Channel Financing

The various committees set up by Reserve Bank of India had suggested Channel Financing in various forms for implementation. These recommendations came from Tandon Committee for receivable financing, drawee bill financing by Chore Committee and Bill discounting and re-discounting by Ramamoorthy Committee. Channel Financing also known as Supply Chain Finance is a structured finance under which the Bank offers working capital facility to the supply chain stakeholders comprising buyers and suppliers.

Channel Financing facilitates enhancing Sales of its products by the Corporate by providing Dealers/Distributors a seamless funding route to meet its commitments to Corporate on due date. The conventional lending focuses on the Corporate or the entity whom credit facilities have been granted whereas Channel Financing also ensures system and procedure followed by the supply chain stakeholders along with their creditworthiness. It doesn't anyway means availing finance by the entire supply chain but just for those who need funding to maintain liquidity for business cycle.

Channel financing is a need based proposition catering industries in Agriculture, Automotive, Consumer durable and Electronics sectors among others. This type of financing helps Corporate to reach out to the remote areas in the Indian markets whereas MNCs gets entry into the market as it creates a value proposition for them.

In the backdrop of what is stated above, Channel Financing is an innovative product, which could be structured according to the supply chain requirements, extending working capital finance to the dealers/distributors having business engagements with large Corporate. The finance could be in the form of Overdraft, Cash Credit and/or bill discounting facilities where lending Bank not only takes care of the Corporate liquidity but also those of its suppliers and the dealer/distributors. Typically, Bank seeks Corporate guarantee for extending finance to the dealer, distributor, vendor or supplier of the Corporate entity.

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