3. 4. 5. 6. 7.
Overstocking Rapid growth Acquisition Debtors issues Succession
Risk Grading Risk grading is a key measurement of a Bank’s asset quality and as such, it is essential that grading is a robust process. All facilities should be assigned a risk grade. Where deterioration in risk is noted, the Risk Grade assigned to a borrower and its facilities should be immediately changed. Borrower Risk Grades should be clearly stated on Investment Applications. Presently the Bank is following/conducting the Investment Risk Analysis to assess the risk grade. The concerned Investment Officer / RM must clearly indicate the risk grade (as per the finding) in the specific column of Investment appraisal form so that the authority can take decision on the matter. A standard Risk Grading Matrix is depicted as under based on the Risk Grade Scorecard attached Risk Rating Grade Details Investment facilities, which are fully secured i.e. fully cash covered. Superior Investment facilities fully covered by government guarantee. (SUP) – 1 Investment facilities fully covered by guarantee of a top tier Low Risk international Bank Good (GD) – Satisfactory 2 Risk
Acceptable (ACCPT) – Fair Risk
These borrowers are not as strong as GOOD Grade borrowers, but still demonstrate consistent earnings, cash flow and have a good track record. Borrowers have adequate liquidity, cash flow and earnings. Investment in this grade would normally be secured by acceptable collateral (1st charge over inventory / receivables / equipment / property). Acceptable management Acceptable parent/sister company guarantee Aggregate Score of 75-84 based on the Risk Grade Score Sheet
This grade warrants greater attention due to conditions affecting the
Strong repayment capacity of the borrower The borrower has excellent liquidity and low leverage. The company demonstrates consistently strong earnings and cash flow. Borrower has well established, strong market share. Very good management skill & expertise. All security documentation should be in place. Investment facilities fully covered by the guarantee of a top tier local Bank. Aggregate Score of 85 or greater based on the Risk Grade Score Sheet
Published on Mar 10, 2013