credit for a short period. Interest is payable on the actual amount withdrawn and not on the entire credit facility. . It is repayable on demand.
. Discounting of Bills Business customers approach banks to discount the commercial bills of exchanges and provide money. It is a short term credit instrument. Banks deduct the discount (interest) for the period mentioned in the bill and release the balance amount to the traders.
If the bill is dishonoured, the bank can recover the amount from the customer. It is a form of unsecured credit. B. Loans Short term and medium term loans are provided by commercial banks against eligible collaterals to business concerns.
It is a definite sum of money lent for a definite period. It is repayable in one lump sum or in instalments. Interest is payable on the entire loan amount. Every bank in these days design new methods of advancing loans to find more ways of learning income.
Generally commercial banks provide the following loans. . Housing Loan Taking the title deeds of the house as collateral security, based on the monthly income of the borrowing customer, banks advance medium and long term loans. The customer repay the loan in equated monthly instalments (EMI consists of principal and interest).
This is a boon to the middle class salaried employees who cannot afford to pay the full price of a house in a lump sum. . Consumer Loan Consumer durables like refrigerator, air conditioner, laptop, washing machine, television, etc. can be purchased by customers with consumer loans from banks.
The product purchased is hypothecated commerce - - . . PM (secured loan arrangement where the movable asset remains with the borrower) as security for the consumer loan amount. The customer pays in equated monthly instalments for a specified period.
. Vehicle Loan Two wheelers, cars, buses and other vehicles can be purchased by individuals as well as institutions obtaining vehicle loans from the banks. Vehicles are hypothecated to the bank until the entire loan amount is repaid. Vehicle registration book is deposited with the bank and on full payment