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A new analyst is asked to write a CAM but has not seen one and does not know which sections are expected or where each figure should come from.
A CAM records one loan decision: borrower profile, request, financial and statement analysis, risks, mitigants, proposed terms and approval path. Statement-derived figures feed income, obligations, balances and flags.
Use a fixed section order, cite the source document and page for each figure, compute FOIR from verified income and obligations, and state conditions clearly.
A short, reviewable memo that explains the recommended amount and terms and can stand up to audit later.
A CAM, or Credit Appraisal Memorandum, is the credit officer’s written recommendation on one loan. It sets out the borrower profile, the request, the financial and bank statement analysis, the risks, the mitigants, the proposed terms and the approval path. Its job is to record why the loan was sanctioned, on what terms, and who agreed.
What sections does a CAM have, and which come from the bank statement?
| Section | Content | Main source |
|---|---|---|
| Borrower profile | Business, owners, vintage, location | KYC, Udyam, field visit |
| Request | Amount, product, tenure, purpose | Application |
| Bureau summary | Score, existing loans, overdues | Credit bureau report |
| Income | Average monthly business credits, assessed income | Bank statement, ITR, GST |
| Obligations | Existing EMIs and limits | Bank statement, bureau, loan letters |
| Balances | Average and minimum balance, trend | Bank statement |
| Conduct | Returned debits, cheque returns | Bank statement |
| Risk flags | Loan-app debits, heavy cash, own transfers | Bank statement |
| Ratios | FOIR, and DSCR where relevant | Calculated |
| Risks and mitigants | What could go wrong, what reduces it | Analyst judgement |
| Recommendation | Amount, rate band, tenure, conditions | Analyst |
| Approval | Sanctioning authority and sign-off | Delegation of powers |
FOIR (fixed obligation to income ratio) is total monthly obligations, including the new loan, divided by monthly income. DSCR (debt service coverage ratio) compares cash available for debt with the debt payments due, and is used mainly for larger business loans.
Who writes a CAM, who reads it and how long should it be?
The credit analyst writes it. A credit manager or credit committee reads it to decide. Later, internal auditors, concurrent auditors and RBI inspectors may read it to check whether the lender followed its credit policy.
Length depends on the loan. For a small business loan, one to three pages is common. Every number should name its source, so a reviewer can check it without rebuilding the analysis.
Worked example: a CAM extract for a working-capital limit
Request: ₹12,00,000 cash credit limit for a building materials trader.
Income and conduct (from twelve months of statements):
- Average monthly business credits: ₹6,40,000, or ₹76,80,000 a year
- Assessed monthly income for FOIR: ₹80,000
- Existing EMIs: ₹22,800 a month
- Returned debits: 2 in twelve months, both for insufficient funds, both cleared within a week
Ratio: Interest on a ₹10,00,000 limit, if fully used at an illustrative 12 percent a year, is about ₹10,000 a month. FOIR = (₹22,800 + ₹10,000) ÷ ₹80,000 = 41 percent.
Risks: Two returned debits show tight months. The requested ₹12,00,000 is about 15.6 percent of annual banking turnover.
Mitigants: Clean last six months; stock verified at the field visit; existing lender references satisfactory.
Recommendation: Sanction ₹10,00,000 (about 13 percent of banking turnover) instead of ₹12,00,000, with quarterly stock statements and review of the limit after six months of clean conduct.
Notice how each figure links back to a document, and how the recommendation follows from the risks.
What makes a CAM good?
- It explains the decision, not just the data.
- Every figure has a source.
- Risks are stated honestly, with a mitigant against each.
- Conditions are specific enough to monitor.
What are the common mistakes in a first CAM?
New analysts often copy total credits straight into the income line without removing own transfers or loan disbursals, which overstates income. Another common slip is listing only the EMIs on the bureau report and missing a regular debit to an unreported lender. A third is writing “satisfactory conduct” without saying how many returned debits there were and when. Each of these makes the memo harder to defend later, because a reviewer cannot tell what was actually checked.
What to read next
- Next in this series: Credit appraisal memo template: a one-page CAM
- Where CAM inputs come from: bank statement analysis use cases for NBFCs
- A related distinction: bank statement analysis vs bank statement audit
- For lenders: bank statement analysis for NBFC lending
TransactIQ is a managed service on Terra Insight’s AWS Mumbai infrastructure that reads bank statements and produces 40+ engineered credit signals, giving the analyst the income, obligation and conduct figures that fill a CAM.