Formula for passing cc by banks

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Vijay Kr. Mishra

Vijay Kr. Mishra (Querist)
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10 November 2009 On which formula Banks are passing Cash Credit (CC), if CC is required Rs. 10 Lakhs ?

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10 November 2009 Based on Project report that you have submitted.

CA SANJAY MUKHERJEE

CA SANJAY MUKHERJEE (Expert)
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10 November 2009 Hi Vijay,
CC is meant to meet the borrowers working capita gap. So this is based on the computation of working capital requirement, i.e. Current Assets - Current Liabilities.

Then Bank calculates the Maximum permissible Bank Finance on the basis of Margin Amount to be paid or sourced by the borrower.

Another approach is a 20% of Turnover can be considered as working capital requirement. So turnover must be > 50 laks for a 10 laks cc limit beside the Working capital computation by CA-CL formula.

Another approach is a 20% of Turnover can be considered as working capital requirement. So turnover must be > 50 laks for a 10 laks cc limit beside the Working capital computation by CA-CL formula.

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