“Credit Management”

Learning Objective

Take Risks but Calculated!!!

Presented By:

Asif Naqvi
 A Brief Intro

Education:
Jan 2001-Jan 2003 : MBA (Finance) QAU Islamabad
1998-2000: BSc Maths & Physics, GC Lahore

Industry Experience:
Regulator (SECP), Development Financial Institution, Commercial Banking
(SME Focused), Corporate Banking, Corporate Finance (IB) and Brokerage
House

Functional Experience:
Relationship Management, International Trade, Corporate Finance and Portfolio
Management

Volunteer Experience:
Event Management with UNDP & Ministry of Science & Technology

Future Plans:
Hopefully I will be leaving for France in Sept 09 to pursue my PhD in Finance.
 Course Objectives

• To give the students the capacity to understand the theory and apply, in real
world situations, the techniques that have been developed in Credit
Management:

Motto for the Class:

If it cannot be applied, who cares????
• To give students the big picture of Credit Management so that students may
understand how things fit together.

Motto for the Class:

You can forget the details, but don’t miss the story
line!!!

• To prove that Credit Management is FUN.

Motto for the Class:

Are We having Fun Yet????
Magnitude of Credit Portfolio of Banks
Where there is Credit Portfolio, there are
BAD LOANS!!!
BAD DEBTS (Non Performing Loans)
What is Credit Management??????
Goals & Objectives of Credit Management

• Assess and assure Credit Risk and manage it in such

a way that risks (losses) are minimized and return is
optimized.

• To achieve target cash flows followed by risk based

return by managing a credit portfolio.

• Install a system and control measures for periodic

reviews.
Credit Management

Credit Management is a process of managing Credits

using following steps:

• Formulation of Credit Policy

• Credit Initiation

• Credit Evaluation & Risk Assessment and

• Credit Monitoring & Control

Credit Policy

• Credit Policy Provides a broader frame work of reference and

uniform standards.
• It should be flexible to meet various situations
• It should aim to provide guidance for what to do, not how to do.
• Should contain segmentation of the Credit Portfolio.
• Should consider Legal & regulatory environ.
• Should clearly specify certain parameters like maximum
amount of loan, deposits and capital etc.
• Should clearly state the delegated authorities for processing and
approval of loan.
• Guidelines for pricing
• Quality of Credit
• Should put a good administrative set up for Credit
administration.
Credit initiation

• Target Market planning is the most important aspect

of the Credit Initiation.
• Target Market refers to business discipline &
selectivity.
• The Target Market (TM) process follows the
formulation of the overall business strategy for the
Bank
• Identifying business potential, defining desirable
opportunities and adhering to resultant marketing
objectives.
• TM identifies the acceptable and desirable profile of
customers and the products to be offered.
• Defines Risks Acceptance Criteria (RACs)
Credit Evaluation & Risk Assessment

• The 3 C’s of the Credit:

• Character
• Capacity
• Collateral

Risk Assessment:
• Business Risk
• Management Risk
• Product Line
• Critical Success Factors
• Risk Based Pricing.
Credit Monitoring & Control

• Periodic Reviews

• Interim Reviews

• Quarterly Accounts

• Identification of Early Warning Signs

• Classification of Bad Debts &

• Rehabilitation of Bad Debts (Remedial Management).

 Marks Distribution

Weightage

Sessional Exams: 40

Quizzes: 7.5

Project: 20

Class Participation: 7.5

Final: 75
The House is Open to Any Number of Questions

Thanks