Question
Under the Loan System for delivery of bank credit, UCBs
have the freedom to increase the cash credit component beyond 20% or increase the loan component beyond 80% for borrowers with working capital credit limits:Solution
Loan System for Delivery of Bank Credit In the case of borrowers enjoying working capital credit limits of ₹10 crore and above from the banking system, the loan component should normally be 80% and the remaining Cash Credit component. UCBs have been given freedom to change the composition of working capital by increasing the cash credit component beyond 20 per cent or increase the loan component beyond 80 per cent, as the case may be, if they so desire. UCBs are expected to appropriately price each of the two components of working capital finance, taking into account the impact of such decisions on their cash and liquidity management.
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