Drawing power calculator for cash credit
Drawing power is how much of your cash credit limit you can actually use, based on your latest stock and book-debt statement. Enter stock by category with its margin, sundry creditors and book debts by age; the calculator applies the margins, drops debts older than your bank's cut-off and caps the result at the sanctioned limit. A second tab sizes the limit itself by the turnover method and MPBF.
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How this is calculated
Drawing power
- Paid stock. If creditors are deducted, total stock less sundry creditors for goods. The deduction is spread across categories in proportion to their value, so each category's own margin still applies.
- Drawing power on stock = paid stock in each category × (1 − that category's margin).
- Eligible book debts = debts no older than the cut-off you choose. Older debts are shown but not counted.
- Drawing power on book debts = eligible book debts × (1 − book-debt margin).
- Available to draw = the lower of total drawing power and the sanctioned limit. Headroom is that figure less today's outstanding.
Banks differ on details: some apply one margin to all stock, some deduct creditors after the margin, some exclude debts from group concerns or debts already discounted, and many cap book debts at a share of the limit. Your sanction letter governs. RBI's asset-classification rules add two practical limits: drawing power must come from a current stock statement (not older than three months), and an account that stays above its limit or drawing power for 90 continuous days is out of order and can become an NPA.
Turnover method
For micro and small enterprises needing fund-based working capital up to ₹5 crore, RBI guidance (from the Nayak Committee) is to assess the requirement at 25% of projected annual turnover, shared between the borrower, who brings 5% of turnover as net working capital, and the bank, which finances at least 20%. Many banks' CMA formats take the lower of 20% of turnover and 25% of turnover less the borrower's actual NWC. If the operating cycle is longer than about three months, a bank may sanction more on the traditional method.
MPBF — Tandon Method II
MPBF = 75% of total current assets − current liabilities other than bank borrowings
Equivalently, the working capital gap (current assets less other current liabilities) minus a minimum borrower contribution of 25% of current assets. Where the borrower's actual NWC is higher, banks generally use it instead, so the lower figure is shown. RBI no longer mandates MPBF: banks may use it or any other method approved by their Board, such as cash budgets for seasonal businesses, so treat this as an indicator rather than the bank's number.
Not a sanction. Banks also look at your credit history, account conduct, collateral, receivables quality and industry. The bank's own assessment decides the limit.
Questions people ask
How is drawing power calculated?
Drawing power is the value of eligible security less the bank's margin. For stock, banks usually take paid stock (stock less sundry creditors for goods) and apply a margin by category. For book debts, they count only debts younger than the cut-off in the sanction letter, often 90 days, and apply a margin. The total is then compared with the sanctioned limit, and you can draw the lower of the two.
What margin do banks apply on stock and book debts?
There is no single regulatory margin. Each bank sets margins in its policy and your sanction letter, by category and by borrower. Margins of 25% on stock and 25–40% on book debts are common, and higher margins are often applied to work in progress or slow-moving stock. Always use the figures in your own sanction letter.
Why are sundry creditors deducted from stock?
Stock bought on credit has not been paid for, so the bank would effectively be financing the supplier's money. Deducting creditors for goods gives paid stock. Some sanctions don't require it, for example where purchases are under a letter of credit, so the calculator lets you switch it off.
How old can my stock statement be?
RBI's asset-classification rules say drawing power should be based on a current stock statement, and statements relied on should not be older than three months. Drawings against an older statement can be treated as irregular. Most banks ask for a monthly statement.
What happens if my outstanding is above drawing power?
The excess is irregular. If a cash credit or overdraft account stays above the sanctioned limit or drawing power continuously for 90 days, RBI rules treat it as out of order, and it can be classified as a non-performing asset. Bring the balance down or submit an updated statement promptly.
What is the turnover method?
For micro and small enterprises with fund-based working capital limits up to ₹5 crore, RBI guidance is to assess the requirement at 25% of projected annual turnover, with the borrower bringing 5% as net working capital and the bank financing at least 20% of turnover.
What is MPBF Method II?
Maximum permissible bank finance under the second method of the Tandon Committee is 75% of current assets minus current liabilities other than bank borrowings, which means the borrower funds at least 25% of current assets from long-term sources. RBI now lets banks use MPBF or any other method approved by their Board, so the method and figures vary from bank to bank.
Drawing power short of what you need?
If your limit or drawing power no longer matches your turnover or order book, we can help you prepare the renewal or enhancement proposal and approach suitable banks and NBFCs.
This calculator gives an estimate for planning and discussion. It is not financial, legal or tax advice, and it is not a sanction or an offer. Lenders, regulators and government offices apply their own rules and may round or calculate differently; their figures prevail. Biz Corp Solutions arranges funding through partner banks, NBFCs and financial institutions, and lenders decide sanction, rates and terms. Last reviewed 5 October 2026.