Key Takeaway
Callable bonds can be redeemed early by the issuer (usually when rates drop), exposing investors to reinvestment risk. Non-callable bonds guarantee the full tenure, making them preferable in falling-rate environments.
5,00,000
Callable FD Rate (%)
Non-Callable (%)
3 Years
Additional Gains4,579
Non-Callable Maturity6,23,939
Callable Maturity6,19,360
Returns Comparison:
- Callable FD maturity value: ₹6,19,360.
- Non-Callable FD maturity value: ₹6,23,939.
- Net extra returns by locking in without premature exit options: ₹4,579.
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Frequently Asked Questions
What is a callable fixed deposit?
A callable FD allows you to withdraw your funds prematurely before maturity, subject to bank penalty fees.
What is a non-callable fixed deposit?
A non-callable FD does not allow premature withdrawals until the maturity date is reached, except under extreme insolvency or death circumstances.
Why do non-callable FDs offer higher interest?
Lenders offer a premium rate (+0.10% to +0.25%) because locked-in funds provide asset liability stability for their lending books.
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