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

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

Partnership deed is mandatory for a partnership firm

• Partnership deed is a legal document that outlines the terms and conditions of the partnership

• It includes details such as the name of the firm, the names of the partners, their capital contributions, profit sharing ratio, etc.

• It is important to have a partnership deed to avoid any disputes or misunderstandings between the partners

• It is also required for registration of the partnership firm with the Registrar of Firms

• Partners...read more

Documents required for a term loan file.

• Loan application form

• Income tax returns

• Bank statements

• Financial statements

• Credit report

• Collateral documents

• Legal documents

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 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

Current Ratio is a financial ratio that measures a company's ability to pay its short-term liabilities with its short-term assets.

• Current Ratio = Current Assets / Current Liabilities

• It indicates the liquidity of a company

• A higher current ratio is generally considered better

• Standard current ratio varies by industry

• For example, a current ratio of 2:1 is considered good for most industries

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

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.

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

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

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.

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

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

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

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

I will check liquidity, profitability, and solvency ratios before granting a loan to a company.

• Liquidity ratios such as current ratio and quick ratio to ensure the company has enough short-term assets to cover its liabilities

• Profitability ratios such as return on assets and return on equity to assess the company's ability to generate profits

• Solvency ratios such as debt-to-equity ratio and interest coverage ratio to evaluate the company's long-term financial health

• Examples of ...read more

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.

Underwriting is the process of evaluating the risk of a loan or investment and determining if it meets the lender's criteria.

• Underwriting involves analyzing financial statements, credit reports, and other relevant information to determine the borrower's ability to repay the loan.

• The underwriter also assesses the value of the collateral and the overall market conditions.

• Examples of underwriting include mortgage underwriting, insurance underwriting, and investment underwriting....read more

To check legal report, obtain a copy from relevant authority and review for any legal issues. Incumbrance refers to any legal claims on property.

• Obtain a copy of the legal report from relevant authority

• Review the report for any legal issues such as pending lawsuits or liens

• Incumbrance refers to any legal claims on property such as mortgages or unpaid taxes

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

If property sides do not match, the value demand may vary based on the extent of the mismatch.

• The value demand may decrease if the mismatch is significant and affects the functionality of the property.

• The value demand may increase if the mismatch is minor and does not affect the overall value of the property.

• The value demand may also depend on the location and demand for the property.

• A professional property appraiser can provide a more accurate assessment of the value demand.

Red flags while checking applicant's or firm's banking

• Frequent overdrafts or bounced checks

• Unexplained large deposits or withdrawals

• Multiple accounts with low balances

• History of late payments or delinquencies

• Suspicious activity such as money laundering or fraud

• Negative information from credit reports

• Inconsistent information provided on applications

CC assessment is done by evaluating credit history, income, debt-to-income ratio, and credit score.

• Credit history is reviewed to see if there are any missed payments or defaults.

• Income is evaluated to determine if the applicant can afford to make payments.

• Debt-to-income ratio is calculated to see if the applicant has too much debt compared to their income.

• Credit score is checked to see if the applicant has a history of responsible credit use.

• Examples of CC assessment include ...read more

Reading a balance sheet involves analyzing a company's assets, liabilities, and equity.

• Start by identifying the assets, which are listed in order of liquidity.

• Then, identify the liabilities, which are listed in order of maturity.

• Finally, analyze the equity section, which shows the company's net worth.

• Compare the assets and liabilities to determine the company's financial health.

• Look for trends over time to identify changes in the company's financial position.

• Examples of asset...read more

I check for accuracy, completeness, and relevance of technical information in reports.

• Accuracy of data and calculations

• Completeness of information provided

• Relevance of technical information to the report's purpose

• Consistency of technical terminology and units of measurement

• Clarity of presentation and organization

• Adherence to industry standards and regulations

I will check the financial stability, credit history, and payment behavior of the flour mill owner.

• Check the credit score and credit history of the owner

• Analyze the financial statements of the flour mill

• Check the payment behavior of the owner with their suppliers and creditors

• Assess the market reputation of the flour mill and its owner

• Evaluate the industry trends and competition in the market

Ideal debt equity ratio varies by industry and company, but generally ranges from 0.5 to 2.

• Debt equity ratio is a measure of a company's financial leverage.

• It compares a company's total debt to its total equity.

• A higher debt equity ratio indicates higher financial risk.

• Ideal debt equity ratio varies by industry and company, but generally ranges from 0.5 to 2.

• For example, a technology company may have a higher debt equity ratio than a utility company.

• Credit appraisal is the pr...read more

MPBF stands for Maximum Permissible Bank Finance. It is the maximum amount of loan that a bank can provide to a borrower.

• MPBF is calculated based on the working capital cycle of a business.

• It is calculated by taking into account the inventory, receivables, and payables of a business.

• The formula for calculating MPBF is: MPBF = (Current Assets - Current Liabilities) x 75%.

• For example, if a business has current assets of $100,000 and current liabilities of $50,000, then the MPBF...read more

Credit Manager should know 3 ratios and its analysis, role of credit manager, cibil and MD of ICICI Bank.

• 3 ratios: Debt-to-Equity, Current Ratio, and Gross Profit Margin. Analysis helps in assessing the financial health of a company.

• Role of Credit Manager: Assessing creditworthiness of potential borrowers, setting credit limits, and managing collections.

• CIBIL: Credit Information Bureau (India) Limited. It is a credit information company that maintains credit records of indivi...read more

The recent budget focuses on healthcare, infrastructure, and digitalization.

• Increased allocation for healthcare sector

• Focus on building new highways and railways

• Investment in digital infrastructure

• Reduction in customs duty on certain products

• Introduction of new tax regime for small businesses

Yes, I have some information about tractors.

• I know that tractors are commonly used in agriculture for plowing, tilling, and planting.

• Tractors come in different sizes and types, such as utility tractors, row-crop tractors, and compact tractors.

• I am aware that some tractors are equipped with attachments like loaders, backhoes, and mowers.

• I also know that tractors require regular maintenance and repairs to ensure their optimal performance.

To appraise a loan of a flour mill, I will consider factors such as market demand, competition, financial statements, and collateral.

• Assess the market demand for flour and the competition in the area

• Review the financial statements of the flour mill to evaluate its profitability and cash flow

• Evaluate the collateral being offered for the loan, such as the flour mill property and equipment

• Consider the management team's experience and expertise in running a flour mill

• Assess the o...read more

No, high GST TO does not necessarily indicate good financial health if banking EOD balances are poor.

• High GST TO could be due to high sales but poor collection of receivables

• Poor banking EOD balances could indicate cash flow issues or mismanagement of funds

• Further investigation into the reasons behind poor EOD balances is necessary before making a decision

Working capital is the amount of money a company has available to fund its day-to-day operations.

• Working capital is calculated by subtracting current liabilities from current assets.

• It is important for a company to have enough working capital to pay for expenses such as rent, salaries, and inventory.

• If a company has negative working capital, it may struggle to meet its financial obligations.

• Examples of current assets include cash, accounts receivable, and inventory.

• Examples o...read more

CIBIL is a credit information company that provides credit scores based on an individual's credit history.

• CIBIL stands for Credit Information Bureau (India) Limited.

• It is one of the four credit information companies in India.

• CIBIL collects credit information from banks and financial institutions to generate credit reports and scores.

• Factors checked include payment history, credit utilization, length of credit history, types of credit used, and new credit inquiries.

• A high CIBI...read more

Components of balance sheet include assets, liabilities, and equity.

• Assets: resources owned by the company such as cash, inventory, and property

• Liabilities: debts owed by the company such as loans and accounts payable

• Equity: the residual interest in the assets of the company after liabilities are deducted

• Examples: cash, accounts receivable, inventory, accounts payable, long-term debt, common stock, retained earnings

Cash credit and bank overdraft are two types of short-term credit facilities offered by banks.

• Cash credit is a type of loan where the borrower is given a credit limit and can withdraw funds as needed, usually for working capital purposes.

• Bank overdraft is a facility where the borrower is allowed to withdraw more money than they have in their account, up to a certain limit.

• Both cash credit and bank overdraft are short-term credit facilities and are usually secured by collatera...read more

Delinquency ratio at our branch is 5%. Methods to control high delinquency include regular monitoring, early intervention, and offering flexible payment options.

• Regularly monitor customer accounts for any signs of delinquency

• Implement early intervention strategies such as contacting customers as soon as a payment is missed to understand the reason and offer solutions

• Offer flexible payment options to customers facing financial difficulties to prevent further delinquency

• Analyze...read more