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 has, therefore, become a matter of crucial importance. Credit Administration includes three major functions:

• Business Development & Credit Appraisal
• Credit Sanction
• Review and follow up

In today's context, it is not sufficient to appraise a loan and release it. The most important aspects are follow up regarding utilization and whether the unit is generating sufficient surplus to service interest and installment dues and watching out for any red signal that can help the bank prevent possible sickness and consequential loan losses.

We have to look for collateral to enhance the asset backing. We have to be watchful about utilization by seeing every check. We have to review our earlier practice of referring in our Funds Book, the accounts where interest/installments are not serviced.

It’s never too late to reinforce our strength in Appraisal and Effective Monitoring.