2. TABLE OF CONTENTS
Title of the project
Objective of the study
Review of Literature
Research Methodology
Data Analysis
Findings and Suggestions
Conclusions
3. A Comparative Analysis Of
Risk Management In
Public Sector And Private Sector Banks
SUBMITTED BY
Manoj G
1411000285
UNDER THE SUPERVISION OF
MR. GOKUL
2014 - 2016
4. OBJECTIVE OF STUDY
•To understand the analytical framework and analyzing the existing credit risk,
capital adequacy ratio, liquidity ratio, interest rate risk at Corporation Bank.
•To know the RBI Guidelines regarding credit risk management, Basel
requirement, Maturity Analysis and the interest spread.
•Comparative analysis of various ratios of the public and the private sector
banks.
•To understand the various liquidity risk residual margin, NPA’s and the
provision, and the amount of lending to various sectors.
•Analysing of various Public and the private banks Ratio’s Dividend per Share,
operating profit per share.
5. REVIEW OF LITERATURE
Risk can be defined as any uncertainty about a future event that threatens
the organization’s ability to accomplish its mission. Business is a trade off between
risk and return. Risk management is the discipline that deals with the possibility
that some future event will cause harm. It involves identification, measurement,
monitoring and controlling risks to ensure that:
The individuals who take or manage risks clearly understand it.
The organization’s Risk exposures is with in limits established by Board of Directors.
The expected payoffs compensate for the risks taken.
Risk taking decisions are explicit and clear.
Sufficient capital is available as a buffer to take risk.
Risk management as commonly perceived does not mean minimizing risk;
rather than the goal of the risk management is to optimize risk reward trade - off.
Not with standing the fact that banks are in the business of taking risks, it should be
recognized that an institution need nit engage in business in a manner that
unnecessarily imposes risk upon it, nor it should absorb risk that can be
transformed to other participants. Rather it should accept those risks that are
uniquely part of the array bank’s services.
6. RESEARCH METHODOLOGY
To fulfil the objectives of the study both primary and secondary data are used.
The primary data was collected through interviewing all the executives and
officials of the Zonal Office, Bangalore.
The secondary data was collected from the published records, websites and
reports of the bank. Mainly the data relating to the credit procedures followed by
the bank and risk management was obtained through manager from bank
database. Based on the availability of the data, the analysis was made from
different angles to asses the credit risk, capital adequacy risk, liquidity risk, interest
rate risk management at Zonal Office, Bangalore.
The research design of this study is descriptive research. The descriptive research
studies are those studies which are concerned with describing the characteristics
of a particular individual, or of a group. The studies concerned with specific
predictions, with narration of facts & characteristics concerning individual, group
or situation are all examples of descriptive research studies.
7. DATA ANALYSIS
In today’s market scenario most of the banks are depending on deposits
more as their sources of funds. Basically the banks prefer the level of CASA to raise in
terms of getting the deposits from the public. Because in the CASA the banks need not
to be paid too much interest on the saving account of the public and in the current
account the interest payment is NIL. So, they prefer more on CASA first to get the
money as sources of the revenue or funds from the public and also we can say that
these are the cheapest way of getting the money to get from the individuals and
corporate people. Secondly the major sources of revenue for the Banks are
Borrowings from the RBI, others banks, other institutional and Agencies or Borrowing
through outside India. The deposits can be classifieds into three categories:
Demand Deposits which includes the banks and the others Deposits.
Deposits from Branches In India
Deposits from outside India.
8. DATA ANALYSIS
Comparison of Various Sources of Funds between Public and Private Sector Banks:
The below column chart is representing the various sources of funds between the public and the private sector banks. It means
which are the banks that give more concentration on deposits as sources of funds as comparison to the other sources of funds like
by issuing capital, by taking the reserve and surplus for doing their operation.
Below is the column chart representing the comparison of Sources of funds Between different Banks.
9. FINDINGS AND SUGGESTIONS
•NPA’s ratios are the least in the industry implies the effectiveness of credit risk
management.
• Bank has been quite conservative when it comes to covering their NPA’s.
•Total advances has been increasing in the both the public and the private banks.
•Credit exposures to the infrastructure, Retail Finance and the automobile sector are
higher exposures to these sector is increased by 40%.
•Private Banks has more CAR as compared to the public banks which indicates the
inefficient utilisation of funds by keeping more capital.
•Credit to Deposit Ratio of corporation is stable over years indicates risk averse
nature, unlike SBI, ICICI, HDFC banks whose credit to deposit ratio increasing over the
years.
•Banks uses the Risk Assessment Model (RAM) developed by CRISIL for assigning
internal ratings.
•More exposure to infrastructure and real estate will increases the asset liability mis-
matches.
•Monthly review policy and the reports of the banks some times restrict to grant the
loans to the highly net worth individuals and the corporate people also.
10. CONCLUSION
The aim of the risk management is to reduce the probability of loss from a
credit transaction. Thus its is needed to meet the goals and objective of the
banks. It aims to strengthen and increase the efficiency of the organization,
while maintain consistency and transparency. Its is predominantly concerned
with probability of default. It is forward looking in its assessment, looking for
instance at a likely scenario of an adverse outcome in the business.
Thus we conclude that credit risk management is not just a process or
procedure. It is a fundamental component of the banking function. The
management of credit risk must be incorporated into the fibre of banks. Credit
risk systems are currently experiencing one of the highest growth rates of any
systems area in financial services. There is a direct correlation between market
risk and credit risk and credit risk has an impact on the operational risk
management. In my opinion credit risk management is an important function
today. All Banks need to practice it in some form or the other. They need to
understand the importance of credit risk management and think of it as a ladder
to growth by reducing their NPA’s. Moreover they must use it as a tool succeed
over their competition because credit risk management practices reduces risk
and improve return on capital.
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