Different Loans

Different Loans

1. Continuous Loan (CL):
• What: Revolving credit facility for working capital.
• Use: Businesses can withdraw, repay, and re-borrow within limits.
• Example: Factory uses raw material loan repeatedly.
2. Demand Loan (DL):
• What: Loan repayable on demand by the bank.
• Use: Short-term financing for emergencies or working capital.
• Example: Bank can recall loan if cash is needed.
3. Term Loan (TL):
• What: Loan for a fixed period for specific purposes.
• Use: Project financing, equipment purchase.
• Example: Loan to buy machinery for 5 years.
4. Short Term Agricultural Loan:
• What: Loan for seasonal farming needs.
• Use: Seeds, fertilizers, irrigation, crop production.
• Example: Loan to a farmer for monsoon crop season.
5. Micro Credit Loan:
• What: Small loan to low-income individuals or small entrepreneurs.
• Use: Encourage self-employment and small businesses.
• Example: Loan to start a small grocery shop.

Banking Instruments / Credit Facilities

1. LC (Letter of Credit):
• What: Bank guarantees payment to exporter on behalf of importer.
• Use: Facilitates international trade.
• Example: Importing machinery from abroad.
2. TR (Trust Receipt):
• What: Loan given against goods imported under LC; importer sells and pays bank.
• Use: Short-term trade financing.
• Example: Importer sells goods and repays bank.
3. LIM (Loan against Imported Merchandise):
• What: Loan secured against imported goods.
• Use: Short-term funding until goods are sold.
• Example: Loan for imported electronics stock.
4. PAD (Payment Against Documents):
• What: Payment made to exporter when shipping documents are received.
• Use: Export financing.
• Example: Exporter ships garments; bank releases payment.
5. IBP (Import Bills Purchased):
• What: Bank buys import bills from importer before due date.
• Use: Cash flow support for importers.
• Example: Importer gets advance funds from bank.
6. OS (Overdraft Scheme):
• What: Facility to withdraw more than balance in account within limit.
• Use: Temporary working capital.
• Example: Business overdraws account for urgent payment.
7. DOD (Demand Overdraft):
• What: Overdraft repayable on bank’s demand.
• Use: Flexible short-term cash support.
• Example: Sudden supplier payment need.
8. PC (Packing Credit):
• What: Pre-shipment loan to exporters.
• Use: Finance raw materials, production.
• Example: Garment exporter gets loan to make goods.
9. CC (Cash Credit):
• What: Short-term credit against stock and receivables.
• Use: Working capital finance.
• Example: Retailer borrows against inventory.
10. BG (Bank Guarantee):
• What: Bank promises payment if client defaults.
• Use: Support contractual obligations.
• Example: Supplier guarantees performance in tender.
11. BLC (Back-to-Back LC):
• What: LC opened against another LC.
• Use: Import raw materials for export production.
• Example: Exporter imports fabric to make garments.
12. UPAS LC (Usance Payable at Sight LC):
• What: LC with deferred payment, but bank pays exporter at sight.
• Use: Exporter gets immediate payment; importer pays later.
• Example: Exporter ships goods, gets payment; importer pays in 90 days.
13. EDF (Export Development Fund):
• What: Special fund to support exporters.
• Use: Reduce export cost, promote trade.
• Example: Bank provides lower-rate loan for exporting garments.
14. FSSP (Finance under Short-term Scheme for Projects):
• What: Short-term project financing by bank.
• Use: Temporary funding for specific projects.
• Example: Loan to construct a warehouse.
15. IPFF (Investment Promotion Financing Facility):
• What: Bank financing for investment promotion projects.
• Use: Encourage industrial/business investment.
• Example: Loan for new factory setup.
16. Directors Loan:
• What: Loan provided to company directors (with regulation).
• Use: Temporary financial support to directors.
• Example: Director borrows for business expansion (as per legal compliance).