The people of India, in general, prefer to invest in bank fixed deposits and this is not limited to risk-averse and conservative investors. Investment in fixed deposit is safe and secure in nature and offers a cumulative option, instead of the regular or interest payment options.

There are various tenures to choose from while parking one’s money in FD, which ranges from 7 days up to 10 years. However, when it comes to making withdrawals in advance from a fixed deposit account, it can be an issue as depositors are not allowed to make a pre-mature withdrawal, or a penalty is charged by the bank. While opening an FD account depositors can choose from two types of account- Fixed deposit with premature withdrawal facility or without premature withdrawal facility, wherein the second one has a compulsory lock-in period.

Opting for premature withdrawal in FD means depositors can withdraw their amount and close the account before the term ends, with an added penalty which is generally a percentage of the deposited amount. However, major banks like the State Bank of India, HDFC Bank, ICICI Bank have their own set of terms and conditions when it comes to withdrawing money from an FD account before maturity.

Here is how your FD account from either of these banks will be treated if you wish to make a premature withdrawal:

Treatment of your money in case of premature withdrawal from SBI fixed deposits

  • If the depositor wants to make premature withdrawal of his FD from SBI before the completion of its tenure, the depositor has to pay a penalty of 0.05 per cent across all tenures, for any amount below 5 lakh. If you have deposited Rs 3 lakh with the bank as a fixed deposit, you will be charged Rs 1,500 as a penalty.
  • For deposits above Rs 5 lakh up to Rs 1 crore, a penalty of 1 per cent will be applicable. For instance, if you have a fixed deposit of Rs 18 lakh with SBI, and you make a premature withdrawal, you will be charged a penalty of Rs 18,000. The bank will pay interest for the whole period the deposit has remained with the bank.
  • The interest will be 0.50 per cent or 1 per cent lower than that of the rate applicable at the time of the deposit or lower than the contracted rate, whichever is lower.
  • No interest will be paid for deposits that have remained with the bank for less than 7 days.

Treatment of your money in case of premature withdrawal from ICICI Bank fixed deposits

  • In case you plan to make a premature withdrawal from your FD account with ICICI Bank, the request is processed within a day, but in case you plan to close your FD account with ICICI Bank before the maturity date, the request is processed immediately.
  • Once a request for premature closure is made with the bank, it cannot be canceled.
  • On premature withdrawal of an FD account, the interest is paid as per the rate of interest applicable for that tenure during which the deposit was with the bank. However, an additional penalty will be charged on the deposit.
  • For deposit less than Rs 5 crore, with a tenure of less than 1 year, a penalty of Rs 0.50 per cent will be charged, and for tenure between 1 year and above 1 per cent will be charged.
  • On the closure of the FD account, the funds will be credited to the savings account selected by the depositor while opening the account.
  • Note that, requests for premature closure of a linked FD account or a money multiplier FD account are not processed online. The depositor needs to visit the branch for that.

Treatment of your money in case of premature withdrawal from HDFC Bank fixed deposits

  • In case of premature closure of the FD account with HDFC Bank, the interest rate applicable is either the base rate for the tenure/maturity period for which the FD has been opened or the base rate applicable for the tenure for which the deposit has been with the bank, whichever is lower.
  • The base rate will be applicable on the deposit, for deposits of lower than Rs 1 crore as on the date of opening the FD account.
  • The bank charges a penalty of 1 per cent, for premature withdrawals, including sweep-ins and partial withdrawals.
  • Note that HDFC Bank does not charge any penalty for any premature withdrawal made from an FD account within the tenor of 7 to 14 days.