200+ Credit Manager Interview Questions and Answers

I would assess the situation and try to find alternative ways to verify the client's identity and creditworthiness.

• Ask the client if there are any other forms of identification they can provide

• Check if the client has any existing accounts or relationships with the bank

• Ask for references or guarantors who can vouch for the client's credibility

• Consider alternative credit scoring methods such as social media or utility bill payments

• Evaluate the risk and potential consequences of...read more

The most important ratios to analyze balance sheet and profit loss statement of borrower are liquidity, solvency, and profitability ratios.

• Liquidity ratios measure the borrower's ability to meet short-term obligations

• Solvency ratios measure the borrower's ability to meet long-term obligations

• Profitability ratios measure the borrower's ability to generate profits

• Examples of liquidity ratios include current ratio and quick ratio

• Examples of solvency ratios include debt-to-equity...read more

I will check the client's financial history, credit score, business plan, collateral, and repayment ability.

• Check the client's credit score and financial history to assess their creditworthiness

• Evaluate the client's business plan and long-term project to ensure it is viable and profitable

• Assess the client's collateral to determine its value and potential for resale

• Verify the client's repayment ability through income statements, cash flow projections, and other financial docum...read more

Important clauses in 3CD for loan sanctioning

• Clause 4 - Purpose of loan

• Clause 5 - Amount of loan

• Clause 6 - Repayment terms

• Clause 7 - Security for loan

• Clause 8 - Interest rate

• Clause 9 - Default and consequences

Operating cycle and working capital cycle are measures of a company's efficiency in managing its cash flow.

• Operating cycle is the time it takes for a company to convert its inventory into cash. It is calculated as the sum of the inventory holding period and the accounts receivable collection period.

• Working capital cycle is the time it takes for a company to convert its current assets into cash to meet its current liabilities. It is calculated as the sum of the operating cycle...read more

No, someone earning less than EMI should not take a loan.

• Taking a loan when earning less than the EMI can lead to financial strain and difficulty in repayment.

• It is important to have a stable income that can comfortably cover the loan repayment.

• If someone is already struggling to meet their financial obligations, taking on additional debt can worsen their situation.

• It is advisable to explore alternative options such as increasing income or reducing expenses before considering...read more

Before sanctioning a loan, I check various information and documents.

• Credit score and credit history of the borrower

• Income and employment details of the borrower

• Collateral offered by the borrower

• Purpose of the loan

• Legal documents like ID proof, address proof, and income proof

• Bank statements and tax returns

• Credit reports from credit bureaus

• Business plan and financial statements for business loans

Documents required for a term loan file.

• Loan application form

• Income tax returns

• Bank statements

• Financial statements

• Credit report

• Collateral documents

• Legal documents

CIBIL check includes credit score, credit history, loan/credit card repayment history, defaults, and outstanding debts.

• Credit score

• Credit history

• Loan/credit card repayment history

• Defaults

• Outstanding debts

The classification of borrower accounts into SMA0, SMA1, and SMA2 is based on the number of days the account is overdue.

• SMA0: Account is not overdue

• SMA1: Account is overdue for 1-30 days

• SMA2: Account is overdue for 31-60 days

Concurrent audit is conducted during the course of business operations, while statutory audit is conducted at the end of the financial year.

• Concurrent audit is performed concurrently with the operations of the organization.

• Statutory audit is conducted to ensure compliance with legal and regulatory requirements.

• Concurrent audit helps in detecting and preventing frauds and errors in real-time.

• Statutory audit provides an independent opinion on the financial statements of the com...read more

The three pillars of loan eligibility are credit score, income, and collateral.

• Credit score: A good credit score indicates a borrower's ability to repay the loan.

• Income: Sufficient income is necessary to ensure timely loan repayments.

• Collateral: Providing collateral reduces the risk for the lender and increases loan eligibility.

• Example: A person with a high credit score, stable income, and valuable collateral has a higher chance of loan approval.

DSCR is Debt Service Coverage Ratio, a measure of a company's ability to repay its debt. It is calculated by dividing net operating income by total debt service.

• DSCR is a financial ratio used by lenders to assess the creditworthiness of a borrower.

• It measures the cash flow available to cover debt payments.

• The formula for DSCR is: DSCR = Net Operating Income / Total Debt Service.

• A higher DSCR indicates a better ability to repay debt.

• An ideal DSCR ratio varies depending on the ...read more

Calculating EMI involves assessing income, expenses, and financial stability to determine a suitable repayment amount.

• Assess total monthly income: Include salary, bonuses, and any other sources.

• Calculate total monthly expenses: Rent, utilities, groceries, and other obligations.

• Determine disposable income: Subtract total expenses from total income.

• Apply the 50/30/20 rule: Allocate 50% for needs, 30% for wants, and 20% for savings/debt repayment.

• Example: If monthly income is $5...read more

I once faced an ethical dilemma when a client asked me to approve a loan despite knowing they had a poor credit history.

• I explained the risks involved in approving the loan and the potential consequences for both parties.

• I suggested alternative options such as a smaller loan or a longer repayment period.

• I consulted with my superiors and legal team to ensure I was making the right decision.

• Ultimately, I declined the loan application as it was not in the best interest of the cl...read more

Assessing income of SENP segment

• Analyze income sources such as salary, investments, and rental income

• Consider debt-to-income ratio and credit history

• Look at demographic data and economic trends in the area

• Use financial statements and tax returns to verify income

• Compare income to expenses and debt obligations

KYC documents are documents required for verifying the identity of customers. PAN card is a KYC document.

• KYC documents are Know Your Customer documents used for verifying the identity of customers.

• Examples of KYC documents include Aadhaar card, passport, driver's license, and voter ID card.

• PAN card is also considered a KYC document as it contains details such as name, date of birth, and photograph of the individual.

I would assess the applicant's creditworthiness based on their credit history, income, and debt-to-income ratio.

• Check the applicant's credit score and credit report

• Verify their income and employment status

• Calculate their debt-to-income ratio

• Consider any past delinquencies or bankruptcies

• Assess the purpose of the loan and the likelihood of repayment

• Review any collateral offered as security

Underwriting process involves analyzing credit reports, business margins, and calculating creditworthiness.

• Underwriting involves analyzing credit reports from CIBIL, Experian, and Equifax

• Assessing the type of business and its margins is important in determining creditworthiness

• Credit appraisal process involves evaluating the borrower's financial history and ability to repay

• Calculations such as CFA are used to determine creditworthiness

• PD process is used to assess the probabil...read more

I can process around 20-25 cases on a daily basis depending on the complexity of the cases.

• The number of cases processed depends on the complexity of the cases.

• On average, I can process around 20-25 cases per day.

• I prioritize cases based on their urgency and importance.

Repo rate is the rate at which RBI lends money to banks, while reverse repo rate is the rate at which RBI borrows money from banks.

• Repo rate is higher than reverse repo rate

• Repo rate is used to control inflation

• Reverse repo rate is used to control money supply

• Example: If RBI increases repo rate, banks will increase their lending rates to customers

Profit and loss ratios are financial metrics used to assess the profitability of a company.

• Profit ratio measures the percentage of profit earned on sales.

• Gross profit ratio is calculated by dividing gross profit by net sales.

• Net profit ratio indicates the percentage of net profit earned on sales.

• Operating profit ratio measures the profitability of core operations.

• Return on investment (ROI) is a common profitability ratio.

Banks offer various types of credit including personal loans, credit cards, mortgages, and business loans.

• Personal loans: unsecured loans for personal use

• Credit cards: revolving credit with interest rates and rewards

• Mortgages: loans for purchasing or refinancing a home

• Business loans: loans for small or large businesses

• Lines of credit: flexible credit for businesses or individuals

• Auto loans: loans for purchasing a vehicle

Credit of a customer can be justified by evaluating their credit history, financial stability, and repayment capacity.

• Evaluate the customer's credit history, including their payment patterns, outstanding debts, and any previous defaults.

• Assess the customer's financial stability by analyzing their income, assets, and liabilities.

• Consider the customer's repayment capacity by reviewing their cash flow, debt-to-income ratio, and ability to meet financial obligations.

• Verify the cu...read more

The repayment capacity of the borrower is the most important yardstick in assessment of Term Loan.

• Repayment capacity of the borrower is assessed through various financial ratios such as Debt Service Coverage Ratio (DSCR), Interest Coverage Ratio (ICR), and Loan to Value Ratio (LTV).

• The borrower's credit history, income, and assets are also considered in the assessment.

• The purpose of the loan, the industry in which the borrower operates, and the economic conditions of the coun...read more

Eligibility for a salaried employee is checked by verifying their employment status, income level, and credit history.

• Verify employment status through pay stubs or employment verification letter

• Check income level through recent pay stubs or tax returns

• Review credit history through credit reports from bureaus like Equifax or TransUnion

The creditability of a borrower can be determined by analyzing their credit history, financial statements, and references.

• Check credit score and credit report

• Analyze financial statements such as income statement and balance sheet

• Verify references provided by the borrower

• Consider the borrower's industry and market conditions

• Assess the borrower's ability to repay the loan

• Evaluate collateral offered by the borrower