Lending to SMEs: Indian banker's perspective

Credit officers act as a pivot in the loan decision-making process, which is greatly affected by their assessment. The objective of this research is to examine the lending decision criteria of bankers. To attain this objective, qualitative methodology has been adopted for this research. In-depth interviews of 12 credit officers were undertaken. For the analysis, thematic approach was adopted. Three main themes emerged from the thematic analysis. The first theme relates the complimentary existence of transactional and relationship lending. The second theme discloses the information sought by lenders under transactional lending approach. The third and major theme of this research (which emerged from this study) is the identification of data affecting the subjective decisions of credit officers. Investigation revealed that, while taking loan decisions, credit officers place emphasis on borrower's certain characteristics such as his/her political background, egotism, business skills, age, experience and previous defaults. The findings of this study provide a new understanding of the factors that are perceived by lenders while evaluating a loan applicant. This is the first study reporting the factors that affect the subjective judgements of credit officers.