Ranjan Varma

HDFC Charges 1% Penalty on Sweep-in/Premature withdrawals February 6, 2011

A reader wanted the HDFC penalty to be shared on my blog. While there’s nothing illegal with the charge and Banks are at liberty to charge this, it’s important to be aware of these things.

Moreover, if you happen to know the right guys and/or are able to make the right noise, I’ve seen that some of these charges can be waived. I especially have seen the waivers happening in case of prepayment charges which your loan company charges for paying early.


The reader writes:
Note: “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%.” This will be applicable with effect from 24th January 2011.”
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Does this not sound a little weired and trust breaking. Probably bank does not want to increase the interest rate and at the same time do not want the fund to flow out hence, made a new rule starting Jan 24, 2011 and not even bothered to advertise this.


As I said, it’s normal for Banks to raise charges to keep their profit margin up and healthy. In India, it’s normal to consider the interests of the shareholders first and consider the interest of the customers last.

But things are changing. You are becoming more aware of your rights and responsibilities. You need to raise your voice. Raise your voice so that you become a priority for your Bank/Financial Institution.

After all, they need you as much as you need them.

Thanks for reading. Please check out our financial planning workshops and You can send us email for details about the workshops and book.

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Ranjan Varma has written 471 post on this blog.

Ranjan Varma has over 20 years of work experience in the financial services industry. Ranjan has worked with LIC & LIC Housing Finance in various positions like Branch Manager, Manager Sales, Area Manager, Deputy Regional Manager, etc. Ranjan has experience working in areas like Sales, Marketing, Investments & HR. Ranjan Varma has been interacting on his blog @ http://ranjanvarma.com since 2007, with posts on how to manage money. Ranjan Varma edits a personal finance website and has built products & tools for financial management @ http://rupeemanager.com. Ranjan also delivers training on personal finance. Ranjan has spoken at various seminars/workshops at Corporates and many Educational Institutions. Ranjan believes in Vipassana, a way of self-transformation through self-observation (to see things as they really are). Ranjan also aspires to create new businesses & projects from time to time.

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HDFC Charges 1% Penalty on Sweep-in/Premature withdrawals

13 Comments

  1. Sanjay

    It is shocking to say the least. What it means is if I put a fixed deposit in HDFC for 6 months and liquidate after 1 month then I wont even get the full principal back.

    I am going to stop opening FDs in HDFC bank. Their interest rates never have been great anyway.


  2. KS

    Sweep in FDs was a great option to convert debt instrument like FD to liquið cash immediately.. Its almost like MNP where the customer has the option to churn banks, but wit the 1% penalty am sure other banks will soon follow suit and FDs might even lose their glitter (if at all there was any !)


  3. Smart Singh

    Am I the only one here who thinks that 1% penalty is not much. Many banks have charged as much as 3% penalty for premature liquidation.
    And the deposit is supposed to be ‘fixed’, right?


  4. Sanjay

    I would have been okay if the penalty would have been 1% of principal or 50% of interest whichever is minimum.


  5. NB

    Which is the best bank to have a sweep in account? Any thoughts?


  6. bharat shah

    i am doubtful that the penalty could be on principal amount. i think, it would be on the rate of interest for the time period for which the sweep in a/m swept to saving account from the fd i.e. 1% less than the interest rate for that preriod , applicable at time of sweeping. please elaborate your view / actual provision.


  7. Vishal

    I clarified with HDFC Bank. It is not as bad as it seems.
    1. FDs booked before Jan 24 2011 don’t have these penalties. So currently, only FDs booked within last 2 or 3 weeks are affected.
    2. Bharat Shah is right – instead of (say) 7% interest rate, you would get 7-1=6% interest rate for the period. But no penalty on the principal.


  8. Sanjay

    @Vishal,
    Thanks for info.
    For premature closure, calculating interest with 1% interest rate less than mentioned one is very common practice. The wording of note made the confusion.


  9. coolvyakti

    Why is that banks like HDFC cannot express financial facts clearly in “english”? The whole “Premature withdrawal” description was confusing as “hell” and since current corporate houses seem to be getting away with all kinds of “tricks” from cell phone companies to banks to other service providers – obviously people like to get their facts clear before they step into “quick sand” and then have to chase some dorky customer service idiot who keep repeating the same damn thing over and over.
    Recently I had the same experience with HDFC’s “other investment schemes” – where their staff wants to “explain” things to you in person; and then when you look at the details on the website – there is none. This is the case for e.g.. with their “Classic Assured” product, for which there are no details on the website.
    What is HDFC becoming? a bunch of “snake oil” salesmen?


  10. Ella

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  13. Shalini

    Even one is unaware whether there FD is in sweep in. These employee
    what they do with customer account is really unknown.I don’t know why this whole world are busy in snatching others money only….I just want to spit on them really they are so disgusting yak…………


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Ranjan Varma

Ranjan Varma has over 20 years of work experience in the financial services industry. Ranjan has worked with LIC & LIC Housing Finance in various positions like Branch Manager, Manager Sales, Area Manager, Deputy Regional Manager, etc. Ranjan has experience working in areas like Sales, Marketing, Investments & HR. Ranjan Varma has been interacting on his blog @ http://ranjanvarma.com since 2007, with posts on how to manage money. Ranjan Varma edits a personal finance website and has built products & tools for financial management @ http://rupeemanager.com. Ranjan also delivers training on personal finance. Ranjan has spoken at various seminars/workshops at Corporates and many Educational Institutions. Ranjan believes in Vipassana, a way of self-transformation through self-observation (to see things as they really are). Ranjan also aspires to create new businesses & projects from time to time.

HDFC Charges 1% Penalty on Sweep-in/Premature withdrawals February 6, 2011

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