Auto-renewal of fixed deposits: how it works and how to stop it

Auto-renewal is the choice you make for the day your fixed deposit (FD) ends. If you ask for it, the bank rolls the money into a new FD at the rate its renewal policy gives. You can also renew only the original amount, or take everything out.

What is auto-renewal of a fixed deposit?

Auto-renewal is an instruction that your FD should roll into a new FD on its maturity date instead of being paid out. Maturity is the day the deposit's term ends. Renewal starts a new term with the same money.

RBI's 2025 Responsible Business Conduct Directions say a bank must obtain your instructions for the maturity "in the application form itself". Where you gave none, the bank must write to you well before the due date.

If you made no choice and the date has already passed, the FD is overdue: matured but neither renewed nor paid out. Read what happens to an overdue fixed deposit.

Deposits with an NBFC, a non-bank finance company, follow their own rules. An NBFC has to give you the maturity details at least 14 days before the date. It cannot renew a matured deposit without your "express and voluntary consent". More in the corporate fixed deposits guide.

What choices do you have when an FD matures?

You have three. You can renew the principal and the interest, renew only the principal, or close the FD and take everything. The principal is the amount you first put in.

Take a 38-year-old whose one-year FD, opened in November 2025, matures in November 2026. She put in ₹4,20,000. Assume it earned 7% a year, so it matures at ₹4,49,400. The renewal rates below are assumptions, chosen to show that the new rate can differ from the old one.

Assume the renewal policy gives 6.25% on a one-year FD, with the interest added once a year (a cumulative FD, where interest stays in the deposit and is paid at the end).

• Renew principal and interest: ₹4,49,400 grows to ₹4,77,488, which is ₹28,088 of interest.
• Renew principal only: ₹4,20,000 grows to ₹4,46,250, and the ₹29,400 is already in her account.
• Renew at an assumed 7.5% instead: principal and interest grow to ₹4,83,105.

The same deposit ends up ₹5,617 apart between the 6.25% and 7.5% cases. Try your own numbers in the fixed deposit calculator.

What interest rate does a renewed FD earn?

A renewed FD earns the rate set by the bank's renewal policy, which can be higher or lower than your old rate. An FD you never renew keeps its contracted rate to the end of its term. RBI requires every bank to keep a renewal policy that is "transparent", "non-discretionary and non-discriminatory". The bank must tell you the renewal terms, including interest rates, "at the time of acceptance of deposit". Since 1 October 2026, RBI's rules also say a bank's deposit rates must be "strictly as per the schedule of interest rates disclosed in advance on the bank's website". That schedule is the bank's rate card. Rates are not open to negotiation between you and the bank.

As one dated example of a rate card, SBI's card in force since 15 December 2025 pays 6.25% a year on a deposit of 1 year to less than 2 years. Rates change, so check the bank's own page on the day.

People ask whether RBI issued a new circular on renewal. The rules above are in RBI's 2025 Directions on interest rates on deposits and on responsible business conduct, as updated to 1 October 2026. None of the amendments RBI listed between 28 November 2025 and 1 October 2026 is about renewal. The 1 October 2026 change above covers deposit rates in general, renewals included. For the basics of how an FD's rate is set, see what a fixed deposit is and how it works.

How do you stop or change auto-renewal?

You change the maturity instruction with your bank before the maturity date. The steps differ from bank to bank.

Once the FD has renewed, the only way out is to break the new FD early. This is premature withdrawal, which means taking the money out before the term ends. The rules for banks say a deposit of ₹1 crore or less held by an individual must have this facility. You then get interest at the rate for the time the money actually stayed, not the rate you contracted. A penalty, a cut from that rate, applies only if the bank disclosed one.

SBI, for example, states a penalty of 0.50% on retail term deposits up to ₹5 lakh and 1% above ₹5 lakh and below ₹2 crore. How the cost is worked out is covered in how to avoid the penalty on premature withdrawal.

What should you check when an FD renews?

Check the new rate and term first, then the instruction for next time, your nominees and your tax paperwork.

• Next maturity instruction. Decide what should happen at the end of the new term.
• Nominee. A nominee is the person named to receive the deposit if you die. The Banking Companies (Nomination) Rules, 2025 say a nomination "shall not cease to be in force merely by reason of the renewal of the deposit". Since 1 November 2025 you can name up to four nominees on a bank deposit. You can change them while the deposit is held. See how a nominee claims an FD.
• Form 121. This is the form that asks a bank not to deduct TDS, tax deducted at source before the interest reaches you. It covers one tax year, so you give it again each April. You can use it only if the tax on your total income for the year will be nil. If you are under 60, the income you declare must also be within the tax-free limit.

On tax, renewing changes nothing. Interest added on renewal is taxable income for a resident individual in tax year 2026-27, taxed year by year as it is earned. On a cumulative FD, the bank can credit the interest in its books each year, and TDS can be cut each year though no money reaches you. TDS is 10% once interest from one bank passes ₹50,000 in a tax year, or ₹1,00,000 if you are 60 or older at any time in it. The full rules are in the guide to FD taxation.

A tax-saving FD is a special case. It cannot be renewed as a tax-saving FD. A new one made at maturity counts as a fresh investment in the year you make it, within that year's ₹1,50,000 limit. The deduction is under section 123 (the old Section 80C) and is available under the old tax regime only. See what a tax-saving fixed deposit is.

What are the pros and cons of auto-renewal?

Auto-renewal keeps your money earning an FD rate and saves you from tracking dates, but it puts the money back in a fixed term at the rate the bank's renewal policy sets.

In its favour

• You do not have to remember the maturity date.
• The money keeps earning an FD rate instead of the lower overdue rate.

Against it

• The new rate may be lower than the old one.
• The money is tied up for a new term. Breaking it early means a lower rate for the time held, and possibly a penalty.

Which side weighs more depends on when you will need the money and whether the rate on offer suits you. See the wider trade-offs in the advantages and disadvantages of fixed deposits.

Koshex offers fixed deposits, both bank and corporate, from ₹10,000. Only the bank deposits are insured, up to ₹5 lakh per depositor per bank. See fixed deposits on Koshex.