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Ananya Shrivastava
Ananya Shrivastava is a Content Writer specialising in finance-focused news, blogs, and long-form articles on Indian markets, RBI policy, personal finance, and lending. She has authored over 450 blogs and 250 news pieces, combining technical knowledge with rigorous research to simplify complex financial concepts into clear, engaging content. With a marketing-driven lens and sharp editorial judgment, she consistently achieves top Google rankings while ensuring every claim is backed by verified data.
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Overdraft facility means your bank lets you take out more cash than you actually have. There's a cap on this, and you pay interest only on the part you use.
Say your account shows zero balance but rent is due tomorrow. That's the exact gap an overdraft facility fills. Banks have offered it to savings, current, and fixed deposit customers for decades now. A shopkeeper stocking up before Diwali, a family with a sudden hospital bill, someone stuck a week before payday, this facility covers all of them. So what does it actually cost, and who can get one? Read on.
An overdraft facility is a credit line on your bank account. You can pull out more than your balance, capped at a limit the bank fixes, and interest hits only the amount you actually use.
A term loan charges interest on the whole amount from day one, even the part sitting unused. An overdraft doesn't work that way. Your outstanding balance rises and falls every day, tracking what you withdraw and repay. RBI now covers overdraft, cash credit, and current accounts under one regulatory framework, effective April 1, 2026. Banks build overdrafts around a fixed deposit, a salary account, property, or in rare cases, no security at all.
The bank hands you a fixed limit. You draw from it whenever needed and repay whenever cash allows, and interest ticks up daily only on what's still outstanding.
The cycle plays out like this:
HDFC Bank confirms interest on its Overdraft Against FD facility applies only to the withdrawn amount, while your fixed deposit keeps earning interest in the background.
Banks in India mostly offer four kinds of overdraft, each tied to a different form of security.
SBI offers overdraft against time deposits between ₹25,000 and ₹5 crore through net banking and the YONO app. HDFC Bank asks for a minimum FD of ₹25,000 held for at least 6 months and 1 day before it opens an Overdraft Against FD account.
Eligibility shifts with the type of overdraft and the bank's own policy. Most lenders check your account history, income, and the security you can offer.
SBI restricts its online overdraft against fixed deposit to single-name FD holders applying through internet banking. Joint FD holders need to visit an SBI branch instead.
Rates depend on the bank and on what backs the overdraft. A fixed deposit brings a lower rate than a clean, unsecured overdraft.
Banks calculate interest daily on the outstanding withdrawn balance, never on the full sanctioned limit. SBI runs this on a daily reducing balance basis for its overdraft against time deposit product.
Your limit hinges on the bank, the security you offer, and your account type.
Beyond interest, some banks add processing fees, renewal charges, or annual maintenance costs. These vary by bank and by overdraft type.
SBI skips processing fees and prepayment penalties on its overdraft against time deposit facility. RBI's 2025 draft rules also propose scrapping foreclosure charges on floating rate loans for individuals and MSEs.
An overdraft gives you flexible access to funds without a fresh loan application every time. It fits short-term, unpredictable cash needs well.
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If you are weighing loan and overdraft offers from different banks and NBFCs side by side, a marketplace like LoansJagat can help you check eligibility and rates before you apply.
Rohan Mehta, a shop owner in Delhi, holds a fixed deposit of ₹4,00,000 with SBI. He needed ₹1,50,000 for two months to restock inventory before Diwali, and chose an overdraft against his FD instead of breaking it. His FD earned 6.50% interest, so his overdraft rate worked out to 7.50% per annum, 1% above the FD rate as per SBI's published rate structure.
His FD kept earning interest throughout the 45 days, and he repaid the ₹1,50,000 without any premature withdrawal penalty on the FD itself.
RBI updated its overdraft and current account rules in 2025, effective from April 1, 2026. The changes touch exposure limits and monitoring norms.
For a closer look at how these 2025 RBI changes affect overdraft borrowers, LoansJagat's guide on RBI overdraft rules covers the foreclosure charge ban and disclosure norms in detail.
An overdraft account can be a viable solution to handle short-term cash flow requirements without having to break your fixed deposit or take up another loan. There are some variations in the cost of the overdraft facility between SBI and HDFC Bank. Thus, it would be advisable to compare both banks before making an application.
It is a credit line on your bank account that lets you withdraw more than your balance, up to an approved limit.
Yes, some banks offer overdraft on savings accounts, usually against a fixed deposit or salary credit history.
Interest is calculated daily on the amount withdrawn, not on the full sanctioned limit.
The minimum online overdraft amount at SBI against a fixed deposit is ₹25,000.
Yes, in most FD-backed overdrafts, you can repay and close the account anytime through net banking, without penalty.
Timely repayment can improve your credit score, while frequent maximum utilisation or default can lower it.
An existing account, KYC documents, and proof of the security offered, such as an FD receipt.
Overdraft is usually linked to personal or current accounts. Cash credit is tied to a business's working capital needs.
Yes, SBI offers NRI overdraft against NRE and NRO fixed deposits through internet banking.
The bank can recover the amount from your linked security, such as your fixed deposit, or withdraw the facility.
