Banks to levy on premature withdrawal of F.D

The banks are planning to impose fine on the premature withdrawal of the fixed deposits. Most of the banks are considering the proposal for implementation. Earlier there was no such penalty on premature withdrawal of the fixed deposits.

There are some public sector banks that have already started to levy on premature withdrawal but the private sector banks were tolerating the practice in order to attract more and more customers to invest with their bank.

For past few months the deposit rates are on a constant rise and that is why there has been a sudden rise in the premature withdrawal of the fixed deposits. Continuous migration of the investors is creating a lot of problem for the banks as such acts were putting unnecessary pressure on the liquidity position of the banks.

Hence, private sector banks have also started taking the situation very seriously . Pioneering the trend in the private sector bank HDFC Bank announced to levy 1 percent interest rate on premature withdrawals.

IDBI Bank also announced new guidelines for the same. The bank announced to impose 1 percent penalty on the withdrawal of the term deposit opened on or after 1 January 2011 however it gave relaxation to the customers that opened deposit account before January 1, 2011.
IDBI Bank said in a statement "Interest payable on prematurely withdrawn deposits will be the contracted rate or the rate applicable for which the deposit remained with the Bank, whichever is lower, less 1 per cent penalty."

South Indian Bank raises deposit rates

The Thrissur based South Indian Bank has raised the deposit rates across various maturities. Earlier the bank revised the deposit rates on 4^th September last year.

Such a move was very much expected from the bank ,as all the other banks are consistently increasing their deposit rates in order to attract more and more customers so that their deposits could rise. Apart from this, the bank is offering an additional 0.50 interest rate to the senior citizens across all the maturities .

The new deposit rates are in effect from 24^th January.

Preclosure penalty on FD from HDFC

Like other banks HDFC Bank has also decided to impose a penalty on the premature withdrawal of the money from the fixed deposit scheme. Earlier the bank did not used to impose any penalty for the purpose . Regarding the matter the issued a statement stating “As per the terms and conditions of fixed deposit accounts of the bank, the penalty on premature closure of FDs, including sweep-in and partial closures has been fixed by the bank at the rate of 1%. This will be applicable with effect from 24th January 2011.”

Most f the private sector banks impose a penalty on the premature withdrawal of money from the fixed deposit scheme on the other hand some banks like Axis Bank and IDBI Bank stand firm on their decision to not to impose any penalty on premature withdrawal.

Executive Director and CFO of Axis Bank Mr Somnath Sengupta said “We do not have any penalty for premature withdrawal . However, in case of premature withdrawal, the depositor will not get the interest for the original period but for the period the deposit has actually run,”

An official from HDFC Bank said that the customers that have invested in the Fixed Deposit scheme of the bank have a clear choice whether to continue with the investment with the bank or not as the amendment on the penalty will be applicable from 24^th January a day before the RBI announces the monetary policy for the third quarter.

RBI has provided customers the liberty to withdraw money before the fixed tenure however it is up to the bank if it wants to implement the penalty in premature withdrawal. According to the guidelines from RBI if the bank intends to impose penalty then the bank must make sure that the customer is made aware about the fact.

ING Vysya raises deposit rates

ING Vysya Bank has announced increase in the deposit rates across various maturities. The rates are increased by a maximum of 1 percent.

According to the new deposit rates the customers will now earn an interest of 8.75 percent on the maturity of 501-729 days against 7.75. The maturity of 201-364 days will now earn 7.75 percent and the maturity of 365-499 days will earn 8.50 percent interest rate according to the revised deposit scheme.

There has been several other revivals in the interest rates across various maturities. The new deposit rates will be effective from 14^th January.

New deposit scheme from Union Bank of India

Public sector lender Union Bank of India has announced the introduction of a new deposit scheme. The bank announced the new deposit scheme on Saturday will start will start accepting deposits under this scheme from today itself.

In the new deposit scheme the bank is offering an interest rate of 9.15 per cent per annum on a deposit of 1100 days.

Prior to that , the bank also introduced a deposit scheme for 700 days for in which the bank offers interest rate of 8.60 percent.

Deposit rates hiked by Bank of Maharashtra

Bank of Maharashtra has revised fixed deposit rates for various maturities. Earlier the bank revised the deposit rates on 15^th December last year. The revision in the interest rates by the bank might be step from the bank to attract more people and to increase the deposits.

The bank has raised the interest rates ranging 25 to 75 basis points over various other maturities. According to an official , deposits under Mahalaxmi Term Deposit Scheme, for three-year period will get 8.60 per cent, an increase of 30 basis points.

The new interest rates came into enforcement from 10^th of December. The bank offers an additional interest of 0.50 percent on the maturity slabs from 91 days to less than a year and the interest rate has been raised from 0.50 to 0.75 for all the maturities above one year slab for senior citizens

Bank of Baroda revises Deposit Rates

Like the other banks, Bank of Baroda has also raised the deposit rates across various maturities. The bank has raised the deposit rates in the range of 25 to 75 basis points.

Now, on a term deposit of 91-180 days the customers would earn interest of 6.25 percent raised from 5.50 percent earned earlier , similarly the term deposit for 181-270 days would fetch an interest rate of 7.00 percent compared to 6.25 percent. The bank has raised deposit rates on various other maturities.

Bank of Baroda last raised the fixed deposit rates on 10^th December 2010. The bank has made this move to attract more funds to tide over liquidity.