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Fixed deposit is the most popular investment choice for investors. They strive to balance their investment portfolio by investment in fixed deposits. You can earn guaranteed returns at a predetermined interest rate upon maturity without any risk of market fluctuations. However, fixed deposit provides investors with a facility to withdraw from their fixed deposit before maturity. In this article, we will discuss the premature withdrawal of fixed deposit. 

What is Premature Withdrawal of Fixed Deposit?

Premature withdrawal of fixed deposit is withdrawing money from a fixed deposit account before maturity. You can opt for partial withdrawal or a complete withdrawal, depending on your financial need. Usually, investors opt for premature withdrawal if they need money urgently for any financial emergency. Further, investors can also withdraw money from a fixed deposit before maturity if an investment option is better than a fixed deposit. 

The penalty is the additional charges levied by the bank for premature withdrawal of fixed deposits. Generally, the penalty is levied on the interest rate on fixed deposits. In other words, the actual interest to be received will be lowered at the time of premature closure. Thus, the primary objective of locking in fixed deposits is to discourage the frequency of withdrawals and encourage savings. 

FD Premature Withdrawal Penalties for Top Banks

Bank NamePremature Withdrawal Charges
SBI0.50% – 1%
ICICI Bank0.50% – 1%
Axis Bank1%
HDFC Bank1%
Kotak Mahindra Bank0.50%
IDFC First Bank1%
Union Bank of India1%
Canara Bank1%
IDBI Bank1%
Punjab National Bank1%
Bank of India0.50% – 1%
Bank of Baroda1%
STFC Fixed Deposit2% – 3%
Bajaj Finance FD0.55% – 1%

How To Break FD Prematurely?

You can opt for premature withdrawal of fixed deposits with a nominal penalty. Also, you can complete the premature withdrawal of FD either online or offline. The money is transferred to your savings account immediately. The following are the steps for the withdrawal process – 

Online FD Withdrawal

The following are steps to withdraw from a fixed deposit prematurely

  1. Firstly, you have to visit your respective bank website.
  2. Secondly, you need to login into your net banking with your credentials. 
  3. After logging in, select the ‘Fixed Deposit’ option under your account.
  4. Select the fixed deposit account from which you wish to withdraw.
  5. Click on the premature withdrawal option.
  6. Your premature withdrawal details will appear on the screen, and select the account you wish to transfer.
  7. Finally, click on ‘Submit’ to complete your withdrawal process.

Note: The withdrawal process is almost similar for all banks. However, the procedure after logging in may vary depending on the bank.

Offline FD Withdrawal

The following are the steps for premature withdrawal of fixed deposit offline – 

  1. Firstly, you have to physically visit the nearest bank branch where you have opened the FD account. 
  2. You have to submit the required withdrawal form and a deposit certificate, ID proof and photograph. 
  3. After successfully verifying all documents, you will receive the funds to your savings bank account. 

Disadvantages of Premature Withdrawal of Fixed Deposit

Whenever investors opt for a premature withdrawal of a fixed deposit, they stand to lose on various factors. The following are the disadvantages – 

  • Penalty: If you opt for premature withdrawal of a fixed deposit, you have to pay a specific penalty to the bank. The penalty charged by the bank generally ranges between 0.50% to 1.00%. The penalty charges may vary depending on the bank, the fixed deposit duration, and the amount invested in FD. 
  • Loss of interest: When you withdraw before maturity from your fixed deposit, you must know that you will not get the exact amount based on the rate of interest and duration of the fixed deposit, at the time of investing in fixed deposit. This is because the amount has been withdrawn before the said investment tenure. Thus, while calculating the amount you will receive from premature withdrawal, the penalties are also included. 
  • Halt to Financial Objective: Investment in FD provides you with guaranteed returns in the form of interest at the end of your tenure. Hence, if you have planned a series of cash outflows with FDs, the premature withdrawal of FD will disturb the cash flow and the financial objective you plan to achieve. 
  • Time Taking Process: Opting for premature withdrawal of fixed deposits online can be an easy process. However, when you have to visit the branch physically to submit the documents for withdrawal of FD, it might be a cumbersome and time taking process. This is because you have to submit all the relevant documents and get approved by the senior officials.