Over the years, banking has evolved significantly, and banks offer many products and services. However, the core function of banks of accepting deposits and giving loans remains intact. The difference between the average interest rate charged on loans and the average interest paid on deposits by a bank is known as the net interest margin, the primary source of the bank’s income.
If banks are lending more, they will earn more. Thus, it can be easily said that a bank's credit portfolio is the source of its bread and butter. So, banks want this portfolio to be strong, qualitatively and quantitatively.
Since banking is much about credit, banks treat it as a generalist function. General banking officers used to and still work in this function, but a new trend is being seen. Many public sector banks now have started recruiting credit officers in specialist cadres.
Earlier, the maximum number of people joining public sector banks entered as probationary (general banking) officers. Now, one such bank has advertised 1000 vacancies for credit officers. Few other banks have posted similar requirements, though in lesser numbers.
Any graduate is considered eligible to apply for the position of probationary officer. To apply to become a credit officer, one should be at least a chartered accountant or a cost management accountant, a chartered financial analyst or a postgraduate in management with a specialisation in finance or a master's in finance.
In some cases, the selection process will comprise only an interview, but mainly, a written test is conducted, and those standing high in merit are called for an interview.
The written test usually is in two parts. The first part will have reasoning tests, English language and quantitative aptitude. The second part will be about professional knowledge relating to credit and finance. Minimum qualifying marks are prescribed for each test segment.
While a generalist probationary officer, after training, may be put in any banking function, credit officers, for most of their career, will be deployed in their specialised area.
Banks provide loans for various purposes. After nationalisation, agricultural credit has been their thrust area. To promote and manage this, banks recruit agricultural or rural development officers.
Retail loans have emerged as a profitable segment for banks, comprising loans for purchasing consumer durables, vehicles, etc. Education and housing loans are also in high demand—business loans. Industries and corporates fetch higher revenue for banks.
Whatever the type of loan, the lender bank has to ensure that eligibility norms are met, the project is economically viable, and funds are utilised for the intended purpose. In banking parlance, this is called exercising due diligence. Gradually, technology has made deeper inroads into banking and much of banking today is technology-driven. The credit function is also being supported by technology.
Application for loans can be submitted online; there are software programmes to calculate eligibility amounts, equate monthly instalments and repayment schedules, etc. PAN, AADHAR and the borrower's credit rating can be verified online. All these things are done by people working in the credit department. In the coming days, we’ll see a larger use of technology in credit processing, but the credit portfolio needs human intervention in equal measure.
Credit officers provide this human link to understand potential borrowers' credit requirements. Their recommendations carry a lot of weight in the sanctioning of a loan. Pre-sanction and post-sanction have to be done physically, and the work is entrusted to credit officials. They must watch that loan accounts remain in order with timely payment of dues and instalments.
Whenever a default trigger is generated, it must be attended seriously. Credit officers are involved in the recovery of loans and negotiations related to that. Their role has a mix of customer service, compliance and risk management.
Undoubtedly, the job is challenging. This challenge can be met by developing the right skillset required for the role. Good communication skills, decision-making, customer orientation and objectivity are requirements for the job. You also learn these and other useful skills on the job.
Those beginning as credit officers may expect to be put into higher positions in the function. For example, starting with a small branch, you may be moved to extensive bank branches with a bigger credit portfolio. After obtaining some experience, credit officers are also hired as bank branch managers. Those with good exposure to the credit function are preferred for branch manager assignments.
In the long run, credit officers can be promoted to deputy general manager, general manager and even higher. The roles of credit analysts and credit risk managers can also be explored. As things are moving, experienced credit officers will have various lateral entry opportunities.