During appraisal of a project loan proposal what factors does a banker take into consideration

Appraisal is necessary to justify the soundness of an investment. It is done with a view to determine—

1. Commercial profitability; i.e.-technical, marketing, financial, managerial

and organizational soundness

2. Economical viability

3. Social desirability

Loan proposal will be appraised with updated market prise, quality and other information of the merchandise and product. The appraisal/updates will be checked by the concerned higher authority to ensure that it was in order & reviewed time to time(at lease annually)

A detail analysis id documented to arrive at the following aspects:

a) Credit worthiness

b) Guarantor/borrower's cash flow 

c) Debt service coverage  ratio;

d) Benefit cost ratio;

e) NPV,BCR & IRR

f) Break even analysis 

g) Margin/liquidity

h) Assessment of working capital 

i)  Cash flow analysis

j)  Environmental issues

k) Ability to penetrate market sector and comparative factors

Before appraisal officer will verify the invoice and contract with suppliers & customer and will ensure genuineness. During implementation period disbursing official will verify the proper utilization of the loan/fund and ensure utilization for which loan is sanctioned.

What do you mean by a project & project appraisal?

 A project is temporary in that it has a defined beginning and end in time, and therefore defined scope and resources that are ways of organizing resource. It is a group of individuals who are assembled to perform different tasks on a common set of objectives for a defined period of time.

A Project appraisal is refers to the process of assessing, in a structured way, the case for proceeding with a project that is the effort of calculating a project's viability. The processes of a project appraisal are- Initial assessment, define problem and long-list, consult and short-list, develop options, compare and select project

What is a Project? List down the cost components of a Rice Mill project (capital cost)

A project is refers to that a temporary group of activity designed to produce a unique product, service or a result. A project has defined by following aspects:

1) It is defined a beginning-end schedule and approach; 

2) Uses the resources to allocated works;  

3) Achieves the specific goals within an organized approach;

4) Usually involves a team of workforce.

1. Cost of land and site development

a)      Cost Of Land

b)      Cost of Leveling/Development

c)       Cost of Approach Road

d)      Cost of Compound Wall

 2. Cost of Building & Civil Work

a) Factory building

b) Raw material godown

c) Finished goods storage & packing

d) Administrative building - Conference hall e) Generator room & workshop

f) Watchmen Cabin

g) Electricity Chamber

 3. Cost of plant & machinery

a) Milling section b) Paddy bar

c) boiling/steaming plant d) Steam boiler

e) Excuse Duty & Other Taxes

4. Others fixed assets costs

a) Office furniture & fixtures b) Computer

c) Electrification & firefighting equipment’s

d) Air compressor

e) Vehicle (truck)

f) Other machineries tools & tackles

5. Preoperative Expenses

6. Margin Money for Working Capital

a) Raw material

b) Electricity charges c) Salary & wages

d) Stores & spares

e) Overhead & packing

f) Stock of finished goods & goods in process

Purposes, cases, modes, and requirements of Rescheduling

Purposes for Rescheduling:

(i) To provide for borrower’s changed business condition

(ii) For better overdue management

(iii) For amicable settlement of problem accounts

 

Cases for Rescheduling:

Rescheduling would be considered only under the following cases-

(i) Overdue has been accumulated or likely to be accumulated due to change in business conditions for internal or external factors and the borrower is no way able to pay up the entire accumulated overdue in a single shot.

(ii) The borrower should be in operation and the assets have a productive value and life for servicing the outstanding liabilities.

(iii) The borrower must be capable of and willing to pay as per revised arrangement.

 

Modes of Rescheduling:

Rescheduling can be done through adopting one or more of the following means. (i) Extension of financing term keeping lending rate unchanged

(ii) Reduction of lending rate keeping financing term unchanged (iii) Both reduction of lending rate and extension of financing term (iv) Bodily shifting of payment schedule

(v) Deferment of payment for a short-term period with or without extending the maturity date (this may be a temporary relief to prevent the inevitable collapse of a company).

 

 

However, under any circumstances reschedule period must not exceed economic life of the asset.

 

Analysis  of  Rescheduling  Case  and  decision  on  different  modes  of rescheduling:

An account, which has been going through liquidity crisis, may be considered for rescheduling after identifying symptoms, causes and magnitude of the problem. For

rescheduling an account, the criteria mentioned in Bangladesh Bank guideline, if any has to be followed strictly.

 

 

Post Rescheduling Requirements:

  Rescheduling of a contract must require prior approval of CRM and management

  All rescheduled accounts are to be kept in a separate watch list so that post rescheduling performance of the accounts can be monitored closely