Trending In Banking

We are advising our clients on some of these products and concepts. And, using an appropriate mix of these products to reduce overall finance cost.

Marginal Cost of Lending Rate (MCLR)


» A benchmark derived from bank’s cost and other factors which is individually published each month by banks. 

»  It varies from overnight to 12 months.

»  Ideally, interest rate for a corporate should be linked to MCLR

       »  It is important to chose the correct MCLR depending on the         type of loan taken 

Buyer’s/Supplier’s Credit Portfolio Management


»  Buyer’s/ Supplier’s credit provides a cheaper way to finance imports. However it adds to currency risk

»  A smart management of all the costs and currency risk can lead to significant reduction in interest cost

Foreign Currency Term Loan (FCTL)


»  Long term foreign currency Loan

»  Rate of interest varies from bank to bank; possible ranges are L+2% to 5%

»  Provides more flexibility of end use etc.

»  Generally banks do not give for more than 7 years

External Commercial Borrowing (ECB)


»  Foreign currency Long Term Loan from an overseas party though an AD bank in India

»  RBI guidelines restricts overall cost, end use, tenor etc.

»  High on compliance – Monthly filing of return

 Commercial Paper


»  Unsecured borrowing in INR

»  Generally mutual funds invest in CPs

»  Increasingly being used by corporates of rating A and above

»  Interest rate could be significantly lesser than MCLR



»  An alternate to bill discounting, generally unsecured and usually more expensive

»  Helps exporter switch working capital when bank limits are over; bank’s not willing to discount bills of certain countries

»  Unlike bank limits, setting of factoring limits with factoring company is less time taking

»  India has few active factoring companies

Export financing


»  Its a tricky choice and each choice has pros and cons

»  An intelligent comparison could save 2-4%

»  Correct timing, structuring and negotiation of terms with bank is important



»  Form of cash credit with committed usage of funds for certain period- as low as one month to 12 month.

»  Could be taken in INR or in USD. If in USD, it is generally called FCNR loan. If in INR, it is generally called WCDL

»  In case of FCNR generally the rate of interest various between L+2% to 4%

»  In case of WCDL generally the rate of interest is 0.25% to 0.50% lower than Cash Credit

Don’t just take it from us, let our customers do the talking!

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