One of India's most desired investment / saving methods is fixed deposits. In addition to delivering reasonably low risk and guaranteed returns, they offer a variable alternative, instead of the regular or interest payment option. While opening a bank FD you can opt from 2 types of account i.e. with premature withdrawal facility and without premature withdrawal facility (fixed lock-in period). By considering a penalty charged by most of the major banks with a set of terms and conditions you can initiate a partial withdrawal from your FD account or else you can close the account before the maturity period.
The penalty charges range from 0.55 per cent to up to 1 per cent of the FD amount in case of making a premature withdrawal or closing the FD account before the completion of tenure period. For a minimum deposit of Rs.5 lakh, a penalty of 0.05 per cent will be charged and similarly 1 per cent for deposits above Rs 5 lakh up to Rs 1 crore if you are a holder of SBI bank FD. Similarly, you will be charged Rs 1,500 as penalty from your deposit if you have Rs 3 lakh of FD with the bank and a penalty of Rs 18,000 will be charged if you have an FD of Rs 18 lakh with the bank.
On the other side a penalty of Rs 0.50 per cent for deposit less than Rs 5 crore and tenure less than 1 year, and a penalty of 1 per cent for a tenure between 1 year and above is charged by ICICI Bank for making a premature withdrawal from FD. Consequently, HDFC Bank charges a 1 per cent penalty for premature withdrawals, partial withdrawals and sweep-ins from FDs.
It is suggested to keep in mind that banks typically pay interest for the entire period of the deposit made with the bank that is 0.50% or 1% lower than the rate applicable at the time of account is opened, or lower than the rate contracted, whichever is lower.
Please note that for certain types of customers, some banks eliminate the penalty on FDs for a particular tenure and do not penalise on premature withdrawals from FD. Therefore, it is suggested to check the guidelines of your bank before initiating a premature withdrawal from your FD. Consequently, for most banks, there is no penalty on withdrawals that are rendered within 7 or 14 days of the account opening date.