What is a cash credit or overdraft limit?
Cash credit (CC) and overdraft (OD) are revolving working-capital facilities. Instead of a lump-sum loan with fixed EMIs, the bank sanctions a limit that you can draw from, repay and draw again any number of times. Interest is charged only on the amount actually used and only for the days it is used. The limit is typically valid for 12 months and renewed annually based on your business performance.
Cash credit vs overdraft — what's the difference?
| Cash Credit (CC) | Overdraft (OD) | |
|---|---|---|
| Security | Hypothecation of stock & book debts | Property, FD, insurance, shares — or GST turnover |
| Who it suits | Traders, manufacturers, distributors | Businesses, professionals & individuals |
| Limit based on | Drawing power (stock + debtors − margin) | Value of security / turnover |
| Monitoring | Monthly stock statements | Minimal |
| Interest | Only on utilised amount | Only on utilised amount |
Eligibility criteria
- Proprietorships, partnerships, LLPs, companies and self-employed professionals
- Business vintage of at least 2–3 years with audited financials
- Healthy current account turnover and GST returns
- Credit score of 700+ for promoters, CMR rank 1–6 for companies
- Adequate collateral or stock / debtors for secured limits
Documents required
| Purpose | Accepted documents |
|---|---|
| KYC | PAN & Aadhaar of promoters, business PAN, constitution documents |
| Registration | GST certificate, Udyam registration, trade licence |
| Financials | 3 years audited balance sheet & P&L, ITR, projected financials |
| Banking & GST | 12 months bank statements, GST returns |
| Working capital data | Stock & debtors statement (CC); property / FD documents (OD) |
Interest rates, fees & charges
| Charge | Typical range |
|---|---|
| Interest rate | 9.10% – 16% p.a. on utilised amount |
| Processing / sanction fee | 0.25% – 1% of limit |
| Annual renewal fee | 0.10% – 0.50% of limit |
| Commitment charge on unused limit | Nil – 1% (some banks) |
| Stock audit / inspection | As per actuals |
Tips to get a higher CC / OD limit
- Keep stock and debtor statements accurate and submitted on time
- Maintain good utilisation (60–80%) with regular credits — avoid a limit that stays maxed out
- Bring your GST and bank turnover in line with ITR figures
- Offer property or FD as collateral for lower rates and larger limits