Investors will be able to break their fixed deposits (FDs) in non-banking financial companies (NBFCs) prematurely within three months from the date of its creation from January 1, 2025, as per the latest rules of the Reserve Bank of India (RBI). According to its August 12 circular, NBFCs can offer the withdrawal facility to customers without deducting any interest. However, it will be allowed only during financial emergencies, subject to the NBFC’s satisfaction.

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Current Rule

Currently, the premature withdrawal facility is not available in NBFCs. According to RBI’s “NBFCs’ Acceptance of Public Deposits Rules 2016”, no NBFCs can grant a loan against a public deposit or prematurely repay it within three months of its acceptance.

Further, it says, “In the event of the depositor’s death, the NBFC will repay the public deposit prematurely, even within the lock-in period, to the surviving depositor/s in the case of a joint holding or the nominee or the legal heir/s on the request of the surviving nominee/legal heir, subject to the submission of proof of death, and the satisfaction of the company”.

What Is Revised?

NBFC customers can now prematurely withdraw an FD within three months of its creation. The earlier rules provided for a three-month lock-in.

Deposits up to Rs 10,000 can be withdrawn 100 per cent prematurely or within three months at the depositor’s request. The NBFC will not charge interest on such withdrawals. Additionally, the withdrawal request must be made within three months from the date of deposit.

For deposits up to Rs 5 lakh, one cannot withdraw more than 50 per cent of the principal amount. Also, no interest payment request can be made within three months from the deposit date. The balance amount with the NBFC will earn interest.

What Are Withdrawal Conditions?

One can break an FD within three months during a medical emergency, natural calamity, or a disaster notified by the government. It is also allowed during a critical illness. Depositors can withdraw up to 100 per cent of the principal amount. A critical illness will be considered as defined under the IRDAI (Health Insurance) Regulations, 2016, and its amendments. In addition, the revised rules will apply to new and existing deposits where the facility is not available.

Maturity Intimation

NBFCs must inform depositors about the maturity of their deposits at least 14 days before, as per the revised rules. The previous rule allowed them to inform depositors before two months.

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Passbook Record of Nominations

Currently, NBFCs must inform depositors about the nomination in writing. In revised rules, RBI advised NBFCs to develop a system to cancel or change nominations. It further suggests updating the nomination on passbooks as ‘nomination registered’ or writing the nominee’s name in the passbook if a customer agrees. The new rules will apply from January 1, 2025.