Question

Ram has a current account with State Bank of India. He issues a cheque of ₹ 55,000/- to his supplier, but the balance in his account was only ₹ 50,000/-. The cheque is cleared. The bank provides him:

Options

• Cash credit

• Overdraft

• Short-term loan

• Discounting of bills

Answer 1

Overdraft

Explanation:

The bank allows a current‑account holder to draw beyond the available balance up to an agreed limit. When the ₹ 55,000 cheque cleared against a ₹ 50,000 balance, the bank granted an overdraft, charging interest on the excess.