Legal & Regulatory Aspects of Banking - Types of Credit Facilities Unit - 9 : Types of Credit Facilities Lending is a principal activity of a bank . Therefore , a banker for his success, as a lender , is required to acquaint himself with various types of credit facilities .
TYPES OF CREDIT FACILITIES : Credit facility are broadly classified: FUND BASED NON- FUND BASED FUND BASED NON- FUND BASED Cash Credits Bank guarantee Overdrafts Acceptance Facility Bill Finance Letter of Credit (LC) Term Loans Derivative Products Demand loans Underwriting &Credit Guarantee
Fund Based Credit Facilities Cash Credits / Overdrafts – Cash credit /Overdraft is an arrangement by which a banker allows his customer to borrow money up to a certain limit. Term Loans - Bill Finance Non-Fund based Credit Facilities Bank Guarantee Letter of Credit Facility Rule in Clayton’s Case Discharge of debit items by subsequent credits was enunciated in a case called Clayton’s case.