Question
Under the simplified procedure for working capital
finance to Micro and Small Enterprises (MSEs) with working capital limits of up to ₹5 crore, the working capital limit is computed based on:Solution
As per RBI guidelines, for MSE units requiring working capital limits up to ₹5 crore, banks follow a simplified method of assessment. • The working capital limit is fixed at 20% of the projected annual turnover of the enterprise. • This streamlined approach reduces compliance burden for small units and ensures faster access to credit. • For larger enterprises (above ₹5 crore), working capital is generally assessed using the traditional methods such as the Nayak Committee norms or detailed cash flow-based analysis. Thus, the correct working capital computation is 20% of projected annual turnover.
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