Professional Documents
Culture Documents
Management
Dr. A. Muralidhar Prasad
M.Com, MBA, M.Phil, CAIIB, PGDADR , Ph.D
Associate Professor
and
Agenda
Overview of Lending Activity
Principles and Objectives of Credit Management
Credit Policy in Banks
Lending Classification
Credit Policy
Credit Creation
Credit Creation
77567.21
Aggregate Banking Credit (10th Jan- 2014)
Rs. In Billions
59698.28
Credit Creation
The All-India credit-deposit (C-D) ratio of all SCBs
stood at 77.8 per cent in September 2013.
Among the States/Union Territories, the highest
C-D ratio was observed in Tamil Nadu (125.2 per
cent) followed by Chandigarh (121.1 per cent)
and Andhra Pradesh (111.3 per cent).
At the bank group level, C-D ratios of Foreign
Banks (89.0 per cent), New Private Sector Banks
(84.5 per cent), and SBI and its Associates (78.9
per cent) were higher than the all-India average
http://rbidocs.rbi.org.in/rdocs/Publications/PDFs/0QSCBS23011
4_F.pdf
College of Agricultural Banking, RBI, PUNE
Credit Management
Credit refers to
Short Term Loans & Advances
Medium / Long Term Loans
Off-Balance Sheet Transactions
Management refers to
Pre-sanction appraisal
Documentation
Disbursement
Post-lending supervision and control
Credit Management
Credit Management includes
Capital adequacy norms
Risk Management including ALM
Exposure Norms
Pricing policy and credit risk rating
IRAC norms
Appraisal, credit-decision making and loan review
mechanism
Two-pronged approach
Pre-Sanction appraisal
To determine the bankability of each loan proposal
Post-Sanction control
To ensure proper documentation, follow-up and supervision
According to L.C.Mather
The lending banker : a review of the principles of bank lending, unsecured advances and balance
sheets and the banker
Mather, L. C. (Leonard Charles)
College of Agricultural Banking, RBI, PUNE
Credit Cycle
TYPES OF ADVANCES
LOANS
DEMAND LOANS
TERM LOANS
DEMAND LOANS
To meet Short term financial needs
Usually disbursed in lump sum by way of
vouchers
Cheque book is not be issued
Repayable within a period of less than 36
months
Repayable in lump sum or in Installments
Repayment will permanently reduce the
liability of the Borrower
TERM LOANS
CASH CREDITS
An operative limit is sanctioned against the
security of Inventory/stock in trade
Sanctioned for a period of one or two years
It is not sanctioned for personal purposes
The security is stored outside the bank
premises
Borrower can draw funds by way of a
cheque upto to the limit & subject to the
availability of Drawing Power
Amount credited into the account can be
withdrawn again by the borrower
CASH CREDITS
OVERDRAFTS
SECURED OVERDRAFTS
CLEAN OVERDRAFTS
TEMPORARY OVERDRAFTS
SECURED OVERDRAFTS
(SOD)
Sanctioned against the security of Bank
deposits, Real estate, Shares and securities etc
Sanctioned for a period of 1 or 2 years
Facility is allowed as an operative account like
Cash Credit account
Drawings allowed upto the limit subject to the
Drawing Power
TEMPORARY OVERDRAFTS
(TOD)
It is a Clean Advance allowed in current accounts
Allowed for a maximum period of 7 days
No TOD in SB accounts
BILL FINANCE
Allowed to meet the financial requirements during
the time lag between sale of goods and receipt of
proceeds
It is a Post sale finance
These advances are self liquidating in nature
Augments Fees based income
Negotiable Instruments
-Demand Bills
-Usance Bills
Others
-Supply Bills
DEMAND BILLS
Clean Bills Purchase (CBP)
(Cheques, DDs, Pay Orders,Dividend warrants,
Refund Orders etc,.)
Documentary Bills Purchase (DBP)
(Demand bills backed by invoices and Documents of
title to goods)
USANCE BILLS
Clean Usance Bills Discounting (CUBD)
(Usance bills of exchange and promissory notes)
Documentary Usance Bills Discounting (DUBD)
(Usance bills backed by Invoices and Documents of
title to goods)
SUPPLY BILLS
Supply Bills Purchase (SBP)
(Invoices arising out of execution of supply / works
contracts accompanied by Receipted challans /
Inspection Notes / Certificates as per the terms of
contract)
LETTERS OF CREDIT
GUARANTEES
Thank you