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