The Reserve Bank of India (RBI) has formulated a comprehensive framework to facilitate liquidity through the discounting and rediscounting of genuine trade bills. One of the key mechanisms introduced under this framework is the Bills Rediscounting Scheme (BRDS). This scheme enables banks to raise funds by issuing Usance Promissory Notes (UPNs) based on trade bills…
The Reserve Bank of India issued draft guidelines to provide a harmonised prudential framework for financing projects in Infrastructure, Non-Infrastructure, and Commercial Real Estate sectors by regulated entities (REs). In the backdrop of a review of the extant instructions and analysis of the risks inherent in such financing, the Central Bank prescribed norms for restructuring…
Introduction: Term loan is a type of loan where a fixed amount of money is borrowed from a financial institution for a specified period. These loans can be classified as short-term, medium-term, or long-term, with repayment periods typically ranging from one to twenty years. The repayment amount includes both the principal and interest, which may…
It is inevitable for banks to ascertain that bank could easily take possession of such security based on documents obtained from the borrower with very little expenses and dispose-off the same to recover its dues when the account goes bad. Banks obtain ‘Different Types of Documents‘ from the borrower based on the type of security…
(This post explains basic concept of term loans and important ratios are to be examined while appraising a term loan project. The article also deals with how to compute break even point, how to calculate DSCR (Debt service Coverage ratio) for the period of repayment of the loan, how to arrive fixed asset coverage ratio…
The credit facilities given by the banks where actual bank funds are not involved are termed as ‘non-fund based facilities’. Letter of Credit (LC), Letter Of Guarantee (Bank Guarantee), Advance Payment Guarantee (APG) comes under this category. The assessment Letter of Credit, Bank Guarantee (BG), or Letter of Guarantee (LG) limits are fixed by banks…
Receivables financing, also referred to as bills finance, is a facility offered by banks and financial institutions that enables businesses to convert their outstanding invoices (accounts receivable) into immediate liquidity. This form of short-term funding supports effective working capital management by bridging the gap between the delivery of goods or services and the receipt of…
A legal document is a written agreement between two or more parties that can be relied upon in court. They can be used to establish contractual relationships, grant rights, or provide evidence for legal obligations. It is inevitable for banks to ascertain that they could easily take possession of such security based on documents obtained…
TReDS (Trade Receivables Discounting System) is an institutional setup for the flow of finance to micro, small, and medium enterprises (MSMEs) through multiple financiers at a competitive rate. The model outlined for TReDS in the paper, envisages its operation both in the primary market segment as well as a secondary market segment as authorised payment…
The credit facilities given by the banks where actual bank funds are not involved are termed as ‘non-fund based facilities’. Various types of guarantees are issued by the banks on behalf of their customers. Bank Guarantees (BG) is also known as Letter of Guarantees which can be broadly classified as (i) Financial Guarantees and (ii)…
