June 24, 2026

Techno Economic Feasibility Report for Bank Loan The Rejection That Wasn’t About the Business In India, about 70% of MSME loan applications may be rejected not due to the strength of the business idea but because of the project documents. That number, often quoted in the Reserve Bank of India’s financial inclusion reports, is an unfortunate paradox – India has the capital, and the ideas are brought to the table by the nation’s entrepreneurs, but the paperwork doesn’t. Techno-Economic Feasibility Report (TEFR) is the document that forms the basis of all possible bank sanction processes. If you ask any MSME relationship manager from Punjab National Bank, Bank of Baroda or SIDBI, they will all reply the same: MSME feasibility report. It’s not about the entrepreneur’s enthusiasm. Not the opportunity pitch for the market. The report. In India, most first-generation entrepreneurs, who are rice mill owners in the state of Chhattisgarh, garment manufacturing in Tiruppur, cold storage investor in Agra, etc., take months to choose the equipment and negotiate land, and invest just two days in the report. That’s the exact opposite ratio. Poorly written TEFR will sink an otherwise good project. With a proper structure a one can sanction a ₹5 crore in 8 weeks. Here’s the inside scoop on what a bank-grade TEFR includes, how to assemble each section, and what sets it apart from the rejected documents that languish in a credit manager’s rejection bin. Related Article: Detailed Project Report (DPR) Consultants in India: How to Get Bank Loan and Government Subsidy for Your Business Why Most Project Reports Fail at the Bank Counter The formal banking system consisting of public sector banks, private banks and development finance institutions (DFIs) such as SIDBI have together allocated more than ₹22 lakh crore to support MSME loans as per their respective priority sector policies. However, penetration of credit into micro and small businesses is still very low. The shortage is not due to the lack of money. It is caused by poor quality project documentation. One of the most consistent findings in the Reserve Bank of India’s annual report on MSMEs is that ‘inadequate financial data’ and ‘insufficient technical details’ are the main reasons for the MSME applications to be rejected. There are many applicants that present what they term a ‘project report’ which is actually a simple spreadsheet with projected revenues and a quotation from a supplier pasted into it. A structured document which contains three layers of analysis is called a Techno-Economic Feasibility Report: Analysis of the technical aspects — what is to be produced, how it is to be produced, and what infrastructure is required for the production. Economic analysis — will the unit be able to produce cash sufficient to pay back the loan and to show a profit? Risk evaluation – what can go wrong and have they done something to minimise the risk? The TEFR is used by banks in India as a report for Due Diligence Input Report (DDIR) before the credit sanction committee meeting. The credit officer has nothing to go on but the entrepreneur’s past, if there is a credible TEFR. As per the Ministry of MSME’s Udyam registration portal, there are more than 4.6 crore MSME’s in India registered with the ministry. Only a small proportion of these have sought formal bank finance. One of the reasons is the quality of documentation – which is 100% fixable. Table 1: Common TEFR Deficiencies and Their Impact on Loan Applications TEFR Deficiency Section Affected Bank’s Concern Rejection Risk No break-even analysis Financial Projections Can the unit survive a bad quarter? High Missing pollution NOC reference Regulatory Compliance Will the plant face shutdown orders? High Equipment cost without quotations Capital Cost Estimate Is the capex realistic or inflated? Medium-High No raw material sourcing plan Technical Feasibility Supply disruption risk unquantified Medium Promoter contribution not shown Funding Pattern Is the promoter committed? High No sensitivity analysis Risk Assessment What if revenue falls 20%? Medium Generic market study, no India data Market Feasibility Is there real demand for this product? Medium-High Missing working capital estimate Financial Projections How will day-to-day operations run? High The Window That Policy Has Opened The credit scenario for MSMEs manufacturing has significantly improved in India. There are now several policy instruments that reduce the risk on bank lending to units that provide a credible feasibility plan. Collateral free loan guarantees up to ₹5 crore have been introduced for micro and small enterprises through the Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) run by Government of India and SIDBI. Banks are much more likely to make loans through CGTMSE — and a decent TEFR is the most important document needed to activate the guarantee. PMEGP (Prime Minister’s Employment Generation Programme) is administered by KVIC, which provides capital subsidy ranging from 15% to 35% of the project cost for the first-generation entrepreneurs for the setting up of manufacturing units. Subsidy shall be disbursed based on the Detailed Project Report (DPR) – which is equivalent to a TEFR. Production Linked Incentive (PLI) schemes in 14 sectors (food processing, specialty chemicals, electronics, etc.) mandate for larger investments demand techno-economic documents to be submitted when claiming incentives. Some states such as Gujarat, Tamil Nadu, Karnataka and Telangana have state-level MSME investment policies which require a feasibility report for disbursement of incentives. Having a well-balanced TEFR is more than just a business case for bank loans. A well-formulated report is also a: Rationale for the application of CGTMSE guarantee Requests for refinancing by SIDBI will be handled technically by the technical input The main exhibit in an equity investment or joint venture talks The compliance documents required for availing the MSME incentive from the state governments. According to SIDBI’s MSME Pulse report, credit is available at lower interest rates and with faster sanctioning periods at MSMEs with structured techno-economic documentation (6–10 weeks) as compared to the undocumented ones (18–24 weeks). Get Detailed Insights from This Book: Select & Start Your Own Industry