Banks may lend up to 80 to 85 percent of the face value of NSCs or KVPs in the form of a loan or overdraft facility.
Process
To get a loan, the NSC or KVP holder must pledge the certificates to the lender. On application, the concerned post office where the certificates were purchased will mark the lien of the bank on the certificates and return them to the bank. The bank will disburse the loan after receiving the lien-marked certificate in its name. Post Office Lien marking charges are to be recovered from the borrower.
Repayment:
The loan may be repaid in monthly installments or a single lump sum before the maturity of the certificate. The bank will reassign the certificate to the Certificate holder on closure of the loan. The Borrower shall present the certificate issued by the bank to the Post Office for lifting the lien marked on the NSCs/KVPs. The certificate holder is entitled to receive full maturity of such certificates released by the banks.
Interest rate:
The interest rate for a loan against National Savings Certificates (NSCs) or KVPs can vary between banks but is typically lower than a traditional personal loan. The interest rate is usually between MCLR + Spread.
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