Fixed Deposit Auto Renewal: Benefits and Best Practices
September 13, 2024
In Indian households, when it comes to investments, Fixed Deposits have always been a popular choice. In fact, as per SEBI data, about 95% of Indian households have parked their savings in FDs. In spite of this popularity, most FD investors still have little clarity of Fixed Deposit renewals and the benefits of such.
Basically, when your FD matures, you have two options - either withdraw or renew your FD. In this blog, we have explained how FD renewal works and its benefits.
Understanding Automatic Fixed Deposit Renewal
Automatic fixed deposit renewal offers convenience to investors. Banks allow investors to automatically renew their fixed deposits upon maturity without any manual intervention. The tenure remains the same as the original deposit tenure. With auto-renewal, you don't need to visit the bank to renew your FD. The process happens seamlessly, ensuring that your funds remain invested and continue to earn interest.
Benefits of Automatic Fixed Deposit Renewal
Fixed deposit renewal offers several benefits for investors, making it a preferred choice for many. These benefits include:
1. Effortless Renewal
Opting for auto-renewal for fixed deposits eliminates the need to visit the bank or navigate online procedures for FD renewal. This approach saves time and effort, making it a suitable choice for those seeking a seamless and hassle-free experience.
2. Uninterrupted Interest Accumulation
Auto-renewal ensures that your funds remain invested without interruption. It allows continuous interest accumulation. This facilitates the compounding effect, ultimately leading to higher returns over the long term.
3. Interest Rate Advantage
In an environment where interest rates are declining, auto-renewal shields you from reinvesting at lower rates. By renewing your FD at the original deposit's interest rate, you can maintain higher earnings.
4. Avoidance of Non-Earning Periods
Investors may sometimes neglect to renew their FDs upon maturity, causing their funds to sit in a non-interest-bearing account. Auto-renewal prevents such situations, ensuring that your funds remain consistently invested.
Why Banks Provide Automatic Fixed Deposit Renewal Facility?
The automatic fixed deposit renewal service provides advantages to both banks and customers. For customers, it simplifies the renewal process, improving overall satisfaction and engagement.
For banks, it optimises administrative procedures, making operations more efficient and reducing costs. Additionally, this approach enhances the fixed deposit renewal experience, benefiting all parties involved.
For customers, auto-renewal increases convenience and provides reassurance. It aligns with the bank's goal of delivering customer-focused services while promoting savings and disciplined investment.
How to Renew Fixed Deposit
Most banks allow investors to opt for auto renewal at the time of opening FD account.
Make payment towards your FD to open your account. Upon maturity, your FD will get automatically renewed.
Alternatively, you can visit your nearest bank branch, specify your FD details and submit your term deposit renewal request. The bank will process your FD renewal request.
Advance Tips on Auto Renewal: Things to Consider
1. Interest Rate Consideration
Consider prevailing FD rates and auto-renewal rates. If the prevailing rates are higher, you may lose out on higher returns. Factor in this scenario before opting for auto-renewal.
2. Liquidity
Opting for auto-renewal means your FD will get reinvested for the same tenure upon maturity. This may block quick access to funds at the time of emergency. Though callable FDs (FDs that don't come with lock-in period) offer premature withdrawals, however, banks pay charge a certain penalty fee, usually up to 1% for early withdrawal of funds.
3. Investment Goals
Evaluate your liquidity needs, investment horizon and financial goals before opting for auto-renewal. Manual renewal maybe suitable if you have specific plans for funds upon FD maturity.
Final Thoughts
Ensure your FD renewal is aligned with your investment goals. Consider all the factors, including investment horizon, financial goals, liquidity needs, etc., before opting for auto-renewal. Else, you can always opt for manual FD renewal. Looking to grow your savings? Ujjivan SFB offers a wide range of fixed deposit products.
Select the FD of your choice and take a step forward to your financial goals. Alternatively, you can browse through Ujjivan SFB product suite - our wide range of financial products are designed to make your financial life better.
Disclaimer:
The contents herein are only for informational purposes and generic in nature. The content does not amount to an offer, invitation or solicitation of any kind to buy or sell, and are not intended to create any legal rights or obligations. This information is subject to updation, completion, amendment and verification without notice. The contents herein are also subject to other product-specific terms and conditions, as well as any applicable third-party terms and conditions, for which Ujjivan Small Finance Bank assumes no responsibility or liability.
Nothing contained herein is intended to constitute financial, investment, legal, tax, or any other professional advice or opinion. Please obtain professional advice before making investment or any other decisions. Any investment decisions that may be made by the you shall be at your own sole discretion, independent analysis and evaluation of the risks involved. The use of any information set out in this document is entirely at the user’s own risk. Ujjivan Small Finance Bank Limited makes no representation or warranty, express or implied, as to the accuracy and completeness for any information herein. The Bank disclaims any and all liability for any loss or damage (direct, indirect, consequential, or otherwise) incurred by you due to use of or due to investment, product application decisions made by you on the basis of the contents herein. While the information is prepared in good faith from sources deemed reliable (including public sources), the Bank disclaims any liability with respect to accuracy of information or any error or omission or any loss or damage incurred by anyone in reliance on the contents herein, in any manner whatsoever.
To know more about Ujjivan Small Finance Bank Products Visit:"https://www.ujjivansfb.bank.in"
All intellectual property rights, including copyrights, trademarks, and other proprietary rights, pertaining to the content and materials displayed herein, belong
to Ujjivan Small Finance Bank Limited or its licensors. Unauthorised use or misuse of any intellectual property, or other content displayed herein is strictly prohibited and the same is not intended for distribution to, or use by, any person in any jurisdiction where such distribution or use would (by reason of that person’s nationality, residence or otherwise) be contrary to law or registration or would subject Ujjivan Small Finance Bank Limited or its affiliates to any licensing or registration requirements.
