14 NPC MD106

1.
1 INTRODUCTION TO BANKING
In simple way we can define bank as an institution, authorized as a collector of deposit. It

refers to a money related establishment that deals with the financial exchange. It gathers cash
from surplus units and loans it to the shortage units or to the individuals who needs it to use
for beneficial reason. In other words we can say, bank implies an establishment that accepts
stores in various accounts and gives advances to the needy ones. Bank then activate their
stores in giving the credit to the overall population, business houses, commercial ventures,
farming and some other poor parts by charging premium. Thus, the goal of the bank is to
activate idle resources in a profitable segment in the wake of gathering from various scattered
sources.
But in todays world, with the advent of time, bank performs a variety of functions and the
definition of a bank has changed drastically. There are many types of banks at present, which
do not accept deposits. The earlier definition of accepting deposit and lending loans relates
mainly to commercial banks. Now, Banks offer many different services like discounting bills,
allowing an overdraft, remitting funds, issuing LC, advising agent, referencing customer,
safeguarding assets, etc.
Banking industry has played a crucial role for the growth of the economy, we cannot think of
an entrepreneur or businessman investing in large project without the help of the banking
support. Thus a bank proves to be an essential part to the growth of every spheres of the
economy, whether it is service, trade, industry, agriculture or finance and commerce. The
bank has been defined by different people and institutions in different ways. Some of the
important definitions are:-
According to the World Bank, Banks are financial institutions that accept funds in the form
of deposits payable on demand or in short notice.
According to Peter S. Rose, Bank is a financial intermediary accepting deposits and granting
loans; offers the widest menu of services of any financial institutions.
During last three centuries different types of banks have evolved which differ in their
orientation and the function they perform. Each type usually specializes in a particular kind
of business. Thus one type of bank can easily be distinguished with another by the type of
function they perform. Some of the major types of banks are; commercial banks, central
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Banks, exchange banks, industrial Banks, agricultural and co-operative banks, saving banks,
merchant banks etc.
Banks offers an extensive variety of services to their clients. One of the important services of
bank incorporate accepting deposits, dispensing advances and putting resources into
government securities. Next to these banks gives distinctive agency services, for example,
gathering of credit instruments, receipt and payment of salary to the various parties, buy and
offer of securities, trustee and lawyer, settlement of cash, tax consultant, management of
foreign trade, issue of assurance and LC, guaranteeing services and so on as of late banks
have created other more services with a specific end goal to give more comfort to the client.
Such services are giving purchaser advances administration, financial advisory services, cash
management services, offering retirements arranges, security financier, merchant banking.
A sound banking system mobilizes the small and scattered saving of community, and makes
them available for investment in productive sector. In this connection, the banks perform two
important functions:
They mobilize deposits by offering attractive rate of interest, thus converting saving,
which otherwise would have remained inert, into active capital.
They distribute these savings through loans among enterprises which are connected
with economic development. In this way, they promote the developing of agriculture,
trade and industry.
1.2 EVOLUTION OF BANKING IN NEPAL
In Nepal the development of the modern commercial banks started in the year 1994 .
Before that one financial institution name by Tejarath Adda performed the commercial
banking function during the regime of Ranodipp Malla. Then after the first commercial
bank of Nepal,Nepal Bank Limited came into being on Kartik 30, 1994 B.S. as the first
commercial bank in Nepal. Being a commercial bank it was natural to be a profit driven
organization and also had to look after the neglected sectors and therefore NBL was
established with 51% ownership of His Majesty Government (HMG) and 49% from the
equity participation from the private sector. With the development of the banking sector
and to help the government, formulate monetary policies, Nepal Rastra Bank was set in
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Baisakh 14 2013 B.S. as the central bank of the country. Since then it has contributed to
the growth of financial sector.
However the Central Bank, Nepal Rastra Bank had its own particular confinements and
as a business Bank, it was not legitimate for Nepal Bank Ltd. to go to unbeneficial areas.
So to make up for lost time with these issues, the legislature set up Rastriya Banijya Bank
in 2022 B.S (1965 A.D), as a completely state claimed business manage an account with
full government possession. At that point the foundation of Nepal Industrial Development
Corporation (NIDC), Employee Provided Fund, Agricultural Development Bank and so
forth took after the arrangement of money related establishments.
The government of Nepal adopted liberal economic policy to accelerate countrys growth and
development. The government then enacted Joint Venture Banking policy. Commercial
Banks ought to work under the Bank and Financial Institution Act 2063, Nepal Rastra
Bank Act 2058 and Contract Act 2056. Nepal Arab Bank Ltd. (at present known as
NABIL) is the principal bank set up in joint interest in Nepal in 2041 B.S. With the
progression of time a few other joint endeavor bank has been built up, for example,
Indosuez Bank Limited (Nepal Investment Bank) in 2042 B.S., Nepal Grind lays Bank
(Standard Chartered Bank) in 2043 B.S., Himalayan Bank Limited in 2049 B.S., Nepal
SBI Bank Ltd in 2050 B.S and so on
Keeping in mind the end goal to enhance the living state of the general population in the
nation, banks in Nepal thought of innovative banking plans proposed to redesign the
financial state of the nation. The banking institutes in Nepal offer cutting edge facilities
and a portion of the global banks of repute have additionally opened their branches in the
capital city of Nepal to take into account the necessities of foreign travelers. These banks
in Nepal offer money exchange value and credit card facilities to the foreign travelers.
1. 3 THEORETICAL BACKGROUND OF THE STUDY
Credit examination is a vital movement completed by the credit division of the bank to
figure out if to acknowledge or dismiss the proposition for money. credit examination - It
is the procedure by which the money lender surveys the credit value of the borrower. It
rotates around character, insurance ability and limit. It considers different variables like
pay of the candidates, number of wards, month to month consumption, reimbursement
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limit, and work history, number of years of service and different components which
influence credit rating of the borrower.
Credit appraisal is an examination done by the banks and the other lending institutions to
know about the various factors related to the customer and to take decision regarding
whether to give the loan or simply do not accept the loan proposal, since it is very
important for the organization to access to know the real position or the current status of
the borrower, it plays a vital role. Credit appraisal is the most crucial activity performed
by the various financial institutions to take the decision or to determine for the sanction of
loans to the various parties or the customer.
1.4 IMPORTANCE OF THE TOPIC

Banks use the credit appraisal services for themselves before providing loan to a
borrower. The Credit Appraisal process is based on careful analysis of various facts and
data provided by the borrower to the bank. After the proper credit appraisal process,
banks takes a decision to either fund the project or reject the proposal. This in-depth
study is called the pre-sanction credit appraisal which helps the approver to sanction the
loan to the borrower.
Credit appraisal takes care of
Borrower's capacity to finish the venture and its expectation to re-pay the
advance in the wake of charging of the task
Specialized details of interest identified with the undertaking like task
prerequisite, deciding item, maintenance, venture determinations, quality and so
on.
All the monetary points of interest identified with the undertaking like Cash
Inflow, Cash Outflow, NPV, Break Even period, development opportunity and
so forth.
Financial examination to figure out if the organization will have the capacity to
reimburse the advance from incremental money streams or not.
Market Appraisal to figure out if the task is suitable or not and what are chances
of being fruitful
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Credit examination decides the advance qualification. A credit evaluation is an essential
piece of deciding the qualification for a home advance, and the quantum of the advance.
A prospective borrower needs to experience the different phases of the credit evaluation
procedure of the bank. Every bank has its own particular criteria to fulfill itself on the
credit value of the borrower.
The qualification for the advance that a man can get relies on upon his credit value,
decided as far as the standards and norms of the bank. Being a vital stride in the credit
procedure, a borrower should be watchful in arranging his financing modes.
The credit worthiness, basically, assures the repayment capacity of the borrower -
whether the borrower is capable of repaying the loan and dues on time. Due to the
growing importance of money and the money related activities nowadays many people
want to fulfill their needs and desires by taking various types of loans from the financial
institutes. it is not possible for the financial institutes to provide loans to each and every
needy people since their involves a lot of risks. only after getting the complete
information about borrower and its repayment capacity loans can be disbursed.inorder to
get benefit from lending loans and avoiding risks it is very important to appraise the
creditability of loans.
1.5 NEED TO STUDY THE TOPIC

Due to the advancement of technology and growth in the economy as well as due to the
favorable demographics changes there is an increase in the demand of credit for the
people. They also want to live a better life and this is happening as a result of increase in
the number of options available for retail credit. Favorable to economic condition, led the
people to live luxurious life. Now the challenge comes to the banks and the other
institution how to approve the loans. Hence, there is a need to study the credit appraisal of
retail in bank
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2.1 INTRODUCTION
Review of literature has vital relevance with any research work due to literature review
the possibility of repetition of study can be eliminated and another dimension can be
selected for the study. The literature review helps researcher to remove limitations of
existing work or may assist to extend prevailing study. Several research have been
conducted to analyse the different aspects of performance of commercial banks in India
and abroad. But there are very few research and literature available on the subject related
to financial reforms and its impact on banks.
Literature Review
Hrishikesh Bhattacharya (2006)
The liberalization of the money related part requests another innovation to adapt to the
rising pressure on the productivity of banks and financial establishments. Examining
lending techniques, credit evaluation, hazard investigation and lending decisions, while
remembering the expansive structure of corporate banking strategy, this book accentuates
that lending is no more a movement confined to the asset side of the monetary record.
Dr.RamJassYadav
Credit risk essentially implies the danger of default made by a client inferable from non
reimbursement of the credit that he had acquired from the bank. In this manner a
legitimate assessment of the client that measures the money related condition and
capacity of the client to reimburse the credit taken from bank. Credit examination,
primarily is a procedure of gathering data identified with the client and in this way
surveying the risk involved for the bank by checking the specialized, money related
&economical practicality of the project.
Nancy Arora
Credit Risk is a danger that is identified with non-reimbursement of the credit that was
acquired by the client from the banks. Therefore assesing the validity of the client with a
specific end goal to moderate the danger is very vital. Appropriate assessment of the
client is required that would evaluate the money related position of the client to reimburse
the advance sum in future.
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Credit Appraisal is the procedure to find out the risk connected with the extention of the
credit facility. It is for the most part done by money related foundations who are included
in giving monetary financing to its clients. A study on the monetary, specialized,
feasibility of the proposed undertaking is required.
SathyaVarathan PriyaKalyanasundaram and S.Tamilenthi

Credit Appraisal is an all encompassing activity that begins from the time when a
forthcoming borrower requests the advance and the banks and the money related
foundations works on that and lastly it wraps up by authorizing of the loan.credit
examination decides whether to acknowledge or dismiss the advance
According to the SBI bank report:

Credit appraisal is one of the important tasks performed by the banks and the financial
institution in order to reduce or remove the risks and to get the maximum benefit. A study
of project report of credit appraisal of SBI at hisar branch helps me a lot to get various
important information related to the credit appraisal and SBI norms of credit appraisal,
including credit appraisal standard. SBI loan policy contains various norms for sanction
of different types of loans.
Uwe (2005)
Analysed and further development of the building blocks of modern credit risk
management: Definitions of default; Estimation of default probabilities; Exposures;
Recovery Rates; Pricing etc
.Mohan (2003)
According to him the lending rates have not come down as compared to the deposit and
the interest rate on the government bonds. While some institutions have reduced their
prime lending rates (PLRs) to some extent, effective lending rates continue to remain
high.
Ms.Balkees (Oct 2015) and Sun and Li (2006)

They have built up a model to anticipate organizations monetary distress by testing 35
budgetary proportions for 135 sets of recorded organizations.
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Their final distress expectation model incorporates net benefit development rate,
liabilities to tangible resources, money due turnover, liabilities to money streams,
liabilities to value market esteem, total asset turnover and gross net revenue
Akila and Pathmavathy (2014)

They concentrated on the theme Credit examination technique and payment of advances
to MSME.They infer that legitimate assessment of the client is required. so that legitimate
state of the client can be discover furthermore the state of the client to reimburse back the
loan.genarally credit are given against securities called as guarantee.
2.2 STATEMENT OF THE PROBLEM

Confidence in retail lending growth is particularly evident in Emerging Asia. This
confidence is driven by strong domestic demand, a growing middle class and government
policy designed to boost credit availability. Most notably, demand for retail lending is
growing faster in comparison with other types of lending in Asia. In General people do
not know about various types of retail lending which is available for them and rest who
knows does not know the exact procedure to obtain loans and there exist the gap between
the lender and the borrower, hence they have to pass through various hurdles, and this
identification is giving scope to make a research on the title which is the trend of the
current scenario.
2.3 SCOPE OF THE STUDY
By exploring this study, it helps with setting standards for retail lending and credit
appraisal associated with retail loans. It further deals with various other process involved
like security arrangement, valuation and documentation required. Because of time
constraints the scope is limited to credit appraisal of Himalayan bank limited in retail
lending.
Retail Lending and Credit Appraisal Standards associated with retail loans
Security Arrangement, Valuation and Documentation in Retail Lending
Credit Policy of Himalayan bank Limited in case of Retail Loans
2.4 OBJECTIVE OF THE STUDY
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To study the credit appraisal of bank in retail lending.
To check the primary and collateral security cover available for recovery of funds.
To get a clear picture of the credit appraisal process of the banks.
To evaluate the findings, suggestions and recommendations on credit appraisal.
2.5 TOOLS FOR DATA COLLECTION

The report is prepared by collecting the data through the primary and secondary sources.
Primary Sources
Direct contact with employees
Observing environment.
Direct contact with customer
.
Secondary Sources
Internal Circulars/Credit Policy of the Bank
Access to loan files of the client.
Internet
Newspaper
2.6 PLAN OF ANALYSIS

The case study method is used to make necessary analysis and criterias would be
analyzed to derive the inferences on findings to provide recommendations and conclusion
2.7 LIMITATIONS
This dissertation project report in HBL was completed gaining a lot of practical
knowledge and experiences. However, there were certain limitations observed. The main
limitations are:
This report had been prepared by using the limited information due to the limited
time at HBL.
Some information was highly confidential and cannot be presented in the report.
The deep analysis could not be done due to the time constraint.
It is based on the personal understanding of the internee regarding the banks

operation during the Dissertation period.
Due to the busy schedule of the staffs, it was difficult to gather more information.
The report could not cover entire working process of bank.
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3.1 AN OVERVIEW OF HIMALAYAN BANK LIMITED
Himalayan Bank was established in 1993 in joint venture with Habib Bank Limited of
Pakistan. Despite the tough competition in the Nepalese Banking sector, Himalayan Bank
has been able to maintain a lead in the primary banking activities- Loans and Deposits.
Legacy of Himalayan lives on in an organization that is known all through Nepal for its
imaginative ways to deal with promoting and client administration. Items, for example,
Premium Savings Account, HBL Proprietary Card and Millionaire Deposit Scheme other
than administrations, for example, ATMs and Tele-keeping money were initially
presented by HBL. Other money related establishments in the nation have been taking
after our lead by presenting comparable items and administrations. Accordingly, HBL
stand for the developments that it realize in this nation to help Customers other than
modernizing the managing an account segment. With the most noteworthy store base and
advance portfolio amongst private segment banks and stretching out insurances to
reporter banks covering presentation of other neighborhood banks under its acknowledge
remaining for outside journalist banks, it trusts that it clearly lead the saving money part
of Nepal. The latest rating of HBL by Bankers' Almanac as nation's number 1 Bank
effectively affirms our case.
All Branches of HBL are incorporated into Globus (created by Temenos), the single
Banking software where the Bank has made substantial investment. This has helped the
Bank give administrations like 'Any Branch Banking Facility', Internet Banking and SMS
Banking. Satisfying the desires and goals of the Customers and different partners of being
creative, HBL presented several new products and services. Tycoon Deposit Scheme,
Small and Medium Enterprises Loan, Pre-paid Visa Card, International Travel Quota
Credit Card, Consumer Finance through Credit Card and online TOEFL, SAT, IELTS,
and so on charge installment office are a portion of the products and services. HBL
additionally has a devoted offsite 'Disaster Recovery Management System'. Taking a
gander at the quantity of Nepalese workers abroad and their requirement for formal
money transfer software; HBL has created selective and restrictive online money transfer
software HimalRemitTM.. By deputing our own staff with technical tie-ups with local
exchange houses and banks, in the Middle East and Gulf region, HBL is the biggest
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inward remittance handling Bank in Nepal. All this only reflects that HBL has an outside-
in rather than inside-out approach where Customers needs and wants stand first
HBL is not only a Bank, It is committed Corporate Citizen
Corporate Social Responsibility (CSR) holds one of the essential parts of HBL. Being one
of the corporate citizen of the nation, HBL has always promoted social activities.
Numerous activities that do a typical decent to the general public have been attempted by
HBL in the past and this happens as HBL on a continuous premise. Noteworthy part of
the sponsorship spending plan of the Bank is committed towards activities that help the
general public as vast.
The Banks Vision:
Himalayan Bank Limited holds of a vision to become a Leading Bank of the country by
providing premium products and services to the customers, thus ensuring attractive and
substantial returns to the stakeholders of the Bank.
The Banks Mission:
The Bank's central goal is to end up favored supplier of value money related services in
the nation. There are two parts in the mission of the Bank; Preferred Provider and Quality
Financial Services; consequently we at HBL trust that the mission will be expert just by
fulfilling these two vital segments with the Customer at core interest. The Bank
dependably endeavors situating itself in the hearts and psyches of the clients.
The Banks Objective:
To become the Bank of first choice is the main objective of the Bank.
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3.2 PRODUCTS AND SERVICES
HBL, as a pioneer in introducing many innovative products and marketing concepts in the
domestic banking sector, represents a milestone in the banking history of Nepal. To cater all
the needs of the target customers HBL has designed various products and services in a unique
manner.
Although the basic type of the services offered by a bank depends upon the type of bank and
the country, services provided usually include:
Taking deposits from the customers which can be individuals and businesses.
Extending loans to individuals and businesses.
Cashing cheques.
Facilitating money transactions.
Issuing credit cards, ATM Cards, and debit cards.
Storing valuables, particularly in a safe deposit box.
Consumer and commercial financial advisory services.
Pension and retirement planning
1) Deposit Product
Himalayan Bank offers a wide range of deposit products that caters to your requirement. HBL
brings you the convenience of networked branches/ATMs and facility of E-channels like
Internet, and SMS Banking. In simple words, HBL brings banking at your doorstep.
Call Deposit Account: Term deposits for a period of 7 days upto 3 months.
Fixed Deposit Account: Fixed Deposits can be made for a period ranging from 3 months and
above. Minimum required balance to open a fixed deposit account is Rs. 10,000/-.
Whenever required you can borrow from the Bank against the Fixed Deposit Certificates.
Deposit Guarantee of upto Rs. 200,000/- deposit on fixed deposits through Deposit and Credit
Guarantee Corporation.
Structured Term Deposit Account: Term Deposit with specific conditions related to amount
of deposit, applicable interest rate, deposit tenure etc.
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3 Years Recurring Deposit Account:
Features:
Minimum Balance of Rs. 1,000/-

Monthly Deposit Amount: Multiple of Rs. 1000/-
Tenure: 3 years
Interest calculated on Daily Outstanding Balance and capitalized on monthly basis
Interest Rate: Attractive
Whenever required you can borrow from the Bank for value up to 90% against lien on
the balance held in the account
Accidental Death Insurance for value equivalent to four times of the minimum balance
maintained in the account with maximum ceiling of Rs. 500,000/-
Deposit Guarantee of upto Rs. 200,000/- deposits on fixed deposits through Deposit and
Credit Guarantee Corporation.
Savings Deposit
Savings Deposit Account can be opened in any of our Branch Offices. Customers are provided
with free personal accidental death insurance. Customers opening this account get a free Cheque
Book. The Bank offers Any Branch Banking Facility.
Normal Savings Account (NSA)
Features:
Interest calculated on daily balance, capitalized quarterly basis

Attractive Interest Rate (Quarterly Posting)
Minimum Balance of Rs. 2,500/- (within valley), Rs. 1,000/- (outside valley)
Free Cheque Book
Free Statement
Free Any Branch Banking Service
Free SMS service
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Bishes Savings Account (BSA):
Features:
Minimum Balance of Rs. 2,000/- only

Attractive Interest Rate (Quarterly Interest Posting)
Eligibility: Minor, Senior Citizens (50 & above), Physically challenged individuals,
Illiterate individuals
Free Debit card for first year
Free Cheque Book
Free Statement
Free SMS service
Himal Savings Account (HSA):
Features:
Minimum Balance of Rs. 0 only

Free Cheque Book issuance upto 12 leaves a year
Free SMS service
Evening Counter Facility
Free Any Branch Banking facility
Unlimited Deposit and Withdrawal facility
24 hour - 7 days access to cash through ATM Network
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Premium Savings Account (PSA):
Features:
Exclusive PSA Counter for deposit and withdrawal facilities

Minimum Balance of Rs. 50,000.00 only
Interest calculated on Daily Balance basis
Free Debit Card
Free SMS Banking
Free Cheque Book
Free Statement
25% discount on the Bank service charges: Loan Processing Fee, T-C, Draft, Locker,
Fund Transfer etc.
Rebate of 10 paisa per USD on FX transaction
Super Premium Savings Account (SPSA):
Features:
Privileged counter for banking services

Minimum Balance of Rs. 100,000/-
Attractive Interest Rate - (Quarterly Interest Posting)
Rebate: 50%on any Banking service charge
Free Debit Card (which may also be used as ID for SPSA account holder a privilege card
for special facilities)
Free SMS service
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maintained in the account with the month with maximum ceiling of Rs. 500,000/-
T-C, Draft, Locker, Cheque book, Fund Transfer, Loan Processing Fee and other services.
Himal Remit Savings Account (HRSA):
Features:
Special Account type for Remitter and Beneficiary

Minimum Balance of Rs. 0 only.
Cheque Book issuance on minimum balance of Rs. 1,000.00
Attractive Interest Rate (on daily balance with quarterly interest posting)
24 hour - 7 days access to cash through ATM network
Free Debit Card (1st Year of subscription)
Free SMS facility
Shareholder's Savings Account (SSA):
As a privileged service to our valued shareholders, Himalayan Bank Limited has introduced a
deposit scheme - "Shareholder's Savings Account" with special incentives. Features:
Minimum Balance of Rs. 500.00 only

Eligibility : Individual shareholders of HBL
Interest calculated on daily balance and will be posted on quarterly basis
Direct credit of dividends into account, wiping off hassles of encashing dividend
cheques
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2) Lending Products
The banks provide the customer with loan. It provides the loan to the customer with the
minimum rate charged on the loan amount. It provides customer with housing loan, auto loan,
corporate loan, Overdraft, etc.
Himalayan Bank offers a wide range of tailor-made funded and non-funded credit facilities to
suit your funding requirements.
Small & Medium

Corporate LoanRetail/Consumer Enterprises Loan
Funded | Non-Funded Loans
FUNDED FACILITIES
Bank extends both Fixed Term Loan and Working Capital Loan. Loans are provided for the
establishment, capacity addition, up-gradation of existing facilitates as well as acquisition of
existing facilities. The loan is extended to manufacturing as well as service sector.
And if the project is big, Himalayan Bank helps financing needs of the project through
consortium lending as the lead Bank and/or Co-lead Bank.
Non Revolving Cash Credit:
Bank extends Non Revolving Cash Credit to finance import of capital items being imported
as supplementary equipment of the existing plant and machinery.
Working Capital Financing: The bank extends Working Capital Loans under various
headings to finance the working capital requirements.
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Overdraft Facility: Overdraft Facility, a recurring (revolving) credit facility, is offered to
customers for meeting fluctuating working capital needs for funding current assets,
overheads and administrative expenses
Short Term Demand Loan (STDL):
This is another form of working capital loan extended to finance seasonal and occasional
working capital requirement of companies.
Revolving Cash Credit
Revolving Cash Credit is extended to finance working capital requirements particularly

to finance import of raw materials (including custom duties) from India. Similarly the
Bank extends Revolving Cash Credit to finance purchase of agriculture produce from
local market as well as India.
Import Credit for Telex Transfer and Demand Draft Payment
Bank extends Import Credit to finance import of goods from third countries other than
India where payment is made through Telex Transfer or Demand Draft.
Trust Receipt Loan
The Bank extends Trust Receipt Loans for financing raw materials and trading
merchandise while retiring documents of the Import Letters of Credit.
Export Credit Facilities:
The Bank extends Export Credit Facilities against export letters of Credit. Pre Export
Loan, Post Shipment Loan and Back to Back L/C are some of the facilities that can be
extended.
Pledge Loan:
Against security of movable non-perishable stock merchandise, the bank grants Demand
Loan / Cash Credit.
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Clean Bills purchased and discounted:
The Bank extends these facilities against the Bills/Drafts/Cheque (Negotiable

Instruments). The Bank purchases cheques issued by individuals, financial institutions
and credit the customers account immediately.
Documentary Bills Purchased and Discounted:
The bank extends loan facilities against the Documentary Bills on recourse basis
NON FUNDED FACILITIES

Bank Guarantee:
The Bank issues various types of Bank Guarantee Facilities like Performance Bond
Guarantee, Bid Bond Guarantee, Bonded Ware House Guarantee, Financial Guarantee,
Deferred Payment Guarantee, Counter Guarantee and Advance Payment Guarantee.
Letters of Credit:
The Bank establishes Import Letters of Credit, sight as well as usance.
RETAIL CONSUMER LOANS
Hire Purchase Loan

The Bank extends Hire Purchase Loan for purchase of new vehicles, (including body
making in case of commercial vehicles) to individuals as well as companies. The bank
also finances equipment such as medical equipment, construction equipment,
manufacturing machinery equipments under Hire Purchase Financing.
Housing Loan
Housing Loan is available to purchase readymade / under construction building

(including land cost), construct a building on an already owned land, for purchase of
adjacent land or extension of existing building.
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Subidha Loan
This is a customized loan facility offered to Customers to meet various social needs such
as ceremonial expenses, education expenses, minor business dealings, home furnishing,
etc.
Credit Card Loan
The bank extends credit to individuals through credit cards that could be payable on
monthly installment basis (credit card), fixed tenure basis (capital asset financing), etc.
Loan against Fixed Deposit Receipt
The Bank extends Loan against the Fixed Deposit Receipt issued by the Bank itself or
by other Banks (in Nepal). Generally upto 90% of the FDR value can be disbursed as
Loan.
Loan against Government Bonds & Bonds of Bank
The Bank extends loans against various Bonds / Stocks/ Promissory notes issued by the
Government/ Nepal Rastra Bank. Under this, upto 90% of the value of such Bonds can
be disbursed as Loan. Similarly, the bank can extend loans against bonds issued by
commercial banks.
Loan against First Class Bank Guarantees
The Bank extends various credit facilities, funded as well as non-funded, against
unconditional guarantees issued by First Class International Banks.
Loan against Shares
The Bank also advances loan against listed shares of Public Ltd. companies.
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SMALL AND MEDIUM ENTERPRISES LOAN
As a step further to help establishment, growth and expansion of small and medium sized
enterprises, Himalayan Bank has developed a special loan package meant just to suit small and
medium sized enterprises. Business houses coming from industrial, trading and service sector
can avail of this facility to meet their short-term and long-term financing needs. This could
come in any form- funded or non-funded, depending on specific needs of the business
enterprise:
Prospective Customers
Industrial Sector such as small and cottage industry

Trading Sector such as wholesaler, stockiest, retailers, importers, exporters and suppliers
Service Sector such as Lodge, restaurants, medical clinics, travel agencies
Basic Criteria of Eligibility
Satisfactory Profit margin substantiated by positive cash flow

Already established/running enterprise for minimum last 2 years or new enterprise to be
established by individual having proven first hand experience of at least 3 years in
similar business entity.
Loan to be secured by Fixed Assets Collateral
Credit Facility Limit
Funded and Non - Funded Facility : Rs. 0.50 Mil to Rs. 40.00 Mil Loan Tenure
SMEs Term Loan: up to 6 years
SMEs Working Capital Loan (Demand loan/ Overdraft/ Trust Receipt): Annual renewal
basis
Each Trust Receipt Loan Deal : up to 90 days
Term Loan Repayment
Either equal/ballooning installment on a monthly or quarterly basis

Repayment of Term Loan may be fixed on EMI basis
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Interest Payment
Except in cases where repayment of Term Loan is fixed on EMI basis, Interest on all
credit facilities is payable on every quarter end.
Interest Rates
SMEs Fixed Term Loan

SMEs Working Capital Loan
Letter of Credit/Bank Guarantee/Cash Margin/Commission: As per Bank's Schedule of

Charges
Loan Processing Fee: As per Bank's schedule of charges
Annual Renewal Fee
As per Bank's schedule of charges
3.4 SERVICES OFFERED
I. International banking (LC)
To assist its trading Customers, HBL offers Letter of Credit (LC) facilities. Customers can
place their LC application in any of HBL Branches. The fees/charges are one of the lowest
amongst the commercial banks of Nepal. The Customers enjoy wide correspondent network of
Himalayan Bank in addition to the attractive rates.
ii. Himal Remit, a premium online client centered and innovation situated Money Transfer
item, is conveyed to you by Himalayan Bank Limited - the main joint endeavor bank of Nepal.
Himalayan Bank is a pioneer in the field of retail cash exchange business with right around two
decades since quite a while ago altered administration conveyance involvement in the field.
22
iii.Safe Deposit Locker
Looking at the varying needs/wants of the Customers, we offer locker facilities with sizes of our
Customers preference. Customers availing of this facility enjoy not only peace of mind in terms
of security of their valuable belongings but also one of the most attractive rates and ease of
location.
iv.Himalayan sms
Himalayan Bank is glad to present SMS Banking. Presently deal with a large group of your
saving money needs while never waiting in lines. Utilizing SMS Banking, you can check your
parity, status of check (encashed or not) and the Bank's remote swapping scale, all at a couple
snaps of your cell.
v. ATM Card
HBL has launched SCT and VISA Debit Card services for all the branches within
Kathmandu valley and has extended the services to the other branches outside
Kathmandu valley. The customer can enjoy fast cash and cash withdrawal services
through SCT and VISA Debit Card.
vi. E-Banking
HBL facilitate banking with a click of a mouse and customer can keep track of their account
from anywhere in the world. HBL has instant, secure and reliable banking solution for its
clients.
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3.5 SWOT ANALYSIS OF HBL
STRENGTH OPPORTUNITIES
Financial reserves Market development

Competitive advantage Arise in the need of the customer
Accreditations. Unfulfilled customer needs
Good reputation New market
Nations number one bank New technology
Single banking software Can compete with overseas bank
Biggest inward remittance handling
Resources
WEAKNESS THREATS
High cost structure. Market demand for new technology

weak brand name in overseas country IT development
Internal recruitment shift in consumer taste
More pressure on few employs. Other strong competitor like Investment
bank,
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INTEREST RATE CHARGED BY HBL
Interest Rate (Per

Annum)
Product Payable Quarterly
A) Deposits Individual Institutions
Saving Deposit 4.00% 3.50%
Fixed Deposit
Up to 3months 1.5% 1.25%
6 months 2.5% 2.00%
1year & above 3.5% 3.5%
B) Loans & Advances

Overdraft 9.00-10.50%
Demand Loan 9.00-10.50%
Term Loan 10.25-12.00%
8.00-
Short Term loan 9.5.00%
10.00-
Pledge Loan 11.00%
Mortgage Loan(secured
personal loan) 9.00-11.00%
Housing Loan
-up to 10 years 7.5-10%

-Above 10 years 8.00-10.50%
Auto Loan
-Private 7.50-10.25%
-Commercial 10.00-12.00%
HBL farmers loan

Fixed term loan 9.00-
Working capital loan 10.00%
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4.1 OVERVIEW OF CREDIT APPRAISAL
Credit Appraisal is the procedure by which a moneylender evaluates the specialized

feasibility, monetary feasibility and bankability including financial soundness of the
forthcoming borrower. Credit evaluation procedure of a client lies in surveying if that client
is obligated to reimburse the credit sum in the stipulated time, or not. Here bank has their
own particular approach to figure out whether a borrower is financially sound or not. It is
resolved as far as the standards and models set by the banks. Being an extremely significant
stride in the endorsing of a credit, the borrower should be extremely watchful in arranging his
financing modes. Nonetheless, the borrower alone doesnot need to do all the diligent work.
The banks should be wary, for fear that they wind up expanding their danger introduction. All
banks utilize their own particular one of a kind goal, subjective, money related and non-
money related systems to assess the reliability of their clients.
Adequacy of Credit Management in the bank is highlighted by the nature of its advance
portfolio. Each Bank is endeavoring hard to guarantee that its credit portfolio is sound and
that Non-Performing Assets are kept at most reduced conceivable level, as both of these
variables have direct impact on its profitability. In the present situation effective project
evaluation has accepted an incredible significance as it can check and anticipate instigation of
week records to our advance portfolio. All conceivable stepss should be taken to reinforce pre
authorize evaluation as usual "Avoidance is superior to anything Cure
DIFFERENT TYPES OF RISKS ASSOCIATED WITH CREDIT APPRAISAL:
The portfolio is funded primarily from the medium term and core savings
Liquidity deposit base. Liquidity risk is managed by ALCO and longer term liquidity
Risks risks will be managed by maneuvering the product in line with the
guidelines provided by the ALCO.
Government regulations and policies, availability of infrastructure
Industry
facilities, Industry Rating, Industry Scenario & Outlook, Technology Up
Risks
gradation, availability of inputs, product obsolescence, etc.
Operating efficiency, competition faced from the units engaged in similar

Business
products, demand and supply position, cost of labor, cost of raw material
Risks
and other inputs, pricing of product, surplus available.
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Background, integrity and market standing/ reputation of promoters,
organizational set up and management hierarchy, expertise/competence of
Management persons holding key position in the organization, delegation and
Risks decentralization of authority, achievement of targets, track record in
execution of project, debt repayment, industry relations etc.
Financial strength/standing of the promoters, reliability and reasonableness

of projections, past financial performance, reliability of operational data
Financial
and financial ratios, adequacy of provisioning for bad debts, qualifying
Risks
remarks of auditors/inspectors etc.
INFERENCE
Credit appraisal is the process where the bank appraises the credit worthiness of the borrower
and decide to give the loan or not. each and every business is operating in this vast world has
some kind of risk associated with.In credit appraisal also there exist various types of risk like
liquidity risk,financial risk,managent risk and business risk which affect the overall efficiency
of the bank and its credit appraisal.
WHY IT IS IMPORTANT TO ANALYSE THE VARIOUS TYPES OF RISK?
As we know that the risk is involved in banking sector and the banks in todays world is
operating in such a risky situation.a single mistake can lead to a big disaster. The banks and
the financial institution has to be aware of the various factors which can affect their
performance. The various types of risks as I have mentioned earlier as financial risk,
management risk and others have to be properly analyzed and evaluated so that the credit
appraisal can be done without any hurdles.
In light of the foregoing risks, the banks appraisal methodology should keep pace with ever
changing economic environment. The appraisal system aims to determine the credit
needs/requirements of the borrower taking into account the financial resources of the client.
The end objective of the appraisal system is to ensure that there is no under - financing or
over - financing. This project report focuses on credit appraisal of retail loans.
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4.2 CREDIT APPRAISAL PROCESS
When a potential customer approaches the bank for any credit facility, the Branch
Manager/Credit officials shall, before proceeding with preparing formal credit appraisal
memo, should follow the following process:
4.2.1 Discuss with the customer about his/her business, expertise, existing banks, future
plans, collateral to be offered, etc.
4.3.1 Visit their place of business and offered collateral
4.3.2 Seek opinion from existing customers/other market sources about the
creditworthiness of the customer, where possible
4.3.3 Ask the potential customer for credit application along with financials, past 2 years
actual, current years estimates and next 1 years projections (in case of corporate and
business loans)
4.3.5 Seek credit report from CIC and, where applicable, from other banks
4.3.6 Prepare credit appraisal memo on the Banks prescribed format and put up the memo
to the sanctioning authority
4.3.7 Issue the sanction letter to the customer only upon sanction by the sanctioning
authority in writing
4.3.8 Finally disbursement of loan after completing all the documentation required
PROCESS OF CREDIT APPRAISAL
Receipt of application from the applicant
Receipt of documents (Balance sheet, KYC papers, Different govt. registration no., MOA,
AOA, and Properties documents)
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Discuss with the customer about all the areas related to business,future plans and collateral to
be offered
Check whether fall in defaulter list
Valuation reports of the properties to be obtained from empanelled valuter/engineer
Prepare credit approval package
Issue the letter to the customer
Documentations, agreements, mortgages
Disbursement of loan
Figure: Process of Credit appraisal
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INFERENCE
In order to lend loans to the borrower, the bank requests about all the necessary information
and the documents required for the sanctioning of the loan. Each and every bank has their
own credit appraisal process and they follow their own rules and regulations in sanctioning of
credit to the borrower. The process includes so many steps which start from collecting
information about various issues and ends with sanctioning of loan.
WHY IT IS IMPORTANT?
All these steps are very much important to follow as the bank is going to lend money to the
respective borrower and if a single step is missed out there could arise some risks for the
business of not getting the loan amount back, The bank plays various roles in sanctioning of
credit facility to the borrower and all the roles played has got its own importance and also
some risks. All the steps in credit appraisal process is very much important so that the future
risk can be minimized.
4.3 DESCRIPTION AND ANALYSIS OF ROLES OF FELLOW

WORKER
1. CUSTOMER RELATIONSHIP DEPARTMENT
This department helps to build good relationship with the existing clients and the bank.The
major function of managers in CRD is to interect with the loan applicant/client and discuss
the need of the credit facility and other various factors related to it as well as understand that
there is inherent credit risk in any business proposal in the banking sector.The relationship
managr of the bank has to work according to the HBLs credit policy guidelines which has
set the parameters of credit operation.
HOW IT HELPS IN CREDIT APPRAISAL?

This department comes under the direct supervision of the branch manager and the CAP
prepared has to be provided to the bank manager for approval. The CAP prepared plays a
crucial role in the credit appraisal and it is one of the most important document which helps
the determine the credit worthiness of the borrower.
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2 . CREDIT CONTROL DEPARTMENT (CCD):
The CCD comes under the head office and managers in CCD are directly supervised by the
general manager-marketing and credit, The main function of managers in CCD is to make
thorough and critical analysis of the credit approval packages forwarded by the CRD of the
various branches all over the country.
HOW IT IS IMPORTANT FOR CREDIT APPRAISAL?
All the credit decisions cannot be made at the branch level.Same credit proposals need to be
decided at the corporate level,even though they originate from branches.Inorder to streamline
the flow of such proposals, which are to be finally disposed off at corporate level, a team of
managers dedicated to to this has been created which is the credit control department..
4.4 CREDIT APPRAISAL STANDARDS

The credit proposal shall be evaluated from the angle of the Five Cs namely: Character,
Capacity ,Capital, Collateral and Condition . A brief summary of the five Cs are furnished
below:
4.4.1 Character
Character or creditworthiness of the borrower ranks first among the Five Cs. However
impressive may be the activity level and generation of income, unless the borrower has the
willingness to live up to his promise to repay the debt, the lender will be taking and undue
risk. The creditworthiness will be reflected by his reputation in the market, honesty and
integrity. In case the entrepreneurs are already in business, opinion reports from their existing
bankers and report from Credit Information Centre shall be obtained.
4.4.2 Capacity
Capacity generally follows the character as second C. Capacity indicates the ability of the
borrowing unit to operate the business as per their projected plans like sales level, net profit,
cash profit, etc. This will require in-depth study of the capability of the borrower. The
appraisal should be based on the viability of the projects, and not only on the reputation of
the promoters or directors.
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4.4.3 Capital
Capital indicates borrowers contribution. The banks require that the borrower should bring
in adequate margin money so that he will have a stake and interest in the objective for which
the loan is to be availed. It will also serve as a cushion if the bank has to realize the loan out
of the assets. The margin for retail loans may be sanctioned against the available margin in
the distress value of properties created under the Housing Loan financed by the bank or
properties already obtained for any other credit facilities.
4.4.4 Collateral
Or guarantees, are additional forms of security you can provide the lender. Giving a lender
collateral means that you pledge an asset you own, such as your home, to the lender with the
agreement that it will be the repayment source in case you can't repay the loan. A guarantee,
on the other hand, is just that - someone else signs a guarantee document promising to repay
the loan if you can't. Some lenders may require such a guarantee in addition to collateral as
security for a loan.
4.4.5 Conditions
Condition describe the intended purpose of the loan. Will the money be used for working
capital, additional equipment or inventory? The lender will also consider local economic
conditions and the overall climate, both within your industry and in other industries that
could affect your business.
INFERENCE AND WHY IT IS IMPORTANT?
The five cs describe the each and every aspect of the borrower. It gives the clear picture of
the reputation of the borrower in the market. It also clarifies the intention of the borrower and
shows if he or she is capable to repay back the loan or not. The above mentioned five Cs can
not be ignored as these serve the main pillers for the retail loan approval. If the borrower is
sound enough in this five areas of cs the bank can easily sanction loan to the respective
borrower. So the role of this five cs is very much important in credit appraisal.
4.5 RETAIL LENDING AND TYPES OF CREDIT

Over the globe, retail lending has been a terrific advancement in the business managing an
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account sector as of late. The development of retail lending, particularly, in rising economies,
is inferable from the fast advances in information technology, the developing macroeconomic
environment, budgetary business sector change, and a few small scale level demand and
supply side components.
In the present situation, banks have been blossoming with retail lending. The center of banks
now, is to build the likely benefits while restricting conceivable misfortunes
An expansion in business sector infiltration realized an adjustment in the business

environment and in the way banks led their business. There was an adjustment as far as
development in items and also procedures to take into account the requests of the new age
client on one hand and to shield the bank from various dangers on the other.
Retail presentation of banks incorporates different sorts of retail acknowledge, for example,
mortage, automobile fund and individual advances, advances against securities, home
advance, credit for purchaser durables, and advances to SME segments.
Retail lending may suffer from certain risk elements like the borrower borrowing beyond his
means, low asset coverage during the tenure of the loan, etc. Hence, no letup should be there
in making proper enquiry about the applicant and constant follow up of the loan recovery.
The retail advances can be for profitable as additionally for utilization purposes. Credits to
the SMEs occupied with assembling, exchanging and administrations are considered for
profitable purposes. Advances to people for purchaser durables, housing, training and general
purpose are considered for utilization needs. The development and nature of retail lending
relies on convenient conveyance of credit and viable follow up of recovery.
BASIC TYPES OF CREDIT
There are four basic types of credit. By understanding how each works, we will be able to get
the most for our money and avoid paying unnecessary charges.
Service credit is monthly payments for utilities such as telephone, gas, electricity, and water.
we often have to pay a deposit, and we may pay a late charge if our payment is not on time.
Credits let us obtain money. Credits can be for little or extensive sums and for a couple days or quite
a long while. Cash can be reimbursed in one singular amount or in a few normal
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4.5.4 SME Loans
INFERENCE
This is a tailor made loan product devised with special focus on the needs of Small and
Medium Sized Enterprises to meet their financing requirements in a convenient manner.The
bank helps these enterprises by granting SME loans with the fixed rate of interest which the
bank charge to them and they have to repay back in each monthly installments.
4.6 TARGET MARKET

INFERENCE
Nepalese society is traditionally joint family based. However, growing urbanization,
professionalism and independent life style have resulted in the growing trend of the people
moving away from joint family concept to nuclear families. The new generation prefers
independence and consequently a separate home and vehicle for themselves. Keeping
these things at most, the primary target market for retail lending comprises the following
target customers:
Salaried Individuals with stable employment history and qualifications/degree
Qualified Professionals Doctors, Engineers, Chartered Accountants, Academicians
Self-employed businessmen at least 2 years in business
Other customer segments normally for Good Repeat Customers
British Gurkha/Army & Singapore Police Servicemen/Pensioners
From the paragraph mentioned above what we can say is the new generation of the Nepal
want to have a luxurious life they want to live with all sorts of facilities and for this they
prefer retail lending. The bank can focus these target customers by providing attractive rate of
interest and low processing fee.
4.7 APPLICANT & OWNER STATUS

INFERENCE
Loan can be applied in single or joint names. Third party collateral is not acceptable
unless the property owner becomes a co-applicant. Only immediate family members
(e.g. Father/Mother/Brother/Sons/Daughter/Husband/Wife) do not fall under third
party definition. This is applicable to all product parameters.
34
Combined income of joint-applicants and guarantors can be considered for
calculating the overall value of the proposal.
The property financed can be the sole name or joint names of applicant and/or co-
applicants and/or guarantors.
There is no age restriction in case of guarantors
4.8 SECURITY ARRANGEMENT
IT is a document that provides a lender a security interest in a specified asset or property

which is pledged as collateral. If in case that the borrower defaults, the pledged collateral
can be seized and sold. A security agreement mitigates the default risk the lender faces.
INFERENCE
It is necessary to secure the Banks exposure with tangible security, by way of charge on
current and/ or fixed assets including immovable properties. The security for the credit
facilities is classified as primary and collateral. For all loans, with specific purpose, the
assets created out of the Banks finance shall be taken as primary security. The personal
guarantee of the borrower and its family members shall be invariably obtained as
collateral (i.e. additional security).
Borrower shall replenish the shortfall amount by making an immediate payment or

provide the supplement security acceptable to the Bank.
Where required all hakwalas (claimants in a joint family) consent must be obtained
in case of inherited property. This is to be done by signing as witness by all the
hakwalas on the transfer deed.
Property related documents will be scrutinized by the Banks in-house legal counsel to
ascertain legality and enforceability of Banks charge on property.
A first legal mortgage on freehold property (L&B) being financed that is valuated by
the Banks Valuator must be obtained
Property mortgaged to be re-valued whenever real estate value fluctuates
considerably or as per the Banks credit policy. In the event of shortfall in the value of
security,
WHY IT IS IMPORTANT?
35
Proper security arrangement is very much important for the appraisal of credit as the bank will
be able to appraise the credibility of the borrower by the value of security pledges by them.
Without proper security arrangement applicable for the loan the borrower is not eligible for the
loan.
4.9 VALUATION OF PROPERTIES
Property valuation is an essential part for any kind of loan taken as it help to determine the
value of the property and it will also serve as a security against the loan.
INFERENCE
Once the loan sanction letter has been accepted by the borrower and guarantor/s, one of the
panel valuator of the Bank is advised to conduct the valuation of the properties, where
required. The officials must scrutinize the valuation report to check whether all requisite
documents are in place and the properties are acceptable. Then the credit officials shall, in the
light of the valuation report, inspect the properties and verify whether the same properties as
promised by the borrower at the time of loan application have been valued. The loan to be
sanctioned depends upon the distress value of the properties.
4.10 DOCUMENTATION
INFERENCE
Preparation of loan documents depends on the credit policy of the bank, prevailing legal
aspects, risk factors associated with the credit, and other factors. The documents should be
specific to the practice of law. The ultimate objective of documentation can be listed as
below:
1. The documents serve as a clear evidence of owing the debt, if any dispute arises in future
between the borrower and the bank.
2. The bank is able to force its right to recover the loan amount together with interest thereon
on the strength of documents executed, through a court of law as a final resort, in the event of
all other recourses proving to be of no avail.
3. The documents are able to create a perfect and enforceable security interest on the assets
for the debt.
REQUIREMENT OF DOCUMENTS FOR PROCESS OF LOAN
36
1. Application for requirement of loan
2. Copy of Memorandum & Article of Association
3. Copy of incorporation of business
4. Copy of commencement of business
5. Copy of resolution regarding the requirement of credit facilities
6. Brief history of company, its customers & supplies, previous track records, orders in
hand. Also provide some information about the directors of the company
7. Financial statements of last 3 years including the provisional financial statement for
the year 2007-08
8. Copy of PAN/TAN number of company
9. Copy of last Electricity bill of company
10. Copy of Excise number
11. Photo I.D. of all the directors
12. Address proof of all the directors
13. Copies related to the property permission, Allotment letter, Possession etc
14. Bio-data form of all the directors duly filled & notarized
15. Financial statements of associate concern for the last 3 years
The major things to be taken care of while vetting the documents can be mentioned as
follows:
"Know Your Customer" (KYC) To comply with KYC norms, take care of the
37
following things
Identify information such as National Card Number/Citizenship number, age, etc., the name
of three generation details to be mentioned in the loan deed.
Insert complete name and address instead of shortened version.
Document Scrutiny
While executing the following document, the thumb impressions of both hands of the
concerned person including the signature of a literate person shall be put:
A deed of transfer of ownership
Mortgage deed
Personal Guarantee deed
Power of Attorney
Personal Guarantee
A guarantee with a minor (person below the age of 16) shall not be eligible.
A bond of guarantee prepared without presence of both the debtor and the guarantor shall not
be valid.
The guarantee must be supported by the board resolution with authority to execute in case of
a company.
Accepting Collateral
Obtain witness of all the grown-up family members of the collateral owner in the
mortgage deed itself or obtain letter of consent.
Ensure that the property owned by the collateral owner was transferred in his/ her
name before one year plus thirty-five days, in the case of transfer by way of Rajinama
and two years plus thirty-five days, in case of BAKAS.
WHY IT IS IMPORTANT FOR CREDIT APPRAISAL?
ted dully by the borrower it will not be

possible for the bank and the other financial institutions to work for the sanctioning of the
loan. Each and every documents asked by the bank has to be submitted by the respective
borrower. He or she cannot be eligible if any single document is not presented to the
banks.All the documents serve as a evidence for the loan taken for the borrower and loan
given by the lender.With the help of the documents the bank can appraise the credibility of
the borrower and can work in a better way for the sanctioning of the loan.
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4.11 DISBURSEMENT OF THE SANCTIONED CREDIT FACILITIES
INFERENCE
After completion of security documentation, the credit official is to cross check between the
security and related documents required as per the sanction terms and the security/documents
actually obtained to correct the deviations, if any.
If entire security/documents as required are obtained, the Branch Manager shall authorize to
disburse the credit facilities through a memo.
After the disbursement, the copies of the security documents is to be forwarded to the Law
Department of the Bank which shall scrutinize the documents and advise the Branch whether
or not any rectification is to be made.
4.12 CREDIT INFORMATION BUREAU

INFERENCE
Credit Information Bureau plays a crucial role toward improving credit market performance
and acts as credit information broker that increases the transparency of credit markets. It is a
public limited company with banks and financial institutions holding majority of equity
(90%) while the rest (10%) is held by Nepal Rastra Bank (Central Bank of Nepal). Credit
Information Bureau currently has 69 promoter shareholders including 21 Commercial banks,
4 Development Banks, 43 Finance Companies and Nepal Rastra Bank.
The credit information of the borrowers needs to be updated with Credit Information Bureau
by the Banks and Financial Institutions. The information is to be updated through an excel
sheet. There are separate excel sheets for Individual Loans, Individual Joint Loans and Loans
by Firm, Companies or Organized Institutions. The important information that needs to be
updated is as follows
Name of the borrower (Individual or Company), Details of Registration/PAN No.,

Shareholders (In case of Firm), Details of Citizenship/Voters ID/License (In case of
Individuals).
39
Type of Loan the borrower has borrowed Mortgage, Overdraft, Cash Credit,
Housing, Education, Term Loan, etc. and the sanctioned amount.
Details of shareholders/proprietor (in case of a firm).
Particulars of the guarantor and three generation details of the guarantor.

Particulars of assets (both movable and immovable) placed as security collateral.
WHY IT IS IMPORTANT TO GET CICL REPORT
CICL plays a major role in credit appraisal. It gives a clear picture of the borrower and its
present condition. It helps to minimize the credit risk and helps to improve the credit market
performance. The banks and the other financial institutes can use the CICL report to get
better understanding of the borrower and its intended purpose of the loan.
These credit information needs to be updated on compulsory basis by all banks and financial
institutions, and while processing the loan of the borrower, the credit information report is to
be obtained by the bank prior to advancing loan; to investigate if the borrower has borrowed
loan from other financial institutions or whether the borrower is a defaulter (Black listed) in
other banks..
4.13 ANALYSIS OF THE WORK OF CREDIT MANAGEMENT AND

ADMINISTRATION DEPARTMENT(CMAD)
Credit Management
Credit management covers a diverse field of credit-related areas, from granting consumer
credit requests to managing the credit options of large corporations to collecting debts. There
are a variety of educational and career options in credit management .
ANALYSIS OF THE ROLE OF CREDIT ADMINISTRATION DEPARTMENT
The Credit Administration Departments (CAD) responsibility is to make sure that all
financing facilities are well documented and fully cover Pak Omans exposure. The main
functions of CAD include preparation of all loan documents, record keeping and safe custody
of all type of legal documents, arrangement of disbursement of loan facility once security
documents are complete, liaising with the Bank's lawyers, frequently reviewing portfolio
credit and security files, etc. An excellent turn around time is ensured in the department.
40
Credit management is the process of controlling and collecting payments from customers.
This is the function within a bank or company to control credit policies that will improve
revenues and reduce financial risks. A credit manager is a person employed by an
organization to manage the credit department and make decisions concerning credit limits,
acceptable levels of risk and terms of payment to their customers. In companies, the role of
Credit manager is variable in its scope. Credit managers are responsible for:
Controlling bad debt exposure and expenses, through the direct management of credit
terms on the company's ledgers.
Maintaining strong cash flows through efficient collections. The efficiency of cash flow
is measured using various methods, most common of which is Days Sales
Outstanding (DSO).
Ensuring an adequate Allowance for Doubtful Accounts is kept by the company.
Monitoring the Accounts Receivable portfolio for trends and warning signs.
Enforcing the "stop list" of supply of goods and services to customers.
Determine credit ceilings.
Setting credit-rating criteria.
Setting and ensuring compliance with a corporate credit policy.
Obtaining security interests where necessary. Common examples of this could be letters
of credit or personal guarantees.
Initiating legal or other recovery actions against customers who are delinquent.
4.14 LEGAL PROCEDURE
Each and every work in the bank related to credit department requires legal documents. The
legal procedure includes:
1. Document enquiry
2. Malpot for mortgage property
3. Loan disbursement
Some important documents are that is very much important for legal works are listed and
described below:
1.letter of aggrement:
A letter of purpose (LOI or LoI, and now and again promoted as Letter of Intent in legitimate
written work, however just when alluding to a particular archive under talk) is a report
41
outlining one or more aggrements between two or more parties before the understandings are
finished.
Common purposes of an LOI are:
To allow parties to sketch out fundamental terms quickly before expending substantial
resources on negotiating definitive agreements, finalizing due diligence, pursuing third-
party approvals and other matters
To declare officially that the parties are currently negotiating, as in a merger or joint
venture proposal
To provide safeguards in case a deal collapses during negotiation
To verify certain issues regarding payments made for someone else (e.g., credit card
payments)
2.promissory note:
A promissory note is a legal instrument (more particularly, a financial instrument), in which
one party (the maker or issuer) promises in writing to pay a determinate sum of money to the
other (the payee), either at a fixed or determinable future time or on demand of the payee,
under specific terms. If the promissory note is unconditional and readily salable, it is called
a negotiable instrument.
3. Networth statement:
Networth (sometimes called net or wealth) is the value which we get by reducing total
liabilities from the total asset of an individual or a company. Net worth is used when talking
about the value of a company or in personal finance for an individual's net economic position.
Put another way, total assets is any benefit claimed short any obligation owed. Total assets
can be a negative number on the off chance that one's obligation owed is more prominent
than the estimation of the benefits claimed
4. Letter of continuity:
Letter of Continuity is an instrument utilized as a part of conjunction with the interest

promissory note. This is to secure privilege of recovery for existing and future credit facility,
42
which are progressed in parts or on are covery premise. Advance records may every once in a
while be decreased or even the balance in the said advance record might be in credit.
5. Personal guarantee:
Individual certifications are particularly imperative for little organizations. Banks perceive
that a little business' money related wellbeing is firmly attached to its proprietor's budgetary
wellbeing. That is the reason they consider the proprietor's financial record when choosing
whether to affirm a business credit card application. It's likewise why they consider the
proprietor in charge of reimbursing all credit card equalizations if the business can't. A
business liquidation would not shield the underwriter from using individual advantages for
reimburse the business' credit card debts. The underwriter would need to file for individual
bankruptcy to get relief from business obligations.
A personal guarantee might seem like an extra risk to the business owner, but without it,
credit might not be available at all. Many small businesses have little to no credit history of
their own for lenders to consider. If the owners personal credit history is good, a personal
guarantee makes it possible to get credit for the business. Dont be surprised if youre asked
for your Social Security number when you apply for a business credit card.
INFERENCE AND WHY IT IS IMPORTANT FOR THE APPRAISAL OF CREDIT?
As I have already mentioned above that the bank are the institutions which operate in a legal
way,they cannot do whatever they want.They have to follow many rules and regulation set by
the central bank of Nepal i.e Nepal rastra bank.Nepal rastra bank has made many provisions
and the rules regarding the process of credit appraisal with all the commercial banks and the
financial institutes have to follow.the legal documents are very much important to carry trhe
entire work of credit appraisal.These legal documents have to be submitted by the borrower
and it is properly scrutinized by the respected bank for the appraisal of credit in retail lending
4.15 LOAN LOSS PROVISION
MEANING
Whenever the bank gives the loan to the borrower there exist some kind of risk and there also
exist chance that the loan amount cannot be recovered in time so inorder to avoid such type
43
of heavy loss the bank from the initial phase starts keep some amount aside so that at the end
the loss will not be heavy.A loan loss provision is an expense kept aside as an allowance for
the bad debt
Each and every bank has got their own process for the provision of loan loss.Simailarly HBL
has also got some kind of process for the provision of the loss loan. Provisioning in HBL
includes:
Pass loan 1%
Watch list(31 days to 90 days) 5%
Restructuring 12.5%
Substandard (91 to 180 days)25%
Doubtful (181 to 364 days)50%
Loss( above 365 days )100%
A loan loss provision is an expense that is reserved for defaulted loans or credits. It is an
amount set aside in the event that the loan defaults.
HOW IT WORKS (EXAMPLE):
Generally, banks conduct their business by taking deposits and making loans using those
deposits. It is a bit more complicated (e.g. investments, securitization, etc,), however, this is
the basic banking model. Banks must balance their loan receivables (i.e. the principal and
interest repayments from borrowers), with the demand for deposits (i.e. the requests from
depositors for all or a portion of their deposits.) In any group of loans, banks expect there to
be some loans that do not perform as expected. These loans may be delinquent on their
repayments or in default of the loan entirely, creating a loss for the bank on
expected income.
Therefore, banks set aside a portion of the expected loan repayments from all loans in its
portfolio to cover all, or a portion, of the loss. In the event of a loss, instead of taking a loss in
its cash flows, the bank can use the amount set aside to cover the loss. Since the bank does
not expect all loans to be late, there is usually enough in the loan loss reserve to cover the full
loss for any one or small number of loans when needed. The loan loss reserve acts as an
internal insurance fund.
44
4.16 RECOVERY OF LOSS LOAN
Recovery of a loss loan is very critical task. It creates a lot of pressure on the bank employess
to recover the loss and for this purpose they do so many things like:
1. Issuance of letter: they issue the letter in the name of borrower in 30 days,15 days and in 7
days.
2. Publish notice in daily newspaper: publish notice for 35 days in the news paper.
3. Auction(bidding):15 days and 7 days
In finance the term recovery refers to collection of amount due. The normally recovery
depends on the purpose, time and condition, business running process etc.
Normally loan amount will be recovered on installment basis. The manager can fix
installment period on the basis of nature of their business.
Example:
1. Installment fixes on salaried person on a monthly basis.

2. In the agriculture sector, installment fixes on biannual basis.
3. Business person normally 1 year per installment.
Recovery is different from one loan to another.
In short term loans recovery is less than 36months.

In medium term loans recovery is from 36 months to 84 months.
In long term loans recovery is normally 84 months or longer.
45
Case: I
Details of the Proposal

Borrowers: Mr. Pawan Rana & Mrs. Nysha Gopali Rana
Type of Loan: Overdraft facility of Rs. 30 lacs under the Mortgage Scheme
Net Annual Income of the Borrowers: Rs.12.03 lacs

Distress Value of the Security: Rs. 92.66 lacs
50% of available distress value: Rs.46.33 lacs
Loan Amount Eligible as per scheme: Rs. 36.09 lacs
Source of Repayment: Salary/Pension
Purpose of Loan: Fulfilment of Personal Obligation
Calculation of Net Annual Income (NAI)

(Rs. in lacs)
Per Annum
Net income of the Borrowers Per Month
(NAI)
Salary 90,000.00 10.80
Pension 10,273.00 1.23
Total 12.03
3 times of NAI ------- (A) 36.09
Distress Value of the Property 92.66
50% of Distress Value ------ (B) 46.33
Loan Amount Eligible (A) or (B) whichever
36.09
is lower
Loan Proposed for approval Rs. 30 lacs
Details of Salary and Pension:

Mr. Pawan Rana is a retired Government Official. At present, he is associated with
46
Backward Society Education (BASE), a National level NGO working in the area of social,
economic and political discrimination in the capacity of Team Leader. Mr. Rana
monthly salary of Rs. 90,000 from this organization. Also he is receiving monthly pension of
Rs. 10,273 which is sufficient for the proposed loan.
Security Arrangement:
The land and building owned by Mrs. Nysha Gopali Rana, located at Biratnagar has a distress
value of Rs. 92.66 lacs.
Personal guarantees of Mr. Pawan Rana (husband) and Mrs. Nysha Gopali (wife) has been
obtained.
Justifications for the Proposal:

The Net Annual Income of the borrowers is Rs. 12.03 lac which is satisfied for the proposal.
The borrowers are creditworthy and earn good reputation in the locality.
In view of good market reputation and creditworthiness of the borrowers, adequate sources of
income and security coverage and satisfactory conduct of account the sanction for the limit of
Rs. 30.00 lacs is considered fair banking risk.
Total exposure to the group falls under the SOL.
47
CASE: II
Details of the Proposal:
Borrowers: Nith Thapa and Asmita Thapa
Type of Loan: Education Loan 32.00 lacs
Distress Value of the Security: Rs. 81.45 lacs
50% of available distress value: Rs.40.72 lacs
Source of Repayment: Self-Employed
Purpose of Loan: For pursuing Post Graduate Diploma
(Management Level 8) course by Mrs.
Nitasma Thapa in New Zealand
*Total Education cost is NZ $ 40,560.00 as per offer letter provided to us which is equivalent to
NPR 3,244,800.00 as of 24.07.2014 (1 NZ $=NPR 80)
NPR in lacs
Limit Outstanding (As of 26.08.2014)
This Proposal 32.00 NA
Group 35.00 20.57 (SME OD)
Total 67.00 20.57
The group limit of NPR 3,500 K is for the SME Overdraft facility being availed in the name of
the firm M/s Meera Decors Pvt. Ltd. which is registered in the name of Mr. Nith Thapa (the
applicant) and is the father of Mrs. Nitasma Thapa
Background of Borrowers:
Mr. Nith Thapa and Mrs. Nitasma Thapa are the father and daughter in relation. The family of
48
the applicants includes the following:
Name Relationship with the Applicants

Nith Thapa Applicant
Asmita Thapa Spouse of the Applicant & Mother of the Co-applicant
Nitasma Thapa Co-Applicant
Nitas Thapa Son of the Applicant & Brother of the Co-applicant
Mrs. Asmita Thapa (Spouse of Mr. Nith Thapa) is a housewife and also looks after the
business of M/s Meera handicrafts which is operating from their own home since 10 years.
Mrs. Nitasma (the co-applicant and elder daughter of Mr. Thapa) is an MBA degree holder and
unmarried. Likewise, younger son Mr. Nitas Thapa is studying Computer Science in USA and
working independently. He is also unmarried. As declared by the applicants their family net
worth is estimated to be at NPR 67.20 Million which is for the value of the real estate
properties owned by them and their business investments.
Group Exposure
Mr. Nith Thapa (Applicant) is the proprietor of the firm M/s Meera Decors and the firm has
been availing SME overdraft facility of NPR 35.00 lacs from the bank. Current outstanding on
the account is NPR 2,057,062.79. The repayment behavior till date has been found regular and
satisfactory with timely servicing of interest.
CASE III
49
(All amounts in Millions unless specified otherwise)
MEMORANDUM ON CREDIT APROVAL LIMIT PROPOSED FUNDED

PACKAGE (CAP) FOR HOME LOAN
Name of the Group: N/A New
(1) Name and Address of the Customer: Renewal
Applicant: Mrs. Shova Mallik Enhancement
Address: Chhapkaiya, Parsa (Birgunj-03) Others
Phone No: 9845100247 Scheme
A/C No & C. ID : 00906106210011
Customer Category: General Internal Credit Rating: 3.20
Regulatory Risk Category and Weightage:
Capital Adequacy : Claims secured by

residential properties 60%
(2) Account Opened Date : 31.03.2016
(3) Requested Loan Amount & Purpose : Rs. 0.90M Home Loan Purchase (Land only)
Home Loan Type Purpose of Home Loan
Home Loan Purchase land To purchase a piece of land with area of 10.00 dhur out of
alone: Rs. 0.80M for 10 Years 1K10D-15Kn land for residential purpose. The proposed land
is located at Birgunj Sub metropolitan city wada No. 27, Parsa
(Previously Ramgadhwa 06, Parsa). The proposed land is
currently registered in the name of Mr. Balmiki Sah Kanu.
(4) Background Information of the Customer:
50
Family Background: Applicant Mrs. Shova Mallik aged 35 yrs. was born in India Madhubani
district as a daughter of Mr. Bhagwan Lal Dal and granddaughter of Late
Mahabir Lal Dal. She has got married to Mr. Bipin kumar Mallik and has
been residing at Chhapkaiya, Parsa (Birgunj-03) for last decade. Ms. Arya
Mallik aged 13 yrs and Mr. Ayush Mallik aged 11 yrs are the children of the
applicant. Both children are studying at Kadambari Boarding School,
Birgunj. The daughter is in class seven and the son is in class 5 respectively.
Academic & Professional Both Mrs. Mallik and Mr. Mallik are commerce graduates. Applicant Mrs.
Background: Mallik is working as an Assistant Woman Development Supervisor at
Woman & Children Programme under Ministry of Woman Childern and
Social Welfare whereas Mr. Mallik has been working as a LC and Logistic
Manager at M/s Jagadamba Enterprises Pvt. Ltd. (Prime AAA customer of
the bank)
As per CICL reply dated 2072/12/30 B.S, the applicant and her spouse (guarantor) are not availing any
credit facility which is also declared by multiple banking declaration form. Report enclosed.
(12) Sources and Application of Monthly Income of the Applicant/ Co-applicants:
A. Sources of income:
S.N. Applicant Personal

Particulars Guarantor
i. Salary Rs. 16,883.00 Rs. 30,000.00
ii. Business Income
iii. Rent from land/ building(s) -
iv. Interest from Deposits / Bonds -
v. Consultation Fees -
vi. Dividend from Shares -
vii. Rental Income( Income from vehicles on lease in the -

name of the co-applicant as per self declaration and lease
contracts)
viii Remittance Income -
ix. Others, if any, specify (Pension) -
51
Total Income of Applicant and Co-Applicant Rs. 46,883.00
Say Rs. 46,000.00
B. Application (Expenses):
S. N. Nature Applicant/
Co-Applicant (Rs.)
i. Living Expenses (food, clothing, medical, entertainment, electricity etc) 10,000.00
ii. Education of Children 5,000.00
iii. Tax (Income Tax) 1,000.00
iv. Rent ---
v. Insurance ---
vi. EMI of the proposed Home Loan 9,496.14
vi. Miscellaneous Expenses 2,000.00
Total Expenses of Applicant and Co-applicant Rs. 27,496.14
Total Expenses of Applicant and Co-applicant (Say) Rs. 27,500.00
C. Total Surplus available for Applicant and Co-applicant {Total source Rs. 18,500.00
Total Expense i.e. A-B}
(13) Cost Estimation for Home Loan Purchase (Land Alone) Submitted by Customer:
S.N. Description Amount (Rs.)
1. Home Loan Purchase (Land only) 1,900,000.00
Total Project Cost 1,900,000.00
4. Equity Injection by Customer (Through own sources) 1,100,000.00
52
5. Loan Amount Requested by customer 800,000.00
6. Proposed Home Loan Amount 800,000.00
7. Debt to Equity Ratio for Loan 60:40 (not exceeding

DV of the land)
8. Property Status:
Location of Property: Birgunj Sub metropolitan city wada No. 27 Parsa (Previously Ramgadhwa
06, Parsa)
Construction Structure: None
Access to the Property: Around 12 ft. earthen road from east and south side of the property.
Importance: The site is located within a residential area in Birgunj Sub metropolitan city. The
property is surrounded with basic amenities and processes high residential value.
(14) Present Proposals:
Type of Facility: Home Loan Purchase (Land alone)
Proposal Status: New
Limit: Rs. 0.80 M
Interest Rate: @ 7.50 % p.a.
Type of Interest Rate: Floating
Tenor of Loan: 10 Years from the date of initial disbursement
Loan Processing Fees 0.5% of the approved loan amount
Prepayment Charge 1% of prepaid amount
Full Prepayment Charge 1.50% of foreclosure amount
Moratorium Period NA
Debt to equity Ratio: 60:40 or not exceeding DV of property
(15) Exception in the Proposal, if any: NA
53
(16) Mode of Repayment : 120 Equal Monthly Installment of Rs. 9,496.14 (Tentatively)
(17) Mode of Disbursement : After approval of the proposed loan, a letter of undertaking will be
issued favouring to the seller of the property. The proposed loan will
be disbursed on account of the party maintained with us and
equivalent amount will be issued to the seller in form of Managers
Cheque or transfer in sellers account if maintained with Himalayan
Bank Limited. Disbursement of the loan will be done after completion
of all necessary documentation including mortgage of the property in
the name of HBL, Birgunj. Disbursement of the loan is subjected to
the valuation of property and if the valuation amount is less than the
required amount to cover the approved loan facility, the loan limit
shall be adjusted proportionately and disbursement will be done
accordingly.
(19) Justification of Present Proposals:
The applicant has intended to purchase a piece of land with area of 10 dhur, located at Birgunj Sub
metropolitan city wada No. 27 Parsa out of total area: (0B-1K-10D-15Kn) for residential purpose. As per
party, she will purchase the proposed land from eastern side having dual access of road from eastern and
southern side. She has given Rs. 55,000.00 as advance (Token Baina) to the owner of the land and requested
the bank for home loan purchase of Rs. 0.80M to execute the deal within predefined time frame.
Capacity to repay:
Both applicant and her spouse are in job and have been earning Rs. 46,000 per month. We have calculated
monthly disposable income of Rs. 18,500.00 after deducting their personal/household expenses as well as
EMI of the proposed loan. The disposable income is sufficient to cover the contingencies and other liabilities
of the family if any. Moreover, they have some agricultural land in Solakhpur. Hence, income of agriculture
may contribute to cover their household expenses.
Collateral value:
The loan is proposed under fully secured basis having 130% collateral margin. As per land purchase
agreement, the land is going to be purchased on Rs. 1.90M and we will finance only Rs. 0.80M which is
below than 42% of the purchased value. The proposed land is suitable for residential purpose and price
escalation perspective is equally high at this locality.
(20) Total Exposure of Customer Including Present Proposal:
Total Funded Facility/ies Total Non-Funded Facility/ies
Limit Outstanding* Limit Outstanding
54
Rs. 0.80 M Rs. 0.80 M Nil Nil
*Assuming full utilization of Home loan limit.
(21) Proposed Securities:
a) Own (Un-encumbered):
Particular Kitta No./ Land /Built Up Area DV as per our

valuator
Registered mortgage of land located at Birgunj Existing Kitta no.: 2336

Sub metropolitan city wada No. 27 Parsa
currently owned by Mr. Balmiki Sah Kanu Area of land: 0B-0K-10D-0Kn
(Out of total area: 0B-1K-10D-15Kn) Rs. 1.09M

Ownership to be transferred in the name of
Mrs. Shova Mallik (applicant)
(Kitta kat and Valuation of the land is yet to

be done & approved)
Total 0B-0K-10D-0Kn Rs. 1.09 M
b) Personal Guarantees of Mrs. Shova Mallik (Applicant/Proposed land owner) and Mr.
Bipin Mallik (spouse of the applicant)
(22) Creditworthiness Analysis of Customer based on Three Pillar Analysis:
Credit Pillars Inferences & Comments Rating
Financial Strength We have calculated disposable income of Rs. 18,500.00 to the

applicant which is sufficient to cover the contingencies and
other liabilities of the applicant if any. 3.10
Management Quality Both applicant and her spouse are job holders. Applicant
herself is in supervisor level and her spouse is in managerial
3.50
level. Hence, management aspect of the applicant can be
considered as good.
The loan is proposed under fully secured basis having 130%

collateral margin. We will finance only Rs. 0.80M which is
55
Security Strength around 42% of the purchased value. Moreover, personal 3.00
guarantee of the applicants spouse will also be obtained for
additional comfort.
Overall Credibility Rating (Average of above scores) 3.20
(23) RECOMMENDATIONS/ COMMENTS:
Analyst Comments and View Point:
This proposal is being forwarded for providing Home Loan (land purchase) as detailed under S. No. to
materialize the dream to construct own residential building of the applicant.
56
CASE V
The case is related to home lone of Mr Bishwa raj Ghimire
MEMORANDUM ON CREDIT APROVAL LIMIT PROPOSED FUNDED

PACKAGE (CAP) FOR HOME LOAN
(1) Name of the Group: N/A
(2) Name and Address of the Customer: New (Residential)
APPLICANT/ Co-Applicant : MR. BISHWA RAJ Renewal

GHIMIRE/TIRTHA ADHIKARI
Contact no: 9851021056 Enhancement
Suwarnpur-Parsa Reschedule/ Restructure
Internal Credit Rating: 3.75
A/C No & C. ID : To be opened Regulatory Risk Category & Weightage

for Capital Adequacy: Claim secured by
Customer Category: General residential properties , 60 %
(4) Requested Loan Amount & Purpose :
Home Loan Type Purpose of Home Loan
Home Loan (Swap) Total Rs. 2.90 M To purchase House located at Tejarath
Tole- Birgunj
for 10 yrs @8.00%
p.a (Interest Rate
Fixed for 1 years)
57
Family Applicant, Mrs. Bishwaraj Ghimire aged 40, son of Bharat Kumar Ghimire, is the
Background: permanent resident of Suwarnpur-01, Parsa district. He married to Ms. Tirtha
Adhikari(Co-applicant) and has a daughter. He is currently living in Suwarnpur-01,
parsa, in his own house. He also owns house at Kathmandu-Bafal. His wife with
his daughter stays in Kathmandu. The couple has one daughter, Bitisha Ghimire
aged 4. She is studying in Nursery. The couple is planning to buy proposed house
of his sister Bimala Ghimire. Mr. Ghimire has also worked in Cyprus in agriculture
field for about 10 years. Now he got settled in Nepal and working as chairman of a
co-operative limited (Gantavya Dugdha Udpadak Co-operative Ltd).
Academic and Mr. Ghimire has studied upto Masters (MBS) and his wife upto M.BA. Applicant
professional Mrs. Bishwaraj Ghimire is currently associated with Gantavya Dugdha Utpadak
Background: Co-operative Ltd. He has also established a chilling centre from which the milk is
supplied to DDC. He also owns a bus which is leased to Mr. Bishnu Prashad
Kafle.Mrs Tirtha Kumari Adhikari is currently working in Gatishil Press/Alekh
Prakashan,Shanti Nagar kathmandu
(9) Previous remarks of the sanctioning authority, if any, and their implementation :
Remarks N/A
Implementation None
(10) Total Facility/ies of Customer Group: N/A
(11) Dealing / Liabilities with Other Branches of HBL/Other Banks/Financial Institutions (CICL
Reports):
As per CICL report dated 2071/08/17 applicant Mr. Bishworaj Ghimire and his wife Mrs. Tirtha
Kumari is availing H.P loan from Lumbini Bank. There reflects overdue of Rs.24, 714.48 as per the
report dated 2071.06.31.However as per the report obtained from Lumbini bank as of
2014.12.09(2070.08.23), they do not have any due pending. The party is not blacklisted too. Report
Enclosed.
(12) Sources and Application of Monthly Income of the Applicant/ Co-applicants:
A. Sources of Income (in Rs.):
58
S.N. Particulars Applicant/ Co-
applicant
i. Salary 30,000.00
ii. Rent from land/ building(s) 14,000.00
iii. Interest from Deposits / Bonds -
iv. Consultation Fees -
v. Dividend income -
vi. Business Income monthly -
vii. Remittance Income -
viii. Income from Bus leased to Mr. Bishnu Prashad Kafle 50,000.00
Grand Total Income of Applicant and Co-applicant 94,000.00
Considering only 80% of the income 75,200.00
1. Salary of Mr. Bishwaraj Rs.20,000.00 and his wife Ms. Tirtha Kumari.
2. Rental income from the proposed building Rs.14000.00 (7000 per flat).
3. Income for the bus after deducting installment and maintenance.
B. Application of Income (Expenses in Rs. Per month):

S. N. Nature Applicant /Co applicant
i. Living Expenses (food, water, clothing, medical, 25,000.00

entertainment, etc)
(for combined family)
ii. Electricity & Telephone 1,500.00
iii. Education 2,000.00
iv. Tax* -
v. Rent** -
vi. Insurance -
vii. Travel Expenses 3,000.00
vii. Others expenses 2,000.00
59
A. Grand Total Expenses of Applicant and Co-Applicant 35,500.00
B. Total Surplus Income per month (A-B) 39,700.00
C. Proposed EMI for the loan 35,185.00
D. Net Surplus after paying EMI 4,515.00
Note: Further the party has also agricultural income, which is not included in calculation.
(12) Cost Estimation for Home Loan :

Description of Home (As per valuator :) Amount (Rs.)
1. Fair market Price of Property 4,718 ,000.00
2. Distress value of Property 3,774 ,400.00
Loan Requested by the party 2,900,000.00
3. D:E on Fair Market Value 61.46:38.54
Property Status: Brief details of property observed at the time of site visit is as follows:
The proposed property Kitta No.257 (7 dhur) is located at Tejarath Tole, Birgunj ward no. 16.
Proposed property is accessible with RCC road of around 10 ft from southern side. Property
contains two storied building. The building contains two flat at ground floor each having two rooms
and a kitchen. In first floor there are three rooms and a kitchen. The building is well maintained.
Proposed Property is free from high tension electricity/conservation area, it is facilitated with water,
electricity and telephone.
Note: We have also obtained interim valuation of land, civil and building as detailed:
Fare Market value Distress value

Land 2,203,000.00 1,762,400.00
Building 2,515,000.00 2,012,000.00
Total 4,718,000.00 3,774,400.00
(14) Present Proposal:
Type of Facility: Home Loan (Purchase Birgunj)
Proposal Status: New
Proposed Loan Amount Rs. 2.90 M
60
Interest Rate: @8.00% p.a
Type of Interest Rate: Fixed for 1years
Loan Processing Fee 0.50% of disbursed Loan amount
Tenor of Loan: 10 years from the date of initial disbursement
Grace Period: None
Debt to Equity Ratio: Maximum of 66:33 on fair market value of land and building as valuated
by our Banks Valuator.
Prepayment Charges: 1.00% of principal Prepaid amount
Swap Charges: 2.00% of swapped amount
(15) Exception in the Proposal, if any: N/A
(16) Mode of Repayment :
The proposed home loan shall be repaid in 120 monthly installments (10 years) of approximately
Rs. 35,185.00 (EMI basis).
(17) Mode of Disbursement:
Manager's Cheque (M.C) will be issued favoring Ms. Bimala Ghimire (Current owner of the
property) or loan the amount will be credited to his account maintained at Himalayan Bank Limited,
after completion of all necessary documentation works.
(18) Special Covenant: N/A
(19) Justification of Present Proposal:
Background of Applicants:
The party has requested to provide Home Loan of Rs. 2.90M. Applicant Mrs. Bishwaraj ghimire
and his wife is involved in job and they also have rental income.
61
Capacity to repay:
Applicant/Co applicant average monthly income of Rs.94, 000.00 from salary leased bus and rent
from the proposed building. With the saving of Rs. 39,700.00 the party can pay EMI of proposed
loan .However, his agricultural income will be addition cushion to pay this loan.
Collateral & future value:
As per the valuation report, fair market value of proposed security is Rs.4, 718,000 and distress
value Rs.3,774,000.00 The party has requested loan of Rs. 2.90 million which is just 61.46% of fair
market value of the building. Hence collateral provided by the party fully secures the proposed loan.
Limit Outstanding Limit Outstanding
Rs. 2.90 M Rs. 2.90 M - -
(21) Proposed Securities:
Particular Kitta No./ Area of land and Present Value (Rs.)

built up area of construction
Registered mortgage of Land and Kitta No.: 257 Fair market value:
Building. Located at Tejarath Tol-16, 4,718,000.00
Birgunj, Parsa in the name of applicant Area-118.51 Sq.M
Mr. Bishwaraj ghimire. Distress value:
(7 dhur) 37,74,000.00
( Detail Valuation & mortgage to be
done) (Complete valuation to
be obtained)
b) Personal guarantees of Applicant Mr. Bishwa Raj Ghimire and his wife Ms.Tirtha Kumari.
(22) Creditworthiness Analysis of Customer based on Three Pillar Analysis:
Financial The total income of the applicant is Rs. 75,200.00 expense amount is 3.50
Strength tentative Rs. 35,500.00 per month with monthly saving of Rs.39,700
before paying EMI for proposed loan.
Tentative EMI for 10 years reveals that the party needs to repay Rs.
35,185.00 as Equal Monthly Installment. The party shall be able to
62
service EMI of proposed loan .
Management The party looks serious about paying EMI on time and is banking with 3.50
Quality other bank too.
Security The proposal pertains to Home Loan Purchase. We are financing 3.50
Strength around 61.4% of total fair market value of the property. Even with the
decrease in the real estate price, the proposed collateral should be able
to cover the loan outstanding.
Overall Credibility Rating 3.50
(23) RECOMMENDATIONS/ COMMENTS:
Analyst Comments and View Point:
Applicant/Co applicant has satisfactory salary and rental income. Besides, they have also
agricultural income so there would not be problem in serving proposed EMI of Rs. 35,185.00.
Based on sufficient income, home loan of Rs. 2.90 Million is recommended and forwarded for
approval.
A. Recommendation and Justification of Branch (Home Loan of Rs. 2.90 M of Mr. Bishwaraj
Ghimire/Tirtha kumari)
CASE V
This case is of hire purchase loan of Mr pramod kumar sarraf.
MEMORANDUM ON
CREDIT APPROVAL PACKAGE (CAP) NON

FOR HIRE PURCHASE FACILITY LIMIT
FUNDED
PROPOSED FUNDED
(AUTO LOAN : PRIVATE)
(1)Name of the Group : New
(2) Name and Address of Customer : Enhancement
63
DR. PRAMOD KUMAR SARRAF Reschedule
GEETA MANDIR ROAD-08, BIRGUNJ Restructure
Tel: 051-526601, 9855020357 ( mobile) Proposal Under : Scheme ( ) / Non scheme ()
A/c No / C. ID : 009 0472675 0013 Automobile Vehicle : Private ( ) Commercial ()
Customer Category : General Internal Credibility Rating: 3.58
(3) Account Opened Date : July 25, 2013.
(4) Loan Amount Requested : Rs. 3.300,000.00 (78.76 % of total cost of one vehicle)

Applicant Dr. Pramod Kumar Sarraf is married to Mrs. Renuka Devi Sarraf . Dr. Sarraf and his
wife is our Home Loan and Subidha Loan (Non-revolving) client and repayment record
of the party is good so far.
Family Applicant, Dr .Pramod Kumar Sarraf aged 57 is the permanent resident of Geeta Mandir
Background: Road, Birgunj 08, Parsa. Mrs. Renuka Devi Sarraf is spouse of Dr. Pramod Kumar
Sarraf. The couple has one daughter, Shrijana Sarraf and one son, Sagar Kumar Sarraf.
Shrijana Sarraf has completed her MBBS from Nobel Medical College, Biratnagar and
is married. Their son, Mr. Sagar Kumar Sarraf, is studying Pharmacy in the Fourth year
at Bangalore, India.
Currently family is living their own house at Geeta Mandir Road-08, Birgunj. Beside
their residential house, the family also owns another building and Geeta Mandir Road,
Birgunj 12, which is rented. The rented building is situated in prime location of Birgunj
and building is being rented for commercial purpose. Dr. Sarraf has been dealing with us
from the past 3.5 years and the transaction of the party is satisfactory so far.
Academic Dr. Sarraf has done M.D from BPKIHS in General Practice and has six month training
Background: course in Nephrology. Dr. Sarraff has studied MBBS under Colombo Plan from St.
Petersburg University,USSR.
64
Professional Dr. Pramod Kumar Sarraf is a medical doctor. He is working as Hospital Director at
Background: National Medical College and he is also working part time in Advance Medicare
Hospital. He is running his own clinic name Sarraf Clinic at Geeta Mandir Road. Dr.
Sarraf has more than 2 Decade of experience in medical field.
(7) Details of Associated Firms/ Companies of the Customer and their nature of business: N/A
(8) Present Facility/ies of the Customer: As of 2073-02-21 (03-06-2016)
Present
Nature of Facility/ies Approved Limit Int. Rate Expiry/ Tenure
Outstanding*
Home Loan Rs. 4.8 Mil 8.5% p.a. Rs. 3.84 Mil 2023-09-13
Subidha Loan (Non-Rev.) Rs. 2.0 Mil 10.5% p.a. Rs.1.74 Mil. 2020-07-13
Rs.6.8 M Rs.5.58 M x x
*Latest Classification of Facility/ies: Pass Loan as of Baisakh End-2073
Conduct of Account: Regular
(8)Business Turnover of the Customer:
Fees / Commission /
Account Turnover Interest Income Total Income
Charges Income
FY 2070/71 FY 2071/72* FY 2070/71 FY 2071/72* FY 2070/71 FY 2071/72* FY 2070/71 FY 2071/72*
Rs. 2.62M Rs. 1.1 M Rs.0.06 M Rs. 0.31 Rs.0.021 M - Rs. 0.081M Rs. 0.31M
(9) Present Security/ies available covering exposure of Customer:

9.1 Fixed Asset Collateral:
Particular Kitta No./ Area of land and Present Distress
built up area of Value (Rs.)
construction
65
Registered mortgage of Land and Building. Kitta No.: 111
Located at Geeta Mandir Road, Birgunj 12, Parsa land: 5.50M
in the name of Co-applicant Mrs. Renuka Devi Area-187.26 Sq.M
Sarraf. Building: 3.30 M
(0.54 kattha)
Valuation do by Naresh Giri and consulting Total: Rs.7.80 M
engineers on Septemeber 01, 2013
Valuation done by Naresh Giri and Consulting Engineers on 01-09-2013and valuation approved on 24-
09-2013
9.2 Other Securities : N/A
9.3 Guarantees :
Personal guarantees of Dr. Pramod Kumar Sarraf and Mrs. Renuka Devi Sarraf (wife of applicant).
(10) Previous remarks of the sanctioning authority, if any, and their implementation:
Remarks Branch Manager Approval:
Approved Subidha Loan (Non-Revolving) of NPR 2.0 Mil.
Implementation Implemented as per the approving remark's
Last Audit Comment Remarks Compliance Update
Internal Audit N.A N.A.
Statutory Audit N.A N.A.
NRB Audit N.A N.A.
Reports):
As per CICL report dated 2073-02-23, Dr. Pramod Kumar Sarraf is not availing any credit facilities
from any other listed financial institutions and they are not blacklisted as well. Same thing have been
declared in Multiple Banking Declaration form. Report Enclosed
(13) Sources of Income of Main Applicant (Monthly/ Annual):
66
A. Sources of Income (in Rs.):
S.N. Applicant
Particulars
i. Salary (Considering 75% of income) Rs. 153,750.00
ii. Rent from land/ building(s)-(after 10% of tax) Rs. 50,200.00
iii. Consultation Fees* Rs. 100,000.00
iv. Others, if any, specify -
Total Rs. 303,950.00
*Dr. Sarraf Examines an average of 10 patients per day in Sarraf clinic. His fee per patient is
Rs.400. At this rate if he checks 10 patients per day for one month(25 days in a month) . His
monthly income comes to be Rs.(10*25*400)=Rs. 1,00,000.00
*He also owns a medical shop medical and pathology lab which income has not been considered in
calculation but this income will be additional cushion for loan repayment.
B. Application of Income (Expenses in Rs. Per month):
S. N. Nature Applicant
i. Living Expenses (food, water, clothing, medical, Rs. 20,000.00

entertainment, etc)
(for combined family)
ii. Electricity & Telephone Rs. 5,000.00
iii. Education * Rs. 25,000.00
iv. Tax ** Rs. 10,000.00
v. Rent (They are living in their own house) -
vi. Insurance -
vii. Travel Expenses Rs. 5,000.00
viii -Existing one Hire Purchase Loan Installment Rs. Rs. 101,896.27
58,849.09
-Existing Subidha Loan (Non-Rev.) Installment-

Rs.43,047.18
ix Others expenses -
Total Rs. 166,896.27
67
*Education expense is allocated for study of Son Mr. Sagar Kumar Sarraf (son of applicant)
C. Total surplus available for Applicant and Co-applicants Rs. 137,053.73
(Total Source of Income Total Expense)
D. Tentative EMI for proposed HP loan limit of Rs. 3.30 mil @ Rs.66,125.23
7.5 % p.a. for five year is:
E. Net Surplus after payment of EMI Rs.70,928.50
(14)Description of Automobile Vehicle proposed for financing:
S.N. Description Particulars / Amount
i. Automobile Vehicle : NEW FORD ECOSPORT TITANIUM 1.5L
ii. Quotation Price : Rs. 4,190,000.00
iii. Other Costs : N/A
iv. Total Cost of Vehicle: Rs. 4,190,000.00
v. Auto Loan Requested (78.76 % of total cost) Rs. 3,300,000.00
vi. Proposal Under scheme/ Non scheme NA
vii. Type of Vehicle: Private
(15)Present Proposal(s) :
Proposal Interest Tenure Processing Debt/ Equity

Nature of facility Amount
Status Rate * Fee Ratio
Hire Purchase ( private) New Rs.3.30 M 7.50% 5 Years 0.5% 78.76:21.24
(16) Special Covenants in the Present Proposal: N/A
(17) Purpose of Facility Applied:
Present Request:
Party has requested for Hire Purchase Loan of Rs.3.30 Mil to purchase one unit of New Ford
Ecosport Titanium from S.A. Enterprises. Party requires this car to for their personal use and will be
68
easy to visit Hospital, clinic for day to day work
Per month combined net saving of applicant is Rs. 137,053.73 which can easily cover EMI of
proposed loan of Rs. 66,125.23. Moreover, income from Sagar Aaushadi Pasal and other income of
the doctor have not been considered but they are regularly receiving income from medicine shop and
pathology lab. Those incomes will be additional cushion for loan repayment.
After expending on all the household/personal requirements and meeting EMI obligation of present
and proposed loan, the party will still have monthly savings of Rs. 47,980.64. Keeping in view of the
above, we propose New Hire Purchase Loan of Rs. 3.30 Mil D:E ratio of 78.76:21.24 for the period of
5 years @ 7.5% p.a
(18)Disbursement Criteria :
Shall be disbursed upon approval from the competent authority and completion of all legal documents
and ownership transfer in banks name.
Managers cheque shall be issued to the supplier or account will be directly credited maintaining D/E
ratio 78.76:21.24 and not exceeding the proposed limit.
(19) Mode of Repayment:

Party will pay installments (principal and Interest) on monthly EMI basis and will be repaid in 60
equal monthly installments of Rs. 66,125.23
Rs. 10.1 M Rs. 8.88* M - -
# Considering full utilization of the proposed limits.
(21) Proposed Securities for proposed Hire Purchase Facility (Auto Loan):
I. Registration of proposed one Unit of New Ford Ecosport Titanium 1.5 L in name of the Bank
duly insured in favour of the Bank with comprehensive risk coverage including terrorism.
II. Personal Guarantee of Dr. Pramod Kumar Sarraf
(22)Creditworthiness Analysis of Customer Based on Five Pillars Analysis :
Credit Inferences & Comments Rating
69
Pillars
The total income of the applicant from rent and medical practice is
Rs.303,950.00 and an expense amount is tentative Rs. 166,896.27 per
month including, EMI of existing Home Loan and Subidha Loan
Financial (Non-Revolving), resulting in the net surplus of the party to Rs. Rs.
70,928.50
Strength
Payment track of applicant is very good. Applicant has income source 4.0
with regular in nature. Salary and income from transport is sufficient to
repay the EMI of proposed HP loan.
Mr. Sarraf is doctors by profession. Salary income from hospital and

Clinic is enough to serve the EMI for proposed HP loan after deducting
their personal expenses.
Dr. Pramod Kumar Sarraf is well educated and professionally reputed.
Management
He has been managing his clinic and hospital very well. Moreover he is 3.50
Quality experienced in dealing with bank. He understands all banking
requirement and importance of paying EMI on time
We are financing 78.76% of the total cost of vehicle. Party proposed
Security limits will be secured by registration of vehicle in banks name with full 3.25
Strength insurance coverage and personal Guarantee of Dr. Pramod Kumar
Sarraf will be obtained
(23)RECOMMENDATIONS/COMMENTS:
Analyst Comments and View Point
Dr. Pramod Kumar Sarraf has more than 2 Decade of experience in medical field. Further, party has
multiple source of income to serve the interest and principle of the proposed loan.
Looking in to the background of the party, past transaction history and multiple source of income is
enough repayment sources to repay EMI for proposed Hire purchase of Rs. 3.30 Mil @ 7.5% p.a. for 5
years is recommended for approval.
A. Recommendation and Justification of Branch: New Hire purchase Loan for Mr. Pramod kumar
Sarraf
CASE VI
70
This case is for hire purchase loan of Om shakti itta udyog
MEMORANDUM ON CREDIT APPROVAL

LIMIT PROPOSED NON FUNDED
PACKAGE (CAP) FOR HIRE PURCHASE
FUNDED
(1) Name of the Group : N/A New (Auto Loan)
M/s. Om Shivshakti Itta Udyog Reschedule
Address: Ward no. 9, Dahiyar, Bara. Restructure
Mobile: 9851130465
Accont no : 437624 Internal Credibility Rating: 3.46
Customer Category: Prime AAA Regulatory Risk Category & Weightage for Capital
Adequacy: Regulatory Risk Portfolio, 75%
(3) Account opened date : 2067/06/06(at Bahaktapaur)
(4) Corporate Structure : Sole Proprietorship
Capital structure : Rs.4.70M
(5) Nature of Business : Manufacturing/Trading of bricks
(6) Names of Major Promoters/ Shareholders & Shareholding Pattern:
S. No. Shareholders Designation Shareholding (%)

(01) Mr. Dipal Prsad Kayastha Proprietor 100.00%
Total 100.00%
Company/Institution being managed by: Mr. Dipal Prasad Kayastha
(7) Present Facility/ies of the Customer:
Approved Int. Rate / Commission/ Present O/s

Nature of Facility/ies Expiry*
Limit Cash Margin (10/09/2015)
71
Overdraft Rs. 3.00M 8.50 % p.a. Rs. 2.66 M 25/11/2015
Rs. 3.00 M. Rs. 2.66 M. - -
Latest Classification of Facility/ies :Pass Loan as of Shrawan end 072
Conduct of Account: Satisfactory
(8) Present Facility of the group: Same as customer
(9) Security/ies provided By the Customer:
9.1 Fixed Assets Securities:
a) Own (Encumbered): N/A
b) Own (Un-encumbered
Particular Approved Distress Value Kitta No./ Area
Registered mortgage of land owned by Mrs. Juna Maiya

Kayestha (Mother of the proprietor) located at Ward no.7,
Chhaling VDC, Bhaktapur.
Valuated by Technical Services Consultant (TESCO) on Rs. 3.00 M 1213

November 27, 2012. Distress Value of Rs. 3.00 M 01-06-02-00
approved by BM on 27/11/2012
(R-A-P-D)
Total Rs. 3.00 M
c) Third Party: N/A

9.2 Other Securities:
Particulars Description Value Remarks
Hypothecation of Stocks Various stock of the firm Loan value
72
Assignment of Current Accounts and Bills Receivables Loan value
Others, if any None
9.3 Guarantees:Personal guarantee of proprietor Mr. Deepal Kayastha and his mother Juna Maiya
Jayastha.
9.4 Other Securities, if any N/A
Reports):
As per CICL replied dated 2072-05-11, the firm and its proprietor is not availing any credit facilities from listed
financial institution. However, Mrs. Junu Maiya Kayastha is availing personal loan from other bank with clean
repayment record. Further, CICL report doesnt disclose any blacklisting report of the party.
(11) Business Given :
(a) By Customer:
Particulars 2013/14 2014/15
Account Turnover Rs. 4.79 Mil. Rs. 8.733Mil.
Import - -
Demand Draft - -
(b) By Group: Same as customer
(12) Earnings:
(a) By Customer:
Particulars 2013/14 2014/15
Interest Rs. 0.364 Mil. Rs.0.263M
Commission, Fees& Rs. 0.0057 Mil. Rs. 0.06 M

charges
Total Earning: Rs. 0.369 Mil. Rs.

0.269M
(b) By Group: Same as customer
(13) Background of Company/ Promoters/ Directors:
73
Background of Company/Directors
M/s Om Shivshakti Itta Udhyog was registered as a sole proprietorship firm with Department of Industry,
under Cottage and Small Industry on 13/06/2067. The company was previously in the name of Mr.
Arabinda Shah Kalwar which was transferred in the name of Mr. Dipal Prasad Kayestha on 20/05/2069.
The company is involved in the manufacturing and marketing of bricks. The manufacturing site of the
company is located at Dahiyar VDC-9, Bara. The party has leased around 7 Bighas of land in the area.
The company is promoted by Mr. Dipal Prasad Kayestha. Mr. Kayestha has been involved in this line of
business for more than half a decade. In due period of time, he has developed strong network with the
suppliers and built up strong client base. Besides, Mr. Kayestha is also involved in export business in
partnership.
(14) Financial Highlights/Analysis: Summary of Past Performance: Audited by: M/s. Pashupatiram Thapa
&Associates
2071/72 2072/73 2073/74 2074/75
Key Financial Indicators (Audited) (Projected) (Projected) (Projected)
Volume Indicators (Rs. in Mil.)
(a) Sales 33.53 34.00 34.50 35.00
(b) Net Working Capital* 8.55 9.30 10.74 13.37
(c ) Net Trading Assets 8.64 9.53 10.79 13.16
(d) Net Worth 11.52 12.96 16.07 17.97
(e) Net Fixed Assets 5.32 8.04 9.40 8.40
(f) Total Bank Loan O/S 2.35 4.38 4.07 3.80
Profitability Indicators (% )
(a) Gross Profitability 8% 11% 16% 13%
(b) Net Profitability 5% 4% 9% 5%
( c) Return on Capital Employed 14% 11% 19% 11%
Liquidity Indicators (times)
(a) Current Ratio 2.57 2.72 3.16 3.75
(b) Quick Ratio 0.88 1.03 1.32 1.69
Efficiency Indicators (days)
(a) Stock days in hand 79 82 88 96
74
(b) Average Collection Period 37 43 52 65
(c ) Average Payment Period 0 0 0 0
(d) Net Operating Cycle 116 125 141 161
Financing Ratios
(a) D/E Ratio (Overall in %) 17% 25% 20% 17%
(b) Interest Cover (times)** 7.62 3.75 6.00 4.34
Altman's Z Score 4.29 3.90 4.07 3.94
* Before bank loan. ** Earnings before interest and taxes/interest expense amount.
COMMENTS ON FINANCIAL INDICATORS / HIGHLIGHTS:

Company has attained sales revenue of Rs.33.53 M. in FY 2071/72 and is projected to
increase further in coming FYs.
The profitability indicators of the company are satisfactory with gross profitability 8%, net
profit margin of 5% and ROCE of 14 % in FY 2071/72.
Liquidity indicators of the party is good with current ratio of 2.57.
Net operating cycle of the party is within acceptable range.
In FY 2071/72, the overall D/E ratio of 17.50%.
Interest coverage of 7.62 times shows that the party is in a comfortable position to serve its
interest obligations.
Altmans Z score of 4.29 of the firm is on the favorable side.
(15) Description of Automobile Vehicle proposed for financing:
i. Automobile Vehicle : Escorts Bakhoe Loader
ii. Name of Dealer M/S. IME AUTOMOTIVES
iii. Quotation Price : Rs. 3,950,000/-
75
iv. Other Costs : Registration charge and insurance fee to be borne by the applicant
vi. Total Cost of Vehicle: Rs. 3,950,000/-
vii. Auto Loan Requested Rs. 2,700,000/- not exceeding 70% of final bill value
viii. Use of Vehicle: For Factory Use

Nature Hire Purchase Loan
Proposal Status New
Loan Amount Rs. 2.70 M
Interest Rate 9.00% p.a.
Loan Processing Fee 1.00% of approved loan amount
Loan Tenure 5 yrs from the date of disbursement
Debt / Equity Not exceeding 70:30 at maximum
Prepayment Charge/ Full payment As per H.P Loan Policy

Charge

Rs. 5.70 M. Rs. 5.70 M. - -
(18) Total Exposure of group including Present Proposal: same as customer.
(19) Detail of overdue if any and Repayment Plan: None
(20) Disbursement Criteria :
Upon the completion of registration of the proposed vehicle in the name of bank along with comprehensive insurance
and related security documentation, equivalent amount will be issued to the supplier in the form of Managers Cheque
or transfer in suppliers account if maintained in Himalayan Bank Limited, Birgunj Branch as requested.
76
(21) Repayment Plan:
i. Mode of Repayment in Equated Monthly Installment (EMI)
ii. The party will repay from the income of the company.
(22) Proposed Security/ies Arrangements for proposed loan:

A.Registration of One Unit of proposed vehicle in the name of the Bank duly insured in favor of
the Bank with comprehensive risk coverage.
B Personal guarantee of proprietor Mr. Deepal Kayastha and his mother Juna Maya Jayastha.
(23) Fixed Assets Collateral Requirement Computation:Considering present proposal
Facility/ies Limit Margin FAC Required Covered by
Overdraft Rs.3.00 Mil. 100% Rs.3.00 Mil. FAC,Stock and PG

Hire Purchse Loan Rs.2.70 Mil. - - Registered vehicle
Total Rs.3.00 Mil.
Total Collateral Requirement : Rs. 3.00 Mil
Total Collateral Provided : Rs. 3.00 Mil.
(24) Credit Worthiness Analysis:

Industry The industry environment for this business has good prospects. The
Environment demand for the bricks has good future prospects looking at the growing
urbanization and construction works in the valley. There are 80 brick
industries operating in the market of Bara and Parsa. Hence there is 3.30
competition in the market. However, since brick is the basic construction
material and the construction activities will go on increasing, the market
is big enough to accommodate all the industries.
Financial Sales turnover of the firm is projected to improve in future. Profitability

Strength indicators are satisfactory with gross profit margin of 8%, net profit
3.30
margin of 5% and ROE of 14%. Current ratio of 2.57 and Altman Z
score of 4.92 all point out to the financial strength of the firm.
Management The company is managed by Mr. Dipal Prasad Kayestha who has been
Quality involved in the business for more than half a decade. The proprietor has
a good business background. Hence he has adequate experience, 3.30
knowledge and skills and strong network with the suppliers and
customers.
Technical The factory is well equipped with the required man power, tools and 3.40
machines. The company employs 5 administrative level staff. During on
77
Strength season it hires around 150 labors.
Security The party has provided FAC worth Rs. 3.00 Mil. Which fully cover the
Strength exposure. Besides, the party has also provide stock hypothecation duly
insured with the bankers clause and personal guarantee of the 4.00
proprietor.
(25) RECOMMENDATIONS/COMMENTS:
M/s Om Shiv shakti Itta Udyog is banking with us since 2012 under SME category. The
loan account was previously maintained at Bhaktapur Branch. However as per the
management secision the file was transferred to Birgunj branch on 23rd July 2015.
As of today, the party has satisfactory repayment history. They are maintaining regular &
satisfactory conduct with us. Looking at the requirement of Vehicle for the factory
purpose, H.P Loan of Rs.2.70M is recommended for approval.
A. Recommendation and Justification of Branch :( HP Loan of 2.70 M for M/s om Shiv Shakti Itta
Udyog)
CASE VII
MEMORANDUM ON CREDIT APPROVAL

LIMIT PROPOSED NON FUNDED
PACKAGE (CAP) FOR HIRE PURCHASE
FUNDED
(1) Name of the Group : N/A New (Auto Loan)
78
M/s. kitchen Concepts P.L Reschedule
Address: Ward no. 11, Teku, kathmandu. Restructure
Mobile: 014221858,Mob:9851024017
Accont no : 586401 Internal Credibility Rating: 3.70
Customer Category: General Regulatory Risk Category & Weightage for Capital
Adequacy: Regulatory Risk Portfolio, 75%
(3) Account opened date : 2015.10.08(at Teku)
(4) Corporate Structure : Private Limited
Capital structure : Rs.5.00M
(5) Nature of Business : Design of Kitchen Interiors , Trading of Kitchen products etc.
(6) Names of Major Promoters/ Shareholders & Shareholding Pattern:
S. No. Shareholders Designation Shareholding (%)

(01) Ms. Mita Baruwal Promoter 25.00%
(02) Ms. Sima Tibrewal Promoter 25.00%
(02) Mr. Prakash Tibrewal Promoter 25.00%
(02) Mr. Sanjeev Parajuli Promoter 25.00%
Total 100.00%
Company/Institution being managed by: Mr. Prakash Tibrewal(Spouse of Sima tibrewal)
(7) Present Facility/ies of the Customer: None
(8) Present Facility of the group: None
79
(9) Security/ies provided By the Customer: None
Reports):
As per CICL replied dated 2072-06-28, the firm and its promoters are availing credit facilities from other listed
financial institution. The company and its promoters do not have any overdue pending. Further, CICL report doesnt
disclose any blacklisting report of the party.
(11) Business Given : None
(12) Earnings: None
(15) Background of Company/ Promoters/ Directors:
Background of Company/Directors
M/s Kitchen Concept P.L is registered as a Private Limited Company with Office of Company Registrar on
2060/11/21. The company is registered in the name of Ms. Mita Baruwal, Ms. Sima Tibrewal, Mr. Prakash
Tibrewal and Sanjeev Parajuli with shareholding of 25% each. The company is involved in trading of
Kitchen products and interior designing of kitchen.The company is involved in trading and interior
designing of major apartments and individual houses inside Kathmandu valley. The office cum outlet is
located at Teku-Kathmandu.
The company is managed by Mr. Prakash Tibrewal. He has proven experience in this field of more than a
decade. In due period of time, he has developed strong network with the customers and built up strong
client base. Besides, is also involved in plastic container manufacturing company name Pack well.
(16) Financial Highlights/Analysis: Summary of Past Performance: Audited by: M/s. D.N Shah &Associates
Key Financial Indicators
2069/70 2070/71
80
(Audited) (Audited)
Volume Indicators (Rs. in Mil.)
(a) Sales 43.09 52.27
(b) Net Working Capital* 21.96 28.53
(c ) Net Trading Assets 22.13 28.36
(d) Net Worth 9.25 11.08
(e) Net Fixed Assets 1.59 5.33
(f) Total Bank Loan O/S 14.30 22.77
Profitability Indicators (% )
(a) Gross Profitability 23% 23%
(b) Net Profitability 4% 4%
( c) Return on Capital Employed 18% 17%
Liquidity Indicators (times)
(a) Current Ratio 1.55 1.38
(b) Quick Ratio 0.47 0.75
Efficiency Indicators (days)
(a) Stock days in hand 175 135
(b) Average Collection Period 52 113
(c ) Average Payment Period 0 0
(d) Net Operating Cycle 227 248
Financing Ratios
(a) D/E Ratio (Overall in %) 61% 67%
(b) Interest Cover (times)** 2.33 2.16
Altman's Z Score 3.53 2.89
* Before bank loan. ** Earnings before interest and taxes/interest expense amount.
COMMENTS ON FINANCIAL INDICATORS / HIGHLIGHTS:
81
Company has attained good sales revenue of Rs.52.27 M. in FY 2070/71.
The profitability indicators of the company are satisfactory with gross profitability 23%, net
profit margin of 4% and ROCE of 14 % in FY 2070/71.
Liquidity indicator of the party is good with current ratio of 1.38.
Net operating cycle of the party is above acceptable range.
In FY 2070/71, the overall D/E ratio of 67%.
Interest coverage of 2.16 times shows that the party is in a comfortable position to serve its
interest obligations.
Altmans Z score of 2.89 of the firm is on the favorable side.
(15) Description of Automobile Vehicle proposed for financing:
i. Automobile Vehicle : Hyundai-Creta
ii. Name of Dealer M/S. Laxmi Intercontinental
iii. Quotation Price : Rs. 4,771,000/-
iv. Other Costs : Registration charge and insurance fee to be borne by the applicant
vi. Total Cost of Vehicle: Rs. 4,771,000/-
vii. Auto Loan Requested Rs. 2,500,000/- not exceeding 53% of final bill value
viii. Use of Vehicle: For personal and official use
82
Nature Hire Purchase Loan
Proposal Status New
Loan Amount Rs. 2.70 M
Interest Rate 6.50% p.a.
Loan Processing Fee 0.50% of approved loan amount
Loan Tenure 5 yrs from the date of disbursement
Debt / Equity Not exceeding 53:47 at maximum
Prepayment Charge/ Full payment As per H.P Loan Policy

Charge

Rs. 2.50 M. Rs. 2.50 M. - -
(21) Total Exposure of group including Present Proposal: same as customer.

(19) Detail of overdue if any and Repayment Plan: None
(20) Disbursement Criteria :
Upon the completion of registration of the proposed vehicle in the name of bank along with comprehensive insurance
and related security documentation, equivalent amount will be issued to the supplier in the form of Managers Cheque
or transfer in suppliers account if maintained in Himalayan Bank Limited, Birgunj Branch as requested.
(26) Repayment Plan:

iii. Mode of Repayment in Equated Monthly Installment (EMI)
iv. The party will repay from the income of the company.
(27) Proposed Security/ies Arrangements for proposed loan:

a. Registration of One Unit of proposed vehicle in the name of the Bank duly insured in favor of the
Bank with comprehensive risk coverage.
b. Personal guarantee of Ms. Mita Baruwal, Ms. Sima Tibrewal, Mr. Prakash Tibrewal and Snjeev
Parajuli
(28) Fixed Assets Collateral Requirement Computation: Considering present proposal
83
Facility/ies Limit Margin FAC Required Covered by
Hire Purchse Loan Rs.2.50 Mil. - - Against Registered vehicle

Total -
(29) Credit Worthiness Analysis:

Industry The industry environment for this business has good prospects. The
Environment demand for the kitchen product is in increasing trend looking at the
4.00
growing urbanization and construction work. Further due to the change in
lifestyle of the people prefers to have all kitchen requirements in house.
Financial Sales turnover of the company is good. Profitability indicators are

Strength satisfactory with gross profit margin of 23%, net profit margin of 4% and
4.00
ROE of 14%. Current ratio of 1.38 and Altman Z score of 2.89 all point
out to the financial strength of the firm.
Management The company is managed by Mr. Praksh Tibrewal who has been involved
Quality in the business for more than a decade. The proprietor has a good business
3.50
background. Hence he has adequate experience, knowledge and skills and
strong network with the suppliers and customers.
Technical The company is operated with the required man power and supply chain
Strength management. The r outlet is located at Teku-Kathmandu, one of the prime 3.50
location for this business.
Security The the exposure will be backed by one unit of Creta vehicle having
Strength market value of Rs.4,771,000.00.Since the party has requested only
Rs.2,500,000.00,the coverage will be about 190%.Further the loan will 3.50
also be backed by personal guarantee of the promotes.
(30) RECOMMENDATIONS/COMMENTS:
M/s Kitchen Concept is currently banking with NABIL and Kumari Bank with permanent credit
line.However the party has requested us for H.P loan of Rs.2.50M under NADA scheme.
Hence looking at the market reputation and nature of business, H.P Loan of Rs.2.50M @ 6.5% p.a is
recommended and forwarded for approval.
84
A. Recommendation and Justification of Branch :( HP Loan of 2.50 M for M/s Kitchen Concept P.L)
5.1 SUMMARY OF FINDINGS
Retail lending has come to play an increasingly important role as an instrument in the financial
planning of households and business. At a more aggregate level, consumer credit constitutes a
significant part of financial institutions' assets and activities. When current earnings fall below a
permanent income and assets are either not available or not accessible for dissaving, credit is a
means to maintain consumption at a level that is consistent with permanent income. People
expecting a lasting increase in their income but lacking any assets have a desire to maintain
consumption at a higher level than their current earnings allow for. Borrowing can assist them in
85
doing that. Therefore, the importance of consumer lending is of paramount importance.
Credit Appraisal is a process to ascertain the risks associated with the extension of the credit
facility. It is generally carried by the financial institutions which are involved in providing
financial funding to its customers. Credit risk is a risk related to non repayment of the credit
obtained by the customer of a bank. Thus it is necessary to appraise the credibility of the
customer in order to mitigate the credit risk. Proper evaluation of the customer is performed
which measures the financial condition and the ability of the customer to repay back the loan in
future? Generally the credit facilities are extended against the security know as collateral. But
even though the loans are backed by the collateral, banks are normally interested in the actual
loan amount to be repaid along with the interest. Thus, the customer's cash flows are ascertained
to ensure the timely payment of principal and the interest
It is the process of appraising the credit worthiness of a loan applicant. Factors like age, income,
number of dependents, nature of employment, continuity of employment, repayment capacity,
previous loans, credit cards, etc. are taken into account while appraising the credit worthiness of
a person. Every bank or lending institution has its own panel of officials for this purpose.
5.3 SUGGESTIONS
Credit appraisal means an investigation/assessment done by the bank prior before providing any
loans & advances/project finance & also checks the commercial, financial & technical viability
of the project proposed its funding pattern & further checks the primary & collateral security
cover available for recovery of such funds.
Credit appraisal in retail is of outmost importance. as I have worked in HBL for one
complete month I came to know about the various facts and figures of the work being
done in HBL.as per my views what I would like to suggest is the bank should hire more
86
no of staff in Birjung branch as the work load in this branch is heavy and the staffs are
less.
In some case of retail lending what I found is the interest rate charged is changed
compared to others parties so what I would like to recommend is they should make
flexible interest rate system for all the institutions so that it helps to build good relations
with all the existing clients.
There exist some problems in the file kept of the borrower; no proper place is allocated in
the bank for the files of the clent.It is kept simply in the drawer without any lock. There
should be proper racks for the clients file with proper lock system.
The documents required for the credit appraisal process is very confidential. They didnt
give those documents to any intern working and because of this I was not able to get clear
picture of all the documents. What I want to suggest is they should let few old files to
have access to the interns so that it will help them to know about the various documents.
To encourage high repayment by creditor a differential interest rate can be administered.
Some the clients file is pending so what I would like suggest is the credit manager should
take some action for those files like searching and solving the problem for those files.
CICL report should be properly evaluated.
The risk involved in credit appraisal should be minimized with the proper study of all the
factors like technical, managerial etc.
Client files and other important documents should be given outmost importance.
Bank may strengthen the credit collection system, so that loans lent are collected on time
from retail lending.
87
The recovery system of banks should be improved in order to reduce the NPA
percentage and increase profitability of the bank.
BIBLIOGRAPHY
JOURNALS:
A journal of economics and management related to SBI bank

Asian research journal of business management.
An Overview of Credit Appraisal System with special reference to
Micro Small and Medium Enterprises (MSME)
CASE STUDY:
88
A case study of premier bank on credit appraisal and assessment.
Credit appraisal process of SBI at hisar branch
A project report on credit appraisal of Shakti finance limited.
Credit appraisal system at Indian overseas bank guindy Chennai.
BOOKS
NAME AUTHER PUBLISHER PUBLISHED
DATE
23ndAnnual book of hari krishna adhikari Himalayan bank 16-04-2015
HBL
Understanding credit Kamal Academic publisher

appraisal in banks chattopadhayay
WEBSITES:
www.himalayanbank.org.com
www.nrb.com
www.creditappraisal.in
www.studymode.com
www.academia.edu
www.arjam.com
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1.

In simple way we can define bank as an institution, authorized as a collector of deposit. It

1.2 EVOLUTION OF BANKING IN NEPAL

1. 3 THEORETICAL BACKGROUND OF THE STUDY

1.4 IMPORTANCE OF THE TOPIC

Credit appraisal takes care of

1.5 NEED TO STUDY THE TOPIC

SathyaVarathan PriyaKalyanasundaram and S.Tamilenthi

According to the SBI bank report:

Ms.Balkees (Oct 2015) and Sun and Li (2006)

Akila and Pathmavathy (2014)

2.2 STATEMENT OF THE PROBLEM

2.3 SCOPE OF THE STUDY

2.4 OBJECTIVE OF THE STUDY

2.5 TOOLS FOR DATA COLLECTION

2.6 PLAN OF ANALYSIS

It is based on the personal understanding of the internee regarding the banks

HBL is not only a Bank, It is committed Corporate Citizen

The Banks Vision:

The Banks Mission:

The Banks Objective:

Minimum Balance of Rs. 1,000/-

Normal Savings Account (NSA)

Interest calculated on daily balance, capitalized quarterly basis

Bishes Savings Account (BSA):

Minimum Balance of Rs. 2,000/- only

Himal Savings Account (HSA):

Minimum Balance of Rs. 0 only

Premium Savings Account (PSA):

Exclusive PSA Counter for deposit and withdrawal facilities

Super Premium Savings Account (SPSA):

Privileged counter for banking services

Himal Remit Savings Account (HRSA):

Special Account type for Remitter and Beneficiary

Shareholder's Savings Account (SSA):

Minimum Balance of Rs. 500.00 only

Small & Medium

Non Revolving Cash Credit:

Short Term Demand Loan (STDL):

Revolving Cash Credit

Revolving Cash Credit is extended to finance working capital requirements particularly

Import Credit for Telex Transfer and Demand Draft Payment

Trust Receipt Loan

Export Credit Facilities:

The Bank extends these facilities against the Bills/Drafts/Cheque (Negotiable

Documentary Bills Purchased and Discounted:

NON FUNDED FACILITIES

RETAIL CONSUMER LOANS

Hire Purchase Loan

Housing Loan is available to purchase readymade / under construction building

Loan against Fixed Deposit Receipt

Loan against Government Bonds & Bonds of Bank

Loan against First Class Bank Guarantees

Loan against Shares

Industrial Sector such as small and cottage industry

Basic Criteria of Eligibility

Satisfactory Profit margin substantiated by positive cash flow

Credit Facility Limit

Term Loan Repayment

Either equal/ballooning installment on a monthly or quarterly basis

SMEs Fixed Term Loan

Letter of Credit/Bank Guarantee/Cash Margin/Commission: As per Bank's Schedule of