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C Working Capital Finance Part2
What is the primary purpose of working capital finance provided by banks?
Working capital finance is provided to meet the day-to-day operational requirements of a business, covering the gap between current assets and current liabilities in the operating cycle.
What is the concept of 'Permissible Bank Finance' under the Tandon Committee's first method?
75% of working capital gap after 25% NWC contribution by borrower.
What does the Tandon Committee recommend regarding the Maximum Permissible Bank Finance (MPBF)?
The Tandon Committee recommended that MPBF should be computed as 75% of the net working capital (current assets minus current liabilities other than bank borrowings), ensuring borrowers contribute at least 25% margin from long-term sources.
What is the third method of lending as recommended by the Tandon Committee?
Borrower finances core current assets from long-term funds entirely.
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