[sonalb]

What is credit appraisal and what are its contents?

How is it different from project appraisal?

[nishant12345]

Credit Appraisal is a process to ascertain the risks associated with the extension of the credit facility. It is generally carried by the financial institutions which are involved in providing financial funding to its customers. Credit risk is a risk related to non repayment of the credit obtained by the customer of a bank. Thus it is necessary to appraise the credibility of the customer in order to mitigate the credit risk. Proper evaluation of the customer is perfomed which measures the financial condition and the ability of the customer to repay back the loan in future. Generally the credit facilities are extented against the security know as collateral. But even though the loans are backed by the collateral, banks are normally interested in the actual loan amount to be repaid along with the interest. Thus, the customer's cash flows are ascsertained to ensure the timely payment of the principal and the interest.