In case of premature withdrawal, depositors can withdraw their amount by paying a penalty before the end of the period.
Talking about deposits and savings, the fixed deposit scheme of banks is very popular. The biggest reason for this is that people consider it safe and they get fixed returns. The best thing is that there is no market-linked scheme, so the fluctuations in the market have no effect on it. Different tenure options are available in bank FD. It ranges from 7 days to 10 years.
It helps a lot when emergency funds are needed. For example, in case of a crisis like Coronavirus, depositors can withdraw premature withdrawals from their fixed deposits. But it often has to be fined. At the time of opening an FD in the bank, the depositor has the option to choose two types of accounts – with premature withdrawal facility, without premature withdrawal facility. The second option comes with a mandatory lock-in period.
In the case of premature withdrawal FD, depositors can withdraw their amount and close the account by paying a penalty before the end of the period. But most of the big banks have fixed their terms and conditions. SBI, HDFC Bank and ICICI Bank have their own rules for withdrawal of money from FDs before maturity.
Fine on premature withdrawal
Banks often charge a penalty for closing a fixed deposit or withdrawing prematurely before the tenure is completed. It varies from 0.55 per cent to 1 per cent of the FD amount. For example, on withdrawal of premature withdrawal from SBI’s bank FD, the depositor will have to pay a penalty of 0.05 per cent for all tenures for less than Rs 5 lakh and 1 per cent for deposits ranging from Rs 5 lakh to Rs 1 crore. If your FD is Rs 3 lakh in the bank, then you will have to pay a fine of Rs 1,500 from the deposit and a fine of Rs 18 thousand for having FD of Rs 18 lakh.
For premature withdrawal of FD in ICICI Bank FD, a deposit of less than 5 crore and tenure less than 1 year will attract a fine of 0.50 per cent and a penalty of 1 per cent for 1 year and above. Similarly, HDFC Bank charges a penalty of 1 per cent for premature withdrawal from FDs, including sweep-in and partial withdrawal.
Payment of interest on premature withdrawal
Keep in mind that banks generally pay interest for the entire period when the deposit is with them. But it can be 0.50 percent or 1 percent less than the appropriate rate at the time of opening the account. For example, on withdrawal of premature withdrawal from a fixed deposit with HDFC Bank, the interest rate will be applicable for the tenure for which the FD was opened or for which the deposit has been with the bank, the rate of the two, whichever is lower.
(Story: Priyadarshini Maji)