OD Against FD

Getting an overdraft against fixed deposits is one of the fastest ways to access funds. Offered by banks and financial institutions, this option lets you borrow money using the value of your FD. 

While getting an overdraft against FD, your FD serves as collateral against the funds. Rather than cashing in your FD early, you can secure funds this way while keeping your investment intact.

Financial institutions often offer you an overdraft facility against your fixed deposit, giving you access to additional funds. Usually, you can get up to 80% to 90% of your FD's value. 

You need to pay interest on the amount you borrow, and the interest rate on the overdraft is typically higher than that of your fixed deposit. Note that you only pay interest on the amount you actually use, not the total limit. 

The interest continues to accrue until you fully repay the loan. You have the flexibility to make repayments either in full or through partial payments.

The most essential requirement for obtaining an overdraft against a fixed deposit is that you must have a fixed deposit account with the bank or financial institution from which you wish to obtain the facility.

Apart from this, to obtain OD against FD, you must be one of the following:

• An Indian citizen or NRI above 18 years

• Members of HUF (Hindu Undivided Family)

• Partnership Firms

• Family Trusts

• Corporations

• An Association

• Educational Institutions

• Societies

• Clubs

Here are some additional eligibility requirements:

• Holders of individual and combined fixed deposit accounts can opt for this facility

• FD in the name of a minor can’t be utilised for an overdraft facility

• FD account holders having a 5-year tax saver FD are not eligible for this facility

You can apply for an overdraft on FD through online or offline mediums.

Online Medium

Here are the steps to follow:

1. Log in to your net banking account using your credentials

2. On the main tab, go to the ‘Fixed Deposit’ menu

3. Choose the ‘Overdraft facility against FD’ option

4. Fill in the form and provide the details like the required amount, tenure, etc and so on.

5. Next, submit the form

6. Following that, your bank will process your request and approve it within a few days

7. Once approved, the amount will be transferred to your account

Offline Medium

Here are the steps to follow:

1. Visit the financial institution’s branch

2. Ask for the form from the officials

3. Fill in the form carefully and provide details like the required amount, payback tenure, and so on

4. Submit it along with the supporting documents

5. After that, your request will be processed

6. It may take up to a few days to receive the approval

7. After approval, the funds will be transferred to your account

Here are some of the factors to keep in mind while getting an OD against FD:

• Overdraft Amount

Assess how much you need and whether the overdraft facility can cover it. Some financial institutions may not offer the full amount you are seeking, so it is important to check in advance.

• Interest Rates

Before applying for an overdraft against your FD, make sure to understand the interest rates. These will be higher than the interest earned on your FD, so knowing the rates helps you make an informed decision.

• Repayment Terms

Ensure the repayment terms are manageable for you so you can pay off the overdraft without penalties affecting your FD returns. Having a repayment plan in place beforehand is always wise.

You can close the overdraft against FD once you have repaid the whole amount by visiting the financial institution’s branch. You may also do so through your net banking account.

An overdraft against a fixed deposit offers a flexible way to access funds while keeping your FD intact. By using your FD as collateral, you can secure credit at competitive rates. Not only that, you keep earning interest on your fixed deposit. 

Before choosing this option, evaluate your financial needs, repayment ability, and interest rates from different banks.