Canara Bank FD Premature Withdrawal

What is Canara Bank FD Premature Withdrawal?

Canara Bank permits FD premature withdrawal in case of urgent financial needs, such as medical emergencies or unforeseen expenses. While premature withdrawal is allowed, it may affect your returns since the final payout depends on how long the deposit was held. The applicable Canara Bank FD interest rates at the time of booking and the withdrawal duration will determine the revised interest.

How to Close Canara Bank FD Prematurely?

Canara Bank allows the premature closure of fixed deposits through both online and offline modes. Here's how you can proceed:

1. Online Method

   You can close your FD conveniently from anywhere using either Net Banking or the Canara Bank Mobile Banking App:

   Net Banking

   • Log in to Net Banking: Access Canara Bank Net Banking with your credentials.
   • Navigate to Premature Closure: Go to Term Deposits and select the option for Premature Closure.
   • Choose the FD Account: Select the FD you want to close from the available list.
   • Confirm and Authenticate: Submit the closure request and authenticate it using OTP or the transaction password.
   • Receive the Amount: Once processed, the FD amount (after interest adjustment) will be credited to your linked savings account.

   Mobile Banking App:

   • Open the Canara ai1 App: Launch the official Canara Bank mobile app on your smartphone.
   • Go to the Fixed Deposits Section: Tap on Deposits and select the Fixed Deposit option.
   • Select FD and Request Closure: Choose the FD you wish to close and tap on Premature Closure.
   • Complete the Request: Follow the instructions to confirm and complete the process securely.

2. Offline Method

   If you prefer handling the withdrawal in person, you can visit your nearest Canara Bank branch to close your FD.

   • Visit the Nearest Branch: Go to your nearest Canara Bank branch during working hours.
   • Carry Valid ID Proof: Take along a valid identity document such as Aadhaar or PAN.
   • Fill Closure Form: Request and complete the FD Premature Closure Form.
   • Submit the Request: Submit the form to the bank official for processing and approval.

Disadvantages of Canara Bank FD Premature Withdrawal

While Canara Bank allows premature withdrawal of fixed deposits, there are certain drawbacks to be aware of:

• Reduced Returns: If you withdraw your fixed deposit prematurely, Canara Bank recalculates the interest based on the actual holding period. As a result, the returns are often lower than what was initially promised at the time of booking.
• Disruption to Financial Goals: Premature withdrawal from a Canara Bank FD can affect your long-term financial plans. Funds originally allocated for goals like education, retirement, or home purchase may fall short due to reduced interest and the loss of compounding benefits.
• Procedural Delays: In certain instances, premature withdrawal of a fixed deposit with Canara Bank may involve formalities such as documentation or in-person verification, especially for offline closures, which can lead to delays in fund availability.
• Impact on Loan: Premature withdrawal of a Canara Bank FD can impact any loan linked to the deposit, as FDs are commonly held as security. Closing the FD early may result in changes to the loan agreement or even cancellation of the loan facility.

Tax Implications on Canara Bank FD Premature Withdrawal

If you withdraw your Canara Bank Fixed Deposit before maturity, the interest is recalculated at a lower rate based on the actual tenure the funds remained in the account. This revised interest is fully taxable and classified under “Income from Other Sources” as per your income tax slab. As per Section 194A of the Income Tax Act, Canara Bank deducts TDS at 10% if the total interest earned in a financial year exceeds ₹50,000 for regular customers or ₹1,00,000 for senior citizens. If your PAN is not linked to the bank account, TDS is deducted at a higher rate of 20%.

How to Avoid Canara Bank FD Premature Withdrawal?

To avoid reduced returns and Canara Bank FD premature withdrawal charges, consider the following alternatives before closing your FD:

1. Take a Loan/Credit Card Against FD: 

   Canara Bank offers loans of up to 90% of your fixed deposit amount at competitive interest rates. This allows you to manage urgent financial needs without opting for premature withdrawal of your FD. You can also consider applying for a Canara Bank credit card against FD instead of premature withdrawal.

2. Choose Flexible Tenures: 

   Select a fixed deposit tenure with Canara Bank that aligns with your financial goals to minimise the chances of premature withdrawal. You can use the Canara Bank FD rates calculator to choose the most suitable tenure and plan your returns effectively.

3. Opt for a Sweep-out Facility: 

   Canara Bank allows you to link your fixed deposit to your savings account through a sweep-out facility, enabling you to automatically access surplus funds without prematurely withdrawing your FD.

4. Maintain an Emergency Fund: 

   Keep a portion of your savings in a liquid fund or a regular savings account to handle unexpected expenses, so you don’t need to prematurely withdraw your Canara Bank fixed deposit.

Key Takeaways

You can close your Canara Bank Fixed Deposit through both online mode using Net Banking or the Canara ai1 Mobile App and offline by visiting a branch. However, premature withdrawal attracts a 1% penalty on the applicable FD interest rate, and no interest is paid if the FD is closed before completing 7 days. The interest is recalculated based on the actual tenure the deposit was held, which may reduce your overall returns.