2. A. CREDIT MONITORING (CM)
1. CM Post-Loan Activity: Caring for the loan at Post-
Sanction Stage in order to ensure the safety of
the money lent.
Mechanism which reduces the need for collateral.
2. Why Credit Monitoring?
• Minimize Credit Losses
• Return Flow of Funds
• Compliance of Terms and Conditions
• Problem Solving
• Feed back
• Taking Timely Corrective Action
• Review of Borrower Relationships/ Loan Facilities
3. 3. Methods Employed
• Off-site Monitoring
- Periodic Reports
- Discussion
- Operating Statements and Cash Flow Statements
• On-site Monitoring
- Visits
- Nominee Directors
4. Early Warning System (EWS) to be in place to identify
Early Alert Accounts (EAA):
Address Problems [When alternative actions exist]
Prevent Loan Classification, Int. Rev loss
Obtain support for redress
4. 5. EAA
Loan account having risks or potential weaknesses (W)
of a material nature requiring monitoring
Uncorrected W may deteriorate loan recovery prospects/
have likely prospect of downgrading to CG 5 or Worse
6. Early Warning Signals
Material Changes …..
Industry Patterns
Management composition
Economic Trends-Local & International
Client performance-versus budget
Bank versus client relationship
Evidence of weakness in borrower.
5. 7. Prevention
Understand client’s business
Analyse client’s financials
Frequent visits to client
Perfected legal documentation
100% security cover for Bank’s risk
Investigate market rumors
Use Credit Bureau checkings
8. RM to be alert and tasks to be accomplished on a
continuous basis
• Early Identification of EAA
• Prompt Reporting of Credit Signs
• Pro-active Management of EAA
6. EARLY ALERT REPORT (EAR)
Symptoms
Updating Risk Grade & Referral of Problem Accounts
to CRM Dept.
Conversion of EAA to Regular Account
