Overdrafts against fixed deposits are one of those quiet banking features that most people overlook until a cash crunch hits. Instead of breaking your FD, losing interest, and resetting your savings plan, you can borrow against it at a relatively low cost, keep the FD running, and still meet your immediate need for money. The key is to understand when this option genuinely saves you money and when it is better to simply redeem the deposit.

How an overdraft against FD works

When you take an overdraft against an FD, the bank extends a limit linked to your deposit, usually in the range of 75-90 percent of its value. The FD itself is marked as security and continues as before. You are charged interest only on the amount you actually withdraw and not on the full limit. For existing customers,

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