IT Action Plan (Part III)
Long Term National IT Policy

In addition to the policies given in IT Action Plan Part I and Part II, the following Policy recommendations are made with specific reference to the Working Capital financing.

115. Financing will be in the form of business based financing and financing against receivables and not asset based financing

116. Conventional collateral securities will be waived

117. Financing proposals will be appraised on parameters like credentials of entrepreneurs, company performance, etc.

118. Small start-up units will be provided funding at concessional rates of interest.

119. Banks will be advised to sanction working capital finance to IT companies engaged in software services, project services and software products irrespective of the age of the borrower unit and/or the quantum of turnover achieved by it in the previous year.

120. Applications for working capital finance will be evaluated on criteria like track record of the founders, management team, professional qualifications, work experience in the software industry and infrastructure available.

121. Working capital limits may be assessed by banks on the basis of 20% of projected turnover for units having working capital limits of upto Rs. 2 crore.

122. Assessment of bank finance for units having working capital limits of over Rs. 2 crore will be on the basis of peak deficit as per the cash budget.

123. The following Documents will only be required to be submitted for availing working capital finance:

• Operating statement
• Balance sheet
• Cash budget
• Statement of contract economics
• Detailed project report and business plan

124. Nature of credit facilities:

• For Credit facilities upto Rs. 10 crore, Banks will have freedom to sanction credit facilities by way of cash credit facility or overdraft.
• For Credit facilities above Rs. 10 crore. Cash credit component will be restricted to 20% of the aggregate credit limit after excluding export credit sanctioned with the balance being disbursed as a demand loan component.

125. Funding for the implementation of the recommendations/policies in this report will be mobilised from the 1 to 3 percent of the sectoral Plan Budget already approved by the Cabinet under IT Action Plan - Part I as well as funds from bilateral and multilateral agencies and corporate investments including private sources.