Preclosure of deposits in Indian banksMany banks levy a penal interest on the preclosure. For example if you have invested 1 lac on an FD for five years and if you want to close it after one year, the bank will pay only the interest applicable for one year minus a penal interest( which is upto one per cent) unless the proceeds of the closure is invested for a longer period.
This rule in my opinion is not morally sound. I have a trick. You close it after one year and invest the proceeds( without penal interest)for a fresh deposit of five years. Close the new deposit the next day( I do not know whether you can close the same day!) You just lose a very small amount - the one days interest!
The bank has to do a lot of clerical work for their not very moral rule! I know Canara Bank doest not charge penal int