Loans And Advances Management

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presentation on concepts of advances management with an illustration showing the financial analysis

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Loans And Advances Management

  1. 1. ADVANCES MANAGEMENT INDIAN OVERSEAS BANK sinhasoniya87@yahoo.com
  2. 2. INDIAN BANKING INDUSTRY BANK REFORMS 1991 NATIONALIZATION 1969-1991 EARLY PHASE 1786-1969 sinhasoniya87@yahoo.com
  3. 3. INDIAN OVERSEAS BANK  FOUNDED ON FEBRUARY 10, 1937  1st BANK TO ESTABLISH OPERATIONS OVERSEAS  1st PSB TO START MOBILE BANKING  ‘AA’ RATING BY CRISIL IN 2000  RANKED AS BEST PUBLIC SECTOR BANK IN 2007 sinhasoniya87@yahoo.com
  4. 4. LOANS AND ADVANCES The ideal advance is one that is granted to a ‘reliable’ customer for a legal purpose where he has enough experience for efficient utilization of the amount and repays the amount within a given time frame as per the agreement sinhasoniya87@yahoo.com
  5. 5. PROCEDURE FOR SANCTION LENDER • comes up with a (BANK) • verifies the loan proposal proposal • collateral • verifies the • either approves security purpose of loan (final sanction) • financial details • assess the or rejects credibility of BORROWER borrower REGIONAL OFFICE sinhasoniya87@yahoo.com
  6. 6. FINANCIAL ANALYSIS • PROFITABILITY ASSESSMENT • STABILITY OF: • SOLVENCY • LIQUIDITY • BALANCE SHEET VERIFICATION • INCOME STATEMENTS • INCOME TAX RETURNS OF: sinhasoniya87@yahoo.com
  7. 7. CASE ANALYSIS: XYZ INFOTECH The borrower is into business since 1992, his existing branch of NIIT is working successfully. NIIT has offered him for opening a new unit at Kharagpur and he has paid more than Rs 10,00,000 as advance for starting the same. The borrower is one of the very old and regular client of the bank and needs another Rs. 20,00,000 as loan from the bank to start this new set up sinhasoniya87@yahoo.com
  8. 8. XYZ INFOTECH • March, 07 -- 7.01 • March, 08 – 7.57 In Rs, Lacs TNW • March, 09 – 11.87 • March, 10 -- 16.77 • March, 07 -- 0.26 • March, 08 -- 21 • March, 09 -- 30 NET SALES • March, 10 -- 40 • March, 07 -- 0.56 • March, 08 -- 1.63 • March, 09 -- 2.69 NWC • March, 10 -- 4.83 sinhasoniya87@yahoo.com
  9. 9. XYZ INFOTECH DER: TOTAL DEBT Details of Ratios TOTAL EQUITY 3 2.5 DSCR: N. OPERATING Inc. T. DEBT SERVICE 2 1.5  CR: CURRENT ASSETS CURRENT LIABILITIES 1 0.5 0 MARCH, 07 MARCH, 08 MARCH, 09 MARCH, 10 DE 2.83 2.7 1.39 1.78 DSCR 1.4 1.53 1.91 2.12 CR 1.55 1.59 1.42 1.56 sinhasoniya87@yahoo.com
  10. 10. XYZ INFOTECH MULTIPLE DISCRIMINANT ANALYSIS: Z SCORE Z= 0.012X1 + 0.014X2 + 0.033X3 + 0.006X4 + 0.010X5 where Z = discriminant function score of the firm X1= net working capital/total assets (%) X2= retained earnings/total assets (%) X3= EBIT/total assets (%) X4= market value of total equity/book value of debt (%) X5= sales/total assets (times) sinhasoniya87@yahoo.com
  11. 11. XYZ INFOTECH Z SCORE 3 2.73 2.5 2 2.12 1.5 1 1.08 0.5 0 2008 2009 2010 sinhasoniya87@yahoo.com
  12. 12. XYZ INFOTECH ASSESSMENT OF MPBF FOR CC A/c IN Rs. LACS • March, 07 -- 0.56 NWC • March, 08 -- 1.63 • March, 09 -- 2.69 • March, 10 -- 4.83 NWC CONSIDERED AS 3.00 MPBF = 25% of Sales – 5% as margin or 25% of Sales - NWC (whichever is lower) sinhasoniya87@yahoo.com
  13. 13. XYZ INFOTECH COLLATERAL/ TERM LOAN GUARANTEE MARGIN MONEY CREDIT RATING TERMS & REPAYMENT SCHEDULE DOCUMENTATION & FIANL SANCTION sinhasoniya87@yahoo.com
  14. 14. FURTHER PROCEDURE STANDARD ACCOUNT FOLLOW UP & MONITORING NON • SUBSTANDARD ASSET • PERFOMING DOUBTFUL ASSET ASSET • LOSS ASSET sinhasoniya87@yahoo.com
  15. 15. TREATMENT OF N PA BANK UPGRADATION PROCEEDINGS OF ACCOUNT • LEGAL NOTICE • RENEWAL • SARFESI ACT • RECOVERY 2002 • RESTRUCTURING • FILING OF SUIT • WRITE OFF * SARFESI: SECURITISATION AND RECONSTRUCTION OF FINANCIAL ASSETS AND ENFORCEMENT OF SECURITY INTEREST ACT sinhasoniya87@yahoo.com
  16. 16. PREVENTIVE MEASURES IMPACT EXTERNAL INTERNAL MEASURES MEASURES • DRAIN ON • RELEASE OF • DECLARATION PROFIT DEFAULTER’s OF SMA • EFFECT ON LIST • RISK CAPITAL • FORMATION ASSESSMENT ADEQUACY OF CIBIL • FOLLOW UP sinhasoniya87@yahoo.com
  17. 17. RECOMMENDATIONS  THOROUGH STUDY OF CASE IN PRELIMINARY PHASE  ESTIMATION OF BANKRUPTCY APPLYING Z SCORE FOLLOW UP SINCE DECLARATION OF SMA sinhasoniya87@yahoo.com
  18. 18. THANK YOU Presented By Soniya Sinha sinhasoniya87@yahoo.com

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