Please refer to Regulation R-5 of Prudential Regulations for Corporate/Commercial Banking.

2). It has been decided that banks/DFIs may now determine by themselves the appropriate level of current ratio for various types of borrowers. Accordingly Para-2 of the Regulation R-5 has been amended as under:

            “At the time of allowing fresh exposure/enhancement/renewal, the banks/DFIs should ensure that the current assets to current liabilities ratio of the borrower is not lower than such ratio as may be required under the Credit Policy of the bank/DFI. Banks/DFIs shall prescribe the minimum current ratio under their Credit Policy keeping in view the quality of the current assets, nature of the current liabilities, nature of industry to which borrower belongs to, average size of current ratio of that industry, appropriateness of risk mitigants available to the bank/DFI etc. It is expected that bank/DFI’s Credit Policy, duly approved by the Board of Directors, shall emphasize higher credit standards and provide full guidance to the management about the current ratio requirement for various categories of clients and corresponding risk mitigants etc. acceptable to the bank/DFI.”

3). In view of the above amendment, reference of Para-2 given in the Para-5 of the Regulation R-5 may be deleted.

4). All other instructions on the subject shall remain unchanged.