South Indian Bank FD Premature Withdrawal

What is South Indian Bank FD Premature Withdrawal?

South Indian Bank FD premature withdrawal means closing your fixed deposit before its maturity date. The bank allows this in situations like a medical emergency or sudden business cash flow requirements. In such a case, the South Indian Bank FD interest rates are recalculated based on how long the deposits were actually invested, and the final payout is adjusted accordingly.

How to Close South Indian Bank FD Prematurely?

The following methods can be used to close your South Indian Bank fixed deposit before maturity:

1. Online Method

   If you want to close your FD using the internet or mobile banking, the following steps can be followed:

   • Log in: Access South Indian Bank’s internet banking portal or mobile app (SIB Mirror+) using your credentials.
   • Go to Deposits Section: Navigate to the ‘Deposits’ section and select the FD you want to close.
   • Choose Closure Option: Click on the ‘Premature Withdrawal’ or ‘Close FD’ option shown with your deposit.
   • Review Adjustments: Check the revised interest rate and penalty displayed on the screen.
   • Confirm the Request: Authenticate the transaction using your OTP or transaction password.
   • Receive Funds: The adjusted settlement amount will be credited to your linked savings account.

   Note: FDs opened online can be closed through both online and offline modes.

2. Offline Method

   If you prefer to close your FD by visiting a South Indian Bank branch, the following steps can be followed:

   • Visit the Branch: Go to your nearest South Indian Bank branch where the FD is maintained.
   • Request the Withdrawal Form: Ask for the FD premature withdrawal form at the customer service desk.
   • Fill and Submit the Form: Complete the form and submit it along with your FD certificate or receipt.
   • Provide Identity Proof: Submit a valid ID proof such as PAN, Aadhaar, or Voter ID.
   • Receive the Amount: After processing, the withdrawal amount will be credited to your account or issued via cheque.

Note: FDs opened at a branch can only be closed through the offline channel.

Disadvantages of South Indian Bank FD Premature Withdrawal

Closing your FD early may seem convenient, but the following disadvantages should be kept in mind before making the decision:

1. South Indian Bank FD Premature Withdrawal Charges: 

   South Indian Bank imposes premature withdrawal charges on the early closure of fixed deposits. These charges vary based on the FD value, with lower rates for smaller deposits and higher rates for larger amounts, as shown in the table below:

   Deposit Amount	Penalty Rate
   Less than ₹15 lakhs	0.50%
   ₹15 lakhs and above	1.00%

2. Impact on Loan or Overdraft Linked to FD: 

   If your South Indian Bank FD is linked to a loan or overdraft, closing the FD early can lead to the loan being reduced or cancelled. The bank may use the FD amount to recover the loan, which can affect your cash flow.

3. Impact on Credit Card Linked to FD: 

   If you have a South Indian Bank credit card against FD, closing the deposit before maturity may lead to the card being cancelled or the credit limit being reduced. Since the FD is used as security, withdrawing it early affects the linked credit facility.

4. Disruption of Financial Planning: 

   Withdrawing your South Indian Bank FD before maturity can affect your long-term financial goals or emergency savings. It may leave you short of funds when you need them most.

Tax Implications on South Indian Bank FD Premature Withdrawal

If you withdraw your South Indian Bank Fixed Deposit before maturity, the interest is recalculated at a lower rate based on how long the funds were actually held in the FD. This revised interest is fully taxable and is counted under “Income from Other Sources” as per your income tax slab. According to Section 194A of the Income Tax Act, South Indian Bank deducts Tax Deducted at Source (TDS) at 10% if the total interest earned in a financial year exceeds ₹50,000 for regular individuals and ₹1,00,000 for senior citizens. If your PAN is not linked with the bank, TDS is deducted at a higher rate of 20%.

How to Avoid South Indian Bank FD Premature Withdrawal?

The following are some ways to manage your money without closing your FD before maturity:

• South Indian Bank’s Sweep-out Facility: South Indian Bank offers a sweep-out facility that allows funds to be automatically transferred from your FD to your savings account when needed.
• Use a Credit Card Against FD: South Indian Bank offers a credit card against fixed deposits. This can help you meet short-term expenses without withdrawing your FD, while also building your credit score.
• Ladder Your FDs: Split your investment across multiple fixed deposits with different maturity periods. This helps you access funds when needed while keeping your long-term South Indian Bank FDs intact and earning interest.
• Take a Loan Against Your FD: Instead of withdrawing your deposit, you can get a loan of up to 90% of your South Indian Bank FD amount. This allows you to meet urgent financial needs without affecting your FD’s interest earnings or maturity.
• Plan Your FD Tenure Wisely: South Indian Bank offers flexible tenures to suit different financial goals. 

Key Takeaways

South Indian Bank allows premature closure of fixed deposits, but it charges a penalty of 0.50% to 1%, and the interest is recalculated at a lower FD interest rate based on the actual tenure. To avoid this, it's better to plan your FD tenure using an FD calculator and keep some money aside for emergencies. The bank also gives you the option to close your FD either online or by visiting a branch. If you need money, you can also consider a sweep-out deposit, take a loan, credit card against your FD instead of closing it early. Use an FD Premature Withdrawal Penalty Calculator to make an informed decision.