Answer / sana

Drawing Power is the amount of Working Capital funds the
borrower is allowed to draw from the Working Capital limit
allotted to him. Because the working capital limit is
usually allotted to a borrower against security of Stock and
Book Debts, the amount of funds a borrower is allowed to
draw is calculated by considering the total value of Stock
plus total value of Book Debts for the month after deducting
the margin. Margin is the component of funds raised from
long term sources such as Share Capital and Term Finance
(Long Term Loans). It is for this purpose that the borrower
must regularly submit Stock and Book Debts Statement and
Statement of Trade Creditors.

Answer / anlitha

drawing power is the limit upto which a person can withdraw
from the bank.drawing power is calculated based on closing
stock + book debts.in most of the cases the margin will be
25%.drawing power=(closing stock+book debts)-margin.

Answer / shefali

DP cannot exceed the limit sanctioned by the bank.
DP = {[(stock +drs) for 90 days +margin money]-(crs.+
buyers credit)}-25% margin.

Answer / priyul

Banks are giving this facility in which party can withdraw
amount as sanctioned by bank in sanction latter that limit
called drawing power. we can withdraw amount more than
balance in our account.

Answer / sarvjeet

Concept of drawing power is generally applicable on CC accounts. CC accounts are opened on the basis of Debtors minus Creditors or/and Stock-in-hand at the month end. After deducting its margin (which can vary from bank to bank but is generally 40% of net debtors and 25% of stock in hand as on the last day of the month) bank reaches a figure up to which it allows its customer to utilize the limit for one month (as of course next month its debtors and stock would change and consequently that figure would also change). Banks also however do not allow its customers to utilize more than sanctioned amount too. So, this figure (calculated on the basis of debtors and stock) which bank allows to its customer to use as limit utilization subject to maximum of sanctioned amount is called drawing power (usually called DP).

Further for clarification; sanctioned amount is maximum amount which a bank allow the customer to use out of CC account; no matter what the DP is. In other words if sanctioned amount is less than DP then customer can not utilize more than sanctioned amount and in that case practical DP for customer is sanctioned amount.

To save its customers from capital crunch due to limited stock or debtors (as in that case DP get reduced) most banks finance its customers with Temporary Overdrafts (usually called TOD)which carries higher interest rates. TODs are normally extended for 5-10 days.

Answer / macs

Drawing power for stocks: Value of stocks-less sundry creditors equals to paid for stocks-less margin equals to drawing power for stocks (A)
Drawing power for book debts: Book debts -less margin equals
DP for book debts (B)
Total drawing power= A+B

Answer / ca rs goel

A Borrower firm is availing Cash Credit facility of Rs. 300 Lacs and Buyers credit facility of Rs. 700 Lacs .
Prime Securities Stock and Book Debt: Margin in Cash Credit against stock is of 25% and against Book debts up to 90 days is of 40%..

Facts in this case
Stock of Rs, 30 Lacs
Total debtors Rs. 1000 Lacs
Upto 90 days debtors: Rs. 580 Lacs
Creditors Rs.160 Lacs
Oustanding Buyers credit Rs.460 Lacs. Margin Money in buyers credit is 25%. How we Calculate drawing power in that case

Answer / sujeet gupta

((Stock + Debtors) - Creditors) * 75 / 100

Answer / 9151404570

In bank, Drawing Power should not exceed the limit
sanctioned by the bank and it is arrieved at as
under
Example

if A trader approach bank for advance against a order.

now i a order profit is inculded so bank after deduction
margin for order may 10% / 20% etc. grant advance to the
trader within the limit sanctioned. thus he builds up
stock. total advance granted should be within or upto the
limit credit limit sanctioned by the bank.

Answer / sonal soni

DP is the drawing power which is given by bank to there customer who is CC Account holder. It is the limit up to which the Holder can withdraw the funds from his Account for the limited period. Normally the DP can be calculated as follow
Debtors-Creditors and the need to submit the Stock Statement to the Bank.

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