DSCR Deep Dive
DSCR Explained — The Ratio That Decides Your Loan Size
Debt Service Coverage Ratio: how it's computed, what threshold each lender requires, and how to improve yours before applying.
The DSCR formula
- Numerator (EBITDA proxy): Net Profit + Interest + Depreciation + Amortisation
- Denominator: Sum of all annual EMIs (existing + proposed)
- PSU banks: 1.75x+ preferred, 1.5x minimum
- Private banks: 1.5x minimum, 1.25x with strong collateral
- NBFCs: 1.25x minimum, sometimes lower for secured
- Fintech: 1.1–1.25x (cash-flow based underwriting, higher pricing)
DSCR bands and what they mean
DSCR < 1.0x
Insufficient cash flow. Universal decline — no lender will approve. Restructure or wait.
DSCR 1.0–1.25x
Tight. Only NBFCs at higher pricing, often with collateral. Banks decline.
DSCR 1.25–1.5x
Borderline. NBFCs approve readily; private banks may approve with strong banking/CIBIL.
DSCR 1.5–1.75x
Comfortable. Most banks approve at competitive rates. Sweet spot for unsecured loans.
DSCR 1.75–2.0x
Strong. Premium rates, higher ticket sizes, longer tenures available.
DSCR 2.0x+
Excellent. Top-tier bank rates, max ticket, max tenure. May be eligible for negotiated pricing.
Improve DSCR
How to lift your DSCR before applying
- Declare higher profit in next ITR — directly raises EBITDA
- Prepay existing small loans — reduces denominator
- Increase proposed loan tenure — reduces annual EMI in denominator
- Restructure existing debt to longer tenure — same as above
- Add co-applicant with separate income — combined EBITDA, shared obligations
- Show non-operating income (rental, interest) — adds to numerator if documented
FAQ
Common questions
What if my DSCR is below 1.5x but my business is genuinely profitable?+
If your DSCR is below 1.5x because of tax-optimised low profit, the lender will still read it as weak — they underwrite on declared numbers. Options: wait a year and declare higher profit, take a secured loan (DSCR matters less with collateral), or approach an NBFC with bank-statement underwriting.
Does EMI for an existing home loan count in the denominator?+
Yes — all existing loan EMIs are included. If your home loan EMI is ₹60,000/year... actually it's ₹60,000/month = ₹7,20,000/year, and your proposed business loan EMI is ₹30,000/month = ₹3,60,000/year, the denominator is ₹10,80,000. If EBITDA is ₹16 L, DSCR is 1.48x — borderline.
Can I get a longer tenure to reduce EMI and improve DSCR?+
Yes, up to the lender's maximum tenure. Unsecured business loans cap at 5 years (some 7); LAP can go to 15; home loans to 30. Longer tenure reduces EMI, raises DSCR, but increases total interest paid. The trade-off works if eligibility is the binding constraint.
Next step
Get your file reviewed before you apply again.
Share basic details — a senior advisor will read your profile, diagnose what's blocking approval, and tell you exactly what to fix first.
- No CIBIL pull until strategy is agreed
- No blind portal submissions
- Review by a senior advisor — not a call-centre agent
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