Working capital and term debt
MPBF and DSCR, worked line by line
Both Tandon methods and the debt service coverage ratio, with every intermediate figure shown. Runs in your browser, no signup.
Your figures
Maximum permissible bank finance, first method
₹ 30,00,000
Actual net working capital of ₹ 30,00,000 is higher than the margin this method requires, so the borrower's own contribution sets the limit, not the 25 percent.
first method
01 / Both methods
The same borrower, under each method
The second method almost always asks the borrower to bring more of its own money in, because the margin is struck on total current assets rather than on the gap.
| Line | First method (selected) | Second method |
|---|---|---|
| Margin taken on | ₹ 60,00,000 | ₹ 1,00,00,000 |
| Minimum net working capital required | ₹ 15,00,000 | ₹ 25,00,000 |
| Borrower's contribution applied | ₹ 30,00,000 | ₹ 30,00,000 |
| Maximum permissible bank finance | ₹ 30,00,000 | ₹ 30,00,000 |
| Excess borrowing | ₹ 0 | ₹ 0 |
| What the usual shortcut reports | ₹ 45,00,000 | ₹ 35,00,000 |
| Overstated by | ₹ 15,00,000 | ₹ 5,00,000 |
02 / Where other calculators go wrong
Why this is not 75 percent of the gap
Most calculators reduce the first method to 75 percent of the working capital gap. That is the right answer only while the borrower's own net working capital is at or below the 25 percent margin.
Why the shortcut goes wrong
Where the borrower's own net working capital is higher than the margin, the borrower is already funding more of the gap than the margin asks for, the bank is left to fund only the remainder, and the permissible finance is lower than the shortcut reports. This page takes the higher of the required margin and actual net working capital, which is what the Tandon working itself requires. What a bank finally sanctions is its own affair: its own margin, its own view of which assets are current, and its own internal norms.
On the figures above the two answers part company, because actual net working capital is the higher of the two contributions. Put a lower net working capital in and they converge again.
03 / Term debt
Debt service coverage, with both sides shown
Cash accruals over the year's term debt service, with interest on term loans on both sides: added back, and serviced.
Your figures
Interest on working capital limits stays out of both sides. It is an operating cost, not term debt service.
Debt service coverage ratio
1.70
₹ 34,00,000 of cash accrual against ₹ 20,00,000 of debt service.
At or above 1.25 the year covers its service on most lenders' internal norms.
Which year to check
Check the worst projected year too, not the average alone, since that is usually the one a credit note turns on.
04 / From the books instead
Typed figures are the slow way
OptiReports builds the CMA from the client's Tally books, an ITR or figures you enter, and works MPBF and DSCR for every year in it.
Nothing leaves this page
This page works on the figures you keyed in. A proposal needs the whole set, tied across years and agreeing with the books they came from.
Every figure above is computed in your own browser as you type. The numbers are never sent to us, never stored, and never logged. There is no email box in the way of the result, no account, and nothing to unlock. Close the tab and the working is gone.
Client figures on a bank proposal are confidential. A calculator that holds them for a mailing list is not a calculator you should be pasting a client's balance sheet into.
Assumptions and basis
What this calculator applied
- Method applied
- Tandon Committee methods of lending, first and second
- Basis checked
- Checked on 17 September 2026
7 notes on what the method assumes
- These methods are not mandated by the Reserve Bank. The prescribed MPBF formula was withdrawn in April 1997 and banks have set their own working capital assessment since. The working remains the format most banks ask a proposal to be put in, which is why it is here, but nothing on this page is a regulatory requirement.
- The arithmetic is implemented from the Tandon Committee formulation of the two methods, the same working the OptiVida CMA module runs. It is not reproduced from any circular in force, because none prescribes it.
- A bank applies its own margin and its own definition of current assets. A branch may hold stock beyond a holding norm, or a deposit maturing next year, outside current assets, and the permissible figure moves with it.
- Export receivables come off the margin base only where the facility provides for it. Leave that field at zero where it does not. Netting off more than the base itself drives the required margin below nil, which is arithmetic rather than a limit any bank would sanction.
- The borrower's contribution is the higher of the required margin and actual net working capital. Where a calculator reports 75 percent of the working capital gap it has assumed the first of those, which understates the contribution whenever actual net working capital is higher.
- A DSCR of 1.25 is a widely used internal comfort level, not a statutory floor. It varies by lender, by facility and by tenor.
- This is an aid to preparing a proposal, not a sanction, and nothing here commits any lender.
This is a working estimate, not advice, and it will not cover every case. Check the figure against the lending bank's own assessment norms and format before you rely on it or sign anything. All calculators