Updated August 2026
Cash Credit Facility up to Rs 25 Crore for MSMEs
India\'s most popular MSME working capital product. Revolving limit backed by inventory + receivables. Interest only on utilised amount. CGTMSE coverage up to Rs 5 Cr for collateral-free CC. Rates from 9.15% p.a.
Rs 25 CrMax Limit
9.15%+Interest
Revolving12-Month
CGTMSECovered
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Cash Credit Facility Explained
Cash Credit (CC) is a revolving working capital facility where the bank sanctions a limit against hypothecation of your inventory and book debts. You can draw up to this limit whenever needed, repay when receivables come in, and redraw within the annual renewal cycle. Interest is charged monthly only on the utilised amount - calculated daily on the actual outstanding balance.
CC is India\'s most widely used MSME working capital product because it aligns perfectly with the operating cycle of manufacturing, trading, and inventory-heavy businesses. You buy raw material (drawing from CC), produce goods, sell to customers (on credit), receive payment (repay CC), then repeat - all without needing fresh loan applications. The limit "breathes" with your business.
The key concept in CC is Drawing Power - your CC limit is not fixed at the sanctioned amount. Each month, based on your stock statement showing inventory + receivables values, the bank calculates DP: (Inventory x 75% margin) + (Debtors under 90 days x 75% margin) - Creditors. This is the actual limit you can draw against. If inventory drops, DP drops. Effective CC management requires balancing sanctioned limit vs actual DP throughout the year.
Why Choose Cash Credit
Revolving Facility
Draw, repay, redraw - unlimited transactions within 12-month period, no re-application.
Interest on Usage Only
Charged only on the amount drawn, calculated daily. Zero interest if limit unused.
Lowest WC Rates
PSU CC starts at 9.15% - among the lowest working capital rates in India.
CGTMSE Coverage
MSME CC up to Rs 5 crore covered by government guarantee - no property collateral.
Grows With Business
DP increases as inventory + debtors grow. Renewals often bring limit enhancements.
Inventory as Security
No separate collateral needed - your inventory + receivables serve as security.
No Prepayment Fee
Repay any amount, any time, no charges. Encourages efficient cash management.
Annual Renewal
12-month term, renewed each year with updated financials review.
Cash Credit Eligibility
Business Vintage
PSU: 2-3 years. Private: 2-3 years. New businesses: WCTL is a better entry point.
Annual Turnover
Rs 40 lakh+ for private-bank CC. Rs 1 crore+ for larger CC limits. Rs 5 crore+ for consortium.
CIBIL Score
700+ preferred. 650+ acceptable for CGTMSE-covered CC. Sub-650 requires collateral.
Inventory Business
Manufacturing, trading, distribution, retail - CC is designed for stock-based operations.
Clean Banking
12+ months primary current-account with no bounces. Regular turnover in the account.
GST + Udyam
Both mandatory. MSME status unlocks CGTMSE + priority-sector CC rates.
Documents Required
One-Time CC Sanction Documents
PAN + Aadhaar of proprietor/partners/directors. Business PAN. Udyam Registration Certificate. GST Registration. 2 years audited P&L + Balance Sheet + ITR. 12-24 months current-account bank statements. Constitution documents (partnership deed / MOA / AOA). Detailed project report / working capital assessment.
Stock & Debtors Documents
Detailed inventory list with values (raw material, WIP, finished goods). Debtor ageing statement (0-30, 31-60, 61-90, >90 days). Sample sales invoices for key buyers. Purchase invoices for key suppliers. Creditor ageing statement.
Post-Sanction Monthly Submissions
Monthly Stock Statement (declaration of inventory + debtors value). Monthly turnover statement. Quarterly financials (if larger CC). Annual audited financials at renewal.
Additional (Case Dependent)
Property documents (if additional collateral). CGTMSE application form (for MSME collateral-free CC). Personal guarantee documents from promoters. Insurance policy on hypothecated stock (bank\'s name as beneficiary).
Best Banks for Cash Credit
State Bank of India
India\'s largest CC lender. Best for CGTMSE-covered MSMEs. SBI e-DFS (Digital Financial Services) for streamlined CC.
Bank of Baroda
Strong CC product for manufacturing and trading MSMEs. Dedicated MSME cells in most branches. CGTMSE-friendly.
Punjab National Bank
Wide branch network for regional MSMEs. Good CGTMSE coverage. Preferential rates for priority sectors.
HDFC Bank
Fastest private-bank CC sanction. Digital limit management. Best for MSMEs with existing HDFC current account.
Axis Bank
Excellent CC product depth for mid-market MSMEs. Well-developed CGTMSE integration. Digital stock statement submission.
IDFC First Bank
Specialised CC for smaller MSMEs. CGTMSE-backed CC up to Rs 1 crore. Modern digital experience.
Cash Credit Rates (August 2026)
| Lender Category | Interest Rate (p.a.) | Processing Fee | Max Limit |
|---|---|---|---|
| PSU Banks (CGTMSE-covered) | 9.15% - 13.50% | 0.50% - 1.00% | Rs 5 Cr |
| PSU Banks (Standard CC) | 9.35% - 15.90% | 0.50% - 1.00% | Rs 25 Cr |
| Private Banks (MSME CC) | 10.75% - 16.00% | 1.00% - 1.50% | Rs 10 Cr |
| Private Banks (Corporate CC) | 9.75% - 13.00% | 0.75% - 1.25% | Rs 50 Cr |
| Consortium CC (Large MSME) | 9.50% - 12.50% | 0.50% - 1.00% | Rs 100 Cr+ |
| Priority Sector (Women MSME) | 9.00% - 13.50% | 0.25% - 0.75% | Rs 5 Cr |
How to Get a Cash Credit Limit
1
Assess WC Need
Calculate operating cycle + working capital gap.
2
Document Prep
Financials, stock/debtor lists, GST filings.
3
Bank Application
Submit CC application with all documents.
4
Stock Verification
Bank visits for inventory + premises check.
5
Sanction
Limit + DP finalised. Documents signed.
6
Facility Live
Draw as needed. Monthly stock statement.
Is Cash Credit Right for You?
Advantages
- Revolving - most flexible WC product
- Interest only on utilised amount
- Rates from 9.15% (with CGTMSE)
- Inventory itself is the collateral
- Nil prepayment charges
- Grows with business (DP scales)
- CGTMSE covers up to Rs 5 crore
- Preferential rates for women MSMEs
Trade-offs
- Monthly stock statements mandatory
- Stock audit intrusion (annual/quarterly)
- DP fluctuates with inventory
- Sanction takes 15-30 days
- Not suitable for pure services businesses
- Annual renewal risk if performance drops
- Non-renewal means immediate repayment
Cash Credit vs Overdraft vs WCTL
| Feature | Cash Credit (CC) | Overdraft (OD) | WCTL |
|---|---|---|---|
| Security | Inventory + receivables | Optional / FD / property | Property or CGTMSE |
| Stock Statement | Monthly mandatory | Not required | Optional |
| Repayment | Revolving | Revolving | Fixed EMI |
| Interest On | Utilised amount | Utilised amount | Full outstanding |
| Interest Rate | 9.15% - 15.90% | 11% - 24% | 10.75% - 18% |
| Tenure | 12 months (renewable) | 12 months (renewable) | 12-36 months |
| Best For | Manufacturing / trading | Services / professionals | Structured needs |
| Approval Speed | 15-30 days | 5-7 days | 7-14 days |
Cash Credit - Frequently Asked Questions
What is a Cash Credit (CC) facility?
Cash Credit is a revolving working capital facility where a lender sanctions a limit against hypothecation of your inventory and book debts (receivables). You can draw up to this limit as needed, repay when cash comes in, and redraw - all within an annual renewal cycle. Interest is charged only on the utilised amount, not the full limit. CC is India's most widely used MSME working capital product.
How is a Cash Credit limit calculated?
CC limits are calculated based on Drawing Power (DP), typically: (Value of Inventory x 75% margin) + (Value of Book Debts under 90 days x 75% margin) - Sundry Creditors. Example: Rs 2 Cr inventory + Rs 1 Cr debtors - Rs 50 lakh creditors = Rs 1.75 Cr DP. Actual sanctioned limit may be lower or higher based on lender assessment.
What is the interest rate on Cash Credit?
PSU banks: 9.15% - 15.90%. Private banks: 10.75% - 16%. NBFCs generally do not offer traditional CC (they offer OD instead). CGTMSE-covered CC for MSMEs: 9.15% - 13.50%. Interest is charged monthly only on the utilised amount, calculated daily on outstanding balance.
What is the difference between Cash Credit and Overdraft?
Cash Credit is specifically backed by hypothecation of inventory + receivables, requires monthly stock statements, most suitable for manufacturing/trading MSMEs. Overdraft is more flexible - can be unsecured or backed by FD/property, does not require inventory monitoring, typically for professionals and service businesses. CC has lower rates due to security but more compliance.
What documents are needed for a Cash Credit limit?
One-time: PAN, Aadhaar, GST + Udyam certificates, 2 years audited financials + ITR, 12 months bank statements, sales orders, purchase orders, constitution documents. Monthly (post-sanction): stock statement (inventory value), debtor ageing statement, financial statements. Periodic: renewal application with updated financials.
What is Drawing Power in Cash Credit?
Drawing Power (DP) is the maximum you can draw from your CC limit at any point, recalculated monthly based on your inventory + receivables. Formula: (Inventory x margin %) + (Debtors < 90 days x margin %) - Creditors. If your inventory drops, DP drops - even if your sanctioned limit is higher. Lenders restrict drawdowns to DP, not sanctioned limit.
What are the margin requirements in Cash Credit?
Inventory margin: typically 25% (you get 75% funding). Debtors margin: typically 25%-30%. Higher-risk inventory (perishable, fashion, technology): margin can be 35%-50%. Debtor concentration (single buyer >25% of receivables): additional margin. Margins are lender-specific and negotiable based on your risk profile.
What is a Stock Statement and why do banks need it monthly?
A Stock Statement is a monthly declaration of your inventory value (raw material, WIP, finished goods) and receivables ageing (debtors 0-30, 31-60, 61-90, >90 days). Banks need this to recalculate your Drawing Power monthly - since inventory + debtors fluctuate, your available limit fluctuates too. Non-submission or false statements trigger CC facility review.
What is a Stock Audit in Cash Credit?
A Stock Audit is a physical verification of your inventory (and sometimes debtors) by the bank's external auditor. Frequency: annually for smaller CC limits, semi-annually or quarterly for larger. Auditor cross-checks stock statements vs actual inventory, GST records, purchase invoices. Significant discrepancies can result in limit reduction or CC facility recall.
What is the tenure of a Cash Credit facility?
12 months. Renewable annually based on your continued eligibility - updated financials, banking behaviour, stock audit findings. Renewal can be at same limit, higher (if business grew), or lower (if performance declined). Non-renewal means the outstanding balance must be repaid immediately.
Can I get a Cash Credit limit without collateral?
Traditional CC always has inventory + receivables as security (they are the collateral). For additional security-free CC, options: (a) CGTMSE-covered CC for MSMEs up to Rs 5 crore - government guarantees to bank, no property/FD needed, (b) Small unsecured CC limits (up to Rs 25 lakh) from some private banks based on GST + banking history alone.
What is CGTMSE-covered Cash Credit?
CGTMSE (Credit Guarantee Fund Trust for MSEs) provides a government guarantee to the lender for MSME loans up to Rs 5 crore. When your CC is CGTMSE-covered, you get: no separate collateral requirement (beyond inventory/receivables hypothecation), preferential PSU bank rates, longer approval turnaround but more secure. Annual fee: 0.75%-2%.
Is Cash Credit interest tax-deductible?
Yes - fully deductible as business expense under Section 37(1). Since CC interest can vary monthly, keep the bank interest certificate at year-end for CA filing. Also deductible: CGTMSE annual fee, stock audit charges, facility renewal fees.
What is the difference between Cash Credit and Working Capital Term Loan?
CC is revolving - you draw and repay repeatedly within the 12-month period. WCTL is structured - fixed disbursal, fixed EMI over 12-36 months. CC is more flexible for genuine day-to-day operations; WCTL is better for one-time large working capital needs (season-launch stock buildup, expansion). Rates similar. Choose CC for ongoing, WCTL for specific projects.
Can I have Cash Credit limits with multiple banks?
Technically possible but rarely done in practice. Most banks require you to declare all existing CC limits and typically insist on being the primary/sole banker for your CC needs. Multi-banking arrangement is common only for large corporates (Rs 25 Cr+ WC requirements) via consortium banking arrangements.
What is Drawing Power vs Sanctioned Limit?
Sanctioned Limit: maximum CC amount the bank approved (e.g. Rs 1 Cr). Drawing Power: how much you can actually draw right now based on current inventory + debtors (e.g. Rs 75 lakh if inventory dropped). You cannot draw above DP even if sanctioned limit is higher. Manage inventory + debtors carefully to keep DP close to sanctioned limit.
What happens if I exceed the CC limit?
The bank returns the cheque or refuses further drawings. Repeated over-limit attempts trigger CC facility review. Penalty interest (2%-3% above CC rate) applies on the over-limit amount if the bank temporarily allows an excess. Ad-hoc limit enhancement is possible with prior request but rare.
Which banks are best for MSME Cash Credit?
SBI - largest CC lender, best for CGTMSE-covered MSMEs. Bank of Baroda - strong manufacturing sector focus. PNB, Canara, Union Bank - PSU alternatives with regional strengths. HDFC, ICICI, Axis - private banks with faster processing, digital limit management. IDFC First - excellent CGTMSE-covered CC for smaller MSMEs.
What is a Consortium Cash Credit?
A Consortium CC is when multiple banks jointly finance a single borrower's CC needs, typically for large corporates with WC requirements above Rs 50 crore. One bank is the lead (holds all documents, monitors), others share the exposure proportionally. Rare for MSMEs; common for large-cap corporates.
How can MahadevX help with Cash Credit sanction?
MahadevX assesses your inventory + receivables profile, calculates realistic DP, identifies the best-fit PSU or private bank based on your industry, and manages the sanction process end-to-end. We help prepare stock statements, coordinate stock audits, and negotiate limit + rate. For MSMEs, we specifically pursue CGTMSE coverage for lowest rates. Free for borrowers.
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