Bank fails to return your FD after maturity? What depositors can do to recover their money

A bank’s refusal or delay in returning money from a matured fixed deposit can leave depositors in a difficult position. A recent Kerala High Court ruling has highlighted that banks handling public funds have a responsibility to make timely payments to depositors.

The case involved a Thrissur depositor whose ₹5 lakh fixed deposit matured in 2015 but was not repaid by the bank, which cited technical reasons. The Kerala High Court eventually upheld an order directing the bank to pay the depositor ₹5 lakh with 12% interest and ₹10,000 as cost and compensation.

What happened in the Kerala case?

Sethumadhavan, a resident of Mullamkunnath Kavu in Thrissur, had invested ₹5 lakh in fixed deposits that matured on June 2, 2015. When he approached the bank for repayment, the money was not released.

He subsequently approached the District Consumer Disputes Redressal Commission, Thrissur. In an order dated December 31, 2021, the commission directed the bank to repay the ₹5 lakh with 12% interest and ₹10,000 towards cost and compensation.

The bank challenged the order before the Kerala High Court after a delay of 825 days. It attributed the delay to the fact that its management had been under an administrator between December 2014 and May 2022.

A single judge rejected the bank’s contention and directed it to comply with the consumer commission’s order. The bank then approached a larger Bench, arguing that since it was a co-operative bank, provisions of the Kerala Co-operative Societies Act applied and the consumer forum did not have jurisdiction.

The larger Bench rejected the argument in its June 2, 2026 judgment and upheld the consumer commission’s order.

The court said the Consumer Protection Act provides an additional remedy for consumers and that provisions of the Kerala Co-operative Societies Act do not take away a depositor’s right to approach consumer forums.

The High Court also said that a banking institution dealing with public funds is duty-bound to make prompt payment to its depositors. It criticised the bank’s reliance on technicalities when its liability to return the matured FD was not disputed.

The court granted the bank six months to comply with the order.

What can you do if your bank delays your FD repayment?

The Kerala case provides a useful reminder for depositors facing delays.

If your FD has matured and the bank has not released the proceeds, approach the bank and formally raise the issue. Keep records of the FD, its maturity date and your communications with the bank. If the bank gives a reason for withholding the money, ask for the explanation in writing.

If the issue remains unresolved, depositors can use the applicable grievance-redressal mechanisms. Under the RBI’s Integrated Ombudsman Scheme, a customer can approach the RBI Ombudsman if the regulated entity does not respond to the complaint within 30 days or the response is unsatisfactory.

The RBI also provides an online mechanism for filing complaints against covered banks and other regulated entities.

What happens to interest if an FD remains unpaid after maturity?

RBI guidelines also provide for interest on overdue domestic term deposits. Under the current RBI directions, when a term deposit matures and the proceeds remain unpaid, the amount is treated as an overdue deposit and interest is payable at the applicable savings-deposit rate or the contracted rate on the matured term deposit, whichever is lower.

This is separate from the 12% interest awarded in the Kerala case, which was part of the remedy ordered in that particular dispute. The ruling does not mean that every delayed FD automatically attracts 12% interest.

What is the key takeaway for FD holders?

The Kerala High Court’s ruling reinforces that a depositor does not lose the right to seek recovery merely because the bank is a co-operative institution or because another law provides a separate mechanism for resolving disputes.

For depositors, the important step is to act promptly when an FD matures but the money is not returned. Keep documentary evidence of the deposit and the bank’s response, raise a formal complaint with the bank and, where appropriate, pursue the available consumer or banking grievance mechanisms.

In the Kerala case, the court made clear that when a bank’s obligation to return a matured deposit is undisputed, relying on technicalities to delay repayment is not acceptable.