For account holders wanting to withdraw money from fixed deposits before their term ends, bigger banks such as State Bank of India (SBI) and HDFC Bank have their own terms and conditions.
Risk-averse and conservative investors still prefer to invest their money in bank fixed deposits (FDs) in India. The safe and secure nature of the investment is the reason for the attraction towards FD. Some investors also opt for the cumulative option, instead of the regular or interest payment options.
FDs comes with a wide range of tenures. You can choose from 7 to up to 10 years. Nevertheless, liquidity of FD can be an issue, as premature withdrawals are generally not allowed or come with a penalty. Broadly Fixed deposit is categorized into two types: i) with premature withdrawal facility; ii) without a premature withdrawal facility (compulsory lock-in period).
Premature withdrawal from an FD basically means that the account holder is allowed to close the FD before its term ends. With a penalty to banks, depositors can make a premature withdrawal of their fixed deposits. For account holders wanting to withdraw money from fixed deposits before their term ends, bigger banks such as State Bank of India (SBI) and HDFC Bank have their own terms and conditions.
Here is the comparison of premature withdrawal rules and regulations on fixed deposits of SBI and HDFC Bank:
In case of Premature withdrawal from SBI Fixed Deposits (FDs)
– According to SBI’s website (sbi.co.in.), if you want to make a premature withdrawal from SBI FDs, for an amount below Rs. 5 lakh, you have to pay a penalty of 0.50% across all maturities.
– In case of Premature withdrawal from SBI fixed deposit within Rs. 5 lakh to Rs. 1 crore, the bank will charge you a fixed penalty of 1% for all tenors, according to SBI.
– For the period the deposit has remained with SBI, the interest is 0.50% or 1% below the rate applicable at the time of fixed deposits or 0.50% or 1% below the contracted rate, whichever is lower.
– Further, interest will not be paid on the FDs which remain for a period of less than 7 days.
In case of Premature withdrawal from HDFC Bank Fixed Deposits (FDs)
– According to the bank’s website, before the completion of its period (FD), HDFC Bank allows withdrawal from the fixed deposit as per the terms agreed upon at the time of placing the deposit.
– The interest rate applicable for premature closure is lower of either the base rate for the contracted tenure/maturity period for which the FD has been booked or the base rate applicable for the tenure for which the deposit has been with the Bank.
– Deposits of less than Rs. 1 crore as on the date of booking the deposit the base rate is the rate applicable to deposits.
– The base rate is the rate applicable as on the date of booking the fixed deposit, for deposits less than Rs. 5 crores.
– HDFC Bank levies a penalty of 1%, for premature withdrawals, including sweep-ins and partial withdrawals, on the applicable rate.
– According to HDFC Bank, the penalty for premature withdrawal will not be applicable on FDs booked for a tenor of 7 to 14 days.