Overdraft is a type of bank account where an extension of credit from a bank or a lending institution beyond the available balance in the current account can be made. Whereas the normal account cannot avail this feature.
Overdraft account is usually used by companies, business houses where there is a high volume of transactions. These parties can enter into an agreement with the bank on the terms of Overdraft account like maximum credit limit, maximum default time, interest rates etc depending upon their respective business and volumes.
Here is a small illustration on how overdraft works
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