🏦 Types of Credit Facilities
Fund-based vs non-fund based credit facilities, loan portfolio segregation into retail and commercial loans, and overview of credit types.
Types of Credit Facilities
Credit facilities are broadly classified into two categories based on whether there is a direct outflow of the bank's funds.
| Category | Description | Examples |
|---|---|---|
| Fund-Based Facilities | Direct outflow of bank's funds | Cash credits/overdrafts, term loans/demand loans, bill finance |
| Non-Fund Based Facilities | No direct lending of bank's funds; bank assumes a risk based on certain contingencies | Bank guarantees, letters of credit, acceptance facilities |
Interest on fund-based facilities can be charged on a temporary basis; each credit discharges the earliest debit entry.
Loan Portfolio Segregation
Banks typically segregate their lending portfolio into:
Retail Loans:
- For individual customers (includes small business for some banks)
- Examples: Vehicle loans, home loans, education loans, credit cards, consumer durables, small business loans
Commercial Loans:
- Larger amounts with personal attention due to their uniqueness
- Term Loans: Fixed repayment schedule
- Working Capital Loans: Payable on demand; classified as current assets
Summary Cheat Sheet
| Concept / Topic | Key Details / Explanation |
|---|---|
| Fund-Based Facilities | Direct outflow of bank's funds — cash credit, overdraft, term loans, demand loans, bill finance |
| Non-Fund Based Facilities | No direct lending; contingent risk — bank guarantees, letters of credit, acceptance facilities |
| Retail Loans | Individual customers — vehicle, home, education, credit cards, consumer durables |
| Commercial Loans | Larger amounts — term loans (fixed schedule) and working capital loans (on demand) |
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Types of Credit Facilities
Credit facilities are broadly classified into two categories based on whether there is a direct outflow of the bank's funds.
| Category | Description | Examples |
|---|---|---|
| Fund-Based Facilities | Direct outflow of bank's funds | Cash credits/overdrafts, term loans/demand loans, bill finance |
| Non-Fund Based Facilities | No direct lending of bank's funds; bank assumes a risk based on certain contingencies | Bank guarantees, letters of credit, acceptance facilities |
Interest on fund-based facilities can be charged on a temporary basis; each credit discharges the earliest debit entry.
Loan Portfolio Segregation
Banks typically segregate their lending portfolio into:
Retail Loans:
- For individual customers (includes small business for some banks)
- Examples: Vehicle loans, home loans, education loans, credit cards, consumer durables, small business loans
Commercial Loans:
- Larger amounts with personal attention due to their uniqueness
- Term Loans: Fixed repayment schedule
- Working Capital Loans: Payable on demand; classified as current assets
Summary Cheat Sheet
| Concept / Topic | Key Details / Explanation |
|---|---|
| Fund-Based Facilities | Direct outflow of bank's funds — cash credit, overdraft, term loans, demand loans, bill finance |
| Non-Fund Based Facilities | No direct lending; contingent risk — bank guarantees, letters of credit, acceptance facilities |
| Retail Loans | Individual customers — vehicle, home, education, credit cards, consumer durables |
| Commercial Loans | Larger amounts — term loans (fixed schedule) and working capital loans (on demand) |
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