Loan scheme to minimise risks

By Our Special Correspondent

MUMBAI, OCT. 22. The Reserve Bank of India introduced `loan system' to minimise the risks of cash and liquidity management on the part of the banking system, caused by volatile movements in cash credit component of working capital.

In the current environment of short-term investment opportunities available to both corporates and banks, banks will henceforth have the freedom to change the composition of working capital by increasing the cash credit component beyond 20 per cent for working capital limits of Rs. 10 crores and above, if they so desire.

Further, a committee consisting of representatives of banks, RBI, Central Government and Food Corporation of India was constituted by the RBI for undertaking a review of the consortium arrangement for food credit. The report of the committee is under consideration in consultation with the agencies concerned and the government.

Kissan Credit Cards (KCCs) scheme for eligible agricultural farmers has proved to be successful. To accelerate the scheme of KCCs to cover all eligible agricultural farmers within the next three years, the RBI has advised all banks about their targets to be achieved for 2001-02.

The Reserve Bank intends to process applications promptly in the light of considerations outlined in its circular to financial institutions on approach to universal banking in April this year.

In processing a specific proposal, the overwhelming consideration of the RBI will be to meet the strategic objectives of the financial institution concerned for meeting the varied needs of different categories of customers, while at the same time ensuring healthy competition in the financial system through transparent and equitable regulatory framework applicable to all the participants in banking business.

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Section  : Business
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