Case Study: Working Capital Financed by Multiple Banks

M/S. Alline Feed Mills Limited (AFML), a concern of TD Group, produces poultry and fish feed and supplies all over the country through their designated dealers. It has also achieved a good market reputation for their quality and price. M/S. AFML has already been a sought after client in the banking industry. The TD Group has been availing of a large credit exposure from different banks and NBFIs. M/S. AFML avails of term loan limit of Tk. 100 crore and working capital limit of Tk. 70 crore from bank X. Then the client approached Bank Y for working capital limit of Tk. 100 crore to purchase and stock up seasonal raw materials at lower price. The manager of Bank Y convinced and sanctioned Tk. 100 crore as working capital limit. The Manager of bank Z approaches the management of M/S. AFML for loan marketing and the client agrees to take the same and applies for Tk. 70 crore as working capital finance from bank Z and the bank manager forwarded the proposal to Banks Head Office for approval. The management of bank Z scrutinized the proposal and calculated the total working capital requirement of the said project considering its production capacity, sales volume and market share and found that the initial working capital financed by the bank X was good enough to run its operations.

Causes of Refusal

Here it is found that the proper assessment of the client was not conducted by bank Y. Finally the management of bank Z came to a conclusion that the business was over financed through working capital and the proposal for another Tk. 70 crore was declined by the management.