Many people use fixed deposits (FD) to earn higher interest rates than regular savings accounts. If you are also one of them, you must know all about the recent changes introduced by the Reserve Bank of India (RBI) related to FD.
Recently, both government and non-government banks increased the interest rate on FDs. Now, the RBI has changed some rules related to FD. In case you are planning to make investments in the form of FD, you should be aware of these rules.
What changes has RBI made in relation to FD?
According to the recent changes made by RBI in the FD rules, if you don’t claim your amount after the due date, you will get less interest. In this case, you will not get the interest on the fixed-term deposit, but rather what you should receive in the savings account.
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So far, most banks give more than five percent interest on FDs that are held for 5 to 10 years. The interest rate on the savings account for the same period is about 3 to 4 percent.
In simpler words, if you don’t claim the amount after a FD is due, then the interest will be based on the savings account or the FD due (whichever is less).
In particular, the new rules will apply to deposits made in all commercial banks, cooperative banks, small finance banks and local regional banks.
What was the previous rule related to FD?
According to the above rule, if you don’t withdraw or claim your FD at expiration, the bank will extend it for the same period you selected at the time you started expiration.
For example, if those who have made a FD that matures in 5 years do not withdraw it for some reason, you will get the lower interest rate on the savings or FD.