Q.Distinguish between an Overdraft and a Cash Credit facility.

Both let a company draw more than its own balance, but they differ mainly in what account they attach to, what security backs them, and how long they are typically meant to run.

An Overdraft and a Cash Credit facility differ on several points:

Both facilities share the feature that interest is charged only on the amount actually used, not on the full sanctioned limit — the real difference lies in the account structure and the kind of security each is secured against.

Students sometimes treat Overdraft and Cash Credit as identical because both allow drawing beyond the balance — remember they differ in the account they run on and, most importantly, in what security backs them.