Credit appraisal system in banking sector

Credit appraisal is the process of accepting or rejecting the proposal for finance from the public carried out by department of credit of the banks. Finance is required at every stage of business either for meeting day to operations or for starting up a new project. One of the important sources of raising finance is loans from banks. Commercial lending is one of the prime functions of any bank. The fund of depositors i.e, general public are mobilized by means of such advances/investments. Thus it is extremely important for lender bank to assess the risk associated with credit, thereby ensure the fund deposited by depositors. This paper describes and gives the idea about How does the bank appraises the creditworthiness of a borrower? What are the criterions to be fulfilled for granting loans? These questions are being answered in this paper.