BUISENESS MANAGEMENT
RISK MANAGEMENT
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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5% of the Projected Annual Turnover
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5% of the total requirement
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5% of the Total Current Assets
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25% of the Projected Annual Turnover
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Detailed explanation-1: -As per this method, 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-2: -Simplified Turnover Method is used to assess the working capital requirement of any borrower based on the turnover of the business. This method was originally suggested by the P.J. Nayak Committee for the Small Scale Industries in India in need of working capital from banks.
Detailed explanation-3: -The method of assessment of working capital limits up to Rs. 2 crore (Rs.
Detailed explanation-4: -PJ Nayak Committee Recommendations. Repeal the Bank Nationalisation Act (1970, 1980), the SBI Act and the SBI Subsidiaries Act. This is because these acts require the government to have above 50% share in the banks.
Detailed explanation-5: -Under turnover method, the aggregate fund-based working capital limits are computed on the basis of Minimum of 20% of their projected annual turnover. The borrower has to bring the margin of 5% of the annual turnover of such borrowers as margin money.