QIS Statement

What Is a QIS Statement?

Two different returns are routinely confused, and the difference is one of tense. A stock statement reports a position that has already happened: what was held at a date. A quarterly information return does that as well but adds what is expected to happen, setting projected performance for the coming period alongside actual performance for the one just closed. It is a planning document as much as a reporting one.

The comparison is the point. A borrower whose actuals consistently fall short of its own projections is telling the lender something about either the business or the quality of its forecasting, and neither reading is comfortable. Persistent divergence prompts a reassessment of the working capital limit itself, since the limit was sized on projections of the same kind. The return also brings current assets and current liabilities together in one view, which lets a lender see the working capital cycle rather than only the stock position that the monthly statement reports.

Where QIS Statement Appears in a Sanction Letter

The obligation is created by covenant and the detail sits in the same place.

• The information covenant, which imposes the filing requirement and states the frequency, most often quarterly for this return and monthly for the stock statement.
• The due date provision, expressed as a number of days after the period end, which is what makes a submission late rather than merely delayed.
• The format requirement, frequently referring to a prescribed annexure attached to the letter itself rather than describing the layout in the clause.
• The events of default clause, which commonly treats repeated failure to file as a breach in its own right, independently of anything the figures show.
• The review clause, allowing the limit to be reassessed where actual performance falls persistently short of what the borrower projected.

QIS Statement Under Indian Law

Position: the prescribed Quarterly Information System formats, which accompanied the Tandon and Chore committee lending framework, were withdrawn as part of the deregulation of working capital finance in 1997. There is no current regulatory requirement to file a return in that form.

• Banks were given freedom to design their own monitoring systems, and most continue to require regular submissions covering stock, book debts and performance in their own formats.
• Source: the RBI circular of April 1997 withdrawing the Maximum Permissible Bank Finance framework, and subsequent master circulars on loans and advances confirming that freedom.
• Note: the obligation a borrower actually faces arises from the sanction letter rather than from regulation. Where a facility calls for a quarterly return, that covenant is enforceable whether or not any regulator requires it.

How QIS Statement Works in Practice

1. The sanction letter imposes the obligation and states the format, the due date relative to the period end and what has to accompany the figures.

1. At the close of each quarter the borrower prepares actual performance for the period just ended: sales booked, current assets carried, current liabilities standing and the working capital gap that falls out of them.

1. Alongside it, projections are set out for the coming period on the same basis.

1. The return is filed with the lender, which compares the actuals now reported against the projections filed for that same quarter three months earlier.

1. Persistent shortfalls against a borrower's own forecasts prompt a review of the limit, since the facility was originally sized on projections prepared the same way. A close match, sustained across quarters, is one of the stronger arguments available at renewal.

QIS Statement: A Worked Example

A Surat processing house files its quarterly information for the September quarter. Read line by line, nothing is fatal. Read together, the four lines tell one story.

Sales came in well below projection while inventory rose sharply, which means production continued into a market that stopped absorbing it. Payables nearly doubled, so the unsold inventory was funded by stretching suppliers rather than by the bank. That combination is the classic build-up pattern, and it is visible a full quarter before it reaches the profit and loss account. Note that these formats were withdrawn in 1997 and now survive as a covenant many sanction letters still carry, so what is filed is whatever the letter specifies rather than a prescribed return.

Common Mistakes With QIS Statement

The return is misunderstood more often than it is misfiled.

• Confusing it with the monthly stock statement and submitting one in place of the other, which leaves a condition unmet. They serve different purposes and both are usually required.
• Filing projections that are optimistic rather than realistic, then missing them every quarter, which tells the lender the forecasting cannot be relied on. Project what you expect, not what you hope.
• Carrying forward last quarter's projections unchanged because circumstances have not been reviewed, so the comparison measures inattention rather than performance.
• Completing only the current-asset side and leaving current liabilities thin, which prevents the lender seeing the working capital cycle the return exists to show.
• Treating persistent shortfalls as a reporting nuisance rather than as the trigger for reassessing the limit itself, which is what they usually become.

Related Stock Audit Terms

The running account the return reports against is the facility itself, so cash credit limit is the entry to read next. Every other term in this cluster is listed in the the glossary, grouped by the part of the work it belongs to.