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Credit Delivery Part 2 Ques
What is the primary purpose of a term loan in the context of credit delivery?
A term loan is extended for acquisition of fixed assets such as land, machinery, or buildings, repayable over a defined period usually exceeding one year through scheduled instalments.
What is a 'Line of Credit' and how does it function as a credit delivery tool?
Pre-approved borrowing limit drawn as needed by borrower
What does the concept of 'fungibility of funds' imply in credit management?
Fungibility of funds means that once credit is disbursed, it becomes indistinguishable from the borrower's own funds, making end-use monitoring essential to ensure funds are used for the sanctioned purpose.
What is the difference between 'Fund-Based' and 'Non-Fund-Based' limits in bank credit?
Fund-based involves actual disbursement; non-fund-based is contingent liability
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