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    Question

    Which of the following documents are commonly relied

    upon by lenders to validate a business’s operational and financial information during due diligence?
    A GST returns Correct Answer Incorrect Answer
    B Income Tax (IT) returns Correct Answer Incorrect Answer
    C Bank statements Correct Answer Incorrect Answer
    D Only C Correct Answer Incorrect Answer
    E All of the above Correct Answer Incorrect Answer

    Solution

    When conducting credit appraisal and due diligence, banks/lenders use multiple sources of information to cross-verify the financial and operational standing of a borrower. These include: • GST Returns (A): Provide insights into sales, turnover, and tax compliance. • IT Returns (B): Validate declared income and profit figures. • Bank Statements (C): Reflect actual cash flows, liquidity, and repayment behavior. In addition, lenders also rely on: • External databases (CIBIL, CRILC, ROC, CERSAI, Wilful defaulters list, Fraud registry). • Internal sources (past relationship track record with the bank). • Market feedback and site visits (plant, office, or residence of borrower). Thus, all the given documents (A, B, and C) are important sources of verification.

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