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Overdrafts against fixed deposits on the rise

August 09, 2023

Overdrafts against fixed deposits on the rise
Banks are seeing a trend of higher demand for loans or overdraft against fixed deposits (OD against FD) product, senior bankers have told FE.

OD against FD is one of the quickest and cost-effective ways to borrow money from a bank without any premature withdrawal of FD. In this product, a customer FD is used as collateral for OD facility. Typically, banks allows OD up to 90% of the existing FD value, and interest levied on the facility is maximum 2% above the contractual FD interest rate. Another advantage of taking an OD against FD is that customer is charged OD interest only on the amount utilised and not against the entire principle amount sanctioned.
 
Further, customer do not need to worry about EMI obligations as they have the flexibility to deposit the outstanding amount at their convenience, bankers say, adding that there are no processing charges to avail the OD facility.
 
“At RBL Bank we have seen a 43% rise on the ODFD product. In the current environment of high FD rates, ODFD is the quickest and a cost-effective way to borrow money from the Bank without premature withdrawal of FDs,” says Deepak Gaddhyan, head of branch & business banking at RBL Bank. He, however, did not share the exact quantum of OD against FD loans disbursed till date by the bank.
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