Recurring deposits allow you to save funds through monthly investments over a period of time. You can choose the duration and the amount you want to deposit based on the rules of the institution where you save, and your preferences.
In this article, we will discuss if you can withdraw an RD before it matures and what are the rules, penalties, and other conditions related to it.
Some banks may allow you to withdraw money from an RD before maturity. Whether a partial withdrawal or a complete withdrawal is allowed depends on the rules and regulations of the bank.
For example, HDFC Bank does not allow complete or partial withdrawals from an RD account till the account reaches maturity. Whereas, Axis Bank allows only complete withdrawals before RD maturity.
However, post offices allow you to partially withdraw money from an RD before it matures.
Even when an institution allows breaking an RD before maturity, there are specific rules and regulations about it. Let’s take a look at some common ones -
In the case of post office RD accounts, you can make only one withdrawal before the RD maturity
You can withdraw up to 50% of the amount deposited in your post office RD account
Post office RDs allow withdrawals only if the RD has been active for 1 year, and 12 consecutive deposits have been made
You must repay the premature withdrawal funds in either partial or lump sum
The withdrawal amount must be in multiples of Rs.5
When you make a withdrawal, the bank or post office may charge a simple interest on it
If you fail to repay the amount before your RD matures, it will be deducted from the maturity amount
On choosing to break an RD or partially withdraw from an RD before maturity, some charges or penalties will be incurred. Depending on the guidelines of the institution, you will have to pay a penalty (generally 0.50% - 1.00%).
You will also lose some interest amount. The interest amount paid with the maturity value will be lesser as it is calculated for the time it stays active.
Here is a list of the documents required for a premature withdrawal from an RD account -
Duly filled application form for premature withdrawal (partial or complete)
The original transaction logbook
A valid identity proof such as an Aadhaar card and PAN card
Withdrawing money from an RD before maturity involves some paperwork. Here is how you can do it online -
Visit your financial institution’s website.
Find the ‘Savings’ section, and select ‘Recurring Deposits’.
Choose the option for withdrawal. Then, submit the form, and the required documents.
You can also do this process offline if you prefer that. Here are the steps you need to follow -
Visit the branch where you started your recurring deposit account.
Request the officials for a withdrawal form and fill it out.
Submit the form along with the required documentation.
When you open an RD account, you have some options. You can choose to get your maturity amount in the same bank account that you hold or in some other bank’s account. You can also choose to reinvest it in an RD.
Depending on what you choose, your maturity amount will be directly deposited into the account of your choice.
To know more Recurring Deposit articles here:
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The decision to break or close an RD prematurely depends on your financial scenario. Breaking an RD should be considered as a last option when all other options have been tried and tested.
However, if you have no alternatives left but to make a premature withdrawal, it is momentous to ensure timely repayment. Failing to do so may result in the RD not delivering the intended benefits.
You can make informed decisions regarding your investments by understanding the rules, penalties, and procedures for premature withdrawal. Ensure compliance with the RD scheme's terms and conditions by consulting with Post Office /bank personnel or perusing the official guidelines.
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