The full form of CAM in banking is Credit Appraisal Memorandum. It is an important internal document used by banks to evaluate a borrower’s creditworthiness before sanctioning a loan. The CAM contains detailed financial, technical, and risk-related information that helps a bank decide whether the loan request should be approved, modified, or rejected.
What Is CAM in Banking?
A Credit Appraisal Memorandum (CAM) is a formal document prepared by a bank’s credit officer after assessing the loan applicant’s profile. It includes borrower details, business history, financial statements, collateral information, repayment capacity, and risk analysis. CAM plays a key role in ensuring that banks lend safely and responsibly.
Key Components of CAM
1. Borrower Information
This section covers the basic details of the customer, including business type, ownership structure, KYC documents, banking relationship, and past repayment records.
2. Financial Analysis
Here, the bank analyses the applicant’s financial statements such as balance sheet, profit and loss account, cash flow position, and key ratios like DSCR, current ratio, and turnover.
3. Purpose of the Loan
The CAM specifies why the loan is being taken—working capital, term loan, machinery purchase, expansion, or any other business requirement.
4. Collateral and Security
It includes details of the primary and collateral security offered, along with valuation reports, legal clearances, and insurance information.
5. Risk Assessment
Banks evaluate risks such as market risk, business risk, financial risk, and operational risk before recommending the proposal.
6. Recommendation and Decision
Finally, the credit officer recommends loan sanction, modification, or rejection based on the overall appraisal.
Importance of CAM in Banking
CAM ensures that banks follow a structured and transparent loan approval process. It helps reduce lending risks, prevents NPAs (Non-Performing Assets), and protects the bank’s financial health. For borrowers, CAM increases the chances of faster approval by presenting a clear financial picture.