The craze for bank fixed deposits has not abated. Many people rely on these for interest returns. Many people prefer these as they have a low base interest, guaranteed interest rate and insurance of up to Rs 5 lakh per deposit.
Bank Fixed Deposits can be selected for a period of 7 days to a period of 10 years. FDs can be withdrawn in advance in the event of an emergency.
However, banks charge a penalty for closing or withdrawing a fixed deposit before maturity.
There are 2 types of accounts that you can choose from when opening a bank fixed deposit.
- With premature withdrawal facility
- Without premature withdrawal facility.
If you choose not to have a premature withdrawal facility, it will come with an incorrect lock-in period. Even if someone is able to withdraw a bank FD with a premature withdrawal, the FD will incur an additional penalty. Large banks such as SBI, ICICI Bank and HDFC Bank have their own rules and regulations for withdrawing money from FD accounts before maturity.
What happens if you break a fixed deposit
Banks charge a penalty for closing or early withdrawal of a fixed deposit account before maturity. Penalty ranges from 0.50% to 1% of the FD amount. For example, in the case of an early withdrawal from an ICICI Bank FD, a deposit of less than Rs. 5 crore and a term of less than one year carries a penalty of 0.50%. If the year is longer than that, the penalty is 1 percent..
SBI Bank FD usually imposes a penalty of 0.5% for less than Rs 5 lakh for premature withdrawal. This means that if you have an FD of Rs. 3 lakhs in the bank, if you withdraw it in advance, you will get almost Rs. 1,500 will have to be paid as a fine. In the amount of more than Rs.5 lakhs Rs. If the deposit is withdrawn up to Rs 1 crore, there will be a penalty of 1%. HDFC is also levying a penalty of up to 1 per cent for advance withdrawals.
Penalty is levied in the form of interest rate. Suppose the interest rate is 6% when you make a deposit for 1 year. If you expect an early withdrawal penalty of 1%, you will receive only 5% interest instead of 6%. It may not seem like much in a small deposit, but it can be a burden when depositing a large amount.
Some banks may waive the penalty on certain categories of FD withdrawals for a certain period of time. Therefore discuss the terms and conditions with the bank before making an early withdrawal. Most banks do not charge any penalty for withdrawals made within 7 or 14 days of opening an account.
