If I were to extend the bank FD term before it gets over, will I have to pay a penalty? -- Himanshu Kukreja, Noida
You will not be able to extend the term of the FD before it matures. Extension is but a new deposit that invests the proceeds of a matured FD without having to give you a redemption cheque and take back another investment cheque from you. So, making a deposit requires funds, which you won’t have before the existing deposit matures. You have the option of prematurely closing the existing FD, releasing the funds and investing them in a new FD. Such a withdrawal will have a penalty, or loss of interest income, depending on the terms and conditions of the FD.