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CA warned against using fixed deposits as emergency funds. A woman lost Rs 25,000 due to penalties and lower interest rates when withdrawing early.
CA warns considering FDs as emergency funds.
Fixed Deposits are considered as the safest investment option due to trust in banking system. Unlike, equity market where investment keeps changing every moment, FD ensures a regular income to investors with a promise to return the lump sum once the maturity is over. Across India, FDs are quite popular, especially among millennials and boomers. Many of them put all their money in FDs in the hope of breaking them when they require during emergency.
But are FDs good to consider as a emergency fund when there’s a requirement?
A recent case shared by chartered accountant Nitin Kaushik has highlighted how using fixed deposits (FDs) as an emergency fund can lead to unexpected financial losses, despite their reputation as a “safe” investment.
According to Kaushik, a woman recently suffered a loss of Rs 25,000 while trying to access her own FD savings for a medical emergency. She had four fixed deposits, all with maturities over 1.5 years away. When her father required urgent surgery, she prematurely withdrew the FDs to arrange funds.
The early withdrawal came at a cost: the bank applied lower premature withdrawal interest rates, imposed penalties of 0.5–1% on the contracted rate, and cut short the benefit of future compounding over two years. The combined effect resulted in a total loss of Rs 25,000.
She didn’t lose money in the stock market.She lost ₹25,000 in Fixed Deposits.Yes, the “safest” investment. Here’s how 👇Let this be a warning for those who treat FDs like an emergency fund:
🔸 A woman had 4 Fixed Deposits — all with maturity more than 1.5 years away🔸 Her…
— CA Nitin Kaushik (@Finance_Bareek) August 11, 2025
Kaushik stressed that while FDs are secure for capital preservation, they are not suited for emergency needs. “They’re not instantly accessible, not penalty-free, and not designed for quick liquidity,” he noted.
Instead, financial planners recommend building a dedicated emergency fund. Ideal options include liquid mutual funds or sweep-in FDs that allow faster, penalty-free access to funds. Kaushik advised keeping at least six months’ worth of expenses in such instruments, linked to a separate emergency savings account. He also suggested using auto-debits to replenish the fund and keeping a medical credit card or an insurance top-up as a backup.
“An emergency fund is about peace of mind, not profit,” Kaushik said, adding that the goal should be readiness to face unexpected expenses without incurring additional losses.
Varun Yadav is a Sub Editor at News18 Business Digital. He writes articles on markets, personal finance, technology, and more. He completed his post-graduation diploma in English Journalism from the Indian Inst…Read More
Varun Yadav is a Sub Editor at News18 Business Digital. He writes articles on markets, personal finance, technology, and more. He completed his post-graduation diploma in English Journalism from the Indian Inst… Read More
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