DSCR Calculator

For each year, (profit after tax + depreciation + interest on term loans) ÷ (interest on term loans + principal repaid). The RBI defined it on the same lines in its September 2020 resolution framework: net cash accruals plus interest and finance charges, divided by the current portion of long-term debt plus interest and finance charges.

There is no single figure; it depends on the bank, the scheme and the sector. Many banks look for an average DSCR of about 1.25 or more for MSME term loans. For example, Central Bank of India asks for an average DSCR of at least 1.25 in its cold storage and warehouse cluster scheme, and SBI’s Surya Shakti solar finance asks for an average gross DSCR of at least 1.20 across all term loans. Ask your bank for the figure it uses.

The DSCR over the whole loan period: the total of profit after tax, depreciation and interest for all the years, divided by the total interest and principal for the same years. It is not the simple average of the yearly ratios, though the two are usually close. The RBI’s 2020 framework calls it ADSCR.

Depreciation is a cost in the profit and loss account but no cash goes out for it, so it is added back to show the cash the business generates. Interest is added back because it is part of the debt service being covered; it appears on both sides of the ratio.

In that year the cash the business earns does not cover the interest and principal falling due, so the shortfall has to come from elsewhere. In its 2020 resolution framework the RBI set a floor of 1.0 for the yearly DSCR and 1.2 for the average DSCR in most sectors. A longer tenure, a moratorium or a smaller loan raises the ratio.

This calculator follows the common bank format, which counts interest on term loans. The RBI’s 2020 framework used all interest and finance charges, which would include working capital interest on both sides of the ratio. Check which version your bank uses and enter the interest to match.