by Credit Information Analysis is the systematic process of collecting, verifying, and interpreting all relevant data to assess a borrower’s creditworthiness. It involves evaluating key sources: the Credit Information Bureau (CIB) report for repayment history and score; the Lender’s Risk Analysis (LRA) for financial health and cash flow; and Market/Industry Reports for economic and sectoral risks. The goal is to form a holistic view of the borrower’s ability and willingness to repay a loan. This analysis underpins the lending decision, determining approval, terms, and pricing while safeguarding the lender from potential default.
1. Credit Information Bureau (CIB) Report
The Credit Information Bureau (CIB) Report, primarily from TransUnion CIBIL in India, is the foundational document for assessing an individual’s or company’s formal credit history. It provides a numerical Credit Score (300-900) and a detailed record of all credit accounts, including:
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Loan Types & Status: All active and closed loans (home, auto, personal) and credit cards.
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Payment History: A monthly track record of payments (on-time, late, missed).
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Credit Utilization: The ratio of used credit to available limits.
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Inquiry Record: A log of when lenders have checked the report (“hard inquiries”).
Role in Analysis: It quantifies repayment discipline and indebtedness, directly informing the “Character” and “Capacity” aspects of the 5 Cs. A high score with a clean history supports approval, while delinquencies, high utilization, or multiple recent inquiries raise red flags.
2. Lender’s Risk Analysis (LRA) / Internal Credit Report
The Lender’s Risk Analysis (LRA) is an internal document prepared by the bank’s credit department. It is a comprehensive, forward-looking analysis that synthesizes data from the CIB report, financial statements, bank statements, and the loan application. Its core components include:
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Financial Ratio Analysis: Calculation of FOIR, DSCR, leverage, and liquidity ratios.
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Cash Flow Assessment: Evaluation of income stability and sufficiency for debt servicing.
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Collateral Evaluation: Details on security offered, its valuation, and legal status.
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Purpose & Industry Risk: Analysis of the loan’s purpose and the borrower’s sector outlook.
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Final Risk Rating & Recommendation: A conclusive grade (e.g., A/B/C) and a sanction recommendation.
Role in Analysis: The LRA is the analyst’s core work product. It transforms raw data into an actionable risk assessment, providing the justification for the lending decision. It covers all 5 Cs of Credit in a structured narrative.
3. Market Intelligence / Industry Report:
A Market or Industry Report provides the macro and sectoral context for the credit decision. Sourced from agencies like CRISIL, ICRA, CARE, or independent research, it offers intelligence on:
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Industry Health: Growth prospects, cyclicality, regulatory changes, and competitive landscape.
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Economic Conditions: Macroeconomic trends (GDP, inflation, interest rates) impacting the borrower’s sector.
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Company Positioning: Where the specific business stands relative to peers (if available).
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Commodity Prices & Supply Chains: Critical for businesses in agriculture, manufacturing, etc.
Role in Analysis: It directly informs the “Conditions” aspect of the 5 Cs. This report answers whether the borrower’s business or employment is in a growing, stable, or declining environment. It helps stress-test the borrower’s capacity against potential industry downturns or external shocks, ensuring the loan is viable not just today but under foreseeable future scenarios.
