AU Small Finance Bank FD Premature Withdrawal

What is AU Small Finance Bank FD Premature Withdrawal?

AU Small Finance Bank FD premature withdrawal refers to closing a fixed deposit before maturity. This facility is provided by AU Small Finance Bank for all FDs, except tax-saving deposits. Commonly, this option is used during urgent financial needs like medical emergencies, education expenses, or liquidity losses. Customers should carefully review the AU Small Finance Bank FD rates and premature withdrawal terms to understand the penalties on interest.

How to Close an AU Small Finance Bank FD Prematurely?

Closing your AU Small Finance Bank FD premature withdrawal process is possible online (using the AU 0101 App) or offline (visiting your nearest branch and submitting the required documents).

1. Online Method

   AU Small Finance Bank customers can easily close their fixed deposit through the AU 0101 App using the following steps:

   • Login: Open the AU 0101 App and log in using your credentials.
   • Access Fixed Deposits: Navigate to the ‘Products’ section and select ‘Fixed Deposits’.
   • Select FD for Closure: Choose the fixed deposit you wish to close prematurely.
   • Initiate Withdrawal: Click on the ‘Premature Withdrawal’ option.
   • Review Penalty: Before proceeding, check the applicable penalty (typically 1% of the interest).
   • Confirm Request: Confirm your withdrawal request. After penalty deductions, the adjusted amount will be credited to your linked savings account.

2. Offline Method

   Here are the steps to follow to close your FD offline.

   • Visit the Branch: Go to a neighbouring AU Small Finance Bank branch.
   • Collect and Fill the Closure Form: Consult with a bank personnel there to obtain the FD closure form, then fill in all the details.
   • Attach Supporting Documents: Attach your original FD receipt and proof of valid ID with the duly filled form.
   • Document Verification: Finally, the bank official will check and validate your documents and process them accordingly. 
   • Fund Credit: Upon approval of your request offline, the FD amount, after subtracting the penalty, will be sent to your savings account.

Disadvantages of AU Small Finance Bank FD Premature Withdrawal

While premature withdrawal offers liquidity in emergencies, it also has notable drawbacks. Here are the key disadvantages:

• AU Small Finance Bank Premature Withdrawal Penalty: AU Small Finance Bank charges a 1% penalty on the applicable interest rate if you withdraw an FD before maturity. These AU Small Finance Bank FD premature withdrawal charges are subtracted from the original FD interest rates. 
• Time-Consuming Process: Several steps are involved in the AU Small Finance Bank FD premature withdrawal when done offline. You must visit the bank’s branch, fill out the necessary forms, and submit relevant documents.
• Loan Impact and Restrictions: If your FD is used as collateral for a loan, premature withdrawal may not be allowed until the loan is fully repaid. The bank may require a No Objection Certificate (NOC) or loan closure confirmation before processing the FD closure.
• Restriction on Credit Card Against FD: For FDs linked to a secured credit card, premature withdrawal is not permitted until all outstanding dues are cleared. AU Small Finance Bank may require proof that EMIs or credit card balances have been paid in full. Until then, the FD remains locked as collateral.

Tax Implications on AU Small Finance Bank FD Premature Withdrawal

If the total interest earned from all your FDs in a financial year exceeds ₹50,000 (for regular individuals) or ₹1,00,000 (for senior citizens), 10% TDS is deducted per Section 194A of the Income Tax Act. If you don’t submit your PAN, a higher TDS of 20% will be applied.

To avoid paying higher TDS, you can submit Form 15G or 15H from the start of the financial year. Be sure to report the interest accurately when filing our income tax return.

How to Avoid AU Small Finance Bank FD Premature Withdrawal?

To preserve your interest earnings and avoid penalties, it’s important to plan. Here are some smart strategies to help you avoid premature withdrawal:

• Plan Your Tenure Wisely: Choose an FD tenure that aligns with your financial objectives and anticipated cash flow. Using its FD calculator, you can opt for a suitable tenure to wisely plan your investment and decrease the risk of early closure.
• Create Multiple FDs in AU Small Finance Bank: You can divide your investment into several smaller FDs. For example, you can divide ₹50,000 into five FDs, each with an amount of ₹10,000.
• Maintain an Emergency Fund Separately: Ensure you maintain a separate emergency fund in a savings account or liquid instrument. This will help you manage unforeseen expenses. 
• Use Sweep-out or Flexi Deposit Options: AU Small Finance Bank provides a Sweep-out facility. It links your FD to the savings account. In this option, the surplus funds from your savings account will be automatically converted into FDs. You can reverse it when needed.
• Use Overdraft or Credit Card Against FD: If you don’t want to withdraw your FD, consider applying for an AU Small Finance Bank credit card against FD or use an overdraft facility. 

Key Takeaways

You can benefit from the AU Small Finance Bank premature FD withdrawal, but it usually charges a 1% interest penalty, lowering your returns. These premature withdrawals may impact several linked facilities. These issues can be addressed if you wisely plan your FD tenure, set aside a separate emergency fund, or categorise your investment into several smaller FDs. You can even choose flexible FD options by AU Small Finance Bank to strengthen liquidity.