Axis Bank Interview Questions For Credit Analyst

#4 – What do you mean by interest coverage ratio?

This is one of the most important credit analyst interview questions. When a company takes debt, they need to pay interest. The interest coverage ratio shows the company how able they are in paying off its interest expenses. All we need to do is to divide EBIT (Earnings before interests & taxes) by interest expense. The higher the ratio, the better the company’s ability to pay off the interest expenses and vice-versa.

#10 –  What is the difference between a debenture and a bond?

It can also be stated that ‘All debentures are bonds, but all bonds are not debentures.’

DSCR = Net Operating Income/Total Debt Service

#1 – What is Credit Analysis?

The below diagram sums up the overall Credit Analysis Process.

axis bank interview questions for credit analyst

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This is where you get to show some personality and demonstrate your ability to think about risk, plus be a good communicator. There is no right or wrong answer to this question, but you could say something about how you evaluate tradeoffs (upside vs downside), how you put hedges in place to reduce losses, purchase insurance, or you can use a wide range of other examples.

It completely depends on the industry. Some industries can sustain very low debt to capital ratios, typically cyclical industries like commodities or early-stage companies like startups. These might have a 0-20% debt to capital ratio. Other industries such as banking and insurance can have up to 90% debt to capital ratios.

Review all three financial statements for the past five years and perform a financial analysis. Determine what assets can be used as collateral, how much cash flow there is, and what the trends of the business are. Then look at metrics such as debt to capital, debt to EBITDA, and interest coverage. If all of these metrics are within the bank’s parameters, then it may be possible to lend the money, but the decision will depend on qualitative factors as well.

#7 – What are the typical Credit Analysis Ratios?

You must expect this credit analyst interview question. There are a few top ratios that banks constantly use. The debt-equity ratio, interest coverage ratio, tangible net worth ratio, fixed charge coverage ratio, debt-EBITDA ratio, and debt-capital ratio are the most common. Since these ratios can easily portray the financial health of businesses, these are the ones banks have to use the most.

#8 – What do credit rating agencies do?

There are many things that I would look at.

#3 – What are the 5Cs of Credit Analysis

  • Character – This is a subjective opinion about the trustworthiness of the entity to repay the loan.
  • Capacity – Most important of the five factors, Capacity relates to the ability of the borrower to service the loan from the profits generated by his investments.
  • Capital – This means how much the borrower has contributed to the project (own skin in the game)
  • Collateral (or Guarantees) – Security that the borrower provides to the lender to appropriate the loan in case it is not repaid from the returns as established at the time of availing the facility.
  • Conditions – Purpose of the loan as well as the terms under which the facility is sanctioned.
  • CREDIT ANALYST Interview Questions And Answers!

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