Meaning
Cash Credit is a short-term loan provided by a bank to businesses to meet working capital needs.
How It Works
The bank sets a credit limit, and the business can borrow money as needed within that limit. Interest is charged only on the amount used, not the full limit.
Example
If a business has a ₹5 lakh limit and uses ₹2 lakh, interest applies only to ₹2 lakh.
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