## Types of Bank Advances
All bank loans (advances) are classified based on whether the bank actually disburses funds to the borrower.
### Funded Advances
The bank physically transfers funds to the borrower.
| Product | How It Works |
|---|---|
| Cash Credit (CC) | Running limit sanctioned against stock/debtors; borrower draws as needed |
| Overdraft (OD) | Borrower permitted to draw beyond current account balance up to a sanctioned limit |
| Demand Loan | Lump sum disbursed, repayable on demand or at fixed schedule |
| Bills Discounted & Purchased | Bank pays the bill amount upfront and recovers from the drawee at maturity |
| Participation on Risk-Sharing Basis | Bank co-funds a loan originated by another bank |
| Interest-Bearing Staff Loans | Loans at concessional/standard rates extended to bank employees |
### Non-Funded Advances
No actual outflow of funds at sanction; bank assumes a contingent commitment.
| Product | How It Works |
|---|---|
| Letter of Credit (LC) | Bank assures payment to a seller on behalf of the buyer when documents are presented |
| Bank Guarantee (BG) | Bank undertakes to pay a third party if the customer fails to honour an obligation |
> Key Distinction: Non-funded advances appear as contingent liabilities in the Balance Sheet, not as direct loans. The bank's liability crystallises only on default.