Working Capital of Icici

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  • Topic: Bank, Trade finance, Credit
  • Pages : 60 (18557 words )
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  • Published : January 3, 2013
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INTRODUCTION
1.1 WORKING CAPITAL FINANCE
Every Enterprise namely company/firm/individual requires money to meet the day to day business operations, for purchasing stocks and for acquiring raw materials for processing and conversion to finished good. Banks provide finance to purchase inventory directly by providing funded limits or by issuing letter of credit or Bank Guarantee. Bank also provides receivables finance to provide liquidity to the customers. 1.2 CREDIT - THE LIFELINE OF BUSINESS

Of all the elements that go into a business, credit is perhaps the most crucial. The best of plans can come to naught if adequate finance is not available at the right time. SSIs need credit support not only for running the enterprise & operational requirements but also for diversification, modernization/ up gradation of facilities, capacity, expansion etc. In respect of SSIs, the problem of credit becomes all the more critical whenever any episodic event occurs such as a large order, rejection of consignment, inordinate delay in payment etc. In general, SSIs operate on tight budgets, often financed through owner's own contribution, loans from friends and relatives and some bank credit. 1.3 FACILITIES IN NUTSHELL

Funded Limit – Bank provides funded limit for purchasing stock-in-trade to traders, for purchasing raw materials to manufacturers. Receivables finance to traders/manufacturers is also provided by the banks. Non-Fund limit – Bank also issues letters of credit and Bank Guarantees on behalf of customers to suppliers/ Government Departments for the procurement of raw materials or services on credit or deferred payment of taxes. Both the above facilities are provides both in Indian rupees and Foreign currency. 1.4 EXPORT & IMPORT FINANCE

Bank in tune with Government guidelines is actively financing export and import trade transactions. The Bank is providing credit to exporters on simple and hassle free terms. Pre-shipment Finance:

➢ Packing credit in Indian Rupees
➢ Running Account facility to established exporters
➢ Packing Credit in Foreign currency
➢ Foreign Letter of Credit and Foreign Bank Guarantees for procuring materials and services Post-shipment Finance:
➢ Negotiation of Documents under Letters of Credit
➢ Purchase/discount of export bills under LCs or Confirmed orders ➢ Purchase/discount of Export bills in foreign currency. ➢ Demand loans against export bills sent on collection ➢ Advances against export incentive receivables (duty draw back)

1.5 SMALL SCALE INDUSTRIES (SSI):
The SSI sector covers wide range of enterprises with diverse characteristics. This sector consists of tiny enterprises, small-scale service business enterprises, artisans, khadi and village industries, Woman enterprises and sophisticated modern small-scale units engaged in manufacturing, processing or preservation of goods. The types of facilities, which are generally needed by such units and granted by the Bank, are as under: ➢ Term Loans

➢ Working Capital Loans
➢ Composite loans
➢ Deferred Payment Guarantee
➢ Clean Limits
➢ Financing of exports
➢ Financial/Performance Guarantee
Other Priority Sector:
The advances made to the following category are being classified as other priority sector advances: - ➢ Transport Operators
➢ Retail Trade
➢ Professional and self employed
➢ Business enterprises
➢ Advances granted under DRI.
Advances are allowed for consumption needs and construction of houses and tenements for weaker sectors. SME Sector:
We must now acquaint ourselves with two definitions. SSI & SME. Historically our commercial banks started financing Small Scale Industrial Units way back in the year 1960 with a credit guarantee scheme by the Central Government administered by the Reserve Bank as the Agent. (Presently this scheme is not available). The SSI is defined as an industrial unit whose original investment in plant and machinery...
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