Bank Working Capital & Credit Limit Monitoring

Cash Credit (CC) & Overdraft (OD) Drawing Power Calculator

Compute your actual monthly Drawing Power (DP) based on paid inventory and eligible book debts after bank margins. Detect DP deficits, quantify excess borrowing penal interest (2% p.a.), model delayed stock statement bleed, and track RBI Special Mention Account (SMA) classifications.

Industry & Business Presets

Bank Facility & Interest Terms

Sanctioned credit ceiling and commercial interest rates

DP: ₹69,00,000.00

Sanctioned CC / OD Limit (₹)

₹

Maximum credit limit approved in your bank sanction letter.

Current Outstanding Balance (₹)

₹

Actual debit balance currently utilized in your CC/OD account.

Regular Bank Interest Rate (% p.a.)

Base lending rate + spread (e.g. MCLR/EBLR + 2.5% = 10.5%).

Inventory & Paid Stock Particulars

Inventory at cost less unpaid trade creditors

Gross Stock Value (₹)

₹

Total raw materials, WIP, and finished goods at landed cost.

Less: Trade Creditors for Goods (₹)

₹

Sundry creditors for raw materials / goods (unpaid inventory).

Bank Margin on Stock (%)

Borrower's margin contribution (standard is 25%, typical 20–30%).

Book Debts (Receivables) Particulars

Total customer receivables less ineligible aged debts

Total Book Debts / Receivables (₹)

₹

Total sundry debtors outstanding in your books.

Less: Ineligible Debtors (>90 Days) (₹)

₹

Receivables exceeding 90 days (or 120 days) or disputed debts.

Bank Margin on Book Debts (%)

Bank margin on receivables (standard is 40%, typical 30–50%).

Account Monitoring & Default Parameters

Track penal interest on DP deficit and delayed stock statements

Stock Statement Delayed (Past 7th / 15th Cutoff)

Banks levy ~2% p.a. penal interest on ENTIRE balance for late monthly statements.

Continuous Days Overdrawn / in DP Deficit

Days

Used to determine RBI Special Mention Account (SMA-0/1/2) classification.

Drawing Power & Interest Bleed Summary

Drawing Power Headroom (Available Buffer)₹9,00,000.00

Stock DP Contribution (Paid Stock - Margin): ₹45,00,000.00
Debtor DP Contribution (Eligible Debts - Margin): ₹24,00,000.00
Total Calculated Drawing Power: ₹69,00,000.00
Regular Monthly Interest: ₹52,500.00
Effective Borrowing Cost Rate: 10.50% p.a.
Sanctioned Limit Utilization: 60.0%

Effective Operating Drawing Power (DP):₹69,00,000.00

Total Monthly Bank Interest:₹52,500.00

RBI Account Health & SMA ClassificationREGULAR

Account has adequate Drawing Power headroom. No penal interest applied.

How it works

In Indian commercial banking, Cash Credit (CC) and Overdraft (OD) are revolving working capital facilities where interest is charged on the daily outstanding balance using the daily product method. However, borrowers cannot simply withdraw up to the full Sanctioned Limit; borrowing is restricted to the lower of the Sanctioned Limit and the monthly calculated Drawing Power (DP). 1. Stock Drawing Power Computation: • Gross Stock: Total inventory (raw materials, work-in-progress, finished goods, trading stock) at landed cost. • Less: Sundry Creditors for Goods: Unpaid supplier purchases must be deducted because unpaid inventory is financed by vendors rather than the bank. • Net Paid Stock = Gross Stock - Trade Creditors for Goods. • Stock Margin: Banks apply a statutory margin (typically 25%, ranging 20–30%) which represents the promoter's own margin contribution. • Stock DP = Net Paid Stock × (1 - Stock Margin). 2. Book Debts (Debtors) Drawing Power Computation: • Gross Book Debts: Total receivables outstanding from customers. • Less: Ineligible Debtors: Receivables exceeding the bank's sanctioned age cutoff (typically debts older than 90 days, or 120 days for select capital goods/export sectors) plus any disputed debts are completely ineligible. • Net Eligible Debtors = Gross Book Debts - Ineligible Debtors (>90 days). • Debtors Margin: Banks typically apply a 40% margin (ranging 30–50%). • Debtors DP = Net Eligible Debtors × (1 - Debtors Margin). 3. Effective Operating DP & Deficit Penalties: • Total Calculated DP = Stock DP + Debtors DP. • Effective Operating DP = min(Sanctioned Limit, Total Calculated DP). • If Outstanding Balance ≤ Effective DP: Account has positive Drawing Power Headroom (available buffer). • If Outstanding Balance > Effective DP: Account suffers a Drawing Power Deficit (Excess Drawal). Banks immediately slap Penal Interest (typically 2.0% p.a. over and above the regular rate) on the excess overdrawn amount. 4. Delayed Stock Statement Penal Bleed: • Banks mandate submission of monthly stock statements on or before the 7th or 15th of the succeeding month. • If delayed, banks penalize the account by charging penal interest (typically 1.0% to 2.0% p.a.) on the ENTIRE outstanding balance until the statement is regularized. 5. RBI SMA Classification Norms: • Under RBI prudential guidelines, continuous DP deficit or overdue interest is classified as: SMA-0 (1–30 days), SMA-1 (31–60 days), SMA-2 (61–90 days), and Non-Performing Asset / NPA (beyond 90 days), triggering credit downgrades and SARFAESI recovery proceedings.

Example

An engineering manufacturer in Pune holds a ₹1,00,00,000 (₹1 Crore) Cash Credit limit at 10.5% p.a. The monthly stock statement shows ₹80,00,000 in inventory, ₹20,00,000 unpaid trade creditors, ₹50,00,000 in total book debts, and ₹10,00,000 in debtors older than 90 days. Net paid stock is ₹60,00,000; at a 25% margin, Stock DP is ₹45,00,000. Eligible debtors are ₹40,00,000; at a 40% margin, Debtors DP is ₹24,00,000. Total Drawing Power is ₹69,00,000. If the borrower has utilized ₹75,00,000, the account is in a DP deficit of ₹6,00,000. Regular monthly interest is ₹65,625, and excess drawal penal interest (2% on ₹6L) is ₹1,000. If the stock statement was also delayed beyond the 15th, an additional 2% penalty on the full ₹75L adds ₹12,500/month, surging total monthly interest to ₹79,125 (effective 12.66% p.a.).

Frequently asked questions

Why do banks deduct sundry creditors from inventory when computing Drawing Power?

Sundry creditors for goods represent raw materials or inventory supplied on credit where payment has not yet been made to the vendor. Since the goods are already funded by trade credit, allowing the bank to finance them again would constitute double-financing. Banks therefore finance only 'Paid Stock'.

What is the difference between Sanctioned Limit and Drawing Power (DP)?

The Sanctioned Limit is the ceiling amount approved in your bank sanction letter based on annual turnover and financials. Drawing Power is the dynamic, monthly limit computed from your actual current paid assets (stock and debtors less bank margins). You can only draw up to the lower of the two.

What happens if my CC account remains in DP deficit for more than 90 days?

Under RBI prudential norms, if an account remains continuously overdrawn beyond the sanctioned limit or drawing power for 90 days, the bank is legally required to classify the account as a Non-Performing Asset (NPA), freeze operations, report defaults to CIBIL, and initiate SARFAESI recovery actions.

Can book debts older than 90 days be included in Drawing Power?

Generally no. Indian banks consider receivables older than 90 days (or 120 days for specific industries approved in the sanction letter) as sticky or at risk of default, making them ineligible for Drawing Power. They must be excluded from the eligible book debts figure.

What is the cutoff date for submitting monthly stock statements to banks in India?

Most PSU and private banks specify the 7th, 10th, or 15th of the succeeding month as the deadline. Missing this cutoff triggers automated penal interest (1% to 2% p.a.) on your entire outstanding credit balance until the statement is submitted and verified.

How is daily interest calculated in bank CC and OD accounts?

Interest is computed daily on the day-end debit balance: (Daily Balance × Annual Interest Rate) ÷ 365 (or 366 in a leap year). The accumulated daily interest is debited to the CC/OD account on the last day of each month.