1.

Justify the following statement:Overdraft facility is given only to current depositors.

Answer»

Overdraft is a credit facility allowed to current account holders:

  • Under an overdraft facility, the bank allows, customers, to withdraw an amount, up to a particular limit.
  • The collateral securities are usually accepted for an overdraft facility.
  • The rate of interest charged by commercial banks for overdraft is low. 
  • Overdraft facility is given only to existing current depositors because they have good relations with the Bank. 
  • Thus, an overdraft facility is given only to current depositors.


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