In banking, RTL commonly refers to Rupee Term Loan.
A Rupee Term Loan (RTL) is a loan denominated in Indian Rupees (INR) provided by banks and financial institutions for a specific period, typically for financing capital expenditure or long-term working capital requirements. It is a common financing tool used by businesses operating in India.
Here's a breakdown of what RTL entails:
- Currency: The loan is disbursed and repaid in Indian Rupees (INR).
- Term: RTLs are typically medium- to long-term loans, ranging from a few years to several years, depending on the purpose and the repayment capacity of the borrower.
- Purpose: These loans are generally used for:
- Capital Expenditure: Funding the purchase of fixed assets like machinery, equipment, land, and buildings.
- Project Financing: Funding new projects or expansions of existing businesses.
- Long-Term Working Capital: Meeting the long-term working capital needs of a company.
- Repayment: The loan is repaid in installments, usually monthly or quarterly, over the agreed-upon tenure. Repayment schedules are structured based on the cash flow projections of the borrower.
- Interest Rate: The interest rate on an RTL can be fixed or floating.
- Fixed Rate: The interest rate remains constant throughout the loan tenure, providing certainty in repayment planning.
- Floating Rate: The interest rate is linked to a benchmark rate (e.g., MCLR, Repo Rate) and fluctuates with changes in the benchmark.
- Security: Banks usually require collateral security for RTLs, such as fixed assets, current assets, or personal guarantees.
- Documentation: Obtaining an RTL involves extensive documentation, including financial statements, project reports, and legal documents.
Example:
A manufacturing company needs to purchase new machinery to increase its production capacity. The company approaches a bank for a Rupee Term Loan. The bank assesses the company's financial health, project viability, and repayment capacity. If satisfied, the bank provides an RTL of, say, INR 5 crores, repayable over five years with monthly installments and secured against the machinery being purchased.
In summary, a Rupee Term Loan is a vital financing option for businesses in India looking to fund their long-term capital needs in Indian Rupees.
