How can I break Recurring Deposit (RD) before maturity

Saving money systematically is a financial habit that many individuals adopt to secure their future. Recurring Deposits (RDs) are a popular savings instrument for this purpose, offering fixed returns with minimal risk. However, unforeseen financial emergencies may compel you to consider breaking your RD before maturity. While this is possible, it comes with specific rules, penalties, and implications. Let us explore the process, conditions, and impact of premature RD withdrawal in detail.

Breaking an RD before its maturity is subject to specific rules set by financial institutions. These rules ensure that the structured nature of the RD is maintained while providing flexibility in emergencies. Here are the key rules:

• Premature withdrawal is generally allowed only after the RD account has been active for a minimum of 12 months.
• Some banks and financial institutions, such as HDFC Bank, do not permit premature withdrawal of RDs.
• Axis Bank allows only complete withdrawal of the RD amount; partial withdrawals are not permitted.
• For Post Office RDs, one withdrawal is allowed, capped at 50% of the deposited amount.
• Withdrawn amounts must be repaid either in instalments or as a lump sum. If not repaid, the withdrawn amount, along with applicable interest, is deducted from the maturity value.

Pro Tip: Before initiating a premature withdrawal, consult your bank or financial institution to understand the specific rules applicable to your RD account.

Alternatively, consider investing in a Bajaj Finance Fixed Deposit, which offers higher returns with flexible tenures and easy liquidity options, making it a reliable choice for your savings goals. Explore Bajaj Finance FDs today.
 

Breaking an RD before maturity comes with specific conditions that vary across financial institutions. Here are the key aspects you need to consider:

Partial RD withdrawal

• Some financial institutions, like the Post Office, allow partial withdrawal of up to 50% of the deposited amount.
• The withdrawn amount must be in multiples of Rs. 5 and is subject to repayment in instalments or as a lump sum.
• Some banks do not allow partial withdrawal; only complete withdrawal is permitted.

Penalty

• Penalties are typically charged as a percentage (0.5% to 1%) of the applicable interest rate.
• For example, if your RD was earning 7.2% interest and you withdraw prematurely, the penalty may reduce the effective interest rate to 6.7%.

Lost interest rate

• When you withdraw your RD prematurely, the interest rate is recalculated based on the actual tenure completed.
• For example, if you had a five-year RD earning 7.2% interest but withdrew after one year, the interest rate might drop to the one-year RD rate, which could be 6.5%.
• The compounding benefits of long-term deposits are also lost, reducing overall returns.

Plan effectively by understanding reduced interest and penalties before breaking your RD prematurely.

You can also invest in Bajaj Finance FDs for stable returns. Start with as low as Rs. 15,000 get up to 7.30% p.a. returns. Open FD. 

To ensure a smooth premature withdrawal process, it is essential to have the required documents ready. These may vary slightly depending on your financial institution, but the commonly required documents include:

• Original RD account passbook: This serves as proof of your RD account details.
• Duly filled withdrawal form: Obtain this form from your bank or post office and complete it accurately.
• Valid photo ID proof: Examples include Aadhaar card, PAN card, or voter ID.
• KYC documents: Ensure your Know Your Customer (KYC) details are updated with the institution.
• Bank account details: Provide your account number for the transfer of the withdrawn amount.

Explore flexible RD withdrawal options at your nearest branch or through net banking services with your documents ready. Alternatively, consider switching to Bajaj Finance Fixed Deposits for higher returns and flexible tenures, offering a reliable way to grow your savings. 

Explore competitive FD rates and start planning for a secure financial future.

Breaking an RD before maturity can be a practical solution during financial emergencies, but it comes with penalties, reduced interest rates, and potential disruptions to your savings goals. Understanding the rules, conditions, and required documents is crucial for making an informed decision. Before opting for premature withdrawal, consider alternative solutions like loans against RD to avoid losing out on potential returns. Always consult your financial institution for personalised advice tailored to your specific needs.

If you are looking for a more flexible and rewarding savings option, consider AAA-rated FDs by Bajaj Finance. Senior citizens can get returns of up to 7.30% (0.35% extra as compared to customers below the age of 60). Book an FD.