The document outlines the principles of credit management, including the functioning of banks, types of lending, and the requirements for granting credit. It details the classifications of lending such as retail, wholesale, directed, and normal lending, and introduces the 6 C's of borrowers which include character, capacity, capital, collateral, condition, and credit history. The importance of interest rate spread for bank operations is also highlighted.

1. DEVTECH FINANCE
CREDIT
MANAGEMENT

2. CONTENTS
• Introduction to Credit management
• Function of Bank
• Classification of Lending
• Requirements for Lending
• 6 C’s of Borrower

3. INTRODUCTION
• Credit management is the process of granting credit , setting the term its
granted on, recovering this credit when its due and ensuring compliance
with company credit policy.
• The difference in the rate of interest that a bank charges on the amount
lent and the rate it pays to the depositors is technically called spread or
interest rate spread.
• This spread bank has to use to meet all its overheads and interest on
deposit but also provide for NPA.

4. Function of Bank
Primary function
Accepting
deposits
Lending /
Credit
Secondary function
Remittances
Cross
selling
Bank
Guarantee /
Letter of credit
Safe Deposit
Vault
FUNCTION OF BANK

5. CLASSIFICATION OF LENDING
Lending
On the Basis of Size of
Advance
Retail Lending
Wholesale
Lending
On the Basis of
Regulation
Directed
Lending
Normal
Lending

6. TYPES OF LENDING
• Retail Lending – It refers to the lending by banks to individual customers and
SMEs. The ticket size of these advances would be small but the no. of accounts
would be high.
• Wholesale Lending – It refers to financing to corporate customer and institutional
finance. Here, the size of advance is large and the no. of borrowers is relatively
small.
• Directed Lending – Banks are required to lend 40% of net bank credit to priority
sectors which are necessarily mandated by govt. for development of economy.
• Normal Lending – Loans and advances other than directed lending is termed as
Normal Lending.

7. REQUIREMENTS FOR LENDING
Sources of
funds
Efficient system &
procedures
Credit PolicyDelegation of power
Trained Manpower

8. 6 C’s of Borrower
• Character – The most important requirement for granting credit to a customer is his
integrity.
• Capacity – A prospective client for credit must have the knowledge of the business
process for which loan is being granted.
• Capital – Bankers insist that the client has to bring some portion of total investment
which is technically termed as margin.
• Collateral – Banks take collateral security in the form of mortgage of property, pledge of
shares etc. as guarantee for loan repayment.
• Condition – Condition refers to macro economic factors of country like political stability,
demand & supply, legal environment etc.
• Credit history – Past records credit transactions of client.

9. THANK YOU FOR WATCHING
DEVTECH
FINANCE