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Deposits
Auto renewal of Fixed Deposit (FD)
Auto-renewal of Fixed Deposits is a convenient feature that automatically reinvests your FD upon maturity, saving time and manual effort. With recent updates to FD auto-renewal rules, it’s essential to understand how it works, the benefits it offers, and the renewal methods available. By staying informed, you can maximise your returns and ensure your savings grow efficiently.
Understanding auto-renewal of FDs
Auto-renewal of Fixed Deposits automatically renews your FD for the same tenure at maturity, without any manual intervention. The new term will be at the current interest rate, ensuring your funds continue to grow without sitting idle in your Savings Account.
Benefits of auto-renewal
- Seamless process: Auto-renewal automatically reinvests your FD, saving you time and effort.
- Continued earnings: Your funds keep earning interest post-maturity, ensuring you don’t miss out on potential returns.
- Rate protection: Auto-renewal locks in the current interest rate, helping you benefit from favourable rates at renewal.
- Default prevention: It prevents matured funds from moving to low-interest savings accounts, ensuring your money stays in a high-earning FD.
Methods for renewing your FD
1. Fixed Deposit automatic renewal
Auto-renewal happens when you give your bank standing instructions to automatically reinvest your FD at maturity. You can opt for this feature when opening the FD or at any point during its tenure. Upon maturity, the bank will renew the FD for the same term at the current interest rate, which may be higher or lower than the previous rate.
While convenient, auto-renewal could reduce your returns if interest rates have dropped, so it’s important to monitor rate changes.
2. Manually renewing FDs
To renew your FD manually, visit your bank’s branch or complete the process online close to the maturity date to avoid any loss of interest. Manual renewal gives you control over your investment, allowing you to adjust the tenure or consider the prevailing interest rate, which may be higher or lower than before. This flexibility helps you align your FD with your financial needs and market conditions.
Ways to withdraw Fixed Deposits
- After maturity: Withdrawing your FD after maturity gives you the full principal and interest earned. If auto-renewal isn’t enabled, the funds are credited to your Savings Sccount with no penalties.
- Before maturity: Premature withdrawal is possible for urgent liquidity but usually incurs penalties, reducing interest earnings. If your FD auto-renews, penalties apply based on the terms of the new tenure. It’s essential to weigh the penalty against the need for liquidity before opting for premature withdrawal.
Also Read: 7 Different types of fixed deposit in banking
Conclusion
FD auto-renewal provides greater flexibility and convenience for Fixed Deposit investors. While auto-renewal offers a seamless way to reinvest and continue earning interest, understanding the prevailing interest rates and penalties for premature withdrawal is important. Whether you prefer the convenience of auto-renewal FD or prefer to manage your investments manually, being informed about your options ensures that you get the most out of your savings.
For a seamless experience, consider the Auto Fixed Deposit offered by Axis Bank. With this product, you can enjoy the convenience of auto-renewal and benefit from features like automatic transfers from your Savings Account when the balance exceeds ₹25,000. Additionally, it offers flexible tenure options and helps you avoid premature withdrawal penalties.
Disclaimer: This article is for information purpose only. The views expressed in this article are personal and do not necessarily constitute the views of Axis Bank Ltd. and its employees. Axis Bank Ltd. and/or the author shall not be responsible for any direct / indirect loss or liability incurred by the reader for taking any financial decisions based on the contents and information. Please consult your financial advisor before making any financial decision.
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