How to Close a Bank Fixed Deposit Online or Offline?

Investors can choose to let their FD mature or opt for premature withdrawal. However, prematurely closing a fixed deposit is not recommended as it attracts premature withdrawal charges. If immediate funds are needed, taking a loan against FD or using a credit card against FD are more advisable options.

When considering how to close an FD, it is essential to understand that there are two methods: closing on maturity and closing before maturity. This article will delve into both online and offline modes for closing the FD on maturity and prematurely.

Fixed Deposit Closure Upon Maturity:

When opening a bank fixed deposit, it is necessary to provide your bank with instructions regarding maturity. You are required to select one of the following options when completing your FD form, whether online or offline:

a. Automatic renewal of both principal and interest upon maturity:

If you have chosen this option at the time of opening an FD, your fixed deposit maturity amount (principal and interest) will get automatically renewed for the same duration at the prevailing interest rate.

The fixed deposit will automatically renew at each maturity unless you instruct the bank to close the FD. If you wish to change the instructions and receive the FD amount in your savings bank account, you are required to reach out to the bank and modify the maturity instructions.

Some banks also allow their depositors to modify the FD maturity instructions through online channels. This is a very useful feature for those who cannot visit the bank branch and may need to change the maturity instructions in future.

b. Automatic renewal of only the principal and interest payout upon maturity:

This option automatically renews the principal amount of your fixed deposit and transfers the interest amount to your savings bank account. Similar to the first option, the principal amount gets renewed at the prevailing interest rate for the same duration.

As the maturity date nears, if you think you do not require the interest and want to renew it along with the principal amount or want to withdraw the entire amount for some emergency, you can do so by informing the bank or changing the instructions online in advance.

c. Withdrawal, i.e. the deposit of both principal and interest into the associated savings account upon maturity:

If you have selected the withdrawal option at the time of booking your bank FD, your total maturity amount (principal and interest) will get automatically deposited to your savings bank account upon maturity.

In case you have missed providing any maturity instructions (which might not be possible for recently opened FDs as banks have made it mandatory to provide the maturity instructions), your total FD amount will get withdrawn upon maturity and deposited to your associated savings bank account.

How to Close a Bank Fixed Deposit Upon Maturity?

FD Closure Offline:

While the procedure for closing a fixed deposit may differ among different banks, the common requirement across all banks and providers is the submission of the FD receipt or FD certificate. Before presenting it to the bank, ensure that it is duly signed by all depositors in the case of joint ownership.

Additionally, your bank may request an account closing form or a simple written request signed by all the joint holders on plain paper. This form should include essential details such as the FD particulars and savings account details.

Upon verifying the details and signatures, the bank will proceed with the FD closure, and you will receive the funds in your savings bank account or a demand draft, as you requested.

FD Closure Online:

In order to close the fixed deposit online, you simply have to log into your internet banking, visit the fixed deposits section, choose the fixed deposit you want to withdraw and proceed with the withdrawal.

While this is a common procedure to close the fixed deposit online, some banks may have different procedures. For example, certain banks require you to raise a withdrawal request from the service request section, whereas others may have the FD withdrawal option in the fixed deposit section.

Once you proceed with the withdrawal online, you receive the funds in your savings bank account almost immediately.

Fixed Deposit Closure Before Maturity / Premature FD Withdrawal:

Fixed deposits come with various durations, ranging from as short as 7 days to as long as 10 years, during which the invested capital accrues interest at a fixed rate for a specified period. Despite having a predetermined lock-in period, individuals can opt for premature withdrawal of their FD, partially or entirely, in case of unforeseen circumstances. In some instances, investors may choose to withdraw funds from an FD before its maturity date if they find a more appealing investment opportunity.

However, early withdrawal attracts additional charges in the form of a penalty imposed by the financial institution, thereby reducing the effective interest rate of the FD. Typically, the penalty for withdrawing an FD prematurely falls within the range of 0.5% to 1%. It is crucial to note that if an FD is closed prematurely within the initial 7 days of opening the account, the bank or NBFC is not obligated to pay any interest.

When closing FD prematurely, you can opt for a partial or complete closure. If the fixed deposit is partially closed, the withdrawn amount gets credited to your linked savings bank account and the remaining amount remains reinvested at the predetermined FD interest rate.

In case of a complete closure prematurely, a penalty may be imposed as per the bank's policy. If you are booking a fresh FD for a higher interest rate, the new FD will earn the new interest rate on its reinvestment date.

How to Close a Bank Fixed Deposit Prematurely?

You have the option to withdraw your fixed deposit prematurely either for personal use or to reinvest in a new fixed deposit account with a higher interest rate. If you choose the latter, it is essential to consider any penalties before withdrawing your fixed deposit and reinvesting.

Premature FD Closure Offline:

This process involves completing a premature FD closure form with the bank, specifying whether you want partial or complete funds transferred to your savings account. You are also required to submit the FD receipt/advance.

Follow the process below for premature FD closure offline:

1. Go to the bank branch to get a premature withdrawal form.

2. Complete the form by providing essential details, including your name, bank account information, and FD number.

3. Submit the form to the bank for processing your request along with the FD receipt.

4. After the FD closure, the funds will be transferred to your savings account.

Premature FD Closure Online:

Follow the process below for premature FD closure offline:

1. Visit the bank website and log in to your internet banking account with your login credentials.

2. Navigate to the Fixed Deposit tab.

3. Choose the 'Liquidate Fixed Deposit' or 'Withdraw Fixed Deposit' option.

4. Review the list of your fixed deposits.

5. Pick the FD account number you wish to close from the provided list.

6. Proceed to close the FD after verifying the details.

7. You will be directed to a page confirming the closure of your fixed deposit.

8. The funds will be immediately transferred to your savings account.

Online FD closure applies only to fixed deposits with sole depositors. In case you have a joint FD with your spouse or other family member/s, you will have to visit the nearest bank branch and proceed with the offline procedure.

To conclude:

Bank fixed deposits, known for their liquidity and safety, are a reliable investment option. Closing your bank fixed deposit online is a more efficient and expeditious process compared to offline closure. Whether opting for premature withdrawal or reinvesting, individuals can now manage their fixed deposits with greater convenience through online channels, ensuring a seamless and secure financial experience.

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KETKI JADHAV is a Content Writer at PersonalFN since August 2021. She is an MBA (Finance) and has over seven years of experience in Retail Banking. Ketki specialises in covering articles around banking, insurance, personal finance, and mutual funds and has been doing it for over three years now.

Disclaimer: Investment in securities market are subject to market risks, read all the related documents carefully before investing.
This article is for information purposes only and is not meant to influence your investment decisions. It should not be treated as a mutual fund recommendation or advice to make an investment decision in the above-mentioned schemes.