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Explain how the Commercial Banks provide credit facilities through the measures given below: 

Cash Credit. Discounting bills of exchange.

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1. Cash Credit: It is a type of loan which is given to the borrower against his current assets such as shares, stocks, bonds etc. Such loans are not based on personal security. They have to credit the account in the name of the borrowers and allow them a certain limit to withdraw money. The interest is charged on the amount withdrawn by the borrower and not on the entire amount of the loan sanctioned. 

2. Discounting bills of exchange: This is another particular type of lending by modem banks. Through this method, a holder of a bill of exchange can get it discounted by the bank. In a bill Of exchange, the debtor accepts the bill drawn upon him by the creditor and agrees to pay the amount mentioned on maturity. After making some marginal deductions, the bank pays the value of the bill to the holder. When bill of exchange matures, the bank gets its payments from the party which had accepted the bill.

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