Loan Management.pptx,,,,,,,,,,,,,,,,,,,,

Loan Managemen

1. Loan Management– 1 GROUP-B

2. The profit oriented business organization if a bank gives its resources item purely under a certain condition and for a specific duration , it will be called loan . According to Timothy W Koch: “ Formal agreement between a bank and borrower to provide a fixed amount of credit for a specified period” According to the Dictionary of Banking Of Finance: “The lending of a sum of money by a lender to a borrower to be repaid with a certain amount of interest”

3. Point of difference Loan Investment Transaction Type Best transactions Mostly Equity Transactions Contracts Direct Indirect And Important Knowledge of maturity period Known to lender borrower and other interested parties. Except debentures not known in other type s of instruments. Term May very from several days to even 40 years. Depends on he investment policy of the bank. Negotiation Based on views of both bankers and borrowers No scope for discussion as all the terms and condition are pre fixed and not negotiable. Purpose of the raised funds Lending Banks are expressed informed Instrument purchasing investing banks are not aware

4. Characteristics of Bank Loan. Parties Amount of loan Ultimate decision Mode of loan Nature of distribution Process of distribution Security Loan price Periodicity of bank loan Repayment of loan .

5. Loan Based on Security Based on User Industry Based on tem Businessman Farmer Land less Individual C onsumption Housing loan Educational Fixed capital loan One term Distribution Working capital loan Working Capital loan Installment Corp loan Export import loans Farming Equipment Medium term Partly secured Fully secured Unsecured Sort term Long term Poultry Housing loan Medical Non corp.

6. Sources of credit Information Sources of information A. Internal Sources Govt. or Regulatory Authority Filled in Application Interview Financial Statements Banks own Record. Income tax office : Revenue Board Government Gazette Record from the other govt. office Register of joint stock companies Inspection Market report Credit information News paper Audit firm Other Banks Record. Trade journal Trade Directories Others B. External Sources

7. Interest based pricing Interest free pricing Variable rate Fixed rate Compensation balance of deposit Fees, charges, etc. Caps and floor Prime times Quantity based Prime rate General rate Method of loan pricing

8. Internal factors External factors Amount of Loanable funds. C ost of bank fund. Administrative and transactional cost Overhead expenses Expense or credit investigation and credit analysis. Security maintenance expense . Supervision and collection expense of loan . Quantum and cost of risk . Cost of default loan . Bank-Customer relation . Earning possibility from alternatives other then lending . Shareholders expectation of the rate of dividend. Guidance of the government and regulatory agencies. Numbers of competitors and their capacity to control the market . Number of loan pricing by the competitors . Risk of increase and decrease of interest rate . Possibility of cost of raising funds through other alternatives. Consideration in Loan Pricing

9. Credit analysis means analysis of the eligibility for getting loan un the light of applications. Credit analysis covers the area of analyzing the character of the borrowers, capacity to use loan amount, condition of capital, objectives of taking loan, planning fore uses, probable repayment schedule and so on.

10. Eligibility in getting loans History of the past loan transaction data Ability to use loan and the characteristics of the potential borrower Ability to repay the applied loan amount Amount of capital to support any contingencies The presence of any risk factors that may make him a defaulter by interfering his cash flow stream

11. Methods of credit Analysis 1.CONDITIONC2.HARACTER 3.CAPACITY 4.CAPITAL 5.COLLATERAL **most widely used

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