PAPER NO.18 CREDIT PRACTICE
GENERAL OBJECTIVE
This paper is intended to equip the candidate with the knowledge, skills and attitudes required for the application of various credit management concepts in a practical scenario.
LEARNING OUTCOMES
A candidate who passes this paper should be able to:
- Demonstrate sound technical knowledge in credit management
- Demonstrate diverse knowledge clearly applied in an analytical and practical manner in solving the problems in a case study
- Present appropriate alternate solutions in credit management and make effective judgement in a logical and rational manner
- Communicate effectively with realistic recommendations in a concise and logical manner
- Prepare a comprehensive credit
CONTENT
Credit portfolio risk management
- Definition of credit portfolio risk management
- Pre and post credit disbursement risks
- Measuring credit portfolio risk
- Credit risk models
- Credit enhancement methods
- Credit portfolio segmentation and risk diversification
- Identifying concentrations of risk
- Evaluating and managing concentrations of risk
- Concentration management techniques
Illustrative case studies on credit portfolio risk management
Regulatory requirements: minimum capital requirements
- Basel capital adequacy framework for credit risk
- Impact of changes to the Basel Capital Adequacy framework on credit risk
- Key differences between regulatory capital (Under Basel framework) and economic capital
- Uses of economic capital and economic value added concepts in a bank
- Relationship between shareholder, regulatory and economic capital
Corporate failure and financial distress
- Definition of Financial Distress
- Indicators and Early Warning signs of corporate failure
- Reasons of corporate failure
- Use of statistical models in predicting corporate failure
- Comparison of corporate failure prediction models
- Strategies of Mitigating against Financial Distress and Corporate failure
Illustrative case studies on corporate failure and financial distress
Working capital and credit management
- Relationship between working capital cycle and credit management
- Effects of credit terms on working capital management
- Impact of credit policy on working capital management
- Determination of working capital
- Strategies of improving working capital
Illustrative case studies on working capital and credit management
Delinquency management
- Introduction to delinquency management
- Causes of delinquency management
- Delinquency classification
- Effects of delinquency in credit portfolio
- Work outs and restructuring
- Negotiation and influencing
- Dealing with problem loan accounts: nature of problems and immediate action drill
Illustrative case studies on delinquency management
Accounts receivables management information systems (MIS)
Case study on automation of receivables management function
Case studies on:
- Microfinance
- Cooperatives
- SME lending
- Trade and export credit management
- Credit policy
Emerging Issues and trends