Project report for a bank loan: what Indian banks check before they lend (2026)
A project report for a bank loan has one job: to show the business can repay. Banks read it for three things: cash that covers every instalment (the DSCR), your own money in the project (margin money), and evidence behind every number (quotations, capacity, prices). Here is the section-by-section format drawn from banks' own checklists, how PMEGP, Mudra and CGTMSE change what you need, the documents to attach, and the gaps that get reports sent back.
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Most project report templates treat the report as a form: fill in the blanks, attach, done. Banks read it as an argument that your business can pay them back. Here is what that argument has to contain, drawn from banks’ own published loan checklists and official pages on PMEGP, Mudra and CGTMSE.
What a banker reads a project report for (the only useful framework)
A project report, which banks often call a DPR (detailed project report), turns a business idea into a loan proposal. Whatever the template, the loan officer is reading it for three things.
Check 1: Can the business repay from its own cash?
The bank wants to see projected cash covering each year’s instalment, for every year of the loan. Karur Vysya Bank’s MSME checklist asks term-loan applicants for projections for the entire tenor of the loan, with DSCR. Union Bank of India’s asks for projected profit and loss and balance sheets for the next 7 to 8 years, and projected balance sheets for the full period of a term loan.
Check 2: Is the promoter’s own money in?
Margin money is the share of the project cost you fund yourself. City Union Bank’s checklist asks where it comes from, and for a schedule of your money going in against the bank’s term-loan drawals.
Check 3: Is every number backed by evidence?
Checklists ask for machinery quotations, installed capacity and assumed utilisation, the availability of raw material, power and labour, and the market: buyers, competitors, any off-take agreement. Every rupee of projected revenue should trace back to a capacity, a price and a buyer.
The sections of a bank-ready project report
This builds on what City Union Bank, Union Bank of India and Karur Vysya Bank list. Formats differ a little, so ask your branch for theirs.
| # | Section | What goes in | What the banker checks |
|---|---|---|---|
| 1 | Promoter and business profile | Experience, legal form (proprietorship, partnership, company), activity, address | That you can run it, and that it matches your KYC |
| 2 | Market | Buyers, prices, competitors, orders in hand or off-take agreements | That the sales line is believable |
| 3 | Operations | Installed capacity, assumed utilisation, process, machinery, raw material, power, labour | That the output is physically possible |
| 4 | Cost of project | Land, building, machinery (with quotations), other fixed assets, working-capital margin | A quotation or estimate behind each line |
| 5 | Means of finance | Your contribution, term loan, working-capital loan, any subsidy | That sources equal uses, and your share is real |
| 6 | Projections | Profit and loss, balance sheet and cash flow for every year of the loan, assumptions written out | A realistic ramp-up |
| 7 | Ratios | DSCR, IRR, break-even point | Cash covering debt service every year |
| 8 | Approvals and schedule | Licences, pollution-control applicability, implementation schedule, start of production | That the project starts when the projections say it does |
If you are applying under PMEGP, two rules change section 4: Bank of Maharashtra’s PMEGP page notes that the cost of land is not included in the project cost and that projects without capital expenditure are not eligible. A regular term-loan report can show land in the cost of project (City Union Bank’s checklist lists it); a PMEGP report cannot, and it has to buy assets.
Financial projections and DSCR: the number that decides the loan
DSCR, the debt service coverage ratio, measures how many times a year’s cash covers that year’s loan payments. The usual calculation for a term loan, year by year:
DSCR = (profit after tax + depreciation + interest on the term loan) ÷ (principal repaid + interest on the term loan)
Depreciation is added back because it is a cost on paper, not cash leaving the business; interest is added back because it is paid out of the same cash and sits in the denominator. A DSCR of 1.0 means all of that cash goes to the bank, with nothing to spare.
There is no single RBI-mandated DSCR for a new loan; each bank sets its own floor in its credit policy. As one published example, Central Bank of India’s cold-storage scheme page lists a minimum average DSCR of 1.25 for MSME units, in line with its Master Credit Policy 2025-26. Treat that as one bank’s floor for one scheme, not a target. Ask your branch for theirs, then build in headroom.
A worked example
Illustrative only: a ₹15 lakh term loan, ₹3 lakh of principal repaid each year over five years, an assumed 10% interest on the balance at the start of each year, and ₹1.5 lakh of depreciation a year. Figures in ₹ lakh.
| Year | Profit after tax | Depreciation | Interest | Cash available | Principal | Debt service | DSCR |
|---|---|---|---|---|---|---|---|
| 1 | 3.0 | 1.5 | 1.5 | 6.0 | 3.0 | 4.5 | 1.33 |
| 2 | 3.4 | 1.5 | 1.2 | 6.1 | 3.0 | 4.2 | 1.45 |
| 3 | 3.8 | 1.5 | 0.9 | 6.2 | 3.0 | 3.9 | 1.59 |
| 4 | 4.0 | 1.5 | 0.6 | 6.1 | 3.0 | 3.6 | 1.69 |
| 5 | 4.2 | 1.5 | 0.3 | 6.0 | 3.0 | 3.3 | 1.82 |
The five yearly ratios average 1.58, which looks comfortable. Year one is the real test: if year-one profit came in at ₹1.5 lakh instead of ₹3 lakh, DSCR would fall to exactly 1.0 ((1.5 + 1.5 + 1.5) ÷ 4.5), with nothing left for a bad month. Run that downside case before the banker does.
To keep projections credible, ramp utilisation up over the first years and say why; price from current quotations and real market prices; and include working capital, because profit on paper is not cash in the bank (the point of our essay Cash flow buys time). Show any moratorium in the cash flow; PMEGP loans, for example, are repaid over 3 to 7 years after an initial moratorium.
Margin money: how much of your own money goes in
Under a plain term loan, the bank sets the margin. Under PMEGP the scheme sets it, with a subsidy on top:
| PMEGP category | Your contribution | Subsidy, urban | Subsidy, rural |
|---|---|---|---|
| General | 10% of project cost | 15% | 25% |
| Special: SC, ST, OBC, minorities, women, ex-servicemen, transgender, differently abled, North East, aspirational districts, hill and border areas | 5% of project cost | 25% | 35% |
DIC Ganjam’s scheme note puts the bank loan at 90–95% of the sanctioned project cost; Bank of Maharashtra describes it as the balance of the project cost after your contribution. The subsidy applies to projects of up to ₹50 lakh in manufacturing and ₹20 lakh in business or service; above that, banks may finance the balance without subsidy. Applicants must be over 18, only one person per family (self and spouse) is eligible, and projects above ₹10 lakh (manufacturing) or ₹5 lakh (service) need at least a Class VIII pass. One check before you start: Bank of Maharashtra’s page describes PMEGP as approved for five years, 2021-22 to 2025-26, so confirm with KVIC or your District Industries Centre that it is taking new applications, and on what terms, before you build the report around it. Mudra loans carry no subsidy unless the proposal is linked to a government scheme that provides a capital subsidy.
Scheme by scheme: what changes in the report
| Route | Who it is for | Size | What it changes for your report |
|---|---|---|---|
| PMEGP | Individuals over 18 setting up new micro enterprises outside the scheme’s negative list | Project cost up to ₹50 lakh (manufacturing) or ₹20 lakh (service) | Upload the report with your online application on KVIC’s PMEGP portal. EDP training under the revised guidelines: at least 5 days up to ₹5 lakh, at least 10 days above, not mandatory up to ₹2 lakh. |
| Mudra (PMMY) | Micro enterprises with an income-generating activity in manufacturing, processing, trading or services, plus agri-allied activities, needing up to ₹20 lakh | Shishu up to ₹50,000; Kishor up to ₹5 lakh; Tarun up to ₹10 lakh; Tarun Plus up to ₹20 lakh after repaying a Tarun loan | MUDRA refinances lenders; it does not lend. Apply to a bank, MFI or NBFC, or via Udyami Mitra. Shishu has a one-page form, other tiers three pages; the lender decides the rest. |
| CGTMSE | Micro and small enterprises borrowing from CGTMSE’s member banks, NBFCs and financial institutions | Collateral-free credit up to ₹10 crore per borrower | A guarantee behind your lender’s collateral-free loan, covering 75–90% by loan size, borrower category and location. Annual fee at a standard rate of 0.37% for loans up to ₹10 lakh, higher for larger loans and adjusted by lender and borrower category; the lender decides who pays. |
| Bank term loan | Any MSME | The bank’s own limits | The full standard: DSCR projections for the whole tenure, quotations, and three years’ balance sheets if you’re already trading. |
Sources: PMEGP from Bank of Maharashtra, DIC Ganjam and the Andaman & Nicobar Industries Department; Mudra from mudra.org.in and its FAQ; CGTMSE from cgtmse.in and its fee FAQ.
On collateral, the rules moved this year. Under RBI’s MSME lending amendment of 9 February 2026, banks must not take collateral on loans of up to ₹20 lakh to micro and small enterprises sanctioned or renewed on or after 1 April 2026; the one exception RBI allows is gold or silver that a borrower pledges voluntarily. Under their own policy, they may raise that limit to ₹25 lakh for units with a good track record and financial position, and they are advised to lend collateral-free up to ₹20 lakh to all PMEGP units. Above that, a lender that is a CGTMSE member can still lend without collateral and cover the loan with a CGTMSE guarantee.
Documents banks ask for
These recur across the Union Bank of India, Karur Vysya Bank and City Union Bank checklists; get your own bank’s list first.
- Identity and business: KYC of the applicant and guarantors (Aadhaar, PAN, voter ID), proof of business address, partnership deed or memorandum and articles, Udyam Registration certificate, and the licences that apply.
- The project: the project report, machinery quotations or pro-forma invoices, a rent or lease agreement (or title deeds for property offered as security), pollution-control clearance where it applies, and building plans and estimates if you are building.
- Financials: for an existing business, three years of balance sheets with income tax and GST returns (Union Bank of India accepts unaudited ones if your total borrowing from all banks and financial institutions is under ₹25 lakh); for promoters and guarantors, a statement of assets and liabilities and latest income tax returns.
- PMEGP adds: Aadhaar, educational certificate, caste or special-category certificate if applicable, photograph and a population certificate from the appropriate authority, as listed by DIC Ganjam.
For Mudra loans, MUDRA’s FAQ says a PAN card is not compulsory (you still have to meet the lender’s KYC rules) and income tax returns are generally not insisted on for small loans.
Why project reports get sent back
- The application is incomplete. Bank timelines assume a complete file: Bank of Maharashtra commits to 14 working days for MSME proposals up to ₹25 lakh and six weeks for those above ₹25 lakh and up to ₹25 crore, provided the application is complete and carries the documents on its checklist. A missing quotation can take your file outside that promise.
- DSCR misses the bank’s floor, or clears it only on optimistic assumptions.
- Numbers without evidence: revenue with no capacity or price behind it, machinery with no quotation.
- Margin money with no visible source.
- The scheme doesn’t fit. For PMEGP: a negative-list activity (DIC Ganjam’s list includes producing, processing or selling meat or intoxicants such as beedi, pan and cigarettes, and cultivation, sericulture, horticulture and floriculture), land in the project cost, no capital expenditure, or a capital subsidy already taken under another central or state scheme.
- Credit history. Union Bank of India’s checklist says the applicant must not be a defaulter with any bank or financial institution.
If you’re turned down, ask for the reasons in writing. RBI’s 2007 Fair Practices Code for Lenders told banks to convey the main reasons for rejecting a loan application in writing, for all categories of loans whatever the amount. RBI’s site now marks that circular withdrawn, but the duty carries on in banks’ own fair lending codes: City Union Bank’s, updated under RBI’s Commercial Banks – Responsible Business Conduct Directions, 2025, commits to giving the main reasons in writing within one month of receiving the application. Check your own bank’s code for its timeline. For Mudra, MUDRA’s FAQ says you can escalate within the bank or approach another bank, NBFC or MFI.
Where Nilam fits
Nilam is MoonProduct’s district-by-district business research tool: every idea ships with its capex, payback period, risk level and a frank note on what’s hard about it. When an idea holds up, Nilam can generate a bank-ready project report you can take to a lender, no consultant required, so you can move from idea to loan application. Start from the business closest to yours on nilam.moonproduct.tech.
Treat any generated report the way a banker will: replace every assumption you can with your own quotations and prices before it goes in.
The honest caveat
A project report doesn’t get a loan approved; the bank decides on the merits of the proposal, as MUDRA’s own FAQ says. Scheme limits and bank policies change too, and RBI rewrote the collateral-free limit this year. The figures here are from official scheme and bank pages as of October 2026; confirm them with your branch, District Industries Centre or KVIC before you file. And MUDRA says plainly that it engages no agents or middlemen for Mudra loans, so be wary of anyone who charges to “arrange” one.
If you’re still choosing what to build, start with How to generate business ideas (and validate them in 7 days). For capital-heavy plays, where the project report matters most, read Manufacturing business ideas in India 2026.