How can You Withdraw Premature Fixed Deposits?

A fixed deposit is a popular investment option where you invest your funds for a fixed period, ranging from 7 days to 10 years. The investor selects the tenure for investment based on his financial needs. He gets his principal amount with accumulated interest at the time of maturity.

Premature withdrawal

Withdrawing invested funds from the fixed deposit account before maturity is called early withdrawal. On this basis, fixed deposits can be of two types – with provision for early withdrawal and without the premature withdrawal provision. 

The first type of FD allows the investor to withdraw his funds before maturity. However, he has to pay a penalty of a certain amount to avail of this facility. On the other hand, a fixed deposit without the provision for premature withdrawal does not allow the closure of the FD account before the maturity time. 

Points to consider before Premature Withdrawal

Premature withdrawal helps you meet your urgent financial needs, but it also has negative consequences. These are some of the points to keep in mind while deciding on premature withdrawal:

• Penalties: 

The investor has to pay the penalty to the bank or the NBFC in case of early withdrawal. The penalty amount generally ranges from 0.50 % to 1.00 % of the interest. This penalty amount may change as and when the bank updates its policies.

• Loss of Interest: 

Due to the premature withdrawal of the funds, the investor will not get the returns he would have received if he continued with the FD account for the decided tenure. Along with the reduced interest amount, he is also losing by paying the penalty. 

• Financial Growth on halt:

The premature withdrawal of the funds from FD will disturb your cash flow and budget planning. Fixed deposits are the schemes to provide the investor with guaranteed returns as interest at maturity. 

• Premature Withdrawal is a Cumbersome Process: 

Early withdrawal of the fixed deposit is a cumbersome process. It is not a simple transaction. One has to go through several steps to get his funds before maturity. 

 How to break a fixed deposit before maturity?

You can break a fixed deposit and withdraw your funds prematurely either by visiting your bank or NBFC in person or through net banking. If you are doing the process in person by visiting the financial institution, you will have to submit your fixed deposit receipt, which all the account holders duly sign. If the receipt is misplaced by chance, all the joint holders of the FD account will have to fill out a fixed deposit liquidation form. After filling out and submitting this form, the financial institution will process the request for premature withdrawal, and the money will come to your personal savings account in a few days. 

As we can see from the above points, it is not advisable to opt for premature withdrawal of the FD amount. It has many disadvantages. One should raise funds by some other means, if possible.