40 Questions
What is the main objective of managing a quality loan portfolio in a bank?
To minimize credit risk and ensure a strong credit culture
What has led to increased competition in the banking industry?
Entry of new banks in the credit market
What is a major challenge for banks in disbursing quality loans?
Selecting the right borrowers
How have mobile banking and online banking platforms impacted the banking business?
Changed the banking business environment
What is a recent focus area for banks, in addition to their traditional services?
Financial inclusion and extended SME banking services
What is the primary purpose of ratio analysis in financial statement evaluation?
To evaluate operating and financial performance of a firm
What does a ratio express in financial statement data?
A mathematical relationship between two figures
What is the purpose of growth ratios in financial analysis?
To measure a company's potentiality and performance
Why is it necessary to analyze financial ratios to understand a company's financial condition?
Because a company's financial condition cannot be immediately understood from its financial statements
What is the limitation of evaluating a company's financial performance based on a single financial figure?
It may not provide a complete picture of the company's financial health
What does the Gross Margin ratio measure?
Profit margin of sales
What is the rule of thumb for the Net Margin ratio?
Higher is better
Which ratio measures earning power on shareholders’ equity?
Return on Equity
What does the Operating Profit Margin ratio measure?
Profit before tax and extra income
What is the rule of thumb for the SG & A ratio?
Lower is better
What is the primary purpose of financial analysis in the loan application process?
To judge the financial feasibility of the project
What happens after the loan structure, price, tenure, and nature are finalized?
The bank proceeds with documentation and disbursement
Why is it essential for the bank to consider socio-economic aspects of the project?
To ensure the project's viability and potential impact on the community
What is the outcome if the financial analysis based on historical data is unsatisfactory?
The bank rejects the loan application
What is the final step in the loan application process?
Disbursement of loan
What is capital budgeting in the context of a firm?
A process of analyzing projects and deciding which are acceptable projects
What does the term 'capital' refer to?
Fixed assets used in production
What is the payback period in capital budgeting?
The length of time to recover the initial investment without interest
What is calculated to compute a project's payback period?
The cumulative value of expected cash flows
What is the purpose of capital budgeting techniques?
To analyze and select the best project
What is the primary goal of the discussion between the banker and the customer regarding credit facilities?
To ensure the proposed credit is for a permissible and expected credit facility
What is the purpose of collecting a Credit Information Bureau (CIB) report?
To determine the customer's creditworthiness
Why is selecting a good borrower important for the bank?
To reduce the risk of loan default
What is the primary difference between preventive and curative measures in loan repayment?
Preventive measures are less costly, while curative measures are more costly
What is the ultimate goal of a banker in the credit sanctioning process?
To ensure loan repayment
Why is credit investigation necessary for selecting a good borrower?
To determine the customer's creditworthiness
What is the benefit of ensuring that the proposed credit is from an expected business segment or sector?
It reduces the risk of loan default
What is the primary purpose of the loan application format provided by the bank?
To collect necessary information from the customer
Why is it better not to sanction any credit rather than sanctioning a bad credit?
It minimizes the risk of loan default
What is the primary focus of the credit sanctioning process?
To select good borrowers
What is the primary objective of credit planning at the bank level?
Maximizing profit
What is one of the key factors to consider when formulating a bank's credit plan?
Government priority set in the 5-year plan
What is the ultimate goal of a bank's credit plan in relation to regulatory limits?
To comply with regulatory limits
What is a key benefit of a well-planned credit portfolio?
Diversification of credit portfolio
What is the relationship between a bank's credit plan and national priority?
The bank's credit plan is in line with national priority
Learn about the crucial steps in managing a quality loan portfolio, from loan initiation to recovery procedures. Understand the importance of a strong credit culture in a competitive banking environment.
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