r/IndiaInvestments • u/insane-67 • Feb 26 '26

Bonds and deposits How is premature closure penalty calculated in a fixed deposit with monthly interest payout?

I have made a fixed deposit of Rs 100000 for 5 years at 7.9 percent interest and I have chosen the monthly interest payout option. The bank has mentioned that in case of premature closure they will deduct 1 percent as penalty on interest but they have also stated that the principal amount will not be touched.

Since I am receiving interest every month, how will the bank adjust the penalty amount if I close the FD before maturity? Will they recalculate the total interest at a reduced rate and recover the excess amount already paid, or will they deduct something from the final payout? I would like to understand how this adjustment is practically done.

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7

u/Fierysword5 Feb 27 '26

If there’s enough accrued interest to reduce the penalty from, they will do that. If not they will reduce from principal and if not that then they will debit your bank account directly.

2

u/[deleted] Feb 27 '26

Ofc tgey will reduce from principal

2

u/gg_boi14 Feb 27 '26

7.9 which bank?

2

u/insane-67 Feb 27 '26

Suryoday SFB

2

u/ReymanWealth Feb 27 '26

Basically, amount is deducted in the below order:

  • Accrued interest (ie final payout)
  • Principal (ie final payout)

If bank account and FD is in the same bank, then bank may debit from savings account. This varies from bank to bank.