TYPES OF CREDIT FACILITY OFFERED BY BANK

Banks main source of funds is deposits from public at large. These deposits are repayable on demand or after a specific time. So banks should deploy such funds very carefully. The funds which are deposited into banks are generally used by the bank for lending purpose. The business of lending is carried on by banks offering various credit facilities to its customers.

Credit facilities broadly classified as under:-

1.       Fund based credit facilities:

                                                        Fund based credit facilities involves outflow of fund to the customer. They can be generally of following types:-

1.       Cash Credits/Overdrafts.

2.       Demand loan/Term Loans

3.       Bill finance.

2.       Non-fund based Credit Facilities:

                                                               In this type of Credit Facilities the bank does not lent any fund to the customer otherwise they include:

1.       Bank Guarantees.

2.       Letter of Credit.

Details discussion of individual credit facility will be published in next blog.