Automatic Rollover

Posted in Finance, Accounting and Economics Terms, Total Reads: 274
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Definition: Automatic Rollover

The reinvestment of the maturity proceeds of any fixed income instrument in a scheme of same type for same time period is automatic rollover.


For example:

A person puts Rs 1 crores in a Fixed Deposit (FD) for 1 year at 10% in SBI. At the end of 1 year, the investor does not come for redemption. Now the total amount of Rs1.1 crores (1crores principle + 10 lakh interest earned) will be automatically converted to a FD of 1 year for the principle of Rs. 1.1 crores.


This is called Automatic Rollover. Note that the rollover happens for the same duration as that of the original investment. In many cases the maturity proceeds are directly transferred to the linked bank account that was mentioned by the investor during investing.

 

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