# Drawing power in banking: meaning and calculation

> Drawing power in banking: the amount a borrower can draw on a working capital limit, based on current assets less margin. Calculation and RBI treatment.

Source page: https://creditbrief.in/posts/drawing-power-in-banking
Published: 2026-11-06
Publisher: CreditBrief

Drawing power (DP) is the amount a borrower can draw on a cash credit (revolving working capital) limit, based on current assets after margin.

## Formula

DP = (paid stock less stock margin) + (eligible receivables less receivables margin)

Paid stock is stock less trade creditors. Margin is the share of asset value the borrower funds. This is working practice, not a regulatory formula. Margins vary by institution.

## Example, made-up numbers

| Item | Rs lakh |
|---|---|
| Paid stock (80 less 30 creditors) | 50 |
| DP on stock, 25% margin | 37.5 |
| Eligible receivables (45 less 5 aged) | 40 |
| DP on receivables, 40% margin | 24 |
| Drawing power | 61.5 |
| Sanctioned limit | 75 |
| Outstanding | 68 |
| Excess over DP | 6.5 |

## How it gets read

The limit is fixed; DP moves with each stock statement, the borrower's declaration of stock and receivables. The borrower can draw the lower of the two.

Common practice, not regulation: receivables past the lender's ageing cut-off drop out, a stock audit can cut DP when physical stock falls short of the statement, and lapsed insurance can take stock out of DP. Cut-offs and triggers vary by institution.

The [Reserve Bank of India (Commercial Banks – Income Recognition, Asset Classification and Provisioning) Directions, 2025](https://www.rbi.org.in/Scripts/BS_ViewMasDirections.aspx?id=13146) (updated October 01, 2026) cover commercial banks other than small finance, payments and local area banks (paragraph 3).

- Paragraph 15: drawings must be covered by current assets, with DP based on a current stock statement. For large borrowers, statements should not be older than three months; outstanding based on older ones is deemed irregular.
- Paragraph 5(7): one out-of-order test is a balance continuously above the sanctioned limit or DP for 90 days.
- Paragraph 45: a temporary DP shortfall or missing stock statement alone should not make an account a non-performing asset. Classification rests on the record of recovery.

## Sources

- [Reserve Bank of India (Commercial Banks – Income Recognition, Asset Classification and Provisioning) Directions, 2025](https://www.rbi.org.in/Scripts/BS_ViewMasDirections.aspx?id=13146), rbi.org.in, accessed 2026-11-06

Indicative only. Verify against your institution's policy.