Banking News

Difference between Open Cash Credit and Key Cash Credit facilities


The mode of creating charge on prime security offered in case of OCC and KCC are different. In OCC, neither the possession of assets nor the ownership of the assets transferred to the lender. The asset hypothecated remains under the possession of the borrower and he is free to deal with it. The securities commonly covered under hypothecation are raw materials, semi- finished goods, finished goods and book debts. In case of traders the limit is allowed for the purchase of goods they deal. The charge under hypothecation and terms and conditions thereby is created by an agreement commonly known as “Letter of Hypothecation” or hypothecation deed.

In KCC, the borrower lodges the stocks in his godown and the key of the godown will be handed over to the bank. The goods lodged in the godown are pledged to the bank and they are allowed to be removed by the borrower on remitting into his CC account the amount equivalent to value of the goods. The bank would release further funds to the borrower within the Drawing Power (DP)/sanctioned limit on borrower depositing (pledge) more stock in the godown.  Therefore, such facility is called Key Cash Credit. This facility is more useful for traders and manufacturers buying and storing the  bulk quantity of seasonal goods or importing raw materials under the bulk order.

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