DSCR Calculator
Compute Debt Service Coverage Ratio (DSCR) used by Indian banks to assess loan repayment capacity. Free DSCR calculator with verdict and lender benchmark.
Debt Service Coverage Ratio, or DSCR, is the single most important number Indian banks use to assess whether a business can comfortably repay a loan. It measures how many times the annual debt service (principal plus interest) is covered by the annual net operating income. A DSCR of 1 means just barely covered; 1.25 means a 25 percent buffer; 1.5 means very comfortable. The DSCR calculator on this page gives you the ratio and a plain English verdict on lending viability.
DSCR
Why use the DSCR Calculator
Loan applications routinely fail not because the borrower is unfit but because the DSCR submitted to the bank is below the threshold the lender requires. Indian commercial lenders typically want DSCR of 1.25 or higher for term loans and 1.5 or higher for project finance. The calculator helps you check whether your projections clear the bar before you spend time on the application, and identifies whether the issue is on the income side or the debt service side.
Benefits at a glance
Industry standard formula
DSCR equals Net Operating Income divided by Total Debt Service. Both numbers are annual, both expressed in the same currency, both before tax. The calculator implements the standard definition that all major Indian lenders use.
Verdict in plain English
The calculator returns a label (Strong, Adequate, Weak, Unviable) based on the resulting ratio, which makes the answer immediately interpretable without finance jargon.
Useful for loan applications
Most Indian banks ask for DSCR projections in their term loan application. Run the numbers in advance to make sure your projections clear the lender's threshold before submitting.
Useful for refinancing decisions
Compare DSCR under your existing debt structure versus a proposed refinancing. A refinancing that improves the DSCR materially is usually worth the transaction cost.
How to use the DSCR Calculator
- 1
Enter Net Operating Income
Annual income from operations, before interest, tax, depreciation and amortisation. For most businesses this is EBITDA. Use a conservative estimate based on the last 12 months actual numbers, not best case projections.
- 2
Enter Total Debt Service
Annual principal and interest payable on all debt obligations. Include the proposed new loan you are evaluating. The calculator gives you the DSCR including the new loan, which is what the lender will compute.
- 3
Read the DSCR and verdict
If the DSCR is 1.5 or above, you have strong loan repayment capacity. Between 1.25 and 1.5 is adequate for most banks. Between 1 and 1.25 is weak and may face rejection. Below 1 means the business cannot service the proposed debt from current operations.
Frequently asked questions
What is a healthy DSCR?
Indian commercial lenders typically require a minimum DSCR of 1.25 for term loans and 1.5 for project finance and large infrastructure deals. A DSCR of 2 or higher is considered very strong and gives the borrower meaningful negotiating room on rate, tenure and security.
How is DSCR calculated?
DSCR equals Net Operating Income divided by Total Debt Service. Net Operating Income is annual income from operations before interest, tax, depreciation and amortisation (essentially EBITDA). Total Debt Service is annual principal repayment plus interest payment on all debt. Both numbers are pre tax.
Should DSCR include depreciation?
Most lenders use EBITDA based DSCR (which adds back depreciation and amortisation to operating profit). This treats depreciation as a non cash item available to service debt. Some conservative lenders use Operating Profit based DSCR which keeps depreciation as a cost. Always clarify with the lender which version they require.
What if my DSCR is below the lender's threshold?
Three options. Restructure the loan to a longer tenure, which lowers annual debt service and improves DSCR. Reduce the loan amount, which lowers debt service. Increase income through operational improvements, expansion or cost cutting before reapplying. The calculator helps you find the loan size and tenure combination that meets the lender's DSCR.
Is DSCR the same as Interest Coverage Ratio?
No. Interest Coverage Ratio (ICR) divides EBIT by interest expense alone, ignoring principal repayment. DSCR is broader and includes both interest and principal. ICR can look healthy while DSCR is weak, especially for loans in the early years where principal repayment is low. Lenders care about DSCR for the full repayment obligation, ICR for just the interest serviceability.
How do MSMEs improve DSCR for loan applications?
Common levers include extending the loan tenure (lowers annual debt service), formalising additional income streams (rental income, sub leasing), bringing in promoter equity or a quasi equity loan that reduces external debt service, or providing additional collateral that lets the bank classify a portion as a different facility. The calculator helps you size each lever.
Does DSCR matter for personal loans?
Personal loans use Fixed Obligations to Income Ratio (FOIR) or EMI to Income Ratio rather than DSCR. The concept is similar (income should comfortably cover debt obligations) but the specific formula differs. The loan eligibility calculator on this site uses the EMI to income approach for retail loans.
Final word
DSCR is the cleanest single number for assessing whether a business can sustainably service a proposed loan. Use the calculator before any loan application, especially for working capital and term loans where the DSCR threshold is binding. If the ratio falls short, the calculator points you toward whether to restructure the loan or improve operations before reapplying. Either way, knowing your DSCR before the bank tells you saves time and credit pulls.
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