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When you break your FD prematurely, you lose out money that could have been compounded as interest. An unplanned FD closure also invites a penalty that is usually around 1 % of your principal, and the rate varies from bank to bank.
Example – Suppose, you have deposited a principal of Rs. 1,00,000 for a tenure of 10 years. The maturity amount that you gets is Rs. 1,93,974. Now suppose you decide to withdraw the amount after 4 years. The rate of interest for 4 years is 6.8% which is the rate that you will get with a penalty of 1%. Hence the net rate of interest you will get is 6.8 – 1 = 5.8%. This translates to a maturity amount of Rs. 1,25,297. So, technically you stand to lose a sum of Rs. 68,677. You can use the Paisabazaar FD Calculator to work out your returns if you prematurely break your FD.
Now unless you invest the amount withdrawn at a place that covers this loss, it is unwise to do so. Rather, there are other things you can do, which will be discussed below. Let’s first see how many penalties are applicable at the top banks for premature FD withdrawals.
Penalty Rates in Different Banks
Different banks apply different penalty rates that are subtracted from the applicable interest rates, some of which are given below.
| Banks | Penalty Rate |
| SBI | 1% |
| HDFC BANK | 1% |
| ICICI BANK | Up to 1.50%* |
| PUNJAB NATIONAL BANK | 1% |
| AXIS BANK | 1% |
| CANARA BANK | 1%** |
| BANK OF BARODA | 1%*** |
| UNION BANK | None |
| IDBI BANK | 1% |
| BANK OF INDIA | 1% |
* 0.50% for tenure less than a year, 1% for beyond a year if the deposit is less than 5 Cr; for deposit above 5 Cr, 1% for tenure up to 5 years, and 1.50% for 5 years and beyond
** Applicable on deposits below Rs, 1 Crore
*** Penalty not applicable if the amount is less than 5 Lacs and is kept for a minimum of 12 months
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What to do Instead?
There are alternatives that don’t involve breaking your FDs while still taking care of your immediate needs. They are given below:
- Opt for a credit card against FD. Banks like SBI and SBM Bank (India) Ltd. offer lucrative credit card options with a minimum FD amount of Rs. 25,000 and Rs. 12,000, respectively. These cards are issued against your FD. These cards also help in building a solid credit score
- You can raise short-term liquidity by taking a loan against your FD Account. The maximum amount that you can raise is 90% of your FD Account. Also, the interest rate for the loan is generally lower than a regular loan. Your credit score is not taken into account as your fixed deposit amount serves as collateral.
- You can break down your money into different parts and make separate FDs from it. That way, you wouldn’t have to rely on just one deposit. If you need to access a smaller amount than the value of your FD, you don’t have to break your whole FD.
10 Comments
I have FD in Axis Bank NRE status of Rs 50,00,000/- for 2 years and now completed 17 months. If I close the FD now, any loss for me.
Hi,
Axis Bank provides the following information on their website:
“For NRE /FCNR Deposits if a contracted amount is less than Rs 5 Crores (or equivalent in FCNR), interest rate shall be rate applicable for the period the deposit has remained with the bank or the contracted rate, whichever is lower.”
However, we suggest you contact the bank for the latest information regarding the stated premature withdrawal.
I have FD account don’t want to break it. How can i withdraw small amount like 30k 35k. Can u please help me out with this issue
Most of the banks provide this facility of partial withdrawals instead of breaking FD. You need to check with your bank or please comment with complete details of your FD, for e.g. FD amount, bank name, tenure, etc. so that we may provide better solution to your query.
I have opened an FD & do not want to break, but how can I withdraw a small amount of RS. 5k or 10k. OR get loan how ??
It works very well for me
Thanks for the wonderful manual