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    Question

    Under the assessment guidelines given in Master Circular on Management of Advances – UCBs working capital requirement of borrowers, other than Micro and Small enterprises, requiring fund based working capital limits up to ₹1.00 crore and Micro and Small enterprises requiring fund based working capital limits up to ₹5.00 crore, what percentage of the projected turnover is to be shared between the borrower and the bank for working capital requirement?

    A Borrower contributes 25%, bank provides 75% Correct Answer Incorrect Answer
    B Borrower contributes 10%, bank provides 90% Correct Answer Incorrect Answer
    C Borrower contributes 5%, bank provides 15% Correct Answer Incorrect Answer
    D Borrower contributes 5%, bank provides 20% Correct Answer Incorrect Answer
    E Borrower contributes 20%, bank provides 80% Correct Answer Incorrect Answer

    Solution

    Working Capital Requirements The assessment of working capital requirement of borrowers, other than Micro and Small enterprises, requiring fund based working capital limits up to ₹1.00 crore and Micro and Small enterprises requiring fund based working capital limits up to ₹5.00 crore from the banking system may be made on the basis of their projected annual turnover. In accordance with these guidelines, the working capital requirement is to be assessed at 25% of the projected turnover to be shared between the borrower and the bank, viz. borrower contributing 5% of the turnover as net working capital (NWC) and bank providing finance at a minimum of 20% of the turnover. Projected turnover may be interpreted as 'Gross Sales' including excise duty.

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