Premature Withdrawal Of Fixed Deposit: Can You Withdraw Money Before Maturity?

A fixed deposit or FD is one of the safest investment instruments in India that offers guaranteed returns at a very low risk. Here, you can deposit a certain amount in the fixed deposit account for a fixed tenure and earn interest on your investment.

When you invest in a fixed deposit, your investment is locked in for a pre-specified tenure. So, if you need to withdraw the money before the FD maturity date, you can opt for a premature withdrawal of the fixed deposit.

In this article, we will learn more about the premature withdrawal of fixed deposits and its consequences.

Withdrawing your investment from a fixed deposit before its maturity period is completed is called premature withdrawal. You may want to opt for a premature withdrawal from your FD if you are in need of funds urgently or if you wish to invest that amount in a different investment option.

If you wish to make a premature withdrawal from your fixed deposit, you can do it through your bank’s net banking facility or by visiting the bank’s branch. Once you submit the withdrawal request, the bank will process it and transfer the money to your bank account.

However, if you opt for a premature withdrawal from your fixed deposit, you will have to face certain consequences.

#1 Penalties

Most banks usually charge a penalty for withdrawing your fixed deposit before its maturity. This penalty is usually 0.5% - 1.00% of the rate of interest. However, some financial institutions and banks may not charge any penalty if you are withdrawing the amount due to an emergency.

#2 Interest Loss

You invest in fixed deposits to earn interest on your invested amount. When you make a premature withdrawal from your fixed deposit, you will lose out on the interest income that you would have earned on completing the tenure.

#3 Prevention Of Growth

Fixed deposit investments have the potential to multiply into a substantial amount over time. The longer the investment tenure, the more value addition you can get on your fixed deposit. You can use this multiplied capital for various financial goals. However, when you withdraw your FD prematurely, it will hinder this growth as you will only receive your invested amount back, without any incremental amount.

Now, you know that withdrawing your fixed deposits can lead to adverse and unwanted consequences. Hence, you must consider the following things before deciding to withdraw your fixed deposit before its maturity:

• Read through the terms and conditions of your fixed deposit carefully and check the penalties charged on premature withdrawal.

• Look out for any alternate modes of arranging finances instead of withdrawing your fixed deposit. These could include personal loans or availing a loan against your fixed deposit.

• Always ensure that you have adequate liquid assets and that you don’t only rely on your fixed deposits for financial backup. These could include stocks, gold, mutual funds, etc.

Also Read: Ahead Of The Festive Season, Here's How Banks Are Upping Fixed Deposit Rates To Attract Depositors