The term daylight overdraft refers to a situation in which an FI's:
A)reserve account at the central bank is negative at the end of a banking day
B)reserve account at the central bank is negative at the beginning of a banking day
C)reserve account at the central bank becomes negative within the banking day
D)account with another FI becomes negative within the banking day

Question

Quizplus · Accepted Answer

A daylight overdraft occurs when an FI's reserve account at the central bank becomes negative within the banking day, usually as a result of outgoing payments exceeding incoming payments. Option A is incorrect because the reserve account may have been positive at the beginning of the day. Option B is incorrect because a negative balance at the start of the day would be an overnight overdraft. Option D is incorrect because it refers to an account with another FI, which is not relevant to the definition of a daylight overdraft.

The Term Daylight Overdraft Refers to a Situation in Which