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Difficulty: EasyBanking: Functions and Services to Trade

Complete the following statement regarding commercial banking services to trade by supplying the correct term for the blank space.

Answer:A short-term financial facility that enables a current account holder to withdraw funds exceeding their actual account balance up to a pre-approved limit is called a bank 【overdraft】.

Answer

Bank overdraft
A bank overdraft is a flexible short-term credit service granted by commercial banks exclusively to current account holders, permitting them to make payments or cash withdrawals beyond their available balance up to an agreed limit.

Step-by-Step Solution

1
Analyze the description of the banking service provided in the stem.
The service is characterized as a short-term financial arrangement available to current account holders to overdraw their balance up to a set ceiling.
Commercial banks provide this flexible credit line to assist traders in covering temporary working capital shortages.
2
Match the described feature to the standard commercial banking term.
The term is bank overdraft.
Unlike formal bank loans which are granted for fixed terms as lump sums, an overdraft directly allows the account balance to become negative up to an agreed limit.

Key Concept

Bank Overdraft Facility
Estimated Time:45s
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Topics

Banking: Functions and Services to Trade

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