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CCP Certification exam | Credit Appraisal | Chapter 5 | Module A [Free Epdf]

Ever wondered how banks decide whether to approve or reject a loan? Are you preparing for CCP Certification and want to master the art of credit appraisal? Then this video is just for you!

In this session, we cover everything from credit appraisal meaning, risk evaluation, key factors, and modern-day approaches used by banks. Understanding credit appraisal is crucial for bankers, finance professionals, and students aiming to excel in the banking sector.

  • What is credit appraisal, and why is it important?
  • The 8 Pโ€™s framework for loan evaluation.
  • Traditional vs. Modern credit appraisal methods.
  • Financial risk assessment and risk mitigation techniques.
  • The role of fintech in credit evaluation.

Before we dive in, watch this video for a complete breakdown:

 

What is Credit Appraisal?

Credit appraisal is the process banks use to evaluate the creditworthiness of borrowers before sanctioning loans. The goal is to minimize risk and prevent NPAs (Non-Performing Assets).

Key Objectives of Credit Appraisal:

  • Ensure the borrower has the ability to repay the loan.
  • Minimize credit risk and reduce NPAs.
  • Maintain a stable financial system for banks.

The 8 Pโ€™s of Credit Appraisal

1๏ธโƒฃ Project: Purpose of the Loan

Banks first check why the borrower needs funds. Whether for business expansion, working capital, or personal needs, the project should be viable and profitable.

2๏ธโƒฃ People: Whoโ€™s Behind the Business?

Banks assess the promoters, management team, and their experience to ensure they can run the business efficiently.

3๏ธโƒฃ Process: Operational Strategy

A business needs a well-structured process to generate revenue, manage costs, and remain sustainable.

4๏ธโƒฃ Product: Market Demand & Competition

The bank evaluates whether the borrowerโ€™s product/service has enough market demand to sustain in the industry.

5๏ธโƒฃ Prospect: Market Potential

Banks analyze the market conditions, potential competitors, and economic factors to determine if the business will be profitable.

6๏ธโƒฃ Projection: Financial Forecasting

Banks estimate the future revenue, expenses, and profitability of the business to gauge repayment capability.

7๏ธโƒฃ Profitability: Earning Potential

Without consistent profits, loan repayment becomes difficult. Thus, a borrowerโ€™s ability to generate steady profit is critical.

8๏ธโƒฃ Proposed Repayment: Loan Repayment Plan

Banks check the repayment plan to ensure the borrower can repay the loan on time without financial distress.

https://learningsessions.in/ccp-exam-credit-delivery-chapter-4-free-epdf/

Download the Full Credit Appraisal PDF Guide

For your convenience, download the complete Credit Appraisal Guide in PDF format.

Download Now

Conclusion

Credit appraisal is a crucial process for banks to assess a borrowerโ€™s repayment ability and reduce risks. With modern data-driven approaches, fintech solutions, and robust risk assessment models, banks can make smarter lending decisions.

What do you think about modern credit appraisal techniques? Let us know in the comments!

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Stay tuned for Part 2, where we dive deeper into advanced credit risk management strategies!

 

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