Fixed deposits add a healthy mix of risk-free investment options to your portfolio. Apart from diversifying your portfolio and accruing guaranteed returns, fixed deposits also come with a good liquidity balance. Thus, if you find yourself in need of emergency cash flow, you can easily fall back up on your FD investments.
Both partial and complete premature withdrawals of fixed deposits are permitted by most banks and NBFCs against certain penalty charges. This penalty charge usually varies from 0.5%-1% and can be revised from time to time as per the policies of the bank/NBFC.
However, there are certain non-callable plans that don’t permit such premature withdrawals of fixed deposits. Additionally, while most institutions don’t pay any interest on FDs withdrawn in less than seven days, different banks/NBFCs may have different minimum lock-in periods. To know more about premature withdrawal of FD, read on.
A premature withdrawal of a fixed deposit is when you make a full or partial withdrawal of an FD before maturity. As such, with any fixed deposit, the early withdrawal penalty will be clearly listed as lenders will levy this charge for this service.
Every issuer has a different penalty policy and penalty amount, which you should take into consideration while investing. In any case, this liquidity is one of the benefits that makes it a popular option for many. However, while full or partial withdrawal of FD is possible, it does come at the cost of your potential earnings.
As such, assessing the impact helps ensure that you are not blindsided by additional charges and fees that strain your finances. The terms and conditions, along with the rate, will be mentioned in the document. So, be sure to carefully and thoroughly read the document.
When it comes to levying the penalty on premature closure of an FD, the base rate is similar for most issuers. Generally, this base includes the investment amount and tenor. Let’s look at the withdrawal penalty policy of top banks:
Bank |
Withdrawal Penalty |
Premature Withdrawal of Fixed Deposit in Yes Bank |
3% penalty if withdrawn within 7 to 90 days.
2.25% penalty if withdrawn within 91 to 181 days.
2% penalty if withdrawn within 182 days to 2 years.
1% penalty if withdrawn within 12 to 36 months.
No penalty for senior citizens. |
Premature Withdrawal of Fixed Deposit in SBI Bank |
0.50% penalty on deposits up to ₹5 Lakh.
1% penalty on deposits above ₹5 Lakhs.
No interest is paid on deposits withdrawn in less than seven days.
Interest for the deposit tenor will be 0.5%-1% lower than the agreed-upon rates when the FD was opened. |
Premature Withdrawal of Fixed Deposit in ICICI Bank |
Interest is calculated as the lowest rate applicable for the tenor the FD stayed in the bank.
0.5% penalty levied on deposits above ₹5 Crores and above that are withdrawn in less than a year.
1% penalty is charged on deposits above ₹5 Crore and above that are withdrawn after a year but before five years.
1% penalty charged on deposits of less than ₹5 Crore that are withdrawn after five years.
1.5% penalty charged on deposits of more than ₹5 Crore that are withdrawn after five years. |
Premature Withdrawal of Fixed Deposit in HDFC Bank |
Interest rates are calculated as the base interest rate for the original tenor or the base rate applicable for the tenor the deposit has remained in the bank.
1% penalty is charged on all complete and partial premature withdrawals.
No interest for FD deposits withdrawn in less than seven days of account opening. |
With premature withdrawal penalties levied by banks, you should also know the FD premature withdrawal penalty levied by NBFCs. Let’s have a look at the different premature withdrawal of fixed deposit penalties levied by leading NBFCs:
NBFC |
Withdrawal Penalty |
No withdrawals are allowed in the first three months.
No interest is paid for withdrawals after three months but before six months.
2% interest penalty is levied on the applicable interest rate for withdrawals made after the first six months but before the maturity date. |
|
No withdrawals are allowed in the first three months.
4% p.a. interest rate is applicable for withdrawals made in the first six months.
1% interest penalty levied on the applicable interest rate for withdrawals made after the first six months but before the maturity date. |
|
No withdrawals are allowed in the first three months.
No interest is paid on FDs withdrawn between 3-6 months.
For withdrawals made after the first six months but before maturity, interest is calculated at a rate that’s 2% lower than the rate applicable for the FD’s completed tenure.
If no rates are mentioned for this tenure, interest will be calculated at a rate that’s 3% lower than the minimum prevailing FD rate the company offers. |
Most FD issuers cap the fixed deposit premature withdrawal penalty charges at around 0.5%-1%. Additionally, when you make a premature FD withdrawal, you also stand to lose out on potential compounded interest earnings.
While it is important to know the premature withdrawal penalty rates for your banks/NBFC, you should also know how these penalties are calculated. Most banks/NBFCs will likely use one of the following two ways to calculate interest on premature withdrawals of fixed deposits:
Let’s say you have invested ₹1,00,000 in FD for a period of 3 years at a rate of 5.80% p.a. Suppose the interest rate for the first FD year is 5.50% p.a. Now, if you decide to withdraw the amount after one year, your interest will be calculated after factoring in the bank’s 1% penalty rate.
Let’s assume the bank levies a penalty of 1% on the premature withdrawal of fixed deposits; your new interest rate then becomes 5.50%-1%= 4.50%. The revised FD rates are lower than the original 5.80% rate. Here’s an overview of how this affects your returns:
Parameter |
Details |
Principal Sum Invested |
₹1,00,000 |
Maturity Amount After 1 Year |
₹1,05,927 |
Rate of Interest at the Time of Booking |
5.80% p.a. |
Effective Interest Rate |
5.50% p.a. |
FD Premature Withdrawal Penalty Rate |
1% |
Final Interest Rate |
4.50% p.a. |
Final Amount Payable |
₹1,04,593 |
Disclaimer: The FD rates, penalty, and returns mentioned are for calculation purposes only. Contact your issuer to better understand the penalty on your fixed deposit.
Suppose you’ve booked a 1-year FD at 7% p.a. interest. However, due to some financial emergency, you had to withdraw the amount after six months. The prevailing interest rate for a six-month FD at the time was 6.50%.
This means that the interest payable to you will be that of a 6-month FD because the interest rates for this tenure were lower than a 1-year FD. Let’s also assume that the bank levies a 1% penalty charge on the effective interest rate for the premature withdrawals.
With this penalty, the interest payable to you will be calculated as 6.50%-1% = 5.50%. The table below shows how this affects your returns.
Parameter |
Details |
Principal Sum Invested |
₹1,00,000 |
Maturity Amount After 1 Year |
₹1,07,229 |
Rate of Interest at the Time of Booking |
7% p.a. |
Effective Interest Rate |
6.50% p.a. |
FD Premature Withdrawal Penalty Rate |
1% |
Final Interest Rate |
5.50% p.a. |
Final Amount Payable |
₹1,05,640 |
Disclaimer: The FD rates, penalty, and returns mentioned are for calculation purposes only. Contact your issuer to better understand the penalty on your fixed deposit.
The FD premature withdrawal penalty calculator offers the same benefit as that of an FD calculator – enabling informed decisions. Here, you enter the key details of your FD – investment amount, tenor, interest rates, and effective interest rates, it gives you an estimate of your loss.
With this estimate you can determine whether opting for premature withdrawal of FD is a good idea for your current and future finances. Additionally, a majority of FD issuers offer FD with premature withdrawal facility as well as a loan against FD facility.
Knowing the penalty will also help you gauge if opting for a loan may be a better idea. Generally, loans against FD are offered at a lower interest rate. As such, if your loan is costing less, you can continue your FD and earn returns to grow your wealth while meeting your current needs.
The FD premature withdrawal penalty calculator is simple and easy to use, requiring minimal information from your end. To use the calculator, you will need to enter your investment amount, investment date, maturity date, interest rate, penalty, and date of premature withdrawal.
Since the penalty on premature closure of FD or premature withdrawal of FD is levied on the interest rate, the calculator will give you an estimate of the effective interest rate and returns on the rate as well as the expected returns, if the investment was maintained till maturity.
This way, you can understand how much you stand to lose when you make a complete or partial withdrawal of FD before maturity. To know the penalty rate, you can visit the FD issuer’s official website. You can also contact the issuer via call, or email, or visit the branch.
Unforeseen emergencies can take you by surprise. Most people invest in FDs to prepare for such rainy days well in advance. While that is a smart and important move, it is equally important to know the process of making a premature withdrawal of a fixed deposit.
While earlier, FDs could only be withdrawn offline, digitisation has also made online FD withdrawal possible. Let’s have a look at different ways to register a request for the premature withdrawal of FD online and offline.
By initiating an online request for the premature withdrawal of fixed deposit, you can avoid the hassle of visiting a physical branch office. Here are the steps you need to follow to register such requests online
Step 1: Visit your bank or NBFC’s website.
Step 2: Log in to the Net Banking portal using your ID and password.
Step 3: Go to the ‘Service’ tab and select the ‘Premature Withdrawal of Fixed Deposit’ option.
Step 4: Enter all the relevant information, like your name, FD number, etc.
Step 5: Submit the request and wait for it to be processed.
Step 6: After your request is processed, the money will be automatically transferred to your account.
You can follow the below-mentioned steps to apply for the premature withdrawal of fixed deposits offline:
Step 1: Visit your bank or NBFC branch and get an application form for the premature withdrawal of your fixed deposit.
Step 2: Carefully fill out the application form with details like name, FD number, etc.
Step 3: Submit the form with all the supporting documents, including your FD certificate.
Step 4: Once processed, the FD amount will be credited to your savings bank account.
While most fixed deposits can be withdrawn before they reach maturity, there are some that don’t permit such premature withdrawals. For instance, non-callable deposits and tax-saving 5-year deposits are the two types of FD without premature closure facilities or any premature withdrawal provisions.
Usually, this restriction also extends to the premature withdrawal of fixed deposit amounts above ₹2 Crores. Some instances of such FDs are listed below:
ICICI Bank: Deposits of ₹2 Crores and above
HDFC Bank: Deposits of ₹2 Crores and above
SBI Bank: Non-callable deposits of ₹1 Crore and above
PNB: Non-callable deposits of ₹15 Lakhs and above
It is important to note that every bank has a certain lock-in period - ranging from one week to three months- during which no premature withdrawals are permitted. In other words, regardless of whether you have a non-callable or callable deposit with a premature facility, you cannot opt for it before the lapse of this minimum lock-in period.
Additionally, for the FD accounts mentioned above, banks make special withdrawal concessions in the event of the account holder’s untimely demise. Carefully read the terms and conditions listed by the issuer before starting your investment, to avoid being blindsided.
Investing in an FD is a clever way to park your savings in a low-risk plan. With a little foresight, you can optimise such simple investment avenues to contribute to your wealth creation journey, as well as come in handy on rainy days.
If you’re thinking about ways to bypass the fixed deposit early withdrawal penalty levied by the issuers, here’s a list of strategies you can adopt:
Fixed Deposit Laddering - While FD laddering may seem like a complicated concept, it really just translates to diversifying your investment portfolio. Instead of putting all your eggs in one basket, with a laddering approach, you divide your corpus among various FD avenues with different maturity tenures.
If you can pick a healthy mix of long and short-term FDs, you can reduce the risk of penalties associated with the premature withdrawal of fixed deposits. With FDs maturing at different times, you can enjoy windows of liquidity and help meet any immediate needs without withdrawing your long-term FDs.
Loan Against Your FD - You can secure short-term liquidity by taking a loan against your FD. Most banks and NBFCs offer this facility, allowing you to withdraw up to 90% of your principal as a loan. Usually, the interest charged is 1%-2% higher than the FD interest rate, but at the same time, it's lower than regular personal loan interest figures.
Additionally, since this is a secured loan, your credit score will not have a bearing on the interest rates or loan amount. Thus, such loans help avoid premature withdrawals on your fixed deposit while also guaranteeing that the deposited amount continues to grow at the fixed rate.
Invest in a Sweep-In FD - Sweep-in FDs combine the liquidity benefits of a saving account with the high interest rates of a regular FD to bring you the best of both worlds. To avail of such benefits, you simply need to link your sweep-in FD to a current or savings account.
You need to set a minimum balance mandate for your savings account. After that’s done, any excess sum in this account will be redirected to the sweep-in FD. The best part about a sweep-in account is that you can withdraw money without attracting penalties on your withdrawals.
Loss of Interest - If you opt for the premature withdrawal of fixed deposit, you lose out on reaping the benefits of compounding interest on the sum. FD maturity amounts are calculated on the basis of a set tenure and the prevailing interest rate on the day the account is opened. However, withdrawing the sum before the end of this tenure will result in lower returns as you will not receive this set interest rate.
Penalty Payments - As already mentioned, every bank and NBFC levies certain penalty charges on the premature withdrawal of fixed deposits. While generally, this penalty charge can range from 0.5% to 1% of your interest rate, the rate might be revised by the institution from time to time.
Tiring Procedure - From handling a mountain of paperwork to meeting designated personnel and submitting relevant documents, the process of prematurely closing an FD is a long and tiring one.
Loss to Your Financial Journey - Earning guaranteed returns from the invested lump-sum amount is the primary goal behind an FD. However, when you opt for the premature withdrawal of fixed deposits, you lose out on such benefits. For instance, if you’ve opted for a monthly interest payout option, you will lose out on your source of monthly earnings by liquidating your FD.
While cash is needed to tackle financial emergencies, you don’t necessarily need to resort to premature withdrawal of FD to get the required cash flow. Instead of losing out on the potential returns from this investment plan, you can avail a credit card against your FD.
Such credit cards allow you to withdraw 75%-80% of your principal deposit while still earning interest. Most banks and NBFCs offer this facility to their customers. Moreover, while such secured credit cards help you manage your expenses without prematurely withdrawing your fixed deposit amount, they also help you build your credit score.
Premature withdrawal of fixed deposit refers to the partial or full withdrawals made on an FD account before its maturity.
Yes, you can register a request for the premature withdrawal of your fixed deposit online. Simply login to your account on the issuer’s website, go to the ‘Services’ tab, and click on the ‘Premature FD Withdrawal’ option. Once you’ve filled in the application form and submitted the necessary documents, your request will be processed.
financial institution. However, generally, every bank/NBFC has certain minimum lock-in periods during which no withdrawals are allowed. They also have a set premature withdrawal penalty rate, usually going up to 1%.
Most banks and NFBCs offer a FD premature withdrawal penalty calculator. You can use this free online tool to determine the penalties levied on the premature withdrawal of your fixed deposit.
For an offline premature FD withdrawal, simply visit the issuer’s branch and fill out the required form. Once you’ve entered all the details of your FD, you can submit the form along with your FD certificate and other important documents.
After the issuer has processed the request, the lump-sum amount will be transferred to your savings account with the issuer or as mentioned in the form.
Yes. However, premature withdrawals of fixed deposit attract certain penalty charges that vary from one financial institution to the next.
No, all banks and NBFCs have different penalty policies and processes, and you contact the issuer to know the penalty rate applicable. The same will be mentioned on the form you fill at the time of investing.
No, tax-saver FDs are one of the types of FD without premature closure facility or premature withdrawal facility.
Yes, if you are making a partial withdrawal of FD before maturity you can continue to earn returns on the remaining investment amount. However, the interest rate may not be the same. Additionally, the terms vary for each issuer. So, contact your issuer before deciding.