Overdraft Facility For Pensioners: How Does It Work?

By | January 1, 2019

With a cluster of overdraft facilities to select from, making the right choice can be tough. Read on to find out about the eligibility, terms & conditions and the fine print before you apply for one.

Overdraft Facility For Pensioners: How Does It Work?

Overdraft is a facility that allows lenders to withdraw from their existing bank account even when the balance is zero. In its functioning, it is quite similar to a Personal Loan. However, unlike a Personal Loan, the rate of interest on overdraft is calculated only on the amount withdrawn. The overdraft facility is unique and can prove to be useful in addressing sudden and unplanned financial situations.

While this short-term credit facility already has a massive fan base among salaried employees, pensioners are in close pursuit.

How Can You Get Approved For An Overdraft Facility?

An overdraft facility can be availed by pensioners on a secured basis. As a primary condition, pensioners will be required to pledge collateral in the form of an asset.

Additional Reading: Latest Updates About The Atal Pension Yojana

What Is The Rate Of Interest For Pensioners?

The rate of interest varies from one bank to another. While some banks calculate the interest on the amount withdrawn, others charge interest based on the reducing balance method. The sanctioned overdraft limit and the actual interest charged will also be influenced by the nature of the asset offered as collateral.

Additional Reading: Can Senior Citizens Get A Home Loan?

Can A Pensioner Avail An Overdraft Facility From Any Bank?

The overdraft facility is available for only those pensioners who have either a pension account or a Fixed Deposit account with their bank.

Is An Overdraft Better Than A Loan?

If you are looking to meet a short-term financial requirement, then an overdraft could be the right instrument for you. Unlike a Personal Loan, you are not charged on the entire sanctioned amount. The banks charge interest only on the amount you utilised. For instance, if the overdraft sanction limit is Rs 50,000 and you spend a total of Rs 25,000, you will be required to pay interest only on the Rs 25,000 you utilised.

However, if you plan to settle your dues over a long-term period, Personal Loans are your best bet.

Does An Overdraft Impact Your Credit Score?

Your Credit Score gets affected every time you miss a payment or fail to clear your dues. As long as you remember to pay off the borrowed amount in time, your Credit Score will not be impacted.

Not sure about your Credit Score? Use this simple tool to figure it out.

Where Can A Pensioner Find The Best Overdraft Facility?

A handful of banks are offering overdraft facilities to pensioners at concessional rates. Some of the best ones are listed below.

State Bank Of India


Single/Joint account holder of SBI’s Term Deposit Receipt (TDR)/Special Term Deposit Receipt (STDR)/ RD / including NRE/NRO/RFC and FCNR(B) Deposits can avail this loan.

Amount Of Loan

Minimum Amount: Rs 25,000

Maximum Amount: Rs 5 Crore

Repayment Period

The maximum repayment period has been capped at 5 years against STDR/e-STDR and 3 years against TDR/e-TDR respectively for overdraft availed online.

Central Bank Of India


Pensioners/family pensioners having their pension account at any of its branches.

Maximum Loan Amount

The maximum amount is capped at Rs 10 lakh.

 Repayment Period

The entire amount with interest has to be paid back within 60 months.

UCO Bank


Pensioners/family pensioners (with co-borrowers) having their pension account at any of its branches.

Maximum Loan Amount

Pensioners having a provision of family pension can avail up to a maximum amount of Rs 10 lakh.

Repayment Period

The entire amount with interest has to be paid in a maximum of 48 monthly instalments.

Additional Reading: Top 5 Personal Loans For Pensioners

Syndicate Bank


Pensioners having their pension account with Syndicate Bank and receiving a regular monthly pension from Central / State Governments/Public Sector Undertakings/Units, defence establishments and other government or quasi-government institutions.

Maximum Loan Amount

The maximum amount is capped at Rs 10 lakh.

 Repayment Period

The entire amount with interest has to be paid in a maximum of 72 monthly instalments.

Despite being a great problem-solver for short-term requirements, overdrafts have their drawbacks. Either the sanctioned amount or the time provided for payback might not be suitable for your specific needs.

A Personal Loan could be a great alternative for long-term needs. It’s twice as effective as an overdraft and you can take your time to pay it off. There is absolutely no rush. Care to explore some offers?

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Category: Retirement planning UCN

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