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Non fund based limit

Rohan Pandey (Chartered Accountant) (208 Points)

31 May 2012

My client is interested in trading coal, for the said purpose he has commissioned a new company. Now to further the business he need to draw back to back l/c on the supplier for which he is in need of non fund based limits.

Can anybody, provide any insight on the above deal. Can the non fund based limit be availed? If yes, how can it be arranged?

Rohan

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3 Replies

Bindu Madhav (Head - Finance & Accounts) (151 Points)
Replied 31 May 2012

Any limits for issuing BG/Forex etc., (funds flow will happen only on default not immediately) will be treated as Non-fund based limits.These will be given by banks on scrutinising the custome proifle, similar to term loans/fund based limits. However, the requirements will be little relaxed/will give more amounts based on history/security. However, for these limits also customer should have good credit worthiness, they will also see for past history and also may ask for security.

Rohan Pandey (Chartered Accountant) (208 Points)
Replied 31 May 2012

Thanks for sharing the information.

Rohan Pandey (Chartered Accountant) (208 Points)
Replied 31 May 2012

However, to add on the above if the company is a newly incorporated company can the non fund based limit be arranged by entering in a joint venture with an existing compnay.