OD/CC Limit

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What is OD?

Overdraft is a facility given by the bank to companies, to withdraw money "more" than the balance available in their respective accounts. You have to pay interest only on the amount taken as loan. Since it is a current account, you can make as many transaction as you want. You have to pay interest on the amount which is due by the end of the day.

What is CC?

Cash credit is a type of short term loan provided to companies to fulfill their working capital requirement.

Difference between OD & CC

Cash Credit Account Overdraft Account
It is normally given on security of stock, debtors etc. It is normally given on security of a fixed asset.
The maximum amount is calculated as a percentage of sale and stock along with financial statements. For eg A bank allowed cash credit upto 80% of stock plus 20% of sales. The maximum amount allowed is calculated mainly on basis of financial statements and security.
It should be used for the purpose of business. Can be used for any purpose
Balance Sheet, P & L account , VAT reports is required be submitted to bank generally annually or quarterly. Financial statements are generally not required to be resubmitted after approval.
It doesn’t reduce over time. There is a monthly reduction in amount of overdraft protection in Dropdown Overdraft (DOD).
Insurance of stock is normally required. Insurance of the property is generally required.
Many a times new account has to be opened to take cash credit facility. Overdraft is generally started by banks in existing current accounts
Interest rate is normally lower than overdraft account. Interest rate is normally higher than cash credit account.

Similarities

  • Payable on demand
  • Money can be withdrawn more, than the amount available in the account.
  • Security
  • Limit
  • Line of credit