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abhishek bhatt (CA student) (136 Points)

19 January 2009

wht is difference btween cash credit and overdraft
?

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8 Replies

Prakash Popat (3134 Points)
Replied 19 January 2009

OD temporary to adj few days gap of cash flow,whereas Cash credit based on the evaluation of working capital requirements by unit,and normally pre sanctioned as per norms.

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Prakash Popat (3134 Points)
Replied 19 January 2009

OD temporary to adj few days gap of cash flow,whereas Cash credit based on the evaluation of working capital requirements by unit,and normally pre sanctioned as per norms.

Ahmed (Accounts) (77 Points)
Replied 19 January 2009

OD is temporary loan from bank which is increase ur current liabilities and cash credit means reduced in ur current assets

Varun Malhotra (Chartered Accountant) (207 Points)
Replied 19 January 2009

Major difference is due to the requirement of security/ collateral against loan. Cash credit is secured by hypothecation of existing current assets the company whereas bank OD is generally unsecured. Bank OD is extended to entities having good creditworthiness in the market.

srinivas (humble devotee of saraswati) (885 Points)
Replied 19 January 2009

VARUN SIR'S ANSWER CLEARLY POINTS OUT THE DIFFERENCE

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CA Sudhir Halakhandi (PRACTICING CHARTERED ACCOUNTANT) (13401 Points)
Replied 19 January 2009

Cash credits are agianst the hypotecation of stock and debtors and over draft may be secured or unsecured . The unsecured overdraft is the sanction to overdrawn the account without any security except the personal security and credit worthyness of the borrower. In case of secured overdraft , the borrowed money is secured against FDR, NSC etc.

- ca sudhir halakhandi