Credit Delivery
Chapter notes, video classes, MCQ practice tests and quick-revision one-liners for Advanced Bank Management — CAIIB.
One-liners from this chapter
Free sample — 8 of 66 rapid-fire Q&A cards.
What is meant by 'credit delivery' in the context of banking?
Credit delivery refers to the process by which banks disburse sanctioned credit facilities to borrowers in a structured and controlled manner, ensuring funds are used for the intended purpose.
What is a 'Revolving Credit Facility' and how does it benefit borrowers?
A facility where repaid amounts become available again for re-borrowing.
What is the difference between fund-based and non-fund-based credit facilities?
Fund-based facilities involve actual outflow of funds (e.g., term loans, cash credit), whereas non-fund-based facilities like letters of credit and bank guarantees represent contingent liabilities where funds are released only upon invocation.
What is a 'Clean Credit' facility in banking?
Unsecured credit granted based solely on borrower's creditworthiness.
What is a Cash Credit (CC) facility and how does it work?
Cash Credit is a revolving credit facility where the borrower can withdraw funds up to a sanctioned limit against the security of current assets like stock and debtors, paying interest only on the amount utilised.
What is 'Hypothecation' as a mode of charge creation in credit delivery?
Equitable charge on movable assets without transfer of possession.
What is the primary purpose of a Working Capital Demand Loan (WCDL)?
A WCDL is a short-term loan granted to meet the working capital needs of a borrower, typically for a fixed period at a fixed or floating interest rate, unlike the revolving nature of cash credit.
What is the difference between a 'Pledge' and 'Hypothecation' in secured lending?
Pledge transfers possession to lender; hypothecation does not.
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