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Your FD is maturing in two weeks. You get an SMS from your bank. If you do nothing, it auto-renews. If you log in and make a decision, you have options. Most people do nothing. The FD quietly renews itself and life moves on.
That’s not always a bad choice. But it’s worth understanding what auto-renewal actually does to your money, because in some cases, manually renewing your FD at the right time can mean better returns meaningfully.
What Is FD Auto-Renewal?
When you open an FD, banks typically ask whether you want it to auto-renew at maturity. If you say yes, or if you don’t specify, the bank reinvests your principal and accumulated interest into a new FD of the same tenure on maturity day.
The new FD is booked at whatever interest rate the bank is offering on that day. Not the rate you had before.
That’s the part most people miss.
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What Is Manual Renewal?
Manual renewal means you actively review your options when the FD matures and then decide: renew at the same bank, move to a different bank offering a better rate, change the tenure, or redirect the money elsewhere entirely.
It takes more effort. But it gives you full control over where your money goes next.
So which approach actually puts more money in your pocket? The answer depends on what interest rates are doing.
How Auto-Renewal Can Work Against You
Here’s a scenario that plays out often.
You opened a 1-year FD at 7.5% in April 2023. It auto-renewed in April 2024. The bank’s 1-year FD rate at that point was 6.8%. Your FD silently renewed at the lower rate and you earned less than you could have, without realising it.
This is called reinvestment risk: the risk that when your investment matures, prevailing rates are lower than what you were earning before.
| Situation | What auto-renewal does |
| Rates have risen since you opened the FD | Locks you in at the old lower rate for another full tenure |
| Rates have fallen | Works in your favour, renews at the same (higher) old rate… wait, no. Auto-renewal uses the new rate, not the old one |
| Your financial goals have changed | Renews at the same tenure regardless of your current needs |
| Better rates are available at another bank | Misses the opportunity entirely |
The bottom line: auto-renewal is convenient, but it never optimises for you.
When Auto-Renewal Actually Makes Sense
That said, auto-renewal isn’t always the wrong move. There are situations where it’s perfectly fine.
- You’re parking emergency funds and just need the money to stay safe and accessible
- The maturity amount is small and the effort of manual renewal isn’t worth it
- You’ve checked current rates and they’re similar to what you’re already earning
- You’re in a period of financial stability and don’t need the money for a specific goal
The problem isn’t auto-renewal itself. The problem is auto-renewal by default, without even checking what rates look like at maturity.
What to Do When Your FD Matures: A Simple Checklist
Whether you decide to auto-renew or renew manually, run through this before the maturity date.
| Step | What to check |
| Check current rates at your bank | Is the renewal rate better, worse, or similar to your current rate? |
| Compare with other banks | Are small finance banks or NBFCs offering meaningfully higher rates right now? |
| Review your tenure | Do you still need the money locked in for the same period? |
| Check your liquidity needs | Is there an expense coming up in the next 6 to 12 months? |
| Decide on cumulative vs non-cumulative | Do you need regular interest payouts, or is compounding better for you? |
Taking 10 minutes to do this before your FD matures can make a real difference, especially on larger deposits.
The Actual Rupee Impact: Auto vs Manual
Let’s say your FD of Rs. 5 lakh matures and you have two choices:
- Auto-renew at your current bank’s 1-year rate of 6.8%
- Manually move to a small finance bank offering 8.0%
| Option | Principal | Rate | Interest earned in 1 year |
| Auto-renewal | Rs. 5,00,000 | 6.80% | Rs. 34,000 |
| Manual renewal at a higher rate | Rs. 5,00,000 | 8.00% | Rs. 40,000 |
| Difference | — | — | Rs. 6,000 |
Rs. 6,000 extra for 10 minutes of action. On Rs. 20 lakh, that difference is Rs. 24,000 per year.
Of course, before moving to a higher-rate option, always check the credit rating and financial health of the institution. Higher rates sometimes reflect higher risk.
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Auto-Renewal vs Manual Renewal: Side-by-Side
When an FD matures, you can let it renew automatically or do it manually. Each approach has trade-offs across rate, tenure, and reinvestment risk. Here’s how they compare.
| Parameter | Auto-Renewal | Manual Renewal |
| Effort required | None | 10 to 30 minutes |
| Rate | Whatever the bank offers on the maturity day | You choose the best available rate |
| Tenure | Same as original FD | Flexible, you decide |
| Reinvestment risk | Higher | Lower, you can act on rate changes |
| Missed opportunity risk | High | Low |
| Best for | Small, emergency, or short-term FDs | Larger deposits, long-term goals |
FAQs on FD Auto-Renewal and Manual Renewal
Most banks auto-renew the FD for the same tenure at the interest rate applicable on the maturity date. The principal and the interest accumulated are both reinvested. If you wanted to withdraw the money or change the tenure, you’d need to contact the bank after the renewal and request a premature closure, which may attract a penalty.
Not automatically. Auto-renewal uses the same tenure as the original FD. To change the tenure, you need to give instructions to the bank before the maturity date or do a manual renewal.
Yes and it happens more often than people realise. If rates have risen since you opened your FD, auto-renewal at the new (still possibly lower) rate means you might be getting less than what another bank is offering. Comparing rates before maturity takes very little time.
Reinvestment risk is the chance that when your FD matures, the rates available for reinvestment are lower than what you were earning. Auto-renewal doesn’t protect you from this. Manual renewal lets you shop around and potentially move to a better rate or a different product entirely.
Manual renewal is generally worth the effort for senior citizens, because the additional interest rate benefit (usually 0.25% to 0.5% above regular rates) can vary between banks and changes from time to time. Checking rates at maturity ensures you’re getting the best available senior citizen rate, not just the default renewal rate at your existing bank.
Disclaimer: Fixed returns do not constitute guaranteed or assured returns. Investments in corporate debt securities, municipal debt securities/securitised debt instruments are subject to credit risks, market risks and default risks including delay and/or default in payment. Read all the offer related documents carefully.
