What is the procedure of withdrawing FD before it matures?

  • Fixed Deposit
  • 3 Months ago
Withdraw FD before it matures
HIGHLIGHTS

  • How to close the FD before the maturity date
  • FD locking period for foreclosure
  • Document required for FD foreclosure


Fixed deposits (FDs) are among the most popular instruments to save and invest money that offers good returns and is easy to open. Putting it simply, an investor puts a lump sum amount in his/her bank for a fixed tenure at an agreed rate of interest, and at the end of that tenure, the investor receives the amount he has invested plus compound interest on the same amount. Thus, FDs are also called term deposits. 

Bank FDs are among the safest and most preferred investment options and quite popular in India among risk-averse investors. Banks offer FDs with a wide range of tenure options ranging from 7 days up to 10 years. Moreover, FDs are equally liquid investment options, i.e., one can open and close it anytime as per their convenience. 

Investors can choose to continue their FDs till maturity or access it before the time via premature withdrawal. However, it's not advisable to prematurely close your FD. In case of dire need or emergency, the investor can opt for a fixed deposit foreclosure procedure, for which banking institutions levy an FD foreclosure fee as a penalty. 

FD offers various advantages: 

  1. Interest rate: The interest rate on a fixed deposit is fixed, and the rate depends on the term an investor wishes to hold it for.
  2. Secure investment: Fixed deposits offer guaranteed returns.
  3. Flexible tenure: Banking institutions offer fixed deposit tenures ranging from 7 days to 10 years.
  4. Loan against FD account: While FDs are fixed for an agreed tenure, the investor can take a loan against it when he/she needs funds. 

How to close the FD before the maturity date 

The investor can opt for FD foreclosure in full or parts (i.e., FD foreclosure or partial withdrawal). There is a nominal penalty charged on FD foreclosure and withdrawal. However, the money is transferred to the depositor's account in no time. In case of partial withdrawal, investors can withdraw a part of the entire FD value. The withdrawal amount will be credited to the investors' savings bank account while remaining invested and continuing to earn interest. 

There are both online and offline procedures available for closing the FD before the maturity date. 

  1. Offline FD Foreclosure procedure: An investor should follow the below-mentioned steps for closing his/her FD before the maturity date:
    1. Collect all documents, such as ID proof, deposit certificate, and photographs.
    2. Then, visit the nearby bank branch or the bank branch where the FD account was opened.
    3. Fill and submit the FD account closing form to the bank representative.
    4. The bank representative shall help you with the FD foreclosure process.
    5. On successful closure of FD, funds will be transferred to your savings bank account.
  2. Online FD Foreclosure procedure: Every bank has its own FD foreclosure procedure to close an FD account successfully. To close a fixed deposit online, the investor must be registered with the bank's internet banking option. Find below the list of steps followed at the top 4 banks for fixed deposit foreclosure. 

FD locking period for foreclosure 

For investors looking for FD foreclosure, below is the list of guidelines mandated by the Reserve Bank of India: 

  1. Withdrawal within 3 months: There is a minimum locking period of 3 months when the investor is invested in a fixed deposit with a non-banking financial company. The fixed deposit cannot be liquidated before 3 months, except in case of death. 
  2. Withdrawal between 3 and 6 months: The investor will only get the principal amount if the FD is foreclosed between 3 and 6 months, and no interest will be earned. 
  3. Withdrawal after 6 months: In case the investor chooses to do FD foreclosure after 6 months, the investor will be able to liquidate the FD, but the interest payable is 2%–3% lower than the interest rate applicable to public deposit. 

Document required for FD foreclosure

For investors looking for FD foreclosure, the following set of documents are required: 

  • Identity proof: Any one of the following document as identity proof
  • Passport
  • PAN card
  • Voter ID card
  • Driving licence
  • Government ID card
  • Photo ration card
  • Senior citizen ID card
  • Address proof: Any one of the following document as address proof
  • Passport
  • Telephone bill
  • Electricity bill
  • Bank statement with cheque
  • Certificate/ID card issued by the Post Office
  • Latest passport size photograph 

Disadvantages of FD foreclosure 

The following are the disadvantages of FD foreclosure. Hence, it's not recommended to close the FD account prematurely unless there is a dire need for money in case of an emergency. 

  1. Penalty for foreclosure of FD: Bank charges a penalty when the investor withdraws money from your fixed deposit before maturity. The fee varies across banks and is generally at 0.5% to 1% of the total deposit amount. This essentially means that your fixed deposit will yield interest at a rate of 0.5% to 1% less than what you would have otherwise obtained. So essentially, the liquidity is available but at a cost.
  2. Loss of potential earning: When you make a premature withdrawal, you do not receive the amount guaranteed at the time of booking the FD. 

Conclusion

We at Shriram City Union Finance Limited have the most reliable fixed deposit schemes for your secured and better future. Contact us any time to understand in detail about interest earned on FD renewal. Moreover, we follow easy ways for premature withdrawal of fixed deposits if a customer deals with a cash crunch. 

Frequently Asked Questions 

  • Is Shriram City a safer option for creating Fixed deposits? 

The fixed deposit of Shriram City Union Finance limited is rated FAAA/Stable by CRISIL and MAA+ with Stable Outlook by ICRA. 

  • Is there any penalty on making a fixed deposit withdrawal before the maturity period? 

Yes, making a fixed deposit withdrawal before the maturity period comes up with the penalty charges. The amount of penalty differs from bank to bank based on their policies. 

  • Can one make FD deposit foreclosure offline, which is created via offline mode? 

Usually, if the fixed deposit is created offline, it will not be reflected in the FDs list created online. But still, some banks have given the provision to close all the fixed deposits via online mode. Another way to close the offline FD sitting from the comfort of home is by requesting customer care. 

  • What is the penalty charge applicable on FD Foreclosure? 

It is a certain percentage of the interest amount the depositor earned on the fixed deposit. This percentage varies 

  • Can one break the fixed deposit without paying the penalty? 

Usually, the penalty is levied on premature withdrawal of fixed deposit. Still, some financial institutions are not charging any penalty if you have held a fixed deposit for a minimum of 7 days.

  • Can those with fixed deposits breakable that come with a lock-in period? 

No, you cannot break that fixed deposit. 

  • Can I break my tax-saving fixed deposit before the maturity period? 

No, as per the Income Tax Act, you cannot break tax-saving FDs before 5 years. 

  • Is the joint account holder's signature required to break the fixed deposit? 

 Yes, the joint account holder’s signature is required for closing the fixed deposit.