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(^426) Financial Management
Relaxation from Norms
Requests for relaxation of inventory norms and for ad-hoc increase in limits would be
subjected by banks to close scrutiny and agreed to only in exceptional circumstances.
Toning Up-Assessment Technique
The banks should devise their own check lists in the light of the instructions issued by
the Reserve Bank for the scrutiny of data at the operational level.
Delays in Sanction
Delays on the part of banks in sanctioning credit limits could be reduced in cases where
the borrowers cooperate in giving the necessary information about their past performance
and future projections in time.
Bill System
As one of the reasons for the slow growth of the bill system is the stamp duty on
usance bills and difficulty in obtaining the required denominations of stamps, these
questions may have to be taken up with the state governments.
Sales Bill
Bank should review the system of financing book debts through cash credit and insist
on the conversion of such cash credit limits into bill limits.
Drawee Bill System
A stage has come to enforce the use of drawee bills in the lending system by making it
compulsory for banks to extend at least 50% of the cash credit limit against raw materials
to manufacturing units whether in the public or private sector by way of drawee bills.
To start with, this discipline should be confined to borrowers having aggregate working
capital limits of Rs. 50 lakhs and above from the banking system.
Segregation of Dues of Small Scale Industries
Banks should insist on the public sector undertakings/large borrowers to maintain control
accounts in their books to give precise data regarding their dues to the small units and
furnish such data in their quarterly information system. This would enable the banks to
take suitable measures for ensuring payment of the dues to small units by a definite
period by stipulating, if necessary, that a portion of limits for bills acceptance (drawee
bills) should be utilised only for drawee bills of small scale units.
Discount House
To encourage the bill system of financing and to facilitate call money operations an
autonomous financial institution on the lines of the Discount Houses in UK may be set
up.