CMA Data Format for Bank Loans: What Banks Want and How to Prepare It

When you apply for a cash credit limit, a term loan or an enhancement, the bank will almost always ask for "CMA data". It is the bank's standard way of reading your past performance and your projections in one format, so the credit officer can compare you with every other borrower on the same basis.

This guide explains what goes into each of the six forms, how banks work out how much working capital they will fund, which ratios they look at, and why so many reports come back for revision.

What CMA data is, and why banks still want it

CMA stands for Credit Monitoring Arrangement. The RBI introduced it to monitor borrowers with large limits, and the six-form layout became the standard for working capital appraisal. The RBI gave banks freedom in 1997 to choose their own method of assessing working capital, so the format is no longer mandated. But most public and private sector banks still use it, because their credit appraisal templates are built around it.

A CMA report usually covers:

two or three years of audited actuals
the current year estimate (provisional figures for the year in progress)
projections for the next one to two years for working capital, and for the full loan tenure for a term loan

The six forms

Form	Title	What the bank reads from it
I	Particulars of existing and proposed limits	Who you bank with, what limits you have, how much you use, and what you are asking for
II	Operating statement	Sales, cost of sales, profit before and after tax, year by year
III	Analysis of balance sheet	Liabilities and assets regrouped into current, term and net worth heads
IV	Comparative statement of current assets and current liabilities	Inventory, receivables and creditors in amount and in days or months
V	Computation of MPBF	The working capital gap and how much of it the bank will fund
VI	Funds flow statement	Long-term sources and uses, showing whether long-term funds cover long-term uses

Form II: the operating statement

Start here, because everything flows from sales. Show gross sales, less GST if the books show it gross, then net sales. Break cost of sales into raw materials (opening stock + purchases − closing stock), power, direct labour, other manufacturing expenses and depreciation. Then selling, general and admin expenses, interest, and tax.

Banks compare the growth you project with your track record and your industry. A business that grew 8% a year for three years and now projects 40% will get questions, unless the projection is backed by an order book, new capacity or a new customer contract.

Form III: analysis of balance sheet

This is your audited balance sheet regrouped the way a banker reads it. Two rules cause most errors:

Current liabilities include bank borrowings for working capital, trade creditors, advances from customers, statutory dues and the instalments of term loans due within the next 12 months.
Unsecured loans from promoters are usually treated as quasi-equity only if they are subordinated to the bank loan with a written undertaking. Otherwise they are term liabilities.

Form IV: holding levels

Banks look at the number of days or months of each current asset:

raw material holding in months of consumption
finished goods in months of cost of sales
receivables in months of sales
creditors in months of purchases

A sudden jump in projected receivable days, or inventory holding much higher than peers, reduces the limit the bank will allow or prompts a demand for justification.

How banks work out the working capital limit

The Tandon Committee methods (MPBF)

The RBI's Tandon Committee (1975) set out three ways to work out Maximum Permissible Bank Finance. The first two are the ones banks still use.

Method	Formula	Effect
First method	MPBF = 75% × (current assets − current liabilities other than bank borrowings)	You fund 25% of the working capital gap from long-term sources
Second method	MPBF = (75% × current assets) − current liabilities other than bank borrowings	You fund 25% of total current assets; implies a minimum current ratio of 1.33
Third method	As the second, but core current assets are funded entirely from long-term sources	Rarely used

A worked example with current assets of ₹10 crore and other current liabilities (mainly creditors) of ₹3 crore:

Item	First method (₹ crore)	Second method (₹ crore)
Total current assets	10.00	10.00
Other current liabilities	3.00	3.00
Working capital gap	7.00	7.00
Borrower's margin	1.75 (25% of gap)	2.50 (25% of current assets)
MPBF	5.25	4.50

Form V in your CMA shows exactly this computation. If your existing net working capital (long-term funds in current assets) is lower than the required margin, the shortfall is a problem the bank will ask you to fix, often by bringing in more capital or converting promoter loans into subordinated loans.

The turnover method for MSMEs

For smaller borrowers, the Nayak Committee (1991) recommended a simpler method based on turnover, which the RBI later built into its MSME lending directions. For micro and small enterprises with fund-based working capital limits of up to ₹5 crore, banks are asked to assess the limit at a minimum of 20% of projected annual turnover, with the working capital requirement taken as 25% of turnover and the borrower bringing a margin of 5% of turnover.

So a small enterprise projecting ₹8 crore of sales would normally qualify for a working capital limit of at least ₹1.6 crore, provided the projection is accepted and the other parameters are fine.

Cash budget method

For seasonal businesses (sugar, tea, construction contractors), banks may assess the limit from a monthly cash budget showing the peak funding need. Your CMA then needs monthly projections, not just annual ones.

The ratios banks look at

These are typical benchmarks used in credit appraisal. They are not RBI rules, and each bank's policy differs, so treat them as a guide.

Ratio	What it shows	Typical comfort level
Current ratio	Current assets ÷ current liabilities	1.33 or more (follows from the second Tandon method)
DSCR (term loans)	(PAT + depreciation + interest on term loan) ÷ (term loan instalments + interest)	Average around 1.5; no year much below 1.2–1.25
TOL/TNW	Total outside liabilities ÷ tangible net worth	Up to about 3:1 for manufacturing; higher may need justification
Debt–equity (term loans)	Long-term debt ÷ tangible net worth	Around 2:1 or lower
Interest coverage	EBITDA ÷ interest	Comfortably above 2
Promoter's margin on projects	Own funds as % of project cost	Commonly 20–25%

DSCR is the ratio that decides most term loans. Calculate it year by year in your CMA, and show both the average and the minimum.

Why CMA reports get sent back

Actuals don't match the audited accounts. Every figure in the past-year columns should tie to the audited balance sheet and profit and loss account, after regrouping.
Sales don't match GST returns or the ITR. Banks now routinely compare CMA turnover with GSTR-3B and income-tax returns. Explain any difference (for example, stock transfers between branches).
Projections with no basis. Growth, margins and holding periods that jump without an explanation.
Term loan instalments not shown as current liabilities for the next 12 months, which flatters the current ratio.
The limit requested doesn't follow from Form V. The amount you ask for should be the MPBF or the turnover-method figure, not a round number.
The funds flow in Form VI doesn't balance, or long-term uses (new machinery) are funded with short-term money.
Missing assumptions sheet. A one-page list of assumptions (price increases, capacity utilisation, holding periods) saves weeks of questions.

A checklist before you submit

Past years tie to audited accounts, after regrouping.
Sales tie to GST returns and ITR, with reconciliation notes.
Current-year estimate is based on actual months to date.
Term loan instalments due in 12 months are in current liabilities.
Form V gives the limit you are requesting.
DSCR shown year by year, with the average and minimum.
Assumptions sheet attached.
Project report (for term loans) uses the same numbers as the CMA.

Frequently asked questions

What does CMA stand for?

Credit Monitoring Arrangement. It was introduced by the RBI in the 1970s and 80s to monitor large borrowers. The RBI no longer prescribes the format, but most Indian banks still ask for CMA data in the same six-form structure.

How many years of data does a CMA report need?

Typically two to three years of audited actuals, the current year's estimate, and projections for the loan period: at least one to two years for working capital and the full tenure for a term loan.

What is MPBF?

Maximum Permissible Bank Finance: the most a bank will lend for working capital. Under the Tandon Committee's second method it is 75% of current assets less current liabilities other than bank borrowings.

What DSCR do banks expect?

There is no single regulatory figure. Many banks look for an average DSCR of around 1.5 over the loan tenure, and do not accept a year below roughly 1.2 to 1.25. Check your bank's credit policy.

Is the turnover method still used?

Yes, for MSE borrowers. The RBI's MSME lending directions ask banks to assess working capital limits of up to ₹5 crore at a minimum of 20% of projected annual turnover, with the borrower bringing a margin of 5% of turnover.

Sources

General information only, not professional advice. Rules change; check the current law and your facts before acting.