Credit Management

Assignment - Part I & II

Part I (marks - 30%)

01. A case study, you are required to apply 5Cs in credit process & selection and submit an assessment
as a Credit Proposal for risk approval by considering the requested Auto Loan.

Mr. Amarasinghe is a retail client of Golden Bank, Nugegoda Branch who has an employee banking
account for 5years. He is 50years old and a mathematics teacher for advanced level students, currently
working for Brilliant International College (BIC), Nugegoda for last one year. BIC is also a corporate client
of the branch and fairly maintain the relationship with the Bank.

Mr. Amarasinghe has a Credit Card facility of LKR100,000 with good track records. In addition to that he
has a personal loan of LKR500,000 with Super Bank, Kolpity Branch and remaining current outstanding
of LKR340,000, which needs to pay an installment of LKR21,000 per month for next 23 months. He also
has a housing loan and remaining balance of LKR1.5Mn, final maturity date in December 2025, with an
EMI of LKR25,000.

Mr. Amarasinghe has applied for an Auto car loan of Golden Bank and he wish he could have a loan of
LKR2Mn to purchase a used car, valued for LKR3.5Mn. (Toyota, year of manufacture 2015)

His savings account has LKR200,000 currently and noted a monthly fund transfer of LKR148,000 to the
savings account from BIC as the salary. Further Mr. Amarasinghe conduct private tuition classes where
he earns about LKR15,000 per month. However, this is not reflected in the savings account but shall be
deposited in future. He has a fixed deposit of LKR1.5Mn with Super Bank which will be used to purchase
the car.

Mrs. Amarasinghe is also a retired teacher who runs a pre-school and a day care for long in small scale.
They have two kids and elder son is an undergraduate of Colombo University who is a part-time earner.
Daughter of Amarasinghe is still studying in a government school, grade 11.

Notes: you may present in a manner of order of 5Cs (lecture 2) in detailed and shall include Takehome
calculation within it (lecture 3, ‘Financial Analysis – Retail, a personal client’).

You shall mention your assumptions of information that has been used in the absence of details in the
case and make notes within the paper ‘why & how’ you have considered things (thought process)

Further you shall make terms & conditions for the request by assuming that you are the approver of this
facility. If you do not wish to approve the request, please do mention the reasons for the decline.
Part II (marks - 70%)

02. Briefly describe following (marks - 30%)

2.1. What is the Credit Risk

2.2. What is the Credit Risk management

2.3. What are the objectives of Credit portfolio

2.4. Contrast following terms,

i) Lending facilities vs Trade facilities

ii) Capital expenditure vs Working capital

iii) Standard documentation vs Non-standard documentation

iv) Contractual binding vs Non contractual binding

03. You shall provide short & direct answers for following (marks - 40%)

3.1. List 5 associated risks within the Bank as an Enterprise in addition to the Credit Risk

3.2. List 5 sub risk types which you shall find in Credit Risk

3.3. List 10 facility types shall be offered to a client

3.4. Denote “CAMPARI” as a Credit Risk identification & assessment model

3.5. Provide 5 important ratios shall be useful under financial analysis of a corporate client

3.6. How do you arrive ‘Working Capital Cycle’ of a corporate client.

3.7. List 5 types of collaterals which shall be used as a Mitigation in Credit Risk

3.8. List 6 features of ‘Remediation & Recovery’ in risk mitigation of the Credit Process

3.9. Provide 3 examples of regulations which relates to Credit Measuring

LILAN WICKRAMASEKARA
MBA-PIM, AIB, ADICM