The State Bank of India (SBI) has announced the 2025 rules for premature fixed deposit (FD) withdrawal, thus making it clear to their customers the penalties, the interest calculations and the conditions of early withdrawal. These rules are prepared in such a way that they will allow the investors to have some flexibility, while the bank will still be in a position to remain stable financially. These rules are indispensable knowing, particularly for the depositors, who for one reason or another, may need to terminate their FD before maturity—because of emergencies.
Premature Withdrawal Penalty Structure
A penalty is imposed by SBI in case a customer withdraws their FD before the maturity date that was pre-agreed. If the retail term deposits are no more than ₹5 lakh, then the applied penalty will be 0.50% of the deposit amount. If the deposit exceeds ₹5 lakh, the penalty further goes up to 1%. Consequently, larger withdrawals—these are the ones which have more impact on the bank’s liquidity—carry higher penalties. The customers need to be very clear with this deduction before they proceed with the early withdrawal request.
Reduced Interest Rate After Early Withdrawal
Withdrawing an FD before the maturity date, the rate at which interest will be paid is less than the agreed rate. SBI does the interest calculation by either of the following methods:
- The original interest rate minus the penalty, or
- The prevailing rate applicable for the period the FD remained active—whichever is lower.
- In such a case, the depositors might get less interest than they expected, especially if they take out the deposit shortly after it has been opened.
No Interest for FDs Held for Less Than 7 Days
According to the SBI rules, the customer who withdraws an FD within the first 7 days will receive no interest at all; this is the case irrespective of the deposit amount. This rule applies even if the FD was made at a highly favorable rate. This rule discourages depositors from breaking their FD before the very minimum period.
Impact on Final Payout for Customers
If an investor withdraws the amount beforehand, the investor’s final payout will be reduced by the interest earnings and, in addition, the penalty charge. To illustrate, an early withdrawal of a ₹3 lakh FD can attract a penalty of approximately ₹1,500 besides the loss of interest that has been earned. More significant the withdrawal is earlier, the larger the loss potential is. It is recommended that customers weigh the needs for the funds against the financial loss of early withdrawal.
When Premature Withdrawal Makes Sense
Even though there are penalties, the withdrawal of the deposit may be needed in emergencies of medical kind, sudden financial requirement, or urgent expenses. In such situations, the possibility of withdrawing an FD is a great support. It is advisable for customers to weigh their lost interest against their immediate need for cash before making a choice. Otherwise, taking a loan against the FD may be one of the options to consider.
Checklist Before Breaking Your FD
Before going for premature withdrawal of your FD, check the following:
- The penalty that concerns your deposit amount.
- The new interest rate after the withdrawal period.
- The total money you will have post-deductions.
- If there are options for partial withdrawal or FD loan under your scheme.
Also Read: PPF Withdrawal Rules 2025: Easy Guide To Partial, Premature & Full Withdrawals