What is the difference between Current Account & Cash Credit

This query is : Resolved 

15 October 2009

Resp. Sir,
I want to know the detail information about the difference between current account & cash credit account & also
why the people opened cash credit account instead of current account..
the above question is asked by Accounts General manager in one of my interview

Pl. help me in this matter
how can i get the exact information
pl. tell me in detail
Vinay Kulkarni

C.A.Harish Singh (Expert)
15 October 2009

Current account is open by a person for operation of his business i.e. he issue cheque from this account and deposit cheque for collection where as cash credit account is a credit facility given by bank and it is type of short term loan given by bank on the hypothication of stock.

15 October 2009

Dear Vinay just to add that Cash Credit is for working capital finance and which has a sanctioned limit but interest is charged on the basis of utilisation of fund on the basis of daily balance.There is no fixed period for repayment of Cash Credit. However in term loan the loan is for a fixed period and interest is charged on the loan amount and repayed by fixed instalment for a pre fixed period.

Sreedhar Atchutuni ACA,GradCWA (Expert)
15 October 2009

Current account: Non interest-bearing bank account which allows the account holder to write cheques against the funds in the account and also deposit cheques into the account.

A cash credit is an understanding on the part of the bank to advance to an individual such sums of money as he may from time to time require, not exceeding in the whole a certain definite amount; the individual to whom the credit is given entering into a bond, with securities, generally two in number(primary and collateral), for the repayment, on demand, of the sums actually advanced, with interest upon each issue from the day upon which it is made.

Vinay A Kulkarni (Querist)
15 October 2009

Thanks a lot.......... sir,
I'll definately keep this in mind
Have a good day!
Vinay Kulkarni

CA CS CIMA* Prakash Somani (Expert)
15 October 2009

additionaly current account is opened by corporates mainly :)

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