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Name Sandeep Mishra Enroll No- 12BSP0671 Case Summary Making a Lending Decision Mr.

r. Nirmal Kumar, a bank manager in a new age private sector bank in India, has been approached by a transport operator named Sajjan Singh for a loan. Nirmal has collected and reviewed all the relevant information. Now he has to calculate the debt service coverage ratio (DSCR) and, taking into consideration the various bits of information available to him, take a decision on whether to extend the loan to Sajjan. Issues are follows (i) Lending decisions How they are taken at the branch/unit level (ii) The various issues and factors (such as security offered, repayment period, etc.) to be considered in making a lending decision (iii) The various factors to be considered in a prospective borrower (such as Age, Constitution, Education, Family background, etc.) in order to make a lending decision (iv) The concept of DSCR, how it is arrived at, and how it helps in making a lending decision Introduction Nirmal Kumar (Nirmal), Manager at the M/S Conservative Bank Ltd, a new age private sector bank in India, had been working with the bank for five years. At present, he was posted at the Indore branch...

Questions 1. What are the various requirements for making a lending decision? To ensure that Bank lend responsibly, Banks will consider a range of factors when they decide whether to accept an application. So although customer may have a good credit profile this does not always guarantee the outcome of a lending decision. Other factors may include: 1. Customers record of managing credit from his profile 2. Information the bank already holds about customer

3. What customer earn and his current credit commitments to consider customers affordability 4. Customers circumstances when he apply: for example, details about his employment 5. Terms of Customers application: which could include how much he want to borrow and for what purpose.

2. What are the various factors to be considered in making a lending decision? Capacity Does the borrower have the ability to repay the loan? Factors that affect a borrowers ability to repay the loan include how much money the borrower makes, how long the borrower has been at his or her Current job and how much debt the borrower already has relative to income. Character Will the borrower repay the loan? The primary factor that affects character is the borrowers past bill-paying history. The creditor wants to know if the borrower has paid his/her bills and if he/she has paid them on time. Collateral Is there a financial asset or a piece of property that a creditor can take if the borrower fails to repay the loan? Collateral provides protection for the creditor if the borrower fails to repay the loan. For example, if a borrower fails to repay a car loan, the creditor can repossess the car. The car is collateral for a car loan.

3. What are the various facets of the lending proposal? Facets of the lending proposal are as follows. How much money customer needed? How he will use the money. How he will repay the amount of loan. What if he is unable to repay the loan?

3. In this case, should Nirmal Kumar extend the loan to Sajjan? Give reasons to support your answer. Yes loan should be extended to Sajjan for his truck loan. Following are reasons are as follows. Monthly income expected more than 1 lakh. Sajjan is qualified with all his documents for loan application. Sajjan already experienced driver and before was into in same business. Sajjan ready to provide all financial data at the end of each year

Conclusion After deep analysis of the case according to me the loan should extended to Sajjan as he is providing all needful information to bank and as well as a eligible candidate for loan with 1 lakh plus income expected monthly which will make him easy to pay monthly EMI for truck loan and even he does not have any other liability.

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