IRJMST Vol 8 Issue 1 [Year 2017] ISSN 2250 – 1959 (0nline) 2348 – 9367 (Print) International Research Journal of Management Science & Technology http://www.irjmst.com Page 191 SUPPLY CHAIN FINANCING: A BETTER APPROACH FOR WORKING CAPITAL ASSISTANCE D Santhosh Kumar mrsanthosh786@yahoo.com DGM & Faculty Jawarhal Nehru Institute of Banking & Finance Hyderabad 500032 Shivesh Kumar Jha Regional Head IDBI Bank Patna Bihar 800001 Abstract Working Capital assistance is one of the main activities of the commercial banks. Banks tend to finance the operating assets of the entity or the borrower. The delivery of assistance has been mainly as cash credit/overdraft facility. The said delivery mechanism has its inadequacies and leads to inefficiency and distortions. Lenders over the years, have come across situations when the underlying assets are not available during times of stress. Many attempts have made to improve the delivery and more focus is being given to buildBill Finance as an alternative mode of delivery. However, bill finance is still to take firm roots as it is only seen as an alternative mode rather than the main delivery mechanism. With recent international events unfolding like the financial crisis of 2008 the Supply Chain Finance (SCF) has emerged out to be a better tool for working capital assistance. The mechanism operates in an automated environment. No doubt, the development is concomitant to the changing pattern of trade as well as revolution in the underlying technology. The mechanism can also facilitate better monitoring and management of working capital assistance. Keywords : Current Assets, Current Ratio , Owned funds, Supply Chain, Working capital, 1. INTRODUCTION An enterprise needs finance to create fixedas well as operating assets. Generally, finance for fixed assets are long term and are financed through term loan or its variants, while the operating assets are financed through short term working capital loans/borrowings. Banks have been on the forefront in extending working capital assistance. In fact, working capital advance forms the major part of the advances portfolio of a commercial bank. 1 The working capital advances have mainly been delivered in the form of the cash credit/overdraft account. Attempts have been made to rationalize the assessment as well as delivery of the working capital limit from time to time. Tandon committee (Study Group to Frame Guidelines for Follow up of Bank Credit), appointed by Reserve Bank of India, was one such attempt to rationalize the process of assessment as well as delivery. 2 The committee suggested three methods of assessmentof limits which were popularly referred as Maximum Permissible Bank Finance (MPBF).In the 1 st Method, the borrower will have to bring minimum of 25% of the working capital