Explain how the Commercial Banks provide credit facilities through the measures of 'Cash credit'.
Cash credit is very popular among businessmen in India for
meeting their working capital requirements. Its working is explained as :
1)Cash credit is a short-term credit given to the
businessmen for meeting their working capital requirement It is normally made against certain security
like shares, stocks, bonds, etc.
2) Under this facility, the entire amount of loan
will not be given at one particular time. The banker opens the cash credit
account in the name of the borrower and permits him to withdraw money from time
to time up to a certain limit fixed by the value of stocks/security. The
security remains in the possession of the bank. The borrower takes money from
the cash credit account as per his requirements.
3) He
cannot at any time exceed the credit limit allowed to him. Here the interest is
charged only on the amount actually withdrawn by the account holders from the
account. This type of loan is very popular among businessmen in India.
Cash credit is very popular among businessmen in India for meeting their working capital requirements. Its working is explained as :
1)Cash credit is a short-term credit given to the businessmen for meeting their working capital requirement It is normally made against certain security like shares, stocks, bonds, etc.
2) Under this facility, the entire amount of loan will not be given at one particular time. The banker opens the cash credit account in the name of the borrower and permits him to withdraw money from time to time up to a certain limit fixed by the value of stocks/security. The security remains in the possession of the bank. The borrower takes money from the cash credit account as per his requirements.
3) He cannot at any time exceed the credit limit allowed to him. Here the interest is charged only on the amount actually withdrawn by the account holders from the account. This type of loan is very popular among businessmen in India.
