CREDIT APPRAISAL AT CENTRAL BANK

OF INDIA
Under the guidance of: Presented By:
Dr. Deepak Singh Nimisha Kumari
PGFB1328


COMPANY DESCRIPTION
Established in 1911
Shri. Rajeev Rishi(Chairman & Managing Director)

Shri Gumansingh (Director)

Shri Raj Kumar Goyal(Executive Director)

Corporate Vision
To emerge as a strong, vibrant and pro-active Bank/Financial Super Market and to
positively contribute to the emerging needs of the economy through consistent
harmonization of human, financial and technological resources and effective risk
control systems.

Corporate Mission
To transform the customer banking experience into a fruitful and enjoyable one.
To leverage technology for efficient delivery of all banking services.
To have bouquet of product and services tailor made to meet customers aspirations.
The pan-India spread of branches across all the state of the country will be utilized to
further the socio economic objective of the Government of India with emphasis on
Financial Inclusion.

JOB DESCRIPTION (CONTD..)
At Central Bank of India we were required to check the customers
eligibility for credit. Before a credit facility is sanctioned to any borrower
firm, the proposal should be rigorously appraised. The appraisal process
should involve an in- depth study of the financial, commercial, technical
and managerial aspects of the borrower. An assessment of the financial
requirement of the borrower should be made in order to arrive at the
amount of credit to be considered by the bank. Even though the data
supplied by the client is the base data for analysis, greater reliance is to
be placed on data obtained from independent sources.

In appraisal following 5 Ps are important:-
PERSON: In person following Cs are to be considered:-
Character,
Capacity &
Creditworthiness
PROJECT
PROCESS
PRICING
PROSPECTS

Project appraisal involves detail study of the arrangements
made for the production, marketing and financing. It examines
a systematic way whether the resources are properly utilized
to produce the best results, i.e. whether the project is viable. A
venture, which is put on stream, should sustain itself without
external support and only then it can be treated as viable.
Viability study can be made on the following aspects :
Technical Feasibility
Commercial and Economic Viability
Financial Feasibility
Managerial Competence
Firstly, for the initial staring days of my project period I was
told to see the documents on which bank issues loan.
JOB DESCRIPTION
JOB DESCRIPTION
When I was done with the study of documents, then I used to
sit with my industry mentor and help him on finding the data's
of the companies of which the term loan was used to be
sanctioned.
After that on the month of June the audits of the banks
started and the auditors were required with the borrowers
files to whom the loans were given. Then I used to make the
borrowers file then after.
ANALYSIS OF JOB DONE(CONTD)
For assessment purpose the forms prescribed were used and
Debt equity ratio, average DSCR, BEP, Pay back period are
taken into consideration

Debt Equity Ratio(Not more than 2.33:1 , 1.7:1 is accepted in
case of real estate and generally for different type of industries
different levels of DER is accepted)

Average DSCR (Should not be less than 1.5-2 , ratio should
not be lower than this)

Ratios for appraising term loans:

Debt equity ratio: long term debt
Tangible net worth
Average DSCR :Net profit + Depreciation + interest on TL
Term loan instalment + interest on TL
Breakeven point : Fixed cost
Sales-Variable cost (contribution)

ANALYSIS OF JOB DONE
LEARNING OUTCOMES(CONTD..)
This project gave me so much understanding of what Banks or we
can say that investor look before lending money. I am lucky to work
on this wonderful project which helps me to learn and understand
theoretical and practical part of lending. Lending is a big and very
important decision as if we miss a single point a lender can face a
huge amount of loss. So, this project gives huge knowledge about
the practices done before lending money. After working on this
project for 2 months I am able to know the practical importance and
different techniques which banks used before lending money. Central
Bank of India lend huge amount of money for different projects
throughout the year, so they give me this opportunity to work on this.


This project exposes me to the practicality of Banks work culture which will help me a lot in
my future to survive and understand the work culture.

As this was my first exposure into a work culture I was bit nervous at the beginning, but as
the days past I was able to fit myself in that environment

After working for two months on this project I came two know many technical and practical
aspects which helps me a lot to understand the different financial ratios used in banks to
determine the effectiveness of project.

This project enhances my knowledge about the lending techniques used by lenders before
financing any project.

I came to know about the different factors which taken into account by the banks before
lending money for different project and how they calculate the different ratios to determine
the successfulness of any project.

About these both companies who applied in Central Bank of India for huge amount were
successfully appraised and bank will happily lend money to both of them as their past
record and other determinates look positive which will lead in success of these project.

The ratios used in this shows positive and healthy return in future and there is very less
chance of failure of this project.

LEARNING OUTCOMES
SUGGESTIONS
There should be some prescribed uniform format for lien application in the
bank to facilitate the borrowers.
Time bound process should be there for sanctioning if there are loan
proposals.
Loan process time should be minimized in order to make easy availability of
bank finance.
Single window approach should be adopted in bank so that applicant may
contact to one person/officer for all credit affairs.
Project approval/ necessary clearances from government department should
be eased and response time should be reduced.
Bank should adopt flexible approach towards infrastructure project in
completion of statutory formalities /approval so that the project work should
not be delayed for want of finance.
Insistence of collateral, securities sometimes causes non availability of
financial assistance to deserving clients
CONCLUSION (CONTD)
Credit appraisal is a process of appraising the credit worthiness of
loan applicants. The fund of depositors i.e. general public are
mobilised by means of such advances / investments. Thus it is
extremely important for lender bank to assess the risk associated
with credit, thereby ensure the security for fund deposited by
depositors. Therefore my analyses regarding credit appraisal
procedure of CENTRAL BANK OF INDIA are as follows:-
In case of retail lending bank strictly follow its circular and fulfils all
requirement of necessary documents required for different types of
loan so that bank do not suffer any types of loss.
Bank is very much particular about CIBIL report of borrowers in case
of each type of lending.
Bank lending process in case of retail loan is very much fast after
compiling with all the criteria of bank.



In case of project financing bank follow lengthy norms to
check the feasibility of the project such as:-
Firstly personal appraisal of promoter is done by the bank to
ensure that promoters are experienced in the line of business
and capable to implement and run the project efficiently.
Secondly detail study about the technical aspect is done to
find the technical soundness of project such as proper scrutiny
of financial report is done, valuation of property by
government approved valuer is done and view regarding each
and every area of project is done under technical analysis.

CONCLUSION (CONTD..)
CONCLUSION
A detail study relating financial viability of project is done by detail
study of cash flow, fund flow statements and by calculating import
ratio which is very much necessary for project appraisal such as
DSCR, DER etc. the main purpose of financial appraisal is insure
that project will ensure sufficient surplus to repay the instalment and
interest.
Risk analysis is done by bank to determine the risk associated with
the project. Credit rating or scoring is done of various parameters
such as personal, management, financial etc , thereby determine
credit worthiness of customer.
It is on basis of credit risk level, a collateral security to be given by
borrower is determined.
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THANK YOU