Important factors that are considered in credit appraisal in Bank are:

1. Background of the company: Business of the company, key milestones achieved since

incorporation, Business Segments and Product Profile, Capacities and Production facilities,

Technical Collaborations, Marketing , Group companies.

2. Promoters & top management – (a) have the promoters/senior executives ever

defaulted in the past either in this company or in any of the group companies and the reasons for

the same b) market reputation c) non-compliance of any regulatory guidelines, Management

achievements and skills (project management skills/ market share/ shareholder value/ strong

marketing and production skills/operational efficiencies / decision making skills/ challenges

faced and their ability to overcome them etc.). Key man risk and succession plan. References,

capacity, address, educational qualification, experience in the field, technical expertise, network

so that the real worth of the business promoters can be assessed. In case of partnership firm, the

study of the above mentioned factors of all the partners are studied.

3. Industry analysis: industry related Outlook (demand/supply/margins), Global Scenario,

Competitiveness of Indian Industry (areas of strength and weakness to be identified/ growth

segments/ export potential/import threats- tariff / regulatory protections if any) are analyzed.

4. Business module: Please highlight the major strengths and weaknesses visa-a-vie

competitors, sources of purchases, raw materials & spares, credit period, purchase orders that the

business receives, time required for preparing raw material, transit time, payment terms,

conversion of the raw materials time, raising of the invoices for the output, stake holders of the

business, standard credit turn over (usually 90 days) , vendor analysis is done under the head of

the business module as value chain analysis of the business helps in understanding the business

better.

(Specific aspects to be covered may include (only relevant ones, not each one) -

Technology/R&D/Distribution/Market segmentation/Location/Outsourcing/Access to low cost

inputs/Integration in value chain/Business model which may be difficult for competitors to

replicate).

5. Production process: The production details of the business venture needs to be analyzed

in terms of the installed capacity, the conversion time of the inputs to output, utilized capacity &

the number of shifts that are carried in the organization.

6. Product profile: the product produced, its potentiality, the target market, life cycle of the

product, usage cycle, demand, competitor’s product, quality, product prices, substitutes are also

important factors of the credit appraisal determination.

7. Financial & operational analysis: the financial analysis of the project is the factor on

which the viability of the project can be traced. The factors of the financial analysis are sales,

sales trend for past 5 years, profitability aspects which include profit before depreciation interest

& tax, profit before tax, profit after tax, operating margins, cash accrual, liquidity ratio, gearing

ratio, leverage ratio, credit holding period, cash flow & fund flow of the firm.

(Rs. crores)

(YEAR 1) (YEAR 2)Last

Year

Last

Year

(Current

Year)

(Next

Year)

Audited Audited Estimates Audited Estimates Projections

Net Sales

Operating Profit

Other Income

PBDIT

Depreciation

Interest

PBT

PAT

Cash Accruals

Paid up Capital

Tangible Net worth

(TNW)

TTL

TOL

Net Sales Growth

(in %)

Operating Profit

margin (in %)

PBDIT Margin (in

%)

PAT Margin (in %)

ROCE (in %)

TOL / TNW

TTL / TNW

Current Ratio

Current Ratio w/o

TL Inst.

Interest Coverage

DSCR

In case of renewal of working capital loans the estimates made for the year at the time of the last

assessment are to be given in brackets.

Cash Flow Analysis:

(Cash flow statements would be annexed to the balance sheets in case of those companies/firms,

which have a turnover of more than Rs.50.00 crore or borrowings in excess of Rs.10.00 crore

during a given accounting period (As-3))

Generation of cash from all the three activities is given as per the following table with brief

comments on the ratios suggested as per Circular No.: Credit/13/2008-09 dated 12 th December

2008.

(Rs. in crores)

Audited

Year before last

Audited

Last year

Estimates

Current year

Opening cash & cash equivalents

Net operating cash flow after working

capital changes

Cash flow from investing activities

Cash flow from financing activities

Surplus/Deficit

Closing cash & cash equivalents

Funds Flow Analysis:

Funds Flow Analysis reveals the effect of change in the financial position between two balance

sheet dates in the NWC of the Company/Firm. As WC lenders, Bank would like to know

whether the funds provided by it have been put to proper uses, whether the NWC of the

Company/Firm is increasing or not, if increasing, what are the components that have funded the

increase. For this purpose, Funds Flows Analysis is carried out by examining the sources and

uses of funds and brief comments on cash accruals vis-à-vis estimates, repayment of term loans,

infusion of equity/quasi equity, investment in fixed assets, payment of dividend, retention of

profits be furnished.

(Rs. in crores)

Audited

year before

last

Estimated

for last

year

Audited

for last

year

Estimates

for

current

year

Projection for

next year

Long Term sources

Long Term uses

Surplus/Deficit

Short term sources

Short term uses

Surplus/Deficit

7. Position of Existing Accounts:

(Rs. crores)

FacilityExisting

Limit

Drawing

PowerOutstanding Irregularity

Fund Based WC

Cash Credit

Demand Loan

Export Packing Credit

Post Shipment Credit

Others

Total –A

Non Fund Based WC

Letter of Credit

Bank Guarantee

Others

Total – B

Total WC – C (A+B)

Term Loan

DPG

LC for Capital Goods

Total – D

Grand Total (C+D)

(In case of irregularity, reasons thereof and likely time by which it would be adjusted to be

stated).

(In case of Term loan the drawing power would be the operative limit i.e. the loan amount minus

the installments due. However, if there is undrawn portion, the same to be clearly shown)

Details of Proposal

Sanction/ Enhancement/ Renewal of working capital limits as follows

(Rs. crores)

Facility Existing LimitProposed

Increase/(Decrease)Total

Fund Based

Cash Credit *

Demand Loan

Export Packing

Credit

Post Shipment Credit

Total –FB

Non Fund Based

Letter of Credit

Bank Guarantee

Total – NFB

Total

Sanction of Term Loan / DPG / LC facilities

Amount of Loan/ nature of the loan / Capital goods LCs as sublimit under LCs if any to be

mentioned.

Proposed Project

Description of the project (also discuss the location, infrastructure, utilities, technical

arrangements, EPC Contractors, impact on environment, if appraisal of the projected has been

carried out by any agency/ institution, etc.)

Project Cost (Rs. crores)

Particulars Already Incurred To be Incurred Total

Land

Land Development

Building

Plant and Machinery – Imported

Plant and Machinery –

Indigenous

Misc. Fixed Assets

Technical Fees

Others (if any to be specified)

Contingencies

Sub Total – A

Interest During Constriction

(IDC)

Preliminary and Pre-operative

Expenses

Margin Money for Working

Capital

Sub Total ( B)

Total (A+B)

Means of Finance: (Rs. Crores)

Particulars

Already

brought/ tied

up

To be brought/

tied upTotal %

Promoters Equity

Public Issue

Subsidy

Internal Accruals

Sub Total (A)

Term Loans (Rupee)

Term Loans (Foreign

Currency)

DPG

Other Debt

Sub Total (B)

Total (A+B)

9. Security / Collateral details: the security that the customer is providing to the bank is

referred to as the collateral security. This collateral is very important factor of study because it

minimizes the risk in case of nonpayment of the loan that the assesses would be supposed to &

this collateral will help the banker to reduce the level of the NPA.

Primary:

Collateral:

EM charge on the following immovable properties:

(Rs. in crores)

Sl.

No.

Description of

the Property

Owner of the

Property

Valuation Date Valuation

Amount

Personal Guarantee: (Please give the net worth details)

(As of a recent date/31st March of the last financial year).

Corporate Guarantee: (Please give net worth of the firm/company)

(As of a recent date/31st March of the last financial year).

Security Coverage Ratio:

Total Exposure Value of the Collaterals Collateral Security

(%)

Collateral Security (Value to be mentioned. In case of corporate guarantee brief profile and

financials of the company extending the guarantee and the aggregate guarantees executed by the

entity on behalf of associate concerns to be given in annexure. In case of personal guarantees

net-worth to be obtained)

Time being granted for security creation.

Disbursement

To whom the disbursements are to be made, are multiple disbursements allowed, last date for

disbursements if any, supporting documents to be submitted for disbursement of funds.

Other Proposals (if any)

Changes if any to Existing Terms / Standard Terms / Deviations from Credit Policy

Changes other than those related to pricing are to be discussed

10. Risk Analysis

Risk Factors Risk Mitigates

11. Assessment of limits: the assessment of the limits of a particular project is done. There are

two types of assessing limits they are fund based limit & non fund based limits. The assessment

is done be following

12. Collateral details: the security that the customer is providing to the bank is referred to as the

collateral security. This collateral is very important factor of study because it minimizes the risk

in case of nonpayment of the loan that the assesses would be supposed to & this collateral will

help the banker to reduce the level of the NPA.

13. Credit rating & pricing: the ratings to the business proposal submitted or new venture

project details are studied, analyzed & ratings are given on the basis of the financial, business,

industry, management & conduct parameter so that the credit that can be given to a proposal can

be assessed & sanctioned.

13. Conduct and Value of Account

Conduct

Security creation/ timely payment of dues/conduct of the account/utilisation of limits

(reasons for low utilisation is any)

Audit comments

RBI audit/Internal audit/Statutory audit comments and responses to be given

Value of account

(In case we have a strong relationship with the other companies in the group the values of

connection to be mentioned)

14. SWOT Analysis: the situational analysis which includes in-depth study of the strengths,

weakness, opportunities & threats of the business is done & conclusions are made.

15. Prudential Exposure Norms (Rs. Crores)

Max.

Permissible

Exposure

Existing

Exposure

Proposed

Exposure

Total

Exposure

RBI InternalFund

Based

Non-

Fund

Based

Fund

Based

Non-

Fund

Based

Company

Group

Company 1

Company 2

Total

Exposure

(If internal norms are being exceeded, justification for the same and plans if any, to reduce

exposure to be given).

16. RBI Defaulters List, RBI Willful Defaulters List/Ecgc Caution List:

Particulars Date Position

RBI Defaulters list

ECGC Specific Approval List

17. CIBIL Defaulters List:

Credit reports of Credit Information Bureau (India) Ltd (CIBIL) should be made use of without

fail for new clients and in case of existing clients at the time of annual review/renewal of limits.

Copy of CIBIL Credit Report to be enclosed to the proposal.

18. Value of the account

(In case of Review/renewals) (Delete whatever not applicable)

(Rs. in crores/lacks)

Facility

01.04.XXX

to

31.03.XXX

For current

periodRemarks

Cash Credits:

Debit Summations in the account.

Credit Summations in the account.

Maximum Balance

Minimum Balance

Average Balance

Interest earned in the account during

the period of review.

Any cheque returns during period of

review.

Term Loans:

Installments and interests paid in time.

Interest earned on term Loan during

the period of review.

Export Packing Credits:

Interest earned on EPC.

Whether liquidation of PC’s are on

time.

LC:

Number of LCs opened.

Amount of LCs opened.

Number of LCs devolved.

Amount of LCs devolved.

Commission earned.

BG:

Number of BGs issued.

Amount of BGs issued.

Number of BGs invoked.

Amount of BGs invoked.

Commission earned.

FBILL/Inland Bills:

Number of Bills Discounted.

Amount of Bills Discounted.

Number of Bills Dishonored.

Amount of Bills Dishonored.

Number of Bills Overdue.

Amount of Bills Overdue.

Interest earned on the bills.

Whether entire export sales is routed through us.Other checks:

Whether stock statements submitted

regularly.

Number of occasion’s excess drawings

allowed.

Whether excess drawings regularized

within stipulated time.

Whether insurance is adequate and

current.

Whether security documents are

current and in order.

Availability of Search report ROC -

Verification of charges

Compliance of Terms & Conditions

stipulated during last sanction –

Pending Terms & Compliance.

19. Other Observations (if any)

(Observations if any, from Internal/credit audit, RBI Inspection etc. & reply thereto)

20. Recommendations

Basis of recommendation to be given. Terms and conditions as per appendix.

We certify that RBI instructions/Central Office instructions including instructions on

documentation/instructions of other regulatory authorities/local laws etc have /will be complied

with.

21. Terms & conditions:

All terms & conditions as per Circular No. Credit/21/2006-07 dated 17.06.2006 to be

complied.

All terms & conditions as per Circular No. Credit/07/2008-09 dated 22.09.2008 to be

complied.