#overdraft loans

The Problem Many Businesses Face

Running a business often means dealing with sudden expenses — supplier payments, urgent stock purchases, or covering short-term cash gaps. While business loans are a common choice, they can take days (or even weeks) to process. That’s where the Overdraft against Fixed Deposit (OD-FD) comes in — a quick, cost-effective solution that lets you access funds instantly without breaking your FD.

And now, with the ability to spend your OD limit via UPI, this facility is more powerful than ever for MSMEs, startups, professionals, and salaried individuals.

What Is an OD-FD?

An Overdraft against a Fixed Deposit is a type of secured business overdraft loan where you pledge your FD as collateral. Instead of liquidating your FD, the bank gives you an OD limit for business or personal use, often up to 90% of the FD value.

You pay interest only on the amount you use, not the full sanctioned limit. This makes it cheaper than small business loans or startup business loans when you need short-term working capital loans.

Business overdraft definition: A revolving credit facility allowing businesses to withdraw more than their account balance, up to a pre-approved limit.

Why Choose OD-FD Over Regular Business Loans?

Key Benefits of OD Against FD for Businesses

Quick OD Approval – No lengthy eligibility checks for existing FD holders.

Lower OD Loan Interest Rate – Often 2–4% lower than unsecured business loans.

Pay Only for What You Use – Saves interest cost.

Use for Any Business Need – Stock purchase, supplier payments, marketing, etc.

Now Spend via UPI – NPCI’s new rule allows linking OD accounts for UPI transactions.

Who Can Apply? (OD Loan Eligibility)

Banks offer OD facilities for businesses, professionals, and even salaried employees. Common overdraft eligibility criteria include:

You must have a Fixed Deposit with the bank.

FD should meet the minimum value (often ₹50,000+).

The account holder must meet OD account eligibility requirements set by the bank.

A company overdraft facility is available for registered firms with valid documents.

Documents Required (OD Loan Documents Required)

FD receipt

Business registration proof (for business OD loan)

PAN & Aadhaar

GST certificate (for MSME overdraft facility)

Bank account statement

How to Apply for OD Limit and Use It via UPI

Step 1: Check Eligibility

Visit your bank’s branch or online portal to confirm overdraft facility eligibility.

Step 2: Apply for an Overdraft Loan

You can apply for an overdraft facility through:

Net banking (for an overdraft facility online)

Branch visit Search “how to apply for an overdraft loan” on your bank’s site for exact steps.

Step 3: Link to UPI

After OD account approval:

Link OD account to your UPI ID in your bank app or UPI app.

Select OD account as the default payment account.

Step 4: Spend & Repay Smartly

Use UPI to pay suppliers instantly.

Repay quickly to reduce interest charges.

Overdraft Facility Charges & Interest Rates

OD Loan Interest Rate: FD rate + 1–2%

Business Overdraft Rates: Varies per bank; generally lower than unsecured loans.

Overdraft Facility Charges: Nominal processing fee; some banks waive it for premium customers.

OD Limit for Business

The OD limit for business depends on:

FD value

Bank’s policy

Your credit profile (though OD-FD is less dependent on CIBIL)

Best Use Cases

MSME overdraft facility for working capital

Emergency fund for startups

Seasonal business cash flow gaps

Professional expenses (CA, doctors, consultants)

Tips to Maximize Your OD-FD Facility

Borrow Only When Needed – Lower interest cost.

Repay Early – Interest is calculated daily.

Review OD Account Regularly – Avoid unused limits with charges.

Negotiate Rates – Large FDs can get better OD loan interest rates.

FAQs

Q1: What does overdraft mean in business? It’s a facility allowing businesses to withdraw more money than their account balance, up to a preset limit.

Q2: Can salaried employees apply for OD against FD? Yes, an overdraft facility for salaried employees is available if you have an FD with the bank.

Q3: Is OD better than a business loan? For short-term needs, yes — OD has faster approval, and interest is charged only on the used amount.

Q4: How fast can I get an OD limit? For existing FD holders, quick OD approval is possible — often same-day.

Q5: Can I apply for an unsecured business loan instead? Yes, you can apply for an unsecured business loan, but rates are higher than OD-FD.

Final Words

The overdraft facility for business is a game-changer for MSMEs, startups, and professionals who need instant working capital without making investments. With the new ability to spend via UPI, your OD account becomes as flexible as cash, without the hassle of loan paperwork.