Social Sciences, asked by aryansehgal5501, 1 year ago

How loans and advances provided by commercial banks?

Answers

Answered by alokpratap

commercial banks provide loans to any person by land securance and any property which under in your name

Answered by XxMissPaglixX

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$..Advancing of LoansAnother primary function of the commercial banks is to advance loans. A certain part of the cash received by the banks as deposits is kept in the reserve and the rest is given as loan Banks advance loans mostly for productive purposes, on approved security. The amount of loan isgenerally less than the value of the security. Banks advance following types of loans.(i) Cash Credit:-The debtor is allowed to withdraw a certain amount on a given security. The debtor withdraws the amount within this limit, as per his requirement and also repays it Interest is charged by the bank on the amount actually withdrawn.(ii) Overdraft:-Clients who have current account with the bank get the sanction to withdrawmore money than is lying in the said account. It is called overdraft. This facility is available for short-term to reliable persons. Supposing a person has 15.000 lying in current account. If the bank allows him to issue cheques up to 20,000, then the amount of 5.000 will be called overdraft(iii) Loans and Advances:- These loans are given in the form of a fixed amount Bank enters the amount of loan in the account books of the debtor. The latter can withdraw it any time. The interest is chargeable on the whole amount from the day the loan is sanctioned irrespectiveof the fact that the debtor withdraws the whole amount or part of it.(iv) Discounting of the Bill of Exchange:- It is another method of giving advance by the banks. Under this method, banks give advance to their clients on the basis of their bills of exchange before the maturity of such bills. A deduction is made out of the face value of the bill for the period the bill is yet to run. This deduction is called discounting of the bill. Thebanks discount only the trade bills. The bills are discounted at the market rate of interestOn the expiry of the maturity period, the amount mentioned in the bill is collected from theparty concerned by the bank...$

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