RBI releases loan system draft for large borrowers | Daily Current Affairs 2021

RBI releases loan system draft for large borrowers

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Aiming to improve the loan system and discipline among large borrowers, the Reserve Bank of India (RBI) has released draft guidelines.

According to the draft, a minimum level was stipulated for ‘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 per cent 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. Besides, the 40 per cent loan component will be revised to 60 per cent, with effect from April 1, 2019, it added.

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