Cash Credit Drawing Power Calculation: Worked Example
Calculate illustrative drawing power from stock, receivables, creditors and margins.
Worked example: Eligible stock ₹80 lakh, receivables ₹40 lakh.
Consider eligible inventory of ₹80 lakh, eligible book debts of ₹40 lakh and trade creditors of ₹20 lakh. Suppose the bank stipulates a 25% margin on eligible inventory and receivables, with creditors deducted from inventory before applying its margin.
| Item | ₹ lakh |
|---|---|
| Eligible stock less creditors: 80 − 20 | 60 |
| Stock drawing power at 75% | 45 |
| Eligible receivables at 75% | 30 |
| Illustrative drawing power | 75 |
Actual drawing power depends on sanction-specific margins, ageing exclusions, unpaid stock, creditor treatment, valuation and the sanctioned cash credit limit. Operative availability is generally constrained by the lower of sanctioned limit and eligible drawing power, less utilisation.
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Assumptions and limitations
These examples are educational and use the stated illustrative assumptions. Actual interest and repayment calculations can depend on day-count convention, compounding, rounding, moratorium, fees, rate resets, sanction conditions and bank policy. Verify against the sanction letter and account statement.