These loans are meant for
corporate bodies (and bigger ones among other entities like proprietorships, partnerships
and HUFs) engaged in any legal activity with the object of making profit. Banks lend to
such entities on the strength of their balance sheet, the length of cash cycle and
depending upon the products available with individual banks.
Lending on the strength of balance
Banks analyse the audited balance sheets of the prospective borrowers to appraise their
needs as also the capacity to absorb credit. Prospective borrowers are required to furnish
their financial details in the form of CMA data to the bankers and file an application for
the loan. This application is processed and a line of credit (limit) allowed to the
borrower. The overall limit (line of credit) is structured into various type of facilities
or accounts - each with its own limit within the overall line of credit - depending upon
the needs of the customer. The borrower is then asked to execute Bank's standard
documents, surrender the security or title to the security to the Bank and open suitable
accounts (mostly Cash Credit accounts with different underlying securities) with the Bank.
Thereafter the borrower can operate these accounts within the limit (line of credit).
There are many type of loan products
available for corporate clients in India. The loans are structured depending upon the need
of the client and the product available with the lending Bank