13 Lending Ppt

7/27/2019 13 Lending Ppt

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Principles of Lending

Presented

by

Dr.S.C.Bihari



THE A OF LENDING

8/6/2012 2

•

Activity• Ensuring Safety

• Providing Liquidity

•

Generating Profits



8/6/2012 3

THE BBBB OF LENDING

• Borrower • Character

• Capacity

• Capital

• Conditions

• Collateral

• Compliance



THE C OF LENDING

ConstitutionLegal Status

KYC ComplianceNecessary Records

Borrowing PowersSupporting Papers

8/6/2012 4



THE D OF LENDING

8/6/2012 5

•Documentation

• Bind Borrowers Legally

•

Enforce the charge.• Primary evidence in all

disputes.

• Defend claims in courts of law.



THE E OF LENDING

8/6/2012 6

•Eligibility Norms

• Off the Caution List of RBI• Off the Specific Approval List of

ECGC• Activity legally permitted• No Dues with Other Lenders



THE F OF LENDING

8/6/2012 7

•

Financial feasibility –• Cost of production, and

profitability,

• Cash flow, estimated sources offunds

• Yield should be commensuratewith the risk



THE G OF LENDING

8/6/2012 8

Growth potential1. Proof showing the turnover

achieved in the past 3 years2. Income tax returns the last 3

years

3. Sales Tax Returns for the last 3

years



THE H OF LENDING

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• HOME OF

BORROWER/BUSINESS

Residence proof

Address proof

Place of Business

Authorization-Municipal/LegalRent Agreement



THE I OF LENDING

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•Insurance

• For full value of security

• Comprehensive Risks

•

Bank as financer added



THE J OF LENDING

8/6/2012 11

•Job Position

• Engagement in any job

•No Objection from employer

• Feasibility of Tie up with salary



THE K OF LENDING

8/6/2012 12

•Knowledge of

• Business

• Enterprise• Working

• Regulation

• Information System etc.



THE L OF LENDING

8/6/2012 13

•

License/Permit• Driving license for Transport

Vehicle

• Permit for Plying Fleet

• Municipal Permit for Business

• Necessary permission for Industry

• Ecological Clearance



THE M OF LENDING

8/6/2012 14

MONITORINGFinancial Supervision

Financial Follow-up and Reports

Physical Follow-upVERIFICATION OF ASSETS

•Inventory Based-Quality of Goods,

Maintenance of Books•Operations Based-Level of Activity,

Labour Situation



THE N OF LENDING

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Norms of ExposureExposure norms as prescribed by RBI

-Maximum exposure for an individual <

15% of Bank’s capital(Tier-1&Tier-2)and 40% to group

-For infrastructure projects the

exposure limits to individuals is 20%of Bank’s capital and for group it is

50% of capital



THE O OF LENDING

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•

OPERATIONAL EFFICIENCY• Cost of funds and cost of

operation should be low

• Economic feasibility - ensuring

capacity, demand and supply

position, cost of production, saleprospects and price level



THE P OF LENDING

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•

PERSON• PURPOSE

• PROSPECTS

•

PROFITABILITY



THE Q OF LENDING

8/6/2012 18

•

Quality• Of Management

• Of Products

• Of Services

• Of Suppliers

• Of Distributors

• Of Employees etc,



THE R OF LENDING

REPAYMENT PERIODProper Repayment Period

With Moratorium Period

Should Commensurate With

Income Generating Capacity Of

The Borrower

8/6/2012 19



THE S OF LENDING

8/6/2012 20

SECURITY:

• MARKETABILITY

• ASCERTAINABILITY

• STABILTY

• TRANSFERABILITY/TITLE



THE T OF LENDING

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• TECHNICAL FEASIBILITY

• Raw materials supplies,

• Transport bottlenecks,

• Power and water supply,

• Availability of machineries

• Other civic facilities



THE U OF LENDING

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UNDERSTANDING THE MARKET

• PRODUCT

• PRICE

• PLACE

• PROMOTION

• PEOPLE• PROCESS

• PHYSICAL EVIDENCE



THE V OF LENDING

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• Verification/Valuation of

Assets/Securities:

• The valuation report should be current

and should be obtained from approvedvaluers.

•

The valuation report involvesverification of the existence of the

property by outside agencies.



THE W OF LENDING

8/6/2012 24

• Working Capital Financingbased onNature of businessMarket and demandTechnologyManufacturing policyCredit policySupplies’ creditOperating efficiencyInflation



THE X OF LENDING

8/6/2012 25

•

X’RAY OF FUNCTIONING• There is a need for Review of

performance/functioning of the

borrower from time to time

• This calls for periodic Review of the

loan account Annually/ Half-yearly/Quarterly and even on Monthly/

Fortnightly/ Weekly basis in case of

Large Advances



THE Y OF LENDING

8/6/2012 26

•

Yearly Review of Account• Borrowers are required to submit

various reports/statements and otherinformation required by the Bank.

• But yearly statements like BalanceSheets, Profit & Loss Statements areessential to be submitted for the

purpose of Yearly Review and Renewalor otherwise withReduction/Enhancement/Cancellationof limit



THE Z OF LENDING

8/6/2012 27

•

Zeal of the Borrower toSucceed

•All the A to Y for Lending maybe a waste paper exercise

unless the borrower(s) have azeal to succeed in the

enterprise.

13 Lending Ppt

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