(^440) Financial Management
- General Guidelines
- The DBF method shall be applicable to working capital finance granted by a
bank whether it is in sole banking or in multiple banking or in consortium banking
arrangements. In multiple banking or consortium banking, there may be a
situation where other banks are following a different method of working capital
finance. In such a case:.
(a) if a bank is leader or holding the highest share in total working capital
finance (i.e., total of funded and non-funded finance), the bank shall
adopt the DBF-method and other banks shall be requested to accept
the same;
(b) if a bank is not a leader or holding smaller percentage shares
in total working capital finance (i.e., total of funded and non-funded
finance), the bank may accept the assessment done by the consortium
leader or the bank having largest share in the working capital financing,
as the case may be, provided the bank is prima facie satisfied with
efficacy of the method adopted by the consortium leader or the bank
having largest share; otherwise, the bank shall follow DBF-method.
(2) Wherever any of borrower is having multi-division activities/businesses, the
working capital credit requirement shall be perceived/assessed separately for
each of the division as is done at present.
(3) At present, classification of Current Assets and Current Liabilities for the
purpose of arriving at current ratio and for computing MPBF are different and
the dual approaches often causes misunderstandings and confusions. Therefore,
the committee proposed that, henceforth, there will be only one single
classification of Current Assets and Current Liabilities and will be substantially
be the same as is directed in the Form No. 111 (i.e., the extant CMA-guidelines
for classification of C/As and C/Ls for the purpose of arriving at Current Ratio)
subject to the changes briefed out hereunder:
(a) The components of the inventory procured under any of the Non-
funded limits (viz., Letter of Credit and Guarantee) shall form part of
Total Current Assets and the corresponding outstanding liabilities for
payments therefore shall be added to Total Current Liabilities so as to
arrive at the real financial position and short term solvency position of
the borrower.
(b) Accordingly, the cash margins for L/Cs and Guarantees shall be part
of total Current Assets.
(c) The amount of the Inter- corporate Deposits (ICDs), repayable by the