(^438) Financial Management
of working capital funded and non-funded credit facilities (illustrative list furnished
in Table-1) with appropriate limits shall be made available to the borrower.
TABLE 1
Note: The directive of Reserve Bank of India for Loan Delivery System in Working Capital
finance are to be complied with scrupously.
The Committee noted:
Entire Current Assets are to be the prime security for the confirmed Line of Creditó
LCS (i.e., fixed/outer limit of working capital financeówhether funded finance or non-
funded finance) and any excess drawings/requirement over and above the confirmed
LCS may be subjected to additional rate of interest, say, upto 2.00%, to take care of the
bankís cost of managing the uncommitted funds/obligation. However, specific long term
working capital requirements such as (Sales to Electricity Boards, Bills Discounting
under IDBI/SIDBI scheme etc. guaranteed by State/ Central Government is proposed
to continue to be separate as is at present. The financing pattern in this regard would
continue to be assessed taking into account quantum of Deferred Receivables as is the
practice at present.
In the above context, the committee suggested that the existing system of assessment
of working capital finance (based on MPBF-computations of Tandon Committee
recommendations) may be replaced by a new system of assessment of working capital
finance, ambodying essence of the deeply considered recommendations of the committee.
The new system is proposed for all borrowers engaged in legally permitted economic/
financial activities excepting the following give in Table 2.
TABLE 2
(1) Cash credit including bills-
acceptance/Letter of credit for
purchases.
(with sub-divisions into respectively
(i) hypthecation of stock; and, (ii) hypothecation of
book debts);
(2) Inland Bills Purchased (with further sub-divisions into sub-limit for
(i) documentary bills; (ii) clean bills, (iii) usance
bills; and (iv) sight bills);
(3) Export credit-FCNR (B) (with further sub-divisions into (i) Packing Credit;
(ii) PCFC; (iii) FBP etc.);
(4) Letter of credit for purchase other
than Capital goods.
(with sub-divisions into usance L/C ard sight L/C);
(5) Guarantee (with sub-divisions into Performance Guarantee, bid
bond guarantee, advance money guarantee etc.)
- NBFCs (Non banking Finance
Companies)
for whom, separate guidelines for assessment of
W/C finance are devised by RBI;- Construction Companies/Contractors for whom, separate guidelines for assessment for
assessment of W/C finance are suggested by
RBI; - Tea Companies for whom. Cash Budget system is used to assess
W/C finance - Ship breaking companies Existing system of W/C finance is to be
continued. - Diamond Industry Existing system of W/C finance is to be
continued. - Small Scale Industrial Undertakings
requiring W/C funded finance upto Rs.
2 crores;
for whom, RBI has directed to use "Turnover
Method" propounded by Nayak Committee"- Small borrowers (all sectors)
requiring: Working Capital finance
upto Rs. 2.00 Lacs (Rupees Two Lacs)
Most of such borrowers are usually covered
under one or the other Schemes Sponsored by
various Governments/local bodies. Therefore,
financing— requirements of such borrowers
shall be met as per the directives of the relevant
sponsored scheme.- Specific Long term working capital
requirements such as Bills
Discounting under IDBI/SIDBI—
schemes etc.
Existing separately set out guidelines to continue
to be in force.