Business / Fd fixed deposits premature withdrawal how penalty charge know rules

New Delhi. Even today, a large number of people in the country prefer to invest in the Fixed Deposit Scheme of the bank. While investing in FD scheme, you have to choose a period in which you invest your money in the bank. Your money is locked for this period, which is available with interest returns after maturity. However, in case of emergency, you can break this FD even before maturity. This is called Premature FD Withdrawal. In this news, we will talk about how the penalty is usually imposed for breaking the fixed deposit before the maturity date.

Premature withdrawal allows investors to withdraw investment money before maturity if needed. If customers break their FD prematurely for the need of money in emergency, then they have to pay a fixed amount to the bank as a fine. In traditional FDs, a penalty of 1% is usually applicable on the interest amount on premature withdrawal. This penalty is imposed on the interest money.

Example: FD with maturity of 5 years but to be redeemed in 1 year

Investment: Rs 1 lakh

FD tenure: 5 years

Interest on 5 years: 7 percent

Interest on 1 year: 6 percent

If the penalty is 1 percent and the FD is broken after 1 year, then the effective interest rate will be considered as 6-1=5 percent.