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Saturday, Oct 18, 2008
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Business Daily from THE HINDU group of publications Saturday, Oct 18, 2008 ePaper | Mobile/PDA Version | Audio | Blogs |
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Corporate Money & Banking - Credit Market Web Extras - Short Term Instruments Ministry asks banks to allow cos to utilise sanctioned loan limits The advisory is to make sure that banks disburse credit limits already sanctioned The recent measures by the Centre and RBI would make available Rs 1.25 lakh crore for the banking system K.R. Srivats New Delhi, Oct. 17 The Finance Ministry has advised public sector banks (PSBs) to allow borrowers/companies to utilise the sanctioned term loan and working capital limits. They have also been asked to assess on a priority basis all requests of borrowers for enhancement in existing credit limits. Banking industry sources said that the advisory comes in the wake of apprehensions in some quarters that some banks may temporarily put on hold, due to liquidity constraints, the disbursement of credit limits already sanctioned. This advisory has been issued along with the spate of measures taken by the Reserve Bank of India and the Union Government in the recent days to tackle the liquidity constraint in the financial system. The recent measures technically would make available Rs 1.25 lakh crore for the banking system. In the recent years, India Inc has to a large extent been relying on overseas resources to fund business growth and acquisitions. But with the current meltdown in financial markets of the developed world, raising equity or even debt funds from abroad would be a difficult task for many a corporate with good credit ratings here. Such companies are now expected to look to domestic banks for credit, pushing up local interest rates. “Banks have been asked to ensure that borrowers are allowed to use the funds according to their business requirements so long as they have drawing power within their existing working capital limits,” sources said. On term loans already sanctioned and where part disbursements have been made, the Finance Ministry has advised that further drawdown should be allowed according to the stipulated schedule so that project implementation does not suffer, For cases where term loan and/or working capital limits have been sanctioned but no disbursement has been made, the Finance Ministry has said that in such cases the disbursements should be made according to the commitment already given to the borrower.
In the advisory, the Finance Ministry has also said that it is important that borrowing/lending between the banks in the inter-bank call money market is carried out freely so that adequate liquidity is available in the system and call money rates are maintained at moderate and reasonable levels. RBI to consider controls on working capital credit by banks Continue lending to SMEs, RBI tells banks More Stories on : Corporate | Credit Market | Short Term Instruments
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