FD interest rates changed: old FD break and create new?

1. Calculate the original maturity amount.

2. Calculate the surrender value of FD (principal amount + interest till now - penalty of breaking of FD(it will be 1 or 2% of interest earned))

3. Calculate the new maturity value with the remaining tenure, current interest rate, and new principal amount (i.e.  surrender value from point 2)

4. Compare the old and new maturity value, if it makes a difference then you can create new FD, otherwise continue with the old FD

Also, you can create FD laddering to deal with this increasing interest rates

Penalty of 1% will be charged on original interest rate

if u r making profit by breaking and creating why not it needs to calculated there is no single answer, last time i checked for some fds it was profit so i broke them but for some which is already completed 5-11 months out of 2yr tenure there was no profit 

desiman wrote:

Penalty of 1% will be charged on original interest rate

Penalty is not on original intrest rate... It's prevailing intrest rate i.e intrest rate applicable for the period you have kept while breaking .. pls double check

JNR4U wrote:

Penalty is not on original intrest rate... It's prevailing intrest rate i.e intrest rate applicable for the period you have kept while breaking .. pls double check

Bhai sahab.... if you want to invest in FD for 10 years itself, then why go in for such a low rate of interest from "leading banks"... why not ask around/research before getting fooled? Government backed scheme is giving 7.7% for 10 years (guaranteed double in 9 years and 3 months +/- few days).

The rate of interest would start going down from March/April next year.

Ramta_Jogi wrote:

Bhai sahab.... if you want to invest in FD for 10 years itself, then why go in for such a low rate of interest from "leading banks"... why not ask around/research before getting fooled? Government backed scheme is giving 7.7% for 10 years (guaranteed double in 9 years and 3 months +/- few days).

The rate of interest would start going down from March/April next year.

mysalemo771 wrote:
suggest few such schemes

Kvp. 10 years. 7.5%

Nsc. 5 years. 7.7%

Ramta_Jogi wrote:

Kvp. 10 years. 7.5%

Nsc. 5 years. 7.7%

largest deno of NSC is 10000, handling will be big issue

I am looking at investment of about 10L and easy liquidity for emergency

mysalemo771 wrote:

largest deno of NSC is 10000, handling will be big issue

I am looking at investment of about 10L and easy liquidity for emergency

Upto you 

flash007 wrote:

1. Calculate the original maturity amount.

2. Calculate the surrender value of FD (principal amount + interest till now - penalty of breaking of FD(it will be 1 or 2% of interest earned))

3. Calculate the new maturity value with the remaining tenure, current interest rate, and new principal amount (i.e.  surrender value from point 2)

4. Compare the old and new maturity value, if it makes a difference then you can create new FD, otherwise continue with the old FD

Also, you can create FD laddering to deal with this increasing interest rates

kukdookoo wrote:
FD laddering
paji please explain this

Split your principal investment amount into 3 parts,

Create FD in this way: 

• 1st part for 1 year
• 2nd part for 2 years, 
• 3rd part for 3 years

Whenever your FD matures, renew FD for 3 years, so after 2 years, all fd will have a tenure of 3 years each.

This way you will have 1 FD maturing every year to manage any emergency cash requirement in any year and generally FDs with tenure of 2-3 year has the highest interest rate also, so that's the other benefit.

JNR4U wrote:

Penalty is not on original intrest rate... It's prevailing intrest rate i.e intrest rate applicable for the period you have kept while breaking .. pls double check

"In the event of Premature withdrawal before the specified tenure, the offered interest rate applicable will be the interest rate corresponding to the amount based slab (withdrawn amount) and basis the actual run period (tenure). Additionally, penal interest of 1% shall be levied on the premature withdrawal, if applicable."

This means if the original FD is for 365 days(say int. rate 7.5%), but the actual run is 130 days(say int. rate 5%). Interest will be given as per the actual run date minus 1% thus 4% ?

And if it's right this also applies for renewed FDs? Why don't they consider the total tenure in that case instead of counting the days only since the last renewal?

CC: @flash007

Tejaa wrote:

"In the event of Premature withdrawal before the specified tenure, the offered interest rate applicable will be the interest rate corresponding to the amount based slab (withdrawn amount) and basis the actual run period (tenure). Additionally, penal interest of 1% shall be levied on the premature withdrawal, if applicable."

This means if the original FD is for 365 days(say int. rate 7.5%), but the actual run is 130 days(say int. rate 5%). Interest will be given as per the actual run date minus 1% thus 4% ?

And if it's right this also applies for renewed FDs? Why don't they consider the total tenure in that case instead of counting the days only since the last renewal?

CC: @flash007

kukdookoo wrote:
Yes 4%. They should do that for renewal par apni kaun sunega bhai.

Faced a loss of 7K in interest due to this situation. The interest rate dropped from 7.5% straight down to 4%. Koi fayda nahi renewal ka.

.

All of this happened because I couldn't break the FD in time and reopen it due to a credit card lien (it required an offline visit and multiple follow-ups). Lesson learned: avoiding a FD-based credit card for minor benefits. BTW, this was with Indusind.