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Credit appraisal can be defined as the assessment of risk that impact the repayment of loan, i.e. this question is important to the lending institution " would i get my money back?".
The assessment of the various risks that can impact on the repayment of loan is credit appraisal. In short, you are determining "Will I get my money back?". Depending on the purpose of loan and the quantum,the appraisal process may be simple or elaborate. For small personal loans, credit scoring based on income, life style and existing liabilities may suffice. But for project financing, the process comprises technical , commercial, marketing, financial , managerial appraisals as also implementation schedule and ability.
Credit appraisal :
It is the process by which the lender assesses the credit worthiness of the borrower.
Procedures ofcredit appraisal: It revolves around character, collateral capability and capacity. It takes into account various factors like income of the applicants, number of dependents, monthly expenditure, repayment capacity, employment history, number of years of service and other factors which affect credit rating of the borrower.
Confidence in the bank for someone, whether natural or moral, that gives him a sum of money to be used for a specific purpose, during the agreed period of time and under certain conditions to meet material return agreed and guarantees enable the bank to recover the loan in case the client has stopped payment
Well explained by Mr. Vinod Jelty
Credit appraisal in general is the process of evaluating the credit worthiness of the loan applicant. Credit or Project Appraisal means an investigation/assessment done by the Financial Institution prior to providing any Funding /Loan/Project Finance, in which it checks the economic, financial & technical viability of the proposed project.
•The appraisal of a project involve the examination of:–Technical Feasibility : To determine the suitability of the technology selected and the adequacy of the technical investigation, and design.
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–Economic Feasibility : To determine the conclusiveness of economic parameters to setting up the project and their impact on the scale of operations. It also contains Market Demand/Survey providing rationale for undertaking the Project.
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–Financial Feasibility : To determine the accuracy of cost estimates, suitability of the envisaged pattern of financing and general soundness of the capital structure.
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–Commercial Viability : To ascertain the extent of profitability of the project and its sufficiency in relation to the repayment obligations pertaining to term finance.
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–Managerial Competency : To ascertain that competent men are behind the project to ensure its successful implementation and efficient management after commencement of commercial production.
The assessment of the various risks that can impact on the repayment of loan is credit appraisal. In short, you are determining "Will I get my money ..Credit appraisal is the process of appraising the credit worthiness of the loan applicant.
It is a type of loan from the back given a certain business or can be borrowed from the credit agency. Must be returned with interest to the issuing agency.
Credit evaluation is to know the client's ability to fulfill its obligations under the agreed terms. That applies to the Group's exposure to the risk of funding resulting from premiums and rents entitlement management (such as Murabaha, Ijara) operations and working capital financing (such as peace or Istisna'a or speculative).
And each unit of the group's general framework for the management of credit risk includes the diagnosis, measurement, monitoring and reporting on credit risk. Each unit of the Group controls the credit risk from the initial approval and credit granting process, and then the subsequent follow-up of the credit worthiness of the counterparty and the active management of credit risk. And delegated authority to approve the credit facilities by the Board of Management Module to committees entrusted her
The functions of credit analysis and evaluation:
Under specific credit policies and procedures for operational works in that unit.
Exist in every unit of the group's internal audit department responsible for carrying out a review of credit obligations of counterparties and assess their quality and secure compliance with procedures approved for credit approval.
Credit appraisal is detail analysis of a credit proposal or project proposal in respect of all risks and also analysis whether the project will be financially/commercially/socially viable or profitable and whether the borrower will be able to repay the borrowed money in course of time or as per loan repayment schedule.
