CC and OD limit eligibility: who qualifies and how much you can get
Reviewed 4 November 2026 · Prateesh Nair, BISFIOPS Private Limited
Your CC or OD limit depends on three things: how much your business sells, what you hold in stock and debtors, and how cleanly your bank accounts have been run. For limits up to ₹5 crore, banks size the limit from about 20% of projected annual turnover, then cap what you can draw at any time by your drawing power.
What decides your limit
A bank looks at the same few things whichever name the facility carries:
- Turnover. Your projected turnover for the year sets the starting figure. It has to fit the trend of your past years, because banks compare it with your GST returns and bank statements.
- Stock and debtors. For a cash credit limit, these are the security. They decide how much you can draw on any given day.
- How your accounts are run. Regular credits, no long overdue periods, and limit usage that is not stuck at the maximum.
- Credit record. The bank may check your business's CIBIL MSME Rank and the promoter's personal score. What CMR is.
- Security. Stock and debtors for a CC. Property or deposits are common for an OD.
Eligibility checklist
- The business is a proprietorship, partnership, LLP or company with a running track record. Banks differ on the minimum period.
- GST returns are filed and match your bank turnover. Udyam registration helps, and many lenders ask for it.
- You can share 12 months of bank statements and recent financials.
- Projected turnover is credible against your last years' figures.
- No recent overdue payments on existing loans or limits.
- You can offer the security the bank asks for.
These are typical expectations, not a fixed list. Each bank sets its own policy.
How much limit can you get?
For working capital limits up to ₹5 crore, RBI guidance treats the working capital need as 25% of projected annual turnover. The borrower brings 5% of turnover as margin, and the bank finances at least 20%.
Worked example (illustration): for a business with ₹2 crore of projected turnover, the need is ₹50 lakh, the bank finances ₹40 lakh and the borrower brings ₹10 lakh.
How much can you draw?
The limit is a ceiling. What you can withdraw on a given day is your drawing power. It is stock plus debtors under 90 days, less the bank's margin (often 25%), less trade creditors.
Example: stock of ₹30 lakh and debtors of ₹20 lakh make ₹50 lakh. After a 25% margin, that is ₹37.5 lakh. Less ₹10 lakh of creditors, your drawing power is ₹27.5 lakh, even if the sanctioned limit is higher. Try it with your own figures.
CC or OD?
A cash credit limit is secured on stock and debtors, moves with them, and needs regular stock statements. An overdraft is often secured on property or deposits, has a fixed limit and does not need stock statements. Both charge interest only on the amount you use. Full comparison.
Documents banks ask for
- Audited financials, or the latest ITR and balance sheet
- GST returns for the last 12 months
- 12 months of bank statements
- A current stock statement, plus debtor and creditor ageing
- KYC for the business and its promoters
Why a limit can come out lower than you expect
- Projected turnover that is far above what the last years show
- A CC or OD account that sits close to its full limit most months
- Overdue days on existing loans or limits
- A weak CMR or promoter score
- Missing or late stock statements
Questions we are asked
Who is eligible for a CC or OD limit?
Proprietorships, partnerships, LLPs and companies can apply. Banks look at turnover, stock and debtors, how your accounts are run, your credit record and security. Terms vary by bank.
How much CC limit can I get on my turnover?
For limits up to ₹5 crore, banks commonly finance about 20% of projected annual turnover. A business with ₹2 crore of projected turnover would be assessed at about ₹40 lakh, subject to drawing power.
What is drawing power?
Drawing power is the amount you can withdraw from a CC limit on a given day. It is based on stock and debtors, less the bank's margin and trade creditors.
Do I need collateral for a CC or OD limit?
A cash credit limit is normally secured by stock and debtors. An overdraft is often secured by property or deposits. Requirements vary by bank and limit size.
Is a CC limit better than an OD limit?
Cash credit suits a business that holds stock and debtors. An overdraft suits a business with property or deposits to offer. Both charge interest only on the amount used.
Sources: RBI — Master Direction on lending to the MSME sector
Written by Prateesh Nair, Director, BISFIOPS Private Limited (CIN U66190MH2026PTC475143), Malad East, Mumbai. General information, not personal advice; lenders decide final terms.