An overdraft is the facility extended by a bank to allow a customer to withdraw money from his account even if he has exhausted his balance.
To put it more simply consider the situation that you have Rs 80,000 in your bank, but need to issue a cheque for Rs 85000. In normal situations the cheque would bounce leading to the associated complications. If a user has overdraft facility however, the bank may still honour the cheque. This facility is generally extended to customers depending on the soundness of their credit history.
As with any loan amount, the amount extended as the overdraft amount may have an associated interest payment. This may vary from bank to bank and is generally lower than the rate of interest on Credit Card Loans.
Please watch the video below for an explanation of Overdraft in Hindi.
Hope the above article has been able to clear your doubts on the Overdraft Facility extended by banks. Please let us know if you have any doubts in the comments section below.
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