Premature bidroll allows investors to withdraw the investment money before maturity if needed.
In case of emergency, customers break their FD before maturity to require money, then they have to pay a fixed amount to the bank as a penalty.
- January 17, 2021, 5:49 AM IST
The bank said that to avail this rebate to the customer, they have to keep their FD or RD operational for 15 months. If customers break their FD or RD after the completion of 15 months, then they will not have to pay any kind of pre-maturity penalty. If the bank’s FD and RD customers make the first withdrawal equal to 25 percent of the principal of the deposit scheme, then no penalty will be charged from them. In this news we will talk Usually, how is the penalty imposed for breaking a fixed deposit before the maturity date.
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What is premature bidrolPremature bidroll allows investors to withdraw the investment money before maturity if needed. In case of emergency, customers break their FD ahead of time for the money required, then they have to pay a fixed amount to the bank as a penalty. In traditional FDs, a penalty of 1 per cent is generally applicable on the interest amount on premature bidroll.
Example: 5 years maturity, but FD is to be broken in 1 year
Investment: Rs 1 lakh
FD duration: 5 years
Interest on 5 years: 7 percent
Interest on 1 year: 6%
If the penalty is 1 percent and FDs break after 1 year, then the effective interest rate will be considered 6-1 = 5 percent.