Page 12 - DCOM208_BANKING_THEORY_AND_PRACTICE

Unit 1: Introduction to Banks

advances are normally granted for a short period of time. Further, the purpose of Notes
granting advances is to meet the day to day requirements of business. The rate of
interest charged on advances varies from bank to bank. Interest is charged only on
the amount withdrawn and not on the sanctioned amount.
Modes of short-term financial assistance: Banks grant short-term financial assistance by way of
cash credit, overdraft and bill discounting.
(i) Cash Credit: Cash credit is an arrangement whereby the bank allows the borrower to
draw amounts upto a specified limit. The amount is credited to the account of the customer.
The customer can withdraw this amount as and when he requires. Interest is charged on
the amount actually withdrawn. Cash credit is granted as per agreed terms and conditions
with the customers.
(ii) Overdraft: Overdraft is also a credit facility granted by bank. A customer who has a
current account with the bank is allowed to withdraw more than the amount of credit
balance in his account. It is a temporary arrangement. Overdraft facility with a specified
limit is allowed either on the security of assets, or on personal security, or both.
(iii) Discounting of Bills: Banks provide short-term finance by discounting bills that is, making
payment of the amount before the due date of the bills after deducting a certain rate of
discount. The party gets the funds without waiting for the date of maturity of the bills. In
case any bill is dishonoured on the due date, the bank can recover the amount from the
customer.

Task Visit a commercial bank and study the conditions on which it issues loans and
advances to its clients.

Caselet United Bank of India Corporate Loans

nited Bank of India corporate loans are given to a wide swathe of industries that
include housing finance companies, large corporate, and Non-banking Financial
UCorporation’s (NBFCs). Minimum loan amount is ` 25 crores. The loan can be
utilized for establishing new units and modernizing old ones. Both infrastructure and
non-infrastructure sectors are covered under the scheme. Export Credits are also permitted.

Priority Sector Loans
United Bank of India priority sector loans covers the following different types:

Small Scale Industries
Retail Trade
Agricultural Loans
Retail Sector Loans
United Bank of India Retail Sector loans cover the following products:

United Smart Loan Scheme
United Personal Loan Scheme for Salaried Persons
Contd...

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