Description
Describes lending activities of a bank and basic requirements for lending.
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Lending Activity of Bank
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Basic requirements for lending
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Credit Management
Objectives of Credit Management
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Credit Appraisal Credit Monitoring
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.
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Install a system and control measures for periodic reviews.
Credit Management is a process of managing Credits using following steps:
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Formulation of Credit Policy Credit Allocation Credit Evaluation & Risk Assessment and Credit Monitoring & Control
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Credit Policy Provides a broader frame work of reference and uniform standards. It should be flexible to meet various situations 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. Quality of Credit Should put a good administrative set up for Credit administration.
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The 3 C’s of the Credit: ? Character ? Capacity ? Collateral
Risk Assessment ? Interest Rate Risk ? Credit Risk ? Business Risk ? Management Risk
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Capital Borrower’s constitution Documentation Credit monitoring Legal Remedy Risk management Credit Information
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To commence bank’s operations and to continue the same Helps to absorb possible substantial losses Provides the margin of safety Need for servicing its depositors For maintaining net worth requirements For acquiring assets For entering into fund based activities
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Banks serve varied customers with different legal capacities and perspectives single individual group of individuals government Loan process
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During the “post-sanction” phase, the bank has to obtain the details regarding the customer, to bind him/them legally and enforce the charge. This is possible only if the bank keeps in force the documentation for the loan/s granted to the customer/s. It is very important for the bank to establish the primary evidence in all disputes
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3 types of follow-up that constitute Credit Monitoring. These are: (a) Financial follow-up (b) Physical follow-up and (c) Legal follow-up.
Legal Remedy
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Risk is difference between Actual & Expected outcome Risk Management is a process which will identify risks weigh cost versus benefits eliminate unnecessary risks Risk Management Tools
Examine Financial Statements Analyzing Sensitivity of the firm’s value or cash flows to changes in financial prices Derivatives
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1. 2. 3.
doc_189157613.pptx
Describes lending activities of a bank and basic requirements for lending.
?
Lending Activity of Bank
?
Basic requirements for lending
?
Credit Management
Objectives of Credit Management
?
Credit Appraisal Credit Monitoring
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 is a process of managing Credits using following steps:
? ? ? ?
Formulation of Credit Policy Credit Allocation Credit Evaluation & Risk Assessment and Credit Monitoring & Control
?
Credit Policy Provides a broader frame work of reference and uniform standards. It should be flexible to meet various situations 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. Quality of Credit Should put a good administrative set up for Credit administration.
? ? ? ?
?
? ?
The 3 C’s of the Credit: ? Character ? Capacity ? Collateral
Risk Assessment ? Interest Rate Risk ? Credit Risk ? Business Risk ? Management Risk
? ? ? ? ? ? ?
Capital Borrower’s constitution Documentation Credit monitoring Legal Remedy Risk management Credit Information
?
? ? ? ? ? ?
To commence bank’s operations and to continue the same Helps to absorb possible substantial losses Provides the margin of safety Need for servicing its depositors For maintaining net worth requirements For acquiring assets For entering into fund based activities
?
Banks serve varied customers with different legal capacities and perspectives single individual group of individuals government Loan process
?
During the “post-sanction” phase, the bank has to obtain the details regarding the customer, to bind him/them legally and enforce the charge. This is possible only if the bank keeps in force the documentation for the loan/s granted to the customer/s. It is very important for the bank to establish the primary evidence in all disputes
?
3 types of follow-up that constitute Credit Monitoring. These are: (a) Financial follow-up (b) Physical follow-up and (c) Legal follow-up.
Legal Remedy
? ?
Risk is difference between Actual & Expected outcome Risk Management is a process which will identify risks weigh cost versus benefits eliminate unnecessary risks Risk Management Tools
Examine Financial Statements Analyzing Sensitivity of the firm’s value or cash flows to changes in financial prices Derivatives
?
1. 2. 3.
doc_189157613.pptx