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How do banks assess the working capital requirements of borrowers in MSME's?

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Varsha Varsha
Answered on February 03,2020

The banks have been advised by RBI to put in place loan policies governing extension of credit facilities for the MSE sector duly approved by their Board of Directors Vide RBI circular; Banks have, however, been advised to sanction limits after proper appraisal of the genuine working capital requirements of the borrowers keeping in mind their business cycle and short term credit requirement. As per Nayak Committee Report, working capital limits to SSI units is computed on the basis of minimum 20% of their estimated turnover up to credit limit of Rs.5crore. For more details paragraph 4.12.2 of the RBI Master Circular on lending to the MSME sector dated July 1, 2010 may please be seen.

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