BANKING AFFAIRS

Detailed explanation-1: -1. 2. This Master Circular consolidates the instructions issued by the Reserve Bank of India to banks on statutory and other restrictions on loans and advances. A statutory guideline issued by the Reserve Bank in exercise of the powers conferred by the Banking Regulation Act, 1949.

Detailed explanation-2: -2.2 In accordance with these guidelines, the working capital requirement is to be assessed at 25% of the projected turnover to be shared between the borrower and the bank, viz. borrower contributing 5% of the turnover as net working capital (NWC) and bank providing finance at a minimum of 20% of the turnover.

Detailed explanation-3: -Guidelines on Loan System for Delivery of Bank Credit In respect of borrowers having aggregate fund based working capital limit of ₹1500 million and above from the banking system, a minimum level of ‘loan component’ of 40 percent shall be effective from April 1, 2019.

Detailed explanation-4: -Answer: The Reserve Bank of India supervises the functioning of formal sources of loans. Functions of Reserve Bank of India.

Detailed explanation-5: -The Reserve Bank of India was set up on the basis of the recommendations of the Hilton Young Commission. The Reserve Bank of India Act, 1934 (II of 1934) provides the statutory basis of the functioning of the Bank, which commenced operations on April 1, 1935.