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Question
Answer the following question :
What are the different types of loans provided by commercial banks ?
Solution
Loans : Loans are the credit provided by banks for a certain time period bearing a varying rate of interest. Various type of loans provided by the banks are as follows:
(i) Call Loans/Money at Call Notice : These loans are provided for a period of 7 to 15 days. These loans are generally taken by bill brokers or stock brokers. These are called as call loans, as they can be called back anytime by the commercial bank from the borrowers. Hence, rate of interest is the lowest.
(ii) Short term loans : These are provided by commercial banks for a period of not more than two years. They are given to the businessmen to satisfy their working capital requirement. The rates of interest are higher than call loans and lower than medium term loans.
(iii) Medium term loans : These loans are provided by commercial banks for a period ranging from two to five years. Such loans are useful to producers and manufacturers for making changes in the methods of production, purchase of equipment, tools, etc.
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