What a CMA report is, and why the bank is asking for one

A CMA report is a package of six or seven prescribed financial statements that a bank uses to decide how much credit your business can support. It covers your audited history and your projections in a format the bank already knows how to read. The forms are not independent documents — they are one business described from several angles, and every angle has to agree with the others.

That last point is where most applications come unstuck, and it is worth understanding before you start filling anything in.

Where did this format come from?

The Tandon Committee, commissioned by the Reserve Bank in 1974 and chaired by P.L. Tandon, then chairman of Punjab National Bank.

Before it, working capital lending in India had no standard method. Banks lent on relationships and judgement, and often lent more than a business needed. The Committee introduced three things that still govern the process: a prescribed set of forms, the concept of Maximum Permissible Bank Finance as a mathematical ceiling on how much a bank may lend against working capital, and the principle that a borrower must fund a share of their current assets from long-term sources rather than from the bank.

Five decades on, the same structure is used across commercial banks, cooperative banks and NBFCs. It is why the format feels dated — it is — and why arguing with it is not a productive use of your time.

What is in the forms?

Form	What it shows	What the bank is checking
Existing and proposed limits	Facilities you already hold and what you are asking for	Your current exposure and credit conduct
Operating statement	Sales, costs, profit — past years and projected	Whether the business earns enough to service debt
Analysis of balance sheet	Assets and liabilities across the same period	Whether the balance sheet supports the borrowing
Current assets and liabilities	Receivables, inventory, creditors in detail	Whether the working capital need is genuine
Computation of MPBF	The permissible finance figure	The ceiling on what can be sanctioned
Fund flow statement	Where money came from and went	Whether the other forms reconcile
Ratio analysis	Current ratio, DSCR, gearing and others	The screens the file is judged against

You will see both six and seven quoted, and both are right — some banks fold ratio analysis into the fund flow statement rather than presenting it separately.

What is MPBF, and why does it decide the outcome?

Maximum Permissible Bank Finance is the ceiling on how much a bank may lend you against working capital. It is a calculation, not a negotiation, which is why the number you asked for may be irrelevant to the number you get.

Two methods remain in use. Under Method I, you fund a quarter of the working capital gap from long-term sources and the bank may finance the rest. Under Method II, you fund a quarter of your total current assets — a stiffer test, and the one used for most established borrowers. A third method existed and was discontinued.

The practical consequence: the size of your sanction is largely determined by your own balance sheet before anyone reads your business plan. A business with thin net worth relative to its current assets will find the calculation limiting the facility regardless of how good the projections look.

What ratios does the file get judged on?

Screens rather than fixed rules, and they vary by bank, sector and scheme. The ones you will hear discussed most:

• Current ratio — commonly looked for around 1.33, sometimes 1.25. It follows directly from the MPBF method applied.
• TOL/TNW — total outside liabilities to tangible net worth, often screened at up to about 3.
• Interest coverage — usually 2 or better.
• DSCR — debt service coverage, whether cash flow covers principal and interest.

A file can usually carry one weak ratio if the rest is sound and the reason is explained in the narrative. Two or three weak ratios with no explanation is where applications stall — not because a rule was broken, but because nobody at the bank can construct the argument for you.

When will you be asked for one?

For working capital facilities, and for term loans where the bank wants to see projections. The threshold at which a full CMA is required varies considerably — you will see ₹5 lakh quoted for some working capital facilities and ₹1 crore for the full six-form treatment, and the honest answer is that it depends on the bank, the scheme and the branch.

Ask your relationship manager what their format is before preparing anything. Banks have their own templates, and preparing to a generic one often means redoing it.

What actually makes this difficult?

Not the data entry. The reconciliation.

The forms interlock. Projected sales drive receivables. Receivables drive the working capital gap. The gap sets the permissible finance. The finance figure changes the ratios. And everything has to tie in the fund flow statement.

Change one assumption — a better collection period, a larger sales projection — and the effect travels through every subsequent form. A CMA assembled form by form, each in isolation, almost always comes back from the bank. We have written about that specifically in why CMA files get sent back.

Last verified: 22 August 2026. This is a general explanation of a bank process, not financial advice. Formats, thresholds and ratio screens vary by bank and change — confirm with your bank or a chartered accountant before relying on it.

Common questions

Do I need a chartered accountant to prepare it?

Not formally in every case, though most businesses use one and many banks expect the historical figures to be certified. What matters more is that the projections are defensible and the forms reconcile — a CA who prepares these regularly will get there faster than a first attempt.

How many years does it cover?

Typically two or three years of audited history and two to five years of projections, depending on the facility. The historical figures must match your audited accounts exactly — this is checked.

What if we are a new business with no history?

Then the file rests entirely on projections and on the project report behind them, which raises the standard of evidence considerably. Expect more scrutiny of your assumptions and of the promoter’s contribution.

Can we submit the same CMA to several banks?

The underlying figures should be identical — different numbers to different banks is the kind of thing that ends a relationship. The presentation often has to be reworked to each bank’s template.

More on this: why CMA files get sent back and projections a bank will believe. See also StartYourIndustry.