Dropline Overdraft

A dropline overdraft (DLOD) is a type of credit facility where a bank provides a fixed credit limit that gradually decreases each month over a set period. This limit reduces gradually each month during the loan tenure. Interest is charged only on the amount you actually use, not on the entire limit. You can repay or deposit funds anytime, which lowers your outstanding balance.

Let’s say, your dropline OD is ₹1 Lakh for 12 months. Your limit reduces by ₹8,333 every month. Your available limit becomes ₹91,667 after one month. You can repay fully or partially. This depends on your cash flow.

You can explore the key features of a dropline overdraft facility.

• Quick Fund Access: You access funds immediately up to a pre-sanctioned limit. This helps you manage urgent financial needs.

• Secured and Unsecured Credit: The facility is available in secured and unsecured forms. Unsecured overdrafts do not require collateral. These are based on your financial history.

• Interest Charged Monthly: Interest is calculated daily on the amount you use. It is charged monthly. You do not pay interest on the full sanctioned limit.

• Flexible Repayment Tenure: Repayment tenure typically ranges from 1 to 15 years. Your available credit limit reduces evenly every month throughout the tenure.

• Partial or Full Repayment Anytime: You can repay any amount at any time. This lowers your outstanding balance. This frees your available limit.

• High Credit Limits: Credit limits can be as high as ₹15 Crores. This depends on your profile and bank policies.

• No Annual Renewal Fees: There are no yearly renewal charges. However, a one-time processing fee applies in most cases.

• Funds Credit to Current Account: Only your current account is credited with funds from this facility.

• Hybrid of Loan and Overdraft: It combines the flexibility of an overdraft with the discipline of a term loan.

Here are the entities that are eligible to apply for a dropline overdraft facility:

• Entrepreneurs

• Sole proprietorships

• Self-employed professionals

• Partnership firms

• Private company

The documents required for a dropline overdraft facility are generally as follows and align closely with your list, with some clarifications and minor details added for completeness:

Common Documents

• PAN card

• Filled application form

• Passport-sized photographs of applicants and co-applicants

• Identity proof: Aadhaar card, voter ID, driving licence, passport

• Address proof: Passport, voter ID, utility bills (electricity/telephone)

For Self-Employed Individuals / Sole Proprietorship

• GST returns of the last year

• Audited Income Tax Returns (ITR) for the last 3 years

• Bank statements for the previous year

• Profit and Loss (P&L) statements and balance sheets for the last 3 years

• Details of existing loans, if any

For Partnership Firms / Private Limited Companies

• GST returns of the last year

• Details of existing loans, if any

• Partnership deed for partnership firms

• Bank statement for the last 1 year of the borrower’s account

• Certificate of Incorporation for private limited companies

A reference to all T&C necessarily refers to the terms of the partners regarding pre-approved offers and loan processing time, amongst other conditions.