Overdraft Facility

How Does the Overdraft Account Work?

• Overdraft facility to savings bank and current account holders is given depending on the customer's profile, credit score, and repayment history.
• The regulation of RBI has stipulated a maximum overdraft of ₹50,000 to the current account and cash credit account holders to take care of temporary cash-flow deficit.
• This does not apply to a personal overdraft facility.
• A temporary cash-flow deficit normally exists for businessmen who depend on receivables until the payment for their services and products comes through.

Types of Overdraft Facility

• Overdraft Against Salary Account
• Overdraft on Savings Bank Account
• Overdraft Against Fixed Deposit

Overdraft Against Salary Account

• Extended to Salary Accounts opened by Corporates and Business Establishments for their employees.
• The Corporates and Business Establishments must be on the approved list of the bank and the salary should be credited regularly month after month.
• An overdraft facility up to 3 times the current salary credited to the account will be provided.
• Minimal documentation with easy repayment feature.
• The customer can prepay anytime without prepayment charges; interest applies only on the utilised amount and duration.
• Minimum salary requirement: ₹15,000 to ₹25,000.
• Some banks offer overdraft up to ₹4,00,000.

Overdraft on Savings Bank Account

• Extended to accounts opened under Pradhan Mantri Jan Dhan Yojana (PMJDY).
• Overdraft facility of ₹10,000 permitted for PMJDY accounts.
• Account holder should be aged 18 to 65 years.
• Account must be operated satisfactorily for 6 months to avail the facility.
• Only one member per family eligible; preferably the earning woman member.
• Aadhaar linking mandatory.
• PMJDY account holder should also have another account complying with RBI Directive.
• Kisan Credit Card holders and minors are not eligible.
• Interest rate not to exceed 2% above base rate.
• No processing fees.

Overdraft Against Fixed Deposit

• Overdraft against fixed deposits can be availed instead of premature closure of FD.
• Premature closure reduces interest and attracts penalty.
• Opting for overdraft keeps principal intact while earning contracted FD interest.
• Facility up to 90% of the deposit permitted.
• Interest charged 1–2% above FD rate depending on the bank.
• Facility can be closed anytime without prepayment charges.
• No processing fees applicable.
• Available for individual or joint fixed deposits.

Details of Overdraft Facilities from Top Indian Banks

HDFC Bank Smartdraft Overdraft Against Salary

• Eligibility: All HDFC Bank Corporate Salary Account holders with minimum ₹15,000 monthly salary and employer on bank’s approved list.
• Quantum: Up to 3 times the salary credited.
• Repayment: Revolving facility renewed annually; repayment through any deposit made to the account.
• Interest: Charged only on the utilised amount for the period used.
• Processing charges: Nil; ₹250 nominal renewal fee after 12 months.
• Prepayment charges: None; full repayment allowed anytime.

• Minimal documentation and easy setup.
• Interest charged only on used amount.
• Renewable after 12 months with limit reinstated.
• No EMI repayment required.

Citibank Ready Credit Advantage

• Eligibility: Citibank Suvidha Salary Account holders aged 21–65 years with minimum net salary of ₹25,000.
• Quantum: Up to 5 times monthly salary (max ₹5 Lakhs).
• Interest: 16%–19%, charged on daily balance.
• Repayment: One-year tenure, renewable with regular salary credit.
• Processing charges: 2% of overdraft (minimum ₹750) at renewal.
• Prepayment charges: None.

• Funds accessible anytime once credit line fixed.
• Revolving facility renewable yearly.
• Interest only on utilised amount and period.
• Access through cheque, ATM, mobile, internet, or phone banking.
• No prepayment penalty; repayment restores available limit.

HSBC Smart Money Account

• Requires a minimum fixed deposit of ₹25,000 by a Resident Indian (age 18+).
• Overdraft facility up to 90% of FD value.
• Earns full FD interest while paying overdraft interest (2% above FD rate) only on used portion.
• No fixed repayment tenure.
• Accessible via cheque, ATM, internet, and mobile banking.
• Comes with free HSBC Credit Card and International Debit Card.
• Free online bill payments available.

SBI Overdraft Facility in Corporate Salary Package Account

• Eligibility: Corporate employees maintaining CSP salary account with SBI; minimum 6 months of regular salary credits.
• Quantum: Up to 2 times the monthly net salary.
• Interest: Charged on daily outstanding balance; applicable only to utilised amount.
• Tenure: Repay within 6 months.
• Processing charges: None.
• Prepayment charges: None.

• Minimal documentation and easy process.
• Access via cheque, internet, phone, or ATM banking.
• No EMI repayment; repay within 6 months.

ICICI Bank Salary Overdraft

• Eligibility: Customers maintaining regular salary accounts with ICICI Bank.
• Quantum: Up to twice the monthly net salary (maximum ₹4 Lakhs).
• Interest: Charged at competitive rates on daily utilised balance.
• Repayment: Revolving facility; repaid automatically through monthly salary credit and renewable annually.
• Processing charges: None.
• Prepayment charges: None.

• Simple documentation, no security required.
• Quick processing and flexible usage.
• Interest charged only on utilised amount.

Difference Between Bank Overdraft Facility and Personal Loan