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FAT 16 is the older file system used by DOS, and Windows 3.x. FAT16 has a 2GB size limitation due to its ability to only recognize 65,535 clusters.
FAT 16 uses the 8.3 file format where there is a maximum of 8 characters to the left of the period and a maximum of 3 characters to the right of the period.

FAT32 has many more features than FAT16, but it is not compatible with Windows NT 4.0. FAT 32 may be found on Windows 95b, Win 98 SE and ME. File level security cannot be implemented on FAT 32. It offers folder level security only. You can convert FAT16 to FAT32 without losing your data, but you cannot convert FAT32 to FAT16 without reformatting and losing all your data.

Converting from FAT16 to Fat32 in Real Mode

CVT.EXE Command line utility for Fat32 conversion.

CVT1.exe is used to convert FAT16 to FAT32 from the command line. Start ? Run cvt1.exe (Opens GUI for drive conversion)

Large Disk Support involves using FAT32, the absence of which implies the use of FAT16. By using the FAT32 Drive Converter (cvtl.exe), you can convert FAT16 to FAT32 without losing data. You cannot convert from FAT32 to FAT16 without formatting the drive and losing all data.