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Commercial Banks

Commercial Banks:

Commercial Banks normally provide short-term finance which is repayable within a year. The major finance of commercial banks is as follows:

Short-term advance:

ommercial banks provide advance to their customers with or without securities. It is one of the most common and widely used short-term sources of finance, which are needed to meet the working capital requirement of the company. It is a cheap source of finance, which is in the form of pledge, mortgage, hypothecation and bills discounted and rediscounted.

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Short-term Loans:

Commercial banks also provide loans to the business concern to meet the short-term financial requirements. When a bank makes an advance in lump sum against some security it is termed as loan. Loan may be in the following form:

(a) Cash credit: A cash credit is an arrangement by which a bank allows his customer to borrow money up to certain limit against the security of the commodity.

(b) Overdraft: Overdraft is an arrangement with a bank by which a current account holder is allowed to withdraw more than the balance to his credit up to a certain limit without any securities.

Commercial Banks Commercial Banks Reviewed by Blog Editor on Monday, March 27, 2017 Rating: 5

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