Examine the article reproduced below and consider how the five Cs discussed in the course have application in the present coronavirus pandemic.

5Cs Of Lending To Businesses In The Time Of Pandemic

19 Jul'20 | By Dhruv Bajaj

Covid-19 has undoubtedly posed a wide array of new challenges and a newer landscape in the lending world

Every borrower was a good borrower before it turned bad

Its time to control the actual outflow of funds ensuring funds are used only for intended purposes

The credit analysis universe is commonly governed by the famous 5 Cs Character, Capacity, Capital, Collateral and Covenants. Whether it is sourcing, appraisal or monitoring, these are the five attributes which asked to look at especially when we are lending to businesses.

The unexpected emergence of the dreaded pandemic has undoubtedly posed a wide array of new challenges and a newer landscape in the lending world wherein every C of the model is affected. Borrowers are taking moratorium on repayment (supposedly affecting their character), their repayment capacity (historically judged from quarterly P&Ls) has reduced, values of collaterals are going down, RBI itself has asked to soften the capital requirements and most of the stipulated covenants are getting breached.

It is indeed organic repercussion of the situation that many of the credit folks are wondering how to lend in these times. Clearly, the need of the hour is new through the process. Based on my own experience and understanding, I propose a new version of 5C model of credit, replacing or modifying earlier mantras.