Essays on rational absurdity of banking
How lenders assess borrowers, deal with uncertainty, and make credit decisions under imperfect information.
Even after we have taken due care of matching correctly graded current assets to current liabilities, the business eventualities, customer behaviour and business exigencies may still bring new challenges. How does a lender factor in these potential risks on company’s liquidity?
In Part 2 of the #LiquidityAssessment series, Amit Balooni explains the concept of #NetWorkingCapital and the caution that a Credit Analyst needs to take.
Liquidity assessment using Current Ratio is a powerful tool and a staple for credit risk analysts . But it has its limitations. In this three part series, Amit Balooni shares his perspectives and how to fine tune liquidity assessment for credit risk
While there are no set parameters on how many credit covenants should be there in a Sanction Letter, one has to keep in mind that ratios tend be inter-linked. One does not become a better banker by stipulating multiple covenants. Two covenants are sufficient to trigger any recourse against the borrower.
Bank Loan agreement had been written ages ago. There are innumerable archaic clauses that may be unjustifiably invoked, without assigning any reasons under the guise of ‘early warning signals’. This creates a trust deficit. Sumit Kakkar recommends the need to relook at these.