Credit Authorization Scheme

The Credit Authorization Scheme (CAS) was launched in 1965 and was withdrawn in 1989. Under the scheme, all selected commercial banks were advised to obtain the RBI’s prior authorization before sanctioning any credit limit of Rs.1 crore or more to an single party or any limit that would take the total limits enjoyed by such party from the entire banking system (including co-operating sector) as a whole to Rs.1 crore or more. The appraisal on the part of the banks related to need of funds, security for the advance and suitability of terms and conditions is taken for granted. Normally authorization is given within 3 days of the receipt of application. Rejections are few and mainly related to the regular activity of the borrower, intermediate trading activities and double financing.

Since 1965, the Credit Authorisation Scheme (CAS) has been playing a significant role as an effective instrument of credit Method 3: 0.75(CA-CCA)-CL = 075(50-20)-15 = Rs.75 million regulation.

Rationalization of the Scheme

RBI advised commercial banks in June 1970 to collect and examine data relating to

• Utilisation of existing credit limits by borrowers
• Total working capital requirements and bank finance permissible together with the borrower’s ability to meet the gap between the two.
• Comparative financial position for the last 3 years d. Cash flow
• In respect of term loans, project cost and sources of financing the project.