Credit Appraisal

The Credit Appraisal is a holistic exercise which starts from the time a prospective borrower walks into the branch and culminates in credit delivery and monitoring with the objective of ensuring and maintaining the quality of lending and managing credit risk.
The process of Credit Appraisal is multidimensional and includes:
 Management Appraisal
 Technical Appraisal
 Commercial Appraisal
 Financial Appraisal and
 Economic Appraisal
Management Appraisal has received lot of attention these days as it is one of the long term factors affecting the business of the concern.
Technical Appraisal emphasizes on the technical feasibility of the venture and also finds out the possible economic life period of the present technology.
Commercial Appraisal focuses on the commercial viability of the project .It tries to find matters regarding demand in market, the acceptance of product in market. It also focuses on the presence of other substitutes of the product in the market. It also focuses on the multiple scope of the product.
Financial Appraisal is done to find out whether the promoter is having the capacity to raise finance – both own equity and debt? What are the sources of margin? Will the business generate sufficient funds to service the debt and other stakeholders? Is the capital structure optimal?
Economic Appraisal examines level of cost/ benefit and IRR (Internal Rate of Return).
The scope of credit structure is incomplete without examination of credit proposal. Credit proposal has to be examined from the point of 6 C’s viz. Character, Capacity, Capital, Condition, Collateral and Cash flow.
The Credit Policy of Bank of India has undergone changes to cope with the environmental changes, tap the available opportunities, achieve their commercial objective, fulfill social obligations and adhere to mandatory directed lending norms. The credit policy consists of both fund based credit exposure and non fund based credit exposure. The credit policy is studied under – Coverage, Clientele, Marketing.
The majority of the banks have introduced Fair Lending Practices Code which helps the banks to provide professional, efficient, courteous, diligent and speedy services in matter of lending. The Fair Practices Code codifies the procedures to ensure clarity, transparency, timeliness and responsiveness in Bank’s relationship with the borrower customers at all stages like marketing, processing, sanctioning, monitoring and administration.

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