Overdraft facility allows the customer to withdraw the money even if the amount to be withdrawn is in excess of the credit balance available in the overdraft account. Overdraft facility enables the customer to honor the payments to be made to the third party, even though the account may not have sufficient balance. The maximum overdraft limit is sanctioned by the bank and is agreed upon by the customer. The excess amount withdrawn over the overdraft limit is charged interest upon and must be settled by the customer on demand from the bank in India.
Based on the security pledged to the bank, a certain limit is fixed to the extent of which the customer is allowed drawing.
Overdraft facility is given by all leading banks. Banker open overdraft account against security offered by Customer and give this facility for business in banking language it is known as OD account. Overdraft is a Type of secured loan. Generally Rate of interest in Overdraft case are low then personal loan and unsecured business loan.
