Many borrowers ask one question:
“How do banks decide how much loan I get?”
Loan limit is not random.
Banks follow financial formulas plus risk rules.
Step 1: Profit check
Banks see last 2–3 years ITR.
Net profit plays major role.
Typical internal rule:
-
EMI should stay within safe portion of income
-
Higher profit means higher eligibility
Step 2: Existing loan burden
Banks calculate total running EMIs.
They subtract this from repayment capacity.
If too many loans running, new limit drops sharply.
Step 3: Bank turnover analysis
Bank statement gives real business activity picture.
They check:
-
Monthly credit average
-
Balance pattern
-
Bounce record
-
Supplier payments
Stable flow builds confidence.
Step 4: GST turnover
For GST registered businesses, lenders compare GST sales with bank credits and financials.
Mismatch raises risk flag.
Step 5: Collateral strength
For secured loans:
-
Property location
-
Construction quality
-
Market demand
-
Legal clarity
All affect sanction amount.
Step 6: Industry risk
Some industries get lower exposure:
-
Seasonal trading
-
Cash heavy business
-
New startup without track record
Established sectors get better support.
How to increase your limit
-
Show stable income growth
-
Reduce unsecured loans
-
Maintain healthy bank balance
-
Keep documents consistent
-
Avoid cheque returns
Final thought
Loan limit is math plus risk judgment.
Stronger financial story leads to bigger approval.
