Fundamentals of Banking Operations

2.1. Loan Processing and Credit Appraisal

Loan processing is a structured risk assessment mechanism.

Step 1: Loan Application

Client submits:

• Identification

• Financial statements

• Business plan (if applicable)

Step 2: Credit Analysis

Banks apply the 5 Cs of Credit:

• Character

• Capacity

• Capital

• Collateral

• Conditions

Step 3: Risk Assessment

Financial ratios assessed:

• Debt-to-income ratio

• Liquidity ratios

• Profitability indicators

Step 4: Loan Approval and Disbursement

Approval is based on risk grading and internal credit policy guidelines.