16 October 2013
various bankers provides Rural and Inclusive Banking Group (RIBG) offers Overdraft and Cash Credit facility to traders, processors, transporters, aggregators etc.
CASH CREDIT FACILITY ********************* This kind of fund based working capital facility is provided to traders/manufacturers & the like. Bank has focus for extending cash credit facility to small & medium size enterprises.
must read: https://www.caclubindia.com/experts/difference-btw-cash-credit-and-term-loan-368360.asp#.Ul5LfVNHhkg
letter of credit ***************** Letter of Credit L/c also known as Documentary Credit is a widely used term to make payment secure in domestic and international trade. The document is issued by a financial organization at the buyer request. Buyer also provide the necessary instructions in preparing the document.
The International Chamber of Commerce (ICC) in the Uniform Custom and Practice for Documentary Credit (UCPDC) defines L/C as:
"An arrangement, however named or described, whereby a bank (the Issuing bank) acting at the request and on the instructions of a customer (the Applicant) or on its own behalf :
Is to make a payment to or to the order third party ( the beneficiary ) or is to accept bills of exchange (drafts) drawn by the beneficiary. Authorised another bank to effect such payments or to accept and pay such bills of exchange (draft). Authorised another bank to negotiate against stipulated documents provided that the terms are complied with.
A key principle underlying letter of credit (L/C) is that banks deal only in documents and not in goods. The decision to pay under a letter of credit will be based entirely on whether the documents presented to the bank appear on their face to be in accordance with the terms and conditions of the letter of credit.
must read: http://howtoexportimport.com/How-Letter-of-Credit-LC-works-36.aspx
overdraft *********
A bank overdraft is when someone is able to spend more than what is actually in their bank account. Obviously the money doesn't belong to them but belongs to the bank so this money will need to be paid back; normally automatically done when money goes into the persons account. The overdraft will be limited.
A bank overdraft is also a type of loan as the money is technically borrowed.
must read: https://www.caclubindia.com/experts/difference-between-cc-and-od-172641.asp#.Ul5Mu1NHhkg
16 October 2013
generally these are forms of working capital finance products available from financial institutions.
In short:
Cash Credit: This facility will be given by the banker to the customers by giving certain amount of credit facility on continuous basis. The borrower will not be allowed to exceed the limits sanctioned by the bank.
Bank Overdraft: It is a short - term borrowing facility made available to the companies in case of urgent need of funds. The banks will impose limits on the amount they can lend. When the borrowed funds are no longer required they can quickly and easily be repaid.
The banks issue overdrafts with a right to call them in at short notice.
Line of Credit: Line of Credit is a commitment by a bank to lend a certain amount of funds on demand specifying the maximum amount.
Letter of Credit: It is an arrangement by which the issuing bank on the instructions of a customer or on its own behalf undertakes to pay or accept or negotiate or authorizes another bank to do so against stipulated documents subject to compliance with specified terms and conditions
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