1. What do you mean by a prospective borrower? In selecting a prospective borrower, what are the points to be taken into consideration? Highlight the role and responsibilities of a branch manager in identifying a prospective borrower and processing his loan proposal.
Prospective borrower: An individual, organization or company having requirement of additional fund for utilization and
have the ability to borrow the same is treated as potential borrower.
Selecting
a prospective borrower: Not all banks are
giving concentration on the same area for all time to select a borrower, but
many of them focus on the same areas throughout the loan review process.
Following points to be taken into consideration in selecting a prospective borrower-
a. Borrower (himself) analysis
i.
Man behind the business to be
judged(Character, willingness)
ii.
Management integrity, quality, and
competencies;
iii. Majority share holders & relation among the owners;
b. Industry Analysis:
i.
Industry
Situation
ii.
Borrower’s position into the industry’
iii.
Production capacity
iv.
Product distribution & marketing;
v.
Market Competition
vi.
Demand Supply situation
- c. Supplier/Buyer
analysis: Any concentration on buyer or supplier to be checked which may
disrupt the borrower performance in future.
- d. Historical
financial analysis: An analysis of historical financial statement of the
borrower to be conducted to ascertain the profitability, liquidity and solvency
of the borrower.
- e. Projected
financial analysis: Borrower’s projected financial to be analyzed to check
whether borrower will be able to meet their future debt obligation.
- f. Account
conduct: the historic performance in meeting repayment obligation (Trade
repayment, interest, principal, cheque repayment)
- g. Adherence
to lending guideline: the credit facility to be proposed must comply with the
internal & regulatory guideline.
- h. Loan
Pricing: Total earning from the client is also important to sanction any loan.
- i.
Debt structure: the loan amount, tenor
of the proposed loan to be justified with the repayment ability of the
customer.
- j. Security: The proposed loan to be secured enough so that loan can be fully adjusted incase of liquidating the security.
Role &
responsibilities of a branch manager in identifying a prospective borrower and
processing his loan proposal:
1.
Marketing
2.
Customer hunting
3.
Product offering to the proposed
customer
4.
Customer Analysis
5.
Selecting
6.
Risk Grading
7.
Processing Loan application