Punjab National Bank FD Premature Withdrawal

What is Punjab National Bank FD Premature Withdrawal?

Punjab National Bank FD premature withdrawal is an early withdrawal of a fixed deposit before it has come to its maturity date. This is an option that customers can use to solve an emergency financial need. Although the bank permits premature closure, it charges a penalty on the FD interest rates, and the principal amount is remunerated accordingly, with reference to the tenure of the money left deposited. No penalty is charged if the FD is closed prematurely to reinvest in another term deposit with PNB, provided the new deposit exceeds the remaining tenure of the original FD.

To assess potential returns before making a decision, it’s helpful to refer to the latest Punjab National Bank FD rates.

How to Close Punjab National Bank FD Prematurely?

You can opt for either online or offline methods to initiate premature FD closure, depending on your convenience. Follow the steps below based on your preferred mode:

1. Online Method

   Net Banking:

   • Visit PNB Net Banking.
   • Log in using your customer ID and password.
   • Go to Term Deposits, and then look for Premature Closure.
   • Choose the FD account, verify details, and confirm closure.
   • Funds are credited to your linked savings account after deductions.

   PNB ONE Mobile App:

   • Open the PNB ONE App.
   • Tap on Deposits, then select FD Account.
   • Choose the FD to be closed, then Tap on Premature Closure.
   • Complete OTP authentication and receive confirmation.

2. Offline Method

   • Visit the nearest PNB branch.
   • Carry valid identity proof (Aadhaar, PAN, etc.).
   • Fill out the FD Premature Closure Form.
   • Submit the form and original FD receipt (if issued).
   • The branch will process the closure and credit the revised amount.

Disadvantages of Punjab National Bank FD Premature Withdrawal

While Punjab National Bank allows premature withdrawal of fixed deposits, doing so can affect your returns and financial planning.

• Lower Interest Earnings: On early withdrawal, the bank recalculates interest based on the actual tenure. You do not receive the originally agreed-upon rate, which lowers the overall return. An FD calculator can estimate the revised payout before initiating a premature withdrawal.
• Interest Rate Penalty: Punjab National Bank charges a 1% penalty on premature withdrawals. This is deducted from the applicable FD Interest rates for the completed tenure, further reducing your payout.
• Impact on FD-based Loans: In case a loan or overdraft facility is taken against the FD, then early closure may need a loan foreclosure. 
• Missed Credit Card Benefit: Premature withdrawal makes you ineligible for a secured credit card against the FD, which could have helped with short-term credit needs.
• Documentation and Processing: In offline mode, premature closure may involve additional verification steps, causing delays in fund access during emergencies.
• Loss of Compounding in Cumulative FDs: For cumulative FDs, early closure stops the compounding process. This significantly reduces the total interest earned.

Tax Implications on Punjab National Bank FD Premature Withdrawal

Interest on premature withdrawal of the Punjab National Bank FDs is completely taxable under Income from Other Sources, as per Section 194A of the Income Tax Act. In case the total annual interest amount is more than ₹50,000 (₹1,00,000 in case of a senior citizen), Tax Deducted at Source (TDS) is applicable. In case of an invalid PAN, TDS is levied at a higher rate of 20 per cent. TDS can be avoided by eligible depositors filling Form 15G or 15H on the basis of age and income eligibility.

How to Avoid Punjab National Bank FD Premature Withdrawal?

Withdrawing a fixed deposit early can reduce your returns due to penalties and lower interest rates. To avoid this, consider the following smart strategies:

• Loan Against FD: PNB allows loans of up to 90% of the FD value, helping you meet short-term needs without closing your deposit. Interest is charged at 1–2% above the FD rate.
• Laddering Your FDs: Instead of putting all your money in one FD, split it into smaller FDs with different maturity dates. This way, you can withdraw part of the money when needed without closing the whole FD.
• PNB Sweep-out Facility: This links your savings account to an FD. Extra money from your savings is moved into an FD automatically. You can withdraw from it anytime without penalty or closing the full FD.
• Maintain an Emergency Fund: Keep part of your portfolio in liquid funds or high-interest savings accounts, reducing the need to prematurely withdraw long-term FDs.
• Consider a Loan or Credit Card Against FD: A Punjab National Bank credit card against FD typically comes at lower interest rates than personal loans. 
• Choose the Right Tenure: Select an FD duration that aligns with your financial goals and cash flow requirements to reduce the chance of early withdrawal.

Key Takeaways

Punjab National Bank charges 1% on the premature withdrawal of FD, to be subtracted from the relevant interest rate corresponding to the actual tenure. There will be no interest on the FD if it is closed within the initial seven days. The withdrawal method is either online through Internet banking or through the PNB mobile app, or offline by visiting a branch. All deposits, including deposits held by senior citizens, are subject to premature withdrawal charges.