The bank received the application for working capital loan from Jupiter Private Ltd. Following is the balance sheet of the company  Based on the above balance sheet, what will be the Maximum permissible bank finance (MPB

The Tandon Committee established three methods for calculating Maximum Permissible Bank Finance (MPBF) to assess working capital requirements. Methods I and II dictate how much a bank can finance, while Method III is for highly specialized use cases i. Maximum permissible bank finance (MPBF) as per Method I MPBF as per method I is Working capital gap (WCG) – 25% of WCG or 75% of WCG  WCG = Current assets – current liabilities, other than any bank borrowings = 25,20,000 – (14,70,000 – 3,20,000) = 13,70,000 Thus, MPBF (method I) = 75% of 13,70,000 = Rs.10,27,500 ii. Maximum permissible bank finance (MPBF) as per Method II MPBF as per method II is Working capital gap (WCG) – 25% of CA  WCG = 13,70,000 (as calculated in iii above) Thus, MPBF (method II) = 13,70,000 – 25% of 25,20,000 = 13,70,000 – 6,30,000 = Rs.7,40,000