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authenticity of important credit information provided by the will lead either misappropriation of funds or lack of finance
applicant in proposal form.The banker thoroughly scrutinizes for the proposed venture. Hence, good credit appraisal
the credit proposal, thereby increasing the quality of increases the quality of lending in credit function. Hence,
lending. Casual approach in first stage of scrutiny of proposal banks should take more precautious measures while
in credit management process will dilute the quality of selecting officials for credit function and train them in credit
lending. management.

Essentials of a Good Proposal: How to improve Appraisal Skills?

Application for credit should be as simple as possible and Study of credit proposal is an art as well as a science. After
should contain vital information of proposed loan. Proposal thorough appraisal, appraiser will arrive at a conclusion of
should contain the following important information: whether, to accept or reject a credit proposal.The second
G Brief information about applicant or promoter. important stage in credit management requires intelligence
and good knowledge in credit management. Following are
G Purpose and quantum of Loan. the critical areas in arriving at conclusions on applied loan
by the applicant.
G Particulars of project or proposed activity. Strengths of the proposal.

G Applicant's / Promoter's experience in the Line of Suitability of bank credit product to the applicant.
Activity.
Future prospects of the business activity / income or
G Stake or margin amount in the proposed loan or surplus generation.
project.
Access exact credit requirements of proposed activity.
G Collateral securities to be offered for the proposed loan.
Margins, collaterals offered by the applicant.
G Success Rate in earlier business (if any).
Valuation of collaterals and rating of the unit based on
G Existing borrowing particulars (from other banks and financials.
financial institutions).
Judgment on information provided by applicant.
G Supply and Demand gap of activity for the proposed
loan in the market. Information provided by the applicant in interview and
its authenticity.
G Economic viability and Technical feasibility of the
proposed project.

Banker has to study and understand the above particulars While doing the appraisal part, bank should avoid
in detail by collecting relevant information from other mediators; direct interaction with the prospective borrower
sources or through interview with the applicant to arrive throughout the lending process gives good results both to
to a conclusion on authenticity of data and information the bank as well as to the prospective borrower / promoter.
provided by applicant for the proposed loan. The banker
should not give any scope for wrong data, partial data, and
partial answers through interview with the applicant and
he should fully satisfy the correctness of information
submitted by the applicant.

Skills of the Appraiser:

One of the important factors in increase credit risk is lack
of appraisal skills of the operating staff in lending function
of the bank. After receiving the proposal, the next step is
appraisal of loan as per the credit norms defined by the
bank. Due to wrong appraisals,some of the loans are turn
into NPAs. Excess funding or shortage of lending amount

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