Debt Service Coverage Ratio (DSCR) Calculator

DSCR shows how easily a business can repay its debt using operating income. A ratio of 1.25 or higher is generally considered healthy.

Income before interest and taxes from normal operations.
Total loan principal you’ll repay in this financial year.
Total interest payable on loans during the year.

What is DSCR (Debt Service Coverage Ratio) for Bank Loan?

The Debt Service Coverage Ratio (DSCR) is a key financial metric used by banks and financial institutions to measure a borrower’s ability to repay loans. It compares a company’s net operating income to its total debt obligations (principal + interest).
In simple words, DSCR tells how comfortably your business can repay its loans from its profits.

  • A higher DSCR means the company earns much more than it needs to pay debts.
  • A lower DSCR indicates a higher risk of default and financial stress.

👉 As per international standards, a DSCR above 1.25 is considered healthy.

DSCR Formula

Debt Service Coverage Ratio (DSCR) is calculated using the following formula:

DSCR = Net Operating Income ÷ (Principal Repayment + Interest Payment)

Example:
If your Net Operating Income is ₹12,00,000 and your total annual debt payments (Principal + Interest) are ₹8,00,000, then:

DSCR = 12,00,000 ÷ 8,00,000 = 1.5

✅ A DSCR of 1.5 means your income is 50% higher than the debt payments — an excellent sign of financial health.

What Does DSCR Indicate?

DSCR RangeMeaningInterpretation
Above 1.25ExcellentBusiness comfortably meets debt obligations
1.00 – 1.24AverageIncome just covers loan payments
Below 1.00PoorIncome is not enough to service debt

Why DSCR Matters for Businesses?

Banks, NBFCs, and investors use DSCR to assess a borrower’s financial strength before approving a loan.

  • It helps banks understand if you can repay EMIs without stress.
  • A high DSCR improves your loan approval chances and may help negotiate better interest rates.
  • It also helps business owners evaluate their financial stability before taking additional debt.

FAQs on DSCR Calculator for Bank Loan

Q1. What is a good DSCR ratio?
A DSCR above 1.25 is considered good as per international banking standards. It means your income is 25% higher than your debt obligations.

Q2. Can DSCR be less than 1?
Yes. A DSCR below 1 indicates that the company’s income is not enough to pay its debt, which is a sign of poor financial health.

Q3. How can I improve my DSCR?

  • Increase revenue or profits.
  • Reduce expenses or debts.
  • Refinance loans at a lower interest rate.
  • Avoid unnecessary borrowings.

Q4. Why is DSCR important for loan approval?
Banks use DSCR to decide whether a borrower can safely handle loan repayments. A good DSCR ratio increases loan eligibility and creditworthiness.

Q5. Is hellobanker DSCR calculator free?
Yes, this is a free online DSCR calculator. You can use it unlimited times to check your financial health or business loan eligibility.