Difference Between Bank OCC AC and Bank OD AC
Most of the people keep saving accounts and current accounts in the banks. They often do not know about other types of accounts. Bank OCC account and Bank OD account are the accounts opened by business owner which provide him the loan without completing formalities. Both types of accounts have a number of similarities and differences.
OCC stands for Open Cash Credit. A holder of an OCC A/C can have instant cash as loan on his stocks. Its purpose is to meet the requirement of the working capital. OCC account is limited. Its limit is decided by the bank and different banks have different limits. The turnover of an SME is the factor deciding the limit of the loan through OCC A/c. Cash budget system may be used to decide the limit of an OCC account. An OCC holder can draw cash as a loan on the basis of the finished stock, goods, receivables, raw material, products under process, stocks etc. The drawing through OCC account is secured. Stocks and receivable are kept as a security by the bank. Sometime collaterals such as land and machinery may also be required by the bank.
An OD account is a current account. It provides the facility of overdraft. This facility is provided only by a written request by an account holder. An OD account holder may issue a cheque even if he has no money in his account in the bank. The limit of such a cheque is limited. The account holder may issue a cheque containing limited amount of money. The limit is decided by the concerned bank. Interest is levied on the overdrawn payment. It is like a bank loan. But the difference is that the account holder needs to pay interest only on the amount he has over withdrawn, not on the complete amount.