Take Risks but Calculated!!!

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Presentation transcript:

Take Risks but Calculated!!! “Credit Management” Learning Objective Take Risks but Calculated!!!

Course Objectives Motto for the Class: To give the students the capacity to understand the theory and apply, in real world situations, the techniques that have been developed in Credit Management: Motto for the Class: If it cannot be applied, who cares???? To give students the big picture of Credit Management so that students may understand how things fit together. You can forget the details, but don’t miss the story line!!! To prove that Credit Management is FUN. Are We having Fun Yet????

Magnitude of Credit Portfolio of Banks

Where there is Credit Portfolio, there are BAD LOANS!!!

BAD DEBTS (Non Performing Loans)

What is Credit Management??????

Goals & Objectives of Credit Management Assess and assure Credit Risk and manage it in such a way that risks (losses) are minimized and return is optimized. To achieve target cash flows followed by risk based return by managing a credit portfolio. Install a system and control measures for periodic reviews.

Formulation of Credit Policy Credit Initiation Credit Management Credit Management is a process of managing Credits using following steps: Formulation of Credit Policy Credit Initiation Credit Evaluation & Risk Assessment and Credit Monitoring & Control

Credit Policy Credit Policy Provides a broader frame work of reference and uniform standards. It should be flexible to meet various situations It should aim to provide guidance for what to do, not how to do. Should contain segmentation of the Credit Portfolio. Should consider Legal & regulatory environ. Should clearly specify certain parameters like maximum amount of loan, deposits and capital etc. Should clearly state the delegated authorities for processing and approval of loan. Guidelines for pricing Quality of Credit Should put a good administrative set up for Credit administration.

Target Market refers to business discipline & selectivity. Credit initiation Target Market planning is the most important aspect of the Credit Initiation. Target Market refers to business discipline & selectivity. The Target Market (TM) process follows the formulation of the overall business strategy for the Bank Identifying business potential, defining desirable opportunities and adhering to resultant marketing objectives. TM identifies the acceptable and desirable profile of customers and the products to be offered. Defines Risks Acceptance Criteria (RACs)

Credit Evaluation & Risk Assessment The 3 C’s of the Credit: Character Capacity Collateral Risk Assessment: Business Risk Management Risk Product Line Critical Success Factors Risk Based Pricing.

Credit Monitoring & Control Periodic Reviews Interim Reviews Quarterly Accounts Identification of Early Warning Signs Classification of Bad Debts & Rehabilitation of Bad Debts (Remedial Management).

Marks Distribution Weightage Sessional Exams: 40 Quizzes: 7.5 Project: 20 Class Participation: 7.5 Final: 75

The House is Open to Any Number of Questions Thanks