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Credit Programme For Axis Bank Praloy Majumder Kolkata October 25 2010
Credit Programme For Axis Bank Praloy Majumder Kolkata October 25 2010
Praloy Majumder
Kolkata
October 25th 2010
Session One
Loans and Advances
Loan Division
Working Capital
Borrowing
Repayment Sales
Realisation
Methods of Assessment of
Fund Based Working Capital
FB Assessment
Method
MPBF CB TO
I II III
Working Capital Facilities
Concept of Working Capital Funding MPBF
LTA
NWC
FB facility CA
NFB OCL
Company’s Bank’s CMA
CMA
FA
FA
LTL LTL
NCA NCA
NCA
NWC LTL
WCG NWC
BB CA
BB WCG CA
OCL
MPBF Process..
I II III
A CA CA CCA
Advance against
Advance against
Bill Discounting Duty draw back
Bills for collection
Receivable
Liquidation Source
Liquidation
Source
With LC Without LC
Bill Discounting
Bill Discounting
Replacing Receivable
Financing with
Bill
Drawee Bill Discounting
Pays on due date
Sends documents
LC
Negotiating
LC Bank
opened
Issuing
Accepts documents and deposits
Bank
Advising
Bank
Approaches for LC
Opening
Advises
Buyer Approaches
Selller
Interest Increased
Interest Rate Situation- US
GDP 4% 1.5%
Inflation Low
Interest Low
Conclusion
Domestic rate would be higher
LIBOR related rates would be lower
LIBOR borrowing would be preferred
compared to domestic borrowing
LIBOR rates are also associated with
exchange risk
This needs to be taken into account before
borrowing
Foreign Currency Borrowing
India has USD 280 billion FX Reserve
FX Reserve means amounts of dollar India has
This balance has been built up by net of Inflows and Outflows:
Inflows :
Export
Capital Account Inflows
Loans
Investment in Capital Market
Recovery of assets
Out flows :
Import
Capital Account Outflows
Purchase of Assets
Repayment of Loan
Foreign Currency Borrowing
Permanent foreign currency is when country is having
trade surplus
India is trade deficit country
Dollars are not India’s dollars
This is outsiders money
So RBI would not allow this lenders to lend in the short
term market easily
So restriction on Short Term Lending in the form of
Foreign Currency would always be there
Foreign Currency Borrowing
Foreign Currency
Borrowing
Short Term
Medium Term Long Term
( Medium ( Minimum
( Maximum
Restriction ) Restriction )
Restriction )
Foreign Currency – Short Term
Borrowing
Short Term
Import – No
Import – Yes Import – No
Export – Yes
Export – No
Only through Export – No
Only through
PCFC and PSCFC Only through
TC for the imported
For export portion FCNR(B)
Portion
Only
Suppliers credit
Supplier would :
Inform Indian buyer that it would arrange the
fund
Indian buyer has to give a guarantee
LOU
SLC
Opens
Accepts documents
Submits Documents
LC
Payment Made
For Negotiation
Applies to bank
Advising Bank/
Confirming
Bank
Advises
LC
Without LC
Assessment of LC
Sl NO Particulars Source
V % of Purchase on Cash
VI % Of Purchase on Credit
Financial
guarantee- Mob
Advance
Financial
Guarantee- Secured
Advance
Performance
Guarantee-
Retention Money
Secured Unsecured