Closing Bank Fixed Deposits: A Complete Guide

Key Takeaways:

1. Closure of FD on Maturity:

• Surrender the deposit certificate after signing by all holders.
• Submit a signed form indicating the closure on the maturity date.
• Maturity proceeds will be transferred to the savings account.
• Banks may auto-renew or auto-liquidate the FD on the due date.

2. Premature Closure of FD:

• Early closure is allowed, but the interest rate may be revised, and a penalty may be levied.
• Interest will be paid as per the rate applicable for the tenure, and a penalty may be levied thereafter.
• Funds will be credited to the savings account upon closure.
• Partial closure and reinvestment options are available, with interest rates adjusted accordingly.

To close a bank fixed deposit (FD), whether opened online or offline by visiting a bank branch, both on maturity and premature closure, there are specific forms and documents that need to be submitted. The process for closing an FD may vary across different banks, so it’s important to understand the specific requirements from the bank where the FD is held. Here’s a detailed guide on how to close a bank FD, including the forms and documents required, and the interest rate implications for premature closure.

Closing an FD on Maturity

When an FD reaches its maturity date, the following steps are generally involved in closing the FD:

1. Surrender of Deposit Certificate: The primary requirement is to surrender the deposit certificate after it has been signed by all the holders.

2. Submission of Signed Form: The individual may be asked to submit a signed form indicating that the FD may be closed on the maturity date.

3. Transfer of Maturity Proceeds: The maturity proceeds after the due date will be transferred to the savings account of the individual. For online FDs, the option to renew or close the FD on the maturity date can be done online, and the maturity proceeds will then be credited to the savings bank account.

Premature Closure of FD

If an individual wishes to close the FD before its maturity date, the following steps and considerations apply:

1. Interest Rate and Penalty: An early closure of the FD is allowed, but the interest rate may be revised, and a penalty may be levied. Interest will be paid as per the rate applicable for the tenure during which the deposit was kept with the bank, and then a penalty may be levied thereafter.

2. Crediting of Funds: Once closed, the funds will be credited to the savings account of the individual.

3. Partial Closure and Reinvestment: If the individual wishes to partially close the FD or reinvest the balance at a higher interest rate, a form needs to be filled with the bank, indicating whether the entire or partial funds are needed in the savings account and the balance to be reinvested at a higher rate of interest.

4. Interest Rate Reset: For partial closure, the interest rate will be reset as per the prevailing rate for the remaining amount for the original tenure.

5. Full Closure and Reinvestment: In the case of full closure and reinvestment into a new FD, the existing deposit would be subject to a penal rate of interest as prescribed by the bank on the date of deposit. The interest rate prevailing on the date of reinvestment of the term deposit will be applicable for the new term deposit.

It’s important to note that the specific forms and documents required for closing an FD, as well as the terms and conditions, may vary across different banks. Therefore, it’s advisable to check with the respective bank for the exact requirements and procedures.

For further details on the premature withdrawal penalty and specific terms and conditions, it’s recommended to refer to the deposit certificate, receipt, or the deposit advice provided by the bank.