SBI to Start Cash flow Based Lending rather Than Balance Sheet Based

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  • State Bank of India is largest Lender and largest Bank of the country and has planned to increase its lending figures to SME units with a growth rate of 10 to 12 %.
  • For this SBI is planning to change policy of analyzing the borrowers capability or eligibility to get finance, formula to calculate PBF – (Permissible Bank Finance) are going to change.
  • Presently all nationalized bank including SBI calculate eligibility of borrower for Working Capital or other financing by Balance Sheet based calculation.

No doubt fund flow is also prepared and analyzed.

  • If for a borrowers, Balance Sheet based Analysis does not permit the desired funding them Bank does not sanction proposal despite its Cash Flow position is very good.
  • But Now SBI has decided to fund Borrowers based on cash flow position also.
  • With these Schemes of SBI, Borrowers with heavy investment in Plant & Machinery will get benefited as deprecation is very heavy which is a non-cash expense, so Cash Flow will be good.
  • If Stock and Debtors are less due to prompt payment by customers, than Cash Flow will be good SME will have eligibility for Funding.
  • If other nationalize banks follow SBI, policy them the scene of SME founding will get changed in India.

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