Question

When a corporate banking team computes the eligible base for a client's dynamic Drawing Power, why are "Trade Creditors" (Accounts Payable) mathematically subtracted from the total value of raw materials and inventory?

A To prevent double-financing, as those specific inventory items have not yet been paid for by the borrower.
B To artificially lower the borrower's risk weight under international Basel accord regulations.
C To convert a fund-based credit exposure directly into a non-fund-based facility like a Letter of Credit.
D To account for the seasonal depreciation rate of the physical warehousing facility.
E To balance the long-term capital assets equation against equity infusions.
Practice Next

Hey! Ask a query

🎓
Think You're Ready for RBI Grade B?
RBI Grade B 2026 Phase 1 Memory Based Paper
  • 200 Questions with Detailed Solutions
  • Section-wise Coverage (GA, English, Quant & Reasoning)