Credit Management

“Credit Management”

Learning Objective

Take Risks but Calculated!!!

Presented By:

Asif Naqvi

A Brief Intro Education: Jan 2001-Jan 2003 : MBA (Finance) QAU Islamabad 1998-2000: BSc Maths & Physics, GC Lahore

Industry Experience: Regulator (SECP), Development Financial Institution, Commercial Banking (SME Focused), Corporate Banking, Corporate Finance (IB) and Brokerage House

Functional Experience: Relationship Management, International Trade, Corporate Finance and Portfolio Management

Volunteer Experience: Event Management with UNDP & Ministry of Science & Technology

Future Plans: Hopefully I will be leaving for France in Sept 09 to pursue my PhD in Finance.

Course Objectives •

To give the students the capacity to understand the theory and apply, in real world situations, the techniques that have been developed in Credit Management:

Motto for the Class: If it cannot be applied, who cares???? •

To give students the big picture of Credit Management so that students may understand how things fit together.

Motto for the Class: You can forget the details, but don’t miss the story line!!! •

To prove that Credit Management is FUN.

Motto for the Class: Are We having Fun Yet????

Magnitude of Credit Portfolio of Banks

Where there is Credit Portfolio, there are BAD LOANS!!!

BAD DEBTS (Non Performing Loans)

What is Credit Management??????

Goals & Objectives of Credit Management

• Assess and assure Credit Risk and manage it in such a way that risks (losses) are minimized and return is optimized. • To achieve target cash flows followed by risk based return by managing a credit portfolio. • Install a system and control measures for periodic reviews.

Credit Management

Credit Management is a process of managing Credits using following steps: • Formulation of Credit Policy • Credit Initiation • Credit Evaluation & Risk Assessment and •

Credit Monitoring & Control

Credit Policy • Credit Policy Provides a broader frame work of reference and uniform standards. • It should be flexible to meet various situations • It should aim to provide guidance for what to do, not how to do. • Should contain segmentation of the Credit Portfolio. • Should consider Legal & regulatory environ. • Should clearly specify certain parameters like maximum amount of loan, deposits and capital etc. • Should clearly state the delegated authorities for processing and approval of loan. • Guidelines for pricing • Quality of Credit • Should put a good administrative set up for Credit administration.

Credit initiation

• Target Market planning is the most important aspect of the Credit Initiation. • Target Market refers to business discipline & selectivity. • The Target Market (TM) process follows the formulation of the overall business strategy for the Bank • Identifying business potential, defining desirable opportunities and adhering to resultant marketing objectives. • TM identifies the acceptable and desirable profile of customers and the products to be offered. • Defines Risks Acceptance Criteria (RACs)

Credit Evaluation & Risk Assessment

• • • •

The 3 C’s of the Credit: Character Capacity Collateral

• • • • •

Risk Assessment: Business Risk Management Risk Product Line Critical Success Factors Risk Based Pricing.

Credit Monitoring & Control • Periodic Reviews • Interim Reviews • Quarterly Accounts • Identification of Early Warning Signs • Classification of Bad Debts & • Rehabilitation of Bad Debts (Remedial Management).

Marks Distribution

Weightage Sessional Exams:

40

Quizzes:

7.5

Project:

20

Class Participation: Final:

7.5 75

The House is Open to Any Number of Questions

Thanks