Overdraft Facility

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 the temporary cash-flow deficit. However, this does not apply to a personal overdraft facility. A temporary cash-flow deficit normally exists for businessmen who depend on the receivables until the payment made for their services and products comes through.

There are three types of overdraft facilities:

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

Overdraft Against Salary Account

• This facility is 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 into the account.
• An overdraft facility to the extent of 3 times the current salary credited to the account of the customer will be provided.
• The documentation for this facility is minimal and it has the advantage of an easy repayment feature
• The customer can prepay the amount at any time without any prepayment charges. Interest will be applied only to the extent of the amount utilised and for the period utilised.
• The minimum salary requirement for this facility is 15,000 to 25,000
• Some of the banks offer overdraft facilities to the extent of 4 Lakhs

Overdraft on Savings Bank Account

• This facility is extended to all accounts opened under Pradhan Mantri Jan Dhan Yojana (PMJDY)
• An overdraft facility of 10,000 will be permitted for the accounts opened under PMJDY
• The customer opening the account under PMJDY should be in the age group of 18 years to 65 years.
• The account should be operated satisfactorily for 6 months to avail of the overdraft facility
• Only one member of a family will be provided with this facility
• The earning member of the family, preferably woman, will be provided with this facility
• Aadhaar linking is a mandatory requirement to be eligible for this facility
• The person having an account under PMJDY should also have another account that complies with the RBI Directive.
• Kisan Credit Card holders and minors are not eligible for this facility
• The rate of interest for this facility should not exceed 2% above the base rate
• No processing fees will be collected for this facility

Overdraft Against Fixed Deposit

• Overdraft against fixed deposits can be availed under this facility
• If you opt for closure of the fixed deposit when in need of funds, i.e., the closing of the fixed deposit before the maturity, you will not be paid the contracted rate of interest but only the interest applicable for the period the deposit was with the bank minus a penalty as stipulated by the respective bank.
• Instead of losing out on the interest you can avail an overdraft facility against the fixed deposit. This will keep the principal amount intact while earning the contracted rate of interest.
• An overdraft facility to the extent of 90% of the deposit will be permitted
• An interest either at 1% or 2% over and above the contracted rate of interest of the fixed deposit, depending upon the bank where you have the fixed deposit will be collected.
• You can close the overdraft limit whenever you choose to without any prepayment charges
• This overdraft facility will not attract any processing charges
• The fixed deposits that are either in an individual name or in joint names will be eligible for the facility.

Additional Info: Check HDFC Overdraft Facility.

5 Top Indian Banks that offer overdraft facilities are:

HDFC Bank Smartdraft Overdraft Against Salary

Features of HDFC Bank Smartdraft Overdraft Against Salary

• Eligibility: All HDFC Bank Corporate Salary Account Holders are eligible for this facility. The Corporate Company should be on the approved list of the bank. A minimum salary credit of 15,000 p.m. is required to be eligible for the facility.
• Quantum: A quantum up to 3 times the salary credited will be provided
• Repayment: The overdraft amount need not be paid in equated monthly installments (EMIs). It is a revolving facility that can be renewed after 12 months of regular repayment. Repayment will be by way of any deposits made to the account. The amount repaid will be available for utilisation again when in need of funds.
• Interest: Interest will be charged at a competitive rate and will be applied only to the amount utilised and for the period utilised.
• Processing charges: Nil. A nominal fee of 250 will be collected if the account is renewed after 12 months.
• Prepayment charges: No prepayment charges will be collected. The customer has the option to repay the entire amount utilised and close the overdraft facility. However, if the customer intends to continue, the amount fully repaid will again be available for usage since the overdraft limit will be replenished.

Benefits of HDFC Smartdraft Overdraft Against Salary

• No elaborate procedure. Only an HDFC Corporate salary account with regular salary credit every month is required.
• Simple and minimal documentation
• The interest will be applied only to the amount utilised
• The overdraft facility can be renewed after 12 months and the amount will be available for usage again.
• No prepayment charges and processing charges
• Only a nominal fee of 250 will be collected if the facility is renewed
• No need to pay back the amount in EMIs

Citibank Ready Credit Advantage

Citibank Ready Credit Advantage is an instant cash facility to meet any unplanned expenses for Citibank Suvidha Salary account holders.

Features of Citibank Ready Credit Advantage are:

• Eligibility: The account holder should be in the age group between 21 years to 65 years. A minimum net salary credit of 25,000 is required.
• Quantum: Quantum up to 5 times the monthly salary credited to the account with a maximum of 5 Lakhs will be provided.
• Interest: Interest in the range of 16% to 19% will be collected. The exact interest will be communicated to the customer at the time of fixing the line of credit. Interest will be applied to the daily balance in the account.
• Repayment: The tenure of the loan is 1 year, but the facility can be renewed provided the salary is credited regularly to the account.
• Processing charges: A minimum fee of 2% of the overdraft amount with a minimum of 750 will be collected at the time of renewal of the facility after 12 months of providing the facility.
• Prepayment charges: No prepayment charges will be collected

Benefits of Citibank Ready Credit Advantage

• Once the Ready Credit Cash Line is fixed, you will have access to the funds whenever required
• The tenure is not fixed. It is a revolving facility and can be renewed every year provided the salary credits are regular.
• Interest will be applied only on the amount utilised and for the period utilised
• You can access the account through a cheque, ATM, Mobile banking, Internet banking, and phone banking.
• You can opt to pay any amount over and above the 5% stipulated without any prepayment charges. The amount so repaid will again be available for usage.
• To apply for the facility, you will have to just access your net banking facility and click on the ready credit offer and a credit line to the extent of eligibility will be fixed and made available to you.

HSBC Smart Money Account

With HSBC Smart Money Account, you can get a greater benefit for your Fixed Deposit Account while keeping the principal amount intact while earning the contracted rate of interest for the Fixed Deposit.

Features and Benefits of the HSBC Smart Money Account

• All you need to open an HSBC Smart Money Account is a minimum fixed deposit of 25,000. The Smart Money Account can be opened only by a Resident Indian who is above 18 years of age.
• An overdraft facility of up to 90% of the fixed deposit will be provided
• You will earn interest on the entire fixed deposit amount while you pay interest only to the extent of the overdraft limit utilised. Interest for the overdraft facility will be at 2% above the contracted rate of interest on the fixed deposit.
• There is no fixed tenure for repayment
• You can access the Smart Money Account through ATM, Internet banking, mobile banking, and through a cheque. A personalised cheque book will be issued to this account.
• HSBC Credit Card will be issued free of cost
• An International Debit Card will be issued to the account
• Free online bill payments can be done through the account

SBI Overdraft Facility in Corporate Salary Package Account

Corporate Salary Package (CSP) is a facility offered for employees of Corporate Companies, including service organisations like transport corporations, hotels, hospitals, etc. An overdraft facility is provided for the salary accounts under this package.

Features of SBI Overdraft Facility in CSP Account

• Eligibility: Employees of Corporate Companies maintaining their salary account with SBI under the CSP. A minimum of 6 consecutive salary credits to the account is a mandatory requirement. Even with a minimum of 6 months residual service with regular salary credits to the salary account maintained with the bank, the customer will be eligible for the overdraft facility.
• Quantum: An overdraft facility of up to 2 times the monthly net salary will be set to the existing CSP Account.
• Interest: Interest will be charged at a competitive rate on the daily outstanding balance. Interest need not be paid on the entire limit that has been set for the account. Interest has to be paid on the amount that has been utilised.
• Tenure: The overdrawn amount has to be repaid within 6 months
• Processing charges: No processing charges will be collected
• Prepayment charges: No prepayment charges will be collected

Benefits of SBI Overdraft Facility in CSP Account

• Simple procedure with minimal documentation
• The overdraft facility can be accessed through cheques, internet banking, phone banking, ATM, etc.
• Interest has to be paid only on the amount utilised
• Repayment need not be done in EMIs. However, the amount utilised has to be repaid within 6 months.

ICICI Bank Salary Overdraft

ICICI Bank Salary Overdraft is a facility extended by ICICI Bank to its customers maintaining a salary account with the bank.

Features of ICICI Bank Salary Overdraft

• Eligibility: The main eligibility criterion is maintaining a salary account with ICICI Bank. The overdraft facility is provided for accounts where the salary is being credited regularly.
• Quantum: An overdraft facility to the extent of twice the net monthly salary credited to the salary account with a maximum of 4 Lakhs will be provided.
• Interest: Interest will be charged at a competitive rate on the utilised part of the overdraft limit. The interest is charged on the daily outstanding balance in the account.
• Repayment: The facility is revolving in nature. The overdrawn amount will get regularised to the extent of the salary credited to the account every month. The amount so credited will be available for usage once again as the limit gets replenished. The account will be renewed after 12 months provided the conduct of the account is satisfactory.
• Processing charges: No processing charge will be collected
• Prepayment charges: No prepayment charges will be collected

Benefits of ICICI Bank Salary Overdraft

The following are the benefits of ICICI Bank Salary Overdraft:

• Simple documentation
• No security is required for this facility
• The interest charged is minimal and has to be paid only on the amount utilised
• Quick processing.

The following are the differences between Bank Overdraft Facility and Personal Loan: