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      Question

      As per the Master Circular on Management of Advances –

      UCBs, for borrowers (other than MSEs) requiring fund-based working capital up to ₹1 crore and for Micro & Small Enterprises requiring up to ₹5 crore, how is the working capital requirement (25% of projected turnover) shared between borrower and bank?
      A Borrower contributes 25%, bank provides 75% Correct Answer Incorrect Answer
      B Borrower contributes 10%, bank provides 90% Correct Answer Incorrect Answer
      C Borrower contributes 5%, bank provides 15% Correct Answer Incorrect Answer
      D Borrower contributes 5%, bank provides 20% Correct Answer Incorrect Answer
      E Borrower contributes 20%, bank provides 80% Correct Answer Incorrect Answer

      Solution

      • Under RBI’s guidelines for working capital assessment (turnover method): o Working capital requirement = 25% of projected annual turnover. o This is shared between the borrower and the bank as:  Borrower’s contribution (Net Working Capital) = 5% of turnover.  Bank finance = minimum 20% of turnover. • Example: If projected turnover = ₹10 crore, o Total working capital requirement = ₹2.5 crore (25% of turnover). o Borrower contributes ₹0.5 crore (5%), and o Bank provides at least ₹2.0 crore (20%).

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