How can you avail salary overdraft facility?
For availing the facility the salary account holder needs to separately apply at the concerned bank branch or can download the form for applying for salary overdraft available on the bank's website whenever required. The salary account holder can also apply for the facility at the time of opening the salary account with the bank.
For processing your request for the facility, some banks levy one-time processing charges of Rs. 500 - Rs. 1,000. Also, for renewing, banks levy renewal fee that can be either a fixed amount or a % of the overdraft credit.
How the facility works?
The overdraft credit extended by banks under the salary overdraft facility is linked to the take home monthly salary. Some banks allow maximum credit equivalent to the take home salary while certain others offer upto thrice the value of your monthly salary. So, in case your take home salary for a month amounts to Rs. 50,000/-, you can expect to get a maximum of Rs. 1.5 lakhs as overdraft credit against your salary account.
For instance, Union Bank of India exclusively to its Union Super Salary Account holders (USSA) offers an overdraft credit upto 90% of the take home salary of the previous month subject to a maximum of Rs. 25,000/-. UCO Bank to its UCO Veer-Shakti account holders that can be exclusively maintained by retired or serving Indian Armed forces or Para Military forces extends a minimum salary overdraft facility of Rs. 10,000/- and a maximum of monthly net take home salary/ pension or Rs. 1Lakh, whichever is lower.
What is the interest rate charged for salary overdraft facility?
Interest on salary overdraft facility ranges between 1.3%-2.5% per month and is computed on the amount that is accessed by the borrower for the time the money is put to use. While interest is calculated on a daily basis, the salary account holder availing the facility is required to pay it on a month on month basis. Some of the banks allow you to repay a minimum sum for the borrowed amount.
So, as it is the facility is extended only to some select salary account holders and moreover the interest charges are pretty high, so only in case of dire need after confirming your eligibility for the facility with the bank, you can avail salary overdraft.