CREDIT ADMINISTRATION AND MONITORING

Paper Code: 
SBFS 601
Credits: 
4
Contact Hours: 
60.00
Max. Marks: 
100.00
Objective: 

Learning outcome

 (at course level)

Learning and teaching strategies

Assessment Strategies

On the completion of this course, the students will be able to :

  1.  Explore Various types of credit customers and providers, Analyze the impact of credit on a business, Principles of lending ,credit policies and credit risk management
  2.  Differentiate between fund-based and non-fund-based facilities, explore the attributes of sound bank lending, monitoring and control of credit facilities, and the pre-sanction appraisal and credit process.
  3.  Able to perform comparative analysis, common size analysis, ratio analysis, funds flow analysis, and cash flow analysis of a business.
  4. Equipped with the knowledge and skills necessary to evaluate consumer loan applications, monitor loan performance, implement effective credit collection strategies, and ensure compliance with regulatory requirements.
  5. Equipped with the knowledge and skills necessary to effectively manage NPAs and implement strategies for loan recovery and asset quality management.

Approach in teaching: Interactive Lectures, Discussion, Tutorials, Practical cases Demonstration, Power point presentation.    

 Learning activities for the students:                              Self learning assignments, Effective questions, Seminar presentation, Live practical problems analysis

Class test, Semester end examinations, Quiz, Solving problems in tutorials, Assignments, Presentation, Individual and group projects

 

12.00
Unit I: 
Introduction to credit

• Definition of credit, Reason for and benefits of extending credit , Effect of credit to a business , Categories of credit (consumer, trade and export)
• Types of credit customers - Individuals, Sole traders, Partnerships, Limited companies, Government bodies, Unincorporated associations, Trusts/ Foundations/NGOs.
• Overview of credit providers - Banks, Cooperative societies -, Microfinance institutions, Finance houses, Online credit providers.
• Basic lending principle of lending, Credit policy of RBI, Advantages of a credit policy. Credit Risk Management, Credit risk rating and risk pricing

12.00
Unit II: 
Introduction to bank credit

• Types of bank credit facilities - Overdraft, Cash Credit, Bills Facility and Term Loans , Drawing Power and Drawing Limit
• Fund-based and Non-fund-based Facilities – Bank Guarantee (BG)
• Letter of Credit
• Overview of bank credit process, Attributes of sound bank lending, Monitoring and control of bank credit facilities.
• Pre Sanction Appraisal- Know your Borrowers, Different types of borrowers. The credit process. Screening of applications, Appraisal of credit, Sanction limit
Financial Statement and Ratio Analysis-
• Meaning of Financial Statements – Directors’ Responsibility Statement ,Users’ Information Needs
• Qualitative Characteristics of Financial Statements, Quantitative Tools of Financial Statement Analysis, Comparative Financial Statement Analysis ,Common Size Financial Statement Analysis , Ratio Analysis ,Funds Flow Analysis , Cash Flow Analysis , Limitations of Financial Statement Analysis
• Creative Accounting/Window Dressing.
• Assigning a Credit Rating to a Customer.

12.00
Unit III: 
Project Financing and Project Assessment

• Evaluation of Project Reports. - Technical Evaluation and Financial Evaluation
• Calculation of Internal Rate of Return
• Calculation of Payback Period, Using Net Present Value to Accept / Reject a Project
• Using DCF techniques to evaluate projects
• Sensitivity Analysis.
• Working Capital Finance- Meaning of Working Capital – Kinds of Working Capital,
• Non Fund based exposure- letters of credit and bank guarantees, Export Finance.

12.00
Unit IV: 
Evaluating consumer loans

• Types- Credit analysis of consumer loans- Risk–return analysis of consumer loans- Customer profitability analysis and loan pricing- Fixed Vs floating rates.
• Post- Sanction Monitoring- Loan Documentation and Charge creation;
• Post Sanction Monitoring- purpose, need, tools, early warning signals
• Credit Collection Techniques- telephone calls, personal visit, letters, using collection Agency, Legal action
• Important guidelines of RBI on monitoring operations in loan accounts

12.00
Unit V: 
Loan Recovery Management

NPA Management –
• Introduction- Identification of NPAs- Asset classification- Prudential norms, Capital asset classification
• Effect of NPA on profitability - Assessment procedure-
• Pre-sanction appraisal – Post sanction supervision
• Monitoring systems for existing and likely NPAs—Tools to manage NPAs
• Compromise scheme, Lok Adalats, Debt Recovery Tribunals,
• Corporate Debt Restructuring, Willful defaulters, SARFAESI Act
• Asset Reconstruction Companies, Restructuring Stressed Assets.
• Creating Provisioning.
• Restructuring of loans and advances and legal remedies for loan recovery.

Essential Readings: 

• S. Murali and K.R. Subbakrishna, Bank Credit Management, Himalayan Publishing House, 2019.
• Banker’s Hand Book on Credit Management, Indian Institute of Banking & Finance. MacMillan Publishers India Limited,1st edition 2010 2.
• Risk management, Indian Institute of Banking & Finance. MacMillan Publishers India Limited,1st edition 2010
• Strategic Credit Management In Banks , PHI learning G. S. Popli and S. K. PURI, edition 2013.
• Credit Management, Glen Bullivant,Institute of Credit Management, edition 2010

References: 

E- Resources:
• Swayam: https://swayam.gov.in/
• NPTEL: http://nptel.ac.in/
• DIKSHA: https://diksha.gov.in/
• E-Skill India: https://www.eskillindia.org/
• National Digital Library: https://ndl.iitkgp.ac.in/
• E-Pathshala: https://ndl.iitkgp.ac.in/
• e-PG Pathshala: https://epgp.inflibnet.ac.in/
• Sakshat: https://www.education.gov.in/en/technology-enabled-learning-1
Journal:
• Journals of credit risk
• Journals of credit and banking
• Journal of credit management
• Journal of Banking and Finance

Academic Year: 
2023-2024
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