Question

Write short notes on the following:
Cash Credit.

Answer 1

Cash credit is a facility to withdraw money from a current bank account without having credit balance but limited to the extent of borrowing limit which is fixed by the commercial bank. The interest on this facility is charged on the running balance and not the borrowing limit which is given by bank.

Features of cash credit :

1. Borrowing limit
2. Interest on running balance
3. Minimum committment charge
4. Security
5. Validity of credit period