About the MPBF (Tandon)
Maximum Permissible Bank Finance (MPBF) is the working-capital limit a bank is willing to lend after the borrower has brought in its own margin. Indian banks still appraise most cash-credit limits with two RBI-era methods: the Tandon Committee's second method, under which the borrower funds 25 % of total current assets and the bank finances the rest of the working-capital gap, and the Nayak Committee's turnover method, under which the bank lends 20 % of projected annual turnover and the borrower brings 5 %.
This calculator applies both methods to your figures. Enter total current assets (stock, debtors, advances), other current liabilities (creditors, statutory dues, other short-term payables that are not bank borrowing) and projected annual turnover. The result shows the working-capital gap, the margin the bank expects you to bring, the Tandon II limit, the Nayak limit and the figure a lender is most likely to work with.
Use it before a cash-credit or overdraft application to see whether the limit you are asking for is defensible, and to spot the lever that moves it: lower stock and debtor days shrink the current assets and the margin the bank expects, while a realistic turnover projection drives the Nayak number.
How to use it
- 1Enter total current assets — inventory, receivables and short-term advances.
- 2Enter other current liabilities — trade creditors and other non-bank payables.
- 3Enter the projected annual turnover for the coming year.
- 4Read the working-capital gap, the margin, the Tandon II and Nayak limits and the likely sanction.
How this is calculated
Working-capital gap (WCG) = total current assets − other current liabilities Tandon II: MPBF = WCG − 25 % of total current assets Nayak: limit = 20 % of projected turnover (borrower margin 5 % of turnover) Likely sanction: the higher of the two for turnover up to ₹5 crore (Nayak applies to smaller limits); Tandon II above that.
Rates used
- Tandon II margin on current assets25 % of total current assets · RBI Tandon Committee (second method) · verified 2026-09-25
- Nayak turnover method — working-capital limit20 % of projected turnover · RBI Nayak Committee · verified 2026-09-25
Frequently asked questions
Which method will my bank use?
For working-capital limits up to about ₹5 crore, most banks use the turnover (Nayak) method — 20 % of projected turnover. For larger limits and for manufacturing units with long operating cycles, they assess the working-capital gap with the Tandon second method. Many banks compute both and sanction the lower unless the cash budget justifies more.
What counts as 'other current liabilities'?
Trade creditors, advances from customers, statutory dues payable, provisions and any other short-term liability that is not bank borrowing. Existing cash-credit or overdraft balances are bank finance and are excluded — the method is computing how much of that the bank should provide.
Why is the margin 25 % of current assets and not of the gap?
That is what distinguishes the second Tandon method from the first. The second method asks the borrower to fund a quarter of all current assets from long-term sources, which forces a current ratio of at least 1.33 — the ratio banks still quote as the working-capital benchmark.
Does the calculator include the drawing power?
No. Drawing power is the month-to-month cap computed from the stock and debtor statements you file, after margins on each. This tool gives the sanctioned limit the bank appraises once a year; drawing power can be lower in a slack month.