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Credit Management Essay

4879 words - 20 pages

Table of Contents
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TARGET MARKET:-
BANK AL HABIB limited has conservative credit approach. They provide loan to those customers who are already their customers and have accounts with bank. We can say that they are solely focusing on relationship oriented lending for major corporate exposure. Thus it is clear that bank has mitigated their risk. This is the main reason that credit ...view middle of the document...

Then ufone first responsibility will be to give back amount to the bank. And if not then SECP will be responsible to direct the company for giving the amount.

CREDIT RISK ASSESSMENT
(GUIDELINES TO LOAN OFFICER FOR APPRAISING CREDIT)
It is not a difficult matter to complete the forms necessary in order to submit an application for facilities (AFI) to the sanctioning authority, especially if the guidelines which will be conveyed by us from time to time are followed. The complete forms by themselves rarely give an adequate picture however supporting information is usually necessary if the sanctioning authority is to have the clear overall picture necessary upon which to base a sound decision.
These guidelines which comprises of two parts are intended to give some thought to loan officers on the following
QUESTIONS WHICH A LOAN OFFICER MUST SEEK ANSWERS TO AND TOOLS WHICH HE MUST LOOK FOR IN APPRAISING CREDIT AND
QUESTIONS WHICH A LOAN OFFICER MUST PONDER TO ASK A BORROWER TO APPRAISE A CREDIT PROPOSAL
QUESTIONS WHICH A LOAN OFFICER MUST SEEK ANSWERS TO AND TOOLS WHICH HE MUST LOOK FOR IN APPRAISING CREDIT
INTRODUCTION
Extending credit is a closed chain process which begins from credit request of the borrowers and ends at complete repayment of the principal and interest. The credit process may be divided into four parts i.e.
i. MEASUREMNT OF CREDIT RISK
ii. CREDIT INVESTIGATION AND ANALYSIS
iii. FINANCE ANALYSIS
iv. PROTECTION AND COLLETCTION

A. MEASUREMENT OF CREDIT RISK
The two basic questions regarding measurement of credit risk are
Can he pay?
Will he pay?
The answer to these questions is sought by considering, the risk on the basis of FIVE factors generally known as FIVE C’s i.e.
* CHARACTER
* CAPACITY
* CAPITAL
* CONDITION
* CASH FLOW
How do we determine CHARACTER?:-
This is the most important factor to be appraised. It refers to the intensity of the borrower’s desire to repay. There must not be only a willingness to repay, but beyond that, determination to repay. Determination to repay will be found to very directly with character. Lack of character may signify not only no determination to repay but even an intention to defraud the Bank
Character is a difficult quality to be appraised. One reason for this is that it possesses no unit of measurement. We can only describe it by adjective such as high, great, low, little, etc. when he usually investigates is in reality reputation but the distinction between the two is of considerable degree. Character is within a man himself, while reputation is in the minds of others. Reputation may or may not be a true reflection of character. On the other hand, a man’s character controls his action and it is from a man’s deeds that a reputation is built up.
The character of a person may be appraised in terms of the following positive or negative factors.
* Integrity
* Obedience to law
* Loyalty to his country and family
*...

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