
Fixed Deposits (FDs) are one of the most reliable investment options, offering flexibility in tenure and a safe return on investment. When an FD matures, you have the option to renew it or withdraw the funds. To simplify this process, many banks provide auto-renewal and auto-repay facilities. Here’s a detailed guide to help you navigate FD renewal and withdrawal processes.
1. FD Auto Renewal
Auto-renewal is a convenient option where the bank automatically renews your FD for the same tenure at the prevailing interest rate. This ensures your funds stay invested without requiring you to track the maturity date.
How it Works:
You can set up auto-renewal at the time of opening the FD or during the tenure.
On maturity, the FD will renew for the same period at the current interest rate, which may be higher or lower than the original rate.
When to Avoid Auto-Renewal:
If interest rates are falling, manually renewing your FD allows you to choose a more favorable tenure.
For better control, avoid auto-renewal if you have changing financial goals.
2. Manual Renewal
If you prefer to renew the FD manually, you can visit the bank or use internet banking. Manual renewal gives you the flexibility to select a new tenure or adjust the deposit amount.
Ensure you renew the FD on the maturity date to avoid losing out on interest.
3. FD Auto Repay
The auto-repay option automatically credits the maturity amount (principal + interest) to your linked savings account upon the FD's maturity.
Benefits of Auto Repay:
Ensures easy access to funds without the need for manual intervention.
Ideal for those who need liquidity immediately after the FD matures.
4. Premature Withdrawal of FD
Premature withdrawal allows you to access your funds before the FD matures, though it often comes with penalties.
Steps for Premature Withdrawal:
Online:
Log in to your bank’s internet banking portal.
Navigate to the FD section and select the option to close the FD prematurely.
Verify details and authenticate the transaction.
The funds will be credited to your linked account.
Offline:
Visit your bank branch and fill out the FD closure form.
Submit the form along with necessary documents and the Fixed Deposit Receipt (FDR).
5. Penalties for Premature Withdrawal
Penalty charges typically range from 0.5% to 1% of the contracted interest rate.
The bank calculates the revised interest rate based on the period in which the deposit was held.
6. Important Points to Consider
Interest Rate Risk: Auto-renewals are subject to the current FD rates, which may not always be favorable.
Taxation: Interest earned on FDs is taxable as per your income tax slab.
Renewal Choice: Manually renewing allows you to compare interest rates and choose a better option.
Senior Citizens: Some banks waive penalties for senior citizens on premature withdrawals.
Tax-Saving FDs: These have a lock-in period of 5 years and cannot be prematurely withdrawn.
7. How to Stop Auto Renewal or Change Maturity Instructions
To stop auto-renewal, inform your bank before the FD matures. This can usually be done via:
Internet banking.
Visiting the branch and providing a written request.
You can also contact the bank at least seven days before the FD matures to update maturity instructions, such as opting for auto-repay.
8. What Happens If You Don’t Renew or Withdraw the FD?
If no maturity instructions are provided, some banks auto-renew the FD, while others transfer the maturity amount to your savings account.
If electronic transfer fails, banks issue a cheque.
Key Takeaways
Auto-renewal is convenient but may not always secure the best returns.
Manual renewal provides flexibility to optimize tenure and interest rates.
Always consider penalties, taxation, and financial needs before prematurely withdrawing or renewing an FD.
For tax-saving FDs, premature withdrawals are not allowed due to the mandatory 5-year lock-in period.
Choose the right maturity and renewal strategy to make the most of your fixed deposit investments.
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