CMA data for a bank loan: format, Forms II to VI and how to prepare it
CMA data is the set of past, current and projected financial statements a bank uses to assess a working capital limit such as cash credit or an overdraft. The usual format has six forms: Form I (limits), Form II (operating statement), Form III (balance sheet analysis), Form IV (current assets and liabilities), Form V (MPBF) and Form VI (funds flow). Prepare Forms II and III first, because the other forms draw on them.
This article explains the format and walks through one example. If you already know the format and want to avoid the usual errors, read the CMA mistakes that delay sanction.
What CMA data is, and who decides the format
CMA stands for Credit Monitoring Arrangement, an old Reserve Bank of India mechanism. The forms outlived it, and they follow the Tandon Committee's way of thinking about working capital.
RBI has withdrawn the earlier MPBF prescription based on a 1.33 current ratio. Banks are now free to decide their minimum current ratio and to evolve their own system for assessing working capital. So the format is banking practice more than a legal requirement, and each bank's credit policy decides what it wants. Some banks use their own template, but the content is broadly the same.
A typical CMA covers five years: two audited years, the current year (estimated) and two projected years. Banks may ask for more, especially when a term loan runs alongside the working capital limit.
The six forms at a glance
| Form | Name | Question it answers |
|---|---|---|
| I | Particulars of existing and proposed limits | What does the borrower have, and what is it asking for? |
| II | Operating statement | How has the business earned, and what does it expect to earn? |
| III | Analysis of balance sheet | How is the business funded, and what does it own? |
| IV | Comparative statement of current assets and current liabilities | How much is locked in stock and debtors, and who funds it? |
| V | Computation of maximum permissible bank finance | How much can the bank fund? |
| VI | Funds flow statement | Where did long-term money come from and go? |
Form I: existing and proposed limits
Form I lists the facilities with all banks and lenders: type of limit, sanctioned amount, outstanding and the limit now requested. It is the shortest form and the easiest to get wrong, because it must agree with the bank statements, sanction letters and the credit bureau report. A loan missing from Form I raises a question that has nothing to do with the numbers.
Form II: operating statement
This is the profit and loss account rearranged for credit analysis. It runs from sales through raw materials and manufacturing costs to cost of production and cost of sales, then selling and administrative expenses, interest, profit before tax, tax and profit after tax. The arrangement matters because stock holding periods are measured against these cost lines.
Form III: analysis of balance sheet
Form III regroups the balance sheet into current liabilities, term liabilities, net worth, current assets, fixed assets and non-current assets. Banks read this classification closely, and it often differs from the audited presentation. For example, term loan instalments due within twelve months sit in current liabilities, and old debtors or loans to associates may be pushed out of current assets.
Form IV: comparative statement of current assets and liabilities
This form breaks current assets and liabilities into detail, with holding levels in days or months: raw material, work-in-progress, finished goods, receivables and creditors. A jump in holding days from one year to the next needs a reason. The drawing power a borrower later enjoys rests on the same stock and debtors.
Form V: computation of MPBF
Form V works out the maximum permissible bank finance using the Tandon methods. It starts with total current assets, deducts other current liabilities to reach the working capital gap, and then applies the borrower's contribution.
Form VI: funds flow statement
Form VI shows long-term sources (profit, depreciation, new capital, term loans) against long-term uses (capex, repayments, withdrawals). The surplus or deficit is the change in net working capital. This form is a useful test, because if it does not tie to Form III, something in the CMA is wrong.
How to prepare CMA data, step by step
- Collect the documents. Audited financials with schedules, the latest provisional figures, stock and debtor statements, sanction letters, GST returns and the capex plan.
- Understand the business first. Know the operating cycle, how the business buys and sells, and how its capacity is used.
- Fill Form II for the audited years. Place each expense by its nature, not by the audited grouping.
- Fill Form III and tally it. The balance sheet difference must be zero in every year.
- Estimate the current year. Use actual figures to date plus a realistic estimate for the remaining months.
- Project the next two years. Start from sales and capacity, then carry past holding days and cost ratios forward unless there is a stated reason to change them.
- Build Forms IV, V and VI from those figures, and check that they agree with each other.
- Write a short covering note explaining the assumptions.
The online CMA tool handles steps 3 to 6 and the MPBF. Enter five years of P&L and balance sheet figures, and it shows the balance sheet difference, ratios, holding days, MPBF methods and a credit officer's checks, with an Excel download. It does not generate Form I or a funds flow statement, so prepare those separately.
A worked example
A typical case: a small manufacturer projects sales of ₹1,200 lakh (₹12 crore) for the coming year. All figures below are in ₹ lakh and are illustrative.
Form II (projected year)
| Item | ₹ lakh |
|---|---|
| Sales | 1,200 |
| Raw material consumed | 720 |
| Other manufacturing expenses, including depreciation of 30 | 240 |
| Cost of production and cost of sales | 960 |
| Selling and administrative expenses | 120 |
| Interest | 38 |
| Profit before tax | 82 |
| Tax at 30% | 24.6 |
| Profit after tax | 57.4 |
Cash accruals are 57.4 + 30 = ₹87.4 lakh.
Form III (closing position)
| Liabilities | ₹ lakh | Assets | ₹ lakh |
|---|---|---|---|
| Creditors | 90 | Stock | 160 |
| Statutory and other dues | 30 | Debtors | 200 |
| Term loan instalments due within a year | 20 | Other current assets | 40 |
| Bank working capital limit | 160 | Total current assets | 400 |
| Current liabilities | 300 | Net fixed assets | 300 |
| Term loan (long-term portion) | 80 | Other non-current assets | 20 |
| Unsecured promoter loans (subordinated) | 40 | ||
| Capital and reserves | 300 | ||
| Total | 720 | Total | 720 |
Form IV (holding levels)
- Stock: 160 ÷ 960 × 365 = about 61 days
- Debtors: 200 ÷ 1,200 × 365 = about 61 days
- Creditors: 90 ÷ 720 × 365 = about 46 days (taking raw material consumed as purchases)
Form V (MPBF)
- Other current liabilities (excluding the bank limit): 90 + 30 + 20 = 140
- Working capital gap: 400 − 140 = 260
- Method I: 75% × 260 = ₹195 lakh
- Method II: (75% × 400) − 140 = ₹160 lakh
For comparison, the turnover method gives 20% × 1,200 = ₹240 lakh. RBI's FAQ on MSMEs refers to this method, based on the Nayak Committee, for limits up to ₹5 crore. The figure is only one view of the need, since the bank will still test it against the stock and debtors the business actually carries. You can test these numbers in the MPBF calculator.
With a limit of ₹160 lakh, the current ratio is 400 ÷ 300 = 1.33 and net working capital is 400 − 300 = ₹100 lakh, which is 25% of current assets.
Form VI (funds flow)
- Long-term sources: cash accruals of 87.4
- Long-term uses: capex of 40 and term loan repayment of 20, total 60
- Surplus: ₹27.4 lakh, added to net working capital
So net working capital rises from ₹72.6 lakh to ₹100 lakh. Now check it from Form III: long-term funds of 420 (300 + 40 + 80) less non-current assets of 320 (300 + 20) gives ₹100 lakh. The two agree, which is exactly what a credit officer looks for.
How a bank reads the finished CMA
In practice, banks read the forms in this order: past performance in Form II, then gearing and liquidity in Form III, then holding periods in Form IV, and only then the limit in Form V. The benchmarks most credit teams use, such as a current ratio of 1.33 and a TOL/TNW of around 3, are common norms, and each bank sets its own.
The limit in Form V is a calculation, not a decision. The bank still weighs the track record, conduct of the account, security and the sector.
Frequently asked questions
Does RBI prescribe the CMA format? RBI has withdrawn the earlier MPBF prescription and leaves banks free to set their own assessment system. The forms continue as common banking practice, and each bank decides what it requires.
How many years of data does a CMA need? Typically five: two audited, the current year estimated and two projected. Check with the bank, because some ask for more.
Is CMA data needed for every working capital limit? Not always. For smaller limits, banks often use the turnover method and a simpler set of financials. Ask for the bank's requirement before preparing the full set.
Who prepares CMA data? Usually the borrower's chartered accountant, working with the promoter. The promoter must own the projections, because the bank will question them.
Sources
- RBI FAQs: Micro, Small and Medium Enterprises (assessment of working capital, 20% of turnover for limits up to ₹5 crore)
- RBI Master Circular: Management of Advances, UCBs, 2009 (MPBF prescription withdrawn; banks free to decide the minimum current ratio and assessment system)
