Credit Profiling:

Is verification enough to determine the ability of applicant to repay Loan?

Is Fraud Checking enough to know the intention of the applicant to repay Loan?

Is one to one meeting with applicants not necessary?

Many more such questions remain unanswered, because credit team has too little time to do to many jobs. Even in our day to day buying decisions, we would like to touch, feel, experience the product/services before we take a final decision, can credit be any different? Is taking a decision to provide loan or extend credit facility is not known as “Credit Buying”. Given a option, credit manager certainly would like to meet applicant to understand the financial, socio-economic & business profile but there is always going to be time & resource limitation, hence now a days many company outsource a part of credit process called Personal Discussion (PD), it acts as additional tool for credit department to take a final decision.

The process of PD squarely depends on following three criteria, which ultimately determine the scale, extent & information generation through PD, as well as level of person undertaking the discussion; however it is certain that an interviewer must have workable knowledge & understanding of Banking, Finance & Business.

1 Nature of Loan. ( Secured or Unsecured )

2 Amount of Loan.

3 Specific needs of PD. (Business Profiling/ Estimation of Income etc.)

While, PD can provide in-depth details, however it will fall short of providing intrinsic business details, net-worth of applicant. In Indian context, a parallel economy coupled  with tax planning through Joint Family makes on the books financial health of a person in adequate compared to the real net-worth, hence if a specialized person with in depth knowledge of tax, accounts & business scenario can help credit in taking a final decision on exposure. Hence a product called Liquid Income Programme (LIP) is launched by many companies. LIP report amongst other specific information, provide following important set of information viz;

1 Business profile & working capital cycle.

2 Estimated Turnover & Profitability.

3 Projection of future.

4 Fund Flow, Cash Flow & Net-worth of applicant.

Generally, LIP is undertaken by a chartered accountant, who by his qualification and experience is equipped to provide a complete report.

To know more about PD or LIP……..please contact us.