Affiliated to

University of Mumbai

Revised Syllabus for

Programme:
B.Com
(Accounting and Finance)
Semester VI
Under Choice Based Credit System
Academic Year 2020-2021

PROJECT ON
STUDY OF CREDIT APPRAISAL PROCESS OF SELECTED PUBLIC AND PRIVATE
BANK

I
 PROJECT REPORT
ON

STUDY OF CREDIT APPRAISAL PROCESS OF SELECTED PUBLIC

AND PRIVATE BANK

SUBMITTED BY

NEHAL VASANT DEDHIA

TYB.Com (Accounting and Finance)

(SEMESTER VI)

UNDER THE GUIDANCE OF

Asst. Prof. Patel Jatin

ACADEMIC YEAR

2020 - 2021

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 DECLARATION
I, Ms. NEHAL VASANT DEDHIA the student of T.Y.B. Com
(Accounting and Finance) Semester VI (2020 - 2021) hereby declare
that I have completed the Project on STUDY OF CREDIT APPRAISAL
PROCESS OF SELECTED PUBLIC AND PRIVATE BANK.

I also declare that this report which is the partial fulfilment of the
requirement for the degree of T.Y.B. Com (Accounting and Finance) of
KES SHROFF COLLEGE OF ARTS AND COMMERCE is the result
of my own efforts with the help of experts.

III
 CERTIFICATE
This is to certify that Ms. NEHAL VASANT DEDHIA
of Third Year B Com (Accounting and Finance) Semester VI (2020
- 2021) has successfully completed the Project / Internship on
STUDY OF CREDIT APPRAISAL PROCESS OF SELECTED PUBLIC
AND PRIVATE BANK as per the guidelines of KES’ Shroff College
of Arts and Commerce, Kandivali (W), Mumbai-400067.

Coordinator Guide Principal

Dr. Vaibhav R. Ashar Asst. Prof. Patel Jatin Dr. L. Bhushan

IV
 ACKNOWLEDGEMENT

To list who all have helped me is difficult because they are so numerous
and the depth is so enormous.
I would like to acknowledge the following as being idealistic channels
and fresh dimensions in the completion of this internship.
I take this opportunity to thank the KES SHROFF COLLEGE OF
ARTS AND COMMERCE for giving me chance to present this report.
I would like to thank my Principal, Dr. Lily Bhushan for providing the
support required for the internship.
I take this opportunity to thank our Guide Asst. Prof. Patel Jatin, for
her moral support and guidance.
Lastly, I would like to thank each and every person who directly or
indirectly helped me specially my parents and peers who supported me
throughout my project.

V
 INDEX
CHAP. NO PARTICULARS PAGE NO
1 INTRODUCTION 1
1.1 MEANING OF CREDIT 1
1.2 TYPES OF CREDIT PROVIDED BY BANK 2
1.3 MEANING OF CREDIT APPRAISAL 3
1.4 5C’S THAT MATTER CREDIT APPRAISAL PROCESS 5
1.5 MEANING OF RISK ANALYSIS 7
1.6 FACTORS AFFECTING CREDIT APPRAISAL 10
1.7 DOCUMENTS FOR CREDIT APPRAISAL 11
1.8 PROCEDURE OF CREDIT APPRAISAL 13
1.9 CHART OF CREDIT APPRAISAL 15
1.10 CREDIT APPRAISAL PRE-SANCTION PROCESS 16
1.11 DETAILED APPRAISAL 18
1.12 REVIEW OF PROPOSAL 21
1.13 POST SANCTION PROCESS 23
1.14 CREDIT INVESTIGATION 25
1.15 WORKING OF CREDIT INVESTIGATION 26
1.16 PROPOSAL FEASIBILITY REPORT 28
1.17 SBI BANK 30
1.18 HDFC BANK 33
1.19 TECHNIQUES OF CREDIT APPRAISAL 35
2 REVIEW OF LITERATURE 37
3 RESEARCH METHOLODY 46
3.1 OBJECTIVES 46
3.2 SCOPE OF STUDY AND LIMITATION 47
3.3 METHODS OF DATA COLLECTION 48
3.4 SAMPLE SIZE 49
4 DATA ANALYSIS AND INTERPRETATION 50
5 CONCLUSION AND SUGGESSTIONS 64
5.1 CONCLUSION 64
5.2 SUGGESTIONS 65
5.3 BIBILOGRAPHY 66
5.4 ANNEXURE 67

VI
 INDEX
TABLE NO. PARTICULARS PAGE NO.
4.1 DESIGNATION 50
4.2 INCOME GROUP PREFER CREDIT 51
4.3 MAXIMUM CREDIT ENQUIRY 52
4.4 CREDIT SCORE 54
4.5 NO.OF DAYS FOR CREDIT APPROVAL 55
4.6 STEPS 56
4.7 AREA 57
4.8 BASIS OF CREDIT ALLOWED 58
4.9 OPINION ON CREDIT STRUCTURE 59
4.10 OPINION ON RBI STRICTINESS 60
4.11 CLASS OF PEOPLE PREFER LOAN 61
4.12 OPINION ON CREDIT KYC 62
4.13 OPINION ON FINANCIAL ASPECT 63

VII
 CHAPTER 1: INTRODUCTION
1.1 MEANING OF CREDIT
The term credit has many meanings in the financial world, but credit is generally defined as a
contract agreement in which a borrower receives a sum of money or something of value and
repays the lender at a later date with interest. Credit also may refer to the creditworthiness
or credit history of an individual or a company. To an accountant, it refers to a bookkeeping
entry that either decreases assets or increases liabilities and equity on a company's balance
sheet. In its first and most common used definition, credit refers to an agreement to purchase
a product or service with the express promise to pay for it later on a future date; this is known
as buying on credit. The most common form of buying on credit today is via the use of credit
cards. This introduces a middleman to the credit agreement the bank that issued the card
repays the merchant in full and extends credit to the buyer, who may repay the bank over
time. The amount of money a consumer or business has available to borrow or their
creditworthiness is also called credit. For example: someone may say, "He has great credit, so
he is not worried about the bank rejecting his mortgage application."

There are many different forms of credit. The most popular form is bank credit or financial
credit. This kind of credit includes car loans, mortgages, signature loans, and lines of credit.
Essentially, when the bank lends to a consumer, it credits money to the borrower, who must
pay it back at a future date. For example: when a consumer uses a Visa card to make a
purchase, the card is considered a form of credit because the consumer is buying goods with
the understanding that he or she will pay the bank back later. Financial resources are not the
only form of credit that may be offered. There may be an exchange of goods and services in
exchange for a deferred payment, which is another type of credit. When suppliers give
products or services to an individual but don't require payment until later, that is a form of
credit. When a restaurant accepts a truckload of food from a vendor who bills the restaurant a
month later, the vendor is offering the restaurant a form of credit.

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1.2 TYPES OF CREDIT PROVIDED BY BANKS
Commercial Banks in India have a special role in India. The privileged role of the banks is
the result of their unique features. The liabilities of Bank are money and therefore they are
important part of the payment mechanism of any country. For a financial system to mobilise
and allocate savings of the country successfully and productively and to facilitate day-to-day
transactions there must be a class of financial institutions that the public views are as safe and
convenient outlets for its savings. The structure and working of the banking system are
integral to a country’s financial stability and economic growth. It has been rightly claimed
that the diversification and development of Indian Economy are in no small measure due to
the active role banks have played financing economic activities of different sectors.
Bank in India provide mainly short term credit for financing working capital needs although,
as will be seen subsequently their term loans have increased over the years. The various types
of advances provide by them are:

a. Term Loans
Term loans can be given on an individual basis, but are often used for small
business loans. The ability to repay over a long period of time is attractive for new or
expanding enterprises, as the assumption is that they will increase their profit over
time. Term loans are a good way of quickly increasing capital in order to raise a
business supply capabilities or range. For instance; some new companies may use a
term loan to buy company vehicles or rent more space for their operations.

b. cash credit
A cash credit (CC) is a short-term source of financing for a company. In other words,
a cash credit is a short-term loan. It enables a company to withdraw money from a
bank account without keeping a credit balance. The account is limited to only
borrowing up to the borrowing limit.

c. overdrafts
An overdraft is an extension of credit from a lending institution that is granted when
an account reaches zero. The overdraft allows the account holder to continue
withdrawing money even when the account has no funds in it or has insufficient funds
to cover the amount of the withdrawal.

d. demand Loans
A demand loan is a loan that a lender can require to be repaid in full at any time. This
condition is understood by the lender and the borrower from the outset. Borrowers
like the convenience and flexibility associated with demand loans because they can
repay them in full or in part at any time, without penalty.

e. purchase and discounting of commercial bills

Bill Discounting is a trade related activity in which a company’s unpaid invoices
which are due to be paid at a future date are sold to a financier (a bank or another
financial institution).

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1.3 MEANING OF 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 its funding pattern & further checks the primary & collateral
security cover available for recovery of such funds. Credit Appraisal is a process to ascertain
the risks associated with the extension of the credit facility. It is generally carried by the
financial institutions which are involved in providing financial funding to its customers.
Credit risk is a risk related to non repayment of the credit obtained by the customer of a bank.
Thus it is necessary to appraise the credibility of the customer in order to mitigate the credit
risk. Proper evaluation of the customer is performed which measures the financial condition
and the ability of the customer to repay back the loan in future? Generally the credits
facilities are extended against the security know as collateral. But even though the loans are
backed by the collateral, banks are normally interested in the actual loan amount to be repaid
along with the interest. Thus, the customer's cash flows are ascertained to ensure the timely
payment of principal and the interest. It is the process of appraising the credit worthiness of a
loan applicant. Factors like age, income, number of dependents, nature of employment,
continuity of employment, repayment capacity, previous loans, credit cards, etc. are taken
into account while appraising the credit worthiness of a person. Every bank or lending
institution has its own panel of officials for this purpose. There is no guarantee to ensure a
loan does not run into problems; however if proper credit evaluation techniques and
monitoring are implemented then naturally the loan loss probability/problems will be
minimized, which should be the objective of every lending officer. Credit is the provision of
resources such as granting a loan by one party to another party where that second party does
not reimburse the first party immediately, thereby generating a debt, and instead arranges
either to repay or return those resources at a later date. The first party is called a creditor, also
known as a lender, while the second party is called a debtor, also known as a borrower. Credit
allows you to buy goods or commodities now, and pay for them later. We use credit to buy
things with an agreement to repay the loans over a period of time. The most common way to
avail credit is by the use of credit cards. Other credit plans include personal loans, home
loans, vehicle loans, student loans, small business loans, trade. A credit is a legal contract
where one party receives resource or wealth from another party and promises to repay him on
a future date along with interest. In simple terms, a credit is an agreement of postponed
payments of goods bought or loan. With the issuance of a credit, a debt is formed.
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

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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 5 C’s viz. Character, Capacity, Capital,
Condition and collateral The Credit Policy of Bank of India has undergone changes to cope
with the environmental changes, tap the available opportunities, achieve their commercial
objective, fulfil 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.
Whenever you discuss personal loans or read about loans in general, you may have come
across the term credit appraisal. Credit appraisal basically refers to assessing a particular loan
application or proposal in a thorough manner in order to gauge the repayment ability of the
loan applicant. A lender conducts a credit appraisal chiefly to make certain that the bank gets
back the money that it lends to its customers.
Whether one applies individually or as a corporate entity, a lender always conducts a detailed
and systematic credit appraisal process. The credit appraisal process before giving a loan to
entities is comprehensive in nature as it appraises or evaluates management, market,
technical, and financial elements.
No lender approves and sanctions anybody’s personal loan application instantly without an
evaluation. It is absolutely important for a lender to carry out a credit appraisal process in
order to ensure that the borrower has the capacity to repay the entire loan amount on time
without missing any payment deadlines. This is very crucial for a bank as this determines the
interest income and the capital of the bank. The repayment behaviour of a borrower directly
affects the performance of the bank.
Both banks and non-banking financial corporation’s (NBFCs) utilise credit appraisal
procedures before approving a personal loan application or any other loan application. Each
lender will have its own techniques for performing credit appraisal processes. A lender will
have certain norms, rules, and standards to assess the creditworthiness of a particular loan
applicant. If a borrower has a high creditworthiness, there is high probability that his or her
loan application will be accepted by the bank. A credit appraisal is done to avoid the risk of
default on loans.

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1.4 5C’S THAT MATTER IN CREDIT APPRAISAL PROCESS.
The credit appraisal process depends on several core factors that deserve to be carefully
enumerated. Here is taking a brief look at the same. Wondering what makes up credit
appraisal processes? This procedure depends on the five major Cs of credit. These are capital,
character, conditions, capacity, and collateral. These are the criteria that give lenders the right
perspective on how to evaluate borrowers who have just applied for obtaining loans. The key
question for lenders here is whether it is prudent to invest in a particular borrower or not.
These credit principles are tapped by banks and financial institutions when it comes to home
loans, car loans, education loans, and also MSME and other loan types.
Character: How and why it matters

One of the basic Cs of credit appraisal is character. This is the very first aspect looked into by
lenders and seeks to measure the reliability and trustworthiness of borrowers. It is basically a
paradigm for ascertaining the type of borrower and whether he/she can be trusted to repay the
loan in full within a specific time period. Trust is the key principle that is behind lending and
borrowing of money since time immemorial.
This is the parameter where lenders also delve into your credit history for assessing the type
of borrower you are and your approach towards credit, i.e. whether you repay loans on time
without defaults. Borrowers with higher credit scores always have a natural advantage in any
credit appraisal process since banks feel that they will not create any trouble in the future.
Lenders will naturally be reluctant to fund borrowers who do not have good reputations in the
market or who have poor track records of making payments. Credit scores are thus analyzed
along with credit histories and reports which show how you are utilizing credit and the
percentage of debt to income. Lenders also check how long you have been employed at your
current position, whether you are financially stable, and so on.
Capacity: How is this important?
Another C of the credit appraisal process stands for capacity. Now, this is extremely
important since this equates to your cash flow. This indicates how strong you are financially
when it comes to paying back your loan. If a lender observes that you will not have enough
income to repay the loan, then you will not be sanctioned the same. On the other hand, if cash
flows are good and you have always been a trustworthy borrower, then your loan will be
sanctioned faster.

The debt to income ratio is what is measured here along with income proof and bank
statements. The lower this ratio the higher your eligibility for the loan in terms of the amount.
Bank and cash flow statements indicate the available capital at your hand and lenders will
also ascertain your employment history.
Capital: Looking deeper into this key parameter
Credit appraisal’s third C is capital. This helps lenders in analyzing the money that you have
already invested in your own business if you are a self-employed borrower, for instance. This
may include the money pumped in for establishing the business, how long you have been
doing business, do you have ample assets as collateral for other debts, and so on.
Lenders want to see borrowers who invest money into their own businesses for future growth.
The capital and assets that you have will naturally be ascertained along with investments in
the right channels.

5
Conditions: A vital factor for lenders
For business loan applicants, this factor means the bigger aspects that surround the growth
and future of the business, i.e. social, economic, political, and industry aspects. Most
importantly, for every loan applicant, the bank will look to see what you will be using the
money for. Lenders will look to judge how you will use the sanctioned loan amount. This is a
vital aspect of credit appraisal processes.
They will often look at your relationships with clients and suppliers in case of business loans,
industry factors, how the money may be deployed, and so on.
Collateral: When does this factor come into play?
The fifth and final C of any credit appraisal process pertains to collateral, i.e. the quantum of
assets or securities that you can pledge against your loan. This could be anything from shares,
real estate, life insurance policies, equipment, inventory, accounts receivable, or more. While
some loans like home loans and car loans have the home or car as the collateral respectively,
other loans may necessitate collateral as the backup option for lenders.
Lenders wish to see that they will at least recover some of the money if you are unable to
repay your loan via this collateral. For businesses, collateral stands for real estate, equipment,
accounts receivable, and inventory among other aspects.

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1.5 MEANING OF RISK ANALYSIS
One of the major objectives of the credit appraisal process is to determine the ability and also
the willingness of a borrower to fulfil his obligation as promised. Another objective is to
examine the appropriate terms and conditions that should be imposed on the client in order to
protect the banker as a lender from risk of loss of credit so granted. This exercise on the
part of the lending bank is absolutely essential as the bank is only willing to assume a certain
degree of risk on each loan proposal. While undertaking the credit appraisal procedure for
granting loans to the clients, there are various guidelines as contained in the policy manual of
the banks and other financial institutions, which help the appraisal team to identify the
general guidelines and the format of the credit appraisal process. The issue of fundamental
risks analyzed is more important with regards to the content in the manual. These risks come
under different headings and descriptions and there are various differences in the aspects
which they should cover. Various kinds of risk that go into a solid credit risk analysis are as
follow
1. BUSINESS RISK
Business risk refers to the risk of business as an entity and also the risk of its non-
performance. Business risk can also be defined as the operational risk of any business entity.
For a bank to understand a good analysis of the risks associated with a business, it is
necessary for it to know the business in all aspects. Subsequently, one needs to understand
various sources of information
On business operations, such as onsite visits, the borrower himself, borrower’s staff, the
accounting firm used by the business firm, his suppliers, competitors, the business model,
financial performance of last few years etc. the following are some of the critical areas
the banker must investigate thoroughly to ensure that this risk is analyzed in an adequate
manner.

 Core activity of the business, which is also known as the business model.

 Whether the operations of the business are labour intensive or capital intensive.

 The condition of the company’s facilities

 The impact of technological changes on the business and its performance

 Whether the sales and production of the company is seasonal or continuous.

 Availability of raw material.

 Payment terms offered by the supplier.

 Labour relations and unions.

2. MANAGEMENT RISK

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The management risk of a company refers to the risk associated with personnel who are
engaged in the affairs of the company. The analysis of the management risk should take into
consideration the persons who are able to influence the decision-makers as they are the
persons who influence the entire operations of the company. Moreover, such analysis should
also consider the organizational politics and struggle for power between the key personnel.
The bank must seek information on the borrower to determine the management risk. The
source of such information is quite large. It includes the borrower himself, his neighbours and
business partners, on-site company visits, his relationship with bank, staff and any other
person whom the bank has access to and who knows the
borrower bank has access to and who knows the borrower properly. It is necessary for the ban
ker toarrange a meeting with the management so that he can discuss various relevant issues
that may have come up during the information seeking process. This meeting gives a deep
insight into the fiber that the management is made of. One of the most important topics of
debate is the integrity of the management. An honest management will provide authentic
financial information and present the facts as they are on the grounds sometime, as a matter
of fact, expertise is also consider to the most important factor to understand the risk
associated with the management. Integrity and expertise are undoubtedly the most critical
success factors for the management.

3. ENVIRONMENTAL RISK
A business entity is affected by the economic, political, legal and socio-cultural factors in
various ways. Environmental issues which are related to health hazards are now very
important, since a client’s failure to comply with the government regulations may lead to
reduction in the client’s solvency ratio which would lead to reduction in the value of security
held by its banker. Socio-cultural factors such as demographics, income distribution, social
mobility, and lifestyle changes and normal practices of people also form part of environment,
along with health and other factors. The possible source of information for a banker can be
the business magazines, local newspapers, the borrower himself and other clients.

4. COLLATERAL RISK
Collateral is the security offered by the borrower in order to secure loan facility from the
bank. For every facility that a bank grants to its clients, bank has to decide whether it should
cover the exposure or not. Bank must clearly define what kind of collateral is acceptable to
the bank as security, since each collateral security has an element of risk attached to it. The
analysis of this risk is necessary to ensure that the bank adequately evaluates its collateral for
each borrower, so as to realize its dues in case the borrower defaults. If the bank decides to
leave an exposure uncovered without any security, it must sufficiently justify the same, as it
is a rule of lending that facilities should only be granted when cash flows can support its
repayment.

5. FINANCIAL RISK
One of the most important aspects of the credit appraisal process is the analysis of the
financial information provided by the borrower in the form of audited balance sheets, profit
and loss statements etc. Such analysis enables the banker to evaluate the financial risk for its

8
client. Other sources of information on the financial standing of the company are the
borrower’s accountant, finance manager or auditor, solvency reports etc.

6. ACCOUNT PERFORMANCE RISK

During the credit appraisal process, the banker also considers the history of the company and
account performance with the previous banker. With a new client, the bank looks at its
existing account with the previous banker. However, if the accounts of the company are not
available, the bank may look at the management or the shareholder’s accounts.

9
 1.6 FACTORS AFFECTING CREDIT APPRAISAL
A lender’s credit appraisal process will typically check and evaluate the following important
factors:

 Income

 Age

 Repayment ability

 Work experience

 Present and former loans

 Nature of employment

 Other monthly expenses

 Future liabilities

 Previous loan records

 Tax history

 Financing pattern

 Assets owned

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 1.7 DOCUMENTS FOR CREDIT APPRAISAL
Submission of Documents for Proving Your Bankability
Bankability is a very important aspect that is a part of credit appraisal. Bankability refers to
what will be accepted by a particular bank. A lender will assess if a loan given to a particular
person will result in future cash flow and profitability.
When you apply for a personal loan or any other loan from a bank or an NBFC, you will be
required to mandatorily furnish certain government-approved documents, reports, and other
documents in order to prove your income, age, and other aspects. These norms will vary from
lender to lender. While applying for your loan, your lender will specify the norms and you
will be required to follow them so that they can decide if the loan can be approved or not. Let
us take a look at some of the common norms that are set by lenders for the credit appraisal
process:
Proof of income
In order to prove your monthly income, you will be required to submit certain documents and
they include:
 Most recent bank statements for 3 to 6 months
 Most recent salary slips
 Most recent Income Tax Return (for self-employed individuals)
 Audited financials for the previous 2 years
Proof of address
To prove your residential address, you will have to furnish any one of the following
documents:
 Leave and license agreement
 Latest electricity bills or utility bills
 Aadhaar card
 Driving license
 Passport
Proof of identity
To prove your identity and date of birth, you will be required to submit any one of the
following documents:
 Aadhaar
 PAN card
 Voter ID
 Driving license
 Passport-size photographs
Proof of employment
To prove your employment information, you will be required to give certain documents
regarding your employer or your own company (if you are self-employed):
 Letter from your employer
 Offer letter or appointment letter provided by your employer
 Office address proof
 Employment certificate from your present employer

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 Certificate of experience or relieving letter from your previous employer to show your
overall work experience
Proof of creditworthiness
To prove your creditworthiness, you can show your credit score to your new lender. This can
be done by submitting your CIBIL report. When you are furnishing your CIBIL report, you
should be sure about the details of your credit score. You should also ensure that your credit
score is 750 and above.
With the help of your CIBIL report, your lender will check if you have been prompt while
making you r repayments and while clearing your credit card bills. Your lender will also be
able to see if you have default any loan during your entire credit history and if you have made
many enquiries. Hence, you need to be very particular about how your credit report looks.
Proof of investment
If you have made any investment, you will be required to provide proofs. This can be done by
giving documents of your investments such as fixed deposits, shares, mutual funds, fixed
assets, gold, etc.
When the lender takes a look at your income proof, age proof, and employment proof, the
lender gets an idea about your overall profile and the bank can determine if you will be able
to repay your loan promptly without any financial struggles.

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1.8 PROCEDURE OF CREDIT APPRAISAL
The credit analysis process is a lengthy one, lasting from a few weeks to months. It starts
from the information-collection stage up to the decision-making stage when the lender
decides whether to approve the loan application and, if approved, how much credit to extend
to the borrower.
The following are the key stages in the credit analysis process:

1. Information collection
The first stage in the credit analysis process is to collect information about the applicant’s
credit history. Specifically, the lender is interested in the past repayment record of the
customer, organizational reputation, financial solvency, as well as their transaction records
with the bank and other financial institutions. The lender may also assess the ability of the
borrower to generate additional cash flows for the entity by looking at how effectively they
utilized past credit to grow its core business activities.
The lender also collects information about the purpose of the loan and its feasibility. The
lender is interested in knowing if the project to be funded is viable and its potential to
generate sufficient cash flows. The credit analyst assigned to the borrower is required to
determine the adequacy of the loan amount to implement the project to completion and the
existence of a good plan to undertake the project successfully.
The bank also collects information about the collateral of the loan, which acts as security for
the loan in the event that the borrower defaults on its debt obligations. Usually, lenders prefer
getting the loan repaid from the proceeds of the project that is being funded and only use the
security as a fall back in the event that the borrower defaults.

2. Information analysis
The information collected in the first stage is analyzed to determine if the information is
accurate and truthful. Personal and corporate documents, such as the passport, corporate
charter, trade licenses, corporate resolutions, agreements with customers and suppliers, and
other legal documents are scrutinized to determine if they are accurate and genuine.

The credit analyst also evaluates the financial statements, such as the income statement,
balance sheet, cash flow statement, and other related documents to assess the financial ability
of the borrower. The bank also considers the experience and qualifications of the borrower in
the project to determine their competence in implementing the project successfully.
Another aspect that the lender considers is the effectiveness of the project. The lender
analyzes the purpose and future prospects of the project being funded. The lender is
interested in knowing if the project is viable enough to produce adequate cash flows to
service the debt and pay operating expenses of the business. A profitable project will easily
secure credit facilities from the lender.
On the downside, if a project is facing stiff competition from other entities or is on a decline,
the bank may be reluctant to extend credit due to the high probability of incurring losses in
the event of default. However, if the bank is satisfied that the borrower’s level of risk is

13
acceptable, it can extend credit at a high interest rate to compensate for the high risk of
default.

3. Approval or rejection of the loan application

The final stage in the credit analysis process is the decision-making stage. After obtaining
and analyzing the appropriate financial data from the borrower, the lender makes a decision
on whether the assessed level of risk is acceptable or not.
If the credit analyst assigned to the specific borrower is convinced that the assessed level of
risk is acceptable and that the lender will not face any challenge servicing the credit, they will
submit a recommendation report to the credit committee on the findings of the review and the
final decision.
However, if the credit analyst finds that the borrower’s level of risk is too high for the lender
to accommodate, they are required to write a report to the credit committee detailing the
findings on the borrower’s creditworthiness. The committee or other appropriate approval
body reserves the final decision on whether to approve or reject the loan.

14
1.9 CHART SHOWING CREDIT APPRAISAL PROCESS

1. Receipt of application from applicant

2. Receipt of documents (Balance sheet, KYC papers, Different govt. registration no.,
MOA, AOA, and Properties documents)

3. Pre-sanction visit by bank officers.

4. Check for RBI defaulters list, willful defaulters list, CIBIL data, ECGC caution list,
etc.

5. Title clearance reports of the properties to be obtained from panelled advocates

6. Valuation reports of the properties to be obtained from empanelled values/engineers

7. Preparation of financial data

8. Proposal preparation

9. Assessment of proposal

10. Sanction/approval of proposal by appropriate sanctioning authority

11. Documentations, agreements, mortgages

12. Disbursement of loan

13. Post sanction activities such as receiving stock statements, review of accounts, renew
of accounts, etc. (On regular basis).

15
1.10 CREDIT APPRAISAL PRE-SANCTION PROCESS

1. APPRAISALPRELIMINARY APPRAISAL
Credit appraisal process starts with the initial analysis of
the proposal submitted by the borrower. The sales team is responsible for sourcing the
application from the prospective clients. As the application is received by the sales
team, the next step is to collect the necessary documents from the borrower as a
matter of KYC (Know Your Customer) norms and other documents such as property
papers, audited balance sheets and income statement etc. The application is then
forwarded to the credit team with necessary documents are the points borne in my
mind by the various teams involved in the appraisal procedure:

 Lending policy of the bank

 RBI List of defaulters
 Industry exposure
 RBI guidelines
 Credit risk rating
 Profile of the promoters of the company
 Industry related risk factors
 Government regulations which have an impact on the industry; e.g. ban on financing
of industries producing harmful gases responsible for ozone layer depletion
 If it’s a case of takeover of account from previous bank then, compliance regarding
transfer of borrower’s accounts.
 Status of the borrower vis-a-vis other units of the industry.
 Financial status of the company in broad terms. Bank must attain the MOA and AOA
from the company to understand various internal and external policies of the company
and to make sure whether it is in compliance to the policies of the bank.

Documents required for the processing of Loan are as follow:

a) Application for loan requirement
b) Copy of incorporation of business
c) Copy of commencement of business
d) Copy of Memorandum & Article of Association
e) Brief history of company, its customers & supplies, previous track records, orders In
hand.
f) Information on the directors of the company
g) Audited Financial statements of last 3 years
h) Copy of PAN/TAN number of company
i) Copy of last Electricity bill of company
j) Copy of Excise number
k) Address proof of all the directors
l) Photo I.D. of all the directors
m) Property related papers such as lease or sales deed, Possession

As the above preliminary appraisal of the procedure is done, the bank arrives at a decision
whether to accept the proposal for further sanctioning or not. If the bank finds the proposal
acceptable, it will ask the borrower to submit a detailed application in the prescribed format

16
along with necessary documents required for the credit assessment of the borrower. The
information, among other things, includes the following aspects:

 A list of Board of Directors mentioning their qualifications and experience.

 Projection of cost of production, sales and profitability.

 Current practices followed by the company regarding its products or services such as
those relating to credit sales, bad debts, etc.

 Projections of demand and supply based on the overall scenario of the market. The
market scenario covers geographical spread, demand and supply gap, competition,
marketing arrangement etc.

 Projected income statement and balance sheet for the next two years.

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1.11 DETAILED APPRAISAL
After the preliminary appraisal of the proposal, the bank then carries out the detailed
appraisal of the proposal. The credit team is responsible for performing various activities at
this stage of the appraisal procedure. Following are the activities carried out by the credit
team analysts:

 The credit team examines the viability of the proposal to make sure that the company
will be able to fulfil its loan and interest obligations out of cash accruals from
the business. While appraising a proposal, the critical information furnished by the
borrower is verified and the team also emphasizes on the inter-firm and inter-industry
comparisons.

 The team carries out the financial analysis on the basis of the company’s audited
balance sheets and income statement for the last three years.

 Besides the financial analysis, the following aspects are also examined by the team:

 The method of depreciation followed by the company and also whether the
company has changed the method of depreciation in the past and, if so, the
reason therefore.

 If the company has revalue any fixed assets in the past and the present status
of the revaluation reserve, if any created for the purpose.

 CIBIL report of the borrower indicating any defaults made previously with
any financial institution.

 The company’s position regarding its tax assessment to understand

whether adequate provisions have been made to fulfil its liabilities related to
tax in future.

 The purpose of the contingent liabilities.

 Pending suits by or against the company and their implications on the financial
status of the company (e.g. cases relating to sales tax, vat etc.)

 Critical Remarks, if any, made by the statutory auditors on the accounts of the
company.

 Dividend policy followed by the company.

 A detailed analysis of the financial ratios of the company.

 Production capacity in the past and projected.

 Estimated requirement of working capital finance with reference to makeup

of inventory, receivables and other current assets.

18
  Compliance with lending policy and other necessary guidelines of the bank.

 If the bank requires to make an inter-firm comparison and other information.

The data can be sourced from directory published by the stock exchange,
financial journals, documents etc. Emphasis is laid on following aspects:

 Financial ratios analysis

 Efficiency of the production facility and costs involved

 Perceptions regarding the capital markets

 Comparison of the units on the basis of market share

 Pattern of financing the company

 Level of inventory and receivables

 Utilization of the current capacity

 Pattern of bank borrowings

 Market price of the product

 Share price of the stock showing 52 week high and low price

 Yield percentage (half yearly or yearly basis)

 Price-Earnings Ratio

After the above appraisal, the sales team goes for a pre-sanction visit to the manufacturing
concern. The team members have the main objective of ensuring a higher degree of
commitment from the promoters as the portion of equity which the promoters, their family
members and friends propose to bring in should be brought as soon as possible. However,
bank may give relaxation to the borrowers in this regard for genuine and acceptable reasons,
but with a condition that the promoter should make sure that he has an acceptable plan to
meet his contribution.

Risk rating based on credit profile: rating of the applicant is done so as to understand the
credit risk exposure of the applicant. Rating is done on various parameters such as
financial perspective, managerial perspective, industry outlook etc.

Existing charges on assets of the company: if the company has any charge on the assets with
the previous banker, the report on such charge should be provided to the bank. Bank must ask
for the report from the customer to understand the type of charge created.

Facility structure and the terms of sanction:

The general terms and conditions for the proposals are as follows:

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 Limit for each facility

 Temporary overdrafts facility granted and interest rate on it

 Security - Primary & Secondary

 Guarantee, if applicable

 Margins – as applicable for each facility

 Interest rate on the facility granted

 Commission rate and other fees

 Concessional facilities and value thereof

 Terms of repayment

20
1.12REVIEW OF THE PROPOSAL
A detailed review of the proposal is then done in order to ensure that no important thing
related to the assessment of the borrower has been missed out by the teams involved in the
appraisal process. Review of the proposal is done which covers the following aspects:
 Strengths and weaknesses of the proposal.
 Various risk factors associated with the proposal and steps to ensure their mitigation.
 Deviations seen from the general guidelines of the lending policy of the bank and the
reasons for the same are mentioned.

Proposal for sanction:

A detailed proposal for the final sanction to the borrower is prepared with all the necessary
information on it. The proposal contains the recommendations for sanctioning the limit to
the borrower company.

1. ASSESSMENT :
As the credit team carries out the credit appraisal process, after the detailed appraisal
of
the borrower firm on various aspects, the next step is to make a comprehensive assess
ment of the proposal which involves review of the financial and managerial details of
the borrower. Following are the major highlights of the assessment process:
 Review of the draft proposal together with notes kept for reference, the borrower’s
 Application, financial statements and other reports as examined by the credit team
member.
 Pre sanction visit to the company is made to see the actual operations of
the company.
 Review of the financial statement analysis is done in order to make sure that they
comply with the policy of the bank for lending purposes.
 Following critical aspects of the exposure are also verified:
 Lending policy of the bank
 List of defaulters as published by the RBI
 Profile of the management of the company
 If there are any deviations in the proposal from the bank’s policy, then the
 Justifications have to be provided by the credit team members.
 Industry exposure
 Guidelines prescribed by the RBI
 Rating of the borrower based on credit risk profile
 Risk factors related to the industry outlook
 Government regulations which have an impact on the industry; e.g. ban on financing
of industries producing harmful gases responsible for ozone layer depletion
 If it’s a case of takeover of account from previous bank then, compliance
 Regarding transfer of borrower accounts.
 Current status of the borrower as compared to other units of the industry.
 If any modifications are required by the appraisal team to be made, such
modifications should be provided with the sanction letter and justifications for the
same have be made.
 Risk factors associated with the proposal and necessary steps taken to mitigate those
risks.

21
  The appraiser then draws up the final proposal with the terms and conditions attached
with the proposal.
 Recommendation for sanction: The terms and conditions of the appraisal are then
recaptured briefly to state the economic feasibility of the proposal. The appraisal team
then understands the value of the company’s affairs and the operations. Finally the
recommendations are granted for the requisite fund-based or non-fund based credit
facilities.

Sanction
As the credit team appraises the borrower on various aspects such as financial and
managerial perspectives by analyzing the data provided by the borrower company, if the prop
osal if foundworth funding, the concerned sanctioning authority approves the proposal for
final
funding process. The sanctioning process involves the provision of the funds to the borrower.
Theaccount in the name of the client company is then opened by the operations team and
funds are made available to the client. The sanction process involves the following aspects:

 Cross verification of the proposal is done to check whether the proposal is presented
in the detailed manner as required by the bank. However, if any important information
has not been provided by the borrower to the bank such as any necessary document
regarding the property of the borrower, the proposal is given back to the credit team
for the supply of the required information. The appraisal team examines the following
aspects of the proposal by keeping in mind the bank lending policies:

 Lending policy of the bank

 List of defaulters as published by the RBI
 If there are any deviations in the proposal from the bank’s policy, then
the justifications have to be provided by the credit team members.
 Industry exposure
 Guidelines prescribed by the RBI
 Rating of the borrower based on credit risk profile
 Level of projected operations of the firm
 Critical risk factors and the steps taken to mitigate those risks.
 Value of the security given by the borrower as collateral to secure the risk of default of the
borrower.

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1.13 POST SANCTION CREDIT PROCESS

Need
Lending decisions are made by the bank on the basis critical appraisal and analyzing the
creditworthiness of the borrower. However as a matter of fact, the credit appraisal team also
knows that past performance is not the guarantee of the future performance. However, the
past records provide a critical insight to understand the performance trend in
future. Assessment of the creditworthiness of a prospective applicant is done on the basis of
financial and industrial outlook and also the promises made by the applicant. One should
keep in mind that a loan granted may turn to a bad asset as the borrower did not carry his
obligations as promised by him. Hence, it is essential that a proper follow-up and supervision
is done by the lending bank on regular basis.
A banker cannot compromise its funds in sufficiency of the security provided by the borrower
against the loan. After the sanction, it is really necessary for every banker to ensure the
following:

a) He has made a proper selection of the borrower.

b) Make sure that the borrower complies with the terms and the conditions of the facility
granted.
c) Monitor the borrower’s performance after the loan has been granted to him.
d) Make sure that the funds are utilized properly and are not lying idle in the account of
the borrower.
e) Finally ensure the security of the advances given to the borrower.

STAGES OF POST SANCTION PROCESS

The post-sanction credit process is classified into three stages i.e. follow-up, supervision and
monitoring, which together enables the bankers for effective credit management and
maintaining high level of asset standards. It is very important on the part of the banker to
make sure that the funds given to the borrower are being effectively utilized by him and that
the operations of the firm are in the interest of both the banker and the company. The
objectives of the three stages of post sanction process are detailed below:

1. FOLLOW-UP
The first stage of the post sanction process is the follow-up of the account of the borrower.
Follow-up has the following two objectives:

 Ensuring the compliance with the terms and conditions of sanction on the
regular basis.
 Ensuring performance safety and recoverability of assets.

2. SUPERVISION
After the follow-up, the next step is to supervise and continuous review of the operations of
the borrower and the position of his account. Supervision has following aspects:

 Ensuring effective follow up to maintain asset quality.

 Keeping look-out for early warning signals.3.

3. MONITORING
Monitoring of the accounts after they have been sanctioned is another important aspect of the
credit appraisal post sanction process. Monitoring of the accounts and the borrowers activities

23
provide the banker critical information on the performance of the operations of the company
and also that whether the account has a probability of becoming NPA or not. Monitoring has
the following aspects:

 Ensuring effective supervision.

 Monitoring customer satisfaction.
 Ensuring quick response to early warning signals.

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1.14 CREDIT INVESTIGATION

INTRODUCTION
Credit investigation starts from the time bank officials starts getting the lead for the
prospective credit clients. It basically involves collection of data about the client through
various mediums. After collection of data (both financial and non financial data) trying to
understand them and apply the same in credit sanctioning decision. In earlier times the
nationalized banks used to have Officers designated as Credit Investigator. The
Credit Investigator’s job was to go into the market and gather as much information about
both existing and the prospective borrowers of the bank and give his report to the credit
analyst. His role was independent of the credit analyst. Now those special designated officers
are not there. The credit officer himself does that job. The banker gets fully satisfied
with the replies received from the client for all the queries raised by him during the process of
sanctioning loan. Data received about the client are to be investigated by bankers both
efficiently and effectively .Efficient investigation will ensure that time and money is not
wasted in the process. Effective investigation means the collection and interpretation of all
the relevant data. Much of the data that could be collected may not be really needed.
Unnecessary data can make the investigation costly and prohibitive. However, too little data
can lead to a poor decision. Good credit investigation may be said to be an art developed
through experience and training. The investigation aims at understanding the character and
nature of the borrower by acquiring necessary information needed to determine his ability to
service the proposed loan. The success of any credit investigation depends on the relevancy
of the data collected, the speed with which it is acted upon having regard to the needs of the
business and the intelligent interpretation of the data for effective decision making at the
operative level.

Need
The main purpose of credit investigation is to determine the business reputation, credibility
and responsibility of the individuals involved with particular reference to:

 Experience in the line of their activity

 Dealings with customers trading or dealing with them

 Management capability

 Professional reputation with their bankers

 History of payment record and fulfilment of financial obligations

 Honesty and integrity

 Willingness to repay the debt

25
1.15 WORKING OF CREDIT INVESTIGATION
Before commencing the investigation, the credit officer will consider all the information that
is already available to support the loan decision in question. Investigation should thereafter be
conducted to obtain the other necessary information. A checklist is normally prepared before
the actual investigation so that no point is omitted. The information obtained will be
thoroughly checked and also counter checked wherever required. A credit officer has to be
very alert all the time and has to be very diplomatic in his efforts as said earlier the credit
investigation involves study of both financial and non-financial aspects of the prospective
borrower. It includes ascertaining the creditworthiness of the guarantor’s also. The credit
officer has to consider a number of aspects before sanctioning the loan. The data to be
collected during credit investigation depends on a number of factors, some of which are
mentioned below.

 How well the customer is already known to the bank?

 How much of information was obtained during the initial interview?

 The size of the proposed loan?

 The information already available with the bank about the customer

 The risks that are specifically associated with the case

 The borrower's financial strength

 The value and liquidity of the prime and collateral security

Where to source the information required for credit investigation?

The sources of information available for credit investigation may be broadly classified as
Internal and external.

Internal sources are those, which are available within the bank, like the following:

 Particulars relating to the account including its past history

 Its past financial statements and analyses thereof

 Current or previous borrowings and ratings awarded

 Summary of past dealings with the borrower

 Operations in current and borrower accounts

 Conduct of the account

 Financial discipline practiced by the borrower in the past

26
  Cooperation extended in documentation

 Balances in other deposit accounts

 Previously gathered information on the borrower and kept in record.

External sources are those, which may be got from other sources like the following:

 References provided by the borrower

 Meetings with the borrower

 Circulars issued by the IBA/FEDAI

 Information obtained from other banks and institutions

 Reports of credit rating agencies like CRISIL, ICRA etc.

 Credit investigating entities like Dun and Bradstreet

 References with Government bodies and organizations

 Search in the office of Registrar of Companies

 Meetings with customers of the borrower and third parties

 Information from present and past employees of the borrower

 Informal and social get together

 Websites of RBI, Various Trade Councils etc.

27
1.16 PROPOSAL FEASIBILITY STUDY

When the bank receives any proposal for funding, it analyses the proposal on various aspects
to understand its feasibility. Feasibility of the proposal is necessary for the banks as
profitability depends upon the sound appraisal of the project.

1. Financial Analysis
Financial analysis is the most important part of the credit appraisal process. The
borrower has to provide audited financial statements to the banks for the previous
three years and also the future projections. The firm is then evaluated on several
financial parameters like current ratio, profitability ratio, TOL/TNW ratio, debtors’
turnover ratio, creditors’ turnover ratio, projections regarding future cash flows,
projected balance sheets etc. The bank accepts a project for funding only when the
various ratios and parameters fall within the acceptable range and an increasing sales
and profit trend is forecasted thereby.

2. Technical Analysis
Besides the financial analysis, the proposal is also evaluated on the basis of
technology, the kind of plant and machinery used by the company, location of the site,
the production capacity of the plant, manufacturing process used (whether the process
is aconventional process or a new technology is being used), the viability of the
technology (whether it is going to be obsolete in a near future or not), if a foreign
technology is being used, whether it is adapted to be consumed by local people and
generate enough sales etc.

3. Managerial Analysis
Another parameter of the proposal feasibility analysis is the managerial analysis. A
detailed managerial analysis is undertaken for the reason that a firm may beneficially
and technically sound, but it may face problems if not run efficiently by
the promoters. Therefore, critical evaluation of management is an essential part of app
raisal procedure. Appraisal of the promoters is done on the basis of past financial state
ment, creditrecord, qualities of the management, the management problems faced by
the firm with the bank and also by personally visiting the firm and talking to the
debtors and employees of the entrepreneur etc.

4. Commercial analysis
Sometimes the borrower comes to the bank with the proposal for lending him funds
for such a product which is not easy to market. In order to have a proper appraisal of
the demand forecast made by the borrower, the lending institution required following
information regarding demand, supply, distribution, pricing and external forces:
Appraisal of the borrower: apart from appraising the project on financial, commercial
managerial and industrial aspects, the borrower is appraised on several other aspects.
Points to be kept in mind while appraising the borrowings are as follows:

1. Experience
The borrower should have adequate experience in the line of business or should have
employed competent personnel for management of the business.

2. Purpose

28
It should be ensured that the purpose of advance is acceptable to the bank &the
borrower has the capacity & ability to conduct his business affairs in a successful
manner& that he can be trusted for not misusing the facilities & divert the funds
available in the business.8.

3. Quantum of Advance
The amount of advance asked by the borrower needs to be carefully assessed to
ensure the following:

 The amount of finance together with other resources made available to

the business is reasonable.
 The amount of finance granted by the bank is need based & as per the actual
requirements of the business.

 Adequate cushion is provided to meet the unforeseen contingencies on account

of a possible escalation in the cost.

29
1.17 SBI BANK
State Bank of India (SBI) is an Indian multinational, public sector banking and financial
services statutory body headquartered in Mumbai, Maharashtra. SBI is the 43rd largest bank
in the world and ranked 221st in the Fortune Global 500 list of the world's biggest
corporations of 2020, being the only Indian bank on the list. It is a public sector bank and the
largest bank in India with a 23% market share by assets and a 25% share of the total loan and
deposits market.
The bank descends from the Bank of Calcutta, founded in 1806 via the Imperial Bank of
India, making it the oldest commercial bank in the Indian Subcontinent. The Bank of
Madras merged into the other two presidency banks in British India, the Bank of Calcutta and
the Bank of Bombay, to form the Imperial Bank of India, which in turn became the State
Bank of India in 1955.The Government of India took control of the Imperial Bank of India in
1955, with Reserve Bank of India (India's central bank) taking a 60% stake, renaming it State
Bank of India.

Subsidiaries
SBI provides a range of banking products through its network of branches in India and
overseas, including products aimed at non-resident Indians (NRIs). SBI has 16 regional hubs
and 57 zonal offices that are located at important cities throughout India.

Domestic
SBI has over 24000 branches in India. In the financial year 2012–13, its revenue was rs2.005
trillion, out of which domestic operations contributed to 95.35% of revenue. Similarly,
domestic operations contributed to 88.37% of total profits for the same financial year.
Under the Pradhan Mantri Jan Dhan Yojana of financial inclusion launched by Government
in August 2014, SBI held 11,300 camps and opened over 3 million accounts by September,
which included 2.1 million accounts in rural areas and 1.57 million accounts in urban areas.

BANK PRODUCTS

1 Home loan

SBI home loan have catered to the need of owning a home over 30lakh families in India.SBI
loans come with low processing charges, low interest rate and no hidden costs. SBI home
loan is available at an interest rate starting at 6.95% p.a. State Bank of India housing loan has
range of benefits such as flexible tenure, no prepayment penalty and no processing fees.
Individuals can apply for SBI home loan for buying ready built or under construction or pre
owned properties. SBI home loans can also be availed for the construction, extension, repair,
and renovation of an existing property.

2 Personal loan

SBI offers 4 types of personal loans for tenure ranging from 1 to 5 years.SBI personal
loans cater to the financial needs of any account holder at low interest rates. SBI
offers various types of personal loans such as Xpress Credit Loan, SBI Pension Loan, Xpress
Elite and Pre-approved Personal Loans that cater to the needs of different borrowers. Personal

30
loans offered by SBI may be used for various purposes such as business expansion, debt
consolidation, foreign travel expenses, marriage, home renovation, medical emergency, etc.
Currently SBI offers personal loans of up to Rs. 20lakh with interest rates starting from
9.60% p.a. onwards.

3 Loan against property

SBI offers 2 types of loans against property, namely mortgage of immovable property
and rent plus. Customers can avail loan against property at low cost and for flexible
tenure. The State Bank of India (SBI) offers loan against property for meeting personal
expenses on higher education, wedding, healthcare, etc. Individuals can avail SBI mortgage
loan against both residential and select commercial properties.

4 gold loan

SBI account holders can avail gold loan (from Rs20000 to 20lakh) by a pledge of
gold ornaments including gold coins. It comes with less paperwork and affordable
interest rates. SBI Gold Loan can be availed by submitting applicant’s owned gold
ornaments or gold coins that are sold by banks, as collateral with SBI. The application
process is easy and does not require much time. The interest rate on gold loan offered by SBI
is 7.30% onwards

5 Educational loan

SBI offers 5 types of educational loans. Using SBI educational loan, customers can
opt for leading institutions in India customers can avail a loan amount of up to Rs 1.5
crore. It also provides concession for girl students. State Bank of India has many
attractive schemes that cater to foreign bound students, domestic students, and students who
wish to take skill development classes.

6 car loan

SBI offers 4 types of car loans. It helps its customers in financing a car for its customers at
low interest rates, low EMI’s, less paper work and quick disbursement. SBI car loan offers
the longest tenure of 7 years.

7 Business loan

SBI offers secured and unsecured business loan options to its cust omers to fullfil the
business requirements easily. SBI provides hassle free documentation, attractive
interest rates and flexible tenure options. The bank also assists businesses in availing
loans under government schemes, such as Mudra Yojana under PMMY, PMEGP, PSB Loans
in 59 minutes, CGTMSE, Start up India and Stand-up India.
8 Two wheeler loan

SBI offers 2 types of two wheeler loans with no advance EMI and low interest rates. The
interest of to wheeler loans is calculated on daily reducing balance. SBI also offers the
flexibility of payment of EMI anytime during the month. State Bank of India’s 2 wheeler loan
is designed to help individuals all over India purchase a new motorcycle or scooter of their

31
choice with minimum hassle. Apart from scooter/motorcycle other 2 wheeled transport
including moped and battery-operated vehicles

32
1.18 HDFC BANK
HDFC Bank Limited is a wholly owned subsidiary of Housing Development Finance
Corporation headquartered in Mumbai, Maharashtra. It has a base of 104,154 permanent
employees as of 30 June 2019.HDFC Bank is India’s largest private sector bank by assets. It
is the largest bank in India by market capitalisation as of March 2020.

HISTORY

A subsidiary of the Housing Development Finance Corporation, HDFC Bank was

incorporated in 1994, with its registered office in Mumbai, Maharashtra, India. Its first
corporate office and a full-service branch at Sandoz House, Worli were inaugurated by
the Union Finance Minister, Manmohan Singh.

As of 30 June 2019, the Bank's distribution network was at 5,500 branches across 2,764
cities. The bank also installed 430,000 POS terminals and issued 23,570,000 debit cards and
12 million credit cards in FY 2017.
BANK PRODUCT

1 Home loan

HDFC Bank offers home loans on behalf of HDFC Ltd. HDFC Bank offers 3 types of home
loans for its customers at attractive interest rates. Customers can opt for automated payment
and the EMIs will be directly repaid from HDFC bank saving account. HDFC home loan
interest rate is 6.70% p.a. onwards with EMIs starting from ₹646/lakh. The bank
finances up to 90% of the property value, which you can repay over a flexible tenure
of up to 30 years.

2 Personal loan

It offers low processing fees, low interest rates and simplified documentation to its
customers. Customers can also avail pre approved loan in 10 seconds and others can get a
loan in 4 hours. HDFC Bank offers personal loan with minimal documentation and speedy
approvals, making it easy for individuals to easily access funds due to a financial emergency.
You can avail a loan amount of up to Rs. 40 lakh that can be repaid within a tenure which
ranges between 12 to 60 months.

3 Loan against property

Banks customer can pledge their property to meet the personal or business goals with 4 types
of loan against property. Customers can get up to 65% of one’s property’s value, simplified
process. Customers can avail loan against fully constructed, freehold residential and
commercial properties. Customers can apply for the loan solely and jointly. The loan can be
used to fulfill business and personal requirements. Customers can enjoy a longer repayment
period of up to 15 years in smaller EMIs. HDFC Ltd. offers Loan against Property at
attractive interest rates starting from 8.25%.Customers can repay the loan easily through
monthly instalments

4 Gold loan

33
Bank offers gold loan with a minimum amount of Rs 25000 to its customers at a flexible
rates, minimal documentation and secure storage. Customers can get the funds immediately
and can repay at their own convenience. With HDFC Bank, you can get up to 80% of the
market value of your gold as a loan within 45 minutes over the counter with minimal
documentation. HDFC Bank Gold Loan starts as low as Rs. 25,000 at low-interest rates and
with no hidden charges. Your gold jewellery is stored under a unique triple-layered security
to ensure its safety.

5 Education loan

HDFC Bank offers 3 types of educational loan for studying across leading institutions in
India and overseas to meet their career goals and inspirations. Customer can also enjoy tax
benefits u/s 80 E of income tax act, 1961. HDFC Education Loan aims to satisfy the
requirements of every type of young individual who desires to pursue further studies.

6 Car loan

HDFC Bank helps to finance the dream of buying a new car for its customers with up to
100% funding. Customers can opt 3 types of loan as per their requirements with 7 years
tenure, quick disbursal and quick processing.

7 Business loan

HDFC bank offers business loan to their customers up to Rs 50 lakh to meet their need of
money in business. It comes with easy documentation, overdraft facility, and flexible tenures.
HDFC Bank Business Loan – Interest Rate @ 15%

34
1.19 TECHNIQUES OF CREDIT APPRAISAL
Credit Appraisal Techniques Credit appraisal techniques act as tool for the credit portfolio
managers to take right decisions. It is the first and the prime most function performed by the
Credit Appraisal Cell before providing any sort loans or advances. The appraisal technique
for each type of loan is separate from each other. Each type of loan whether secured or
unsecured has to be analyzed in a different way. The different techniques of credit analysis or
credit appraisal are discussed as under: Process of Credit appraisal for Term Loans Term
loans- Loans which are repayable in not less than 36 months are referred to as term loans. In
the interest of sound risk management practices, banks monitor the percentage of Term loans
in their credit portfolio with a view to keeping the term loan component within a pre-
determined percentage. Requirements to be obtained with the proposal:

a) Copies of project report

b) Where loan is on participation basis, a copy of the appraisal note of the lead institution /
bank should be obtained.
c) Scrutiny of proposals

 The scope of the project

 Background of promoters
 Government consents
 The technical appraisal
 Cost of the project
 Sources of finance
 The schedule of implementation
 The financial projections and profitability
 Cash flow statements
 Calculation of debt service coverage ratio (DSCR)
 Breakeven analysis

d) Disbursement

e) Follow up (post sanction)

Assessment: For assessment purposes the forms prescribed are used and debt equity ratio,
average DSCR, BEP, payback period, etc. are taken into consideration. The following
minimum financial parameters are required to be satisfied for a Term loan proposal to merit
consideration:

Debt Equity Ratio Not more than 2.33:1(1.7:1 may be accepted

in the case of real estate sector and generally
for different type of industry different level of
DER is acceptable.)
Average DSCR Not less than 1.5to 2 (ratio lower than this is
to be looked into)

Ratios for appraising term loans: ➢ Debt equity ratio: long term debt Tangible net worth ➢
Average DSCR: Net profit + Depreciation + interest on TL Term loan installment + interest
on TL ➢ Breakeven point : Fixed cost_______ Sales-Variable cost (contribution) It should be

35
noted that the banks generally consider only term loans repayable within 5 to 7 yrs. Term
loans with maturity beyond 7 yrs are normally not experienced except infrastructure loans.

Debt Equity Ratio: A measure of a company's financial leverage calculated by dividing its
total liabilities by stockholders' equity. It indicates what proportion of equity and debt the
company is using to finance its assets. Also known as the Personal Debt/Equity Ratio, this
ratio can be applied to personal financial statements as well as companies'. A high debt/equity
ratio generally means that a company has been aggressive in financing its growth with debt.
This can result in volatile earnings as a result of the additional interest expense. If a lot of
debt is used to finance increased operations (high debt to equity), the company could
potentially generate more earnings than it would have without this outside financing. If this
were to increase earnings by a greater amount than the debt cost (interest), then the
shareholders benefit as more earnings are being spread among the same amount of
shareholders. However, the cost of this debt financing may outweigh the return that the
company generates on the debt through investment and business activities and become too
much for the company to handle. This can lead to bankruptcy, which would leave
shareholders with nothing. The debt/equity ratio also depends on the industry in which the
company operates. For example for large projects (with project cost Rs. 100 crore and above)
in Power, acceptable level of DER is 2.33:1, in Iron and Steel Industry 2.25:1 , in
Infrastructure and Capital Intensive projects 2:1 and in Real Estate, level of DER is 1.75:1.
The CH, GM, ED and CMD have powers to further relax.

Debt Service Coverage Ratio (DSCR): The ultimate purpose of project appraisal is to
ascertain the viability of a project which has a direct bearing on the repayment of the
instalments under the proposed term loan / deferred payment guarantee. While the repayment
program will depend upon the profitability of a project, the quantum of annual instalments
has to be related to the size of the annual cash flows. The repayment schedule should,
therefore, be fixed after ascertaining the annual servicing by the debt service coverage ratio.

The debt service coverage ratio is the core test ratio in project financing. This ratio indicates
the degree of viability of a project and influences in fixing the repayment period, and the
quantum of annual instalments. For the purpose of this ratio , “debt” means maturing term
obligations viz. instalments payable during a year under all the term loans/ deferred payment
guarantees and ‘service’ means cash accruals (service) available to cover the maturing
obligation (debt) during each year. The debt service coverage ratio indicates the ability of the
firm to generate cash accruals for repayment of installment and interest. For example, a
DSCR of 3:1 indicates that for each Re.1/-long term debt including interest to be paid the
business generates cash accrual of Rs.3/- to be utilized for repayment of debt. The difference
between the accruals and debt is known as margin of safety (Rs.2/- in this case). The ratio of
1.5 to 2 is considered reasonable. Ratio lower than this should be further looked into. A very
high ratio may indicate the need for lower moratorium period/repayment of loan in a shorter
schedule. This ratio provides a measure of the ability of an enterprise to service its debts i.e.
`interest' and `principal repayment' besides indicating the margin of safety. The ratio may
vary from industry to industry but has to be viewed with circumspection when it is less than
1.5.

36
 CHAPTER 2: REVIEW OF LITERTURE
MS. SUGANDHA SHARMA (2015)
An article named “AN OVERVIEW OF CREDIT APPRAISAL SYSTEM WITH SPECIAL
REFERENCE TO MICRO SMALL AND MEDIUM ENTERPRISES (MSME)” written in
the journal “Pacific Business Review International”. The credit appraisal is done by involving
the Evaluation of management, Technical feasibility, financial viability, Risk analysis and
Credit rating. It is on the basis of the credit risk level, collateral securities to be given by the
borrower are determined. The credit department thoroughly analyses the credit requirement
of the company and the capacity to service the debt. The banks have conservative norms to
appraise the project the bank at the max. Banks allow a 20% hike in projections. The credit
appraisal passes through various stages and evaluations before it is appraised. The financial
and banking system has placed before the MSME sector a fully dressed up and it is the
appreciation of the efforts and also as an incentive to work hard. The sector should avail of
the opportunities and scale new heights. With this the sector will be benefited and the society
too. This shows MSME has sound system for credit appraisal. The credit appraisal process
carried out at MSME has good parameters to appraise.
DR. SHANO MOHAMMED (2014)
A report on“EFFECTIVENESS OF CREDIT APPRAISAL ON LOAN PERFORMANCE
OF COMMERCIAL BANKS IN KENYA” written in the journal “International Journal of
Recent Engineering Research and Development (IJRERD)”. Commercial banks are financial
institutions and play a very important role in an economy. Specifically, they channel financial
resources from savers to lenders. In developing economies, they help borrowers who have no
access to capital markets, (Akkizidiz, 2008). According to Fallon, (1996) commercial banks
face three types of risks, financial risk-with credit risk being a component, operational and
strategic risk. These risks have different impact on performance of commercial banks. The
magnitude and the level of loss caused by credit risk compared to others is severe in causing
banks failures. Credit appraisal was found to be very important in influencing performance of
commercial banks. This is because it is the screening stage and those would be bad payers are
sieved out and those expected to be good payers given their credit history and credit score are
granted. Findings revealed that lending placed much reliance on use of past information and
thus credit referencing and credit history were applied more in credit appraisal. The other
techniques were also deemed effective but not as much as credit referencing and use of credit
history of the borrower.
DR. PANAGIOTIS XIDONAS (2007)
A research work on the topic “ON THE APPRAISAL ON CONSUMER CREDIT
BANKING PRODUCTS WITH THE ASSET QUALITY FRAME:A MULTIPLE
CRITERIA APPLICATION.” says that Asset quality refers to the likelihood that the bank's
earning assets will continue to perform and requires both a qualitative and quantitative
assessment. Decision problems like the internal appraisal of banking products, are problems
with strong multiple-criteria character and it seems that the methodological framework of
Multiple Criteria Decision Making could provide a reliable solution. In this paper, the Asset
Quality banking indicators are the, so called, "criteria", the value of these indicators are the,
so called, scores in each criterion and the P.R.O.METH.E.E. [Preference Ranking
Organization Method of Enrichment Evaluations, Brans & Vincke (1985)] Multiple Criteria
method is applied, towards modelling banking products appraisal problems. A Multiple
Criteria process, strictly mathematically defined, integrates the behaviour of each indicator-

37
criterion and utilizes each score in order to rank the so called "alternatives", i.e. categories of
banking products.

S SHARMA (2005)
The research Paper on “EVALUATION OF DECISION SUPPORT SYSTEMS FOR
CREDIT MANAGEMENT DECISIONS” conducted a study to evaluate the efficiency of
decision support system (DSS) for credit management. This study formed a larger initiative to
access the effectiveness of the I.T based credit management process at SBI. Such a study was
necessitated since credit appraisal has become an integral sub-function of the Indian banks in
view of growing incidence of non-performing assets. The DSS they have assessed was a
credit appraisal system developed by Quattro pro at SBI. This system helps in analysis of
balance sheets, Calculation of financial ratios, cash flow analysis, future projections, and
sensitivity analysis and risk evaluation as per SBI norms. They have also used a strong
Quassi experimental design called Solomon’s four group design for the assessment. In the
experiment the managers of SBI who attended the training programme were the subjects the
experiment consisted of the measurements that were taken as pre and post tests. An
experimental intervention was applied between the pre-tests and the pro-tests. The
intervention or stimulus consisted of DSS training and use. There were four groups in the
experiment. The stimulus remained constant as they took care to ensure that the course
content as well as the instructors remained the same during the course of the experiment. Two
were experimental groups and two were control groups. All four groups underwent training in
credit management between the pre and the post tests. Results from research shows that while
the DSS is effective, improvement needs to be done in the methodology to assess such
improvements. Moreover such assessment frameworks while being adequate from a DSS
centric viewpoint do not respond to the assessment of DSS in an organizational setting. In the
concluding section they have discussed how this evaluative framework can be strengthened to
initiate an activity that will allow the long term and possibly the only meaningful evaluation
framework for such a system.
S. MEHDIAN (2009)

The research paper on the topic “TOWARDS AN APPRAISAL OF THE FMHA FARM
CREDIT PROGRAM: A CASE STUDY OF THE EFFICIENCY OF BORROWER
RICHARD” have studied that the production frontier methodology is used to measure the
overall efficiency of a sample of farmers home administration (FMHA) compared to non
participants. The study did not find evidence that the efficiency FMHA farms improved
between a time period Results indicated that overall efficiency of FMHA borrowers is
associated with selected financial characteristics of the farms. A review of the literature
shows that agricultural finance specialists have not been successful in evaluating whether
FMHA pro- grams improve the efficiency and income of probability of success. Eligible
borrowers. Inadequate evaluation of the FMHA program occurs partly because of because the
difficulty of adequately deter-mining the impacts of changes in the econ- borrowers in a more
normal period of the loan. This study addressed these difficulties by utilizing a nonparametric
production frontier technique to measure overall efficiency and a matched pair statistical
procedure to measure how efficiency of farms receiving FMHA credit changed relative to a
Non-FMHA farmers.

SAMPAT.P.SINGH (1991)
The book named “FINANCIAL ANALYSIS FOR BANK LENDING IN LIBERALISED
ECONOMY” have discussed the subject financial analysis for bank lending has assumed

38
considerable importance, particularly since early 1990's when, like most of the countries,
India opted for the policy of liberalisation and globalisation after 1991.

The present volume is meant to be a standard reference as well as text book on the varied
facets of financial analysis with reference to credit management by Banks and Financial
Institutions. The book consists of three parts. Part I discusses the concepts and tools of
Financial Analysis; Part II explains various concepts of working capital in its historical
context; while Part III demonstrates the application of these tools in the changing context of
liberalised economy by focusing on new concepts like 'Credit Worthiness', Risk-Analysis,
Credit Rating, Products-Differentiation, Pricing-Differentiation, Asset-Liability Management,
etc. The book contains- Bank Lending and Industrial Finance in India ,Basic Economics for
Bankers and Business Managers ,Introduction to Fundamentals Accounting Principles ,Profit
and Loss Account (Operating Statement) ,Analysis of Profit and Loss Account (Operating
Statement) ,Structure and Analysis of Balance Sheet ,Ratios as Tools of Financial Statements
Analysis ,Accounting Flows : Income, Cash and Funds ,Break-even Analysis and Margin of
Safety ,Appraisal of Capital Projects ,New Conceptual Framework for Analysis, Liberalised
Era and New Focus of Bank Lending ,Managing Working Capital by Strategic Choice ,
Financing Working Capital : Conceptual and Historical Exposition, Creditworthiness and
Credit Rating : At Centre stage Nucleus of Credit Appraisal , Working Capital Management-I
: MPBF System of Appraisal and Bifurcation of Fund-Based Limit in Two Components
Working Capital Management-II : Alternative Methods of Appraisal ,Working Capital
Management-III : Follow-up and Supervision , Appraisal of a New Project Involving Term
Loan , Management of Problem Accounts , Management of Non-Performing Assets (NPAs),
Rehabilitation of Sick Industrial Units, Working Capital Management : Concepts and
Techniques , 1st Committee on Financial Sector Reform and the 2nd Committee on Banking
System Reform (Known as Narasimham Committee Report, 1998).

DR NICOLA CETORELLI (1994)

The research paper on the topic “COMPETITIVE ANALYSIS IN BANKING: APPRAISAL
OF THE METHODOLOGIES” has discussed about the U.S. banking industry has
experienced significant structural changes as the result of an intense process of consolidation.
From 1975 to 1997, the number of commercial banks decreased by about 35 percent, from
14,318 to 9,215. Since the early 1980s, there has been an average of more than 400 mergers
per year (see Avery et al., 1997, and Simmons and Stavins, 1998). The relaxation of intrastate
branching restrictions, effective to differing degrees in all states by 1992, and the passage in
1994 of the Riegle. Neal Interstate Banking and Branching Efficiency Act, which allows
bank holding companies to acquire banks in any state and, since June 1, 1997, to open
interstate branches, is certainly accelerating the process of consolidation. These significant
changes raise important policy concerns. On the one hand, one could argue that banks are
merging to fully exploit potential economies of scale and/or scope. The possible
improvements in efficiency may translate into welfare gains for the economy, to the extent
that customers pay lower prices for banks. Services or are able to obtain higher quality
services or services that could not have been offered before.1 On the other hand, from the
point of view of public policy it is equally important to focus on the effect of this
restructuring process on the competitive conditions of the banking industry. Do banks gain
market power from merging? If so, they will be able to charge higher than competitive prices
for their products, thus inflicting welfare costs that could more than offset any presumed
benefit associated with mergers. In this article, analysis of competition in the banking

39
industry is done highlighting a very fundamental issue: How market power is measured and
how do regulators rely on accurate and effective procedures to evaluate the competitive
effects of a merger.
DR.MABEL (2016)
The research paper on the topic “A STUDY ON CREDIT APPRAISAL SYSTEM IN
CANARA BANK WITH SPECIAL REFRENCE TO SME BRANCH” has prepared a report
on Credit appraisal means investigation/assessment done by the bank before providing any
loans and advances/project finance and also checks the commercial, financial &industrial
viability of the project proposed its funding pattern and further checks the primary & to study
the collateral security cover available for recovery of such funds. Credit appraisal system
with respect to banking industry which means how the managers in banks appraise the
corporate firms lending process and how the whole process carried forward like a system
keeping certain aspects like risk, legal into concern. The main objective of the study is to
understand the credit appraisal of canara bank. And to check the commercial, financial &
technical viability of the project proposed & its funding pattern. Review of literature mainly
focused on the pattern and methods of credit appraisal system. The study was conducted in
canara bank SME branch. The research design is analytical in nature. The method of the
study is case study method. Tools used in this study are methods followed by this bank
during the period of study. Findings are based on the case and suggestions are given and so
on. According to this study we have found out that the appraisal system is differ from case to
case based on the form of business.
MRS. MANGALGOURI S PATIL (2019)

The research report “A STUDY OF CREDIT APPRAISAL PROCESS AT BANK OF

MAHARASHTRA” This study examines the credit appraisal process and repayment of Bank
loans at Bank of Maharashtra. Specifically the study investigates the appropriateness of the
credit appraisal process of Bank, the relationship between loan officers and customers and the
effect of loan officer, Customer relationship on the credit appraisal process. The study also
identifies strategies to help improve the credit appraisal process of the bank. Finance is
required at every stage of business either for meeting day to operations or for starting up a
new project. One of the important sources of raising finance is loans from banks. Commercial
lending is one of the prime functions of every bank. But how does the bank appraise the
creditworthiness of a borrower? What protection can the borrower provide the bank in the
event of him/her unable to meet the agreed obligation? What are the criterions to be fulfilled
for granting loans? What are the tools used by the banks to appraise the loan proposal? These
questions are being answered in this paper. This paper describes the credit appraisal process
of personal loan followed in Bank of Maharashtra.
HISAR (2019)
A research report “MEASUREMENT OF CREDIT APPRAISAL SYSTEM IN BANKING
SECTOR – A STUDY OF SBI BANK” in the journal of advances and scholarly researches
in allied education explains Credit appraisal is done to check the commercial, financial &
technical viability of the project proposed its funding pattern & further checks the primary or
collateral security cover available for the recovery of such funds SBI loan policy contains
various norms for sanction of different types of loans such as Ganesh Road lines Transport
Company case These all norms does not apply to each & every case. SBI norms for providing
loans are flexible & it may differ from case to case. The CRA models adopted by the bank
take into account all possible factors which go into appraising the risk associated with a loan.

40
These have been categorized broadly into financial, business, industrial, and management
risks & are rated separately. The assessment of financial risk involves appraisal of the
financial strength of the borrower based on performance & financial indicators. After case
study we found that in some cases, loan is sanctioned due to strong financial parameters.
From the case study analysis it was also found that in some cases, financial performance of
the firm was poor, even though loan was sanctioned due to some other strong parameters
such as the unit has got confirm order, the unit was an existing profit making unit & letter of
authority was received for direct payment to the bank from ONGC which is public sector.
Credit is the core activity of the banks & important source of their earnings which go to pay
interest to depositors, salaries to employees & dividend to shareholders. Credit & risk go
hand in hand. Bank’s main function is to lend funds/ provide finance but it appears that
norms are taken as guidelines not as a decision making. A banker’s task is to identify/assess
the risk factors/parameters & manage/mitigate them on continuous basis.
NITHIN KUMAR (2019)
The research on topic “A STUDY ON CREDIT APPRAISAL PROCESS AND ANALYSIS
AT KAVERI GRAMEENA BANK” The study was undertaken for a sample period of five
years from 2013-14 to 2017-18, to find the requirements to perform the Credit Appraisal
Process. From the study it was found that the bank’s norms and criteria’s help to verify the
credit worthiness of the borrower, repayment capacity and good track record of the
borrowers. Before lending, the bank incorporates a lengthy norms and procedures to check
the viability of the project/venture. Firstly, the personal assessment of the borrower is carried
by the bank to safeguard that the borrower is capable of running the business or carrying the
project efficiently. Secondly, the detailed study about the financial capability of the
project/venture is done, such as study of cash flow statement and computing some of the
important ratios which are essential for term loan assessment. It includes examination like
DSCR, DER and BEP. The financial assessment is done to ensure that the project/venture
will capable of earning sufficient surplus to reimburse the loan along with interest. Risk
analysis is also carried out by the bank to decide the risk involved with the project/venture.
This is carried with the help of sensitivity analysis and credit scoring or credit rating. Credit
scoring is done by Kaveri Grameena Bank on various parameters such as personal, business
and collateral, in that way the credit worthiness of the borrower can be determined. So, this is
why Credit Appraisal has gained significance in today’s business world.
GEORGE, OSEI-NYAKO (2016)
The study examines the suitability of the evaluation process of credit in GN Bank and the
bondage between the credit officers and the borrower and the effect of loan officer-borrower
relationship on the evaluation process of credit. He identifies the tactics to advance the
evaluation process of credit in the bank. The learning finds out the loans department offers
excellent reception to all customers irrespective of the loan officers relationship with the
borrower. Majority of the borrowers who defaults the loan repayment has no relationship
with the loan officer.
AMOAH, ANTHONY GYABENG (2016)
The study assessed “THE LENDING PRACTICES OF UPPER AMENFI RURAL BANK
LIMITED”. It identified the following factors as the determinants of credit default among
clients of Upper Amenfi Rural Bank in order to magnitude customer business failure,
diversion of loans, loans for social purpose, inadequate monitoring, inadequate security,
inadequate documentation, inadequate appraisal, inadequate credit staff and staff attitude.

41
He explains that the articles mainly concentrate on the issues of the transactions which gets
processed from loan inception and ends getting lending activities done but comes to the stage
of liquidating the collateral which will be the asset based loan. Due to recent decrease in the
growth, the line of credit is weakened. The banks get the right to lien on these kinds of
transactions to amortise the loan. The result identifies easiest part of the collateral package to
collect the accounts receivable in this situation.

MWAJUMA ZIMBA (2013)

The study emphases on “EFFICIENCY OF CREDIT EVALUATION METHODOLOGY
ALSO TO DISTINGUISH THE DIMENSIONS OF LOANS ENDORSEMENTS AND
REIMBURSEMENT BY THE BUSINESS RELIES UPON THE SOCIAL FINANCIAL
POSITION OF THE POPULACE IN TANZANIA”. It looks at the impacts of bank advance
on the decrease of unemployment status and to build up the connection among bank credits
issuance and financial position of the borrowers. The findings demonstrated that there was an
issue in strategy, criteria and condition in advance arrangement and the credit officer not
agree to the standard, also reasonable for clients.
NANCY ARORA, Dr. ARTI GAUR AND Ms. BABITA (2013)
They say that to mitigate the credit risk, legitimate assessment of the clients is to be done. In
this paper we contemplate the credit risk evaluation model of SBI bank and to check the
practicality of the business, monetary and technical parts of the clients of the undertaking
proposed and its financing pattern. It is additionally important to lessen the different risk
parameters, hence observation of movement of loan procedure is required.
SATYA VARATHAN (2012)
The author explains about the important activities exercised by the credit bureau of the bank
to decide if to acknowledge or dismiss the application for loan. The article bargains in
banking, such as working capital and its administration, strategies for evaluation, gathering of
credit reports. The techniques to be utilized by the banks so as to compute as far as possible
are Turnover strategy, MBPF framework and money spending framework.
Dr. ROSY KALRA (2012)
She explains that finance is required at every stage of the business either for starting up the
businesses or in order to monitor it in meeting the day to day expenses of business. The
primary function of any financial institution is to lend the loan for commercial purpose. She
also explains that how the lender is supposed to verify the credit worthiness of the customer?
What are the criterions to be granted the loan proposal? What are the tools to be used in the
banks to mitigate the credit risk?
HRISHIKES BHATTACHARYA (2011)
The author explains about the vital structure which must include around the benefit goals in
order to develop the quality credit resources portfolios and to guarantee sufficient capital
growth. The investigation of loaning techniques, credit evaluation, risk examination and
loaning choices inside the general destinations of loaning associations. The effect of capital
guidelines on the risk attitude and gainfulness of the banks, procedures to protect banks from
a liquidity emergency, and the need of a portfolio approach in developing models for credit
introduction and advance administration inside a risk return framework.

42
MILCAH CHEPKORIR (2011)
The author determines the credit examination procedures utilized by commercial banks in
Kenya to assess the financial soundness of SMEs and build up whether there exists
connection between the material credit evaluation strategies and the dimension of non-
performing loans. He likewise settled difficulties facing banks in utilizing the relevant credit
evaluation procedure.
HOCHGRAF AND LISA (2003)
The author says that credit union’s effort can get a boost by electronic real estate lending
tools. It speaks of investing hours of time to interrogate issues relating to lending procedure
in the things such as application data for a single loan, calculating debt, collecting credit,
valuation information, other ratios and printing of valuable documents. By using the Ellie
Mae’s loan origination system series to mortgage banking has helped get things done in
minimal time for equity loans as well as the first mortgages.
SIMPSON, ROBERT, REBECCA AND WALZAK (1996)
Says that to protect the integrity of data upon which underwriting decisions are made by the
mortgage industry in order to reduce the mortgage fraud and to decrease its losses. The study
results speaks of three hindrances for the purpose of better adoption of aggressive quality
control protocols which are lack of commitments by the management, certain frauds
tolerances made by the honest professionals in the market and also unwillingness to maintain
as appropriate reviewer.
SURYAWANSI (1978)
In his paper “CREDIT REQUIREMENTS AVAILABILITY AND ITS HOLES” spotted that
enormous farmers got a bigger portion of credit financed by various financial organisations
and the portion of co agents was the greatest. It was likewise watched that remote cash loan
specialists were, still assuming an imperative part in providing rural credit and the extent of
borrowing from this basis was difficult if there should rise an occurrence of little
agriculturists.
REDDY (1985)
The review titled, “OVER DUES APPRAISAL AND MANAGEMENT IN BANKING”
dissected the connection amongst the loaning and recuperation of a apex bank. His verdicts
proposed that the loaning and recuperation of the apex bank had not been balanced, i.e.,
either the apex bank proved unable encounter the whole credit requirements of the essential
banks or the last proved unable attain the assets from the apex bank.
MCNAUGHTON (1992)
Researcher highlighted that, risk taking is part of banking activities and the success of banks
depends on how reasonably they control and manage this risk within their financial reserves
and credit competence. McNaughton further explained that Banks must re-structure their
administrative tendencies to become responsible to the financial needs of the economy in
order to survive the various lending risks and become successful. Loan applicants get
frustrated by these bureaucratic tendencies and are unable to secure credit facilities at the
right time, which may hinder the success of projects leading to the high rate of loan default.

43
ROUSE (1989)
Research explained that lender does not give the monies they lent away but they lend them.
The assessment of the borrower by the lender is for him to look into the future and ask, will
the borrower repay the loan by the agreed date? There is the likelihood that customers will
not be able to repay the loans they take, so the lender needs to demonstrate good skill and
judgment in assessing the borrower, Rouse (1989). The success of banks (in the view of this
researcher), centres on the banks‟ ability to identify the financial services of the public,
produce those services and sell them at a competitive price.

CHAWLA (1988)

Analyzed “DEVELOPMENT AND GROWTH OF BANKING ACTIVITIES AFTER

NATIONALIZATION ESPECIALLY IN THE PUNJAB STATE” during the period 1969-
83. The study found that nationalization of major commercial banks in 1969 made a highly
positive impact on deposit mobilization, credit deployment and branch expansion in the state.
Although inter-district disparities continue to exist, yet a trend was noticed for reduction in
these disparities. The performance of banks in relation to schemes and programmes initiated
for upliftment of weaker sections after nationalization both in quantitative as well as
qualitative terms was found to be unsatisfactory. The researcher observed that within priority
sector the relatively well-off have got the maximum benefits, whereas the poor have
remained credit starved.

VASHISHT (1987)
Evaluated the performance of public sector banks on the basis of branch expansion, deposits,
credit, priority sector advances, differential rate of interest (DRI) advances and net profit over
the period pertaining to 1971-83. For the study purpose, the researcher ranked the banks as
excellent, good, fair and poor by using composite weighted growth index. The study ranked
Indian Overseas Bank on the top and Dena Bank on the bottom among the banks taken under
study. The researcher suggested the development of marketing strategies for deposit
mobilization, profit planning and SWOT analysis in order to improve the performance of
public sector banks.
SINGH (1992)
Project carried out a comprehensive study to analyze the trends in the productivity of the
Indian banking industry since nationalization of 14 major banks in 1969 till the year 1985.
The State Bank of India and its subsidiaries along with the banks nationalized in 1969 were
considered for analysis. He performed cross-sectional and inter-temporal analysis on the basis
of 17 indicators. The indicators were: deposit per employee; credit per employee; business
per employee: establishment expenses per employee; spread per employee; deposit per
branch; credit per branch; business per branch; total earnings per branch; total expenditure
per branch; total earnings as percentage of total credit; establishment expenditure as
percentage of total expenditure; establishment expenditure as percentage of total earnings;
volume of business per Rs. 100 of establishment expenses; and volume of business per Rs.
100 of total expenditure. The results provided that all the banks under study showed
improvement in their productivity except that UCO Bank, which showed decline in
productivity from all angles. He suggested that banks should monitor the productivity and its
growth on the basis of key indicators identified by him. All banks should create productivity
cells. These cells should develop and implement productivity improvement programmes. He
further suggested that the information relating to productivity should become a part of the

44
annual reports of banks and deregulation and negative relationship between efficiency and
non-performing assets of the banks. Based on these assumptions the study highlighted that
the banks should be free to decide the level of deposits and interest rates. Loan appraisal and
monitoring of banks should be strengthened along with upgrading of banking technology.
The banks should adopt suitable measures to reduce wastages and to reduce the operating
cost.

ARCHANA MATHUR (1988)

in her article “CUSTOMER SERVICE IN PUBLIC SECTOR BANKS: A COMPARATIVE
STUDY” studied the problems faced by customers with regard to delayed service, lack of
proper guidance and customer discrimination made by bank staff. She suggested that the
banks could solve all such problems if they go in for automation, and the discrepancies made
by bank staff could be reduced to a great extent.
BISWA N BHATTACHARYA (1991)
Made a study to find out the reason for the poor quality of customer service in banks. The
result showed that more than fifty per cent of the customers who made complaints cited
inefficient service as the main cause. The delay in encashment of cheque was the next reason
for customer complaints. The study pointed out that there was considerable delay in the
service rendered which resulted in total dissatisfaction among customers.

45
 CHAPTER 3: RESEARCH METHODOLOGY
3.1 OBJECTIVE
 To understand the current credit appraisal system used in the bank.
 To study documentation required for credit appraisal.
 To study different techniques used by bank for credit appraisal
 To analyse the flow of credit in public and private banks
 To understand the process of creditworthiness that banks assess of individual while
sanctioning loan.

46
3.2 SCOPE OF THE STUDY
 SBI and HDFC Bank have been selected by the researcher for the research.
 The project shows the analysis of credit appraisal process in public and private banks.
 The project includes the steps of credit appraisal to be followed by bank.
 It also includes the techniques, paper work and stages of credit appraisal.
 The analysis of two banks their history and loan products.
 It includes some common guidelines suggested by RBI for the process of credit
appraisal.

Limitation of the study

 The data collected from various sources cannot be considered as correct information.
 The figures shown in the project are just expected figures.
 The result of project appraisal cannot consider as 100% correct.
 All financial tools which are applied in this appraisal have their own limitations.
 Credit appraisal system includes various types of detail studies for different areas of
analysis, but due to time constraint our analysis was of limited areas only.
 As some of the information is not revealed, whatever suggestions generated are based
on certain assumption.

47
3.3 METHOD OF DATA COLLECTION
For my research the data has been collected by both Primary and Secondary method.

Primary method
Primary data has been collected through questionnaire in Google form by Non probability
convenience sampling method.

Secondary method
Secondary data has been collected from various articles, journals and internet.

48
POPULATION SIZE
Sample size is the size of sample drawn from the population which is true representative of
the research. Population is ever changing, it is finite.

49
 CHAPTER 4: DATA ANALYSIS AND INTERPRETATION
QUESTION 1
WHAT IS YOUR DESIGNATION?

DESIGNATION FREQUENCY PERCENTAGE

MANAGERS 40 40%
OTHERS 34 34%
STUDENTS 26 26%
TOTAL 100 100%

DESIGNATION
MANAGER OTHERS STUDENTS

26%
40%

34%

CHART 4.1
 The above table no 4.1 shows the survey of designation classification such as
manager, student and others.

 According to survey done by me, survey form was filled by 100 respondents from
various designation of the employee’s working in different banks.

 From the data it shows that 40 respondents are managers from 100 respondents

 From the above data it shows that 26 respondents are student from 100 respondents

 From the above table data shows that 34 respondents belongs to others category
which can include different person from different field.

50
QUESTION 2
WHICH INCOME GROUP GENERALLY PREFER CREDIT?

INCOME FREQUENCY PERCENTAGE

1 LAKH TO 3 LAKH 52 52%
3 LAKH TO 10 LAKH 29 29%
MORE THAN 10 LAKH 19 19%
TOTAL 100 100%

INCOME
1 LAKH TO 3 LAKH 3 LAKH TO 10 LAKH MORE THAN 10 LAKH

19%

52%
29%

CHART 4.2

 The chart 4.2, represent the data of the table of the income group of the respondents.

 The income group of 1 lakh to 3 lakh earning income early prefer loan 52% as per
survey conducted of 100 respondents.

 The income group earning income between 3 lakh to 10 lakh prefer loan 29% as per
survey conducted.

 The income group earning income more than 10 lakh prefer loan 19% as per survey
conducted.

 The survey concludes that loan is mostly demanded from the income group earning
between 1lakh to 3lakh i.e. maximum percentage prefer by the respondent .

51
QUESTION 3
FOR WHICH KIND OF CREDIT MAXIMUM ENQUIRY IS DONE BY PEOPLE?

LOAN PRODUCTS FREQUENCY PERCENTAGE

HOME 48 48%
PERSONAL LOAN 21 21%
TERM LOAN 6 6%
GOLD LOAN 4 4%
OTHERS 21 21%
TOTAL 100 100%

LOAN PRODUCTS
HOME LOAN PERSONAL LOAN TERM LOAN GOLD LOAN OTHERS

21%

4% 48%
6%

21%

CHART 4.3

 The chart 4.3, represent the data of the table of inquiry made by the person for which
kind of loan is demanded by various class of person in the society.

 The pie chart shows the maximum respondents demand for 48% of product having
home loan inquiry.

 The pie chart shows the 21% of the respondents demand for personal loan inquiry.

 The chart shows 6% of the respondents demand for term loan

 The chart observes that minimum demand for gold loan i.e. 4%.

 The chart shows others loan which can include vehicle loan, educational loan or any
specific loan, etc. The demand for such kind of loan is 21%.

52
 After analysing with the above respondent it concludes that maximum respondent opt
for home loan as the best loan product.

53
QUESTION 4
WHAT MUST BE THE CREDIT SCORE FOR HAVING CREDITWORTHINESS?

CREDIT POINTS FREQUENCY PERCENTAGE

900 9 9%
800 TO 900 28 28%
700 TO 800 53 53%
LESS THAN 700 10 10%

CREDIT POINTS
900 800 TO 900 700 TO 800 LESS THAN 700

10% 9%

28%

53%

CHART 4.4

 The chart 4.4 shows the survey of credit points eligible for loan.

 According to survey conducted 100 respondent have given their point of view on
credit points.

 The credit score of the person should be 900 according to 9% of the respondent will
be eligible for loan as per survey.

 The credit score of the person between 800 to 900 according to 28% of the respondent
will be eligible for loan as per survey.

 The credit score of the person between 700 to 800 according to 53% of the respondent
will be eligible for loan as per survey.

 The credit score of the person less than 700 according to 10% of the respondent will
be eligible for loan as per survey.

 The conclusion of the survey states that maximum loan will be granted to the person
whose credit score is between 700 to 800.

54
QUESTION 5
HOW MUCH DAYS ARE REQUIRED FOR THE PERIOD OF CREDIT APPRAISAL ?

DAYS FREQUENCY PERCENTAGE

20 DAYS 35 35%
10 DAYS 33 33%
MORE THAN 20 32 32%
TOTAL 100 100%

NO.OF DAYS
20 DAYS 10 DAYS MORE THAN 20 DAYS

32% 35%

33%

CHART 4.5

 the chart 4.5 shows the survey required for the period of credit appraisal

 According to survey 35% respondents concludes that the loan will be sanction within
20 days.

 According to survey 33% respondents concludes that the loan will be sanction within
10 days.

 According to survey 35% respondents concludes that the loan will be take more than
20 days for sanctioning of loan.

 According to survey it is seen that sanctioning of loan is tough job it depends upon the
several factors of person so it may differ from person to person.

55
QUESTON 6
WHAT IS THE FIRST STEP FOR LOAN?

STEPS FREQUENCY PERCENTAGE

ENQUIRY 58 58%
DOCUMENTATION 15 15%
FORM FILLING 14 14%
OTHERS 13 13%
TOTAL 100 100%

STEPS
ENQUIRY DOCUMNETATION FORM FILLING OTHERS

13%

14%

58%
15%

CHARTN 4.6
 Figure 4.6 explains the steps for the loan process; the research was carried among 100
respondents that which is the first step for the credit appraisal.

 58% of the respondents conclude that enquiry is the first step for the loan process.

 15% of the respondents conclude that documentation is the first step for the loan
process.

 14% of the respondents conclude that form filling is the first step for the loan process.

 13% of the respondents conclude that others is the first step for the loan process.

 After the survey it is analysed that maximum credit appraisal starts from the enquiry
process.

56
QUESTION 7
FROM WHICH AREA MAXIMUM APPLICATION OF CREDIT IS APPLIED?

AREA FREQUENCY PERCENTAGE

URBAN 52 52%
RURAL 29 29%
SEMI URBAN 19 19%
TOTAL 100 100%

AREA
URBAN RURAL SEMI URBAN

19%

52%

29%

CHART 4.7
 Figure 4.7 shows the statistics of the 100 respondents that from which area maximum
application of credit is applied.

 It shows that maximum credit is applied from the urban area i.e. 52% of the
respondent thinks that mostly credit application is raised by urban area.

 The data shows that 29% of credit is applied from rural area

 The data shows that 19% of credit is applied from semi urban area.

 After doing research from the 100 respondents it is concluded that maximum loan is
applied by urban areas.

57
QUESTION 8
ON WHICH BASIS CREDITWORTHINESS OF THE PERSON IS JUDGED?

BASIS FREQUENCY PERCENTAGE

CREDIT SCORE 49 49%
NET WORTH 16 16%
COLLATERAL SECURITY 12 12%
GUARANTEE 23 23%
TOTAL 100 100%

BASIS
CREDITSCORE NET WORTH COLLATERAL SECURITY GUARANTEE

23%

49%
12%

16%

CHART 4.8
 Figure 4.8 shows the data collected from 100 respondents about on which basis the
loan approval is made.

 49% of the respondent’s conclusion is that loan process is sanctioned after judging the
credit score of the person.

 16% of the respondents conclude that net worth will be important factor for
sanctioning of loan

 12% of the respondents conclude that collateral security will be the factor for
providing loan to the person

 23% of the respondent concludes that guarantee will be the factor for sanctioning of
credit.

 The conclusion from the above research states that credit approval is based on the
basis of credit score.

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QUESTION 9
DO YOU THINK CREDIT STRUCTURE IN INDIA IS UNSOUND THAN OTHER
DEVELOPED COUNTRY?

OPNION FREQUENCY PERCENTAGE

MAYBE 39 39%
AGREE 38 38%
DISAGREE 23 23%
TOTAL 100 100%

OPINION
MAYBE AGREE DISAGREE

23%

39%

38%

CHART 4.9
 Figure 4.9 shows the data of 100 respondent shows the opinion of credit structure in
India is unsound than other developed country

 From the 100 respondents 39% of the respondents conclude that the statement is
maybe.

 The 38% of the total respondent concludes that the above statement is true so that
they agree with the above statement

 At last 23% of the total respondents states that the above statement is false so they
disagree with the above statement.

59
QUESTION 10
IS RBI STRICT AFTER THE SCAM MADE BY VIJAY MALIA, NIRAV MODI, ETC?

REASON FREQUENCY PERCENTAGE

AGREE 60 60%
DISAGREE 40 40%
TOTAL 100 100%

REASON
AGREE DISAGREE

40%

60%

CHART 4.10

 Figure 4.10 explains the research conducted of 100 respondents about RBI strictness
after the scam made by Vijay Malia, Nirav Modi, etc.

 Among 100 respondents 60 percent of the respondent agrees with the statement that
RBI is becoming strict in their rules after various scams made by various big
personalities.

 40% of the respondent thinks that RBI has not made any strict rules regarding loan
procedure and not making any strict rules.

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QUESTION 11
WHICH CLASS OF PERSON PREFER LOAN?

CLASS FREQUENCY PERCENTAGE

SALARY EARNERS 52 52%
BUSINESSMEN 35 35%
PROFESSIONALS 13 13%
TOTAL 100 100%

CLASS
SALARY EARNER BUSINESSMEN PROFESSIONALS

13%

52%
35%

CHART 4.11

 Figure 4.11 shows the analysis of the research which class of person prefer loan.

 Salary earners prefer for loan as per research conducted by the 100 respondents, the
reports shows 52% of the person prefer for credit.

 As per research reports states that 35% of the respondents thinks that businessmen
generally prefer for loan.

 The last 13% of the respondent thinks that the loan is preferred by professionals.

 After the detailed analysis it is concluded that mostly loan is prefer by business class
person.

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QUESTION 12
DOES ANY CHANGE IN CREDIT STRUCTURE SEEN AFTER COMPLUSION OF
KYC?

OPNION FREQUENCY PERCENTAGE

YES 38 38%
NO 21 21%
MAYBE 41 41%
TOTAL 100 100%

OPINION
YES NO MAYBE

41% 38%

21%

CHART 4.12
 A chart 4.12 show is there any changes in the credit structure after compulsion of
KYC.

 38% of the respondents assume that credit structure has been changed after the
compulsion of KYC.

 21% of the respondent assumes that credit structure has not been changed after the
compulsion of KYC.

 41% of the respondent assumes that there is no change in the structure of RBI after
the compulsion of KYC.

 After research the data concludes that may be there is no change in the structure after
the compulsion of KYC.

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QUESTION 13
DOES A BANK ASSESS ONLY FINANCIAL ASPECTS OF THE PERSON ONLY?

OPNION FREQUENCY PERCENTAGE

YES 31 31%
NO 30 30%
MAYBE 39 39%
TOTAL 100 100%

OPINION
YES NO MAYBE

30%
40%

30%

CHART 4.13
 Figure 4.13 explains the research conducted on opinion of respondents that banks
only give credit on the basis of financial aspect.

 31% of the respondents assumes that the statement is true means the credit is allowed
on the basis of only financial aspect

 30% of the respondent assumes that the statement is false means the credit is not
allowed only on financial aspect but also other factors are judged such as credit score
etc.

 39% of the respondent assumes that statement is maybe.

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 CHAPTER 5: CONCLUSION AND SUGEESTIONS

5.1 CONCLUSION
Banks loan policy contains various norms for sanction of different type of loan. There all
norms do not apply to each and every case. Banks norms for providing loans are flexible and
it may differ from case to case.
Usually, it is seen that credit appraisal is basically done on the basis of fundamental
soundness. But, after different types of case studies, my conclusion is such that banks credit
appraisal system is not only looking for financial wealth. Other strong parameters also plays
important role in analyzing creditworthiness of firm, individual.
After analysing two banks i.e. SBI and HDFC both the banks credit appraisal process is
almost same there is no vast difference in the process all the banks follow the guidelines
provided by RBI time to time. Now

I have realized during my project that a credit analyst must own multi-disciplinary talents like
financial, technical as well as legal.

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5. 2 SUGGESTIONS
1. I would like to suggest that credit appraisal process in Public bank is slow process
compared to Private Banks
2. Banks mostly prefer for Documentation due to which the Appraisal process becomes
lengthy. So after analysing project the banks should make credit appraisal process fast to
make the procedure easy.

3. While doing analysis of the SBI bank it shows that there is huge percentage of NPA since
2008, so credit appraisal process should focus mostly on creditworthiness of the people rather
than other procedures.
4. HDFC bank is one of the prominent bank in India, as per credit terms mostly people prefer
for loan from private banks since the credit appraisal is fast than public banks so after doing
research I would suggest that public banks should try to make credit appraisal easy and less
time consuming.
5. Banks should make one common steps for credit appraisal, most of time people are
confused with different procedures in different banks. So I would suggest that RBI should
make one procedure for credit appraisal which should be followed by every bank.

6. Some relief of paper work and documentation should be given to some small businessmen
and some middle class earners so that they can apply for loans.
7. There are various fraud made by several big celebrity so I would like to suggest that every
banks should make some changes in their credit appraisal techniques so that interest of
people towards bank will be maintain.

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5.3 BIBILOGRAPHY
https://corporatefinanceinstitute.com/resources/knowledge/credit/credit-analysis-process/

https://www.paisabazaar.com/hdfc-bank/

https://www.paisabazaar.com/sbi-bank/

https://indianmoney.com/articles/what-is-credit-appraisal

https://www.managementpedia.com/threads/credit-appraisal-process.193286/

http://ignited.in/I/a/89513/

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5.4 ANNEXURE

1. What is your designation?

a. Manager
b. Student
c. Others

2. Which income group generally prefer credit?

a. 1 lakh to 3 lakh
b. 3 lakh to 10 lakh
c. More than 10 lakh

3. For which kind of credit maximum enquiry is done by people?

a. Home loan
b. Personal loan’
c. Term loan
d. Gold loan
e. Others

4. What must be the credit score for having creditworthiness?

a. 900
b. 800 to 900
c. 700 to 800
d. Less than 700

5. How much days are required for appraisal of credit?

a. 10 days
b. 20 days
c. More than 20 days

6. Which is the first step for loan?

a. Documentation
b. Form filling
c. Enquiry
d. Others

7. From which area maximum application of credit is applied?

a. Rural
b. Urban
c. Semi urban

8. On which basis creditworthiness of the person is judged?

a. Collateral security
b. Guarantee
c. Credit score
d. Net worth

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9. Do you think credit structure in India is unsound than other developed country?
a. Agree
b. Disagree
c. Maybe

10. Has RBI become strict after the scam made by Vijay Malia, Nirav Modi?
a. Agree
b. Disagree

11. Which class of person prefer for loan?

a. Salary earners
b. Businessmen
c. Professionals
12. Does any change in credit structure seen after compulsion of KYC?
a. Yes
b. No
c. May be

13. Does bank assess only financial aspects of the person only?
a. Yes
b. No
c. May be

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