Navigating the Benefits of Auto-Renewal Fixed Deposits

Posted on Monday, May 20th, 2024 | By IndusInd Bank

Fixed deposit is one of the most preferred and reliable investment options sought by individuals seeking stability and guaranteed returns. The reason for their popularity is the security and guaranteed returns they offer on the invested amount. Nowadays, the financial market has numerous lucrative products, be it systematic investment plans, unit-linked investments, or traditional fixed deposits. Among the various types of fixed deposits, auto-renewal fixed deposits are trending for the convenience and long-term benefits they offer. This blog explains the advantages of auto-renewal fixed deposits and their benefits as a valuable tool in a financial portfolio. 

What are Auto-Renewal Fixed Deposits? 

Auto-renewal fixed deposits, as the name suggests, are a type of fixed deposit account in which the principal amount and the interest earned are reinvested automatically for another fixed term upon maturity. This means that instead of withdrawing the funds at the end of the deposit term, the entire money invested with the interest earned originally is re-deposited for the same duration. With this facility, the investor can seamlessly enjoy the renewal of his investment without visiting the bank. Usually, under auto-renewal fixed deposit, the entire maturity amount, including the interest, is reinvested.  

Benefits of Auto-Renewal Fixed Deposits: 

1. Continuous Growth: One of the primary advantages of auto-renewal fixed deposits is that the funds remain invested, and the investor does not lose interest. Auto-renewal fixed deposit accounts offer uninterrupted growth of your savings. By automatically reinvesting the principal amount and accumulated interest, your investments grow exponentially over time with the compounding effect. 

2. Convenience: Auto-renewal fixed deposits offer unparalleled convenience to investors. As the name suggests, the funds are reinvested automatically at maturity. Due to this feature, the need for manual intervention is eliminated. 

3. Interest Rate Stability: In a volatile financial market environment, maintaining stable returns on your investments is crucial. Auto-renewal fixed deposits offer stability by reinvesting the maturity amount at the original interest rate, thereby shielding investors from fluctuations in interest rates.  

4. Convenience: The automatic renewal feature allows the bank to reinvest your money and continue earning interest unless you specifically tell them about withdrawal. Thus, from the comfort of home, investors can enjoy continued investments without worrying about losing interest. 

Why is an Auto Renewal Facility Offered by Banks? 

The financial sector is booming with numerous options at the disposal of customers. There are numerous financial institutions available in the market offering numerous products and services. So, to be at the forefront, numerous banks are offering lucrative services to retain their customers. Auto-renewal of fixed deposits is one such service. Banks offer auto fixed deposits because it is a good attraction for customer engagement. Banks can build secure and long-term relationships with their customers by providing such lucrative options. On the other hand, for customers, this facility offers convenience along with disciplined investment. However, it is best to consider the existing interest rate before committing to auto-renewal.  

Also Read: Step By Step Procedure For Renewing And Withdrawing A Fixed Deposit 

To sum it up, we can say that auto-renewal fixed deposits offer convenience, stability, and growth and are an excellent investment option for individuals. It is suitable for those looking to build wealth systematically. The money grows thanks to the compounding effect of the interest rate. The auto-renew fixed deposit instrument offers growth with minimised risk and provides a secure foundation for achieving your financial goals. Whether you’re saving for a major purchase, building an emergency fund, or planning for retirement, auto fixed deposits can play a pivotal role in navigating your financial journey with confidence and peace of mind. 

Disclaimer:  The information provided in this article is generic in nature and for informational purposes only. It is not a substitute for specific advice in your own circumstances. Hence, you are advised to consult your financial advisor before making any financial decision. IndusInd Bank Limited (IBL) does not influence the views of the author in any way. IBL and the author shall not be responsible for any direct/indirect loss or liability incurred by the reader for taking any financial decisions based on the contents and information.