Introduction to
Credit Administration
Educating, enlightening, and familiarizing the core concepts of banking and lending skills.
The Essence of Credit
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. Therefore, being a commercial organization, banks cannot afford to accumulate non performing assets in their portfolio.
Need for Well-Trained Credit Officers
Credit administration calls for an effective, preventive mechanism to avoid bad cases and to accept only viable lending propositions. Credit Administration can be broadly divided into:
Phenomenal Growth & Infrastructure
The Banking Industry witnessed phenomenal growth in deposits and advances in the post-nationalization period. To handle this size and volume, banks need well-trained credit officers and robust infrastructure.
The lack of expertise coupled with socio-economic lending programs resulted in accumulating sizeable legacy of bad advances in the past. To avoid distortions in bank's balance sheet, it is necessary for banks to be geared up to face higher growth and lend only to viable proposals to optimize profit.
Effective Credit Decisions
"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."
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.
We present a comprehensive suite of tools and case studies to benefit readers who face the tasks of handling large scale credit disbursement qualitatively.
