DSCR Calculator
Calculate Your DSCR
Enter your business income and loan repayment figures below to calculate your Debt Service Coverage Ratio.
DSCR is commonly used by banks to assess whether a business generates enough cash flow to meet its loan repayment obligations.
The DSCR calculator above shows whether your business earns enough to pay its loan installments.
Enter your profit, depreciation, interest and loan repayment figures, and you get your Debt Service Coverage Ratio in seconds.
This guide explains what the number means, how banks read it, and what you can do if your ratio is lower than you hoped.
Your DSCR helps show whether the cash generated by your business is enough to cover its loan repayment obligations.
What Is DSCR?
DSCR measures how many times your business income covers its loan payments. A DSCR of 1.5 means you earn ₹1.50 for every ₹1 you owe the bank in principal and interest.
DSCR stands for Debt Service Coverage Ratio. "Debt service" is the total amount you must pay toward your loans in a year, which includes both the principal and the interest. The ratio compares that amount with the cash your business generates.
A higher DSCR means more cushion. If sales drop or costs rise, a business with a strong ratio can still pay its EMIs. A business with a thin ratio may struggle after even one bad quarter.
That is why DSCR is one of the first numbers a lender checks. It gives a quick and clear view of your repayment capacity, which is your ability to pay back borrowed money on time.
DSCR Formula: Two Versions You Should Know
Many people search for DSCR kaise calculate karein, which simply means "how to calculate DSCR." There are two common ways to do it. Both follow the same idea, but they use slightly different inputs.
Standard DSCR Formula
The income your business earns from its main operations before interest and taxes. In practice, it is close to EBITDA (earnings before interest, tax, depreciation and amortization).
The total of all principal and interest payments due during the year.
This version is common in global finance and real estate lending.
Banking Version Used in India
Most Indian banks use a version based on PAT plus depreciation:
| Component | Meaning | Why It Is Included |
|---|---|---|
| PAT | Profit After Tax | The profit left after all expenses and taxes |
| Depreciation | Yearly reduction in the value of assets | A non-cash expense, so the cash is still in the business |
| Interest on term loan | Interest paid during the year | Added back on top because it is part of the debt service below |
| Principal repayment | Loan amount repaid during the year | The core of your loan obligation |
Depreciation lowers your profit on paper, but no cash leaves your bank account for it. So the bank adds it back to see the actual cash you have for repayment.
Interest has already been subtracted to arrive at PAT. Adding it back on top shows the full cash available before paying the lender. Placing it at the bottom shows the full amount owed to the lender.
An important point: If you already have other loans, their principal and interest must also be included in debt service. Leaving out existing EMIs is one of the most common mistakes in a DSCR calculation.
DSCR Example: MSME Term Loan
Here is a simple DSCR example for a small manufacturing MSME. (All figures are for illustration only.)
Year 1 Calculation
| Particulars | Amount (₹ lakh) |
|---|---|
| Profit After Tax (PAT) | 7.00 |
| Add: Depreciation | 2.50 |
| Add: Interest on term loan | 2.80 |
| Cash available for debt service (A) | 12.30 |
| Principal repayment | 4.85 |
| Interest on term loan | 2.80 |
| Total debt service (B) | 7.65 |
| DSCR (A ÷ B) | 1.61 |
Sharma Packaging earns ₹1.61 for every ₹1 it must pay toward the loan. That clears the common bank benchmark of 1.5.
DSCR Over the Full Loan Tenure
Banks do not stop at one year. They look at the ratio for every year of the loan.
| Year | PAT | Depreciation | Interest | Principal | Cash Available | Debt Service | DSCR |
|---|---|---|---|---|---|---|---|
| 1 | 7.00 | 2.50 | 2.80 | 4.85 | 12.30 | 7.65 | 1.61 |
| 2 | 7.80 | 2.20 | 2.27 | 5.38 | 12.27 | 7.65 | 1.60 |
| 3 | 8.60 | 1.90 | 1.71 | 5.94 | 12.21 | 7.65 | 1.60 |
| 4 | 9.40 | 1.70 | 1.09 | 6.56 | 12.19 | 7.65 | 1.59 |
| 5 | 10.20 | 1.50 | 0.38 | 7.27 | 12.08 | 7.65 | 1.58 |
Notice how interest falls each year while principal rises. The yearly total stays the same because the EMI is fixed. That is why profit growth matters. It keeps the ratio steady even as depreciation falls.
What If Profit Falls?
Now suppose Year 1 profit comes in 30% lower, at ₹4.90 lakh.
The business can still pay its EMIs, but the cushion is much thinner. A credit manager may ask how the business would handle a second weak year.
You can test scenarios like this in the DSCR calculator above by changing the profit figure.
Try the DSCR Calculator ↑To work out the exact EMI and yearly split of principal and interest for your loan, use our EMI Calculator.
DSCR Benchmark: What Ratio Do Banks Expect?
Banks generally prefer 1.5 or above, though this varies by bank policy. Some lenders accept a lower ratio for small loans, secured loans or borrowers with a long track record. Others ask for more for riskier sectors.
| DSCR Range | What It Means | Likely Bank View |
|---|---|---|
| Below 1.0 | Income does not cover loan payments | Loan is very unlikely to be approved |
| 1.0 to 1.25 | Just enough to pay, with almost no cushion | High risk; may be rejected or need extra security |
| 1.25 to 1.5 | Adequate, but limited room for error | Often acceptable as a minimum, depending on the bank |
| 1.5 to 2.0 | Comfortable repayment cushion | Generally preferred range |
| Above 2.0 | Strong cushion | Very comfortable; may support better terms |
Over the loan tenure, often expected at 1.5 or higher
In any single year, often expected at 1.2 to 1.25 or higher
Always confirm the exact norm with your bank, as internal policies differ across lenders and loan types.
What a Good DSCR Ratio Means for Loan Eligibility
A good DSCR ratio does more than get you a "yes." It shapes the whole loan offer. Your ratio affects your loan eligibility in several ways:
Loan Amount
A strong DSCR supports a larger loan. A weak one may lead the bank to cut the amount.
Tenure
If your DSCR is low, the bank may suggest a longer tenure. This lowers the yearly debt service and lifts the ratio.
Collateral
A borderline ratio may lead the bank to ask for more security or a guarantor.
Interest Rate
Lower risk can help you negotiate better pricing, though rates also depend on your credit score and the bank's policy.
Processing Speed
Clear, comfortable numbers mean fewer questions and quicker decisions.
How to Improve a Low DSCR
If the DSCR calculator shows a number below what your bank expects, you have some options:
Extend the loan tenure
Spreading repayment over more years reduces yearly principal.
Ask for a moratorium
A short repayment holiday during setup helps new projects that take time to earn.
Increase your own contribution
A smaller loan means a smaller debt service.
Close or restructure small existing loans
Fewer EMIs mean lower total debt service.
Review your projections
Make sure your profit estimates are realistic and supported by orders, capacity or past performance. Don't inflate them to reach a target ratio, as banks will check.
Change your profit, loan repayment or interest values and recalculate your DSCR.
DSCR for Bank Loan: How Credit Managers Use It
When you apply for a term loan, a credit manager at the bank does not just glance at one figure. Here is how DSCR for bank loan appraisal usually works.
They Rebuild Your Numbers
The credit manager takes your projected profit and loss account and recalculates DSCR on their own. If your report shows 1.8 but their working shows 1.3, that gap becomes a red flag.
They Check Against Tax Records
Your projected profits are compared with your past Income Tax Returns, GST returns and bank statements. A sudden jump in profit with no clear reason will be questioned.
They Include All Your Debts
The bank checks your credit report for other loans, such as vehicle loans, business loans or credit lines. All related EMIs are added to debt service, even if you left them out.
They Look at Every Year
A strong average can hide a weak year. Credit managers check whether any single year drops below the bank's minimum, especially the early years when interest is highest.
They Run Stress Tests
Many banks test what happens if sales fall 10% to 20% or costs rise. If DSCR stays above 1.0 under stress, the proposal looks safer.
They Read It With Other Ratios
DSCR is one part of a bigger picture. Banks also look at the current ratio, debt-equity ratio, interest coverage and working capital cycle. For working capital limits, the bank also relies on detailed financial statements in a standard format.
You can learn more in our CMA Data pillar page .
A practical tip: Before you submit your loan file, run your numbers through the DSCR calculator and check each year separately. If any year looks weak, add a short note explaining why and how you plan to manage it.
Calculate DSCR ↑FAQs on DSCR Calculator
01 What is a DSCR calculator used for? +
A DSCR calculator shows whether your business income can cover its yearly loan payments. MSME owners, startups and loan applicants use it to check their repayment capacity before they apply to banks.
02 What is the simple DSCR formula? +
The standard DSCR formula is net operating income divided by total debt service. In Indian banking, the common version is (PAT + Depreciation + Interest) divided by (Principal + Interest).
03 What is a good DSCR ratio for a bank loan? +
Banks generally prefer 1.5 or above, though this varies by bank policy. Some lenders accept 1.25 as a minimum for certain loans. A ratio below 1.0 means income cannot cover loan payments.
04 Why do banks add depreciation in the DSCR formula? +
Depreciation reduces profit on paper, but it does not involve any cash going out. Adding PAT plus depreciation gives a truer picture of the cash available to repay the loan.
05 Should existing loans be included in DSCR? +
Yes. Total debt service should include the principal and interest of all your business loans, not just the new one. Banks will check your credit report and include them anyway.
06 Is DSCR needed for working capital loans? +
DSCR is used mainly for term loans, where you repay a fixed amount over several years. For working capital limits, banks focus more on the current ratio, stock, debtors and the working capital gap. Some banks still review DSCR if you have term loans alongside.
07 Can a new business calculate DSCR? +
Yes. A new business uses projected figures instead of past results. In that case, the projections should be realistic and backed by a clear project report, quotations and market details.
08 What happens if my DSCR is below 1? +
A DSCR below 1 means your expected income will not cover your loan payments. Most banks will not approve the loan in that form. You may need to reduce the loan amount, extend the tenure, bring in more of your own capital or revisit your business plan.
Enter your financial figures and calculate your DSCR instantly.
Key Takeaways
DSCR shows how many times your income covers your loan payments.
Indian banks usually calculate it as (PAT + Depreciation + Interest) ÷ (Principal + Interest) .
Banks generally prefer 1.5 or above, though this varies by bank policy.
Credit managers check every year of the loan, include all existing debts and test weaker scenarios.
Use the DSCR calculator above to test different profit levels, tenures and loan amounts before you apply.
CA Sagar Batra
ICAI Registered Chartered Accountant · 10+ Years of Professional Experience · 12,000+ Tax Filings
Chartered Accountant with experience in taxation, compliance and business advisory. His work covers Income Tax, GST, TDS, tax notices, business compliance and financial documentation for individuals and businesses across India.