What is Out of Order in Case of CC and OD Accounts
Before understanding what is “Out of Order”, we need to first discuss “What is CC/OD Account”:
Cash Credit Facility:
CC limit is a type of short-term loan which is provided to enterprises to meet their working capital requirement. The full form of cc is Cash Credit Account. Generally awarded against the security of hypothecation of the list of enterprises.
Overdraft Facility:
OD Limit is a facility given by the bank to enterprises to withdraw money “exceeding” the balance available in their respective accounts. The full form of OD is Overdraft Account. Generally awarded against the security of financial instrument and assets like movable and immovable property.
What is Out of Order in CC and OD Accounts?
In the case of CC/OD accounts, an account was considered “Out of Order” if there was no credit for 90 consecutive days on the balance sheet date or the credits were not sufficient to cover the interest debited during the same period.
The “Out of Order” status of CC/OD accounts will be determined on the following basis:
- the outstanding balance in the CC/OD account remains continuously more than the sanctioned limit/drawing power for 90 days, or
- the outstanding balance in the CC/OD account is less than the sanctioned limit/ drawing power but there are no credits continuously for 90 days, or
- the outstanding balance in the CC/OD account is less than the sanctioned limit/ drawing power but credits are not enough to cover the interest debited during the previous 90 days period.
In lay man we can cay Out of order means if interest is not served or balance outstanding remain above limit sanctioned during the prescribed particular period.
