Vegetron Case

PFA
End Term Exam
Vaibhav Gupta, Roll No. 18

13

What is Credit Appraisal?  Credit appraisal means an investigation/assessment done by the bank prior before 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  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.  5 ‘C’ of credit are must be kept in mind for lending funds:» Collateral » Condition » Capital » Character » Capacity

If any one of these are missing in the lending officer must question the viability of credit Credit Risk Assessment  The CRA models adopted by the Bank take into account all possible factors into appraising the risks, associated with a loan.  These have been categorized broadly into financial, business, industrial & management risks are rated separately.  These factors duly weighted are aggregated to arrive at a credit decision whether loan should be given or not Financial parameters: The assessment of financial risk involves appraisal of the financial strength of the borrower based on performance & financial indicators which assessed in terms of static ratios, future prospects & risk mitigation.

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,