One form of loan that has caught the eye of retail borrowers in recent times is loan against fixed deposits (FDs). According to data from the Reserve Bank of India’s (RBI’s) April 2023 bulletin, this form of loan witnessed an unprecedented surge of 43 per cent during the 2022-23 financial year, making it one of the fastest-growing retail loan products in the country. The outstanding portfolio of this form of loan had soared to Rs 1.13 trillion by February 2023.
How does it work?
If you have an FD and want a loan, the bank will lien-mark the FD and give you the money. Banks charge an interest rate that is 100-200 basis points higher than the interest paid by the FD.
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