By Sharda Associates | CA Firm, Bhopal, Madhya Pradesh, India
Your CMA report came back with a query letter, and you do not know what happens now.
This is one of the most common calls our CA team receives. A business owner submitted their CMA report weeks ago; the bank finally responded, and instead of a sanction letter, there is a query letter listing problems they do not fully understand. DSCR below benchmark. Balance Sheet discrepancy. MPBF recalculation required. Historical figures not matching ITR.
The first reaction is usually panic. Does this mean the loan is rejected entirely? Does the business have to start over? Will this affect future applications with the same bank?
Here is what we tell every client in this situation. A CMA report return is not a final rejection. It is the bank’s credit officer telling you exactly what is wrong with the document, which is actually useful information. Almost every returned CMA report can be corrected and resubmitted successfully, often within days, once the specific problems are identified and fixed properly.
Sharda Associates is a CA firm based in Bhopal, Madhya Pradesh, India. Our CA team reviews rejected CMA reports every week—identifying exactly what went wrong and preparing corrected, bank-ready documents. We have helped over 45,500 businesses with their loan documentation across India. If your CMA Report has been returned, call +91 89899 77769 today, and our CA will review your bank’s query letter the same day, completely free.
Why Banks Return CMA Reports — The Real Reasons Behind the Query Letter
A CMA Report return almost always falls into one of five categories. Understanding which category your specific query falls into tells you immediately how serious the problem is and how quickly it can be fixed.
Category 1 — DSCR Below the Minimum Threshold
This is the most common reason for return, and in our experience the least serious despite sounding the most alarming. Most banks require DSCR of at least 1.25 for every individual repayment year. A query stating DSCR is below this benchmark usually means one specific thing — depreciation was not added back to net profit when calculating Net Cash Accruals.
Depreciation is a non-cash expense. It reduces accounting profit on paper, but no actual money leaves the business because of it. The correct DSCR formula is Net Profit After Tax plus Depreciation, divided by Loan Repayment plus Interest. When this addition is missing, DSCR can appear less than half of what the business actually generates in real cash terms.
Category 2 — Balance Sheet Not Balancing
A query stating that Total Sources of Funds does not equal Total Application of Funds in one or more projection years points to a linkage error between statements. Usually this means net profit from the Operating Statement was not correctly carried into retained earnings, or depreciation in the Balance Sheet does not match the depreciation shown in the Profit and Loss Statement.
This sounds technical, but it is almost always a single traceable error rather than a fundamental problem with the business.
Category 3 — Historical Figures Not Matching ITR or GST Returns
Banks cross-verify the turnover shown in your CMA Operating Statement against your filed Income Tax Return and GST returns for the same years. A query here means there is a gap between what your CMA shows and what your official filings show for the same period.
This is one of the more serious categories because it raises a credibility question about the entire document — but it is also usually a simple data entry or sequencing error, where figures from one year were placed in the wrong column.
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Category 4 — Wrong MPBF Calculation Method
For working capital applications, a query about MPBF usually means the wrong method was used for your bank and loan size. Most MSME businesses below Rs.5 crore working capital should use the Nayak Committee Turnover Method, while larger borrowers or specific bank requirements call for Tandon Committee Method 2. Using the wrong method produces a CC limit figure that does not match what the bank’s own calculation would produce.
Category 5 — Revenue Projections Not Supported by Capacity or Market Data
A query asking for justification of revenue projections means the bank’s credit officer compared your projected growth against your historical trend or their internal industry benchmarks and found a gap that was not explained. This is common when projections are built backward from a desired loan amount rather than forward from actual production capacity and current market prices.
What to Do in the First 48 Hours After Receiving a Query Letter
The speed and quality of your response to a query letter determines whether your resubmission is approved in the next review cycle or generates a second round of queries that adds another month to your timeline.
Step 1 — Read the Query Letter Line by Line
Banks issue specific queries, not general feedback. Make a list of every individual point raised, in the exact order the bank raised them. Each point needs to be addressed individually in your resubmission, ideally with a brief covering note explaining what was corrected for each query.
Step 2 — Do Not Simply Adjust the Number That Was Flagged
This is the mistake that causes the most second rejections. If DSCR was flagged as low, simply increasing a revenue figure to push DSCR above 1.25 without changing the underlying calculation creates new inconsistencies elsewhere. Statement 3 will no longer balance with the new Statement 2 figures. The credit officer will notice the change does not flow through the linked statements correctly.
The correct approach is to fix the root cause. If DSCR was wrong because depreciation was not added, fix the formula. The DSCR figure that results from the correct formula is the correct DSCR — whatever that number is. If it is still below 1.25 after correction, the fix is loan restructuring, not number adjustment.
Step 3 — Verify All Seven Statements Together, Not Just the Flagged One
A query about Statement 7 ratios often has its root cause in Statement 2 or Statement 4. Before resubmitting, verify that Total Sources equals Total Application in Statement 3 for every year, that depreciation matches between Statement 2 and Statement 3, and that every ratio in Statement 7 can be recalculated independently from the figures in the other statements and arrives at the same number shown.
Step 4 — Get the Documents the Original Preparation Was Missing
Most CMA Report problems trace back to a missing source document. The depreciation schedule from audited accounts. Twelve months of complete bank statements. Current local market prices for raw materials and finished goods. If these were not used the first time, collecting them now is the single most effective step toward a clean resubmission.
How DSCR Problems Get Fixed When the Business Is Actually Viable
The most reassuring thing our CA team can tell a business owner whose CMA was returned for low DSCR is this — in the large majority of cases, the business itself is fine. The document was wrong, not the business.
The Two-Part Fix : The first part is correcting the formula. Net cash accruals equal net profit after tax plus depreciation. For businesses with significant fixed assets or livestock, depreciation can be a substantial figure, and its absence from the calculation is often the entire gap between a DSCR that looks unviable and one that comfortably clears 1.25.
The second part, if DSCR is still below 1.25 after the formula is corrected, is loan restructuring. Extending the loan tenure reduces the annual principal repayment, which directly improves DSCR in every year. Requesting a longer moratorium period delays the start of principal repayment until the business has ramped up to higher production or revenue levels, which is particularly relevant for new manufacturing units, dairy farms, or any business with a genuine ramp-up period before reaching full capacity.
When By-Product or Secondary Revenue Was Left Out : For certain businesses, legitimate revenue streams are sometimes missing from the original Operating Statement entirely. A flour mill generates bran as a by-product with real market value. A dairy farm generates calf sales and manure revenue. Including these at current verified local prices is not optimistic projection. It is an accurate representation of the business that was missing from the first version.
The Outcome When the Fix Is Done Correctly : When DSCR is corrected through the right combination of formula correction, loan restructuring, and complete revenue representation, the resubmitted CMA Report typically shows DSCR rising progressively across the repayment years, often starting marginally above 1.25 in the first repayment year and rising to 2.5 or higher by the later years as the business reaches full operating capacity. This progression is exactly what credit officers want to see, because it reflects how businesses genuinely grow.
At Sharda Associates our CA team has corrected and resubmitted hundreds of CMA reports following exactly this process. Most corrected resubmissions clear appraisal without a second round of queries because the correction addresses the actual root cause rather than the symptom the bank happened to flag first.
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Conclusion
A CMA report return is a moment of useful information, not a dead end. The bank’s credit officer has told you specifically what they need to see corrected before they can move your application forward. In the overwhelming majority of cases we review, the underlying business is sound, and the issues are document preparation problems with specific, identifiable, fixable causes.
The path from a query letter to an approved loan is usually shorter than business owners expect, provided the correction addresses root causes rather than surface symptoms, and provided every point raised in the query letter is verified and resolved together rather than one at a time in isolation.
At Sharda Associates, our CA team reviews rejected CMA reports every week, identifies exactly what went wrong, and prepares corrected, internally consistent, bank-ready documents that give your resubmission the strongest possible chance of clearing appraisal on the next review.
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Frequently Asked Questions
1. Does a returned CMA report mean my loan application is rejected?
No. A returned CMA Report with a query letter is the bank asking for specific corrections before appraisal can continue. It is a request for clarification or correction, not a final rejection. Most returned CMA Reports are successfully resubmitted and approved once the specific issues are addressed.
2. Why was my CMA Report returned for low DSCR when my business is profitable?
The most common cause is depreciation not being added back to net profit in the DSCR calculation. Depreciation is a non-cash expense that reduces accounting profit but does not reduce actual cash generated by the business. Correcting this single formula often resolves the DSCR issue entirely.
3. Can I just change the numbers to get DSCR above 1.25?
No. Adjusting one figure without correcting the underlying linkage between statements creates new inconsistencies that a credit officer will identify, often resulting in a second query. The correct approach is to fix the formula error at its source, and if DSCR is genuinely still below 1.25, restructure the loan tenure or moratorium rather than altering individual figures.
4. How long does it take to correct and resubmit a rejected CMA Report?
With the right documents in hand, a correction and resubmission can typically be completed in 24 to 48 hours. The time required depends on whether additional documents need to be collected, such as a depreciation schedule or twelve months of bank statements that were missing from the original preparation.
5. What is the most common reason CMA reports are returned?
DSCR calculation errors, primarily the omission of depreciation from the Net Cash Accruals figure, are the single most common reason. Balance Sheet imbalance and mismatches between CMA figures and filed ITR returns are the next most common categories.
6. My CMA was returned because the balance sheet does not balance. Is this a serious problem?
It signals a linkage error between statements, usually because net profit was not correctly carried into retained earnings or depreciation figures do not match between statements. It is usually a single traceable error rather than a fundamental issue, and is straightforward to correct once the statements are rebuilt as a properly linked system.
7. Will a returned CMA Report affect my future applications with the same bank?
A query and correction cycle is a normal part of credit appraisal and does not create a negative record. What matters is the quality of the resubmission. A well-corrected resubmission that addresses every point in the query letter clearly is viewed positively, since it demonstrates the underlying business information is being presented accurately.
8. Should I go back to the same person who prepared the original CMA report?
If the original preparation contained the errors that led to the return, the same approach is likely to produce similar issues again. Having the document reviewed by a CA who specifically identifies the root cause of each query point, rather than only addressing the symptom, gives the resubmission a stronger chance of clearing appraisal without further queries.
9. What documents should I send for a CMA report correction review?
Send the bank’s query letter along with the originally submitted CMA report. Our CA team reviews both together to identify the specific root causes and will then request any additional documents needed for correction, such as the depreciation schedule from audited accounts or twelve months of bank statements.
