Overdraft Facility Against Fixed Deposit

A fixed deposit (FD) account is considered to be one of the safest ways to invest your money. The catch here is that it comes with a specific lock-in period. If withdrawn within this period, you will not get the returns in full. But, what should you do if you need some emergency cash before the FD matures? The overdraft facility comes for the rescue at such situations.

An overdraft facility will allow you to withdraw cash and repay it as and when possible. You have to provide collateral in the form of an FD certificate to assure the bank that you will repay the credit.

Malaysian Banks Offering Overdraft Facilities

RHB Bank Automatic Standby Overdraft: It can be used to get cash for both personal and business needs. You have to pledge the fixed deposit receipt to get the benefits of the facility.

Maybank Overdraft Facility: You must provide collateral that is worth a minimum of RM10,000 to get the benefits of the scheme. Commitment fee will not be charged for an overdraft facility of up to RM250,000. The scheme is ideal for personal purposes, purchase of assets, and education.

OCBC Overdraft: Get additional funds when you need them the most with the OCBC Overdraft facility. You can pledge one of the following assets to secure the overdraft—fixed deposits, unit trusts, property, structured investments, shares, and single-premium insurance policies.

CIMB Credit Line Secured Overdraft: You can withdraw additional funds from your current account when you provide collateral, such as CIMB Fixed Deposit, CIMB Unit Trust, Floating Rate Negotiable Instruments of Deposit (FRNID), Negotiable Instruments of Deposit (NID), and others.

HSBC Personal Overdraft: HSBC Bank provides an overdraft limit ranging from RM10,000 up to RM5 million. There is no fixed instalment amount to be paid every month. You can serve the interest on a month-on-month basis and pay for the principal amount as and when you get some cash in hand.

Features and Benefits

  • Enjoy standby funds with a pre-specified limit.
  • Get extra cash in hand whenever you need.
  • The interest calculation is made only on the amount drawn.
  • Withdraw cash via cheque, ATM, and bank branches.
  • Flexible repayment structure for the principal, i.e. you can pay any time based on your convenience.
  • The pledged fixed deposit account continues to earn interest and matures with the promised amount.
  • Securing overdraft with an FD certificate includes a lower interest rate as compared to an unsecured overdraft facility.
  • You can withdraw the repaid principal again.
  • Get a high margin of advance.

Eligibility Criteria

  • Age: Between 21 years and 60 years.
  • An account with the bank providing overdraft facility.

Documents Required

Regular-Income Applicants
  • A copy of NRIC.
  • A copy of the latest payslip.
  • A copy of last 3 months’ bank statements to show salary being credited.
  • Latest Form BE/Form EA.
  • Latest EPF statement not older than 12 months.
  • Appointment Letter or Employment Confirmation Letter stating the salary and allowances.
Variable-Income Earners
  • A copy of NRIC.
  • A copy of the latest payslip.
  • A copy of the last 3 months’ commission statements.
  • A copy of the last 3 months’ bank account statements to show commission being credited.
  • Latest Form BE with the tax payment receipt.
  • Latest EPF statement not older than 12 months.
  • A copy of the yearly commission statement from the employer.
Self-Employed Applicants
  • A copy of NRIC.
  • A copy of the latest Form B with the tax payment receipt.
  • Latest EPF statement not older than 12 months.
  • A copy of the audited financial statement.
  • Business registration certificate.
  • Evidence for being in the business for at least 2 years.
  • Last 6 months’ business/proprietor account statements.
  • Last 6 months’ personal bank account statement.

Fees and Charges

Stamp Duty As per the Stamp Duty Act 1949.
Third Party MOD - Stamping RM10.
Documentation Fee RM100.
Commitment Fees Varies with banks.

It does not make sense to make a premature withdrawal only because you need some emergency cash. Breaking the FD account will end you up with not getting any interest earned so far. In this case, it is a good idea to pledge the FD certificate and get an overdraft facility. You get the money you need and the FD still earns the designated interest by itself. If you are planning to invest in fixed deposits, check for the best available offers given by various banks in Malaysia, and put your money accordingly.

FAQs

Q. What is the margin of advance available with an overdraft facility?

A. The margin of advance provided is determined based on if you wish to withdraw the interest/profit or just the principal amount repaid. On the whole, you can get financing of up to 100% of the fixed deposit receipt.

Q. What is a commitment fee?

A. A commitment fee is charged when you do not utilise the available funds of the overdraft facility when the limit is set above RM250,000. You will be charged up to 1% of the unutilised amount as a commitment fee. Not all banks charge the commitment fee.

Q. Can I get the overdraft facility if I am a joint account holder?

A. Yes. Some banks provide overdraft facility for joint account holders. In that case, the fixed deposit receipt must have your name to qualify for the facility.

Q. What happens if I am unable to repay the withdrawn money?

A. If you are unable to repay the money withdrawn, the bank reserves the right to acquire the collateral in order to set-off the outstanding balance. The bank can also use the credit balance in your accounts maintained with the bank towards the outstanding balance.

In another case, the bank can initiate recovery activities and make legal proceedings against you. You should know that the legal proceedings will directly affect your credit rating.

Q. Is there a limit for withdrawal?

A. Yes. Each bank will specify its own limit for withdrawal. You are not allowed to withdraw funds beyond the limit until you repay the withdrawn sum. If you withdraw beyond the limit, you will be charged a penalty. For example, CIMB Bank charges a penalty of BR + 6.35% on the excess amount, starting at RM5.

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