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Credit Administration
Introduction to Credit Administration
By the word 'credit', let us understand it is monies lent. Money lent is always meant to be recovered and recovered with interest. The borrower will be able to service the interest, if the money lent to him performs. It should perform, not only to service the loan, but also to enable the borrower to sustain reasonable existence.
Aristotle, the famous Greek Philosopher, has once mentioned, it is easy to "spend" or squander away money, but it is most difficult to lend money for the right purpose, to the right man, at the right time and the right amount.
This presupposes certain amount of lending skills available with the lender and if not, he should atleast acquire them. We do not propose to define credit or lending as an art or science to scare our colleagues in the bank.
On the contrary, it is our intention to educate, enlighten and familiarize the known concepts of lending.
The financial reforms introduced by the Government and Reserve Bank of India based on 'Narasimhan Committee Recommendation' emphasize stringent capital adequacy norms, asset classification, loan provisioning, income recognition and above all publication of transparent balance sheet by the Banks.
The study conducted reveals, several thousand crores of bank money is blocked under sticky loan portfolio; crippling the liquidity and profitability of the banks themselves. Enormous man-hours are being spent in reviewing these hard- core cases, cumbersome legal proceedings and infructuous efforts towards the direction of negotiated / out of court settlement.
Therefore, being a commercial organization, banks cannot afford to accumulate non performing assets in their portfolio.
Need for Well-Trained Credit Officers
Sourcing good credit proposals 
Thorough appraisal 
Evaluating technical & financial viability. 
Proper sanctioning 
Proper & appropriate security creation. 
Effective credit administration on an ongoing basis. Importance of Effective Credit Administration
In order to ensure such an effective credit administration, it is not only necessary for banks to have proper infrastructure, but also well trained credit officers. Banking Industry witnessed phenomenal growth in deposits and advances in the post-nationalization period. During the four and half decades after nationalization, banks have grown from few hundred to thousands of crores
To handle this size and more particularly, this volume of credit expansion, banks need well trained credit officers. The overwhelming volume in credit expansion and the lack of expertise coupled with socio-economic lending programs resulted in accumulating sizeable legacy of bad advances in the past.
Though efforts are made to rectify this imbalance and avoid distortions in bank's balance sheet, and they perhaps get sizeable funds to off-set the loss assets in portfolio, The problem will not be solved unless and until banks are geared up to face higher growth in deposits and higher and large volume of lending and more particularly lend only to viable proposals to optimize the profit which is very necessary for meeting the new provisioning requirements and for servicing additional capital, subordinated funds acquired to meet revised capital adequacy norms.
Effective Credit Decisions
We present a set of case studies compiled for the purpose of driving home certain essential points in making credit decisions. As a measure of effective credit monitoring, It is our endeavor to provide insights into credit administration and to benefit readers who face the stupendous task of handling large scale credit disbursement to do so qualitatively.
A good Credit Manager or an Officer is really not the one who is able to solve the problem, or clean the mess, or recover bad debts. On the contrary, under a good Credit manager or Officer such a mess or bad debts would not occur.
It is said that we do not call someone a good jockey, if he is able to remain in the saddle when the horse bucks, because under a good jockey the horse seldom bucks .
