Banks assess borrower risk through a combination of financial analysis, credit scoring models, and qualitative evaluation. Key parameters include credit score, debt-to-income ratio, employment stability, collateral quality, and past repayment records. Loan officers also review financial statements and banking behavior. Advanced risk models may use statistical tools to predict default probability. By analyzing these factors, banks categorize borrowers into different risk tiers, helping them decide loan eligibility, sanction limits, and appropriate interest rates for each applicant. Apply Now - https://www.mymudra.com/blog/what-is-loan-grading