Depositors can’t break entire FDs within three months: RBI

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According to the latest rules and regulations as issued by the Reserve Bank of India (RBI), if you have opened a fixed deposit with any of the Non-Banking Financial Companies (NBFCs) including Housing Finance Companies (HFCs) in the country, and, if you break that FD within just three months, then, you will not be able to withdraw the entire amount.

Only 50 per cent amount withdrawal: RBI

According to the RBI, you can withdraw only 50 per cent of the principal sum of that FD or Rs 5 lakh whichever lower, if you break that FD within three months.

Suppose, you open an FD of Rs 12 lakh with a prominent HFC in the country like LIC Housing Finance. Suddenly, you need cash within two months, you can only withdraw 50 per cent of principal sum (Rs 12 lakh) = Rs 6 lakh or Rs 5 lakh whichever lower. So, in this case, you will be able to withdraw only Rs 5 lakh from your term deposit. And the remaining Rs 7 lakh, you will be able to withdraw only after three months.

Exemption for ‘tiny deposits’

It is to be noted that the RBI’s latest guidelines on corporate FDs do not apply to “tiny deposits” amounting to not more than Rs 10,000. Depositors can prematurely withdraw the entire principal sum of such “tiny deposits”.

Now, let’s see how much interest you will get on premature withdrawal of term deposits with NBFCs:

No Interest

You will not get any interest on your FD if you break it within first six months.

Two per cent Lower Interest

If you break the term deposit after six months, but before maturity, then, you will get interest amount. But the interest will be calculated at two per cent lower rate than the applicable rate. Interest accumulated till date of premature withdrawal will be credited to depositor’s bank account.

Even in case of “tiny deposits”, you will not get any interest if you break the corporate FD within first three months.

It is to be noted that according to the latest rules and regulations of the RBI, NBFCs including HFCs cannot allow customers to open fixed deposits of tenures of more than five years. While, the minimum tenure of fixed deposits is one year.

It is to be noted that the latest guidelines of RBI apply only on corporate FDs and not on term deposits opened with banks.