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What is Maximum Permissible Bank Finance?

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Question ajoutée par Vinod Jetley , Assistant General Manager , State Bank of India
Date de publication: 2015/01/09
Vinod Jetley
par Vinod Jetley , Assistant General Manager , State Bank of India

As per the recommendations of Tandon Committee, the corporate are discouraged from accumulating too much of stocks of current assets and are recommended to move towards very lean inventories and receivable levels.

Depending on the size of credit required, two methods are in practice to fund the working capital needs of the corporate.

 

Method I: For corporate whose credit requirement is less than Rs.10 lakhs, banks can find the working capital required. Working capital is calculated as difference of total current assets and current liabilities other than bank borrowings (called Maximum Permissible Bank Finance or MPBF). Banks can finance a maximum of75 per cent of the required amount and the rest of the balance has to come out of long-term funds.

 

Method II: For corporate with credit requirement of more than Rs.10 lakhs this method is used. In this method, the borrower finances minimum of25% of its total current assets out of long term funds. The rest will be provided by the bank through MPBF. Thus, total current liabilities inclusive of bank borrowings could not exceed75% of current assets.

Utilisateur supprimé
par Utilisateur supprimé

Thanks Mr.Vinod

I agreed with your answer

Mir Mujtaba Ali
par Mir Mujtaba Ali , Internal Audit Manager , Confidential

AGree with answer by Mr. Jetley

georgei assi
par georgei assi , مدير حسابات , المجموعة السورية

Thank you certainly agree with your answer wonderful

RAJ DAHIYA
par RAJ DAHIYA , Project Manager - Energy Optimization , Siemens

Endorse Mr.Jetley's answer

VENKITARAMAN KRISHNA MOORTHY VRINDAVAN
par VENKITARAMAN KRISHNA MOORTHY VRINDAVAN , Project Execution Manager & Accounts Manager , ALI INTERNATIONAL TRADING EST.

mpbs that is described  in different ways and need not be followed with the same principles and  procedures all over.

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