CREDIT AUTHORIZATION SCHEME WORKING CAPITAL MANAGEMENT

• CREDIT AUTHORIZATION SCHEME
  WORKING CAPITAL MANAGEMENT
• CREDIT AUTHORIZATION SCHEME

1. CAS FOR BANK ADVANCES WAS INTRODUCED BY RBI IN 1965
2. UNDER THIS SCHEME ,ALL SCHEDULED BANKS HAVE TO OBTAIN PRIOR AUTHORIZATION OF THE RBI BEFORE GRANTING ANY FRESH CREDIT LIMIT OF ONE CRORE OR MORE TO THE SINGLE BORROWER
3. LIMIT WAS RAISED TO 2 CRORES IN 1975
4. BANKS FIRST SCRUTINIZE THE PROPOSALS OF THE BORROWERS AND THEN SEND THEM TO RBI FOR APPROVAL
5. RBI AFTER VERIFICATION THE PROPOSAL MAY AUTHORIZE THE CONCERNED BANK TO SANCTION THE LOAN
6. CAS IS REVIEWED FROM TIME TO TIME AND IS PROGRESSIVELY LIBERALIZED
7. THE CREDIT AUTHORIZATION SCHEME WAS THE KEY INSTRUMENT OF CREDIT CONTROL BETWEEN 1965 AND 1988
8. USED BY RBI TO REGULATE BANK CREDIT EXCEEDING THE PRESCRIBED CREDIT LIMIT DIRECTLY
9. LATER THE RECOMMENDATION BY THE CHORE COMMITTEE AND TANDON COMMITTEE WERE INCORPORATED IN THE CAS SCHEME
10. RBI AUTHORIZATION INVOLVED LONG DELAYS
11. BANKS AND FINANCIAL INSTITUTION REQUEST TH LOAN APPLICANT TO PREPARE CREDIT MONITORING ARRANGEMENT REPORT IN ORDER TO UNDERSTAND THE FLOW AND APPLICATION OF FUNDS IN BUSINESS

• CMA REPORT

1. IS A REPORT SHOWING THE PROJECTED PERFORMANCE AND THE PAST PERFORMANCE OB BUSINESS IN FINANCIAL TERMS
2. UNDER THE CREDIT MONITORING ARRANGEMENT BANKS HAVE BEEN PERMITTED FOR SANCTIONING THE CREDIT PROPOSAL ( OF LARGE BORROWER) AFTER DETAILED ANALYSIS OF THE PAST PERFORMANCE
3. THE PROPOSAL INVOLVING WORKING CAPITAL LIMIT RS 5 CRORES AND OR TERM LOAN EXCEEDING 2 CRORES TO  BE SUBMITTED TO RBI FOR POST SANCTION SCRUTINY

• STATEMENTS COVERED IN CMA REPORT

1. PARTICULAR OF CURRENT AND PROPOSED LIMITS
2. OPERATING STATEMENT
3. ANALYSIS OF BUSINESS PLAN
4. ANALYSIS OF BALANCE SHEET
5. COMPARATIVE STATEMENT OF CURRENT ASSETS AND CURRENT LIABILITIES
6. CALCULATION OF MAXIMUM PERMISSIBLE BANK FINANCE
7. FUND FLOW STATEMENT
8. RATION ANALYSIS
9. OTHER DOCUMENTS:

a)    PREVIOUS 2 YEARS AUDITED FINANCIAL

b)    LATEST SANCTION LETTER( IN CASE OF RENEWAL)

c)    PROVISIONAL FINANCIAL FOR THE CURRENT YEAR

d)    TERM LOAN REPAYMENT SCHEDULE

• DETAILS OF THE PROPOSED ENHANCEMENT( IF ANY) ALONG WITH THE TERMS AND CONDITIONS