FD matured and forgotten? Your money does not vanish, but the interest can change

New business data points to the fact that A set deposit that reaches maturity and is left untouched does not simply disappear. The bank keeps hold the money, but the amount may stop earning the FD’s original contracted rate. Under current RBI rules, an unpaid domestic term deposit after maturity earns the softer of the applicable savings account rate or the contracted rate on the matured deposit.

That can matter when a sizeable FD is left unattended for months or years. A depositor who assumes the money is still earning the original FD rate could end up with a softer return than anticipated.

What happens after the maturity date

First check the maturity instruction given when the FD was opened. Depending on the product and bank terms, the maturity proceeds may be credited to the linked account or renewed according to the instruction selected by the customer.

If the deposit matures and the proceeds stay unpaid with the bank, RBI rules apply the softer of the savings rate or the contracted rate on the matured term deposit for the overdue period.

For example, suppose an Rs. 5 lakh FD was earning 7 percent and its maturity proceeds were left unpaid. If the applicable savings rate were 3 percent, the overdue amount would not continue earning 7 percent simply because that was the old FD rate.

Do not assume the FD will renew at the old rate

Renewal is another area where customers can get caught out. A fresh FD is generally booked at the rate applicable under the bank’s prevailing deposit policy when renewal is made, subject to the bank’s rules and customer instructions. An old FD rate should not be treated as guaranteed for the next tenure.

If you have given a maturity instruction, check whether the bank followed it. If the deposit has already matured, ask the bank for the current value, overdue interest and available options for reinvestment or withdrawal.

What if the money is forgotten for years

A forgotten FD can eventually become an unclaimed deposit. RBI considers a credit balance in a deposit account, or an amount remaining unclaimed, for 10 years or more for transfer to the Depositor Education and Awareness Fund.

This does not mean the depositor loses the money. RBI requires banks to provide a mechanism for customers or eligible claimants to recover such amounts from the bank. Banks must additionally display information around unclaimed deposits on their websites and take steps to trace customers or legal heirs.

The process can involve more paperwork if the original depositor has died. The nominee, legal heir or other eligible claimant may need to submit documents required under the bank’s claim procedure.

Keep a record of every FD, its maturity date, maturity instruction and linked account.

If an FD has already matured, check its status rather than assuming it has been renewed on favourable terms. A quick review will show whether the money is in the savings account, has been renewed, or is earning a softer overdue rate.

A maturity date is not the end of the investment decision. It is the point at which you need to decide what the money should do next, rather than leaving that decision to an old instruction or an assumption.