13 lending ppt
TRANSCRIPT
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Principles of Lending
Presented
by
Dr.S.C.Bihari
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THE A OF LENDING
8/6/2012 2
•
Activity• Ensuring Safety
• Providing Liquidity
•
Generating Profits
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8/6/2012 3
THE BBBB OF LENDING
• Borrower • Character
• Capacity
• Capital
• Conditions
• Collateral
• Compliance
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THE C OF LENDING
ConstitutionLegal Status
KYC ComplianceNecessary Records
Borrowing PowersSupporting Papers
8/6/2012 4
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THE D OF LENDING
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•Documentation
• Bind Borrowers Legally
•
Enforce the charge.• Primary evidence in all
disputes.
• Defend claims in courts of law.
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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
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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
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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
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THE H OF LENDING
8/6/2012 9
• HOME OF
BORROWER/BUSINESS
Residence proof
Address proof
Place of Business
Authorization-Municipal/LegalRent Agreement
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THE I OF LENDING
8/6/2012 10
•Insurance
• For full value of security
• Comprehensive Risks
•
Bank as financer added
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THE J OF LENDING
8/6/2012 11
•Job Position
• Engagement in any job
•No Objection from employer
• Feasibility of Tie up with salary
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THE K OF LENDING
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•Knowledge of
• Business
• Enterprise• Working
• Regulation
• Information System etc.
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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
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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
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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
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THE O OF LENDING
8/6/2012 16
•
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
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THE P OF LENDING
8/6/2012 17
•
PERSON• PURPOSE
• PROSPECTS
•
PROFITABILITY
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THE Q OF LENDING
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•
Quality• Of Management
• Of Products
• Of Services
• Of Suppliers
• Of Distributors
• Of Employees etc,
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THE R OF LENDING
REPAYMENT PERIODProper Repayment Period
With Moratorium Period
Should Commensurate With
Income Generating Capacity Of
The Borrower
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THE S OF LENDING
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SECURITY:
• MARKETABILITY
• ASCERTAINABILITY
• STABILTY
• TRANSFERABILITY/TITLE
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THE T OF LENDING
8/6/2012 21
• TECHNICAL FEASIBILITY
• Raw materials supplies,
• Transport bottlenecks,
• Power and water supply,
• Availability of machineries
• Other civic facilities
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THE U OF LENDING
8/6/2012 22
UNDERSTANDING THE MARKET
• PRODUCT
• PRICE
• PLACE
• PROMOTION
• PEOPLE• PROCESS
• PHYSICAL EVIDENCE
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THE V OF LENDING
8/6/2012 23
• 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.
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THE W OF LENDING
8/6/2012 24
• Working Capital Financingbased onNature of businessMarket and demandTechnologyManufacturing policyCredit policySupplies’ creditOperating efficiencyInflation
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THE X OF LENDING
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•
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
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THE Y OF LENDING
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•
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
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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.
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