Special service of the bank: not even a single rupee is in savings account

Overdraft Facility: In order to meet the needs of a person’s money in difficult times, banks have provided a loan facility for this. But banks also offer another facility similar to a loan, which is ‘overdraft’ (OD). This product is a little different from being like a loan. OD is offered by almost all financial institutions including banks and NBFCs.Like a loan, an overdraft, a certain amount of money is sanctioned by the bank to the customer as a loan amount with a fixed repayment period. In the loan option, the entire loan amount is given to the customer and interest on that entire amount has to be paid from the first day of receiving the money. But in the overdraft facility, the customer can withdraw the money equal to his need out of the sanctioned amount and according to his convenience, he has to pay interest only on the amount he has used with withdrawal. There are also processing fees on overdrafts. Interest and fees are charged from the day the customer starts using the overdraft limit.

Can withdraw OD money from the bank account

The overdraft is linked to the customer’s savings or current account so that the customer can withdraw the OD amount as per requirement and then deposit it. The overdraft remains outside the balance in the savings / current account, ie even if there is no money in the savings / current account of the customer, due to the overdraft, he can withdraw cash from his account up to the limit of the overdraft. What will be the overdraft limit depends on the customer’s requirement and the bank or NBFCs?

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Repair of OD

Overdraft is not obligated to be repaid in EMI like a loan. The customer can repay it whenever he wants during the repair period. He can repay it in pieces, or outright. If desired, the overdraft can be repaired before the completion of the repair period without paying any charge. If money is available, after depositing the OD amount, it can be withdrawn again only if needed during the repair period. Interest can be saved from this. Interest is calculated on a daily basis.

Security has to be given

Customers can get an overdraft against things like FD, shares, property, salary, insurance policies, bonds etc. It is also called taking loans on FD or shares in easy language. Some banks also offer overdrafts on salary. This facility can also be taken in a joint. In such a situation, both will have the responsibility to pay the money. On the other hand, if one cannot repay the amount, then the other will have to pay the entire amount. There will be a risk on the things mortgaged.