MPBF & Working Capital Loan: How Banks Decide Your Limit
If you need a cash-credit or working-capital limit, the bank decides how much you get using MPBF — Maximum Permissible Bank Finance.
The Tandon method
Under the commonly used second method, MPBF = 75% of (current assets − current liabilities), i.e. the bank funds 75% of the working-capital gap and you bring the rest as margin. This keeps your current ratio at a healthy 1.33.
Why it matters
Your projected current assets (stock, debtors) and creditors directly set your eligible limit. Estimate it with a free MPBF calculator.
Where MPBF appears
MPBF is part of your CMA data — banks read it straight from the CMA statements, so those numbers must be consistent with your balance sheet.
FAQ: Method 1 or Method 2?
Most banks use the second method (75% of the working-capital gap) for limits above ₹10 lakh.
