TYPES OF CREDIT ACTIVITIES
Bankers Of the Article
TYPES OF CREDIT ACTIVITIES
worldbanks.news
Depending on the various nature of financing, all the lending activities have been brought under the following major heads:
Loan (General) :
Short term, Medium term & Long term loans allowed to individual/firm/industries for a specific purpose but for a definite period and generally repayable by installments fall under this head. This type of lending are mainly allowed to accommodate financing under the categories (I) Large & Medium Scale Industry and (ii) Small & Cottage Industry. Very often term financing for (I) Agriculture & (ii) Others are also included here.
Loan (General) :House Building Loan (General):
Loans allowed to individual/enterprises for construction of house (residential or commercial) fall under this type of advance. The amount is repayable by monthly installment within a specified period. Such advances are know as Loan (HBL-GEN).
House Building Loan (Staff) :
Loans allowed to our Bank employees for purchase/construction of house shall be known as Staff Loan (HBL-STAFF).
Other Loans to Staff :
Loans allowed to employees other than for House Building shall be grouped under head – Staff Loan (Gen).
Cash Credit (Hypo.):
Advances allowed to individual/firm for trading as well as wholesale purpose or to industries to meet up the working capital requirements against hypothecation of goods as primary security fall under this type of lending. It is a continuous credit. It is allowed under the categories (I) “Commercial Lending” when the customer is other than a industry and (ii) “Working Capital” when the customer is an industry.
Cash Credit (Pledge) :
Financial accommodations to individual/firms for trading as well as for whole-sale or to industries as working capital against pledge of goods as primary security fall under this head of advance. It is also a continuous credit and like the above allowed under the categories (i) “Commercial Lending” and (ii) Working Capital”.
Hire Purchase
Hire-Purchase is a type of installment credit under which the Hire-Purchaser agrees to take the goods on hire at a stated rental, which is inclusive of the repayment of Principal as well as interest for adjustment of the loan within a specified period.
Lease Financing:
Lease Financing is one of the most convenient sources of acquiring capital machinery and equipment whereby a client is given the opportunity to have an exclusive right to use an asset usually for an agreed period of time against payment of rent. It is a term financing repayable by installment.
Time Loan :
This is one time financial accommodation for short period maximum 12 months to meet some specific purpose. The loan is adjustable within the validity and not renewable and no transaction is allowed.
Consumers Credit Scheme :
It is a special credit scheme of the Bank to finance purchase of consumers’ durable to the fixed income group to raise their standard of living. The loans are allowed on soft terms against personal guarantee and deposit of specified percentage of equity by the customers. The loan is repayable by monthly installment within a fixed period.
SOD (General) :
Advances allowed to individual/firms against financial obligation (i.e. lien on FDR/PSP/ BSP/Insurance Policy/Share etc). This may or may not be a continuous Credit.
SOD (Others):
Advances allowed against assignment of work order for execution of contractual works falls under this head. This advance is generally allowed for a definite period and specific purpose i.e. it is not a continuous credit. It falls under the category “Others”.
SOD (Export) :
Advance allowed for purchasing foreign currency for payment against L/Cs (Back to Back) where the exports do not materialize before the date of import payment. This is also an advance for temporary period which is known as export finance and falls under the category “Commercial Lending”.
PAD:
Payment made by the Bank against lodgment of shipping documents of goods imported through L/C falls under this head. It is an interim advance connected with import and is generally liquidated against payments usually made by the party for retirement of the documents for release of imported goods from the customs authority. It falls under the category “Commercial Lending”.
XV. LlM :
Advances allowed for retirement of shipping documents and release of goods imported through L/C taking effective control over the goods by pledge in godowns under Bank’s lock & key fall under this type of advance. This is also a temporary advance connected with import which is known as post-import finance and falls under the category “Commercial Lending”.
LTR:
Advance allowed for retirement of shipping documents and release of goods imported through LC falls under this head. The goods are handed over to the importer under trust with the arrangement that sale proceeds should be deposited to liquidate the advances within a given period. This is also a temporary advance connected with import and known as post-import finance and falls under the category “Commercial Lending”.
IBP:
Payment made through purchase of inland bills/cheques to meet urgent requirement of the customer falls under this type of credit facility. This temporary advance is adjustable from the proceeds of bills/cheques purchased for collection. It falls under the category “Commercial Lending”.
Export Cash Credit (ECC) :
Financial accommodation allowed to a customer for exports of goods falls under this head and is categorized as “Export Credit”. The advances must be liquidated out of export proceeds within 180 days.
Packing Credit (P.C.) :
Advance allowed to a customer against specific L/C/firm contract for processing/packing of goods to be exported falls under this head and is categorized as “Packing Credit”. The advances must be adjusted from proceeds of the relevant exports within 180 days. It falls under the category “Export Credit”.
F D B P :
Payment made to a customer through purchase/negotiation of a Foreign documentary bills falls under this head. This temporary advance is adjustable from the proceeds of the shipping/export documents. It falls under the category “Export Credit”.
IDBP :
Payment made against documents representing sell of goods to Local export oriented industries which are deemed as exports and which are denominated in Local Currency / Foreign Currency falls under this head. This temporary liability is adjustable from proceeds of the Bill.
F B P :
Payment made to a customer through Purchase or Foreign Currency Cheques/Drafts falls under this head. This temporary advance is adjustable from the proceeds of the cheque/draft.