Lender - s Appraisal Procedure
Chapter notes, video classes, MCQ practice tests and quick-revision one-liners for Retail Banking and Wealth Management — JAIIB.
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Free sample — 8 of 66 rapid-fire Q&A cards.
What is the primary purpose of a lender's appraisal in retail banking?
A lender's appraisal assesses the creditworthiness of a borrower and the viability of a loan proposal to ensure the bank's funds are deployed safely and profitably.
What is the purpose of a credit risk rating model in lender appraisal?
Quantifies borrower risk to determine loan pricing and approval.
What does the term 'credit appraisal' mean in the context of lending?
Credit appraisal is the process by which a bank evaluates a loan application by analysing the borrower's financial position, repayment capacity, collateral, and purpose of the loan before sanctioning credit.
What does 'Know Your Customer' (KYC) compliance mean during loan appraisal?
Verifying borrower identity and address through approved documents.
Which of the 5 Cs of credit refers to the borrower's willingness to repay?
'Character' refers to the borrower's willingness to repay, assessed through their credit history, past repayment track record, and general reputation in the market.
What is the significance of the Equated Monthly Installment (EMI) calculation in appraisal?
Determines borrower's monthly repayment obligation for the loan.
What does 'Capacity' signify in the 5 Cs framework of credit appraisal?
Capacity refers to the borrower's ability to repay the loan from their income or cash flows, evaluated through income statements, salary slips, or business turnover.
What is a Debt-to-Income (DTI) ratio and how is it used in lending?
Ratio of total debt payments to gross monthly income assessed.
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