City Union Bank FD Premature Withdrawal

What is City Union Bank FD Premature Withdrawal?

City Union Bank FD premature withdrawal means closure of your Fixed Deposit before the maturity date. In such cases, the interest is recalculated based on the actual tenure of the deposit. A penalty is then deducted from the applicable interest rate. Before opting for early closure, review City Union Bank FD rates to estimate the interest loss based on your actual holding period.

How to Close City Union Bank FD Prematurely?

City Union Bank offers online and offline options if you need to close your fixed deposit before maturity. Here’s how you can do it:

1. Online Method

   City Union Bank clients can close their FDs prematurely using Internet Banking and the CUB Mobile Banking App. Here’s how you can proceed with the suitable option:

   Through Internet Banking

   • Log in to Net Banking: Go to City Union Bank's Net Banking portal and enter your User ID and password to log in.
   • Go to the Deposit Section: On the dashboard, click "Deposits" or Accounts and then Term Deposits.
   • Premature Closure: Choose the FD you want to close prematurely and click "Premature Closure" or "Close FD."
   • Confirm & Authenticate: Once you have gone through the details of the interest adjustment, submit your confirmation. The system may require authentication of your request by entering an OTP sent to your registered mobile number or your transaction password.
   • Receive the Amount: After confirmation, the adjusted maturity amount (interest recalculated minus City Union Bank FD premature withdrawal penalty) will be credited to your savings account linked to the FD, typically on the same day or by the next working day.

   Using CUB All in One Mobile App

   • Open the App & Log In: Launch the CUB All in One Mobile App and enter your credentials to sign in.
   • Navigate to Deposits: Tap on the “Deposits” or “Term Deposits” section accessed through the main menu.
   • Select Your FD: You can view all active fixed deposits. Now, to close a fixed deposit, choose that particular FD.
   • Initiate Premature Closure: Click “Premature Closure” and go through the subsequent steps to initiate.
   • Verify & Submit: OTP or secure PIN verification is required here. Once verified, the amount will be credited to your savings account.

2. Offline Method

   If you prefer to visit a branch, here’s how to close your FD prematurely offline:

   • Visit Your Home Branch: Go to the City Union Bank branch where the FD was originally opened or the account is maintained.
   • Carry Necessary Documents: Carry your FD certificate or receipt (if issued), any valid photo ID proof (like Aadhaar, PAN, or Voter ID), and, if required, your passbook.
   • Request the Closure Form: Request the bank executive for the “FD Premature Closure” form.
   • Fill and Sign the Form: The form must be completed with accurate details, including the FD account number, bank account number, and the closure reason (optional). 
   • Submit Documents: Submit the filled form, identity proof, and FD documents to the bank officer.
   • Receive the Funds: Once verified and processed, the maturity amount will be transferred into your savings account, after deducting any applicable penalties, usually within one to two business days.

Disadvantages of City Union Bank FD Premature Withdrawal

Before deciding to close your fixed deposit, it’s important to understand the potential drawbacks. Here are some disadvantages to keep in mind:

• Interest Reduction: Premature withdrawal directly impacts the City Union Bank FD interest rate; for instance, if the original rate was 7.5%, the bank pays only 6.5% for premature withdrawal. The City Union Bank FD interest rates may be even lower for FDs with shorter tenures. Use the FD Premature Withdrawal Penalty Calculator to assess your revised returns.
• Restriction on Credit Card against FD: The fixed deposit serves as collateral if you have availed a City Union Bank credit card against FD. To close the FD early, you must first clear all EMIs and outstanding dues. After that, you’ll need a No Objection Certificate (NOC) from the bank to complete the withdrawal.
• Loan Against FD Restriction: If your FD is pledged as security for a loan, City Union Bank does not allow premature closure until the loan is fully repaid. This helps protect the bank’s interests and keeps the loan agreement valid.

Tax Implications on City Union Bank FD Premature Withdrawal

Interest earned from a prematurely closed City Union Bank FD is subject to full taxation under "Income from Other Sources" as per the Income Tax Act. If the total FD interest exceeds ₹50,000 (₹1,00,000 for senior citizens) in a financial year, TDS at a rate of 10% shall be deducted. The rate of 20% applies if PAN has not been linked. 

If your income is below the taxable limit, you can submit Form 15G or Form 15H to avoid Tax Deductions at Source (TDS). Keep in mind that premature withdrawal is not a tax-saving option. It is taxed in the same way as a regular FD. Always consider both penalties and taxes before closing your FD early.

How to Avoid City Union Bank FD Premature Withdrawal?

To make the most of your fixed deposit without incurring penalties, consider these smart alternatives:

• Loan or Overdraft Against FD: Borrow against your FD for up to 90% of its value at preferential rates. Keeps FD intact, still earning interest.
• Plan with Flexible Tenures: Opt for FD tenures based on your requirements. Know the current FD interest rates and maturity profiles to prevent premature withdrawal.
• Utilise Sweep-out Facility: City Union Bank’s sweep-out facility helps you access emergency funds without withdrawing your FD. Extra money stays in your savings account and moves automatically when needed, so your FD keeps earning interest and you avoid premature withdrawal charges.
• Maintain an Emergency Fund: Maintain a liquid savings account worth at least 3–6 months of expenses to avoid premature FD closing.
• Use City Union Bank Credit Card Against FD: For minor short-term expenses. Provides flexible options for repayment, allowing FD earnings to remain intact, and addressing short-term needs without requiring premature withdrawal.

Key Takeaways

City Union Bank allows premature FD withdrawal, incurring a 1% penalty, with no interest paid if the account is closed within 7 days. To avoid premature closure of your FD, you can look for a loan or credit card against your FD or opt for the sweep-out facility. No proof of income is required to open an FD or obtain a secured card, which makes it easier for people like young professionals and homemakers.