In the last one fiscal, banks have witnessed a big rise in loans against fixed deposits. Such loans have grown by as much as 25% as on April 2011 as compared to 3% a year prior to that.
In a period between April 23, 2010 to April 22, 2011 such loans have increased by Rs 11,966 crore, read data released by Reserve Bank of India.
With interest rates on a rising spree, a customer who had for example taken a five year deposit at 8% per annum can now avail a loan on it at 10%.
"The net outgo for the borrower is only 2 per cent in the case of loans against FDs. So, instead of breaking his FD, he could take a loan against it," said a senior Union Bank of India official.
These are comparatively cheaper than personal loans.