Thread Hole Size

ASME B1.1 specifications allow for larger hole sizes to be used if the length of engagement between the internal and external thread is long enough as not to compromise thread strength. Hole size is selected based on the number of tap diameters of the length to be tapped. The greater the length of engagement, the larger the hole size can be.

For examples see chart below for 1/4-20:

If threading with a 1/4-20 tap with a 1/4″ length of engagement, (1xdia.) a tap drill chart may direct you to a #6 drill (.2040) Using the chart above, it falls into the 2/3 to 1-1/2 diameter range and allows the use of a .207 hole size. The advantage to you may include longer tap life, fewer tap problems, less torque required etc.

Note: This being said, you cannot violate the given minor diameter specification for the thread size.