Distinguish between:
3. Cash credit and overdraft facility
Answer:
Bases
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Cash credit
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Overdraft facility
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Definition
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A loan taken in the form of cash by anyone from the bank against some securities is called cash credit.
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Commercial banks allow their customers to withdraw an amount from the bank in excess of their balance.
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Drawers
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Anyone can take a cash loan from banks against some securities.
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Only current account holders can avail this facility.
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Interest rate charged
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They charge higher rates of interest against a cash loan.
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They charge minimal rates of interest against an overdraft.
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