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Know what your bank will compute before you submit the CMA.
Enter your projected figures and see the numbers a credit officer works out first: maximum permissible bank finance, current ratio, leverage, debt service cover and holding periods. Then download the full template for the six CMA forms.
All figures in ₹ lakh. Calculations run in your browser; nothing you enter is sent anywhere.
How it is worked out
| Measure | Formula | Notes |
|---|---|---|
| Working capital gap | Total current assets − other current liabilities | Other current liabilities exclude bank working capital borrowing. |
| MPBF, Method I | 75% × working capital gap | Borrower funds 25% of the gap. |
| MPBF, Method II | 75% × total current assets − other current liabilities | Borrower funds 25% of total current assets. Implies a current ratio of about 1.33. |
| Turnover method | 20% × projected net sales | For fund-based limits up to ₹5 crore to micro and small enterprises. Working capital need is taken at 25% of turnover, with 5% as the borrower's margin. |
| Current ratio | Total current assets ÷ (other current liabilities + requested limit) | |
| TOL / TNW | Total outside liabilities ÷ tangible net worth | Outside liabilities: creditors, other current liabilities, requested limit, term loans and other long-term liabilities. |
| DSCR | (PAT + depreciation + term-loan interest) ÷ (term-loan interest + principal due) | One-year view; banks usually look at the average over the loan tenor. |
| Holding periods | Inventory ÷ cost of sales × 12; receivables ÷ sales × 12; creditors ÷ cost of sales × 12 | In months, as CMA Form IV presents them. The bank will ask for inventory split by raw material, WIP and finished goods. |
What the CMA data contains
CMA (credit monitoring arrangement) data is the standard set of statements Indian banks use to assess working capital and term-loan proposals. It usually covers two years of actuals, the current year's estimate and one or more projected years, laid out in six forms.
| Form | Content | What the bank reads from it |
|---|---|---|
| Form I | Particulars of existing and proposed limits | Your full banking arrangement. |
| Form II | Operating statement | Sales growth, margins and profitability. |
| Form III | Analysis of balance sheet | Net worth, leverage and liquidity. |
| Form IV | Current assets and current liabilities, with holding levels | Whether the stock and debtor levels you project are reasonable. |
| Form V | Computation of maximum permissible bank finance | The limit the numbers support. |
| Form VI | Funds flow statement | How long-term sources and uses reconcile. |
The ratios on this page are the ones a credit officer computes first. If your requested limit is above Method II MPBF, expect to be asked for a higher margin, in the form of more net worth or long-term funds, or to justify the holding levels you have projected.
On benchmarks
Mandatory MPBF norms were withdrawn by the RBI in 1997 and banks now assess working capital under their own Board-approved credit policies. Method II remains widely used for larger limits, and the 1.33 current ratio it implies is a common reference. Acceptable TOL/TNW and DSCR levels vary by bank, sector and rating; this page shows your figures without passing or failing them.
Sources and references
- Report of the Study Group to Frame Guidelines for Follow-up of Bank Credit (Tandon Committee), 1975: Methods I and II of MPBF.
- Reserve Bank of India, guidelines on the turnover method of assessing working capital (Nayak Committee): 25% of projected turnover as working capital requirement, of which at least 20% to be provided by banks and 5% by the borrower.
- Reserve Bank of India, Master Direction on Lending to Micro, Small and Medium Enterprises (MSME) Sector, FIDD.MSME & NFS.12/06.02.31/2017-18 dated 24 July 2017, as updated.
Other free tools
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- Monthly cash flow modelA 12-month, April–March view of cash in and out
- Overdraft cost calculatorThe all-in cost of your CC/OD line, not just the rate
- GST reconciliation checklistMonthly GSTR-2B and IMS close, with an ITC-at-risk estimate
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