FD auto-renewal: Your fixed deposit auto-renewed at a lower interest rate? Can you reverse it? Know here

Fixed deposits (FDs) are a preferred investment avenue for risk-averse investors who seek predictable, assured returns and wish to avoid volatility associated with market-linked investments such as mutual funds and stocks.

However, depositors may sometimes fail to claim their maturity proceeds on time, either because they overlook notifications from the bank or do not receive them at all. Banks typically send reminders before an FD matures, but the next course of action can be initiated once the deposit reaches maturity, regardless of whether the depositor has read the notification.

In such cases, the accumulated corpus remains intact, but the interest earned on the amount after maturity may differ from the original FD rate. This depends on the bank's rules and whether the deposit was set up for automatic renewal.

The auto-renewal facility allows depositors to instruct the bank at the time of opening the fixed deposit to automatically reinvest the maturity proceeds when the FD tenure ends. This option is useful if you do not expect to need the funds when the fixed deposit matures and want to continue earning interest on the amount without opening a new deposit.

However, choosing auto-renewal does not necessarily mean you are locked into it. Some banks allow depositors to cancel the instruction before the maturity date, even if they opted for automatic renewal when opening the FD.

A matured fixed deposit is repaid to the depositor or renewed depending on the instructions recorded for the deposit. Here's what happens to your money if you do not take any action after maturity:

• Automatic renewal: Some fixed deposits may carry an instruction for automatic renewal, wherein it can be continued according to the renewal terms agreed upon during the opening of the account. According to a blog post by HDFC Bank, the interest rate for the renewed FD will be the rate applicable on the date of renewal for the chosen tenure. It may be different from the rate at the time of your original FD.

• Credit of maturity amount: If the deposit carries a repayment instruction, the maturity amount may be credited to the depositor's registered bank account according to the specified bank's process.

The Reserve Bank of India (RBI)'s directions state that if the maturity proceeds remain unpaid, the amount will earn interest at the applicable savings account rate or the contracted rate on the matured deposit, whichever is lower.

Though you can break the auto-renewed FD before its new maturity date, premature withdrawal penalties will be applicable. These typically involve a reduction of 0.5% to 1% in the applicable interest rate for the period the deposit was held, according to a blog post by Paisabazaar.

If the auto-renewal happened within the last one or two weeks of the maturity date, you can contact your branch immediately and ask if they can reverse it as a goodwill gesture. However, whether the bank agrees to this request or not will depend on its policies and discretion.

If no action is taken within 10 years from the FD's date of maturity, it is classified as an “unclaimed deposit” and is transferred to the depositor education and awareness (DEA) fund maintained by the RBI.

If you or your family members want to reclaim the FD amount along with its accrued interest, you have to first check the RBI UDGAM Portal to locate your account, and then apply for a claim directly through your bank

Eshita Gain is a digital journalist at Mint, where she joined in May 2025. She writes on corporate developments, personal finance, markets, and business trends, with a focus on delivering timely and relevant stories to a broad audience. <br><br> While her core beat lies in business and finance, she is not confined to a single niche and frequently explores stories across domains, including international relations and policy developments. <br><br> She holds a postgraduate diploma in business and financial journalism by Bloomberg from the Asian College of Journalism (ACJ), Chennai. During her time there, she received rigorous training in tracking financial data, interpreting corporate filings, and reporting on business developments. She has pursued her graduation from St. Joseph’s University, Bengaluru in a multi-disciplinary course. Her majors included Journalism, International Relations, peace and conflict studies. <br><br> Eshita has previously worked in digital marketing, which enables her to write SEO friendly copies that are clear and engaging. <br><br> Her primary interest lies in breaking down complex subjects and writing clear, accessible copies that inform readers. She aims to bridge the gap between technical financial language and everyday understanding. Outside the newsroom, Eshita enjoys reading non-fiction, and exploring new places, constantly seeking fresh perspectives and stories beyond headlines.

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