If you are considering opening a new bank account, it’s advisable to inquire about the availability of an overdraft facility. Similarly, if you already have an account, you should inquire about this feature from your bank. An overdraft (OD) facility can be immensely beneficial during times of financial difficulty. Individuals with Jan Dhan accounts are eligible for this facility. Let’s delve into what an overdraft facility entails and how you can access it.
An overdraft is essentially a type of loan provided by the bank. However, what sets it apart is that you can access this facility instantly without the need to visit the bank, fill out forms, or wait for approval. You can withdraw money from any ATM, although the maximum amount available to you is predetermined.
Access Emergency Funds
The specific terms of overdrafts vary from one bank to another. For instance, individuals with Jan Dhan accounts may be eligible for up to Rs 10,000 under the overdraft facility. This amount can be withdrawn directly from the ATM without the need for a positive balance in the account.
Even if the account has a zero balance, the individual can withdraw Rs 10,000 and is required to repay this amount along with interest. It’s worth noting that overdraft facilities are not limited to Rs 10,000; many banks offer higher overdraft limits, but maintaining a minimum balance may be required for such accounts.
Interest rates on overdrafts for Jan Dhan accounts typically range from 2 to 12 percent, depending on the policies of different banks. However, the interest rate will not exceed 12 percent. If a bank provides an overdraft facility of Rs 50,000 and a customer withdraws Rs 10,000, interest will only be charged on the withdrawn amount, not on the entire overdraft limit. It is advisable to utilize overdrafts only in emergencies to avoid unnecessary interest charges.
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