Bank of Baroda FD Premature Withdrawal

What is Bank of Baroda FD Premature Withdrawal?

A premature withdrawal from a Bank of Baroda FD means closing your fixed deposit before the selected tenure ends, usually due to urgent financial needs. This minimises the FD returns, and there can be a penalty as well.

The bank provides both non-callable and callable FDs. In case of premature withdrawal, the Bank of Baroda FD interest rate is recalculated based on the actual investment period rather than the initial term. The bank charges a 1% penalty on domestic term deposits between ₹5 lakh and ₹1 crore. However, if your deposit is below ₹5 lakh and has been held for more than 12 months, no penalty is charged.

Non-callable deposits limit early withdrawals and may be subject to a penalty of up to 2% in some instances.

How Does the Bank of Baroda FD Premature Withdrawal Process Work?

Suppose you invest ₹7.5 lakh in a 2-year FD with Bank of Baroda. And there’s an urgent need for funds, which makes you close your FD after 6 months.

In this scenario, the bank recalculates the interest on the real investment period and imposes a penalty. That is, if the 6-month interest rate is 6%, a 1% penalty reduces it to 5%. So, here’s how you may observe how the FD premature withdrawal leads you to lower returns:

How to Close Bank of Baroda FD Prematurely?

You may apply for a premature withdrawal online or offline, as you prefer.

Online Closure

You can use digital banking platforms to manage and close your FD anytime, from anywhere.

• Log In: Enter the BOB world application or NetBanking with your account details.
• Go to Deposits: Click on “Fixed Deposit” under the dashboard.
• Select FD: Select the FD to be closed.
• Request Closure: Select Premature Withdrawal or Close FD.
• Select Account: Select the savings account to credit.
• Authenticate and Submit: Authenticate with OTP, MPIN or transaction password.

Offline Closure

You may visit the nearest Bank of Baroda branch for in-person guidance and follow these steps:

• Visit Branch: The first step is to pay a visit to your closest branch.
• Collect Form: Next, you can request the premature FD closing form there.
• Fill Details: In the form, enter the respective details properly.
• Submit the Required Documents: Attach the FD receipt, ID proof and enter account details.
• Place Request: Hand in the form and documents to the bank executive.
• Receive Funds: After checking, the funds are credited.

Key Consideration to Bank of Baroda FD Premature Withdrawal

Before choosing early withdrawal, keep these points in mind:

• Reduced Interest Earnings: The interest is recalculated based on the actual tenure, which is usually lower than the original rate.
• Penalty Charges: The Bank of Baroda imposes a penalty charge, which lowers your end returns, usually between 1% to 2%.
• Tax-saving FD restriction: Bank of Baroda tax savings FD has a lock-in period of 5 years. This tenure does not permit premature withdrawal and thus is less flexible than regular fixed deposits.
• Loan or Overdraft Impact: If your FD is linked to a Bank of Baroda loan against FD facility, closing it early may affect your loan terms or eligibility.
• Implication on Financial Objectives: Early closure of your FD may have an impact on your long-term plans like retirement or education savings.
• Limit on Credit Card on FD: In case you have a Bank of Baroda credit card against FD, you may not be able to withdraw the FD until you settle all your dues.

Tax Implications on Bank of Baroda FD Premature Withdrawal

For the Bank of Baroda FD premature withdrawal, the interest is calculated again according to the final tenure. This interest is subject to full taxation under “Income from Other Sources. According to Section 194A of the Income Tax Act, the bank withholds TDS at 10% when the total amount of interest in a financial year is more than ₹50,000 (₹1,00,000 for senior citizens). The updated interest will have to be claimed when you submit your Income Tax Return (ITR) and this can have an impact on your total tax.

How to Avoid Bank of Baroda FD Premature Withdrawal?

Some of the effective ways of preventing early FD closure are as follows:

• Plan Wisely: Choose a deposit term that fits your financial goals and cash flow needs.
• Maintain an Emergency Fund: You should have a certain amount of money in your Bank of Baroda savings account or in other liquid investments in case of unforeseen expenses.
• Divide your Investment into Multiple FDs: You can divide your investment into small investments with different maturity dates to be more flexible.
• Select Sweep-in Facility: Select a Bank of Baroda sweep-in FD to withdraw funds automatically without closing the whole deposit.
• Utilise Loan Against FD: If you’re having a short-term need but do not want to forfeit your deposit, use a Bank of Baroda loan against FD.

Key Takeaways

Bank of Baroda FD premature withdrawal allows immediate access to the money, but with lower returns. As the FD interest rate is recalculated after penalty deductions. Deposits of 5 lakh to 1 crore are subject to 1% penalty. However, if any deposit is below ₹5 lakh and maintained for a period of 12 months, no penalty will be levied. Non-callable FDs are subject to premature withdrawal restrictions, with implying higher penalty charges of 2%.