Loan Against Recurring Deposit (RD): Quick Cash Guide
Loan Against Recurring Deposit (RD): How to Get a Loan Without Closing Your RD
A recurring deposit (RD) is a disciplined savings tool used by millions of Indians. But what if you need urgent cash while your RD is still running? A loan against your RD lets you access funds without closing the account and losing the accumulated interest.
Overview of Loan Against RD
Similar to a loan against a fixed deposit, a loan against a recurring deposit uses your RD account as collateral. The bank places a lien on your RD and advances you a loan based on the current accumulated value of your RD. Since the lender has security in the form of the RD balance, these loans come at lower interest rates than unsecured loans.
Most banks including SBI, HDFC Bank, ICICI Bank, Bank of Baroda, and post offices (where RDs are also held) offer this facility. The interest rate is typically 1% to 2% above the RD interest rate, similar to the FD loan model.
Interest Rates
| Bank | Loan Interest Rate | Max Loan Amount |
|---|---|---|
| SBI | RD rate + 1% | Up to 90% of accumulated RD value |
| HDFC Bank | RD rate + 2% | Up to 90% of accumulated RD value |
| Bank of Baroda | RD rate + 1% | Up to 95% of accumulated RD value |
| Post Office RD | Applicable savings rate | Up to 50% of accumulated value |
The loan is available only on the accumulated RD balance at the time of application. So if you have paid 12 instalments of Rs. 5,000 each, your accumulated balance is approximately Rs. 60,000 plus interest, and you can borrow up to 90% of this amount.
Eligibility
- You must hold the RD with the same institution where you are seeking the loan
- The RD account must have a minimum accumulated balance (banks usually set a floor)
- Individual and joint RD holders are eligible (with co-holder consent for joint accounts)
- No separate income proof or CIBIL score check is required
- RDs in the name of minors are usually not eligible
Documents Required
- RD passbook or account details
- Identity proof: Aadhaar and PAN card
- Address proof
- Loan application form
- Passport-sized photographs
Application Process
Offline at Bank Branch
Visit the bank branch where your RD is active. Fill out the loan application form and submit your KYC documents. The bank will verify the RD balance, place a lien on the account, and credit the loan amount to your savings account. The process typically takes a few hours to one working day.
Online via Net Banking
SBI and a few other banks now allow you to apply for a loan against your RD online through net banking. Log in, navigate to the loan section, select your RD account, enter the desired loan amount (within the eligible limit), and submit. The loan is usually processed within the same day.
Important Considerations
Your RD instalments must continue during the loan tenure. Missing RD instalments can result in penalties and may also affect the lien arrangement. Make sure your finances support both the RD instalment and the loan repayment simultaneously.
If the loan remains unpaid when the RD matures, the bank will adjust the outstanding loan from the maturity proceeds and credit only the balance to your account.
Frequently Asked Questions
Can I take a loan against a post office RD?
Yes. The Department of Posts allows loans against RDs held at post offices, but only after the RD has been active for at least 12 months. The maximum loan is 50% of the balance held at the time of application.
Will taking a loan against my RD affect my credit score?
Yes. Like any loan, a loan against an RD is reported to credit bureaus. Timely repayment will have no negative impact and can actually build your credit history.
Is there a minimum RD tenure before I can apply for a loan?
Most banks require the RD to have been active for at least 6 to 12 months before you are eligible for a loan against it. Post offices require at least 12 months.
What is the maximum tenure for a loan against an RD?
The loan tenure is usually linked to the remaining maturity period of the RD. You cannot take a loan that outlasts the RD maturity date. Most banks cap this at the remaining RD tenure or 12 months, whichever is shorter.
