Pvt Banks Draw Up Alternative Credit Assessment Plans

Private sector banks have finalised norms for assessing the credit requirement of corporates, and have decided to use the age old system of maximum permissible bank finance (MPBF) only sparingly. Says a banker, The changes envisaged in the credit policy have begun taking place, and the desired direction seems to be set with major private sector banks offering flexibility in their lending patterns. The banks are waiting for clearances their board before formally putting the plans into action.

IndusInd Bank Ltd has decided not to change its stance regarding MPBF, and would appraise clients on a case-by-case basis. It will employ either the turnover method or the cash budget method for corporates seeking credit. HDFC Bank has also indicated its willingness to use the turnover method for assessing borrowers with low requirements. It has said that it may even consider going beyond the RBI -suggested 20 per cent of the turnover for arriving at working capital requirements. For the cash budget method, the banks will be following the system of calculating the peak and non-peak requirements for borrowers. Bank officials have also indicated that they would be ready to consider higher needs should it be required .

 

Given the mind set which the public sector banks have become accustomed to, private sector banks are better placed to meet specialised funding requirements of corporates, says a senior official of Times Bank. Times Bank will offer its clients credit based on the turnover method if the financing needs are up to Rs 2 crore. Thereafter, the cash flow method will be used by the bank to assess credit needs of corporates.ICICI Banking Corporation is also gearing up for change. We are in the process of finalising our plans, and they should be ready shortly, says a senior executive with the bank .

Development Credit Bank will formalise its plans soon. We feel that if the banks had taken the borrowers seriously, most of the banks, by now, would have been in a position to offer the cash budget method to customers. The problem is that the smaller companies are not in a position to meet our information needs, says a senior official of the corporate banking division of the bank.

Centurion Bank is already extending loans to companies affected by seasonality using the cash budget method, and the same may be offered to companies with a good track record. In fact, tea companies and sugar companies are already under the cash flow method of assessment, says a bank official . The bank is also lending to better-off corporates against shares at 50 per cent margin.