Private sector lender, HDFC Bank has decided to levy penalty on customers for preclosure of fixed deposits. This new rule will come into effect from January 24. Following the recent interest rate hike most customers are willing to give up their existing FDs and go for the ones coming with better interest rates.

"As per the terms and conditions of fixed deposit accounts of the bank, the penalty on premature closure of FDs, 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," said a notice issued by the bank.

"The terms and conditions of opening an account state that the terms of the deposit can be changed anytime after providing a 30-day notice which we have done," said an official with HDFC Bank. "The depositor does not stand to lose since he has the option to withdraw his deposits till January 24 without paying any premature penalty" he added.

Thus customers have to evaluate consciously on the pros and cons of preclosure of FDs and then opt for one.