Credit sanctioning is very important consideration for the credit department of any financial institution. So a heavy liability is on the shoulder of credit manger of the credit department. While approving a loan to a customer he has to keep an eye on different factors if he takes care of these factors he can convert these advances into cash but if he ignore the analysis of a customer he will face the failure of converting the advances into cash and resultantly his accounts will go into uncollectible amounts and these can be refilled with the help of reserve for doubtful debts.
But to refill the uncollectible accounts isn’t a serious issue. A credit manager’s success is depending upon the factor that how much he takes care of analyzing the customer’s credibility.
Customer can be an individual, company or a partnership firm. Efficiency does not lie on the number of loans sanctioned it depends on whether he is able to collect it back or not.
Example: There are two branches of HBL bank. The manager of branch 1 issued loans of 2 million rupees and he is able to collect back the loan of Rs. 1.9 million. On the other hand, manager of branch 2 issued loans of 10 million rupees but he is able to collect back up to Rs. 4 million
As we know that efficiency is not sanctioning more and more loans it is about collecting back the maximum amount of loan issued. It is evident that the manager of branch 1 is more efficient than that of the other one as he is able to collect more amounts of loans.
FACTORS CONSIDERED IN CREDIT ANALYSIS
Following are the factors which are considered in credit analysis of a customer before sanctioning him the loan:
Character means that the lending officer should keep an eye on the family background, moral character of the customer, his willingness to pay the debt, his living standard etc. all is comes under the character of the customer.
If a person is facing problems in payment of his other debts then he...