What happens if a Loan against FD is not paid?

If a loan against a Fixed Deposit (FD) is not repaid, the financial institution follows a specific process to recover the outstanding amount:

1. Notice and Default: The financial institution sends a notice for overdue payments. If not addressed, the loan is marked as in default.
2. Liquidation: The FD is liquidated to recover the outstanding loan amount, including interest and charges.
3. Recovery: The proceeds cover the loan, and any surplus is returned to the depositor.
4. Deficit: If the FD’s value is insufficient, the remaining balance must be paid by the borrower.

Procedures may vary by institution, so it is advisable to review the loan terms or consult with the financial institution.