DSCR Calculator
Whether the asset services its own debt, measured the way a lender measures it.
- Gross income, less vacancy
- ₹22,80,000.00
- Less operating expenses
- −₹4,00,000.00
- Net operating income
- ₹18,80,000.00
- Total debt service — principal plus interest
- ₹11,00,000.00
- Coverage
- 1.71x
Debt service coverage is net operating income divided by everything the debt costs in a year, principal included. Lenders typically want at least 1.20x to 1.25x, and 1.40x or more on riskier assets; below 1.0x the asset does not service its own debt. Net operating income deliberately excludes depreciation, income tax and capital expenditure, and it excludes interest — putting interest in the numerator as well as the denominator is a common error that flatters the ratio. There is no RBI-mandated floor: each lender sets its own, and Indian banks and NBFCs generally look for 1.25x to 1.50x depending on the sector. For project finance, note that lenders look at the minimum-year DSCR as well as the average, and that the average should be the ratio of the sums, not the mean of the yearly ratios.
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Independent · No commissions · No fund-house data — how the numbers are computed
How it works
Debt service coverage is net operating income divided by everything the debt costs in a year — principal repayment as well as interest. It answers a lender's first question: does this asset service its own borrowing, without help.
Net operating income deliberately excludes depreciation, income tax and capital expenditure, and it excludes interest. Leaving interest in the numerator as well as the denominator is a common error that flatters the ratio considerably.
Lenders typically want at least 1.20x to 1.25x, and 1.40x or more on riskier assets. Below 1.0x the asset does not cover its debt at all. There is no RBI-mandated floor — each lender sets its own in its credit policy.
DSCR = net operating income / (annual principal + annual interest), where net operating income = gross income less vacancy and credit loss, less operating expenses.For project and term-loan appraisal, Indian banks use a variant: profit after tax plus depreciation plus interest on the term loan, over interest plus principal. They look at the minimum-year ratio as well as the average across the loan's life.
Frequently asked questions
What DSCR do lenders require?
Usually a minimum of 1.20x to 1.25x for conventional commercial property lending, rising to 1.40x or 1.50x for higher-risk assets or aggressive structures. Indian banks and NBFCs appraising a project loan often want a minimum-year DSCR of 1.20x to 1.25x and an average of 1.50x to 2.00x across the loan's life. None of this is prescribed by the RBI.
What should I exclude from net operating income?
Depreciation, because it is not a cash cost; income tax; capital expenditure and tenant improvements, which are investments rather than operating costs; and interest, which belongs in the denominator. Include property tax, insurance, management fees, repairs, utilities and security, and take a realistic vacancy allowance off gross income rather than assuming full occupancy.
Why average the ratio wrongly matter?
For a multi-year loan the average DSCR should be the sum of the numerators over the sum of the denominators, not the mean of the yearly ratios. Averaging the ratios overweights years with small debt service and can make a marginal project look comfortable. It is a small technical point that materially changes an appraisal.