About Business Loan Project Report

CMA Data Project Report bank-format projections for term loan working capital and CGTMSE collateral-free loans. Forms handled: Project Report, CMA Data, Form 5, CGTMSE. Legal basis: RBI Master Direction MSME Sector.

Glossary

Plain-English glossary for this service

CMA Data

Credit Monitoring Arrangement Data — a standardised format prescribed by RBI for assessment of working capital and term loan proposals by banks. Comprises six statements covering existing and projected balance sheets, profit and loss, fund flow, ratio analysis, and assessment of working capital. Mandatory for credit limits above ₹2 crore in most banks.

Debt-Equity Ratio

Ratio of total long-term debt to tangible net worth. Bankers cap this at 2:1 for most sectors and 3:1 for infrastructure. Breach typically requires promoter capital infusion before sanction.

ICR

Interest Coverage Ratio — computed as EBIT divided by total interest expense. Bankers target a minimum of 3 for comfortable servicing. ICR below 2 signals stress; below 1.5 typically triggers EM-1 flagging.

Current Ratio

Ratio of current assets to current liabilities. Bankers target a minimum of 1.33 for working capital sanction. Below 1.17 the proposal is typically deferred for restructuring.

DSCR

Debt Service Coverage Ratio — computed as (Net Profit + Depreciation + Interest on Term Loan) divided by (Interest on Term Loan + Principal Repayment). Bankers target a minimum of 1.5 for sanction. Average DSCR over loan tenure is the key acceptance metric.

Working Capital Gap

Computed as current assets less current liabilities (excluding bank borrowing). The gap is funded by margin money (promoter contribution) and bank borrowing. Used as the base for MPBF computation under Tandon Methods.

Margin Money

The borrower's own contribution to the asset financed — typically 25% to 35% for term loans depending on asset category and 25% on stock plus 35% on debtors for working capital. Must be from declared sources verifiable in CMA.

Stress Test

Sensitivity analysis of CMA projection under adverse scenarios — typically revenue down 15%, interest up 100 bps, raw material up 10%. Bankers expect DSCR to remain above 1.2 under stress and current ratio above 1.17. Honest stress test is more credible than optimistic single-scenario projection.

MPBF

Maximum Permissible Bank Finance — the ceiling on working capital bank borrowing, computed under Tandon Methods. Method I: 75% of working capital gap. Method II: 75% of current assets less current liabilities. Method III: current assets less core current assets less current liabilities. Most banks apply Method II.

Form 5 CGTMSE

Application form for CGTMSE coverage filed by the lending institution within 60 days of sanction. Captures borrower particulars, loan amount, asset details, and consent for premium deduction. Failure to file within the window forfeits coverage eligibility for that loan.

Section 180 Companies Act

Section 180(1)(c) of the Companies Act 2013 requires a special resolution of the members where the borrowing (excluding temporary loans from bankers in the ordinary course) exceeds the aggregate of paid-up capital, free reserves, and securities premium. Resolution must be filed in MGT-14 within 30 days.

Quarterly Operating Statement

QOS — quarterly statement filed by the borrower to the bank capturing sales, purchases, debtors, creditors, inventory and bank account turnover. Mandatory for accounts with limits above ₹1 crore. Variance from CMA projection beyond 15% requires explanation.

Statutory Basis

Operative provisions cited on this page

Every claim on this page can be traced back to a section or rule below.

RBI Master Direction MSME SectorAnchor

Statutory basis — RBI Master Direction MSME Sector

RBI Master Direction MSME Sector is the operative provision for business loan project report in this engagement. CMA Data Project Report bank-format projections for term loan working capital and CGTMSE collateral-free loans The taxpayer should ensure the procedural conditions under this section are met before any filing or submission. Failure to comply attracts the consequences separately prescribed under the penalty and interest provisions of the same Act.

Forms Library

Forms used in this engagement

Project ReportForm Project Report

Statutory form prescribed for Business Loan Project Report engagements; carries the information set required for filing or submission to the prescribed authority.

As prescribed under the relevant section / rule Prescribed authority

CMA DataForm CMA Data

Statutory form prescribed for Business Loan Project Report engagements; carries the information set required for filing or submission to the prescribed authority.

As prescribed under the relevant section / rule Prescribed authority

Form 5Form Form 5

Statutory form prescribed for Business Loan Project Report engagements; carries the information set required for filing or submission to the prescribed authority.

As prescribed under the relevant section / rule Prescribed authority

CGTMSEForm CGTMSE

Statutory form prescribed for Business Loan Project Report engagements; carries the information set required for filing or submission to the prescribed authority.

As prescribed under the relevant section / rule Prescribed authority

Statutory Deadlines

Compliance deadlines that matter

Miss any of these and the next consequence kicks in automatically.

Trigger event	Days	Form	Consequence
CMA submission to bank along with loan application	At the time of loan application	CMA Data (six statements) + audited financials	Application not processed; credit committee review deferred until full CMA received
Annual review of working capital limit	Within 12 months of last sanction or renewal	Renewal CMA + audited financials + projections for next year	Limit treated as ad-hoc beyond review date; interest rate may step up by 100 to 200 bps; Rule 21A-equivalent flag in NPA framework
Monthly stock and debtor statement submission	10th of following month	Stock statement + debtor ageing statement	DP capped at last submitted statement; interest at penal rate on excess drawing; cumulative non-submission flags SMA-2 classification
Drawing Power computation by branch	Monthly post stock statement	DP working sheet by branch officer	Without DP working, sanctioned limit is not the effective cap; drawings beyond auto-DP are treated as excess
Quarterly review meeting with bank	Within 30 days of quarter-end	QOS + quarterly financials + ratio summary	Account flagged for enhanced monitoring; possible stock-audit triggered
Audited financials submission to bank post FY-end	Within 6 months of FY-end (i.e. by 30 September)	Audited balance sheet + P&L + tax audit report + GST reconciliation	Limit suspended until submission; interest at penal rate of 2% over agreed rate; renewal not processed
Section 186 board resolution for borrowings (companies)	Before availing borrowing	Board resolution + MGT-14 (if Section 180 special resolution applicable)	Borrowing ultra vires the company; charge unenforceable; ROC penalty under Section 186(13)
CGTMSE Form 5 coverage application by lender	60 days from sanction	Form 5 on CGTMSE portal	Loss of CGTMSE coverage eligibility; borrower exposed to full collateral demand or sanction lapse
OD / CC limit renewal	Annually before expiry of sanction	Renewal CMA + latest stock statement + audited financials	Limit expires; account treated as overdrawn; SMA-1 flag and step-up interest
EM-1 / SMA classification on default indicator	Cure within 30 days of flag	Reconciliation note + corrective action plan	SMA-2 escalation at 60 days; NPA classification at 90 days under IRAC norms

Comparison

Term Loan vs Working Capital

Aspect	Term Loan	Working Capital
Statutory foundation of lending	Sanctioned under bank's credit policy framed pursuant to RBI Master Direction on MSME Sector dated 24-07-2017 and Banking Regulation Act 1949 Section 21; secured under SARFAESI Act 2002 Sections 2(zd)/13 once classified as financial asset	Cash-credit/overdraft sanctioned under same RBI Master Direction with hypothecation of stock/book-debts as primary security; enforcement mirror-image under SARFAESI Section 13(2) on default-driven NPA classification
Project-appraisal document	Detailed Project Report (DPR) covering technical feasibility, financial projections, DSCR of minimum 1.5, IRR, payback, sensitivity analysis; mandatory under RBI Prudential Framework for Resolution 2019 for exposures above Rs.5 cr	CMA Data Form-I to Form-VI as per Tandon-Chore Committee methodology integrating operating cycle, MPBF computation, current-ratio benchmark of 1.33; mandatory for facilities above Rs.2 cr per RBI circular DBOD.No.BP.BC.46/08.12.001/2015-16
Coverage ratios tested	Debt-Service Coverage Ratio (DSCR) minimum 1.5x on annual basis and 1.25x average over loan tenure; Fixed Asset Coverage Ratio minimum 1.4x; Debt-Equity ratio capped at 3:1 for MSME borrowers	Current Ratio benchmark 1.33; MPBF computed at 75% of working-capital gap (Method-II); inventory and receivable holding-period norms per industry benchmark; no DSCR test as facility is non-amortising
Security and collateral	First charge on project assets created out of loan proceeds; collateral coverage minimum 125% of facility value for conventional loans; equitable mortgage of immovable property registered under Transfer of Property Act Section 58(f)	Hypothecation of stock and book-debts as primary security; secondary collateral on residual basis; pari-passu charge among consortium lenders intimated through CERSAI under SARFAESI Section 20A read with Rule 7
Disbursement methodology	Lump-sum or staggered disbursement against asset-creation milestones; subject to architect/chartered engineer's progress certificate; moratorium of 12-24 months from first disbursement; repayment in EMIs over 5-10 years	Drawing power computed monthly from stock-statement under RBI's drawing-power formula; renewable annually with comprehensive review; no fixed repayment schedule but turnover routing through cash-credit account mandatory
Default-recovery framework	NPA classification after 90 days overdue per RBI IRACP norms; demand notice under SARFAESI Section 13(2); secured-asset enforcement under Section 13(4); DRT challenge under Section 17 within 45 days; appeal to DRAT under Section 18 with 50% pre-deposit	NPA classification on continuous excess over drawing power for 90 days; same SARFAESI Section 13(2)/13(4) route plus invocation of personal guarantee; recovery proceedings before DRT under Recovery of Debts and Bankruptcy Act 1993 for unsecured residual
Insolvency trigger	Financial creditor may file Section 7 IBC application before NCLT on default of Rs.1 cr or more; Innoventive Industries v ICICI Bank (SC 2017) clarifies that proof of debt and default suffices; Vidarbha Industries v Axis Bank (SC 2022) recognises NCLT's discretion to refuse admission on equitable considerations	Same Section 7 IBC route on continuous default in CC limits aggregating Rs.1 cr; Standard Chartered v Andhra Bank confirms cash-credit overdrafts qualify as financial debt; Swiss Ribbons v UoI (SC 2019) upheld constitutional validity of the IBC framework
Government-backed alternatives	Credit Guarantee Fund Trust for MSEs provides cover up to Rs.5 cr (Micro) and Rs.10 cr (Small) under MLI agreement with bank; guarantee fee 0.37%-2% based on facility size; eligibility requires Udyam Registration and project DSCR above 1.5	Standalone bank credit with collateral coverage minimum 125%; pricing 100-200 bps higher than CGTMSE-covered facilities due to absence of guarantee comfort; preferred for exposures exceeding Rs.10 cr where CGTMSE cap is exhausted
Micro-enterprise schemes	Pradhan Mantri MUDRA Yojana under Micro Units Development and Refinance Agency Act; three tiers Shishu (up to Rs.50,000), Kishor (Rs.50,001-5 lakh), Tarun (Rs.5 lakh-10 lakh) and Tarun-Plus up to Rs.20 lakh; collateral-free; routed through PSBs and MFIs	Stand-Up India Scheme launched 05-04-2016 for SC/ST/Women entrepreneurs; composite loan Rs.10 lakh-1 cr covering term plus working capital; minimum 51% promoter stake; refinancing through SIDBI under Stand-Up India Mission directorate
RBI resolution framework	Prudential Framework for Resolution of Stressed Assets dated 07-06-2019 mandates Inter-Creditor Agreement, Reference Date, 30-day Review Period and 180-day Resolution Plan window for exposures above Rs.2,000 cr (since lowered); Bank-led Resolution Approach for sub-threshold	Same Prudential Framework applies on aggregation of facilities; additional MSME-specific OTR-2 window under RBI circular dated 06-08-2020 for Covid-impacted accounts; restructuring without downgrade subject to viability and DSCR projection above 1.2
Asset Reconstruction Company route	Bank may assign NPA to ARC registered under SARFAESI Section 3 read with RBI guidelines on ARCs dated 24-10-2022; assignment via SR/security receipt or cash; ARC steps into lender's shoes and enforces under Section 13	Same SARFAESI Section 5 assignment to ARC available; particularly attractive where security cover is partial; ARC's resolution toolkit includes settlement, sale of secured asset, conversion of debt to equity under Section 9 of SARFAESI Act
Writ remedy against arbitrary classification	Article 226 writ before High Court available where bank's NPA classification is arbitrary, malafide or in violation of RBI IRACP norms; not available against private contractual disputes; precedent set by Madras HC and Bombay HC across MSME borrower cases	Same Article 226 jurisdiction; particularly invoked where drawing-power computation is arbitrary, stock-statement rejection is unreasoned, or NPA tagging happens despite borrower's continuing service of interest under RBI's invocation guidelines