What are the sources of credit investigation?/What are the five C’s for borrower analysis? & Others

      1.  What are the sources of credit investigation?


      1. Personal interview 2. Internal Bank Source (Loan application form, credit files, account performance etc.) 3. External Bank source (CIB report, confidential report of other Bank, Balance sheet, market report, stock exchange publications, income tax statement etc.)


      1. Define borrower?

      Ans. Borrower means a person or group or group of persons or individual associated under a legal entity whom Bank’s extend their credit facilities.

      1. What are the five C’s for borrower analysis?

        Ans.   Character  = Trust & confidence Capital = Financial solvency & strength Capability = Ability to manage, adjust & adopt. Condition= under which the credit to be allowed. Collateral= Offering by the client to secure the loan.

      1. What are the five R’s for borrower analysis?

      Ans.  Responsibility, Reliability, Respectability, Resources, Returns.

      1. What are the five P’s of business analysis?

      Ans. Person, Purpose, Products, Place, Profit.

      1. What are the five M’s of business?

      Ans. Man, Money, Materials, Market, Management.

      1. What are the important analysis to be made for taking lending decisions?

        Ans. a. Borrower analysis: Assessment of Majority shareholder, management team & other affiliated companies (if any). Lack of management depth, complicated ownership structure etc.

      1. Industry analysis: SWOT analysis.
      1. Supplier/Buyer analysis: Analysis on concentration of supplier or buyer with their future prospect.
      1. Historical financial analysis: Analysis on minimum 3 years financial statements including profitability, leverage, cash flow etc.
      1. Projected financial performance analysis: Borrowers projected future financial performance to be analyzed properly.
      1. Account conduct analysis: Analysis of trade payments, cheques, interest & principal payments from account statement.
      1. Adherence to Lending guideline: Credit application do not adhere to the bank’s lending guideline.
      1. Mitigating factors: Margin sustainability or volatility, high debt load(leverage/gearing), overstocking or debtor issue, rapid growth, acquisition or expansion, new business line, management changes or succession issue etc. 29.06.2008 reviewed thorough.


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