Banking · Credit Appraisal Metrics
Examine the following statements regarding commercial credit appraisal procedures: Statement 1: During term loan appraisal, the lender evaluates repayment capacity primarily via the Average Debt Service Coverage Ratio (ADSCR) across the loan tenure, rather than solely relying on isolated annual ratios. Statement 2: The Fixed Asset Coverage Ratio is a solvency metric utilized during project appraisal to ensure asset backing suffices to cover outstanding balances upon potential liquidation. Statement 3: Under the Turnover Method (Nayak Committee recommendations) for micro and small enterprises, working capital limits are assessed as a fixed percentage of projected annual turnover. Which of the statements are correct?
Verified Solution4 OptionsUpdated: October 2026👁️1 View
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- 1Statements 1 and 2 are correct, but Statement 3 is incorrect.
- 2Statement 2 is correct, but Statements 1 and 3 are incorrect.
- 3Statements 1 and 3 are correct, but Statement 2 is incorrect.
- 4All three statements (1, 2, and 3) are correct.✓
Correct answer
All three statements (1, 2, and 3) are correct.
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