Bank Overdraft
Definition
A facility allowing a business to withdraw more than its account balance up to an agreed limit, providing short-term working capital. Interest is charged on the amount used.
Related Terms in Banking & Payments
Cash Credit
A short-term borrowing facility in India where a business can draw funds up to a sanctioned limit, typically secured against inventory and receivables, with interest on the amount actually used.
Letter of Credit
A bank's guarantee to pay a seller on behalf of a buyer once specified documents proving shipment are presented. It reduces risk in international trade where the parties do not know each other.
Demand Draft
A prepaid instrument a bank issues on a customer's behalf, guaranteeing payment to the named party. Because the funds are taken upfront, it is more secure than a personal cheque for the payee.
Standing Instruction
An authorisation a customer gives their bank to make regular fixed payments automatically on set dates, such as rent or loan instalments, without initiating each one.
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