Understanding Bank Rules for FD Loans
A loan against Fixed Deposit (FD) is a secured loan where your FD acts as collateral. Most banks allow you to borrow 75% to 90% of your FD amount without breaking the deposit. The process is simple and quick, but it’s important to know the bank’s rules and terms before applying. These rules cover eligibility, loan limits, interest rates, tenure, and repayment. Understanding these guidelines helps you make smart borrowing decisions and avoid extra charges or penalties in the future.
Eligibility Rules for FD Loans
Most banks allow the following customers to apply for an FD loan:
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Individual FD holders
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Joint FD holders (with consent from all holders)
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Senior citizens with FDs
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Proprietorships, partnerships, and companies with corporate FDs
Note: You must have an active fixed deposit with the same bank to be eligible for the loan.
Loan Limit and Disbursement Rules
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Loan Amount: Usually 75% to 90% of the FD value
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Minimum Loan: Starts from ₹10,000 (may vary by bank)
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Maximum Loan: Depends on your FD amount and bank policy
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Disbursement Time: Instant for online applications, or 24–48 hours offline
Example: If you have an FD of ₹5,00,000, you can typically get a loan of up to ₹4,50,000.
Interest Rate Rules
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The loan interest rate is typically 1% to 2% higher than the FD interest rate.
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Interest is charged only on the loan amount, not on the full FD.
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Interest is calculated monthly or quarterly based on the bank’s terms.
Example: If your FD earns 6% interest, your loan rate may be 7%–8%.
Loan Tenure Rules
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The loan tenure cannot exceed the remaining maturity of your FD.
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You can repay the loan before the due date to reduce interest costs.
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Early closure of the FD will also close the loan and may attract penalties.
Tip: Always check the FD maturity date before deciding your loan tenure.
Repayment Rules
Banks offer flexible repayment options such as:
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EMI (Equated Monthly Instalments)
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Bullet Repayment (pay the full amount at once at the end)
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Overdraft Facility (pay interest only on the used amount)
Note: Failure to repay may lead the bank to adjust the loan from your FD amount.
Online vs Offline FD Loan Rules
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Online Loans:
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Available via net banking or mobile apps
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Instant approval and disbursement
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Fewer documents required
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Offline Loans:
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Visit the bank branch
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Fill out application forms
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Submit identity and FD documents
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Important Conditions and Restrictions
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Loan not available on tax-saving FDs (with 5-year lock-in)
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Premature withdrawal of FD will close the loan and may incur charges
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FD must be lien marked by the bank for loan security
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Loan against FD is not available if FD is in a minor’s name
Conclusion
Knowing the bank rules for FD loans is essential before applying. These rules help you understand how much you can borrow, what interest you’ll pay, and how to repay the loan. It’s a great way to get quick funds without breaking your deposit. Always check your bank’s specific terms, compare interest rates, and choose the best option that suits your needs.