Kerala High Court sets aside order in Bank of India non-callable FD closure case

A division bench of the Kerala High Court on 13 October 2026 allowed an appeal by Bank of India and dismissed a writ petition that sought early closure of two non-callable fixed deposits of Rs 1 crore and Rs 2 crore. The court held that the dispute arose from a contract and raised facts that needed evidence, so it could not be decided in a writ petition. It set aside a single judge's judgment of 16 July 2026.

What Happened

The depositor, Kerala State Nirmithi Kendra, a Government of Kerala undertaking, said in its petition that it had placed Rs 17 crore with the bank in several fixed deposits classed as non-callable, meaning deposits that cannot be withdrawn before maturity. It said it needed funds for salaries and statutory dues and that a branch official had assured it that early closure would be allowed on payment of a penalty.

The bank rejected the request, citing RBI guidelines on non-callable deposits. In its affidavits, the bank said the two deposits were for 450 days, maturing on 3 September 2026 and 17 September 2026. It said its scheme allowed early withdrawal only if the depositor became bankrupt, was a company ordered to be wound up by a court, or died, and that such deposits earn a higher rate of interest than normal fixed deposits. The bank said RBI circulars permit banks to offer such deposits, with a minimum above Rs 1 crore, and that the depositor had chosen the scheme knowingly.

The court held that whether the conditions were properly explained was a disputed question of fact. Their rights came from the scheme, the deposit receipts and their letters, and needed evidence.

What It Means

The ruling does not decide whether the deposits could be closed early. It holds only that a writ petition was the wrong route for this contractual dispute. The court cited principles that purely contractual disputes may be left to the remedies meant for them, such as a civil court.

For depositors, the case shows that a non-callable deposit, as described by the bank in this case, is locked in until maturity except in narrow situations. Complaints about a bank's service can be filed with RBI at https://cms.rbi.org.in.

Source: High Court judgment