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Overlay/function pointers

Hi,
In our project we are using function pointers. After compiling the project, we got "RECURSIVE CALL TO SEGMENT" warning. By selecting OVERLAY (sfname ! *)in BL51, that warnings was removed.
If we add function name in OVERLAY, will it allocate diffrent memory for local variables and function argumants?.
How it is diffrent from by difining same function as rentrant function ?.

Thanks in advance..