TYPES OF CREDIT FACILITIES :

The business of lending is carried on by banks offering various credit facilities to its customers. Basically various credit facilities offered by banks are generally repayable on demand. A bank should ensure proper recovery of funds lent by him and acquaint itself with the nature of legal remedies available to it and also law affecting the credit facilities provided by it.

Credit facilities broadly may be classified as under:

(a) Fund Based Credit Facilities

Fund based credit facilities involve outflow of funds meaning thereby the money of the banker is lent to the customer. They can be generally of following types:

(i) Cash credits/overdrafts

(ii) Demand Loans/Term loans

(iii) Bill finance

(b) Non-Fund Based Credit Facilities

In this type of credit facility the banks funds are not lent to the customer and they include:

(a) Bank Guarantees

(b) Letter of Credit