Introduction

An overdraft facility is a credit facility offered by the bank to its customers, which entails allowing them to withdraw a pre-approved amount of money from their accounts with the bank in excess of the credit balance in the accounts. It is arranged in advance with the bank, which normally advises the customer of its revocable overdraft limit. And when money re-deposited to the account, it is first used to repay the overdrawn amount, and then any excess becomes the bank's liability.