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.