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(^448) Financial Management
purpose of assessing MPBF. These instalments continue to be treated as current liabilities
for all other purposes including for calculation of current ratio.
iii. Export Credit
(i) In order to ensure that the credit requirements of exporters are promptly met
and their additional credit requirements out of firm orders/confirmed letters of
credit, not taken into account while fixing their regular credit limits, the banks
were advised in December 1992 to sanction such additional credit limits, even
in excess of maximum permissible bank finance (MPBF).
(ii) Borrowing units engaged in export activities need not bring in any contribution
from their long-term sources towards financing that portion of current assets
as is represented by export receivables.
(iii) Banks were also advised not to apply the Second Method of Lending for
assessment of MPBF to those exporter borrowers, who had to their credit
export of not less than 25 per cent of their total turnover during the previous
accounting year provided their aggregate fund-based working capital limits
from the banking system were less than Rs. 1 crore.
While announcing the credit policy for the first half of 1997-98 (April-Sept.), the RBI
has withdrawn its earlier instructions regarding MPBF and has given freedom to banks
to determine working capital requirements of the borrowers on their own. The cash
credit to loan ratio in the working capital limit has been fixed as follows:
Category of Borrower Cash Credit to Loan Ratio
(i) Borrowers with a credit Bank and the Borrower
limit of less than Rs. 10 crore can settle freely
(ii) Borrowers with credit limit
between Rs. 10 and 20 crore 25 : 75
(iii)Borrowers with credit limit
Rs. 20 crore and more 20:80