Earning 7.15% FD? Your 10% Loan Costs More

Bank of Baroda launched a 'green' FD offering up to 7.15% interest. But if you have active loans at 9–12%, this FD is likely costing you money — not making it. Here's what borrowers must know before parking cash here.

Here's what happened: Bank of Baroda launched the BOB Earth Green Term Deposit, offering interest rates up to 7.15% per annum for retail depositors across select tenors.. The deposit comes in callable (premature withdrawal allowed) and non-callable variants — non-callable FDs typically offer a slightly higher rate but lock your money in completely.. Like all bank FDs, deposits up to ₹5 lakh per depositor per bank are covered under DICGC insurance — amounts above that are uninsured and carry bank default risk..

What you should do: List every active loan — personal, home, car, credit card — and note the interest rate; if any rate exceeds 7.15%, prepay that loan before opening a new FD.. If you still want the FD, ask your bank about an FD-backed overdraft (OD) facility — you can keep the FD earning interest while borrowing against it at just 1–2% above the FD rate for emergencies.. Check your income tax slab before booking — if you're in the 30% bracket, your effective FD return is closer to 5%, making debt prepayment an even stronger move..

An FD pledged as loan collateral is taxed on interest earned, but the loan interest may also be deductible if used for business — a double benefit most salaried borrowers never use.

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