Y



 


Y





Can be divided into 2 areas

’  tivity - of Borrower

’ Individual - Evaluating
Õ



’ Extent of funds available with bank
’ dvan e should be reasonably liquid
’ sset liability management, Quality of assets an
be easily onvertible to ash without loss of
value.
’ Collateral - absen e of risk of loss on sale of the
asset
Y




’ inan ial intermediaries operate for earning
profits.
’ Banks re eive interest on loans and advan es
and pay on deposits and differen e between
re eipts and payments shall be gross profits.
’ Banks in ur expenditure on establishment, rent,
salaries, in ur depre iation
’ Banks have to earn profits, they have to pay
dividends, even lending rates de ision taken into
a ount the likely operational expenditure.
’
ates depend on rates of ompeting banks,
regulatory dire tives, nature of se urity et .
’ In ertain servi es to a ustomer there may not
be desirable returns, however for the same
ustomer other servi es may generate more than
desirable returns.
’ herefore profitability may be assessed
ustomer wise. ( ustomer profitability
analysis)
’ Banks have to retain existing ustomers and
attra t new ones, there is a dire t relationship
between profits and pri ing of servi es offered.
a

’ enerally banks grant loans on the basis of
se urity provided by borrowers, in ase of
default se urity an be sold and loan adjusted.
’ Banks he k the nature of se urity and ensure
that it is free from en umbran es and harges.
’ Collateral se urity should be utilized under
extreme ir umstan es.
Ê
   

 




’ ever keep all eggs in same basket prin iple.
’ By lending to different se tors banks an save
themselves from slump in parti ular industry.
ë
Õ
ÊÊëÊ

CH
CE

’ ersonal hara teristi s whi h in lude honesty,
attitude, willingness and ommitments to repay
debt.
’ ersonal hara teristi s are very personal in nature
and it may not be possible to fudge at the time of
loaning.
’ Banker has to use diligen e and resour es to find out
the true hara ter of a person.
’
eputation need to be probed.

Y


’ Borrowers potential to re-pay, look into

borrowers profitability and managing ash flows.
’ eaders usually onsider the apa ity of physi al
assets, plants and equipment along with time,
labour and management skills.
’ Banks generally insist upon finan ial statements
and analyze them .

Y
Õ
’ et Worth.
’ Capital in relation to debt.
’ aluation of underlying assets.
ÕÕ
ëÊ
Õ
’ ssets that are pledged for se urity in a redit
transa tion need to b looked into.
’ In default, if there is ollateral, borrower has
in entive to repay the debt otherwise he would loose
the property.
’ If normal revenues are inadequate, the ollateral
liquidation may be ne essary.
’ he valuation of ollateral at the time of liquidation
may pose diffi ulty, property appraisal while
disbursing loan in very important and may require
expertise.
YÕ
ë
’ oan as per rules and regulations.
’ Banker to ensure that all formalities have been
met.
’ otal omplian e by borrower of erms and
Conditions.
’ oans as per govt. and regulatory authorities
guidelines.

Y 
 
Õ 
’ Code envisages that lenders must treat their borrowers fairly
’ hat if they fail to do so they an be subje ted to litigation by the
borrowers for variety of reasons
’ nder .S. laws liability is lassified in two broad ategories
’ Brea h of Context
’ raudulent Claims

e ently another liability i.e. environmental lean up has also
been added
Ê


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