CREDIT APPRAISAL PROCESS IN BANKS

Q: Discuss CREDIT APPRAISAL PROCESS IN BANKS (STEP-WISE) ?

A: Steps are:
Receipt of application from applicant on bank’s prescribed form

Receipt of supporting documents such as 3 years’ balance sheet, projected balance sheet, KYC documents, MOA, AOA in case of companies or Partnership Deed in case of a partnership firm & photocopies of title deeds of properties to be mortgaged etc.

Spot verification visit by bank officers or its authorised vendors

To check RBI defaulters list, wilful defaulters list, CIBIL data, ECGC caution list, etc. to check past record of the borrower

Obtaining non-encumbrance certificate from bank’s approved advocate

Valuation report of the properties from empanelled valuer/engineers

Preparation of financial data based on CMA and carry out risk rating as per bank prevailing model

Proposal preparation: this contains detailed information about borrower, its rating analysis of financial data, computation of PBF, terms and conditions of sanction and past conduct of account. This is prepared by one officer lower than sanctioning authority and such officer is called recommending authority. If there are more than one such officer then all of them have to sign.

Sanction/approval of limits/loan by competent sanctioning authority. In banks, various officers as per their rank are vested with loaning powers.

Documentation: This involves execution of appropriate agreements by borrower/guarantor.

Disbursement of term loan is done in phased manner as per progress of project. In case of WCL, limit is fixed in an operative account such as cash credit or overdraft and operations are allowed as per available drawing power. The drawing power is computed based on value of security available at a given point of time.