Breaking FD for current higher interest rate

POSTED BY nsabhyankar ON September 3, 2013 10:34 am ONE COMMENT

Given the following situation, does it make sense to break the existing FD and go for a new one with a higher interest rate? I am asking this out of academic interest but is this practically feasible?

What happens if the current interest rate is say, 9% or 9.5%? Is it advisable then?
Existing FD details:

Date of FD start: 1st July 2013
Rate of interest: 8%
Maturity Date: 2nd Jan 2014
Term: 6 months 1 days

Current rate of interest for 46 days to 6 months: 8.5%

Premature Liquidation clause: Effective 01st Dec’06, the interest rate applicable for premature closure of deposits (all amounts) will be lower of :

The base rate for the original/contracted tenure for which the deposit has been booked
OR
The base rate applicable for the tenure for which the deposit has been in force with the Bank.
The base rate is the rate applicable to deposits of less than Rs.15 lacs as on the date of booking the deposit. As per the Terms & Conditions of Fixed Deposit Accounts of the bank, the penalty on premature closure of Fixed Deposits including sweep-in and partial closures has been fixed by the Bank at the rate of 1%.

One reply on this article “Breaking FD for current higher interest rate”

  1. Dear nsabhayankar, due to this 1% penalty, the actual earning on your revised rate ‘ll be lower than the old Fd rate. For the same maturity date.

    thanks

    Ashal

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