How to apply for an Overdraft facility — complete 2026 guide

The OD product is one of the most under-used facilities in Indian retail banking. RBI's Customer Service Reports show that fewer than 18% of salary-account holders eligible for a pre-approved Salary OD ever activate it — most reach for personal loans instead, paying 3-6 percentage points more for the same money plus a long-tail commitment. For business borrowers the numbers are similar: cash-credit / OD facilities save real money over fixed-EMI working-capital loans because you pay interest only on the days you use the limit.

An Overdraft is a credit facility where the bank lets you spend / withdraw beyond your account balance, up to a sanctioned limit. Mechanics:

• Limit — sanctioned amount the bank will let you go negative to.
• Drawing power — for asset-backed OD (LAP / FD / Securities), the actual usable amount = limit minus margin requirement at the moment.
• Interest — calculated daily on utilised balance (not the limit). Charged monthly.
• Repayment — no fixed EMI. Repay anytime; the limit “refreshes” as you repay.
• Tenure — usually a 12-month renewable facility; LAP-OD can be 5-15 years.

Difference from a personal loan: a personal loan is a lump-sum disbursal with EMI on the entire principal; an OD is a revolving credit line with interest only on what you use.

Statutory and regulatory anchors:

• RBI Master Direction — Overdraft Facility (revised 2024) — defines OD products, drawing power computation, default treatment, classification.
• Banking Regulation Act, 1949 — basis for bank lending.
• PMJDY Operational Guidelines — Jan Dhan account OD (₹10,000 after 6 months of active operation).
• RBI Master Direction — KYC — eKYC for activation.
• RBI Circular on Risk Management & Inter-Bank Dealings — OD against securities (margin maintenance).
• CGTMSE Act, 2000 — collateral-free OD up to ₹10 lakh in MSE cases (when bundled into MSME OD/CC).

• Limit: typically 2-3x net monthly salary. Some banks (HDFC, ICICI, Axis, IndusInd) offer up to 4x for premium salary segments.
• Eligibility: salary credited in the same bank for 3-6 consecutive months minimum; CIBIL ≥ 700.
• Documents: zero — pre-approved limits show up on net banking dashboard. For non-pre-approved cases: salary slips (3 months) + ITR + employer letter.
• Rate: 10-18% pa (unsecured, similar to personal loan but on used balance only).
• Tenure: 12-month renewable; auto-renews on continued salary credit.
• Best for: short-term cash flow gaps, emergencies, festival spends.

• Limit: 75-90% of FD value. Most banks: 90%.
• Eligibility: any FD held in your name (including jointly).
• Documents: bank's OD-against-FD form + FD receipt (digital is fine).
• Rate: FD rate + 1-2 percentage points — currently roughly 7.5-9% pa. Among the cheapest credit available.
• Tenure: equal to FD tenure; FD continues to earn interest.
• Best for: short cash needs without breaking the FD (which would lose accrued interest + premature-withdrawal penalty).

• Limit: 50-65% of fair market value of residential / commercial property; banks valuate via empanelled valuers.
• Eligibility: property in your name (or co-applicant's, with both joining the OD); clear title; no existing mortgage.
• Loan-to-value (LTV): higher for self-occupied residential, lower for commercial / land.
• Documents: title deeds + property tax receipt + sale deed + sanctioned plan + occupancy certificate (if applicable) + valuation report + insurance.
• Rate: 9-13% pa.
• Tenure: 5-15 years (some banks up to 20).
• Ticket size: ₹10 lakh to ₹5 crore+ typical.
• Best for: large, long-term funding needs (business expansion, child's education abroad, debt consolidation) at far lower rates than unsecured.

• Limit: 50% on listed equity shares (RBI cap), 60% on mutual fund units, 75% on listed bonds and debentures, 90% on government securities.
• Eligibility: demat account in your name; securities marked as lien in favour of the bank.
• Documents: demat statement + KYC + bank's LAS form + lien-marking authorisation.
• Rate: 9-13% pa.
• Margin maintenance: if market value falls, you must top up either cash or securities. Bank can sell pledged securities on default.
• Best for: investors who don't want to sell holdings (and trigger capital gains) but need liquidity.

• Limit: ₹10,000 collateral-free.
• Eligibility: active PMJDY account, at least 6 months of operation with regular transactions, Aadhaar-seeded, RuPay debit card active.
• Documents: none beyond standard PMJDY KYC; activation at branch / through BC (Business Correspondent).
• Rate: typically 12% pa (varies by bank).
• Best for: financial-inclusion segment; emergency household needs.

• Salary OD: check your bank's net banking dashboard first (“Loans / Overdraft” or “Pre-approved offers”). HDFC, ICICI, Axis, Kotak, SBI, IndusInd surface pre-approved limits in-app. Activation is usually 2-tap with OTP.
• OD against FD: net banking (“Loans against deposits”) OR branch with the FD receipt.
• OD against Property (LAP): branch only; requires property valuation and legal vetting. Apply at SBI, BoB, PNB, HDFC, ICICI, Axis, LIC HFL, Bajaj Finserv.
• OD against Securities: through your demat broker's bank partnership (Zerodha-IDFC First, ICICI Direct-ICICI Bank, Kotak Securities-Kotak Bank, etc.) or directly at the bank.
• PMJDY OD: at the PSU bank branch where you hold the Jan Dhan account, or through the village-level Business Correspondent.

• Need ₹10k-50k for 2-4 weeks → Salary OD (if pre-approved) OR PMJDY OD (if eligible).
• Have a chunky FD and need cash without breaking it → OD against FD. Cheapest.
• Need ₹10 lakh+ for 1-5 years → LAP OD. Long tenure, low rate.
• Have a sizeable demat portfolio you don't want to sell → OD against Securities.

• Login to net banking → “Loans / Overdraft” → “Pre-approved offers”.
• For salary OD: limit usually visible without any application.
• For OD against own FD: visible under “Loan against deposit”.
• Take the pre-approved route if available — it skips most documentation.

• Online (for Salary OD / OD against FD / OD against own securities) or branch (for LAP, large LAS).
• Fill: limit requested, tenure, drawing-account linkage, repayment instruction, KYC re-confirmation.
• Bureau consent for CIBIL pull (for Salary / Personal OD).

• Salary OD: salary slips (3 months), ITR (1 year), employer letter — only if not pre-approved.
• OD against FD: FD receipt(s), lien-marking form.
• LAP: title deeds, sale deed, sanctioned plan, occupancy certificate, latest property tax receipt, valuation report (bank's valuer), property insurance, NOC from society if applicable, encumbrance certificate (last 13 / 30 years depending on state), legal opinion (bank's panel lawyer).
• OD against Securities: demat statement (CDSL/NSDL), holding statement, KYC, lien-marking POA.

• Salary / FD OD: instant to 24 hours (digital activation).
• LAP OD: 15-30 working days (legal + valuation + credit committee).
• LAS OD: 3-7 working days (lien marking with depository).
• PMJDY OD: 1-3 working days at the branch.

• Sanction letter recites: limit, rate, tenure, drawing power formula, margin requirement, default clauses, processing fee.
• OD Agreement + Hypothecation / Lien deed (for asset-backed OD).
• DPN (Demand Promissory Note) for unsecured OD.
• For LAP: equitable mortgage created by deposit of title deeds at the bank's nominated SARFAESI office.

• The OD limit is set on a separate ledger linked to your savings / current account.
• When you go negative, the system draws from OD; when you deposit, OD utilisation reduces.
• Daily interest accrual; debited monthly on the OD account on a fixed date (typically last working day).

• Most OD facilities are 12-month renewable.
• Bank does an annual review — verifies salary continuation, FD validity, property insurance, etc.
• Renewal fee (0.25-1% of limit) typical; sometimes waived for clean accounts.

+-----------------------------------+------------------------------------------+
| Salary OD                         | Limit: 2-3x net monthly salary           |
|                                   | Rate: 10-18% pa on used balance          |
|                                   | Tenure: 12-month renewable               |
+-----------------------------------+------------------------------------------+
| OD against FD                     | Limit: 75-90% of FD value                |
|                                   | Rate: FD rate + 1-2 pp = ~7.5-9% pa      |
|                                   | Tenure: equal to FD tenure               |
+-----------------------------------+------------------------------------------+
| OD against Property (LAP)         | LTV: 50-65% of fair market value         |
|                                   | Rate: 9-13% pa                           |
|                                   | Tenure: 5-15 years                       |
|                                   | Ticket: ₹10 lakh – ₹5 crore+             |
+-----------------------------------+------------------------------------------+
| OD against listed equity shares   | LTV: up to 50% (RBI cap)                 |
| (LAS)                             | Rate: 9-13% pa                           |
+-----------------------------------+------------------------------------------+
| OD against mutual fund units      | LTV: up to 60%                           |
+-----------------------------------+------------------------------------------+
| OD against listed bonds /         | LTV: up to 75%                           |
| debentures                        |                                          |
+-----------------------------------+------------------------------------------+
| OD against government securities  | LTV: up to 90%                           |
+-----------------------------------+------------------------------------------+
| Jan Dhan (PMJDY) OD               | ₹10,000 after 6 months active operation  |
|                                   | Rate: ~12% pa (collateral-free)          |
+-----------------------------------+------------------------------------------+
| Processing fee                    | NIL (Salary OD pre-approved) to 1% (LAP) |
+-----------------------------------+------------------------------------------+
| Annual renewal fee                | 0.25% – 1% of limit                      |
+-----------------------------------+------------------------------------------+
| Pre-payment / closure penalty     | NIL on floating-rate OD (RBI rule)       |
+-----------------------------------+------------------------------------------+
| Margin call (LAS, if mkt value    | Top-up required typically within 7 days  |
| falls)                            | else bank can sell pledged securities    |
+-----------------------------------+------------------------------------------+
| RTI for PSU bank PIO              | ₹10 by IPO; BPL = free                   |
+-----------------------------------+------------------------------------------+

• Salary not received in same bank for 3-6 months yet. No salary OD until threshold is met. Wait, or shift salary credit and re-apply after 3 months.
• CIBIL < 700. For unsecured Salary OD, this is a hard floor at most banks. Improve score (clear card dues, pay EMIs on time, reduce utilisation) and re-apply after 3-6 months.
• Property valuation lower than expected for LAP. Banks use empanelled valuers; their fair market value is conservative. Either accept the lower limit, or seek a second valuation (bank's panel only).
• Title deeds incomplete for LAP — missing parent deeds, gap in chain of title, encumbrance found in the last 13/30-year EC. Resolve via legal opinion / rectification deed before re-applying.
• Existing loans raising your DTI (Debt-to-Income) ratio above bank's threshold (typically 50-55%) — pay down existing dues or reduce the OD ask.
• KYC mismatch — Aadhaar address vs PAN address vs bank record. Fix on UIDAI portal first.
• FD already lien-marked elsewhere — can't double-lien the same FD. Either close the existing lien or use a different FD.
• Shares pledged elsewhere — same constraint on demat lien.
• Property under home-loan mortgage — most banks won't do LAP on a property already mortgaged for home loan (with the same or other bank). Pay down the home loan first or look at top-up loan instead.
• PMJDY account dormant — irregular transactions or no Aadhaar seeding. Reactivate, transact regularly for 3-6 months, then re-apply.
• Income proof gaps for self-employed Salary OD applicants — file ITR for 2 years first.

• Get the dealing officer's name + designation + email in writing.
• Submit a written status request after 7-15 working days from application.

• Each bank publishes a Principal Nodal Officer for grievance redressal. Find on the bank's grievance page.
• 30-day SLA under RBI's Customer Service framework.

• RBI Integrated Ombudsman Scheme 2021 — covers all scheduled commercial banks.
• File at https://cms.rbi.org.in.
• Helpline: 14448.
• No fee. Award binding on the bank up to ₹30 lakh.

• For systemic complaints (e.g., a bank consistently denying Salary OD activation despite eligibility) — file with RBI's Department of Regulation through CMS.

• https://pgportal.gov.in → “Department of Financial Services” or “Reserve Bank of India”.
• Higher visibility, routed to a senior officer.

This is where the public-vs-private distinction matters again.

RTI helps here when:

• Your OD application is at a PSU bank (SBI, BoB, PNB, Canara, Union, BoI, Indian Bank, Central Bank, etc.) — public authorities under §2(h) RTI Act 2005. Ask the PIO of the relevant Circle / Zonal office for: status of your OD file, dealing officer name + designation, internal note recording the OD limit computation (especially for LAP — how the valuation was arrived at), audit trail of credit-committee decision, written reasons for delay/rejection, copy of property valuation report (you have a right to your own file).
• RTI to PIO Reserve Bank of India for: bank-wise OD / LAP grievance statistics, regulatory clarifications on a specific RBI Master Direction provision, PMJDY OD enrolment data.
• RTI to PIO Department of Financial Services for systemic questions on PMJDY OD performance, scheme-level rejection rates.

RTI does NOT help here when:

• Your OD application is at a private bank (HDFC, ICICI, Axis, Kotak, IndusInd, RBL, Yes, Federal, Bandhan, etc.) or an NBFC (Bajaj Finserv, Tata Capital, Aditya Birla Capital, etc.). These are not “public authorities” under §2(h) RTI Act and the Supreme Court has consistently held so. PIOs cannot compel them.
• For private banks / NBFCs, the binding route is RBIOS / NB-IO at https://cms.rbi.org.in (helpline 14448) — that order is binding on them (with appeal to RBI).
• For interpretation (“is this OD interest rate fair?”) — opinion, not record. Use Ombudsman.
• For pre-emptive (“the OD is not yet rejected, I want internal notes”) — fishing; PIOs refuse under §8(1)(j) RTI Act.

For the RTI procedure see RTI in 12 simple steps.

Q. What's the difference between Overdraft and Cash Credit (CC)?
Largely a product-naming distinction. Cash Credit is typically a working-capital facility for businesses against hypothecation of stock and book debts; Overdraft is broader and can be against various securities (FD / property / shares) or unsecured (Salary OD). Both are revolving credit lines with daily interest on used balance.

Q. Is the interest on OD tax-deductible?
For personal-use OD (Salary OD for household needs) — no, not deductible. For business-use OD (CC/OD on a current account) — yes, treat as finance cost under §37 of the Income Tax Act. For OD against securities used to buy more securities — interest may be deductible under §57 against the income from those securities (consult a CA).

Q. The salary credit stops because I changed jobs. What happens to my Salary OD?
The OD enters review at next renewal cycle. If salary doesn't resume in the same account within the bank's threshold (typically 60-90 days), the bank can recall the limit. Pay down outstanding to zero and the limit can be kept dormant for a while; it'll be cancelled at annual review.

Q. Can I take a LAP OD on agricultural land?
Generally no. Most banks only accept residential or commercial property in urban / semi-urban municipal limits. Agricultural land has separate (and more restricted) financing schemes through agri-priority-sector lending.

Q. My LAP OD has been sanctioned but the property valuation is lower than I expected. Can I challenge it?
You can request a second valuation by another empanelled valuer (some banks allow this; fee around ₹3,000-₹5,000). You generally cannot force a valuation higher than the bank's panel — the bank's risk policy governs the LTV. If you genuinely believe the valuation is in error (wrong sq ft, wrong locality classification), submit documented evidence in writing.

Q. Can a freelancer / consultant get a Salary-style OD without a corporate salary?
Some banks now offer Personal OD against ITR for self-employed professionals — typically at private banks (Axis, Kotak, IndusInd) and a few PSU banks. Limit based on average ITR income. Rates higher than Salary OD (12-20% pa).

Q. What happens if I don't repay my OD by the renewal date?
The OD becomes a non-performing asset (NPA) if utilisation continues without repayment / interest service for 90 days. The bank classifies as substandard, charges penal interest (additional 2% pa typical), and can invoke recovery — including against pledged collateral (FD / shares / property under SARFAESI for LAP). Repay or restructure well before this point.

Q. The bank is forcing me to take insurance with my LAP OD. Is that legal?
Property insurance for the mortgaged property is legitimately required — protects the bank's collateral. Life insurance as a separate add-on is not mandatory and you can refuse — RBI / IRDAI have repeatedly clarified that mis-selling of insurance bundled with loans is a violation. If the bank insists, complain to RBIOS.

Q. Can I get an OD on my Jan Dhan account from Day 1?
No. PMJDY OD requires at least 6 months of active operation with regular transactions, Aadhaar seeding and RuPay debit card activation. After that, ₹10,000 is collateral-free.

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• All Indian government helplines — one master directory
• RTI forms + state-wise fee chart

Last reviewed: 26 April 2026 by RTI Wiki editorial team. OD interest rates, LTV caps and PMJDY thresholds are revised periodically by RBI — verify on rbi.org.in or write to admin@bighelpers.in if you spot a stale figure.