Overdraft or OD Limit
An overdraft limit is a loan amount sanctioned by the bank or NBFC to the borrower to meet his business requirements. OD limit is like a current account. An OD facility allows you to withdraw money or issue cheque up to the approved OD limit, even if there is no balance in the account. It is a short term credit facility generally for 12 month, which is renewable after every 12 months.
The overdraft limit or OD limit is the maximum amount that you can overdraw from bank or NBFC. Borrower has to pay interest on utilized amount only. Interest is calculated on daily overdrawn balance and debited to the OD account monthly.
Whatever amount you repay into the overdraft account, you can withdraw it again as long as the limit is not over utilized. That’s why OD limit or overdraft facility is also called revolving credit facility.
Cash Credit or CC Limit
Cash credit limit or CC limit is a kind of current account with cheque book facility. Cash credit limit or CC limit sanctioned by the bank to the small medium enterprises (SME) to fulfill their working capital requirements. CC limit holders offers stock and debtors as primary security to the bank. A CC limit or cash credit limit allows you to withdraw money or issue cheque up to the approved CC limit, even if there is no balance in the account. It is a short term credit facility generally for 12 month, which is renewable after every 12 months
The cash credit limit loan in Delhi or CC limit is the maximum amount that you can overdraw from bank. However the drawing limit is specified by the bank. Borrower has to pay interest on utilized amount only, not on limit sanction. Interest is calculated on daily overdrawn balance and debited to the cash credit or CC account monthly.
Whatever amount you repay into the cash credit or CC account, you can withdraw it again as long as the limit is not over utilized. That’s why Cash credit limit or CC limit facility is also called revolving credit facility.