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A dropline overdraft facility allows a borrower to overdraw funds from their current account up to a limit that the financial institution sets. An overdraft is an affordable form of borrowing since you only need to pay interest on the amount that you withdraw.

 

This withdrawal limit of the dropline overdraft facility eventually reduces every month from the original limit fixed by the lender. The interest that you need to pay is calculated on a daily basis, and you need to pay it at the end of the month. 

 

For example, suppose you avail of a dropline overdraft of ₹1 Lakh with a tenure of 12 months. In this case, the overdraft limit will be reduced by 1,00,000/12, which equals ₹8,333. 

 

Therefore, the overdraft limit available to you for the next month will be ₹91,667. Also, you can make full or partial repayments, as per your affordability and preference. 

Features of Dropline Overdraft

The dropline overdraft facility comes with a number of features and benefits. Here are some of them:

Quick Fund Access

With the dropline overdraft facility, you enjoy quick access to funds up to a certain limit that is pre-sanctioned by the financial institution. This allows you to meet time-sensitive financial obligatREAD MOREions of the business effectively READ LESS

Secured and Unsecured Credit

Financial institutions provide dropline overdraft facilities in secured and unsecured forms

Repayment Tenure

Most financial institutions offer the flexibility to choose repayment tenures as per your convenience and affordability. The repayment tenure for this facility may be short, or it can go up to a few yeREAD MOREars READ LESS

Popular Banks/NBFCs Offering the Dropline Overdraft Facility

Here are some of the popular financial institutions that offer the dropline overdraft facility:

  • Aditya Birla Finance

  • AU Small Finance Bank

  • Axis Bank

  • Bajaj Finance

  • HDFC Bank

  • ICICI Bank

  • Kotak Mahindra Bank

  • SBI

  • Tata Capital

  • YES Bank

  • RBL Bank

Eligible Entities for Dropline Overdraft

Here are the entities that are eligible to avail of a dropline overdraft facility:

  • Entrepreneurs

  • Sole proprietorships

  • Self-employed professionals

  • Partnership firms

  • Private limited companies 

 

The eligibility criteria vary with financial institutions. It depends on the following factors:

  • Type of business

  • Business turnover

  • Financial stability

  • Business vintage

  • Property ownership

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Documents Required for Dropline Overdraft

Check out the documents that a business needs to submit to avail of the dropline overdraft facility:

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

For Self-Employed Individuals/Sole Proprietorships:

  • GST returns of the last year

  • Audited ITR of the last 3 year

  • Bank statements for the previous year

  • 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 of partnership firms

  • Last 1 year’s bank statement of the borrower’s account 

  • Certificate of Incorporation for Private Limited Companies

FAQs on Dropline Overdraft

What are the types of dropline overdrafts?

A dropline overdraft facility is available in secured and unsecured forms. You need to provide collateral for a secured overdraft. Conversely, you do not need to provide collateral in case of unsecured overdraft.

When do I need to pay the interest for the dropline overdraft facility?

You need to pay the interest for the dropline overdraft facility at the end of the month.

What is the maximum amount that I can get through a dropline overdraft?

The financial institution decides the maximum limit you can get. It depends on various factors like the business type, the turnover, creditworthiness of the business, business vintage, etc.

Can self-employed individuals avail of the dropline overdraft facility?

Collateral requirements depend on the financial institution you Yes, self-employed individuals are eligible to avail of the dropline overdraft facility.

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