Banks ease debt collection norms to support cash-strapped firms
A senior State Bank of India (SBI) official said that in the case of working capital loans, previously, if the company did not collect a certain portion of its receivables within 90 days, these were removed for the purpose of calculation of drawing power. “Now, depending on the industry and the real need of the company, we have increased that period to 120-150 days and, in some cases, up to nine months, so that their liquidity is not impacted,” the official said.
Drawing power refers to the amount that company can withdraw from its sanctioned working capital loan amount. It is calculated by adding the total value of stock and total value of book debts and subtracting the amount due to creditors. This amount is revised on a monthly basis.
The SBI official said that the bank is extending the timeline for debt collection to companies across sectors on a need-based manner. “Payments do come in for these companies, but they come in late. In some cases, payments pile up in certain months like in the year end March quarter,” the official added.
Bankers say that cash flows of a wide range of industries have been affected for a number of reasons in the recent times. In the case
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