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    Need to withdraw an FD before maturity? Find out how much it costs

    Need to withdraw an FD before maturity? Find out how much it costs

    Need to withdraw an FD before maturity? Find out how much it costs
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    By Anshul   IST (Published)

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    Fixed deposits, with premature withdrawal facility, allow the depositor to close the FD before the date of maturity.

    Fixed deposits (FDs), also known as term deposits (TDs), are fixed-income instruments that yield fixed returns over a pre-defined period of lock-in. FDs can be broadly categorized into two types – with premature withdrawal and without premature withdrawal facility.
    Fixed deposits, with premature withdrawal facility, allow the depositor to close the FD before the date of maturity. However, liquidating a fixed deposit before the end of its term attracts certain penalty charges.
    What are the penalty charges?
    The penalty charges usually range between 0.5 percent and 1 percent, according to Paisabazaar -- a leading online marketplace for lending products.
    Some banks also offer a premature withdrawal facility with zero penalty charges.
    If the FD is prematurely closed, before completing 7 days from the date of the booking, the bank is however not liable to pay any interest, say experts.
    "For some banks, deposits cannot be withdrawn before a minimum of 6 months since the day, the account was opened and if done so, no interest is paid," they add.
    SBI currently charges a penalty up to 1 percent for premature withdrawal of an FD deposit up to Rs 1 crore. For premature withdrawal from SBI fixed deposits up to Rs 5 lakh, customers are required to pay a penalty of 0.50 percent across all maturities.
    For premature withdrawal from SBI fixed deposits above Rs 5 lakh but below Rs 1 crore, the bank has fixed the penalty at 1 percent for all tenors.
    HDFC Bank currently charges 1 percent for premature withdrawal. On the other hand, ICICI Bank charges 0.5 percent to 1 percent.
    How are the penalty charges levied?
    A penalty is levied on the interest to be paid to the depositor.
    "If a bank charges 1 percent penalty on premature withdrawals, so the calculation of the interest on premature withdrawal of the FD will be done in the following manner- suppose a customer has FD of Rs 1 lakh and is earning interest at 8 percent. He withdraws the FD after completing 1 year. In one year, he has earned interest at 8 percent. But now, the bank will recalculate the interest at revised FD rates, i.e. 8 percent – minus 1 percent. The new rate will be 7 percent and interest will be paid at this rate instead of the previous 8 percent," according to Paisabazaar.
    How advisable it is to withdraw FD before maturity?
    Experts advise against withdrawing FDs before maturity unless there is a deep cash crunch and the customer is left with no other option.
    "Premature withdrawal of fixed deposit results in a great loss for the investor," according to BankBazaar- an online investment platform.
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