DSCR Calculator — Debt Service Coverage Ratio (2026)
Calculate DSCR (Debt Service Coverage Ratio) year by year for a term loan. Enter Profit After Tax, Depreciation, Interest on Term Loan and Principal Repaid for each year of the loan tenure — the calculator shows the DSCR for every year plus the Average DSCR across the tenure, with a status read against standard banking rules of thumb.
- Formula: DSCR = (PAT + Depreciation + Interest on Term Loan) ÷ (Interest on Term Loan + Term Loan Principal Repaid)
- Purpose: measures whether a borrower’s own cash accruals can cover its debt obligations for the year
- Below 1: cash accruals cannot cover that year’s debt service — a red flag
- Average DSCR: simple average of year-wise DSCR across the full loan tenure, used alongside the year-wise figures in credit appraisal
- Rule of thumb: 1.25+ is generally acceptable, 1.5+ is comfortable — but actual covenants are set by the bank/sanction terms, not by a fixed RBI rule for all loans
| Year | PAT (₹L) | Depreciation (₹L) | Interest on TL (₹L) | TL Principal Repaid (₹L) | DSCR | |
|---|---|---|---|---|---|---|
| Year 1 | — | |||||
| Year 2 | — | |||||
| Year 3 | — | |||||
| Year 4 | — | |||||
| Year 5 | — |
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How DSCR Is Calculated
Worked Example
A 5-year term loan shows PAT rising from ₹18 lakh to ₹34 lakh as interest falls from ₹14 lakh to ₹6 lakh (a reducing-balance loan), with depreciation steady at ₹12 lakh and principal repayment fixed at ₹20 lakh a year. Year 1 DSCR = (18+12+14) ÷ (14+20) = 44 ÷ 34 = 1.29 — a thin cushion. By Year 5, DSCR = (34+12+6) ÷ (6+20) = 52 ÷ 26 = 2.00 — comfortable. The Average DSCR across all 5 years works out to 1.62, generally viewed as a healthy repayment profile.
Frequently Asked Questions — DSCR Calculator
What is the DSCR formula used by Indian banks?
DSCR = (Profit After Tax + Depreciation + Interest on Term Loan) ÷ (Interest on Term Loan + Term Loan Principal Repaid). This is the standard formula taught in JAIIB/CAIIB and used by Indian bank credit officers to assess whether a borrower’s own cash generation can service a term loan.
Why is depreciation added back in the DSCR formula?
Depreciation is a non-cash accounting expense — it reduces reported profit but does not actually use up cash. Adding it back to Profit After Tax gives a closer approximation of the actual cash the business generated during the year, which is what is really available to service debt.
What is a good DSCR for a term loan?
As a general rule of thumb in Indian banking practice, a DSCR below 1 means the business cannot cover that year’s debt obligations from its own cash accruals — a serious concern. A DSCR of 1.25 or above is generally considered acceptable, and 1.5 or above is viewed as comfortable. These are conventions, not a fixed RBI-mandated threshold for all loans — actual minimum DSCR covenants are set by the bank’s own credit policy and the specific sanction terms.
What is the difference between year-wise DSCR and Average DSCR?
Year-wise DSCR shows the ratio for each individual year of the loan tenure, which reveals whether debt-servicing capacity is improving, worsening, or has a particularly weak year. Average DSCR is the simple average of all the year-wise ratios across the tenure. Credit appraisal typically looks at both — a healthy average can still hide one very weak year that needs closer scrutiny.
Is DSCR only used for business loans, or also for personal/real estate loans?
DSCR in its Indian bank credit-appraisal form (using PAT, depreciation and term loan interest/principal) is used primarily for business and project term loans. A related concept — often also called DSCR — is used in real estate and rental-property lending internationally, where it is calculated as rental/property income divided by total debt service (principal, interest, taxes and insurance). The underlying idea is the same: does the income generated cover the debt obligation.