Raising FD interest rates: Is Manual Renewal of Fixed Deposits better than auto-renewals?

Avoiding auto-renewal of fixed deposits can help maximize returns. Learn why auto-renewal may not be the best option for your investments in India.

maximize FD Returns

Auto-Renewal vs Manual Renewal: Which is Best for Your FD Investment?

Fixed Deposits (FD) are a preferred investment instrument in India for their low-risk and guaranteed returns. Auto-renewal is a common feature of FDs, where the principal amount is reinvested on maturity. While it may seem convenient, it may not be the best option for those seeking higher returns.

This article examines the advantages of avoiding the auto-renewal feature for bank fixed deposits and how it can help investors achieve better returns.

Interest Rate Fluctuations

Fixed Deposit Interest rates in India are subject to change from time to time based on various economic factors. When you opt for auto-renewal of FDs, you may miss out on the opportunity to earn higher returns. This is because the interest rate offered on auto-renewal may be lower than the prevailing rate at the time of renewal.

By choosing to renew your FDs manually, you can take advantage of the current interest rate scenario and invest in FDs that offer higher returns. Calculate your potential earnings with ease using a fixed deposit interest calculator, and make informed decisions when manually renewing your FDs in India to maximize your returns.

Lack of Flexibility

While there is no general rule on the term for auto-renewal offered by banks, most banks typically offer auto-renewal for a term similar to the original term of the fixed deposit, such as one year for a one-year fixed deposit.

If you have a long-term investment horizon and the interest rates are expected to rise in the future, you may want to consider investing in shorter-term FDs.

This will allow you to reinvest the money at a higher rate when the FD matures. Similarly, if you need the funds at maturity, you may want to invest in shorter-term FDs so that you have access to the funds when you need them.

Penalty for Premature Withdrawal

In case of an emergency, if you need to withdraw the funds from your FD prematurely, you may have to pay the penalty. This penalty can be as high as 1-2% of the invested amount, depending on the bank and the tenure of the FD. If you have opted for auto-renewal of FDs, you may not be aware of the penalty charges and may end up losing a significant amount of money in case of premature withdrawal.

Also ReadWhy Short-Term Bonds Now?

To avoid such penalties, it is essential to compare the fixed deposit interest rates offered by different banks and choose the one that offers the highest interest rate and a lower penalty for premature withdrawal. 

Conducting a fixed deposit interest rate comparison is easy these days, as most banks have their interest rates and other terms and conditions listed on their websites. By taking the time to research and compare, you can make an informed decision and ensure that your FD investment provides you with maximum returns without any hidden costs.

Let's take an example of different FD Rates offered by SBI from their site:

FD Rates offered by SBI


Inflation is the rate at which the general level of prices for goods and services is rising and, subsequently, purchasing power is falling. Inflation erodes the value of money over time, and if the interest rate offered on FDs is lower than the inflation rate, the real rate of return on the investment is negative. 

Also ReadRelationship Between Inflation and Interest Rates

By manually renewing your FDs and choosing the interest rate offered at the time of maturity, you can ensure that your investment is protected against inflation. Also, if you're looking for a secure and profitable investment option, consider corporate FDs with high-interest rates, and stay ahead of the inflation game.

While auto-renewal of Fixed Deposits may seem like a convenient option, there may be better options for investors who are seeking higher returns. Choosing manual renewal over auto-renewal of fixed deposits can help maximize returns for investors in India.

By staying updated with the prevailing interest rates and conducting a fixed deposit interest rate comparison, investors can choose the bank that offers the highest interest rate and a lower penalty for premature withdrawal.

Taking these factors into account, investors can ensure that their FD investment provides maximum returns without any hidden costs.


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