The Key Parameters used in CMR to measure credit risk are:
1. Liquidity-the liquidity profile of borrower is adjudged by looking at the seasonally adjusted patterns of funds utilization over the past 24 month's period.
2. Firmographics-descriptive attributes like the maturity of the entity, ownership type, industry, location.
3. Repayment Behaviour-month on month analysis of payments made along with the assets classification, are considered to determine if the borrower has a poor or a good track record.
The Model categorises the Entity into broadly three categories:
a) CMR-1 to CMR-3-Never delinquent or No Amount overdue.
b) CMR-4 to CMR-7-Are delinquent but never an NPA
c) CMR-8 to CMR-10-are known to be NPA at some point in time in the past 24 months.
Important points:
1. Borrowers with CMR rating up to CMR-3 should be given preference for faster disposal
2. For CMR 4/5, need-based facilities may be approved.
3. For CMR 6/7, Proper justification for the sanction/enhancement should be given. Credit Risk mitigants like additional collateral, guarantee etc.may be stipulated.
4. For CMR of 8/9/10 may not be consider in case of new proposal while in case of existing accounts, enhancement may be done if reason is justifiable. Credit Risk mitigants like additional collateral, guarantee etc. may be stipulated.
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