OD & CC Limit, both are a sort of “Running Loan Accounts” reviewed and renewed, if necessary, after one year. Such loan accounts are ideal for traders and manufacturers for managing their cash flow and working capital requirements. Cash Credit (CC) Limit: Cash Credit Limit is granted by the bank against hypothecation of goods inventory. The inventory lying in store / factory is kept as a security with the bank and the customer may enjoy a running loan against the security. Bank periodically demands stock statement and its valuation is being done to assess the value of current stock.
Over Draft Limit is similar to Cash Credit Limit except the fact that the inventory is not pledged in this case. Instead, bank asks for money papers as security such as fixed deposits, insurance policies, National Savings certificates or any other financial instruments. Banks do not advance 100% of the value of underlying securities when they sanction you a CC/ OD limit. The difference between the market value of the security pledged and the OD / CC limit available to you is called as Margin Money. This is a sort of safety cushion for the bank to limit its risk.
The lease rental discounting is a term loan offered by banks against the rentals derived from lease contracts of commercial or residential properties with the reputed corporate tenants. Any individual or a firm may avail LRD & use the loan amount as per own wish. The underlying leased property, which may be commercial or residential, will be taken as collateral. You can borrow up to 65 to 70 % of the market value of your property subject to your income eligibility. The repayment towards your loan will be from the escrow account opened exclusively for collection of the rentals from the lessee occupying your property.
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