A loan or overdraft against a fixed deposit (FD) allows BOB customers to borrow funds by pledging their FD instead of breaking it. Banks typically sanction 80–95% of the deposit value as a loan. Interest on the loan is generally 1–2 percentage points higher than the FD rate. The following table summarises key aspects of loans against FDs.
| Parameter | Typical value |
|---|---|
| Loan limit | Up to 90% of FD amount |
| Interest rate | FD rate + 1–2 percentage points |
| Processing fees | Nil to nominal |
| Tenure | Co-terminus with FD maturity |
| Prepayment penalty | Usually none; interest charged only on the utilised amount |
Advantages
- Liquidity without breaking the FD: Your FD continues to earn interest while you access funds.
- Lower cost than unsecured loans: Since the FD is collateral, interest rates are comparatively lower than personal loans.
- Flexible repayment: You pay interest only on the amount used and can repay partially or fully anytime without penalty.
Eligibility and process
Most banks permit loans against resident, NRE/NRO and even tax-saving FDs (after the lock-in). You need to hold an FD with the bank and submit a simple application. The bank marks a lien on your FD and links the loan limit to your savings account.
While loans against FDs are convenient, you should use them judiciously. If you default, the bank can adjust the loan with your deposit. Always verify the latest terms and charges with the bank.
