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Banking > Lendings > Domestic Lendings > Recent Position

Recent Position

State Bank of India and its associate banks have shifted to Projected Balance Sheet (PBS) Method in which the corporate is asked to project its balance sheet including the requirements for bank finance. The Bank validates these requirements through time-series and ratio analyses and sanctions the limits, if the level of finance projected by the corporate is found acceptable. Otherwise, the corporate is requested to alter its business plans and funding pattern.

Some other Banks like Bank of Baroda have preferred Cash Flow method of assessment of corporate requirements and are shifting to this method. Under Cash Flow Method, the corporate is required to project its cash receipts and expenditure. Whenever, the expenditure overshoots the incomes, the Bank finance steps in to fill the gap. Many other banks, however, have continued with the method of Maximum Permissible Bank Finance (MPBF)

Bifurcation of Bank limits into two components i.e. Working Capital Demand Loan (fixed component) and Working Capital Cash Credit (variable component) has been mandated by Reserve Bank of India for larger borrowers.

While other bank loans have to be provided at rates of interest not less than Prime Lending Rate (PLR), discounting the bills of exchange has been permitted by the RBI at a rate less than PLR.


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