Being a faculty at a Bankers Training College, many a times I would refer the RBI master circulars for my sessions. Every time I found it a huge task. The language is complicated, Compound sentences were making it difficult to comprehend and above all the circulars are real lengthy. So I started simplifying them for my future consumption.
Why not share my work with others.
So my dear friends enjoy reading.
Streamlining flow of credit to Micro and Small Enterprises
i) Standby Credit Facility- Banks
may consider providing a ‘standby credit facility’, while funding capital
expenditure, to fund unforeseen increases in capital expenditure. Further, such
facility may also be sanctioned to fund periodic capital expenditure.
ii) Working Capital Limits –Banks
may incorporate a policy for fixing a separate additional limit, at the time of
sanction / renewal for meeting temporary rise in working capital requirements.
Such limits may be released, where there is evidence of an increase in the
demand for products. Banks may also sanction adhoc limits, to be regularised within
three months of sanction.
iii) Review of Regular Working
Capital Limits –Where banks are convinced that changes in the demand pattern require
a midterm review, they may do so. Such reviews may be based on an assessment of
sales performance since the last review without waiting for auditing financial
statements. However, such midterm reviews shall be revalidated during the
subsequent regular review based on audited financial statements.
iv) Timelines for Credit
Decisions–Reserve Bank has issued several guidelines.
·Banks were advised to put in place a structured monitoring
·Banks were advised to have a Credit Proposal Tracking System
·Banks were advised that the time frame within which loan
applications up to Rs.2 lakh will be disposed of should be indicated at the
time of acceptance of loan applications.
·Banks were advised, that they should clearly delineate the
procedure for disposal of loan proposals, with appropriate timelines, and
institute a suitable monitoring mechanism for reviewing applications pending
beyond the specified period, without any compromise on due diligence. Banks are
also required to make suitable disclosures on the timelines for conveying
credit decisions through their websites, notice-boards, product literature,
Banks are advised
that above systems should be put in place with immediate effect, with regard to
credit facilities for MSE borrowers.
Based on RBI Circular dt 27/08/15. Please visit www.rbi.org.in for any further clarification
if required….. Poppy