Answer-Why did the Reserve Bank of India (RBI) historically refuse to implement the 'Third Method' of Maxim...

The Third Method introduced the concept of Core Current Assets CCAthe permanent baseline level of current assets required to run a business uninterrupted. The mathematical logic of this method forced the borrower to fund the entirety of their CCA plus 25 of the remaining current assets from long-term sources equityretained earnings. Because this imposed an ultra-stringent requirement on corporate entities to lock up massive long-term funds for day-to-day operations, the RBI opted not to enforce its implementation to avoid completely choking business growth.

Question

Why did the Reserve Bank of India (RB

F proposed by the Tandon Committee, despite recognizing its realistic approach to scarcity allocation?
I historically refuse to implement the "Third Method" of Maximum Permissible Bank Finance (MPB

A It failed to recognize any form of promoter margin contribution, placing 100% risk on the bank.

B It required the segregation of "Core Current Assets" (CCA) to be funded entirely through long-term resources/equity, making it too restrictive for general credit expansion.

C It calculated the working capital requirement based strictly on past historical sales rather than future projections.

D It was heavily dependent on weekly agricultural cash flows, rendering it useless for industrial sectors.

E The method incorrectly treated bank borrowings as part of Other Current Liabilities.

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