Can calculate CC Limit on short term FD

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This query is : Resolved

Quick Summary

This discussion explores the possibility of using short-term Fixed Deposits (FDs) to increase a company's Cash Credit (CC) limit. The company proposes depositing funds into an FD, which is considered more liquid than stock or debtors, to potentially receive 100% value in the CC limit calculation. The consensus is that this is a viable strategy and bankers typically have no reason to disallow it.

Bazeer Ahmed

Bazeer Ahmed (Querist)

22 February 2023 Dear Sir/ Madam,
Our Company has a CC account so every month we have to provide a stock statement for margin of working capital. They fix margin 25% for Stock and 50% for Debtors balance. We have an idea to make a Short-Term Fixed Deposit for a sum and as it will be more liquid than Stock and Debtors, there won’t be without margin and can be taken 100% value in calculation of CC Limit.
Our query is
1) Whether we can make a short term fixed deposit and calculate CC limit on 100% value of FD?
2) On what reasons will the bankers not allow to calculate on FD value?
Kindly advise us whether this idea is work out.
Thanks in advance,
With regards,
Bazeer L