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Case of Retail Loans

Case of Retail Loans

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Published by: 263421 on Aug 27, 2009
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 Appraisal of Education Loan and Consumer LoanMaterial
Background information on applicant Rajan Soni and LoanApplication formLiterature on Retail Banking -Set III
Evaluation of Education and Consumer Loan Request
Using the six “C” criteria and the credit scoring model, you are asked, first of all, todecide if the loan should or should not be made as it is presented.
Specifically work out the availability of funds to establish timely payment of EMI.
If the loan is not acceptable in its present form, decide under what circumstances youwould be willing to grant this loan, including what adjustments Rajan could undertake tomake this credit request acceptable to Sun Bank.
Background Information on Applicant Rajan Soni
The credit application, as per Exhibit I, was submitted by Rajan Soni to the Sun Bank,New DelhiOffice. The application indicates that Rajan has recently been admitted to the three year parttime Executive MBA Program of FORE School of Management. Considering the distance fromhis present place of residence, he has shifted to a new one room apartment in the neighbourhoodof the institute and requires new furniture, consumer durables etc for furnishing the apartment.For payment of fee and furnishing the apartment, he has applied for an education loan of Rs.360,000 (Rupees Three Lakhs Sixty Thousand) and a 12 month consumer loan for Rs.90,000(Ninety Thousand). His aunt, Ms Ruby Malhotra is working as a designer with a leading fashionhouse and also a customer of the bank, has agreed to stand as guarantor should the loan beapproved. Ms Ruby has been in the current employment for the past 3 years and earns Rs.300000(Rupees Three lakh)per annum. Her credit rating is only average with some slow or delayed payments. Currently, Rajan is working as an Assistant Accountant with a consulting firm at asalary of Rs 30,000 per month, which is barely enough to meet his living expenses. Rajan’semployer indicates that he is with them for the last 3 years, initially on part-time basis and on present position for last two years. They are aware that Rajan has got admission in MBA part-time program. Incidentally, Rajan is expecting a salary revision soon.
Exhibit I
Composite Loan Application FormNature and Purpose of the Loan Request
DateAugust 3, 2009Amount Requested Rs 450,000/= Nature of LoanAmount (Rs)PurposeRepayment TermsEducation Loan360,000Course fee payable inthree equal annualinstalments36 months aftecompletion of the courseConsumer Loan90,000Purchase of furnitureand consumer durables12 monthsCollateral that might be pledged to secure the Consumer loan: Furniture, Consumer durables etc.Personal Guarantee of Ms Ruby Malhotra for education loan
Name and Address of Customer
Full name of customer: Rajan SoniCurrent residence address: C 201, Ber Sarai, New DelhiTelephone: None.Mobile: 9899324211
Customer’s Personal History
Date of Birth: 18 March, 1983Pan Number: Not AvailableDriver’s license no: 22218Previous residence address: F 321 Janakpuri, New Delhi Number of dependents: None
Employment Status
 Name of employer: Fine Consulting Inc. Name of immediate supervisor: Raman VargheseEmployer’s business address: Commercial Complex, Tower B, Raja Garden, New DelhiCurrent salary: Rs 24,000 per monthPrevious employer’s name: NoneOther sources of income: None
Banking Relationships
Customer of this bank today:
 NoAccounts held with the Bank: Savings Bank A/c No. 042-331218-006Average monthly account balance (approx.) Rs 7,500
Relatives Who May Be Contacted

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