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Bank audit

Yami Soni (145 Points)

24 July 2020

general difference in drawing power and sanction limit??

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Sagar Patel (Tax and Business Consultant) (11611 Points)
Replied 24 July 2020

The sanctioned limit is the total exposure that a bank can take on a particular client for facilities like cash credit, overdraft, export packing credit, non-funded exposures etc. On the other hand, drawing power refers to the amount calculated based on primary security less margin as on a particular date.

Like in a cash credit account limit is sanctioned against securities like stock value. Suppose limit is fixed at ₹5lacs against stock with 25% margin. If the stock maintained by the borrower is ₹6lacs, drawing power will be ₹4.5lacs after deduction of margin. However, if stock is ₹7lacs, maximum limit permissible is ₹5lacs.

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Yami Soni (145 Points)
Replied 24 July 2020

Sanctioned limit is prescribed by?..

Sagar Patel (Tax and Business Consultant) (11611 Points)
Replied 24 July 2020

Sanctioned limit is calculated/ decided by bank authority as per prescribed Guidelines of RBI, which is different for different financial instruments.

Yami Soni (145 Points)
Replied 24 July 2020

Okay means..
sanction limit is ..limit for bank
and drawing limit is limit of a client

Sagar Patel (Tax and Business Consultant) (11611 Points)
Replied 24 July 2020

No, Yami ji

Sanctioned limit is limit sanctioned by bank to clients after keeping safety margin on credit
e.g.Suppose loan/ credit facility sanctioned by bank i.e sanctioned limit is at ₹5 lacs against stock with 25% margin. ( which is calculated at time of sanctioned of loan)

After that, client need to file monthly/ quarterlly, as the case may be stock statement with bank. Suppose in any report, If the stock maintained by the borrower is ₹6lacs, drawing power will be reduced to ₹4.5lacs (i.e after deduction of margin). However, if Suppose stock is ₹7lacs in any month, than drawing power has been increased accordingly, but up to maximum sanction limit of ₹5lacs.

So, Sanctioned limit is maximum limit sanctioned by bank, whereas drawing power is change with time on which it depends (i.e on stock in our case)
Drawing limited can't be more than sanctioned limit

annu Goyal (1102 Points)
Replied 26 July 2020

Yes, there are difference between drawing power and sanction limit
Drawing Power means how extent amount you can withdraw from bank
sanction limit is max amount of loan passed by bank

SarkarPortalyo (web design) (22 Points)
Replied 30 July 2020

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