MPBF Method I vs Method II Explained
How Maximum Permissible Bank Finance differs under Method I and Method II—and where to review it in Credlook CMA.
MPBF helps frame how much short-term bank finance is supportable from current assets and net working capital.
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Method I
Minimum NWC is commonly 25% of the working capital gap. Assessed MPBF is often WCG minus that minimum.
Method II
Minimum NWC is commonly 25% of total current assets, implying a stronger current-ratio expectation (~1.33).
In Credlook
Open CMA → Working Capital to see Method I, Method II, and the turnover method side by side.
FAQ
Which method do banks prefer?
Many emphasise Method II today, but confirm with your branch and credit policy.
Is MPBF the sanctioned limit?
No. It is an assessed ceiling from financials; sanction is a separate bank decision.
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