Banking Tips - FDR - Maturity instructions - Opt for Auto-Closure
We make investment in FDRs for different period of maturity, most commonly being 1 year, 3 years and 5 years period depending upon our respective future needs for liquid money to fund children's education, marriage and/or purchase of Flat/property etc. Therefore, while making FDRs with Banks, and to save the expense of visiting Bank branch once again at the time of maturity, most of us tend to opt for auto-renewal as maturity instructions and tick appropriate box for that.
Now here is the catch we all need to guard against.
In auto-renewal option, while the Bank automatically renews the FDR for the same period for which the FDR was originally made @ the then prevailing ROI for the same period (at the time of auto-renewal), but the bank in the meantime, depending upon market conditions, changes in REPO rate announced by RBI, and on review of their own Asset-Liability-Management (ALM) at that point of time, might have reset the ROI payable on FDRs for different maturity, which at times might work against the interest of depositors, if auto-renewal option gets exercised.
Depositors needs to understand that Banks, depending upon macro economic environment in the financial sector, sometimes needs short term funds, and jack up the applicable ROI for short term period, and sometimes they need long term funds and may lure depositors with higher ROI in long term, and auto-renewal won't work in a dynamic economy.
Therefore, it shall be prudent if depositors do not opt for 'auto-renewal' at the maturity of FDR, and instead take back the maturity proceeds of FDR into their operative SB/CA (auto-closure), have a review of the prevailing ROI payable on FDR for different maturity periods (at the time of maturity of FDR), and take a conscious decision on which period investment at that point of time is best for them.
So, opt for auto-closure instead of auto-renewal as maturity payment instructions while making FDRs, and be entitled for best ROI suited to your requirements.