Short answer: CMA stands for Credit Monitoring Arrangement. The name is
misleading — it is not a report on a loan you already hold. It is the analytical
pack a bank uses to size your working capital limit, usually seven prescribed
statements, and it is most often asked for before anything is sanctioned.
Read literally, "Credit Monitoring Arrangement" sounds like an ongoing
surveillance document — something the bank runs on a facility already in place.
In practice it is an appraisal document. When a credit officer asks for "your
CMA", they are asking you to demonstrate, in a standard format they can compare
against every other file on their desk, that:
- the working capital you are asking for is genuinely needed;
- the projections behind it are consistent with your history; and
- the business can service the limit.
The term survives from an era when the Reserve Bank prescribed how banks were to
monitor large credit exposures. The format outlived the framework that named it.
Seven statements, each doing one job:
| What it establishes |
|---|
| Form I | Existing limits and what is being asked for |
| Form II | Operating statement — past and projected performance |
| Form III | Analysis of the balance sheet |
| Form IV | Comparative current assets and current liabilities |
| Form V | Computation of MPBF — the number everything builds to |
| Form VI | Fund flow statement |
| Form VII | Ratio analysis |
Form V is the destination. Maximum Permissible Bank Finance is the working
capital gap the bank will fund after deducting the margin you are expected to
contribute. Everything before it is the evidence; everything after it is the
cross-check.
For each statement worked through with actual figures, see
the CMA data format explained with a worked example.
The vocabulary around this is loose, and the same document gets called several
things:
- CMA statement / CMA report / CMA projections — the same pack.
- CMA format in Excel — the template, not a different document.
- Project report — a genuinely different thing. It justifies a proposed
venture; CMA assesses an operating working capital cycle. See
CMA data vs project report vs DPR.
- MPBF — a figure computed within the CMA, not a separate document.
Broadly, businesses seeking or renewing fund-based working capital — cash
credit or overdraft — above the threshold the particular bank applies.
Two things worth knowing about that threshold:
- It is bank policy, not law. There is no statutory figure, which is why one
bank asks and another does not for a similar limit.
- It sits well above the small-ticket range. Micro-enterprise and
government-scheme borrowing is generally assessed on far simpler documents —
see CMA data for a Mudra loan.
Not arithmetic. Projections that do not reconcile with history.
A credit officer reads Form II against Form III and Form VII, and what they are
testing is whether the story holds together: sales projected to rise 40% with
debtor days unchanged, or a creditor cycle that quietly stretches to fund the
growth, or a margin that improves for no stated reason.
Each of those is answerable — but it has to be answered in the file, not in a
phone call three weeks later. The projections need a reason, and the reason needs
to be visible in the numbers.
The same statements come back at every renewal, and the bank rechecks a narrower set of things the second time — see CMA data for a cash credit renewal.
Knowing what the pack is does not settle who should build it. Who is allowed to prepare CMA data, and what the branch does with it once it arrives, is set out in who prepares it and how the bank reads it.
This is a working reference. Bank formats and thresholds vary, so confirm what
your lender specifically requires before preparing the pack.