Many investors prefer to park a part of their savings in Fixed Deposits (FDs), as they are considered as a stable investment tool with minimal risk. But life can be unpredictable. There may come a time when you need to transfer your existing FD to someone else, owing to personal reasons, financial planning, or unforeseen circumstances.
This brings forth an important question: Is it legally possible to transfer the ownership of an FD to another person in India?
In this blog, we’ll explore the rules and options around FD ownership transfer, clarify common misconceptions, and guide you on what steps you can take if you want to change the beneficiary or nominee of your fixed deposit.
Transfer of FD to Another Person: Is It Allowed?
No, it is not possible to transfer an existing FD from one person to another in India, even if there is a beneficiary account in place. The Reserve Bank of India (RBI) guidelines do not permit the transfer or assignment of FDs to any third party.
Therefore, the only way to transfer a fixed deposit to another person is to first close the existing FD after maturity and then open a new FD in the other person’s name with either the new financial institution or the existing one. While transferring a fixed deposit (FD) from one person to another is not possible, transferring an existing FD from one branch to another branch within the same financial institution is a more convenient option.
What are the Alternatives Available?
Since an outright FD transfer is not possible in India, here are a few alternatives you can consider:
1. Renew the FD in Another Person's Name After Maturity
When your fixed deposit matures, financial institutions give you the option to renew it further for another term. Instead of renewing in your name, you can fill out a new FD form at maturity to open it in another person’s name.
This process lets you gift your maturity proceeds legally to any individual without any transfer-related restrictions.
You can also opt to open the new FD at a different financial institution and get the maturity amount transferred.
2. Make it a Joint Fixed Deposit
An alternative is opting for a Joint FD account at the time of opening the deposit itself. You can add another primary account holder, ensuring full access to the FD details for that person.
In case of your demise, the joint account holder will become the primary account holder seamlessly. The FD amount will be accessible to the surviving holder without any additional formalities or transfer requests.
What Are the Steps to Transfer an Existing FD?
As explained above, you cannot directly transfer or change ownership of your existing fixed deposits in India. However, renewal is possible with the right procedures.
- Fill the pay-in slip: When your FD is nearing maturity, visit your bank branch. Fill out the fixed deposit pay-in slip to renew it further, but change the account holder's name to the other person.
- Submit KYC documents: You will need to submit identity and address proof documents of the new account holder you are nominating. If renewing at another financial institution, the person will need to submit new KYC documents.
- Get new FD receipts: The financial institution will issue new FD certificates and receipts in the name of the new nominated holder you have selected.
- Change account details: The payout from the next maturity will now be sent to the account linked to the new fixed deposit account holder.
By planning in advance of maturity, you can seamlessly transfer FD earnings to any person you wish without violating any RBI guidelines.
Conclusion
While transferring or changing ownership of an active fixed deposit is not directly possible in India, alternatives like joint accounts, premature withdrawals, and renewal nominees allow you to redirect your investment as needed.
Careful planning regarding premature penalties, KYC submissions, and tax implications will enable a smooth, effective transfer process without any regulatory hurdles. Discuss with your financial institution well in advance before considering moving your FD investments to another person.