Rules & tax
RD Premature Closure Rules
Closing an RD early — penalty, revised interest, bank-wise rules, and partial withdrawal or loan alternatives.
Updated 30 September 2026Highest RD rate now
7.25%
Bandhan BankWhat you need to know
You can usually close an RD before maturity. The bank pays interest at the rate applicable for the period the RD actually ran, minus a penalty (typically 0.5%–1%). Some banks pay no interest if the RD is closed within the first few months. Post Office RD can be closed after 3 years.
Bank-wise rules
| Bank | Minimum instalment | Missed / late instalment | Premature closure |
|---|---|---|---|
| State Bank of India | ₹100 (multiples of ₹10) | Nominal penalty for delayed instalment, varies with instalment amount | 1% penalty; rate as per bank deposit policy |
| HDFC Bank | ₹500 (steps of ₹100); ₹1,000 online | Interest on daily balances if instalments pending at maturity | 1% charge; no interest if closed before lock-in |
| ICICI Bank | ₹500 (multiples of ₹100) | ₹12 per ₹1,000 per month of delay, deducted from maturity interest | 0.50%–1.50% penalty depending on tenure and deposit size |
| Axis Bank | ₹500 | ₹10 per ₹1,000 per month (RDs opened after Aug 2016) | Rate 1% below that applicable for period held |
| Punjab National Bank | Rs 100/month, multiples of Rs 1 | Rs 1 per Rs 100 per month | Allowed; 1% penal interest on applicable rate |
| Bank of Baroda | ₹50 | As per bank rules | 1% on applicable/agreed rate (deposits <12 months or ₹5 lakh–₹1 crore); ₹1 crore+: 31 days' notice, 1.5% deduction |
| Kotak Mahindra Bank | ₹100 | Penal interest of RD rate + 2% p.a. for the month of delay | Lower of contracted/holding-period rate minus 0.5%–1%; no interest if closed within 1 month |
| YES Bank | Rs 1,000/month | 1% charged for missed instalments | Allowed; charges may apply (none on Flexigain RD) |
| Union Bank of India | ₹100 | No penalty for missed instalments (Union Monthly Plus) | Allowed; interest for completed period at applicable rate, penalty per bank policy |
| Bandhan Bank | Rs 100/month, multiples of Rs 1 | Nominal penalty as per bank rules | Allowed; 1% penalty |
| IndusInd Bank | ₹1,000 | Nominal penalty on late/defaulted instalments (amount not stated) | Allowed; interest recalculated for actual tenure, less penalty |
| Central Bank of India | Rs 100/month, multiples of Rs 50 | Rs 1.50 per Rs 100 (up to 5 yrs); Rs 2.00 per Rs 100 (above 5 yrs) | Allowed; 1% penal interest |
| IDBI Bank | Rs 500/month (SSP) | As per bank rules | Allowed; 1% reduction in applicable rate |
| Karnataka Bank | ₹50 | Missed instalments can be paid later with a small charge | Penalty 0.50% (below Rs 2 crore) / 1.00% (above Rs 2 crore) on applicable rate |
| South Indian Bank | ₹100 | Rs 1.50 per Rs 100 per month beyond grace period | 1% penalty |
| Tamilnad Mercantile Bank | — | Penal interest if instalment delayed beyond 30 days; account may be closed if >3 months in arrears (1% penalty on closure) | Permitted per bank's RD rules (1% penalty on bank-initiated closure) |
| Canara Bank | Rs 50/month (Nitya Nidhi); Flexi RD Rs 500 | As per bank rules | As per bank rules |
| Bank of India | Rs 500/month (Flexi RD Rs 1,000) | Rs 1.50 per Rs 100 per month (up to 5 yrs); Rs 2.00 per Rs 100 (above 5 yrs) | Below Rs 5 lakh: 0.50% penalty if before 12 months, none after; Rs 5 lakh+: 1% penalty |
| Indian Bank | ₹100 | Nominal penalty on late/missed instalments (amount not stated) | Allowed; interest at rate for actual tenure run, less applicable penalty |
| Indian Overseas Bank | ₹50 | Nominal penalty for late instalments (rate not stated) | Allowed; 0.5%-1% penalty, interest recalculated for actual tenure |
| Federal Bank | Rs 50/month, multiples of Rs 10 | As per bank rules | Permitted at reduced interest per bank rules |
| DBS Bank India | Rs 100/month | As per bank rules | Allowed; may attract charges or lower interest |
| Dhanlaxmi Bank | Rs 1,000/month, multiples of Rs 500 | Nominal penalty (rate not specified) | No interest if closed within 12 months; after 12 months interest for actual tenure less 1% |
| Punjab & Sind Bank | ₹10 | As per bank rules | Allowed; nominal penal charges (amount not stated) |
| Saraswat Co-operative Bank | ₹500 | Penalty may be levied on delayed instalments (amount not stated) | 1% below applicable rate for period deposit remained with bank |
| UCO Bank | ₹100 | Interest may be computed differently (daily balance basis) on missed/delayed instalments | 1% if closed within 1 year, 0.5% after 1 year (Sowbhagya RD) |
Alternatives to closing
- Take a loan or overdraft against the RD (commonly up to 80%–90% of the balance).
- Pause by paying missed instalments later with the penalty, if the bank allows.
- Post Office RD allows a loan of up to 50% of the balance after 12 instalments.
Frequently asked questions
Will I lose all interest?
No, you get interest for the period held at a reduced rate — unless you close within a very short initial period at some banks.
For information and comparison only. Confirm rates and rules with your bank or post office.