Overdraft Facility from Banks

Last Updated : July 17, 2017, 12:11 p.m.

In all walks of life, you never know when financial emergency strikes its chords leaving you in despair giving you no time to arrange your funds from your own deposit or savings but you need the money anyhow. What to do now? There comes an overdraft facility from banks which is very well accessible to protect you from distressful situations. In general, certain credit facility can also come to your mind like availing bank loans or using a credit card but interest rates tend to be quite high making you feel restless. Also, there are unexpected situations where your contingent funds fall short of fulfilling such short-term financial needs. But overdraft facility is such which you can avail it from any banks by choosing a particular asset for using it as collateral in order to counteract the situation.

For the common masses, overdraft meaning is still not yet clear, as the banks provide this facility under their discretion to help the masses financially in order to meet their short-term financial requirements.

What is Overdraft?

Overdraft stands for a credit facility which is provided to an individual against his/her collateral assets from the bank. In other words, overdraft is a credit arrangement allowed by the banks to individuals for using or withdrawing more money from their respective accounts even when it is below zero. Such facility is granted by the banks in order to help you withstand any crises which may have arisen from any unexpected events like immediate payment to your creditor, early settlement of your previous loan, purchase of gifts for an unexpected wedding of a relative or friend, unplanned travel expense or medical expenses etc. It could also be related to some major events of life such as the untimely death of a spouse or parent, accidental mishaps, business failure, fire breakdown etc.

For availing overdraft, as a collateral, an individual has to offer either of the following assets to the banks: house, insurance policies, bank fixed deposits, shares, and bonds etc. However, interest rates charged and overdraft sanctioned to you by banks varies on each of the collateral. Some banks charge the interest rate on the amount withdrawn for use or charge on the reducing balance basis.

Is CIBIL check necessary for Overdraft Against Fixed Deposit?

The significance of CIBIL score is when a person has a credit history which means he/she has taken a debt (a loan or credit card) in the past. Having a good credit history and score helps a person get a lower rate of interest and higher loan amount on a loan. However, overdraft facility against fixed deposits is like a secured loan where FD account is treated as a security. The interest rates on an overdraft against FD is much lower than a new personal loan and it is generally 1% higher than fixed deposit interest rates. The maximum amount you can get is also fixed just like interest rate. So, even those who have a good credit history can not get either lower rate as compared not more than the restricted loan amount. Thus, checking CIBIL is not necessary as it has no impact on overdraft facility.

How to get overdraft facility?

To avail overdraft facility is similar to taking any loans from the banks. The type of asset as collateral you produce in front of the banks depends on the frequency of sanctioning you an overdraft facility from the banks. As every collateral have its own upside and downside.

For example : It takes long duration for sanction of an overdraft if your collateral is your home since property evaluation is a time consuming process. Whereas availing an overdraft amount sanctioned against fixed deposits or life insurance policy will not take much time as the bank sanction it quickly.

Let’s say, if you have applied for an overdraft against your home i.e. collateral you choose is your property. Assume that your house is worth ₹1 crore, depending on your repayment capacity and other prime factors such as remaining life of the property, bank’s rules, the bank may approve you an overdraft limit(or od limit) of ₹70 lakhs.

The money is not allotted to you immediately. It almost works similar to your approved loan. Whenever you need funds, you can keep withdrawing money from overdraft account. In addition, you have to pay interest on the money borrowed for the time you have utilized it. Further, in this article, we have discussed the procedure for obtaining overdraft facility from SBI, HDFC and Bajaj Finance.

Which Account Type Allows Overdraft Facility?

Banks offer overdraft facility against salary accounts, fixed deposits, etc. You can also get an overdraft facility against current accounts.

Overdraft against Property

Normally, some banks don’t offer overdraft facility against immovable property such as LAP but for home loans only a few banks do. The banks which offer overdraft against home loan are: State Bank of India, PNB, Standard Chartered Bank, HSBC and Central Bank of India.

Overdraft against home loan

Overdraft facility is available only for home loan borrowers who are in dire need of funds in the course of settling their existing home loan repayments. And who doesn’t want to get rid from paying off all home loan dues before the actual tenure ends? The customers who look for settling off their liabilities prefer to opt for part pre-payment facility but you should know that it’s not an easy call to retire from such liability. As some banks put a ceiling on maximum pre-payments while others put conditions on a minimum amount for part-payment. Moreover, who knows in the process of settling a pre-payment this month, there could have been an unknown financial emergency suddenly knocking your door next month. In that case, home loan overdraft comes to your rescue as you don’t have to do anything, just ask your bank to open your overdraft account separately against home loan.

The bank then links either your current account or your salaried account with your home loan account. Afterward, you can easily park away the extra funds in your account whenever you want, just like you are putting your money in a savings account.

An extra sum, over and above your EMI, parked in your account will then be viewed as pre-payment towards your home loan. In this way, it will be helpful in bringing down your overall loan liability and the interest will be charged only on your balance loan amount.

What else? Still, you’ll be having all rights of retaining the option of withdrawing that surplus money you parked additionally whenever you need.

Home loan overdraft lures the attention of double income families that have surplus amount or businessmen who receive regular additional funds. It will be a ‘gala time’ for businessmen as they can withdraw the surplus money from loan overdraft account whenever they need. This pacifies their financial emergencies and thereafter there is no need to go for a personal loan. And again, you have a certain flexibility of repayment, whenever you obtain funds.

Overdraft loan against the home loan is appropriate under such circumstances if you are sure you are able to save some extra funds every month after repaying your monthly installments, otherwise, home loan is sufficient. Overdraft loans are apt for self-employed persons who always are in need of short-term liquidity.

Overdraft facility in SBI

Let’s take a look at various overdraft facilities offered by State Bank of India :

SBI overdraft against salary

Are you running short of cash? Wish to avail overdraft against your SBI Salaried account? Ofcourse, you can do that provided you should acknowledge the stipulated conditions prescribed by State Bank of India. In order to be eligible for availing SBI overdraft facility against salary, ensure that you should have atleast 6 months of residual service and have regular salary credits with SBI. To qualify for SBI overdraft limit , minimum 3 salary credits are required. This overdraft facility is only applicable on your 2 months net salary. In other words, the maximum amount you can avail as an overdraft limit is upto 2 times the Net Monthly salary based on certain monetary ceiling. This facility is offered to you based on your complete eligibility criteria.

Such kind of facility is extended to you in the form of a short-term loan or overdraft loan for use during short-term exigencies. But take a note that you have to repay your overdraft in 6 equated monthly installments i.e. in 6 months time. Moreover, you have an option to contact your nearest SBI Branch if you want to convert your overdraft to a Personal Loan account with a higher limit, subject to your eligibility criteria as per the discretion of the bank.

When you contact your bank for opening an overdraft account against salary for you, the bank in such a case links your direct salaried account with your overdraft account. The funds will then get easily available to you by the bank

Even you can access your overdraft money disbursed to you by SBI in your salaried account, also you can withdraw this amount through the regular medium such as ATM, Cheques and online transfers.

Do you know that on your existing CSP(Corporate Salary Package) account SBI puts an overdraft limit on it? Yes, by doing so it allows you to withdraw a certain amount from your SBI Overdraft account.

Surprisingly, to avail this facility you have to undergo minimum documentation, that too without processing fees. However, there are no pre-closure charges if you want to discontinue. The interest payable to you is applicable only on your utilized amount. Much to your surprise again, you can save on your interest amount by allowing your monthly salary and other credits to get add on to your overdraft account.

This facility is available to select customers of SBI.

SBI Overdraft against Fixed Deposit

Is there any unexpected contingency which requires your immediate attention? Well, whatever the contingency is, definitely it must relate to having some extra funds. But your present bank balance with SBI is not allowing you to meet out your such expenses. What to do now? Don’t be disheartened. Just go for SBI overdraft facility. Still, you don’t get enough net salary to accommodate your contingency. The next option you can consider is to apply for SBI Overdraft against the Fixed deposit, keeping in mind some essentials :

Eligibility

You should be either a single or Joint account holder of SBI’s Term Deposit Receipt/Special Term Deposit Receipt or you can say SBI fixed deposit. Such deposits you can use in case of a loan. If you require extra funds in case of special circumstances, don’t hesitate to approach SBI for availing overdraft against fixed deposit even if you are a single account holder. To reduce your time gap, you can opt for this facility through Internet Banking as well. But joint holders need to visit their nearest SBI branch for getting access to this facility.

Amount of Loan

Minimum amount : ₹25000

Maximum amount : ₹5 crore

Margin

The margin requirement is available on your Overdraft loan upto 90% of your fixed deposit value.

Security

Security is placed upon ‘lien’ on underlying fixed deposit.

Repayment period

Maximum repayment period has been set upto 5 years against Special time deposit receipt(STDR) and e-STDR; upto 3 years against fixed deposit/online fixed deposit for overdraft facility online.

Processing fee

There is no processing fee on SBI Overdraft against Fixed Deposit.

Interest Rate

The interest rate is 1% of the relatively fixed deposit rate.

SBI Overdraft Home Loan

SBI MAXGAIN

SBI offers the flexibility to borrowers to park away their surplus money or savings in SBI Maxgain with an option of withdrawing it whenever they require in order to repay their outstanding loan amount. Count on those instances, when your fixed deposit is offering you lower returns due to lower-interest rates as per market conditions, while at the same time your other financial liabilities urge you for your attention. In such instances, plough the surplus money from SBI Maxgain which comes as a fruitful purpose for you then.

SBI Maxgain is an innovative product suite offered by State Bank of India for allowing the customers to earn sufficient yield on their savings by reducing their interest burden on Home loans with no extra cost.

SBI offers this loan as overdraft with an added convenience to operate the Home loan account like savings bank or current account. If you avail this facility, you will also get cheque book or net banking facility for accessing SBI Maxgain.

Let’s take a look on pre-requisite for getting access to SBI Maxgain:

Eligibility

SBI Maxgain is applicable for both woman salaried/non-salaried borrowers and for other customers categorized into salaried/non-salaried borrowers.

Loan Amount

Minimum : ₹ 20 lakhs

Maximum : No cap

However, other terms and conditions of a regular Home loan scheme are also applicable on it.

SBI Overdraft Interest Rate on Home loans

The floating interest rate applicable on borrowers are as follows:

1. For women salaried borrowers

Loan Amount upto ₹75 lakhs : 8.70%-9.00% p.a.

Loan amount above ₹75 lakhs : 9.05%-9.15% p.a.

2. For women non-salaried borrowers:

Loan Amount upto ₹75 lakhs : 8.75%-9.05% p.a.

Loan amount above ₹75 lakhs : 9.10%-9.20% p.a.

3. For general salaried borrowers

Loan Amount upto ₹75 lakhs : 8.80%-9.20% p.a.

Loan amount above ₹75 lakhs : 9.25%-9.35% p.a.

4. For general non-salaried borrowers

Loan Amount upto ₹75 lakhs : 8.95%-9.25% p.a.

Loan amount above ₹75 lakhs : 9.30%-9.40% p.a.

HDFC Overdraft against Salary

HDFC SMARTDRAFT

HDFC overdraft against salary is offered through HDFC SMARTDRAFT facility wherein you should have a salaried account with HDFC bank, also your company should be on their approved list in order to become eligible for such facility.

Don’t let unexpected emergencies to take a toll on your life? Act smartly by availing HDFC Smartdraft, provided you should follow the pre-requisites of the bank as under:

1. To start with, your minimum net monthly income should be ₹15,000/-.

2. Overdraft limit or Od limit should be upto 3 times of your salary amount

3. Overdraft limit

Minimum overdraft amount : ₹25,000

Maximum overdraft amount : ₹1,00,000

4. Minimum documentation processes are required to fulfill the overdraft norms.

5. Repay your loan any time without any preclosure fee.

6. Easy accessibility to overdraft credit via cheque, ATMs, online transfer etc. This is not applicable on any EMI based facility.

7. Interest is charged only on the amount utilized.

8. Renewal of Smart Draft Limit is available by paying a nominal fee of ₹ 250/- after 12 months of regular payments.

9. SmartDraft is available in the following cities only: Mumbai, Delhi, Gurgaon, Noida, Bangalore, Chennai, Hyderabad, Secunderabad, Kolkata, Pune, Nasik, Jaipur, Baroda, Indore, Bharuch, Surat, Silvasa, Chandigarh, Ludhiana, Patiala, Coimbatore, Ahmedabad, Lucknow, Calicut, Trichur and Cochin.

HDFC Overdraft against Fixed Deposit

SUPERSAVER FD HDFC Bank

Fulfill your financial contingencies without breaking your existing fixed deposit. Yes, you can do that as HDFC has come up with SuperSaver FD facility which offers you an overdraft facility against your existing fixed deposit. Now you can grab hold of this advantage which can also supplement your household or business necessities. This overdraft facility is available either in your current or savings account. Overdraft on current account is applicable for businessmen whereas overdraft on the savings account is meant for salaried class individuals. Whichever account your bank will finalize gets linked to your fixed deposit account. However, you can opt this facility against FD/Super Saver facility on deposit held in single name through Netbanking instantly. Also, you can visit your nearest HDFC Branch or call on phone banking services to avail Supersaver facility.

The added advantage is you can payback your interest only on the amount withdrawn, while your remaining amount continues to earn an ongoing interest. Moreover, you get the flexibility to alter the periods of your deposit, maturity, payment instructions, principal amount and rollover mode even before the maturity of the rollover deposit. Before availing HDFC SUPERSAVER, just go through the following essentials:

1. The following entities are eligible for availing HDFC SUPERSAVER :

• Resident Individuals
• Hindu Undivided Families
• Private and Public Limited Companies
• Senior Citizens or Retired Personnel (above 60 years of age) who are Resident Indians are eligible for the Senior Citizen rate on the Indian rupee fixed deposit.

2. The overdraft interest rates you may earn would vary according to the tenure of your fixed deposit. Moreover, the applicable rate of interest is only 2% above the fixed deposit rate for the period for which the money is withdrawn for use.

3. If your savings account has a credit balance, you will be earning 4% paid directly in your account half-yearly on the funds remaining in your Savings Account

4. In effect, you will earn a higher interest rate on your overdraft against FD/Super Saver Account than what you were earning on your regular savings account.

5. The margin limit is capped at 90% overdraft which is available on your existing fixed deposit. By gaining access to online facility, a 75% of your Fixed Deposit Principal amount will be granted to you as an Overdraft facility

6. A minimum amount of ₹ 25,000 for a minimum duration of 6 months 1 day is required to open an Overdraft against FD or SuperSaver Account, in addition to a Zero Balance Savings Account.

7. Single or Joint account holders both can get an ATM or a Debit Card, but a maximum of two cards are available for each Super Saver account

8. You can also avail Super Saver account as a Premium Savings account. This way you can get the dual benefits of a fixed deposit and a Savings account . In addition, you will get high interest rates, personalized cheque book, free ATM card and free-inter-city access as unique features available on it.

9. Premature liquidation of your FD upon which overdraft is taken doesn’t change the interest rate on the overdraft utilized.

10. If you choose sweep-in fixed deposit linked to a Super Saver facility, a lien will be marked on the chosen fixed deposit for the Super Saver facility.

HDFC Overdraft Loans against Securities

When you need surplus funds the most and you have several securities already invested whose maturity date doesn’t seem to be so close, what to do then? It’s the time to plan judiciously, when financial commitments are constantly ringing the bells.

Look for HDFC Overdraft loans against securities, a better option where you can get it instantly by sitting from the comfort of your home. The best thing is you don’t have to break any of your security but use it as a collateral for obtaining HDFC Overdraft loan.

Before that, make yourself informed about certain essentials:

• By pledging 80% value of the securities, you can avail a minimum loan amount of ₹2 lakhs.
• You can only use the overdraft loan for fulfilling your personal needs. The loan amount cannot be utilized for any speculative purposes which have any relation to either stock market or for any anti-social purposes.
• Interest is charged only on the amount withdrawn for use. Interest will be calculated on the daily outstanding balance and debited to your account at the end of every month
• All the charges are applicable on upfront basis at the time of processing the loan. Moreover, HDFC bank loan against securities comes without any prepayment and foreclosure charges and release you from the pressure of dealing with any outdated cheques.
• You can also avail single scrip worth upto 50% of the value with any Depository Participant.
• If you have an existing Demat Account with HDFC Bank, you can easily avail this overdraft facility through Net banking by using your Customer ID and IPIN.
• Demat holdings should be of the previous working day, the final overdraft limit will be decided based on the value and quantity available at the time of pledging securities.
• Minimum loan amount for eligibility is ₹1,00,000 and maximum is ₹2,00,000. However, you have to adjust the quantity of scrips for pledging in case your overdraft limit is not in the range.
• You can use only equity shares for pledging and should also be in the approved list of the bank.
• The contribution of any single scrip should not exceed 65% of the total portfolio value at any time.
• In case if you hold your Demat account jointly, the authorization of the joint Demat account holders would be required. Bank representative will visit you for making you sign the documents.

Bajaj Finance Overdraft – Flexi Loans

Bajaj Finance Flexi loans are akin to Bajaj Finance overdraft loan (or od loan) which is a unique and innovative offering helping you to manage your cash flow more effectively and save on interest wisely. Without liquidating your existing loan before maturity, you are opting for overdraft facility i.e. you are choosing the frequency of your deposit or withdrawing money at your convenience from your flexi-loan accounts subject to your cash flow. In other words, you can either pre-pay or ‘down-draw’ against your loan and therefore make multiple withdrawals as long as you stay within your credit limit. Now you can easily clear all your previous loan at ease by availing Flexi loans from Bajaj Finance. This facility is available online through customer portal ‘Experia’. The interest is charged on the amount you have withdrawn for use. Moreover, flexi loans are available for a maximum amount upto ₹30 lakhs for which approval can be done within 24 hours. So, don’t prolong your goals but fulfill it immediately.

ICICI Bank Launches India’s First Online Overdraft Facility for MSMEs

ICICI Bank, with a view to support Micro, Small and Medium Enterprises (MSMEs), has launched OD, arguably India’s first online overdraft facility for the segment. MSMEs can get an overdraft of up to ₹15 lakhs online. This novel initiative would facilitate online loan processing and instant disbursement without requiring an individual to submit a collateral and pay any prepayment or foreclosure charges. Minimal documentation only adds to the delight of the customers.

How to Apply for InstaOD?

There are two ways by which you can apply for InstaOD – Internet Banking/I-Bizz App or ICICI Bank website.

Internet Banking/I-Bizz App

• MSME customers can login through their corporate Internet Banking/I-Bizz App.
• Those who are eligible for InstaOD can see a pre-approved offer displayed in the ‘Offers’ tab
• Click ‘Avail Now’ to get a pre-approved InstaOD

ICICI Bank Website

• Go to ICICI Bank website
• Navigate to ‘Business’ and then to ‘Business Loans’
• Upon clicking on Business Loans, you can see a list of credit on the screen
• You then need to get around ‘InstaOD’ and click on ‘Apply Now’ button
• You will see a new page wherein you need to tick options of whether you have an ICICI Bank current account, corporate Internet Banking Login or debit card
• Submit the pre-filled application form
• Subsequently, you need to verify details such as overdraft limit, interest rate and processing fee
• Confirm the acceptance
• After that, an overdraft will get set up instantly

Current Account Unsecured Overdraft

Those not eligible for InstaOD can apply for an current account unsecured overdraft. For that, you need to fill the application form at the nearest ICICI Bank branch.

Who Are Eligible for Current Account Unsecured Overdraft?

The list below comprises those who are eligible for the unsecured overdraft facility.

• Individual
• Proprietorship Firm
• Limited Liability Partnership
• Public or private limited Entities
• Business Vantage for a minimum of 2 years
• Last 12-month current account statement