An overdraft is a limit which is set up in customer’s Current Account for business purpose. The customer can withdraw money from the Current Account to the extent of limit sanctioned. Overdraft is an efficient form of borrowing, as interest will be levied only on the amount utilised for the corresponding period. It gives flexibility to the customers of depositing money into the account, to reduce the outstanding balance or draw more as per customer’s business needs.
Interest is calculated daily on the fluctuating outstanding balance and is normally charged at the end of the month.