FD Closure Letter: Application Format for Fixed Deposit Withdrawal

Fixed deposits are a popular and reliable investment choice. You can choose your tenure and even withdraw funds early by paying a small penalty in emergencies.

Many people, however, find it difficult to draft a formal request to the bank for such withdrawals. While maturity withdrawal usually needs no letter, premature closure may require one stating your reason.

Let us check out the FD closure letter format with sample templates and premature withdrawal application forms.

Quick Synopsis

• An FD closure request letter is usually required for premature withdrawal.
• Premature withdrawal may attract a lower interest or penalty.
• Closure is possible through branch or net banking.

Structure of FD Closure Letter to Bank

The FD closure letter format is usually similar for all banks. It is simple and requires some very basic information. In fact, most banks only ask for it in case of premature withdrawal.

Here is a sample letter and premature withdrawal application form:

Letter

Sample Form 1

Sample Form 2

Types of FD Closure

Primarily, a fixed deposit closure happens on maturity. The process is extremely simple. After maturity, depositors must submit their FD certificate signed by the holder/holders.

The bank then transfers their maturity amount to their linked savings account. For online FDs, closure or renewal can be done digitally and the funds move directly to their account.

Other than this, there is also an option of premature closure.

Premature Closure

Banks allow early withdrawal of FDs, but interest rates may be reduced and a penalty may apply. The interest is recalculated for the actual deposit period before the funds are credited.

Some depositors may close FDs to reinvest at better rates, but it is wise to assess their loss before doing so.

Premature FD closure can be of 2 types:

Partial Closure

In a partial closure, only a part of the FD amount is withdrawn and the remaining balance stays invested. The interest rate for the leftover amount resets to the rate applicable for that sum and tenure. This helps maintain continued earnings.

Full Closure and Reinvestment into New FD

A full closure happens when the FD is closed entirely to open a new one. The bank pays interest for the completed period before closure. The new FD then earns interest at the current rate with better returns on reinvestment.

What Steps Can a Bank Take if a Depositor Does Not Act After the FD Matures?

If a depositor does not act on a matured FD, banks follow their set procedure. There are 2 common actions taken in such cases.

1. Auto Renew: Banks may automatically renew the FD for the same tenure or for one year at the prevailing interest rate.
2. Auto Liquidation: Banks may close the FD and transfer the maturity amount to the linked savings account.

Note: Always check your deposit certificate to know which option applies to your account.

Modes of FD Closure Process

The process to close a fixed deposit depends on how you opened it. Customers can complete the procedure through their bank branch or via online banking, depending on the facilities offered by their bank.

Offline Closure

Visit your home branch and submit your fixed deposit certificate with valid ID proof. Fill out an FD closure form and mention whether you wish to withdraw, renew or reinvest the amount.

For premature closure, you must submit a signed FD closure letter stating your reason for closure, account details and payment instructions.

The bank verifies your request, applies the applicable interest and penalty and then transfers the funds to your linked savings account or issues a cheque.

Online Closure

Log in to your net banking account and go to the ‘Fixed Deposits’ section. Enter your FD number and select either ‘Close’ or ‘Premature Closure’. Confirm the payout account and submit the request.

The bank then credits your funds directly to your account without any paperwork or a branch visit.

Note: The procedure can vary from bank to bank. Talk to the bank’s customer support or visit your nearest branch in case of any queries.

Final Word

To sum up, not only closing but writing an FD closure letter is easy. Check all your options before premature withdrawal to get the best value for your funds.

If you hold an FD with Stable Money, the process becomes even more convenient. Just open the app, click on your ‘Profile’ and then on ‘My Investment’ to view all active deposits.

Choose the FD you want to close, tap ‘Withdraw’ and the money moves directly to your bank account. It is quick, safe, and fully digital.