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Working Capital Financing:

Working capital products include both fund and non-fund based products. Fund-based working capital products include cash credit, packing credit, short-term loans payable on demand, inland/export bills discounting, export and import financing and subscription to commercial paper. Non-fund based products include documentary credit and bank guarantees. We also prepare CMA data for Working Capital Loan syndication


A-1. Cash Credit for Manufacturers / Traders / Service Providers / Transporters

What is Cash Credit and Working Capital Cycle?

When any business entity starts business - be it a manufacturer / trader / service provider – micro-small- medium or large enterprise- it deals in manufactured or traded goods or provides services. Every business transaction passes through a Working Capital Cycle– from initial cash -to Credit Purchase of Goods - to manufacture process- to Credit Sales to Customer – Realisation of Book Debts – payment to creditors- and again in Cash for smooth functioning of every business, it needs Working Capital Funds in the form of Cash Credit

  1. for buying Raw Materials & Finished Goods, Purchase of Services
  2. Packing Material & Stores and Consumables, Spare Parts
  3. Payment to Labour, Wages & Salaries to Staff
  4. meeting business expenses like Power & Electricity, Rent, Rates, Taxes
  5. Administrative, Selling & Marketing Overheads
  6. Payment of Corporate and Individual Income Taxes

Cash Credit is granted by banks for above needs keeping a certain percentage of the current assets value as margin money. The Cash Credit facility is generally granted for one year and it is subject to review at the expiry of one year. At the time of first time sanction of Cash Credit or Renewal of Cash Credit, borrower is required to give to the bank a Cash Credit Proposal along with CMA DATA, through which bank assesses the Working Capital Gap of the borrower that can be funded by the bank.

Security for Cash Credit Facility

Cash Credit is primarily secured by way of Hypothecation of Stock of Goods- Raw Material, Work-in-progress or Semi Finished Goods, Finished Goods and Debtors and all other Current Assets of the business generated during the course of the normal business. Cash credit can also be secured by way of offering adequate Collateral Security in the form of Immovable Properties acceptable to the bank.

We also arrange cash credits at the lowest possible rate of interest and for minimum applicable margin on Stocks and Book Debts in the form of a running account, similar to an overdraft secured by a charge on current assets like Stock of Goods – Raw Material, Work-in-progress or Semi Finished, Finished Goods- Book Debts etc that meets the frequent cash requirements of your trading cycle.

A-2 Overdraft – Clean and Secured

What is an Overdraft?

Overdraft is a credit facility in the nature of a Credit Account from which the borrower can avail the funds anytime at his convenience but whose Upper Limit is fixed depending on the value of the security offered by the borrower to the bank. Overdraft can be availed against

  1. any financial assets like Fixed Deposits, Bonds, Shares Securities, Gold & Silver Jewelry or
  2. Physical Assets like Motor Car, Pool of Vehicles,
  3. Immovable Properties like Factory Land, Industrial Shed, Warehouses, Godowns, Residential Houses, Commercial Office Space, and Commercial Shops

Overdraft helps you meet your short-term funding needs and allows you to leverage every business opportunity that comes your way against the security of residential or commercial property. Sanction Procedures, Loan Documents are easy for Overdraft Accounts. Overdraft Account Facility is generally for one year and renewed on request.

A-3 Finance for Inland Bill Purchase & Bill Discounting

What is Bills Purchase and Bill Discounting Facility ?

When a Sale and Purchase Transaction takes place, the seller issues an Invoice (Bill) to the Purchaser. If this Sale is a Credit Sales, then the seller will get the money from the purchaser only after the expiry of credit period. If the seller does not have extra money, during the period between credit sales and realization of money from debtor, he will not be able to buy more goods and sell again at a profit. To facilitate the business of manufacture, trade etc, banks help you by giving financial resources in the form of Bill Discounting Facility. And the bank's bill finance product helps you bridge the fund gap between the date of sale of products to the receipt of payments.

  • The bank purchases the bill of exchange your company receives against a product sale, at a discount, thus doing away with the delay in realizing the receivables.
  • The extent of discounting would amount to the interest calculated till the payments for the original sale are realized, and will be determined on the basis of market interest rates as well as the credit rating of the borrower.

So, don't keep the funds blocked during the credit period but get them discounted and increase your sales turnover.


B-1. Letters of Credit

What is Letter of Credit?

When a buyer want to purchase goods or importer wants to import goods from an unknown seller or exporter, he can take assistance of banks in such buying or importing transactions.

On the basis of creditworthiness, a Bank issues a Letter of Credit addressed to the supplier or exporter who, on the strength of Letter of Credit issued by a reputed bank, will not hesitate to supply or export goods to such unknown buyer/ importer. After the goods are supplied, A Signed Invoice with a Letter of Credit is presented to the banker of buyer / importer and the payment is made to the seller/exporter directly by the bank.

Letter of Credit facilitates your purchases of goods in trading operations, both domestic and international. Backed bank's strong reputation, you will be able to build better trust in trade and forge business relationships faster.

  • The bank's vast network of branches and correspondent banks enables your enterprise to sustain a seamless flow of business on a wide platform.
  • Further, the bank's informed trade finance crew can provide you with sophisticated credit and trade information and market knowledge, helping you extract more value from business.

Depending on the credit worthiness of the borrower, Letter of Credit can be availed with as low as 10% of Cash Margin and Mortgage of Immovable Properties.

B-2. Bank Guarantees ( Performance / Financial)

What is Bank Guarantee

A Bank Guarantee is a guarantee issued by a banker that, in case of an occurrence or non-occurrence of a particular event, the bank guarantees to make good the loss of money as stipulated in the contract.

Bank analyses the creditworthiness or the business capacity of its clients and then issues various types of bank guarantees like Financial Guarantees, Performance Bank Guarantees, Deferred Payment Guarantees. Bank guarantees can be issued against Cash Margin and Mortgage of Immovable Properties.

Bank Guarantee can be availed

  • to submit Tender –Bid Money / Earnest Money Deposit / Security Deposit / Maintenance Deposit
  • Performance of a Tender / Bid Contract, Bid Bond Guarantee
  • Advance Payment Guarantee
  • Performance Guarantee Down
  • Payment Guarantee
  • Retention Money Guarantee
  • Overseas Borrowing Guarantee

Depending on the credit worthiness of the borrower, Bank Guarantee can be availed with as low as 10% of Cash Margin and Mortgage of Immovable Properties.

B-3. Suppliers Credit Inland- Import and Export

A financing arrangement under which an exporter extends credit to a foreign importer to finance his purchase. Usually the importer pays a portion of the contract value in cash and issues a Promissory note or accepts a draft as evidence of his obligation to pay the balance over a period of time. The exporter thus accepts a deferred payment from the importer, and may be able to obtain cash payment by discounting or selling the draft or promissory notes created with his bank.

B-4. Buyer's Credit Inland- Import and Export

Buyer's credit is the credit availed by an Importer (Buyer) from overseas Lenders i.e Banks and Financial Institutions for payment of his Imports on due date. The overseas Banks usually lend the Importer (Buyer) based on the letter of Credit (a Bank Guarantee) issued by the Importers (Buyer's) Bank. In fact the Importers Bank brokers between the Importer and the Overseas lender for arranging buyers credit by issuing its Letter of Comfort for a fee. Buyers credit helps local importers access to cheaper foreign funds close to LIBOR rates as against local sources of funding which are costly compared to LIBOR rates.