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How do banks assess the working capital requirements of borrowers?

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Karan Karan
Answered on February 17,2020

The banks have been advised to put in place loan policies governing extension of credit facilities for the MSE sector duly approved by their Board of Directors (Refer circular RPCD.SME & NFS.BC.No.102/06.04.01/2008-09 dated 4 May  2009). However, banks have 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 $ .7 million. For more details paragraph 4.15.2 of the Master Circular on lending to the MSME sector dated 1 July 2014 may please be seen.

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