CMA (Credit Monitoring Arrangement) Report
A CMA (Credit Monitoring Arrangement) Report is a financial analysis report commonly required by banks and financial institutions in India when evaluating working capital loans, term loans, or enhancement of existing credit facilities. It helps the lender assess a borrower’s financial health, repayment capacity, and future funding requirements.
Information required to prepare a CMA Report
Typically, the following documents and information are needed:
- Audited financial statements for the last 2–3 years
- Provisional financial statements (if available)
- Projected financial statements for the next 3–5 years
- GST returns and sales details
- Income tax returns
- Details of existing loans and credit facilities
- Stock statements
- Debtors and creditors ageing
- Production or service capacity details
- Bank statements
- Details of promoters’ capital and unsecured loans
A standard CMA report usually includes the following details:
| Statement | Purpose |
|---|---|
| 1. Particulars of Existing & Proposed Limits | Shows current credit facilities and the additional limits requested. |
| 2. Operating Statement | Projects sales, purchases, expenses, profit, and net income for past and future years. |
| 3. Analysis of Balance Sheet | Summarizes assets, liabilities, and net worth over multiple years. |
| 4. Comparative Statement of Current Assets & Current Liabilities | Analyzes working capital components. |
| 5. Maximum Permissible Bank Finance (MPBF) | Calculates the eligible working capital finance as per the bank’s lending norms (where applicable). |
| 6. Fund Flow Statement | Explains the movement of funds between two balance sheet dates. |
| 7. Cash Flow Statement | Shows cash inflows and outflows from operating, investing, and financing activities. |
| 8. Ratio Analysis | Includes key financial ratios such as Current Ratio, Debt-Equity Ratio, DSCR, Interest Coverage Ratio, Inventory Turnover, Debtor Turnover, etc. |
| 9. Working Capital Assessment | Evaluates the working capital gap and bank finance requirement. |
| 10. Assumptions & Notes | Explains the basis for financial projections and key assumptions used. |
Why banks require a CMA Report
Banks use the report to:
- Assess the borrower’s repayment capacity.
- Determine working capital requirements.
- Evaluate financial performance and trends.
- Analyze projected profitability and cash flows.
- Decide on sanction, renewal, or enhancement of credit limits.
