Types of credit made by the Premier bank
Modern banking operation touches almost every sphere of economic activity. The extension of bank credit is necessary for expansion of business operations. Bank credit is a catalyst bringing about economic about economic development. Without adequate finance there can be no growth or maintenance of a stable output. Bank lending is important to the economy, for it makes possible the financing of commercial and industrial activities of a nation. The credit facilities are generally allowed by the bank may be in two broad categories. They are as follows:
Funded facilities can also be divided into the following categories
The term of loan is determined on the basis of gestation period of a project generation of income by the use of the loan. Such loans are provided for Farm Machinery, Dairy, Poultry, etc. It is categorized in three segments:
|Types of Term Loan||Time (Period)|
|Short Term||1 to 3 years|
|Medium Term||3 to 5 tears|
|Long Term||Above 5 years|
Over Draft (OD):
OD is some kind of advance. In this case, the customer can over draw from his/her current account. There is a limit of overdraw, which is set by the bank. A customer can with draw that much amount of money from their account. For this there is a interest charge on the over draw amount. This facility does not provide for every one, the bank will provide only those who will fulfill the requirement. It means that only real customer can get this kind of facility.
Cash Credit (Hypo):
It allows to individuals or firm for trading as well as whole-sale purpose or to industries to meet up the working capital requirements against hypothecation of goods as primary security fall under this type of lending. It is a continuous credit. It allowed under two categories:
- Commercial Lending
- Working Capital
Cash Credit (Pledge):
Financial accommodation to individual/firm for trading as well as whole sale purpose or to industries as working capital against pledge of goods primary security falls under this head of advance. It also a continuous credit and like the above allowed under the categories:
- Commercial Lending
- Working Capital
Advance allowed to individual/firm against financial obligation (i.e. lien of FDR/PS/BSP etc.) and against assignment of work order for execution of contract works fall under this head. This advance is generally allowed for allowed for definite period and specific purpose. It is not a continuous credit.
Advances allowed for purchasing foreign currency for opening L/C for imports of goods fall under this type of leading. This is also an advance for a temporary period, which is known as preemptor finance and falls under the category ‘Commercial Lending’.
Payment made by the bank against lodgment of shipping documents of goods imported through L/C falls under this type head. It is an interim type of advance connected with import and is generally liquidated shortly against payments usually made by the party for retirements of documents for release of import goods from the customer authority. It falls under the category ‘Commercial Lending’.
Advances allowed for retirement of shipping documents and release of goods imported through L/C without effective control over the goods delivered to the customer fall under this head. The goods are handed over the importer under trust with arrangement that sales proceed should be deposited to liquidate the advances within a given period. This is also temporary advance connected with import that is known post-import finance under category ‘Commercial lending’.
Payment made through purchase of inlands bill to meet urgent requirements of customer fall under this type of credit facility. This temporary advance is adjusted from the proceeds of bills purchased for collection. It falls under the category ‘Commercial Lending’.
Payment made to a party through purchase of foreign documentary bills fall under this head. This temporary advance is adjustable from the proceeds of negotiable shipping/export documents. It falls under category ‘Export Credit’.
Payment made to a party through purchase of local documentary bills fall under this head. This temporary liability is adjustable from proceeds of the bill.
The exporters pay of the imported goods on behalf of the importer through bank guarantee. If the exporter fails to make the fulfill payment at the moment the bank will take the liability and pay to the exporter. This type of guarantee is also needed to attend in any tender.
Loan has given only to the Person for the purpose of Repairing and Reconstruction of dwelling Houses
House building Loan: A credit facility is available for the person having land property.
Non Funded Facilities:
Non funded facilities are divided into the following categories:
A credit facility in contingent liabilities from extended by the banks to their clients for participation in development work, like supplies goods and services.
Letter of Credit:
A credit facility in contingent liabilities from provided to the clients by the banks for import/procurement of goods and services.