Premature withdrawal of term deposit
Banks must allow premature and partial withdrawal of deposits, subject to conditions, which have to be notified to depositors in advance by the banks.
The rate of interest on the deposit is lower of the contracted rate or the one for the shorter deposit period at the time of taking it.
The interest rate for the curtailed deposit may be reduced further by penal interest, if it is applicable. This may range between 0.5% and 1%.
Banks can prescribe a minimum period for a term deposit. No interest is payable if the deposits are withdrawn before the completion of this period.
Banks may waive the penalty charge if the deposit is held for a minimum period. It may also be waived for deposits with very short tenures, typically 90 days.
A bank may disallow premature withdrawal of large deposits, which are held by entities other than individuals or HUFs.
Source: Economic Times
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