Drawing power

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Manisha Sharma

Manisha Sharma (Querist)
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17 December 2010 What is the relevance of calculating D.P.?
And how it is related to stock audit?

CA PARAS BAFNA

CA PARAS BAFNA (Expert)
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18 December 2010 1 A borrower can not withdraw more than the Drawing Power which is calculated on the basis of stock statement filed by him with his bank,
2 Bank allows him to utilise the Cash Credit or OD limits within the DP.
3.On the basis of Stock Statements and /or Book Debts filed (say -on or before 10th of the next month) the Bank Calculates DP and changes the DP accordingly.
4. Advances beyond the DP limit is considered as not secured by the banks.
5. In Stock Audit of the bank's customer, an auditor has to check whether the DP allowed to the constituent is in accordance with the Monthly/Periodically Stock Statements.

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