THE WORTHINESS OF THE CREDIT DOCUMENTATION IN SECURING THE BANKING INTEREST IN LOAN / CREDIT DEFAULTS

Abstract

Purpose- The aim of this research is to identify the worthiness of various credit documents which are acquired by the banks before sanctioning of the loan with respect to the safeguarding the bank interest Methodology/sample- The banks under the scope of this research are NBP, UBL, HBL and MCB which are operating in the Karachi. Head offices and branches of these banks are reached. The relationship managers of these are the population for this research. The sample size is 120 for this research. The data would be collected by the research questionnaire. The collected primary data would be integrated with SPSS. The collected qualitative factors would be ranked and assigned value on the SPSS. Such then would be analysis both through descriptive and inferential statistics. In descriptive statistics the data would be analyzed through graphs and frequency table in order to know about the worthiness in detail. For testing the hypothesis the inferential statistics is applied. In this regression and t test would be applied. Findings- The tabulated critical t value at degree of freedom 119 (n-1) and 95% confidence level is 1.984. The calculated t value from the SPSS at t value 3 the t value of bank statement, salary slips, facility acceptance letter, obligor risk rating is less than the tabulated t value which means that these lies in the rejection region. All except above lies in the acceptance region, such documents are loan application, legal agreement, CIB report, Company synopsis sheet, Credit application and memorandum, financial statement, certificate of registration and valuation report. Thus the later documents place a vital role in securing the banking interest in case of loan default. Practical Implications- This research is of significant worth for the banking sector of Pakistan through which they may reveal the real worth of the credit documentations in securing the banking credit. By knowing this banks and relationship managers may put their efforts in the correct direction for securing the interest of bank.