ISSN (Print) - 0012-9976 | ISSN (Online) - 2349-8846
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Arms Purchates- Limited Options

More Funds, Less Discipline THE government has made two policy changes designed to increase the flow of funds to the private corporate sector. First, it has raised from 11 to 12 per cent the ceiling rate, of interest on seemed public debenture capital raised by Companies whose shares are listed on stock exchanges. To enable comparties to raise more funds through such debentures, which may he issued for project financing as well as for working capital requirements, the debt-equity ratio for the purpose has been simultaneously raided from 1:1 to 2:1. The total amount raised through debentures for working capital purposes alone could be as much as 20 per cent of gross current assets, loans and advances. The permissible amount for financing of projects will he determined on the basis of the project-financing scheme approved by the financial institutions or by the government under the MRTP Act, etc. Many Other incentives have been provided or promised, For instance, to make debentures more attractive, it will be open to a company to offer incentives like issuing them at a discount or payment of additional interest of, say, upto 1 per cent for any year in which the company declares dividend on its equity at a rate higher than the highest rate declared in the preceding three years. Special steps have also been promised, in particular through the financial institutions, for developing the secondary debenture market.

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