There are many types of bank accounts that people are not aware of as most of the customers have either savings accounts or current accounts only. Bank OCC A/C and Bank OD A/C are two special accounts that allow business owners have the facility of credit without having to formally apply for a loan. There are many similarities in these two types of account though there are also some differences. Let us take a closer look at both OCC A/C and OD A/C.
OCC A/C
OCC refers to Open Cash Credit and is applicable to SME entrepreneurs. In the case of OCC account, the holder of the account can have cash credit facility against his stocks and receivables. The purpose of the loan is to meet the shortfall in working capital of the SME. Different banks have different criterion to assess the limit of an OCC account. In a majority of cases, the OCC limit is calculated depending upon turnover of the SME. In some cases MPBF or cash budget system may be employed to assess the limit of such an account. Drawing to an OCC holder is based upon the position of raw materials, finished stock, receivables and the goods that are in process of manufacturing. It is not that drawings under OCC account are unsecured. For security, stocks and receivables may have to be attached with the bank. There are instances when bank may require collaterals in the form of land and machinery also. The limit of drawing is reviewed every year and may be extended depending upon the condition of SME.
OD A/C
OD account is simply a current account with the facility of overdraft that current account holders running a small business are entitled to in any bank. In some banks, this facility is available only upon request through an application by the account holder. Once set up, the account holder can issue a Cheque up to the limit prescribed even if he does not have money in his account and he is charged interest only on the overdrawn amount on which applicable interest rates are levied. OD is like a bank loan but is flexible in the sense that one can deposit money in the account and has to pay interest only on the difference between amount withdrawn and the amount remaining in his account.