Somaskanda Printers Limited approached Support Bank, for working capital facilites. The projected annual turnover of the Company is ₹ 1,85,00,000. Explain the assessment of working capital requirement as per Nayak Commit

As per Nayak Committee, bank credit for working capital purposes for borrowers requiring fund-based limits up to ₹ 5 crores for Small Scale Industries borrowers and ₹ 2 crores in case of other borrowers, may be assessed at minimum of 25% of the projected annual turnover of which should be provided by the borrower (i.e. minimum margin of 5% of the annual turnover to be provided by the borrower) and balance 4/5th (i.e. 20% of the annual turnover) can be extended by way of working capital finance. The projected turnover or output value may be interpreted as projected gross sales which will include excise duty also. Since the bank finance is only intended to support the need-based requirement of a borrower, if the available Net Working Capital (net long-term surplus funds) is more than 5% of the turnover the former should be reckoned for assessing the extent of bank finance. Computation of Working Capital Particulars Amount (in ₹) Projected Sales-turnover 1,85,00,000 Working Capital Limit (25% of annual turnover) 46,25,000 Permissible Bank Finance 37,00,000 Minimum money from borrower (5% of Projected Sales Turnover) 9,25,000