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 CREDIT APPRAISAL

 

 Abhishek Patawari57

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WHAT IS CREDIT APPRAISAL?

Credit appraisal means aninvestigation/assessment done by te ban!prior providing any loans " advan#es/pro$e#t%nan#e " also #e#!s te #ommer#ial& %nan#ial" te#ni#al viability o' te pro$e#t proposed(

Proper eval)ation o' te #)stomer is pre'erred*i# meas)res te %nan#ial #ondition " abilityto repay ba#! te loan in ')t)re

Credit appraisal is te pro#ess o' appraisingte #redit *ortiness o' te loan appli#ant

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WHAT IS CREDIT APPRAISAL? +C,-T.D0a#tors li!e12

  3  Age3  In#ome

  3  -)mber o' dependents  3 -at)re o' employment

3  Contin)ity o' employment  3 Repayment #apa#ity  3 Previo)s loans& et#( are ta!en into

a##o)nt *ile appraising te #redit *ortinesso' a person(4 5C. o' #redit are m)st be !ept in mind 'orlending 12 3 Cara#ter 3 Capa#ity

3 Collateral

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CREDIT APPRAISAL PROCESS

Re#eipt o' appli#ation 'rom appli#ant

8

Re#eipt o' do#)ments

+9alan#e seet& :;C papers& DiC #a)tion list& et#(

8 Title #learan#e reports o' te properties to be obtained 'rom

empanelled advo#ates

8

al)ation reports o' te properties to be obtained 'rom

empanelled val)er/engineers

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CREDIT APPRAISAL PR,CESS+C,-T.D

Prepara

tion of financial data

|Proposal preparation

|

Assessment of proposal

|

Sanction/approval of proposal by appropriate sanctionin a!t"ority

|

Doc!mentations# areements# mortaes

|

Disb!rsement of loan

|

Post sanction activities s!c" as receivin stoc$ statements# revie%of acco!nts# rene% of acco!nts# etc

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TECHNIQUE FOR CREDIT APPRAISAL

L,A- AD=I-ISTRATI,- PRE SA-CTI,- PR,CESS

Preliminary appraisal1

So)nd #redit appraisal involves analysis o' te viabilityo' operations o' a b)siness and te #apa#ity o' tepromoters to r)n it pro%tably and repay te ban! ted)es

 Te #ompany.s =emorand)m and Arti#les o' Asso#iationso)ld be s#r)tiniBed #are')lly to ens)re tat tere areno #la)ses pre$)di#ial to te 9an!.s interests

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TECHNIQUE FOR CREDIT APPRAISAL

To%ards t"is end t"e preliminary appraisal %ill

e&amine t"e follo%in aspects of a proposal' (an$)slendin policy and ot"er relevant !idelines/R(I

!idelines*

• Ind!stry related ris$ factors

• Credit ris$ ratin

• Profile of t"e promoters/senior manaement personnel of t"e

 pro+ect

• List of defa!lters• Ca!tion lists

• ,overnment re!lations impactin on t"e ind!stry

• -inancial stat!s %"et"er it is acceptable

 

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TECHNIQUE FOR CREDIT APPRAISAL

."et"er t"e pro+ect cost acceptable or not

Debt/ E!ity ratio %"et"er acceptable

Orani0ational set !p %it" a list of (oard of Directors 1 indicatin

t"e !alifications 1 e&perience in t"e ind!stry

Demand and s!pply pro+ections based on t"e overall mar$et

 prospects toet"er %it" a copy of t"e mar$et s!rvey report

Estimates of sales# cost of prod!ction and profitability

Pro+ected profit and loss acco!nt and balance s"eet for t"e

operatin year 

A!dited profit loss acco!nt and balance s"eet for t"e past t"ree

years

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TECHNIQUE FOR CREDIT

APPRAISAL

L,A- AD=I-ISTRATI,- P,ST SA-CTI,- PR,CESS

 Te post2san#tion #redit pro#ess #an be broadly#lassi%ed into tree stages1

  0ollo*2)p

  S)pervision

  =onitoring

  *i# togeter 'a#ilitate e6#ient and e

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