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A Current Account's higher daily transaction limit makes it an ideal choice for businesses. But while Current Accounts come with several features to support the financial needs of business owners and entrepreneurs, one feature that deserves your attention is the "Overdraft Facility."
Let's look at what is an Overdraft and how it can help you tackle the financial challenges of running a business.
The Overdraft Facility allows Current Account holders to withdraw money even when their account balance is zero. In many ways, using the Overdraft Facility is similar to taking a short-term loan from your bank. As a result, interest is levied on the amount borrowed through the Overdraft Facility.
As the bank fixes the Overdraft Limit for every Current Account, it can significantly vary between two account holders. Moreover, unlike a loan where the borrowers are required to repay the amount in EMIs over a fixed tenure, the Overdraft Facility is more flexible as it allows account holders to repay the amount as and when possible, in parts or in full.
To better understand what is Overdraft, it is essential to know the types of Overdraft facilities. Current Account Overdraft is of two types- Secured and Unsecured.
A Secured Overdraft is when you borrow an amount from your bank against collateral or asset. In India, most banks allow Current Account holders to use the Overdraft Facility against property, Fixed Deposit (FD), Insurance policy, and Equity. Original documents related to the collateral remain with the bank until the account holder repays the borrowed amount.
The Unsecured Overdraft Facility in a Current Account does not require any collateral. Depending on certain factors, the bank fixes an Overdraft Limit for the Current Account holders. Any time the account holders need instant access to additional funds, they can borrow it through the Overdraft Facility up to the pre-approved limit.
AU Small Finance Bank in India offers Vyapar Overdraft Facility to Regular Current Account and AU Power Current Account holders. Some of the highlights of the AU Vyapar Overdraft Facility are-
If you're looking for a new-age Current Account with features customized to support your entrepreneurial journey, AU Small Finance Bank can be an excellent choice. All business enterprises are eligible to open a Current Account with us & experience a host of benefits.
Existing customers of AU Small Finance Bank can get in touch with their Relationship Manager for Current Account opening process.
