Corporate finance
This query is : Resolved
Mayur Ejrekar
(Querist)
26 September 2014
What is the Drawing Power? How is it calculated?
Nikhil Kaushik
(Expert)
26 September 2014
drawing power is the maximum amount of working capital loan that the borrower can draw from the bank
the computation depends on the conditions prescribed by the lender in the sanction letter.
the computation depends on the conditions prescribed by the lender in the sanction letter.
Nikhil Kaushik
(Expert)
26 September 2014
For eg: the bank say it will cover only 3 months debtors at 25% margin.
The borrower has Rs 200 debtors but only 150 are 3 months old with remaining Rs 50 o/s for more than 3 months.
So DP will be calculated at 75% of Rs 150 = Rs 112.5
For eg: the bank say it will cover only 3 months debtors at 25% margin.
The borrower has Rs 200 debtors but only 150 are 3 months old with remaining Rs 50 o/s for more than 3 months.
So DP will be calculated at 75% of Rs 150 = Rs 112.5
Mayur Ejrekar
(Querist)
26 September 2014
Then what is MPBF? How are the two different?
Nikhil Kaushik
(Expert)
26 September 2014
MPBF is Maximum Permissible Banking Finance Limit. The borrower is not eligible for sanction limit in excess of this amount. Once the sanctioned amount is decided, DP is used to compute the maximum amount allowed to be drawn by the borrower within the sanctioned limit
01 October 2014
MPBF IS LIKE A CELIING AMOUNT..............
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