Difference

Save Share

Join Us Follow Us Add as Source

This query is : Resolved

Report Follow Query Ask a Query

Prince

Prince (Querist)
Follow

08 August 2013 what is the difference between bank od and cash credit

CMA. CS. Sanjay Gupta

CMA. CS. Sanjay Gupta (Expert)
Follow

08 August 2013 Cash Credit and Overdraft, both fulfill the requirement of Working Capital of the borrowers. However, Cash Credit is for specific use of limit which is given on the basis of value of book debt and value of paid up stock. Limit of 75% is given calculated on (Value of book debt+Stock-Creditors). For this borrower is supposed to furnish the stock statements in given format of the bank on monthly basis based on which limit will be sanctioned.

Overdraft - An extension of current account in which the customer is allowed to withdraw more than the credit balance lying in the account. This may be a temporary accommodation to tide over temporary cash crunch or on a regular basis. If permitted on a regular basis, withdrawals are allowed up to a ceiling (called a limit), subject to availability of sufficient security with the bank.

Overdraft is generally for small working capital requirement but where larger funds are required C/C limit is preferred.

You need to be the querist or approved CAclub expert to take part in this query .
Click here to login now