Kerala Gramin Bank FD Premature Withdrawal

What is Kerala Gramin Bank FD Premature Withdrawal?

Kerala Gramin Bank FD premature withdrawal refers to closing a fixed deposit prior to the date of maturity. The bank allows premature withdrawal under some conditions. The interest is recalculated on the actual duration for which the deposit was held. The bank deducts the applicable Kerala Gramin Bank FD premature withdrawal penalty of up to 1%, resulting in a reduced payout. Therefore, it is recommended that one should review the current Kerala Gramin Bank FD rates before committing to a premature closure to know the impact on your earnings.

How to Close a Kerala Gramin Bank FD Prematurely?

You can close your FD early by visiting a branch. Keep your FD receipt, account details, and identity documents ready before you start. Mentioned below are the steps you must follow to close a Kerala Gramin Bank FD prematurely:

Online Close Process

To close your Kerala Gramin Bank FD online, follow these steps:

• Log In: Log in to the Kerala Gramin Bank customer portal.
• Navigate FD Section: Go to the fixed deposit section and select the FD to close.
• Select Withdrawal Option: Choose the premature withdrawal option.
• Review Details: Review the revised interest rate and charges.
• Confirm Request: Confirm and submit the request.
• Receive Payment: The adjusted amount after deduction will be credited to your linked bank account.

Offline Closure Process

Similarly, for the Kerala Gramin Bank FD premature withdrawal offline process, you may follow these steps:

• Visit the Branch: Go to your nearest Kerala Gramin Bank branch.
• Carry Documents: Carry your FD receipt and an ID proof.
• Request Form: Ask for the form for premature FD closure and fill it.
• Check Payout: Check the updated payout displayed by the bank and then send the form.
• Submit Application: Send the application along with the documents.
• Receive Payment: The bank will then credit the amount to your savings account.

Disadvantages of Kerala Gramin Bank FD Premature Withdrawal

Premature withdrawal is beneficial in emergencies, but it reduces the benefits of the FD. Here are the key drawbacks:

• Penalty on Interest: Kerala Gramin Bank will charge a penalty on the applicable FD interest rate in the case of premature closure of a fixed deposit. The penalty deducts the amount of interest on the deposit.
• Loss of Compounding Benefits: If the FD is withdrawn prematurely, the interest that would have been earned in subsequent months or years will not be paid out, which will reduce the total amount accruing from the investment.
• Disruption of Financial Planning: If you opened the FD for some future purchase, like a house or education, withdrawal can create a financial trap. You will end up getting a smaller amount than you anticipated, which could force you to reconsider your other investments or finances.

Tax Implications of Kerala Gramin Bank FD Premature Withdrawal

Premature closure of a Kerala Gramin Bank fixed deposit does not exempt you from tax on the interest earned. This interest will be a part of your income in that financial year as Income of Other Sources. Tax deducted at source may also be deducted by the bank as per Section 194A of the Income Tax Act against the interest. The TDS is applicable when the total interest earned is over ₹50,000 in a year for regular depositors and ₹1,00,000 in a year for senior citizens. TDS can still be deducted if the deposit is closed before maturity, in case your interest income exceeds these limits. When a valid PAN is given, the standard TDS rate is 10%, but when it is not given, it is deducted at 20%.

How to Avoid Kerala Gramin Bank FD Premature Withdrawal?

The following are some of the methods of managing your funds without necessarily carrying out an early drawdown of your FD:

• Split Your Deposits: You can divide the deposit into several smaller deposits with varied maturity durations rather than investing in a single huge FD. This allows you to close the necessary FD only when you need the money, therefore, keeping the rest intact.
• Plan FD Tenure Wisely: Select an FD term that suits your future financial requirements. You should not lock in funds for long-term which you are likely to spend.
• Maintain an Emergency Fund: Keep some funds in a savings account that can be used in case of an emergency. This will make sure that you can get access to funds fast, and you will not have to close your FD.
• Avail Loan or Overdraft Against FD: Customers can take a loan against FD or overdraft the FD rather than closing it. This helps to settle cash needs, and your FD saves on interest at the same time.
• Use Sweep-In or Flexi Deposit Options: Choose sweeps in or flexi fixed deposits. These would allow funds to automatically move between your savings account and FD, and that gives you liquidity without closing your deposit.

Key Takeaways

Kerala Gramin Bank FD premature withdrawal allows you to close your FD if you require immediate funds, but it charges a penalty. Closing the FD before maturity results in 1% penalty that lowers the final payout. Premature withdrawal also interferes with the financial planning process as well as with compounding advantages. To avoid these drawbacks, customers must consider a good FD tenure, have an emergency fund, diversify deposits, or seek other options like loans, overdrafting, or sweep-in facilities, without interfering with the returns that the fixed deposit is earning.