Definition
Lien on Deposit
A lien is a bank's legal right to hold or restrict access to your deposit, often as security against a loan or pending dues.
A lien marks part or all of a deposit as restricted so it cannot be withdrawn. Banks place a lien when an FD is pledged as collateral for a loan or overdraft, or to secure other dues, and they release it once the obligation is cleared.
When you take a loan or overdraft against an FD, the bank marks a lien on that FD; you keep earning interest on it, but cannot break it until the loan is repaid. A lien can also be placed temporarily for regulatory or dispute reasons.
Understanding liens matters because a lien-marked deposit is not freely available even though it appears in your balance. Always check whether funds are lien-free before counting on them for an urgent need.
Related terms
- OverdraftAn overdraft is a credit facility that lets you withdraw more money than you have in your account, up to an approved limit.
- Sweep-in Fixed DepositA sweep-in FD links a savings account to a fixed deposit so surplus funds auto-move to earn FD interest, and reverse-sweep back when the account needs money.
Plain-English explainer from The Dispatch Investors Encyclopedia. General information, not financial advice.