Karur Vysya Bank FD Premature Withdrawal

What is Karur Vysya Bank FD Premature Withdrawal?

Karur Vysya Bank FD premature withdrawal means closing your fixed deposit before it matures due to medical or financial emergencies. In such cases, the interest rate is reduced, as the bank recalculates the return based on the actual tenure and applies a penalty. If the FD is withdrawn within 7 days of opening, no interest is paid. However, if the deposit is withdrawn early and reinvested to benefit from higher Karur Vysya Bank FD interest rates, the penalty is not charged.

How to Close Karur Vysya Bank FD Prematurely?

If you need to withdraw your fixed deposit before maturity, Karur Vysya Bank allows you to do so through both online and offline methods. Below is a step-by-step guide for each option.

1. Online Method

   You can close your FD conveniently using KVB Net Banking or the KVB DLite Mobile App. Here’s how:

   • Log in to Internet Banking or the Mobile App: Access Karur Vysya Bank’s Net Banking portal or mobile app using your credentials.
   • Go to the Deposits Section: Navigate to the “Deposits” or “Fixed Deposits” section from the main menu.
   • Select the FD Account: Choose the fixed deposit you wish to close prematurely.
   • Initiate Premature Closure: Click on the “Premature Withdrawal” or “Close FD” option available for the selected deposit.
   • Confirm and Authorise: Review the FD details, confirm your request, and authenticate using an OTP or transaction password.
   • Fund Credit: The amount, after deducting applicable penalty and recalculated interest, will be credited to your linked savings account.

2. Offline Method

   For those who prefer or require branch assistance, the FD can also be closed manually at the bank.

   • Visit the Nearest Branch: Go to the KVB branch where you opened the FD or any nearby branch.
   • Collect the Premature Withdrawal Form: Ask for the “FD Premature Withdrawal” form from the help desk.
   • Fill and Attach Required Documents: Complete the form and attach your original FD receipt along with a valid ID proof (like PAN, Aadhaar, or Passport).
   • Submit the Form: Hand over the completed form and documents to the bank officer for processing.
   • Receive Payment: After verification, the prematurely withdrawn amount will be credited to your savings account, after applying interest recalculation and penalty.

Disadvantages of Karur Vysya Bank FD Premature Withdrawal

While Karur Vysya Bank allows premature withdrawal of fixed deposits, doing so can have several drawbacks. Here are the key disadvantages:

1. Lower Interest Earnings: 

   If you close your FD before maturity, the bank pays interest at a reduced rate and applies a penalty. This affects the final amount you receive. The penalty structure is as follows:

   Deposit Amount	Penalty on Pre-closure
   Up to ₹3 crore	1% deduction from the applicable interest rate
   Above ₹3 crore	Penalty as per the bank’s discretion and internal norms

   To understand the exact impact on your returns, it's advisable to use the FD Premature Withdrawal Penalty Calculator before initiating closure.

2. Affects Financial Planning: 

   Premature withdrawal of your Karur Vysya Bank FD can disturb your financial plans. If the FD was meant for future needs like education, marriage, or emergency savings, withdrawing it early may leave you unprepared when those expenses come up.

3. Affects Loan Eligibility: 

   A fixed deposit with Karur Vysya Bank can be used to get a loan or overdraft. But if you withdraw it early, you lose that option, which may make it harder to get a loan.

4. Restriction on Credit Card Against FD: 

   If you have a Karur Vysya Bank credit card issued against a fixed deposit, you may face restrictions if you try to withdraw the FD before maturity. The bank will not allow a premature withdrawal until all outstanding credit card dues are cleared. You may also need to provide a No Objection Certificate (NOC) confirming that there are no pending payments.

Tax Implications on Karur Vysya Bank FD Premature Withdrawal

If you withdraw your Karur Vysya Bank Fixed Deposit before maturity, the interest is recalculated at a lower rate based on how long the money stayed in the deposit. This interest is fully taxable and is added to your income under “Income from Other Sources” as per your applicable tax slab. As per Section 194A of the Income Tax Act, the bank deducts Tax Deducted at Source (TDS) at 10% if the total interest earned in a financial year exceeds ₹50,000 for regular customers and ₹1,00,000 for senior citizens. If your PAN is not provided, TDS is deducted at a higher rate of 20%.

How to Avoid Karur Vysya Bank FD Premature Withdrawal?

Here are a few ways to help you avoid premature withdrawal of your Karur Vysya Bank FD before maturity:

• Credit Card Against FD: If you need urgent funds, consider applying for a Karur Vysya Bank credit card against FD instead of withdrawing the deposit early. This allows you to access credit without affecting your fixed deposit.
• Use Sweep-Out Facility: Karur Vysya Bank’s sweep-out facility links your FD to your savings account. If your savings balance is low, money is automatically taken from the FD in small parts. This gives you easy access to funds without closing the full deposit.
• Take a Loan Against FD: Karur Vysya Bank lets you take a loan of up to 90% of your fixed deposit amount. This helps you get money when needed without doing a premature withdrawal.
• Spread Your Investment Across Different FDs: Instead of placing the entire amount in one fixed deposit, divide it into smaller Karur Vysya Bank FDs with different maturity periods. This way, if you need money, you can withdraw one deposit without disturbing the others.
• Plan Finances with the Help of Tools: Use the Karur Vysya Bank FD calculator to estimate your returns in advance and plan your investments accordingly. Proper financial planning can help you avoid premature withdrawals and the penalty that comes with them.

Key Takeaways

Karur Vysya Bank allows premature withdrawal of fixed deposits, but it may lead to lower interest earnings and affect your savings plan. It can be done both online and offline. To avoid early withdrawal, keep an emergency fund, use a credit card or loan against your FD, and invest in more than one FD with different maturity dates. This helps you protect your savings and continue earning the applicable FD interest rates on the remaining deposits.