Overdraft is referred to as a short-term business loan that is offered to businesses for maintaining the working capital. The amount of the overdraft is treated as a short-term liability. The working capital cycle is determined by the finance required to complete one production cycle of production as per the estimated scale of operation.
1. Overdraft facilities shall fluctuate fully, and the balances shall be brought to zero at least once per operating cycle or, in any event, during the term of the credit line.
2. No excess above the approved marked limits unless with express authority of the competent authority.
3. The initial term of an Overdraft facility shall be marked for 12 months or lesser period but remain payable on demand.
4. The amount of the Overdraft facility shall be based on a percentage of current assets (A/R and/or inventory) that need to be financed and/or to cover deficit in the business operational cycle.
