OVERDRAFT LIMIT

What is Overdraft Limit?

• Loan arrangement under which a bank extends credit up to a
maximum amount (called overdraft limit) against which a
customer can make withdrawals.

• The most common form of business borrowing, an overdraft

is a type of revolving loan where deposits (credits) are
available for re-borrowing

• Interest is charged only on the daily overdraft (debit)

balance.
 Options to avail Overdraft Limit

• Overdraft Limit with Bank

• Overdraft Limit with Corporate/NBFC

General Procedure to open Overdraft Limit
with a Bank
• Submission of documents:

• Application Letter to grant banking facilities

• Declaration of Assets and Liabilities.
• IT /WT Assessment orders of prop / partner/ Directors/ Guarantors.
• Legal opinion / Valuation certificate of the collateral security.
• Latest audited financial statement of Associates for 3 years.
• Latest audited financial statements for the applicant /firm /company
 Sanction of Overdraft Limit by Bank
• Submission of documents:

• Board Resolution for availing sanctioned OD Limit & authorizing person(s) for
execution of loan documents

• Agreement cum Pledge

• Open demat & CSGL Account

• Furnish Personal Guarantees

• Credit Rating etc

General Procedure to open Overdraft Limit
with a Corporate/NBFC
• Submission of documents:

• Application Letter to grant OD facilities

• KYC Form consisting of details like:
• General details of the company
• Particulars of Key Personnel
• Names of Major Clients
• Infrastructure Facilities
• Financials, etc
Sanction of Overdraft Limit by Corporate/NBFC
• Submission of documents:

• Board Resolution for availing sanctioned OD Limit & authorizing person(s) for
execution of loan documents.

• Agreement
 Availment of Overdraft Limit
• The Sanctioned OD Limit is to be secured by pledge of eligible
securities & bonds in dematerialized form.
• Amount outstanding under the limit to be covered by full value of
securities/bonds etc plus 10%-15% margin to be provided in form of
cash/eligible securities. The Pledger shall create pledge on such
securities in favour of the Pledgee.
• On release of bonds pledged for sale, either the pledger shall remit
the proceeds along with margin for the utilization period on the date
of release of the pledged securities Or replace the unpledged security
with other similar security & pay the interest amount separately.
• Settlement of bonds/funds in the first case can be done off market or
on real time platforms like NSCCL/ICCL.