CC vs OD: the difference between cash credit and overdraft
Reviewed 4 November 2026 · Prateesh Nair, BISFIOPS Private Limited
A cash credit (CC) limit is secured on your stock and debtors, and what you can draw moves with them. An overdraft (OD) is usually secured on property or deposits and has a fixed limit. Both are revolving, and both charge interest only on the amount you use. Check what you could get with the CC and OD limit estimator.
Side by side
| Cash credit (CC) | Overdraft (OD) | |
|---|---|---|
| Usual security | Hypothecation of stock and debtors | Property, fixed deposits or other assets |
| How much you can draw | Drawing power: stock and eligible debtors, less margin and creditors | Usually the full sanctioned limit |
| Paperwork | Regular stock and debtor statements | Usually no stock statements |
| Suits | Traders and manufacturers with stock and credit sales | Service businesses and owners with property or deposits |
| Interest | On the daily amount used | On the daily amount used |
| Review | Usually renewed every year | Usually reviewed every year |
Which suits your business?
If most of your working capital sits in stock and in money customers owe you, a cash credit limit grows with your business: more stock and debtors mean more drawing power. If you hold little stock but own a property or have deposits, an overdraft is often simpler, because there are no monthly stock statements.
What both have in common
- You draw and repay as often as you like within the limit.
- Interest is charged only on what you use, usually on the daily balance — see the CC/OD interest calculator.
- Using the limit close to its maximum every month can weigh on your CMR and on renewal.
- Both need clean conduct: regular credits into the account and no overdue interest.
Rules on how accounts are kept
RBI rules govern which current, cash credit and overdraft accounts a business may keep with different banks. These rules have changed in recent years, so check the current RBI directions with your bank before you open a second account.
Questions we are asked
What is the difference between CC and OD?
A cash credit limit is secured on stock and debtors, and the amount you can draw moves with them. An overdraft is usually secured on property or deposits and has a fixed limit. Both charge interest only on what you use.
Is OD cheaper than CC?
Not necessarily. The rate depends on the bank, the security and your credit record. An overdraft against a fixed deposit is often priced close to the deposit rate; others vary.
Do I need stock statements for an OD?
Usually not. Stock statements are needed for a cash credit limit, because drawing power is based on stock and debtors.
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.