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Occ- drawing power calculation

How sanction Limit is fixed?

How to calculate the Drawing Power?


Can we consider the Advance given for purchase of Raw material for the calculation of Drawing Power?


Please Help 

Article Assistant

1) The Sanction limit fixed on D.P.

2) Calculate D.P.As follows :- Debtors + Stock - Creditors = D.P.




Advance payment to Crs can be netted out .Paid stock (Stock -Trade Crs ) has to taken for Calculation of drawing power.Ensure there is movement of advance payment being given instead of one entry carried in Books for a longtime.Advance payment made to foreign suppliers can be verified through bank payments .advance payment to buy critical material from say Reliance,Oil .companies can be verified with purchase order terms.

Some banks stipulate higher margin for advance against such payments upto 50% according to sanction terms.

Similarly , advance received against supply has to be deducted from eligible Book Debts.



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