Cash left idle in one account while an overdraft is used on another costs the gap between two interest rates on the sum that could close the overdraft, and net debt does not show that cost
10 October 2026, 09:37
On 9 October the Bank of Italy published «Banche e moneta» (Banks and money), with August's figures still provisional. In the tables on average rates across all outstanding deposits and loans, not just new ones, there are two figures worth reading together. Current account deposits of non-financial corporations earned an average of 0.63 per cent a year; overdrafts and revolving loans to the same businesses cost 4.33 per cent. In the statistics, non-financial corporations means businesses that do not engage in lending, insurance or asset management, excluding sole traders and simple or de facto partnerships with no more than five employees.
Two balances that cancel out on paper but not at the bank
An overdraft is a cash credit line in use: the business goes into the red when it needs to and comes back into credit when it collects. Revolving loans are lines that are drawn and repaid within a set limit. The net financial position, the NFP, is the difference between financial debt and cash. A business with €300,000 in one account and the same amount overdrawn on another has, for that portion, zero net debt: in the NFP calculation the two balances offset each other.
Not for the bank. Interest on the overdraft accrues on the amount used day by day, and the money sitting in the other account, unless the bank calculates interest on several accounts together, does not reduce it: it earns the deposit rate, which is much lower. At August's averages, every €100,000 left idle for a whole year while an equal sum stays overdrawn costs about €3,700 before tax, the gap between 4.33 and 0.63 per cent.
Why it happens even in well-run businesses
On a given day, a single account has only one balance: money coming in reduces the overdraft by itself. Idle cash on one side and an overdraft on the other occur when there is more than one current account. The account in credit is with one bank and the overdraft with another, and nobody is tasked with moving the money. Or a loan for an investment, credited with no restrictions to an account other than the one with the credit line, sits there waiting to pay the supplier of the machinery, while on the credit-line account the overdraft stays drawn.
Some cash in the accounts in credit is needed, and how much can be calculated. Each account should hold a balance large enough for the debits that land on it on peak days, such as salaries, F24 tax and contribution payments, loan instalments and suppliers' bank receipts. Above that balance, every euro moved from the account in credit to the one in the red, up to closing the overdraft, saves interest at the overdraft rate instead of earning interest at the deposit rate.
How to measure it, day by day
The cost of idle cash is calculated on daily balances by value date, meaning from the moment each transaction starts or stops generating interest: they are shown in the interest statements, or can be rebuilt from the transactions. For each day, take the smaller of two totals: the cash in the accounts in credit, less the balances that must stay there, and the overdrafts on the other accounts. Add up these minimums over the whole period, multiply the total by the gap between the overdraft rate and the deposit rate, taken from the contracts, and divide by the number of days in the year that the bank uses in its calculation. With several banks, imagine closing the most expensive overdraft first, using first the cash in the deposit that earns least. Each sum matched in this way takes the gap between its own two rates.
The typical mistake is to judge treasury on the net position alone. Two businesses with the same NFP can pay different amounts of interest, because one keeps only the balance it needs in its accounts in credit and the other piles up cash on one side and overdrafts on the other.
What to look at in your own figures
What is needed are the interest statements for the last year, from all banks together: on how many days there was cash in one account while interest was being paid on another, and for what amount. Alongside go, bank by bank, the rate paid on the deposit and the rate charged on the overdraft, as stated in the contracts. With these figures the calculation described above is redone. Put on a separate line of the monthly treasury report, the result becomes a number to decide on: moving the cash to the account in the red, or concentrating receipts and payments on fewer banks.
This article was prompted by a news item published in Banca d'Italia on 9 October 2026.