There is a difference between Loans and Advances given by the Bank.

Question

Justify the following statement:

There is a difference between Loans and Advances given by the Bank.

Answer 1

• Bank lends money in two ways – i.e. Loans and Advance. 
• The loan is granted for a specific period of time against personnel security, gold or silver, and other movable or immovable properties. 
• Advances is a credit facility provided by the bank to its customers against collateral securities like – shares, Government shares, F.D.R., L.I.C. Policy, Stock of raw materials, or finished goods. 
• Loans are granted for a longer period while Advances are granted for a shorter period. 
• Loans may be short-term, mediumterm, or long-term while advances are in form of overdraft, cash credit, and discounting of bills. 
• Thus, there is a difference between Loans and Advances given by the Bank.