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CCP | Credit Policy | Chapter 2 | Part 1 |IBF Certification [Free Epdf]

Have you ever wondered how banks decide whom to give loans to? Or why some loan applications get rejected despite having a good income? 🤔

If you’re preparing for the CCP certification, understanding credit policy in banking is crucial. Credit policies guide banks on responsible lending, risk management, and ensuring regulatory compliance. In this session, we break down the essential components, from loan approval criteria to risk assessment methodologies.

Who should watch this?

  • Bankers preparing for CCP certification
  • Finance professionals looking to understand credit risk management
  • Anyone curious about how banks manage their lending portfolio

🚀 Watch the full video below and engage with us in the comments!

Before we dive in, check out this in-depth video:

Understanding Credit Policy in Banking

What is Credit Policy?

Credit policy refers to a structured set of guidelines banks follow while granting loans and advances. It helps in managing risks and improving profitability while ensuring compliance with RBI guidelines.

Key Objectives of Credit Policy:

  • Ensuring responsible lending and minimizing risk
  • Maintaining a balance between credit volume, earnings, and asset quality
  • Complying with regulatory requirements (RBI Guidelines)
  • Enhancing customer satisfaction by offering structured credit solutions

Key Components of a Bank’s Credit Policy

1. Customer Acceptance Policy 🏦

Defines which customers qualify for loans.

  • Eligibility criteria like stable income, credit history, and CIBIL score
  • Example: A bank may approve home loans only for applicants with a CIBIL score of 750+

2. Know Your Customer (KYC) Compliance 🆔

Ensures fraud prevention and anti-money laundering (AML) checks

  • Requires submission of PAN, Aadhaar, and bank statements

Loan Approval Process – Step by Step

Loan Appraisal Standards

Checking salary slips, ITR, and balance sheets for financial stability.

https://learningsessions.in/principles-of-lending-iibf-certified-credit-professional-chapter-1-free-epdf/

Loan Types and Their Purpose

  • Home Loans – Financing for purchasing or constructing a home
  • Personal Loans – Unsecured loans for personal expenses
  • Business Loans – Funds for business expansion and operations
  • Overdraft Facility – Allowing withdrawal beyond deposited amount

Risk Management in Credit Policy

Banks must ensure a diverse and balanced loan portfolio to reduce risks. Here are key risk management strategies:

  • Risk Diversification: Limiting exposure in high-risk sectors.
  • Credit Scoring: Assessing borrower’s financial health.
  • Regular Monitoring: Evaluating performance of loans over time.
  • Regulatory Compliance: Adhering to RBI norms.

Conclusion

A well-structured credit policy ensures banks lend responsibly while maintaining profitability and minimizing risks.

Key Takeaways:

  • Banks follow credit policies to manage risks and maintain profitability
  • Loan approval depends on financial stability, credit score, and risk assessment
  • Regulatory compliance (RBI guidelines) is crucial for lending practices
  • Risk mitigation is key – through credit analysis and borrower assessments

📥 Download Free Credit Policy PDF!

👉 Click below to get a detailed PDF version of this session’s notes:

Download PDF

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