From the Reserve Bank of India’s Annual Policy Statement for the Year 2010-11:

Banks should allow conversion of term deposits, daily deposits, or recurring deposits to enable depositors to immediately reinvest the amount lying in the aforesaid deposits with the same bank in another term deposit. Banks are required to pay interest in respect of such term deposits without reducing the interest by way of penalty, provided that the deposit remains with the bank after reinvestment for a period longer than the remaining period of the original contract.

A precise explanation here.

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