CONCEPTS ON CREDIT RISK MANAGEMENT PRACTICES ON LOAN PORTFOLIO PERFORMANCE

LITERATURES ON CREDIT RISK MANAGEMENT PRACTICES ON LOAN PORTFOLIO PERFORMANCE

Loan Portfolio

Calculated on a particular date, the loan portfolio is the total outstanding balance of all loans that the bank has granted to borrowers, be they people or businesses. A credit organization’s loan portfolio is one of the reporting indicators that make up the asset portion of the organization’s total value.

Deposit Money Bank

A financial institution that is authorized by the regulatory body to provide various financial services, including the collection of deposits from surplus units, the distribution of those funds in the form of loans to deficit units, and the provision of other financial services.

Hedging

The practice of hedging is a form of risk management that involves offsetting potential financial losses by assuming an opposite position in another asset that is related to the original investment.

Credit risk insurance

Credit insurance is a type of business insurance that protects the policyholder in the event that a policyholder’s customer declares bankruptcy or is unable to pay its trade credit debts. This protection is achieved by shifting the risk away from the business and onto the insurer. In addition to this, insurers really have the ability, by providing support for credit management, to help lower the likelihood of suffering a financial loss.

Five Cs principles

The five C’s of credit, also known as characteristics, are a framework that is utilized by many conventional lenders to evaluate potential small-business borrowers. These characteristics include character, capacity, capital, conditions, and collateral.

Cash flows

The quantity of cash that enters and leaves a business is referred to as the “cash flow” of that business. The money that a company earns through sales is known as revenues, and the money that they spend is known as costs.