OVERDRAFT
An Overdraft is an advance given by allowing a customer to overdraw his current account upto an agreed limit. the overdraft facility is allowed in Current account and Pradan Mandri Jhan Dhan Yojana Accounts. the security for an overdraft account may be shares, debentures, government securities, life insurance policies or Fixed deposits.
The Overdraft differs from Cash Credit by two aspects
1) Security
2) Duration
For Cash Credit the security offered is current assets of business such as inventories of raw materials, goods in process or finished or receivable goods.
For Overdraft the security will be in the form of financial assets held by the borrower.
The Overdraft is temporary facility and cash credit is Long run facility.
The rate of Interest in Overdraft is low compared to Cash Credit
An Overdraft is an advance given by allowing a customer to overdraw his current account upto an agreed limit. the overdraft facility is allowed in Current account and Pradan Mandri Jhan Dhan Yojana Accounts. the security for an overdraft account may be shares, debentures, government securities, life insurance policies or Fixed deposits.
The Overdraft differs from Cash Credit by two aspects
1) Security
2) Duration
For Cash Credit the security offered is current assets of business such as inventories of raw materials, goods in process or finished or receivable goods.
For Overdraft the security will be in the form of financial assets held by the borrower.
The Overdraft is temporary facility and cash credit is Long run facility.
The rate of Interest in Overdraft is low compared to Cash Credit
