Calculate actual monthly interest payable on your bank CC/OD facility based on daily fluctuating utilization balances and compute savings against term debt.
How Banks Calculate CC / OD Interest in India
Unlike standard term loans where interest is charged on the full principal, Cash Credit (CC) and Overdraft (OD) accounts charge interest only on the daily utilized balance:
Daily Simple Interest: Calculated as (Closing Utilized Balance × Interest Rate) / 365 each day.
Monthly Capitalization: Accumulated daily interest is debited at the end of each calendar month.
Commitment Charges: Many banks charge 0.5%–1.0% penalty if average utilization falls below 50% or 60% of sanctioned limit.
Drawing Power is the maximum amount you can withdraw from your sanctioned CC limit, calculated as: `(Eligible Paid Stocks + Debtors under 90 days) − Bank Margin (usually 25%)`.
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Yes, for variable working capital requirements, because you only pay interest for the exact days you use the funds and can deposit daily sales collections to reduce interest instantly.