Regulation of Bank Finance^425
be fixed at 2% per annum over the ratio applicable on the relative cash credit limits.
This procedure should made compulsory for all borrowers (except sick units) having
aggregate working capital limits of Rs. 10 lakhs and over.
Peak Level and Normal Non peak Level Limits to be Separate
While assessing the credit requirements, the bank should appraise and fix separate
limits for the ënormal non-peak levelí as well as for the ëpeak levelí credit requirements
indicating the periods during which the separate limits would be utilised by the borrower.
This procedure would be extended to all borrowers having working capital limits of Rs.
10 lakhs and above. One of the important criteria for deciding such limits should be the
borrowersí utilisation of credit limits in the past.
Financing Temporary Requirements through Loan
If any ad-hoc or temporary accommodation is required in excess of the sanctioned limit
to meet unforeseen contingencies the additional finance should be given, where
necessary, through a separate demand loan account or a separate ënon-operatable
cash credit accountí. There should be a stiff penalty for such demand loan or non-
operatable cash credit portion, at least two per cent above the normal rate, unless
Reserve Bank exempts such penalty. This discipline may be made applicable in cases
involving working capital limits of Rs. 10 lakhs and above.
Penal Interest
The borrower should be asked to give his quarterly requirement of funds before the
commencement of the quarter on the basis of his budget, the actual requirement being
within the sanctioned limit for the particular peak level/non peak level periods. Drawing
less than or in excess of the operative limit so fixed (with a tolerance of 10% either
way) but not exceeding sanctioned limit would be subject to a penalty to be fixed by the
Reserve Bank from time to time. For the time being the penalty may be fixed at 2% per
annum. The borrower would be required to submit his budgeted requirements in triplicate
and a copy each would be sent immediately by the branch to the controlling office for
record. The penalty will be applicable only in respect of parties enjoying credit limits of
Rs. 10 lakhs and above, subject to certain exemptions.
Information System
The non-submission of the returns in time is partly due to certain features in the forms
themselves. To get over this difficulty, simplified forms have been proposed. As the
quarterly information systems, is part and parcel of the revised style of lending under
the cash credit system, if the borrower does not submit the return within the prescribed
time, he should be penalised by charging the whole outstanding in the account at a penal
rate of interest, 10% per annum more than the contracted rate for the advance from
the due date of the return till the date of its actual submission.