Excellence in SME lending –

Credit Risk Analysis & Management

Target Group:

Commercial Banks and NBFCs – Credit Analysts and Relationship Managers in SME Business.

Objectives:

Two day intensive programme for persons working in the area of SME financing. The course will cover all aspects of SME business and will provide participants with foundation and skills necessary to originate and manage this business in a profitable and risk contained manner. The success of SME business lies in understanding the target market and making judgement based on less than perfect information. The course will have several case studies/case lets and group tasks to appreciate all risks including promoters risk and asymmetry in information in the SME lending space. The course will also outline emerging products and practices- Digital Lending, Vendor Bills, TReDs etc.

· Provide a better orientation towards SME business domain in India.

· Analyse fundamental non-financial risks associated with SME lending – Industry risk, management Risk and Market Risk

· Analyse Financial Risks from financial statements – Liquidity Ratios, Profitability Ratios, Coverage Ratios, Break Even Ratios, Common Size Vs Peer group analysis.

· Understanding of credit appraisal techniques and risk rating methodologies.

· Facilitate better selection of clients by understanding risks and mitigants, key success factors in each business.

· Sample Product Design for various segments – Group Task

· Assessment of Fund and Non Funded Working Capital limits – Various methods. Orient participants towards product lending which is inherently risk mitigated.

· Critical aspects of SME Project Appraisal

· Build skills to monitor and identify early warning signs and proactively manage them.

· New Generation Products.

Day 1

Session 1

Introduction to the SME Domain and its importance to Banks/NBFCs

· Introduction to the SME market size in India

· Why is SME business attractive to Banks and NBFCs

· Govt initiatives- Mudra bank, CGTSME, Start up and Stand up guidelines

· RBI guidelines on SME lending

Session 2

Credit Appraisal of SME Clients – A changing Science

Promoter Risk / Management Risk - Ability vs Willingness to pay

Industry Risk

Market Risk

Credit Scoring Model & Rating – Thresholds

Case Study / Case lets

Session 3

Financial Risk Analysis.

· Reading the financial statements

· Classification of Profit & Loss items

· Analysing Financial performance – Profit & Loss Account & Balance Sheet Ratios

· Classification of Balance Sheet – Lenders perspective

Case lets

Session 4

· Cash flow VS Fund Flow & its Importance

· Critical aspects of SME project Appraisal

Case Study / Case lets

Day 2

Session 1

· Client Interviewing skills and Role of RMs

· Various methods of Assessment of Working Capital.

· Building / Validation of projection of SMEs in context of business, industry and economic environment.

Case Study / case lets

Session 2

· Traditional SME Products in the market

· Introduction to product design, USPs, risk pricing

Case Study / Case lets

Session Three & Four

· Documentation, Disbursement and Monitoring systems

· Early Warning Systems

· Whither collateral in SME Credit – Diminishing role

· Product Structuring and innovation –

o Vendor bills, Supply chain financing,

o TReDS,

o Equipment finance for Mfg. and Doctors,

o Structured Term Loan

· Digital Lending – Evolution, Key determinants, Process Flow and Risks.