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Step-By-Step Procedure for Renewing and Withdrawing a Fixed Deposit
Posted on Friday, September 2nd, 2022 | By IndusInd Bank
Fixed deposits are an excellent way to invest your money and grow your wealth. They’re the best option when you don’t want to take market risks because they’re a safe form of investment. They function similarly to liquid funds and can also be liquidated prematurely. They offer a secure way to invest excess funds.
Besides, fixed deposits, need less monitoring because they offer guaranteed returns, but you must keep an eye on the maturity date.
Because, when you invest in FDs, either of the two things happen:
- Under certain circumstances, you may need to withdraw their funds earlier than planned.
- In some cases, you may not require the money when it matures. In such circumstances, banks allow you to renew the investments for a set period of time.
In this article, we understand how to renew and withdraw a fixed deposit.
Renewing an FD
Fixed deposits can be renewed manually or automatically by the FD holder after maturity.
1. Renew Automatically
If you give the bank a standing instruction, your fixed deposit will automatically renew. You can choose auto-renewal at the time of FD investment or at any time throughout the term of the FD. When the FD matures, the bank will automatically renew it for the same term at the current interest rate.
Here, the current FD interest rate may be greater or lower than the FD’s previous rate. As a result, auto-renewal may be counterproductive if interest rates decline.
2. Renewal After Maturity
When you renew an FD upon maturity, you must do so manually, either in person at the bank’s branch or online. To do this, you must monitor your fixed deposit investments. If you choose to renew the FD, the bank will extend the term at the current interest rate.
Withdrawing FD Amount
1. Post-Maturity
After the FD matures, you can withdraw your money as well as the interest collected. You can choose FD auto-withdrawal, in which case the bank will deposit the maturity proceeds into your savings account. Alternatively, investors can manually withdraw the FD when it matures. In this situation, the bank will reimburse the investor’s principal and interest when the investor withdraws. Investors must, however, keep a record of their term deposits in order to withdraw their funds.
2. Automated Withdrawal
Your FD may also be automatically terminated, in which case the maturity amount will be transferred to your savings account.
In automated withdrawal, a bank or NBFC instantly transfers the maturation sum principal + interest to your savings bank account at the end of the deposit term.
3. Withdrawal prematurely
You can withdraw funds from your FD early to cover any unexpected expenses or tend to liquidity needs. Investors must, however, incur a penalty if they close their FD investments early. The penalty is usually levied on the FD interest rate that was agreed upon.
Here, the bank will deduct the penalty from the collected interest and credit the remainder to the investor’s savings account if the withdrawal is made prematurely. For most banks, the penalty ranges from 0.5% to 1%.
Over To You
Now you know your options to renew or withdraw your FD. Consider all the variables, interest rate, maturity date, tenure, etc. before deciding to renew your FD or withdraw earnings from it.
Disclaimer: The information provided in this article is generic in nature and for informational purposes only. It is not a substitute for specific advice in your own circumstances. Hence, you are advised to consult your financial advisor before making any financial decision. IndusInd Bank Limited (IBL) does not influence the views of the author in any way. IBL and the author shall not be responsible for any direct/indirect loss or liability incurred by the reader for taking any financial decisions based on the contents and information.
