Why fixed deposits ?

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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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.

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

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.