Bank Fixed Deposit (FD)-What happens if You Do Not Renew or Withdraw It?

Although unlikely, it is still possible that one may forget to withdraw or renew their bank fixed deposits. Usually, when the tenure is for a more extended period, it may slip from one’s mind. But the question is, what can be done in that case? 

Let us first look at some key terms used while dealing with bank fixed deposits and understand them.

Key terms to remember about withdrawal and renewal of fixed deposits.

These are some of the key terms to remember while understanding Bank Fixed Deposits-

  • Withdrawal– A person can withdraw the principal and interest deposited when the Fixed Deposit matures.
  • Renewal– A person can also choose to renew the Fixed Deposit under the same conditions for a longer time instead of withdrawing it.
  • Auto-Withdrawal– Auto-withdrawal is done by the bank itself once the FD has completed its scheduled tenure. The final amount consisting of both the principal and interest gets credited directly into the customer’s savings account.
  • Auto-Renewal – Upon instruction from the depositor, the bank automatically renews the fixed deposit under the same tenure and current interest rates.
  • Premature Withdrawal– If a person wishes to break the Fixed Deposit before its maturity date, it is termed Premature withdrawal. Some banks even charge a considerable amount as a penalty.

Now let us look at what we can do if we do not renew or withdraw a fixed deposit.

What happens when you forget to renew it?

There are two ways to open a fixed deposit account. One is offline, which requires you to go to the bank and open an FD. The other is online and requires you to open FD through net banking. When you open FD Account through net banking, the amount will directly get credited to your account at the time of maturity. The entire process gets rolled over automatically without fail, even if you forget to renew it. Once the tenure gets completed, one can either choose to deposit the amount in the account or the other option is to renew your Bank Fixed Deposit automatically. 

What happens when you forget to withdraw it?

If you forget to withdraw your FD, here’s what can happen:-

In case you had chosen to open FD account worth 5 lakhs for a tenure of 5 years and have completely forgotten about the maturity date. A year later, when you finally decide to withdraw your funds. You will realise that the bank pays you your money, but you end up losing the Fixed deposit interest rate for a whole year.

Only if you had chosen auto-withdrawal you would have directly received the amount in your account. This way, you would have earned more interests or used the money to fulfil other purposes.  

Things to keep in mind while renewing and withdrawing bank fixed deposits

Most people opt for offline, fixed deposit services. They visit the branch in person, fill up forms and start with the investment procedure. It causes fewer people to interact through net banking. Thus forgetting the date of maturity is pretty common. So, it is important to note a few things to keep in mind while renewing fixed deposits.

  • To continue services, it is important to renew your FD within 14 days from the date of maturity.
  • If you fail to do the needful, then the accumulated amount gets termed as an overdue deposit. Suppose any overdue deposit is not taken care of for more than 10 years. In that case, it is transferred to the Bank’s Depositor Education and Awareness Fund Scheme and treated as an inoperative account.
  • Overdue deposits can be renewed within 15 days.
  • According to the Reserve Bank of India guidelines, how much a person can avail from overdue deposits depends entirely on the individual banks. Each bank possesses its own set of rules for overdue deposits. In most cases, individuals are entitled to interests from saving accounts. But certain financial institutions like the co-operative banks may straightaway deny to pay you anything at all!

It is advised to make a wise and informed decision while renewing fixed deposits to claim the highest benefits.

When an FD matures, the auto-termination option shuts the Fixed Deposit down and the amount is transferred to an already selected savings account. However, it is interesting to note that the auto-termination option may result in low interest rates due to the changed market scenario during the time of original FD. If you choose to withdraw from a premature FD, you may be subjected to penalty charges.

Therefore, it is very important to keep track of your fixed deposits. If you forget to renew it, it may get difficult to claim your money from the bank later on and due to that, you may also end up paying your FD to the nominee. Likewise, auto-renewal is not always a smart option either because banks’ interest rates might be lower during that time and you will eventually end up in a disadvantageous situation. Also, premature withdrawal results in penalty charges. Therefore, it becomes essential to keep track and choose the best options when it comes to Bank Fixed Deposits.