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In many countries, banks sanction a facility called headroom. What exactly is this facility ?

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Question added by SAI ANIMESH KUMAR N , Senior Manager, Credit , Ahli United Bank
Date Posted: 2016/03/02
SAI ANIMESH KUMAR N
by SAI ANIMESH KUMAR N , Senior Manager, Credit , Ahli United Bank

Headroom (or marketing headroom) is a facility which will generally be sanctioned in multinational banks, which can be a primary (fund based or non-fund based) or settlement limit sanctioned to the customer, but will not be revealed to the customer as to how much amount is sanctioned. 

When the customer gets back to the bank asking for a temporary increase in limits to meet exigencies, RM can facilitate this to the customers. This is beneficial because turn around time in disbursing the amount to the customer is lower as the facility is already sanctioned and the relationship manager can disburse it. 

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Mohammed Amin Petiwala
by Mohammed Amin Petiwala , Finance and Investment Advisor , Special Economic Zone Authority Duqm

It is the flexibility limit which the bank has given to the borrower. This is provided over and above normal business case debt assessed for the company. Banks do not have much of re-assessment required in case of need of such limits. However, beyond this, the borrower needs to be re-assessed by the Bank and with more vigilance.

Vinod Jetley
by Vinod Jetley , Assistant General Manager , State Bank of India

head·room

 (hĕd′ro͞om′, -ro͝om′)n.

1. Space above one's head, as in a motor vehicle, above a doorway, or in a tunnel; clearance.     Thus, a contingent facility, over and above the facilities asked for, which can be provided to the customer as per the rules and norms of the bank.

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