Q.What is Cash Credit?
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Start your 14-day free trial to unlock the full solution →Cash credit is a short-term loan facility where a bank sets a borrowing limit against security and the customer withdraws as needed, paying interest only on the amount used. A TS Inter 2nd-year Commerce / NCERT-aligned banking term.
Cash Credit
Cash credit is one of the important lending functions of a commercial bank. Under this arrangement the bank sanctions a credit limit to a business customer against the security of tangible assets such as stock-in-trade, raw materials or other goods. The customer can withdraw money from this account as and when required, up to the sanctioned limit, and can also repay when funds are available. A key feature is that interest is charged only on the amount actually withdrawn and used, not on the whole sanctioned limit. Because of this flexibility, cash credit is widely used by businesses to meet their day-to-day working-cap …
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