Summer Training Project Report on

Credit Appraisal System IN Commercial Vehicle loans

Undertaken at

INDIA INFOLINE FINANCE LTD

Submitted in Partial Fulfilment of the Requirement for the Award of

the Degree of

Master of Business Administration By

Danish Showkat Dhar Roll No.14036113030

Reg. No.:-29437-IC-2011

Under The Supervision of

MR. Sachin Gupta

(AVP: CREDIT & OPS)

INDIA INFOLINE FINANCE LTD

DEPT. OF MANAGEMENT STUDIES

SOUTH CAMPUS UNIVERSITY OF KASHMIR

ANANTNAG

2

ACKNOWLEDGEMENT

I take this opportunity to express my deep sense of gratitude, thanks and regards towards all of those

who have directly or indirectly helped me in the successful completion of this project. I present my

sincere thanks to Mr. SACHIN GUPTA who allowed me to take training at INDIA INFOLINE.I would

also like to thank INDIA INFOLINE Staff for their wonderful support & inspirable guiding. I also

thank Murtaza sir who has sincerely supported me with the valuable insights into the completion of this

project. i am grateful to all faculty members of South Campus and my friends who have helped me in

the successful completion of this project.

Last but not the least I am indebted to my PARENTS who provided me their

time, support and inspiration needed to prepare this report.

3

DECLARATION

I, Danish Showkat Dhar, a bonafide student of MBA (Full Time) Program at the Dept. of

Management Studies, South Campus University of Kashmir, Anantnag, hereby declare that

I have undergone the Summer Training at India Info line LTD under the supervision of Mr

Sachin Gupta on and from 10th March 2016 to 4thth

May, 2016.

I also declare that the present project report is based on the above summer training and is

my original work. The content of this project report has not been submitted to any other

university or institute either in part or full for the award of any degree, diploma or

fellowship.

Further, I assign the right to the University, subject to the permission from the organization

concerned, use the information and contents of this project to develop cases, case lets, case

leads, and papers for publication and/or for use in teaching.

Place: Anantnag

Date: 04-05-2016

Danish Showkat Dhaar

Roll No. 140361130

4

INDEX

1 Introduction 5

1.1 Credit Appraisal System and its importance 3-4

1.2 Theoretical Background of the Study 5-7

1.3 Commercial vehicle Finance overview 8-13

1.4 Role of NBFC‘s in Commercial vehicle Financing 14-15

2 Company Profile 17

2.1 History of IIFL and Vision Values and strategy 18-19

2.2 Corporate structure 20-23

2.3 CSR practised by IIFL 23-25

2.4 Credit Policy of IIFL 26-33

3 Literature Review 35

3.1 Reasons for doing study 36- 38

4 Research Methodology 36

4.1 Objectives 36-38

5 Data Analysis and research Findings 49

5.1 Loan appliers to defaulters 42-45

5.2 Parameter used for credit appraisal 46-49

5.3 5 C‘s of Credit 50-51

5.4 Credit appraisal process at IIFL 52-55

5.5 Findings 56-57

6 Conclusion 59

7 Bibliography and References 60

8 CIBIL REPORTS

5

Introduction

EXECUTIVE SUMMARY

We have often heard about home loans, car loans and personal loans. Most of us also know the purpose

which these loans serve. However, only a few of us would be aware of commercial loans. Let‘s try to

understand the purpose of these loans, documentation process and who can avail them.

Commercial vehicle loans are usually taken by individual, partnership firms, proprietorship firms, HUF

(Hindu Undivided Family), trusts, societies, self-employed, businessmen and private and public limited

companies for their financing needs for owning and running commercial vehicles.

The borrowers of these loans are usually engaged in the business of transportation. Commercial vehicle

loan options are available for buses, tippers, transit mixers or any other heavy, light or small

commercial vehicle. A commercial vehicle loan can be taken for a variety of commercial vehicles,

which may be used at different locations.

Banks such as HDFC Bank, ICICI Bank, DCB Bank and Yes Bank among others provide such loans.

Also NBFCs (non banking financial companies) like Reliance Commercial Finance and Fullerton India

provide loans.

While loans are sanctioned for the purchase of a new commercial vehicle, banks also offer loans for

pre-owned vehicles. Borrowers can also avail of a top up on existing loans subject to conditions

The study found that current credit appraisal process at IIFL is time consuming process and it can be

significantly reduced by following certain set standards. It was also found from the study that at the

percentage of defaulters at IIFL increased from 2014 to 16 the main reason for such an increase was

such poor techniques used for credit appraisal at IIFL.

6

CHAPTER - 1

7

CREDIT APPRAISAL:-

The process by which a lender appraises the creditworthiness of the prospective borrower is

called the CREDIT APPRAISAL. This normally involves appraising the borrower‘s payment

history and establishing the quality and sustainability of his income. By the process of credit

Appraisal, the lender satisfies himself of the good intentions of the borrower, usually through

various processes including TVR (Telephonic Verification Report), CPV (Contact Point

Verification), CIBIL Check (Credit Information Bureau Limited) & RCU (Risk Control Unit) or

by physical interview of the Borrower.

Importance of credit appraisal system

Financial institutions & banks are intermediate between lenders and borrowers. These financial

intermediaries collect deposit and disburse it as loan and advance to the individual people,

business, commercial, industrial entity. The loan and advance should be given to them who have

the certain and predicted cash flow to repay the credit. If the manger fails to analyze the clients

viability of repaying the loan, possibility of default may arise due to the fact.

So the importance of APPRAISAL, in sanctioning the loan, is the key to identify the borrower‘s

ability, expertise, efficiency, industrial analyses and business performance.

Recovery of credit:-

Appraisal is done to ensure the recovery of the credit along with the good supervision,

monitoring and the relationship. In other words, the purpose of appraisal is to be sure that the

proposed advance will be safe, liquid, and profitable for accepting purpose covered by adequate

security.

SAFETY:-

8

The most important measure of appraising a loan proposal is safety. Safety means the assurance

of repayment of distributed loans. Company is in business to make money but safety should

never be sacrificed for profitability. To ensure the safety of loan, the borrower should be chosen

carefully. He should be a person of good character and capacity.

LIQUIDITY:-

The banker must ensure that the borrower is able to repay the loan on demand or within a short

period. This depends upon the nature of the assets owned by the borrower and plugged to the

company. For example goods and commodities are easily marketable while fixed assets are land

and buildings can be liquidated after a time interval. Thus, company regard liquidity as important

as safety of the funds and grants loans on the security of assets which are easily marketable

without much loss.

PROFIT:-

“Profit” is the blood for any commercial institution. Before approval of any loan project, the

company authority has to be sure that the proposed project will be a profitable venture.

Diversification of risk:-

During sanctioning any loan, company has to be attentive about diversification of risk. All money

must not be disbursed amongst a small number of people.

National interest and growth:-

The company would lend if the purpose of the advances can contribute more to the overall

economic development of the country.

Theoretical Background

9

Non-Banking Financial Companies (NBFC’S)

We usually study about banks, apart from the banks the Indian financial system have a large

number of privately owned, decentralised and small sized financial institutions known as NBFCs.

In recent times, the NBFCs have contributed to the Indian economic growth by providing deposit

facilities and specialised credit to certain segments of the society such as unorganised sector and

small borrowers.

NBFCS provide financial services like hire purchase, leasing, loans, investments. NBFCs can

be classified into deposit accepting companies and non deposit accepting companies. NBFCs are

small in size and are owned privately. The NBFCs have grown rapidly since 1990. They offer

attractive rate of return. They are fund based as well as service oriented companies. Their main

companies are banks and financial institutions. According to RBI act 1934, its compulsory to

register NBFCs with the reserve bank of India. NBFCs are heterogeneous group of Finance

companies means all NBFCs provide different types of financial services.

NBFCs constitute a important segment of the financial system. NBFCs supplement the role of

the banking sector in meeting the increasing financial need of the corporate sector, delivering

credit to the unorganised sector and to small local borrowers. NBFCs have more flexible structure

than banks. As compared to banks, they can take quick decisions; assume greater risks and tailor

– make their services and charge according to the needs of the clients. There flexible structure

helps in broadening the market by providing the saver and investor a bundle of services on a

competitive basis. NBFCs at present providing financial services partly fee based and partly fund

based. There fee based services include portfolio management, issue management, loan

syndication, merger and acquisition, credit rating etc. Their asset based activities include venture

capital financing, housing finance, equipment leasing, hire purchase financing factoring etc. In

short they are now providing variety of services. NBFCs differ widely in their ownership; some

are subsidiaries of large manufactures ( T.V motors, and T.V finances and services ltd). Many

others are owned by banks such as ICICI banks, ICICI securities ltd, SBI capital market ltd,

Muthoot bankers, Muthoot financial services ltd a key player in Kerala financial services. NBFCs

10

carry out financing activities but their resources are not directly obtained from the savers as debt.

Instead, these institutions mobilize the public savings for rendering other financial services

including investment. All such institutions are financial intermediaries and when they lend, they

are known as a non-banking financial intermediaries (NBFIs) or investment institutions.

Classification of Non-Banking Financial Companies (NBFC’S)

11

Equipment Leasing Company.

Hire Purchase Finance Company.

Housing Finance Company.

Investment Company.

Loan Company.

Residuary Non-Banking Company.

Miscellaneous Finance Company.

Commercial vehicle Finance Overview

Commercial Vehicle (CV) industry in India has surged over the past decade and the market is expected to

grow at a Compound Annual Growth Rate (CAGR) of over 15% until 2016 (Source: Society of

Indian Automobile Manufacturers (“SIAM”)) with many companies competing to expand.

Commercial vehicle is a type of motor vehicle that is used for transporting goods or carrying passengers

with former contributing around 87% in India. Commercial vehicles are classified into Light, Medium &

Heavy depending upon its gross vehicle weight. The CV industry enables quick, easy departure of goods

and accepts smaller loads than railways and also commercial vehicles can access remote and hilly areas

where rail lines cannot be constructed.

12

The main growth drivers for CV Industry are modernisation of the trucking industry,

structural shift to Hub & Spoke model, improved road infrastructure, growing freight capacity

and increase in exports from remote areas enabling the producers/manufacturers to move their

goods to ports. The key risk factors for this industry are low freight demand and truck rentals,

non-availability of cargos, fuel price, risk prone area of occupation, sudden transport strike,

competition with alternate mode of transport (Railways) and any new government regulations

related to restrictions based on age of the vehicle and other environmental safety issues. Also,

recent study on CV industry by ICRA found that the India‘s GDP and IIP numbers are very

closely correlated with the development of Commercial Vehicle Industry, which in turn has made

this industry the lifeline of Indian Economy.

CV Financing and Securitisation

CV Financing Industry in India has seen an impressive growth and in the last five years till 2012-

13, CV loan disbursements grew by around 11 per cent (Source: CRISIL Research, Retail

Finance- Auto, June 2013). Major players in CV Financing in India are Tata Motors

Cholamandalam Finance, Sundaram Finance, AU Finance, Shriram Transport Finance, Magma,

L&T, M&M and Religare. The key factors that could impact vehicle financing in India are

growth in vehicle sales, finance penetration and average ticket size (players offering marginally

higher LTV because of competition from other players). The process of pooling the loans given

by these CV financiers and selling the securities backed by cash flows from the loans to investors

is termed as ‗Securitisation‘ of CV pools and the bank or finance company that has originated the

pool of receivables/loans is termed as ‗Originator‘. While selecting the loans for securitisation,

Originator should take into account the factors such as loan tenure, Interest rates, vehicle type

(LCV/UCV), geographical diversity, recovery rates, etc.

Risk Factors affecting the CV portfolio performance

We performed a small study to identify the factors that significantly affect the Securitised CV

pool performance (delinquencies) and have illustrated the way in which these factors affect the

delinquencies.

13

Data was collected from the Pool Performance reports (from Jun‘ 08 to Dec‘12) published by

Rating Agencies (CARE, ICRA and CRISIL) with a total number of 194 transactions of 14

different Originators. The factors, which could affect the pool performance, were identified based

on three broad categories such as Transaction Details, Initial Pool Details and Pool Performance

Details. Once data and factors were identified, regression of these factors with 90+ and 180+

delinquencies was performed and the significance level of factors affecting the delinquencies was

observed.

We found that originators have greater impact on delinquencies than any other factor. This

implies that the characteristics and business model of originator seems to be the most important

deciding factor for the CV pool performance. Even though none of the coefficients of other pool

parameters are found to be significant, certain parameters like presence of new CV (NCV) in the

pool, weighted average seasoning of the pool and ticket size of the loans seem to have positive

impact on pool performance. However, the single regression results do not consider the inter

dependencies between the factors. For example, presence of NCV in the pool and high-ticket size

of the loans can go hand in hand. Further, an originator may spend significantly more effort in the

credit evaluation of a high-ticket loan resulting in better origination.

Trend in Domestic Commercial Vehicle Volumes & Growth Rates by segments

Domestic Commercial vehicles Sales (in No‘s)

Segments FY2010 FY2011 FY2012 FY2013 FY2014 10m FY2015

LCV Bus

Sales

34,413 44,816 48,868 47,827 42,799 35,812

14

LCV Truck

sales

253,364

3,17,030 4,11,415 4,76,695 3,89,312 2,80,130

Total LCV

Sales

2,87,777 3,61,846 4,60,283 5,24,522 4,32,111 3,15,312

M&HCV

Bus Sales

43,083 47,938 49,882 46,931 38,709 27,687

M&HCV

Truck Sales

2,01,861 2,75,121 2,99,334 2,21,776 1,61,918 1,53,696

Total M&H

CV sales

2,44,944 3,23,059 3,49,216 26,8,689 2,00,627 1,81,383

Total CV

Sales

5,32,721 6,849,05 8,09,499 7,83,211 6,32,738 4,96,695

15

Total sales of Light commercial vehicle (LCV)

0

1,00,000

2,00,000

3,00,000

4,00,000

5,00,000

6,00,000

LCV Bus Sales LCV Truck Sales Total LCV Sales

FY 2010

FY 2011

FY 20102

FY 20103

FY 20104

FY 20105

16

Total sales of Medium and Heavy Commercial Vehicle (M&CV)

0

1,00,000

2,00,000

3,00,000

4,00,000

5,00,000

6,00,000

M & HCV Bus Sales M & HCV Truck Sales M & HCV Sales

FY 2010

FY 2011

FY 20102

FY 20103

FY 20104

FY 20105 10 m

17

Total sales of commercial vehicle

0

1,00,000

2,00,000

3,00,000

4,00,000

5,00,000

6,00,000

7,00,000

8,00,000

9,00,000

Total LCV Sales Total M&H CV sales Total CV Sales

FY2010

FY2011

FY2012

FY2013

FY2014

10m FY2015

18

Growth Rates by segments

Segments FY2010 FY2011 FY2012 FY2013 FY2014 10m

FY2015

LCV Bus

Sales

27.7% 30.2% 9.0% -2.1% -10.5% -8%

LCV

Truck sales

45.8% 25.1% 29.8% 15.9% -18.3% -13.8%

Total LCV

Sales

43.4% 25.7% 27.2% 14.0% -17.6% -12.4%

M&HCV

Bus Sales

23.5% 11.5% 4.1% -6.0% -17.5% -12.5%

M&HCV

Truck

Sales

35.8% 36.3% 8.8% -25.9 -27.0% 19%

Total,

M&H CV

sales

33.5% 31.9% 8.1% 23.1% 25.3% 10.9%

Total CV

Sales

38.7% 28.6% 18.2% -2% -20.0 -4.6%

19

Growth Rates by segments (LCV)

Growth Rates by segments (M&HCV)

-40%

-20%

0%

20%

40%

60%

80%

100%

LCV Bus Sales LCV Truck sales Total LCV Sales

10m FY2015

FY2014

FY2013

FY2012

FY2011

FY2010

20

-60%

-40%

-20%

0%

20%

40%

60%

80%

M & HCV Bus Sales M & HCV TruckSales

M & HCV Sales

10m FY2015

FY2014

FY2013

FY2012

FY2011

FY2010

21

Total Commercial vehicles sales

-30%

-20%

-10%

0%

10%

20%

30%

40%

50%

60%

70%

80%

Total CV sales

10m FY2015

FY2014

FY2013

FY2012

FY2011

FY2010

22

Role of NBFC’S in Commercial vehicles financing

The NBFC sector has been playing important role in development of the road transport sector.

The banks have not been in a position to deploy more than 3 to 4 percent of their funds to this

sector. Therefore, disbursals to SRTO‘S (small road transport operators) have not been

significant enough to support the road transport operators. Bank funding as a percentage of total

funding in the commercial market has therefore not exceeded 25 to 30 percent in the past.

Recoveries have also not matched expectations. Funding SRTO‘S requires specialized customer

evaluation skills and infrastructure that is different from the requirements of typical bank

borrowers. The operators provide the necessary documentations and securities required for

processing of the disbursal. The purpose of special schemes for SRTOs has been defeated by this

in ability to conduct business in this segment. Further, recovery management in this also requires

specials and infrastructure. The NBFC sector has grown to fill this void. It has developed

necessary focus and the infrastructure to operate successfully in this sector. The high share of

funding to this sector reflects this fact. The NBFC sector therefore is an excellent position to

develop this role in the industry.

Existence of recovery management systems and infrastructure to ensure high collection

efficiency.

Retail network geared to handle the funding requirements of commercial vehicle

operators due to exclusive focus on this segment.

Flexibility to design customised funding options to suit the needs of individual

operators.

NBFC‘s jointly participate with manufacturers to provide higher levels of customer‘s

service. They are in a position to offer vehicle service packages in addition to funding. This is

done jointly with manufactures and dealers.

23

Capability to induct new participants into commercial vehicle operating business by

effective utilization of existing database infrastructure.

Better capability to manage risk due to focused infrastructure and activity.

24

CHAPTER - 2

25

COMPANY PROFILE

IIFL Holdings Ltd is divided into 9 companies.

1. IndiaInfoline Ltd.

2. IndiaInfoline Finance Limited: IndiaInfoline housing Finance Limited is under this

company.

3. Indiainfoline Insurance brokers Ltd.

4. IndiaInfoline Commodities Ltd.

5. IIFL Assets management company & IIFL MF

6. IIFL Private Wealth management Ltd.

7. IIFL (Asia) Pte Ltd.

8. IIFL Inc. (US) investment Advisors Ltd.

9. IIFL (UK)

10. IIFL Multi National Company.

HISTORY OF INDIA INFOLINE FINANCE LTD

IIFL was co-founded on Oct 17, 1995 by Nirmal Jain and R. Venkatraman. Jain was previously

employed with Hindustan Lever Limited. The company was founded as Probity Research and

Services Private Limited which provided research on the Indian economy, businesses and

corporates. The name was later changed to India Infoline Limited.

A few years into the business, the organisation found itself with clients which included research

organisations, banks and corporates. They then began launching their research products to

become more noticeable in the market. In the meanwhile, the dotcom revolution was beginning to

take place in India. Taking advantage of this revolution would mean an increase in the number of

readers to millions. The website was created in 1999.

26

Taking the business one step ahead this group of consultants opened a trading portal –

www.5paisa.com –in 2000 thus moved into the business of being a full service broking agency.

During this time they widened their distribution network.

In 2001, the Indian dotcom industry saw a downfall. During this time, sustaining became tough.

The organisation then decided to tie-up with leading Life Insurance company ICICI Prudential,

thus putting to use its distribution network and becoming India‘s first corporate agent for

insurance.

In 2009, IIFL also held their first global investor conference, Enterprising India, which was

attended by the likes of Jim Walker, David Bloom and Brahma Chellany, amongst others.

Operations and Global Offices

IndiaInfoline has about 4000 business locations in about 900 cities. Apart from India they are

presenting 8 other countries- Singapore, Dubai, USA, UK, Switzerland, Hong Kong,

Mauritius and Sri Lanka.

VISION, VALUES, & STRATEGY

Vision

To become the most respected company in the financial services space in India.

Values

Values are IIFL are summarised in one acronym: GIFTS.

Growth with focused team of dynamic professionals.

Integrity in all aspects of business – no compromise in any situation.

Fairness in all our dealings – employees, customers, vendors and shareholders all

included.

27

Transparency in what we do – and in how and why we do it.

Service orientation is our core value, imbibed by all sales as well as support teams.

Business strategy

Steady growth by adapting to the changing environment, without losing the focus on our

core domain of financial services.

De-risked business through multiple products and diversified revenue stream.

Knowledge is the key to power superior financial decisions.

Keep costs low and continuously strive for innovation.

Customer strategy

Remain largely a retail focused organisation, driving stickiness through knowledge and

quality service.

Cater to untapped areas in semi-urban and rural areas, which is relatively safe from cut-

throat competition.

Target the micro, small and medium enterprises mushrooming across the country

through a cluster approach for lending business.

Use wide multi-modal network serving as one-stop shop to customers.

People strategy

Attract the best talent and driven people.

Ensure conducive merit environment.

Liberal ownership-sharing.

28

CORPORATE STRUCTURE

Brand IIFL

In today‘s world, brand is considered as the most valuable asset of an organisation. It serves as

the medium that connects product as well as service offerings to customers and is an intangible

voice that speaks volumes about the company.

At IIFL, we believe that a brand is the face of a company‘s work culture. Think of it as a

something that introduces us to our customers and to the world. Our brand is our identity; it

narrates our story of success and serves as a sign of trust.

29

Positioning

The IIFL brand is associated with trust, knowledge and quality service. But more importantly, the

brand stands for timely assistance provided to the country‘s under-banked customers.

When we pioneered online trading in India with the launch of our brand 5 paisa, the tag line was

―It‘s all about money, honey‖. We then realigned our positioning from ―Knowledge is the Edge‖

to ―When it‘s about Money‖.

The significance of IIFL logo

The IIFL Logo comprises of the nine triangles which form the Sri Yantra. In Hindu Mythology,

the nine interlocked triangles that surround and radiate from the centre (bindu) symbolize the

highest, the invisible and elusive centre from which the entire cosmos expands.

Our brand represents a cosmos in itself, where two worlds meet. One, where we together strive to

grow and expand and the other, where we strive to make possibilities infinite for our customers.

It is the confluence of these two thoughts, represented by the age old symbol of converging

powers that stands as the face of our brand.

30

WHAT DO INDIAINFOLINE DO?

Financial Advisory & Broking

One of the leading broking house with

extensive presence all over the country

providing financial planning and broking

services in equity, commodities and currency

trading.

Realty & Property Advisory Services

Real estate services provider advising clients

in transaction of commercial and residential

properties across the country. IIFL also

provides advisory and funding services to

real estate developers

Wealth Management

One of the largest and fastest growing

Wealth Management companies in India

with assets under advice, management and

distribution of over Rs. 700 billion

Asset Management

Our AMC is wholly owned subsidiary of

IIFL Wealth and is the Investment manager

of IIFL Mutual Fund and rapidly growing

Alternative Investment Funds.

31

Inte

rnati

onal

Subs

idiar

ies

To

cater

to

overs

eas

Instit

ution

al

Inves

tors

and

NRIs

for

their

India

-

centri

c

invest

ment

s,

IIFL Group has established subsidiaries in seven countries worldwide.

Financial Products Distribution

IIFL is one of the largest distributors of

financial products such as Life Insurance,

Mutual Funds, NCDs, Tax-free bonds, IPOs

etc. through our wide distribution network

and business associates. Emerged as one of

the largest broker for life insurance in the

country.

Institutional & Investment

Banking

Premier broker for FIIs, DIIs, financial

institution, private equity funds and banks.

Investment Banking division leverages its

distribution reach in capital markets with

strong institutional placement capabilities

and a wide reach across investor segments.

Financing

Our NBFC is a diversified financing

company, offering loans secured against

collaterals of home, property, gold, medical

equipment, commercial vehicles, shares and

other securities.

Housing Finance

The company is focussed on home loans and

loans for residential project.

32

CSR Practises by IIFL

Rural Development for Holistic Transformation and Change

IIFL understands that all social problems are intertwined and to bring about a total change it is

important to take a holistic view of the situation. The ―Gram Vardhan― yojana adopts rural

underdeveloped villages to bring about a complete change.

Sustainable Livelihood

IIFL recognizes that it is imperative to mainstream the disengaged to participate in the labour

force of the country and adapt to a sustainable livelihood in order to contribute positively to the

nation building process. The intervention areas under livelihoods for IIFL encompass two broad

verticals: 4 Entrepreneurship and Employment. IIFL Foundation will support holistic

development in regions identified by engaging with the said communities and enabling them to

attain sustainable livelihood opportunities.

Entrepreneurship

IIFL undertakes projects that support small-scale enterprises run by marginalized communities

and equip them with skills and resources to run the enterprises. These projects are further divided

into those that are focused on agro-based enterprises and those that focus on non-agro-based

enterprises

Employment

Projects that fall under this category focus on enhancing employment potential of unskilled or

under skilled populations. These include pre-livelihood training, which involves career

counselling for school children that focus on reducing drop-out rates of students.

Education

33

Education is one of the basic building blocks of a great nation. A literate population can catapult

India towards realizing its demographic dividend. For IIFL, education is one of the key focus

areas for CSR. The CSR projects in education will include promoting education, setting up and

upgrading educational facilities and supporting institutes of higher education.

Financial literacy

IIFL believes that individuals with basic financial knowledge can make informed financial

decisions and therefore, maintain better financial health. Through the IIFL Foundation, the Group

will endeavor to provide information of financial products, especially of rewards and risks, in

order to better equip the financially excluded to make informed choices with respect to money.

The company has undertaken projects that focus on educating school students and slum women

in this respect. The school children targeted are largely those who are studying in 8th or 9th

standard, and include students both from urban schools (both private and municipal schools) and

rural schools.

Healthcare

In its endeavour to promote healthcare (including preventive healthcare), CSR projects of IIFL

seek to support those healthcare initiatives and medical research institutions that aim to enhance

healthcare access, especially to the disadvantaged and underprivileged.

Disaster Relief & Rehabilitation

Major natural disasters can and do a severe negative short run economic impacts. Disasters also

appear to have adverse longer term consequences for economic growth and development . India

is vulnerable to natural disasters and she has to face nature‘s fury atleast once or twice each year.

As a responsible company, IIFL should support the relief & rehabilitation where ever needed.

dard asset).

34

The credit policy of IndiaInfolineFinance ltd.

IndiaInfoline Finance Ltd., (IIFL) has adopted the code to provide transparency in business

dealings with its customers.

Objectives:

To promote good and fair practices by setting minimum standards in dealing with

customers.

To increase transparency so that the customer can have a better understanding of what

they can reasonably expect of the services.

To encourage market forces, through competition, to achieve higher operating

standards.

To promote a fair and cordial relationship between customer and IIFL; and to foster

confidence in the investment services system.

Application of the code:

This code shall apply to all employees of IIFL and other persons authorized to represent it in

the course of its business, whether the products and services are provided across the counter,

over the phone, by post, through interactive electronic device, on the internet or by any other

method.

Commitments:

IIFL shall adhere to this code to act fairly and reasonably in all dealings, on the ethical

principle of integrity and transparency, to meet the standard practices prevalent in the

investment services industry.

IIFL would provide clear information, without any ambiguity, to the customer in

understanding:

35

1. Products and services together with its terms and conditions including interest and service

charges.

2.Benefits available to customer.

IIFL will deal quickly and sympathetically in correcting mistakes if any, and attend to

customer's complaints in light of the objectives of this code.

IIFL shall treat all personal information of customers as private and confidential and shall not

divulge any information to third person unless required by any law or Government authorities

including Regulators or Credit agency or where the sharing of information is permitted by the

customer.

IIFL would provide, on request, copy of the Code to the existing borrowers and new customer

prior to commencement of business transaction.

IIFL shall not discriminate its customers on the basis of race, caste, gender, marital status,

religion or disability. However the restrictions, if any, as mentioned in the loan products shall

continue to apply.

IIFL shall refrain from interference in the affairs of the borrowers except for the purposes

provided in the terms and conditions of the loan agreement (unless new information, not earlier

disclosed by the borrower, has come to the notice of the lender)

IIFL shall ensure that changes in interest rates and charges are effected only prospectively.

Disclosure and Transparency :

IIFL would provide information on interest rates, common fees and charges through:

1. Putting up notices in branches.

2.Through telephones or help lines.

3. Through designated staff/help desk

36

4. Providing service guide/tariff schedule.

Advertising, Marketing and Sales :

IIFL shall ensure that all advertising and promotional material is clear and not misleading. The

Fair Practice Code shall also apply to sales Associates / representatives of the company to the

extent of their identification when they approach the customer for selling products personally.

In case of any advertisement in any media and promotional literature that draws attention to a

service/product and its interest rate IIFL shall also provide the details of other fees or charges,

if any. Further on the request of the customer IIFL shall provide the details of relevant terms

and conditions.

Credit Reference Agencies :

IIFL would give information about customers to credit reference agencies on:-

1. Opening of an account

2. The customer fallen behind with his/her payments and the performance of loan account

which includes how much loan has been sanctioned and the subsequent performance

3. Legal proceedings have been initiated against the customer to recover the dues.

4. Debts settled through legal recourses against the customer

IIFL may give credit reference agencies other information about the customer's account if law

requires it or the customer has given them his/her permission to do so.

Collection of Dues:

Whenever loans are given, IIFL would explain to the customer the repayment process by way

of amount, tenure and periodicity of repayment. However if the customer does not adhere to

repayment schedule, a defined process in accordance with the laws of the land shall be

followed for recovery of dues. The process will involve reminding the customer by sending

him/her notice or by making personal visits and / or repossession of security, if any.

37

IIFL staff or any person authorized to represent the company in collection of dues or/and

security repossession shall identify himself / herself and display the authority letter issued by

the IIFL and upon request, display his/her identity card issued by the IIFL or under authority of

the IIFL . IIFL shall provide the customers with all the information regarding overdue.

All assistance shall be given to resolve disputes or differences regarding dues in a mutually

acceptable and in an orderly manner.

During visits to customer's place by the person authorised by IIFL for dues collection or/and

security possession/repossession the following guidelines shall be followed:

1. Customer would be contacted ordinarily at the place of his / her choice absence of any

specified place at the place of his / her residence and if at his / her residence, at the place of

business / occupation.

2. Identity and authority to represent the Company shall be made known at the first instance.

10. Customer‘s privacy should be respected.

3. Interaction with the customer shall be in a civil manner.

4. The Company representatives shall contact the customers between 0700 hrs and 1900 hrs

unless the special circumstances of the customer‘s business or occupation otherwise.

5. Customer's request to avoid calls at a particular time or at a particular place honored as far as

possible.

6. Time and number of calls and contents of conversation would be documented.

7. All assistance should be given to resolve disputes or differences regarding mutually

acceptable and in an orderly manner.

8. During visits to customer's place for dues collection, decency and decorum be maintained.

9. Inappropriate occasions such as bereavement in the family or such other occasions should be

avoided for making calls/visits to collect dues.

38

Know Your Customer (KYC) Guidelines:

IIFL shall explain the requirements of KYC guidelines to its customers and inform them about

the documents required for establishing the identity of the customer before loan sanctioning,

account opening and operation. IIFL shall also put the KYC requirements and filling up the

same on the website of IIFLwww.iiflfinance.com for the benefits of the customers.

IIFL would obtain only such information to meet with company's KYC, Anti-Money

Laundering or any other statutory requirements. In case any additional information is asked for,

it will be sought separately and shall specify the objective of obtaining such additional

information.

Loans:

Assessment of Loan Repayment Capacity by IIFL:

All loan application received by IIFL will be processed inline with the internal policies and

criteria's. If IIFL cannot provide the loan to the customer, it shall communicate the same to the

customer through its appointed representatives or directly to the customer verbally. In case

customer requires the same in writing the reason(s) for rejection can be provided

Applications for Loans and its Processing:

I. At the time of sourcing a loan product, IIFL shall provide information about interest

rates applicable, as also the fees/charges, if any, payable for processing, pre-payment

options and charges, if any, and any other matter which affects the interest of the

borrower.

II. All particulars required for processing the loan application shall be submitted to IIFL at

the time of application. In case it needs any additional information, IIFL would contact

the customer.

III. IIFL shall convey to the customer the loan sanction along with the terms and conditions

thereof.

39

IV. The customer is entitled to one set of authenticated loan documents on execution of the

same.

V. IIFL shall not discriminate on grounds of sex, caste and religion in the matter of

lending. However, this does not preclude IIFL form instituting or participating in

schemes framed for different sections of the society.

VI. IIFL at its discretion shall process requests for transfer of a loan account, either from the

borrower or from a bank/financial institution, in the normal course. IIFL shall convey

the consent or objection as the case may be within 21 days from the receipt of the

request.

VII. Before taking a decision to change any terms and conditions including disbursement

schedule, interest rate, service charges, recall/accelerate payment or performance under

the agreement or seeking additional securities or any other charges, IIFL shall give

notice to borrowers in consonance with the loan agreement.

VIII. IIFL shall release all securities on repayment of all dues or on realization of the

outstanding amount of loan subject to any legitimate right or lien for any other claim

that IIFL may have against borrower. If such right of set off is to be exercised, the

borrower shall be given notice about the same with full particulars about the remaining

claims and the conditions under which the company is entitled to retain the securities till

the relevant claim is settled/paid.

Guarantors:

When a person is considered to be a guarantor to a loan, IIFL shall inform him/her the

following under acknowledgement-

I. Letter/ Deed of Guarantee stating the terms of liability as guarantor.

II. IIFL shall keep him/her informed of any default in servicing of the loan by the borrower

to whom he/she stands as a guarantor.

40

Branch Closure/Shifting:

IIFL shall inform the customer in the event of closure/shifting of its branch office.

Communication with the customer:

Customers should be able to access the Company through any of the following means:

I. Walk In to branches (as mentioned in Company brochure/website/any other leaflet)

II. Telephone, Fax and Email ID (as mentioned in Company brochure/website/any other

leaflet)

Complaints :

IIFL would strive for customer satisfaction within the framework of law, adopted policies and

procedures.

In case of any grievance, the customer may approach the In-Charge of the business location

where he / she had his / her account and register the complaint in the 'Complaint Register'

available with the In-Charge. The Company has in place Customer grievance recording and

resolving process. The process broadly includes mode of receipt and resolution of complaints

and turnaround time for resolution.

On registering the complaint, the customer should obtain complaint number and date for future

reference.

Customer may also write / communicate with the concerned location for redress of the

grievance.

PRIVACY AND CONFIDENTIALITY

IIFL shall ensure all personal information of customers are treated as private and confidential

[even when the customers are no longer customers], and shall be guided by the following

principles and policies. IIFL shall not reveal information or data relating to customer accounts,

41

whether provided by the customers or otherwise, to anyone, including other companies or

entities in their group, other than in the following exceptional cases:

I. If the information is to be given by law.

II. If there is a duty towards the public to reveal the information.

III. If the Company's interests require them to give the information (for example, to prevent

fraud) but it should not be used as a reason for giving information about customer or customer

accounts [including customer name and address] to anyone else, including other companies in

the group, for marketing purposes.

IV. If the customer asks the Company to reveal the information, or with the customer's

permission.

V. If IIFL is asked to give a reference about customers, they shall obtain his / her written

permission before giving it.

VI. The customer shall be informed the extent of his / her rights under the existing legal

framework for accessing the personal records that an IIFL holds about him /her.

VII. IIFL shall not use customer's personal information for marketing purposes by anyone

including IIFL unless the customer specifically authorizes them to do so.

General:

IIFL reserves the right to amend /alter /modify the codes as mentioned herein above and

provide updates from time to time, not affecting/sacrificing the underlining spirit of the code.

Such alternation/amendments may be displayed at the notice boards of the branches /Corporate

Office for the benefit and information of the customer.

42

CHAPTER - 3

43

REVIEW OF LITERATURE

The account of the previous studies taken in this field is presented in the table below

Title Author Journal Name Year Findings

Credit Appraisal System in

Allahabad Bank

Dr Kalra,

R.

International Journal of

Management, IT and

Engineering

2012 The Credit Appraisal

System of Bank is in

accordance with the RBI

norms and effective Credit

Appraisal Cells at Zonal

offices has helped the bank

in effectively identifying

the creditworthiness of the

borrowers and NPA

management

Credit Appraisal Process of

SBI

Arora ;

Arti

Gaur;

Babita

A Journal of

Economics and

Management

2013 Credit appraisal is done to

check the commercial,

financial & technical

viability of the

project proposed its funding

pattern & further checks the

primary or collateral

security cover available for

the recovery of such funds.

An Overview of Credit

Appraisal System with

special reference to

Micro Small and Medium

Enterprises. (MSME)

Sharma,

&

Kalra

Pacific Business

Review International

2015 The credit appraisal system

followed by Micro Small

and Medium Enterprises

(MSME) sound enough

with respect to the

parameters used for

appraisal.

A Study on Credit

Appraisal System of Sakhti

Finance limited, Calicut

with special reference to

commercial vehicles.

Balkees International Journal of

Research instinct

2015 The most important reason

for default could be

mismatch between

borrower‘s item of credit

and creditors term of credit.

44

Reasons for doing this study

The credit appraisal holistic exercise which starts from the time a prospective borrower walks

into the branch and culminates in credit delivery and monitoring with the objective of ensuring

and maintaining the quality of lending and managing credit risk. The process of credit appraisal

is multi dimensional and includes,

Management Appraisal

Technical appraisal

Commercial appraisal

Financial appraisal

Economic appraisal

Management appraisal has received lot of attention these days as it is one of the long term

factors affecting the business concern. Technical appraisal emphasis on the technical feasibility

of the venture and it also finds the possible economic life period of the present technology.

Commercial appraisal focuses on the commercial viability of the project. It tries to find matters

regarding demand in the market, the acceptance of the product in the market. It also focuses on

the presence of other substitutes of product in the market.

It also focuses on the multiple scope of the product. Financial appraisal is done to find out

whether the promoter is having the capacity to raise the finance both own equity and debt?

What are the sources of margin?

45

The scope of the credit structure is incomplete without examination of credit proposal. Credit

proposal has to be examined from the point of 5 C’s viz.

Character

Capacity

Capital

Condition

Collateral

46

Limitation of study

Difficulty in data collection :

It is difficult to collect more important and confidential personal documents. They are rarely

recorded and more seldom preserved. They are generally destroyed after a short time.

Limitation of time :

There are limitations of time so i can‘t measure the trends which are very slow. Due to lack time

i can‘t have that much quality data.

Inadequacy of sufficient materials:

There is great dearth of journals and magazines in different areas in India to publish data

concerning various aspects of problem. Even the data is collected: it is seldom published in

time. Thus i can‘t use it for our purpose of research.

47

CHAPTER - 4

48

Research methodology

Methodology is the important part of research study, which enables the researcher to form blue

print of the research undertake. Research methodology involves the systematic procedure by

which the research starts from the time of initial identification of the problem to the final

conclusion.

This chapter deals with different steps which are undertaken by the investigator for gathering and

organising the data. It includes the description of research approach, research design, setting of

the study, population, sampling techniques, criteria for selection of the sample size, limitation,

method data collection, development and description of the tools.

Objective of the study

o To study and understand the parameters of credit appraisal system of commercial

vehicle finance at IIFL.

o To study the process of credit appraisal and the reason for an increase in the no. Of

defaulters at IIFL.

o To identify and suggest the scope for improvement in credit appraisal system.

Data Used:

For the present study secondary data has been used. This comprises of Records, Published data,

Journals and magazines, internet and other documents.

49

1) Records:

Records occupy the most important place among public documents. Most of companies preserve

so many types of a record of important information. I used much information from the records.

2) Published Data:

Published documents include published by institutions from time to time. I used this data which

company published for their customers.

3) Journals & Magazines:

Journals & Magazines are important public documents including a variety of information, which

can be usefully utilized in research. Most of this information is very much reliable. Letters to the

editors published in various magazines and journals are important source of information.

4) Other documents:

Other documents mainly include newspapers publish news, discussions on important issues,

meetings and conferences. The reliability of this source is very high. Besides it television public

speeches are other important source of information.

5) Internet:

In today‘s world of information technology internet is the biggest source of secondary data. I

used internet for finding many data.

50

CHAPTER - 5

51

DATA ANALYSIS

Year 2014-2015 2015-2016

Loans sanctioned 2175 3726

Defaulters 64 191

Loan Appliers To Defaulters

The following is data loan appliers anddefaulters. In the year(2014-2015)97.06% of the

customers are able to repay the loan amount but 2.94% failed to repay.

In the year (2015-2016) 94.87% of the customers are able to repay the loan amount but 5.13%

failed to repay.

92%

93%

94%

95%

96%

97%

98%

99%

100%

2014-2015 2015-2016

Percentage change

Defaulters

Loan sanctioned

52

The average percentage of default in these two years taken together which shows us default of

5.51%

Loan Amount To Loan Defaulted

Year (2014-2015) in cr. (2015-2016) in cr. NPA %

Loan amount

sanctioned

110 237 0.51

Defaulters 0.56 2.16 0.91

The following is the data loan amount sanctioned to the customers and loan amount defaulted by

the customers. The 99.29 % of the loan amount is recovered but 0.71% of loan amount is failed

to recovered.

0

50

100

150

200

250

300

14-15 15-16

% NPA

NPA (In cr)

In Cr

53

Reasons for Default

Capacity issue:

Capacity—too much of it, or too little. One of the major causes of default by a Loanee is the

decrease in the capacity to produce. A new customer may fail to operate a vehicle because of

which there will be a decline in his/her income, thus he/she won‘t be able to repay the loan

amount that has been borrowed from the NBFC or a Bank.

Circumstantial Defaulter:

A loanee may also default because of certain conditions that are generated usually from the

external environment. Some of the sources include

a) Theft.

b) Govt. Norms issue.

c) Accidents.

d) Death cases.

Service issues:

5%

91%

3% 1%

Capacity issue Circumstantial defaulter

Service Issues Habitual defaulter

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Another cause of default may because of the poor services provided by the bank or a financial

institution. A bank or any nbfc may change the terms and the norms of an agreement with a

customer. What they promised before the agreement , they are not able to stand on their terms

and conditions. Some of the service issues may be:

a) Rate issue.

b) Repayment period issue.

c) Advance EMI issue.

d) PF and other advances issue.

e) Timely and ECS and ACH presentation.

Habitual defaulter:

Habitual defaulter is the actual defaulter; this person defaults because his/her intentions are not

clear. The person has actually applied for the loan for the purpose that he/she won‘t repay back.

This may result a case of fraud later on.

55

Parameters used for Credit appraisal

Parameter Documents

Technical

feasibility

Field investigation, Market value asset

Economic

viability

LTV (loan to value), IIR

Bankability Past month bank statement, Assets and liabilities of

an applicant

CIBIL

Report

Credit worthiness

1. Technical feasibility:

Technical

Feasibility

What is company looking for

Living Standard Decent living standard with some tangible assets like

T.V and Refrigerator will provide assurance to bank

regarding to the residential status of the customer.

Locality Presence of some undesirable elements like local

goons or controversial areas adversely affects the loan

appraisal process.

Telephonic

verification

Educational

Qualification

Not an essential barrier but essential to understand the

complex terms and conditions of bank loan.

Political influence An interesting reference point in the sense that they

56

are one of major categories of loan defaulters.

References To establish the residential identity of person from

human contact point of view and cross check of their

loans.

2. Economic feasibility:

Economic viability

Instalment to income ratio IIR for salaried case would be capped at

60% of net income in general.

Pension income cases IIR restricted to

be 40%.

Fixed obligation to income ratio FIOR kept at 55%.

Loan to cost ratio LTV amount to 80%.

3. Bankability:

Parameter Norms Check point’s

Bank statements 6 months bank

statements need to be

furnished.

To check the average

amount client is

maintaining in the

account is sufficient to

pay the instalment

amount or not.

Business continuity

proof

Two years IT returns

made compulsory.

To enquire primary

source of income.

Credit interview For the big loan amount

credit interview is

necessary.

To check the general

attitude of customer

along with efforts are

put in to understand

57

their needs better.

Profile of customer Salaried professionals

get an edge over

business income people.

Secured source of

income give them a

edge.

Security Asset of value equal to

or more than loan

amount taken has to be

put as pledge or

collateral.

To safeguard bank

interest against any

future default.

Ownership title To be on the name or

blood relative of

applicant.

To establish the

ownership claim of the

loan applicant.

Credit Information Bureau (India) Limited

CIBIL is India‘s first Credit Information Company (CIC) founded in August 2000. CIBIL

collects and maintains records of an individual‘s payments pertaining to loans and credit cards.

These records are submitted to CIBIL by member banks and credit institutions, on a monthly

basis. This information is then used to create Credit Information Reports (CIR) and credit scores

which are provided to credit institutions in order to help evaluate and approve loan applications.

CIBIL was created to play a critical role in India‘s financial system, helping loan providers

manage their business and helping consumers secure credit quicker and on better terms.

CIBIL Score:

The CIBIL score is predictive scoring model that uses the credit information available at CIBIL.

The score is a number between 300 and 900 which is calculated at the time a credit report is

accessed and is representative of an individual‘s credit behaviour. The higher the numerical value

of score the lower the risk profile of the individual.

What factors influence the score?

Various factors influence the score, including the following;

58

1. Payment history

2. Outstanding debt

3. Length of credit history

4. Number and types of credit accounts

5. Utilisation

6. Application‘s for new credit

These factors impact the score either positively or negatively. Factors that have an unfavourable

impact on the score are explained in reason codes.

Score range is between 300 and 900: but in some cases score can be 0 or -1.

Score could be ‗-1‘ for no match cases or cases with only enquires.

Score could be‘0‘ for cases where the account opened trade is less than 6 months or there is an

error while computing score.

FAQ – CIBIL Score

1. Individuals get‘s a score of ‗0‘ for the following reason:

Individual has no trade with performance history of > 6 months.

Due to data base connection issues there are few enquire with a score of ‗0‘. This however, is an

aberration. If an enquiry is pulled on the same individual again he would get a valid score.

Score could be ‗0‘ owing to errors specified as duplicate history as well. Such cases arises due

to wrong reporting.

2. Individual get‘s a score of ‗-1‘ in case of the following:

Individual has no trade and is not reported to CIBIL.

Individual has no trades and has not only been enquired upon.

Individual has trades on the CIBIL. However, same has not been reported in the last 24 months

prior to the date of inquiry done by the member bank.

3. Cases where score is higher despite default (suit filled status written off etc.,/ amount overdue

value being present):

Refer to the latest date reported for such cases. Recency of delinquency/ overdue amount flag is

given higher weight while computing the score. In recent 6 months, if there are no trades with

delinquency flags and no overdue amount, then it will fetch more score for the customer.

59

Amount overdue reported but asset classification reported as STD (Stan

5 C’s of Credit :

Credit-Appraisal

1) Character:

It refers to the honesty and integrity of the person. Borrowers are not necessarily reliable or host

and the lender must look evidence of good character, if it exists. Frequently, this can be

ascertained during an interview. The lender must, however, be sure to make his own assessment

and not rely on the decision of an existing lender, or similarly on a key individual in the

company- so called name lending.

Character

Capacity

Capital Collateral

Condition

Credit Appraisal

60

2) Capacity:

It refers to the actual ability of the borrower to enter into a contract with the lender. It relates to

the technical, managerial and financial means. It also refers to how the company monitors and

manages its risks and the suitability of the assets in the company to generate sufficient levels of

cash to repay the loan.

3) Capital:

Capital refers to the investment or the stake that the borrower has in the firm. This is important to

understand the capability of the individual. It is important for analysis as it determines how well

the firm is capitalized and does the borrower has reasonable stake or he is willing to let it go

down the tubes and walk away from the obligations.

4)Collateral:

It analysis other potential sources of repayment of the obligations if these aresupported by

collateral security. Typically the amount of security required will depend on the type of business

enterprise and the circumstances.

5) Conditions:

It discusses the competitive environment of the firm and how well the firm fits in. It also

considers any economic event that affect the repayment ability of the firm and also the purpose

for which loan is required.

61

Credit appraisal process at IIFL

Marketing Executive

File

Credit Department

CIBIL

FI (Field Investigation)

Marketing Executive

Credit Department

Approval / Decline

Post Approval Documents

Disbursement

Credit approval memo

62

Sales executive:

Sales executives sell a company's products and services. Customers include individuals,

businesses and government organisations and sales may be domestic (within the UK) or

international, or a combination of both.

As well as approaching potential customers with the aim of winning new business; sales

executives work to maintain good relationships with existing clients, gaining repeat business

wherever possible.

File Making:

The second thing the company officials do is that they send their sales executives to the

customers for attaining KYC documents (know your customers). These documents include any

identity proof like PAN card, VID Passport, Driving license, Voter Card & address proof such as

VID, passport, Bank Statement, Adhaar card. These documents help in identifying the details of

the customer about his residence and his personal identification.

Asset related documents in file making: asset related documents are fulfilled by dealer (in case

of new vehicle) and by client himself/herself (in case of old vehicle)

Documents related to asset

New vehicle: Invoice/Bill or Performa

Used vehicle: RC (registration certificate), Insurance policy, Permit, Fitness, Tax, Valuation

(value of vehicle)

Credit:

After the sales team credit department investigates about the worthiness of the customer which is

based on the five C‘s of credit that are:

1) Character

2) Capacity

3) Capital

63

4) Condition

5) Collateral

For this the credit team goes for CIBIL (credit information bureau limited) & FI (Field

investigation)

CIBIL scorecard of a client is calculated and if the score is found greater than 500 than the credit

team approves for further processing like FI (field investigation) that can be done internally and

externally.

Marketing executive:

After credit team processes the CBIL score and FI, the credit team sends the customers file back

to the sales team. The sales team prepares the credit approval memo under which they enquire

about the vehicle which is needed by the customer weather which is a light commercial vehicle

(LCV), moderate commercial vehicle (MCL) or heavy commercial vehicle (HCL). They also

check about the loan amount further they also check the background of a customer whether the

customer is a newcomer or already exists in the segment.

Credit department:

After accessing by the sales department finally the credit team decides whether the loan should be

approved or disapproved to the customer.

For the decision making credit department cross checks whether the relevant documents are

positive or negative viz.

1) CBIL report Positive

2) Field Investigation Positive

3) Policy criteria Positive

4) Telephonic verification report (TVR) Positive

64

If these documents are found with the positive review by the credit experts than the loan is

sanctioned by the credit team, and if any above conditions are not met than the loan won‘t be

granted to the customer.

Post approval documents:

When the credit team finally sanctions loan to a customer Company demands further documents

such as Insurance policy, registration certificate, (in case of new vehicle it is mandatory to submit

these documents within 30 days) affidavits, signed blank cheques.

Disbursement:

Finally the amount of money in the form of loan is paid to the customer in the form of cheques or

in the bank accounts. The company charges

65

Findings and Recommendation

IndiaInfoline Finance Limited is one of the trusted financial institutions limited in

NBFC, with a huge number of satisfied customers more than 10 Million.

Underwriting or Credit appraisal plays a very vital role and key role in any organisation

for the selection of right buyers for lending through which various resources as explained in the

report.

The staff and the team of IndiaInfoline finance limited is very much cooperative and

supportive in nature of response.

IndiaInfoline provides various kinds of lending to its customers in commercial vehicle

including new vehicle, re-finance, used finance & BT loan.

From the data the loan procedure of the company is easy as compared to others.

Although there is a tough competition in the market, but it was also found that these

NBFCs are connected with each other. The middle level managers of different companies share

their daily experiences with each other. This helps them to avoid some risks and losses.

The overall collection percentage of the IndianInfoline finance limited is about 98.70%

in commercial vehicle finance.

There is an increase in the number of defaulters at IIFL from 2.94% to 5.13% in 2014 –

in 2016.

The main reason for an increase in the number of defaulters at IIFL is an inefficient

process of screening and lengthy process of credit appraisal.

66

The Company should move to E-Documentation that will help in reducing the

documentation part as well as save the paper work and reduce the overall TAT in the decisioning,

despite of the fact that it will enhance the productivity of the team too.

Company should appoint customer relationship manager for better customer relations.

The company should offer some special offerings to their existing clients to sustain their loyalty

towards the company.

67

CHAPTER - 6

68

Conclusion

The credit appraisal system in IIFL is simple to understand and easy to calculate, which helped

me to understand the credit appraisal system. Sometimes credit goes to wrong person then it will

also affect the performance of the company because company may give loan against

hypothecation (HP) of vehicle. The loan system starts from verifying and checking the necessary

documents, collection the actual cost in terms of monthly instalment and end‘s with No Objection

Certificate (NOC).

In the company the credit manager is the only person who takes care of proposals. The credit

manager should consult the recovery manager that a person is not a default gist. If the customer is

taking loan twice then credit manager should check his/her previous record.

It can be concluded from the study that the Credit appraisal process at IIFL goes through a set of

processes which have been described in the project.

The study found that current credit appraisal process at IIFL is time consuming process and it can

be significantly reduced by following certain set standards. It was also found from the study that

at the percentage of defaulters at IIFL increased from 2014 to 16 the main reason for such an

increase was such poor techniques used for credit appraisal at IIFL.

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Crizal reports

http://www.iiflfinance.com/policies/fair-practice-code

http://www.iiflfinance.com/commercial-vehicle-loan/product-details

https://www.dnb.co.in/BFSISectorInIndia/NonBankC2.asp

https://rbi.org.in/Scripts/BS_ViewNBFCNotification.aspx