CHHATRAPATI SHAHUJI MAHARAJ

UNIVERSITY

A
PROJECT REPORT
ON
Analysis on
“CREDIT APPRAISAL”

UNDERTAKEN AT

SUBMITTED BY

SAURABH KUMAR
MBA (FINANCE AND CONTROL)
SEMESTER – 4TH
ROLL No: 6131048

SUBMITTED TO
PROF. ARPANA KATIYAR
INSTITUTE OF BUSINESS MANAGEMENT

1
 C S J M UNIVERSITY, KANPUR
DECLARATION

I, Mr. SAURABH KUMAR Student of M.B.A (FINANCE AND CONTROL) –

Semester-4TH , INSTITUTE OF BUSINESS MANAGEMENT STUDIES
CSJMU KANPUR. Hereby declare that the Report on project work entitled
CREDIT APPRAISAL IN CENTRAL BANK OF INDIA has been result of my
own work and has been carried out under guidance of PROF. ARPANA
KATIYAR.

I declare that this submitted work is done solely by me and to the best of my
knowledge; no such work has been submitted by any other person for the award
of post graduation degree or diploma.

I also declare that all the information collected from various secondary sources
has been duly acknowledged in this project report.

PLACE: KANPUR SAURABH KUMAR

DATE:

2
 ACKNOWLEDGEMENT

My debts are many and I acknowledge them with much pride and delight. This
project was undertaken as a part of MBA (FINANCE AND CONTROL)
Programme at Institute of Business Management Studies, CSJM UNIVERSITY
KANPUR . I would like to thank my institute and Central Bank of India which
has provided me with the infrastructure and opportunity for doing this project
work.

I am extremely great full to PROF. ARPANA KATIYAR, Faculty member in

Institute of Business Management Studies, CSJMU KANPUR, for his
invaluable help and guidance throughout my work. He kindly evinced keen
interest in my work and furnished some useful comments, which could enrich
the work substantially.

In fact it is very difficult to acknowledge all the names and nature of help and
encouragement provided by them. I would never forget the help and support
extended directly or indirectly to me by all.

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4
 TABLE OF CONTENTS

PARTICULARS PAGE NO.

COMPANY PROFILE 6

INTRODUCTION TO BANKING SECTOR 7

3 GLOBAL AND LOCAL SCENARIO OF 9

BANKING SECTOR

4 INDUSTRY ANALYSIS 13

RESEARCH METHODOLOGY 21
6 INTRODUCTION TO CENTRAL BANK OF 26
INDIA

INTRODUCTION TO SME 28

8 OVERVIEW OF CREDIT APPRAISAL 31

CREDIT APPRAISAL MODEL 50

10 OTHER DEPARTMENT OF BANKS 60

11

Survey Questionnaire on Credit Appraisal 62

Process

12 CONCLUSION 63

13 BIBLIOGRAPHY 64

6
 Profile

Native Name Central Bank Of India

Type Public

Traded as BSE: 532885

NSE: CENTRALBK
Industry Banking, Financial
Services
Founded 21 December 1911,
106 years ago
Headquarter Mumbai. Maharashtra,
India
Key people Shri. Rajeev Rishi,
Chairman & MD
Revenue Rs. 25887.89 Crore
(US$4.0 billion) (2016)
Operating Income Rs. 2643 Crore
(US$400 million)
(2016)
Net Income Rs. -1418.19 Crore (US$-
220 million) (2016)
Total Assets Rs. 305466.09 Crore
(US$47 billion) (2016)
 Number of employee 37685 (2016)

Capital Ratio 10.41% (2016)

Website www.centralbankofindia.co.in

INTRODUCTION TO BANKING SECTOR

A SNAPSHOT OF THE BANKING INDUSTRY

The Reserve Bank of India (RBI), as the central bank of the country, closely
monitors developments in the whole financial sector.

 DEFINITION/MEANING OF A BANK

As per Indian Banking Act, “ A service to accept deposits from people with
the intention to invest or lend with the condition of returning it immediately
whenever demanded at any predetermined time. An institute this service is
Bank”
While analyzing definition of bank as per Indian Banking Act, below mentioned
matters are clarified:

8
(1) Bank accepts monetary deposits from people.
(2) The intention behind accepting these deposits is to invest or lend the
respective fund.
(3) The function of accepting deposit or lending money is made under the
condition that on demand or as predetermined otherwise the same amount has
to be refunded immediately.
(4) The institution doing this type of business is called bank.

The banking sector is dominated by Scheduled Commercial Banks (SBCs). As

at end March 2002, there were 296 Commercial banks operating in India. This
included 27 Public Sector Banks (PSBs), 31 Private, 42 Foreign and 196
Regional Rural Banks. Also, there were 67 scheduled co-operative banks
consisting of 51 scheduled urban cooperative banks and 16 scheduled state
cooperative banks.
Retail Banking is the new mantra in the banking sector. The home Loans alone
account for nearly two-third of the total retail portfolio of the bank. According
to one estimate, the retail segment is expected to grow at 30-40% in the coming
years.
Net banking, phone banking, mobile banking, ATMs and bill payments are the
new buzz words that banks are using to lure customers.

REFORMS IN THE BANKING SECTOR

The first phase of financial reforms resulted in the nationalization of 14 major
banks in 1969 and resulted in a shift from Class banking to Mass banking. This
in turn resulted in a significant growth in the geographical coverage of banks.
Every bank has to earmark a minimum percentage of their Loan portfolio to
sectors identified as “priority sectors”. The manufacturing sector also grew
during the 1970s in protected environs and the banking sector was a critical
source. The next wave of reforms saw the nationalization of 6 more commercial
banks in 1980. Since then the number scheduled commercial banks increased
four-fold and the number of banks branches increased eight-fold.

After the second phase of financial sector reforms and liberalization of the sector
in the early nineties, the Public Sector Banks (PSB) s found it extremely difficult
to complete with the new private sector banks and the foreign banks. The new
private sector banks first made their appearance after the guidelines permitting
them were issued in January 1993. Eight new private sector banks are presently
in operation. These banks due to their late start have access to state-of the- art
technology, which in turn helps them to save on manpower costs and provide
better services.

CLASSIFICATION OF BANKS:
The Indian banking industry, which is governed by the Banking Regulation Act
of India 1949 can be broadly classified into two major categories, non-scheduled
banks and scheduled banks. Scheduled banks comprise commercial banks and
the co-operative banks. In Terms of ownership, commercial banks can be further
grouped into nationalized banks, the State Bank of India and its group banks,
regional rural banks and private sector banks (the old / new domestic and
foreign). These banks have over 67,000 branches spread across the country. The
Indian banking industry is a mix of the public sector, private sector and foreign
banks. The private sector banks are again spilt into old banks and new banks.

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 Banking System in India

Reserve bank of India (Controlling Authority)

Development Financial institutions Bank

IFCI IDBI ICICI NABARD NHB IRBI EXIM Bank SIDBI

Commercial Regional Rural Land Development Cooperative Banks

Banks Banks Banks

Public Sector Banks Private Sector Banks

SBI Groups Nationalized Indian Banks Foreign Bank

Bank

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GLOBAL AND LOCAL SCENARIO OF BANKING SECTOR

INDIAN BANKING SYSTEM: THE CURRENT STATE & ROAD

AHEAD

INTRODUCTION:
Recent time has witnessed the world economy develop serious difficulties in
terms of lapse of banking & financial institutions and plunging demand.
Prospects became very uncertain causing recession in major economies.
However, amidst all this chaos India’s banking sector has been amongst the few
to maintain resilience.

GENERAL BANKING SCENARIO:

The predicament of the banks in the developed countries owing to excessive
leverage and lax regulatory system has time and again been compared with
somewhat unscathed Indian Banking Sector. An attempt has been made to
understand the general sentiment with regards to the performance, the
challenges and the opportunities ahead for the Indian Banking Sector.

On being asked what is the major strength of the Indian banking industry, which
makes it resilient in the current economic climate; 93.75% respondents feel the
regulatory system to be the major strength, 75% economic growth, 68.75%
relative insulation from external market, 56.25% credit quality, 25%
technological advancement and 43.75% our risk assessment systems.
Change is the only constant feature in this dynamic world and banking is not an
exception. The changes staring in the face of bankers relates to the fundamental
way of banking-which is going through rapid transformation in the world of
today. Adjust, adapt and change should be the key mantra. The major challenge
faced by banks today is the ever rising customer expectation as well as risk
management and maintaining growth rate. Following are the results of the
biggest challenge faced by the banking industry as declared by our respondents
(on a mode scale of 1 to 7 with 1 being the biggest challenge):

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13
ORGANIC MEANS

Direct sales 14%

New ventures 7%
Upgrade offices 24%
Branch Expansion 33%
New Representative office 22%

INORGANIC MEANS

Subsidiaries 12%
Joint Venture 27%
Buyout Portfolios 9%
M & A 21%
Startegic Alliance 31%

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We see from the above graph that amongst organic means of expansion, branch
expansion finds favor with banks while strategic alliances is the most popular
inorganic method for banks considering scaling up their operations. On the
other hand, new ventures and buyout portfolios are the least popular methods
for bank expansion.

BANKING ACTIVITIES:

Their survey finds that within retail operations, banks rate product development
and differentiation; innovation and customization; cost reduction; cross selling
and technological up gradation as equally important to the growth of their retail
operations. Additionally a few respondents also find proactive financial
inclusion, credit discipline and income growth of individuals and customer
orientation to be significant factors for their retail growth.

There is, at the same time, an urgent need for Indian banks to move beyond retail
banking, and further grow and expand their fee- based operations, which has
globally remained one of the key drivers of growth and profitability. In fact, over
80% of banks in their survey have only up to 15% of their total incomes
constituted by fee- based income; and barely 13% have 20-30% of their total
income constituted by fee-based income.

Out of avenues for non-interest income, we see that Banc assurance (85.71%)
and FOREX Management (71.43%) remain most profitable for banks.
Derivatives, understandably, remains the least profitable business opportunity
for banks as the market for derivatives is still in its nascent stage in India

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 Series 1

Forex Management (71.43%)

Derivative Trading (14.29%)

Bancassurance (85.71%)
Series 1

Wealth management (64.29%)

Selling of mutual fund (64.29%)

0.00 % 20.00% 40.00% 60.00% 80.00% 100.00%

FINANCIAL INCLUSION AND EXPANSION OF BANKING

SERVICES:

Additionally, 81.25% of respondents found branchless banking to be an

effective and secure way of reaching out to rural markets, with mobile,
biometric and handheld devices, equally popular amongst banks. Some
respondents also found the Business Correspondents model to be an untapped
model for financial inclusion.

As Indian financial markets mature over time, there is also a need for innovative
instruments to deepen the market further. Suggestions ranged from micro saving
and micro insurance initiatives, Cash deposit machines, warehouse receipts, to
prepaid cash cards, derivatives, interest rate futures and credit default swaps as a
means to further the financial inclusion and expansionary process.

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 APPROACH TOWARDS RURAL LENDING
Opening of
branches in major
agriculturew (60%)
90%
80%
70%
Innovative and 60% customized 50% Rural internet kioks
40% (40.00%)
products (80%) 30%
20%
10% APPROACH TOWARDS RURAL
0%
LENDING

Supply Chain Tie ups with

Management MFIs/SHGs/NGOs
(33.33%) (86.67%)

Tie ups with Post

offices and
Panchayats
(26.67%)

CREDIT FLOW AND INDUSTRY:

None of the banks in their survey considered the cap on bank deposit rates to be
one of the causes of inflexible lending rates. Due to long-term maturity, the trend
seems to be changing. However, there are other factors which have led to the
stickiness of lending rates such as wariness of corporate credit risk (33.33%),
competition from government small savings schemes (26.67%). Benchmarking
of SME and export loans against PLR (20.00%) on the other hand, do not seem
to have as significant an influence over lending rates according to banks

The great Indian industrial engine has nevertheless continued to hum its way
through most of the year long crisis. We asked banks about the sectors that they
consider to be most profitable in the coming years. All respondents were
confident in the infrastructure sector leading the profitability for the industry,
followed by retail loans (73.33%) and others

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18
INDUSTRY ANALYSIS
Competitive Forces Model:

(Porter’s Five ForceModel):

(2)
Potential Entrantsis
high as
development financial
institutions as well as
private
and Foreign Banks
have entered

(5) (1) (4)

Organizing power of Rivalry among
the Bargaining power
existing firms has of
supplier is high. With
the increased with buyers is high as
liberalization.
new financial corporate can raise
instruments New products and funds
they are asking higher improved
return
easily due to high
customer services is
on the investments the focus. Competition.

(3)
The threat of substitute
product is very high like
credit
unions and investment
houses.
There are other substitutes as
well banks like mutual
funds,
stocks, government
securities,
debentures,
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SWOT ANALYSIS:
The performance of banking industry is done through SWOT Analysis. It
mainly helps to know the strengths and Weakness of the industry and to
improve will be known through converting the opportunities into strengths. It
also helps for the competitive environment among the banks.

a) STRENGTHS

1. Greater securities of Funds

Compared to other investment options banks since its inception has been a better
avenue in terms of securities. Due to satisfactory implementation of RBI’s
prudential norms banks have won public confidence over several years.

2. Banking network
After nationalization, banks have expanded their branches in the country, which
has helped banks build large networks in the rural and urban areas. Private Banks
allowed to operate but they mainly concentrate in metropolis.

3. Large Customer Base

This is mainly attributed to the large network of the banking sector. Depositors
in rural areas prefer banks because of the failure of the NBFCs.

4. Low Cost of Capital

Corporate prefers borrowing money from banks because of low cost of capital.
Middle income people who want money for personal financing can look to
banks as they offer at very low rates of interests. Consumer credit forms the
major source of financing by banks.

b) WEAKNESS

1. Basel Committee
The banks need to comply with the norms of Basel committee but before that it
is challenge for banks to implement the Basel committee standard, which are of
international standard.

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2. Powerful Unions
Nationalization of banks had a positive outcome in helping the Indian Economy
as a whole. But this had also proved detrimental in the form of strong unions,
which have a major influence in decision-making. They are against automation.

3. Priority Sector Lending

To uplift the society, priority sector lending was brought in during
nationalization. This is good for the economy but banks have failed to manage
the asset quality and their intensions were more towards fulfilling government
norms. As a result lending was done for non-productive purposes.

4. High Non-Performing Assets

Non-Performing Assets (NPAs) have become a matter of concern in the banking
industry. This is because reduced to meet the international standards of change
in the total outstanding advances, which has to be reduced to meet the
international standards.

c) OPPORTUNITIES

1. Differential Interest Rates

As RBI control over bank reduces, they will have greater flexibility to fix their
own interest rates which depends on the profitability of the banks.

2. High Household Savings

Household savings has been increasing drastically. Investment in financial assets
has also increased. Banks should use this opportunity for raising funds.

3. Untapped Foreign Markets

Many Indian banks have not sufficiently penetrated in foreign markets to
generate satisfactory business therefore, it can be concluded clear opportunity
exists in such markets.

4. Interest Banking
The advance in information technology has made banking easier. Business can
effectively carried out through internet banking.

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d) THREATS

1. NBFCs, Capital Markets and Mutual funds

There is a huge investment of household savings. The investments in NBFCs
deposits, Capital Market Instruments and Mutual Funds are increasing.
Normally these instruments offer better return to investors.

2. Changes in the Government Policy

The change in the government policy has proved to be a threat to the banking
sector. Due to some major changes in policies related to deposits mobilization
credit deployment, interest rates- the whole scenario of banking industry may
change.

3. Inflation
The interest rates go down with a fall in inflation. Thus, the investors will shift
his investments to the other profitable sectors.

4. Recession
Due to the recession in the business cycle the economy functions poorly and
this has proved to be a threat to the banking sector. The market oriented
economy and globalization has resulted into competition for market share. The
spread in the banking sector is very narrow. To meet the competition the banks
has to grow at a faster rates and reduce the overheads. They can introduce the
new products and develop the existing services.

INTRODUCTION TO CENTRAL BANK OF INDIA

.
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 Build a better life around us.
Establish in 1911, Central Bank of India was the first Indian commercial bank
which was wholly owned and managed by Indians. The establishment of the
Bank was the ultimate realization of the dream of Sir Sorabji Pochkhanawala,
founder of the Bank. Sir Pherozesha Mehta was the first Chairman of a truly
'Swadeshi Bank'. In fact, such was the extent of pride felt by Sir Sorabji
Pochkhanawala that he proclaimed Central Bank of India as the 'property of the
nation and the country's asset'. He also added that 'Central Bank of India lives
on people's faith and regards itself as the people's own bank'.

During the past 99 years of history the Bank has weathered many storms and
faced many challenges. The Bank could successfully transform every threat into
business opportunity and excelled over its peers in the Banking industry.

A number of innovative and unique banking activities have been launched by

Central Bank of India and after the nationalization of the Bank in the year 1969,
Central Bank continued to introduce a number of innovative banking services as
under:
1976 The Merchant Banking Cell was established.
1980 Centralcard, the credit card of the Bank was introduced.
1986 'Platinum Jubilee Money Back Deposit Scheme' was launched.
1989 The housing subsidiary Cent Bank Home Finance Ltd. was started with its
Headquarters at Bhopal in Madhya Pradesh.
1994 Quick Cheque Collection Service (QCC) & Express Service was set up to
enable speedy collection of outstation cheques.

Among the Public Sector Banks, Central Bank of India can be truly described as
an All India Bank, due to distribution of its large network in 27 out of 29 States
as also in 3 out of 7 Union Territories in India. Central Bank of India holds a very
prominent place among the Public Sector Banks on account of its network of
4715 branches and 178 extension counters at various centres throughout the
length and breadth of the country.
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DESCRIPTION OF SME IN THE MANUFACTURING SECTOR:

For the Manufacturing Sector, the MSMED Act 2006 defines micro, small and
medium enterprises (MSMEs) as mentioned below:
• A micro enterprise is an enterprise where investment in plant and
machinery does not exceed Rs 25 lakh.
• The investment in plant and machinery in a small enterprise is more than
Rs 25 lakh, but does not exceed Rs 5 crore.
• A medium enterprise is one where the investment in plant and machinery
is more than Rs 5 crore, but does not exceed Rs 10 crore.
In all these, the cost excludes that of land, building and the items specified by
the Ministry of Small Scale Industries with its notification No SO 1722 (E)
dated October 5, 2006.

SME DEFINITION FOR SERVICE ENTERPRISES:

A service sector enterprise is defined as one involved in providing services. The
following points will explain how.

• Small road and water transport operators that can now own a fleet of
vehicles not exceeding ten in number.
• Small business, whose original cost price of equipment used for business,
does not exceed Rs 20 lakh.
• Professional and self-employed persons, whose borrowing limits do not
exceed Rs 10 lakh of which not more than Rs 2 lakh should be for working
capital requirements
• Professionally qualified medical practitioners setting up a practice in semi
urban and rural areas, whose borrowing limits should not be less than Rs 15
lakh with a sub ceiling of Rs 3 lakh for working capital requirements.
OVERVIEW OF CREDIT APPRAISAL

Credit appraisal means an investigation/assessment done by the banks 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.
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BRIEF OVERVIEW OF CREDIT:

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 this 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.
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.

However the 3 ‘C’ of credit are crucial & relevant to all borrowers/ lending,
which must be kept in mind, at all times.
• Character
• Capacity
• Collateral

If any one of these is missing in the equation then the lending officer must
question the viability of credit. 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 (or material(s) of equal value) 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.

BASIC TYPES OF CREDIT:

25
There are four basic types of credit. By understanding how each works, you will
be able to get the most for your money and avoid paying unnecessary charges.

Service credit is monthly payments for utilities such as telephone, gas,

electricity, and water. You often have to pay a deposit, and you may pay a late
charge if your payment is not on time.

Loans let you borrow cash. Loans can be for small or large amounts and for a
few days or several years. Money can be repaid in one lump sum or in several
regular payments until the amount you borrowed and the finance charges are
paid in full. Loans can be secured or unsecured.

Installment credit may be described as buying on time, financing through the

store or the easy payment plan. The borrower takes the goods home in exchange
for a promise to pay later. Cars, major appliances, and furniture are often
purchased this way. You usually sign a contract, make a down payment, and
agree to pay the balance with a specified number of equal payments called
installments. The finance charges are included in the payments. The item you
purchase may be used as security for the Loan.

Credit cards are issued by individual retail stores, banks, or businesses. Using a
credit card can be the equivalent of an interest-free Loan- end of each month.-if
you pay for the use.

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BRIEF OVERVIEW OF LOANS:
Loans can be of two types fund base & non-fund base: 
Fund Base includes:
• Working Capital
• Term Loan

 Non-fund Base includes:

• Letter of Credit Bank Guarantee  Fund
Base:
• Working capital
The objective of running any industry is earning profits. An industry will require
funds to acquire “fixed assets” like land, building, plant, machinery, equipment’s,
vehicles, tools etc., & also to run the business i.e. its day-to-day operations.
Capital or funds required for an industry can therefore be bifurcated as fixed
capital & working capital. Working capital in this context is the excess of current
assets over current liabilities. The excess of current assets over current liabilities
is treated as net, for storing finishing goods till they are sold out & for working
capital or liquid surplus & represents that portion of the working capital, which
has been provided from the long-Term source. Assessment of Working Capital
in Central bank of India

Particulars Amount

****
25% of estimated sales
Less : 5% of estimated sales(A) *****
OR ****
Net working capital(B) *****
Which is higher ( A or B)
 MPBF *****
(Maximum Permissible Bank Finance)

24

Term Loan

A Term Loan is granted for a fixed Term of 3 years to 7 years intended normally
for financing fixed assets acquired with a repayment schedule normally not
exceeding 8 years. A Term Loan is a Loan granted for the purpose of capital
assets, such as purchase of land, construction of, buildings, purchase of
machinery, modernization, renovation or rationalization of plant, & repayable
from out of the future earning of the enterprise, in installments, as per a
prearranged schedule.

From the above definition, the following differences between a Term Loan &
the working capital credit afforded by the Bank are apparent:
• The purpose of the Term Loan is for acquisition of capital assets.
• The Term Loan is an advance not repayable on demand but only in
installments ranging over a period of years.
The repayment of a Term Loan depends on the future income of the borrowing
unit. Hence, the primary task of the bank before granting Term Loans is to assure
itself that the anticipated income from the unit would provide the necessary
amount for the repayment of the Loan. This will involve a detailed scrutiny of
the scheme, its capital assets. Financial aspects, economic aspects, technical
aspects, a projection of future trends of outputs & sales & estimates of cost,
returns, flow of funds & profits.

Eligibility of term loan

Particulars Amount

28
 Cost of machineries *****
Cost of accessories/equipment *****
Total cost of machines *****
Less : 25% of margin *****
Eligible amount of term loan *****

 Non-fund Base:
Letter of credit

25

• A Letter of Credit (LC) is an arrangement whereby a bank (the issuing

bank) acting at the request & on the instructions of the customer (the
applicant) or on its own behalf,
• Is to make a payment to or to the order of a third party (the beneficiary), or
is to accept & pay bills of exchange (drafts drawn by the beneficiary); or
• Authorizes another bank to effect such payment, or to accept & pay such
bills of exchanges (drafts);

• Bank Guarantees:
A contract of guarantee is defined as ‘a contract to perform the promise or
discharge the liability of the third person in case of the default’. The parties to
the contract of guarantees are:
a) Applicant: The principal debtor – person at whose request the guarantee is
executed
b) Beneficiary: Person to whom the guarantee is given & who can enforce it
in case of default.
c) Guarantee: The person who undertakes to discharge the obligations of the
applicant in case of his default.
Thus, guarantee is a collateral contract, consequential to a main co applicant &
the beneficiary.

30
CREDIT APPRAISAL PROCESS:

Receipt of application from applicant

Receipt of documents (Balance sheet, KYC papers, Different govt.

registration no., MOA, AOA, and properties

documents

Pre-sanction visit by bank officers

Check for RBI defaulters list, willful defaulters list,

CIBIL data, ECGC, Caution list etc

Title clearance reports of the properties to be obtained

from empaneled Advocates

Valuation reports of the properties to be obtained

31
from empaneled valuer/engineers

Preparation of financial data

32
33
 Proposal preparation

Assessment of proposal

Sanction/approval of proposal by appropriate

sanctioning authority

Documentations, agreements, mortgages

Disbursement of Loan

Post sanction activities

LOAN ADMINISTRATION PRE- SANCTION PROCESS:

34
Appraisal, Assessment and Sanction functions

1. Appraisal
A. Preliminary appraisal
 Sound credit appraisal involves analysis of the viability of operations of a
business and the capacity of the promoters to run it profitably and repay the
bank the dues as and when they fall

 Towards this end the preliminary appraisal will examine the following
aspects of a proposal.

• Bank’s lending policy and other relevant guidelines/RBI guidelines,

Industry related risk factors, Credit risk rating, etc.
• Compliance regarding transfer of borrower accounts from one bank to
another, if applicable;
 Financial status in broad Terms and whether it is acceptable The
Company’s Memorandum and Articles of Association.
 After undertaking the above preliminary examination of the proposal, the
branch will arrive at a decision whether to support the request or not. If the
branch (a reference to the branch includes a reference to SECC/CPC etc. as
the case may be) finds the proposal acceptable, The information, among
other things, should include:
• e.g., purchase, production, marketing and finance; in other words a brief on
the managerial resources and whether these are compatible with the size
and scope of the proposed activity.
• Demand and supply projections based on the overall market prospects
together with a copy of the market survey report. The report may comment
on the geographic spread of the market where the unit proposes to operate,
demand and supply gap, the competitors’ share, competitive advantage of
the applicant, proposed marketing arrangement, etc.
• Current practices for the particular product/service especially relating to
Terms of credit sales, probability of bad debts, etc.
• Estimates of sales cost of production and profitability.

35
 • Projected profit and loss account and balance sheet for the operating years
during the
• Currency of the Bank assistance.
 In respect of existing concerns, in addition to the above, particulars
regarding the history of the concern, its past performance, present financial
position, etc. should also be called for. This data/information should be
supplemented by the supporting statements Such as:

Audited profit loss account and balance sheet for the past three years (if
the latest audited balance sheet is more than 6 months old, a pro-forma
balance sheet as on a recent date should be obtained and analyzed). For
non-corporate borrowers, irrespective of market segment, enjoying credit
limits of Rs.10 lacs and above from the banking system, audited balance
sheet in the IBA approved formats should be submitted by the borrowers.

C. Present relationship with Bank:

• Compile for existing customers, profile of present exposures:
• Credit facilities now granted
• Follow-up Reports, renewal data, etc.
• Stock turnover, realization of book debts
• Value of account with break-up of income earned
• Pro-rata share of non-fund and foreign exchange business
• Compliance with other Terms and conditions
• Action taken on Comments/observations contained in RBI Inspection
Reports: CO Inspection & Audit Reports

D. Credit risk rating: Draw up rating for (i) Working Capital and (ii) Term
Finance.

E. Opinion Reports: Compile opinion reports on the company, partners/

promoters and the proposed guarantors.

F. Existing charges on assets of the unit: If a company, report on search of

charges with ROC.

36
G. Structure of facilities and Terms of Sanction:
Fix Terms and conditions for exposures proposed - facility wise and overall:

• Limit for each facility – sub-limits

• Security - Primary & Collateral, Guarantee
• Rate of interest
• Rate of commission/exchange/other fees

H. Review of the proposal:

Review of the proposal should be done covering (i) strengths and weaknesses of
the exposure proposed (ii) risk factors and steps proposed to mitigate them

I. Proposal for sanction:

Prepare a draft proposal in prescribed format with required backup details and
with recommendations for sanction.

J. Assistance to Assessment:
Interact with the assessor, provide additional inputs arising from the assessment,
incorporate these and required modifications in the draft proposal and generate
an integrated final proposal for sanction.

2. Assessment:
Indicative List of Activities Involved in Assessment Function is given below:
• Peruse the financial analysis (Balance Sheet/ Operating Statement/ Ratio
Analysis/
• Fund Flow Statement/ Working Capital assessment/Project cost & sources/
Break Even analysis/Debt Service/Security Cover, etc.) to see if this is
prima facie in order. If any deficiencies are seen, arrange with the appraiser
for the analysis on the correct lines.
• Bank’s lending policy and other guidelines issued by the Bank from time to
time
• RBI guidelines
• Market conditions
• Projected performance of the borrower vis-à-vis past estimates and
performance

37
 • Strengths and Weaknesses of the borrower entity.
• Pricing and other charges and concessions, if any, proposed for the facilities

3. Sanction:

Indicative list of activities involved in the sanction function is given below:

 Examine critically the following aspects of the proposed exposure in the

light of corresponding instructions in force:
• Bank’s lending policy and other relevant guidelines
• RBI guidelines
• Borrower’s status in the industry
• Industry prospects
• Projected level of operations
• Credit risk rating

Loan administration - Post sanction Credit process:

.
 Credit Syndication
A syndicated credit is an agreement between two or more lending institutions to
provide a borrower a credit facility using common loan documentation. It is a
convenient mode of raising long-term funds.
The borrower mandates a lead manager of his choice to arrange a loan for him.
The mandate spells out the terms of the loan & the mandated bank’s rights &
responsibilities.
The mandated banker – the lead manger – prepares an information memorandum
& Circulates among prospective lender banks soliciting their participation in the
loan. On the basis of the memorandum & on their own independent economic &
financial evolution the leading banks take a view on the proposal. The mandated
bank convenes the meeting to discuss the syndication strategy relating to
coordination, communication & control within the syndication process &
finalizes deal timing, management fees, cost of credit etc. The loan agreement is
signed by all the participating banks. The borrower is required to give prior notice
to the lead manger about loan drawal to enable him to tie up disbursements with
the other lending banks.

38
 CREDIT APPRAISAL MODEL

CREDIT TO SME SECTOR

Central bank of India provides credit to SME sector under following Schemes

 SME – Schematic (Fast Track)

It includes structured products basically to provide fast services to clients. It
includes various products like:

• Business Loan for Property

• Card Power Enterprise Power
• Business Power .

 Business Loan for Property:

The product is aimed at providing finance to business enterprises for acquition
of an immovable property. The facility is in the form of a Term Loan repayable
by EMIs. The maximum Loan amount under the product is Rs. 5 crores.

 Card Power:

This is a scheme for financing credit/debit card receivables of units installing

pour EDC machines. Both demand loan & term loan facilities are offered to the
borrowers, subject to a maximum of Rs. 2.5 crores. All trading/ retailing
activities (with a few exceptions like liquor, tobacco, seasonal business etc.),
where credit/ debit cards are used are eligible for the loans.

 Enterprise Power:

This product has been developed to meet the credit needs of the Micro and small

39
Enterprises covering both manufacturing and the service sectors. The facilities
Offered include CC Rupee export credit; pre & post shipment credit & non-fund
Based facilities like LC & BG. The maximum limit is restricted to Rs. 1.00
Crore

 Business Power:

Business Power is an unsecured Term Loan (Maximum loan amount under the
product is Rs. 35 lacs) to be repaid by way of EMI’s over a maximum period of
4 years.

 SME- Non Schematic (Standard)

For a business on the growth phase with a wide range of opportunities to

explore, timely availability of credit is an integral ingredient needed to scale
new heights. Central Bank understands this and endeavor to be not just a bank
but also financing partner, so that focus on business needs becomes possible
whereas Bank cater to meet financing needs.

Their services ranging from Funded to Non-Funded, from Short Term to Long
Term and from Credit to Trade Services ensures to get finance the way it is best
suited for business.

Services:
• Cash Credit
• Working Capital Demand Loan
• Export Finance
• Short Term Loan
• Term Loan
• Clean Bill Discounting
• LC Backed Bill Discounting
• Co-Acceptance of Bills
• Credit Facilities against Guarantee or Stand By Letter of Credit issued by
Foreign Banks
• Letter of Credit
40
 • Bank Guarantee
• Solvency Certificates

 Cash Credit:

Bank offer Cash Credit facilities to meet day-to-day working capital needs. Cash
Credit is provided against the primary security of stock, debtors, other current
assets, etc., and/or collateral security of movable fixed assets, immovable
property, personal or corporate guarantee, etc. Interest is charged not on the
sanctioned amount but on the utilized amount

 Working Capital Demand Loan:

Bank also provides working capital facilities in the form of Working Capital
Demand Loan instead of cash credit facility. The primary or collateral security
will be as mentioned in cash credit facility. Here also interest is levied on the
amount drawn rather than on the amount utilized.

 Export Finance:

Bank provides finance for export activities in the form of Pre-Shipment Credit
against firm order and or Letter of Credit and Post shipment credit. Credit is
available for procuring raw materials, manufacturing the goods, processing and
packaging the goods and shipping the goods. Finance is provided in Indian or
foreign currency depending upon the need of the borrower.

 Short Term Loan:

Bank provides Working Capital facilities to meet day-to-day working capital

needs and Term Loan for capacity. However there may be occasions where there
is need of ad hoc or short-Term finance for general corporate purposes, meeting
temporary mismatches in working capital or for meeting contingent expenses. In

41
such situations it provides Short Term Loans for tenure up to a year to ensure that
business runs smoothly.

 Term Loan:

When there is need of long-Term funds for capacity expansions or plant

modernization and so on. Keeping these requirements in mind Bank provides
Term Loans up to acceptable tenor with suitable moratorium, if required, and
repayment options structured on the basis of customer’s estimated cash flows.
These Loans are primarily secured by a first charge on the fixed assets acquired
through the Loan amount. Suitable collateral security is also taken whenever
required.

 Clean Bill Discounting:

Bank provides clean bill discounting facilities to fund receivables. Bank

discount bills or receivables and provide credit against that. This facility is
provided for a period of 3-6 months depending upon the tenor of the bill.

 LC Backed Bill Discounting:

Bank discount trade bills drawn under Letters of Credit issued by reputed banks
to fund receivables. This facility is provided for a period of 3-6 months
depending upon the tenor of the bill or Letter of Credit.

 Co-Acceptance of Bills:

Bank also provides co-acceptance of trade bills depending upon the need of the
borrower.

 Credit Facilities against Guarantee or Stand By Letter of Credit

issued by Foreign Banks:

Various foreign companies set up subsidiary in India. Bank provides funding to

such companies against guarantees or SBLCs of acceptable foreign banks.

42
  Letter of Credit:

Apart from fund based working capital facilities Bank provides a range of
NonFund Based facilities such as Letter of credit, Bank Guarantees, Solvency
certificates, etc. Letter of Credit is provided to meet trade purchases. These are
generally provided for 3-6 months depending upon Trade cycle. Apart from this
it provides Import Letter of Credit for importing machinery or capital goods.
Such LCs are for tenure ranging from 1-3 years depending upon the need of the
borrower.

 Bank Guarantee:

Bank provides Bank Guarantee on behalf of its client to various other entities
such as Government, quasi government bodies, corporate and so on. it provides
a range of guarantee such as Performance guarantee, financial guarantee, EPCG
etc. The tenure of Bank Guarantee range from 1 year to 10 years depending upon
the purpose of the guarantee.

 Solvency Certificates:

Bank also provides solvency certificate depending upon the need of the borrower.

Sanctioning powers for schematic Loans under MSME and Mid

Corporate:

In order to have better control over the portfolio, it is felt that the budget for
schematic advances should be allotted only to select branches, where the
potential and manpower support exist for such business.

Accordingly, the budget for FY 11 has been restricted to select branches, to be

decided by Advances Cells. The Branch Heads of branches located at centers
where Advances Cells have been set up will not have any sanctioning powers.
Branch Heads of stand-alone branches where budgets have been allocated will
have sanctioning powers as per delegation of powers given below. The Branch
Heads of other stand-alone branches where budgets have not been allocated will
43
not have any sanctioning powers. These branches would, however, continue to
source business and such proposals would be processed / sanctioned at the
respective Advances Cells. Review / renewal of existing Loans at such branches
would also be done at the Advances Cells.
Branches would continue to be responsible for all post sanction formalities,
maintaining quality of assets held in their books, periodic updating of drawing
power, and abstention of stock statements and periodical inspection of borrowed
units.

All requests for interest rate concessions are to be forwarded to the Advances
Cells.

The proposals sanctioned at Advances Cells / Zonal Offices during a particular

month are to be submitted for review by the next higher authority through a
monthly control return, latest by the 5th of the succeeding month, in the
prescribed format and not on a case-by-case basis. Similarly, the proposals
sanctioned by the Branch Heads /Advances Cells (headed by AVPs/Managers)
during a particular month are to be submitted for review by the appropriate
authority at Zonal Office or Advances Cells as the case may be through a
monthly control return, latest by the 5th of the succeeding month, in the
prescribed format and not on a case-by-case basis. The concessions in rates of
interest / variations authorized by the VP (Advances) and SVP (Advances)
during a particular month are to be submitted for review by the SVP(Advances)/
Zonal Head respectively through a monthly control return, in the prescribed
format by the 5th of the succeeding month.

If a combination of schematic Loan products is to be offered, the combined

exposure should be the criterion while sanctioning the limits

INTRODUCTION TO CREDIT RISK MANAGEMENT:

DEFINITION:

Of all different types of risks that a bank is subject to, credit risk can be defined
as the risk of failure on the part of the borrower to meet obligations towards the
bank in accordance with the Terms and conditions that have been agreed upon.

44
Inability and/or unwillingness of the borrower to repay debts may be the cause
of such default.

The bank aims at minimizing this risk that could arise from individual
borrowers or the entire portfolio. The former can be addressed by having well-
developed systems to appraise the borrowers; the latter, on the other hand, can
be minimized by avoiding concentration of credit exposure with a few
borrowers who have similar risk profiles. Credit risk management becomes
even more relevant in the light of the changes that have been brought about in
the economic environment, including increasing competition and thinning
spreads on both the sides of Balance sheet

DETERMINANTS OF CREDIT RISK:

Factors determining credit risk of a bank’s portfolio can be divided into external
and internal factors. The banks do not have control on external factors. These
include factors across a wide spectrum ranging from the state of the economy to
the correlation among different segments of industry. The risk arising out of
external factors can be mitigated via diversification of the credit portfolio across
industries especially in light of any expectations of adverse developments in the
existing portfolio.

Given that the banks have very little control over such external factors, the bank
can minimize the credit risk that it faces mainly by managing the internal
factors.

These include the internal policies and processes of the bank like Loan policies,
appraisal processes, monitoring systems etc. These internal factors can be taken
care of, partly, via effective rating and monitoring systems, entry level criteria
etc. These processes would enable improvement in the quality of credit
decisions.

45
This would effectively improve the quality (and hence profitability) of the
portfolio. While monitoring systems are useful tool at post-sanction stage, rating
systems act as important aid at the pre-sanction stage.

INTRODUCTION TO CREDIT TOOLS:

The Bank has developed tools for better credit risk management. These focus on
the areas of rating of corporate (pre-sanctioning of Loans) and monitoring of
Loans (post-sanctioning). The focus of this manual is to familiarize the user with
the credit rating tool.

 Credit Rating: Definition

Credit rating is the process of assigning a letter rating to borrowers indicating

the creditworthiness of the borrower. Rating is assigned based on the ability of
the borrower (company) to repay the debt and his willingness to do so. The
higher the rating of a company, the lower the probability of its default. The
companies assigned with the same credit rating have similar probability of
default.

 Use in decision-making

Credit rating helps the bank in making several key decisions regarding credit
including:

• Whether to lend to a particular borrower or not; what price to charge

What are the products to be offered to the borrower and for what tenor?
• At what level should sanctioning be done?
• What should be the frequency of renewal and monitoring?

It should, however, be noted that credit rating is one of the inputs used in taking
credit decisions. There are various other factors that need to be considered in
taking the decision (e.g., adequacy of borrower’s cash flow, collateral provided,
and relationship with the borrower). The rating allows the bank to ascertain a
probability of the borrower’s default based on past data.

46
  Main features of the rating tool:

i) Comprehensive coverage of parameters.

ii) Extensive data requirement. iii) Mix of subjective and
objective parameters.
iv) Includes trend analysis.
v) 13 parameters are benchmarked against other players in the segment. The tool
contains the latest available audited data/ratios of other players in the segment.
The data is updated at intervals. vi) Captures industry outlook. vii) Eight
grade ratings broadly mapped with external credit rating agency’s ratings
prevalent in India.

 Special features of the web based credit rating tool

i) Centralized data base.

ii) Easy accessibility and faster computation of scores.
iii) Selective access to users based on the area of operation. Branches have
access to the data pertaining to their branch only, Zonal offices have access to
the data pertaining to all the branches under their control and the Credit
Department and Risk Department at Central Office have access to all accounts.
iv) Adequate security system and provision of audit trails for confidentiality.
v) Maintaining of past rating records in the system for collection of empirical
data on rating migrations. This will enable the bank to arrive at PDs (Probability
of Default) factor.

RATING TOOL FOR SMALL AND MEDIUM ENTERPRISES (SME):

47
The SME rating tool has been developed for the purpose of assigning a credit
rating to the SME borrower of the Bank. The aim of the tool is to provide a
standardized system for the bank to evaluate the credit risk of different
borrowers. It should, however, be noted that this tool is not the standalone
exercise for the purpose of sanctioning of Loan to a SME borrower. It should be
supplemented with other inputs important in the sanctioning process.

The following broad areas have been considered for determining the rating of
borrowers in the SME category:

• Financial performance
• Business performance
• Industry outlook
• Quality of management
• Conduct of account (after roll out of the Monitoring tool)

Within each of these broad areas, various parameters have been used for
obtaining an overall rating of the borrower. In the following sections, we shall
discuss in greater detail the structure of the tool and the methodology of using it.

 Parameters used in the SME tool

• Financial performance

The tool in its current form uses various parameters for rating a borrower on its
financial strength. These various sub-parameters give us an idea of the different
sources of risk being faced by a company in different areas.

• Operating performance of business

Operational efficiency of a borrower is important in determining the generation

of cash for repayment of its debt obligations. The parameters in this category
assess the borrower’s competence in its primary activities.

• Quality of management

48
Quality of the management of a borrower unit has a direct impact on the
performance of the unit. Also, it would have a direct impact on the integrity of
the borrower especially in Terms of its willingness to repay its debt.

• Industry

In order to undertake the credit rating of any borrower, it is important to assess

the riskiness of the industry to which that borrower belongs. Borrowers, which
are similarly ranked in Terms of financial performance, operating performance
of business and quality of management may have different credit ratings due to
the risks inherent in their industry. The risk assessment in industry sectors is done
at the Central Office level and appropriate score for each industry has been
allocated in the tool. On selection of the relevant industry sector, the tool will
automatically reckon the allocated score.

49
RATING SCALES:

The rating tool for SME has an 9-point rating scale, which ranges from A++ to D.

Borrower Rating Range of Scores Risk Level

A++ Above 90 Lowest risk

A+ 85-90 Lower risk

A 80-84 Low risk

B+ 70-79 Low risk

B 60-69 Moderate risk

C+ 56-69 Moderate risk

C 51-55 High risk

D+ 45-50 Higher risk

 D Below 45 Highest risk

43

RESEARCH METHODOLOGY

 INTRODUCTION:
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 & collateral security cover available for
recovery of such funds.

 PROBLEM STATEMENT:
To study the credit appraisal system in SME sector, at Central bank of India.

 OBJECTIVES:
• To study the credit appraisal methods.
• To understand the commercial, financial & technical viability of the
proposal proposed and it’s finding pattern.

 DATA COLLECTION:

51
 • Primary data:
Informal interview with manager and other staff members at Central bank
of India.

• Secondary data:
 Books
 websites
 database at Central bank of India
 library research

 BENEFICIARIES:
 Researchers:
This report will help researchers improving knowledge about the credit
appraisal system and to have practical exposure of the credit appraisal
system at Central bank of India.
 Management Students:
The project will help the management student to know the patterns of credit
appraisal in Central bank of India.
CONCLUSION

 Finance management is the backbone of any organizations and hence yields

a number of job options ranging from strategic financial planning to sales.

 From the study of Credit appraisal of SME, it can be concluded that credit
appraisal should therefore be based on the following factors, the same are
applied at Central bank of India:

• Financial performance
• Business performance
• Industry outlook
• Quality of management
• Conduct of account

52
 Central Bank of India loan policy contains various norms for sanction of
different types of loans. These all norms do not apply to each & every case.
Central bank of India norms for providing loans are flexible & 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, our
conclusion was such that credit appraisal system is not only looking for
financial wealth. Other strong parameters also play an important role in
analyzing credit worthiness of the firm/company.

 In all, the viability of the project from every aspect is analyzed, as well as
type of business, industry, promoters, past records, experience, projected
data and estimates, goals, long term plans also plays crucial role in
increasing chances of getting project approved for loan.

LIMITATION OF THE STUDY:

 As the credit appraisal is one of the crucial areas for any bank, some of the
technicalities are not revealed.
 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.

53
 BIBLIOGRAPHY

 WEB SITES:

• www.rbi.org.in
• www.centralbankof india.com
• www.indianbankassociation.com
• www.scird.com www.project99.com

 BOOKS:

“Credit and banking” By: K. C. Nanda

Survey Questionnaire on Credit Appraisal Process of Bank Loans at CBI

54
Q 1.) Did the Bank get itself credit rated by a credit rating agency,

• Yes
• No
• Not Always

Q. 2.) Did the Bank updates its credit rating for the last financial year
within six months from the date of close of the financial year

• Yes
• No
• Not Always

Q. 3). Did the Bank submit the credit rating report complete in all respects to the
Credit Rating Agency within seven days of its receipt from credit rating agency?

• Yes
• No
• Not Always

Q. 4) Did the Bank make public the credit rating report within seven days of
its receipt from the credit rating agency?

• Yes
• No
• Not Always

Q. 5) Did the Bank fully secure itself against all guarantees issued for the
condi-tions mentioned in the Regulation of Credit Rating Agency?
• Yes
• No
• Not Always

Q. 6 What kind of credit is more profitable?

55
 • SOD
• HBL
• General Loan
• Corporate loan
Q. 7 What type of Credit rating score does Bank use

•
Credit score provided by a credit reporting agency
•
Third party report
•
Credit information or history only, no credit score provided by a credit
reporting agency

Q. 8 Does factory visits are made before approved the loan?

• Yes
• No
• Not Always

Q. 9 Is a credit rating score shared with other insurers?

• Yes, on a request basis only

• Yes, only within the group of affi-liated companies No
Q. 10 How often is the credit rating score updated?

• More than once a year

• Annually
• Every two or more years
• Only on request
• Never

56
Survey Questionnaire on Credit Appraisal Process of Bank Loans at
CENTRAL BANK OF INDIA.
I furnished here under the details on a survey conducted by me on BANK‟s
employees working in the credit department and queries to my question:

Q 1.) Did the Bank get itself credit rated by a credit rating agency,

Frequency Percent Valid Percent Cumulative

Percent
Yes 25 100.0 100.0 100.0

No 0 0 0 0
Not Always 0 0 0 0
50
 .
30

25

20

15
.

10

0
Yes No Not Always

From the survey it has been found that all the 25 respondents think that, CBI
Bank get itself credit rated by a credit rating agency, which is approved by
Credti Rating Agency. So here 100% of the respon-dent prefers option 1- Yes.

Q. 2.) Did the Bank updates its credit rating for the last financial year within six
months from the date of close of the financial year?

Frequency Percent Valid Percent Cumulative

Percent
Yes 25 100.0 100.0 100.0
 No 0 0 0 0
Not Always 0 0 0 0

.
30

25

20

15
.

10

0
Yes No Not Always

From the survey it has been found that all the 25 respondents think that, CBI
Bank get itself credit rated by a credit rating agency, which is approved by
Credti Rating Agency. So here 100% of the respon-dent prefers option 1- Yes.

51
Q. 3). Did the Bank submit the credit rating report complete in all respects to the
Credit Rating Agency within seven days of its receipt from credit rating agency?

Frequency Percent Valid Percent Cumulative

Percent
Yes 18 72.0 72.0 72.0
No 7 28.0 28.0 100.0
Not Always 0 0.0 0.0 0.0
Total 25 100.0 100.0
 .
20
18
16
14
12
10
.
8
6
4
2
0
Yes No Not Always

From the survey it has been found from 25 respondents 72% thinks that, CBI
Bank submit the credit rating report complete in all respects to the Credit Rating
Agency within seven days of its receipt from credit rating agency& 28% thinks
CBI bank didn‟

52

Q. 4) Did the Bank make public the credit rating report within seven
days of its receipt from the credit rating agency?

Frequency Percent Valid Percent Cumulative

Percent
 Yes 15 60.0 60.0 60.0
No 6 24.0 24.0 84.0
Not Always 4 16.0 16.0 100.0
Total 25 100.0 100.0

.
16

14

12

10

8
.
6

0
Yes No Not Always

From the survey it has been found from 25 respondents 60 % thinks that, CBI
Bank make public the credit rating report within seven days of its receipt from
the credit rating agency, 24% respondent thinks no, the Bank doesn‟t do it and
4% respondent thinks the Bank make public the credit rating re-port within
seven days of its receipt from the credit rating agency, but not always
53
Q. 5) Did the Bank fully secure itself against all guarantees issued for the condi-
tions mentioned in the Regulation of Credit Rating Agency?

Frequency Percent Valid Percent Cumulative

Percent
Yes 20 80.0 80.0 80.0
No 2 8.0 8.0 88.0
Not Always 3 12.0 12.0 100
Total 25 100.0 100.0
 .
25

20

15

.
10

0
Yes No Not Always

Here the survey shows that from 25 respondents, 80% prefer option 1 –Yes, 8%
prefer option 2 – No and 12% prefer option 3 – Not always

54

Q. 6 What kind of credit is more profitable?

Frequency Percent Valid Percent Cumulative

Percent
 SOD 0 0 0 0
HBL 1 4.0 4.0 4.0
General Loan 2 8.0 8.0 12.0

Corporate loan 22 88.0 88.0 100.0

Total 25 100.0 100.0

.
25

20

15

.
10

0
SOD HBL General Loan Corporate loan

From the survey it has been found that, form 25 respondents 88% respondent
prefer option 4 - “Corporate loan”, 8% prefer option - 3 “General Loan” and
remaining 4% prefer option 2 – “House Building Loan”.
55
Q. 7 What type of Credit rating score does Bank use?

Frequency Percent Valid Cumulative

Percent Percent
Credit score provided by a 25 100.0 100.0 100.0
credit reporting agency

Third party report 0 0.0 0.0 0.0

Credit information or history 0 0.0 0.0 0.0

only, no credit score provided by
a credit re-porting agency

Total 25 100.0 100.0

 .
30

25

20

15
.
10

0
Credit score provided by Third party report Credit information or history
a credit reporting agency only, no credit score provided
by a credit re-porting agency

Here the survey shows that from 25 respondents, 100% goes with option 1 –
“Credit score provided by a credit reporting agency”
56

Q. 8 Does factory visits are made before approved the loan?

Frequency Percent Valid Cumulative

Percent Percent
Yes 25 100.0 100.0 100.0
 No 0 0 0 0
Not Always 0 0 0 0
Total 25 100.0 100.0

.
30

25

20

15
.

10

0
Yes No Not Always

From the survey it has been found that, form 25 respondents the entire 100%
respondent pre-fers option 1 - “Yes”.

57
Q. 9 Is a credit rating score shared with other insurers?
.

Frequency Percent Valid Cumulative

Percent Percent
Yes, on a request basis 3 12.0 12.0 12.0
only
Yes, only within 22 88.0 88.0 100.0
the group of
affiliated
companies
No 0 0 0

Total 25 100.0 100.0

 .
30

25

20

15
.
10

0
Yes, on a request basis Yes, only within the No Total
only group of affi-liated
companies

From the survey it has been found that, form 25 respondents 88% respondent
prefer option 2 - “Yes, only within the group of affiliated companies”, and
remaining 3% prefer option 3 – “Yes, on a request basis only”.

58

Q. 10 How often is the credit rating score updated?

Frequency Percent Valid Cumulative

Percent Percent
More than once a year 2 8.0 8.0 8.0
59
 Annually 22 88.0 88.0 96.0
Every two or more years 1 4.0 4.0 100.0

Only on request 0 0 0 0

Never 0 0 0 0

Total 25 100.0 100.0

From the survey it has been found that, form 25 respondents 88% prefer option
.
25

20

15

10 .

0
More than once a Annually Every two or Only on request Never
year more years

2 - “Annual-ly”, 8% prefer option – 1 “More than once a year” and remaining

4% prefer option 3 – “Every two or more years”.