Credit Appraisal Process at AXIS Bank

Aಆಕ್ಸಿ ಸ್ ಬ್ಯ ಾಂಕ್ಸನಲ್ಲಿ ಕ್ರೆ ಡಿಟ್ ಮೌಲ್ಯ ಮಾಪನ ಪೆ ಕ್ಸೆ ಯೆ

ABSTRACT

Credit Appraisal means an investigation/assessment done by the banks

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 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 this measures the
financial condition and the ability of the customer to repay back the
Loan in future. Generally the credits 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.

Objective of the Research

To Study the credit appraisal system in SME sector, at AXIS Bank

• To study the credit appraisal methods.

• To understand the commercial, financial & technical viability of the

proposal proposed and it's finding pattern.

• Researchers:

This report will help researchers improving knowledge about the credit
appraisal system and to have practical exposure of the credit appraisal
system at AXIS Bank.

• Management Students:

The project will help the management student to know the patterns of
credit appraisal in Axis bank.

Basic Types of Credit

There are four basic types of credit. By understanding how each works, you will be
able to get the most for your money and avoid paying unnecessary charges.

Service credit is monthly payments for utilities such as telephone, gas, electricity, and
water. You often have to pay a deposit, and you may pay a late charge if your
payment is not on time.

Loans let you borrow cash. Loans can be for small or large amounts and for a few
days or several years. Money can be repaid in one lump sum or in several regular
payments until the amount you borrowed and the finance charges are paid in full.
Loans can be secured or unsecured.

Installment credit may be described as buying on time, financing through the

store or the easy payment plan. The borrower takes the goods home in exchange
for a promise to pay later. Cars, major appliances, and furniture are often
purchased this way. You usually sign a contract, make a down payment, and agree
to pay the balance with a specified number of equal payments called installments.
The finance charges are included in the payments. The item you purchase may be
used as security for the Loan.

Credit cards are issued by individual retail stores, banks, or businesses. Using a
credit card can be the equivalent of an interest-free Loan- end of each month.-if
you pay for the use of it in full at the

Loan Administration Pre- Sanction Process

Preliminary appraisal

• Sound credit appraisal involves analysis of the viability of operations of a

business and the capacity of the promoters to run it profitably and repay the bank
the dues as and when they fall

• Towards this end the preliminary appraisal will examine the following aspects
of a proposal.

Bank's lending policy and other relevant guidelines/RBI guidelines,

Prudential Exposure norms,

Industry Exposure restrictions,

Group Exposure restrictions,

Industry related risk factors,

Credit risk rating,

Profile of the promoters/senior management personnel of the project,

List of defaulters,

Caution lists,

Acceptability of the promoters,

Compliance regarding transfer of borrower accounts from one bank to another, if

applicable;
Government regulations/legislation impacting on the industry; e.g., ban on
financing of industries producing/ consuming Ozone depleting substances;

Applicant's status vis-à-vis other units in the industry,

Financial status in broad Terms and whether it is acceptable The Company's

Memorandum and Articles of Association should be scrutinized carefully to
ensure (i) that there are no clauses prejudicial to the Bank's interests, (ii) no
limitations have been placed on the Company's borrowing powers and operations
and (iii) the scope of activity of the company.

• Further, if the proposal is to finance a project, the following aspects have to be

examined:

Whether project cost is prima facie acceptable

Debt/equity gearing proposed and whether acceptable

Promoters' ability to access capital market for debt/equity support

Whether critical aspects of project - demand, cost of production, profitability, etc.

are prima facie in order

Required Documents for Process of Loan

• Application for requirement of loan

• Copy of Memorandum & Article of Association

• Copy of incorporation of business

• Copy of commencement of business

• Copy of resolution regarding the requirement of credit facilities

• Brief history of company, its customers & supplies, previous track records,
orders In hand. Also provide some information about the directors of the
company
Financial statements of last 3 years including the provisional financial statemenfor
the year 2007-08

• Copy of PAN/TAN number of company

• Copy of last Electricity bill of company

• Copy of GST/CST number

• Copy of Excise number

• Photo I.D. of all the directors

• Address proof of all the directors

• Copies related to the property such as 7/12 & 8A utara, lease/ sales deed, 2R
Permission, Allotment letter, Possession

• Bio-data form of all the directors duly filled & notarized

Financial statements of associate concern for the last 3 years