Lahore
School
of
Economics
Lending
Policies
Ayesha
Afzal
Assistant
Professor
Lahore
School
of
Economics
Types
of
Loans
Made
By
Banks
Real
Estate
Loans
Financial
Institution
Loans
Agriculture
Loans
Commercial
and
Industrial
Loans
Loans
to
Individuals
Miscellaneous
Loans
Lease
Financing
Receivables
Lahore
School
of
Economics
Factors
Determining
the
Mix
of
Bank
Loans
Characteris<cs
of
Market
Area
Lender
Size
Experience
and
Exper<se
of
Management
Expected
Yield
of
Each
Type
of
Loan
Regula<ons
Lahore
School
of
Economics
CAMELS
Ra=ng
System
Capital
Adequacy
Asset
Quality
Management
Quality
Earnings
Record
Liquidity
Position
Sensitivity
to
Market
Risk
Lahore
School
of
Economics
Banks
Loan
Policy
Goal
Statement
for
Banks
Loan
Portfolio
Specication
of
Lending
Authority
of
Each
Loan
Ocer
Operating
Procedures
for
Soliciting,
Evaluating
and
Making
Loan
Decisions
Required
Documentation
for
All
Loans
Guidelines
for
Taking
and
Perfecting
Collateral
Procedures
for
Setting
Loan
Interest
Rate
Statement
of
Quality
Standards
for
All
Loans
Statement
of
Upper
Limit
for
Total
Loans
Outstanding
Procedures
for
Detecting,
Analyzing
and
Working
Out
Problem
Loans
Lahore
School
of
Economics
Steps
in
the
Lending
Process
Finding
Prospective
Loan
Customers
Evaluating
a
Customers
Character
and
Sincerity
of
Purpose
Making
Site
Visits
and
Evaluating
a
Customers
Credit
Record
Evaluating
a
Customers
Financial
Record
Assessing
Possible
Loan
Collateral
and
Signing
the
Loan
Agreement
Monitoring
Compliance
with
the
Loan
Agreement
and
Other
Customer
Service
Needs
Lahore
School
of
Economics
The
Six
Basic
Cs
of
Lending
Character
Specic
Purpose
of
Loan
and
Serious
Intent
to
Repay
Loan
Capacity
Legal
Authority
to
Sign
Binding
Contract
Cash
Ability
to
Generate
Enough
Cash
to
Repay
Loan
Collateral
Adequate
Assets
to
Support
the
Loan
Conditions
Economic
Conditions
Faced
By
Borrower
Control
Does
Loan
Meet
Written
Loan
Policy
and
How
Would
Loan
Be
Aected
By
Changing
Laws
and
Regulations
Lahore
School
of
Economics
Common
Types
of
Loan
Collateral
Accounts
Receivables
Factoring
Inventory
Real
Property
Personal
Property
Personal
Guarantees
Lahore
School
of
Economics
Informa=on
About
Consumers
Consumer-Supplied
Financial
Statements
Credit
Bureau
Reports
Experience
of
Other
Lenders
Verication
of
Employment
Verication
of
Property
Ownership
The
Web
Lahore
School
of
Economics
Parts
of
a
Loan
Agreement
The
Note
Loan
Commitment
Agreement
Collateral
Covenants
Armative
Negative
Borrower
Guaranties
and
Warranties
Events
of
Default
Lahore
School
of
Economics
Loan
Review
Procedures
Carrying
Out
Review
of
All
Types
of
Loans
on
a
Periodic
Basis
Structuring
the
Loan
Process
Record
of
Borrower
Payments
Quality
and
Condition
of
Collateral
Completeness
of
Loan
Documentation
Evaluation
of
Borrowers
Financial
Condition
Assessment
as
to
Whether
Fits
with
Lenders
Loan
Policies
Lahore
School
of
Economics
Warning
Signs
of
Problem
Loans
Unusual
or
Unexpected
Delays
in
Receiving
Financial
Statements
Any
Sudden
Changes
in
Accounting
Methods
Restructuring
Debt
or
Eliminating
Dividend
Payments
or
Changes
in
Credit
Rating
Adverse
Changes
in
the
Price
of
Stock
Losses
in
One
or
More
Years
Adverse
Changes
in
Capital
Structure
Deviations
in
Actual
Sales
from
Predictions
Unexpected
and
Unexplained
Changes
in
Deposits
Lahore
School
of
Economics
Loan
Workouts
The
Process
of
Resolving
a
Troubled
Loan
So
the
Bank
Can
Recover
Its
Funds
Goal
is
to
Maximize
Recovery
of
Funds
Rapid
Detec<on
and
Repor<ng
of
Problems
is
Essen<al
Loan
Workout
Should
Be
Separate
From
Lending
Func<on
Should
Consult
With
Customer
Quickly
on
Possible
Op<ons
Es<mate
Resources
Available
to
Collect
on
Loan
Conduct
Tax
and
Li<ga<on
Search
Evaluate
Quality
and
Competence
of
Management
Consider
All
Reasonable
Alterna<ves
