RBI issues draft guidelines on loan system for bank credit
Mumbai, June 11: In a move to enhance credit discipline among larger borrowers, the RBI on Monday proposed a "minimum level of loan component" of 40 per cent for borrowers having an aggregate fund-based working capital limit of Rs 150 crore and above from the banking system, a condition proposed to be effective from October 1, 2018.
Issuing the draft guidelines on the loan system for bank credit, the Reserve Bank of India (RBI) also said that the undrawn portion of cash credit and overdraft limits sanctioned to larger borrowers will attract a credit conversion factor of 20 per cent, effective from April 1, 2019.
The central bank said drawings up to 40 per cent of the total fund-based working capital limits shall only be allowed from the "loan component".
"Drawings in excess of the minimum loan component threshold may be allowed in the form of cash credit facility," it said.
According to the RBI, cash credit is by far the most popular mode of working capital financing, which also poses several regulatory challenges "such as perpetual roll overs, transmission of liquidity management from the borrowers to banks/RBI, hampering of smooth transmission of monetary policy, etc".
"Effective from April 1, 2019, the undrawn portion of cash credit/overdraft limits sanctioned to the aforesaid large borrowers, irrespective of whether unconditionally cancellable or not, shall attract a credit conversion factor of 20 per cent," the statement said.
The 40 per cent loan component will be revised to 60 per cent from April 1, 2019, it added.
The RBI has invited comments on the draft guidelines from banks and other stakeholders by June 26.
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Davangere: Two policemen injured in stone pelting during Ganesha procession
Davangere: Reports state that two groups engaged in stone pelting at each other during Ganesha idol immersion ceremony in Davangere on Thursday. Two police personnel were injured in the incident.
Few days ago, two groups of youth engaged in verbal altercation regarding raising of a flag for Eid Milad celebration. On account of the clashes, police had heightened security for the Ganesha procession. Despite the additional security, stones were pelted at the procession, sources stated. Inspector Gururaj and constable Raghavendra were injured in the incident. The procession continued after the police brought the situation to control. However, the stone pelting resumed once again as the procession surged forwards.
Security has been tightened up in the area and all shops have been closed down by the police. The two police personnel, who were injured in the stone pelting, are undergoing treatment at a hospital.
