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CAIIB Paper 1: Advanced Bank ManagementModule D: Credit ManagementUnit 22: Working Capital Assessment & MPBF
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Q1. Under Tandon Committee Method II, a borrower has Total Current Assets of Rs. 390 Lakhs and Current Liabilities (other than bank borrowings) of Rs. 100 Lakhs. What is the Maximum Permissible Bank Finance (MPBF)?
Incorrect Answer
Formula: MPBF = 0.75 * (Total CA - Non-Bank CL)Under Method II of Tandon Committee norms, MPBF = 0.75 * (Current Assets - Non-Bank Current Liabilities) = 0.75 * (390 - 100) = 0.75 * 290 = Rs. 218 Lakhs.
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