Advances against goods are allowed to traders for their trading activities, to manufacturers and producers for their requirements of raw materials etc and also to enable them to sell their products at better prices. The account is to facilitate the borrower to hold on to the goods for a short period, by creating a pledge in favor of the Bank. This is a type of account where the credit for a specified period of time, generally for one year and release of goods are allowed any number of times during the currency of the limit, within the limit/Drawing power. This limit cannot be allowed to be operated by the borrower by issuance of cheques or by deposit of cash and other instruments for collection.
Advances against goods are allowed on the basis of pledge or hypothecation of goods depending upon the credit worthiness and the requirements of the borrower, keeping in mind that the security by way of pledge, where possible and practical is always preferable to hypothecation.
