Check if your business meets the bank's minimum Debt Service Coverage Ratio before submitting your project report. Free, instant, and uses the exact IBA formula.
All amounts in ₹ lakhs (100,000s)
Fill in your figures and click Calculate to see your DSCR
Bank thresholds
IBA Standard Formula
DSCR = Numerator ÷ Denominator
Numerator: PAT + Depreciation + Interest on TL
Denominator: Principal Repayment + Interest on TL
PAT = Profit After Tax (net profit from P&L)
Depreciation = non-cash charge added back (doesn't reduce cash)
Interest on TL = interest portion of your term loan EMI
Principal Repayment = principal portion of your term loan EMI
Extend loan tenure
5 years → 7 years reduces annual principal repayment and directly improves DSCR.
Increase own contribution
Contributing 25% instead of 15% reduces loan amount, lowering the denominator.
Revise Year 1 revenue
Use market survey data, order book, or district demand estimates to justify higher revenue.
Add co-applicant income
Spouse or family member's salary can be shown as additional income, improving DSCR.
Reduce working capital ask
Lower CC limit reduces interest burden and improves DSCR across all years.
Moratorium period
Request 6–12 month repayment holiday — no principal during setup phase, DSCR stays high.
DSCR (Debt Service Coverage Ratio) = (PAT + Depreciation + Interest on Term Loan) ÷ (Annual Principal Repayment + Interest on Term Loan). It measures whether your business generates enough income to repay the loan. A DSCR of 1.50 means your business earns ₹1.50 for every ₹1 of loan repayment — a 50% buffer. Banks require DSCR ≥ 1.25 for service/trading and ≥ 1.50 for manufacturing businesses.
For MUDRA Kishor (₹50K–₹5L) and Tarun (₹5L–₹10L), banks expect DSCR ≥ 1.25 for service businesses. For manufacturing, DSCR ≥ 1.50. MUDRA Shishu (up to ₹50K) is typically assessed without formal DSCR calculation — business viability and promoter character are the main criteria.
If DSCR is below 1.25, the loan application is likely to be rejected or returned for revision. To fix low DSCR: (1) Extend the loan tenure — longer tenure means lower annual principal repayment, improving DSCR. (2) Increase promoter contribution — reduces the loan amount and thus the repayment burden. (3) Revise revenue projections upward with market evidence. (4) Reduce operating costs if there are genuine savings possible.
No. ICR (Interest Coverage Ratio) = EBIT ÷ Interest Expense — it only measures ability to cover interest, not principal repayment. DSCR = (PAT + Dep + Interest) ÷ (Principal + Interest) — it measures ability to cover the full debt service (principal + interest). Banks use DSCR, not ICR, for loan appraisal. DSCR is stricter and more relevant for repayment capacity.
Banks calculate DSCR for each year of the loan repayment period (typically 5–10 years). They check the average DSCR across the repayment period and the minimum DSCR in any single year. The minimum DSCR across all years should not fall below 1.0. An average DSCR of 1.5+ across the tenure is considered strong. Cred by Fastlegal calculates year-wise DSCR automatically for your project report.
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