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)…
Liquidity ratios are key financial metrics used to evaluate an entity’s ability to meet its short-term obligations without the need for external financing. These ratios are essential for assessing a company’s financial flexibility and operational health, providing critical insights to stakeholders such as investors, creditors, and management. A strong liquidity position reflects a company’s ability…
Working capital is a critical financial metric that represents a company’s ability to meet its short-term obligations using its current assets. It is primarily concerned with two major components of a business: current assets and current liabilities. 1. Understanding Current Assets and Liabilities 2. Net Working Capital (NWC) Net Working Capital (NWC) is defined as…
Working capital finance refers to short-term funding provided to businesses to support their day-to-day operational requirements. It ensures that companies maintain adequate liquidity to cover routine expenses such as inventory procurement, accounts payable, salaries, and other overheads. This form of finance is essential for bridging the gap between expenditure and revenue generation, thereby facilitating uninterrupted…
Reserve Bank of India has framed guidelines for extending working capital finance to the Information Technology and Software Industry, based on the recommendations of the National Taskforce on Information Technology and Software development. However, said guidelines prepared by the central bank are not mandatory for lenders. They are free to modify RBI framed guidelines, built…
Payments from Government departments or Public sector Units take time for the goods supplied to them. Similarly, a party might have taken a contract for execution and he is entitled to progressive payments based on the PSU/Government departments on work executed, for which the contractor has to submit bills in accordance with the terms and…
The working capital cycle (WCC) is the time it takes for a business to convert its current assets and liabilities into cash. It’s also known as the cash conversion cycle. In simple terms, the working capital cycle or operating cycle refers to the length of time required to convert non-cash current assets like raw materials,…
On June 19, 2025, the Reserve Bank of India (RBI) issued the Reserve Bank of India (Project Finance) Directions, 2025, with the objective of establishing a standardized and robust regulatory framework governing project financing across all regulated entities (REs). These Directions are designed to streamline project-based lending, enhance credit discipline, and ensure financial prudence while…