A fixed deposit with a bank is a savings instrument which enables an individual to invest a certain sum for a fixed period of time. And the feature that allows a depositor to withdraw partial or whole of the amount parked in the FD before the maturity period makes it a callable FD.
So, in general all the fixed deposits that allow premature withdrawals are callable deposits. These FDs do not come with a lock in period, nonetheless banks charge some amount as penalty for the premature withdrawal depending on the FD tenure.
It is to be remembered that 5 year tax saving fixed deposits come with a 5 year lock in period.
RBI in its sixth bi-monthly monetary policy meet for the year 2014-15 came forth with a new FD type called non-callable FDs which cannot be withdrawn before the maturity period. This means these deposits are completely locked and individuals or depositors do not have any authority to call or withdraw their FD investments before maturity.
The main purpose behind this new FD type is to facilitate banks in better managing their assets and liabilities.
Few cases in which non-callable FDs can be withdrawn prematurely
If the depositor of non-callable FD turns insolvent, takes the decision of winding his or her business, or in the case of death etc.
Should you consider investment in non-callable FDs?
These non-callable FDs come with a requirement of huge minimum deposits of over Rs. 15 lakhs and a lock in period though the same earns a relatively better interest rate than usual bank deposits. Nonetheless you need to keep in mind your liquidity concerns and investment horizon as higher interest rate shall not be worth in case sudden need for funds arises.