While it is generally recommended to let the RD mature for the intended period to maximize its benefits, unforeseen emergencies may necessitate an early withdrawal.
RD premature closure is when you wish to withdraw your money from a Recurring Deposit (RD) account before its actual maturity date. While it is generally recommended to let the RD mature for the intended period to maximize its benefits, unforeseen emergencies may necessitate an early withdrawal.
Rules for premature RD amount withdrawal
Different banks and financial institutions may have slightly varying policies regarding a Recurring Deposit's premature withdrawal. However, some general rules apply:
- Most banks allow only one premature withdrawal before the RD account matures. Only 100% withdrawal is permitted in case of RDs.
- The minimum tenure for booking an RD with Axis Bank is 6 months. In case of premature withdrawal, restrictions on minimum tenure is not applied.
Conditions of premature withdrawal of RD
You could choose a premature withdrawal due to reasons like having a financial emergency, getting a better investment opportunity elsewhere, or a change in the initial purpose for opening that RD. Here are the conditions you need to note during the Recurring Deposit's premature withdrawal:
1) Partial RD withdrawal
Most institutions do not allow partial RD withdrawal.
2) Penalty
You might wonder 'Can we break a Recurring Deposit before its maturity date without facing significant penalties?' The penalty for breaking RD before maturity varies depending on the institution. Most banks and financial institutions levy a penalty for premature withdrawal of RD, ranging from 0.5% to 1%, depending on the period remaining until maturity.
3) Lost interest rate
Premature withdrawal also entails a loss of interest amount. The interest that you get will be lower than the originally mentioned rate, as it is calculated for the period during which the deposit remains active.
What documents are required to withdraw money from the RD Account before maturity?
The required documents for premature RD withdrawal can vary between institutions. However, some common documents typically include:
- Original RD account passbook and a duly filled withdrawal form
- Photo ID proof like a PAN card or Aadhaar card
- Any other documents as mandated by your specific bank or institution
Should I make a premature withdrawal on my RD?
The decision to prematurely withdraw your RD depends on your individual circumstances and financial goals. You need to weigh the potential benefits against the costs:
- Benefits: You can access your funds for immediate needs, be it funding an emergency or to get potentially higher returns elsewhere.
- Costs: Some consequences that you may face when prematurely closing an RD account are penalty charges, lost interest income and potential disruption to your financial planning.
It's important that you carefully assess your situation and consider alternatives like borrowing against your RD (if available), meaning seeking a loan or an overdraft, before prematurely closing your account.
It is recommended to keep premature closure of RD as your last resort. You can plan your finances to avoid such situations with Axis Bank's Recurring Deposits and build your savings with minimum monthly instalments of ₹500. You can earn interest on your RD for 6 months to 10 years.
FAQs
1. Can I withdraw the entire amount as part of a premature withdrawal?
Yes, since only complete withdrawal is permitted, you can withdraw the entire deposited amount prematurely. However, you will be subject to the applicable penalty and lose out on the contracted RD interest rate.
2. Will the bank levy a penalty for premature RD closure or withdrawal?
Most banks and financial institutions do levy a penalty for premature closure of RD or withdrawal. The penalty amount varies depending on the institution and the remaining period until maturity.
3. Is it mandatory to keep the account operational for a particular number of years before premature withdrawal?
Some institutions might have a minimum tenure requirement before allowing the premature closure of RD. Even if you're willing to accept the lower interest rate, you cannot withdraw the funds before the specified period.
Disclaimer: This article is for information purpose only. The views expressed in this article are personal and do not necessarily constitute the views of Axis Bank Ltd. and its employees. Axis Bank Ltd. and/or the author shall not be responsible for any direct / indirect loss or liability incurred by the reader for taking any financial decisions based on the contents and information. Please consult your financial advisor before making any financial decision.
