Appraisal of Education Loan and Consumer Loan

Material Background information on applicant Rajan Soni and Loan

Application form

Literature on Retail Banking -Set III

Activity Evaluation of Education and Consumer Loan Request

Questions

• Using the six “C” criteria and the credit scoring model, you are asked, first of all, to
decide if the loan should or should not be made as it is presented.
• Specifically work out the availability of funds to establish timely payment of EMI.
• If the loan is not acceptable in its present form, decide under what circumstances you
would be willing to grant this loan, including what adjustments Rajan could undertake to
make this credit request acceptable to Sun Bank.

Background Information on Applicant Rajan Soni

The credit application, as per Exhibit I, was submitted by Rajan Soni to the Sun Bank,New Delhi
Office. The application indicates that Rajan has recently been admitted to the three year part
time Executive MBA Program of FORE School of Management. Considering the distance from
his present place of residence, he has shifted to a new one room apartment in the neighbourhood
of the institute and requires new furniture, consumer durables etc for furnishing the apartment.
For payment of fee and furnishing the apartment, he has applied for an education loan of Rs.
360,000 (Rupees Three Lakhs Sixty Thousand) and a 12 month consumer loan for Rs.90,000
(Ninety Thousand). His aunt, Ms Ruby Malhotra is working as a designer with a leading fashion
house and also a customer of the bank, has agreed to stand as guarantor should the loan be
approved. Ms Ruby has been in the current employment for the past 3 years and earns Rs.300000
(Rupees Three lakh)per annum. Her credit rating is only average with some slow or delayed
payments. Currently, Rajan is working as an Assistant Accountant with a consulting firm at a
salary of Rs 30,000 per month, which is barely enough to meet his living expenses. Rajan’s
employer indicates that he is with them for the last 3 years, initially on part-time basis and on
present position for last two years. They are aware that Rajan has got admission in MBA part-
time program. Incidentally, Rajan is expecting a salary revision soon.
Exhibit I

Composite Loan Application Form

Nature and Purpose of the Loan Request

Date August 3, 2009

Amount Requested Rs 450,000/=

Nature of Loan Amount (Rs) Purpose Repayment Terms

Education Loan 360,000 Course fee payable in 36 months after
three equal annual completion of the course
instalments
Consumer Loan 90,000 Purchase of furniture 12 months
and consumer durables

Collateral that might be pledged to secure the Consumer loan: Furniture, Consumer durables etc.
Personal Guarantee of Ms Ruby Malhotra for education loan

Name and Address of Customer

Full name of customer: Rajan Soni
Current residence address: C 201, Ber Sarai, New Delhi
Telephone: None. Mobile: 9899324211

Customer’s Personal History

Date of Birth: 18 March, 1983

Pan Number: Not Available
Driver’s license no: 22218
Previous residence address: F 321 Janakpuri, New Delhi
Number of dependents: None

Employment Status

Name of employer: Fine Consulting Inc.

Name of immediate supervisor: Raman Varghese
Employer’s business address: Commercial Complex, Tower B, Raja Garden, New Delhi
Current salary: Rs 24,000 per month
Previous employer’s name: None
Other sources of income: None

Banking Relationships

Customer of this bank today: Yes/No

Accounts held with the Bank: Savings Bank A/c No. 042-331218-006
Average monthly account balance (approx.) Rs 7,500

Relatives Who May Be Contacted

Nearest living relative: Ms. Ruby Malhotra
Relationship : Aunt Telephone: 32402286
Address: C 432 Malviya Nagar, New Delhi

Personal Finances and Credit Record

Assets
Cash on Hand Rs 7,500/-
Automobiles:
1. Motor Bike (2004 model)
2. Securities or Investments
Rs 45,000/- Mutual Funds
3. Insurance Policy Rs 450,000/-
(Cash value of Rs 30,000/-)
Liabilities
1. Mortgage or Lease Held:
Lease Apt. at Rs 6,000 per month
2. Other Debts: From employer, Fine
Consulting Inc. Rs 60,000/- (Outstanding
as on date Rs 18,000/- )

The credit investigation on Rajan reveals nothing adverse.