Working capital finance — cash credit, overdraft, MPBF-based limits, drawing power — is the bread and butter of commercial banking in India. It is also where CBS implementations most frequently produce post-go-live defects. Not because the technology fails, but because the domain logic is more complex than it appears, and the teams writing test cases have not worked in a branch credit department.
Drawing Power: The Monthly Calculation That Breaks Systems
Drawing Power (DP) in a cash credit account is the maximum a borrower can draw at any point, computed monthly from the stock statement — typically as a percentage of eligible stock (debtors and inventory) less margins and creditors. It is not a fixed limit. It changes every month when the stock statement is submitted.
Most CBS implementations test that DP is a field that can be entered. They do not test the DP computation engine — whether the system correctly applies the margin, whether it correctly reduces DP when a stock statement is not submitted on time, and critically, whether it blocks drawings that exceed DP even when they are within the sanctioned limit.
The last scenario is the one that matters. A borrower has a cash credit limit of ₹5 Cr and a DP of ₹3.2 Cr based on the latest stock statement. They attempt to draw ₹4 Cr. The system must block the drawing at ₹3.2 Cr — not at ₹5 Cr. If the system enforces the sanctioned limit but not the drawing power limit, the bank has effectively funded unsecured lending without knowing it.
India's MPBF (Maximum Permissible Bank Finance) framework, based on Tandon Committee Method II, specifies that working capital limits be computed from the borrower's working capital gap — current assets less current liabilities less the borrower's own contribution. A CBS that does not implement this correctly has a regulatory compliance gap, not just a functional defect.
Drawing power computation from stock statement (debtors, inventory, creditors, margins). Drawing blocked when exceeds DP even within sanctioned limit. Stock statement not submitted — DP reduction applied automatically. MPBF computation per RBI Tandon Committee Method II.
IRAC Classification: The 90-Day Clock That Starts Automatically
Under RBI's IRAC (Income Recognition and Asset Classification) norms, a loan account that remains overdue for more than 90 days is classified as NPA (Non-Performing Asset). The classification is automatic — it does not require a credit officer to manually change the status. The system must monitor every account daily, compute overdue days correctly, and trigger NPA classification on day 91 without human intervention.
The SMA (Special Mention Account) cascade before NPA — SMA-0 (1-30 days), SMA-1 (31-60 days), SMA-2 (61-90 days) — also requires automatic system classification, CRILC reporting, and early warning alerts. Most CBS test plans have a single test case: "account with 91 days overdue classified as NPA." The SMA cascade, the daily monitoring, and the CRILC reporting are absent.
SMA-0 classification at day 1 overdue — CRILC reporting triggered. SMA-1 at day 31 — lender monitoring enhanced. SMA-2 at day 61 — JLF convened. NPA classification at day 91 — provisioning 15%, income de-recognised, recovery action initiated.
Renewal and Annual Review: The Flow Nobody Models
Working capital limits are typically sanctioned for 12 months and require annual renewal. In a live system, the renewal cycle means tens of thousands of credit facilities come up for review at various points through the year. The CBS must track renewal due dates, generate renewal reminders, continue the facility during the review period (without lapsing), and correctly update the limit post-renewal.
This is a workflow test, not just a data test — and it requires the tester to understand the credit operations cycle, not just the screen. It is almost never in a UAT plan built by a team without commercial banking operations experience.