bank od loan stock statement prepared drawing power procedure.

[Sundaraiah kollipara]

Sir, A business person rs:40 lacs received od loan from union bank of india Question: A person monthly stock statement report compulsory and rs:40 lacs od loan minimum stock value show in stock statement report drawing power procedure.

[YAGAY andSUN]

A businessperson who has availed an OD (Overdraft) loan of ?40 lakhs from Union Bank of India is required to follow certain compliance procedures, especially concerning the submission of monthly stock statements. Heres how it typically works:

1. Monthly Stock Statement Requirement

• The borrower must submit a stock statement every month to the bank.
• This statement must include details of the inventory held by the business, including raw materials, finished goods, and work-in-progress items (if applicable).
• The purpose of this is to help the bank assess the current value of the stock, which acts as primary security against the OD facility.

2. Minimum Stock Value Requirement

• For an OD loan of ?40 lakhs, the borrower needs to maintain a minimum stock value that supports this loan limit.
• Banks usually set a margin (e.g., 25%). This means only 75% of the stock value is considered for Drawing Power (DP).
• To justify ?40 lakhs in drawing power, the borrower must maintain stock worth approximately:

Required Stock Value=?40,00,000(100%-Margin%)=?40,00,0000.75=?53.33lakhs.

So, the minimum stock value shown in the monthly stock statement should be at least ?53.33 lakhs, assuming a 25% margin. If the margin is different (say 20% or 30%), this value will change accordingly.

3. Drawing Power (DP) Calculation

• Drawing Power is calculated every month based on the latest stock statement.
• DP = Stock Value × (100% - Margin%)
• The bank adjusts the limit available to the borrower based on the updated DP.
• If the stock value drops, the drawing power also reduces, which may lead to the borrower being asked to reduce the outstanding OD or bring in additional stock.

4. Bank Compliance

• Timely submission of the stock statement is mandatory. Non-compliance may result in:
  • Freezing of the OD limit
  • Penal interest
  • Classification of the account as irregular
• Some banks also require book debt (receivables) to be submitted if the OD is against stocks and receivables.

Conclusion:
For a ?40 lakh OD from Union Bank, the borrower must maintain monthly stock statements reflecting a value of at least ?53.33 lakhs (assuming 25% margin) and submit them regularly to keep the drawing power intact. In this matter you need to approach to your banker. Also it is advisable to read the OD Terms & Conditions or terms sheet or contract as the case be (you had entered with your banker).

AI Summary

Borrower must submit monthly stock statements for ?40L overdraft; banks apply margins and recompute Drawing Power monthly A borrower with a ?40 lakh overdraft secured by stock must typically submit monthly stock statements showing inventory values used to calculate Drawing Power (DP); banks apply a margin (commonly 20-30%), so only a percentage of stock value counts toward DP (e.g., at a 25% margin, stock ˜ ?53.33 lakh yields ?40 lakh DP). DP is recomputed monthly and a fall in stock value can reduce available limits, trigger requirement to reduce outstanding exposure or provide additional security, and lead to penalties, account irregularity or freezing for non-submission; review the loan terms for specific margins and procedures.