Answer-Which of the following best describes “Drawing Power (DP)” in the context of a Cash Cred...

Drawing Power DP refers to the maximum amount a borrower can actually withdraw from the sanctioned Cash Credit CC limit. It is calculated on the basis of the latest stock and receivables statement submitted by the borrower, after applying the margin requirements of the bank. For example, if a borrower has a sanctioned CC limit of 1 crore but the DP calculated from stocks and receivables is 70 lakh, then only 70 lakh can be drawn, not the entire limit. This ensures that withdrawals remain linked to actual working capital needs and adequately secured. Thus, Drawing Power Sanctioned Limit subject to availability of drawing based on stockreceivables position.

Question

Which of the following best describes “Drawing Power (D

P ” in the context of a Cash Credit facility given by a bank?

A The total credit limit sanctioned by the bank to the borrower for meeting working capital requirements

B The total amount of money a borrower can withdraw from the bank, across all accounts maintained with the bank

C The value of assets pledged by the borrower to secure the loan, adjusted for repayments

D The amount that a borrower can withdraw from the sanctioned credit limit based on the latest stock and receivables statement

E The change in the repayment schedule based on the inventory and sales position of the company on a quarterly basis

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Which of the following best describes “Drawing Power (D

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