INDEX
1. Introduction.
Executive Summary.
Credit Appraisal.
Importance of Credit Appraisal System.
Objectives of the Research.
Significance / Scope of the study.
Limitations of the Research.
2. Theoretical Background
Commercial Vehicle Industry Overview.
Non-Banking Financial Companies (NBFCs).
Role of NBFC’S in Commercial Vehicle Financing.
Financing procedure of Commercial Vehicle.
3. Company Profile.
o Supreme Financial Services ltd.
Introduction.
Vision and Mission.
Branches.
4. Research Methodology of the Project.
Means of research.
Primary Data.
Secondary Data.
5. Data Analysis.
Loan Appliers to Defaulters.
Parameter used for credit appraisal.
5 C’s of Credit
6. Findings.
7. Suggestions.
8. Conclusion.
9. Bibliography.
Executive Summary
Credit Appraisal
The process by which a lender appraises the creditworthiness of the
prospective borrower. This normally involves appraising the borrower’s
payment history and establishing the quality and sustainability of his income.
The lender satisfies himself of the good intentions of the borrower, usually
through an interview.
IMPORTANCE OF CREDIT APPRAISAL SYSTEM
Financial institutions and 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 manager fails to analyze the
client’s 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 analysis &
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 and for acceptable purpose covered by adequate security.
SAFETY: -
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 & 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 assets
owned by the borrower & pledged to the company. E.g. goods & commodities
are easily marketable while fixed assets like land & buildings can be liquidated
after a time interval. Thus, the company regards liquidity as important as safety
of the funds & 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 & GROWTH: -
The company would lend if the purpose of the advances can contribute
more to the overall economic development of the country.
Objective of Study
To study the credit appraisal system of commercial vehicle
finance.
To study the documentation required for credit appraisal.
To know the terms and conditions used in commercial vehicles
financing.
To identify & suggest the scope for improvement in Credit
Appraisal System.
Significance / Scope of the study
The Credit Appraisal is a 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
multidimensional 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 of the concern. Technical
Appraisal emphasizes on the technical feasibility of the venture and also finds
out 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 market, the acceptance of product in market. It
also focuses on the presence of other substitutes of the 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 finance
both own equity and debt? What are the sources of margin?
The scope of 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.
The Credit Policy of Supreme Financial Services has undergone changes to
cope with the environmental changes, tap the available opportunities, achieve
their commercial objective, fulfil social obligations and adhere to mandatory
directed lending norms.
The credit policy is studied under Coverage, Clientele, Marketing. The
Supreme Financial Services has over the years designed and adopted the Best
Practices Code. This in effect represents the Supreme Financial Service’s
philosophy towards effective Corporate Governance. Supreme Financial
Services has specialised type of lending known as Segmented Lending in which
Supreme Financial Services has set within it specialised branches for focused
lending to various segments.
This segmented approach is expected to provide both market and
customer focus for ensuring better business development, better development
of expertise and better customer satisfaction. Supreme Financial Services has
also set exposure norms which corresponds to the quantum of finance been
credited. These exposure norms are as per the RBI norms and also the bank’s
specific norms.
One of the important monitoring aspects in the credit portfolio is the
periodic review of advance accounts. The vital decision to deploy the Supreme
Financial Service’s resources should necessarily be based upon the thorough
assessment and Evaluation of the needs of the borrower. For this, a proper
periodical review of any account is inevitable.
Limitations of the study
Difficulty in 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.
Limitations of time:
There are limitations of time so we can’t measure the trends which are
very slow. Due to lack time we can’t have that much quality data.
Inadequacy of sufficient material:
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 we can’t use it for our purpose of
research.
2. Theoretical Background
NON-BANKING FINANCIAL COMPANIES
(NBFC’s)
Definition under the RBI Act:
Section 45I of the Reserve Bank of India Act, 1934 defines ‘‘non-
banking financial company’’ As-
(i) A financial institution which is a company;
(ii) A non-banking institution which is a company and which has as its principal
business the receiving of deposits, under any scheme or arrangement or in any
other manner, or lending in any manner;
(iii) Such other non-banking institution or class of such institutions, as the Bank
may, with the previous approval of the Central Government and by notification
in the Official Gazette, specify;
A company is, therefore, considered to be an NBFC if it carries on any of the
financial activities listed under clause (i) to (vi) of section 45 I (c) of the Act.
A financial system, which gives access to affordable credit to an
extensive section of society, is imperative for sustainable economic growth
for any country. In India, NBFC’s typically function in unorganized and
under-serviced segments of the economy, establishing a forte in those areas.
The NBFC business model is highly customer centric with a deep perception
of customer needs. With a wider and specialized branch network, they are
able to develop very close customer interaction and relationships, presenting
unique last mile credit delivery. The vast and diverse character of India itself
has inevitably assured a gap in the dispensation of credit and mobilization of
savings. NBFCs have demonstrated that they can play a definite long –term
role in the financial inclusion strategy of the country. They have succeeded in
the mobilization of inactive assets and users of credit because of their innate
capability to provide customized services according to the needs of the client.
It is reflected by the steady increase in the levels of credit penetration that
they are bringing about. The rigidity of the banking system’s policies for
lending, especially in the automobile and transport sector, is consequently
giving NBFCs an opportunity to meet this unmet demand through their
perceptive lending.
Classification of Non-Banking Financial Companies (NBFCs)
Equipment Leasing Company.
Hire Purchase Finance Company.
Housing Finance Company.
Investment Company.
Loan Company.
Residuary Non-Banking Company.
Miscellaneous Finance Company.
Commercial Vehicle Industry Overview:
The total commercial vehicle (CV) segment accounts for about only 5
percent of total automobile sales in India. The Indian Commercial Vehicle (CV)
Industry is the lifeline of the economy. Approximately 66 percent of the goods
and 87 percent of the passenger traffic in the country moves via road. The
trends have clearly indicated that the CV demand is closely correlated with
GDP growth rate (more strongly with the Index of Industrial Production, IIP) of
the country and therefore, it is believed that a growth or slowdown in CV
demand is a harbinger of an upturn or down turn in the economy respectively.
The CVs can be classified on the basis of their Gross Vehicular Weight
(GVW) as Light Commercial Vehicles (LCV) or Medium & Heavy
Commercial Vehicles (M&HCV), with M&HCVs accounting for
approximately 58 percent of the total domestic CV sales. The CV industry has
evolved tremendously over the years.
From the days of traditional all purpose 9 tonner trucks, the industry has moved
towards more usage specific vehicles. The developing road infrastructure is
giving a push to a modern Hub & Spoke model of distribution of goods, which
in turn is changing the kind of vehicles being deployed for goods transportation.
The Industry is now witnessing a clear segmentation in demand, with vehicles
more than 16.2 tonnes (M&HCVs & Multi Axle vehicles) being used for
transportation on the highways and less than 3.5 tonnes being used for intra-city
or last mile transport.
Similarly in case of passenger vehicles there is an increasing demand for luxury
buses from the private players unlike earlier when the demand used to be
largely driven by the State Transport Undertakings. The CV industry draws its
demand from the economy and hence is prone to cyclicality. However, due to
Greater versatility of usage, the LCV demand is less cyclical than the M&HCV
demand. The growth in volume sales of Commercial vehicle in India has been
strong, averaging 11 percent in real terms in the five years ended 2009-10. This
compares with 13 percent in the five years ended 2004-05and -3 percent in the
five years ended 1999-2000. We expect India’s demand for commercial
vehicles to remain strong. India’s stock of commercial vehicles is currently low
at six vehicles per thousand people versus 11 for China and 48 for other
Asian peers. The gap is expected to narrow down in the coming years in wake
of GDP growth and increase in infrastructure spending.
Role of NBFC’S in Commercial Vehicle Financing
The NBFC sector has been playing an important role in
development of the Road Transport sector. The Banks have not been in a
position to deploy more than 3 to 4 per cent of their funds to this sector.
Therefore, disbursals to SRTOs (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 vehicle market
has therefore not exceeded 25 to 30 per cent in the past.
Recoveries have also not matched expectations.
Funding SRTOs requires specialised customer evaluation skills and
infrastructure that is different from the requirements of typical bank
borrowers. The operators are unable to provide necessary documentation
and securities required for processing of the disbursal. The purpose of
special schemes for SRTOs has been defeated by this inability to conduct
business in this segment. Further, recovery management in this also
requires special skills 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 in 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 customized funding options to suit the needs
of individual operators.
NBFC’s jointly participate with manufacturers to provide higher
levels of customer service. They are in a position to offer vehicle
service packages in addition to funding. This is done jointly with
manufactures and dealers.
Capability to induct new participants into commercial vehicle
operating business by effective utilization of existing database
infrastructure.
Better capability to manage risk due to focussed infrastructure and
activity.
Financing procedure of vehicles:
According to Palish “In modern money using economy, finance may be
defined as the provision of money at the time it is wanted”
According to Bonneville and Dewey “Financing consist of the raising,
providing connection with business”
Here we are concerned with assets based financing. There are three most
popular asset based financing.
1) Hire purchase financing
2) Lease financing
3) Loan
Hire purchase financing:
Hire purchase finance is a popular financing mechanism especially in
certain sectors of Indian business such as the automobile sector. In this, there
are 3 parties the manufacture, the Borrower & Guarantor. The borrower may be
the manufacturer or a finance company. The manufacturer sells assets to the
borrower who sells it to the guarantor in exchange for the payment to be made
over a specified period of time.
MANUFACTURER BORROWER GUARANTOR
Hire purchases agreement is the agreement between the customer
(borrower) & the finance company, which is the owner. The title of the vehicle
passes on to the customer when the last due sum & one rupee. Till the last
rupee, the right, title & interest in the vehicle along with any additions and
improvements to the vehicles remain the absolute property of owner
When a payment is more than 14 days late it is considered a default. Date of
receipt is considered. Payment by post is considered the risk of the hirer.
Increases in 0.85% bank interest rate results in a potent increase in
finance charges. But in this regime of falling interest rates NBFC’S also pull
down rates accordingly.
Supplier or dealer delivers the vehicle on behalf of owner but risk is not
that of the owner. Increase the damage or non-delivery suffered by borrower
and borrower charges commence as if vehicle were delivered terms of
agreement remain.
Borrower takes the insurance in the name of the owner. Owner may
renew and recover from hirer. The policy taken and the insurance company
have to be approved by the owner. Borrower obtains necessary license.
Registration of the vehicle is in the joint name of owner and guarantor and copy
of RC submitted to owner. Borrower pays sells tax.
Borrower indemnifies the owner against any claims demands, loss and
damage from a cause even beyond the control of the guarantor. Borrower
cannot sublet or sell the vehicle during the term of the agreement. Expenses of
reposition to be paid by the borrower.
Delivery of vehicles concludes that hirer accepts it as it is. Guarantees or
warrantees are given by the supplier/dealer/manufacturer not the owner.
Increase the damage insurance claim negotiations steeled after consent of the
owner. Any damage to vehicle not covered by insurance is born by borrower.
The vehicle cannot be hypothecated or mortgaged to any other organization.
The asset that is the vehicle is shown in the balance sheet of the hirer.
Accordingly the guarantor can claim depreciation.
Interest component of the instalment is a tax-deductible expense. Guarantor
enjoys salvage value.
There is a 5% service charge & 0.2% resale tax. Resale because the Hire
Purchase agreements involves three parties and two transactions. Dealer or
manufacturer, owner (finance) company and customer.
There are following three conditions.
1. The owner of the asset gives the possession of the asset to the hirer
with an understanding that the hirer will pay agreed instalment over a
specified period of time.
2. The ownership of the asset will transfer to the hirer to the on the
payment of all instalments.
3. They will have the option of the terminating the agreement any time
before the transfer of ownership of the asset.
Thus for the hirer the hire purchase agreement is like a cancellable lease
with a right to buy the asset.
The hirer is required to show the hired asset on his balance sheet and is entitled
to claim depreciation, although he does not own the asset until full payment has
been made. The payment made by the hirer is divided in to two parts; interest
charges and repayment of the principal. The hirer thus gates tax relief on
interest paid and not the entire payment.
Mobilisation of funds:
In case of Hire purchase agreement the finance company can present the
proposal to the bank and mobilized funds against it. These can be done, since
the finance company is the owner of the vehicle till the complete payment is
model thus the bank can hold the vehicle as security.
Lease financing:
Leasing is widely used in Western countries to finance investment in
USA, which has the largest leasing industry in the world.
Lease is contract between a lessor, and the owner gives the right to use
the asset to the user over an agreed period of time for a consideration called the
lease rental. The lessee pays the rental to the lessor as regular fixed payments
over a period of time at the beginning or at the end of the month, quarter, half-
year, or year. Although generally fixed, the amount and the timing of payment
of Lease can be tailored to the lessee’s profits or cash flows. In up-fronted
Leases, more rentals are charged in the initial years and less in the later years of
the contract. The opposite happens in back-ended Lease. At the end of the
contract, the asset reverts to the lessor. Who is the legal owner of the asset. As
legal owner, it is lessor not lessee, who is entitled to claim depreciation on the
leased asset. In long term lease contract, lessee is generally given an option to
buy or renew the Lease. Sometimes it is divided into two types- primary lease
and secondary lease for the purpose of lease rentals. Primary lease provides for
the recovery of the cost of the asset and profit through lease rentals during a
period of about 4-5 years. It may be followed by a perpetual, secondary lease on
nominal lease rentals.
Loan Procedure
Marketing Executive
File
Checking Documents
Coordinator
Initiating Verification
Central Processing Agency
Credit Department
Approval / Decline
Post Approval Documents
Disbursement
Auto Loan:
Most of the banks and financial institution are providing today finances
for most of the automobiles. The most important automobile today being cars,
two wheelers, commercial vehicles. These loans are given on various models at
very competitive rates. If a person has the required eligibility and documents.
He can avail the loans for any vehicle and any model of his choice.
There are two important segments in the auto loan market.
New Vehicle loan
Used vehicle loan.
The loan is given to the person on the basis of the value of the vehicle. Usually
90% of the loan amount of the value of the vehicle is given in case of new one
and in the case of old one. It is up to 80% of the value of the vehicle.
Auto loan is a secured loan. As there are some physical assets involved in it and
it can be hypothecated. Then it is called as hypothecated vehicle, which means
that the motor vehicle is to be owned and acquired by the borrower in respect of
which the loan is to be made by the financial institute.
2) Company Profile
Supreme Finance Services ltd
The Supreme Finance Services LTD. A NBFC leading Auto Finance
company. The Group is one of the largest and well respected financial services
conglomerates in India. The Groups main line of activates in financial services
include chit fund use vehicle finance, three wheeler finance, auto dealership.
The group has a customer base of 5000.thorough network of 14 offices all over
Maharashtra. The Group has the largest force in the private sector. The Supreme
Finance Services LTD Incorporated in 2010. In the State of Maharashtra, Pune
Vision
To be the most profitable global player with quality and technology
leadership in the vehicle finance. Offering the finance solutions to satisfy
ultimate customer needs.
Mission
To become a market leader in light transport vehicle finance segment, and
achieve the status of world Class Company with finance and markets a wide
range of financial products to the total satisfaction of customers in the state.
I) Highly returns.
II) Business ethics.
III) Thorough continuous improvement of
I) Total quality service
II) 100% collection
III) Resource productivity
IV) Cost effectivene
Branches & Offices
PUNE COOPRATE OFFICE: SUPREME FINANCE SERVICES LTD.
Gate No.9, Market Yard, Office No.313, 3rd floor, Mahalaxmi Market,
Near Panan Mahamandal building, Pune 411037
Solapur:
Vaibahvshali Chambers, Ground Floor, 1/5,Morji Peth, Old Pune Naka,
Near Janata Bank, Solapur 413009
Tembhrni:
Oswal Tawar Third Floor, Kurudwadi Road, Tembhurni, Tal. Madha
Dist. Solapur.
Latur:
Ajinkya Arked Opp. Guru Hotel, Near Rajiv Gandhi Chowk, Ring Road,
Latur 413512.
Aurangabad:
First Floor, Tulshi Chambers’, Opp. Sun franchiesco School, Near
Shriram General Ins. Co. Office, Akashwani, Jalna Road, Aurangabad 431005.
Nagpur:
Office No.6, A, 4th
Floor, Mangalwadi Complex, J.B.Wing Sadar, Nagpur
Beed:
Sangale Building Navjivan Shikshak Colony, Near Samant Hospital,
Behind S.T. Stand, Beed.
Nanded:
Shop No. 8, Kothari Complex, Shivaji Nagar Nanded 431605.
3) 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 conclusions.
This chapter deals with different steps which are undertaken by the
investigator for gathering and organizing the data. It includes the description of
research approach, research design, setting of the study, population, sampling
techniques, criteria for selection of the samples size, limitation, method of data
collection, development and description of the tools.
Means of research
The research is based upon various types of information, which give
knowledge concerning the problem. Now in order to carry on research
successfully, information should be gathered from proper source. The more
valid is the source of information, the more reliable will be the information
received, which in turn, will lead to correct, and reliable conclusion.
Kinds of Data:
Primary Data:
Primary data are the actual information, which are received by the
researcher for study from the actual field of research. These data are obtained by
means of questionnaires and schedules. The primary data are the facts there are
many more methods of collecting the primary data. Such data are known as
primary because the researcher attains them from the field of research directly
and for the first time. For this study I had asked queries to the seniors, also
gathered information by direct interacting with customers.
Sources of Primary Data:
The sources of such information are the individuals and the incidents around
them generally, primary source information is gathered through direct
observation and interview methods.
1) Direct observation:
The primary source of information is direct observation. The method
requires that the researcher should personally and directly observes the
conditions of his field study. It is the most reliable method for gathering
information. I observed many things and got the lots of information.
2) Interview:
In an interview, the researcher meets people and discusses the problems
with them. During the course of this discussion, he gathers facts. Schedule
includes a predetermined form of questions but the interview has not any
definite form or order of questions. I have used this method, and discussed
many things with the branch manager.
Secondary Data:
Secondary data are the information, which is attained indirectly. The
researcher does not attain them himself or directly. Such data are attained
generally from published and unpublished material. It provides information of
past which is not possible from any other source? To facilitate the study,
secondary data is important to know historical background of the concerning
problem.
Sources of Secondary Data:
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 data published by institutions from time to
time. I used this data which company published for their customers.
3) Journals and Magazines:
Journals and 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 an important source of information.
4) Other documents:
Other document 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 the
secondary data, I used internet for finding many data.
DATA ANALYSIS
Loan Appliers to Defaulters
The following is data of loan appliers and defaulters. The 90% of the
customers are able to repay the loans but 10% failed to repay.
Year 2008 2009 2010
Loans Sanctioned 1236 2150 1614
Defaulters 123 215 161
0
500
1000
1500
2000
2500
1 2 3
Loans Sanctioned
Defaultres
Parameter used for credit appraisal
Parameter DOCUMENTS
Technical feasibility Field Investigation, Market value of asset
Economic viability LTV(Loan to Value), IIR
Bankability Past month bank statements, Asset and liabilities of the
applicant
Credit Apprasial
Bankability
Economic Viability
Technical feasibility
1) Technical feasibility:
Technical Feasibility What company is looking for
Living standard Decent living standard with some tangibles like T.V. & fridge
will provide assurance to bank regarding your residential
status.
Locality Presence of some undesirable elements like local goons or
controversial areas adversely affects your loan appraisal
process.
Telephonic
Verification
At least one response is need from person to establish the
identity of the person from contact point of view.
Educational
Qualification
Not an essential barrier but essential to understand the
complex terms & conditions of bank loan.
Political Influence An interesting reference point in the sense that they are one
of major category of loan defaulters.
References To establish the residential identity of person from human
contact point of view & cross check of their loans.
2) Economic Feasibility:
Economic viability
Installment to income ratio -IIR for salaried cases would be capped at 60% of
Net income in general
-Pension Income cases IIR to be restricted to 40%a
Fixed obligation to income
ratio
FIOR kept at 55%
Loan to cost ratio LTV amount to 80%
3) Bankability:
Parameter Norms Checkpoints
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
installment amount or not.
Business continuity
proof
Two year 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 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.
5 C’s of Credit:
1) Character:
It refers to the honesty and integrity of the person. Borrowers are not
necessarily reliable or honest and the lender must look for evidence of good
Credit Apprasial
Character
Capacity
Capital Collateral
Conditions
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.
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
are supported 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 will affect the repayment
ability of the firm and also the purpose for which the loan is required.
Findings
1) Supreme finance Services Limited is one of the trusted financial
institutions in NBFC, with 5000 satisfied customers.
2) Credit Appraisal plays the most significant role in funding the right and
eligible person.
3) From the responses of the customer, the staff of Supreme Finance is
cooperative.
4) Supreme finance provides refinance facility if the customer shows a good
Repayment Track Record (RTR).
5) From the information customers are satisfied with Supreme Finance, 35%
customers are old customer.
6) From the data the loan procedure of company is easy as compared to
others.
7) In the company the recovery rate is 90%.
8) Credit & risk go hand in hand.
SUGGESTIONS
1) The company should try for reducing the documentation required for
loan.
2) Company should appoint customer relationship manager for better
customer relations.
3) The company should provide door step service to the potential customer.
4) Company should provide special offerings to old customer.
CONCLUSIONS
The credit appraisal of Supreme Finance is simple to understand and easy
to calculate Which helped me to understand the credit appraisal system.
Sometimes credit goes to wrong person then also it will not affect the
performance of the company because company gives loan against hypothecation
(HP) of vehicle. The loan systems 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 taking loan twice then credit
manager should check his previous record.