RBI has made big changes to the rules for FD. If you are also thinking about investing in a fixed deposit, you should know about this. RBI has changed how FD works. If you don’t know about these rules, you might have to bear the loss. After this change, if you don’t claim your FD before it matures and the money just sits in the bank, you may lose the interest you gained on your FD.
FD Rules Changed: If you also keep your money in fixed deposits, here is some important news for you. RBI has made changes to the rules for FD, which have come into effect. Many government and non-government banks have been praising the interest rates on FDs for the past few days. So, be smart about what you do before you get an FD. If you don’t know these rules, you might lose money.
Get to know the rules
Understand this – if you had an FD that was due to mature in 5 years and it did so today, but you didn’t withdraw the money, there are two ways to look at this. If the interest on the FD is less than the interest on the bank’s savings account, you will still get interest on the FD. If the interest on the FD is higher than the interest on the savings account, you will get the interest from the savings account when the FD matures.
The Old FD Rule
Before, if you didn’t withdraw or claim your FD when it was due, the bank would extend it for the same amount of time that you had made it for. But this won’t happen anymore. Now FD interest will not be paid on the money if it is not taken out at the end of the term. So it would be best to withdraw the money as soon as the time is up.
New FD Rule from RBI
RBI has made a big change to the rules for Fixed Deposits (FD). Now, if you don’t claim the money after it’s matured, you’ll get less interest on it. This interest will be the same as what the savings account earned. At the moment, banks usually pay more than 5% interest on FDs with terms of 5 to 10 years. On the other hand, savings account interest rates are between 3% and 4%.
But this won’t happen anymore. But now, FD interest will not be paid on the money if it is not taken out at the end of the term. So it would be best to take the money out as soon as the time is up.
Moreover, the banks has already deducted 10% TDS (tax deducted at source) on the original capital gain. This will further your losses and complicate things.
New order for Fixed Deposits from RBI in a nutshell.
RBI says that if the fixed deposit matures and the money isn’t paid out or claimed, the interest rate on the savings account or the fixed interest rate on the matured FD, whichever is lower, will be given. All commercial banks, small finance banks, cooperative banks, and local and regional banks that take deposits will have to follow these new rules.
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Donald G. is the Principal Consultant at NRI Money+. He specialises in creating personalised financial plans for NRIs (Non-Resident Indians) and HNI (High Net-worth Individuals).
