Slow-Moving Stock Statement for Bank: A Realistic Guide

A realistic stock statement shows slow-moving and obsolete items separately by age and values them at what they would actually fetch, not what you paid. That usually lowers your drawing power a little, but it keeps your cash credit account regular, survives a stock audit and protects your credibility with the bank. Overstating old stock to borrow more is one of the fastest ways to turn a cash flow problem into a default.

This guide shows how to age your inventory, value it and present it, with an illustrative example. Your bank's margins and ageing cut-offs are in your sanction letter.

Why the stock statement matters so much

For a cash credit or overdraft against stock and receivables, the bank calculates your drawing power (DP) from the monthly stock statement. As of October 2026, RBI's Commercial Banks – Income Recognition, Asset Classification and Provisioning Directions, 2025 say:

• Drawing power must be based on a current stock statement, and statements relied on should not be older than three months.
• Outstanding based on drawing power calculated from older statements is treated as irregular.
• A working capital account becomes a non-performing asset if irregular drawings are allowed for a continuous period of 90 days, and a cash credit account is "out of order" if the balance stays above the sanctioned limit or drawing power continuously for 90 days.

So the statement is not paperwork; it decides how much you can draw and whether your account stays standard.

Step 1: Age your inventory

Use your inventory software's item-wise last movement date or purchase date (first-in, first-out). Group stock into buckets:

Also separate stock that is not yours to pledge: goods held on consignment or for job work for others, goods sold but not yet delivered, and goods whose ownership has not passed to you.

Step 2: Value it realistically

Inventory is valued at the lower of cost and net realisable value (NRV) under Indian accounting standards (AS 2 / Ind AS 2). NRV is the estimated selling price minus costs to complete and sell. Banks usually value stock at cost or market price, whichever is lower.

For slow-moving items, ask: "If I had to sell this within 60 days, what would I get?" Write down obsolete stock to that figure in your books and in the statement.

Worked example: realistic vs inflated statement

Joshi Electricals, illustrative figures. Sanction letter: cash credit limit ₹35 lakh, 25% margin on stock and receivables, stock older than 180 days and receivables older than 90 days not eligible.

Stock at cost: ₹40 lakh

Other figures: receivables under 90 days ₹15 lakh; trade creditors ₹9 lakh; cash credit outstanding ₹33 lakh.

Realistic drawing power:

• Eligible stock: ₹26 lakh + ₹8 lakh = ₹34 lakh
• Add receivables ₹15 lakh, less creditors ₹9 lakh = ₹40 lakh
• DP = ₹40 lakh × 75% = ₹30 lakh

If all stock were shown at cost as fresh:

• ₹40 lakh + ₹15 lakh − ₹9 lakh = ₹46 lakh × 75% = ₹34.5 lakh

The inflated statement overstates DP by ₹4.5 lakh. With ₹33 lakh outstanding, the honest picture is that the account is ₹3 lakh above drawing power.

Fixing the gap

Joshi Electricals clears the old stock: the 181-365-day items sell for ₹3 lakh and the obsolete models for ₹50,000. The ₹3.5 lakh goes into the cash credit account, bringing the outstanding to ₹29.5 lakh, below the ₹30 lakh DP. Because the items sold were already excluded from DP, the sale does not reduce drawing power. The book loss of ₹2.5 lakh (₹6 lakh cost minus ₹3.5 lakh received) is real, but it is far cheaper than an out-of-order account.

Track these numbers monthly alongside your other key figures; see monthly financial numbers for a small business.

What a good stock statement contains

• Date of the statement (stock as on the last day of the month) and date of submission
• Category-wise or item-group quantity, rate and value, with valuation basis stated
• Ageing buckets for stock, with slow-moving and obsolete items shown separately
• Location of stock (godown, shop, factory, in transit) and goods in transit shown separately
• Stock not owned (consignment, job work) excluded or shown separately
• Receivables ageing, customer-wise for large amounts
• Trade creditors (unpaid purchases)
• Insurance policy number, sum insured and expiry, with the bank's interest noted
• Signature of the proprietor, partner or authorised director

Check that the statement reconciles with your books, your GST purchase and sales data, and physical counts. Banks increasingly compare stock statements with GST returns, and large mismatches invite questions.

What to ask your bank

1. What ageing cut-off applies to stock and to receivables for drawing power?
2. Are margins different for raw material, work-in-progress and finished goods?
3. What valuation basis do you accept: cost, market price or lower of the two?
4. By which date each month is the statement due, and what charge applies for late submission?
5. How often will a stock audit or inspection be done, and who bears the cost?
6. Can slow-moving stock be included at a higher margin rather than fully excluded?

Under RBI's penal-charges rules in force since 2024, any charge for late stock statements must be a penal charge disclosed in your loan terms, not extra interest added to the rate.

Common mistakes

• Copying last month's figures with small changes instead of counting.
• Valuing everything at purchase cost, including items that have fallen in price or gone out of fashion.
• Including goods that are not yours, such as consignment stock or goods already sold.
• Counting the same goods twice, once as stock and once as a receivable.
• Missing the due date, which can freeze drawing power and, after three months, make drawings irregular.
• Insurance below stock value, which also weakens the bank's security.
• Funding dead stock with the cash credit limit instead of clearing it. Buying cautiously in the first place helps; see inventory planning for a seasonal business.

If drawing power falls below your outstanding

Tell the branch in writing before month-end, with a plan: clearance sale, collection of specific receivables, or owner's funds. Ask whether a short-term ad hoc limit is possible. If the shortfall is structural, the limit itself may need reassessment, or a part may need converting into a term loan; see working capital loan vs term loan.

How to escalate

If the bank does not update your drawing power after you submit a statement on time, applies charges not in your sanction letter, or does not respond to written requests, complain to the bank's grievance cell. If unresolved within 30 days, or if you are not satisfied with the reply, file on cms.rbi.org.in under the Reserve Bank – Integrated Ombudsman Scheme, 2026 within 90 days. The Ombudsman examines deficiency in service; it does not decide the bank's commercial judgment on margins or limits.

Key takeaways

• Age your stock, value it at the lower of cost and realisable value, and show slow-moving items separately.
• Statements older than three months make drawings irregular; 90 continuous days of irregularity can lead to NPA classification.
• In the example, honest valuation cut DP from ₹34.5 lakh to ₹30 lakh, and a clearance sale fixed the ₹3 lakh gap.
• Know your sanction letter's ageing cut-offs, margins and due dates.
• Clearing dead stock early is cheaper than an out-of-order account or a failed stock audit.