Introduction of Indian Bank

Indian Bank is an Indian public sector bank, established in 1907 and headquartered in Chennai.
It serves over 100 million customers with 39,734 employees, 5,721 branches with 5,428 ATMs
and Cash deposit machines. Total business of the bank has touched ₹1,010,000 crore (US$130
billion) as on 31 March 2022.

The bank's Information systems and security processes are certified to meet ISO27001:2013
standard. It has overseas branches in Colombo and Singapore including Foreign Currency
Banking Units at Colombo and Jaffna. It has 227 overseas correspondent banks in 75 countries.
Since 1969, the Government of India has owned the bank. As per the announcement made by
the Indian Finance Minister Nirmala Sitharaman on 30 August 2019, Allahabad Bank merged
from 1 April 2020, making Indian Bank now the seventh largest bank in the country.

Early formation and expansion:

In the last quarter of 1906, Madras (now Chennai) was hit by the worst financial crisis the city
was ever to suffer.[1] Of the three best-known British commercial names in 19th-century
Madras, one crashed; a second had to be resurrected by a distress sale; and the third had to be
bailed out by a benevolent benefactor. Arbuthnot & Co, which failed, was considered the
soundest of the three. Parry's (now EID Parry), may have been the earliest of them and Binny
and Co.'s founders may have had the oldest associations with Madras, but it was Arbuthnot,
established in 1810s, that was the city's strongest commercial organization in the 19th Century.
A key figure in the bankruptcy case for Arbuthnot's was the Madras lawyer, V. Krishnaswamy
Iyer who founded the Indian bank which was an offshoot of nationalistic favor and the
Swadeshi movement, when the then British Arbuthnot Bank collapsed and the Indian Bank
emerged. Mr V. Krishnaswamy Iyer solicited the support of the Nagarathar Chettiars authored
by Mr. Ramasamy Chettiar, who was Annamalai Chettiar's elder brother. Sri V. Krishnaswamy
Iyer and Mr. Ramasamy Chettiar were one of the first directors of Indian Bank. Later on in 1915,
Mr. Annamalai Chettiar was inducted into the board of the Indian Bank. It commenced
operations on 15 August 1907 with its head office in Parry's Building, Parry Corner, Madras.

In 1932 IB opened a branch in Colombo. It opened its second branch in Ceylon in 1935 at Jaffna,
but closed it in 1939.IB next opened a branch in Rangoon, Burma, in late 1940s. Then in late
1941 IB opened branches in Singapore, Kuala Lumpur, Ipoh, and Penang. The exigencies of war
forced IB to close its Singapore and Malayan branches with months. The closing of the
Singapore branch resulted in little loss to IB; the loss of the branches in Malaya was much more
costly.
World War II resulted in further financial problems for IB and it was forced in 1942 to close a
number of its branches in India, and also its branch in Colombo.

Post Independence of India:

After the war, in 1947, it reopened its branch in Colombo.[2] Indian Bank also reopened its
branches in Burma, Malayan and Singapore, the last in 1962. The Burmese government
nationalised all foreign banks, including Indian Bank's branch, in 1963.

The 1960s saw IB expand domestically as it acquired Rayalaseema Bank (est. 1939), Mannargudi
Bank (est. 1932), Bank of Alagapuri, Salem Bank (est. 1925), and Trichy United Bank. Trichy
United was the result of the 1965 merger of Woraiyur Commercial Bank (est. 1948), the
Palakkarai Bank, and the Tennur Bank (est. 3 March 1947). These were all small banks with the
result that all the acquisitions added only about 38 branches to IB's network. Trichy United had
five branches and its acquisition in 1967 brought the number of IB branches up to 210.

Then on 19 July 1969 the Government of India nationalised 14 top banks, including Indian Bank.
One consequence of the nationalisation was that the Malaysian branches of nationalised Indian
banks were forbidden to continue to operate as branches of the parent. At the time, Indian
Bank had three branches, and Indian Overseas Bank, and United Commercial Bank had eight
between them. In 1973 the three established United Asian Bank Berhad to amalgamate and
take over their Malaysian operations. Post-nationalization, Indian Bank was left with only two
foreign branches, one in Colombo and the other in Singapore.

International expansion resumed in 1978 with IB becoming a technical adviser to PT Bank Rama
in Indonesia, the result of the merger of PT Bank Masyarakat and PT Bank Ramayana. Two years
later, IB, Bank of Baroda, and Union Bank of India established IUB International Finance, a
licensed deposit taker in Hong Kong. Each of the three banks took an equal share in the joint
venture; IB's Chairman became the first Chairman of IUB International Finance.In May 1980s, IB
also opened a foreign currency unit at its branch in Colombo.

In 1981 IB set up its first Regional Rural Bank, Sri Venkateswara Grameena Bank, in Chittoor.

Post nationalisation
In 1983, ethnic sectarian violence in the form of anti-Tamil riots resulted in the burning of
Indian Overseas Bank's branch in Colombo. Indian Bank, which may have had stronger ties to
the Sinhalese population, escaped unscathed.[6]

In 1990, Indian Bank rescued Bank of Tanjore (Bank of Thanjavur; est. 1901), with its 157
branches, based in Tamil Nadu.[7]
A multi-crore scam was exposed in 1992, when then chairman M. Gopalakrishnan lent ₹13
billion to small corporates and exporters from the south, which the borrowers never repaid.

Bank of Baroda bought out its partners in IUB International Finance in Hong Kong in 1998.
Apparently this was a response to regulatory changes following Hong Kong's reversion to
Chinese control. IUB became Bank of Baroda (Hong Kong), a restricted licence bank.

In June 2015, business of the bank crossed the Milestone Target of ₹3 lakh crore (US$38 billion).

Amalgamation:
On 30 August 2019, Finance Minister Nirmala Sitharaman announced that Allahabad Bank
would be merged with Indian bank. The proposed merger would create the seventh largest
public sector bank in the country with assets of ₹8.08 lakh crore (US$100 billion).[8][9] The
Union Cabinet approved the merger on 4 March 2020. Indian Bank assumed control of
Allahabad Bank on 1 April 2020.[10]

Keymilestone:
1907- The Bank was incorporated on 5 March 1907 under the Indian Companies Act, 1882 as
"Indian Bank Limited" and commenced operations on 15 August 1907.

1932 - The Bank opened its Colombo branch.

1941 - The Bank opened its Singapore branch

1962 - The Bank acquired the Royalaseema Bank, the Bank of Alagapuri, the Salem Bank, the
Mannargudi Bank and the Trichy United Bank

1969 - The Bank was nationalized. It was appointed as the lead bank for nine districts in the
States of Tamil Nadu, Andhra Pradesh and Kerala and the Union Territory of Pondicherry.

1970 - The Head Office of the Bank was shifted to its own building

1981 - The first regional rural bank sponsored by the Bank, Sri Venkateswara Grameena Bank,
was founded

1989 - Indbank Merchant Banking Services was incorporated as a subsidiary of the Bank 1990;
Bank of Thanjavur Limited (with 157 branches) was amalgamated

1991 - Ind Bank Housing Limited was incorporated as a subsidiary

1994 - Indfund Management Limited was established to manage the operations of Indian Bank
Mutual Fund

2006-07 - The Bank entered into a strategic alliance with Oriental Bank of Commerce and
Corporation Bank

2012 - Scheme of Amalgamation of M/s. lndfund Management Limited, a wholly owned

subsidiary of the Bank with Indian Bank, Indian Bank.

2020 - On 1 April 2020 Indian bank and the history of the bank now spreads over three
centuries.
 Chapter 1
INTRODUCTION OF BANK OVERDRAFT
Introduction on bank overdraft in Indian banking system :

Bank overdraft is a credit facility provided by banks to their customers, allowing them to
withdraw more money than the balance in their account, up to a certain limit.

The overdraft limit is determined by the bank based on the customer's creditworthiness and
financial history, and it can be reviewed periodically.

Indian banks offer two types of overdraft facilities: secured overdraft and unsecured overdraft.

Secured overdraft is backed by collateral, such as property, stocks, or bonds, and it usually has a
lower interest rate than unsecured overdraft.

Unsecured overdraft, on the other hand, does not require any collateral, but it has a higher
interest rate than secured overdraft.

Overdraft facilities are typically used by businesses to manage their cash flow and meet their
short-term financing needs.

Indian banks charge interest on the amount overdrawn, which is usually higher than the
interest charged on regular loans, and they may also levy additional fees and charges.

Banks can also impose penalties if the customer exceeds the overdraft limit or fails to repay the
overdrawn amount within the specified time frame.

Overdraft facilities can be revoked by the bank at any time, and the customer must repay the
overdrawn amount immediately.

Overall, overdraft facilities can be a useful tool for managing cash flow, but they should be used
responsibly and only when necessary to avoid incurring high interest costs and penalties.

Definition of bank overdraft :

A bank overdraft is a type of credit facility offered by banks to their customers, which allows
them to withdraw more money than they have in their bank accounts, up to a pre-approved
limit. In other words, an overdraft facility enables customers to borrow money from the bank
on an as-needed basis, without having to go through the formal process of applying for a loan.
An overdraft is essentially a form of short-term loan, which is designed to help customers
manage their cash flow and coer unexpected expenses. It is particularly useful for businesses
and individuals who experience fluctuations in their income or expenditure, as it provides them
with a flexible source of finance that can be used as and when required.

Overdraft facilities are typically offered to customers who have a good credit history and a
regular source of income. The amount of overdraft that can be provided to a customer depends
on various factors such as their credit score, income, and repayment history. Overdraft facilities
are generally subject to interest charges and fees, which are levied on the amount borrowed.

Types of Overdraft Facilities

There are several types of overdraft facilities that are offered by banks to their customers,
including:

Secured Overdraft Facility: This type of overdraft facility is secured against an asset, such as
property or securities. The interest rate for a secured overdraft is generally lower than that for
an unsecured overdraft, as the bank has collateral to fall back on if the borrower is unable to
repay the loan.

Unsecured Overdraft Facility: This type of overdraft facility is not secured against any asset and
is offered based on the borrower's creditworthiness. The interest rate for an unsecured
overdraft is generally higher than that for a secured overdraft, as the bank is taking on more
risk.

Personal Overdraft Facility: This type of overdraft facility is offered to individuals who require
extra cash to cover unexpected expenses or to manage their cash flow. The interest rate for a
personal overdraft is generally higher than that for a secured overdraft.

Business Overdraft Facility: This type of overdraft facility is offered to businesses to help them
manage their working capital requirements. The interest rate for a business overdraft is
generally lower than that for a personal overdraft.

Eligibility Criteria

To be eligible for an overdraft facility, customers must meet certain criteria set by the bank.
Some of the key factors that are taken into consideration by banks when determining eligibility
for an overdraft include:

Credit Score: A good credit score is one of the most important factors that banks consider when
assessing a customer's eligibility for an overdraft facility. A high credit score indicates that the
customer has a good track record of repaying their debts on time.
Income: Banks also consider the borrower's income when assessing their eligibility for an
overdraft facility. A regular source of income is important, as it provides the bank with
reassurance that the borrower will be able to repay the loan.

Repayment History: A borrower's repayment history is also taken into consideration by banks
when assessing their eligibility for an overdraft facility. A good repayment history indicates that
the borrower is responsible and reliable when it comes to repaying their debts.

Existing Debt: Banks also consider the borrower's existing debt when assessing their eligibility
for an overdraft facility. If the borrower already has a lot of debt, the bank may be reluctant to
provide them with additional credit.

Application Process

The application process for an overdraft facility is generally straightforward and can be
completed online or in person at the bank. The application typically requires the following
information:

Personal and Contact Information: The borrower's name, address, phone number, and email

Employment and Income Information: The borrower's employment status, income, and length
of employment.

Financial Information: The borrower's bank account details, including the account number and
the bank's name.

Purpose of Overdraft: The borrower needs to provide information on the purpose for which
they require the overdraft.

Documentation: The borrower must submit documentation to support their application, such
as their ID proof, address proof, income proof, bank statements, and tax returns.

Once the application has been submitted, the bank will review the borrower's creditworthiness
and determine their eligibility for an overdraft facility. If the application is approved, the bank
will set a credit limit and interest rate for the overdraft facility.

Interest Rates and Charges

Interest rates for overdraft facilities can vary depending on the type of facility and the
borrower's creditworthiness. In India, interest rates on overdraft facilities are generally linked
to the RBI's repo rate or the bank's Marginal Cost of Funds Based Lending Rate (MCLR).
Banks may also charge other fees and charges in addition to the interest rate, such as
processing fees, renewal fees, and prepayment charges. These charges can vary depending on
the bank and the type of overdraft facility.

Risks and Mitigation Strategies

Taking on an overdraft facility can carry certain risks, particularly if the borrower is not able to
manage their finances properly. Some of the risks associated with overdraft facilities include:

High-Interest Rates: Interest rates for overdraft facilities can be higher than those for other
types of credit, particularly for unsecured overdrafts. This can make the cost of borrowing more
expensive for borrowers.

Overborrowing: Borrowers may be tempted to borrow more than they can afford to repay,
particularly if they have a large credit limit. This can lead to them accumulating more debt than
they can manage.

Penalty Charges: Banks may charge penalty fees if the borrower exceeds their credit limit or
fails to make repayments on time. These charges can add up and make it harder for borrowers
to repay their debt.

To mitigate these risks, borrowers should have a clear plan for repaying their overdraft and
should avoid overborrowing. They should also keep track of their expenses and ensure that
they only borrow what they can afford to repay.

Conclusion

In conclusion, bank overdrafts are a useful source of credit for individuals and businesses in
India, providing a flexible way to manage cash flow and cover unexpected expenses. However,
borrowers should be aware of the risks associated with overdraft facilities and should take
steps to mitigate these risks. By understanding the eligibility criteria, application process,
interest rates, and risks associated with overdraft facilities, borrowers can make informed
decisions about whether or not to apply for an overdraft.

Bank overdraft is a facility offered by banks to their customers, where the customer can
withdraw more money than they have in their account, up to a pre-approved limit.

The overdraft limit is typically based on the customer's creditworthiness and income, and is
subject to the bank's discretion.
Overdraft is a short-term credit facility and usually carries a higher interest rate than regular
loans.

Overdraft is commonly used by businesses to manage their cash flows, as well as by individuals
to meet unexpected expenses or emergencies.

2. Purpose and importance of bank overdraft facilities

Bank overdraft facilities are short-term credit arrangements that allow customers to withdraw
more money from their accounts than they have in the account, up to a pre-approved limit.
This facility is typically offered to customers who have a good credit history and income, and
need access to funds for a short period. Bank overdraft facilities are important for both
individuals and businesses, as they provide a convenient and flexible way to manage their cash
flows.

Purpose of Bank Overdraft Facilities:

Meeting Short-term Financial Needs: The primary purpose of bank overdraft facilities is to help
customers meet their short-term financial needs. It is particularly useful when customers face
unexpected expenses or have a cash flow mismatch, where their expenses exceed their income
for a short period.

Smooth Cash Flow: Bank overdraft facilities help businesses to manage their cash flows
effectively. For example, a business may have to pay salaries to its employees before receiving
payments from its customers. In such a case, the business can use the overdraft facility to
bridge the gap in cash flow.

Working Capital Finance: Bank overdraft facilities can be used as a source of working capital
finance by businesses. Working capital is the amount of money required to run day-to-day
operations of a business. Overdraft facilities can help businesses to maintain sufficient working
capital to meet their operational expenses.

Financing Seasonal Businesses: Some businesses are seasonal in nature, and they have irregular
cash flows throughout the year. For example, a business that sells winter wear may experience
high sales during the winter months but low sales during the summer months. Overdraft
facilities can help such businesses to manage their cash flows during the low season.
Financing Business Expansion: Bank overdraft facilities can also be used to finance business
expansion. For example, a business may need to purchase new equipment or increase its
inventory to meet growing demand. Overdraft facilities can provide the necessary funds to
finance such expansion plans.

Importance of Bank Overdraft Facilities:

Flexibility: Bank overdraft facilities are flexible in nature, and customers can withdraw funds as
per their requirement. They can also repay the overdraft amount as and when they have
surplus funds available.

Quick Access to Funds: Bank overdraft facilities provide quick access to funds, which is
particularly important in emergency situations. Customers can withdraw funds immediately,
without having to wait for the approval of a loan application.

Cost-effective: Bank overdraft facilities are typically more cost-effective than other forms of
credit, such as credit cards or personal loans. They also do not have any prepayment penalty.

Customizable: Bank overdraft facilities can be customized to suit the specific needs of
customers. For example, the overdraft limit can be set based on the customer's
creditworthiness and income.

Boosts Credit Score: Proper utilization and timely repayment of bank overdraft facilities can
boost a customer's credit score. This, in turn, can help customers to access other forms of credit
in the future.

Conclusion:

In conclusion, bank overdraft facilities are important financial tools that provide customers with
a flexible and cost-effective way to manage their short-term financial needs. For businesses,
overdraft facilities can help to maintain working capital, manage cash flows, and finance
expansion plans. For individuals, overdraft facilities can help to meet unexpected expenses and
emergencies. Proper utilization and timely repayment of bank overdraft facilities can also help
to boost a customer's credit score, and increase their access to other forms of credit in the
future.
3. Describe how bank overdraft works in Indian banks
Introduction:

Bank overdraft is a popular credit facility offered by Indian banks to individuals and businesses
to meet their financial requirements. This credit facility allows the account holder to withdraw
more money from their bank account than the available balance, up to a certain limit. In this
project, we will discuss how bank overdraft works in Indian banks, the types of bank overdrafts
available, the procedure for applying for bank overdraft, repayment terms for bank overdrafts,
advantages and disadvantages of bank overdraft, and the importance of bank overdrafts in the
Indian banking system.

Types of Bank Overdraft:

In India, there are primarily two types of bank overdrafts available - secured and unsecured
overdrafts. Secured overdrafts require the borrower to provide collateral or security against the
credit facility, whereas unsecured overdrafts do not require any collateral or security.
Unsecured overdrafts are usually offered to individuals with a good credit score, whereas
secured overdrafts are offered to businesses or individuals with an asset that can be pledged as
collateral.

Procedure for Applying for Bank Overdraft:

To apply for a bank overdraft, an individual or business must first meet the eligibility criteria set
by the bank. This typically includes having a good credit score, a stable source of income, and a
healthy banking relationship with the bank. The borrower will also need to provide supporting
documents such as income tax returns, bank statements, and identity proof. Once the eligibility
criteria are met, the borrower can submit an application for a bank overdraft.

The bank will evaluate the application and determine the borrower's creditworthiness and
repayment capacity. The bank will also assess the risk associated with providing the overdraft
facility and may require the borrower to provide additional collateral or security.

Repayment of Bank Overdraft:

Bank overdrafts are short-term credit facilities, and the repayment terms vary depending on
the type of overdraft facility provided. Generally, the bank will charge interest on the amount
borrowed, and the borrower must repay the amount within the agreed repayment period. If
the borrower fails to repay the amount within the repayment period, the bank will charge
additional interest and penalties.

Advantages and Disadvantages of Bank Overdraft:

Bank overdrafts have several advantages, including flexible repayment terms, quick access to
funds, and lower interest rates compared to other credit facilities. Bank overdrafts are also easy
to manage, as the borrower can withdraw money from their account as and when required.
However, bank overdrafts also have some disadvantages, including high fees and charges, short
repayment periods, and the risk of accumulating debt.

Importance of Bank Overdrafts in the Indian Banking System:

Bank overdrafts play a crucial role in the Indian banking system, as they provide a quick and
convenient credit facility to individuals and businesses. Bank overdrafts are also an important
source of revenue for banks, as they charge interest and fees on the credit facility provided.
Additionally, bank overdrafts help businesses and individuals manage their cash flow and meet
their short-term financial requirements.

Conclusion:

In conclusion, bank overdrafts are an important credit facility offered by Indian banks to
individuals and businesses. Bank overdrafts provide quick and easy access to funds, but they
also come with risks and high fees. The type of bank overdraft provided and the repayment
terms vary depending on the borrower's creditworthiness and the bank's policies. Bank
overdrafts are an important source of revenue for banks and play a crucial role in the Indian
banking system.
 Chapter 2
UNDERSTANDING BANK OVERDRAFT
1.Bank overdraft and how they work
A bank overdraft occurs when you spend more money than you have available in your bank
account, and the bank allows the transaction to go through anyway. Essentially, an overdraft is
a loan from the bank to you, and you are expected to pay it back with interest.

Overdrafts are a common form of short-term borrowing, and they are often used to cover
unexpected expenses or to bridge the gap between paychecks. However, they can also be
expensive, as banks typically charge fees and high interest rates on overdraft balances.

How Bank Overdrafts Work

When you have an overdraft on your bank account, you have effectively borrowed money from
the bank. The amount of your overdraft is usually limited to a certain amount, which is based
on factors such as your credit score, income, and banking history. The bank will typically charge
interest on the amount of the overdraft, and they may also charge fees for each transaction
that exceeds your available balance.

There are two main types of overdrafts: arranged overdrafts and unarranged overdrafts.

Arranged Overdrafts

An arranged overdraft is when you agree with your bank in advance to allow your account to go
into overdraft up to a certain limit. This can be a convenient way to manage your finances, as it
allows you to borrow money when you need it without having to apply for a loan or credit card.
However, you will still be charged interest on the amount of the overdraft, and you may also be
charged fees for each transaction that exceeds your available balance.

Unarranged Overdrafts

An unarranged overdraft is when you spend more money than you have in your account
without first agreeing with your bank to allow your account to go into overdraft. This can
happen if you forget to keep track of your spending, or if you have an unexpected expense that
you can't cover with your available funds. Unarranged overdrafts can be very expensive, as
banks typically charge high fees and interest rates on these balances.
Overdraft Fees

Banks typically charge a variety of fees for overdrafts, including:

Arrangement fees: This is a one-time fee that banks charge for setting up an arranged overdraft.
Usage fees: These are fees that banks charge for each transaction that exceeds your available
balance, whether you have an arranged or unarranged overdraft.

Daily fees: These are fees that banks charge for each day that your account remains in overdraft.

Interest fees: These are fees that banks charge for the amount of money you have borrowed
through your overdraft. The interest rate charged on overdrafts is typically much higher than
the interest rate charged on other types of loans or credit cards.

It's important to read the terms and conditions of your bank account carefully to understand
the fees that your bank charges for overdrafts.

Overdraft Limits

Banks typically set a limit on the amount of money you can borrow through an overdraft. This
limit is based on factors such as your credit score, income, and banking history. If you have an
arranged overdraft, you will be able to borrow up to the limit that you have agreed with your
bank. If you have an unarranged overdraft, the amount you can borrow may be limited, or the
bank may not allow you to make any further transactions until you have paid off the overdraft
balance.

Overdrafts and Credit Scores

Your use of overdrafts can affect your credit score, as it is a form of borrowing that is reported
to credit reference agencies. If you frequently use your overdraft, or if you have an unarranged
overdraft, it can be

seen as a sign that you are struggling to manage your finances, and this could negatively impact
your credit score. On the other hand, if you use your overdraft responsibly and make payments
on time, it could have a positive effect on your credit score.

Managing Overdrafts

If you have an overdraft on your bank account, it's important to manage it carefully to avoid
expensive fees and charges. Here are some tips for managing overdrafts:

Keep track of your spending: Make sure you know how much money you have in your account
at all times, and avoid spending more than you have available.
Set up alerts: Many banks offer alerts that can be sent to your phone or email when your
account balance falls below a certain level. This can help you keep track of your spending and
avoid going into overdraft.

Negotiate with your bank: If you are struggling to pay off your overdraft, you may be able to
negotiate with your bank to reduce the fees or interest rates.

Consider alternative options: If you find that you are frequently using your overdraft, it may be
worth considering alternative options such as a personal loan or credit card, which may offer
lower interest rates than an overdraft.

Conclusion

In summary, a bank overdraft occurs when you spend more money than you have available in
your bank account, and the bank allows the transaction to go through anyway. Overdrafts can
be a convenient way to manage short-term expenses, but they can also be expensive, with high
fees and interest rates. It's important to manage your overdraft carefully, to avoid fees and to
protect your credit score. If you are struggling to manage your overdraft, consider speaking to
your bank or exploring alternative options such as personal loans or credit cards.

2.Types of bank overdraft available in India

Bank overdraft is a facility provided by banks to their customers to withdraw more money than
they have in their bank accounts. It is a type of credit facility that is used to meet short-term
financial needs. In India, there are various types of bank overdrafts available to the customers.
In this article, we will discuss the different types of bank overdrafts available in India.

Secured Overdraft: A secured overdraft is a type of overdraft that is secured against collateral
such as property, fixed deposit, shares, or other assets. This type of overdraft is preferred by
banks as it reduces their risk in case of default by the borrower. The interest rates for secured
overdrafts are lower than unsecured overdrafts.
Unsecured Overdraft: An unsecured overdraft is a type of overdraft that is not secured against
any collateral. This type of overdraft is granted based on the borrower's creditworthiness and
repayment capacity. The interest rates for unsecured overdrafts are higher than secured
overdrafts.

Cash Credit: Cash credit is a type of overdraft that is granted to businesses against their
inventory or receivables. The limit for cash credit is determined based on the borrower's
working capital requirement. The interest rate for cash credit is generally lower than other
types of overdrafts.

Demand Loan: A demand loan is a type of overdraft that is granted for a specific purpose and
has a fixed repayment period. The borrower has to repay the loan amount along with interest
within the specified time period. The interest rate for demand loans is generally higher than
other types of overdrafts.

Temporary Overdraft: A temporary overdraft is a type of overdraft that is granted for a short
period, usually up to 90 days. This type of overdraft is granted to individuals or businesses to
meet their short-term financial needs. The interest rate for temporary overdrafts is generally
higher than other types of overdrafts.

Clean Overdraft: A clean overdraft is a type of overdraft that is granted to individuals or

businesses without any collateral. The limit for clean overdrafts is determined based on the
borrower's creditworthiness and repayment capacity. The interest rate for clean overdrafts is
generally higher than secured overdrafts but lower than unsecured overdrafts.

Continuous Overdraft: A continuous overdraft is a type of overdraft that is granted to

individuals or businesses for a long-term period, usually up to a year. The limit for continuous
overdrafts is determined based on the borrower's creditworthiness and repayment capacity.
The interest rate for continuous overdrafts is generally higher than other types of overdrafts.

In conclusion, there are various types of bank overdrafts available in India to meet the financial
needs of individuals and businesses. The choice of overdraft depends on the borrower's
requirement and repayment capacity. It is important to compare the interest rates and terms
and conditions of different overdrafts before choosing one.
3.The eligibility criteria for obtaining bank overdraft
An overdraft facility is a type of loan provided by banks to their customers to allow them to
withdraw more money than they have in their account. It can be a helpful financial tool when
managed correctly, but it also carries certain risks. In India, banks offer overdraft facilities to
both individuals and businesses, subject to certain eligibility criteria. In this article, we will
discuss the eligibility criteria for obtaining a bank overdraft in India.

1.Credit score: Your credit score is one of the most important eligibility criteria for obtaining a
bank overdraft in India. It is a three-digit number that indicates your creditworthiness and
reflects your credit history. A good credit score is generally considered to be above 750. If your
credit score is below this threshold, you may find it difficult to obtain an overdraft facility from
banks.

2.Income: Banks also consider your income while evaluating your eligibility for an overdraft
facility. A higher income usually indicates a higher repayment capacity and makes you a more
attractive borrower. Banks typically require proof of income in the form of salary slips, tax
returns, or other documents.

3.Business turnover: For businesses, banks may also consider the turnover of the company
while evaluating their eligibility for an overdraft facility. A higher turnover generally indicates a
higher repayment capacity and makes the business a more attractive borrower. Banks typically
require proof of turnover in the form of audited financial statements.

4.Collateral: Banks may require collateral for overdraft facilities, especially for higher amounts.
Collateral can be in the form of assets such as property, shares, or other securities. The value of
the collateral is usually evaluated by the bank, and the amount of the overdraft facility is
determined based on the value of the collateral.

5.Relationship with the bank: A long-standing relationship with the bank can also be a factor in
determining your eligibility for an overdraft facility. If you have a good track record with the
bank and have maintained a good relationship, you may find it easier to obtain an overdraft
facility.

6.Age: Banks also consider the age of the borrower while evaluating their eligibility for an
overdraft facility. Generally, banks prefer borrowers who are in the age range of 21 to 65 years,
as they are considered to be more stable and have a longer repayment period.

Purpose of the overdraft: Banks may also consider the purpose of the overdraft facility while
evaluating your eligibility. For example, if you are using the overdraft facility for business
purposes, the bank may require proof of business expenses and the expected revenue
generation.

7.Other factors: Other factors that banks may consider while evaluating your eligibility for an
overdraft facility include your employment status, residential stability, and existing debt
obligations.

In conclusion, the eligibility criteria for obtaining a bank overdraft in India includes a good credit
score, income, business turnover (for businesses), collateral, relationship with the bank, age,
purpose of the overdraft, and other factors. It is important to keep these factors in mind while
applying for an overdraft facility and to ensure that you meet the eligibility criteria before
applying.
 Chapter 3
PROCEDURE FOR APPLYING BANK OVERDRAFT
1.The process of applying for a bank overdraft in an Indian Bank
Applying for a bank overdraft in an Indian bank typically involves the following steps:

Determine eligibility: The first step in applying for a bank overdraft is to determine whether you
meet the eligibility criteria. This can vary depending on the bank, but generally includes factors
such as credit score, income level, and relationship with the bank.

1.Gather documents: Once you have determined that you are eligible for an overdraft, you will
need to gather the necessary documents. This may include identification documents such as a
passport or Aadhaar card, proof of income such as salary slips or tax returns, and bank
statements.

2.Choose a bank: You will need to choose a bank to apply for the overdraft with. It is important
to compare the overdraft facilities offered by different banks to ensure that you are getting the
best deal.

3 Fill out application form: Once you have chosen a bank, you will need to fill out an application
form. This will typically include personal and financial information, as well as details about the
overdraft facility you are applying for.

4.Submit application: After filling out the application form, you will need to submit it to the
bank along with the necessary documents. Some banks may allow you to submit your
application online, while others may require you to visit a branch in person.

5.Wait for approval: The bank will review your application and determine whether to approve
your overdraft request. This can take anywhere from a few days to a few weeks, depending on
the bank's processing times.

6.Sign agreement: If your application is approved, you will need to sign an agreement with the
bank outlining the terms and conditions of the overdraft facility. This will include details such as
the interest rate, repayment schedule, and any fees or charges associated with the overdraft.

7.Access funds: Once you have signed the agreement, you will be able to access the funds from
your overdraft facility. It is important to use these funds responsibly and to repay them on time
to avoid any additional fees or charges.

8.Repay overdraft: As you use the funds from your overdraft facility, you will need to make
repayments to the bank according to the repayment schedule outlined in the agreement.
Failure to make timely repayments can result in additional fees or charges, and can also
negatively impact your credit score.
9.Manage overdraft: It is important to manage your overdraft facility carefully to ensure that
you do not exceed your credit limit or incur excessive fees or charges. This may involve
monitoring your account balance, setting up automatic repayments, or adjusting your spending
habits to avoid overspending.

10.Renew overdraft: If you need to continue using your overdraft facility after the initial term
has ended, you may need to renew your agreement with the bank. This will typically involve
submitting a new application and providing updated documentation to ensure that you still
meet the bank's eligibility criteria.

Overall, the process of applying for a bank overdraft in an Indian bank can be complex and
time-consuming. It is important to do your research and compare the overdraft facilities
offered by different banks to ensure that you are getting the best deal. Additionally, it is
important to use your overdraft facility responsibly and to manage your finances carefully to
avoid incurring excessive fees or charges.

2.The documents required to apply for a bank overdraft

1.Application form: The first and most important document required for applying for a bank
overdraft is the application form. This form can be obtained from the bank's website or from
the nearest bank branch.

2.KYC documents: The applicant must submit the Know Your Customer (KYC) documents, which
include identity proof, address proof, and PAN card.

3.Business plan: If the overdraft is being sought for a business, the applicant must provide a
detailed business plan along with the application form.

4.Financial statements: The applicant must also submit financial statements such as balance
sheet, profit and loss statement, and cash flow statement. These documents help the bank
determine the financial health of the applicant and the repayment capacity.

5.Income tax returns: The bank may also ask for the applicant's income tax returns for the past
three years. This helps the bank determine the applicant's income stability and repayment
capacity.

6.Bank statements: The applicant must provide bank statements for the past six months. This
helps the bank assess the applicant's financial behavior and repayment capacity.
7.Collateral documents: If the overdraft is secured, the applicant must submit collateral
documents such as property documents or security agreements.

8.Other documents: The bank may also ask for other documents such as business registration
certificates, partnership deed, and NOC from other lenders.

9.Credit score report: The bank may also require the applicant to provide a credit score report
to evaluate their creditworthiness. The report provides information about the applicant's credit
history, including their past loans and repayment behavior.

10.Letter of Intent: In case the overdraft is being applied for the purpose of purchasing
inventory or assets, the bank may require a Letter of Intent (LOI) from the supplier, which
outlines the details of the transaction.

11.Business registration documents: If the overdraft is being applied for by a business, the
applicant must provide the necessary business registration documents, such as the Certificate
of Incorporation, Memorandum of Association, Articles of Association, and any other relevant
document.

12.Proforma Invoice: If the overdraft is being applied for the purpose of importing goods, the
bank may require a proforma invoice from the supplier, which provides the details of the goods
being imported and their value.

13.Security documents: If the overdraft is being taken against collateral, the applicant must
provide the necessary security documents, such as the property documents or security
agreements.

14.Guarantor documents: In case the overdraft requires a guarantor, the applicant must
provide the necessary guarantor documents, such as their identity proof, address proof, and
PAN card.

These are some of the important documents that are required when applying for a bank
overdraft in India. It's always advisable to check with the bank regarding the specific documents
required and to ensure that all the necessary documents are submitted along with the
application to avoid any delays in the processing of the overdraft application.
3.The factors that banks consider when approving bank overdrafts
An overdraft facility is a credit facility that allows a customer to withdraw more money than the
balance in their bank account, up to a pre-determined limit. The approval of an overdraft
facility is based on several factors, including the creditworthiness of the borrower and their
ability to repay the overdraft amount.

Here are the key factors that Indian banks consider when approving bank overdrafts:

1.Credit score: A credit score is a numerical representation of a borrower's creditworthiness.

Banks check the credit score of the borrower to determine their creditworthiness and likelihood
of repayment.

2.Credit history: Banks review the borrower's credit history, including their repayment history,
loan defaults, and other financial liabilities, to assess their creditworthiness.

3.Income and employment status: Banks evaluate the borrower's income and employment
status to determine their repayment capacity. Borrowers with a stable income and employment
status are more likely to get approval for an overdraft facility.

4.Account relationship: Banks consider the length of the borrower's relationship with the bank
and their account activity to determine their creditworthiness. A long-standing relationship
with the bank and good account activity can increase the chances of getting approval for an
overdraft facility.

5.Collateral: Banks may require collateral or security for overdraft facilities to minimize their
risk. Collateral can include property, investments, or other assets that can be seized in the
event of non-repayment.

6.Overdraft limit: The bank sets an overdraft limit based on the borrower's creditworthiness
and repayment capacity. The overdraft limit is the maximum amount that the borrower can
withdraw from their account.

7.Interest rate: Banks charge interest on the overdraft amount, which can vary depending on
the borrower's creditworthiness and the bank's policies.

8.In summary, banks in the Indian banking system consider factors such as credit score, credit
history, income and employment status, account relationship, collateral, overdraft limit, and
interest rate when approving bank overdrafts. These factors help banks assess the borrower's
creditworthiness and repayment capacity, ensuring that the overdraft facility is granted to
eligible borrowers who can repay the borrowed amount within the specified time frame.
 Chapter 4
REPAYMENT OF BANK OVERDRAFT
1.The repayment terms for bank overdrafts in Indian Bank
In India, a bank overdraft facility is a credit product offered by banks to their customers to help
them meet their short-term financial requirements. It is a type of credit where a customer is
allowed to withdraw more money than they have in their bank account, up to a pre-determined
limit. Overdrafts are typically more expensive than other forms of credit, such as loans, but they
are useful for managing cash flow in the short term.

Repayment of overdrafts in Indian banks can be done in several ways. The terms and conditions
for repayment depend on the bank's policies and the agreement between the bank and the
customer. Here are some of the common repayment terms for bank overdrafts in India:

1.Interest Rate:The interest rate for overdrafts is generally higher than other credit products,
and it can vary based on the bank's policies and the customer's creditworthiness. The interest
rate is typically charged on the amount of overdraft utilized, and the customer must pay
interest on the amount borrowed until the outstanding amount is repaid.

2.Repayment Period:

The repayment period for an overdraft is generally shorter than other credit products. It usually
ranges from 12 months to 36 months, but it can vary based on the bank's policies and the
customer's creditworthiness. Banks may also require customers to repay the overdraft in a
lump sum or in installments.

3.Collateral:

Overdrafts can be either secured or unsecured. Banks may require customers to provide
collateral, such as property or shares, to secure the overdraft. In case the customer fails to
repay the overdraft, the bank can recover the outstanding amount by selling the collateral.

4.Repayment Schedule:

Banks may require customers to repay the overdraft in a lump sum or in installments. In the
case of installments, the customer must pay a fixed amount of money each month until the
overdraft is fully repaid. The repayment schedule can vary based on the bank's policies and the
customer's creditworthiness.

5.Penalty for Non-Payment:

Banks may charge a penalty if the customer fails to repay the overdraft on time. The penalty
can be a fixed amount or a percentage of the outstanding amount, and it can vary based on the
bank's policies and the customer's creditworthiness.
In conclusion, the repayment terms for bank overdrafts in India depend on the bank's policies
and the customer's creditworthiness. Customers must carefully read and understand the terms
and conditions before availing of an overdraft facility to avoid any unpleasant surprises in the
future.

2. The consequences of not repaying a bank overdraft on time

An overdraft is a facility provided by banks that allows their customers to withdraw more
money from their accounts than they have in their balance, subject to a pre-approved limit.
Overdrafts are a form of short-term credit and are generally used to meet immediate financial
needs.

However, failing to repay the overdraft on time can have several consequences, both financial
and non-financial, including:

1.Increased interest and penalties: Banks typically charge a high rate of interest on overdrafts,
and failing to repay the overdraft on time can result in an increase in the interest rate, as well
as additional penalties and fees.

2.Negative impact on credit score: Failure to repay an overdraft on time can negatively impact
the customer's credit score, making it more difficult for them to obtain credit in the future.

3.Legal action: Banks may initiate legal action against customers who fail to repay their
overdrafts on time. This can result in the seizure of assets or legal action to recover the debt.

4.Blacklisting: If the customer's account remains in default for an extended period, the bank
may blacklist them, which could prevent them from obtaining any credit from any bank or
financial institution in the future.

5.Reputation damage: Failure to repay an overdraft on time can damage the customer's
reputation and make it difficult for them to conduct financial transactions in the future.

In summary, not repaying a bank overdraft on time can have severe financial and non-financial
consequences, and it is essential for customers to manage their finances responsibly and
ensure that they repay their debts on time to avoid these consequences.
3.The options available for individuals and businesseses who are unable to
repay their bank overdrafts in time
Overdraft facilities are commonly used by individuals and businesses to meet their short-term
financial needs. However, if you are unable to repay the overdraft in time, you may face
financial difficulties and potentially damage your credit score. Below are some options available
to manage your bank overdrafts in India:

1.Negotiate with your bank: If you are facing difficulties in repaying your overdraft, it
isadvisable to contact your bank and explain your situation. In some cases, the bank may be
willing to offer a repayment plan or a temporary reduction in interest rates to help you manage
your debt. However, the bank is not obligated to offer any such concessions.

2.Restructuring of loans: The Reserve Bank of India (RBI) has issued guidelines for the
restructuring of loans to help borrowers who are facing financial difficulties. The guidelines
cover loans that are in default but not classified as non-performing assets (NPAs) as of March 1,
2020. Under these guidelines, banks may offer a one-time restructuring of the loan, which
includes a moratorium on payment of interest and principal, and an extension of the
repayment period.

3.Debt settlement: Debt settlement involves negotiating with your creditor to settle your debt
for less than the amount you owe. This option is only available if your bank is willing to
negotiate with you. Debt settlement can impact your credit score negatively, so it is important
to consider the potential consequences before opting for this option.

4.Refinancing: Refinancing involves taking out a new loan to pay off your existing debt. This
option can help you consolidate your debt and may result in lower interest rates or longer
repayment periods. However, it is important to compare the costs of refinancing with your
current debt to ensure that it is a viable option.

5.Bankruptcy: Bankruptcy is a legal process where individuals or businesses can be discharged

from their debts. In India, bankruptcy proceedings are governed by the Insolvency and
Bankruptcy Code, 2016. Bankruptcy should only be considered as a last resort, as it can have
long-term consequences, including damage to your credit score and difficulty in accessing credit
in the future.

In conclusion, if you are unable to repay your bank overdraft in time, it is important to take
action as soon as possible to avoid further financial difficulties. You may want to explore the
options listed above and seek professional advice to determine the best course of action for
your individual circumstances.
 Chapter 5
CONCLUSION ON BANK OVERDRAFT
The key points covered in the project of bank overdraft :
I need a brief notes on the summarise the key points covered in the project of bank overdraft in
Indian Bank aspect it should be in paragraph

The project on bank overdraft in Indian banks covers several key points. First, it discusses the
concept of an overdraft facility and how it works. An overdraft facility is a credit facility
provided by a bank that allows its customers to withdraw more money than they have in their
account, up to a pre-determined limit.

The project then goes on to explain the regulations governing overdraft facilities in Indian banks.
The Reserve Bank of India (RBI) has laid down guidelines on the usage of overdraft facilities by
banks. These guidelines aim to ensure that overdrafts are used in a responsible manner, and
that banks do not expose themselves to undue risk.

The project also highlights some of the risks associated with overdraft facilities, both for the
bank and the customer. Banks face the risk of default by the borrower, which can result in
losses for the bank. Customers, on the other hand, face the risk of falling into a debt trap if they
are not able to repay the overdraft amount in a timely manner.

The project then discusses the benefits of overdraft facilities for customers. Overdraft facilities
can provide a quick source of funds for short-term needs, and can be less expensive than other
forms of credit, such as credit cards or personal loans.

Finally, the project provides some recommendations for banks to manage their overdraft
facilities effectively. These include performing a thorough credit assessment of customers
before providing an overdraft facility, monitoring overdraft usage regularly, and implementing
measures to mitigate the risk of default by borrowers.

Overall, the project provides a comprehensive overview of the concept of bank overdrafts in
Indian banks, their regulations, risks, benefits, and best practices for effective management.

Based on the research and analysis conducted on the bank overdraft project in the Indian
banking sector, it can be concluded that bank overdrafts have become an essential tool for
many individuals and businesses in India to manage their short-term financial needs.
In recent years, banks in India have significantly expanded their overdraft facilities to cater to
the growing demand from customers. This has been driven by factors such as the increasing
number of SMEs and startups in the country, the rise in personal loans, and the need for easy
access to credit in emergencies.

The Indian government has also taken various initiatives to promote the use of overdrafts, such
as the Pradhan Mantri Jan Dhan Yojana (PMJDY) scheme, which aims to provide basic banking
facilities to all households in the country, including overdrafts. Additionally, the Reserve Bank of
India (RBI) has implemented various policies to regulate the use of overdrafts and ensure that
banks comply with the necessary regulations.

Despite the many benefits of bank overdrafts, there are also several risks associated with them.
These include the potential for customers to accumulate significant debt if they misuse the
facility, the risk of default by borrowers, and the potential for banks to suffer losses due to non-
performing assets.

To mitigate these risks, banks in India have implemented various measures, such as stringent
credit risk assessments, borrower monitoring systems, and collateral requirements. However,
there is still a need for continued monitoring and regulation by the RBI to ensure that banks
maintain appropriate standards in their overdraft facilities.

Overall, bank overdrafts have become an integral part of the Indian banking sector, providing
customers with easy access to credit and helping to drive economic growth. However, it is
important for both banks and customers to exercise caution and prudence in the use of
overdrafts to ensure that the benefits of this facility are maximized while minimizing the
associated risks.