Punjab and Sind Bank FD Premature Withdrawal

What is Punjab and Sind Bank FD Premature Withdrawal?

Punjab and Sind Bank FD premature withdrawal refers to the early closure of a fixed deposit account prior to the actual duration. When a depositor faces urgent financial needs such as a medical emergency, education expenses, or cash flow issues, the bank allows premature redemption of the fixed deposit before its maturity. However, interest collected is recalculated, and a penalty deduction is charged to the customer, resulting in reduced returns as compared to expectations. To make an informed decision, always check the latest Punjab and Sind Bank FD rates and assess how premature withdrawal may impact your earnings.

How to Close Punjab and Sind Bank FD Prematurely?

You can close your fixed deposit with Punjab and Sind Bank either online or offline, depending on how the deposit was initially opened.

1. Online Mode

   If your FD was opened via Internet Banking or the mobile app, follow these steps:

   Internet Banking:

   • Log in to the Punjab and Sind Bank Internet Banking portal.
   • Navigate to the “Fixed Deposit” section.
   • Select “Premature Withdrawal” or “Close FD”.
   • Choose the FD account and confirm the request with OTP/password.
   • The adjusted amount is credited to your linked savings account.

   Mobile App:

   • Log in to the official Punjab and Sind Bank mobile app (PSB UnIC).
   • Go to the Deposits section.
   • Tap on the FD to be closed → Select Premature Withdrawal.
   • Complete authentication and receive confirmation.

2. Offline Mode

   To close an FD offline:

   • Visit the nearest Punjab and Sind Bank branch.
   • Carry your identity proof (Aadhaar, PAN, Driving Licence).
   • Fill in the FD Premature Closure Form.
   • Submit the original FD receipt (if applicable).
   • Once verified, the revised amount is credited to your account.

Disadvantages of Punjab and Sind Bank FD Premature Withdrawal

While premature FD closure may seem convenient, it comes with several drawbacks:

• Reduced Interest Earnings: An FD is not received at the rate that is initially specified. In addition, the FD interest rates will be reduced, and a 1% penalty will be added.
• No Interest if Withdrawn Early: On closure within 7 days of opening, no interest is paid anywhere. This leads to a total loss of income in that period, and this is very unfavourable to customers who want short-term parking of money.
• Impacts Loan-Linked FDs: Loan-linked FDs can attract automatic repayment clauses in situations where the FD is used as a loan-linked product or as an overdraft facility. It may lead to inconvenience and liquidity problems in the event that you are not ready to repay the associated loan.
• Longer Processing Time: There is a delay in making offline withdrawals compared to making an offline withdrawal through FD, as there is manual documentation, verification, and processing time.
• Disrupts Long-Term Planning: Long-term FDs should not be broken because it can ruin long-term financial planning like retirement, higher education of the kids, or building a house, hence creating economic instability or pressuring to make certain compromises.

Taxation on Punjab and Sind Bank FD Premature Withdrawal

Whether a fixed deposit is withdrawn before maturity or held until maturity, the interest earned is fully taxable. It is added to your total income under the heading 'Income from Other Sources' and taxed as per your applicable income tax slab rate. 

As per Section 194A of the Income Tax Act, a 10% TDS is deducted on annual interest exceeding ₹50,000 (₹1,00,000 for senior citizens), provided a valid PAN is submitted. If no PAN is furnished, TDS is deducted at 20%. Taxpayers with income below the taxable limit can submit Form 15G or 15H to avoid TDS deduction.

How to Avoid Punjab and Sind Bank FD Premature Withdrawal?

To avoid a Punjab and Sind Bank FD premature withdrawal, here are some smart alternatives:

• Loan Against FD: Instead of closing the FD, opt for a loan of up to 90% of your deposit amount in the FD. This is usually offered at 1–2% above the FD interest rates, making it cheaper than personal loans.
• Laddering Strategy: Split your total investment into multiple FDs with staggered maturities. This ensures liquidity at different intervals and minimises the need for premature closure.
• Sweep-out Facility: Under the Flexi Savings Deposit scheme, you can link your Punjab and Sind Bank fixed deposit to a savings account. Surplus funds beyond a specified threshold are automatically transferred into the FD, while any shortfall in the savings balance triggers a reverse sweep.
• Emergency Fund Maintenance: Keep 3–6 months of expenses in a separate savings account or liquid fund. This helps you manage emergencies without disturbing long-term FDs.

Key Takeaways

Punjab and Sind Bank imposes a 1% penalty on premature FD withdrawals, deducted from the applicable interest rate for the completed tenure. No interest is paid if the deposit is closed within the first seven days. Customers can close FDs either online or by visiting a branch, depending on how the FD was originally opened. To avoid interest loss, alternatives like a credit card or a loan against an FD are available.