Credit Thrust: It means the main focus area for a bank or a specific branch should
give. If a branch is in rural, thrust should be on agri sector loans, and so on. This gives
an opportunity for a bank/branch to gather maximum profit with minimum staff, as the
customer is ready. Precaution: While disbursement, the financials and history to be
checked to prevent NPA in future.
Credit Priorities are Same as Credit thrust.
Credit Acquisitions: It means sanctioning the loans to customers by closing their
loans with other banks. In short, acquiring other bank‘s customers for business growth.
Points to remember:
1 Whether the loan in other bank is in standard condition
2 Why is the other bank ready to let go the loan
3 Credit history of the borrower
4 Adequate collateral
Statutory & Regulatory restrictions on Advances :
No banking company shall-
(a) grant any loans or advances on the security of its own shares, or
(b) enter into any commitment for granting any loan or advance to or on behalf
of-
(i) any of its Directors,
(ii) any firm in which any of its Directors is interested as Partner, Manager,
Employee or Guarantor, or
(iii) any company(proprietor/partner/pvt ltd/public) in which any of the
Directors of the banking company is a Director, Managing Agent,
Manager, Employee or Guarantor or in which he holds substantial
interest, or
(iv) any individual in respect of whom any of its Directors is a partner or
guarantor.
Restrictions on Grant of Loans & Advances to Officers and Relatives of Senior
Officers of Banks
The following guidelines should be followed by all the banks with reference to the
extension of credit facilities to officers and the relatives of senior officers:
(i) Loans & advances to officers of the bank
No officer or any Committee comprising, inter alia, an officer as member, shall, while
exercising powers of sanction of any credit facility, sanction any credit facility to his/her
relative. Such a facility shall ordinarily be sanctioned only by the next higher sanctioning
authority. Credit facilities sanctioned to senior officers of the financing bank should be
reported to the Board.
(ii) Loans and advances and award of contracts to relatives of senior officers of the bank
Proposals for credit facilities to the relatives of senior officers of the bank sanctioned by
the appropriate authority should be reported to the Board.
Credit Appraisal :
CREDIT RISK ASSESSMENT (CRA)
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
Validation of proposal:
It is done considering 5 key factors below:
1. CIBIL Score and Report: It is one of the most important factor that affects your
loan approval. A good credit score and report is a positive indicator of your credit
health.
2. Employment Status: Apart from a good credit history, banks also check for
your steady income and employment status.
3. Account Details: Suit filed or written off cases are carefully examined by banks.
4. Payment History: Banks check for any default on payments or amount overdue
cases, which might project a negative overview of your overall report.
5. EMI to Income Ratio: Banks also consider the proportion of your existing loans
when compared to your salary at the time of loan application. Your chances of loan
approval gets reduced if your total EMI‘s exceed your monthly salary by 50%.
Apart from your CIBIL Score, loan eligibility criteria differs from bank to bank and across
loan types. However, some of the basic requirements in terms of documentation are:
Identity Proof: Aadhar Card, Valid Passport, Driving License, Voters ID or PAN
Card
Address Proof: Aadhar Card, Valid Passport, Driving License, Voters ID or Utility
Bills
Proof of Employment: Salary slip, Official ID card or letter from company
Income Proof: Latest 3 months Bank Statement, salary slip for last 3 months
3 Passport size photographs
Dimensions of Credit Appraisals
Six ―C‖ s
1. Character
You are considered to have good credit character when you live up to your
financial and credit agreements. Paying bills on time and meeting financial
obligations are signs of good character.
Your credit score and your credit history are good ways for a bank to learn about
your character or credit reputation and how well you pay your credit obligations.
2. Capacity
Capacity reflects your ability to repay a loan or other financial agreement.
Potential creditors want to see that you‘ll have enough cash left over after paying
your fixed monthly expenses to repay a new credit or loan account.
3. Capital
A potential bank also will assess your capital. Wondering if you have any?
Subtract all your debts from your assets, including any property that you may own,
and this is your capital. Banks and creditors like to see that you have enough
capital to handle another loan or credit account before approving you for new
credit.
4. Conditions
Banks look at conditions such as the stability of your employment, your other
debts and financial obligations, and how often you‘ve moved in the past year when
considering whether to approve you for a loan. The longer you‘ve been in a job
and the less frequently you‘ve moved the more stable your life conditions appear
to potential creditors and banks.
5. Collateral
Collateral is any property or possession that can be used as security for a
payment of a debt. For example, a home or automobile serve as collateral against
the loans you might take out to purchase them. Banks like collateral because it
guarantees them against a total loss if you fail to repay your loan. If that happens,
your collateral may be sold or repossessed to repay your financial obligation.
6. Cash Flow
adequate cash flow to repay a new loan.
Income in each month
Are you paid regularly, or does your income fluctuate based on seasonality or
other factors?
A Bank wants to make sure you have enough cash flowing your way on a regular
basis so that you can pay for a new credit obligation.
give. If a branch is in rural, thrust should be on agri sector loans, and so on. This gives
an opportunity for a bank/branch to gather maximum profit with minimum staff, as the
customer is ready. Precaution: While disbursement, the financials and history to be
checked to prevent NPA in future.
Credit Priorities are Same as Credit thrust.
Credit Acquisitions: It means sanctioning the loans to customers by closing their
loans with other banks. In short, acquiring other bank‘s customers for business growth.
Points to remember:
1 Whether the loan in other bank is in standard condition
2 Why is the other bank ready to let go the loan
3 Credit history of the borrower
4 Adequate collateral
Statutory & Regulatory restrictions on Advances :
No banking company shall-
(a) grant any loans or advances on the security of its own shares, or
(b) enter into any commitment for granting any loan or advance to or on behalf
of-
(i) any of its Directors,
(ii) any firm in which any of its Directors is interested as Partner, Manager,
Employee or Guarantor, or
(iii) any company(proprietor/partner/pvt ltd/public) in which any of the
Directors of the banking company is a Director, Managing Agent,
Manager, Employee or Guarantor or in which he holds substantial
interest, or
(iv) any individual in respect of whom any of its Directors is a partner or
guarantor.
Restrictions on Grant of Loans & Advances to Officers and Relatives of Senior
Officers of Banks
The following guidelines should be followed by all the banks with reference to the
extension of credit facilities to officers and the relatives of senior officers:
(i) Loans & advances to officers of the bank
No officer or any Committee comprising, inter alia, an officer as member, shall, while
exercising powers of sanction of any credit facility, sanction any credit facility to his/her
relative. Such a facility shall ordinarily be sanctioned only by the next higher sanctioning
authority. Credit facilities sanctioned to senior officers of the financing bank should be
reported to the Board.
(ii) Loans and advances and award of contracts to relatives of senior officers of the bank
Proposals for credit facilities to the relatives of senior officers of the bank sanctioned by
the appropriate authority should be reported to the Board.
Credit Appraisal :
CREDIT RISK ASSESSMENT (CRA)
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
Validation of proposal:
It is done considering 5 key factors below:
1. CIBIL Score and Report: It is one of the most important factor that affects your
loan approval. A good credit score and report is a positive indicator of your credit
health.
2. Employment Status: Apart from a good credit history, banks also check for
your steady income and employment status.
3. Account Details: Suit filed or written off cases are carefully examined by banks.
4. Payment History: Banks check for any default on payments or amount overdue
cases, which might project a negative overview of your overall report.
5. EMI to Income Ratio: Banks also consider the proportion of your existing loans
when compared to your salary at the time of loan application. Your chances of loan
approval gets reduced if your total EMI‘s exceed your monthly salary by 50%.
Apart from your CIBIL Score, loan eligibility criteria differs from bank to bank and across
loan types. However, some of the basic requirements in terms of documentation are:
Identity Proof: Aadhar Card, Valid Passport, Driving License, Voters ID or PAN
Card
Address Proof: Aadhar Card, Valid Passport, Driving License, Voters ID or Utility
Bills
Proof of Employment: Salary slip, Official ID card or letter from company
Income Proof: Latest 3 months Bank Statement, salary slip for last 3 months
3 Passport size photographs
Dimensions of Credit Appraisals
Six ―C‖ s
1. Character
You are considered to have good credit character when you live up to your
financial and credit agreements. Paying bills on time and meeting financial
obligations are signs of good character.
Your credit score and your credit history are good ways for a bank to learn about
your character or credit reputation and how well you pay your credit obligations.
2. Capacity
Capacity reflects your ability to repay a loan or other financial agreement.
Potential creditors want to see that you‘ll have enough cash left over after paying
your fixed monthly expenses to repay a new credit or loan account.
3. Capital
A potential bank also will assess your capital. Wondering if you have any?
Subtract all your debts from your assets, including any property that you may own,
and this is your capital. Banks and creditors like to see that you have enough
capital to handle another loan or credit account before approving you for new
credit.
4. Conditions
Banks look at conditions such as the stability of your employment, your other
debts and financial obligations, and how often you‘ve moved in the past year when
considering whether to approve you for a loan. The longer you‘ve been in a job
and the less frequently you‘ve moved the more stable your life conditions appear
to potential creditors and banks.
5. Collateral
Collateral is any property or possession that can be used as security for a
payment of a debt. For example, a home or automobile serve as collateral against
the loans you might take out to purchase them. Banks like collateral because it
guarantees them against a total loss if you fail to repay your loan. If that happens,
your collateral may be sold or repossessed to repay your financial obligation.
6. Cash Flow
adequate cash flow to repay a new loan.
Income in each month
Are you paid regularly, or does your income fluctuate based on seasonality or
other factors?
A Bank wants to make sure you have enough cash flowing your way on a regular
basis so that you can pay for a new credit obligation.
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