Business StudiesCBSE Class 11 · Business Services

Bank Accounts, Overdraft, Cash Credit and E-banking Class 11 Business Studies

Updated 17 October 2026 · Fact-checked

Banks offer deposit accounts (savings, current, recurring, fixed and multiple option) and services such as the bank draft, the overdraft and cash credit. An overdraft lets a current account holder draw above the balance up to a limit, with interest only on the amount overdrawn; cash credit is a limit against stock and receivables for continuing working capital. E-banking offers NEFT, RTGS, UPI and cards.

Notice that the account goes below zero but stays inside the bank limit, and interest is charged only on the overdrawn 30,000.

Illustration drawn for QuestionBuddy.

Understand Bank Accounts, Bank Draft, Overdraft, Cash Credit and E-banking (CBSE 11)

Types of deposit accounts.

Account	Purpose	Key features
Savings	Encourage saving by individuals	Interest paid; cheque book and ATM card; not meant for business
Current	Businesses with many daily transactions	Generally no interest; unlimited deposits and withdrawals; overdraft possible; higher minimum balance
Recurring deposit	Regular saving of a fixed sum	Fixed amount every month for a fixed period; interest higher than savings; lump sum at maturity
Fixed deposit	Investing a lump sum for a fixed period	Higher interest; no withdrawal before maturity without penalty; loan can be taken against it
Multiple option deposit	Combines savings and fixed deposit	Surplus above a limit moves automatically to fixed deposit (auto-sweep)

Simple interest on a fixed deposit = principal x rate x years. For example, 1,00,000 at 7% for 2 years earns 14,000.

Bank draft (demand draft). An instrument issued by a bank directing its own branch or another bank to pay a sum to a named person. The buyer pays the amount plus a commission. It is a safe and certain way of sending money because the bank, not the buyer, promises payment.

Bank overdraft. A facility, usually on a current account, to withdraw more than the balance up to a sanctioned limit for a short period. Interest is charged only on the amount actually overdrawn and for the days used. It suits temporary shortfalls.

Cash credit. A limit sanctioned by the bank against the security of current assets (stock, receivables); the borrower draws as needed and pays interest on the amount used. It is a main source of working capital.

Basis	Overdraft	Cash credit
Account	Current account holders	Separate cash credit account
Security	Often personal standing or small security	Hypothecation or pledge of stock and receivables
Period	Short, occasional	Ongoing, usually renewed yearly

E-banking. Banking through the internet, mobile phones and other electronic media. Services include ATMs, PoS machines, credit and debit cards and electronic fund transfer. NEFT settles in batches; RTGS settles immediately and is used for large amounts; IMPS is instant round the clock; UPI transfers instantly using a virtual address or QR code; USSD works from basic phones by dialling *99#; AEPS uses Aadhaar and biometrics.

Benefits of e-banking. To customers: 24 x 7 service, transactions from anywhere, financial discipline (records) and safety from carrying cash. To banks: competitive advantage, an unlimited network beyond branches, and less load on branches.

Bank Accounts, Bank Draft, Overdraft, Cash Credit and E-banking (CBSE 11): key facts

Simple interest: interest = principal x rate x time in years | maturity value = principal + interest; Assumption for numericals: simple interest.
Overdraft interest: overdrawn amount x rate x days / 365 | charged only on the amount overdrawn; Not on the whole limit.
Overdraft versus cash credit: overdraft on current account, short period | cash credit against stock and receivables, ongoing; Both are short-term bank credit.
Electronic transfers: NEFT in batches
RTGS real time for large amounts
IMPS instant
UPI by virtual address or QR code; USSD uses *99#.

How to answer Bank Accounts, Bank Draft, Overdraft, Cash Credit and E-banking (CBSE 11) questions

To choose or compute a banking service, match the need with the feature.

1Identify the need: saving, lump sum, regular saving, business payments, safe remittance or temporary credit.
2Match it to the account or service using the table of features.
3For overdraft find the amount overdrawn: withdrawal minus balance; check it against the sanctioned limit.
4Compute interest on the amount and time used, with the rate per year divided by 365 for days.
5Write the final answer with the unit (rupees) and name the service chosen.

Bank Accounts, Bank Draft, Overdraft, Cash Credit and E-banking (CBSE 11) in real life

The idea, met in an everyday situation. Answer the question in your own words, then compare with the model answer. The one-line hook is what to remember.

Choosing between an FD and an RD

Suppose Neha has a lump sum of 60,000 from a prize and also wants to save 2,000 every month from her stipend.

Which two deposit accounts suit her?

Try it first, then show the solutionSolution

A lump sum kept for a fixed period earns higher interest in a fixed deposit.
A fixed amount every month for a fixed period is a recurring deposit.

Answer: Fixed deposit for 60,000 and recurring deposit for 2,000 a month.

Memory hook: Lump sum is FD; monthly habit is RD.

Tricks to remember Bank Accounts, Bank Draft, Overdraft, Cash Credit and E-banking (CBSE 11)

Short memory aids. Say each one aloud once, then use it on a question the same day.

Current is for commerce
Current account: many transactions, no interest, overdraft available.
Use it when: Account selection.
Overdraft is occasional, cash credit is continuing
O for occasional, C for continuing.
Use it when: Comparing the two credit facilities.
RTGS is real time
RTGS settles at once for large amounts; NEFT waits for a batch.
Use it when: Electronic transfers.

Bank Accounts, Bank Draft, Overdraft, Cash Credit and E-banking (CBSE 11): solved examples

Ordered from board level to HOTS. Try each one before you open the solution.

Example 1: Account for a business · 1 mark · MCQBoard level

Which account generally pays no interest and allows unlimited deposits and withdrawals?
(a) Savings account
(b) Current account
(c) Recurring deposit account
(d) Fixed deposit account

Try it first, then show the solutionSolution

Businesses with many daily transactions use a current account.
Such an account generally earns no interest.

Answer: (b) Current account

Example 2: Bank draft · 3 marks · Short answerBoard level

What is a bank draft? Why is it called a safe and certain way of sending money, and what does the buyer pay for it? (3 marks)

Try it first, then show the solutionSolution

A bank draft is an instrument issued by a bank ordering its own branch or another bank to pay a specified sum to a named person.
It is safe and certain because the bank, not the buyer, promises the payment, so it cannot be dishonoured for lack of funds in the buyer account.
The buyer pays the amount of the draft plus a commission to the bank.

Answer: A bank-issued payment order; safe because the bank promises payment; buyer pays the amount plus commission.

Example 3: FD and RD figures · 4 marks · Short answerHarder board level

Meena deposits 2,50,000 in a fixed deposit at 7% simple interest per year for 3 years. She also deposits 5,000 a month in a recurring deposit for 2 years. Find the interest on the fixed deposit, its maturity value and the total amount she deposits in the RD. (4 marks)

Try it first, then show the solutionSolution

Interest = 2,50,000 x 7/100 x 3 = 52,500.
Maturity value = 2,50,000 + 52,500 = 3,02,500.
RD instalments = 24 months, so total deposited = 5,000 x 24 = 1,20,000 (interest is extra).

Answer: FD interest 52,500; maturity value 3,02,500; RD deposits 1,20,000

Example 4: Choosing a credit facility · 5 marks · Case-basedHOTS / competency

Case: Dev Traders has a current account with a balance of 12,000 and an overdraft limit of 50,000. (5 marks)
(i) A supplier cheque of 48,500 is paid. By how much is the account overdrawn, and is this allowed? (2)
(ii) The overdraft is repaid after 10 days. Find the interest at 10% per year. (2)
(iii) If the firm needed finance all year against its stock, which facility would be better? (1)

Try it first, then show the solutionSolution

(i) Overdrawn amount = 48,500 - 12,000 = 36,500. This is below the limit of 50,000, so it is allowed.
(ii) Interest is charged only on the overdrawn amount: 36,500 x 10/100 x 10/365 = 100.
(iii) For continuing working capital against stock, cash credit is better because it is a limit against hypothecation of stock, renewed yearly.

Answer: (i) 36,500 overdrawn, within the limit. (ii) Interest 100. (iii) Cash credit.

Example 5: Match the service · 4 marks · Short answerHarder board level

Name the banking service best suited to each need. (4 marks)
(a) Sending a fee of 25,000 safely to a college in another city.
(b) Paying a shop by scanning a QR code on a phone.
(c) A trader needs working capital against stock throughout the year.
(d) Paying a supplier a very large amount immediately in real time.

Try it first, then show the solutionSolution

(a) A bank draft: the bank promises the payment, so it is safe and certain.
(b) UPI, which transfers instantly using a virtual address or QR code.
(c) Cash credit against hypothecation of stock and receivables.
(d) RTGS, which settles in real time and is used for large amounts.

Answer: (a) Bank draft (b) UPI (c) Cash credit (d) RTGS

Where students lose marks in Bank Accounts, Bank Draft, Overdraft, Cash Credit and E-banking (CBSE 11)

The slips examiners see most often, and what to write instead.

Mistake: Charging overdraft interest on the whole limit
Not noting that interest depends on the amount and period used.
Wrong working
Limit 50,000 x 10% x 10/365 = 136.99
Right working
Overdrawn 36,500 x 10% x 10/365 = 100
Do this: Use the amount actually overdrawn.
Usually costs: 1 to 2 marks
Mistake: Writing that NEFT is real time
Mixing up NEFT and RTGS.
Wrong working
NEFT is settled immediately for large amounts
Right working
RTGS is real time for large amounts; NEFT settles in batches
Do this: Link real time with RTGS.
Usually costs: 1 mark
Mistake: Saying a bank draft can bounce for lack of funds
Confusing it with a cheque.
Wrong working
A draft may be dishonoured like a cheque
Right working
The bank promises payment, so it is a safe and certain instrument
Do this: The issuer is the bank.
Usually costs: 1 mark

Exam tips

Use a table when comparing overdraft and cash credit.
State the assumption of simple interest in deposit numericals.
Show the days divided by 365 in overdraft interest.
List both customer and bank benefits when asked about e-banking.

Practice questions on Bank Accounts, Bank Draft, Overdraft, Cash Credit and E-banking (CBSE 11)

Write each answer on paper first. Open the hint only if you are stuck, and the answer only when you have finished.

Q1 · 1 mark · MCQBoard level
Which of the following settles in batches?
(a) RTGS
(b) IMPS
(c) NEFT
(d) UPI
Hint
Real time is the other one.
Answer
(c) NEFT
Q2 · 1 mark · Assertion-reasonHarder board level
Assertion (A): A bank draft is a safe way of sending money to a distant party.
Reason (R): The draft is issued by a bank, which promises the payment, so it cannot be dishonoured for lack of the buyer's funds.
(a) Both A and R are true, and R is the correct explanation of A.
(b) Both A and R are true, but R is not the correct explanation of A.
(c) A is true, but R is false.
(d) A is false, but R is true.
Hint
Who promises payment?
Answer
(a) Both A and R are true, and R is the correct explanation of A.
Q3 · 4 marks · Short answerHarder board level
Distinguish between a savings account and a current account on four bases. (4 marks)
Hint
Purpose, interest, withdrawals, users.
Answer
Purpose: savings encourages saving by individuals; current serves businesses with many daily transactions. Interest: savings pays interest; current generally does not. Withdrawals: savings may limit the number of withdrawals; current allows unlimited deposits and withdrawals. Overdraft and balance: current can have an overdraft facility and needs a higher minimum balance; savings is not meant for business transactions.
Q4 · 5 marks · Short answerHarder board level
A trader deposits 80,000 in a fixed deposit at 6.5% simple interest per year for 18 months. His current account has a balance of 6,750 and he issues cheques worth 25,000 under an overdraft limit of 60,000; the overdraft is cleared after 30 days at 12% per year. Find (a) the FD interest and (b) the overdraft interest. (5 marks)
Hint
18 months is 1.5 years; overdrawn amount is cheques minus balance.
Answer
(a) 80,000 x 6.5/100 x 1.5 = 7,800. (b) Overdrawn = 25,000 - 6,750 = 18,250, within the limit of 60,000. Interest = 18,250 x 12/100 x 30/365 = 180.
Q5 · 5 marks · Case-basedHOTS / competency
Case: Mira Foods has a shortfall of 1,46,000 for 5 days at every month end, but from this year it also needs ongoing finance against its stock of goods. Its overdraft interest rate is 10% per year. (5 marks)
(i) Name the facility for the month-end shortfall and find the interest for one occasion. (2)
(ii) Which facility suits the ongoing need, and what security does the bank take? (2)
(iii) Why is the overdraft unsuitable for the ongoing need? (1)
Hint
Interest for 5 days on the overdrawn amount.
Answer
(i) A bank overdraft; interest = 1,46,000 x 10/100 x 5/365 = 200. (ii) Cash credit; the bank takes hypothecation or pledge of stock and receivables as security. (iii) An overdraft is meant for short, occasional shortfalls, not for continuing working capital.

Test your recall

Answer in your head or on paper first, then open the card. Pulling an answer out of memory makes it stick far better than re-reading.

1.Which account suits a business with many transactions?Show answer
The current account.
2.On what amount is overdraft interest charged?Show answer
Only on the amount actually overdrawn, for the time used.
3.What does RTGS stand for?Show answer
Real Time Gross Settlement.
4.What is the security for cash credit?Show answer
Hypothecation or pledge of current assets such as stock and receivables.
5.What is the auto-sweep feature?Show answer
Surplus above a limit in the savings account moves automatically to a fixed deposit.

Bank Accounts, Bank Draft, Overdraft, Cash Credit and E-banking (CBSE 11): frequently asked questions

Can a savings account have an overdraft?

The overdraft facility is usually given on a current account.

Is UPI the same as NEFT?

No; UPI transfers instantly using a virtual address or QR code, while NEFT settles in batches.

What is USSD banking?

Payments from a basic phone by dialling *99#.