Loan against National Savings Certificates

NSC are backed by the government and are considered a safe and secure investment choice. Their high interest rate and flexibility in terms of operation make them ideal for the working population.

Given all these features, most banks provide loans to certificate holders, with their certificates acting as collateral/security. These loans are subject to the policies in place in a bank, with different banks following different policies.

A general overview on obtaining loans against National Savings Certificates is mentioned below.

Purpose of Loan

Certificate holders can avail loans against their NSCs for multiple purposes, ranging from personal to business use. Most banks do not question the need for a loan unless the need is to meet speculative interests.

These loans can be used for emergency medical expenses, household requirements, education, business improvement, etc.

Quantum of Loan

The quantum of loan one can avail against National Savings Certificates depends on the bank which an individual approaches, with loan amounts varying according to individual policies in place.

Banks can offer loans up to 85-90% of the NSC value, with the amount changing with changes in tenure of certificates. Certificates which have been in force for over 3 years stand to get the largest sum, whereas new certificates which are under a year old are likely to get the least amount.

Banks might keep a margin before offering a loan against securities.

For example, an individual with a NSC of Rs 5 lakh which has been active for 4 years stands a chance to get loans upto Rs 4 lakh or more whereas an individual with a NSC for the same value but which was purchased 6 months ago might stand a chance to get a loan of around Rs 3 lakhs.

Tenure of Loan

The tenure of a loan obtained against National Savings Certificates is equal to the tenure of the certificate. Borrowers can repay the loan in advance, before the tenure ends. Certain banks provide an option to repay the loan in EMIs, spread across the tenure.

Interest Rates

The interest rate charged on loans against NSCs can be lower compared to traditional personal loans. Most banks charge an interest ranging between Base Rate + 4% to Base Rate + 7%. Individuals should check with the respective bank before applying for this loan.

Note – Loans offered against National Savings Certificates are subject to the terms and conditions of individual banks and values and figures could change from bank to bank.

NSC Eligibility

There are a few basic eligibility criteria which must be met before an individual can obtain a loan against his/her National Savings Certificates.

1. Age – An individual applying for a loan should be at least 18 years old. Given the fact that NSCs can be purchased on behalf of minors, most banks enforce this age policy. The upper limit to obtain loans against NSCs is around 75 years.
2. Name and ownership – An individual applying for a loan should prove that he/she is the owner of the NSCs against which a loan is being availed. These certificates should be in the name of the person wishing to obtain a loan and a loan cannot be availed against NSCs which are in someone else’s name.

Documents Required for NSC

An individual hoping to obtain a loan against NSCs would be required to furnish the following documents.

1. Valid ID Proof – An applicant should have a valid government approved ID proof.
2. Income proof – Banks might ask for income proof of an applicant to judge his/her repayment capacity.
3. Photographs – Recent passport size photographs might be required to process an application.
4. Original NSCs – An individual would have to furnish his/her original National Savings Certificates before obtaining a loan.