Fixed Deposit vs Certificate of Deposit: A Comprehensive Guide (2026)

Fixed Deposit (FD) is a retail investment system that allows people put in money to a bank for a fixed tenure at a guaranteed interest rate. 
Certificate of Deposit (CD) is a short-term, transferable money market instrument issued by banks and financial institutions, usually in large denominations. 

Simply put, when comparing fixed deposit vs certificate of deposit, an FD is meant for regular savers, while a CD is primarily designed for institutions and high-value investors. 

Let’s understand both clearly. 

What is a Fixed Deposit? 

A fixed deposit certificate is issued when you invest in a lump sum with a bank for a fixed tenure at a fixed interest rate. 

In India, FDs are offered by RBI-regulated scheduled banks such as SBI, HDFC Bank, ICICI Bank, Axis Bank and also by NBFCs. 

When you open an FD: 

  • You lock money for 7 days to 10 years. 
  • You earn a guaranteed interest rate. 
  • You receive a fixed deposit certificate as proof of investment. 

Latest FD Rates 2026 

As per public data from major scheduled banks (RBI-regulated), FD interest rates in 2026 typically range between: 

  • 3.5% to 8% per annum (depending on tenure and bank). 
  • Senior citizens often receive 0.25%–0.50% extra. 

RBI regulates scheduled banks and monetary policy in India. 

What About NBFC FDs? 

Some NBFCs offer higher returns. NBFC FDs usually give higher returns but higher risk. 
They are regulated, but not as strictly as scheduled for commercial banks. So always check credit ratings before investing. 

What is a Certificate of Deposit (CD)? 

Let’s understand the deposit certificate meaning. 
The CD full form in bank terminology is Certificate of Deposit. 

So, what is a deposit certificate? 

A Certificate of Deposit in India is a short-term money market instrument issued by banks and financial institutions to raise funds. Unlike retail FDs, CDs are typically: 

  • Issued in demat form 
  • Short tenure (7 days to 1 year for banks) 
  • High denomination (usually ₹5 lakh or more) 
  • Tradable in the secondary market 

According to RBI guidelines, CDs are governed under money market regulations. 

Key Difference: A CD is a transferable security. 

What Does Transferable Security Mean? 

In simple terms, you can sell it to someone else before maturity. 

For example: 

  • You buy a CD for ₹5 lakh. 
  • After 3 months, you need liquidity. 
  • Instead of breaking it like an FD (and paying penalty), you sell it in the market. 

Retail FDs are not transferable. 

Fixed Deposit vs Certificate of Deposit: Side-by-Side 

FeatureFixed Deposit (FD)Certificate of Deposit (CD)
Target Investor  Retail investors  Corporates, HNIs, institutions  
Minimum Amount  ₹1,000 – ₹10,000  Usually, ₹5 lakh+  
Transferable?  No  Yes  
Tenure  7 days – 10 years  7 days – 1 year  
Premature Withdrawal  Allowed (with penalty)  Sell in market  
Risk  Low (scheduled banks)  Low to moderate  

When comparing fixed deposit vs certificate of deposit, the biggest difference is accessibility and flexibility. 

Interest Rate (APR) – How It Works? 

Both FDs and CDs quote interest annually, often referred to as APR (Annual Percentage Rate). 

If you invest: 

  • ₹1,00,000 at 7% for 1 year 

You earn ₹7,000 (before tax). 

However, if compounded quarterly, the effective yield becomes slightly higher. 

Always check: 

  • Nominal rate 
  • Compounding frequency 
  • Tax deduction (TDS) 

How EMI Bounce Increases Future Loan Cost? 

This may seem unrelated but it directly impacts your deposit returns and borrowing ability. 

If your EMI bounces: 

  • Banks report it to credit bureaus (CIBIL, Experian) 
  • Your credit score drops 
  • Future loan interest rates increase 

Example: 

  • Good credit score: 9% home loan 
  • After repeated EMI bounces: 10.5% loan 

That 1.5% difference over 20 years can cost lakhs more. That’s why maintaining liquidity (through savings or short-term deposits) is critical. 

Real-Life Example 

Let’s say Rohan has ₹3 lakh: 
Option 1: FD at 7.5% for 1 year 
Returns: ₹22,500 

Option 2: CD at 7.8% (but minimum ₹5 lakh required) 
He can’t invest unless he increases capital. 

This shows why CDs are usually not meant for small investors. 

FAQs on FD vs CD 

Does a Certificate of Deposit Offer Better Interest Rates? 

Sometimes, yes but not always. 

CD rates depend on: 

  • Liquidity conditions 
  • RBI repo rate 
  • Market demand 

In tight liquidity environments, CDs may offer slightly higher yields than FDs. However, they are usually designed for institutional investors and not retail savers. 

Is CD the Same as FD? 

No. Although both involve depositing money with a bank: 

  • An FD is a retail savings product. 
  • A CD is a money market instrument. 

They differ in liquidity, transferability, and minimum investment size. 

Is a CD Better Than a Fixed Term Deposit? 

It depends on who you are. 

Choose FD if: 

  • You are a salaried individual 
  • You want predictable income 
  • You prefer low risk 
  • You may need premature withdrawal 

Choose CD if: 

  • You are a corporate treasurer 
  • You understand secondary markets 
  • You want tradability 

For most Indian retail investors, FDs are more practical. 

What Are the Risks of Investing in a Certificate of Deposit? 

  1. Market Risk – If interest rates rise, CD prices may fall in the secondary market. 
  1. Liquidity Risk – You may not find a buyer instantly. 
  1. Credit Risk – Though issued by banks, smaller institutions carry slightly higher risks. 
  1. Interest Rate Risk – Fixed returns may look unattractive if rates increase later. 

That said, CDs issued by scheduled banks regulated by RBI are considered relatively safe. 

Does Debit Card EMI Affect Credit Score? Here’s the Simple Truth

EMIs have improved access to retail. We see EMI options everywhere right from phones, laptops, appliances and many more. Nowadays, you don’t even require a credit card to convert your expenses into an EMI. You can just use your debit card. 

But here’s the real question most people ask: 

Does debit card EMI affect credit scores? 

Let’s break it down in simple, conversational language so you know exactly how it works — and how it impacts your CIBIL score.   

What is Debit Card EMI? 

Think of it as a loan offered to you at the time of purchase but linked to your debit card instead of a credit card. Instead of paying the full amount upfront, your bank converts your purchase into easy monthly instalments. Once you convert the spend into an EMI, the amount is auto debited from your savings account every month directly. 

Simple, right? 

But behind the scenes, it’s not just a transaction — it’s technically a loan. 

How Does Debit Card EMI Work? 

Let’s say you want to buy a laptop worth ₹60,000. 

At checkout, you select the debit card EMI option and choose a 6-month tenure. 

Once you’re done selecting EMI option and repayment tenure, here’s what happens: 

  • Your bank converts ₹60,000 into a 6-month loan. 
  • Suppose the EMI comes to ₹10,500 per month (including interest, if applicable). 
  • Every month, ₹10,500 is auto debited from your savings account. 
  • Your repayment activity may be reported to credit bureaus like TransUnion CIBIL. 

If you pay all 6 EMIs on time, it reflects positively in your credit report. But if your account doesn’t have enough balance and the EMI bounces, it may impact your credit score. 

That’s exactly how debit card EMI works. It looks simple at checkout, but in the backend, it functions like a small personal loan. 

Does Debit Card EMI Affect Credit Score? 

Short answer: Yes, it can. 

Because a debit card EMI is treated as a loan, your repayment behaviour gets reported to credit bureaus like: 

  • TransUnion CIBIL 
  • Experian India 
  • Equifax India 
  • CRIF High Mark 

So, when people ask, does debit card EMI affect credit score, the answer depends on how you repay it. 

If You Pay On Time: 

  • It can improve your credit profile. 
  • It shows responsible borrower behaviour. 
  • It adds a positive repayment record. 

If You Miss Payments: 

  • It can reduce your score. 
  • Late payments get reported. 
  • It impacts your creditworthiness. 

So yes, does debit card EMI affect credit score? Absolutely — both positively and negatively. 

Does Debit Card EMI Affect CIBIL Score Specifically? 

Now let’s get more specific. 

Many people search: does debit card EMI affect CIBIL score? 
Since CIBIL is one of the main credit bureaus in India, your EMI activity may be reported to it. 
So again, the answer is yes — does debit card EMI affect CIBIL score? It does, if the lending bank reports the loan account. 

And remember: Your EMI repayment shows in credit report history. 

That means lenders can see: 

  • Whether you paid on time 
  • Whether you delayed payments 
  • Whether any EMI bounced 

Which brings us to something important. 

Can EMI Increase CIBIL Score? 

Yes, it can. If you: 

  • Pay every EMI before the due date 
  • Maintain sufficient balance in your account 
  • Avoid defaults 

It reflects positive borrower behaviour, which is a key factor in credit score calculation. 

Regular, disciplined repayments help build trust with lenders. Over time, this can improve your score. 

So, when someone asks, does debit card EMI affect CIBIL score? It can actually help if managed properly. 

Can One EMI Bounce Affect CIBIL Score? 

Unfortunately, yes. Even a single missed EMI can: 

  • Be reported as delayed payment 
  • Lower your score temporarily 
  • Stay visible in your credit report for years 

While one delay won’t destroy your score completely, repeated bounces definitely will. That’s why maintaining balance before the auto-debit date is crucial. 

Do Debit Card Payments Affect Credit Score? 

Here’s a common confusion. Normal debit card payments (like shopping or bill payments) do not affect your credit score. Only when the transaction is converted into an EMI loan does it get reported to credit bureaus. 

So regular debit card swipes? No impact.  
Debit card EMI loan? Yes, it can impact. 

If your goal is to build a stronger credit profile, using structured credit options responsibly can help. For example, the Fibe Axis Bank Credit Card. It offers you cashback up to 3% and reward benefits on everyday spends.  

FAQs on Debit Card EMI 

1. Do debit card payments affect credit scores? 

Normal debit card transactions do not affect your credit score. Only debit card EMIs, which are treated as loans, may impact your credit report. 

2. Can EMI increase CIBIL score? 

Yes. Timely EMI repayments reflect positive borrower behaviour and can help improve your CIBIL score over time. 

3. Can one EMI bounce affect CIBIL score? 

Yes. Even one missed or bounced EMI can negatively impact your credit score and remain visible in your credit report history. 

What is an EMI Bounce Charge and Why Does It Matter?

Imagine this: Your loan EMI is due on the 5th. You assume everything is fine. A day later, you receive an EMI bounce message from your bank saying the payment failed due to insufficient balance. That’s when you first hear about EMI bounce charges and realise they’re more serious than they sound. 
Let’s break it down in simple terms, with real examples and data so you know exactly what you’re dealing with. 

What are Bounce Charges in a loan? 

In the simplest terms,

An EMI bounce charge is a penalty fee levied by a lender when your Equated Monthly Instalment (EMI) fails to get deducted from your bank account on the scheduled date. 

This usually happens because of: 

  • Insufficient account balance 
  • Expired debit card (in case of card-based auto-debit) 
  • Technical error 
  • NACH mandate failure 
  • Bank account closure 

As per RBI’s fair lending practices, lenders are allowed to levy reasonable penal charges in case of payment defaults, but these must be transparently disclosed in the loan agreement. 
[Source: RBI Fair Lending Practice Guidelines] 

How Much are EMI Bounce Charges? 

There’s no universal amount. It depends on the lender. 

Typically: 

  • ₹300 – ₹750 per bounce (common range in India) 
  • Or 2%–3% of EMI amount (in some NBFC cases) 

Let’s assume your: 

  • EMI amount = ₹10,000 
  • Bounce charge = ₹500 
  • Late payment charge = 2% per month 

If you delay payment by 15 days: 

Late payment charge = ₹10,000 × 2% × (15/30) = ₹100 

Total extra cost = ₹500 (bounce) + ₹100 (late charge) = ₹600 for just one missed EMI 

Now imagine this happening repeatedly. 

That’s why understanding EMI bounce rules is crucial before taking a loan. 

What are EMI Bounce Rules? 

While EMI bounce rules vary by lender, most follow similar structures: 

  1. Penalty Charge: Fixed bounce fee per instance 
  1. Late Payment Interest: Charged on overdue amount 
  1. Reporting to Credit Bureau: If unpaid beyond 30 days 
  1. Recovery Follow-ups: Calls, reminders, legal notices (if prolonged) 

The RBI mandates that penal charges must not be used as revenue-generating tools and must be reasonable.  
[Source: RBI Circular on Penal Charges, 2023] 

However, repeated bounces can escalate into serious financial consequences. 

Mini Explainer: What is NACH Mandate? 

NACH (National Automated Clearing House) Mandate is an auto-debit authorisation you give your lender to automatically deduct EMI from your bank account every month. 

It’s managed by NPCI (National Payments Corporation of India). 

If: 

  • Your account balance is insufficient, or 
  • The mandate expires or is cancelled 

The EMI failures will lead to EMI bounce charges. That’s why maintaining balance before EMI date is critical. 

How EMI Bounce Increases Future Loan Cost? 

Here’s what most borrowers ignore. 

An EMI bounce doesn’t just cost you ₹500. It increases your future borrowing cost. 

  • Impact on CIBIL Score: Payment history contributes ~35% of your CIBIL score. Even one delayed EMI reported beyond 30 days can reduce your credit score. 
    Lower score = Higher Interest Rate (APR) on future loans. 
  • Higher APR Example 

Suppose: 

  • With good score → You get loan at 12% APR 
  • After repeated EMI bounce charges → Score drops 
  • New loan offered at 16% APR 

On ₹5,00,000 for 5 years: 

  • At 12% → EMI ≈ ₹11,122 
  • At 16% → EMI ≈ ₹12,163 

Difference per month = ₹1,041 
Total extra paid in 5 years ≈ ₹62,460 
That’s the real cost of ignoring EMI bounce rules. 

Late Payment Charges vs EMI Bounce Charges 

Usually, people get confused between the 2. 

EMI Bounce Charges  Late Payment Charges  
Fixed penalty for failed deduction  Interest charged on overdue EMI  
One-time per bounce  Calculated as % of overdue amount  
₹300–₹750 typically  1%–3% per month common  

Both together increase your repayment burden. 

Real-World Scenario 

Let’s say: 

Rahul has a ₹15,000 EMI. 

He forgets to maintain balance for 3 consecutive months. 

Bounce charge per instance = ₹600 

Total bounce penalty = ₹600 × 3 = ₹1,800 

Add late interest (2% monthly): 

₹15,000 × 2% × 3 months = ₹900 

Total extra outflow = ₹2,700 

And if reported to CIBIL, his score may drop by 50–80 points depending on history. 

That’s why EMI bounce charges matter more than they appear. 

How to Avoid EMI Bounce Charges? 

  • Maintain 2–3 days buffer balance before EMI date 
  • Set calendar reminder before auto-debit 
  • Track NACH mandate validity 
  • Keep alternate payment option ready 
  • Inform lender immediately in case of financial difficulty 

Many lenders allow pre-EMI date manual payment to avoid penalty. 

FAQs on EMI Bounce Charges 

Does 1 EMI Bounce Affect CIBIL Score? 

Short answer: It depends. 

  • If you clear the EMI within a few days and it is not reported as ‘30 days overdue’, it may not significantly impact your score. 
  • If it crosses 30 days and is reported to credit bureaus, it can lower your score. 

CIBIL considers: 

  • Days Past Due (DPD) 
  • Payment history 
  • Frequency of delays 

One isolated incident is manageable. Habitual delay is damaging. 

Is EMI Bounce a Criminal Offence? 

No, EMI bounce is not a criminal offence by itself.

What is a PPF loan? Know the Eligibility Criteria, Benefits and How to Apply

Public Provident Fund (PPF) is an investment plan for individuals that is totally backed by the Government of India. It is known as one of the best long-term savings options. Moreover, you can take out a PPF loan against your balance instead of breaking your savings. 

A loan out of the PPF is a smart option for your short-term financial needs, which, at the same time, doesn’t affect your long-term wealth creation.  
Let’s simplify that. 

What is a PPF Loan? 

A PPF loan is a feature which allows you to access money from your PPF balance. Instead of taking out funds, which would reduce your investment permanently, you may choose to get a loan from PPF account and pay it back with a small interest. 

This feature is especially useful for: 

  • Emergency medical expenses 
  • Short-term cash crunch 
  • Education fees 
  • Temporary business funding 

The great thing is that the interest charged on a PPF loan is lower than that of most personal loans. 

According to the Finance Ministry report, it has been announced that the loan facility is available only for certain years of your PPF term. 
[Source: National Savings Division Ministry of Finance] 

PPF Loan Eligibility 

Now, the question here arises: when do you qualify for a loan? 

According to the official PPF loan rules, you may apply for a loan: 

  • From fiscal year 3 to fiscal year 6. 
  • From the account opening date, which is calculated. 

Let’s understand this with a quick example: 

If in FY 2022–23 you opened your PPF account, then you are eligible to apply for a loan in FY 2024–25 to FY 2027 2028. 

After the 6th year, the loan facility ends and partial withdrawals are made available. 

How Much Loan Can You Get? 

You can borrow up to: 

25% of the PPF balance at the end of the 2nd year preceding the year of application. 

Example: 

  • Account opened: FY 2022–23 
  • Applying for loan in FY 2025–26 
  • Loan amount will be based on balance as of March 31, 2024 

If your balance, then was ₹2,00,000: 
25% of ₹2,00,000 = ₹50,000 (Maximum eligible amount) 

This makes a loan from PPF account predictable and structured. 

PF Loan Interest Rate 

The PPF loan interest is: 1% per annum above the prevailing PPF interest rate. 
(As per the latest amendments by the Ministry of Finance, 2019) 

Since the current PPF interest rate is 7.1% per annum (subject to quarterly revision), the effective PPF loan interest would be 8.1% per annum. 
[Source: Press Information Bureau (PIB), Ministry of Finance] 
 
Compared to personal loans (which typically range between 10%–24%), this is significantly cheaper. 

Repayment Terms 

  • Repayment of the loan is to be made within 36 months. 
  • The principal amount must be repaid first. 
  • Interest is payable in not more than 2 monthly installments after principal repayment. 
  • If not repaid in time, the interest rate increases to 6% above the PPF rate. 

So timely repayment is key. 

Key Benefits of Taking a Loan from PPF 

1. Lower Interest Cost: A loan from PPF is cheaper than most unsecured loans. 

2. No Credit Score Dependency: Approval does not depend on your CIBIL score. 

3. No Processing Hassles: Minimal paperwork if your KYC is updated. 

4. Savings Continue to Earn Interest: Unlike withdrawals, your PPF balance continues to earn interest during the loan period. 

5. Tax Benefits Remain Intact: Your investment still qualifies under Section 80C of the Income Tax Act, 1961. 
[Source: Income Tax India Portal] 

Is It Better to Take a Loan or Withdraw from PPF? 

This is a common dilemma. 

Take a Loan If: 

  • You are within the 3rd–6th year window. 
  • You need short-term funds. 
  • You don’t want to reduce long-term compounding. 

Withdraw If: 

  • You are beyond the 6th year. 
  • You don’t want repayment liability. 
  • Your financial needs are long-term. 

In most early-stage cases, a PPF loan is smarter because your corpus keeps growing. 

How to Apply for a PPF Loan? 

The process is straightforward. 

Step 1: Visit Your Bank/Post Office 

Where your PPF account is held. 

Step 2: Fill Form D 

Submit loan application form (available at branch or online for some banks). 

Step 3: Submit Required Details 

  • PPF account number 
  • Loan amount requested 
  • Identity proof (if required) 

Step 4: Loan Disbursement 

Usually, it is processed within a few working days. 
Many banks like SBI and HDFC allow partial digital tracking. 

A Real-Life Scenario 

Let’s say Rahul invests ₹5,000 per month in PPF. 

After 3 years, his balance reaches approximately ₹1.9–2 lakh (including interest). He suddenly needs ₹40,000 for a medical expense. 

Instead of taking a personal loan at 14%, he opts for a loan from PPF account at around 8.1%. He repays it in 12 months. 

Result? 

  • Lower interest burden 
  • Savings remain intact 
  • No impact on credit score 

Smart move. 

FAQs 

1. How much can I borrow against my PPF? 

You can borrow up to 25% of the balance at the end of the 2nd preceding financial year, subject to eligibility between the 3rd and 6th financial year. 

2. Is it better to take a loan or withdraw from PPF? 

If eligible, a loan from PPF is generally better because: 

  • It preserves your compounding growth. 
  • It comes at a lower interest. 
  • It doesn’t permanently reduce your savings. 

Withdrawals are better after the 6th year when the loan facility ends. 

3. What is PPF 5000 per month? 

“PPF 5000 per month” refers to investing ₹5,000 monthly in your PPF account. 

That equals ₹60,000 per year. Over 15 years at an average 7–8% interest rate, this can grow to approximately ₹16–18 lakhs (depending on rate revisions), thanks to compounding. 

What is MICR? Full Meaning and Importance in Banking

If you’ve ever taken a close look at the bottom of a cheque, you may have seen a series of numbers in a special font. That’s not just some random numbers; that is what we call the MICR code. 

Read on to understand what an MICR code is, its purpose and also how it is relevant in today’s digital banking environment. 

What is an MICR Code? 

MICR code full form: Magnetic Ink Character Recognition. Banks use this technology for fast and secure processing of cheques. These numbers at the bottom of a cheque are printed with magnetic ink for machines to read. This also works if the check is a little damaged or wet. 

 What is a MICR code in Banking? 

When you ask the MICR meaning in a bank, the answer is simple: 

It is a unique 9-digit number that is assigned to each bank branch, which in turn enables smooth cheque processing through the RBI’s clearing system. 

MICR Code Structure 

The MICR consists of 3 parts: 

Digits Meaning 
First 3 digits City code (aligned with PIN code region) 
Next 3 digits Bank code 
Last 3 digits Branch code 

Let’s say, 
If the MICR code is 400002005: 

  • 400 → Mumbai (city code) 
  • 002 → Bank code 
  • 005 → Specific branch 

This helps automated clearing systems route the cheque correctly. 

[Source: Central Bank of India Cheque Clearing System] 

Why Do We Use MICR in Banking? 

Even in today’s world of UPI and net banking, MICR is still relevant. Listed are the below usage: 

  • Faster Cheque Clearing 

MICR technology has the feature of automatic cheque data read out which in turn reduces manual verification. 

  • Fewer Errors 

Machines which read magnetic ink. Human data entry errors are a thing of the past. 

  • Fraud Prevention 

The special magnetic ink and standard format which do not easily reproduce. 

  • Secure Loan Issuance through Cheque. 

In some cases — which is true for personal loans, business loans, or home loans, banks may still present cheques. The MICR is for accurate fund routing. 
For instance, when a bank issues a ₹5 lakh business loan via cheque, the MICR code see to it that the payment goes to the proper clearing branch and does not get delayed. 

MICR vs IFSC – Where are They Used? 

Many people confuse MICR with IFSC. They serve different purposes. 

Feature MICR IFSC 
Used For Cheque clearing Electronic transfers 
Format 9-digit numeric 11-character alphanumeric 
Governing Authority RBI RBI 
Used In Physical cheque processing NEFT, RTGS, IMPS 

 Where each is used: 

  • MICR Code → Cheque clearing system 
  • IFSC Code → 
  • NEFT (National Electronic Funds Transfer) 
  • RTGS (Real-Time Gross Settlement) 
  • IMPS 
  • Online fund transfers 

According to the Reserve Bank of India’s reports, electronic platforms like NEFT and RTGS process millions of transactions daily, while MICR continues to support structured cheque clearing across the country. 

[Source: RBI Payment System Metrics] 

Banking is Transforming – So is Borrowing! 

Today, while we see the use of traditional systems like MICR in cheque processing, what we note is that access to funds in modern financial services is much faster. 

If you are in need of immediate financial help, Fibe Instant Cash Loan could be the best option. You can get cash of up to ₹10 lakhs in as little as 2 minutes. Enjoy a fully digital application process and 0 foreclosure charges. Download the Fibe app now and in a few minutes. 

FAQs about MICR 

What does MICR stand for in a bank account? 

MICR in banking is a 9-digit code which you will find on your cheques and that identifies your bank branch. This is separate from your bank account number but is used in the process of cheque clearance and verification. 

Is MICR the same as an account number? 

No. 

  • Account number → Identifies your specific bank account 
  • MICR code → Identifies your bank branch 

They serve completely different purposes. 

What is a 9-digit MICR number? 

A 9-digit MICR number is a branch identification code used in cheque processing. 

It contains: 

  • City code (3 digits) 
  • Bank code (3 digits) 
  • Branch code (3 digits) 

It helps route cheques correctly through the RBI clearing system. 

What is Collateral? Meaning, Examples & How It Works in Loans

If you’ve ever applied for a loan, you’ve probably come across the term collateral. You must have wondered what it means and why lenders care so much about it. 

Simply put, collateral means an asset you pledge to a lender as security for a loan. In any circumstance you fail to repay the loan, the lender has the legal right to seize and sell that asset to recover their money. 

Let’s break it down in an easy way so you can understand how it works in real life. 

What is Collateral? 

Collateral is something valuable that you own like a house, car, gold, or even investments that you promise to give up if you don’t repay a loan. According to the Consumer Financial Protection Bureau (CFPB), collateral is a property that secures a loan and can be taken by the lender if the borrower defaults. 

In other words, collateral means protection for the lender. Without collateral, lending would be much riskier, especially when large amounts are involved. 

What is Collateral in Finance? 

Now, let’s understand what it means in the world of finance specifically. In financial terms, collateral reduces the risk of lender. Because there is a secured asset involved, lenders are often willing to: 

  • Offer lower interest rates 
  • Approve higher loan amounts 
  • Provide longer repayment tenures 

This is why home loans and car loans always come up with a collateral requirement. The house or car itself is used as collateral. The loan collateral definition is quite straightforward:  
An asset pledged by a borrower to secure a loan, which may be seized if repayment terms are not met. 

The World Bank also describes secured lending as a credit system that uses assets as collateral to reduce the risk of default. 
[Source: World Bank] 

What is a Collateral in a Loan? 

It’s the asset that ‘secures’ your borrowing. 

For instance: 

  • Home loan → House is the collateral 
  • Car loan → Vehicle is the collateral 
  • Gold loan → Gold jewelry is the collateral 
  • Loan against property → Real estate is the collateral 

If you default on your EMIs, the lender can seize and sell the asset to recover their dues. 

That’s the basic loan collateral meaning. 

What is Collateral in Finance vs Unsecured Loans? 

Not all loans are collateral-based. For instance: 

  1. Secured Loans 
  • Requires an asset 
  • Lower interest rates 
  • Higher loan amounts 
  • Risk of losing asset if you default 
  1. Unsecured Loans 
  • No asset required 
  • Higher interest rates 
  • Based on income & credit score 
  • Faster approval 

An instant online unsecured personal loan is a typical example of an unsecured loan. The lender doesn’t require any collateral. Instead, they depend on your stable income, credit score and repayment ability. 

According to the RBI’s financial stability report data, the unsecured personal loan market in India has seen a substantial rise in recent years due to the quicker digital approval process and income-based lending. 
[Source: RBI] 

 Let’s make it a little relatable with a real-life example. 

Imagine you want ₹10 lakh to expand your small business. 

  • If you pledge your property → The bank offers 9% interest. 
  • If you apply without collateral → You may get 14–18% interest. 

Why? Because the risk shifts entirely to the lender. 

This is why learning about what is collateral is essential before picking up a loan option. 

Loan Eligibility Checklist (With & Without Collateral) 

No matter if it is a secured loan or unsecured loan, banks will check for eligibility. 

Here’s a common loan eligibility checklist: 

  • Age (usually 19–60 years) 
  • Stable monthly income 
  • Employment type (salaried/self-employed) 
  • Minimum income criteria 
  • Credit score (typically 650+ for better approval chances) 
  • Existing debt obligations 
  • Property/asset documents (if secured loan) 

Even with collateral, your repayment ability is considered. 

Loan Approval Timeline: How It Works 

Learning about the process makes borrowing easier. 

1️. Application: You provide documents (income proof, KYC, asset papers if secured). 

2️. Approval: The lender checks –  

  • Income 
  • Credit score 
  • Asset valuation (if collateral is required) 

3️. Disbursal: The money is credited to your account. For an instant online unsecured personal loan, this entire process may take a few hours to 48 hours. 
For secured loans, asset verification can take a few days. 

Before making a decision between secured and unsecured loans, assess your repayment ability, risk tolerance and financial objectives. Borrow smart. Borrow informed. 

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FAQs on Collateral 

1. What is an example of collateral? 

A typical example of collateral is a residential property used for a home loan. If the borrower defaults, the lender can sell the property to claim their dues. 

Other examples include: 

  • Car (auto loan) 
  • Gold jewelry (gold loan) 
  • Fixed deposits 
  • Property (loan against property) 

2. What is a collateral in a loan? 

A collateral in a loan is an asset that is pledged as collateral. This decreases the risk for the lender and can be confiscated in case the borrower defaults. 

In simple terms, what is collateral in finance? It’s a safety net for lenders. 

3. Is a collateral loan a good idea? 

It depends. 

  1. Good Idea If: 
  • You want lower interest rates 
  • You need a large loan amount 
  • You’re confident in repayment ability 
  1. Risky If: 
  • Your income is unstable 
  • You are unsure about EMI consistency 
  • The asset is emotionally or financially critical (like your home) 

If you don’t want to risk assets, an online unsecured personal loan may be safer — though it may cost more in interest.  

Can a Fixed Deposit be Transferred to Another Person in India?

If you’ve ever opened an FD and later thought, ‘I should just move this FD to my spouse/daughter/parent,’ you’re not alone. Deposits are a huge part of how Indian households save. RBI’s household savings publications consistently show deposits as a major component of financial savings.  
[Source: Reserve Bank of India] 

But here’s the catch: in most banks, an FD is not like a movable asset you can simply ‘reassign’ mid-way. 

So… can a fixed deposit be transferred to another person? 

In everyday banking terms, a fixed deposit be transferred to another person directly (i.e., change the owner’s name on an active FD) is usually not allowed. Banks treat the FD as a contract issued in the depositor’s name and changing ownership midway typically means closing that contract and creating a new one. 

FD Maturity snippet: ‘FD ownership can only change after maturity.’ 

That line is the simplest way to remember the rules in practice. At maturity, you can choose where the maturity proceeds and that’s when a ‘change of hands’ becomes straightforward. 

The practical ways people ‘transfer’ an FD  

1) Close the FD (or do premature closure) and open a new FD in the other person’s name 

This is the most common workaround when someone asks: can we transfer FD from one person to another. 

What happens: 

  • You request premature closure (if the FD hasn’t matured). 
  • The bank will credit the amount (with a penalty or reduced interest rate for the shorter term, depending on the scheme). 
  • Then you open a new FD in the new person’s name. 

Let’s understand with an example: 

Rohit has a ₹2,00,000 FD at 7.2% interest for 24 months. After 10 months, he wants it in his daughter’s name for her college education. The bank may permit premature withdrawal but will charge according to the bank’s premature withdrawal scheme, then Rohit opens a new FD in her name. 

Tip: This is a very clean process, but you must check the terms for premature withdrawal because your earned interest may decrease. 

2) Use nomination (for transfer on death, not during your lifetime) 

Nomination is supposed to facilitate claim settlement for the family in case the depositor dies. The RBI’s 2025 Directions specifically state that banks must provide nomination, register nominations correctly, and even indicate the nomination status on term deposit receipts.  
[Source: Reserve Bank of India] 

Important clarification: A nominee is not the owner during your lifetime; it’s a facilitation process for later settlement. 

Thus, yes, a fixed deposit can be transferred to another person via nomination only in the context of death claim settlement and not as an ‘ownership transfer’ in the middle of the term.  
[Source: Reserve Bank of India] 

3) Add a joint holder (only if your bank allows it and often not on an already-existing FD) 

Some banks allow FDs to be opened as joint deposits (Either/Survivor, Former/Survivor, etc.). But converting an existing single-account FD to a joint FD in the middle of the term is bank-dependent and often not possible without closing and re-opening. 

If your aim is convenience for your family, joint holding may be more advisable than attempting to ‘transfer.’ 

Steps to Transfer an Existing FD 

When customers look up steps to transfer an existing FD, they are likely trying to accomplish one of 2 things: (a) transfer the ownership of the money, or (b) transfer the FD itself (branch/account change). 

Here’s a bank-approved, risk-free checklist: 

  1. Determine purpose: ownership transfer or branch/account transfer. 
  1. Inquire about premature closure terms: varies by bank and FD scheme. (Reserve Bank of India) 
  1. Perform KYC for transferee (if opening a new FD): 
  1. Aadhaar 
  1. PAN 
  1. Address proof 
  1. Photograph 
  1. (Any other bank documents) 
  1. Submit transfer request: close FD + transfer proceeds to account + open new FD in transferee’s name. 
  1. File away: FD receipt, closure notice, new FD notice. 

That’s the basic steps to transfer an existing FD that most people actually need to do in practice. 

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FAQs on FD Transfer 

1) Can I transfer my FD to my daughter? 

You can’t simply transfer ownership of your FD to your daughter. The usual procedure is premature close → transfer proceeds → open new FD in her name. Or, you can keep your FD and make her your nominee (helpful for future settlement, but not an actual ownership transfer).  
[Source: Reserve Bank of India] 

And don’t forget: ‘FD ownership can only change after maturity.’ 

2) Can we transfer FD from one branch to another? 

Usually yes, operationally, many banks can handle the transfer of deposits to other branches because of core banking. In practice, you can ask the bank to “transfer” or “attach” the FD to your new home branch/service branch. This is not an ownership transfer; it’s a servicing transfer. (The process and forms will differ for each bank.) 

3) Can I transfer FD to another account in the same bank? 

If you are asking, ‘Can I transfer the FD money to another account?’, this is usually done on maturity (you choose the maturity credit account), or premature closure. For other transfers between accounts, banks allow intra-bank transfers through normal channels once the money is in a savings/current account.  
[Source: SBI Bank] 

Quick Ways to Check GST Return Status

GSTIN (GST Identification Number) is your unique GST identity used to log in and file returns. Think of it as your GST ‘account number’ for compliance and tracking. If you’ve ever filed a GST return and wondered, ‘Did it actually go through?’ then, you’re not alone. GST status checking is one of those small habits that saves you from late-fee surprises, missed ITC claims and unnecessary vendor follow-ups. 

But the best part is that the official GST portal offers you the simplest ways to confirm your GST return filing status. You can either use your ARN or directly check the status from the dashboard. 

What is an ARN (Application Reference Number)? 

ARN is a unique acknowledgement number generated after you submit a GST return or application on the GST system. It helps you track submission and filing confirmation on the portal. 

[Source: GST Portal User Manual – Track Return Status] 

Let’s know what the ways are to track your GST returns: 

Method 1: Track Using ARN (Fastest Way) 

If you have your ARN, this is the most reliable way to check the GST return status. 

Steps on the official GST portal 

  1. Log in to gst.gov.in 
  1. Go to Services → Returns → Track Return Status 
  1. Select ‘ARN’ 
  1. Enter your ARN and click Search 

You’ll instantly see your GST return filing status whether it’s submitted, filed, or pending. 

For instance, 

You filed GSTR-3B for January and got an ARN through SMS/email. You can just enter that ARN and check if the return status is ‘Filed – Valid’. 

This is mostly helpful when you want to Check GST filed status quickly after making a payment. 

Method 2: Check via GST Account Dashboard (Visual Overview) 

You can opt for this method if you do not have an ARN. You can check your GST Account Dashboard for a period-wise status. 

Just follow the below menu path: 
Login → Returns → Returns Dashboard → Select Financial Year & Period 

You will see tiles representing return types (GSTR-1, GSTR-3B and so on) and the GST return status real-time. 

Common Status Labels You Should Know 

Status  Meaning  
To Be Filed  Return is pending  
Submitted but Not Filed  Data saved, but filing not completed  
Filed – Valid  Successfully filed  
Filed – Invalid  Filed, but rejected or error occurred  

If your dashboard displays ‘Submitted but Not Filed’, your GST return filing status is not complete then, you need to complete EVC/DSC verification. 

[Source: India Filings] 

Why GST Status Checking is Important 

Filling out GST return on time is important or else; You will be charged late fees under Section 47 of the CGST Act for delayed filing (₹100 per day under CGST, subject to limits, plus similar SGST in most cases). 

[Source: Tax information (CBIC)] 

Not verifying the filing status may result in: 

  • Late fees 
  • Interest on tax dues 
  • Blocked ITC 
  • Vendor reconciliation problems 

This is why GST status checking and GST return status every month is a great compliance routine. 

Smart Compliance Routine (30-Second Habit) 

After filing any return, you should always check the below as a sanity habit. This helps avoid any discrepancies while reconciling accounts later. 

  • Record the ARN 
  • Check GST filed status immediately 
  • Capture a screenshot of ‘Filed – Valid’ 
  • Use a simple sheet: Period | Return Type | ARN | GST return status 

When GST Deadlines Affect Cash Flow… 

Honestly, GST payments sometimes fall due when cash flow is low. This is particularly true for small businesses, freelancers, or new entrepreneurs.  
 
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FAQs 

1) How to view filed returns? 

Login to the government’s official GST website → Navigate to Returns Dashboard → Choose the respective period → View/download filed returns. You can also check the status through ARN under ‘Track Return Status.’ 

2) How to check if a return is filed or not? 

Use the Track Return Status facility or check from the dashboard. If the status indicates Filed – Valid, it is filed. If it indicates To Be Filed or Submitted but Not Filed, it is not fully filed yet. 

3) How do I check my GST return status? 

Login → Services → Returns → Track Return Status → Enter ARN or choose the return period to check your GST return filing status instantly. 

Section 194J of the Income Tax Act: TDS on Professional & Technical Payments

TDS (Tax Deducted at Source) is a tax system where the payer deducts a part of the payment as tax and deposits it with the Government, so tax is collected at the time income is earned, not just at year-end. 

Now, let’s decode Section 194J of Income Tax Act in a simple, real-life way: whenever a business (or specified payer) pays a resident for professional services, technical services, royalty, or certain director payments, they may have to deduct TDS before paying you. This rule is commonly referred to as the provision for service-related payments. 

What payments are covered under Section 194J? 

Under the 194J section, TDS applies broadly to payments like: 

  • Fees for professional services (e.g., CA, lawyer, doctor, architect, consultant) 
  • Fees for technical services (e.g., IT support, software/tech services—depending on contract nature) 
  • Royalty (specific royalty cases like film distribution/exhibition) 
  • Payments to directors like remuneration/fees/commission (other than salary covered under Section 192) 
  • Non-compete fees / certain business-related sums (linked to Section 28 references in the law) 

TDS rates (quick, practical view) 

As per the law text and common compliance guides: 

  • 2% in case of fees for technical services (in many cases) 
  • 10% in other cases covered here (professional fees, most royalties, director fees, etc.) 

Exact applicability can depend on the nature of the service and contract wording—so invoices + agreement description matter. 

Who is required to deduct TDS under section 194J? 

In simple words: If you are making payments under this section and you are not an ‘individual/HUF’ in most cases, you are generally liable to deduct TDS. Individuals/HUF may be liable to deduct TDS in certain cases depending on tax audit/business conditions—your CA will be able to guide you on this. 

This is why section 194J of the income tax act is so important for startups, SMEs, agencies and finance teams  since service payments are ubiquitous. 

Latest Update (Budget 2026 Update) 

Budget 2026 brought attention to rule-based automation for lower or nil TDS certificates, which is intended to minimise the requirement to ‘chase approvals’ and make cash flow easier for small taxpayers. This is a general improvement to TDS compliance (not a rate/threshold update for section 194J), but it may assist eligible taxpayers in reducing over-deductions of TDS throughout the year. 

Let’s understand the deductions with a couple of examples, 

Example 1: Marketing consultant payment 

A company pays a consultant ₹80,000 for a campaign strategy in the FY 2025-26. As it is a professional service, the company checks the threshold and then deducts TDS (usually 10%) before making the payment. This is how the 194J Income Tax Act section works. 

Example 2: Technical service agreement 

A company pays ₹60,000 for technical support services. If it is a “technical service,” TDS is to be deducted at 2%. Again, it is the of the income tax act that comes into play before making the payment. 

Common Things People Miss 

  • The threshold is annual: it’s about the total amount paid/credited in the financial year to that payee, not just for one transaction. It’s about timing: the deduction is to be made at the time of credit or payment whichever is earlier. 
     
  • Getting it wrong affects rates: if you label it ‘technical’ vs ‘professional’, it might affect the rates. Therefore, keep your contracts and invoices simple. 

The Bottom Line 

If you are earning through consulting, freelancing, agency, professional, tech services, royalty, or director fees, Section 194J of Income Tax Act is one of the most common TDS sections you will encounter. And if you are the one making the payment, the 194J Income Tax Act compliance is pretty much: determine the type of payment, see the threshold, deduct at the correct rate and pay/deposit correctly to avoid any unpleasantness down the line. 
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FAQs on Section 194J of Income Tax 

What is the present TDS limit under section 194J? 

For FY 2025-26, most sources and TDS rate tables indicate a threshold of ₹50,000 annually, for each payee, under the categories covered by the section that is, if the aggregate payments made during the year do not exceed ₹50,000, TDS may not be due. 

What is the TDS 194J limit for FY 2025 26? 

The limit for FY 2025-26 is indicated as ₹50,000 in the latest TDS provisions for Section 194J. Therefore, yes—the TDS 194J limit for FY 2025 26 is considered to be ₹50,000 in general. 

Is TDS applicable on director sitting fees? 

Yes. Director fees including sitting fees are specifically included: payments such as ‘remuneration or fees or commission… to a director of a company’ (except under Section 192 for salary) are liable under Section 194J and therefore TDS is normally applicable if the threshold is exceeded. 

KFS Checklist Before Loan: 5 Things You Must Verify

Getting a loan approved feels like a win but before you hit accept, there’s one document you should never neglect: the Key Fact Statement (KFS). 

The KFS document is exactly like your loan’s summary card. It gives you a clear picture of the cost, tenure, charges and repayment details, no fine print surprises later. That’s why having a KFS checklist before loan acceptance is a must. 

To make things easier, here’s a simple, no-jargon guide covering the 5 crucial things to verify in your KFS, so you can borrow with confidence. 

Why Does the KFS Matter Before You Say Yes? 

The KFS is a regulator-mandated document designed to protect borrowers. It helps you understand: 

  • How much money you’ll actually receive 
  • What you’ll repay over time 
  • All charges involved, including GST 

Following a proper KFS checklist before loan ensures you know exactly what you’re signing up for — not just today, but throughout your loan tenure. 

5 Crucial Things to Verify in Your KFS (Step-by-Step) 

Let’s break down the most important KFS verification points you should always check. 

Step 1: Sanctioned Amount vs Disbursed Amount 

This is the first thing to look at. 

  • Sanctioned Amount: The total loan approved by the lender 
  • Disbursed Amount: The amount that actually reaches your bank account 

The difference usually includes Processing Fee, GST, or other upfront deductions. This step answers a big part of what to verify in KFS before proceeding. 

Step 2: Loan Tenure and EMI Schedule 

Your KFS will clearly mention: 

  • Loan Tenure (number of months) 
  • EMI Schedule (monthly EMI amount and due dates) 

Check whether the EMI comfortably fits your monthly budget. This is one of the most overlooked but critical things to check in key fact statement documents. 

Step 3: Total Loan Cost & All Charges 

This is where your KFS checklist before loan really matters. 

Verify the complete cost of borrowing, including: 

  • Interest payable over the tenure 
  • Processing Fee 
  • Late Payment Fees 
  • Applicable GST 

The KFS shows these transparently; use it to avoid surprises later. 

Step 4: Prepayment and Foreclosure Clauses in Your KFS 

Life changes, and you may want to close your loan early. That’s why this step is not negotiable. 

Check the following in bullet format: 

  • Prepayment Charges (for partial repayments) 
  • Foreclosure Charges (for closing the loan early) 
  • Minimum lock-in period, if any 
  • Conditions where charges may or may not apply 

Understanding these clauses is a must-have in any KFS checklist before loan acceptance. 

Step 5: Penalties & Late Payment Rules 

Missed EMIs can cost more than you expect. 

Look for: 

  • Late Payment Fees 
  • Impact on your credit score 
  • Any additional GST on penalties 

This step completes your things to check in key fact statement review and protects you from avoidable costs. 

At Fibe, we believe loans should feel empowering and not confusing. 

When you choose a Fibe Personal Loan, you get a clear KFS upfront with full disclosure. No hidden charges or last-minute surprises and easy-to-understand terms that support fair lending.  
 
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FAQs on Things to Verify on KFS 

What should I check first in a Key Fact Statement (KFS) before accepting a loan? 

Start with the Sanctioned Amount, Disbursed Amount and upfront deductions like processing fee and GST. This sets the foundation for your KFS checklist before loan acceptance. 

How can I verify the total loan cost mentioned in the KFS? 

Add up the total EMIs from the EMI Schedule and include all charges such as processing fee, late payment fees, and GST. The KFS clearly shows this breakup. 

What prepayment or foreclosure charges should I look for in the KFS? 

Check for Prepayment Charges, Foreclosure Charges, lock-in period, and any conditions under which these fees apply. These are key KFS verification points. 

Is there a mandatory review or cooling-off period before accepting the KFS? 

Yes. As per guidelines, lenders must give you time to review the KFS before final acceptance. Use this window to carefully go through all things to check in key fact statement documents.