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CHAPTER 3 CM (Steps involved in credit analysis (Collecting and analyzing…
CHAPTER 3 CM
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Loan structure
Amount
- It must be sufficient according to the types of loan
- Based on net salaries or commitment of borrower's debt
- Example for personal loan the requirement are maximum 35 times of salaries by Bank Rakyat, Maximum Rm200,000 and maximum period is 10 years
Tenor / Duration
- The duration based on the type of risk
- Long term loan is more risky
- It also depend on the borrower's capabilities either short/long term
- For example personal loan is maximum 10 yrs, Housing loan max 30-35 yrs & hire purchase max 9 years
Appropriateness types of facilities ( purpose)
- The purpose of loan reflect on government policies example not for gambling, smuggling, money laundering & others.
- It also based on the customers' intention
- The purpose constant with the risks
- Example is business loan are use for working capital , investment in fixed assets
Direct & indirect exposure
- two perspectives which are micro & macro
- Micro are focused more on industry / parties or segmentation example competitors' , suppliers', new products customer
- Macro are focused on factors that will effect on credit example the politic, economy, social & technology
Collateral (Assets)
- The customer can pledge their collateral if they fail to make repayment according to specific period given
- The collateral must have market value such as land, building, residential, properties
- Example the land prices increasing because of limited asset & highly demand
Appropriate term & condition - There must be stated in an agreement & follower by the borrowers.
- Must be in written evidence and can be use in legal action
- Example the housing loan cannot be make the earlier settlement because the bank cant get the profit, demand
5C's of Credit analysis
Collateral
- Help the borrower to secure loan
- Tangibility
- Secondary sources of repayment
Condition
- Based on the company economy survey, can look on the direct & direct exposure
Character
- Can ask the employer & friends
- Based on the borrower reputation which the sosial & legal
Capacity
- Bank want know the customer ability based on the financial position , credit worthiness , balance sheet
Capital
- When the capital higher, they may get the higher return, the risk may also increase
- Banks also look the sufficient equity
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Sources
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Integrated system
- Convergent Technologies Operating System (CTOS) network all the bank and related agencies
- Checking Credit Reference Information System (CCRIS) provided by BNM
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Type Of analysis
Fact analysis
- Assess track record
- Assess shareholders & directors
Qualitative Analysis
- Assess Management integrity and competence
- Assess nature of the products
- Assess customers and terms of trade
Quantitative analysis
- Assess financial position
- Assess liquidity position
Credit Analysis -A process of determining the loan applicants current creditworthiness& forecasting their future development. The lender can make decision on loan approval, determining the loan structure , evaluate potential borrower's liability to make repayament