CONCEPT OF CREDIT

FUND BASED
NON FUND BASED
FUND BASED

NON FUND BASED

FUND BASED

FUND BASED
AGAINST BANKS
DEPOSITS

AGAINST OTHER
THAN BANKS
DEPOSITS

GOLD LOAN

AGAINST BANKS DEPOSITS

AGAINST
TIME
DEPOSITS

AGAINST
SPECIAL
TIME
DEPOSITS

AGAINST
RECURRING
DEPOSITS
A/Cs

OTHER THAN BANKS DEPOSITS

OTHER THAN
BANKS
DEPOSITS
SHARES
AND DEBENTURE

AGAINST LISTED
MAGNUMS

AGAINST UNITS
OF UTI

OTHER THAN BANKS DEPOSITS CONTD

OTHER THAN
BANKS
DEPOSITS
AGAINST OPEN
ENDED SCHEMES
OF SBI MF

AGAINST
NSC / KVP / IVP

AGAINST
LIC POLICIES

AGAINST RBI
RELIEF FUND

FUND BASED

WORKING CAPITAL ADVANCES

TERM LOAN
CHEQUE PURCHASE
BILL PURCHASE
PACKING CREDIT & POST SHIPMENT CREDIT
DEFERRED PAYMENT GUARANTEE
CONSORITIUM ADVANCES
CREDIT SYNDICATION

NON FUND BUSINESS

LETTER OF CREDIT
BANK GUARANTEE
FORWARD CONTRACTS

TYPES OF ADVANCES

TYPES OF
ADVANCES
DEMAND
LOAN

OVERDRAFT

TERM LOAN

CASH CREDIT

DEMAND LOAN

ONE TIME ADVANCE FOR A FIXED AMOUNT,

NO FURTHER DEBIT IS ALLOWED EXCEPT FOR INTEREST,
INSURANCE PREMIA, OTHER SUNDRY CHARGES
IT IS SANCTIONED AGAINST PLEDGE OF GOLD ORNAMENTS, BANKS
TERM DEPOSITS, AND SECURITIES OTHER THAN BANK DEPOSITS
e.g. NSC / KVP / IVP, PENSION LOAN, AGAINST SHARE/DEBENTURES
SECURITY DOCUMENTS :- a) DEMAND PROMISSORY NOTE b) D P
NOTE DELIVERY LETTER
HOLDER OF D.P.NOTE MAY SUE UPON WITHIN 3 YRS FROM THE
DATE OF ITS EXECUTION
BEFORE EXPIRY OF 3 YRS REVIVAL LETTER OF D.P.NOTE IS TAKEN
LEST DOCUMENT WILL BE TIME BARRED
DETAILS OF DOCUMENTS ARE DIARISED IN document register

OVERDRAFTS

OVERDRAFTS MAY BE SANCTIONED AGAINST SECURITY OR

WITHOUT ANY SECURITY (CLEAN OVERDRAFT)
THESE SECURITY MAY BE BANKs OWN TERM DEPOSIT,
SPECIAL TERM DEPOSIT, L I C POLICIES, UNITS OF UTI, NSC,
MAGNUM CERTIFICATES, SHARES AND DEBENTURES
OVERDRAFT DRAWING EXCEEDING WHAT STANDS TO
YOUR CREDIT
CUSTOMER IS ALLOWED TO DRAW WITHIN THE SANCTIONED
AMOUNT
D.P. NOTE, D.P.NOTE DELIVERY LETTER AND SECURITY
DELIVERY LETTER IS TAKEN

GOLD LOAN

GOLD LOAN IS SANCTIONED AGAINST PLEDGE OF GOLD

ORNAMENTS TO THE BANK BOTH UNDER Per AND Agrl Segments
CUSTOMER
MAY BE SANCTIONED SINGLY OR JOINTLY.
D.P. NOTE AND ACCOUNT OPENING cum-DELIVERY LETTER IS
TAKEN
PURITY OF ORNAMENT IS TESTED BY CASH OFFICER AND IN CASE
OF NEED CERTIFICATE OF PURITY MAY BE OBTAINED FROM
APPROVED GOLD SMITH ALSO. NITRIC ACID TEST METHOD AND
WEIGHTMENT IN WATER TEST METHODS IS USED
WEIGHT IN AIR X AND X X/19 SHOULD BE EQUAL TO THE WEIGHT
OF ORNAMENTS IN WATER Y . IF Y IS LESS THIS SHOWS IMPURITY
ORNAMENTS ARE KEPT IN JOINT CUSTODY

IRREGULAR DEMAND LOAN / GOLD LOAN

EVERY GOLD LOAN AND DEMAND LOAN IS FOLLOWED BY A

FIXED REPAYMENT PROGRAMME AND DRAWING POWER
DECREASES AS THE TIME PASSES AND IT SHOULD BE WITHIN
DRAWING POWER.
IN CASE OF GOLD LOAN IN NO CASE OUTSTANDING SHOULD
EXCEED THE VALUE OF GOLD ORNAMENTS
REMINDER HAS TO BE SENT TO THE DEFAULTER
CUSTOMERS
VALUATION OF GOLD ORNAMENT IS ADVISED REGULARLY BY
THE BANK
PART DELIVERY IS PERMITTED AND IN CASE OF DEFAULTER
BORROWER SALE OF ORNAMENT IS DONE AS PER NORMS

TERM LOAN

TERM LOAN IS SANCTIONED FOR ACQUIRING FIXED ASSETS

e.g. CONSTRUCTION OF HOUSE, PURCHASE OF FLAT,
PURCHASE OF VEHICLE, PURCHASE OF PLANT &
MACHINERIES, EDUCATION LOAN, PERSONAL LOAN,
RENOVATION OF ASSETS
IT IS FOLLOWED BY A FIXED REPAYMENT PROGRAMME.
ASSETS CREATED OUT OF BANKS FINANCE IS
HYPOTHECATED TO BANK
AFTER FULL DISBURSEMENT OF T/L NO SUBSEQUENT
DISBURSEMENT IS ALLOWED EXCEPT INTT. INSURANCE
PREMIA, AND OTHER SUNDRY CHARGES
IT IS GRANTED FOR A FIXED TERM OF NOT LESS THAN 3 YRS
WITH REPAYMENT SCHEDULE NORMALLY NOT EXCEEDING 7
YEARS

CASH CREDIT

FUNDS REQUIRED TO MEET DAY TO DAY REQUIREMENT FOR

PRODUCTION AND SALES
FOR PRODUCTION WE NEED FUND FOR PURCHASE OF RAW
MATERIALS/FUEL / LABOUR PAYMENT / ELECTRICITY
CHARGES etc
CUSTOMER IS REQUIRED TO INFUSE HIS/HER MONEY ALSO
AS MARGIN MONEY. IT DEPENDS UPON NATURE OF
BUSINESS
DRAWING IS ALLOWED WITHIN DRAWING POWER ARRIVED
AT.
DRAWING POWER IS CALCULATED AGAINST ASSETS
HYPOTHECATED TO BANK
DRAWING POWER IS DIFFERENT FROM LIMIT SANCTIONED

CHEQUE PURCHASE

CHEQUE MAY BE DRAWN LOCALLY OR ON OUTSTATION

BRANCH
NORMALLY OUTSTATION CHEQUES ARE SENT TO DRAWEE
BRANCH FOR PAYMENT AND FUND IS PROVIDED TO
CUSTOMER ON REALIZATION OF CHEQUE
HOWEVER, WE MAKE AVAILABLE AMOUNT OF OUTSTATION
CHEQUE TO CUSTOMER ON THE DAY OF PRESENTATION
ALSO AND IS KNOWN AS CHEQUE PURCHASE
THIS FACILITY IS AVAILABLE TO Per Segment CUSTOMER UPTO
Rs.20000/
THIS FACILITY IS AVAILABLE TO BUSINESS HOUSES ALSO
BASED ON THEIR NEED AND FINANCIAL ASSEMENT AFTER
RETAINING SOME MARGIN AND SUCH FACILITY IS KNOWN AS
CHEQUE PURCHASE

BILL PURCHASE

AMOUNT OF BILLS DRAWN (BOTH DRAWN LOCALLY OR

OUTSTATION) IS MADE AVAILABLE TO THE BUSINESS HOUSES
AFTER RETAINING CERTAIN MARGIN.
THIS FACILITY IS KNOWN AS BILL PURCHASE
FACILITY IS ASSESSED ACCORDING TO NEED AND CREDIT
WORTHINESS OF THE BUSINESS HOUSE
BOTH IN CASE OF CHEQUE PURCHASE AND BILL PURCHASE
WE KEEP CLOSE WATCH AND ENSURE THAT ITS PROCEEDS
ARE REALISED WITHIN STIPULATED PERIOD
IN CASE OF RETURN OF CHEQUE / BILL PURCHASED
PROCEEDS IS RECOVERED ALONG WITH INTEREST AND
OTHER CHARGES

PACKING CREDIT ADVANCES

PACKING CREDIT

PRESHIPMENT :
FINANCE PRIOR
TO SHIPMENT

POST SHIPMENT:
FINANCE AFTER
SHIPMENT

DEFERRED PAYMENT GUARANTEE

CONTRARY TO TERM LOAN COST OF MACHINERIES
IS PAID ON DEFERRED TERMS
THE BANK EXECUTES A GUARANTEE ON BEHALF
OF THE BUYER TO THE SELLERS BANKER WHO,
ON THE STRENGTH THEREOF, DISCOUNTS THE
BILL DRAWN ON BUYER.
THE SUPPLIER RECEIVES PAYMENT OF THE BILL
ON BEING DISCOUNTED BY HIS BANKER AND
BUYER REPAYS HIS OBLIGATION IN INSTALMENTS
TO THE SELLERS BANKER BY RETIRING THOSE
BILLS ON ITS MATURITY DATES

CONSORITIUM ADVANCES
WHEN BORROWERS CREDIT NEEDS ARE LARGE
AND FINANCING BANKS RESOURCES ARE SMALL
OR INADEQUATE OR A SINGLE BANK IS RELUCTANT
TO SANCTION VERY LARGE LOAN TO A
PARTICULAR GROWING COMPANY, FEW BANKS
MAY MEET THE NEEDS JOINTLY WITH COMMON
APPRAISAL, COMMON DOCUMENTS AND JOINT
SUPERVISIONS AND FOLLOW UP EXERCISES

CREDIT SYNDICATION
COMPANY CHOOSES A LEAD MANGER (BANK /
FINANCIAL INSTITUTION)
LEAD MANAGER WOOS THE PARTICIPANT BANKS
FOR EXTENDING CREDIT TO THE COMPANY
IT SAVES THE TIME OF THE COMPANY SEEKING
FINANCE
SYNDICATE MANAGER ACTS AS AN AGENT AND
EARNS FEES FOR ARRANGING SYNDICATION. HE
MAY OR MAY NOT CONTRIBUTE THE LOAN
SYNDICATION

NON FUND BUSINESS LETTER OF

CREDITS

LETTER OF CREDIT IS A MEANS TO ENSURE PAYMENT TO THE

SELLER OF GOODS & SERVICES SUPPLIED TO THE BUYER
AND IT ALSO ENSURES THE DELIVERY OF GOODS AND
SERVICES TO THE BUYER
PARTIES TO LETTER OF CREDITS ARE a) APPLICANT b)
ISSUING BANK c) ADVISING BANK d) BENEFICIARY e)
NEGOTIATING BANK
UNDER L/C BILLS DRAWN ARE SENT TO THE BUYERS BANK
AND IT IS PAID BY THE BUYER AS AGREED UPON BY BUYER
AND SELLER

BANK GUARANTEE

IN COMMERCIAL TRANSACTION, THE LENDER DESIRES THAT

MONEY LENT IS RECEIVED BACK WITHOUT FAIL. SO HE
SEEKS FROM THE LOANEE THE GUARANTEE OF ANOTHER
PERSON FOR THE REPAYMENT OF THE DEBT IN CASE THE
LOANEE FAILS TO REPAY.
IT HAS THREE PARTIES a) APPLICANT THE PRINCIPAL
DEBTOR AT WHOSE REQUEST GUARANTEE IS BEING
EXECUTED b) BENEFICIARY PERSON TO WHOM THE
GUARANTEE IS BEING GIVEN AND WHO CAN ENFORCE IT IN
CASE OF DEFAULT c) GUARANTOR THE PERSON WHO
UNDERTAKES TO DISCHARGE THE OBLIGATIONS OF THE
APPLICANT IN CASE OF DEFAULT

FORWARD CONTRACT
A FORWARD CONTRACT IS A CONTRACT BETWEEN
TWO ENTITIES WHERE SETTLEMENT TAKES PLACE
ON A SPECIFIED DATE IN THE FUTURE AT TODAYS
PRE AGREED PRICE.