Which is The First Bank in the World to offer an overdraft facility?



The Royal Bank of Scotland is 'The First Bank in the World to offer an Overdraft Facility'. It started offering this facility in 1728. Before this facility was made available, people could take money in advance through loans by providing some sort of security like property. William Hog, a merchant in Edinburgh often faced shortage or lack of money. The reason being that he had to pay business bills before he could pay his own bills. To counter this William Hog and his bank came up with a solution on May 1728. The bank agreed to provide him cash in advance, keeping in mind his good repute for a limited period of time. He was now able to withdraw more money from his account than he held in it. William Hog thus became the world’s first recipient of a cash credit, the forerunner of the modern overdraft.

Soon the Royal bank started offering the same to other people but only to the reliable ones. The facility became a success and was extended to the general public. The bank was able to provide this facility because it was new in the market and it didn’t get the chance to invest the money. There was surplus cash to invest and by providing this cash to the consumers it not only earned goodwill but also good interest. Al that was required was bond of the applicant and two or more men who were prepared to vouch for him.


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