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RBI's new norms to force small businesses to get cash management act right

From the start of this fiscal, firms with a working capital limit of Rs 150 crore and above will first have to avail of 40% of it in the form of a working capital demand loan

markets, rbi

A new credit regime is upon us, and borrowers will have to grin and bear for a while. Effective from the start of this fiscal, firms with a working capital limit of Rs 150 crore and above will first have to avail of 40 per cent of it in the form of a “working capital demand loan”; and from July 1, it will move up to 60 per cent. It’s a departure from the current practice wherein banks have to maintain adequate cash or liquidity to meet a borrower’s requirement time to time even as borrowers with surplus cash typically reduce the utilisation of their limits. In both ...