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A new credit analyst sees a loan file move from sales to sanction but does not know which checks happen at each stage or who owns them.
Credit appraisal runs in stages: login and KYC, bureau pull, bank statement review, cross-checks, verification, credit memo and approval. Each stage answers one question about ability or willingness to repay.
Map each stage to its owner, its source documents and its output, then compute FOIR from verified income and obligations before sizing the loan.
A sanction, a counter-offer or a decline, recorded in a credit memo that shows why the amount was chosen.
Credit appraisal is the lender’s structured check of whether a borrower can repay and will repay. It covers identity, income, existing debt, credit history, security and the purpose of the loan. It ends in one of three outcomes: a sanction, a counter-offer for a smaller amount, or a decline.
What are the stages from login to sanction?
“Login” is lending slang for the moment a complete application enters the lender’s system. From there, a typical NBFC small business loan moves like this:
| Stage | What happens | Usual owner |
|---|---|---|
| 1. Login and KYC | PAN, Aadhaar or other ID, address and business proof checked | Sales or operations |
| 2. Bureau pull | Credit report and score fetched from a credit bureau | Credit team (automated) |
| 3. Statement review | Six to twelve months of bank statements read for income and conduct | Credit analyst |
| 4. Cross-checks | Statement compared with GST returns, ITR and financials | Credit analyst |
| 5. Verification | Field visit or phone call to the business and residence | Verification agency or field team |
| 6. Credit memo | Analyst writes the appraisal note with ratios, risks and recommendation | Credit analyst |
| 7. Approval | Sanctioning authority approves, modifies or declines | Credit manager or committee |
The exact order varies. Many lenders run the bureau pull before anything else, because a weak report ends the file early and saves effort.
What does each stage try to answer?
- KYC: Is this person or business who they say they are?
- Bureau: How have they repaid credit in the past?
- Statement: How much money really comes in, and what already goes out?
- Cross-checks: Do the documents tell one consistent story?
- Verification: Does the business exist and operate as described?
- Memo and approval: Given all of this, what amount and terms are safe?
Are credit appraisal, underwriting and credit assessment the same thing?
Mostly, yes. People use them interchangeably. If there is a difference, “credit assessment” is the analysis, “underwriting” is the decision to take the risk, and “credit appraisal” is the whole process that leads from one to the other. You will hear all three in the same meeting.
Worked example: ₹10,00,000 requested, ₹8,50,000 sanctioned
A distributor applies for ₹10,00,000 over 4 years at an illustrative 18 percent a year.
- Day 1: Login and KYC complete. Bureau score is acceptable with no overdue accounts.
- Day 2: Statement review. After removing transfers from the owner’s other account, assessed monthly income is ₹80,000. Existing EMIs are ₹14,000 a month.
- Day 3: GST and ITR cross-checks show turnover broadly consistent with the statement.
- Day 4: Field verification confirms the godown and stock.
- Day 5: Credit memo and approval.
The lender’s policy in this example caps FOIR at 50 percent. Fifty percent of ₹80,000 is ₹40,000. Subtract existing EMIs of ₹14,000 and the room for a new EMI is ₹26,000.
At 18 percent over 48 months, the EMI is about ₹2,938 per ₹1,00,000. A ₹10,00,000 loan needs about ₹29,380 a month, which is above ₹26,000. A ₹8,50,000 loan needs about ₹24,970 a month, which fits. FOIR at that amount is (₹14,000 + ₹24,970) ÷ ₹80,000 = about 48.7 percent.
The lender sanctions ₹8,50,000 and records the reason in the memo. That is a counter-offer, not a rejection.
Why does the statement step take so long?
Reading twelve months of statements by hand means sorting hundreds of lines into business income, own transfers, EMIs and returns. It is the step where most analyst time goes, and where small errors change the final amount.
What to read next
- Next in this series: The 5 Cs of credit and where each shows up in a bank statement
- How automation shortens the statement step: 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, a managed service on Terra Insight’s AWS Mumbai infrastructure, reads PDF and scanned bank statements and produces 40+ engineered credit signals so the analyst starts the memo from categorised data.