Q.Write a short note on: Overdraft
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Start your 14-day free trial to unlock the full solution →An overdraft lets a current-account holder withdraw more than the account balance up to an agreed limit. This is a short TS Intermediate 2nd-year Commerce 2-mark term.
Explanation
An overdraft (OD) is a short-term lending facility provided by a bank to its current-account holders, under which the customer is permitted to withdraw an amount greater than the balance available in his account, up to a sanctioned limit agreed with the bank. It is one of the ways in which banks advance loans. Interest is charged only on the amount actually overdrawn and only for the period for which it is used, not on the whole limit, which makes it a convenient and economical source of short-term/working-capital finance for businessmen. The facility may be secured against security or granted as a clean (unsecured) overdraft. This is TS In …
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