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What is the objective of credit analysis?

The objective of credit analysis is to look at both the borrower and the lending facility being proposed and to assign a risk rating. The risk rating is derived by estimating the probability of default by the borrower at a given confidence level over the life of the facility, and by estimating the amount of loss that the lender would suffer in the event of default

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Question ajoutée par Vinod Jetley , Assistant General Manager , State Bank of India
Date de publication: 2014/07/24
Tanveer Qureshi
par Tanveer Qureshi , Director , Qureshi Associates

Tradentially lenders faces risk of default in every loan transaction. Credit risk is major concern for lenders. Bank's and financial itermederies appoints Credit Risk Analyst, who undertake risk assessment for various type of lending proposals, from salo proprietorship to public limited campany and for working capital  to short term and long term loan.

 

Credit Analyssi consist of the following:

 

1. Analysis of business and industry.

2. Financial Statement analysis.

3. Cash Flow analysis.

4. Collateral Analysis.

 

Credit Analysis is based on5 Cs, which are

 

a. Capacity-It determine borrower's capacity to repay of loan.

b. Capital-What the owner are investing in particular business.

c. Collateral-Determine the security or guarantee offered against particular loan.

d. Condition-What terms and conditions offer to secure loan.

e. Character-It determine past history, loan repayment history etc.   

Elke Woofter
par Elke Woofter , Project Assistant , American Technical Associates

The objective of credit analysis is to look at both the borrower and the lending facility being proposed and to assign a risk rating. The risk rating is derived by ...

The major purpose of credit analysis is to identify risks in lending situations, draw ... Credit analysis is the quantitative and qualitative analysis of a company, ...

Amit Gupta
par Amit Gupta , Vice President (Corporate Credit - Credit Risk) , State Bank of India

The main objective of the credit analysis is to assess the risk of default (called credit risk) objectively so as to enable Credit Committees to take appropriate decision regarding the sanctioning of the credit facilities. The accurate measurement of risk of default not only helps in defining appropriate collateral security to mitigate the risk but also on deciding the right pricing for the risk.

Utilisateur supprimé
par Utilisateur supprimé

Agree with the answers 

Ibrahim Hussein Mayaleh
par Ibrahim Hussein Mayaleh , Sales & Business Consultant and Trainer , Self-employed

It gives an indication of your credibility and credit risk.

Mir Mujtaba Ali
par Mir Mujtaba Ali , Internal Audit Manager , Confidential

Agree with the answer by Elke Woofter

Alex Al Yazouri
par Alex Al Yazouri , General Manager , Al Mushref Cooperative Society

Thanks for the invitation.

The colleagues said it all.

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