RBI swells the bank credits for all stage of borrowers to 60%

 

 

Mumbai, December 7: The Central Bank of India has recently issued the draft of the revised guidelines on loan system for delivery of Bank credits on 5th of December this year. Chief general manager in-charge of Reserve Bank of India, Saurav Sinha declared the final annexure in relation which will be applicable from 1st of April, 2019.

 

 

After considering the views and opinions of the stakeholders called for on 11th of June this year, the Central Bank has revised the early existing 40 percent loan component of borrowing capacity to 60 percent applicable with effect from 1st of July 2019.

 

 

Bank credit basically, is an agreement between banks and borrowers where banks trust a borrower to repay funds plus interest for either a loan, credit card or line of credit at a later date. Bank credit is the total borrowing capacity banks provide to borrowers. It allows borrowers to buy goods or services and counts to the total of money banks lend or have already lent to customers.

 

 

However, bank credits demand a fixed minimum monthly payment for a specified period. Borrowers start with a zero balance pays off the balance and borrows again until the credit limit is reached.

 

 

The basic objective behind the revision is to enhance credit discipline among the larger borrowers enjoying working capital facility from the banking system. With the focus audience being large and medium scale borrowers, bank credit policy shall be mandatory to be followed.

 

 

For the borrowers having fund based working capital limit more than ₹1500 million from the banking system, a minimum level of ‘loan component’ remains 40 percent. Accordingly, for such borrowers, drawings up to 40 percent 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.

 

 

However, the ground rules for the consortium of funds, wherever formed, the lenders in the consortium shall be individually and jointly responsible to make sure that at the aggregate level, the ‘loan component’ meets the above mentioned requirements. Under Multiple Banking Arrangements (MBAs), each bank shall ensure adherence to these guidelines at individual bank level.

 

 

The amount and tenure burden of the loan component may be fixed by banks in consultation with the borrowers, it being at least seven days. Banks may decide to split the loan component into Working Capital Limits with different maturity periods as per the needs of the borrowers.

 

 

This revision of rate is looked forward to by the large and the medium scale borrowers at large as the commercial banks are directed to co-operate the working capital limits in a positive manner. It is through consortiums and the shared capital ways that these borrowers may have an opportunity to stress over the rising individual economic growth.