What changed
Previously, premature encashment was not allowed for these bonds. Now, the Government has permitted it for individual investors aged 60 and above, with lock-in periods: 5 years for 60-70, 4 years for 70-80, and 3 years for 80+. Encashment is allowed only after the lock-in period, and a penalty of 50% of the last six months' interest is deducted.
What it means for you
Banks must now handle premature encashment requests for these bonds from eligible senior citizens, verifying age proof and ensuring lock-in periods are met. This adds operational work for agency banks but offers a new service to elderly customers. The penalty structure reduces the payout, so banks need to calculate amounts accurately using the provided tables.
What you must do
- Verify investor's age proof (e.g., date of birth document) for eligibility under the 60+ age criteria.
- Check the lock-in period based on age bracket: 5 years for 60-70, 4 years for 70-80, 3 years for 80+.
- Ensure only full encashment per application is allowed; partial encashment is not permitted.
- Collect surrendered post-dated interest warrants if issued, and process request with discharge certificate in Form 1A.
- Apply 50% penalty on last six months' interest for both cumulative and non-cumulative bonds.
Who it affects
State Bank of India and associates, All nationalized banks (excluding Punjab and Sind Bank & Andhra Bank), Axis Bank, ICICI Bank, HDFC Bank, Stock Holding Corporation of India Ltd. (SHCIL), Individual investors aged 60+ holding 8% Savings (Taxable) Bonds, 2003
Can I partially encash my bond investment?
No, partial encashment of a single application is not permitted. You must encash the entire amount invested through that application.
What is the penalty for premature encashment?
A penalty of 50% of the interest due for the last six months of the holding period will be recovered from the investor, applicable to both cumulative and non-cumulative bonds.
Do I need to submit any specific form for premature encashment?
No specific form is required. You need to submit a request letter along with a discharge certificate in the usual Form 1A, and surrender any post-dated interest warrants if issued.