These are, therefore, counter part of demand deposits of the Bank. Overdraft The word overdraft means the act of overdrawing from a Bank account. In other words, the account holder withdraws more money from a Bank Account than has been deposited in it. How does this account then differ from a Cash Credit Account? The difference is very subtle and relates to the operation of the account. In the case of Cash Credit, a proper limit is sanctioned which normally is a certain percentage of the value of the commodities/debts pledged by the account holder with the Bank.
Overdraft, on the other hand, is allowed against a host of other securities including financial instruments like shares, units of mutual funds, surrender value of LIC policy and debentures etc. Some overdrafts are even granted against the perceived “worth” of an individual. Such overdrafts are called clean overdrafts. Bill Discounting Bill discounting is a major activity with some of the smaller Banks. Under this type of lending, Bank takes the bill drawn by borrower on his(borrower’s) customer and pay him immediately deducting some amount as discount/commission.
The Bank then presents the Bill to the borrower’s customer on the due date of the Bill and collect the total amount. If the bill is delayed, the borrower or his customer pay the Bank a pre-determined interest depending upon the terms of transaction. 2) Customer Advances Sometimes businessmen insist on their customers to make some advance payment. It is generally asked when the value of order is quite large or things ordered are very costly. Customers’ advance represents a part of the payment towards price on the product which will be delivered at a later date.
The Term Paper on Inclusive Growth Is Beyond Just Opening Bank Accounts
Inclusive growth is beyond just opening Bank Accounts Prime Minister Jan Dhan Yojana (PMJDY) has become a national priority. It is designed to end financial untouchability through Financial Inclusion and to convert our country into a digital India. PMJDY aims to provide all the citizen of India– especially the poor masses- Bank Account, Credit Facility, Insurance Cover and Debit Card. Under the ...
Customers generally agree to make advances when such goods are not easily available in the market or there is an urgent need of goods. A firm can meet its short-term requirements with the help of customers’ advances to make advances when such goods are not easily available in the market or there is an urgent need of goods. A firm can meet its short-term requirements with the help of customers’ advances. 3) Instalment credit Instalment credit is now-a-days a popular source of finance for consumer goods like television, refrigerators as well as for industrial goods.
You might be aware of this system. Only a small amount of money is paid at the time of delivery of such articles. The balance is paid in a number of instalments. The supplier charges interest for extending credit. The amount of interest is included while deciding on the amount of instalment. Another comparable system is the hire purchase system under which the purchaser becomes owner of the goods after the payment of last instalment. Sometimes commercial banks also grant instalment credit if they have suitable arrangements with the suppliers. ) Loans from Co-operative Banks Co-operative banks are a good source to procure short-term finance. Such banks have been established at local, district and state levels. District Cooperative Banks are the federation of primary credit societies. The State Cooperative Bank finances and controls the District Cooperative Banks in the state. They are also governed by Reserve Bank of India regulations. Some of these banks like the Vaish Co-operative Bank was initially established as a co-operative society and later converted into a bank.
These banks grant loans for personal as well as business purposes. Membership is the primary condition for securing loan. The functions of these banks are largely comparable to the functions of commercial banks 5) Trade Credit Trade credit refers to credit granted to manufactures and traders by the suppliers of raw material, finished goods, components, etc. Usually business enterprises buy supplies on a 30 to 90 days credit. This means that the goods are delivered but payments are not made until the expiry of period of credit.
The Essay on Access to Bank Credit to Small and Medium Enterprises
Finance function is the most important of all business functions. It remains a focus of all business activities. Financing SMEs has acquired enormous importance in contemporary world of finances. This is primarily due to the national focus and priority of various countries – developed and developing ones as well. In the Sri Lankan context , the government has provided impetus to the ...
This type of credit does not make the funds available in cash but it facilitates purchases without making immediate payment. This is quite a popular source of finance 6) Commercial Papers commercial paper is an unsecured promissory note with a fixed maturity of 1 to 270 days. Commercial paper is a money-market security issued (sold) by large banks and corporations to get money to meet short term debt obligations (for example, payroll), and is only backed by an issuing bank or corporation’s promise to pay the face amount on the maturity date specified on the note.
Since it is not backed by collateral, only firms with excellent credit ratings from a recognized rating agency will be able to sell their commercial paper at a reasonable price. Commercial paper is usually sold at a discount from face value, and carries higher interest repayment rates than bonds. Typically, the longer the maturity on a note, the higher the interest rate the issuing institution must pay. Interest rates fluctuate with market conditions, but are typically lower than banks’ rates
