Is there a penalty for withdrawing a fixed deposit of ₹30 Lakhs before maturity?

While most banks and NBFCs allow premature withdrawal of a fixed deposit (FD) of ₹30 lakhs. It typically comes at a cost—reduced interest earnings and possible penalties. Before you prematurely break your FD, consider alternatives like taking a loan against your deposit, which lets you access funds without sacrificing returns. Also, check if your FD has a minimum lock-in period, especially for tax-saving schemes, which may restrict early exit. Here’s what typically happens when you withdraw a large FD before its term ends:

• Penalty Charges Applied: Most financial institutions typically impose a penalty for early FD withdrawal. This is often a reduction in the interest rate, depending on the financial institution’s policy.
• Reduced Interest Rate: If you break your ₹30 lakh FD early, the bank or Non-Banking Financial Company (NBFC) generally calculates interest based on the rate applicable for the period the FD was held. For instance, if withdrawn after 1 year, you might get the 1-year FD rate, often lower than the 7% or higher rate for longer tenures.
• Loss of Expected Returns: A lower interest rate and penalty can significantly reduce earnings. For a ₹30 lakh FD, this could mean losing a substantial amount of interest.