{"id":2625,"date":"2019-10-20T13:14:56","date_gmt":"2019-10-20T13:14:56","guid":{"rendered":"https:\/\/commerceiets.com\/?p=2625"},"modified":"2019-10-20T13:14:56","modified_gmt":"2019-10-20T13:14:56","slug":"advances-in-banking-company","status":"publish","type":"post","link":"https:\/\/commerceiets.com\/advances-in-banking-company\/","title":{"rendered":"ADVANCES IN BANKING COMPANY"},"content":{"rendered":"\n<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_72 counter-hierarchy ez-toc-counter ez-toc-grey ez-toc-container-direction\">\n<div class=\"ez-toc-title-container\">\n<p class=\"ez-toc-title\" style=\"cursor:inherit\">Table of Contents<\/p>\n<span class=\"ez-toc-title-toggle\"><a href=\"#\" class=\"ez-toc-pull-right ez-toc-btn ez-toc-btn-xs ez-toc-btn-default ez-toc-toggle\" aria-label=\"Toggle Table of Content\"><span class=\"ez-toc-js-icon-con\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #999;color:#999\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #999;color:#999\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/span><\/a><\/span><\/div>\n<nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/commerceiets.com\/advances-in-banking-company\/#ADVANCES_IN_BANKING_COMPANY\" title=\"ADVANCES IN BANKING COMPANY\">ADVANCES IN BANKING COMPANY<\/a><ul class='ez-toc-list-level-4' ><li class='ez-toc-heading-level-4'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/commerceiets.com\/advances-in-banking-company\/#Cash_Credit\" title=\"Cash Credit\">Cash Credit<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-4'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/commerceiets.com\/advances-in-banking-company\/#Overdraft\" title=\"Overdraft\">Overdraft<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-4'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/commerceiets.com\/advances-in-banking-company\/#Loans\" title=\"Loans\">Loans<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-4'><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/commerceiets.com\/advances-in-banking-company\/#Demand_Loan_and_Term_Loan\" title=\"Demand Loan and Term Loan\">Demand Loan and Term Loan<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-4'><a class=\"ez-toc-link ez-toc-heading-6\" href=\"https:\/\/commerceiets.com\/advances-in-banking-company\/#Secured_and_Unsecured_Loan\" title=\"Secured and Unsecured Loan\">Secured and Unsecured Loan<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-4'><a class=\"ez-toc-link ez-toc-heading-7\" href=\"https:\/\/commerceiets.com\/advances-in-banking-company\/#Participation_Loan_and_Consortium_Loan\" title=\"Participation Loan and Consortium Loan\">Participation Loan and Consortium Loan<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-4'><a class=\"ez-toc-link ez-toc-heading-8\" href=\"https:\/\/commerceiets.com\/advances-in-banking-company\/#Purchasing_and_Discounting_Bills\" title=\"Purchasing and Discounting Bills\">Purchasing and Discounting Bills<\/a><\/li><\/ul><\/li><\/ul><\/nav><\/div>\n<h3 class=\"has-text-align-center wp-block-heading\"><span class=\"ez-toc-section\" id=\"ADVANCES_IN_BANKING_COMPANY\"><\/span>ADVANCES IN BANKING COMPANY<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p class=\"has-medium-font-size\"><a href=\"https:\/\/commerceiets.com\/provisions-of-banking-regulation-act-1949\/\" target=\"_blank\" rel=\"noreferrer noopener\" aria-label=\"Banking company (opens in a new tab)\">Banking company<\/a> is a company that deals in cash, money and credit. It accepts deposits and extends loans and advances to the needy persons.<\/p>\n\n\n\n<p class=\"has-pale-cyan-blue-background-color has-background has-medium-font-size\"><strong>ACCORDING TO BANKING REGULATION ACT, 1949<\/strong><\/p>\n\n\n\n<p class=\"has-medium-font-size\">\u201cBanking refers to the acceptance for the purpose of lending\nor investment of deposits of money from the public repayable of demand, order\nor otherwise and withdrawal by cheque, draft, order or otherwise.\u201d<\/p>\n\n\n\n<p class=\"has-medium-font-size\">According to Section 6 of Banking Company Regulation Act,\n1949, a banking company may deal in following forms of business:<\/p>\n\n\n\n<ul class=\"wp-block-list\"><li>Borrowing and lending of money <\/li><li>Drawing, making, accepting, endorsing, buying and selling of bills of exchange, hundies, promissory notes, debentures and other alike securities.<\/li><li>Contracting for public and private loans<\/li><li>Acting as an agent for government or local authority<\/li><li>Undertaking and executing of trusts<\/li><li>Acquisition, construction, maintenance and alteration of any building or works<\/li><li>Carrying on and transacting every kind of guarantee and indemnity business.<\/li><\/ul>\n\n\n\n<p class=\"has-medium-font-size\">The Advances in banking company are:<\/p>\n\n\n\n<ul class=\"wp-block-list\"><li>Cash credit,<\/li><li>Overdraft,<\/li><li>Loans,<\/li><li>Demand loan vs term loan,<\/li><li>Secured vs unsecured loan,<\/li><li>Participation loan or consortium loan,<\/li><li>Purchasing and discounting bills.<\/li><\/ul>\n\n\n\n<h4 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Cash_Credit\"><\/span>Cash Credit<span class=\"ez-toc-section-end\"><\/span><\/h4>\n\n\n\n<p class=\"has-medium-font-size\">Cash Credit is an arrangement by which the customer is allowed to borrow money up to a certain limit known as the \u2018cash credit limit\u2019. Usually, the borrower is required to provide security in the form of pledge or hypothecation of tangible securities. Sometimes, this facility is also provided against personal security.<\/p>\n\n\n\n<p class=\"has-medium-font-size\">This is a permanent arrangement and the customer need not draw the sanctioned amount at once but draw the amount as and when required. Cash credit provides an elastic form of borrowing since the limit fluctuates according to the needs of the business. Cash credits are the most favorable mode of financing by large commercial and industrial concerns.<\/p>\n\n\n\n<h4 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Overdraft\"><\/span>Overdraft<span class=\"ez-toc-section-end\"><\/span><\/h4>\n\n\n\n<p class=\"has-medium-font-size\">Overdraft is an arrangement between a banker and his customer by which the latter is allowed to withdraw over and above his credit balance in the current account up to an agreed limit. This is only a temporary accommodation usually granted against security. The borrower is permitted to draw and repay any number of times, provided the total amount overdrawn does not exceed the agreed limit. The interest is charged only for the amount drawn and not for the whole amount sanctioned.<\/p>\n\n\n\n<h4 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Loans\"><\/span>Loans<span class=\"ez-toc-section-end\"><\/span><\/h4>\n\n\n\n<p class=\"has-pale-cyan-blue-background-color has-background has-medium-font-size\"><strong>ACCORDING TO W. KOCLI<\/strong><\/p>\n\n\n\n<p class=\"has-medium-font-size\">&#8220;Loan is a formal agreement between a bank and borrower to provide a fixed amount of credit for a specified period\u201d.<\/p>\n\n\n\n<p class=\"has-medium-font-size\">The banker advances a lump sum for a certain period at an agreed rate of interest- The entire amount is paid on an occasion either in cash or by credit in his current account which he can draw at any time. The interest is charged for the full amount sanctioned whether he withdraws the money from his account or not.<\/p>\n\n\n\n<p class=\"has-medium-font-size\">The loans may be repaid in installments or at the expiry of a certain period. The loan may be made with or without security.<\/p>\n\n\n\n<p class=\"has-medium-font-size\">A loan once repaid in full or in part cannot be withdrawn again by the customer. In case a borrower wants a further loan, he has to arrange for a fresh loan.<\/p>\n\n\n\n<h4 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Demand_Loan_and_Term_Loan\"><\/span>Demand Loan and Term Loan<span class=\"ez-toc-section-end\"><\/span><\/h4>\n\n\n\n<p class=\"has-medium-font-size\">The loan may be a demand loan or a term loan.<\/p>\n\n\n\n<p class=\"has-medium-font-size\">A demand loan is payable on demand. It is for a short period and usually granted to meet the working capital needs of the borrower.<\/p>\n\n\n\n<p class=\"has-medium-font-size\">Term loans may be medium-term or long-term. Medium-term loans are granted for a period ranging from one year to five years for the purpose of vehicles, tools, and equipment.<\/p>\n\n\n\n<p class=\"has-medium-font-size\">Long-term loans are granted for capital expenditures such as the purchase of land, construction of factory building, purchase of new machinery and modernization of plant.<\/p>\n\n\n\n<h4 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Secured_and_Unsecured_Loan\"><\/span>Secured and Unsecured Loan<span class=\"ez-toc-section-end\"><\/span><\/h4>\n\n\n\n<p class=\"has-medium-font-size\">According to section 5(e) of The Banking Regulation Act, 1949, \u201cSecured loan or advance means such a loan or advance as made against the security assets, market value of which is not at any means less than the amount of such loan or advance and unsecured loan or advance is that loan or advance or part of it does not require sanctioning against the security\u201d.<\/p>\n\n\n\n<h4 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Participation_Loan_and_Consortium_Loan\"><\/span>Participation Loan and Consortium Loan<span class=\"ez-toc-section-end\"><\/span><\/h4>\n\n\n\n<p class=\"has-medium-font-size\">Where one single loan is granted by more than one financing agency, it is termed as a participation or consortium loan.<\/p>\n\n\n\n<p class=\"has-medium-font-size\">Such participation becomes necessary where either the risk involved is too large for one or more of the participating institutions to take individually or there are administrative or other difficulties in servicing and follow up of the loan.<\/p>\n\n\n\n<h4 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Purchasing_and_Discounting_Bills\"><\/span>Purchasing and Discounting Bills<span class=\"ez-toc-section-end\"><\/span><\/h4>\n\n\n\n<p class=\"has-pale-cyan-blue-background-color has-background has-medium-font-size\"><strong>ACCORDING TO THE NEGOTIABLE INSTRUMENTS ACT 1881<\/strong><\/p>\n\n\n\n<p class=\"has-medium-font-size\">Bills of exchange is \u201can instrument in writing containing an unconditional order, signed by the maker, directing a certain person to pay a certain sum of money only to, or to the order of, a certain person or to the bearer of the instrument\u201d.<\/p>\n\n\n\n<p class=\"has-medium-font-size\">Banks grant advances to their customers by discounting bills of exchange.<\/p>\n\n\n\n<p class=\"has-medium-font-size\">The net amount, after deducting the amount of interest\/discount from the amount of the installment, is credited in the account of the customer.<\/p>\n\n\n\n<p class=\"has-medium-font-size\">In this form of lending, the interest is received by the banker in advance.<\/p>\n\n\n\n<p class=\"has-medium-font-size\">Banks sometimes purchase the bills instead of discounting them.<\/p>\n\n\n\n<p class=\"has-medium-font-size\">Bills which are accompanied by documents or title to goods such as bills of lading or railway receipt are purchased by the bankers.<\/p>\n\n\n\n<p class=\"has-medium-font-size\">In such cases, the banker grants a loan in the form of overdraft or cash credit against the security of the bills.<\/p>\n\n\n\n<p class=\"has-medium-font-size\">The term \u2018bill purchased\u2019 seems to imply that the bank becomes the purchaser or owner of such bills. But in almost all cases the bank holds the bill only as a security for the advance.<\/p>\n\n\n\n<figure class=\"wp-block-table\"><table><tbody><tr><td><strong>Also study:&nbsp;<\/strong><\/td><td><strong>Also study:&nbsp;<\/strong><\/td><td><strong>Also study:&nbsp;<\/strong><\/td><td><strong>Also study:&nbsp;<\/strong><\/td><\/tr><tr><td><a href=\"https:\/\/commerceiets.com\/joint-stock-company\/\">Meaning of company<\/a><\/td><td><a href=\"https:\/\/commerceiets.com\/types-of-companies\/\">Types of companies<\/a><\/td><td><a href=\"http:\/\/v\" target=\"_blank\">One person company<\/a><\/td><td><a href=\"https:\/\/commerceiets.com\/difference-between-public-and-private-company\/\">Public VS Private Company<\/a><\/td><\/tr><tr><td><a href=\"https:\/\/commerceiets.com\/sweat-equity-shares\/\">Sweat Equity Shares<\/a><\/td><td><a href=\"https:\/\/commerceiets.com\/stock-and-shares\/\">Stock vs Shares<\/a><\/td><td><a href=\"https:\/\/commerceiets.com\/reserve-capital-and-capital-reserve\/\">Reserve Capital Vs Reserve Capital<\/a><\/td><td><a href=\"http:\/\/v\" target=\"_blank\">Different types of preference shares<\/a><\/td><\/tr><tr><td><a href=\"https:\/\/commerceiets.com\/different-types-of-preference-shares\/\">Equity vs Preference shares<\/a><\/td><td><a href=\"https:\/\/commerceiets.com\/slip-system-of-posting\/\">Slip System of Posting<\/a><\/td><td><a href=\"http:\/\/v\" target=\"_blank\">Redemption of preference shares<\/a><\/td><td><a href=\"https:\/\/commerceiets.com\/buy-back-of-shares\/\">Buy Back of shares<\/a><\/td><\/tr><tr><td><a href=\"https:\/\/commerceiets.com\/debentures\/\">Debentures<\/a><\/td><td><a href=\"https:\/\/commerceiets.com\/issue-of-debentures\/\">Issue of debentures<\/a><\/td><td><a href=\"https:\/\/commerceiets.com\/redemption-of-debentures\/\">Redemption of Debentures<\/a><\/td><td><a href=\"https:\/\/commerceiets.com\/sources-of-redemption-of-debentures\/\">Sources of redemption of debentures<\/a><\/td><\/tr><tr><td><a href=\"https:\/\/commerceiets.com\/balance-sheet-as-per-companies-act-2013\/\">Balance Sheet as per Companies Act 2013<\/a><\/td><td><a href=\"https:\/\/commerceiets.com\/divisible-profits\/\">Divisible Profits<\/a><\/td><td><a href=\"https:\/\/commerceiets.com\/amalgamation\/\">Amalgamation<\/a><\/td><td><a href=\"https:\/\/commerceiets.com\/purchase-consideration\/\">Purchase consideration<\/a><\/td><\/tr><tr><td><a href=\"https:\/\/commerceiets.com\/alteration-of-share-capital\/\">Alteration of share capital<\/a><\/td><td><a href=\"https:\/\/commerceiets.com\/internal-reconstruction\/\">Internal Reconstruction<\/a><\/td><td><a href=\"https:\/\/commerceiets.com\/provisions-of-banking-regulation-act-1949\/\">Provision of banking regulation act 1949<\/a><\/td><td><a href=\"https:\/\/commerceiets.com\/asset-classification-of-banking-company\/\">Asset classification of banking company<\/a><\/td><\/tr><tr><td><a href=\"https:\/\/commerceiets.com\/non-performing-assets\/\">Non-performing assets<\/a><\/td><td><a href=\"https:\/\/commerceiets.com\/advances-in-banking-company\/\">Advances in banking company<\/a><\/td><td><a href=\"https:\/\/commerceiets.com\/types-of-life-insurance-policies\/\">Life Insurance Accounting<\/a><\/td><td><a href=\"https:\/\/commerceiets.com\/valuation-balance-sheet\/\">Valuation balance sheet<\/a><\/td><\/tr><tr><td><a href=\"https:\/\/commerceiets.com\/financial-statements-of-life-insurance-business\/\">Financial statements of life insurance companies<\/a><\/td><td><a href=\"https:\/\/commerceiets.com\/final-accounts-of-general-insurance-companies\/\">Final accounts of general insurance companies<\/a><\/td><td><\/td><td><\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n<p><strong>CONNECT ON LINKEDIN<\/strong><\/p>\n\n\n\n<p><a href=\"https:\/\/www.linkedin.com\/in\/kajal-mahajan-7549b2197\/\" target=\"_blank\" rel=\"noopener\">https:\/\/www.linkedin.com\/in\/kajal-mahajan-7549b2197\/<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"<p>ADVANCES IN BANKING COMPANY Banking company is a company that deals in cash, money and credit. It accepts deposits and extends loans and advances to the needy persons. ACCORDING TO BANKING REGULATION ACT, 1949 \u201cBanking refers to the acceptance for the purpose of lending or investment of deposits of money from the public repayable of&#8230;<\/p>\n<p class=\"more-link-wrap\"><a href=\"https:\/\/commerceiets.com\/advances-in-banking-company\/\" class=\"more-link\">Read More<span class=\"screen-reader-text\"> &ldquo;ADVANCES IN BANKING COMPANY&rdquo;<\/span> &raquo;<\/a><\/p>\n","protected":false},"author":2,"featured_media":2627,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[102],"tags":[183],"class_list":["post-2625","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-corporate-accounting","tag-banking-company"],"_links":{"self":[{"href":"https:\/\/commerceiets.com\/wp-json\/wp\/v2\/posts\/2625","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/commerceiets.com\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/commerceiets.com\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/commerceiets.com\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/commerceiets.com\/wp-json\/wp\/v2\/comments?post=2625"}],"version-history":[{"count":0,"href":"https:\/\/commerceiets.com\/wp-json\/wp\/v2\/posts\/2625\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/commerceiets.com\/wp-json\/wp\/v2\/media\/2627"}],"wp:attachment":[{"href":"https:\/\/commerceiets.com\/wp-json\/wp\/v2\/media?parent=2625"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/commerceiets.com\/wp-json\/wp\/v2\/categories?post=2625"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/commerceiets.com\/wp-json\/wp\/v2\/tags?post=2625"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}