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Credit Appraisal
What is credit appraisal in the context of bank lending?
Credit appraisal is the process by which a bank evaluates a borrower's creditworthiness, repayment capacity, and the viability of the proposed project or activity before sanctioning a loan.
What is the purpose of a 'Sanction Letter' issued after credit appraisal?
It formally communicates the approved loan terms and conditions to the borrower.
What are the five Cs of credit that banks use during credit appraisal?
The five Cs are Character (integrity of borrower), Capacity (repayment ability), Capital (net worth), Collateral (security offered), and Conditions (economic/market environment).
What is the Tangible Net Worth (TNW) of a borrower and why is it assessed?
TNW is net worth excluding intangible assets, showing real financial strength of borrower.
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