Banking · Fund-Based and Non-Fund-Based Facilities
In corporate banking, fund-based and non-fund-based limits serve different purposes in borrower financing. 'Bill Discounting' is categorized as a fund-based facility because the bank:
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- 1accepts a document of title to goods without advancing any monetary credit.
- 2provides a guarantee to the seller that the buyer will pay on the due date.
- 3undertakes a contingent liability that is recorded only as an off-balance sheet item.
- 4disburses funds immediately to the borrower by purchasing the bill at a discount to its face value.✓
Correct answer
disburses funds immediately to the borrower by purchasing the bill at a discount to its face value.
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