PROJECT ON

“CREDIT APPRAISAL SYSTEM IN BANKS”

Project Guide:
Prof. Samveg Patel

Submitted By:
Harshil Badani (03)
INTRODUCTION

Products of The Bank

Commercial lending is the bread &butter activity for

the banks

Increase the market share by reducing the NPAs

OBJECTIVE OF THE STUDY

To know the risk management function for loans

with the help of credit appraisal system in the banks.

To know the perspective of the customer towards

credit appraisal process .
WHY THIS STUDY SHOULD BE DONE?

Growth of the economy

Reduction in the number of the NPAs as well as

improvement in the quality of the different portfolios
WHAT IS CREDIT APPRAISAL?

“Credit appraisal is the technique by which lender

appraises the creditworthiness of the prospective
borrower using different tools.”
COMPONENTS USED FOR CREDIT
APPRAISAL
PARAMETERS (ON THE BASIS OF
DOCUMENTS)
Economic Viability Loan to Cost, Installment to
Income, FIOR
Technical Feasibilty Field Investigation, Market
Value of the Assets
Bank Ability Past Month Bank Statements,
Security, CIBIL Report
TYPES OF RISKS
Credit Risk

Liquidity Risk

Operational Risk

Interest Risk
MODERN APPROACHES OF CREDIT
APPRAISAL
Credit Scoring Model:
Internal source of information
applying statistical tools
Compare score with cut-off which is decided by banks.

Working Capital Assessment

TYPES OF CREDIT
Fund Based Credit Facilities:
Term loan
Cash Credit
Discounting Bills

Non-fund based credit facilities:

Letter of Credit
Bank Guarantee
ROLE OF MONEY SUPPLY
Banks raises funds by attracting deposits

Lends to the seekers/ corporate

By this way the growth of the economy is continued…

BANK CRISIS
As bank have many type of risk

Due to this crisis happened many times in the history

As e.g. in U.S. savings &loan crisis during 1980, in

1990 Japanese banking crisis are there.
REGULATION
Use of specific tools in lending the money by banks

Proper Credit Appraisal System in the Banks

There should be lender of the last resort

CURRENT SCENAREO
Indian banks have more clean & transparent balance-
sheets & positions compared to the other economies
banks

As the RBI is the autonomous body which is giving all

guidelines to the banks for loans & every thing.
CREDIT APPRAISAL TOOLS
Background Information
Industry Analysis
Market Analysis
Financial Indicators
 Net Worth
 Debt Equity Ratio
 Current Ratio
 Working Capital
 Sales
 Pat
 Depreciation
QUESTIONNAIRE FOR CUSTOMERS
QUESTIONNAIRE FOR BANKS