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BNK 601: Credit Evaluation and Analysis

BNK 601Credit Evaluation and Analysis

Course curriculum and Session PlanAcademic Year: 2013

MBA (Finance and Banking), ear!"01#, $er% ! &

cto!er 22" 2013 Pa#e 1 o$ 1"




Course!in!

c'arge

Pro$% S&erna' Bod&an(ala

Contactnor%ation*

S&erna'%!od&an(ala)niituniversity%in

Coursenstructor(s)*

any

Pro$% *ano&ar Sin#&

Course+rereuisites(i ay)

Kno(led#e a!out !an+in# ,roducts" $inanceand accountin#

Evaluation-c'e%e

Class Partici,ation- 10.

Pro/ect ndustry analysis re,ort andassessment o$ t&e (or+in# ca,ital cycleo$ ,articular industry

0.

Pro/ect Credit e,ort4Note 5iva70.8 90.

+edagogictools Case studies" ,o(er ,oint ,resentations"iscussion" *s7E;cel" ata!ases7 Ca,italine"C*E" etc" use o$ internet" iscussion onvarious annual re,orts

- 18 <&e students =uali$y $or class ,artici,ation com,onent (&ent&eir attendance is more t&an >0.% Any attendance !elo( s&alldis=uali$y t&em $or t&is com,onent o$ evaluation%

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Course escri,tion

<&is course (ill ,rovide a com,re&ensive $rame(or+ $or

underta+in# cor,orate credit analysis" demonstrate anunderstandin# o$ t&e relations&i, !et(een $inancial and non7

$inancial $actors in t&e credit analysis ,rocess" identi$y and

evaluate +ey $inancial ,er$ormance indicators" de$ine li=uidity and

s&o( &o( it can !e measured% <&e course (ill involve analy'in#

!ot& =uantitative and =ualitative as,ects o$ various economic"

!usiness and $inancial $actors t&at a$$ect cor,orate credit =uality%

<&e course (ill also !rie$ly deal (it& de!t servicin# a!ility" de$ault

and recovery%

?earnin# utcomes

@,on com,letin# t&is course t&e students (ill !e a!le to:

• @nderstand t&e $rame(or+ o$ credit analysis

• Analy'e &ealt& o$ t&e com,any !ased on its !usiness ris+

and $inancial statements !y usin# various ratios" trends"

li=uidity" #earin# and ot&er =ualitative $actors

• Assessment o$ t&e (or+in# ca,ital re=uirements and limits o$

t&e com,any usin# C*A $ormat and ot&er met&ods

• rite a detailed credit re,ort usin# CC !an+ credit

a,,raisal re,ort $ormat

Session Plan

Session

No%

Su!7sessi

on

ate

<o,ics ?earnin#utcome

s

Peda#o#y

Prereadin#s4

Case

Study

172 1 As

,er

ntroduction toCredit analysis"conce,t o$

@ndersta

nd t&e

Presentat

ion"

cto!er 22" 2013 Pa#e # o$ 1"




t&e

tim

e

ta!l

e

levera#e credit

a,,raisal

,rocess

nstructio

n and

class

discussio

n

2 7777 overvie( o$

credit a,,raisal

,rocess"

im,ortance o$

credit analysis"

event o$ de$ault

777777

#!6 # 7777 ualitative

analysis o$ a

cor,orate

!usiness ris+7

D*acro

economic $actors

a$$ectin#

!usiness"

overnment

,olicy measures7

intervention and

re#ulation"

Soverei#n ris+"

analy'in# t&e

leadin#

economic

indicators

@ndersta

nd t&e

macro

economi

c

scenario

t&at

im,actt&e

!usiness

Presentat

ion"

discussio

n and

e;cel

model

Plannin#

commissi

on re,ort

Five year

,lan" B

re,orts

.!/ 7777 ndustry Analysis Frame(o

r+ to

understa

nd t&e

777777 <e;t 7

FCCA

cto!er 22" 2013 Pa#e . o$ 1"




industry

ris+s and

,ros,ect

s

6 7777 Business

Analysis7

analy'in# +ey

revenue drivers

and !usiness

strate#y" S<

analysis $or t&ecom,any in

select industry"

(ners&i, and

*ana#ement

strate#y and

,er$ormance"

o(ners&i,

su,,ort"

demand7su,,ly

outloo+

Gel,s in

identi$yin

# t&e

!usiness

ris+ and

stren#t&s

o$ t&ecom,any

under

covera#e

777777 <e;t7

FCCA

!1 ,2 7777 Cor,orateFundin#strate#ies:7 or+in#ca,ital cycle andassessment o$

cas& conversioncycle o$ variousindustries

CCC 777777 Case on

calculatin

# CCC o$

a

com,any

Fund !asedcredits 7 S&ort7term vs% ?on#7term $unds

@ndersta

nd

Ban+in#

,roducts

nstructio

n"

iscussio

n

777777

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related

to

or+in#

Ca,ital

!orro(in

#s

10 7777 Non7$und !asedcredits

777777 777777 7777

11 7777 Classi$ication o$

current assetsand currentlia!ilities $orcalculation o$!an+ $inance7Focus onevisedSc&edule andC*A relatedc&an#es

@ndersta

nd &o(items o$

,ro$it

and loss

account

and

Balance

s&eet are

classi$ied

777777 evised

Sc&eduled and

te;t !y

%%

*u+&er/e

e

1",1

#

7777 Assessment o$C limits usin#*a;imumPermissi!le Ban+Finance *et&odand carve outs

Kno(led

#e a!out

t&e

assessm

ent o$

limits

777777 <andon

and

C&ore

committe

e

recomme

ndations"

Case and

e;cel

!ased

assi#nme

nt

cto!er 22" 2013 Pa#e 6 o$ 1"




1. Cas& !ud#etmet&od and

<urnover met&od

o$ assessin#limits

777777 777777 Case

study"

E;cel

!ased

assi#nme

nt

1/,1

6

B7 *asterCircular ?oansand Advances

Kno(led

#e o$

,rovision

s

re#ardin# B

*aster

Circulars

777777 B

Circulars

1 7777 B Circular onECB anduarantees andCo7acce,tances

777777 777777 777777

12!

"/

12!

"#

7777 Pre,arin# Credit*onitorin# data$ormat alon#(it& ,ro/ections

7 FinancialStatementAnalysis Key creditratio

analysis5levera#eratios"covera#eratios"li=uidity"cas&conversion

A!ility to

,re,are

C*A

@ndersta

nd 32

,aramet

ers used

!y 7!an+

E;cel

!ased

e;ercise

to

develo,

C*A

$ormat

$or

various

com,ani

es

Annual

re,orts"

atio

Analysis

c&a,ter

$rom %

*u+&er/e

e"

<B17

c&a,ter

" Ban+Hs

32

,aramete

rs

cto!er 22" 2013 Pa#e o$ 1"




cycle",ro$ita!ilityratios" asset

turnoverratios

7 <rendanalysis

7 Peercom,arison

".!

"/

7777 ?i=uidityAnalysis 7 Studyo$ a!ility to

re,ay de!t7e$ine li=uidity"sources o$ $unds internal vs%e;ternal"committed !an+linesecom,ose cas&$lo( statement ,eratin# cas&

$lo(s" investin#cas& $lo(s and$inancin# cas&$lo(sConce,t o$ FreeCas& $lo( and itssynonym EB<A FCF" ca,itals,endin#

$le;i!ility",arental su,,ort"dividend ,olicy

A!ility to

,re,are

and

discernt&e cas&

$lo(

#enerati

n# a!ility

o$ t&e

com,any

E;cel"

nstructio

n

e$er to

concerne

d c&a,ter

$rom %*u+&er/e

e

"6 e!tAmorti'ation,ro$ile4sc&edule e!t

Pre,arati

on o$

cas& $lo(

E;ercise

on Cas&7

$lo(

cto!er 22" 2013 Pa#e 2 o$ 1"




re,ayment Bullet vs%Amorti'in#

maturity7 *atc&in#

li=uidity tode!tre,aymentsc&edule

statemen

ts as ,er

AS73 as

(ell as

usin#

CC

$ormat

and

inter,ret

and

$orecast

t&e cas&

$lo(s

statemen

t I de!t

maturity

sc&edule

"!

"

7777 Credit Note7 7Ban+ $ormat

o$ Credit Note7 Anne;ure7 ocumentatio

n

@ndersta

nd t&e 7

!an+

Note

(ritin#

$ormat

and

develo,

s+ills o$

lo#ical

re,ort

(ritin#

7!an+

credit

note

$ormat"

nstructio

n" class

discussio

n

Credit

note

#0 Post sanction

monitorin#,rocess

@ndersta

nd ,ostsanction

,rocess

Study o$

di$$erent$orms"

Presentat

ion

TB1-chapter

15

$e3t Book(s)

cto!er 22" 2013 Pa#e o$ 1"




1% Go( to Borro( $rom !an+s and $inancial institutions !y <%%

amamurt&y 5B&arat ?a( Gouse Pvt% ltd87<B1

2% Credit a,,raisal" ris+ analysis and decision ma+in# aninte#rated a,,roac& to on and o$$ !alance s&eet lendin# !y % %

*u+&er/ee 56t& revised edition7Sno( (&ite ,u!lication87<B2

3% Fundamental o$ Cor,orate Credit Analysis !y Blaise an#uin

and Jo&n Bilardello 5Standard and ,oorHs87<B3

4eerence Books

15 o7 to Borro7 ro% Banking and Financial

institutions81.t' edition (Na9'i :u9lication)

"5 Bankers; <ending $ec'niues!"nd edition 9y C N 4ouse

#5 =orking ca:ital %anage%ent > strategies and

tec'niues 9y ris'ikes B'attac'arya

.5 <earning %odule ro% CC 9ank on =orking Ca:ital

/5 Additional reading %aterial to 9e :rovided on certain

to:ics

4u9rics

u!rics $or ,ro/ect evaluation

Sr%no%

Parameters E;,lanation

1% Follo( t&e 7Ban+conventions

e$er to t&e CC Ban+s credit note(ritin# rules i%e% $ollo( t&e #uidelines

$or $ont" s,acin#" ali#nment etc2% Financial *odel 7 @se C*A data $ormat" Forecasts&ould !e !ased on lo#icalassum,tions a$ter t&orou#& sectorstudy and com,any +no(led#e7 ata accuracy7 Avoid any calculation errors" ,utreasona!le c&ec+s in t&e model7 Clearly e;,lain all assum,tions in t&e

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model as emar+s3% Credit Note 7 @se t&e !an+Hs credit note $ormat

version #iven to you in t&e class%onHt use t&e ori#inal $ormat (it&!an+Hs lo#o7 Start (ritin# t&e re,ort only a$ter,ro,er researc& and analysis &as!een done and a$ter &avin# $irm vie(a!out t&e ,ro,osal7 rite meanin#$ul ar#uments clearlyand concisely7 r#ani'e t&e in$ormation in a lo#ical(ay 5lo#ic and structure 7 lo#ical,ro#ression o$ t&e idea8

7 Gi#&li#&t +ey issues ndustry ris+s"!usiness ris+" mana#ement ris+"$inancial ris+" structure ris+% Also &avean o,inion a!out t&e miti#ants andt&eir e$$icacy7 Sources o$ in$ormation s&ould !e,ro,erly cited% Pla#iarism (ill not !etolerated7Avoid $actual errors7 Num!ers e;,lained in t&e re,orts&ould matc& (it& t&e Fin ta!le and

model7 No s,ellin#" $ormattin# or#rammatical errors% o not constructvery len#t&y and con$usin# sentences%7 Assess t&e ,ro,osal and recommend(it& ,ro,er reasonin#

+lagiaris%e are committed to u,&oldin# standards o$ academic inte#rity

and &onesty% Pla#iarism in any $orm is unacce,ta!le and (ill !etreated seriously

Make u: +olicy <&ere (onHt !e any ma+e7u, $or any assessment com,onentmissed !y t&e student unless it &as !een missed due to anymedical emer#ency or any tra#ic event connected (it&immediate $amily mem!er5s8% deally" t&e student s&ould re=uest

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t&e Course7in7c&ar#e t&rou#& email !e$ore t&e assessmentcom,onent is &eld !ut in case t&is is not ,ossi!le" t&e re=uests&ould !e sent (it&in 29 &ours o$ t&e assessment com,onent

!ein# &eld% n addition" t&e student (ould !e re=uired to su!mitall su,,ortin# documents suc& as medical re,orts" ,rescri,tions"recei,ts etc as+ed $or !y t&e Course7in7c&ar#e% n case o$ sur,rise=ui''es and ,ro/ects t&ere is no ,rovision $or ma+e7u,% <&e #ranto$ ma+e7u, (ill !e com,letely at t&e discretion o$ t&e Course7in7c&ar#e and &is4&er decision (ill !e $inal and canLt !e c&allen#ed%

Consultation ours <&e students can meet t&e Course7in7c&ar#e on maters related to

t&e course !ein# tau#&t on all days &e is availa!le on cam,usa$ter ta+in# ,rior a,,ointment t&rou#& email% nstead o$ ,ersonalmeetin#s" t&ey can also re=uest res,onses only t&rou#& emails%P&one calls s&ould !e avoided e;ce,t in cases o$ emer#ency%Course7in7c&ar#e (ill try to res,ond to t&e !est o$ &is a!ility%

?rading +olicyA com,osite score (ill !e ,re,ared a$ter consolidatin# t&e mar+so!tained in all assessment com,onents and t&e com,osite score(ill !e converted to letter #rades" vi'% A" B" C" and E as ,er

university ,olicy% <&e #radin# system $ollo(ed is elative radin#and normally it is centered around t&e mean%

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