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HOW TO APPRAISE TERM LOAN PROPOSALS?

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  (This post explains important ratios are to be examined while appraising a term loan project. The article also deals with how to compute break even point , how to calculate DSCR (Debt service Coverage ratio) for the period of repayment of the loan, how to arrive fixed asset coverage ratio and important financial indicators . The assessment of DPG/APG etc is done in the same method how term loan is assessed, as they are the substitution of the term loan.) Term loan appraisal covers the appraisal of the borrower and appraisal of the project. The characteristics of a term loan are that term loan commitments are to be of long term. The banks and financial institutions normally offer term loans repayable in 10-15 years and beyond that period in  exceptional cases like housing loans. The repayment would be made out of cash generated from business activities. Appraisal of the borrower covers the honesty and integrity of the borrower, the standing of the borrower, business capac...
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WHAT ARE THE METHODS USED FOR WORKING CAPITAL APPRAISAL?

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  (This post explains the definitions of   working capital ,  Operating cycle  and various methods of working capital appraisal viz.   Tandon’s first method, Tandon’s second method, Turnover method or Nayak committee norms, Cash budget method, Chore committee norms,  Maximum permissible bank finance, Minimum permissible bank finance and Important things to note in assessment of working capital assessments) Definitions of  (a)working capital , (b) Operating cycle : (a) Working capital means the sum of the funds invested at various current assets used in the operating cycle, by the industrial and trading establishments. (b) Operating cycle  means the length of time required to convert ‘Non-Cash current assets’, ( like raw material (RM), work in process (WIP), finished goods (FG), and receivables)  into  cash . Methods of Working capital appraisal: B anks in India have evolved their own method of lending as they have been given ...
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No More a Shadow (of a) Bank

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(Remarks delivered by Shri M. Rajeshwar Rao, Deputy Governor, Reserve Bank of India – February 09, 2024 - at the NBFC Summit organised by Confederation of Indian Industry at Mumbai)  Regulatory approaches for NBFC sector While framing the regulations for the financial sector, Reserve Bank has always been conscious of the fact that the degree of regulation of a financial entity should be commensurate with the perception of risks posed by the entity and the scale of its operations on the financial system.  Our regulatory approach towards NBFC sector has been guided by a combination of activity-based and entity-based regulations to safeguard financial stability and protect customers. We have tried to leverage the strengths of both these approaches to achieve a more comprehensive and flexible regulatory framework. We find this hybrid approach particularly valuable for an ever evolving NBFC Sector, where innovations and new business models seem to be constantly emerging. ...
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Banking and Elite Class; Banking By PSBs

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 Many discussions are on by many persons whose life will be impacted by the banking industry. Many who do not have any knowledge about the banking operations are also jumped to give his/ her opinions. This is particularly happen in INDIA. But Graduates join Banking industry through either IBPS or Walk-in. So both pattern has their uniqueness. One makes graduate guarantee basic plus da. But other form does not guarantee any pay structure rather showcase rosy pictures like ESOP, INCENTIVE. So both are having Pros & Cons. Now put HR things aside. Come straight to Customers. Customers for PSBs are all. But Elites are thinking Private Sector Banks are giving value. But it is actually illusion. As all banks are technology driven and also provide Credit cards. So basically there is no difference.           So, customers need to be trapped so that they will stick to an individual bank. It is the philosophy of every bank irrespective of bank types. But on o...
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Happy New Year 2023

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 I wish my readers Very Very Happy New Year. I am hopeful writing good articles for the readers and also wish to get good articles from all of you.
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Banking Definition From India's Perspective

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This article will definitely help all the bankers worked in any banks as well as the students preparing to enter the banking industry space.  Banking is very simple but many claim it to be very difficult. But Banking is in simple terms- DEPOSIT-ADVANCE-RECOVERY . But in the name of universal banking banks are trying to become omnichannel through which banks try to cater all types of facilities to customers so that customers hook to them. It's the simple strategy used by all leading private sector banks as well as public sector banks in India.  CUSTOMER is the main component of the banking ecosystem. This is not clearly understood by the bankers working in many PSBs. If we look very very carefully, we will discover that many are not having any interest to do the business. Before entering the banking sector they might have rosy pictures in their mind for which they feel dissatisfied when they join banks. Here the main skill which every bankers need to have that is communication...
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BIG is the Criteria for Success of the Banks?

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Hi, Everybody                         Do you believe in having big balance sheet to be the criteria for success of the banks? If you are convinced because of the theories put forth in front of you then I must say this notion is very much hypothetical. Rather vision is the important criteria which will drive you to the spot of success. Many try to bring all customer segments into their fold. In this process they not only hurt almost all customers, but also loose many customers. But they don't think it is the primary reason for the loss they suffer in the banking business. But they try to push for their own fancy products to the customers which are profitable in the form one time commission, but customers who are the main ingredient for their profitability get hurt financially in the process. As customer’s requirement is not the main agenda to study by the so called relatio...
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