Mr. Kumar, a bank manager in a new age private sector bank in India, has been approached by a transport operator named Sajjan Singh for a loan. Nirmal has collected and reviewed all the relevant information. Now he has to calculate the debt service coverage ratio (DSCR) and, taking into consideration the various bits of information available to him, take a decision on whether to extend the loan to Sajjan.
(i) Lending decisions – How they are taken at the branch/unit level
Questions for Discussion:
1. What are the various requirements for making a lending decision?
2. What are the various factors to be considered in making a lending decision?
3. What are the various facets of the lending proposal?
4. What is the significance of Financial Appraisal in making a lending decision and how is it done?
5. What is the concept of DSCR? How is it arrived at and how does it help in making a lending decision?
6. In this case, should Mr. Kumar extend the loan to Sajjan? Give reasons to support your answer.