Credit Memo Checklist: 47 Items an Approval-Ready Memo Must Contain

An approval-ready credit memo is one a committee member who has never met the borrower can act on without asking a question. This checklist breaks that standard into 47 checks across seven sections — 18 blocking, 29 advisory. YuSight cites 100% of figures with one-click source verification, which clears 17 of the 47 mechanically.

Key facts

• 47 checks, 18 of them blocking. A single blocking fail returns the memo regardless of the overall score.
• Loans were cited in roughly 69% of FDIC examination reports that raised a Matter Requiring Board Attention, and over three-quarters of those loan MRBAs concerned credit administration — appraisal review, loan grading, documentation exceptions and cash flow analysis. (FDIC, examinations 2010–2013; whether a more recent cut of this series exists.)
• RBI expects a loan review mechanism to re-examine all fresh sanctions and renewals within 3–6 months of sanction, plus a random 5–10% sample of the remaining portfolio.
• 17 of the 47 items can be checked mechanically. 30 need a human. Any vendor claiming otherwise is selling you a spell-checker.
• YuSight cites 100% of figures, each traceable to the source document and page, so the traceability block of this checklist is verified rather than asserted.

Does the borrower and facility section identify who is actually borrowing?

1. Confirm the legal borrower name matches the constitutional document exactly — Certificate of Incorporation, trade licence, or partnership deed — including suffix (Pvt Ltd, LLC, FZE) and spelling. [Blocking]
2. Record the registration identifier (CIN, PAN, GSTIN, EIN, or UAE trade licence number) and confirm it matches the identifier on the bureau report pulled for this file. [Blocking]
3. For multi-entity structures, include a group chart naming every entity whose financials feed the spread, with ownership percentages, marking which are obligors and which are non-obligor affiliates.
4. State whether the borrower is a related party under the connected-lending policy (director, group company, key managerial person) and, if so, name the approval authority that clearance requires.
5. List each facility separately by type, amount, tenor, pricing basis and repayment schedule. No aggregated "total limits INR 25 Cr" line without the breakdown. [Blocking]
6. Confirm the facility amount in the recommendation matches the term sheet and the application form; flag any variance and name who authorised it.
7. Name every guarantor and co-obligor with guarantee type (personal, corporate, unconditional, limited), capped amount, and whether a net-worth statement dated within 12 months is on file. [Blocking]
8. Confirm the stated purpose of funds is specific enough to test later — "working capital gap for FY27 arising from a 22-day increase in receivable days," not "business expansion."

Is every figure in the financial analysis traceable to a source?

1. Confirm every figure in the spread carries a source label naming document and page — "Audited FY25 P&L, p. 14," not "management accounts." [Blocking]
2. State the audit status of each year presented (audited / reviewed / management-certified / provisional) in the column header, not in a footnote.
3. Read the auditor's report for each audited year and record whether the opinion was unqualified. If qualified, quote the qualification and state its effect on the spread. [Blocking]
4. Confirm the closing cash balance in the spread matches the closing balance on the final month's bank statement for the same date, and that any variance is explained in a note. [Blocking]
5. Reconcile revenue in the spread against GST or VAT filings for the same period; explain any gap above 5%.
6. Confirm bank statements cover at least 12 continuous months with no missing months, and that each month's opening balance equals the prior month's closing balance.
7. Confirm the bureau report falls inside the lender's freshness window (commonly 30 days) and that every live facility on the bureau appears in the memo's existing-exposure table. [Blocking]
8. Confirm one currency and one unit throughout — no mixing INR lakh with INR crore, or AED with USD — and state the conversion rate and date wherever a translation was applied.

Have the ratios been computed on a defensible basis?

1. State the DSCR formula in full, including whether it is pre- or post-tax and whether it includes existing debt service as well as proposed. [Blocking]
2. Confirm the DSCR denominator includes the full annual obligation of every facility outstanding at drawdown — proposed facility, existing term loans, lease obligations, and interest on working-capital lines. [Blocking]
3. State whether directors' remuneration and related-party rent have been added back to EBITDA. If added back, cite the written undertaking that they will be subordinated or forgone.
4. Confirm the leverage ratio names its numerator explicitly — total debt or net debt — and that any cash netted off is unencumbered, not held as margin against an LC or BG.
5. Recompute at least one ratio by hand from the spread's own line items and confirm it matches the memo's stated value to two decimals.
6. Confirm ratios are shown for at least three comparable periods on the same basis, with any change in accounting policy or year-end disclosed.
7. State the source and vintage of every peer or industry benchmark quoted. A benchmark without a named source and year is an opinion, not a comparison.

Does the memo test what the covenants will test?

1. For each proposed covenant, state the exact test formula, test frequency, first test date, and the document the tested figure will come from. [Blocking]
2. Confirm the covenant formula matches the ratio formula used in the analysis section. If the memo analyses DSCR post-tax and the covenant tests it pre-tax, one of them is wrong. [Blocking]
3. Show headroom at the covenant level on the base case as numbers: covenanted threshold, projected value, percentage cushion.
4. Run each financial covenant against the borrower's most recent actual results and state whether it would have been breached had it been in force last year.
5. Name the cure rights, cure periods and equity-cure mechanics for each covenant, and whether a cure counts against a cap on cures.
6. Name who inside the lender collects each compliance certificate, on what date, and where the collected certificate is filed.

Are the risks named with mitigants, not just listed?

1. For each named risk, state the trigger event, the quantified downside, and a structural mitigant. A sentence of reassurance is not a mitigant.
2. Quantify concentration with numbers: largest customer's share of revenue, largest supplier's share of purchases, and the top-five figure for both.
3. State the refinancing wall — the amount of other debt maturing inside the proposed facility's tenor — and where its repayment is expected to come from.
4. Run at least one downside case with assumptions stated numerically (revenue down x%, margin down y bps, receivable days up z) and show the resulting DSCR.
5. State the breakeven point: the revenue decline or margin compression at which DSCR falls to 1.00x.
6. State the collateral valuation date, the valuer's name and panel status, the valuation method, and the LTV computed on the facility amount rather than the sanctioned group limit. [Blocking]

Is the recommendation actually decidable?

1. State the recommendation as something the committee can approve or decline unchanged — facility, amount, tenor, pricing, security. Not a range, not "recommended for consideration." [Blocking]
2. Confirm the recommendation's amount, tenor and pricing match the facility table earlier in the memo, figure for figure.
3. List conditions precedent and conditions subsequent separately, each with a named owner and a deadline as a date or a number of days from sanction. [Blocking]
4. State every deviation from credit policy explicitly — policy clause, policy limit, proposed position, compensating strength — rather than leaving the committee to discover it. [Blocking]
5. Name the approval authority the exposure requires under the delegation matrix, and the borrower group's aggregate exposure post-sanction that determines it. [Blocking]
6. State the proposed internal risk rating with model version and inputs, and explain in writing any override of the model output.

Would this memo survive an audit or examiner review?

1. Confirm the memo names its preparer and its reviewer, with dates, and that the reviewer is not the preparer. [Blocking]
2. Confirm any figure that changed between memo versions appears in a version history showing date, author and reason.
3. Read the narrative alone and ask whether it argues for the assigned grade. The OCC's test is direct: "The essential test of a good write-up is whether it supports the rating."
4. Confirm every document referenced in the memo is actually in the credit file, and that documentation exceptions are listed with a cure date rather than left unrecorded.
5. Confirm the memo is dated, and that no financial statement, valuation or bureau report it relies on has aged past its validity window as of the committee date.
6. Confirm a reviewer who has never met the borrower can reconstruct the decision from the memo alone, without asking the analyst a question.

How does a committee secretary turn 47 items into a decision?

Score each item Pass, Fail, or N/A. An N/A must carry a one-line reason — "single entity, no group structure" — because a blank is indistinguishable from an item nobody checked.

• Denominator = 47 minus the N/A items.
• Score = passes ÷ denominator.
• Verdict rule: approval-ready requires a score of 95% or higher and zero blocking fails. Anything else is Rework.

The two conditions are independent on purpose. A memo can score 96% and still be unusable if the one thing it got wrong was the DSCR denominator.

Blocking versus advisory

A blocking item is one where a failure changes the decision rather than the presentation. Getting the guarantor's capped amount wrong (item 7) changes what the lender actually holds. Omitting a peer benchmark's vintage (item 23) makes the memo weaker but does not misprice the credit.

Worked example: scoring a memo

Meridian Fabricators Pvt Ltd, a fabrication SME, seeking INR 18 Cr working capital plus an INR 7 Cr term loan. The committee secretary runs all 47 items.

Items in scope 47 Marked N/A (with reason) 3 (item 3 single entity; item 19 no add-backs claimed; item 32 no other maturing debt) Scored denominator 47 − 3 = 44 Blocking items in scope 18 (none of the N/As were blocking) Blocking fails 2 item 12 — closing cash in spread INR 41 lakh above bank statement, no note item 25 — analysis uses post-tax DSCR, draft covenant tests pre-tax Advisory fails 4 items 23, 31, 34, 43 Total fails 2 + 4 = 6 Passes 44 − 6 = 38 Score 38 ÷ 44 = 0.8636 → 86.4% Threshold: ≥ 95% AND zero blocking fails Result: 86.4% < 95%, and 2 blocking fails VERDICT: REWORK

Either condition alone would have returned it. The secretary sends back six line items, not "please tighten the memo." The analyst fixes six things, the second pass scores 44/44, and the memo goes to committee with a clean sheet attached.

Which of these can a platform check for you?

Be honest about this split when you evaluate software.

A platform can tell you the closing cash in the spread differs from the bank statement by INR 41 lakh (item 12). It cannot tell you whether the explanation the analyst then writes is credible (also item 12, second half). It can confirm a mitigant field is populated (item 30). It cannot judge whether "long-standing relationship with the promoter" is a mitigant.

The right expectation: automation removes the 17 items that consume reviewer attention without needing it, so the reviewer spends a full hour on the 30 that do. That is the whole return. Anything sold as replacing the 30 is worth declining.

FAQ

What makes a credit memo approval-ready?

It is approval-ready when a committee member who has never met the borrower can approve or decline it without asking the analyst a single question. Every figure traces to a source, every risk carries a mitigant, and the recommendation is a specific decision rather than a range.

What should be included in a commercial credit memo?

Borrower and facility identification, financial analysis with sourced figures, ratio analysis with stated formulas, covenants with test mechanics, risks with quantified mitigants, and a recommendation with conditions precedent. The 47 items above expand those six blocks into individual checks.

Who reviews a credit memo before credit committee?

Typically two people before it reaches the room: a senior credit analyst or relationship manager who checks the commercial logic, and an independent credit risk reviewer who checks policy compliance and documentation. Item 42 exists because the reviewer must not be the preparer.

What is a credit memo quality rubric?

It is a fixed scoring scheme that converts a review into a repeatable verdict — in this case, 47 items scored Pass, Fail or N/A, with 18 marked blocking, and a pass threshold of 95% plus zero blocking fails. The point of a rubric is that two reviewers reach the same verdict on the same memo.

How do you standardize credit memos across analysts?

Give every analyst the same template, the same rubric, and the same scored feedback. Publish the score distribution by analyst quarterly so drift is visible, and rewrite the template whenever the same item fails across multiple analysts — that is a template problem, not a people problem.

What do examiners look for in memo consistency?

Whether the narrative supports the assigned risk rating, whether the same ratio is defined the same way across memos, and whether documentation exceptions are tracked and cured. FDIC data shows credit administration accounted for over three-quarters of loan-related Matters Requiring Board Attention.

How often should a bank audit memos for drift?

RBI's guidance note on credit risk management sets a workable cadence: review all fresh sanctions and renewals within three to six months of sanction, plus a random 5–10% sample of the remaining portfolio, with high-risk accounts revisited quarterly.

Can software check a credit memo checklist automatically?

Seventeen of these 47 items, yes — the ones that compare two values, a date or a format. The other 30 require someone to judge whether an argument holds, and no current platform does that reliably.

Takeaways

• 47 items, 18 blocking. Any blocking fail returns the memo whatever the score says.
• Score = passes ÷ (47 − N/A). Approval-ready needs 95% and zero blocking fails.
• N/A must carry a reason. A blank is an unchecked item wearing a disguise.
• 17 items automate; 30 do not. Buy the 17 back so your reviewers can spend their time on the 30.

The audit-and-examiner block — items 42 through 47 — is the part most memo templates handle worst, because it depends on infrastructure rather than on how carefully the analyst writes. Version history, preparer/reviewer separation, and document-to-file reconciliation either exist in your workflow or they do not.

See the audit trail an examiner would see — book a live demo of YuSight's Workflow & Audit Trail.

Sources

• FDIC, Supervisory Trends: Matters Requiring Board Attention Highlight Evolving Risks — https://www.fdic.gov/bank-examinations/supervisory-trends-matters-requiring-board-attention-highlight-evolving-risks
• OCC, Rating Credit Risk, Comptroller's Handbook — https://www.occ.gov/publications-and-resources/publications/comptrollers-handbook/files/rating-credit-risk/pub-ch-rating-credit-risk.pdf
• OCC Bulletin 2026-29, Lending and Loan Portfolio Risk Management Booklet of the Comptroller's Handbook — https://www.occ.gov/news-issuances/bulletins/2026/bulletin-2026-29.html
• FDIC, Loan Operations Review, Examination Policies Manual — https://www.fdic.gov/resources/supervision-and-examinations/examination-policies-manual/section22-1/pc-loan-ops-rev.pdf
• Reserve Bank of India, Guidance Note on Credit Risk Management — https://www.rbi.org.in/scripts/NotificationUser.aspx?Mode=0&Id=906
• Farm Credit Administration, Credit Administration, Examination Manual EM-22.3 — https://ww3.fca.gov/readingrm/exammanual/New%20Exam%20Manual/22.3.pdf