Cash Credit
Cash credit facility is provided usually to entities(borrowers) engaged in manufacturing and / or trading activities to enable them to meet the gap in their working capital requirements. This facility is repayable on demand. The cash credit facility is generally granted against the security of stocks of goods (net of trade creditors), standing crops, bills / book debts representing genuine sales(restricted to pre-defined age of such book debts).
Cheque book is issued to the borrower for withdrawal of money against the limit sanctioned. The withdrawals are permitted within the drawing power
balance available against facility amount approved. This is a revolving facility and is, generally, reviewed and renewed annually.
The cash credit advances are generally on ‘floating’ interest rate basis. The rate is reset periodically, depending upon any changes in the bank’s
base rate (MCLR – Marginal Cost of fund based Lending Rate) / spread in relation to the class of borrower / risk perception about the borrower.