We try our best. Our subscribers are our motivation and brand ambassadors. So introduce us to like minded people through WhatsApp, telegram, face book and any other means. Let us spread the light together.
Excellent video. Itna training mujhe aaj tak bank me nahi mila jitna aapka video dekh kar milta hai. I have one question regarding NWC. Suppose customer has approached bank for CC limit of 50 lakhs, should the customer include 50 lakh CC limit in the projections or not? And also will this 50 lakhs CC limit be part of projected current liability? If yes, then when calculating NWC aren't we already considering the CC limit for which we have to calculate eligibility? Then how we will get the correct eligibile CC limit because we are already taking the CC limit into our calculations while calculating NWC.
It is possible provided the unit has proper storage capacity in place. These are fast moving products so we need to be careful while calculating the operating cycle. If you want to know more on operating cycle watch this th-cam.com/video/poDcaIoD-rA/w-d-xo.html.
Sir/Mam, I liked this video. I am new to this channel. Pls make some more and guide us. Is there any linked series of videos for credit? Then kindly give the link.
In that case when the operating cycle is less than 120 days, don't we accept the debtor that will be realised in less number of days,and it will eventually reduce the nwc, for business of less days of operating cycle
Sir/ mam Make a series under playlist step wise for linking each concept And make one big project with all the concepts at one place for linking each concept at one place
Thank you so much for watching our tutorials so minutely. We are trying to cluster related videos in multiple playlists, we will keep on adding to those. We need to reach more people who are related to finance field and spontaneous sharing by people like you can make it possible. Thanks again.
@@ShuddhDesiBanking hello Ronit I have a question on this. You said that in turnover method it is assumed that a business has 120 days of operating cycle so 33 percent of gross sales should be the working capital requirement. But what is the need to assume that? Can't we calculate each businesses operating cycle and then calculate the wc limit? In this situation we will not end up over or under estimating the limits. Why are we considering 120 days at all for each business?
@@bipulkumaraditya2057 Every business is different and so is their operating cycle. Of course, there is no reason to assume a fixed limit for the same. At the same time, it is difficult to finance small MSMEs if we start calculating their operating cycle. Basically, they themselves do not know. That's the reason RBI came up with a probable solution of assuming a flat 120 days or 90 days so that they can get minimum credit support. And if they are eligible for a higher limit under MPBF banks can very well lend that too. And if there is no operating cycle there is no reason to finance a working capital limit to them. Hope this clarifies.
@@ShuddhDesiBanking thanks Ronit I got your point. But I have another question if let's say we have realised that we have assessed a higher limit for such a firm with operating cycle less that 90 days then how do we control the funding? How do we calculate their drawing power? Can u please elaborate your thoughts on this? Thanking you in advance.
@@bipulkumaraditya2057 DP will be calculated based on the inventory and debtors. So if you note that DP is coming less you can give less DP. But that's the theory. In small accounts, if you do such a thing the account will start showing in SMA from the next month. So better for you to take the customer into confidence before you reduce the DP. If some portion of the limit is unutilized you can do that without any hassle. What I will do depends on how much confidence I have in the party and how much time I have to issue him letters and do a rigorous follow-up. Sometimes I will do nothing knowing fully well that is not correct. So this discussion is very subjective with no straightforward answer.
Sir Should we also calculate drawing power based on stock ,debtors and creditors,or should we give drawing power 25% of gross sales ? This question is in context of turnover method. I mean drawing power is also equal to 25% of gross sales or it should be derived based on (stock-creditor-debtor ). like in MPBF Mthod. Please reply
25% of Gross Sales is working capital requirements (WCR) and not drawing power. WCR is the maximum limit a company requires for entire year. The requirement goes up and down from time to time. Drawing power is used to control this limit based on last month stock and book debt. So its a more dynamic thing as compared to WCR for the entire year.
Sir please clarify difference between SBF SSI and C& I as per latest MSME guidelines and in case of trading unit as like wholesale or retail shop should we use 33% formula or 15% as per turnover method
We are unable to understand your question. Please write the full forms and break down the queries in 1,2,3 so that it is easier to read, understand and respond.
Sir my first question was how to classify a unit as SBF i.e small business finance or SSI i.e small scale industry or C& I i.e commercial and industry..
@@arpanakumari8693 Presently we have three categories. 1. Small Business - Which are having investment in plant and machinery up to Rs 50.00 Crore and turnover up to Rs 250.00 Crores. But they do not have Udyam Registration. 2. MSME - Once the above category does Udyam registration they will join the MSME club. And depending upon investment and turnover further classification can be done. 3. Large Enterprise- Organisations with investment in Plant and Machineries of Rs 50.00 Crores or annual turnover of Rs 250.00 crores are Large Industries. We do not use the term SSI anymore. It existed long back before the MSME act was introduced. Commerce and Industry is a department of the ministry. It makes policy on large industries.
@@arpanakumari8693 33% or 25% whatever is mentioned in the credit policy of your bank is the maximum cap of the working capital requirement. In case the operating cycle is small, let's say a beauty parlor or sweet shop you are free to make decession based on the information available to you. But do not underfinance. Consult bankers in your area they will give you a fair idea of how much other entrepreneurs require to run the show. In my opinion, it is practically impossible to control those limits based on drawing power.
@@ShuddhDesiBanking its only our brethren who can understand the importance of your videos and how it has helped us in our daily routine , thank you again sir
Madam if the company has huge turnover in its current account say 2 crores. However if the sales turn over as per income statement is substantially low say 50 lakhs. What does it indicate?
We presume that by turn over you mean credit summations in the account. This situation indicates two possibilities : 1. The account is used for other business which the proprietors might be having. So transaction which are not pertaining to company are getting routed, resulting in higher credit summation than audited turnover. 2. The promoters are putting their money in the form of capital or unsecured loan that will also increase the credit summation as well as Equity/Unsecured loan in the balance sheet but no increase in sales figures. Right? Study the transactions you will understand. Hope this helps.
Madam the if same firm has availed an OVERDRAFT AGAINST DEPOSIT and has received ADVANCES FROM CUSTOMERS can this be a cause of such increase in credit summations
Clear me one thing .... Jiska operating cycle less than 120 days h usme v turnover method hi use krna h ar bs drawing power ko dhyan dena h I mean 30 days operating cycle mae 10 lakh finance hoga ya 148lacs plz clear..... And if operating cycle is of 6 month then we hv to use mpbf method?
If operating cycle is more than 6 months TO method cannot be used. That will lead to under financing. Your bank's policy will not permit you to take working capital requirement as 50 % of the gross annual turnover. Definitely you have to follow the rules. So eventually you have to use MPBF. Take a look at our MPBF tutorial. I hope you will find that useful.
@@ShuddhDesiBanking and wat about less than 120 days..... We hv to use turnover method.... Ar unko finance krenge as per 120 days operating cycle..... Thoda confusion ho gya plz 🙏clear it
I am presuming that you deal with small account around 10 lacs or 20 lacs. Upto 90 (25%) days or 120 days (33%) as per your bank's guidelines you can do by turnover method. But monitoring should be done through drawing power. And don't accept projected gross sales if they are ridiculously higher. In case the operating cycle is really less like beauty parlor, restaurant the company donot need any working capital facility at all.
We will. And it will be industry specific. For example CRE, NBFC, educational institute, infrastructure, hospital all are different. Its not only about cash flow calculation, you have to know the industry first before you can do any assessment by using cash flow.
![TEEDEE TADA - DIAMOND NARAKORN X LEGO LYKN [Special Dance Performance]](http://i.ytimg.com/vi/QgtZedFeumA/mqdefault.jpg)
You both are saviors to bankers..
Pls keep up this good work...as a new banker i know the worth of your videos...so much clarity 👏👏
We try our best. Our subscribers are our motivation and brand ambassadors. So introduce us to like minded people through WhatsApp, telegram, face book and any other means. Let us spread the light together.
@@ShuddhDesiBanking definitely sir 🙏💖
Please take this as compliment.. Your english and hindi both videos are very comprehensive and amazing with respect to content as well
Excellent video. Itna training mujhe aaj tak bank me nahi mila jitna aapka video dekh kar milta hai.
I have one question regarding NWC. Suppose customer has approached bank for CC limit of 50 lakhs, should the customer include 50 lakh CC limit in the projections or not? And also will this 50 lakhs CC limit be part of projected current liability?
If yes, then when calculating NWC aren't we already considering the CC limit for which we have to calculate eligibility? Then how we will get the correct eligibile CC limit because we are already taking the CC limit into our calculations while calculating NWC.
Your hindi might not be very good ..
But you explained everything very well..
Keep the good work going on ...
Kudos to both of you...
Thanks a lot 😊
Sir in case of Perishable goods like fruits and vegetables , can we provide CC
It is possible provided the unit has proper storage capacity in place. These are fast moving products so we need to be careful while calculating the operating cycle.
If you want to know more on operating cycle watch this th-cam.com/video/poDcaIoD-rA/w-d-xo.html.
Sir/Mam, I liked this video. I am new to this channel. Pls make some more and guide us. Is there any linked series of videos for credit? Then kindly give the link.
You can start with our variety of playlists already listed in this channel.
All the best.
In that case when the operating cycle is less than 120 days, don't we accept the debtor that will be realised in less number of days,and it will eventually reduce the nwc, for business of less days of operating cycle
Fantastic video...👍
Thank you 👍
Oh god seriously i need this
Thank you so much
Sir/ mam Make a series under playlist step wise for linking each concept
And make one big project with all the concepts at one place for linking each concept at one place
I shared this channel with CA students grp
Thank you so much for watching our tutorials so minutely. We are trying to cluster related videos in multiple playlists, we will keep on adding to those.
We need to reach more people who are related to finance field and spontaneous sharing by people like you can make it possible. Thanks again.
May we know your profession, if you don't mind?
@@ShuddhDesiBanking Chartered Accountant(CA final student)
i love this channel, make more and more videos Sir and Madam
Thank you so much. We will try to bring as many useful videos as possible.
@@ShuddhDesiBanking hello Ronit I have a question on this. You said that in turnover method it is assumed that a business has 120 days of operating cycle so 33 percent of gross sales should be the working capital requirement. But what is the need to assume that? Can't we calculate each businesses operating cycle and then calculate the wc limit? In this situation we will not end up over or under estimating the limits. Why are we considering 120 days at all for each business?
@@bipulkumaraditya2057 Every business is different and so is their operating cycle. Of course, there is no reason to assume a fixed limit for the same. At the same time, it is difficult to finance small MSMEs if we start calculating their operating cycle. Basically, they themselves do not know. That's the reason RBI came up with a probable solution of assuming a flat 120 days or 90 days so that they can get minimum credit support. And if they are eligible for a higher limit under MPBF banks can very well lend that too. And if there is no operating cycle there is no reason to finance a working capital limit to them. Hope this clarifies.
@@ShuddhDesiBanking thanks Ronit I got your point. But I have another question if let's say we have realised that we have assessed a higher limit for such a firm with operating cycle less that 90 days then how do we control the funding? How do we calculate their drawing power? Can u please elaborate your thoughts on this?
Thanking you in advance.
@@bipulkumaraditya2057 DP will be calculated based on the inventory and debtors. So if you note that DP is coming less you can give less DP. But that's the theory. In small accounts, if you do such a thing the account will start showing in SMA from the next month. So better for you to take the customer into confidence before you reduce the DP. If some portion of the limit is unutilized you can do that without any hassle. What I will do depends on how much confidence I have in the party and how much time I have to issue him letters and do a rigorous follow-up. Sometimes I will do nothing knowing fully well that is not correct. So this discussion is very subjective with no straightforward answer.
Can you please mention the circular in which WC limit is changed from 25 to 33%
Very Good Video
Glad you liked it!
Bahut khoob
Dhanyabad.
I admire your knowledge, sir..... do u work in nationalised bank or private bank?
Nationalised Bank.
Love this channel
Share with your friends if you like our efforts.
thanks sir. it was really good
Most welcome. Help us reach like minded people.
Really loved this channel !!!
Glad you enjoy it!
Verry much informative
Glad you think so!
Sir
Should we also calculate drawing power based on stock ,debtors and creditors,or should we give drawing power 25% of gross sales ? This question is in context of turnover method. I mean drawing power is also equal to 25% of gross sales or it should be derived based on (stock-creditor-debtor ). like in MPBF Mthod.
Please reply
25% of Gross Sales is working capital requirements (WCR) and not drawing power. WCR is the maximum limit a company requires for entire year. The requirement goes up and down from time to time. Drawing power is used to control this limit based on last month stock and book debt. So its a more dynamic thing as compared to WCR for the entire year.
Sir Abhi April 2020 me turnover method se WC assessment kar rahe hai to Projected sales figure March 2022 ka hi consider karna hoga ya fir March 2021?
If you give sanction in April 2020 the limit should expire on March 2021. So projections upto March 2021 should be sufficient.
@@ShuddhDesiBanking thank you so much sir...🙏
madam please BG limits, LC limits assessment, bill discounting, Working Capital term loan, WCDL par bhe videos banaiye
keep it up sir...well done
Keep watching :)
Again repeating it is not good but excellent, but fast explainatiion made it good
Thanks for the honest feedback. We will work on that. Probably the improvement can be witnessed in our latest videos.
Nice video sir
Thanks
Loved the content👍
Thanks and regards.
Hello Sir, I have a question. Can we replace the calculations of Projected Year with Estimated Year if we require financing for the Estimated Year ?
Yes you can.
Sir please clarify difference between SBF SSI and C& I as per latest MSME guidelines and in case of trading unit as like wholesale or retail shop should we use 33% formula or 15% as per turnover method
We are unable to understand your question. Please write the full forms and break down the queries in 1,2,3 so that it is easier to read, understand and respond.
Sir my first question was how to classify a unit as SBF i.e small business finance or SSI i.e small scale industry or C& I i.e commercial and industry..
And my 2nd question was as per turnover method for financing trading unit which have less operating cycle we will take 33% of gross sale or 15%..
@@arpanakumari8693
Presently we have three categories.
1. Small Business - Which are having investment in plant and machinery up to Rs 50.00 Crore and turnover up to Rs 250.00 Crores. But they do not have Udyam Registration.
2. MSME - Once the above category does Udyam registration they will join the MSME club. And depending upon investment and turnover further classification can be done.
3. Large Enterprise- Organisations with investment in Plant and Machineries of Rs 50.00 Crores or annual turnover of Rs 250.00 crores are Large Industries.
We do not use the term SSI anymore. It existed long back before the MSME act was introduced.
Commerce and Industry is a department of the ministry. It makes policy on large industries.
@@arpanakumari8693 33% or 25% whatever is mentioned in the credit policy of your bank is the maximum cap of the working capital requirement.
In case the operating cycle is small, let's say a beauty parlor or sweet shop you are free to make decession based on the information available to you. But do not underfinance. Consult bankers in your area they will give you a fair idea of how much other entrepreneurs require to run the show.
In my opinion, it is practically impossible to control those limits based on drawing power.
Thank you sir
Thank you so much.. please help us reach more people..
@@ShuddhDesiBanking i have already spread the word about your channel with our banker colleagues... i am sure they will be greatfull too
@@shankarn2198 its encouragement like this that keeps us going :)
@@ShuddhDesiBanking its only our brethren who can understand the importance of your videos and how it has helped us in our daily routine , thank you again sir
Mam, Are banks now following 33% rule or still following 25% rule of Gross sales for WC assessment?
Varies from bank to bank. Covered in Credit Policy of each bank.
Madam if the company has huge turnover in its current account say 2 crores. However if the sales turn over as per income statement is substantially low say 50 lakhs. What does it indicate?
We presume that by turn over you mean credit summations in the account.
This situation indicates two possibilities :
1. The account is used for other business which the proprietors might be having. So transaction which are not pertaining to company are getting routed, resulting in higher credit summation than audited turnover.
2. The promoters are putting their money in the form of capital or unsecured loan that will also increase the credit summation as well as Equity/Unsecured loan in the balance sheet but no increase in sales figures. Right?
Study the transactions you will understand.
Hope this helps.
Madam the if same firm has availed an OVERDRAFT AGAINST DEPOSIT and has received ADVANCES FROM CUSTOMERS can this be a cause of such increase in credit summations
@@kardebajyoti2834 Can we continue our discussion in our FB page please. Please post your queries there. facebook.com/shuddhdesibanking/
Clear me one thing .... Jiska operating cycle less than 120 days h usme v turnover method hi use krna h ar bs drawing power ko dhyan dena h I mean 30 days operating cycle mae 10 lakh finance hoga ya 148lacs plz clear..... And if operating cycle is of 6 month then we hv to use mpbf method?
If operating cycle is more than 6 months TO method cannot be used. That will lead to under financing. Your bank's policy will not permit you to take working capital requirement as 50 % of the gross annual turnover. Definitely you have to follow the rules. So eventually you have to use MPBF. Take a look at our MPBF tutorial. I hope you will find that useful.
@@ShuddhDesiBanking and wat about less than 120 days..... We hv to use turnover method.... Ar unko finance krenge as per 120 days operating cycle..... Thoda confusion ho gya plz 🙏clear it
I am presuming that you deal with small account around 10 lacs or 20 lacs.
Upto 90 (25%) days or 120 days (33%) as per your bank's guidelines you can do by turnover method. But monitoring should be done through drawing power. And don't accept projected gross sales if they are ridiculously higher.
In case the operating cycle is really less like beauty parlor, restaurant the company donot need any working capital facility at all.
Sir please make video on cash budget method
We will. And it will be industry specific. For example CRE, NBFC, educational institute, infrastructure, hospital all are different.
Its not only about cash flow calculation, you have to know the industry first before you can do any assessment by using cash flow.
Thanku Sir
You are welcome!
Please make vedio for assessment of BG Limit
Thats in list. Lets see when we can push it.
Sir/Ma'am is it possible to get the slides of the video?
No.
Good but very fast , please be slow while explaining
Noted, will keep that in mind.
Turn over method me mpbf ka koi concept nahi hai
Sir hindi me banate rahiye