Premature Fixed Deposit Withdrawal: What is the Procedure?
Premature Fixed Deposit Withdrawal: An Overview
Investing in Fixed deposits is considered the most safest and popular investment among Indian investors. They are the most reliable and preferred investment because they offer a fixed rate of interest. Since they are non-market linked investments, it is risk-free. Investors can invest in fixed deposits to diversify their portfolios. One can assure returns in fixed deposits irrespective of the market volatility. However, investors are required to do their proper research and analysis before investing in fixed deposits or any financial instrument. In this article, we are going to learn about the premature closure of fixed deposits.
What is the Penalty for Premature Fixed Deposit Withdrawal?
Conservative investors prefer to invest their money in fixed deposits in India instead of other forms of investment such as equity investing and bonds. When you invest in a fixed deposit, you have to choose a tenure that determines the interest rate per annum. However, the interest rate differed from bank to bank. Fixed deposits have a lock-in period in which you are not allowed to withdraw money. Most people opt for cumulative fixed deposits in India but in case you need the funds and want to withdraw funds from your fixed deposit, you will have to pay a penalty for premature closure of FD.
You are also allowed to withdraw a partial amount of your fixed deposit money in case you need the money on an urgent basis. Moreover, investors can park their money in fixed deposits so that they can invest in other financial instruments whenever they found an attractive opportunity. For example, if you have to park your money in a fixed deposit and found out that the metal sector will boom in the coming year, you can withdraw your money from the fixer deposit and invest in the metal sector.
When investors opt for premature FD withdrawals, they have to pay a penalty to the bank. The penalty is charged on the interest earned on a fixed deposit and hence, the interest earned on your fixed deposit gets reduced due to premature closure of the fixed deposit.
- Premature closure of FD means withdrawing money from your fixed deposit account before the completion of the tenure of your FD.
- Premature withdrawal of a fixed deposit comes with a penalty that the account holder has to pay.
- One can opt for a fixed deposit break in case of a financial emergency.
How to break the fixed deposit before maturity?
You can opt for FD withdrawal if you need funds urgently. However, you have to pay a penalty ranging from 0.50% to 2%. When you opt for premature fixed deposit withdrawal, the money is moved to your saving account. The process for premature withdrawal of a fixed deposit online and offline is given below:
Procedure for offline FD withdrawal:
- The first and foremost thing you need to do is to visit the nearest bank where you have opened your fixed deposit account and ask for a withdrawal form.
- Fill out the form by providing all the required information such as name, bank account details, PAN, etc, and submit the withdrawal form along with ID proof, photograph, and deposit certificate.
- When your withdrawal form and documents get approved by the bank, you will receive the amount in your savings bank account.
Procedure for online FD withdrawal:
- The first and foremost thing you need to do is visit your bank's website.
- Log in to your net banking account by providing the required credentials.
- After logging in to your account, opt for the fixed deposit option.
- If you have more than one fixed deposit account then choose the FD account which you want to withdraw money from.
- Then you have to opt for the premature withdrawal option in your FD account section.
- You need to select the savings bank account in which you want to transfer the fund to your FD account in the premature withdrawal section.
- Now you have to click on submit option and you are almost done with your FD withdrawal.
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To conclude, Investing in a fixed deposit is one of the traditional and most preferred investments among Indian investors because of its fixed returns. You can choose the tenure of the fixed deposit ranging from 7 days to 10 years, depending on your requirements. However, you should be aware of the penalty charges levied if FD is broken before maturity.
What is the penalty for early closure of a fixed deposit?
A 0.50% penalty is charged if you close your fixed deposit in less than 181 days and a penalty of 0.75% is charged if you close your fixed deposit after 181 days or more.
Can I close my fixed deposit before the maturity date?
Yes, you can close your fixed deposit before the maturity date. However, you have to pay a certain percentage of the fixed deposit amount as a penalty charge.
How can I close my fixed deposit account before the maturity date?
You have to visit the institution to collect the form for closing your fixed deposit account then fill the form with the necessary information and then submit the form to the institution. However, some banks provide facilities to close fixed deposit accounts by logging in to your net banking account.
Can I close my fixed deposit account from any branch of the bank?
Yes, you can close your FD account by submitting the closure form of the fixed deposit at the bank.
Can I withdraw a partial fund from my fixed deposit account?
Yes, you can withdraw a partial amount from your fixed deposit account. However, the interest will be reduced on your withdrawn amount.