DSCR shows how many rupees of cash you make for each ₹1 of loan instalment. Example: ₹1.62 crore of cash over 3 years against ₹90 lakh due gives an average DSCR of 1.80. JR Loan Advisors in Chennai checks DSCR before a file goes to the bank.
What is the formula?
DSCR = (profit after tax + depreciation + interest on term loans) ÷ (interest + principal repaid on term loans)
- The top line is the cash left to pay loans.
- The bottom line is what the loans need that year.
Worked example (₹ lakh)
| Year | Profit after tax | Depreciation | Interest | Principal | DSCR |
|---|---|---|---|---|---|
| 1 | 30 | 10 | 12 | 20 | 52 ÷ 32 = 1.63 |
| 2 | 35 | 9 | 10 | 20 | 54 ÷ 30 = 1.80 |
| 3 | 40 | 8 | 8 | 20 | 56 ÷ 28 = 2.00 |
| Average | 162 ÷ 90 = 1.80 |
If profit falls 20% each year, the average drops to 141 ÷ 90 = 1.57 and the weakest year to 1.44. Try it in the DSCR calculator.
What do the numbers mean?
- Below 1.00: cash does not cover the instalments.
- 1.00 to 1.25: tight. Expect questions or a smaller loan.
- 1.25 or more: comfortable for most banks.
What does a bank publish?
RBI sets no single DSCR rule. One published example: Bank of Baroda’s health-sector loan asks for an average DSCR of 1.75 and no year below 1.25 (checked 1 Nov 2026).
Want your DSCR checked before the bank does? WhatsApp +91 94450 93336.
Written and reviewed by CA Jitendraa Rathi, Chartered Accountant (CA membership number 217936) · Ex-banker, 20 years of experience in credit and lending · LinkedInLast reviewed · Expert review: CA Jitendraa Rathi (ICAI 217936)