A Study on the Assessment of Credit Policy for Business Loans and Working Capital Management

Abstract

This research examines the evaluation of credit policies related to business loans and working capital financing, with special reference to Axis Bank. This study focuses on the :assessment of credit policy for business loans and working capital financing, with special reference to Axis Bank. The primary problem addressed is how banks evaluate working capital requirements while balancing risk management and business growth in a competitive financial environment. Efficient management of working capital is crucial for maintaining liquidity, ensuring smooth operations, and achieving financial stability. The study employs a descriptive research methodology utilizing secondary data sourced from Axis Bank’s annual reports, Reserve Bank of India guidelines, industry publications, and scholarly literature. Analytical techniques such as ratio analysis, trend analysis, and working capital cycle assessment are applied to evaluate the data and gain insights into credit appraisal practices.The results reveal that Axis Bank implements a systematic credit assessment framework, incorporating analysis of financial statements, cash flows, credit history, and industry benchmarks. Critical parameters, including the current ratio, liquidity position, and repayment capacity, significantly influence the decision-making process.The study emphasizes the significance of technology and data-driven approaches in enhancing operational efficiency and minimizing credit risk. The study establishes that a clearly defined credit policy, coupled with efficient working capital management, is crucial for banks and businesses to maintain financial stability, mitigate risks, and support long-term growth.