Fixed Deposit: Some people break their Fixed Deposit before Maturity when suddenly money is needed. In such a situation, they have to pay the fixed amount to the bank as penalty.
Fixed Deposit: Penalty is usually imposed for breaking Fixed Deposit before the maturity date. At the same time, the private sector bank Axis Bank has given great relief to its customers. The bank has said that premature closure of new retail term deposits booked for 2 years or more after 15 December 2020 or beyond will not be fined. This discount will be available in the new FD and RD.
This bank gave relief
The bank has said that to avail this rebate to the customer, they have to keep their FD or RD operational for 15 months. If customers break their FD or RD after completion of 15 months, then they will not have to pay any kind of pre-match penalty. If the customers of FD and RD make the first withdrawal equal to 25 percent of the principal of the deposit scheme, then they will not be charged any penalty.
Generally 1 percent fine
Premature withdrawal allows people to withdraw investment money before maturity if needed. For the need of money in emergency, customers break their FD ahead of time, then they have to pay a fixed amount to the bank as a penalty. Traditional FD usually attracts a penalty of 1 per cent on the interest amount on premature withdrawal.
Example: 5 years maturity, but break in 1 year FD
investment: Rs 1 lakh
FD Time: 5 years
5 years interest: 7 percent
Interest on 1 year: 6 percent
If the penalty is 1 percent and FDs break after 1 year, then the interest rate will be considered 6-1 = 5 percent.
How to avoid loss
There are 2 special ways to avoid such damage. First, if you feel that after some time you may need money and due to no other option, you may have to get FD, then you should get FD for a short time. 6 month or year option will be right for you. The second way is that you do not put all the money in a single FD and make several FDs of small amount. This will mean that there will be no need to break all FDs before withdrawing money. You can run your work by withdrawing money from 1-2 FDs.