A)

Safety -

(i)

5 Cs of the borrower

Character – Willingness to repay – honesty, integrity, responsibility and attitude / commitment of the borrower to repay

Capacity – Success of the borrower’s business as reflected in financial condition and ability to repay through cash flow and earnings

Capital – The borrower’s stake in business as also his intrinsic financial strength as reflected in his equity capital or net worth

Collateral – The borrower’s ability to offer quality assets to provide adequate protection to the bank against default in repayment

Conditions – Recent trends in borrower's line of activity and changing economic conditions that might impact his financial conditions and thereby the ability to repay

(ii)

Purpose

- Working capital finance

- Production & marketing finance

- Busy season finance

- Import and export finance

- Bridge finance, TODs

- Personal loans to entrepreneurs, technicians, self-employed

  persons, artisans and professions

iii)

Security

Whether marketable

Whether ascertainable

Whether stable

Whether transferable

M

A

S

T

Marketability

Ascertainability

Stability

Transferability

Self liquidating

Easily realisable by sale

Whether repayment could be ensured at short notice

Small loans to a

large number of borrowers rather than

big loans to a few

Diversified

securities rather than

any one type of

security

Different industries rather than to one or one group of industries. Region-wise, group-wise and industry-wise distribution

Whether

national and public interest is involved

Whether promoting an economic activity aimed at generating surplus

Whether export oriented

Whether supporting production of wealth in the form of goods or services

Whether employment oriented in the backward areas

Whether promoting a small scale industrial sector or supporting neglected sector

1

2

3

4

5

6

Yield should be commensurate with the risk

Cost of funds and cost of operation should be low

Other income accruing from business, anciliary business if the proposal is entertained.

Source and mode of repayment

Duration of loan – short term or long term

Purpose - whether good or bad i.e. productive or speculative

Nature of security and amount of loan

Statutory restrictions- RBI directives

Availability of lending resources and the prevailing local economic conditions

1

2

3

4

5

6

Economic feasibility - ensuring capacity, demand and supply position, cost of production, sale prospects and price level

Technical feasibility –raw materials supplies, government licensing, import policies, transport bottlenecks, wage levels, labour situation, power and water supply, availability of machineries and other civic facilities

Financial feasibility –

cost of production, and profitability, cash flow, estimated sources of funds

Managerial competence and availability of needed personnel – both technical and skilled