Vinu: Manu, before any loan is sanctioned, what is the fundamental objective of credit appraisal?

Manu: To ensure that the borrower has the ability, intent, and cash flow to repay the bank without stress.

Vinu: Let’s start from the beginning. What is the first check?

Manu: Borrower background and integrity. Promoter track record, experience, credit history, and group exposure come before numbers.

Vinu: After that, where do financials fit in?

Manu: Next is financial analysis—profitability, cash flow, net worth, and leverage. I focus more on cash accruals than reported profits.

Vinu: How do you assess working capital needs?

Manu: By analyzing the operating cycle—inventory days, receivable days, and payable days. Excess reliance on bank limits indicates inefficiency.

Vinu: What about projections submitted by borrowers?

Manu:  Projections must be logical and achievable. Sudden jumps in turnover or margins without capacity expansion are red flags.

Vinu: How important is security in appraisal?

Manu: Security is secondary. It reduces loss, not default. Primary reliance must always be on cash flow.

Vinu: Do you evaluate industry risk separately?

Manu: Yes. Industry trends, competition, regulatory impact, and customer concentration affect repayment capacity.

Vinu: What role does account conduct play before sanction?

Manu: A crucial one. Irregular operations, frequent overdrawings, or cheque returns indicate poor financial discipline.

Vinu: Any final checks before approval?

Manu: Sanction terms, covenants, repayment schedule, and monitoring mechanisms must align with business cash flows.

Vinu: So what is the final takeaway?

Manu: Credit appraisal is about preventing future NPAs, not approving files quickly.

Vinu: Well said.

Manu: That mindset protects both the bank and the banker.

To learn more about Banking & Financial related topics
We invite you to join our Diamond Membership
Check - https://courses.carajaclasses.com/courses/Diamond-Membership-6305fad1e4b0cccc82d610be
For Special Discount on Diamond Membership 
Connect with us  - https://wa.me/919025100249?text=DLM