CA Arpit Suresh Kabra

24/10/2026

How does a bank decide the **working capital limit** a business is eligible for?

There is no single method.

Depending on the nature of the business, banks may assess working capital using different approaches such as:

**MPBF Method** — based on the working capital cycle

**Turnover Method** — based on projected turnover

**Cash Budget Method** — based on peak cash-flow deficit

21/10/2026

💰 Planning to Invest in NCDs? Don't Let Higher Interest Rates Blind You!

An NCD offering 11% interest may look more attractive than one offering 9%. But does a higher return necessarily mean a better investment? 🤔

Not necessarily!

Before investing in Non-Convertible Debentures (NCDs), every investor should evaluate these 7 important factors:

✅ 1. Credit Rating – Check the issuer's creditworthiness and rating outlook.

✅ 2. Issuer Financials – Analyse profitability, leverage, cash flows and debt repayment capacity.

✅ 3. Secured vs. Unsecured – Understand whether your investment is backed by security. Remember, secured does not mean risk-free.

✅ 4. Interest Rate – A higher coupon may indicate higher credit risk. Don't chase returns blindly.

✅ 5. Tenure – Match the maturity period with your financial goals and liquidity requirements.

✅ 6. Liquidity – Check whether you can exit before maturity without significant price discounts.

✅ 7. Concentration Risk – Avoid investing a disproportionately large amount in a single issuer.

📌 Remember: In debt investing, return OF capital is just as important as return ON capital.

A few extra percentage points of interest should never come at the cost of overlooking credit risk.

💬 Which factor do you consider most important before investing in NCDs? Share your thoughts in the comments.

📌 Save this post for your next NCD investment decision.

🔄 Share it with someone considering fixed-income investments.

CA Arpit Suresh Kabra
Divyam Fincap Services

For educational purposes only. NCD investments are subject to credit, interest-rate and liquidity risks.

11/10/2026

A sanctioned CC limit does not always mean that the borrower can utilise the entire sanctioned amount at all times.

Suppose a bank sanctions a ₹10 crore CC limit, but in a particular month the borrower is allowed to utilise only ₹8 crore.

Why?

Because actual CC utilisation is linked to the borrower’s Drawing Power (DP).

Drawing Power is derived based on eligible current assets such as stock and debtors, after considering applicable margins and other relevant current liabilities.

Since stock and debtor levels keep changing, the borrower’s DP — and therefore the amount that can actually be utilised from the CC account — can also change every month.

So remember:

Sanctioned CC Limit = Maximum Permissible Limit
Drawing Power = Current Utilisation Eligibility

The amount actually available to the borrower is generally restricted to the lower of the sanctioned limit and applicable Drawing Power.

An important concept for anyone learning Working Capital Finance, Corporate Credit and MSME Lending.

08/10/2026

RBI has increased the repo rate — but does that mean your home loan or other floating-rate loan will automatically become costlier by the exact same percentage?

Not necessarily.

For existing borrowers, the impact depends on whether the loan is repo-linked, the reset frequency, and the terms of sanction. The impact may come through a higher EMI, longer tenure, or a combination of both.

For new borrowers, remember:

Actual Rate of Interest = Benchmark Rate + Bank Spread

So even if the repo rate increases by 0.25%, the final rate offered by the bank may increase by less than, equal to, or more than 0.25%, depending on the bank’s spread, funding cost, competitive strategy and internal policies.

Always check the benchmark, spread, reset terms and final offered rate before comparing loans.

01/10/2026

A lower interest rate does not always mean a cheaper loan.

10% Flat rate of interest can cost more than 14% Reducing balance rate of interest because, under reducing balance method, interest amount falls as the principal outstanding reduces.

So while comparing loans, always check whether the rate of interest is Flat or Reducing.

26/09/2026

It was such a pleasure to take a session on Financial Planning, Mutual Funds and the Share Market for Class 10 students at Shriram English High School, Mumbai. 📚📈

It was wonderful to see their curiosity and enthusiasm towards understanding money and investing at such a young age.

Happy to contribute in a small way towards equipping young minds with practical financial knowledge for the real world. 🙏

A special thanks to the school management for giving me the opportunity to interact with these young minds.

24/09/2026

Your business may be profitable, yet the bank may still sanction a lower loan than you expected.

Banks don't lend based only on turnover or accounting profit.

They also assess cash flow, repayment capacity, existing debt, leverage, promoter contribution, banking behaviour and the overall risk profile before deciding the loan amount.

Understanding these parameters before approaching a bank can improve your chances of securing the right funding.

Need assistance in structuring your loan proposal? Feel free to connect.

22/09/2026

SPV — Special Purpose Vehicle — is a commonly used structure in project finance and large business transactions.

In simple terms, an SPV is a separate legal entity created for a specific project or purpose.

For example, if a business group wants to set up a solar power project, it may create a separate company specifically for that project. The promoters bring in equity, lenders provide debt, project assets and contracts are housed in the SPV, and the project cash flows are used to service the financing.

This helps keep the project’s assets, liabilities, contracts and cash flows distinct from the promoter’s other businesses.

Understanding SPVs is essential for anyone learning Project Finance, Infrastructure Finance or Corporate Lending.

Save this reel for future reference.

16/09/2026

Choosing the right loan is more important than choosing the lowest interest rate.

One of the most common financing mistakes businesses make is using the wrong type of loan for the wrong purpose.

✔️ Use CC/OD for short-term working capital needs such as inventory, receivables, and day-to-day operating expenses.

✔️ Use a Term Loan for long-term investments such as machinery, factory expansion, office purchase, or other capital expenditure.

Using working capital limits to finance long-term assets can block your cash flow and create unnecessary financial stress.

Remember:

📌 Short-term requirement = Short-term funding
📌 Long-term requirement = Long-term funding

A well-structured loan can improve your cash flow, strengthen your business, and support sustainable growth.

Need guidance on structuring the right loan for your business?

📞 Contact CA Arpit Suresh Kabra
📱 +91 98206 82991

Follow this page for practical insights on business loans, banking, and corporate finance.

13/09/2026