Credit approval process starts with receiving prescribed completed credit application from the customer and ends with issuance of a written “Sanction Advice” by the Bank. Credit approval process in the bank shall be guided by some basic principles. These are as follows: Credit Proposal:
A Credit Proposal is prepared by the Relationship Management Team either at Branch or Corporate Division based at Head Office to present a concise and objective assessment of the risks associated with lending money to the prospective borrowers. Banks have to ensure before sanction/disbursement that their portfolio is of high quality, i.e., the risks associated with the portfolio are relatively low. A credit proposal may be defined as hereunder:
1. Initial Credit Proposal – Initiate credit facilities for any new relationship for the bank. 2. Annual Credit Proposal – Renew existing facilities extended to a borrower or amendments to existing facilities at the Annual Review Date. 3. Interim Credit Proposal – Propose amendments (for e.g., an increase in amount or tenor or pricing, or a change in security structure), and/or new facilities for an existing borrower at any time other that the Annual Review date. Steps in Credit Approval Process:
Step-1: A potential borrower collects prescribed Credit Application Form from the Relationship Officer of Branch/Corporate Division, Head Office/Web address of the Bank. Later, he/she submits the filled in Credit Application Form along with required papers and documents. Step-2: The Relationship Officer scrutinizes the Credit Application Form and other documents submitted by the customer and make a preliminary assessment on creditworthiness of the potential borrower on the basis of the information provided by the borrower. Relationship Officer collects further information from the customer if it is felt necessary. And, if Relationship Officer finds the proposal not credit worthy, a refusal letter to...