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2 mins Read | 11 Months Ago

Overdraft Facility on Corporate Fixed Deposits: How Does it Work?

Calculate Interest on Overdraft Against Fixed Deposit

 

Overdraft Facility on Corporate Fixed Deposits: How Does it Work?

An Overdraft facility is a credit arrangement between a bank and the customers who have a Fixed Deposit (FD) with the bank. This includes Corporate FDs as well. Banks also give account holders the option to withdraw money from their FD Accounts up to a certain limit through partial withdrawal (90% for ICICI Bank customers) or by ‘breaking’ their deposits altogether. Both these options can lead to loss of the interest earned and attract potential penalties as well. In case an FD holder is in need of money, instead of partially withdrawing or breaking the FD, he/she can leverage the FD to get an Overdraft against it. ICICI Bank Overdraft facility on Corporate Fixed Deposits (CFDs) enables you to use the amount of your FD without breaking it or losing the interest earned.

The Overdraft amount should be within the limit set by ICICI Bank and the applicable interest rate will be 1-2% above your FD rate. A Processing Fee will be levied for availing this facility. You can repay the Overdraft amount through the FD or other Bank Accounts. Let us examine how a Corporate Overdraft works for ICICI Bank Fixed Deposit.

How does an Overdraft against ICICI Bank Corporate FD work?

A Fixed Deposit is one of the most sought after investments as it can be used to meet short-term and long-term financial needs. An Overdraft is a short-term loan option that can be availed by using an FD as a security. When an Overdraft is availed against an ICICI Bank FD, the customer can get a loan up to 90% of the deposit amount. He/She will have to pay the interest only on the amount utilised without worrying about high repayment. The customer can withdraw funds up to the Overdraft limit at any point in time without any penalty. This makes OD against Corporate FD a good option for those who want to manage their cash flows efficiently.

What is the difference between Premature Withdrawal and OD against FD?

In a financial emergency, you can also withdraw your FD funds prematurely in the form of an Overdraft against Fixed Deposit. However, to do so, you have to apply for the same.

FD Overdraft is one of the easiest methods that ICICI Bank offers customers for borrowing money from the Bank. Your Fixed Deposit investment is utilised as security for this facility and the money is subsequently paid to you as an Overdraft. This means that you save yourself from paying a penalty by using the Overdraft against FD facility.

ICICI Bank also provides a premature withdrawal facility from the FD before its maturity date. This means that if you decide to exercise this option, you will have to pay a nominal penalty.

Ideally, it is better to avoid withdrawing a portion of the deposit and losing the returns, especially when you can take an OD of up to <90>% of the limit of your FD, without suffering any loss.

How to Apply for an OD against Corporate FD?

To avail an Overdraft facility against Fixed Deposit (FDOD), you can visit any ICICI Bank Branch. Our team will provide you with the necessary documents and guide you through the process. Once your OD against FD is approved, you can access the funds whenever you need to.After approval, the funds will be transferred to your account.

Conclusion

Applying for an Overdraft on a Corporate FD can support the growth of your business, stabilise operations and optimise cash flows during difficult times. Whether you need it or not, it is always good to have options that can be availed quickly.

Please note that credit facilities are not available for Non-callable Deposits (Non-withdrawable).

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