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Research Paper | Management | India | Volume 3 Issue 10, October 2014 | Rating: 6.8 / 10
Working Capital Financing with Specific Reference to Cash Credit Policies of Indian Overseas Bank
Abstract: Working capital is the fund invested in current assets and is needed for meeting day to day expenses. It is defined as a firms current assets minus current liabilities on the date a balance sheet is drawn up. It occupies an important place in a firms Balance Sheet. Working capital financing is a specialized area and is designed to meet the working requirements of a business. The main sources of working capital financing are trade credit, bank credit, factoring and commercial paper. Cash Credit (CC) is the most useful and appropriate type of working capital financing extensively used by all small and big businesses. It is a facility offered by commercial banks whereby the borrower is sanctioned a particular amount which can be utilized for making his business payments. The borrower has to make sure that he does not cross the sanctioned limit. Best part is that the interest is charged to the extend the money is used and not on the sanctioned amount which motivates him to keep depositing the amount as soon as possible to save on interest cost. Without a doubt, this is a cost effective working capital financing. The objective of this study is to analyze the role of bank credit in financing working capital needs of firms. It also focuses on the guidelines followed by commercial banks in India regarding the appraisal process of cash credit with specific reference to Indian Overseas Bank.
Keywords: Net Working Capital, Cash Credit, Credit limit, Operating Cycle, PAT, MPBF, Drawing Power
Edition: Volume 3 Issue 10, October 2014,
Pages: 816 - 822