In the dynamic world of personal finance, liquidity and access to short-term credit play a critical role. For investors who prefer low-risk instruments like Fixed Deposits (FDs), there’s a financial tool that offers credit flexibility without having to break the FD—this is known as Overdraft (OD) against FD.
An OD against FD is a secured loan facility where banks allow you to borrow money using your fixed deposit as collateral. It offers a smart way to access funds quickly while keeping your investment intact.
This guide will explore everything you need to know about this facility—from its working and benefits to eligibility, interest rates, and comparison with personal loans.
What is OD Against FD?
OD against FD (Overdraft against Fixed Deposit) refers to a facility where an account holder can withdraw funds in excess of the balance available in their savings or current account, backed by their FD as security.
Key Features:
- It is a secured credit facility.
- The FD acts as collateral, reducing risk for the bank.
- Only a percentage (typically 75–90%) of the FD amount is offered as overdraft.
- Interest is charged only on the utilized amount and not on the entire limit.
- You continue to earn interest on your FD even after availing OD.
How Does Overdraft Against Fixed Deposit Work?
The process of availing an overdraft is straightforward:
- Account Holder Requests OD: You must have an FD with the bank offering this facility. Visit the branch or apply online.
- Determine the OD Limit: The bank will sanction a loan amount (generally 75–90% of the FD’s value).
- Lien is Marked: A lien (hold) is placed on the FD for the sanctioned limit.
- Funds Accessible via OD Account: You will receive a current/overdraft account to withdraw the funds.
- Flexible Withdrawals: Funds can be withdrawn multiple times (similar to a credit line).
- Repayment: Interest is paid only on the amount and days the money was used. There is no fixed EMI structure.
Benefits of Availing OD on Fixed Deposits
Using an OD against FD offers several strategic benefits for both individuals and businesses:
1. Preserves FD Benefits
- Your FD continues to earn interest as usual.
- There’s no premature withdrawal, so you avoid penalties.
2. Lower Interest Rate
- The OD interest rate is generally 1%–2% higher than your FD rate, which is significantly lower than that of personal loans or credit cards.
3. Pay Interest Only on Usage
- Unlike lump sum loans, OD only charges interest on the amount used and for the duration it was used.
- Ideal for fluctuating short-term financial needs.
4. Quick Disbursal
- Since it’s a secured loan, banks process it much faster.
- Some banks offer OD facilities instantly via net banking.
5. No Credit Check Requirement
- Credit score has minimal influence because the FD is already a secured asset.
- This makes it accessible to individuals with limited credit history.
6. Flexible Tenure
- The overdraft tenure is usually aligned with the FD’s maturity.
- It can be renewed upon renewal of the FD.
Eligibility Criteria and Application Process
Who is Eligible?
- Any individual with an active Fixed Deposit with the same bank.
- Corporates, partnerships, trusts, and senior citizens with FDs.
- No default history or litigation with the bank.
Documents Required
- Original FD certificate or details.
- Identity and address proof (PAN, Aadhaar, Passport).
- Bank account KYC compliance.
- Application form (available online or in branch).
Application Process
Offline Method:
- Visit your bank branch.
- Submit a request for OD against FD.
- Provide necessary documents.
- Sign the loan agreement and mark a lien on your FD.
Online Method:
- Log in to your net banking account.
- Navigate to Fixed Deposit or Loan Services.
- Click on “OD against FD” and follow the instructions.
- The OD limit is created instantly in most cases.
Interest Rates and Charges on OD Against FD
The interest rate on OD against FD is relatively low because it is backed by a secure asset.
Typical Structure:
- Interest = FD interest rate + 1% to 2%
- No prepayment charges.
- No processing fee for most banks.
- Penal interest may apply if the limit is overused or tenure extended.
| Bank | FD Interest Rate | OD Interest Rate |
| SBI | 6.50% | 7.50% |
| HDFC Bank | 7.00% | 8.00% |
| ICICI Bank | 6.75% | 7.75% |
| Axis Bank | 7.10% | 8.10% |
(Note: Rates are indicative and subject to change.)
OD Against FD vs Personal Loan – Which is Better?
| Feature | OD Against FD | Personal Loan |
| Collateral | FD required | Unsecured |
| Interest Rate | 7%–9% | 11%–18% |
| Processing Time | Same day | 2–3 days |
| Interest Type | On usage only | On entire amount |
| Credit Score | Not mandatory | Mandatory |
| Prepayment Charges | Usually none | May apply |
Conclusion
OD against FD is one of the most convenient and low-risk ways to access funds without compromising long-term savings. For salaried individuals, business owners, and even retirees, it offers liquidity, flexibility, and peace of mind. Whether for emergency medical expenses, cash flow mismatches, or short-term opportunities, this facility can be an essential part of a well-rounded financial toolkit.
For conservative investors looking to maintain stability while leveraging their existing investments, the OD against FD option stands out as an excellent short-term credit solution.
FAQs for OD against FD
Yes, OD against FD usually offers a lower interest rate and flexibility of usage. It’s ideal for short-term cash needs without breaking the FD.
The rate typically ranges between 1%–2% above the FD rate. For instance, if your FD earns 7%, your OD rate could be 8–9%.
Any individual or entity with an active FD in the same bank is eligible, provided they meet basic KYC and bank relationship requirements.
Most banks offer 75–90% of the FD value as the overdraft limit.
No. Since the loan is fully secured by the FD, banks usually do not perform a detailed credit score check.
Yes. You can repay the entire used amount at any time without any foreclosure charges.
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