A Loan Sanction Dilemma | Management Case Studies | Business Case Study

Details

Case Code : CLMISC010
Publication date : 2010
Teaching Note: Available
Subject : Miscellaneous
Industry : Banking
Length : 03 Pages
Price : Rs. 100

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Key words:

Banking, Capital, Borrower’s constitution, Credit appraisal, Documentation, Credit Monitoring, Loan

Note

* This caselet is intended for use only in class discussions.
** More comprehensive case studies are priced at Rs.200 to Rs.700 (US $5 to US $16) per copy.

Abstract:

The case is meant for discussing the topic of the basic requirements of Lending. The case involves the pre-sanction credit process viz. appraisal and recommendation, assessment, and sanction. The case is aimed at triggering a discussion on the real life scenario in a bank by narrating the predicament of a banker, who in his eagerness to achieve the target for the branch, forgets to ensure some of the basic requirements of bank lending.

Issues:

(i) Capital
(ii) Borrower's constitution
(iii) Credit appraisal
(iv) Documentation
(v) Credit Monitoring

Introduction

Ujjwal Shivacharya (Ujjwal), a newly promoted Branch Manager of Swastik Bank, a mid-sized bank in India, was in a spot of bother. A loan that his bank had sanctioned had become an NPA and now the borrowers were asking for an additional loan from the bank...

Questions for Discussion:

1. Should the bank consider the request of the company for an additional loan?
2. What are the repercussions if the additional loan is not considered?
3. Do you think the situation could have been managed better?
4. Is the bank responsible for the non take-off of the project?
5. Who should be held responsible for the loan becoming an NPA?

A Loan Sanction Dilemma*