Amount available

In the overdraft facility, the amount is not fixed for specific categories of business. The figure is different for each case, depending upon the financial position of an entity and the funds it requires. This is again a short-term facility, so the conditions will keep on changing, resulting in a change in the overdraft limit. Every bank will offer a minimum and a maximum amount as an overdraft limit.

The overdraft limit involves a range that can go from something like Rs 50,000 to Rs 2.5 crore. This might seem to be a very wide margin but with the nature of activities being varied there is a need for such a large margin. There is also the question of requirement because for a small business the amount required might just be around Rs one lakh but larger companies would need several lakhs for the same purpose.

The extent and kind of security provided by the borrower will also determine the overdraft limit for him/her. The right quantity is the figure that takes care of the needs of a business; keeping an extra limit too will help in meeting any cash crunch that arises.