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How an overdraft facility works

Since you are borrowing against an existing relationship, deposit, or asset rather than beginning from scratch, obtaining an overdraft facility is much faster and requires less paperwork than a term loan. When you apply to Bikesh Finserv, it operates as follows:

• Step 1: Check Eligibility: Provide your basic information, including your income, banking relationship, kind of overdraft (against salary, FD, property, or business cash flow), and whether you are a self-employed professional, salaried individual, or business owner. You receive an eligibility assessment based on this in a matter of minutes. Since the bank already has your account or deposit information, this stage is frequently instantaneous for salary-based or FD-backed overdrafts.
• Step 2: Submit Documents: Share your KYC documents, bank statements from the previous three to six months, your salary slips or ITR, and, if the overdraft is secured, your property documents or FD receipt. To avoid any shocks later, our team examines everything and identifies any holes up front.
• Step 3: Sanction & Limit Approval: Before approving your overdraft limit, the lender checks your CIBIL score, banking behavior, and repayment history. This cap is typically a proportion of your FD value or a multiple of your pay for salary or FD-backed overdrafts. The limit for a company or property-backed overdraft is usually valid for 12 months, renewable annually, and is determined by your property valuation, turnover, or banking relationship.
• Step 4: Security & Verification (for Secured OD): The title, appraisal, and ownership records of the property are examined both legally and technically when you take out an overdraft against it. The bank only places a lien on your deposit if it's against an FD; your FD remains intact and continues to accrue interest. This phase is typically completely omitted for unsecured overdrafts (such as salary or digital MSME OD), making activation very instantaneous.
• Step 5: Activation & Usage: After approval, your overdraft account is activated. For pre-approved or FD-linked facilities, this usually happens instantaneously; for property-backed limitations, it usually takes a few working days. You can then use checks, fund transfers, or your associated current account to take out money as needed, up to the amount that has been authorized. Instead of paying interest on the whole authorized limit, you only pay interest on the amount you actually use and for the number of days you use it. It is perfect for handling short-term cash flow gaps without the hassle of a traditional loan structure because there is no fixed EMI; you just repay and utilize the money as a revolving credit line.

How Overdraft Interest Rate is Determined

What Decides Your Overdraft Interest Rate?

Overdraft interest rates are not fixed at a flat number; they depend on several factors. Understanding these helps you negotiate better and choose the right lender.

• Type of Security: This is the most important component. Since the property serves as collateral, overdrafts against FD are priced closest to your FD rate (typically 1%-2% over it); overdrafts against property have moderate rates; and unsecured overdrafts against salary or company cash flow have the highest rates because the bank assumes greater risk.
• Your CIBIL Score & Banking Relationship: You usually get a reduced rate if you have a clean transaction history with the lending bank and a high credit score. A lower sanctioned limit or a higher rate is typically associated with a new or thin credit file.
• RBI Repo Rate: The repo-linked loan rate is followed by the majority of floating-rate overdraft facilities, particularly those associated with real estate or business assets. Your overdraft rate is adjusted when the RBI modifies the repo rate.
• Income or Business Stability: Businesses with consistent turnover and banking vintage, as well as salaried applicants with regular pay credits, typically receive better rates than those with erratic income.

Indicative Interest Rates (2026)

The rate on your overdraft depends on the lender, your credit profile, collateral, and facility size. Here is a current comparison:

NOTE: Interest rates are indicative and subject to change. Contact Bikesh Finserv for current rates. Overdraft interest typically starts from 9.50% p.a. and is charged on utilised balances.

Unlike most intermediaries, Bikesh Finserv offers Up to 100% cashback on processing fees which saves you thousands upfront.

Overdraft Processing Fee & Other Charges

Charges You Should Know Before Taking an Overdraft

Beyond interest, an overdraft may include processing fees, annual renewal charges, documentation costs, and collateral valuation fees. Budget these upfront so your effective cost stays clear.

Tax Treatment of Overdraft Interest

Interest paid on a business overdraft or cash credit used for business purposes is generally deductible as a business expense under the Income Tax Act, subject to documentation and applicable rules. Consult your CA for treatment specific to your entity type and use of funds.

Eligibility for Getting an Overdraft Facility

Who Can Apply for an Overdraft?

Here are the eligibility criteria for an overdraft facility for salaried individuals and self-employed/business applicants:

Key Factors That Improve Your Eligibility

• Higher credit score (700+)
• Regular, stable income or consistent business turnover
• Existing banking relationship with the lender (salary account or current account)
• Low existing debt obligations (FOIR under 50%)
• Clean repayment history on past loans, credit cards, or existing overdraft accounts

Can I get an overdraft without a CIBIL score?

For a secured overdraft, it's challenging but not impossible. Because an overdraft against FD or property is backed by collateral, some banks will prolong the facility even if you have a short credit history, depending more on the security's value than just your credit score. However, without a solid credit history, it is considerably more difficult to obtain an unsecured overdraft against pay or business cash flow because the bank has no backup security in case of default. In either scenario, you'll probably have to pay a higher interest rate and a smaller sanctioned limit. Prior to applying for an unsecured overdraft facility, it's usually a good idea to establish credit through a credit card or modest loan.

Types of Overdraft Facilities

Which Overdraft Facility Do You Need?

• Business Overdraft / Cash Credit: Revolving working-capital facility for traders and manufacturers. Drawing power is often linked to inventory and receivables.
• Current Account Overdraft: Linked to your current account so you can overdraw within a sanctioned limit and clear dues as collections come in.
• Secured Overdraft: Backed by fixed deposits, property, or marketable securities — typically lower interest and higher limits.
• Salary / Professional Overdraft: Short-term liquidity for salaried professionals and consultants, often sized as a multiple of monthly income.

Benefits of Overdraft Facilities

Key Advantages of Taking an Overdraft

• Pay Interest Only on What You Use: Unlike a term loan, you are not charged interest on the unused portion of your sanctioned limit.
• Revolving Liquidity: Repay anytime and reuse the limit — ideal for seasonal businesses and unpredictable cash cycles.
• Faster Access Than Fresh Term Loans: Once sanctioned, funds are available instantly through cheque, NEFT, or debit card linked to the account.
• Supports Growth Without New Paperwork Each Time: Annual renewals keep the facility active; enhancements can raise limits as turnover grows.
• Complements Term Loans: Use OD for short-term needs and term loans for capex — cleaner cash-flow planning for MSMEs.
• Builds Banking Relationship: A well-managed OD / CC track record strengthens future loan and enhancement approvals.
• Flexible Repayment: No rigid EMI schedule on pure OD — repay as surplus cash arrives while staying within limit.

Why Overdraft Applications Get Rejected

Common Reasons for Overdraft Rejection

Understanding rejection reasons helps you avoid them and reapply with confidence.

• Weak Cash-Flow Evidence: Inconsistent bank credits or declining GST turnover reduce lender confidence in repayment ability.
• High Existing Debt Obligations: If FOIR is already stretched by term-loan EMIs, lenders may reject additional revolving credit.
• Incomplete Stock / Receivable Data: Missing or stale stock statements and debtors ageing can block CC / OD drawing-power approval.
• Low Credit Score: Personal or commercial bureau scores below lender norms often lead to rejection or high pricing.
• Inadequate Collateral: For secured OD, insufficient FD margin or disputed property title can stall sanction.
• Too Many Recent Credit Enquiries: Multiple hard inquiries in a short span can temporarily hurt approval odds.

What to do if rejected?

Improve cash-flow documentation, clear existing overdues, strengthen collateral, and wait 3–6 months before reapplying if bureau issues were involved. We help identify the exact gap and match you with a suitable lender.

Government & MSME Support Schemes

CGTMSE & Working Capital Support for MSMEs

Eligible micro and small enterprises may access collateral-free or partially guaranteed working-capital facilities under schemes such as CGTMSE, subject to lender participation and scheme guidelines. These can complement or structure overdraft-style limits for qualifying businesses.

Who may benefit?

MSMEs with eligible activity codes, acceptable credit profiles, and compliant documentation can explore guaranteed facilities where full collateral is not available.

Key Benefits

Reduced collateral pressure, structured working-capital access, and potential to combine term and revolving facilities for growth — always subject to current scheme norms and lender policy.

Important Conditions

• Scheme eligibility and guarantee cover depend on lender and government guidelines in force.
• Accurate GST, ITR, and KYC records are typically mandatory.
• Misuse of funds or diversion from declared business purpose can lead to recall of the facility.