## Credit policyCredit policy reflects the wisdoms of banks and their intention about what they are actually wanted to do and what not. Credit policy helps an institution develop strategic consistent with the profitability expectations of the institutions within an expected level of assets quality. A credit policy gives loan officers and bank management specific guidelines in making individual laon decisions and in shaping the banks overall loan portfolio.

## Components of a Credit policy- 1. Corporate Mission statement2. Analysis of the present credit portfolio3. Broad objectives of the policy4. Preferred area of lending 5. Discouraged areas of lending6. Strategies to achieve the above objectives7. Exposure limits8. Liquid Gap analysis9. Spread Management10. Credit expansion policy11. Combating the growing menace of NPAs12. Industry Wise specialization13. Pricing strategy

## Credit InterviewIt is an education to watch and study a man of real stature as he deals with a top level customer. The Goal of loan interview primarily is to collect information to judge the creditworthiness of borrowers. But this is not the only goal of loan interview. Others- There is a unique opportunity to convince customer that he has chosen the best bank in town which ultimately enhances the goodwill of the bank. It facilitates the collection of necessary information to reach a loan decision. It gave an opportunity to build new bank business. Credit interview enables credit officer to obtain enough data and understanding to ensure that the loan can be collected. ## Credit InvestigationCredit investigation is the process of acquiring enough information from different sources to determine the loan applicants willingness and capacity to service the proposed loan. Upon completion of credit investigation- The loan officer should have a sufficient idea of the clients reputation, character and experience. The companys past and present record and profitable future performance. ## Qualification of a Credit investigator The educational background of an investigator should include knowledge of accounting. An Investigator should be familiar with financial data such as- composition of assests and liabilities, operating percentages, and basic ratios. He/she must also have the capability to spot working capital deficiencies, inventory buildups, equity need, and other sign of problems. An investigator should be familiar with credit and financial terminology. An investigator should be knowledgeable with the code of ethics for the exchange of credit information. An investigator should be fully aware of the legal ramifications involved in the exchange of commercial credit information. An investigator should also be able to contact consulates, embassies and trade development offices. ## Sources of information1. Information supplied by the credit Applicant-a. Type and amount of loan. b. Proposed sources of repayment. c. Plan of repayment. d. Name of collateral or guarantors. e. List of primary customers and trade suppliers. f. Firms account g. Names of previous and current creditors etc 2. Lending Officers Query-a. Characteristics of borrowers market. b. Sales and distribution channels. c. Production process. d. Labor relation. e. Experience and educational background of principal owner or executives etc 3. Internal sources of Information- a. Credit file of present or previous borrowersb. Deposit account of present and previous customers. c. Past payment performance. d. Principal customer, suppliers and other creditors. 4. External Sources-a. Central bank credit information bureau(CIB)b. Commercial publicationsc. Stock exchange publicationsd. Special purpose directories5. Others- a. Banks and trade checksb. Credit operating agenciesc. Public records etc. ## Centralization versus Decentralized InvestigationThe success of banks credit investigation depends largely on the banks organizational structure and the scope of its responsibility. Structure of investigation varies from bank to bank. Some uses Centralized and some Decentralized form of credit investigation. 1) Completely Centralized- In a completely centralized investigation system, one unit is responsible for all foreign and domestic account investigation and answering of references inquires on customer accounts. 2) Partially Centralized- a. Foreign Domestic- Foreign investigations are decentralized while domestic investigations are completely centralized. b. Accounts-non accounts- Non accounts investigation is centralized but account investigation and the answering of inquiries on accounts are decentralized. c. Centralized with exceptions- These exceptions usually include specialized departments such as real estate, consumer lending, personnel, financing companies etc. 3) Completely Decentralized- In this form, Each department or branch service its own needs and possibly those of its customers, including account and non account investigations.