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Definition

Cash Credits

In generally, when the banks take products and non-fixed assets for the security and sanctions to the business people is called cash credit. Here the clients have to open an account to take loan.

Cash credit is a term used to describe an arrangement under which a customer is allowed an advance up to certain limit. Cash credit arrangements are usually made against the security of commodities hypothecated or pledged with the bank. The whole amount need not be drawn at once, but as required. The customer may be either required to deposit securities  to partially or fully cover the credit or to enter into a bond with two more sureties. The effect of such a bond is practically to make all the parties debtors to the bank although the person in whose name the account stands is the principal debtor.

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