Making a Lending Decision*

            


Details


Case Code : CLMISC009
Publication date : 2010
Teaching Note: Available
Subject : Miscellaneous
Industry : Banking
Length : 03 Pages
Price : Rs. 100

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Key words:

Lending decision, DSCR, security offered, repayment period, Age, Constitution, Education, Family background, due diligence

Note

* This caselet is intended for use only in class discussions.
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Abstract:
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Nirmal Kumar, a bank manager in a new age private sector bank in India, has been approached by a transport operator named Sajjan Singh for a loan. Nirmal has collected and reviewed all the relevant information. Now he has to calculate the debt service coverage ratio (DSCR) and, taking into consideration the various bits of information available to him, take a decision on whether to extend the loan to Sajjan.

Issues:

(i) Lending decisions How they are taken at the branch/unit level
(ii) The various issues and factors (such as security offered, repayment period, etc.) to be considered in making a lending decision
(iii) The various factors to be considered in a prospective borrower (such as Age, Constitution, Education, Family background, etc.) in order to make a lending decision
(iv) The concept of DSCR, how it is arrived at, and how it helps in making a lending decision


Introduction

Nirmal Kumar (Nirmal), Manager at the M/S Conservative Bank Ltd, a new age private sector bank in India, had been working with the bank for five years. At present, he was posted at the Indore branch...


Questions for Discussion:

1. What are the various requirements for making a lending decision?
2. What are the various factors to be considered in making a lending decision?
3. What are the various facets of the lending proposal?
4. What is the significance of Financial Appraisal in making a lending decision and how is it done?
5. What is the concept of DSCR? How is it arrived at and how does it help in making a lending decision?
6. In this case, should Nirmal Kumar extend the loan to Sajjan? Give reasons to support your answer.


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