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Cash credit is a term loan or demand loan?

Kashish Gupta (B.com (H) , ACA) (368 Points)

20 January 2013

Hi all,

Please tell me wheather cash credit is a term loan or demand loan?

reply as soon as possible...:)

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6 Replies

shankar (CA, CS Final) (243 Points)
Replied 20 January 2013

Cash credit is Demand loan becouse cash credit is an over draft facility given to you for operating your account to a limit, say, you get a over draft of facility of rs.1000/- from a bank. you can deposit and withdraw cash or transfer funds to the extent of Rs.1000/- for a limited period. its repayble on demand. however in term loan an amount sanctioned to you to be repayable in equal monthly instalments including interest.

Thanks

2 Like

Balaji (Articled assistant & CA final) (117 Points)
Replied 20 January 2013

Its a short term loan and a demand loan granted to businessmen or company. Its for the purpose of working capital requirement of the company, and one can withdrawn only upto the sanctioned limit (Which is decided on Maximum permissible bank finance as per RBI guidelines).

bhavesh goswami ( ca vishnu r renuka) (24 Points)
Replied 20 January 2013

it is a demand loan given by bank on the current account. before giving this facility bank spacified rate of intrest and also period of installment with user. this facilicy give by bank as per user's credit.

Azim Khan ACA,CS,CMA*,LLB* (Proprietor) (1312 Points)
Replied 20 January 2013

Cash Credit is a temporary overdraft facility allowed by the Bank to selected customers who have sound dealing record with the Bank. this facility is given only for a very shot period, therefore this is treated as Demand Loan... I practice, it is demanded from the same day on which it is allowed. As the Branch Manager authorise such transaction and his seniors ask when this will be recovered.