CMA report for bank loans is an important part of the Indian banking system in terms of credit worthiness of a business. Banks are also very reliant on CMA data to determine the financial strength and ability to repay a loan by the borrower.
Credit Monitoring Arrangement (CMA) is a concept that has been running since October 1988. Until then, between 1965 and 1988, large bank credit was regulated by the Credit Authorisation Scheme (CAS) by the Reserve Bank of India (RBI). In CAS, banks had to seek prior RBI permission to lend credit above the set limits. Though effective, this system resulted in delays and operational problems to both the banks and the borrowers.
In order to address these challenges, RBI formalized the CMA framework that enabled the banks to approve credit proposals on their own terms and guarantee comprehensive financial control by the structuring of CMA data. CMA reports have become a compulsory provision on most working capital loans, term loans, and credit limit extensions.
In this blog, we will explain:
- What a CMA report for bank loans is.
- The relevance of CMA data in banking.
- CMA data format and statements.
- Procedural guide on how to make a CMA project report
- Documents required and common mistakes to avoid
What Is a CMA Report for Bank Loans?
A CMA report is also referred to as a Credit Monitoring Arrangement report and is a comprehensive financial report on a business that shows both the history and future performance of a business in terms of finance.
The CMA report for bank loans incorporates organized financial information, forecasts, and significant proportions that assist the bankers and financial analysts to assess:
- Business profitability
- Cash flow position
- Working capital cycle
- Repayment capability
The majority of banks and other financial institutions require applicants to CMA reports when they seek business loans in order to get an idea of how the money is flowing and how it is utilized. A well-prepared CMA report has a great chance of giving a loan.
CMA Data In Banking – Why Banks Need It
CMA data in banking is a decision making tool. Banks rely on CMA data to:
- Evaluate past financial performance.
- Assess future projections.
- Assess credit risk
- Establish working capital limits.
For large borrowers, banks are also required to submit credit proposals to the Reserve Bank of India for post-sanction scrutiny. Typically, this applies to:
- Working capital of 5 crore and more.
- Term loans exceeding ₹2 crore
Banks will not be able to appropriately evaluate the ability of a borrower to maintain the suggested credit facilities without valid CMA data.
CMA Project Report vs Normal Project Report
A CMA project report is different from a normal project report or DPR.
| Aspect | CMA Project Report | Normal Project Report |
| Purpose | Bank loan assessment | Business planning |
| Focus | Financial analysis & ratios | Business model & vision |
| Projections | Mandatory | Optional |
| Bank Acceptance | Required | Not sufficient |
Banks specifically demand CMA project reports because they provide standardized financial statements and ratio analysis aligned with banking norms.
What Is CMA Data for Bank Loan?
Actually, what is CMA data for bank loan? CMA data for bank loan refers to the financial information shown on a structured CMA format typically includes:
- Last 3 years or more audited financials.
- Provisional data of the current year.
- 3-5 years of financial projections.
Using this data, banks can know:
- Growth trends
- Profit sustainability
- Requirements on working capital.
- Ability to repay in the long term.
What Is CMA Data Format?
Among the most commonly asked questions, there is: What is CMA data format?
CMA data format is made up of many financial statements that serve a particular purpose in credit analysis.
1. Particulars of Current & Proposed Limits
This statement shows:
- Current fund-based and non-fund-based constraints.
- Utilization history
- Suggested or improved credit limits.
It is the fundamental details offered by the borrower to the banker.
2. Operating Statement
The operating statement describes the business performance of the business as it has been running over time:
- Sales (past & projected)
- Profit before and after tax
- Direct and indirect costs.
- Profitability trends for 3-5 years.
This assists banks in determining the ability of the business to generate profit.
3. Analysis of Balance Sheet
This statement makes an in-depth analysis of:
- Current and non-current assets.
- Long-term and current liabilities.
- Cash and bank balances
- Net worth position
It provides an entire view of the financial capability of a borrower.
4. Comparative Statement of Current Assets & Current Liabilities
This statement analyzes:
- Movement of current assets
- Modifications of current liabilities.
- Working capital cycle
It assists banks to evaluate how effectively the borrower can carry out daily running of activities.
5. Calculation of Maximum Permissible Bank Finance (MPBF)
The calculation of MPFB establishes:
- Maximum working capital finance allowed by the bank
- Borrower’s contribution
- Bank’s lending eligibility
This happens to be one of the most significant parts of the CMA report.
6. Fund Flow Statement
The fund flow statement follows:
- Sources of funds
- Application of funds
- Flow of money within the estimated time.
It guarantees efficient use of borrowed money.
7. Ratio Analysis
The final statement contains the major financial ratios which include:
- Gross Profit ratio
- Net Profit ratio
- Current ratio
- Quick ratio
- Debt-Equity ratio
- Stock turnover ratio
- Working capital turnover
- Fixed asset turnover
Bankers use these ratios to assess financial health in a brief period of time.
How to Create a CMA Report for Bank Loans?
Let’s check how to create a CMA report for bank loans without much confusion. We can show you this in 7 simple steps.
- Collect audited financial statements: Prepare the last 2 to 3 years audited balance sheets and profit and loss statements. These demonstrate the performance of your business in the past.
- Prepare provisional financials of the current year: Next, prepare an estimated income and expense statement of the current year so as to present your current business performance.
- Develop realistic financial projections: Budget your future revenues, costs, and incomes in 3 to 5 years. Ensure that the numbers are realistic and realistic.
- Input data into the CMA format: This involves entering all financial information into the standard CMA format that banks require in order to review loan applications.
- Determine MPBF and critical ratios: Determine the Maximum Permissible Bank Finance (MPBF) and fundamental financial ratios to be aware of the amount of loan your business can secure.
- Check balance sheet consistency: Check to ensure that all amounts in the CMA report are reflected properly in your balance sheets and financial statements.
- Review bank-specific format requirements: Lastly, check whether your bank requires a particular format of CMA or other information and update it accordingly.
What are the Common Mistakes to Avoid While Preparing CMA Data?
- Mismatch between CMA data and balance sheet
- Impractical sales or profit expectations.
- Wrong working capital calculations.
- Disregarding bank-specific CMA formats.
- Manual calculation errors
These errors can cost a lot of time or the rejection of a loan.
Who Should Prepare a CMA Report for Bank Loans?
The preparation of a CMA report can be made by:
- Chartered Accountants
- Financial consultants
- Online CMA report software platforms like Finline
In case of large loans, banks often accept CA-certified CMA reports, however, with the introduction of such a tool as Finline, even the business owners can produce fully bank capable CMA reports within minutes, and without any mistakes.
Documents Required to Prepare CMA Report for Bank Loans
- Previous 2 years audited financials
- Provisional financials for the current year
- Latest bank sanction letter (for renewals)
- Term loan repayment schedule (if any)
- GST returns
- Details of proposed loan enhancement
CMA Report for Bank Loans: Online vs Manual Preparation
Excel based CMA preparation is also time-consuming and is prone to error. Online CMA tools offer:
- Faster preparation
- Automated calculations
- Bank-ready formats
- Less possibilities of being rejected.
Many businesses now prefer online platforms for CMA report creation.
How can Finline assist you to generate CMA Reports for Bank loans?
At this moment, creating CMA report for bank loans has never been as easy with the help of Finline. This is a completely automated platform that enables the business owners, chartered accountants to create a bank-ready CMA report within 10 minutes. Using advanced AI technology, Finline ensures that every report is accurate, structured, and accepted by all banks.
Whether you are a small business owner or managing a large enterprise, Finline simplifies the entire process, eliminating manual errors and saving you valuable time. With Finline, you can confidently prepare your CMA report and move one step closer to fast and hassle-free loan approval.
Try Finline today and create your CMA report for bank loans in under 10 minutes! that assists you to generate professional, bank ready CMA reports within a few clicks. Finline is trusted by thousands of entrepreneurs in India, and your report will correspond to all banking standards. Give it a go today and be a step nearer to your loan approval. Create your CMA Report for Bank Loans Today!
