Foundation for Cash Credit Operations

• A current account serves as the primary channel for operating cash credit facilities.
• The sanctioned cash credit limit is linked directly to the current account.
• All withdrawals, deposits, and repayments related to the credit facility flow through this account.
• It acts as a working capital bridge for day-to-day business expenses.
• Enables businesses to maintain liquidity without drawing on fixed capital.

Access to Credit Based on Business Need

• Businesses can withdraw funds up to the approved limit as and when required.
• There is no need to use the entire limit at once—interest is charged only on the utilized amount.
• The current account helps track usage and outstanding dues clearly.
• Repayments and deposits made into the account restore available credit instantly.
• It provides flexibility to manage inventory, payroll, and operational costs.

Monitoring and Control by Banks

• The bank monitors current account transactions to assess business performance.
• Consistent credit and debit activity supports trust and further credit assessment.
• Banks evaluate account behavior to revise limits or renew the cash credit facility.
• Misuse or irregularity in the current account may lead to suspension of the credit line.
• Timely interest servicing and limit discipline help maintain creditworthiness.

Collateral and Documentation Alignment

• The current account links with pledged inventory, receivables, or other collateral.
• Banks verify invoices, sales records, and stock statements tied to the credit limit.
• Disbursement and usage are aligned with the documentation flow.
• Ensures that the loan supports actual business needs and not unrelated expenditure.
• Offers transparency and accountability in working capital management.

Efficient Fund Utilization and Business Continuity

• Cash credit through the current account allows smooth day-to-day financial operations.
• Avoids delays in fund access during short-term cash flow shortages.
• Reduces dependency on emergency borrowing or high-interest loans.
• Ensures continuity of operations even during market or payment delays.
• Helps sustain growth and financial stability in competitive environments.