What is Cash credit and Over draft.

Question

Accepted Answer

Cash credit and Overdraft are types of short-term borrowing facilities provided by banks.

Cash credit is a type of loan where the borrower is given a credit limit and can withdraw funds up to that limit as and when required.
Overdraft is a facility where the borrower is allowed to withdraw more money than what is available in their account, up to a certain limit.
Interest is charged on the amount borrowed in both cases, but the interest rate for overdraft is usually higher than that for cash credit.
Cash credit is usually given to businesses for working capital needs, while overdraft is more commonly used by individuals for personal expenses.
Both facilities require collateral in the form of assets or securities.
Example: A business may take a cash credit facility of Rs. 10 lakhs from a bank and withdraw funds as and when required for their day-to-day operations.
Example: An individual may have an overdraft limit of Rs. 50,000 on their savings account and can withdraw more than their account balance up to that limit.

Top Axis Bank Area Sales Manager interview questions & answers