What are the features of different credit products offered by banks?

Banks offer various credit products to meet customers’ diverse financing needs. These products are designed to support working capital requirements, fixed asset investment, import-export trade, consumer financing, and Islamic banking activities.

Each product has its own purpose, tenure, and repayment structure. The major credit products are discussed below:

Funded Credit Products

Overdraft (OD)

An overdraft is a facility that allows customers to withdraw money in excess of their account balance up to an approved limit. It is mainly provided to meet working capital requirements.

A limit is fixed for drawing in excess of the credit balance.
Allowed for working capital.
Repaid from regular cash flows.
Revolving facility.
Reviewed and renewed annually.

Time Loan (Up to 1 year)

A time loan is a short-term loan provided for a specific purpose and a predetermined period.

Short-term loan for a specific period.
Repaid in a lump sum or installments.
Used for temporary working capital needs.

Term Loan (More than 1 year)

A term loan is a long-term financing facility used for fixed capital investment.

Used for machinery, construction, BMRE, and project setup.
The repayment schedule is fixed.
Repaid monthly, quarterly, or half-yearly.
May have a moratorium period.

BLC (Bills under LC)/PAD

BLC is an interim advance provided against import LC documents.

Interim advance for import.
Disbursed against import LC documents.
Also called PAD (Payment Against Documents).
Maximum tenor: 21 days.

Trust Receipt (TR)

A Trust Receipt is a post-import financing facility in which imported goods are released to the importer on trust.

Post-import finance.
Import goods released to the importer on trust.
Importer repays from sale proceeds.
Tenor: 30 to 180 days.

Packing Credit (PC)

Packing Credit is a pre-shipment export financing facility.

Pre-shipment export finance.
Allowed only when the exporter holds a confirmed LC or shipment contract.
Maximum tenor: 180 days.

Loans Against Commitment

Loans against commitment are granted for urgent settlement purposes.

Allowed only for the urgent settlement of a commitment.
Repayable on demand.
Tenure of one day only (for system application).

Consumer Loan Products

Personal Loan (Unsecured)

A personal loan is an unsecured facility provided to meet various personal and household expenses.

Used for household items, marriage, medical, travel, and renovation.
Maximum tenor: 60 months.
Repaid through EMI.

Auto Loan

An auto loan is available to purchase vehicles for family use.

Used for the purchase of brand-new or reconditioned vehicles.
Intended for family use.
Tenor: 60 months.
Repaid through EMI.

Home Loan

A home loan is provided for purchasing or constructing residential property.

Used for the purchase or construction of residential property.
Maximum tenor: 20 years.
Repaid through EMI

Islamic Banking Investment Products

Bai-Murabaha

Bai-Murabaha is a cost-plus financing arrangement where the bank purchases an asset and sells it to the client at a profit margin.

Bank buys the asset.
The bank sells it to the client at a profit margin.

HPSM (Hire-Purchase under Shirkatul Melk)

HPSM is a joint ownership financing arrangement with gradual ownership transfer to the client.

Joint ownership between the bank and the client.
Ownership is gradually transferred to the client.

Bai-Muajjal

Bai-Muajjal is a deferred payment sale arrangement.

Goods are delivered immediately.
Client pays in installments later.

Mudaraba Post-Import (MPI)

MPI is an Islamic post-import financing facility.

Islamic equivalent of Trust Receipt.

Quard against MTDR

Quard against MTDR is an interest-free loan facility provided against Mudaraba Term Deposit Receipt.

Interest-free loan.
Granted against MTDR.