Mohammad yusuf (Corporate Finance Management trainee) (53 Points)
27 January 2012Hello Sir,
1-I wanted to know about fund based and non fund based limit
2-What is cash credit ?
3- What is consotium Banking.
5-what is the method of preparing projected balancesheet ?
Giridhar S Karandikar
(Team Lead)
(7548 Points)
Replied 27 January 2012
Cash Credit is a facility that has the features of the loan as well as bank account. When an person opens an CC account with the bank, he is being provided specified CC limit for the purpose of carrying on his business. For this purpose he is required to submit Stock Statements each month to the bank. The bank charges interest each month for operating the CC account. Once the CC account is being opened, the person can start issuing cheques. The bank will then debit the account holder’s account & the account holder will credit the bank account in his books. This is exactly the opposite of the normal current account. This facility is availed by large business houses who have numerous transactions taking place daily. They need not have to maintain any balance, but have to pay cheques subject to the CC limit granted by the bank.
In case of consortium banking, when suppose an organization is need of a loan which is of a large amount, say about 500crores. Then in such case the bank would not be able to grant the entire loan amount to the organization. In such cases 3-4 banks come together & then they provide the loan to the organization, so that the burden is not going only on one bank. This is known as consortium banking.
Projected B/s can be prepared by taking into account the need of the business to expand it activities in the future. In such cases it has to project the required assets it would tend to purchase & the corresponding cash resources it would be able to generate & the external sources of finance it would require after considering it’s internal cash resources.
Excel Mastery Program
CAclubindia
