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Question
Explain how banks can advance loans through cash credit.
Answer in Brief
Solution
- Cash credit is a type of loan by bank. It is a short term working capital loan against collateral by the borrower.
- Under this, the borrower is allowed to withdraw upto a certain amount on a given security which comprises mainly stocks of goods and bills receivable from others.
- But interest is charged on the amount actually withdrawn.
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Commercial Banks: Functions
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