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What is an overdraft facility
An overdraft lets you withdraw or spend more money than what's actually in your account, up to an agreed limit, functioning as a short-term credit facility from your bank. In India, this is most commonly offered on current accounts for businesses, though some banks also extend it to savings accounts or against fixed deposits.
Overdrafts generally fall into two types:
- Arranged overdraft: Pre-approved by your bank, with a set limit you can draw against as needed
- Unarranged overdraft: When you exceed your available balance without prior approval, which typically attracts higher charges
Interest is usually charged only on the amount actually utilised, and only for the period it remains outstanding, rather than on the full sanctioned limit.
Note: If you have searched for "checking account", in India, this means a current account or savings account. This page explains how overdraft limits generally work.
What determines your overdraft limit
The amount you can access through an overdraft depends on several factors your bank assesses:
| Factor | How it affects your limit |
|---|---|
| Income and repayment capacity | Higher, stable income generally supports a higher limit |
| Banking relationship and history | Long-standing customers with good account conduct may be offered higher limits |
| Type of account | Business current accounts typically carry higher limits than personal savings accounts |
| Collateral offered | An overdraft secured against an asset, such as a fixed deposit, often comes with more predictable terms |
Since limits and eligibility vary significantly between banks, it's best to check directly with your bank for figures specific to your account and profile, rather than relying on generic ranges.
How an overdraft against fixed deposit works
If you hold a fixed deposit and need funds without liquidating it, an overdraft against FD lets you borrow against its value while the deposit continues earning interest.
- You can typically access a portion of your FD's value as an overdraft limit
- Interest is charged only on the amount you draw, not the full sanctioned limit
- Your FD remains intact and continues to accrue interest during the overdraft period
- You can usually manage and repay this facility through your lender's online portal or app
This is a genuinely useful option if you need short-term funds and already hold an FD, rather than looking to open a new overdraft-linked account.
How to check and manage an overdraft against FD
- Log in to your lender's customer portal or app using your registered mobile number and OTP
- Go to your fixed deposit account and check if the overdraft option is available for your FD
- Review your available limit and applicable interest rate
- Apply for the overdraft, and once approved, funds are made available against your FD
- Repay at your convenience, since interest applies only to the amount drawn
Managing an overdraft responsibly
Whether you're using a bank's current account overdraft or an overdraft against FD, a few habits help you avoid unnecessary cost:
- Only draw what you genuinely need, since interest applies to the utilised amount
- Repay promptly to reduce the interest accruing on your outstanding balance
- Avoid relying on an overdraft as a long-term source of funds, given it's designed for short-term needs
- Keep track of your outstanding balance regularly through your bank or lender's portal
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Frequently Asked Questions
Overdraft Limits & Costs
Overdraft Usage
Does Bajaj Finance offer an overdraft on a checking or current account?
No, Bajaj Finance is an NBFC and does not offer current or savings accounts, so it cannot offer an overdraft linked to one. Bajaj Finance does offer an Overdraft Against Fixed Deposit for customers who hold an FD with them.
How much can I overdraft against my FD?
Your available limit depends on the value of your fixed deposit and your lender's applicable terms at the time. Check your lender's portal or app to view the exact limit available against your specific FD.
Does my FD stop earning interest if I take an overdraft against it?
No, your fixed deposit continues to earn interest as usual during the overdraft period. The overdraft is a separate facility secured against your FD, and the deposit itself remains untouched.
What is the difference between a bank overdraft and an overdraft against FD?
A bank overdraft is typically linked to your current or savings account and assessed based on your income and banking relationship. An overdraft against FD is specifically secured against your fixed deposit, so eligibility depends on your FD's value rather than your account history.
How do I repay an overdraft against FD?
You can usually repay through your lender's online portal or app at your convenience. Since interest is charged only on the amount you've drawn, repaying promptly helps reduce your overall interest cost.
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