As interest rates inch upwards, returns on fixed deposits (FD) are also getting better, but it may not be a good idea to hop from one FD to another, hoping for a better rate of interest. If you decide to withdraw the earlier fixed deposit to make your money work harder, it will come at a cost to you.
HDFC Bank, one of the few banks that were not charging a penalty on premature withdrawal, will now charge a penalty of 1 per cent from next week. However there are banks such as the Punjab National Bank which has halved its penalty to 1 per cent in line with the penalties that other public sector banks charge like State Bank of India. While ICICI Bank charges a penalty of 0.5 per cent to 1.5 per cent depending on the tenure and size of the fixed deposit. Axis Bank and IDBI Bank are the only banks that do not charge a penalty. RBI guidelines allow banks to determine the penalty on premature withdrawal. "If someone is breaking a contract they will have to pay a penalty," said K.C.Chakrabarty, Deputy Governor of Reserve Bank of India. This means if a customer decides to invest Rs. 1 lakh in a three year fixed deposit and chooses to withdraw it at the end of the first year, he will get the rate applicable on one-year deposits, but the penalty will be deducted from the interest rate payable. Experts say that with penalties for premature withdrawal becoming the norm, it will be wiser to put your money into a fixed deposit scheme for a shorter tenure.
HDFC Bank, one of the few banks that were not charging a penalty on premature withdrawal, will now charge a penalty of 1 per cent from next week. However there are banks such as the Punjab National Bank which has halved its penalty to 1 per cent in line with the penalties that other public sector banks charge like State Bank of India. While ICICI Bank charges a penalty of 0.5 per cent to 1.5 per cent depending on the tenure and size of the fixed deposit. Axis Bank and IDBI Bank are the only banks that do not charge a penalty. RBI guidelines allow banks to determine the penalty on premature withdrawal. "If someone is breaking a contract they will have to pay a penalty," said K.C.Chakrabarty, Deputy Governor of Reserve Bank of India. This means if a customer decides to invest Rs. 1 lakh in a three year fixed deposit and chooses to withdraw it at the end of the first year, he will get the rate applicable on one-year deposits, but the penalty will be deducted from the interest rate payable. Experts say that with penalties for premature withdrawal becoming the norm, it will be wiser to put your money into a fixed deposit scheme for a shorter tenure.
No comments:
Post a Comment