12-08-2017, 06:43 PM
16-08-2017, 12:24 PM
Dehejia Committee:
The National Credit Council (NCC) was formed in October 1968 under the presidency of V. T Dehejia to examine to what extent the credit needs of trade and industry were inflated and at the same time suggest some measures based on their findings.
In other words, "the extent to which the credit needs of industry and trade are likely to inflate and how many trends could be controlled." The study group submitted its report in September 1969. It should be noted here that the term "inflation" means that borrowers have obtained a short-term credit greater than their actual working capital requirements.
Criteria:
For the purposes of this "inflation", the Study Group took the following criteria:
I) If the increase in short-term credit was substantially higher than the growth in the value of production.
(Ii) If the increase in such credit is greater than the increase in inventories;
(Iii) whether short-term bank loans have been diverted for the construction of fixed assets or other non-current assets;
Iv) whether there is double or multiple financing of the same stocks; Y
(V) if the crediting period is extended unduly.
Recommendations:
The main conclusions of the Dehejia Committee are as follows:
(A) Inflation of bank credit:
The granting of bank credit to industry increased significantly in comparison with the increase in industrial production or inventories in terms of value, Short-term bank lending to industry increased by 130% between 1961-62 and 1966-67, while industrial production increased by only 60% over the same periods.
B) Misuse of short-term credit:
Although bank credit was allowed for short-term current assets, the same was used for the acquisition of non-current assets / fixed assets, that is, short-term credit was diverted.
© Credit granting without adequate values and projected financial statements:
Banks granted credit to the industry without adequate values and without assessing their real needs, which are based on their projected financial needs.
D) Prevailing loan system:
The current lending system helps the industry to rely on short-term bank financing to acquire fixed assets.