I had locked into two bank fixed deposits with two different banks in October 2015. Both these will end on October 2017. I wish to make a premature withdrawal and was informed by the PSU bank that I will have to bear a 1 per cent penalty charge for foreclosure. The same is not the case with the private bank. What is my recourse?
Deepti Rajput, Jaipur
It is standard practice for banks to state an exit clause when FDs are being broken or terminated before maturity. If the penalty and the rate are mentioned in the deposit document, the PSU bank is entitled to deduct the penalty of 1 per cent before terminating your FD, while paying you the stated interest on the deposit. Banks lock-in the money that you have deposited for a defined term, and any early redemption impacts the funds that it has deployed with your deposit. It is for this reason that banks very clearly lay out the financial impact of exit clause in case of premature withdrawals. As for the private sector bank, which is not charging you any penalty, it may be their policy to not charge penalties based on the amount deposit or the time when you are closing the deposit. As you are a few months from the deposit coming to a natural closure, they may be waving any penalty otherwise applicable. Such a move is solely the bank’s discretion and depends on several factors such as the deposit sum, tenure, prevailing interest rates, and your banking relationship and so on. With just 5-6 months to the end of the deposit term and prevalent lower interest on FDs compared to two years ago, you may be better off to continue the deposit. In case you still need the money; you are left with no choice but to pay the penalty.
