“11 Cs for better credit analysis in Asia” authored by me and it was published in “Asian Banking

& Finance” 8 years ago. In this article, it has been emphasized upon 5 Cs for good credit and 5
Cs for bad credit and other 1C for good and bad credit which can be used as a lending/investing
tool for any investment officer/manager towards sound & prudent commercial investnent making
decision.

11Cs for better credit analysis in Asia

Loan default is a universal phenomenon associated with all types of business enterprises.
However, loan default in case of banks has special significance because extending of credit is
almost the exclusive business of banking institutions.

Naturally magnitude of loan default largely determines the destiny of a bank. So, its importance
is absolute for the very existence of a bank. As banks deal with other people’s money, quick
recovery of loans is one of the most important factors that banks make commercially viable.

Investors and entrepreneurs may default in paying their loans for various reasons. Some of the reasons are
as follows:

 When an entrepreneur takes up any project, he/she makes a project profile. The main goals,
objectives and the cost of production are set out there. Likewise, the importers are also required
to submit their project profile showing therein the proposed rate of profit to the Bank for the
purpose of obtaining the loan. Here, it is seen that some entrepreneurs prepare over invoiced
proposals in their bids for extra money from the banks for personal gain.
 Some industries turn sick despite getting adequate loans from banks. The main reasons for this
are weak management, wrong recruitment and administration of the standard of the commodity
and not following correct marketing procedures.
 Inadequate prudential regulation and weak supervision is a recipe for banking problem i.e.
creating non-performing assets.
 Poor prudential regulation and supervision are made all the worse by an inadequate legal
framework.
 Banks are not the only problem in the financial sector. Capital market is small and do not offer a
competitive alternative bank borrowing.
 Many of the classified loans are directive loans which actually given by influence. For any
influence, the banks have to lend money to projects without examining their economic viability.
 Ignorance of knowledge for proper analyzing of loan proposal by credit officers.
 Negligence of the credit officers. Many credit officers do not perform his/her assignment
sincerely despite getting all possible information about the respective credit.
 Connivance of the Bank personnel with the borrower.