Question

What activities are included in advisory services and why advisor fee is linked to loan amount?

A company obtained Rs.40 Cr credit line from a Bank at a 3% interest rate and with a 0.75% commitment fee to keep a credit line open. The fee is charged yearly on the unused portion of the credit line. Company used Rs 25 crore in the first year. Calculate the fee to be paid to Bank in the second year?

Answer 1

DETAILS GIVEN IN THE QUS

• TOTAL CREDIT LINE OBTAINED - RS 40 CR
• INTEREST RATE - 3%
• COMMITMENT FEE - 0.75%

COMMITMENT FEE IS A FEE CHARGED BY THE BANK ON UNUSED PORTION OF ANY LOAN. HERE COMPANY OBTAINED CREDIT LINE OF RS.40 CR IN WHICH COMPANY UTILISED ONLY RS.25 CR IN FIRST YEAR, THEREFORE COMPANY HAS TO PAY COMMITMENT FEE @0.75% ON UNUTILISED AMOUNT OF RS.15 CR( RS.40 CR - RS.25 CR ) IN SECOND YEAR

HERE IS THE CALCULATION -

RS.150000000 * 0.75% = RS.1125000 ANSWER