CCI Online Learning
What do you want to learn today?
     
CIBIL

Share on Facebook

Share on Twitter

Share on LinkedIn

Share on Email

Share More

Drawing power (dp) vs sanctioned limit


ABHINANDAN JAIN (CA Student)     11 September 2011

ABHINANDAN JAIN
CA Student 
 49 likes  886 points

| My Other Post

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...

avater

Milind M. Kulkarni (Practicing CA)     11 September 2011

Milind M. Kulkarni
Practicing CA 
 40 likes  510 points

View Profile | My Other Post

Hi Abhinandan, without going into details of RBI regulations, I understand that drawing power refers to amount that a borrower can withdraw each month/ period based on the latest reported inventories/ book debts, whereas sanctioned limit is the amount of loan/ total credit limit sanctioned by the bank at the time of commencement of the credit facilities. Normally drawing power has to be within the limit of amount sanctioned initially. but based on fund requirements of the borrowers and their credit standing, bank may allow them to withdraw in excess of the sanctioned amount if the drawing power allows them to do so. Normally this excess withdrawal is known as temporary overdraft (TOD) which carries slightly higher rate of interest.

2 Like

Leave a reply

Your are not logged in . Please login to post replies

Click here to Login / Register  


Related Threads


Loading

Popular Discussion


view more »



Trending Tags
traces
Professional Resource
aatmanirbhar bharat
gst council meeting
tcs
income tax
rbi
companies act 2013
icai
accounts
gstr 3b
students
taxpayers
icsi
itr
gst return
career
eway bill
ca students
Others
ca rankholder interview
dgft
csr
tds
Union Budget
mca

GST Live Class    |    x