GET Stock QuotesNews18 APP
News18 English
Powered by cricketnext logo
»
1-min read

RBI Releases Draft Norms to Modify Loan System for Large Borrowers

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.

PTI

Updated:June 11, 2018, 9:17 PM IST
facebookTwittergoogleskypewhatsapp
RBI Releases Draft Norms to Modify Loan System for Large Borrowers
Representative image.
Loading...
Mumbai: The Reserve Bank today 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.

"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 per cent shall be effective from October 1, 2018," said the draft guidelines as RBI proposes to modify the system for delivery of bank credit for large borrowers.

Accordingly, for such borrowers, the outstanding loan component' must be equal to at least 40 percent of the sanctioned fund based working capital limit, including ad hoc credit facilities, it said.

"Hence, for such borrowers, drawings up to 40 per cent 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 40 per cent loan component will be revised to 60 per cent, with effect from April 1, 2019, it added. 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. Cash credit (CC) is by far the most popular mode of working capital financing.

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

It further said that the amount and tenor of the working capital demand loan (WCDL) may be fixed by banks in consultation with the borrowers, subject to the tenor being not less than seven days.

Banks may decide to split the loan component with different maturity periods as per the need of the borrowers, it added. Also, from April 1, 2019, the undrawn portion of cash credit/ overdraft limits sanctioned to the aforesaid large borrowers, irrespective of whether unconditionally cancellable or not, will attract a credit conversion factor of 20 per cent, the draft guidelines said.
Read full article
Loading...
Next Story
Next Story

Also Watch

facebookTwittergoogleskypewhatsapp
Most Active
Company Price Change %Gain
Kotak Mahindra 1,222.45 -2.67
ICICI Bank 358.45 1.86
Yes Bank 181.00 0.36
Reliance 1,129.90 1.59
Vedanta 205.50 1.93
Company Price Change %Gain
Yes Bank 181.10 0.42
Kotak Mahindra 1,223.90 -2.50
Maruti Suzuki 7,708.55 0.71
SBI 288.65 -0.17
Infosys 693.55 -1.71
Top Gainers
Company Price Change %Gain
Tata Motors 173.95 4.19
Power Grid Corp 192.55 3.69
HDFC 1,960.35 2.95
Zee Entertain 501.85 2.53
Hindalco 225.45 2.41
Company Price Change %Gain
Tata Motors 173.75 4.10
Power Grid Corp 192.50 3.77
HDFC 1,959.15 2.89
Vedanta 205.65 2.21
Wipro 339.80 2.01
Top Losers
Company Price Change %Gain
Kotak Mahindra 1,222.45 -2.67
Infosys 694.40 -1.65
Bajaj Finserv 6,087.80 -1.45
Indiabulls Hsg 781.45 -1.44
Bharti Airtel 315.20 -1.27
Company Price Change %Gain
Kotak Mahindra 1,223.90 -2.50
Infosys 693.55 -1.71
Bharti Airtel 314.65 -1.30
Hero Motocorp 3,284.75 -0.87
Asian Paints 1,336.90 -0.24

Live TV

Loading...
Countdown To Elections Results
  • 01 d
  • 12 h
  • 38 m
  • 09 s
To Assembly Elections 2018 Results