200+ Credit Manager Interview Questions and Answers

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

Technical reports should contain accurate and detailed information about a specific topic.

• Technical reports should have a clear and concise title

• The report should have an introduction that outlines the purpose and scope of the report

• The report should contain accurate and detailed information about the topic

• The report should have a conclusion that summarizes the findings and recommendations

• The report should be well-organized and easy to read

• The report should include any releva...read more

The credit manager should be aware of the distance to be covered in their area and the average number of visits made in a month.

• The credit manager should have knowledge of the geographical area they are responsible for.

• They should be aware of the distance between different locations within their area.

• Knowing the average number of visits made in a month helps in planning and managing workload.

• This information can be used to optimize travel routes and schedules.

• For example, if ...read more

SMA in CIBIL study stands for Special Mention Account. DPD stands for Days Past Due.

• SMA is a category in CIBIL report that indicates accounts with delayed payments.

• DPD is the number of days by which a borrower has delayed payment of EMIs or credit card bills.

• SMA accounts have payments overdue between 1-90 days, while accounts with DPD of 90 days or more are classified as NPA.

• Lenders use these parameters to assess the creditworthiness of a borrower before approving a loan or c...read more

The major risk in this financial system is credit risk.

• Credit risk is the risk of loss due to a borrower's failure to repay a loan or meet contractual obligations.

• This can occur due to factors such as economic downturns, changes in interest rates, or borrower default.

• To mitigate credit risk, credit managers must carefully assess the creditworthiness of borrowers and monitor their repayment behavior.

• They may also use tools such as credit insurance or collateral to protect agai...read more

I plan to manage the entire Madhya Pradesh state by implementing efficient credit policies, building strong relationships with clients and stakeholders, and closely monitoring credit risk.

• Developing and implementing credit policies and procedures to ensure timely and accurate credit decisions

• Building strong relationships with clients, vendors, and other stakeholders to facilitate smooth credit transactions

• Closely monitoring credit risk and taking proactive measures to mitigat...read more

Financial ratios are tools used to analyze a company's financial performance and health. Bank statements provide a snapshot of an individual's financial transactions and balances.

• Financial ratios are used to evaluate a company's profitability, liquidity, solvency, and efficiency.

• Examples of financial ratios include debt-to-equity ratio, current ratio, return on equity, and gross margin.

• Bank statements show a person's income, expenses, account balances, and transactions over a...read more

CIBIL is a credit information company that maintains credit records of individuals and companies.

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

• It is a credit information company that collects and maintains credit records of individuals and companies.

• Creditors use CIBIL reports to evaluate the creditworthiness of borrowers before lending money.

• CIBIL reports contain information on credit history, outstanding loans, defaults, and credit inquiries.

• Credit managers che...read more

Debt service coverage ratio measures a company's ability to pay its debt obligations. Interest coverage ratio measures a company's ability to pay interest on its debt.

• Debt service coverage ratio is calculated by dividing a company's net operating income by its total debt service.

• A ratio of 1 or higher indicates that a company is generating enough income to cover its debt obligations.

• Interest coverage ratio is calculated by dividing a company's earnings before interest and tax...read more

There are various types of frauds in the local market.

• Identity theft

• Credit card fraud

• Phishing scams

• Fake check scams

• Ponzi schemes

• Investment fraud

• Pyramid schemes

• Counterfeit products

• Insurance fraud

Our approval rate is 85% and delinquency rate is 5% for the current product.

• Our approval rate is higher than industry average.

• We have strict credit checks in place to maintain low delinquency rate.

• We continuously monitor and analyze our approval and delinquency rates to make necessary adjustments.

• For example, we recently increased our credit score requirement to reduce delinquency rate.

The tools of credit analysis include financial statements, credit reports, credit scoring models, and industry research.

• Financial statements provide information on a company's financial health and performance.

• Credit reports show a borrower's credit history and payment behavior.

• Credit scoring models use data from credit reports to assess creditworthiness.

• Industry research helps to understand the borrower's market and competition.

• Other tools include cash flow analysis, collater...read more

Mortgage requires several documents for approval.

• Proof of income

• Credit report

• Property appraisal

• Title report

• Homeowner's insurance

• Tax returns

• Bank statements

MPBF formula is used to calculate the maximum permissible bank finance for a borrower.

• MPBF stands for Maximum Permissible Bank Finance.

• It is calculated by multiplying the working capital of the borrower with the margin prescribed by the bank.

• The formula is: MPBF = Working Capital x Margin

• For example, if the working capital of a borrower is $100,000 and the bank's prescribed margin is 20%, then the MPBF would be $20,000.

• This formula helps banks determine the maximum amount of ...read more

The average ticket size determines the level of authority for visits.

• The average ticket size indicates the typical amount of credit extended to customers.

• A higher average ticket size may indicate a higher level of authority for visits.

• Authority for visits may be determined based on the risk associated with the credit extended.

• Examples of authority levels could be: low authority for visits if average ticket size is below $10,000, medium authority for visits if average ticket s...read more

Credit worthiness can be assessed with income docs by analyzing income stability, consistency, and sufficiency.

• Verify the source of income to ensure it is stable and reliable.

• Check for consistency in income levels over a period of time.

• Assess whether the income is sufficient to cover existing debts and potential new credit obligations.

• Look for any irregularities or discrepancies in the income documentation.

• Consider the type of income (e.g. salary, rental income, investment in...read more

Loan processes refer to the steps involved in obtaining and managing a loan.

• Loan application and approval process

• Loan disbursement process

• Loan repayment process

• Loan default and collection process

• Loan refinancing process

• Examples: mortgage loans, personal loans, business loans

Ratios used in credit assessments include debt-to-income ratio, loan-to-value ratio, and credit utilization ratio.

• Debt-to-income ratio compares a borrower's monthly debt payments to their gross monthly income.

• Loan-to-value ratio compares the amount of a loan to the appraised value of the asset being purchased.

• Credit utilization ratio compares the amount of credit being used to the total amount of credit available to a borrower.

I was previously a Credit Analyst. Current ratio measures a company's ability to pay its short-term obligations, while DSCR measures a company's ability to cover its debt payments.

• Current ratio is calculated by dividing current assets by current liabilities. A ratio above 1 indicates the company can cover its short-term obligations.

• DSCR (Debt Service Coverage Ratio) is calculated by dividing a company's operating income by its debt payments. A ratio above 1 indicates the comp...read more

Financial ratios impact lending by providing insight into a borrower's financial health and ability to repay loans.

• Financial ratios such as debt-to-income ratio, debt-to-equity ratio, and current ratio are used by lenders to assess a borrower's creditworthiness.

• These ratios help lenders determine the borrower's ability to repay the loan and manage their finances.

• For example, a high debt-to-income ratio may indicate that the borrower has too much debt and may struggle to make ...read more

Loan eligibility can be calculated by considering factors such as income, credit score, and debt-to-income ratio.

• Determine the borrower's income and employment stability

• Check the borrower's credit score and credit history

• Calculate the borrower's debt-to-income ratio

• Consider the loan amount and term

• Example: A borrower with a high income, good credit score, and low debt-to-income ratio is more likely to be eligible for a larger loan with a lower interest rate.

Deferred tax is a liability that arises due to temporary differences between accounting and tax rules. Bank guarantee is a commitment by a bank to pay a specified amount if the beneficiary fails to meet certain obligations.

• Deferred tax is a result of differences in timing between when income or expenses are recognized for accounting purposes and when they are recognized for tax purposes.

• Bank guarantee is a form of security provided by a bank to a beneficiary to ensure that th...read more

Lending policies are guidelines set by financial institutions to determine who can borrow money and under what conditions.

• Lending policies are based on factors such as credit score, income, debt-to-income ratio, and collateral.

• Financial institutions use lending policies to manage risk and ensure that borrowers are able to repay their loans.

• Lending policies may vary depending on the type of loan and the institution offering it.

• For example, a mortgage lender may have stricter l...read more

Working capital can be financed through various methods.

• Short-term loans from banks or financial institutions

• Trade credit from suppliers

• Factoring or invoice discounting

• Inventory financing

• Receivables financing

• Crowdfunding or peer-to-peer lending

• Sale of assets

• Equity financing

• Leasing or renting of equipment

• Negotiating extended payment terms with customers

Ratios such as current ratio and leverage ratio are used to evaluate a company's financial health.

• Current ratio measures a company's ability to pay off its short-term liabilities with its current assets

• Leverage ratio measures a company's debt levels in relation to its assets or equity

• Other ratios include debt-to-equity ratio, return on equity, and gross profit margin

• These ratios are important for credit managers to assess the creditworthiness of a company

To manage central underwriting cases with sales and branch credit team, effective communication and collaboration are key.

• Establish clear communication channels between the central underwriting team, sales team, and branch credit team.

• Regularly hold meetings or conference calls to discuss and review underwriting cases, ensuring everyone is on the same page.

• Define roles and responsibilities for each team to avoid duplication of efforts and ensure efficient workflow.

• Implement a...read more

LC assessment involves evaluating the creditworthiness of the issuing bank and the buyer.

• Assess the financial stability and reputation of the issuing bank

• Evaluate the creditworthiness of the buyer

• Review the terms and conditions of the LC

• Consider the country and political risks involved

• Assess the compliance of the LC with international trade regulations

• Example: Checking if the issuing bank is on the list of approved banks by the importer's country

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

• Repo rate is used by the central bank to control inflation and liquidity in the economy.

• Reverse repo rate is used to absorb excess liquidity in the market.

• Repo rate is higher than the reverse repo rate.

• Example: If the repo rate is 5% and the reverse repo rate is 4%, it means that the central bank cha...read more

We look at various factors before giving a loan to someone.

• Credit score and credit history

• Income and employment status

• Debt-to-income ratio

• Collateral

• Purpose of the loan

• Payment history on existing loans

• Overall financial stability

• Ability to repay the loan

• Legal and regulatory requirements

To prepare for analyzing financial statements and balance sheets, one should have a strong understanding of accounting principles and financial ratios.

• Understand basic accounting principles such as revenue recognition, accrual accounting, and matching principle.

• Familiarize yourself with financial ratios like liquidity ratios, profitability ratios, and leverage ratios.

• Learn how to interpret key financial statement components such as income statement, balance sheet, and cash fl...read more

CRR stands for Cash Reserve Ratio, SLR stands for Statutory Liquidity Ratio, repo rate is the rate at which the central bank lends money to commercial banks, and reverse repo rate is the rate at which the central bank borrows money from commercial banks.

• CRR is currently at 4%

• SLR is currently at 18.25%

• Repo rate is currently at 4%

• Reverse repo rate is currently at 3.35%

The working capital limit against turnover of Rs.10 crore can vary based on various factors.

• Working capital limit is typically a percentage of turnover, ranging from 20% to 30%.

• For a turnover of Rs.10 crore, the working capital limit could be between Rs.2 crore to Rs.3 crore.

• Factors such as industry, business stability, creditworthiness, and collateral can also impact the limit.

• Lenders may also consider the company's financial health, cash flow, and repayment history.

Fund based lending involves actual transfer of funds to borrower, while non fund based lending involves guarantee or letter of credit.

• Fund based lending involves direct transfer of funds to borrower for use, such as term loans or working capital loans

• Non fund based lending involves providing guarantee or letter of credit to borrower without actual transfer of funds

• Examples of fund based lending include cash credit facilities, overdrafts, and term loans

• Examples of non fund bas...read more

The minimum collateral cover against a working capital facility varies depending on the lender and the risk associated with the borrower.

• Minimum collateral cover is typically expressed as a percentage of the total working capital facility.

• Lenders may require collateral such as inventory, accounts receivable, or property.

• The specific collateral requirements will be outlined in the loan agreement.

• Collateral cover is determined based on the creditworthiness of the borrower and t...read more

I will give loans to individuals and businesses with good credit history and stable income on reasonable terms.

• I will consider credit score and payment history of the borrower

• I will also look at the borrower's income and employment stability

• For businesses, I will consider their financial statements and business plan

• I will offer reasonable interest rates and repayment terms based on the borrower's creditworthiness

• I will also require collateral or a co-signer for high-risk loan...read more

Check points for assessing loan proposals include financial stability, credit history, repayment capacity, collateral, and purpose of the loan.

• Financial stability of the borrower

• Credit history of the borrower

• Repayment capacity of the borrower

• Collateral provided by the borrower

• Purpose of the loan

These are various financial terms used in banking and credit management.

• RTGS (Real Time Gross Settlement) is a system used for fund transfers between banks in real-time.

• CIBIL (Credit Information Bureau India Limited) is a credit information company that maintains credit records of individuals and companies.

• ECS (Electronic Clearing Service) is a system used for electronic fund transfers between banks.

• NACH (National Automated Clearing House) is a system used for bulk electronic...read more

Verification of property documents involves checking LSR and TSR.

• Check the authenticity of the documents by verifying the signatures and stamps.

• Ensure that the documents are not forged or tampered with.

• Verify the Land Survey Report (LSR) to confirm the boundaries and measurements of the property.

• Check the Town Survey Report (TSR) to confirm the land use and zoning regulations.

• Consult with legal experts to ensure that all the documents are legally valid and binding.

The number of Credit Managers should be proportional to the size of the sales team and the number of files being logged.

• The ratio of Credit Managers to sales team members should be determined based on the workload and complexity of the credit process.

• The number of files being logged should also be taken into consideration when determining the appropriate number of Credit Managers.

• For example, if there are 10 sales team members and 100 files being logged per month, there shoul...read more

Credit underwriting involves assessing the creditworthiness of borrowers to determine their ability to repay loans.

• Credit underwriting is the process of evaluating the financial information of borrowers to determine their creditworthiness.

• It involves analyzing factors such as income, credit history, debt-to-income ratio, and collateral.

• The goal of credit underwriting is to assess the risk associated with lending money and make informed decisions.

• Underwriters use various tools...read more

Points to check in CIBIL report include credit score, payment history, credit utilization, and credit inquiries.

• Credit score: Check if the score is within the acceptable range.

• Payment history: Ensure all payments are made on time and there are no defaults.

• Credit utilization: Verify the percentage of credit limit being used.

• Credit inquiries: Check for any recent inquiries which may impact the credit score.

CIBIL is a credit information company that maintains credit records of individuals and businesses to help lenders assess creditworthiness.

• CIBIL stands for Credit Information Bureau (India) Limited

• It collects and maintains credit information of individuals and businesses

• Lenders use CIBIL reports to assess the creditworthiness of borrowers

• CIBIL score ranges from 300 to 900, with higher scores indicating better creditworthiness

• A good CIBIL score can help borrowers get better loa...read more

LTV stands for Lifetime Value, which is the predicted net profit attributed to the entire future relationship with a customer.

• LTV helps businesses understand the long-term value of a customer and make decisions on customer acquisition and retention strategies.

• It takes into account factors such as customer acquisition cost, average purchase value, and customer lifespan.

• For example, if a customer typically makes a $100 purchase every month and stays with the company for 2 years...read more

Components of P&L include revenue, expenses, and net income. Components of balance sheet include assets, liabilities, and equity.

• P&L components: revenue, expenses, net income

• Balance sheet components: assets, liabilities, equity

• Examples: Revenue - sales income, Expenses - salaries, Net income - profit, Assets - cash, Liabilities - loans, Equity - retained earnings

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 is calculated by dividing current assets by current liabilities.

• A higher current ratio indicates that a company has more current assets than current liabilities, which means it is better equipped to pay off its short-term debts.

• A lower current ratio may indicate that a company is struggling to pay off its short-term debts.

• For example,...read more

DSCR stands for Debt Service Coverage Ratio. It signifies a company's ability to pay its debts.

• DSCR is a financial ratio that measures a company's ability to pay its debts based on its cash flow.

• It is calculated by dividing the company's net operating income by its total debt service.

• A DSCR of 1 or higher indicates that the company is generating enough cash flow to cover its debt obligations.

• A DSCR below 1 indicates that the company may have difficulty meeting its debt obliga...read more

I am expecting a competitive salary based on my experience and qualifications.

• I am looking for a salary that is in line with industry standards for a Credit Manager role

• I am open to negotiation based on the overall compensation package offered

• I am seeking a salary that reflects my skills, experience, and the responsibilities of the position