BANKS

The following are the various functions performed by banks

·        To accept deposits
·        To advance loans
·        Discount bills
·        Transfer Money
·        Keep safe deposit
·        Agency functions

TYPE OF BANKS

In India, we have different types of banks. Among them, same are nationalised and the others are private limited banks. The different categories of banks are as follows:

·        Commercial Banks
·        Central Bank (Reserve Bank of India)
·        Agricultural Banks
·        Industrial Banks
·        Co-operative Banks
·        Saving Banks (Post Office)

The below given chart indicates the different methods of raising finance for a company.




FINANCE FROM BANKS

A major portion of the deposits collected by banks is used for financing and meeting the requirements of their customers.
There are four types of advances given by banks. They are 1) Secured Loans. 2) Cash credit 3) Overdrafts 4) Clean advances.

Secured Loans

Commercial banks grant advances against securities, finished goods, raw materials, real estates etc. of the borrowers. Sometimes, the customers have to hypothecated their assets against the loan. This means that the hypothecated articles is given by the bank to the customer to meet his financial requirements. Sometimes goods are pledged. This means that the articles remain in the possession of the bank and can be disposed off only with the consent of the bank concerned.

Cash credit

In this case, the borrower is permitted to draw from the bank certain amounts which are agreed upon as the maximum limit. Here, the bank charges interest on the amount actually utilised by the customer and not on the amount actually sanctioned.

Overdrafts

It is a temporary accommodation, given by the bank of their customers against certain security. The account holder (borrower) is allowed to draw advances in excess of the balance kept in their account in the bank. Interest is charged on the excess amount drawn from the current account as overdraft.

Clean Advances

In this case, the bank sanctions loans for a longer period. The customer opens a loan account with the sanctioned amount of loan. The customer is allowed to draw money from that loan account. Here, full interest is charged on the amount of loan, irrespective of whether or not the customer utilise the sanctioned amount.

FINANCIAL INSTITUTIONS

Various Government agencies have also been established for financing industries. The following are the important financial institutions in India:

·        Industrial Finance Corporation of India.
·        National Development Corporation.
·        Life Insurance Corporation.
·        Unit Trust of India.
·        State Government.
·        State Financial Corporation.
·        Nationalised Banks.
·        State Industrial Co-operative Bank.
·        Private Money Lenders.


LEASING INSTITUTIONS

It is not possible for an entrepreneur of small scale industries to construct his own factory building and other infrastructure. To help and promote these small scale units, industrial estates have been established in different industrial towns. These industrial estates provide factory accommodation at suitable location with required facilities like water supply, electricity, post, banks etc. They provide sheds or buildings on rental basis, hire purchase basis, or lease basis. When a plot of land is provided on a rental basis for a very long period, it is known as land on lease. The promoter is allowed to construct his own permanent structure on such land. Following are leasing institutions :
·        Industrial Estates (Government Organisation)
·        Private land owners


After expiry of the lease period, the agreement can be extended only with a mutual consent of the parties.