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CHAKRAVARTHY COMMITTIEE 
BY: 
SHEREEN SHAHANA 
S3 MBA
• S. Chakravarty Committee was formed in 
1985 under the chairmanship of 
Prof. Sukhamoy Chakravarty. 
• The committee was set up to review the working 
of monetary system of India 
• Its goal was to improve monetary regulation, a 
feat that was hoped would enable price stability. 
• The committee submitted its report in April , 
1985
Recommendations by committee: 
• The committee made two major 
recommendations in regard to the working 
capital finance: 
1. Penal interest for delayed payments 
2. Classification of credit limit under three 
different heads.
Penal interest for delayed payments 
• Committee has suggested that the government 
must insist that all public sector units, large 
private sector units and government 
departments must include penal interest 
payment clause 
• In their contracts for payments delayed beyond a 
specific period 
• Penal interest may be fixed at 2 per cent higher 
than the minimum lending rate of the supplier’s 
bank
Classification of credit limit under 
three different heads 
• The total credit limit to be sanctioned to a 
borrower should be considered under three 
different heads: 
1. Cash credit I to include supplies to government 
2. Cash credit II to cover special circumstances 
3. Normal working capital limit to cover the 
balance credit facilities
• The interest proposed for three heads are also 
different. 
• Basic lending rate of the bank should be charged to 
Cash Credit II, and the Normal Working Capital, 
limit may charge as below: 
a. For cash credit portion: maximum prevailing 
lending rate of the bank 
b. For bill finance portion:2 % below the basic 
lending rate of the bank 
c. For loan portion:rate may vary between minimum 
& maximum lending rate of the bank
Chakravarthy committiee

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Chakravarthy committiee

  • 1. CHAKRAVARTHY COMMITTIEE BY: SHEREEN SHAHANA S3 MBA
  • 2. • S. Chakravarty Committee was formed in 1985 under the chairmanship of Prof. Sukhamoy Chakravarty. • The committee was set up to review the working of monetary system of India • Its goal was to improve monetary regulation, a feat that was hoped would enable price stability. • The committee submitted its report in April , 1985
  • 3. Recommendations by committee: • The committee made two major recommendations in regard to the working capital finance: 1. Penal interest for delayed payments 2. Classification of credit limit under three different heads.
  • 4. Penal interest for delayed payments • Committee has suggested that the government must insist that all public sector units, large private sector units and government departments must include penal interest payment clause • In their contracts for payments delayed beyond a specific period • Penal interest may be fixed at 2 per cent higher than the minimum lending rate of the supplier’s bank
  • 5. Classification of credit limit under three different heads • The total credit limit to be sanctioned to a borrower should be considered under three different heads: 1. Cash credit I to include supplies to government 2. Cash credit II to cover special circumstances 3. Normal working capital limit to cover the balance credit facilities
  • 6. • The interest proposed for three heads are also different. • Basic lending rate of the bank should be charged to Cash Credit II, and the Normal Working Capital, limit may charge as below: a. For cash credit portion: maximum prevailing lending rate of the bank b. For bill finance portion:2 % below the basic lending rate of the bank c. For loan portion:rate may vary between minimum & maximum lending rate of the bank