Can I Withdraw from a Corporate Fixed Deposit Prematurely?

Can I Withdraw from a Corporate Fixed Deposit Prematurely?

Corporate fixed deposits are becoming increasingly popular among investors due to higher returns compared to traditional bank fixed deposits. Many people use fixed deposits as emergency funds, breaking them for premature withdrawal in times of need.

Understanding Premature Withdrawal of Fixed Deposits

Fixed deposits are often used to handle emergency situations, but they come with a penalty for early withdrawal. This discourages people from breaking deposits and encourages long-term investment. If a corporate FD is closed prematurely before 7 days from the booking date, banks or corporates may not pay any interest to the investors.

Can I Withdraw from Corporate Fixed Deposits Prematurely?

Yes, you can withdraw your money from corporate fixed deposits before maturity, but the process differs slightly from bank fixed deposits. Corporate FDs have a minimum lock-in period of 3-6 months, and not all corporates allow premature withdrawal within this period. After 6-12 months, companies may charge a penalty for premature withdrawal.

Penalty on Premature Withdrawal

Penalty charges are levied by banks or companies to discourage frequent withdrawals and promote a savings habit. Premature withdrawal of corporate fixed deposits also attracts penalties.

How to Close Corporate Fixed Deposits Prematurely?

There are two methods to close corporate fixed deposits prematurely:

1. Traditional Method: Visit the branch or office to complete the formalities, including filling out the form and submitting documents and FD receipt.
2. Online Withdrawal: Some NBFCs and companies allow online FD withdrawal if the FD was opened online. Active internet connection and a device are required for online withdrawal.

Disadvantages of Premature Withdrawal

Premature withdrawal of corporate fixed deposits has certain disadvantages:

• Penalty: A penalty ranging from 2-3% is charged for premature withdrawal.
• Loss of Interest: Withdrawal before maturity results in loss of interest, and penalty charges may apply.
• Affects Your Goals: Short-term investment goals may be affected due to premature withdrawal.
• Time-Consuming Process: Premature withdrawal involves multiple steps and can be time-consuming.

How to Avoid Premature Withdrawal

To avoid premature withdrawal of corporate fixed deposits:

1. Invest as per Goals: Align your investment with specific goals to discourage premature withdrawal.
2. Avail Loans: Consider availing a loan against your fixed deposit instead of premature withdrawal.
3. Involve Laddering Approach: Diversify investments with different FDs maturing at various times to reduce risk.

Conclusion

Corporate fixed deposits are a popular choice for emergency savings, but it's essential to plan investments according to your goals. Premature withdrawal can be avoided by understanding the lock-in period and exploring alternative options like loans against FDs. Proper planning ensures your investment remains aligned with your financial objectives.