BANKING POLICY RECOMMENDATIONS

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