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Answer: An overdraft is a short-term facility given by a bank to a current account holder to withdraw more money than the balance in the account, up to an agreed limit.

The arrangement is made for a short period and may be secured against assets. Interest is charged only on the amount actually overdrawn and for the period it is used, not on the whole limit. It helps a business meet temporary working capital needs.

Doubtly AI · 28 Oct 2026 AI-verified · Oct 2026 Report
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