Corrected Effective Credit Management

Effective Credit Management
Presentation By
R. Kumaresan ADGM- CD
HO Credit Division
F actors Influencing Credit Decisions
Credit refers to
Running/Operative Limit (SODL)
Term Loan
Off-Balance Sheet Transaction (Bank Guarantee)
Management refers to
Pre-sanction appraisal
Documentation
Disbursement and Disbursal
Post-lending supervision and control
Credit Management –What it means?

Safety of loans is directly related
- To the basis on which decision to
lend is taken
- Type and quantum of credit to
be provided
- Terms and conditions of the loan
- Collateral Coverage
Approach for safety of loans

Two-pronged approach
Pre-Sanction appraisal
To determine the ‘bankability’ of each loan proposal
Post-Sanction control
To ensure proper documentation, follow-up and supervision
Approach for safety of loans (Contd.)

Concerned with measurement of risk(iness) of a loan proposal
Requirements are:
a) Financial data of past and Estimated working results
Detailed credit report is compiled on the borrower / surety
based on discreet enquiries with neighbors, competitors, our
customers and any other reliable sources
b) Final / audited accounts/Income tax and other tax returns

/ assessments
c) Confidential reports from other banks and financial
institutions in case of take over
d) CIBIL Report needs to be scrutinized
Pre-Sanction appraisal
Depends to large extent upon findings of pre-sanction appraisal
Requirements are:
a) Documentation of the facility and ‘after care’ follow- up
b) Supervision through monitoring of transactions in loan amount
c) Scrutiny of periodical statements submitted by the borrower
d) Physical inspection of securities and books of accounts of the
borrower
e) Periodical reviews etc.
Post-Sanction appraisal
Credit investigation: The lender runs a
thorough investigation to verify the
Borrower’s Credit History, Employment
Details, Income Stability, and any outstanding
debts. This may involve contacting
employers, references provided by the
borrowers, and the credit bureaus (CIBIL).
Applicant Profile
a) A good credit history: A good credit history and a good repayment
track record increase the borrower’s eligibility.
b) Loan To Cost Ratio: This ratio is computed for the lender to
understand how much the borrower can pay based on the total loan
amount requested. Actually, this ratio calculates how much can be lent to
the customer.
C) Income and Stability: We assess the borrower’s income level,
employment stability, and capacity to repay the loan.
d) Debt-to-Income Ratio: We evaluate the borrowers based on their debt
to income ratio. This is the ratio of their monthly debt payments to their
monthly income. The lower the ratio, the higher the repayment capacity.
e) Collateral : The value and quality of the collateral provided by the
borrower are as per our bank norm of minimum 1.33 :1 and easily
marketable respectively.
W h a t I s T h e E l i g i b i l i t y C r i t e r i a F o r C r e d i t A p p r a i s a l ?
Analysing the Income Generation
Analysing Financial Discipline using CIBIL Report
a) The CIBIL Report is a reflection of an
individual's true creditworthiness, showcasing
their real character to the world.
b) It serves as the primary source for evaluating a
person's past credit records.
c) However, it's essential to meticulously
scrutinize each transaction by gathering
necessary documentary evidence to demonstrate
innocence in case of adverse remarks.
d) Failure to prove innocence may result in the
rejection of a loan application.
I m p o r t a n c e o f A n a l y z i n g C I B I L
Discussion on Collateral Security
Profile of Guarantor
a) Integrity, credibility, and repaying capability of the borrowers, and the
quality of collateral offered are non-negotiable factors when considering
surety for a loan. The financial viability of the business or services offered
during the loan tenure is crucial.
b) By diligently selecting borrowers who meet these criteria, the need to
approach a surety for recovery can often be avoided altogether.
c) In rare cases where regular recovery measures prove ineffective,
invoking the surety's obligation to repay the loan due to borrower
default becomes necessary.
d) Therefore, branches must exercise prudence in selecting a
creditworthy surety to reinforce our lending practices and mitigate risk
effectively.
I m p o r t a n c e o f o b t a i n i n g s u r e t y
Branch Head
Recommendation
Credit appraisal is an important process for us
in order to ensure that borrowers are
creditworthy and that they can afford to repay
the amount. This should be done meticulously
by credit officer in order to make sure that
there is no financial loss and bad debts and a
profitable one. The above factors should be in
mind while making final recommendation
B r a n c h H e a d F i n a l R e c o m m e n d a t i o n
"Sound Analysis, Prudent Decisions: Building a Resilient
Portfolio. Master the fundamentals, safeguard the bank's future"
"Repco Bank: Championing Prudent Credit Management."
Thank you!

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Effective Credit Management

Credit Management –What it means?

Approach for safety of loans

Approach for safety of loans (Contd.)

b) Final / audited accounts/Income tax and other tax returns

"Repco Bank: Championing Prudent Credit Management."

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