Working Capital Finance to Information Technology and Software Industry
Following the recommendations of the “National Taskforce on Information Technology and Software Development“, Reserve Bank has framed guidelines for extending working capital to the said industry. Banks are, however, free to modify the guidelines based on their own experience without reference to the Reserve Bank of India to achieve the purpose of the guidelines in letter and spirit. The salient features of these guidelines are set forth below:
(i) Banks may consider sanction of working capital limits based on the track record of the promoter’s group affiliation, composition of the management team and their work experience as well as the infrastructure.
(ii) In the case of the borrowers with working capital limits of up to Rs 2 crore, assessment may be made at 20 percent of the projected turnover. However, in other cases, the banks may consider assessment of MPBF on the basis of the monthly cash budget system. For the borrowers enjoying working capital limits of Rs 10 crore and above from the banking system, the guidelines regarding the loan system would be applicable.
(iii) Banks may obtain collateral security wherever available. First/ second charge on current assets, if available, may be obtained.
(iv) The rate of interest as prescribed for general category of borrowers may be levied. Concessional rate of interest as applicable to pre-shipment/postshipment credit may be levied.
(v) Banks may evolve tailor-made follow up system for such advances. The banks could obtain quarterly statements of cash flows to monitor the
operations. In case the sanction was not made on the basis of the cash budgets, they can devise a reporting system, as they deem fit.