Non-fund based lending

S

sunandaC

Sunanda K. Chavan
Non-fund based lending

In case of non fund based lending,the lending bank does not commit any physical outflow of funds.As such,the funds position of the lending bank remains intact.The non fund based lending can be made by the banks in two forms.

a) Bank guarantee.
b) Letter of credit.

Fund based lending
In case of fund fund based lending bank commits the physical outflow of funds.As such, the funds position of the lending bank gets affected. The fund based lending can be made by the banks in the following forms-
(a)loan.
(b)overdraft.
(c)cash credit.
(d)bills purchased/discounted.
(e)working capital term loans.
(f)packing credit.

(C) security for assistance:

(a)hypothecation.
(b)pledge.
(c)lien.
(d)mortgage.















 
Non fund based lending is interesting and thank you for sharing, I will clear more on these like what are the facilities of Non fund based

NON‑FUND BASED FACILITIES

There are three broad categories:

1)Letters of credit
2)Guarantees
3) Co‑acceptance of‑bills/deferred payment guarantees.
 
Now that you know what is non-fund based lending, let's understand what's fund based lenging.

Fund based lending is also known as 'Asset-Based Lending'

DEFINITION of 'Asset-Based Lending' A business loan secured by collateral (assets). The loan, or line of credit, is secured by inventory, accounts receivable and/or other balance-sheet assets.

the lending bank commits the physical outflow of funds. The various forms in which fund based lending may be made by banks:

1) Loan

2) Overdraft

3) Cash Credit

4) Bills Purchased/Discounted

5) Working Capital Term Loans

6) Packing Credit
 
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