If you break FD before maturity, you will not only get less interest, but also have to pay penalty. Know here what is the way to avoid this loss.
Fixed deposit schemes have been trusted by people over the years because after a certain period of time you get guaranteed returns in it. But many times when needed, people get the FD broken before time. But instead of breaking the FD, you should try to meet the need of money in some other way because it can cause you a lot of loss. If you break FD before maturity, you will not only get less interest, but also have to pay penalty. Know about it in detail here-
Less interest plus penalty
If you break the FD prematurely, then you do not get the interest on it, which was told to you when you started the FD. According to SBI rules, your interest is deducted up to 1% if you break FD before maturity. Along with this, penalty is also recovered on the interest received on it. If you get FD up to Rs 5 lakh, then 0.50% penalty has to be paid for breaking that FD before maturity. On the other hand, 1% penalty has to be paid for premature break on FDs of more than 5 lakhs and less than one crore.
Understand by example
Suppose you have got an FD of Rs 1 lakh for one year. On which you are getting interest at the rate of 6 per cent, then after completion of maturity period i.e. after one year you will get the amount with full 6 per cent interest. But if the FD is broken before one year, 5 percent interest will be given, as well as a deduction of 0.50% on the interest received will also be done as a penalty. In this way, the amount will be given to you after deducting up to 1% of the interest received on FD and after charging the penalty, which means you will suffer a double loss.
How to avoid loss
There are two ways to avoid the loss of prematurely breaking the FD. First, if you feel that you may need money after some time and due to no other option, you may have to break the FD, then get the FD done for a short period. The second way is that instead of investing all the money in one FD, get several FDs of small amounts. This will mean that there will be no need to break all FDs on premature withdrawal. You can run your business by withdrawing money from 1-2 FDs.
