Back to Basics in Credit Banking
Insights, Policies & Deep Dive Analysis
CREDIT ADMINISTRATION
There are a number of guidelines for compliance with regard to Capital Adequacy, Income Recognition, Asset Classification and Provisioning Standards. Compliance of the new set of norms hinges around one key factor - How efficiently we manage our Assets and Liabilities.
Lending activity represents the heart of Commercial Banking as loans dominate our asset holdings and generate the largest share of operating income. Credit Administration includes three major functions:
- Business Development & Credit Appraisal
- Credit Sanction
- Review and follow up
It’s never too late to reinforce our strength in Appraisal and Effective Monitoring. Yes, we have to Return to Basics!
Risk Management
In the intricate world of finance, risk management stands as a cornerstone of sound decision-making and financial stability. This section delves into the multifaceted nature of risk, exploring its identification, assessment, classification, and profound impact on profitability.
Basel Framework Pillars:
- Risk Identification
- Limits & Ratings
- Risk monitoring
- Based Auditing
A scientific approach to risk management has yielded valuable outcomes, including risk quantification, risk-adjusted pricing, and risk-related capital norms. Bankers can navigate the financial landscape with greater confidence and prudence.
CONSORTIUM LENDING
Consortium lending stands as a hallmark of collaborative finance, where multiple banks or financial institutions join forces to extend credit to a single borrower. This dynamic arrangement transcends mere expediency, embodying a collective approach to harnessing banking resources effectively.
While the consortium model initially emerged in response to fluctuating liquidity conditions, its evolution has yielded significant benefits, refining credit appraisal processes and fostering a more regulated flow of credit to borrowing entities.
In essence, consortium lending represents a paradigm shift in the banking industry, moving away from individualistic lending practices towards a collaborative approach that optimizes resource allocation, enhances credit risk management, and promotes sustainable growth.
