Question

Explain the term bank overdraft.

Write a short note on overdraft facility.

Answer 1

1. Overdraft is an arrangement under which a current account holder is allowed to withdraw more than the balance to his credit, up to the specified limit.
2. An overdraft is allowed for a short period, and interest is charged on it.
3. Commercial banks provide overdraft facilities on the security of some assets or on the personal security of the account holder.