CANARA BANK : STAFF TRAINING COLLEGE : BANGALORE-560 004

CASE STUDY ON NON-FUND BASED LIMITS

One of your valued customers has approached you for availing non-fund based limits and has furnished the following information.

PARTICULARS AMOUNT(Rs. in lakhs)

FLCTOTAL ANNUAL PURCHASES OF THE COMPANY 1600Important content 60%Inland purchases 40%Imports on DA basis 60%Imports on DP basis 40%Transit period for imports 1 MonthUsance period for imports 3 monthsImport duty clement 20%ILCInland purchases 40% of total annual

purchasesCash purchases per month 10% of inland purchases(Balance on the strength of LCs)

Purchase on DA basisPurchase on DP basisTransit period for Inland purchasesUsance period for inland purchases

2/3rd of LC purchases1/3rd of LC purchases0.5 months1.5 months

GUARANTEESProjected contracts for the ensuing year 1200Average period of the bid 3 monthsEMD for participating in the bid 10% of average monthly

bidsSecurity Deposit 10% of contracts

awardedAnnual mobilisation advance required 20% of contracts

Average retention period of mobilisation advance 9 monthsRequirement of performance guarantee 20% of contractsAverage period of performance guarantee 12 monthsRequirement of retention money bank guarantee per month 10% of contractsAverage period of retention 15 monthsRequirement of Bank Guarantee / month for duty exemption 2% of contractsAverage period for duty exemption 9 months

COMPUTATION OF IMPORT L C REQUIREMENTSDETAILS BASIS FOR WORKING

RS. LAKHS1 Annual Purchases of the Co. Assumed figure2 Import content 60% of (1)3 Average monthly import purchases (2) / 124 Import duty element 20% of (3)5 Net import value per month Imports minus duty (3) – (4)6 Imports on DA basis Say 60% of (5)7 Imports on DP basis Say 40% of (5)8 Transit period for imports In months9 Usance period for imports In months10 Total lead time for DALCs In months (8) + (9)11 Total lead time for DPLCs In months (8)12 LC requirement for DALCs Import / month x lead time in

months (6) x (10)13 LC requirement for DPLCs Imports / month x lead time in

months (7) x (11)14 Total FLC requirement DALCs + DPLCs (12) + (13)

COMPUTATION OF INLAND L C REQUIREMENTSDETAILS BASIS FOR WORKING

RS. LAKHS1. Annual Inland Purchases of the Co. Assumed figure2. Average monthly import purchases (1) / 123. Cash purchases per month 10% of (2)4. Credit purchases per month (2) minus (3)5. Purchases on DA basis 2/3rd of (4)6. Purchases on DP basis (4) minus (5)7. Transit period for inland purchases In months8. Usance period for inland purchases In months9. Total lead time for DALCs In months10. Inland LC requirement for DALCs Lead time x months purchases

(9( x (5)11. Inland LC requirement for DPLCs Transit time x months purchases

(7) x (6)12. Total inland LC requirement DALC + DPLC (10) + (11)