To enforce credit discipline, RBI mandates that for large borrowers (= ?150 Cr), at least 60% of the working capital limit must be utilized as a WCL (Demand Loan) and the balance 40% as Cash Credit (CC).

The LC is opened by the Issuing Bank at the request of the Buyer (Importer). Therefore, the Buyer is the Applicant who instructs the bank to open the credit in favor of the seller (Beneficiary).

A Garnishee Order attaches debts owed BY the bank TO the customer (credit balance). An unutilized CC/OD limit is a facility to borrow; it represents money the customer CAN borrow, not money the customer OWNS. Hence, it cannot be attached.

Guarantees are of two types: Performance (ensuring work is done) and Financial (ensuring money is paid). A Financial Guarantee assures the beneficiary that the debt will be repaid if the borrower defaults.

MCLR replaced Base Rate in 2016. Note: EBLR later replaced MCLR for retail/MSME loans in 2019, but MCLR specifically replaced Base Rate as the internal benchmark.

DPG secures the payment of installments for capital goods purchased on credit. If the buyer defaults on an installment, the bank pays.

In a running account (CC/OD), credits reduce the debit balance. Without a Letter of Continuity, these credits could be legally argued to have discharged the original DP Note. This letter confirms that the security continues to cover the fluctuating balance.

While a full renewal/assessment is annual, banks conduct Short Reviews (Quarterly or Half-yearly) to monitor the account's performance and ensure compliance with terms, based on QIS statements.

Packing Credit is a working capital advance provided *before* shipment to enable the exporter to procure raw materials, manufacture, and pack the goods based on a confirmed export order.

Bridge loans are temporary, short-term loans meant to tide over the period until the long-term funding (like IPO proceeds or Term Loan disbursement) is received.

It is a document issued by a parent company (or bank) to a lender, indicating its support for a subsidiary's loan obligations, but it falls short of a legally binding financial guarantee.

As per RBI directives, interest on loans should be charged at quarterly or shorter rests (like monthly). Charging interest at longer rests (like yearly) is not permitted as it reduces the effective yield.

For a smooth takeover, the new bank needs the exact outstanding amount (Foreclosure letter) and details of security documents to ensure proper transfer of liability and collateral.

Availability of funds is the lower of the Sanctioned Limit or the Drawing Power. Since DP (backed by assets) is lower, the borrower can only draw up to ?8 Lakh.

RBI has directed that penalties should be treated as "Penal Charges" and not "Penal Interest" that gets added to the interest rate and capitalized. This ensures fairness and prevents capitalization of penal components.

A Bank Guarantee is an independent contract. The bank is obligated to pay upon proper invocation "without demur," irrespective of underlying disputes between the parties. The bank is dealing with documents, not goods or disputes.

To protect consumers, banks are prohibited from levying foreclosure charges on floating rate term loans sanctioned to individual borrowers for non-business purposes (e.g., Home Loans, Auto Loans).

Banks may allow borrowers to draw beyond the limit for urgent needs. This is known as a Temporary Overdraft (TOD) or Ad-hoc limit, usually charged at a higher interest rate.