DSCR stands for debt service coverage ratio. It answers one question: for every rupee of interest and principal due this year, how many rupees of cash did the business generate?
DSCR = (PAT + depreciation + interest on debt + lease rentals) / (interest + principal + lease rentals)
RBI’s Credit Risk Management Directions describe the top line, earnings before interest and depreciation, in the same way: profit after tax, plus depreciation, plus interest on debt, plus any lease rentals. Some lenders leave lease rentals out when a borrower has none, which changes nothing.
Example, made-up numbers
| Item | ₹ lakh |
|---|---|
| Profit after tax | 30 |
| Depreciation | 12 |
| Interest | 18 |
| Cash available | 60 |
| Interest + principal of 22 | 40 |
| DSCR | 1.50 |
A DSCR above 1 means the year’s cash covered the year’s debt service. Below 1, the business had to find the difference somewhere else.
The acceptable level depends on your institution’s policy, the product and the tenor.
Sources
- Commercial Banks – Credit Risk Management Directions, 2025 (RBI/DOR/2025-26/157), Reserve Bank of India, 28 Nov 2025, as updated