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Question
It is a formal and revolving credit agreement under which the borrower is allowed to borrow upto the specified limit.
Options
Cash credit
Overdraft
Discounting of bills
None of these
Solution
Cash credit
Explanation:
Cash credit is a formal, revolving credit agreement under which the borrower is allowed to borrow up to the specified limit. The amount may be withdrawn in instalments. Interest is charged on the amount actually withdrawn. The borrower is required to offer security in the form of tangible assets or guarantees.
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