to Funds Before Maturity | Available | Not Available |
| Suitable For | Customers who may need funds before maturity | Customers who can keep funds invested till maturity |
| Bank’s Certainty of Funds | Lower | Higher |
| Return to Depositor | Comparatively Lower | Comparatively Higher |
| Risk of Early Withdrawal | Exists | Does Not Exist |
| Commonly Offered To | Most retail customers | Usually large depositors and institutional customers |
Simple Understanding
- Callable Deposit = You can take back your money before maturity.
- Non-Callable Deposit = You cannot take back your money before maturity, but you earn a higher interest rate.
