New Bank FD Rules: How to Earn Interest Upon Maturity
The RBI has changed the rules related to FDs. Now, after your FD matures, if you don’t break or renew it on time, your money will earn interest at a lower savings account rate, not the higher FD rate. The goal is to make the deposit process transparent and reduce the amount that remains unclaimed for years.
What Used to Happen Before, What Will Happen Now?
Previously, many banks would automatically renew FDs for the same period without asking, causing people to miss out on better rates or inadvertently lock up money for a longer period. Now, auto-renewal will no longer be possible; the depositor must close or renew the FD on time, otherwise, the matured amount will only earn interest at the savings rate.
Why the RBI Changed
A large number of FDs used to lie unclaimed in banks for years—sometimes due to the depositor’s death, or sometimes due to forgetfulness. This added unnecessary burden to record-keeping and interest payments. The new system handles matured FDs with uniform rules, making it easier for family/nominee to identify and claim such deposits.
Impact on Investors
If your ₹10 lakh FD was at 7%, you would earn approximately ₹70,000 in interest annually. If you don’t renew after maturity and the bank’s savings rate is 3%, the interest will drop to approximately ₹30,000. This means that mere negligence can result in significant losses every year. This is why it’s crucial to keep track of FD maturity dates.
What should FD holders do now?
Write down the maturity dates of all your FDs, set reminders on your phone, and keep your mobile/email address updated with the bank to receive timely alerts. Check upcoming maturities in your netbanking/mobile app and decide on renewal or withdrawal in a timely manner. If desired, you can give the bank a standing instruction to renew at the best available rate only after your confirmation upon maturity, but still check the rates periodically.
Impact on Banks and the System
The new rule cleans up banks’ records and reduces risk by minimizing unclaimed deposits. Customers are protected from being trapped in unintentional auto-renewals, and the entire process becomes more transparent. This increases the efficiency and accountability of the entire banking system.
Smart Financial Habits
Laddering small FDs with varying tenures, every month or two, makes it easier to choose the best option when rates change. Keep some money in savings/liquid funds for emergencies to reduce the need to prematurely break FDs. Understand tax rules, and if eligible, submit Form 15G/15H on time to avoid unnecessary TDS deductions.
Conclusion and Caution
FDs are still a popular option, offering safe and predictable returns, but under the new rule, higher earnings are possible only if you take timely action. Monitor your FD, make decisions immediately upon maturity, and compare rates to choose the right tenure—this strategy will protect and maximize your earnings. This is general information; please check your bank or official RBI notifications before making a final decision.
