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Premature FD Closure: How Much Will You Lose? Understand the Calculation!
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News18•02-10-2026, 12:49
Premature FD Closure: How Much Will You Lose? Understand the Calculation!
- •Fixed deposits (FDs) in banks or post offices are generally considered a safe form of investment.
- •Sometimes, money may need to be withdrawn from an FD before maturity, leading to potential losses.
- •Premature FD closure results in a reduced interest rate and may incur a penalty.
- •For example, closing a 2-year FD after 10 months might reduce the interest from 7% to 5%.
- •Instead of breaking an FD, consider taking a loan or overdraft facility against it to meet financial needs.
Key Questions Answered
When you close an FD prematurely, the bank calculates interest based on the actual tenure the money remained invested rather than the original term, and an additional penalty rate of around 1 percent is deducted from it.
If a 5 lakh rupee FD at 7 percent interest is broken after 10 months, you receive an effective interest rate of 5 percent, yielding about 5.21 lakh rupees at maturity, which is a loss of roughly 51,000 rupees compared to the full 2-year maturity amount.
Yes, if you need money urgently, you do not necessarily have to break your FD, as you can take a loan or an overdraft facility against the fixed deposit from your bank.
