What is OD (over draft ) account.

POSTED BY Deep Vineet ON June 8, 2012 10:56 am COMMENTS (4)

Can you please provide details about the OD (Over draft ) Account. Information related to Interest rate, is it alternate to Loan etc would be highly appreciable.

4 replies on this article “What is OD (over draft ) account.”

  1. Dear Deep, normally an over draft account is opened against a security which may be the Fd of the same bank, NSC, Insurance policies, Stocks & MF units, Property. Depending upon the security, you may get an over draft limit of 50 to 90% against the value of security.

    The over draft account operates between zero to negative limit i.e. amount withdrawn by you. You ‘ll pay interest only on the withdrawn amount & for the period you use the amount. If you are parking any surplus funds in this OD account, you ‘ll not earn any interest on this surplus amount.



    1. deepvineet@gmail.com says:

      Hi Ashal,

      Thanks for your response. Can you please elaborate a little more for interest and repayment.
      Like I had open a OD account with Limit Rs. 3,00,000 (3 Lakhs) and i withdraw amount 2.5 L , so on which amount i have to pay interest and if i have to close this account , how can i do that.

      Hope I now make a clear question.


      1. Dear Deep, the interest ‘ll be charged only on the used amount 2.5L Rs. If you withdraw on 9rth June & deposit 1L Rs. on 20th June, the interest ‘ll be charged on 2.5L Rs. from 9th to 19th June & from 20th to 30th June (month closing), the interest ‘ll be charged on the remaining amount which is now 1.5L Rs. only.

        To close the account you w’d have to repay the full amount + any interest there on. If you do not have money to repay, you may ask the bank, to redeem the security & adjust the same towards OD balance.



        1. deepvineet@gmail.com says:

          Thanks Ashal for your comments.

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