Premature withdrawal of a Fixed Deposit (FD) may be unavoidable in certain situations, but it incurs a penalty charge. Fortunately, there are ways through which you can withdraw money from your fixed deposit account without even breaking it. You can earn a monthly income if you invest in a non-cumulative FD. Another way to avoid the penalties is through FD laddering, which gives you the flexibility to access the funds without breaking the deposit.

Before opening a fixed deposit, you need to know the various types and features that will help you achieve your financial goals efficiently. Investing in an FD is a great way to develop a healthy habit of saving. With Shriram Fixed Deposit, you can invest your money in a structured deposit scheme and earn predetermined interest for the selected tenure. You can also get predictable interest rates depending on the deposit tenure and scheme terms offered by the institution.

Starting a new FD requires you to lock-in a lump sum of your money for a fixed tenure. In some cases, especially emergencies, you may require the money you have set aside. So, how can you withdraw the money from a fixed deposit before maturity? Let's explore how to access the funds in your FD.

What is the Premature Withdrawal of a Fixed Deposit?

Premature withdrawal of an FD means breaking the deposit with a penalty to access the funds before its pre-determined maturity date. The reasons why a person may choose to withdraw their money may differ. Some could be doing it for an emergency, while others may have found a better investment scheme and want to invest immediately. Prematurely breaking an FD will usually result in a penalty that you will have to pay.

If you don't want to break the FD and incur any penalties, you can choose a non-cumulative FD. It features a regular payout of the interest accumulated on the fixed deposit so that you can use the earned money for your needs. You may also opt for the FD laddering strategy where you have multiple FDs with different maturity dates.

How to Close an FD Before Maturity?

The process of closing your FD before maturity is straightforward, whether you opened it online or offline. Your financial institution will inform you of the applicable penalty for early withdrawal and credit the remaining amount to your registered bank account. You'll need to visit the branch in person to close the FD before its maturity.

What are the Penalty Charges for Premature Withdrawal of an FD?

Early withdrawal from your fixed deposit is permitted after 3 months, but penalty charges apply in the form of reduced interest rates.

3-6 months: No interest earned—principal returned only

After 6 months: Interest calculated at 2%-3% lower than your contracted rate

Process: Visit your branch with FD receipt and identity proof. The financial institution will calculate applicable charges and credit remaining funds to your registered bank account.

How to Access FD Interest Without Breaking Your Deposit?

Multiple options let you access funds from your FD without breaking it and facing early withdrawal charges. Here are ways to withdraw interest from your FD:

FD Laddering

Fixed Deposit Laddering involves creating multiple FDs with different maturity periods using a lump sum amount. This creates FDs that mature at staggered intervals, giving you periodic access to funds. You can reinvest maturing amounts to maintain the ladder for ongoing liquidity needs.

Non-Cumulative FD

With a non-cumulative fixed deposit, you select your preferred interest payout frequency. Options include monthly, quarterly, half-yearly, or annual payouts. This provides regular income from your investment without needing to break the principal.

Since interest is paid periodically, you won't receive it as a lump sum at maturity. Shriram Finance offers non-cumulative fixed deposits with up to 8.15%* p.a. (inclusive of an additional 0.50%* p.a. for senior citizens and 0.05%* p.a. for women depositors) interest rate. You can use the Shriram FD calculator to check the interest rates for the amount you want to deposit.

Conclusion

There are many ways in which you can invest in an FD. You can invest in the ways described above so that you can avoid breaking an FD. Opening a new fixed deposit is always a good idea as you can earn more interest on your money than keeping it in a regular savings account.

Key Highlights:

• Premature withdrawal of a fixed deposit may result in penalties or reduced interest payouts.
• You can withdraw an FD without breaking it in multiple ways.
• You can earn a monthly income if you invest in a non-cumulative FD.
• FD laddering can help you earn interest on your fixed deposit amount while also giving you the flexibility to access the funds.

FAQs

Can we withdraw interest monthly on FD?

Yes, a non-cumulative fixed deposit gives you the option to earn a monthly income from the interest on your deposit.

How can I earn monthly interest?

You can earn monthly interest by opening a non-cumulative fixed deposit. Shriram Finance offers cumulative and non-cumulative account options so you can choose the best one to grow your money.

How is FD monthly payout calculated?

The Shriram FD Calculator can help you determine your monthly interest payout once you feed in a few variables, like the principal amount invested, tenure selected, and payout option.