2. Introduction Of Bank
ļµ Bank word is dreived from an intalian word banco
and french word banque means bench.Later
derived from german word back mean joint stock
of money.
3. Definition.
ļµ Bank is an institute which collect money from thoes who
have its spares or who are saving it out of their income
and lending to thoes who require it.
5. Overdraft(running finance)
ļµ Features.
ļµ Facility that is provide to the account holder they can
withdraw their money in the excess of there account.
ļµ Bank examine the records of the person.
ļµ Charges on daily basis.
ļµ Securities are requires in some cases.
6. Cash credit.
ļµ Features.
ļµ Is a short term advance.
ļµ usually for commerical industrial concern
ļµ Bank allows to borrow in the from of installment or in
lump sum.
ļµ Pledgeable securities.
ļµ Interset only the amount utlize by the borrow.
7. Difference.
Basis. Cash credit. Overdraft.
Meaning. Is a short term loan provided to the
comapnies to fullfil their working
capital requirements.
Facility provided to the
companies to withdraw in
the exess of their balance.
Securities. Pledge or hypothecation of
goods.(current assets)
In some cases if party is
not off sound reputation.
(Fixed assets)
Intrest. Only on the amount utlizes by
`borrower.
Interest on daily basis.
Demand. At any time. Right to call money,lent at
short notices.
Requirments. On needs to open spreate cash
credit account to avail this offer.
Other avail on existing
current account
End use. This is only for business opreations. Can be use for any
purpose(personal or
business)
Lenght. Only for 1 year. Very short period usually a
month or a week.
8. ļµ An amount of money that is borrowed, often from a bank, and
has to be paid back, usually together with an extxa
amount of money that you have to pay as
a charge for borrowing.
Loan.
9. Securities:
The acceptable securities are goverment
securities, paper securities and tangiable securities in
return of these seucurities we received loans.
Features.
10. ļµ Time Period :
The amount of loan is payable on demand.The time period
depends upon the need of banks.
Cont'd
11. ļµ Rate of profit:
The profit is charged on the whole amount of loan.
Cont'd.
12. ļµ Purpose of Loan:
The purpose of loan is to meet the working capital requirements of the
business for short peorid.
Cont'd.
13. ļµ Demand loan.
ļµ Term loan.
ļµ Secured loans.
ļµ Unsecured loans.
Types of Loans.
14. Demand Loan.
ļµ A demand loan is a loan which is repayable on demand by
bank.In other word it is repayable at short notice.The entrie
amount of demand loan is disburse at one time and borrower has
to pay interest on it.The borrower can repay the amount in lump
sum(one time) or as agreed with bank. Demand loans are raised
normally for working capital purpose like purchase of raw
material and making payment of short term liabilities.
15. Term Loan.
ļµ Medium and long term loan are called term loan.Term loan is granted for more
than a year and payment of such loan is spread over for longer period.Ter loan
is required for starting the new business activity
renovation,modernization,expansion existing unit,purchase of their land for
setting up a factory.etc.These loan are generally secured against the mortage of
land,buliding,machinery.
16. Secured loans:
ļµ These are the loans which are granted against security of
tangiable assets like stock and immoveable.
17. Unsecured loans:
ļµ Unsecured loans are thoes loan which is not secured by security
of tangaible assets.Such loans are granted to frim/institution
against the personal security of the owner,manager or director.
18. Discounting of bill
When the holder of bill deposit or sell bill to bank
and obtain financial help from bank or other
financial institution is know as discounting of bill. A
bank give loan against the bill and discount
represent as interest on loan until the amount is
repay.
20. creation
ļµ Creation of a B/E Suppose a seller sells goods or merchandise to a buyer. In
most cases, the buyer would like to pay only after some time, that is, the
buyer would wish to purchase on credit. To solve this problem, the seller
draws a B/E of a given maturity on the buyer. The seller has now assumed the
role of a creditor; and is called the drawer of the bill. The buyer, who is the
debtor, is called the drawee. . The seller then sends the bill to the buyer who
acknowledges his responsibility for the payment of the amount on the terms
mentioned on the bill by writing his acceptance on the bill. The acceptor could
be the buyer himself or any third party willing to take on the credit risk of the
buyer.
21. Holder have two option
ļµ Discounting of a B/E The seller, who is the holder of an
accepted B/E has two options:
ļµ Hold on to the B/E till maturity and then take the
payment from the buyer.
ļµ Discount the B/E with a discounting agency
22. Types of bill
ļµ Demand bill
ļµ Usance bill
ļµ Documentary bill
ļµ Clean bill
23. Demand bill
ļµ Demand bill
This is payable immediately āat sight. A bill on
which no time of payment or ādue dateā is specified
is also termed as a demand bill
24. Usance bill
ļµ This is also called time bill. The term
usance refers to the time period recognized
by custom or usage for
payment of bills.
25. Documentary bill
ļµ These are the B/Es that are accompanied by documents
that confirm that a trade has taken place between the
buyer and the seller of goods
26. Clean bill.
ļµ not necessary of any documents that show that a trade
has taken place. Thus interest rate charged on such bills is
higher than rate charged on documentary bills.
27. Maturity of bill
ļ The maturity a B/E is defined as the date on which
payment will fall due. Normal maturity periods are
30,60,90 or 120 days but bills maturing within 90 days
seem to be the most popular
28. Features
ļµ Income
discounting of bill is a type of income for bank.
ļ Time period
the time period of bill draw may be within seven days or
more
ļ Negotiable
It is negotiable instrument.
ļ written
it is written document.
29. features
ļµ Finance
through the discounting of bill you have finance at the time
before the maturity.
ļµ trade
Provide benefit to importers and exporters.
mostly provide benefit to the trading purpose.
ļµ Deductions
Except the interest discounting of bill hove no
other deduction like tax.
