How To Avoid Before Penalty On Premature Withdrawal On Fixed Deposit

Bank FDs are one of the best investment options for savers looking to build a good retirement fund. Depending upon your financial needs, you can choose between FDs with terms of up to 10 years. These FDs can be easily liquidated whenever an investor would like. However, to avoid any surprises or regretful decisions that might arise due to early withdrawals or other unexpected reasons, here is a list of ways that will eliminate any chances you’re going to experience penalties if you attempt an early withdrawal on your fixed deposit

Three Approaches to avoid premature withdrawal on Fixed Deposits –

Smart Strategies to Avoid Bank FD Premature Withdrawal Penalties are:

1. FD laddering

Bank FD ladders are a technique that involves breaking a lump sum of investments into smaller investments to invest in different maturity times. The reason behind laddering Bank FDs is for better management of liquidity with total investment. You can break your investment into small parts or fragments and have each invested across the maturity periods. For example, if you have ₹5 lakh to invest in FD’s, you might purchase a five-year FD, a three-year FD, and two year FD as well as one or more one-year maturity FDs. 

2. Sweep-in Facility

The sweep-in facility is a nice little feature that allows you to move whatever extra funds you may have in your savings and into a fixed deposit – and then, later on, withdraw the entire amount, plus the interest it has earned! Different banks offer different names for the same function. The best part is that you can withdraw the money when you need to and still have the rest earning interest there until specific conditions are met. 

To be eligible for Sweep-in Facility, one has to open an FD of ₹25,000 or more with their bank. There are no penalties for emergency withdrawals, and the Sweep-in Scheme continues to earn you interest even after you withdraw the funds if needed due to emergency reasons.

3. Loan Against FD

Banks allow their depositors to take out a loan against their fixed deposits. You should visit several banks to determine which one offers the best deal for a loan on a term deposit. Banks charge interest for a loan on a term deposit that is generally 1-2% more than that charged by these banks on other loans. The interest rates differ from bank to bank.

Best FD Interest Rates in India

  1. Axis Bank’s FD interest rate is 5.75%. The rate is 6.5% for senior citizens, which is the highest among all in the market.
  2. The Second highest interest rates apply to ICICI and HDFC bank customers who wish to extend their FDs for five or more years at 5.50% p.a.
  3. SBI offers the third highest interest rate at 5.40% p.a for five years or longer term.


There are numerous benefits associated with FDs, not least of which includes choices when it comes to tenures. For instance, one can deposit their cash in an FD that’s short-term or long-term. Now that’s not only more convenient but also beneficial! So go ahead and grab the best-fixed deposits with a high-interest rate.

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