Mention the steps taken by financial institutions while appraising a project.

Project Report submitted by a corporate unit to a financial institution for grant of financial facilities is properly appraised by a team of expert drawn from different disciplines. Each project is appraised on its own merits and flexibility is observed while applying the norms of ratio analysis, funds flow analysis, financial indicators, technical norms etc. The various steps taken by a financial institution while appraising a project are: First is the examination of the Project itself: The term lending financial institutions have been established by the Government with the sole objective to promote development and growth of the industries which are given planned priorities for the economic development of the country. Therefore, the project should be such which meet this standard and falls within the category of approved projects. Further the project report prepared by the corporate unit should confirm to the prescribed standard of the financial institutions. The Promoters: Capacity and competence: The promoter's capacity and competence should be examined with reference to their management background, traits as entrepreneurs, business or industrial experience, and past performance in other concerns, their integrity and reputation, market standing and legal competence. Viability Tests: After analyzing the Project and Promoters capacity, a bank/ financial institution carries out the different validity tests: (a) Technical Aspects of Project Appraisal (b) The Financial Aspects of Project Appraisal such as NPV, BCR and IRR, Sensitivity Analysis, Scenario Analysis etc. (c) Economic Appraisal to examine the project from the entire economy's point of view to determine whether the project will improve the economic welfare of the country. (d) Social/distributive Appraisal (e) Environmental Aspects (f) Organizational and Managerial Aspects (g) Commercial Aspects Including Marketing- Commercial aspects of a project include arrangement for supply of inputs for the initiation and operation of the project and marketing of outputs.