Interchange of Limit allows part of a sanctioned exposure to be used between approved facility types, usually within an overall cap and subject to conditions. In MSME banking, a borrower may need flexibility between cash credit, letter of credit, bank guarantee, overdraft, or other sub-limits depending on business needs. For example, a seasonal trader may use more non-fund-based limit during procurement and more working-capital limit during sales. This feature supports operational flexibility, but it can also change the lender’s risk profile if misused. It matters because fund-based and non-fund-based facilities carry different risk, security, and monitoring requirements. The common caution is to define eligible sub-limits, interchange caps, margin, approval level, and documentation clearly in the sanction terms.