A Chartered Accountant can move into credit analysis without discarding what audit, reporting or corporate finance taught. The shift is in the question being answered. An auditor asks whether last year's numbers are fairly stated. A credit analyst asks whether this borrower will pay the lender back on time over the next five or seven years, what could stop that, and which conditions protect the lender if it goes wrong.
The ICAI Career Counselling Committee's list of career avenues for Chartered Accountants names credit rating and risk management among strategic finance roles, and working capital management among consultancy work. That confirms the fit. It does not tell you how the work is judged, which is by the quality of the lending recommendation and the evidence behind it.
Where credit analysts work and what they sign off
| Setting | Typical output | Question the output answers |
|---|---|---|
| Bank or NBFC, new lending | Credit appraisal note, projections, proposed limits and covenants | Should we lend, how much, on what structure and with what safeguards? |
| Bank or NBFC, annual review | Renewal note, covenant compliance review, revised limits | Has the borrower's ability or willingness to repay changed? |
| Portfolio monitoring | Early-warning note, stock and receivables review, exception report | Is a problem visible before the account slips into default? |
| Credit rating agency | Rating rationale and committee note | What is the relative likelihood of timely debt servicing? |
| Corporate treasury or fund | Counterparty or investee credit view | How much exposure to this name can we accept? |
The lender-side work is not a restatement of management's figures. It is a view on future cash, with the analyst accountable for the assumptions.
The regulatory rules a lender's analyst works inside
A CA coming from audit or tax will know accounting standards well but may not know the banking rules that shape every credit file. Two are worth learning before any interview.
SMA and NPA classification
RBI's Master Circular on Prudential Norms on Income Recognition, Asset Classification and Provisioning (RBI/2023-24/06, 1 April 2023) sets the clock that monitoring teams watch. For term loans, an account overdue up to 30 days is SMA-0, more than 30 and up to 60 days is SMA-1, and more than 60 and up to 90 days is SMA-2. A term loan becomes a non-performing asset when interest or principal remains overdue for more than 90 days. Cash credit and overdraft accounts are classified as SMA-1 and SMA-2 on the same 30 and 60 day bands for outstanding balances beyond the limit, and become NPAs when they are out of order.
The circular also says classification happens in the lender's day-end process for the relevant date. Its own illustration: if a loan falls due on 31 March and is not paid before that day's day-end process, it is overdue from 31 March, tagged SMA-1 at day-end on 30 April, SMA-2 at day-end on 30 May and NPA at day-end on 29 June. An NPA can be upgraded to standard only if the borrower pays the entire arrears of interest and principal, and where a borrower has several facilities, all of them must be cleared.
For an analyst, this means an early-warning note is useful only if it is written while the account is still at SMA-0 or SMA-1, not after the NPA date.
Wilful defaulters and large defaulters
The RBI Master Direction on Treatment of Wilful Defaulters and Large Defaulters (DoR.FIN.REC.No.31/20.16.003/2024-25, 30 July 2024) applies to commercial banks including small finance banks, local area banks and regional rural banks, primary co-operative banks, all-India financial institutions, NBFCs in the Middle Layer and above, asset reconstruction companies and credit information companies. Its points that land on a credit analyst's desk:
- Appraisal checks: during credit appraisal, the lender must check by DIN or PAN whether any director, guarantor or person in charge of the borrower appears in the list of large defaulters or wilful defaulters.
- End-use monitoring: lenders must closely monitor the end use of funds and obtain certificates from borrowers that funds were used for the sanctioned purpose. The direction lists quarterly report scrutiny, inspection of assets, audits, periodic visits and stock audits among the monitoring tools.
- Thresholds: the wilful defaulter framework applies to outstanding amounts of ₹25 lakh and above. A large defaulter is one with ₹1 crore or more outstanding where a suit has been filed or the account is classified doubtful or loss.
- Timeline: the lender must complete the process of examining and classifying a borrower as a wilful defaulter within six months of the account becoming an NPA.
- Consequences: no lender may grant additional credit to a wilful defaulter or an entity it is associated with; the bar continues for one year after the name is removed from the list, and credit for new ventures is barred for five years after removal. Wilful defaulters are not eligible for restructuring.
The direction's features of wilful default include having the capacity to pay but not paying, diverting funds to another purpose, siphoning funds, disposing of assets without authorisation, and failing to bring in committed equity that the lender relied on. Each of these is something a careful appraisal and monitoring file should be able to detect early. That is where a CA's evidence habit becomes directly useful.
What carries over from CA training, and what needs unlearning
| CA skill | How credit work uses it | Adjustment needed |
|---|---|---|
| Financial statement analysis | Normalising EBITDA, removing one-off items, reconciling profit to cash | Look forward: projections matter more than last year's accuracy |
| Audit evidence and controls | Testing stock, receivables, related-party balances and MIS quality | Missing evidence becomes a lending condition, not a report qualification |
| Tax and compliance | Spotting statutory arrears, disputed demands and contingent cash outflows | Separate crystallised dues from disputed exposure and size the cash impact |
| Working capital review | Operating cycle, drawing power quality, seasonal funding need | Receivable ageing and stock quality matter more than the current ratio |
| Reporting to management | A credit memo with a clear recommendation | You must commit to approve, decline or approve with conditions |
A worked appraisal: is a profitable borrower a safe borrower?
Take an illustrative manufacturer with revenue of ₹120 crore and an EBITDA margin of 12%, giving EBITDA of ₹14.4 crore. Total borrowings are ₹42 crore. Annual interest is ₹4.2 crore and scheduled principal repayment is ₹3.5 crore, so debt service is ₹7.7 crore. The figures below are the analyst's own bridge, not an RBI formula or a standard bank covenant.
| Item (₹ crore) | Base case | Stress case |
|---|---|---|
| Revenue | 120.0 | 108.0 (down 10%) |
| EBITDA | 14.4 (12%) | 10.8 (10%) |
| Less: cash tax | 1.8 | 1.2 |
| Less: maintenance capex | 2.5 | 2.5 |
| Less: working capital absorbed | 2.0 | 2.6 |
| Cash available for debt service | 8.1 | 4.5 |
| Interest plus scheduled principal | 7.7 | 7.7 |
| Cover (times) | 1.05 | 0.58 |
Debt to EBITDA of 2.92 times looks comfortable, and the company is profitable. The cash bridge tells a different story. Base-case headroom is only ₹0.4 crore. With the same tax, capex and working capital deductions, debt service needs EBITDA of ₹14.0 crore, so a fall of just 2.8% in EBITDA wipes out the cushion. In the stress case the shortfall is ₹3.2 crore.
Receivables tell the same story. If debtors are ₹30 crore, collection takes about 91 days on base revenue and about 101 days if revenue falls to ₹108 crore while debtors stay put. That is a borrower heading towards the SMA bands described above if collections slip.
What can the analyst recommend? Reshaping repayment so that annual principal is ₹2.5 crore brings debt service to ₹6.7 crore. Base cover then rises to 1.21 times, but stress cover is still only 0.67 times. So restructuring the schedule alone is not enough. A defensible memo would approve only with conditions: promoter contribution received before first disbursement, verified receivable ageing supporting the projected collection cycle, quarterly cash accrual reporting, and an escalation trigger if overdue receivables cross a threshold set by the lender's policy. The threshold itself must come from policy and the sanction terms, not from the analyst's imagination.
The six questions every credit note must settle
- Purpose and repayment source: what the facility funds and which cash flow repays it. Asset sale or refinancing should not quietly replace operating cash as the base case.
- Business resilience: customer and supplier concentration, pricing power, seasonality and industry position.
- Quality of numbers: reconciliation of audited accounts with bank statements, GST returns, debt schedules and management accounts, with differences recorded.
- Cash conversion: the EBITDA-to-cash bridge after tax, working capital and maintenance capex.
- Structure and security: limit, tenor, amortisation, collateral, guarantees and covenant headroom mapped to the risks found.
- Downside and decision: stress the variables most likely to move, recommend, and name the fact that would reverse the recommendation.
Showing an interviewer you can already do the job
Certificates matter less than a sample of work. A compact portfolio of about five pages is enough: a one-page borrower profile, a page of adjusted financials, a cash-flow and sensitivity page like the one above, a risk and mitigant matrix, and a one-paragraph recommendation with conditions and monitoring triggers. Build it from a listed company's annual report, label every assumption, and keep out any employer or client data.
Prepare to defend each adjustment in two minutes, and be ready to explain how your note would change if the account moved to SMA-1. Target a product line rather than "credit" in general. Working capital lending, corporate term lending, rating analysis, structured credit and portfolio monitoring each test different evidence, and interviewers notice when a candidate has chosen.
Is this role a good fit for you?
The role suits people who like forming a view under uncertainty and are comfortable declining a proposal or attaching conditions even when historical accounts are clean. If you prefer reporting accuracy, month-end ownership or transaction execution, financial reporting or deal roles may fit better. The useful test is simple: do you want to be accountable for a forward-looking lending call that could be proved wrong?
Updated on 27 September 2026: retitled, restructured away from the 90-day roadmap format, added RBI rules on SMA and NPA classification and on wilful and large defaulters with links to the official documents, and rebuilt the worked appraisal with checked figures.
