Sunday, August 19, 2018
facebook

google plus
Business

Posted at: Jun 12, 2018, 12:35 AM; last updated: Jun 12, 2018, 12:35 AM (IST)

RBI to modify bank credit system for large borrowers

Comes out with draft guidelines, comments invited by June 26

Mumbai, June 11

The RBI on Monday came out with draft guidelines on loan system for delivery of bank credit to improve discipline among larger borrowers enjoying working capital facility from the banking system.

The draft stipulates a minimum level of ‘loan component’ in fund-based working capital finance and a mandatory Credit Conversion Factor (CCF) for the undrawn portion of cash credit/ overdraft limits availed by large borrowers, it said.

“Hence, for such borrowers, drawings up to 40% of the total fund-based working capital limits shall only be allowed from the ‘loan component’. Drawings in excess of the minimum ‘loan component’ threshold may be allowed in the form of cash credit facility,” the RBI’s draft said.

The central bank has invited comments on the draft guidelines from banks and other stakeholders by June 26.

Banks provide working capital finance by way of cash credit/overdraft, working capital demand loan, purchase/discount of bills, bank guarantee, letter of credit, and factoring.

On sharing of working capital finance, the draft said the ground rules for sharing of cash credit and loan components may be laid down by the consortium, wherever formed. — PTI

New norms proposed

  • The draft stipulates a minimum level of ‘loan component’ in fund-based working capital finance and a mandatory Credit Conversion Factor for the undrawn portion of cash credit/ overdraft limits availed by large borrowers
  • In respect of borrowers having aggregate fund based working capital limit of Rs 150 crore and above from the banking system, a minimum level of ‘loan component’ of 40% shall be effective from October 1, 2018
  • Accordingly, for such borrowers, the outstanding ‘loan component’ must be equal to at least 40% of the sanctioned fund-based working capital limit, including ad hoc credit facilities
  • The 40% loan component will be revised to 60%, with effect from April 1, 2019, it added

COMMENTS

All readers are invited to post comments responsibly. Any messages with foul language or inciting hatred will be deleted. Comments with all capital letters will also be deleted. Readers are encouraged to flag the comments they feel are inappropriate.
The views expressed in the Comments section are of the individuals writing the post. The Tribune does not endorse or support the views in these posts in any manner.
Share On