Please
refer to the instructions contained in para 1 of Prudential
Regulation-V and Rule-8(a) of Rules of Business for NBFIs
in terms of which banks / NBFIs are required to ensure that
the ratio of current assets to current liabilities of a borrower
must not be lower than 1:1.
2. It has been observed
that some borrowers who have availed trade finance from banks
under Export Finance Scheme, are classifying these borrowings
as long term liabilities in their balance sheets. This enables
the borrowers to understate their current liabilities, as
also to improve their current ratios.
3. As the financing under
Export Finance Scheme is primarily for 180 / 270 days its
classification as long-term liability, for whatsoever reason,
is against the spirit of the Scheme. Banks / NBFIs are, therefore,
advised to ensure that these loans are classified by them
as “current liabilities” for the purpose of calculating the
current ratio of the borrower under Prudential Regulation
V/ Rule-8 of NBFIs Rules of Business.
4.
All other instructions on the subject shall, however,
remain unchanged.
Please
acknowledge receipt.
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