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Documents a bank asks for before an MSME loan
What an Indian bank or NBFC checks before sanctioning a term loan or working capital limit, from CMA data to collateral, and what continues after sanction.
6 min read, facts checked on
How a bank's diligence differs
An investor asks whether the company will grow. A bank asks whether it will repay, and what it can recover if it does not. So the questions lean towards cash flow, existing debt, credit history and security, and they continue after the loan is sanctioned.
Financial statements and returns
- Audited financial statements for the last two or three years, and provisional figures for the current year.
- Income tax returns for the company, and often for the promoters.
- GST returns, which banks use to check that reported sales are real.
- Bank statements for the last six to twelve months, for every account.
- Details of existing loans, with their sanction letters and repayment track record.
Working capital: CMA data and stock statements
For working capital limits, banks usually ask for CMA data: past and projected financials in a standard format, used to assess how much limit the business needs. Once the limit is sanctioned, they often ask for periodic stock and debtor statements, which set how much can be drawn.
Credit history
Banks pull credit reports for the company and its promoters from the credit bureaus. Late payments, settled accounts or high utilisation on existing limits show up here. It helps to check your own reports before you apply.
KYC
KYC for the company (certificate of incorporation, PAN, address proof, GST and Udyam registrations, board resolution authorising the borrowing) and for the directors and major shareholders.
Security and collateral
- Documents for any property offered as collateral: title deeds, encumbrance certificate, approved plans, and a valuation.
- Personal guarantees from promoters, often.
- After sanction, the charge created over the company's assets has to be registered with the ROC (form CHG-1) within 30 days, and satisfied when the loan is repaid. Unregistered or unsatisfied charges from old loans come up in diligence.
Micro and small enterprises may be eligible for collateral-free credit backed by the CGTMSE guarantee scheme; the bank decides whether a loan qualifies.
After sanction
A loan comes with conditions: periodic stock statements, financial covenants, audited accounts each year, insurance of the hypothecated assets, and notice before certain changes in shareholding or management. Keeping these documents current is what keeps a limit renewed without a fresh round of diligence.
See how due diligence works in India for the stages end to end.
Official sources
The rules this guide describes come from these. Check the current text there, or ask your CA or CS.
- Reserve Bank of India: FEMA rules on foreign investment, and MSME lending
- Ministry of Corporate Affairs: company filings, charges and the Companies Act 2013
- Income Tax Department: the Income-tax Act 2025 and returns
- GST portal: registrations, returns and GSTR-9C
- Udyam Registration: MSME registration
This guide explains how things usually work. Your CA, CS or lawyer advises on your company’s case. To see which of these documents apply to your company, run the free due diligence readiness check; for a form or term you do not recognise, see the glossary.