Bank Overdraft

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Mr Hamilton

Economy & Finance Business

What is a Bank Overdraft? A bank overdraft is the limit you can borrow from an account. When repaying you must pay a service charge.

Advantages. Short term borrowing Interest is only paid on amounts borrowed Flexibility can change the amount borrowed within limits

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The obligation of a banker to honour his customer’s cheque is extinguished (not accepted or clear) on receipt of an order of the Court, known as the Garnishee order, issued under Order 21, Rule 46 of the Code of Civil Procedure, 1908. A court order instructing a garnishee (a bank) that funds held on behalf of a debtor (the judgement debtor) should not be released until directed by the court. The order may also instruct the bank to pay a given sum to the judgement creditor (the person to whom a debt is owed by the judgement debtor) from these funds. If the debtor fails to pay the debt owned by him to his creditor, the latter may apply to the court for the issue of a garnshee order on the banker of his debtor. The account of the customer with the banker, thus, becomes suspended and the banker is under an obligation not to make any payment thereof. The creditor at whose request the order is issued is called the judgment creditor; the debtor whose money is frozen is called judgment debtor and the banker who is the debtor of the judgment debtor is called the Garnishee. The Garnishee order is issued in two parts The court directs the banker to stop payment out of the account of the judgement-debtor ORDER NISHI After the bank file his explanation, if any, the court may issue the final order, called ORDER ABSOLUTE

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