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Over Draft Facility Can Availed in Different Way
There are many type of Over Draft Facility given by Banks to Business Men for there Business
Traders and manufacturers prefer availing the Overdraft facility against the stock. The value of the stock of goods is assessed by the bank or lending institute and against the same overdraft limit is sanctioned. The amount is gradually settled against the amount of sale of the stock. The value of stock is assessed by physical verification and from the purchase invoices and is ensured that it is fully paid for.
2) Over Draft Against Receivables:
Any kind of authenticated receivables like Bills Receivable, Rent Receivables can be pledged as security for the overdrafts. Is known as Overdraft against Receivables .The proceeds of all such receivables are routed through the overdraft account and immediately settled against the overdrawn amount. However drawings can be allowed against fresh receivables. Thus the amount of receivables remains as a continuing security for all drawings. The bank or lending institute ensures that no other loan or obligation is availed by the customer pledging the same receivables. The amount of receivables and the time required to honor or materialize the receivables are the key factors to determine the limit of overdraft.
3) Over Draft Against SKR:
Protection of assets including securities of an individual done by banks, against a receipt known as safe keeping receipt. This is also known as International Depositary Receipt (IDR) The securities backing the receipt remain in the custody of the issuing bank or a correspondent. Safe Keeping Receipt (SKR) guaranteed by client's bank and backed by bankable asset.
Safe Keeping Receipt (SKR) is financial instrument that can be used for many purposes by providing security over assets, with the consent of the issuer or his bank , these instruments have been used frequently in conjunction with Bank Guarantees, Government Bonds, Precious Metals, Real Estate and have assisting in funding numerous government supported projects around the world. Such transactions are always undertaken with a high level of confidentiality.
4) Over Draft Against Property:
To Avail Overdraft against Property you have to mortgage your Property with the bank or lending institute to get Overdraft against Property facility. The value of the property generally appreciates hence they are preferred as securities. On defaulting on the settlement of overdrawn amount the bank or lending institute may sell the property to recover the overdrawn amount with interest thereon and balance, if any, is returned to the customer.
5) Over Draft Against Car:
Car is also a security accepted by the bank or the lending institute to provide overdraft facility. In this case the amount of overdraft is determined from the purchase invoice and if the car is purchased in resale, the value of car is determined by the approved valuer appointed by the bank or lending institute to determine the limit of overdraft. The car or vehicles depreciate by value and hence the loan amount is determined by keeping a margin as decided by the bank.
6) Over Draft Against Gold:
Gold can be immediately converted into cash and has always increasing value. This makes the gold one of the most preferred security to obtain the overdraft facility. Banks or lending institutes assess the cost of gold offered by the customer as security and determine the limit of overdraft. Once the gold is assessed by the bank or lending institute the overdraft the sanctioning process can be completed quickly.
7) Over Draft Against Pledge of Securities:
A customer pledges a collateral security for example shares, mutual fund units, bonds or any fixed asset to the bank or lending institute to obtain overdraft facility. The bank can sell or liquidate these pledged securities to cover up the overdrawn amount and the interest thereon if a customer fails to settle the obligation.
Pledge of security is a very important aspect for obtaining the Overdraft Facility and determines the extent to which the amount can be overdrawn by the client.
8) Over Draft Against Insurance Policy:
Insurance Policy by Public or Private Insurers is another type of pledged security against which Overdraft facility can be obtained. The bank or lending institute determines the actual amount of premium paid on the insurance policy and the amount on maturity to set the Overdraft limit. In case of the death of customer the overdrawn amount is recovered from the claim settlement on the policy from the Insurance Company.
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