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Answer: Overdraft is a short-term facility given by a bank to its current account holder to withdraw more than the balance in the account, up to a sanctioned limit.

It is a source of short-term (working capital) finance. Interest is charged only on the amount actually overdrawn and only for the period it is used. The facility is usually given against security or on the basis of the creditworthiness of the customer, and it is repayable on demand.

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