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PRESENTED BY: SANDEEP GURUNG PATUCK GALA COLLEGE ROLL NO:13 DIV: A PROF: MONISHA DCOSTA

Topic: Credit procedure of Financial Institution ( HDFC & LIC )

Credit

is the trust which allows one party to provide resources to another party where that second party does not reimburse the first party immediately, but instead arranges either to repay or return those resources at a later date. fixed interest rate, monthly or quarterly repayment schedules and a set maturity date

Carry

OBJECTIVE OF THE STUDY


PRIMARY

OBJECTIVE: To study credit procedures of Financial Institution

SECONDARY

OBJECTIVE: To study the growth of financial credit industry in India. To study the credit procedure adopted by a private bank. To study the credit procedure adopted by a financial institution. To study consumer prospective for choosing a credit institution.

PERIOD OF CREDIT

SHORT TERM LOAN


Repayable within 3 years

MEDIUM TERM LOAN


Repayable in more than 3 years and less than 6 years

LONG TERM LOAN


Repayable in more than 6 years

TYPES OF CREDIT

Bank credit Commerce credit Consumer credit Investment credit International credit Public credit Real estate credit

The Six C's of Credit


Character Capacity Collateral Conditions Credit Capital

PROCEDURE FOR CREDIT

Complete a loan application and submit all requested documentation to the loan agent Submit your application Review all documentation Verify employment Review the credit report Receive additional reports, as needed Provide collateral, as need Receive conditional approval Sign a letter of intent and submit a cashiers check Receive a full loan commitment from the lender Sign the required paperwork Close on the loan

Contribution of Credits in Economic Growth


Bank credits promote capital formation Investment in new enterprises Promotion of trade and industry Development of agriculture Balanced development of different regions Influencing economic activity Implementation of Monetary policy Export promotion cells

CREDIT RISK

A consumer may fail to make a payment due on a mortgage loan, credit card, line of credit, or other loan A company is unable to repay amounts secured by a fixed or floating charge over the assets of the company A business or consumer does not pay a trade invoice when due A business does not pay an employee's earned wages when due A business or government bond issuer does not make a payment on a coupon or principal payment when due An insolvent insurance company does not pay a policy obligation An insolvent bank won't return funds to a depositor A government grants bankruptcy protection to an insolvent consumer or business

Advantages

Cost of capital lower than cost of private equity and preference capital. Credit does not result in dilution of control. Credits are preferred since they are backed by security

Disadvantages
Credit does not carry voting rights. Generally do not represent negotiable securities. Upon failure to repay or delay in payment beyond 1 year entails serious consequences.

FACTORS THAT BANKS CONSIDER


Credit worthiness of the borrower Integrity/reputation Credit risk profile Sensitivity to economic and market developments Liquidity Solvency Profitability of business Resource efficiency

CREDIT DECISIONS

Safety of loans is directly related:

basis on which decision to lend is taken type and quantum of credit to be provided terms and conditions of the loan
Pre-Sanction appraisal To determine the bankability of each loan proposal Post-Sanction control To ensure proper documentation, follow-up and supervision

Two-pronged approach:

MOST PREFERED BANK


LOAN ACCOUNT
40 35 30 25 20 15 10 5 0

Axis Title

LOAN ACCOUNT

HDFC BANK 38

LICHF 12

TYPES OF LOAN OFFERED


14 12 10 8 6 4 2 0 Housing loan HDFC LICHF Personal loan Car loan

10 12

4 0

6 0

Working capital loan 7 0

education loan

6 0

CONCLUSION
According

to the survey done, the following results are interpreted: is the most compared to LIC. preferred Bank as

HDFC

LIC

provides minimum number of loans to customers.