UNIVERSITY OF MUMBAI

(SIXTH SEMESTER)

T.Y.B.M.S.

A PROJECT ON

CREDIT MANAGEMENT

ACADEMIC YEAR

2023-2024

SUBMITTED BY

RATHOD KRISHA RAJESH

PROJECT GUIDE

PROF.SARA SHAIKH

DATE OF SUBMISSION

11TH MARCH,2024

MALINI KISHOR SANGHVI COLLEGE OF COMMERCE

AND ECONOMICS

J.V.P.D SCHEME

VILE PARLE(WEST)

MUMBAI-400049
 DECLARATION

I, RATHOD KRISHA RAJESH of MALINI KISHOR SANGHVI COLLEGE OF COMMERCE

AND ECONOMICS, of T.Y.B.M.S (Semester VI) declare that I have completed this project on the
“CREDIT MANAGEMENT” in the academic year 2023-2024. The information submitted is true and
original to the best of my knowledge.

DATE OF SUBMISSION ________________________________

11TH MARCH, 2024 SIGNATURE OF STUDENT

(RATHOD KRISHA RAJESH)

 CERTIFICATE

This is to certify that RATHOD KRISHA RAJESH of MALINI KISHOR SANGHVI COLLEGE
OF COMMERCE AND ECONOMICS, of T.Y.B.M.S (Semester VI) has completed the project on the
‘CREDIT MANAGEMENT’, in the academic year 2023-2024. The information submitted is true and
original to the best of my knowledge.

_______________________________ _________________________________
SIGNATURE OF BMS CO-ORDINATOR SIGNATURE OF PROJECT GUIDE
(DR. NEHA MEHTA) (SARA SHAIKH)

_______________________________ ___________________________________
(COLLEGE SEAL) SIGNATURE OF PRINCIPAL
(DR. KESHAV GHORUDE)

________________________________________
SIGNATURE OF EXTERNAL EXAMINER
 ACKNOWLEDGEMENT

It has always been my sincere desire as a management student to get an opportunity to

express my views, skills, attitude, and talent in which I am proficient. A project is one such
avenue through which a student who aspires to be a future manager does something creative.
This project has given me the chance to get in touch with the practical aspects of
management.

I am extremely grateful to the University of Mumbai for having prescribed this project
work to me as a part of the academic requirement in the Bachelor of Management (BMS)
course.

I wish to appreciate the management and staff of Malini Kishor Sanghvi College, BMS for
providing the entire state of art infrastructure and resources to enable the completion and
enrichment of my project.

I wish to extend a special thanks to my project guide Prof. Sara Shaikh without whose
guidance, the project may not have taken shape.
 INDEX

SR.NO CHAPTER PAGE NO

1. INTRODUCTION
1.1 MEANING & CONCEPT OF CREDIT 1-2
1.2 CHARACTERISTICS OF CREDIT 2-3
1.3 FUNCTIONS OF A CREDIT MANAGER 3
1.4 TYPES OF CREDIT 4-6
1.5 IMPORTANCE OF CREDIT MANAGEMENT 7
1.6 CREDIT INSTRUMENTS 8
1.7 CONCEPT AND PROCESS OF CREDIT MANAGEMENT 9-10
1.8 FUNCTIONS AND CONCEPT OF CREDIT RISK MANAGEMENT 11-13
1.9 CREDIT MANAGEMENT POST COVID-19 14-15
2. RESEARCH & METHODOLOGY
2.1 AIMS AND LIMITATION OF CREDIT MANAGEMENT 16-17
2.2 EVALUATION OF APPLICANT 18-19

2.3 CREDIT MANAGEMENT MONITORING & ANALYSIS 20-22

2.4 SCOPE OF CREDIT MANAGEMENT 23
2.5 HYPOTHESIS & RESEARCH DESIGN 24
2.6 TARGET GROUP, SAMPLING TECHNIQUE & DATA COLLECTION 25
PROCEDURE

3. LITERATURE AND REVIEW 26-30

4. TABLES AND INTERPRETATION
4.1 COLLECTION AND TABULATION OF DATA 31
4.2 TECHNIQUES AND TOOLS USED 32
4.3 ANALYSIS AND INTERPRETATION OF QUESTIONNAIRE 33-53
5. CONCLUSION 54
6. BIBLIOGRAPHY 55
7. ANNEXURE 56-60
 CHAPTER 1- INTRODUCTION

1.1 MEANING
Every nation must go through an ongoing process of development. Banks are essential to this process. The
Indian banking sector has developed into a potent tool for organizing economic expansion. Savings are directed
by banks toward investments and spending. This allows investors' and consumers' credit needs to be balanced
with savers' investment requirements. 1. Lending is the most significant of the banks' primary functions, as it
allows them to supply working capital to businesses and industries. In addition to its civic duty to provide the
credit demands of all facets of society, lending is the most profitable activity—interest rates on business loans
have consistently outperformed those on investments. This is why credit is so important. Since credit is the
primary source of income for banks and typically constitutes one of their most valuable assets, it is even more
important to handle credit properly. Therefore, a bank's ability to develop and prosper depends critically on its
ability to extend credit on a sound basis. Commercial banks' lending activities are expected to align with the
needs of the economy, given the growing significance of commercial banking in capital formation, job creation,
and production facilitation. Currently, banks continue to be the main providers of working capital to businesses
and industries, and they also enjoy the benefit of having large lending facilities generated by the banks. Because
of this, managing bank credit operations now requires more creativity than it did with its previous standard
method. Bank lending operations have a ripple effect on the economy. All economic sectors should expand and
develop equally for the economy to prosper overall. Credit management supports the idea of credit deployment,
which states that banks should make sure that bank credit is generally used to benefit every sector of the
economy and national system. This is the only facet of managing credit. However, if lending stops, it hurts the
economy as a whole. Over the past ten years, banks have realized that a rise in retail credit also increases credit
risk. A bank's capacity to remain profitable and maintain liquidity depends mostly on its ability to make
profitable loans.
 1.
DEFINITION
Credit is purchasing power not derived from income but created by financial institutions either as
an offset to idle income held by depositors in the bank or as a net addition to the total amount or
purchasing power.

CONCEPT OF CREDIT
The Latin word credo, which means "I believe or I trust," is where the term "credit" originates. It denotes a
person's faith or confidence in another. The definition of credit is placing your faith or belief in someone. It is
understood in economics to indicate, among other things, lending money and receiving deposits, or having faith
in someone's solvency, or paying someone and expecting them to repay you later. To put it another way, credit
can be defined as a legal arrangement whereby a borrower receives something valuable now and promises to
pay the lender back later. An individual can borrow money via the financial system, either as a loan or as credit.
The total amount of credit that each bank extends to an individual is known as the individual's total bank credit.
Using credit cards is the most popular way to make purchases using credit these days. This creates a middleman
in the credit arrangement: the bank that issued the card pays the retailer back in full and gives the buyer credit,
which they may repay gradually. Credit is another word for the quantity of money that a person or company is
willing to lend or their creditworthiness. Saying "He has great credit, so he's not worried about the bank
rejecting his mortgage application" is an example of what someone might say.

1.2 CHARACTERISTICS OF CREDIT

Some characteristics of credit are of prime importance when extending credit to an individual or a business.
 Confidence:

Having confidence is crucial while giving or receiving credit. The individual or authority must
have faith in the debtor

 Capacity:

The borrower's ability to repay the debt is an important factor to take into account. The creditor
should assess the borrower's capabilities before making any advances or extensions

 Security:

The primary source of credit is banks. Banks correctly verify the debtor's security before issuing
credit. The borrower's possession of certain property or assets determines whether credit is
 available.

2.
 Goodwill:

The borrower may have no trouble obtaining credit if they have a history of making on-time
payments of outstanding debt.

 Capital:

The sum of money that a business owner invests in their venture. It shows how sincere the
borrower is. Sometimes bankers or lenders may accept any collateral that a person attaches.

 Period of credit:

Long-term credit typically requires more risk factors to be secured, making it more difficult to
get.

1.3 FUNCTIONS OF A CREDIT MANAGER

An individual hired by a company to oversee the credit department and make decisions about credit limits,
acceptable risk levels, terms of payment, and customer enforcement measures is known as a credit manager.
This role is frequently merged into a company's department together with collections and accounts receivable.
The range of a credit manager's responsibilities varies, but they include the following:

 Reducing exposure to bad debt and associated costs by actively

managing credit terms on the company's ledgers.
 Preserving robust cash flows using effective collection methods. There are
several ways to measure the effectiveness of cash flow, but Days Sales
Outstanding (DSO) is the most widely used one.
 Ensuring that the business maintains a sufficient allowance for doubtful accounts.

 Keeping an eye on trends and red flags in the portfolio of accounts receivable

 Recruiting and dismissing staff members for collections, accounts receivable, and credit
analysis.

 Implementing a "stop list" to deliver products and services to clients.

  Taking bad debts (also known as bad debt write-offs) out of the ledger.

 Enforcing credit limitations

 Determining credit terms that are outside the purview of credit analysts.
3.
1.4 TYPES OF CREDIT
Two primary categories of credit assistance are offered by bankers: fund-based and
non-fund-based credit support. The cash outflow is the primary distinction between
fund-based and non-fund-based credit assistance offered by a banker. Customers can
use fund-based facilities from banks in any of the following ways.

TRADITIONAL CREDIT PRODUCTS:

 Cash credit:
Business companies that receive cash credit are granted this type of credit. A cash credit account
functions similarly to a current account and includes all overdraft protections. It is a drawing
account that is backed by a set credit limit that the bank has issued. It is a deal whereby a bank
permits its clients to borrow money up to a predetermined amount against real assets, shares of
authorized enterprises, etc. In general, cash credits are accepted as collateral for personal
protection or the hypothecation of goods or book debts. A bank establishes a limit for a customer
based on the type of requirements they have, up to which they can borrow against the security of
assets after submitting the required terms and conditions. The account is dependent on demand. If
there is a strong turnover in both goods and accounts, the borrowing limit can be extended for an
extended period. Deposits and withdrawals from this account could be impacted regularly. Cash
credit is the most often used form of advance for businesses in India.

 Overdraft:
An overdraft facility is when a bank allows a customer with a current account to withdraw more
money than they have deposited. Customers using this system are allowed to take out as much as
they need to cover their balance, up to the specified limit, and refund the money by making
deposits into their accounts whenever it's convenient for them. This feature is available to
customers in good standing, however there will be interest charged on the additional withdrawal
amount.

 Demand loans:
A demand loan may be demanded to be repaid at any time and has no set maturity date. One of its
 subtle features is that the debtor receives payment for the complete approved loan amount all at
once. interest is charged on the debit balance.

 Term loans:
A term loan is a sum of money given to someone working in the business, industry, or trade for a
predetermined length of time to meet certain needs, such as purchasing fixed assets.
4.
 Bill purchased:

Occasionally, bankers may opt to buy bills rather than reduce their value. However, this is
typically only done in the event of documented bills—and those from clients who have been
approved. Railway receipts and bills of loading or haulage are examples of papers of title to
goods that are attached to documentary invoices. Occasionally, bankers will advance funds in the
form of cash credit or overdraft as collateral for these debts.

 Bill discounted:

A promissory note or bill receivable at a later time is sent to the banker, who then loans the
money by deducting it from the interest on the instrument's total amount. The primary
characteristic of this loan is that the banker receives the interest beforehand. Banks primarily
depend on the creditworthiness of the parties involved in this type of lending, which is essentially
a clean advance.

INNOVATIVE CREDIT PRODUCTS:

There have been significant alterations in the methods of granting loans to both individual consumers and
company owners during the liberalization phase. Easy lending was also pushed upon banks by their shift from
universal to branch banking following the deregulations. Expectations skyrocketed as a result of the rise in
mergers and acquisitions in this industry. There is a lot of pressure on banks to satisfy deposit and lending
targets. Following the processes of liberalization, privatization, and globalization, bankers started concentrating
on both corporate and retail banking operations. This is because it lets users do financial transactions whenever
it's convenient for them. Technology has aided in the growth of the financial services sector and shortened the
money cycle to its minimum. Many banks and other financial institutions have launched online services. The
number of cutting-edge retail goods that Indian banks are offering is rapidly rising.

 Credit cards:

Cash can be substituted with credit cards. Customers of banks can purchase goods and services on
credit. The cardholder's annual income determines which features and facilities are available to them.
 Debit cards:

Debit cards can be used to make purchases with credit cards as well as to get cash out of ATMs.

 Housing loans:
These days, banks offer a variety of home loans for buying or remodeling a property. The customer's
ability to repay the loan and the lending policies determine how much is lent to them. Usually, these
loans are given for a very long time.
5.

 Auto loans:

Auto loans can be obtained for the purchase of a car, motorcycle, or other vehicle.

 Personal loans:

The banks are offering an outstanding service here. Without requiring any significant security, the
individuals are given this loan to meet their personal needs. Many banks use straightforward processes
and issue loans quickly with the fewest paperwork possible.

 Educational loans:

The student is given this loan so they can continue their study. It is accessible for use in domestic or
international education.

 Loans against securities:

These loans are given in exchange for various securities, including as bonds, mutual funds, life
insurance policies, fixed deposits, and demat shares. loans for consumption used to buy durable goods.
Banks provide long-term loans to consumers, to realize their hopes and desires. You can use these loans
to buy a laptop, smartphone, refrigerator, TV, and more.

 Hybrid loan products:

Banks need to embrace new technologies to be competitive and enhance the business environment.
Banks must safeguard borrowers' interests in the face of inflation and changing interest rates. As a
result, banks now provide their clients with hybrid products.
 6.

1.5 IMPORTANCE OF CREDIT MANAGEMENT

Credit control, also referred to as credit management, is one of the most crucial tasks performed by your
organization. The practice of ensuring that clients will pay for the goods or services provided is known as credit
management. Credit management is essential to your cash flow since, even if your organization is thriving, you
will either go bankrupt or be acquired by a cash-savvy party. ACCOUNTS RECEIVABLE (AR) are clients
who haven't paid yet. The issue with AR is that you have no control over the money that belongs to your
organization (AR is also known as debtors). AR has two significant drawbacks. Without proper terms and
conditions, capital is tied in AR and does not even carry interest until your client has paid the outstanding
balance. Capital is money, and you can make a lot more money and use it for a lot more beneficial things. There
is a chance that the client won't be able to pay as long as money is due. Your risk of nonpayment increases with
the length of time the customer takes to make payment. Bad debt or nonpayment entails a 100% loss. EC Credit
Control advises filing this with us as soon as possible to significantly improve your chances of having it
successfully collected. The answer seems obvious at first: don't give consumers credit. Inform a potential
consumer that they have two options for payment: prepayment or payment upon delivery. Since so many clients
need 20th-of-the-month accounts, it isn't always possible to avoid AR, which means all of your cash is easily
accessible and you don't face the risk of bad debt. Additionally, if you choose not to grant credit, the client will
frequently turn to your rival. Because of this, credit management is a crucial procedure. You will always have
to balance two risks when working with a customer: the risk of receiving money after the due date and the risk
of losing the transaction. Once more, it's easier said than done. To prevent good money from being thrown after
bad, EC Credit Control functions as an extension of your company. Credit management is not only a significant
and fascinating activity but also a very challenging job.
 7.

1.6 CREDIT INSTRUMENTS

Credit instruments are particularly beneficial for promoting and developing trade and commerce as well as for
encouraging and developing credit. A few of the lending tools include:

 Cheque

The most often used instrument is the check. It is an order placed with the bank by a depositor to pay a
specific amount of money that has been deposited there.

 Bank draft:

Another crucial credit tool that banks utilize, whether through their main office or a branch, is a bank
draft, which they use to transfer money between locations. Transferring money using a bank draft is
less risky, more convenient, and more affordable.

 Bill of exchange:
It allows the commodity seller to provide the buyer an order to pay the seller directly or to someone
whose name and address are listed on the bill, as long as the payment is made within the time frame
stated.

 Promissory note:
A promissory note is a written document that contains an unconditional promise signed by the maker to
pay a specific amount of money solely to or on the order of a specific person or the instrument's bearer,
as defined by the Indian Negotiable Instrument Act.

 Government bonds:
 A certificate of sorts is issued by the government to the individuals who sign up for these loans. We
refer to these certificates as government bonds. A few of them are exempt from income taxes.

 Treasury bills:
The government is also the issuer of these bills. They are released ahead of anticipated public income.

8.

1.7 CONCEPT OF CREDIT MANAGEMENT

Deposits are gathered by banks and other financial organizations, who then use them to make loans. Generally
speaking, lending is favored since it moves money out of the system and into useful endeavors that boost the
economy. The borrower obtains monies from the bank as a loan, which they then repay principal plus interest.
Bank funds can occasionally be blocked due to non-performance of loan assets, which lowers profit margin.
The bank needs to control its entire credit process to prevent this from happening. Banks ought to allocate
their credit in a way that promotes economic growth in all sectors.
There are two components to credit management: Allocate credit among the economy's sectors to enable each
one to grow and banks to make money. On the other hand, consider how to lend money to different industries,
people, and companies while minimizing credit risk.

The primary goal of credit management is to use the bank's resources profitably and productively to accomplish
desired economic growth. Simultaneously, it aims to achieve equitable distribution across the different
economic segments to facilitate the unhindered growth of the economic fabric, as specified by the banking
objectives and the national objectives in general. In other contexts, credit can also mean a decrease in one's
outstanding debt. For example, imagine someone owes their credit card company a total of $1,000 but returns
one purchase worth $300 to the store.
PROCESS OF CREDIT MANAGEMENT

Beginning with a precise evaluation of the client base's creditworthiness and viability as a firm, credit
management begins. This is especially crucial if the business decides to give certain of its clients access to a
credit line or revolving credit. Therefore, appropriate credit management involves establishing prerequisites
that a client needs to fulfill to be approved for the suggested credit arrangement. Credit management also
requires figuring out the total credit line that will be offered to a certain consumer as part of the evaluation
process.
A customer's evaluation and eligibility for the granting of commercial credit are determined by several
elements as part of the credit management process. This includes gathering data on the potential customer’s
current financial condition, including the current credit track record that discloses the character of a customer
in meeting obligations as well as collateral value. The current ratio between income and outstanding financial
obligations will also be taken into consideration.

Competent credit management seeks to not only protect the bank or any financial institution involved from
possible losses but also protect the customer from creating more debt obligations that cannot be settled
promptly. Everyone who is involved gains from the credit management process when it runs smoothly.
9.

CREDIT PROCESS (A FLOW CHART):

Application Bank Scrutinizes Interview

with the Application in with
Preliminary Detail and Calls the
Project Bank for Further Borrower
Report Details / (detail
and Clarifications discussions)
Enclosures Detailed Project
Report

Regular Completion In Bank

Formal of All Principle Conducts Pre-
Sanction Formalities Sanction Sanction
by the by the by Inspection of
Bank Borrower- the Bank the Business
LSR / VR Premises /
Residence

Execution Release Post- Regular

Acceptance Of Of Sanction Follow-
of Sanction Documents Funds Inspection Up of
Terms to by Bank the
and the Loan
Conditions Borrower till
by the Closure
Applicant

0
 10.

1.8 FUNCTIONS OF CREDIT MANAGEMENT

A company's daily financial operations and continued creditworthiness depend on effective credit management.
A company that uses subpar credit management techniques may be able to generate revenue, but it may still
find itself unable to pay its regular debts. Credit management is a multifaceted process that supports a profitable
company's operations in several ways.

 CREDIT CHECKING
The majority of business businesses rely heavily on sales, meaning that acquiring new clients and
completing orders is of utmost importance. In this process, the purpose of credit management is to
verify the creditworthiness of potential new clients. The majority of potential clients may have credit
ratings so low that doing business with them is not worthwhile. To reduce the possibility of bad debt,
credit management is also in charge of negotiating terms and conditions for payments with both new
and current clients. Credit managers might, for instance, revise the credit terms provided to a customer
who orders a product every month but only has payments due every three months if they believe the
customer's credit rating has decreased. Customers would owe less bad debt if they had monthly terms
or even cash-on-delivery conditions.

 INVOICE AND BILLING

Credit management is in charge of making sure that when bills, statements, and invoices are sent to
clients, they appropriately reflect the state of their account as of right now as well as the precise
amounts and information of payments that are due.

 CREDIT COLLECTION

Bad debt identification and recovery are the responsibilities of credit management
 officers. This can include renegotiating terms of payment for future purchases,
renegotiating lines of credit (the monetary value of products and services that will be
provided to the client on account), and negotiating terms to repay presently outstanding
sums. Credit management officers may choose to transfer a debt to commercial credit
rating and collection agencies if a customer is unwilling or unable to negotiate its
repayment.

11.

CONCEPT OF CREDIT RISK MANAGEMENT

The banking industry places great importance on credit risk management, which has enormous growth
potential. Primarily financial risks frequently confront banks and other financial firms. Risk management has
long been a key element of bank business strategy, and risk reduction and planning have always been a part of
the banking industry.
An essential component of a bank's credit management process is risk management. Professionals in banking
need to keep the ratio of risks to profits in check. Banks must offer a sufficient range of affordable loan
products to serve a sizable consumer base. The bank will experience losses if the interest rates on lending
products are excessively low. Since the beginning of banking, deliberate attempts have been made to reduce
risk without compromising commercial prospects
However, risk management has become more difficult due to the markets' rising volatility. Banks are always
taking risks, thus sometimes it can be problematic for them to give loans. The method of giving loans to
specific clients carries certain risks. If the loan is given to borrowers who are not deserving, there may be
additional risk.
When banks offer securities and other investment options, there may also be some dangers involved.
Since banks have smaller profit margins than other firms, effective credit risk management is essential to their
profitability.
CREDIT RISK RATING:
An assessment of a borrower's ability and willingness to repay a loan determines their credit risk rating. Banks
will be permitted to determine capital charges using their credit risk rating system under the IRB (own Rating
Base) approach. Similar treatment for corporate banks and a different framework for project and retail financing
are offered by the IRB approach. One of the most novel methods of determining credit risk under the new
agreement is the IRB methodology. Basel-II standards state that there are two methods used in the IRB
methodology to calculate credit risk: the Foundation approach and the Advance approach.
The foundational method is quite basic. This allows the banks to create their model for calculating the
likelihood that a certain client or set of clients would default. The banks can create their model for the amount
of capital needed to cover credit risk thanks to the sophisticated approach.
CREDIT RISK AGENCY

 Credit Rating Information Services of India Limited (CRISIL)

 ICRA Limited
 Credit Analysis and Research Limited (CARE)
 Brickwork Ratings (BWR)
 Small and Medium Enterprises Rating Agencies (SMERA)

12

VARIOUS CREDIT COMMITTEES:

THE DAHEJA STUDY GROUP

THE TANDON COMMITTEE
CHORE COMMITTEE NAYAK
COMMITTEE

BASEL–II (Accord)

While Basel-II is difficult, Basel-I was quite easy. The Basel-II Accord should be swiftly and broadly
embraced. The Basel-I Accord was deemed inadequate since each bank has its methods for assessing,
controlling, and reducing risk. As such, it was necessary to update the accord.

Basel-I standards only address credit risk. Therefore, it was insensitive to variations in risk. Because of this,
lending money to an established company was seen to be just as dangerous as lending money to a startup. The
Basel-II pact suggests replacing the categories that borrowers would be assigned to on that credit system with
new risk-weighted categories that would treat all corporate borrowers equally.

This accord is based on three mutually reinforcing pillars, which together contribute to the safety
of the financial system.

First Pillar: Minimum Capital Requirement

Second Pillar: Supervisory Review Process

Third Pillar: Market Discipline

There are some recommendations in the new Basel Accord, particularly about risk management. Better pricing

of loans in line with their actual risk will result from this. The client who has excellent creditworthiness will

gain from lower interest rates on loans.

There is little motivation to lend to debtors whose credit quality is declining due to the norms' higher risk

sensitivity. It directs and demonstrates how the financial sector should manage credit.When it is put into

practice, loan pricing will become more effective and accurately represent the associated costs and risks.

Therefore, over time, there would be a shift toward higher-quality borrowers, and the portfolio's overall risk

should drop. Over the past few years, Indian banks have benefited from the implementation of Basel standards.

In the upcoming years, Basel-II standards will also help Indian banks bolster their defenses against risk

management.

13

1.9 CREDIT MANAGEMENT POST COVID-19

Globally and in the US, the COVID-19 epidemic has had far-reaching effects. Examining the effects of this
public health issue on businesses and society is essential, as the globe is now sharply divided into pre- and post-
COVID periods.
Due to limitations on people's movement and rising health and human costs, the epidemic has stopped the
world's economic growth. This has consequences that cut across all industries. The financial services and
banking industry is also confronting significant obstacles, possibly the worst in many years.
This paper's goal is to describe the difficulties brought about by the pandemic and offer suggestions for
practical steps that banks can take to recognize, control, and reduce credit risk in these trying times. The actions
using data and analytics to lessen possible problems are the main topic of this study.
The suggested remedies, which encompass improved reporting and monitoring, model modifications,
diagnostics and analytics, and banks' regulatory responsibilities regarding stress testing and reserving, have
been delineated throughout the consumer credit lifecycle.

Proposal for banks' credit risk management interventions:

Customers have been offered relief options by banks, including mortgage forbearance, loan modifications,
remission of late fees, payment deferrals, and postponement of reporting account delinquencies.
While these initiatives are required to give customers immediate comfort, they also need to be combined with
more aggressive risk management measures in all impact areas.

A. Acquisition
 B. Account management

C. Collections

D. Reserving and Capital Planning

The actions can be divided into three broad pillars of intervention across the credit lifecycle:
a. Diagnostics and analytics
b. Enhanced reporting and monitoring
c. Model adjustments

14.
CREDIT PROCESSING LINE
 15

CHAPTER 2- RESEARCH & METHODOLOGY

2.1 OBJECTIVES /AIMS OF CREDIT MANAGEMENT

Finding the most efficient strategy to reduce debt is only one aspect of credit management. Building
trustworthy relationships with clients is essential to achieving corporate objectives and boosting
profitability.
Three essential goals of credit management include reducing past-due amounts, enhancing cash flow,
and protecting client risk. These goals are necessary for successful and profitable operations.

 Safeguarding customer risk

Credit management's most important goal is cost control and making sure enough caution is employed to
make the right decisions at the right time. It's the first, and using it requires both caution and danger. It is
a real paradox that drives modern business success.

 Improving Cash flow

The main goal of credit management is to increase cash flow by implementing the most reliable and
effective techniques. This entails making use of reliable software applications in addition to chances for
training and growth to guarantee that the company keeps expanding and competing with the best.

 Settlement of Outstanding Balances

It can be difficult to ensure that the outstanding balances are paid. This assignment resembles the eggs in
a cake. It must rise for you. There is no cash flow if payments are not received. There is no potential in
the absence of cash flow. There is no business if there is no opportunity. It must be completed as soon as
possible.
These three main goals are employed in conjunction with empathy and integrity to get the best possible
outcomes. All of us are just human beings trying to do the best that we can, after all. We can get there
with the use of credit management.

16.
LIMITATIONS OF CREDIT MANAGEMENT

Give credit where credit is due. It comes with some benefits and some risks at the same
time. Credit can be detrimental to the user as well as helpful. Therefore, it must be used
extremely carefully to avoid ruining all businesses and sectors. Credit has inherent risks if it
is not adequately regulated and supervised.

 Encouragement of expenditure:
Credit promotes unnecessary spending on the part of both private citizens and
businesses. Due to people’s reckless belief that the money is not theirs. Simple
accessibility encourages excessive trading and exposure, which eventually results in bad
debts.

 Encourage weakness:
Big business owners are encouraged by credit to keep their flaws hidden. The borrowed
money makes up for their weaknesses. With the aid of borrowed funds and the
expectation of survival, even the losing concerns carry on. Under these circumstances,
the failure of the business puts thousands more people who have advanced loans at risk
in addition to the borrowers.

 Economic crisis:

Credit has been blamed directly for economic catastrophes on multiple occasions. An
economy experiences a recession or depression as a result of the negative impact of the
credit facility boom. Weaker concerns about credit facilities stem from a lack of financial
strength.

 Dangers beyond limit:

When credit in a nation grows beyond a certain point, overinvestment occurs. Excessive
loan issuance surpasses safe thresholds, leading to excessive investment, overproduction,
and price increases. Professor Thomas has highlighted this risk in his book Elements of
Economics, saying that the growth of a credit system is not limited in the same way that
the extension of a metallic circulation is by human intervention.
 17.
2.2 EVALUATION OF APPLICANT

The bank fundamentally has to know the borrower well to make wise credit judgments. The
bank is unable to evaluate the loan application without this data. The applicants'
creditworthiness is assessed to make sure the borrower complies with the requirements set
forth by the bank. A loan that is correctly made can be considered partially collected.
Therefore, a bank ought to conduct a thorough investigation before granting any credit.
Banks must make sure that loans are approved for "safe" and "profitable" projects due to rising
credit risks. They must adjust their appraisal criteria accordingly. To guarantee excellence in
credit appraisal, a combination of formal and informal methods should be used.

The credit evaluation process involves three steps:

 Gathering Credit information

 Credit Analysis (creditworthiness of applicants)

 Credit Decision

Gathering credit information:

A bank's credit department gathers critical data about borrowers from multiple sources to
assess the client. Several resources can be used to obtain information, depending on the type of
business, loan type, loan size, etc. These origins are

Interview:
Banks can obtain comprehensive company information from the borrower during an interview,
which can aid in the credit decision-making process. The loan officer may halt further actions
if the applicant does not meet the credit standards. Should the preliminary investigation be
successful and meet the required standards, the borrower might be required to provide a
variety of financial data.

Financial statements:
The balance sheet and the profit and loss account are examples of financial statements.
 18
Report of credit rating agencies
The Credit Information Corporations (Regulation) Act of 2005 (CICRA) established credit
information agencies or corporations, allowing banks to easily obtain the borrower's whole
credit history. This is an organization that banks, credit card firms, and other lenders
established. Banks can obtain data regarding the applicant's creditworthiness. These businesses
keep track of people's and enterprises' credit histories. With effect from June 23, 2005, the
CICRA was enacted into law. In this sense, credit information consists solely of loan
repayment history in the past and projected ability to repay.

Bank’s records:
If the applicant is already a bank customer, the banker can review the applicant's prior
transactions to gain information about their past interactions with the bank. Every bank keeps
track of all of its debtors and deposits. The banker can have a comprehensive understanding of
borrowers' transactions.

Bazaar report:
You can also get reports about applicants from different markets. The markets keep a close eye
on the borrowers' strengths and vulnerabilities. The future of the company can also be
predicted by market opinion. Additionally, market knowledge might be obtained from the
borrower's rivals. For current account holders and other well-known businessmen, it ought to
be an ongoing exercise.

Report from other banks:

The applicant's past bank transactions may be questioned by the bank's credit department.

Other non-formal methods:

There exist alternative methods that can yield several hints and enhance the precision of the
assessment. The most widely used unconventional approach involves interpreting the
borrower’s personality, motivation, and ability using nonverbal cues in an attempt to forecast
human behavior.
19
2.3 CREDIT MANAGEMENT MONITORING

Repaying the loan amount plus interest within the allotted period is a sign of a good loan. The banker must
oversee, manage, and follow up on the credit to guarantee its security and payback. An essential component of
good credit management is credit monitoring. The bank must always exercise caution to ensure that the money
it receives is used for the intended purpose. Throughout the term of the loan, the lender stays in contact with the
borrower. From the perspective of the banker, there are a few actions to guarantee the security of the advance.

Documentation:
After the bank approves the loan, the borrower needs to provide a few documents. The borrower must properly
fill out and authenticate the documents, which must be fully executed and stamped.
Disbursement of advance:
The documentation must be obtained before the advance can be paid out. Loan accounts need to
be closely examined to make sure the money is only being used for business.
Inspection:

Periodic inspections of the unit and the securities charged to the bank are necessary. When providing the
advance, the banker specifies certain terms and conditions. Furthermore, the banker needs to keep an eye out to
make sure that all of these are followed. To get insight into the customer's business, a team including technical
and financial officers pays a visit to the borrower's company.
Submission of various statements:
Every statement that a banker requests should be routinely obtained and carefully examined. Control forms
reveal information about the health of the borrower's accounts, thus it is important to thoroughly study them.
The borrower's accounts demonstrate the flow of the operational and accounting stages. At least once a year,
financial statements, balance sheets, and credit risk ratings should be reviewed. These verifications show both
the loan assets' positive and negative progress.
Annual review:
Every loan account needs to be updated once a year. Lending decisions are made by borrowers based on
presumptions. Therefore, it is vital to maintain those as good as the advancements continue.

20.
CREDIT MANAGEMENT ANALYSIS

The main technique for lowering the credit risk associated with a loan request is credit analysis. This entails
assessing the borrowers' financial standing, projecting the likelihood of default, and lowering the risk of non-
repayment to a manageable level. Credit assessments are typically predicated on the subjective judgment of the
loan officer (also known as the judgmental assessment technique).

Bank officials examine all relevant data when a customer requests a loan to ascertain whether the loan satisfies
the bank's risk-return goals. A loan officer uses credit analysis, which is default risk analysis, to assess a
borrower's ability and willingness to repay.

Similarly, in response to the following inquiries, Compton (1985) distinguished three separate domains of
commercial risk analysis: 1) What risks are part and parcel of running a business? 2) What steps have managers
taken—or not taken—to lessen such risks? 3) How can a lender organize and manage the risks associated with
providing money?

The initial inquiry compels the credit analyst to jot down a list of potential red flags regarding a borrower's
capacity to repay. The second acknowledges that a borrower's decisions have a significant influence on
repayment. Does management know about the significant dangers, and has it taken any action? The five C's of
credit are frequently used by bank credit analysts to concentrate their attention on the most important aspects of
an applicant's creditworthiness.

Lawrence identified five C’s of credit. They include; Character, Capacity, Capital, Collateral,
and Conditions.

 Character:
The applicant's track record of fulfilling their previous contractual, financial, and moral
responsibilities. The applicant's payment history in the past and any settled or outstanding court
judgments against the company would be considered when assessing its character.
21
 Capacity:
The applicant’s capacity to pay back the credit that was requested. Usually, financial statement
the analysis is performed to evaluate the applicant’s capacity, with special attention paid to debt ratios
and liquidity.

 Capital:
The ownership position of the application indicates its financial strength. To evaluate an
applicant’s capital, it is common practice to analyze its debt to equity ratio and profitability ratios.

 Collateral:
The quantity of assets that the applicant can utilize to obtain credit. If an
application defaults, a firm is more likely to recoup its cash if there are more available assets.
Collateral can be assessed by looking over the applicant’s balance sheet, asset value assessments,
and any lawsuits brought against the applicant’s assets.

 Conditions:
The prevailing commercial and economic conditions, along with any particular factors that may
impact either party involved in the credit transaction. For instance, the company might be ready to
sell to applicants with lower creditworthiness or on more benevolent conditions if it has excess
inventory of the goods the applicant wants to buy on credit.

22
2.4 SCOPE OF CREDIT MANAGEMENT

Three fundamental components comprise the scope of credit management and decision-making: review,
evaluation, and follow-up. When evaluating new or improved proposals, the banker looks back at previous
transactions to assess the client's state of health. Timothy (1995) distinguished three fundamental components of
credit management that are utilized to assess a client's creditworthiness.

The review is for the past. It ought to make it possible for the banker to determine whether
lending to a specific customer is safe. The banker must satisfy himself on the risk and viability of
the unit to make this decision. When any unit is reviewed, its financial statements—profit and
loss accounts and balance sheets—must be examined to determine the unit's solvency, liquidity,
and profitability. Therefore, review entails classifying the balance sheet and profit and loss

accounts by the bank's requirements and analyzing these statements.

Credit appraisal entails taking into account new or improved suggestions that are grounded in
future facts. A banker looks for information about the client's financial need, the intended use
of the funds, the profitability of the business, and the risk associated with evaluating bids.
When evaluating proposals that involve working capital financing, the banker can only
determine the previously mentioned elements after receiving the borrower's business plan for
the next period. Operating, balance sheet, funds flow, and cash flow statements are all

forecasted and used to illustrate a business plan.

Follow-up refers to an ongoing process that is intended to monitor compliance with the
conditions set forth by the bank, identify indicators on the state of the client's position, take
corrective action when necessary, and consistently verify the outcomes of that action. The three
main tenets of lending are end-use, safety, and need-based financing.
To make credit judgments, a banker requires a variety of facts and information from the
borrowers. These details are typically included in a variety of financial statements.
23
2.5 HYPOTHESIS

It's an explanation-focused type of study. The hypothesis is open-ended and adaptable in the inquiry. The results
may only apply to a certain topic or may not be very relevant outside of the researcher's field.

H1 People support credit management because it enables them to profitably and efficiently manage their credit
in the banking sector.

H0 Due to the several credit risks involved, credit management in the banking sector is not well-liked by the
public.

RESEARCH DESIGN

This research uses a case study methodology and is analytical and historical.
Numerous static and dynamic models have been employed to support decision-making in the consumer and
business credit domains.
Whether to offer credit, how much credit to extend, whether to start collections on past-due accounts and what
steps to pursue are among the considerations that are of interest.

For static decisions, we examine the applications of expert systems, decision trees, and discriminant analysis.
For dynamic decision models, we examine the applications of Markov chains, linear programming, and
dynamic programming.
We go over several significant practical aspects of credit management, such as sources of data, regulatory
considerations, and statistical validation of the methodology, because these models don't work in a vacuum.

24.
2.6 TARGET GROUP

The bank's loan customers as well as staff members who work directly on credit processing and administration
are the study's target population. This indicates that the target audience includes top bank professionals,
department heads, branch managers, branch managers, heads of loan sections, loan officers, loan clerks, and
members of the loan committee from all branches.

SAMPLING TECHNIQUE

Stratified random sampling was the sampling method utilized for this study since it is thought to yield a more
accurate sample given the type of loan clients and bank employees. Furthermore, the sample is presumed to
precisely represent the population according to the stratification criterion. Its clients are classified as either
performing or non-performing according to the terms of their repayment agreements and the National Bank of
Ethiopia (NBE), the study's regulating authority, uses a two-stage sampling process to choose the study's
participants. The number of respondents is chosen using the proportionate stratified Sampling (PSS) method,
which takes the study's objectives into account. About 120 loan clients—90 performing and 30 non-performing
—are chosen from a pool of 565 performing and 60 non-performing loan consumers using stratified random
sampling. Every employee participating in credit administration and processing is regarded as an extra study
target group. There were twenty of them, and each is taken into account in the sample.

DATA COLLECTION PROCEDURE

Both primary and secondary data are employed in this investigation. To get primary data, questionnaires and
interviews are employed.
The Bank arranges and conducts unstructured interviews with branch managers, assistant branch managers, and
employees in the loan department. This made it easier to focus more on the topic at hand or to more precisely
answer the study questions.
The researcher interviews to efficiently obtain relevant data for the study. The researcher gathers secondary data
from client files, reports, bank guidelines, manuals, and bulletins.

25.
 CHAPTER 3 – LITERATURE AND
REVIEW

PROFILE OF THE ORGANISATION

ICICI BANK

India's second-biggest bank is called ICICI Bank. The Bank operates a network of more than 2,000 ATMs, 573
branches, and extension counters. A wholly-owned subsidiary of Indian financial institution ICICI Limited,
ICICI Bank was first introduced in 1994.

"With combined total assets of about Rs. 470,000 crores and net value of over Rs. 50,000 crores, ICICI Bank is
the second-largest bank in India. The Bank's capital adequacy ratio of 15.6% is significantly higher than the
legal requirement of 9.0% and is among the highest levels among major Indian banks. After taxes, ICICI Bank
earned Rs. 3,014 crore (US$ 619 million) in the nine months that ended December 31 and Rs. 4,158 crore
(about US$ 850 million) in FY2008.

Initiated by the World Bank, the Indian government, and business leaders, ICICI was established in 1955. The
aim was to establish a development finance institution that would offer Indian enterprises project financing for
both medium- and long-term projects.
To serve its clients' cross-border demands and capitalize on its local banking expertise to offer products
worldwide, ICICI Bank established its international banking group in the 2002 fiscal year. Currently, ICICI
Bank maintains representative offices in the US, China, the UAE, Bangladesh, and South Africa in addition to
subsidiaries in the UK, Canada, and Russia, branches in Singapore and Bahrain, and other locations.

Today, ICICI Bank provides both corporate and retail clients with a broad range of banking products and
financial services via several delivery methods.

26
Origin of ICICI Bank:

In 1994, the Indian financial institution ICICI Limited founded ICICI Bank as a wholly-owned subsidiary.
ICICI's shareholding was lowered to 46% when the business offered ICICI Bank's shares to the public four
years later. The New York Stock Exchange (NYSE) listed ICICI Bank's stock offering in the form of ADRs in
2000, making it the first bank or financial institution from outside of Japan Asia and the first Indian corporation
to do so. It acquired the Bank of Madura Limited through an all-stock consolidation the following year. The
bank sold to institutional investors on the secondary market later that year and in the next fiscal year.

A merger between ICICI and ICICI Bank was deemed necessary by the management of both companies due to
changes in the corporate structure and increasing competition in the Indian banking sector. The merger of ICICI
and two of its fully-owned retail finance companies, ICICI Personal Financial Services Limited and ICICI
Capital Services Limited, with ICICI Bank was approved by the boards of directors of both organizations in
2001. The merger was allowed by the Reserve Bank of India, the High Court of Judicature in Mumbai, the High
Court of Gujarat at Ahmadabad, and the company's shareholders the following year.

Branches

ICICI Bank has extensive international and domestic networks. The bank has roughly 4,644 ATMs and 1,420
branches in India alone. Speaking of other nations, ICICI Bank has operations in eighteen (USA, Singapore,
Bahrain, Hong Kong, Sri Lanka, Qatar, Dubai International Finance Center, and representative offices in the
UAE, China, South Africa, Bangladesh, Thailand, Malaysia, and Indonesia) and the United States. The Bank is
pleased to have subsidiaries in Canada, Russia, and the United Kingdom. Of these, the UK subsidiary has
opened offices in Belgium and Germany.

27
AWARDS & RECOGNITIONS

 The Asset Triple A Country Awards for Best Domestic Bank in India.
 ICICI Bank wins the "Best Bank in India" Award from NDTV Profit-Outlook Money
 ICICI Bank wins the 'Excellence in Remittance Business 2008' award by The Asian Banker
 ICICI Bank wins Finance Asia Country Awards for Achievement 2008 for
 Best Trade Finance Bank• Best Foreign Exchange Bank
 Best Private Bank
 ICICI Bank wins the 'Excellence in Remittance Business 2007' award by The Asian Banker
 Euro Week award for “Most Improved Market Profile”
 The Asset Triple A Transaction Banking Awards, 2008
 Best Trade Finance Bank in India
 Best Transaction Bank in India
 Best Cash Management Bank in India • Best Domestic Custodian in India
 Global Finance Award for:
 Best "Trade Finance Bank and Provider" in India
 Best "Consumer Internet Bank" in India ICICI Bank was declared winner in the
‘Productivity’ category at the Institute of Internal Auditors (IIA) Annual Excellence
Awards 2019 organized by the IIA - Bombay Chapter. These awards recognize impactful
initiatives implemented by organizations in areas of ‘Innovations’, ‘Use of Technology’,
and ‘Productivity’.
 ICICI Bank has bagged two awards in the NSDL Star Performer Awards 2019. The Bank
won ‘Top Performer in the New Accounts Opened’ (Bank category) & in ‘Active
Accounts’ (Bank category). The awards were presented during the 34th DP Conference
organized by the National Securities Depository Limited (NSDL).

28
Present Scenario

The National Stock Exchange of India Limited and the Bombay Stock Exchange both list ICICI Bank's equity
shares in India. American Depositary Receipts (ADRs) of the company are traded on the New York Stock
Exchange (NYSE) overseas. One of India's top private sector banks is ICICI Bank. As of June 30, 2019, the
Bank's consolidated total assets were valued at Rs. 12.50 trillion. ICICI Bank now has a network of 15,589
ATMs and 5,275 branches throughout India.
The fifth bucket banks, ICICI Bank and HDFC, must now set aside 0.20 percent of the bank's capital
requirement as opposed to the current 0.15 percent.
In the nine months that concluded on December 31, 2018 (9M-2019), India's Gross Domestic Product (GDP)
increased by 7.2%, which was the same as in the previous fiscal year. According to CSO estimates, India's GDP
will expand by 7.0% in the upcoming fiscal year.
The Consumer Price Index (CPI) indicated that inflation rose from 4.3% in March 2018 to 6.4% in June 2018
and then decreased to 2.9% in March 2019. However, this spike was just temporary.

Success story

In terms of market share and value among all banks offering retail or consumer lending, ICICI Bank, India now
holds the top spot. In India, ICICI Bank is the biggest credit card issuer. It was the first bank to provide a
substantial network of ATMs, and until 2005, when SBI followed up, it held the largest network.
In the Indian market, ICICI Bank is currently seen by many as a smart bank that can compete with numerous
international banks. The bank is growing in international markets. It operates in Canada, Singapore, Hong
Kong, and the United Kingdom. It bought a tiny Russian bank.

Letter of Guarantee

A letter of guarantee is a formal undertaking provided by a bank to a client to cover losses if the terms and
conditions of the agreement with a third party are not fulfilled.
 29
CREDIT RECOVERY

The bank treats its credit recovery method in the same way as it does credit collection strategies. Strict follow-
up and customer insistence, debt restructuring, court proceedings, and foreclosure are some of the tactics
employed.
When the bank is unable to regularize or settle debts that are in default, or when all attempts to settle the loans
peacefully fail and it is determined that taking legal action is the last resort, credit is transferred to the legal
service.

30
 CHAPTER 4 - TABLES AND
INTERPRETATION

4. 1 DATA COLLECTION

The data collected for this study was obtained from Primary Data as well as Secondary Data.

Primary Data: It is first-hand data that has been gathered straight from customers. The first-time data that are
gathered especially for the study are called primary data.
Primary information is gathered by:

Questionnaire: This is a series of specific questions designed to get the necessary information or viewpoints
from other people. The goal of gathering replies from a diverse range of respondents was the primary focus
during the questionnaire's preparation. To conduct the survey and gather data for analysis, the respondents were
asked a variety of questions, both closed-ended and open-ended.

Secondary Data: Information that has already been gathered from main sources and made easily accessible
for researchers to utilize in their research is known as secondary data. For my project, secondary data was
gathered from a wide range of publications, including books, journals, articles, and websites.

TABULATION OF DATA

Google Forms: Data from respondents are gathered using the survey method, and a Google Forms
questionnaire is used to create the questionnaire. Google Forms' pie charts, bar graphs, and rating scales offer a
practical, organized, and simple-to-understand way to display data.

Google Docs: This program has been my main tool for methodically and securely organizing, modifying,
and saving all of my material

31
4.2 TECHNIQUES AND TOOLS USED

Data collected from the respondents have been analyzed with the help of the following
tools.

Pie chart diagram: Pie charts created with Google Forms are used to carefully analyze the
responses provided by respondents. This is carried out to have a precise and trustworthy grasp
of the information gathered.

Percentage technique: A percentage is one of the best ways to display statistics. A

percentage is just "per hundred." Utilizing percentage analysis, a contingency table is generated
from the frequency distribution to better visualize the gathered data.

32.
4.3 DATA ANALYSIS AND INTERPRETATION
To find relevant information, conclude, and aid in decision-making, data analysis is the process
of examining, purifying, manipulating, and modeling data. Data analysis is a multifaceted field
that encompasses various techniques referred to by different names. It finds application in
various corporate, scientific, and social science sectors. Data analysis is helping firms operate
more effectively and make decisions in the modern business world more scientific.

The process of dividing a large body of material into manageable chunks for personal review is
called analysis. The process of taking raw data and turning it into knowledge that helps people
make decisions is known as data analysis. To find answers, validate theories, or test hypotheses,
data is gathered and examined. The application of procedures that evaluate data to draw well-
informed conclusions is referred to as "data interpretation." The process of interpreting data
gives the examined information meaning and establishes its importance. The process of making
sense of numerical data that has been gathered, examined, and shown is known as data
interpretation.

The process of organizing the results from various data-gathering sources, such as survey
research, is aided by data analysis and interpretation. Once more, it is very beneficial to divide a
large problem into smaller ones.

It functions as a filter to extract valuable insights from large datasets. An essential step in this
process is data analysis. It gives important decisions a solid foundation. It facilitates the
creation of a thorough dissertation proposal. One of the most significant applications of data
analysis is the prevention of human bias from influencing study conclusions through
appropriate statistical handling. A researcher can filter both qualitative and quantitative data for
assignment writing assignments with the use of data analysis and interpretation.

As a result, it can be concluded that data analysis is crucial to the research as well as the
researcher
 33.
1] What is your age?

INFERENCE

The above responses say that most of them almost 44.7% of the respondents
were of the age group of between 0-20 years. 42.6% of the respondents were of
the age group of 21-40 years. 12.8% of the respondents were of the age group of
41-60 years. 0% of the respondents were from the age group of above 60. From
the above diagram, we can say that the topic “Credit Management” is known by
everyone belonging to each age group except senior citizens.
 34.
2] Gender

INFERENCE

Out of the respondents, 55.3% of the respondents were female and 44.7% of the respondents
were male who responded to the “Detailed Study of Credit Management.”
 35.
3] Profession/Occupation

INFERENCE

According to the responses, most of the respondents are students and the least number of
respondents are housewives. 63.8% of the respondents are students, and the second highest
are businessmen with 23.4%, and then 8.5% of respondents are from the service sector and a
very small proportion of housewives.
 36.
4] Monthly Income

INFERENCE

Since most of the respondents are students, however, some of them don’t have any income
and some doing an internship or a part-time job might earn an average income. Secondly, the
next highest respondents are businessmen and servicemen whose monthly income is between
50000- 300000 according to the above responses received. According to the above study,
66% of the respondents are students, 19.1% of the respondents are businessmen, etc.
 37

5] Do you save or believe in saving a part of your income?

INFERENCE

According to the above study majority of the people who earn and who do not even earn also
tend to save their income. A very few respondents amongst many do not save their income,
this might be due to various reasons or high maintenance or expenditure.
 38

6] If yes, what percentage of your income do you save monthly?

INFERENCE

According to a detailed study on Credit Management, 42.6% of people save 20% of their
income which is reasonable enough 25.5% of people save 10% of their income and 31.9% of
people save 30% and above income for their plans or maybe some other purpose.

39
7] Number of years of experience in Credit Management?

INFERENCE

The above respondents say that most of them that are 36.2% of the respondents
have experience of 1 year in credit management. 23.5% of the respondents have
1 to 5 years of experience in credit management. 15.7% of the respondents have
5 to 10 years of experience in credit management. 11.8% of the respondents
have above 10 years of experience in credit management.

40
8] Rate the importance of Credit Risk Management.

INFERENCE

The number of respondents who feel that credit risk management is important is
low is 12.8%.

61.7% of the respondents feel that the importance of credit risk management is
high.

21.3% of the respondents feel that the importance of credit risk management is
very low.

41
9] Which of the following credit collection techniques are adopted by your

banks?

INFERENCE

According to the study, the majority technique adopted by the banks for credit
collection is Cash/Cheque Payments at 53.2% followed by using collecting
agencies at 17% and then debiting clients' accounts per pre-undertaking with
14.9% and the least are telephones and personal visits.

42
10] How do you evaluate your bank’s credit-providing procedure?

INFERENCE

According to the study and the responses received, 42.6% of the respondents evaluate their
bank’s credit-providing procedure Based on Creativity.

29.8% of the respondents evaluate their bank’s credit-providing procedure conservatively.

2.7% of the respondents evaluate their bank’s credit-providing procedure through moderation.

43
11] Which of the following do you think or believe are the most important
potential benefits of a credit risk management strategy?

INFERENCE

The respondents who feel that real-time explosion update is the most
important potential benefit is high i.e.,46.8%.

The respondents who feel that improved pricing of product is the most
important potential benefit are 25.5%.

The respondents who feel that t h e accuracy of explosion modeling is the

most important potential benefit are 19.1%.

8.5% of the respondents feel that other important potential benefits are not
mentioned here.

44
12] Which of the following models are employed by the bank to identify
credit worthiness of a customer?

INFERENCE

31.9% of the respondents feel that scenario analysis is employed by the

bank to identify credit worthiness of customers.

38.3% of the respondents feel that credit to portfolio views are employed
by the bank to identify credit worthiness of customers.

29.8% of the respondents feel that an equality-based approach is employed

by the bank to identify credit worthiness of customers.

No respondents think other than these models are employed by banks to

identify credit worthiness of customers.

45
13] How do you think your bank responds to unforeseen risks or credit crunches?

INFERENCE

The number of respondents who feel that the bank's response to

unforeseen risk will be to increase the capital reserve ratio is 36.2%

The number of respondents who feel that bank response to unforeseen

risk will be by stringent landing policy is 27.7%

The number of respondents who feel that bank response to unforeseen risk
will be due to some other reasons will be 14.9%

The number of respondents who feel that the bank's response to

unforeseen risk will be by reducing employment is 21.3%

46
 14] How would you rate the risk tolerance behavior of the bank?

INFERENCE

34% of the respondents think the risk tolerance behavior of their bank is high.

36.2 % of the respondents think the risk tolerance behavior of their bank is low.

17% of the respondents think the risk tolerance behavior of their bank Is
very high.

12.8% of respondents think the risk tolerance behavior of their bank is very low.

47
15] Does the bank provide loan services that fit the preferences of the borrowers?

INFERENCE

According to the study and responses received, 72.3% of the respondents think that the
bank provides a loan service that fits the preferences of the borrowers.

Whereas, 27.7% of the respondents think that the loan service by the bank does not fit or
cater to the needs and preferences of the borrowers.

48
16] Are u satisfied with the current credit risk management services provided?

INFERENCE

Out of the respondents, 45.5% of the respondents are satisfied with the current credit risk
management services provided.

27.3% of the respondents are not satisfied with the current credit management services
provided.

27.3% of the respondents are not sure whether they are satisfied or not with the current services
provided

49
17] Major challenges faced in the successful implementation of credit risk?

INFERENCE

31.9% of the respondents feel that one of the major challenges faced in
the successful implementation of credit risk management policy is
timeline and quality of information.

23.4% of the respondents feel that one of the major challenges faced in the
successful implementation of credit risk management policy is conflicts in
business priorities

36.2% of the respondents feel that one of the major challenges faced in the
successful implementation of credit risk management policy is difficulty
in quantifying risks.

8.5% of the respondents feel that one of the major challenges faced in the
successful implementation of credit risk management policy is calculating
parameters.
50
 18] Do you feel credit risk management helps make good
investments?

INFERENCE

59.1% of the respondents feel that credit risk management services help make good
investments.

18.2% of the respondents feel that it does not help make good investments.

22.7% of respondents are not sure whether or not the credit risk management theory is helpful
or not for their investment-related decisions.

51
19] Do you manage your credit risk by yourself or through an agency?

INFERENCE

According to the survey, it has been concluded that 50% of the respondents manage their credit
risk by themselves and the remaining respondents manage it through specific agencies.

52
20] Is the minimum capital asset ratio required risk-weighted in line with the Basel II
approach?

INFERENCE

78.7% of the respondents think that a minimum capital asset ratio is required
in risk in risk-weighted line with the Basil II guidelines.

21.3% of the respondents think that a minimum capital asset ratio is not
required in risk in risk-weighted line with the Basil II guidelines.

53.
 CHAPTER 5 – CONCLUSION

Banks are therefore important organizations for financial transactions. More people than any
other financial institution have a great deal of faith in banks for all financial activities.
However, the delivery of credit is the main responsibility of any commercial bank and it is also
a risky endeavor. To make money, banks must rely more on credit. Even though banks serve a
variety of purposes these days, they remain the primary provider of credit to the general public
as well as different economic sectors. Therefore, to preserve public trust and foster their growth,
banks must carry out their primary duty of granting credit with extreme care and security. These
days, banks face a greater risk of non-performing assets (NPAs) and are working hard to lower
them, but they still fall short in this area. Despite their best attempts, they are still unable to
return and unwind. As the backbone of the nation's financial system and economy, banks are
continuously under pressure to lower their risk factors, primarily credit and market risk. Thus,
keeping track of their credit is essential.
In comparison to other banks in the area, the Bank still maintains a sizable area coverage, which
facilitates society's access to finances and other bank services including deposit, transfer, and
currency exchange. Yet, because of the weaknesses that the majority of clients and staff have
admitted to exist in the areas of loan processing and approval, payback schedule, and collateral
valuation, loan growth and client reputation are not as necessary as they once were.
The majority of prospective and seasoned loan clients quit the bank after gaining expertise and
establishing their bankability, which is taken into account when evaluating them by others. This
has a significant negative impact on the reputation of the client.
When loans that exceed the branch's discretion are forwarded to the head office for approval,
this issue is noticed.
People are more in favor of credit management since their loans and credit are safer and come
with interest protection, among other benefits, according to the research and study done, which
makes H1 more relevant.

54
 BIBLIOGRAPHY

 www.creditmanagement-tool.com
 www.eccreditcontrol.co
 www.icicibank.com
 www. Iodm.com.au
 www.mckinsey.com/business-functions/risk/our-insights/managing-and-
monitoring-credit-risk-after-the-covid-19-pandemic

BOOKS

 Banking and financial system – by N.D Kapoor

 Research methodology – by Uma Sekaran
 Origin of the banking financial system
 Vasant Desai: “Indian Banking Nature and Problems”, Himalaya Publishing
House
 H. N. Agarwal: “A Portrait of Nationalized Banks”, Inter India Publication
 Reeta Mathur: “Recent Trends in Indian Economics”, Sublime Publications

55
 ANNEXURE

Q1: What is your age?

 0-20 years
 21-40 years
 41-60 years
 60 years and above

Q2: Gender?

 Male
 Female
 Prefer not to say

Q3: Profession/Occupation?

 Student
 Business
 Service
 Consultant
 Other

Q4: Monthly Income?

 0-50000
 50000-100000
 100000-300000
 300000 and above

Q5: Do you save or believe in saving a part of your income?

 Yes
 No
 Maybe
 No income
56
Q6: If Yes, what percentage of income do you save monthly?

 10%
 20%
 30% and above

Q7: Number of years of experience in Credit Management?

 Below 1 Year
 1-5 Years
 5-10 Years
 Above 10 Years

Q8: Rate the importance of Credit risk Management.

 Low
 Very Low
 High
 Very High

Q9: Which of the following credit collection techniques are adopted by your banks?

 Cash/Cheque Payments
 Using Collection Agencies
 Debiting credit account per pre-undertaking
 Telephone
 Personal Visits

Q10: How do you evaluate your bank’s credit-providing procedure?

 Based on creativity
 Conservative
 Moderate
57
Q11: Which of the following do you believe are the most important potential benefits of a
credit risk management strategy?

 Improved Pricing of products

 Real-time explosion updates
 Accuracy of explosion modeling
 Others

Q12: Which of the following models are employed by the bank to identify credit
worthiness of a customer?
 Credit to the portfolio view
 Scenario analysis
 Equality based approach

Q13: How do you think your bank responds to unforeseen risks or credit crunches?

 Reduce employment
 Stringent Lending Policy
 Increased Capital Reserve Ratio
 Others

Q14: How would you rate the risk tolerance behavior of the bank?

 Very low
 Low
 High
 Very high

Q15: Does the bank provide loan services that fit the preferences of the borrowers?

 Yes
 No

58
 Q16: Are u satisfied with the current credit risk management services provided?

 Yes
 No

Q17: Major challenges faced in the successful implementation of credit risk?

 Difficulty in quantifying risk

 Timeliness and quality of information
 Business priorities are often conflicting
 Calculating of parameters

Q18: Do you feel credit risk management helps make good

investments?

 Yes
 No
 Maybe

Q19: Do you manage your credit risk by yourself or through an agency?

 By yourself
 Through an agency

Q20: Is the minimum capital asset ratio required risk-weighted in line

with the Basel II approach?

 Yes
 No
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