₹5 Crore Cash Credit (CC) Limit: MPBF & Drawing Power Guide
Optimize Maximum Permissible Bank Finance (MPBF), stock margins, and debtor aging for manufacturing and trading enterprises seeking ₹5 Crore working capital facilities.
A ₹5 Crore Cash Credit (CC) limit is underwritten under Tandon Committee Method II MPBF: 0.75 × Total Current Assets − Other Current Liabilities, mandating a minimum Current Ratio ≥ 1.33:1. Monthly Drawing Power (DP) is strictly derived from paid-up inventory (minus trade creditors) at 25% margin and domestic debtors (up to 90 days) at 30% margin, with interest rates from 9.25% to 10.75% p.a.
Why ₹5 Crore is the Watershed Threshold for Working Capital
Under Reserve Bank of India (RBI) and Indian Banks' Association (IBA) underwriting frameworks, ₹5 Crore represents the critical boundary where simplified turnover assessments end and formal balance sheet modeling begins:
Banks calculate working capital requirement as 25% of projected annual turnover, providing 20% in bank finance and requiring 5% from the promoter's net working capital. Minimal balance sheet ratio scrutiny.
Mandatory Tandon Committee Method II where borrower must finance at least 25% of Total Current Assets from long-term surplus (Current Ratio ≥ 1.33:1). Triggers mandatory quarterly external CA stock audits.
Live Drawing Power (DP) Calculation on a ₹5 Crore Limit
A sanctioned limit of ₹5 Crore does not automatically permit ₹5 Crore withdrawal. You can withdraw only up to the monthly Drawing Power (DP) determined by your submitted stock statement:
| Current Asset Component | Gross Ledger Value | Bank Deductions / Margins | Eligible Drawing Room |
|---|---|---|---|
| Total Inventory (Raw Material + Finished Goods) | ₹4.50 Cr | Less Creditors ₹1.50 Cr → Paid Stock ₹3.00 Cr (25% Margin) | ₹2.25 Cr |
| Eligible Domestic Debtors (≤ 90 Days) | ₹4.20 Cr | 30% Standard Bank Margin | ₹2.94 Cr |
| Total Available Drawing Power (DP) | ₹8.70 Cr | Lower of Sanctioned Limit vs Available DP | ₹5.00 Cr (100% Usable) |
Frequently Asked Questions: ₹5 Crore Cash Credit Limit
What annual turnover is required to qualify for a ₹5 Crore CC limit?
Manufacturing units typically require ₹20 Crore to ₹30 Crore in annual turnover, while trading firms require ₹25 Crore to ₹35 Crore, demonstrating healthy inventory turns and debtor realization within sanctioned aging cutoffs.
Why do banks conduct stock audits for limits of ₹5 Crore and above?
Under IBA prudential guidelines, aggregate working capital limits of ₹5 Crore and above mandate annual or semi-annual physical stock verification by an empanelled Chartered Accountant firm to reconcile stock registers against physical warehouse holdings.
Can a ₹5 Crore CC limit be combined with an inland Letter of Credit (LC)?
Yes. CreditCares frequently structures composite working capital packages—for instance, ₹3.5 Crore fund-based Cash Credit and ₹1.5 Crore non-fund based LC/BG lines—to optimize drawing power and reduce overall borrowing costs.
What happens if monthly stock statements are submitted late?
Banks impose a strict cutoff of the 15th of the succeeding month. Delays beyond 30 days trigger automatic debit freezes or penal interest of 1% to 2% across the entire balance. CreditCares institutes pre-vetted compliance workflows to prevent bank penalties.
Submit Your ₹5 Cr Cash Credit Mandate
Direct intake for our Working Capital Syndication team. Receive an initial CMA and Drawing Power assessment within 48 hours.