Cash Credit (CC):
A cash credit is an arrangement by which the customer is allowed to borrow many up to a certain limit. This permanent arrangement and the customers need not to draw the sanctioned amount of money at a time. The borrower can draw the money when required. The borrower can put back any surplus amount, which he/she may be affected frequently. Intersect is charged only to the amount withdrawn and not the whole amount sanctioned cash credit arrangement is usually divide into two ways such as:
- Cash credit pledge.
- Cash credit hypothecation
Cash credit pledge:
In case of cash credit pledge possession of the goods dealings to bank and ownership of the goods belongs to borrower and bank the possessions of the goods as primary security. The goods stored in go down under lock and key by direct supervision of the bank. If the borrower wants to sell any portion of the pledged goods he/she permission of bank with returning the value of the loan amount. It is therefore regarded as the most secured type of advance
Cash credit hypothecation:
In case of cash credit hypothecation possession of the goods not transferred to the bank and therefore such and advance is no better then a clean loan, such an advance can thus only be granted to a person in whose integrity the banked has full confidence cash credit in the form of ‘Hypothecation’ is normally accompanied with mortgage of immovable properties. The pray/borrower possesses the lock and key of the down.
The Formalities of opening cash credit:
The intending cash credit holder should submit the following documents and being fill-up properly:
- Stock report, rend receipt.
- Trade license.
- Up to date income tax clearing certificate.
- Charge documents.
- Letter of continuity.
- Letter of arrangement.
- DP (Demand Promissory) note.
- Letter of guarantee.
- Letter lien.
- Limit sanctions advice.
- Non-Encumbrance certificate.
