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Credit analysis is the integration of both financial data and customer character in dealing with credit.
Customer's financials reflects their proficiency in business and it helps us to understand the sufficiency of cash flow to meet its existing and future financial obligations. But, character in turn helps us to understand the customer's intention to Pay the Credit Commitment constantly on time.
In some cases, customers intention might be cheat the lending party by providing fabricated proofs. In this cases , generally bank should follow up the strict CDD and AML compliance to safeguard its reputation
I opine customers character to be the most important parameter for credit analysis. As a banker I always look at repayment capacity of the customer. However, if borrower is wilfully defaulting or does a fraud, his good repayment capability will not matter and the account will be a non-performing asset for the bank.
Integrity of the promoters is the most important point and we can't take chances in this aspect.
Yes. It is most importent.
Yes, the customer's character is the most important parameter for the sanctioning of the credit facility. It is a non-negotiable requirement on which no Bank/Financial Institution can compromise.
Sanctioning a loan to a good business model but to the promoters with malafide intentions means sanctioning a sure shot Non Performing Asset in future. All over the world, the Central Banks/Regulatory Authorities have issued severe punishments for such promoters and classified them as wilful defaulters.
Thus, checking on the promoters background is the foremost criteria to be adhered to before checking the other parameters, required for the sanctioning of credit facilities.
It can be one of them but can not be most prominent one
Yes
Yes100 % sure
Important, yes.
Most important? Unlikely.
If we were to trust the AUDITED Financial Statements that is based on International Accounting Standards, over the years the "character" of a customer (or company) could be seen through its Financial Statements.
Whatever actions taken by a company would be reflected (in one form or the other) in the Financial Statements in numerical terms.
Reading Financial Statements do not mean just mere reading of numbers. It also encompasses reading the notes (to accounts) and understanding the prevailing economic climate for the period.
Yes
Historic data is important in credit analysis and can give you guidelines as to which risk elements to watch for over a specific client
It is certainly an important one, but, as in any analysis, all the sides of a proposal/client has to be seen.
