# What is DSCR? How banks check if your business can pay the instalments

> DSCR (debt service coverage ratio) = (profit after tax + depreciation + interest) ÷ (interest + principal due). It shows the rupees of cash you make for each ₹1 of instalment. JR Loan Advisors in Chennai treats 1.25 or more in every year as comfortable.

Source: https://jrloanadvisors.com/insights/what-is-dscr-in-loans/ · Author: CA Jitendraa Rathi (CA membership number 217936), JR Loan Advisors · Updated 1 Nov 2026

**[Discuss a ₹5 Cr+ loan](https://jrloanadvisors.com/contact/#enquiry)** · WhatsApp +91 94450 93336 (https://wa.me/919445093336) · Call +91 94450 93336 · [Enquiry form](https://jrloanadvisors.com/contact/#enquiry). Loans of ₹5 crore and above.

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](/tools/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](https://bankofbaroda.bank.in/business-banking/msme-banking/loans-and-advances/baroda-arogyadham-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.

## Frequently asked questions

### What is a good DSCR?

RBI does not set one number. Each bank sets its own. 1.25 or more in every year is a common floor. Bank of Baroda publishes an average of 1.75 and no year below 1.25 for its health-sector loan.

### Why is depreciation added back?

Depreciation is a cost on paper. No cash leaves the business for it, so the cash available to pay loans is higher than profit by that amount.

### Average DSCR or yearly DSCR, which matters?

Both. Banks look at the average over the loan years and also the weakest single year.

### How can I raise my DSCR?

Ask for a longer repayment period, borrow a little less, bring more of your own money, or add a repayment holiday in the first year while the project starts.

## Discuss a ₹5 Cr+ loan

Send your papers for a free first look (₹5 crore to ₹250 crore). This is not a loan approval. **[Discuss a ₹5 Cr+ loan](https://jrloanadvisors.com/contact/#enquiry)** · WhatsApp +91 94450 93336 (https://wa.me/919445093336) · Call +91 94450 93336 · [Enquiry form](https://jrloanadvisors.com/contact/#enquiry). Loans of ₹5 crore and above. You may pay us a fee. We tell you the amount in writing before we start.

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JR Loan Advisors — loan help for borrowers, Chennai & Tamil Nadu. Phone/WhatsApp +91 94450 93336 · jitendraa@jrloanadvisors.com · https://jrloanadvisors.com/