CSEET · Business Communication · Common Business Terminologies
A customer's account shows a negative balance because the bank allowed withdrawals beyond the deposited amount under a pre-arranged limit. This facility is best known as:
The facility is an overdraft. It allows an account holder to withdraw more than the available balance up to a limit sanctioned in advance by the bank, with interest charged on the overdrawn amount. The other options are deposit or payment instruments, not borrowing facilities.
- AFixed deposit
- BOverdraftCorrect
- CRecurring deposit
- DDemand draft
Explanation
An overdraft lets an account holder withdraw more than the balance, up to a sanctioned limit, and interest is charged on the amount overdrawn. A fixed deposit and a recurring deposit are savings instruments. A demand draft is a prepaid payment instrument.
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