The Reserve Bank of India in March, 1979 appointed another committee under the chairmanship of Shri K.B. Chore to review the working of cash credit system in recent years with particular reference to the gap between sanctioned limits and the extent of their utilisation and also to suggest alternative type of credit facilities which should ensure greater credit discipline. The important recommendations of the Committee are as follows:
- The banks should obtain quarterly statements in the prescribed format from all borrowers having working capital credit limits of Rs. 50 lacs and above.
- The banks should undertake a periodical review of limits of Rs. 10 lacs and above.
- The banks should not bifurcate cash credit accounts into demand loan and cash credit components.
- If a borrower does not submit the quarterly returns in time the banks may charge penal interest of one per cent on the total amount outstanding for the period of default.
- Banks should discourage sanction of temporary limits by charging additional one per cent interest over the normal rate on these limits.
- The banks should fix separate credit limits for peak level and non-peak level, wherever possible.
- Banks should take steps to convert cash credit limits into bill limits for financing sales.
