Drawing power (dp) vs sanctioned limit

ABHINANDAN JAIN (CA Student) (886 Points)

11 September 2011  

What is meant by the term DP and Sanctioned Limit in case of Advance account like CC/OD A/c. How it is to be calculated. wht are main differences between them..?

As per RBI Guidelines, Borrower need to retain a margin of 25% i.e. 75% of Cash purchases and Book Debts are eligible.

In my opinion this 75% amount is Drawing Power but phir Sanctioned Limit Kya hota hai. Is it linked with this 75% amount calculation..

pls explain with the help of a example...