- Home
- Blogs
- Fixed Deposit
- Overdraft Against Fd
Overdraft Against Fixed Deposit: Know Its Meaning And How To Apply
Reviewed by: Fibe Research Team
- Published on: 4 Dec 2024
Reviewed by: Fibe Research Team
A fixed deposit comes with a lot of benefits, acting as a lucrative tool to invest your savings securely while generating interest. In addition, it can also help you in arranging funds for financial emergencies or to build your credit score via a loan against FD or a secured credit card. Financial institutions also offer an overdraft against FD.
This is an affordable alternative to getting a personal loan, which you can use without any restriction. By understanding what OD against FD means, you can compare options and choose the best one.
Having an FD account enables you to take different types of credits against it. One such option is an overdraft (OD) facility. Getting an overdraft on a fixed deposit requires you to pledge your FD, and the financial company will sanction 90% to 95% of your FD amount as credit.
To understand the process better, say you have an FD of ₹2 lakhs, and you need immediate funds. Instead of getting a loan, you apply for an overdraft facility where the bank is offering 90% of your fixed deposit as OD. Since 90% of ₹2 lakhs is ₹1.8 lakhs, you get the amount instantly without breaking your FD.
This is a secured credit option where you will have to use your fixed deposit as collateral. However, unlike other secured loans, you don’t repay in full EMIs. It also does not attract interest on the total loan amount. Instead, you will have to pay interest only on the borrowed amount for the duration for which you are using the funds.
Assume you have access to an overdraft of ₹1.8 lakhs, but you only used ₹1 lakh for 5 months. In this case, you only have to pay interest on ₹1 lakh for 5 months. Another noteworthy feature is that you can close your OD anytime without any prepayment charges.
To avail of this facility, you need to meet the following requirements:
There are two types of deposits that are ineligible for OD:
When it comes to making the most of this facility, getting the maximum credit is valuable. Here’s a list of India’s most popular banks and their limit on overdraft against FD.
| Bank | Overdraft Limit |
|---|---|
| State Bank of India | 90% of the FD value |
| ICICI Bank | 90% of the FD value |
| Bank of Baroda | 90% of the FD value |
| Axis Bank | 85% of the FD value |
| HDFC Bank | 90% of the FD value |
| Citibank | 90% of the FD value |
| Kotak Mahindra Bank | 90% of the FD value |
| Yes Bank | 90% of the FD value |
| Punjab National Bank | Minimum ₹25,000 to maximum ₹50 lakhs |
Disclaimer: These details are current as of November 2024 and are subject to change as per the bank’s policy. Check the latest information before you apply for it.
To successfully apply for overdraft against FD, you can follow these steps:
For the offline application, visit the bank branch to fill out the form. After that, you must provide your fixed deposit receipt. On approval, the amount will be credited to your account.
The process doesn’t end here as you must also close your overdraft on a fixed deposit and remove the lien marking from your FD. For that, you need to follow these steps:
While this option is a quick and easy solution to get credit, read all the product details carefully, as you have to pay interest. If you are looking to book an FD, choose the financial institution offering maximum overdraft on a fixed deposit to put yourself in a better position to address an emergency.
Yes, you can take an overdraft against FD with joint account holders. There are only two limitations to this, which are:
Initially, the lender will add interest to your fixed deposit. In case you still cannot pay the borrowed amount, the lender may have to take strict action leading to dissolving your FD to recover dues.
