Guidelines Stock Audit - Drawing Power

April 2, 2018 | Author: Himanshu Aggarwal | Category: Credit (Finance), Stocks, Debt, Margin (Finance), Working Capital


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काप रे शन बकCorporation Bank (सावजिनक े का अ णी बक) धान कायालय, डा.पे. सं.- 88 मंगलूर- 575001 Head Office, PB No.88, Mangalore – 575 001 ( A Premier Public Sector Bank ) ई-सकु लर e-CIRCULAR Credit Division [Credit Policy & Planning Section] Email : [email protected] .का. प रप सं. HO Circular No. 178/2015 सूचकांक Index No. 11.00/19/2015 दनांक Date : 09-March-2015 सम त शाखा / कायालय हेतु TO ALL THE BRANCHES / OFFICES Subject : COMPUTATION OF DRAWING POWER HIGHLIGHTS IBA has revised methodology for calculating Drawing Power in respect of Working Capital limit. 1. Attention of the Branches/Other Offices is invited to HO Circular No. 169/2014 dated 10.03.2014, communicating the methodology for computation of Drawing Powers in respect of Cash Credit against Stock / Book Debts, Working Capital Fixed Loans, Packing Credit etc., 2. On the basis of views / comments received from various banks, IBA vide their letter C&I/Circular/ 2014-15/689 dated 29.09.2014, has advised the Banks to have a uniform methodology for computation of the drawing power. Accordingly, Board at its meeting held on 22.12.2014, has approved the methodology for calculating Drawing Power in respect of Working Capital limit. 3. The revised method for calculating Drawing power is as under: 3.1 Computation of Drawing Power in Cash Credit Hypothecation Limit against security of stocks Total Value of Stocks (Closing balance of Stocks, their value as per market rates or cost price, whichever is lower) A Excess of Sundry Creditors (Stocks), over the level assumed at the time of assessment B Excess of Other Sundry Creditors, over the level assumed at the time of assessment C Less Value of Stock Less: Stipulated Margin Net Value of Stocks D = A-B-C E F = D-E …2 Even though. duty draw backs/ export incentives/VAT receivables. penal rate of interest is to be applied unfailingly. including cash margin on LC/ BG etc. The sanctioning authority may permit the borrower additional time to submit the above statements where compilation of the statement requires extended time for the reasons. export incentive/VAT with the specific permission from the sanctioning authority. Stock/Book debt statements are to be submitted in the prescribed format within stipulated time. by adopting the aforesaid procedure. packing credit etc. …3 . Book Debts Statement shall be certified by the Chartered Accountants on halfyearly basis. Barring those cases where prior permission of the sanctioning authority is obtained.. except receivables in the nature of duty drawback. The drawing power under cash credit against stock/ book debts. advance payment of taxes. 6. However. such as distant locations of the branches/factories/godowns/ units etc. 3. are also reckoned for the purpose of assessment. it shall be restricted to actual level of Sundry Debtors including advances for stocks as a refinement in calculating the drawing power by excluding debtors relating to expenses as envisaged at the time of assessment. shall be regulated based on the monthly stock statement submitted on the basis of actual level of holding of inventories and receivables.3 Computation of Drawing Power in Cash Credit Hypothecation Limit against combined security of Stock & book debts Drawing Power L = F+K 4. other current assets such as advance against purchases.::2:: 3. 7.2 Computation of Drawing Power in Cash Credit Hypothecation Limit against book debts Eligible Trade Debtors including advance for Stocks* G Less: Outstanding under Bills Discounted H Value of Debtors I = G-H Less: Stipulated Margin J Net Value of Debtors K = I-J *the eligible debtors should include advances for stocks and expenses as envisaged at the time of assessment. cash and the bank balances. all other accounts where the delay in submission of stock/ book debt statement is observed. Stock/Book Debt Statement are required to be submitted within 10 days of the close of the month to which the statement pertains to or at such other periodicity as permitted by the Sanctioning Authority. working capital demand loan. the same are excluded while calculating the drawing power. 5. pledge loan. Stock received on consignment 4. Drawing power should be calculated on the eligible stock. the resultant excess amount should be recovered immediately apart from reporting the excess in ADN02 and ADF02. during the intervening period [i. Stocks received for job work. the following stocks to be declared in the Stock Statements and the related amount of creditors also to be shown: 1. The following items shall not be included in the Stock Statement. the consortium leader shall allocate on the basis of pro-rata exposure assumed by the Banks. 4. 1. where separate credit facility is available. Value of goods to the extent of bills liability under documents against acceptance/ co-acceptance. Advances received from the customer against their purchase orders 6. Bank shall follow the revised method of computation of DP as enumerated herein above. 3. good under clearance and goods hypothecated/ pledged to other banks. should be recorded in the Register for recording drawing power and verification of stocks hypothecated and in the system. Goods received on Credit 2. on the date of receipt of the stock statement. Branches shall ensure to note the level of Debtors/Creditors envisaged at the time of assessment of the limit on top of the DP register in order to regulate the Drawing Power and for easy monitoring. In the absence of such information from the bank having major share in working capital. if any excess resulted in the account due to reduction in the drawing power. Drawing power so arrived at. Value of goods to the extent of bills liability under usance LCs (net of cash margin held against LCs issued). 2. Items in the nature of scrap and low value bi-products which does not fetch definite sale value 5. In addition to the above. 3.::3:: 8. 9. goods released under trust. In the case of advances under Consortium/Multiple Banking Arrangement. 10. Value of goods hypothecated/pledged under packing credit. …4 . Obsolete stock and non-moving stock. In case. While arriving at the drawing power. the balance outstanding in the account exceeds the drawing power. The drawings in the cash credit limits should be regulated within the drawing power recorded every month.e. 11. from the beginning of the month till the date of submission of the stock statements should also be observed. b. by adding the amount paid by the borrower as advances towards the purchase of raw materials and applying the stipulated margin and deducting the liabilities under working capital demand loan. a. Value of goods received under bank guarantee. ¾ File all the stock/ Book Debt statements with DP calculations in a separate file and make it available to the auditors at the time of inspection. [P PARAMASIVAM] GENERAL MANAGER Note: Hindi version of the Circular follows. ¾ Ensure that the Bank's Hypothecation board is displayed in a prominent place in godown/business premises of the borrower. call for reasons from the borrower and inform the sanctioning authority. stocks hypothecated to the Bank are insured and Banker's clause is duly noted in the policy. ¾ Verify the stock statement submitted for March. Further. with audited Balance Sheet figures in respect of inventory. duly certified by the Chartered Accountant to be obtained on half-yearly basis. Book Debts and Creditors. . 13. the branches are advised to adopt the following to monitor the receipt of stock/BD statement and while calculating DP: ¾ Ensure that.::4:: 12. ¾ Wherever Book debts are obtained as security. the age-wise details of book debts. All our branches and other offices are advised to note the above for guidance and strict adherence. If any wide variations.
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