One feature that is frequently disregarded when considering credit cards, loans, or emergency savings is the overdraft facility. Banks provide this effective financial instrument to assist people and organisations deal with unforeseen financial difficulties. To put it simply, up to a pre-approved limit, an overdraft facility lets you take out money even if your bank balance is nil or inadequate.
Small company owners, independent contractors, and salaried professionals who frequently experience minor cash gaps would find overdrafts very helpful. Different consumer categories might benefit from overdraft capabilities offered by banks such as HDFC Bank and ICICI Bank. However, if you are wondering how the two are comparable? Continue reading.
An overdraft is a credit extension provided by a bank, allowing the account holder to withdraw more than the available balance in their account. The bank sets a limit, and interest is charged only on the amount used—not the total overdraft limit. You can repay the overdraft as per your convenience, either in a lump sum or in parts.
This facility is linked to your savings account, current account, or even against fixed deposits, insurance policies, and mutual funds. This is a flexible option to mitigate immediate needs such as medical bills, business expenses, education fees or any temporary loss of income.
The HDFC Overdraft Facility is designed with flexibility in mind. HDFC Bank offers overdrafts against fixed deposits (FDs), salaries, and even property, depending on the type of customer. This facility can be availed by individuals, proprietors, partnership firms, or private limited companies.
Here’s why the HDFC overdraft is considered user-friendly:
Minimal paperwork when availed against fixed deposits.
Zero foreclosure charges, giving you the independence to repay at any time.
Only interest on usage: You pay interest only on the amount used, not the full overdraft limit.
High approval speed: If your salary account is with HDFC Bank, you may be eligible for a pre-approved overdraft without the need for collateral.
Let’s take a small example. Suppose your salary is ₹50,000, and HDFC gives you an overdraft limit of ₹75,000. If you only use ₹20,000 out of it, the interest will be charged 20,000 not on ₹75,000. That’s a big plus.
This makes the HDFC Overdraft Facility suitable for salaried individuals who may need temporary relief before the next salary or sudden expenses.
The ICICI Overdraft Facility is even a robust offering known for its high integration with digital banking. ICICI offers overdrafts against fixed deposits, salary accounts, property, and even against mutual fund holdings.
What makes it appealing:
Instant digital application through net banking or iMobile app.
Link to various account types —salary, current, savings or even credit-backed.
Overdraft Against FD allows you to continue earning interest on your FD while still accessing funds through the overdraft.
Pre-approved overdraft facility for eligible customers often with minimal documentation.
ICICI’s facility is also strong on the business side. In case you are a business owner, you can get an overdraft on your current account to manage - vendor payments, staff salaries or raw material buys. The overdraft limit is based on your average monthly balance or fixed deposit value.
For example, if you have a ₹2 lakh FD in ICICI Bank, you can get an overdraft limit of up to 90% of the FD amount. That gives you ₹1.8 lakh at your disposal, without breaking your FD.
| Characteristics | HDFC Overdraft | ICICI Overdraft |
|---|---|---|
| Eligibility | Businesses, self-employed and salaried | Businesses, self-employed and salaried |
| Linked to FD | Yes | Yes |
| Digital application | Limited | Fully Digital |
| Pre-approved OD | For salary accounts | For eligible customers |
| Collateral required | Based on the kind | Based on the kind |
| Interest charged on | Amount used | Amount used |
Both facilities are excellent in their own right. If you are one of those who already banks with HDFC and even has a fixed deposit or salary account, then you may find their procedure faster and simple. On the other hand, if you prefer everything digital and want to apply through an app without visiting a branch, ICICI Overdraft Facility could be more convenient.
Business owners should check which bank offers better terms on current account overdrafts. While HDFC is more conventional, ICICI usually tends to provide a tech-driven experience with fast disbursals.
Before opting for any overdraft facility, consider the following:
Ensure to know the interest rate: It can differ based on the bank policy and collateral.
Check the limit: Do not over-depend on overdrafts. Ensure to utilise them for genuine short-term requirements.
Make repayment: Even though there is zero fixed EMI, note that prolonged non-payment can negatively impact your credit profile as well as score.
Compare processing charges and annual fees if any.
Overdraft options serve as financial cushions, it is there to support you when you need them the most. No matter if it is an HDFC Overdraft Facility or ICICI Overdraft Facility, zeroing in on the correct one must be based on your financial habits, comfort with technology as well as existing relationship with the bank.
If selected wisely, an overdraft facility can assist you in sailing through unanticipated expenditures without resorting to high interest personal loans or credit cards. Think of it as a prudent buffer - just do not turn it into a kind of habit!
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