MPBF working capital calculator (Nayak Turnover & Tandon 2nd Method)
While Drawing Power decides how much Cash Credit you can draw each month against stock and debtors, Maximum Permissible Bank Finance (MPBF) is how banks sanction your overall annual working capital limit from your CMA data. For MSEs up to ₹5 crore, RBI directs banks to sanction at least 20% of projected annual turnover (Nayak Committee method). For larger exposures, banks apply the Tandon Committee 2nd Method: 75% of Total Current Assets minus Other Current Liabilities, requiring a 1.33x current ratio.
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How this is calculated
Nayak MPBF = 20% × Projected Annual Turnover (Promoter Margin = 5% × Turnover)
Tandon II MPBF = (Total Current Assets − Other Current Liabilities) − (25% × Total Current Assets)
- Nayak Committee (Turnover Method): Assesses Gross Working Capital at 25% of projected turnover, funded 5% by promoter margin and 20% by bank finance (applicable to MSEs up to ₹5 crore).
- Tandon Committee 2nd Method: Requires the borrower to fund at least 25% of Total Current Assets from long-term Net Working Capital (NWC), ensuring a minimum Current Ratio of
100 ÷ 75 = 1.33x. - NWC Shortfall Check: Compares your actual NWC in CMA Form III against the 25% statutory benchmark.
Not a credit decision or tax/legal opinion. Figures are indicative and based on your inputs; confirm final sanction terms, tax applicability and statutory notifications with your lender, insurer or Chartered Accountant.
Questions people ask
What is the Nayak Committee Turnover Method for MSEs?
For Micro and Small Enterprises seeking working capital limits up to ₹5 crore, the gross working capital requirement is estimated at 25% of projected annual turnover, of which the promoter contributes 5% as margin and the bank sanctions 20% of projected turnover as minimum MPBF.
How does the Tandon Committee 2nd Method work?
First, compute the Working Capital Gap (WCG) = Total Current Assets (CA) minus Other Current Liabilities (OCL, excluding bank borrowings). Next, subtract the minimum promoter Net Working Capital (NWC) margin of 25% of Total Current Assets. The resulting MPBF equals 75% of CA minus OCL, which corresponds to a minimum Current Ratio of 1.33x.
What happens if our actual Net Working Capital (NWC) in the balance sheet is less than 25% of Current Assets?
If your actual long-term NWC is below the 25% Tandon II requirement, the bank either reduces the sanctioned CC limit by the NWC shortfall or asks promoters to infuse capital or subordinated unsecured loans (quasi-equity) before disbursement.
Preparing CMA data for a new or enhanced CC/OD limit?
We help MSMEs, manufacturers and contractors structure CMA projections and arrange Cash Credit, Overdraft, BG/LC and term loans through banks and NBFCs.
Banks assess acceptable current assets, holding-period norms and non-current classifications per their board-approved credit policy. 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 23 October 2026.