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October 27, 2012

Modes of Short-Term Financial Assistance

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Friends, in our last post we've discussed about the Primary and Secondary Functions of Banks (you can read that post here). Apart from these functions, Banks do provide short-term financial assistance too (usually we include them in the primary functions)

Modes of short-term financial assistance

Banks grant short-term financial assistance by way of cash credit, overdraft and bill discounting.
a) 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 Interest is charged on the amount actually withdrawn.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.
b) 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.

c) 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.

Read Complete Banking Awareness for IBPS Clerks Here

IBPS Clerks CWE Online Exam 2012-13 Banking Awareness

1 comment:

  1. Hi Mam,

    I am Krishnan. I did my B.E.ECE in 2008.Then I did a course in ,NET and Netwoking.It was hard for me to get a IT Job due to severe recession till 2010.Eventhough i tried for IT Jobs upto 2012.From 2012 I have been preparing for banking exams.Now my aim is to get a bank job.I have appeared for 5 bank exams but I didn't get selected.Still iam consistently trying or bank jobs.Now i have no Experience.What to answer in interview if i get selected?.Please give me suggestion for me about the experience.


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