Recurring Deposit Withdrawal Before Maturity: Fees and Other Charges
July 15, 2025

Early withdrawal or pre-closure of RD may attract penalties. Additionally, you would lose out on interest earnings. That said, in emergency situations, where you're in need of urgent cash, RDs could be a saviour. That's why RDs are considered as one of the best financial vehicles to build emergency fund.
In this article, we'll guide you on the implications of withdrawing your RD before maturity. We've highlighted the potential charges involved in pre-closure of RD so that you can make an informed decision.
Understanding Recurring Deposits (RDs)
Let's quickly recap what a Recurring Deposit is. An RD is a financial product offered by banks that allows you to save a fixed amount of money on a regular basis for a predetermined period. The deposited amount earns interest over time, compounded and paid out on a quarterly basis. Once the maturity ends, the principal amount along with the accumulated interest is credited to your bank account. RD tenure ranges from 6 months to 10 years. You can break your RD before 6 months, but a penalty fee of 1% would be levied on the applicable rate.
Recurring Deposit Premature Withdrawal Penalties
If you’re planning to break your RD before maturity, consider the penalty charges involved. Generally, a penalty fee of 1% is levied on the applicable interest rate pertaining to the date of withdrawal. For example: let’s say you have opened a Recurring Deposit with Ujjivan SFB for 5 years. The interest rate for 5-year RD as on 19 June 2025 is 7.20%. For any emergency reason, you decide to withdraw your RD within 6 months. As on 19 June 2025, 6-month RD interest rate is 6.50%. So, you’ll be eligible for 6.50% - 1% = 5.50% interest rate.
But what happens if your withdraw your RD after 6 months but before maturity date? Ujjivan doesn’t charge any premature RD withdrawal fee for withdrawals made after 6 months from the time of deposit. Let’s take the same example to understand this better. Let’s assume you have withdrawn the amount on the 13th month from the time of deposit. The applicable interest rate as on 19 June 2025 is 7.65%. So, you’ll be eligible for 7.65% interest.
But 7.65% interest is more than 7.20%. So, the returns would be more, no? Well, not really. RD interest is compounded quarterly. The interest keeps earning interest and over time provides higher returns.
Why You Should Not Opt For Early Withdrawal of RD?
To withdraw your RD before maturity may seem like a convenient option in times of financial need, but there are several compelling reasons to avoid doing so. Here are the key considerations:
Penalties and Reduced Returns
Most banks impose a penalty of 1% on the interest earned if you withdraw funds prematurely. This can significantly reduce your overall returns, as you'll lose the interest on the withdrawn amount. Apart from this, when you redeem your RD before maturity, the interest rate applied to your remaining balance may drop, further diminishing your potential earnings.
Impact on Financial Planning
RDs are designed to encourage disciplined saving over time. Premature withdrawals can derail your savings plan and hinder your ability to reach financial goals, such as purchasing a home or funding education. By withdrawing early, you miss out on the benefits of compounding interest as well.
Tax Implications
The interest earned on RDs is taxable, which means that any premature withdrawal could lead to a higher tax burden if you're not prepared for it. This could further reduce your net returns from the investment
Final Thoughts
In conclusion, early withdrawal of RD is possible, but it may come with penalty or fees. By understanding the process and potential charges involved, you can make an informed decision when faced with the need to access your funds early.
Remember to reach out to your bank or financial institution for specific guidelines on early RD withdrawal. Keep in mind the penalties or fees associated and evaluate your situation to determine if premature withdrawal is the best course of action.
Start small, dream big! Invest in Ujjivan Small Finance Bank’s Recurring Deposit and enjoy higher interest rates! Save for your long- and short-term goals with our RD and live a stress-free financial life. Start investing with just ₹100!
Disclaimer:
The contents herein are only for informational purposes and generic in nature. The content does not amount to an offer, invitation or solicitation of any kind to buy or sell, and are not intended to create any legal rights or obligations. This information is subject to updation, completion, amendment and verification without notice. The contents herein are also subject to other product-specific terms and conditions, as well as any applicable third-party terms and conditions, for which Ujjivan Small Finance Bank assumes no responsibility or liability.
Nothing contained herein is intended to constitute financial, investment, legal, tax, or any other professional advice or opinion. Please obtain professional advice before making investment or any other decisions. Any investment decisions that may be made by the you shall be at your own sole discretion, independent analysis and evaluation of the risks involved. The use of any information set out in this document is entirely at the user’s own risk. Ujjivan Small Finance Bank Limited makes no representation or warranty, express or implied, as to the accuracy and completeness for any information herein. The Bank disclaims any and all liability for any loss or damage (direct, indirect, consequential, or otherwise) incurred by you due to use of or due to investment, product application decisions made by you on the basis of the contents herein. While the information is prepared in good faith from sources deemed reliable (including public sources), the Bank disclaims any liability with respect to accuracy of information or any error or omission or any loss or damage incurred by anyone in reliance on the contents herein, in any manner whatsoever.
To know more about Ujjivan Small Finance Bank Products Visit:"https://www.ujjivansfb.in"
All intellectual property rights, including copyrights, trademarks, and other proprietary rights, pertaining to the content and materials displayed herein, belong
to Ujjivan Small Finance Bank Limited or its licensors. Unauthorised use or misuse of any intellectual property, or other content displayed herein is strictly prohibited and the same is not intended for distribution to, or use by, any person in any jurisdiction where such distribution or use would (by reason of that person’s nationality, residence or otherwise) be contrary to law or registration or would subject Ujjivan Small Finance Bank Limited or its affiliates to any licensing or registration requirements.
FAQs
1. Can I withdraw my RD before maturity using online facilities?
Yes, most banks allow you to withdraw your RD before maturity using online facilities. Check with your bank for their specific procedures and requirements.
2. Are there any penalty or fees that are applicable for early withdrawal of RD?
Most banks impose a penalty or fees of 1% on the interest rate applicable pertaining to the tenure (at the time of withdrawal). However, please do contact your bank branch officials for more details.
3. How long does it take to process an early withdrawal of RD?
It generally takes a few minutes to get the amount credited to your linked bank account.
4. Will withdrawing my RD affect my credit score?
No, withdrawing your RD prematurely does not directly impact your credit score as it is not a credit-based product.
5. What happens to the interest earned if I withdraw my RD early?
You will receive the interest earned up until the date of withdrawal.
Latest Blogs

Overconfidence Bias and Its Cost in Investing
June 24, 2025
Overconfidence is a well-documented behavioural bias in finance – often described as an “illusion of control” where investors overestimate their ability to predict or influence market outcomes.

What Makes a Savings Account Ideal for First Time Earners?
July 10, 2025
Starting your first job or gig is an exciting milestone. With your first earnings or salary in hand, one of the biggest questions is: "Where should I keep my money?"

How to Avoid Ineligible Deduction Claims While Filing ITR
July 09, 2025
Filing your Income Tax Return (ITR) for the financial year 2024-25 (Assessment Year 2025-26) requires careful attention to detail.

ITR-1 vs ITR-2: Understanding the Difference and Choosing the Right Tax Form
June 24, 2025
Filing your income tax return in India requires using the correct ITR form.

How Jewellers in India Calculate Gold Price
June 26, 2025
Gold jewellery holds a special place in Indian culture, often bought during festivals and family celebrations.
Quick Links
Registered with DICGC

