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Premature Withdrawal of Fixed Deposit

Fixed deposits are a preferred choice of investment among those individuals who are looking for assured returns on their savings. The interest rates offered on such investments are high and their flexible tenures have made it an ideal solution for both long and short investments. Fixed deposits can be classified into two types – FD with premature withdrawal facility and FD without a premature withdrawal facility (here a mandatory lock-in period is applicable).

Premature withdrawal of fixed deposit means that the depositor can close the FD before its term ends. However, to undertake the same, the depositor will have to pay a penalty to the bank. This article is intended to give users fair knowledge of the premature withdrawal facility offered by different banks on FDs and the charges that are applicable on them.

Premature Withdrawal of Fixed Deposit by Different Banks

The terms and conditions associated with premature withdrawal of FDs with ICICI Bank, SBI, Kotak Mahindra Bank and HDFC are listed below. Note - The information below have been sourced from the official websites of the respective banks.

Premature Withdrawal of Fixed Deposit - ICICI

For premature withdrawal of domestic, NRO & NRE deposits:

Interest shall be assessed at the rate applicable for the period for which the deposit was held with the Bank or contracted rate of the deposit, whichever is lower, along with applicable penalty as below:

Original Tenure of DepositLess than Rs. 5 crRs. 5 crores and above
Less than 1 year0.50%0.50%
1 year & above but less than 5 years1.00%1.00%
5 years and above1.00%1.50%

Important points to keep in mind

  • Request for premature closures shall be processed right away. Partial withdrawal requests will be processed in one working day.
  • One cannot cancel requests placed for premature closure of FD/RD.
  • Requests to prematurely close Linked or Money Multiplier FDs cannot be processed online. The user will have to visit the nearest bank to place this request.

Source: ICICI Bank

Premature Withdrawal of Fixed Deposit - SBI

The penalty on premature withdrawals of Domestic Retail Term Deposits with effect from 1 April 2017 are as follows:

DescriptionPenalty
Retail Term Deposits up to Rs. 5 lakhs0.50%
Retail Term Deposits above Rs.5 lakhs but less than Rs.1 crore1%

The interest will be 0.50% or 1% below the rate applicable during the time of deposits for the term that deposit has remained with the bank or 0.50% or 1% below the contracted rate, whichever is lower. Interest shall not be paid on deposits for a period of less than 7 days.

Source: SBI

Premature Withdrawal of Fixed Deposit - Kotak Mahindra Bank

The penalty on premature closure of fixed deposits on fixed deposits booked/ renewed on or after 1st November, 2012 are as follows:

Tenure of Fixed DepositPenalty
Less than 181 daysNil
181 days and above0.50%

Interest shall be paid at the rate that prevails on the date of deposit for the period the deposit or the withdrawn sum remained with the bank or at the contracted rate, whichever is lesser post deducting penal charge.

Premature Withdrawal of RD - For premature closure of this deposit within a month, no interest will be paid. The principal amount will only be returned. On premature withdrawal, the interest shall be paid at the rate prevailing on the date of deposit for the term the deposit remained with the bank or at the contracted rate, whichever is lesser after deducting penal charge of 0.5%.

Source: Kotak Mahindra Bank

Premature Withdrawal of Fixed Deposit - HDFC

On request from the depositor, the bank will allow withdrawal of term deposit prior to the completion of the period of the deposit. Partial withdrawal is not permitted for term deposits booked under preferential rates.

The rate of interest rate applicable for premature closure shall be lower of:

  • The base rate for original /contracted period for which the deposit has been booked or
  • The base rate applicable for the period for which the deposit has been in force with the bank. The base rate is the rate applicable to deposits of below Rs. 1 crore as on the date of booking the deposit. For deposits greater than Rs. 5 crores, the base rate is the rate applicable for Rs. 5 crore deposits as on the date of booking the deposit.

For premature withdrawals, a 1% penalty will be levied on the applicable rate. However, there will be no penalty for premature withdrawal for FDs booked for a term of 7 to 14 days.

Source: HDFC

Things to Consider Before Initiating Premature Withdrawal of Fixed Deposit

Before placing a request for a premature withdrawal of fixed deposit, here are some important points one must keep in mind:

  • Penalty applicable: To make a premature withdrawal, one would have to pay a penalty to the banking institution. This will be 0.50% to 1% of the fixed deposit amount.
  • Loss of interest: On withdrawing from a fixed deposit before it matures, the individual will not receive the exact amount of interest he or she would have got at maturity. A fixed deposit of 7.5% interest per annum will fetch a return of 6.50% to 7% if withdrawn prematurely.
  • Complex procedure: Initiating premature withdrawal is not an easy process. There are many formalities that one will have to go through. This will include filling forms, submitting documents, meeting bank officials etc.

FAQs on Premature Withdrawal of Fixed Deposit

Can we withdraw money from a fixed deposit before maturity?

Yes, it is possible to break an FD before it has reached the end of the investment term. However, it is essential to note that a penalty will be levied when such a withdrawal is made.

What is the penalty applicable for premature withdrawal of FD?

For premature withdrawal of FD, the depositor will be charged a penalty of 0.50% to 1% of the fixed deposit amount. The penalty charged will vary from bank to bank, hence users are advised to check with the respective banking institution before depositing.

What happens if you break FD before maturity?

To make a premature withdrawal, one would have to pay a penalty to the banking institution. This will be 0.50% to 1% of the fixed deposit amount. It is also essential to note that the individual will not get the exact amount of interest that he or she would have received at maturity.

Can we withdraw FD before maturity in post office?

Yes. In case of RD, premature closure is permissible is after 3 years, while for TD, premature closure allowed after 6 months.