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Why fixed deposits ?

Darpan Sharma (People Call me to Join their Firms and I say No isn't it a good Occupation) (28 Points)

28 May 2014

Hi everyone

its a question related to Banks

Why a person lien his Fixed deposit to take term or overdraft loans?

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6 Replies

praveen (Chartered Accountant) (6971 Points)
Replied 28 May 2014

Sometimes it happens such that you have excess money with you and want to make a deposit and you do a fixed deposit with the bank. It may also happen that you may sudenly require some money for business purpose. That time if you break your FD the pre maturity cost may hurt you. Hence for a short period of time you can take a lien on the deposit.

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Tribhuvan Aditya Singh (Student as well as Self-employed) (3710 Points)
Replied 28 May 2014

breaking of fd before maturity brings along some charges to be paid to bank. but when u lien a fd then u pay 1% extra intt. on loan against fd. this way u dont lose intt. on fd and u can also use the amt. of fd as loan for your need by paying small intt. however loan amt. is always less than fd amt.

Gaurav Jain (Zonal Manager-Accounts) (30 Points)
Replied 29 May 2014

Too avail OD on FD is good for short term if you require money for some time say 2-3 months and you are going to deposit the money back in OD a/c with in 2-3 months only, also if FD amount is high and FD maturity period is also long then it is also advisable to take OD against FD. But the FD amount is small and FD is for 3-6 months then Overdraft facility is not feasible. Generally banks take 2% int. more than the FD interest rate. If you go for premature withdrawl the bank charges 1-1.5% penal interest. Also the bank take the lower of prevailing interest rate or original interest rate whichever is lower. e.g if you had booked and FD @ 9% p.a. but now interest rate is 8% p.a. then bank will consider 8% p.a. and will deduct 1-1.5% penal interest, so you will get interesr @ 6.5%-7% on your money. It is always advisable to do cost benefit analysis for taking the decision.

Darpan Sharma (People Call me to Join their Firms and I say No isn't it a good Occupation) (28 Points)
Replied 11 June 2014

Thank You, to all those who replied to my query, Thanx a lot as a Concurrent Auditor this thing suddenly struck in my mind. but I got hte answer now

Gangatharan (Partner) (108 Points)
Replied 12 June 2014

when you have a loan/CC/OD in bank against your deposits, bank ll mark lien against your deposits. It ll not let you to close the deposits unless you cloed the loan. If will don by ban not by the concern person who is having loan. To take control over the lon, bank ll do like that.