1. LITERATURE REVIEW/ CASE STUDIES ON WORKING CAPITAL OF VARIOUS
BANKS
Introduction:
Every business needs adequate liquid resources in order to maintain day to day cash flows. It
needs enough cash to by wages and salaries as they fall due and to pay creditors if it is to keep its
workforce and ensure its supplies. Maintaining adequate working capital; is not just important in
the
short term. Sufficient liquidity must be maintained in order to ensure the survival of business in the
long term as well.
• Working Capital Management (WCM) is the management of short term financing
requirements of a firm.
• Working capital management involves the relationship between a firm's short-term assets
and its
• short-term liabilities.
• The goal of working capital management is to ensure that a firm is able to
• continue its operations and that it has sufficient ability to satisfy both maturing short-term
debt and upcoming operational expenses.
• This includes maintaining optimum balance of working capital components receivables,
inventory and payables and using the cash efficiently for day-to-day operations.
• Optimization of working capital balance means minimizing the working capital
requirements and realizing maximum possible revenues.

2. 1) Bank of Baroda
A firm's working capital is the money it has available to meet current obligations (those due in less
than a year) and to acquire earning assets.
Bank of Baroda offers corporations Working Capital Finance to meet their operating expenses,
purchasing inventory, receivables financing, either by direct funding or by issuing letter of credit.
Key Benefits
•Funded facilities, i.e. the bank provides funding and assistance to actually purchase
business assets or to meet business expenses.
•Non-Funded facilities, i.e. the bank can issue letters of credit or can give a guarantee on
behalf of the customer to the suppliers, Government Departments for the procurement of
goods and services on credit.
•Available in both Indian as well as Foreign currency.
2) Corporation Bank
The working capital limits would be considered only after the project nearing completion and after
ensuring full tie-up of the term loan requirements of the borrower.
These limits would be either in the form of fixed loans or running accounts and / or bill financing
facility.
The finance extended under this category would be for meeting the funds requirements for day to
day operations of the units i.e, to meet recurring expenses such as acquisition of raw material, the
various expenses connected with products, conversion of raw materials into finished products,
marketing and administrative expenses, etc.
• In tune with the Reserve Bank of India guidelines on Loan System for delivery of bank
Credit for working capital purposes to larger borrowers, the same would be extended in the
form of fixed loan (working capital Demand loan) and cash credit (running account) in the
ratio of 60:40 in respect of borrowers enjoying aggregate working capital limits of Rs.10
crore and above from the Banking system.
• The working capital demand loan facility shall be for a minimum fixed term of 7 days
subject to roll over at the option of the borrower concerned.
• Eligible Working Capital Limits would be assessed by adopting various methods such as
Projected Turnover Method, Permissible Bank Finance Method, Cash Budget Method and
Net Owned Funds Method, depending upon the type of borrower, the aggregate working
capital facility enjoyed from the banking system, the scale of operation, nature of
activity/enterprise and the duration/ length of the production cycle, etc..

3. 3) HDFC Bank
HDFC Bank offers you a unique range of working capital facilities at your door-step. We offer
affordable, convenient financial solutions which are of paramount importance in running an
efficient enterprise.
You can choose from the range of customized working capital loans for smooth business
operations.
Types of Working Capital
• Cash Credit/ Overdraft
• Term Loan
• Letter of Credit
• Bank Guarantee
• Packing Credit
• Post Shipment Finance
• Bill Discounting
Small Medium Enterprises including Traders, Manufacturers, Service Enterprises, Retailers,
Stockist, Distributors, Merchant Establishments, Departmental Stores, Supermarkets, Restaurants,
Multi-Brand Outlets etc.
Value Draw
Providing financial assistance to first-time borrowers/ existing borrowers an efficient working
capital solutions from the Emerging Enterprises Group, the Value draw over draft facility.
4) ICICI Bank
Explore innovative financing solutions specifically designed to fuel your business growth.
Managing finance is unarguably the most important component of any business. For MSMEs,
timely finance is the key to making the most of business opportunities. Keeping this in mind, ICICI
Bank offers you a host of innovative products and services which are customized to meet your
evolving financial needs.
Features & Facilities offered:
• Cash Credit / Overdraft for meeting your day to day requirements
• Export Credit for providing Pre-Shipment & Post Shipment finance to exporters
• Letters of Credit & Buyers credit for facilitating trade
• Bank Guarantees for meeting performance and financial obligations
5) Canara Bank
• Working Capital is basically the investment in current assets like raw materials, stores,
semi-finished goods, finished goods, sundry debtors etc.
• It represents the money that is required for purchase / stocking of raw materials, payment of

4. salary, wages, power charges etc. and also for financing the interval between the supply of
goods and the receipt of payment thereafter.
• Working Capital Finance is extended in different forms basing on the requirement in the
form of Inventory Limits (Pre-Sales), Finance against Receivables (Post-Sales), Non-Fund
based limits and Short Term Lending products.
• Working capital requirements of a unit would be assessed by adopting various methods like
Turnover Method, Maximum Permissible Bank Finance (MPBF) System, Cash Budget
System and Net Owned Funds System, depending on the type of activity.
• The securities for working capital facilities per se would be as per general lending norms of
the bank and also depends on the risk perception of the individual account.
• Rate of interest on working capital finance depends on quantum of loan, nature of activity,
purpose of loan, risk rating, financial's etc.
6) Indian Overseas Bank
The manufacturing / Service activity of the unit can smoothly progress while adequate working
capital funds are available. Our Bank provides necessary working capital assistance to MSME
units.
It is normally presumed that the working capital cycle will be of three months i.e. the period taken
for conversion of cash into raw material, raw material into finished goods, finished goods into
receivables and receivables into cash.
Depending on the nature of activity and various other factors it may be either more than 3 months
or lesser than 3 months.
Bank will not insist for collateral security / Third Party Guarantee for total credit limits upto Rs.10
lakhs for SME borrowers. In respect of credit limits above Rs.10 lakhs and upto Rs.100 lakhs
Collateral Security / Third Party Guarantee may be waived on deserving cases and those limits will
be covered under Credit Guarantee Trust for Micro and Small Enterprises (CGTMSE).
7) Case Study on Punjab National Bank
1. Sanctioning Authority may stipulate the periodicity of obtaining inventory/ stock statement
on monthly/quarterly basis, depending on nature and merit of individual case, the quarters
for this purpose will be May, August, November and February, Incumbents to ensure of
inventory/stock statement, as per extent guidelines.
Drawing power in the account will be worked out on the basis of inventory/stock statement
of debtors, (not more than 4 months old) of the preceding month/quarter.
2. In the case of borrower who are whole-sellers/distributors, circle head may permit DP
against advance payment made by them to PSUs/Blue Chip companies (the
companies which are financially sound and have good track record of earning) private
sector for procurement of goods. However, such drawings be restricted up to 50% of CC
limits sanctioned or up to powers for sanction of unsecured advance, whichever is lower.
Regarding netting of sundry debtors against sundry creditors for calculating Drawing power.
• Borrowers to provide, as on the date of inventory, complete statement of stock, sundry
creditors for purchase of stocks and sundry debtors.
• The actual amount of sundry creditors may be netted against sundry debtors and the excess
amount of sundry creditors, if any, may be deducted from the value of stocks to arrive at the
value of security and the drawing power.
• Further, all the sundry debtors including those considered for netting against sundry

5. creditors shall not be got hypothetical to the bank.
• The amount of sundry debtors, if any, after netting, may be considered for financing under
post sales limit, such as DD, BD, ABC, CC, book debts, etc., as per terms of sanction.
• While netting the sundry debtors and sundry creditors, it should be ensured that there is no
double financing frm the financial system i.e. traders should not avail loan against unpaid
stocks.
RATE OF INTEREST:-
Existing concession in the rate of interest which was linked to availability of collateral security by
the way of mortgage of IP/ liquid security in respect of advances up to rs. 2 crore stands
withdrawn. Rate of interest in such interest rate is linked to credit risk rating of the borrower.
8) Case study on Bank of Maharashtra:
Working capital financing in Bank of Maharashtra is done as per the recommendations proposed by
different competent authorities, such as Tandon committee report, Chore committee report.
In order to determine the amount of working capital needed by a firm a number of factors such as
production, policies, nature of business, length of manufacturing process, rapidity of turnover,
seasonal fluctuations, etc, are to be considered by the finance manager.
The requirements should be met both from short term as well long term sources of funds.
Bank of Maharashtra the project element is considered with the risk element collectively.
9) Kotak Mahindra
The funds are obtained by issuing shares, often supplemented by long term borrowings. Much of
these collected funds are used in purchasing fixed assets and remaining funds are used for dad to
day operation as pay for raw material, wages, overhead expenses. After this finished goods are
ready for sale and by selling the finished goods either account receivable are created and cash is
received. In this process profit is earned. This account of profit is used for paying taxes, dividend
and the balance is ploughed in the business.
Current assets turnover ratio speaks about the efficiency of Kotak Mahindra in the utilization of
current assets. Fast turnover current assets result in a better rate on investment.
10) Axis Bank

6. creditors shall not be got hypothetical to the bank.
• The amount of sundry debtors, if any, after netting, may be considered for financing under
post sales limit, such as DD, BD, ABC, CC, book debts, etc., as per terms of sanction.
• While netting the sundry debtors and sundry creditors, it should be ensured that there is no
double financing frm the financial system i.e. traders should not avail loan against unpaid
stocks.
RATE OF INTEREST:-
Existing concession in the rate of interest which was linked to availability of collateral security by
the way of mortgage of IP/ liquid security in respect of advances up to rs. 2 crore stands
withdrawn. Rate of interest in such interest rate is linked to credit risk rating of the borrower.
8) Case study on Bank of Maharashtra:
Working capital financing in Bank of Maharashtra is done as per the recommendations proposed by
different competent authorities, such as Tandon committee report, Chore committee report.
In order to determine the amount of working capital needed by a firm a number of factors such as
production, policies, nature of business, length of manufacturing process, rapidity of turnover,
seasonal fluctuations, etc, are to be considered by the finance manager.
The requirements should be met both from short term as well long term sources of funds.
Bank of Maharashtra the project element is considered with the risk element collectively.
9) Kotak Mahindra
The funds are obtained by issuing shares, often supplemented by long term borrowings. Much of
these collected funds are used in purchasing fixed assets and remaining funds are used for dad to
day operation as pay for raw material, wages, overhead expenses. After this finished goods are
ready for sale and by selling the finished goods either account receivable are created and cash is
received. In this process profit is earned. This account of profit is used for paying taxes, dividend
and the balance is ploughed in the business.
Current assets turnover ratio speaks about the efficiency of Kotak Mahindra in the utilization of
current assets. Fast turnover current assets result in a better rate on investment.
10) Axis Bank