Recurring Deposit (RD) – Premature Withdrawal, Closure, Late Payment Charges

Recurring Deposit (RD) Premature Withdrawal

Recurring deposit is a type of account wherein you authorize banks to deduct fixed amount of money from your savings account every month (you can also deposit online) and tenure varies for each bank. For e.g. In SBI the minimum tenure is 1 year whereas for ICICI it is only 6 months. And maximum tenure is 10 years for both the banks. Minimum deposit amount varies between public and private banks which has higher monthly deposits.

Interest Rate on Early Withdrawal/Closure

In RD premature withdrawal is possible however the interest rate offered would be less as compared to the normal base rate which is 8.40% per annum. However some banks would deduct interest rate by 1%-2% for which the deposit remained in the bank.


Minimum lock-in period for RD account is 1 month and account holder’s request for premature withdrawal before this lock-in period would earn zero interest and in such cases, only the principal amount deposited would be refunded to the account holder by the banks. In addition to the penal interest, any incentives offered are also denied.

Default/Late Payment Charges

If an investor misses to pay monthly instalments for 3 consecutive months or more (varies for each bank) then your account would be permanently closed/discontinued until the account holder pays the outstanding payment due. However banks might penalize by applying service charge which is very small Rs. 10. If person does not want account revival and wants money back then the account holding bank will apply premature withdrawal rules and accordingly interest would be applied.

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