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ASSESSMENT OF ORKING CAPITAL

Any enterprise whether industrial, trading or other acquires two types oI assets to run its business as
has already been emphasised time and again. It requires Iixed assets which are necessary Ior carrying
on the production/business such as land and buildings, plant and machinery, Iurniture and Iixtures etc.
For a going concern these assets are oI permanent nature and are not to be sold. The other types oI
assets required Ior day to day working oI a unit are known as current assets which are Iloating in
nature and keep changing during the course oI business. It is these 'current assets' which are generally
reIerred to as 'working capital'. We are by now already aware oI the shortterm nature oI these assets
which are classiIied as current assets. It may be noted here that there may not be any Iixed ratio
between the Iixed assets and Iloating assets Ior diIIerent projects as their requirement would diIIer
depending upon the nature oI project. Big industrial projects may require substantial investment in Iixed
assets and also large investment Ior working capital. The trading units may not require heavy
investment in Iixed assets while they may be carrying huge stocks in trade. The service units may
hardly require any working capital and all investment may be blocked in creation oI Iixed assets.

A set Iinancing pattern is evolved to meet the requirement oI a unit Ior acquisition oI Iixed assets and
current assets. Fixed assets are to be Iinanced by owned Iunds and longterm liabilities raised by a unit
while current assets are partly Iinanced by longterm liabilities and partly by current liabilities and other
shortterm loans arranged by the unit Irom the bank. The balance sheet oI a unit under such
dispensation may be represented as in next page.

The total current assets with the Iirm may be taken as gross working capital whereas the net working
capital with the unit may be calculated as under:

Net Working Capital Current Assets Current Liabilities
(NWC) (GWC) (including bank borrowings)

This net working capital is also sometimes reIerred to as 'liquid surplus' with the Iirm and has been
margin available Ior working capital requirements oI the unit. Financing oI working capital has been the
exclusive domain oI commercial banks while they also grant term loans Ior creation oI Iixed assets
either on their own or in consortium with State level/All India Iinancial institutions. The Iinancial
institutions are also now considering sanction oI working capital loans.

The current assets in the example given in the earlier paragraph are Iinanced asunder:

Current Assets Current liabilities Working capital limits Irom banks Margin Irom longterm
liabilities



Liabilities

Assets
Capital



Fixed Assets

Long-term liabilities


Margin NWC
Liquid Surplus

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Working capital
limits from
banks

Current Assets
Current Liabilities



(Diagram 1)

This is the normal pattern of financing of current assets. However, a few units may be having a
negative net working capital as shown below :


Liabilities



Assets

Capital



Long-term
Liabilities


Fixed Assets


Working capial
defici




Current
Liabilities


Current
Assets

(Diagram 2)

It is evident from diagram 2 that current liabilities are more than current assets and a part of
shortterm funds (current liabilities) have been diverted to finance fixed assets. Not only that
the unit is not able to provide any margin for working capital from its longterm sources, but it is
showing a net working capital deficit represented by the bracketed area in the diagram. This
situation may not be considered as satisfactory and the unit is experiencing liquidity problems
and has a current ratio of less than one. It may also be stated here that a large liquid surplus
may also not reveal a very encouraging position, as it would mean idle funds or a lower turnover
in working capital. It should, therefore, be the endeavour of every concern to ensure optimum
utilisation of all the resources at its command and have just adequate liquid surplus.

The assessment of working capital may involve two aspects as under
The level of current assets required to be held by any unit which is adequate for its day to day
functioning, and
The mode of financing of these current assets.
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The value oI inventory as given in the balance sheet is the position as on a particular day on which the
balance sheet is drawn and may not be the actual average requirement oI the unit. We will have to,
thereIore, evaluate the actual consumption pattern to arrive at a correct decision.

OPERATING CCLE CONCEPT

The day to day business operations oI a concern oI any nature and, size involves many successive steps
and Iinal working results would depend on the eIIective combination oI all these steps. The steps in
general may include.:

Acquisition and storage oI raw material and other stores and spares required Ior manuIacture
oI any product.
Actual production process when the raw material is subjected to diIIerent processes to bring it
to Iinal shape oI Iinished goods.
Storage oI Iinished goods awaiting sales.
Sales oI Iinished goods and realisations oI sale proceeds.

All these steps put together Iorm an operating cycle which can also be represented diagramatically as
under :

Realisation Cash Raw Material
Stores & Spares

Bills Receivable/Sundry SemiFinished Goods
Debtors



Sales Finished Goods

We start Irom cash to buy raw material etc. and aIter completing all the steps end up with the cash.
The intervening period required Ior completion oI this entire process is the 'Operating Cycle'. The
operating cycle may thus be deIined as the intervening period Irom the time the goods or services enter
the business till their realisation in cash. The study oI this operating cycle is obviously very important as
the actual requirement oI the unit may be limited to the Iunds required to complete an operating cycle
and the simplest Iormula Ior the working capital requirement may be represented as under:

Total working capital requirement Total operating expenses expecting during the year
No. oI operating cycles in a year

This system oI calculation oI working capital requirement is not in vogue as it only helps to assess the
total requirement oI a unit whereas the banks granting working capital limits would be interested in
proper classiIication oI its various components. The concept oI operating cycle, however, throws light
on various components oI working capital required Ior the unit and these components may be classiIied
as under:

Raw material stores and spares consumed in the production process. The unit must have some
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stocks of these items for uninterrupted production.
Manufacturing expenses such as wages, power and fuel etc. to be incurred during the process
of manufacture.
Stocks of workinprocess/semi finished goods maintained by the unit to complete an operating
cycle.
Stocks of finished goods awaiting sale. All the finished goods may not be immediately sold.
Administrative and selling expenses during this process.
Bills receivable/debtors for credit sales.

All or some of these components in varying proportions are required for any business.

CONCEPT OF MARGIN

Margin in relation to working capital has two concepts which need to be clearly understood. The one
concept of providing margin by way of liquid surplus i.e. from longterm liabilities has already been
explained. It must be clear by now that current assets shall partly be financed by capital & longterm
liabilities for any going concern. This gains importance while fixing overall limits of working capital by
the bank.

The other concept of margin as applicable to working capital limits is related to the value of security
charged to the bank as cover for these limits. Financial accommodation up to 100% of the value of
goods would not be granted by the banks and they would fix a certain margin on the value of security
which must be provided by the borrower and the balance amount will be financed by the bank. The
percentage of margin fixed on any security is dependent on its nature.

FORMAT FOR ASSESSMENT OF WORKING CAPITAL

In good old days when the banks were mainly adopting security-oriented approach in lending, no
emphasis whatsoever was placed on assessment of limits as the credit decision was mainly based on
the security available to cover the advance. The concept of assessment of working capital gained
currency in early seventies and Reserve Bank of India proposed a scientific method for this purpose. A
format that would be utilised for assessment of working capital was also prescribed. Various other
formats and techniques for assessment have since been developed for different kinds of projects, the
earlier format nevertheless is still in vogue and is made use of in all such cases where a specific method
has not been prescribed. The proforma as prescribed by Reserve Bank of India is reproduced below :

Assessment of Working Capital Requirements

. months raw material requirements Rs.
. Weeks/months' consumable stores and spares Rs.
. Weeks stocks in process at any one time Rs.
(average period of processing value of raw material
content in stockin process and manufacturing expenses
for the period of processing to be indicated)
. Months finished goods at cost Rs.
. Weeks/months receivables representing credit sales Rs.
One months' manufacturing and administrative expenses Rs.

________________

Total working capital requirement
Less Credit available on purchases and advance payments received . Rs.
Working capital in business or liquid surplus Rs.
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________________
Net working capital requirements Rs.
(A)

________________
Permissible Limits
Raw materials Rs.
Less Margin Rs. Rs.
Stockinprocess Rs.
Less Margin Rs. Rs.
Finished goods Rs.
Less: Margin Rs. Rs.
Receivables representing supplies to Govt. Rs.
Less Margin Rs. Rs.
Receivables representing supplies to sundry parties Rs.
Less Margin Rs. Rs.

_________________
Total limits Rs.
(B)

__________________

Net working capital requirements (A) Rs.
Permissible limits (B) Rs.
Deficit, if any (AB) Rs.
.

It must, however, be noted that assessment of working capital is always done for future period, while
the financial statements reveal the financial position of a concern as it was at some point of time in the
past. If the calculations are based on the basis of the financial statements as on some previous date,
the results derived may not be workable. Furthermore the newly established units may not provide
any financial statements for the past period. The working capital is always to be assessed on tile basis
of projections for the next year. The first most important point, therefore, is to make as accurate
projections as possible for the next year. The projections submitted to the bank are very critically
examined in relation to past performance of the unit, if any, future prospects and market for the
ultimate product production capacity of the unit and general rate of inflation expected during the year.
The projections given for the next year are, therefore, to be supported by convincing logic to stand
scrutiny in the hands of the banker.

We shall now make an attempt to define various components of working capital as taken in the format
and explain the most acceptable principles involved in calculating them for overall assessment of
working capital.

I . . months raw material requirements :

Every production unit will be required to maintain a minimum level of raw material in stock to ensure
continuous production. The level of stock may differ from unit to unit and inter alia depends on nature of
the raw material, its availability with particular emphasis on lead time involved in procuring it, price level,
consumption pattern etc. From the past records, it is possible to find out the average stocking period of
raw material with the following formula :

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Average stocking period in months = Average stock of raw material
_____________________________________________
Average monthly consumption of raw material during the year

where


Average stock of raw material = Opening stock of raw material+ Closing stock of raw material
______________________________________________
2
Average monthly consumption of
raw material during the year = Opening stock of raw material + Total purchases of raw
material Closing stock of raw material of raw
material

_________________________________________________________
12


The average stocking period thus arrived may be taken as the requirement of so many months of raw
material for the unit and the estimated value of stocking of raw material required by the unit can thus be
determined on the basis of projected figures.

In case of new units where figures of past performance are not available, storage period may have to
be compared with storage period of such other units for the purpose of these calculations.

II . weeks/months stores and spares

The calculation for requirement of these items may be done in a similar manner as in case of raw
materials. The average period of stocking required by the unit is generally, done on the basis of past
performance. After determining the average period, the requirement is to be calculated on the basis of
projected figures

III weeks stocks in process

Stocksinprocess is an item representing goods remaining in semifinished form awaiting certain further
processing before these can be finally converted to finished goods. The requirement of blockage of
funds in these stocks will depend upon the processing period involved in the manufacturing. The
processing period may differ from unit to unit and in case of new units it may have to be compared with
existing units of similar nature.

Semi finished goods, however, possess another problem in evaluation. The value representing
manufacturing expenses is added to the cost of raw material to determine the value of stocks in
process. The value of stocksinprocess is thus related to the 'cost of production which may be
calculated as under :

Cost of Production

(i) Raw material consumed Rs.
(ii) Other spares Rs.
(iii) Power and fuel Rs.
(iv) Wages Rs.
(v) Repairs and maintenance Rs.
(vi) Other manufacturing expenses Rs.
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(vii) Depreciation Rs.
(viii) Subtotal Rs.
[items (i) to items (vii)]
(ix) Add : Opening stocks in process Rs.
(x) Subtotal [item (viii) plus item (ix)] Rs.
(xi) Deduct : Closing stocks in process Rs.
(xii) Cost of Production [item (x) minus item (xi)] Rs.


The average period of stocking of 'stocks in process' may nom calculated with the following formula :

Average period of stocking of = Average stock in process
stocks in process in days _____________________________
Daily cost of production

where

Average stock in process= Opening stock in process + Closing stock in process
2

Daily cost of production = Cost of production
365

Average stocking period which may also be taken as average processing period may thus be calculated
from past records. The estimated requirements of the unit under this head may be related to its
projected figures as in case of raw material etc. The calculation will, however, be based on the basis of
cost of production which is the most acceptable principle of valuation of 'stocksin-process'.

IV . . months finished goods

The stocking period of finished goods may also be different for different types of units and will mainly
depend upon the market conditions. The valuation of finished goods also possess a little problem and
most accepted principle is for their valuation in terms of cost of sale which is calculated as under

Cost of sale = Opening stock of finished goods + Cost of production Closing stocks of finished goods.
Cost of sale is also equal to net sales minus gross profit.
Average period of stocking of finished goods may be calculated with the help of the following formula:

Average period of stocking of finished goods in months = Average stock of finished goods
_________________________
Monthly cost of sales during the year
where,

Average stock of finished goods = Opening stock of finished goods +Closing stock of finished
goods

___________________________________________________

2
and

Monthly cost of sales during the year = Cost of sales
___________
12
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This period would give an indication as to the average period of stocking of finished goods by the unit on
the basis of its past performance. This average period so found may now be related to the projected
figures to find out the estimated requirement under this category. The finished goods will, however, be
related to cost of sales while estimating the requirements.

V . weeks/months receivables representing credit sales:

All the sales by any unit may not be against cash in which case the unit would not require any funds to
be blocked under this head. A part of the sales might be effected on credit in which case the
outstanding under debtors/bills receivable will form a part of total working capital required by the unit.
The average period of blockage of funds under this head may also likewise be calculated with the
following formula:

Average period of credit in months = Average debtors
____________________ x
12
Total credit sales



Average debtors =Opening balances Closing balance Opening balance of
Closing balance
of debtors + of debtors bills receivable + of
bills receivable
_________________________________ +
__________________________
2 2

where the figures of credit sales are not separately available, we may take total sales figures in the
denominator for the purpose of above calculation.

After determining the average period of credit sales, the requirement of the unit under this head may be
related to the projected figures.

V1 . One months manufacturing and administrative expenses

The unit has to meet the running, manufacturing and establishment expenses during the period of
manufacture and necessary provision for funds required for this purpose is necessary. The monthly
average expenditure can be determined by dividing total manufacturing and administrative expenditure
during the last year by 12. Suitable adjustment in the anticipated expenditure for the next year may be
necessary as per the projected figures.

The total of items No. I to VI is the requirement of the unit for working capital at the gross level. The
unit raises resources to meet these requirements from many sources besides the liquid surplus already
available with the unit The resources generally available at the command of the unit may be as under:

CREDIT AVAILABLE ON PURCHASES

All the goods may not be purchased by any unit against cash and the concern may avail credit for few
purchases. The credit available from the market will reduce the requirement of the unit for working
capital.

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Creditors may be treated in the same manner as debtors while determining availability to the unit under
this component. Average period oI credit available to the unit may be determined according to the
Iollowing Iormula:

Average period oI credit in months Average creditors
x 12
Total credit purchases

Average creditors Opening balances Closing balance Opening balance oI
Closing balance
oI creditors oI creditors bills payable oI
bills payable

2 2

Where Iigures Ior credit purchases are not separately available, the Iigure oI total purchases may be
taken in the denominator Ior the purpose oI the above calculations. AIter determining the average
number oI days Ior which credit is available, it should be possible to determine the average total credit
available to the unit by relating it to the projected Iigures.

ADVANCE PAYMENT RECEIVED

Advance payment Ior sales may sometimes be received which means that additional Iunds are available
with the unit there by reducing its working capital requirements. Any such advance payments that are
received by the unit must be accounted Ior while determining the actual requirement.

LIQUID SURPLUS

The concept oI liquid surplus has already been explained and it represents excess oI current assets over
current liabilities thereby meaning that some long-term liabilities have already been utilised by the unit
Ior creation oI current assets. This is also one concept oI margin being provided by the unit Ior working
capital as already explained.

Adjustments made in the gross working capital as already calculated Ior the above three items will give
an idea oI net working capital requirements oI the unit which may be availed Irom the bank.

The banks may not be willing to Iinance all the components oI working capital which have been taken
into consideration Ior calculation oI gross working capital requirements. The manuIacturing and
administrative expenses may not be Iinanced by the bank. Banks also stipulate margin requirements, the
other concept oI margin, on the value oI security oI raw materials, semi Iinished and Iinished goods etc.
while sanctioning the limits. Banks may be willing to Iinance sales operation by purchasing/discounting
bills receivable and may not be very keen to Iinance 6ook debts or a very high margin may be stipulated
Ior such advances. The Iollowing method is generally adopted by the banks Ior Iixing limits on various
components oI working capital :

1. Ra Materials : Credit to the unit is generally available Ior purchase oI raw material and the same
is to be deducted while Iixing credit limit against raw material. The margin applicable Ior raw material is
low in comparison to the margin applicable Ior semi Iinished and Iinished goods. The margin ranging
Irom 15 to 25 may be Iixed depending upon the nature oI the material and standing oI the unit.

II. Stores and Spares : A small limit is granted against stores and spares and these are generally
included as a part oI raw material only Ior the purpose oI calculating the credit limits. II a separate limit
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is sanctioned, it will be treated in the same manner as limit against raw materials.

III. Semifinished goods : Semiprocessed goods do not form a good security as its realisable value
cannot be exactly determined. A higher margin upto 40% may be insisted upon by the bank while fixing
a credit limit against stocks in process.

IV. Finished goods : The margin stipulated on finished goods may generally be higher than the margin
on raw material and may be lower than that stipulated for stocks in process.

V. Bills receiable/book debts: Banks generally prefer to grant facilities against bills receivable and
a very low or no margin may be stipulated for supplies to Government or other sundry parties. For
finance against book debts margin stipulation may be as high as 50% and only a small limit may be
permitted.

No bank advance is granted against manufacturing and administrative expenses which are to be borne
by the unit itself. We have thus calculated the actual working capital requirements by the unit and also
the limits sanctioned there against by the banks. Different considerations are involved while arriving at
these figures and it may sometimes be possible that limits sanctioned by the bank are not adequate and
are not equal to the total working capital requirements. The unit has to investigate as to the reasons for
such happening and has to take corrective steps, if possible or to bring in more funds in the business to
correct the situation.

We have made detailed analysis of the balance sheet of a company in Appendix 14.1 given at the end
of chapter 14 and will now attempt to assess the working capital of the unit on the basis of above
discussion. It may, however, be mentioned even at the sake of repetition that in actual practice
assessment is done on the basis of projected figures of sales for the next year. In this exercise also we
have presumed a uniform increase of about 10% in all the figures for the next year.

(All figures are taken in Rupees in

lakhs.)

I . raw material requirement:
(Figures available in Schedule H)

Average stock of = Opening balance of raw material + Closing stock of raw material
raw material ___________________________________________________

= 458.23 +652.77
2
= 555.50

Average monthly
consumption of raw
material during the year = Opening stock of raw material + Total purchase Closing stock of
raw material
12
= 458.23 + 3364.63 652.77
12
= 264.17 per month

Average stocking period in months = Average stock of raw material
__________________________________
Average monthly consumption of R.M.
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= 550.50
264.17
= 2.1 months (app.)



2.1 months is thus the average stocking period for raw material by the unit. Presuming the same level of
production but anticipating a general increase of 10% in all factors of production due to inflation and
other such reasons the raw material requirement of the unit will thus be worked out as under:

2.1 months requirement of raw material
= 2.1 x 290.58 = 610.22

IIweek's/months' stores and spares :

Average stock of stores and spares = 9.93 +7.85
2
= 17.78
2
= 8.89



Average monthly consumption figures are not available and the requirement of the unit against stores
and spares may be taken as equivalent to Rs. 10 lacs after providing necessary increase of about 10%
as already discussed.

III . . weeks stocks in process:

Cost of production = 3,932.82
Weekly cost of production = 3,932.82
52
= 75.63
Average stocks in process = 188.92+215.08
2
= 202
Average period of process = Average stock in process
Weekly cost of production
= 202 x 52
3932.82
= 2.68 weeks
The requirement of the unit for stock in process after providing the 10% increase over the last year
figures would amount to

2.68weeks stocks in process i.e., cost of production
= 2.68 x 4326.1
52
= 222.96

IV . months finished goods:

Cost of sale = Opening stock of finished goods + Cost of production Closing stocks of finished
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goods.
385.73 + 3,932.82 483.92 = 3,834.63

Average stocks of finished goods = Opening stock of Finished goods+ Closing stocks of
finished goods
2
385.73 + 483.92
2
= 434.82
Average period of stocking of
finished goods in months = Average stocks of finished goods
Cost of Sales
= 434.82 x 12
3843.63
1.36 months.

After providing 10% increase under this factor also the requirement of the unit under this component
would be
1.36 months' of finished goods i.e., cost of sale = 1.36 x 4,218.09
12
= 478.05
Vweeks/months bill Receivable representing credit sale

The figures of opening balance of bills receivable/debtors are not given and the figures as per the
balance sheet only is taken to find out the requirement of the unit. The figures of credit sales are also
not separately given and hence figures of total sales are taken for this purpose:


Average period of credit in months = Average Debtors
Sales
= 738.7 12
4832.57

=1.83

The requirement of the unit for bills receivable and debtors will now be computed as under:
1.83 months of bills receivable of sales after providing projected increase of 10 %.
= 1.83 x 5,315.82
12
= 812.56
VI. .. One month's manufacturing and administrative expenses

Total operating expenses = 1211.32

Expenses for one month = 1211.32
12
= 100.94

Anticipated expenses in the next you
after providing for 10% increase = 111.00



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CEDI AAILABLE FO PCHAE

Figures of opening balances under creditors are not given and necessary calculations are made on the
same basis as in case of sundry debtors.

Average period of credit available = Average Creditors x 12
in months Purchases
= 394.85 x 12
3364.63

Credit available for purchases to the unit = 1.41 month

1.41 months of credit after providing
projected increase of 10% = 1.41 x 3701.09
12
= 434.33
We may now proceed to compute the total working capital requirements for the unit as under :

Working capital requirements Rs. in
lacs

2.1 months requirements of raw materials
610.22
months requirement of stores and spares
10.00
2.68 weeks requirement ofstocks in process
222.96
1.36 months of finished goods
478.05
1.83 months of bills receivable & sundry debtors
812.56
1 months manufacturing and administrative expenses
111.00

__________
Total requirement
2244.79

__________

Less :

Credit available on purchases and advance payments received
434.33
Liquid surplus/net working capital available in business
(Current Assets Current Liabilities)
200.98
(After making adjustment for 10% increase)

____________
Net working capital requirements
(A)1609.48

_____________
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Pemiible Bank Limi

Raw material 610.22
Less credit available 434.33
175.89
Less margin @ 25% 43.97
____________
131.92

Stock in process 222.96
Less margin @ 40% 89.18

133.78

Finished goods 478.05
Less margin @ 30% 143.41
_____________

334.64
Receivable
Book debts 412.56
Margin @ 50% 206.28
Bills Receivables 400
Margin Nil 400.00
_____________

606.28

_______________
Total Limits (B)
1206.62

_____________
Net working capital requirement
1609.48
Permissible bank limits
1206.62

Deficit = 1609.48 1206.62
= 402.86

The unit is now faced with a deficit of Rs. 402.86 lacs in working capital and the various options
available to the unit to meet this deficit may be as follows :

To arrange for additional capital to that extent to wipe off the deficit.
To arrange for longterm loans/deposits to strengthen the longterm resources of the unit to
provide necessary margin for working capital.
To critically examine the level of current assets held by the unit. It may be possible that the unit
may be able to work with lower inventory and may make some earnest efforts to quickly realise
its debtors thereby reducing the level of working capital requirements of the unit itself.
To negotiate with the bank to reduce margin requirements so that additional limits are available
thereby reducing the deficit.

A package measure consisting of one or all of these steps is necessary to improve the working condition
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of the unit so that it is not starved of the working capital.

The format as suggested by Reserve Bank of India has been the first attempt to assess the working
capital requirement of industrial units on a scientific basis. The format has been duly amended for
smaller units by Puri Committee. The assessment of requirements of borrowers covered under various
segments of priority sectors is done on different consideration and standard forms and procedure have
been developed for this purpose.

A new dimension to financing of working capital by banks was given by Reserve Bank of India in 1975
by accepting the recommendations of 'Tandon Committee' which were later modified by Chore
Committee. These recommendations were applicable for large advances enjoying working capital limits
of Rs. 50.00 lacs and above. Reserve Bank of India also prescribed a standard format for assessment
of working capital limits for accounts covered under 'Credit Authorisation Scheme' later on renamed as,
Credit Monitoring Arrangement
1
. This form has, however, been adopted by many of the banks for
assessment of limits for working capital advances exceeding Rs. 10.00 lacs.


Different forms adopting different techniques are thus in circulation for assessment of working capital
depending upon the size and category of projects as under:

(i) Form for assessment of requirements of SSI units upto credit limits of Rs. 2,00,000/ (including
composite loans)
(ii) Form for assessment of requirements of SSI units for credit limits of above Rs. 2,00,000 and
upto Rs. 15.00 lacs
(iii) Form for assessment of requirements for units with credit limits above Rs. 15.00 lacs and upto
Rs. 1.00 crore
(iv) Form for assessment of requirements for units with credit limits above Rs. 1.00 crore.
(v) CMA Data form for assessment of requirements for units with credit limits above Rs. 10.00
lacs or as per the cut off point fixed by individual banks.
(vi) Assessment of limits for projects falling under various segments of priority sector.

The format at (v) has been discussed in chapter 17 on New System of Reporting and Loan System for
Delivery of Bank Credit.

It may, however, be added here that assessment of working capital will basically involve all these
factors in all the methods and though this format might have been replaced by other forms, yet its
importance hardly needs any emphasis as will be proved in subsequent discussions.
[M1]Postsanction scrutiny under Credit Monitoring Arrangement has since been withdrawn by RBI and therefore, banks
now have full operational freedom.