Cut point in the Credit Agreement effortlessly

Aug 6th, 2022
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When you deal with diverse document types like Credit Agreement, you understand how important precision and focus on detail are. This document type has its own specific structure, so it is crucial to save it with the formatting intact. For this reason, dealing with this sort of paperwork can be quite a struggle for traditional text editing applications: one wrong action may mess up the format and take additional time to bring it back to normal.

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How to Cut point in the Credit Agreement

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welcomes at the five-minute legal master series were expert attorneys help you master important legal topics today board-certified creditors rights attorney Nicholas D Kralik discusses credit agreements welcome today I want to talk to you a little bit about credit agreements you know in the euphoria of getting a new customer not many creditors especially their sales departments want to think about their customer becoming a debtor somewhere down the line however when a creditor extends credit to that new customer hes essentially lending his companys money and there is a risk that the creditor may not get paid by this customer therefore the outset of the business relationship with a new customer that is precisely the time to be proactive to anticipate what rights and remedies you as the credit grantor will want and need to have at your disposal if and when the new customer becomes a non-compliant debtor youve got to prepare for collection from day one and nobody likes to think about

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Once the account crosses one year as DA1, it becomes Doubtful Asset 2 (DA2-1to 3 years) and requires a provision of 40 per cent on the Secured portion and 100 per cent on the unsecured portion.
Generally CC limit amount is calculated by the bank as a percentage of sale and stock along with financial statements. For example a bank allowed cash credit limit up to 80% of stock plus 20% of sales or turnover of the business.
(D1 = doubtful up to 1 year, D2= doubtful 1 to 3 years, and D3= doubtful more than 3 years). Loss assets should be written off. If loss assets are permitted to remain in the books for any reason, 100 percent of the outstanding should be provided for.
4.1 Categories of NPAs Sub-standard Assets. Doubtful Assets. Loss Assets.
With a view to imparting more objectivity in identifying cases of willful default, decisions to classify the borrower as wilful defaulter, in future, may be entrusted to a Committee of higher functionaries headed by the Executive Director and consisting of two GMs/DGMs as decided by the concerned bank/FI.
The interest is calculated on the outstanding balance. For example, let's say the limit is Rs 100000 and you have used Rs 35000 then the interest is calculated only for 35000. If the interest rate is 10%, then the interest will be (35000*10/1200) =291.66.
The Reserve Bank of India (RBI) defines wilful defaulters as people who had the capacity to repay their loans but chose not to. Companies that use funds for purposes other than what the loans were originally granted for are wilful defaulters as well.
Guidelines on wilful defaulters were introduced by the Reserve Bank of India (“RBI“) over a decade ago, by way of a scheme which came into effect from April, 1999. The scheme required banks and financial institutions to report all cases of wilful defaults of 25,00,000 lakhs and above to the RBI on a quarterly basis.
An integral part of the credit process is an analysis of the borrower's cash flows and financial statements. Credit analysis covers two key risks – business risk and financial risk. Adequate cash flow is key as the bank is primarily concerned with a borrower's ability to generate enough cash to service the debt.
The 3 different categories of Non Performing Assets (NPA's) are Loss Asset, Doubtful Asset, Substandard Asset.

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