CREDIT APPRAISAL

Abhishek Patawari
57

WHAT IS CREDIT APPRAISAL?

Credit

appraisal
means
an
investigation/assessment done by the bank
prior providing any loans & advances/project
finance & also checks the commercial, financial
& technical viability of the project proposed.
Proper evaluation of the customer is preferred

which measures the financial condition & ability

to repay back the loan in future
Credit appraisal is the process of appraising

the credit worthiness of the loan applicant

WHAT IS CREDIT APPRAISAL? (CONTD)

Factors like:-

Age
Income
Number of dependents
Nature of employment
Continuity of employment
Repayment capacity
Previous loans, etc. are taken into
account while appraising the credit worthiness
of a person.
3 C of credit are must be kept in mind for
lending : Character
Capacity
Collateral

CREDIT APPRAISAL PROCESS

Receipt of application from applicant
|
Receipt of documents
(Balance sheet, KYC papers, Different govt. registration no.,
MOA, AOA, and Properties documents)
|
Pre-sanction visit by bank officers
|
Check for RBI defaulters list, willful defaulters list, CIBIL data,
ECGC caution list, etc.
|
Title clearance reports of the properties to be obtained from
empanelled advocates
|
Valuation reports of the properties to be obtained from
empanelled valuer/engineers

CREDIT APPRAISAL PROCESS

(CONTD)

Preparation of financial data

|
Proposal preparation
|
Assessment of proposal
|
Sanction/approval of proposal by appropriate sanctioning authority
|
Documentations, agreements, mortgages
|
Disbursement of loan
|
Post sanction activities such as receiving stock statements, review
of accounts, renew of accounts, etc

TECHNIQUE FOR CREDIT APPRAISAL

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
The companys Memorandum and Articles of Association

should be scrutinized carefully to ensure that there are

no clauses prejudicial to the Banks interests

TECHNIQUE FOR CREDIT APPRAISAL

Towards this end the preliminary appraisal will

examine the following aspects of a proposal. Banks

lending policy and other relevant guidelines/RBI
guidelines:
Industry related risk factors
Credit risk rating
Profile of the promoters/senior management personnel of the

project
List of defaulters
Caution lists
Government regulations impacting on the industry
Financial status whether it is acceptable

TECHNIQUE FOR CREDIT APPRAISAL

Whether the project cost acceptable or not
Debt/ Equity ratio whether acceptable
Organizational set up with a list of Board of Directors & indicating

the qualifications & experience in the industry

Demand and supply projections based on the overall market

prospects together with a copy of the market survey report

Estimates of sales, cost of production and profitability
Projected profit and loss account and balance sheet for the

operating year
Audited profit loss account and balance sheet for the past three

years

TECHNIQUE FOR CREDIT

APPRAISAL
LOAN ADMINISTRATION POST SANCTION PROCESS
The post-sanction credit process can be broadly

classified into three stages:

Follow-up
Supervision
Monitoring
which together facilitate efficient and effective
credit management and maintaining high level of
standard assets

Thank You..