BANKINF PRODUCT

1. Corporate BankingCorporate Banking
KAMAL K JINDALKAMAL K JINDAL

2. Corporate bankingCorporate banking
 Financial services provided by Banks toFinancial services provided by Banks to
the Corporate for meeting theirthe Corporate for meeting their
banking and financial needs forbanking and financial needs for
 Setting up new projectsSetting up new projects
 ExpansionExpansion
 DiversificationDiversification
 ModernizationModernization
 Financial restructuringFinancial restructuring
 Commercial Banking facilitiesCommercial Banking facilities

3. Features of Corporate BankingFeatures of Corporate Banking
 Dealings with legal entitiesDealings with legal entities
 Prudential Exposure normsPrudential Exposure norms
 Prompt decisionPrompt decision
 Competitive pricing-sub BPLR/Base rateCompetitive pricing-sub BPLR/Base rate
 Branch/Bank InfrastructureBranch/Bank Infrastructure
 Sanctioning PowersSanctioning Powers
 Supervision and follow up IssuesSupervision and follow up Issues
 Consortium approachConsortium approach
 Syndication approachSyndication approach
 Transaction approachTransaction approach

4. CORPORATE FINANCE
TRADITIONAL FINANCE
IMPORT TRADE CREDIT
EXTERNAL COMMERCIAL BORROWINMG

5. Traditional FinanceTraditional Finance
 Term loan for creation of fixedTerm loan for creation of fixed
assetsassets
 Working capital for day to dayWorking capital for day to day
operationsoperations
 Letter of Credit forLetter of Credit for
imports/purchasesimports/purchases
 Bank Guarantee forBank Guarantee for
Imports/purchasesImports/purchases

6. Funding Options nowFunding Options now
 Commercial paper for meeting short termCommercial paper for meeting short term
fundingfunding
 Buyer and Supplier CreditBuyer and Supplier Credit
 Import Trade credit [up to 3 years]Import Trade credit [up to 3 years]
 External Commercial Borrowings [moreExternal Commercial Borrowings [more
than 3 years]than 3 years]
 Syndication LoanSyndication Loan
 Structured Project FinanceStructured Project Finance

7. COMMERCIAL PAPER
 Short term unsecured promissory
note, freely negotiable by endorsement
and delivery
 Issued at a discount – discount rate
freely determined by the market
 Prior approval of RBI is not required –
but the largest lender / consortium
leader to take the proposal on record
on the prescribed format
 Each CP issue (including roll-over) to
be treated as a fresh issue.

8. COMMERCIAL PAPER
 No Grace period for repayment of CP. If maturity date happens to
be a holiday, payment will be made on the immediate preceding
working day.
360 days:
15 days: Minimum tenor
Delinked from working
capital limit (fund based)
: Maximum amount of CP
issue
Rs. 25 lacks
(+multiples of Rs.5 lacs)
: Denomination of CP note
Maximum tenor

9. WHO CAN ISSUE ?
 Tangible net worth of at least Rs. 4 crores
 Working capital (fund based) limit
sanctioned by a bank
 Issuing company’s shares must be listed on
at least one stock exchange
 Issuer should obtain a minimum credit
rating of P1/P2 (CRISIL) or equivalents
 Credit rating should not be more than 2
months old at the time applying to RBI for
approval
 Minimum current ratio of 1.33 (not
mandatory but required by investors)

10. Why CP issue ?
 Low interest expenses
 Access to short term funding
 Flexibility (matching the exact amount and
maturity with working capital requirement)
 Ease and low cost of establishment
 Investor recognition
Benefits to the Investor
 Higher yields
 Portfolio diversification
 Flexibility and liquidity

11. Types of Corporate ServicesTypes of Corporate Services
Funded ServicesFunded Services
Non Funded ServicesNon Funded Services
Value Added ServicesValue Added Services

12. Funded ServicesFunded Services
Working Capital FinanceWorking Capital Finance
 The amount required to finance day to day operations isThe amount required to finance day to day operations is
called working capitalcalled working capital
 All enterprises require finance to perform day to dayAll enterprises require finance to perform day to day
operations and to complete their operating cyclesoperations and to complete their operating cycles
MethodsMethods
 Operating Cycle MethodOperating Cycle Method
 Turnover MethodTurnover Method
 Cash Budget MethodCash Budget Method

13. Funded ServicesFunded Services
 Short Term FinanceShort Term Finance
This service essentially to provide funds for short term periodThis service essentially to provide funds for short term period
of a year or lessof a year or less
Example of short term financeExample of short term finance
FactoringFactoring : Raising funds on security of the company’s debt: Raising funds on security of the company’s debt
OverdraftOverdraft: Bank issues overdrafts with right to call them in: Bank issues overdrafts with right to call them in
short notice. The borrower is required to use OD toshort notice. The borrower is required to use OD to
supplement working capital shortfallsupplement working capital shortfall

14. Funded ServicesFunded Services
 Bill DiscountingBill Discounting
Short tenure financing instrument for companies willing toShort tenure financing instrument for companies willing to
discount their purchase/ sales to get funds for short rundiscount their purchase/ sales to get funds for short run
TypesTypes
 Purchase bill discounting: Bank discounts the purchase bill ofPurchase bill discounting: Bank discounts the purchase bill of
the company and pays the company who in turn pay thethe company and pays the company who in turn pay the
suppliersupplier
 Sales bill discounting : Bank discounts the sales bill of theSales bill discounting : Bank discounts the sales bill of the
company and pays directly to the company. The investor getscompany and pays directly to the company. The investor gets
his return from the company at the end of the discountinghis return from the company at the end of the discounting

15. Funded ServicesFunded Services
 Structured FinanceStructured Finance
Services offered to the firms having unique finance needsServices offered to the firms having unique finance needs
 Consortium LendingConsortium Lending
 Syndicated LoanSyndicated Loan
Syndicated loans: is a large loan in which a group of banks work together toSyndicated loans: is a large loan in which a group of banks work together to
provide funds for a borrower.provide funds for a borrower.
 Export CreditExport Credit
A credit opened by an importer with a bank in an exporter's country to financeA credit opened by an importer with a bank in an exporter's country to finance
an export operation.an export operation.

16. Consortium lendingConsortium lending
 Group of banks providing credit to a CorporateGroup of banks providing credit to a Corporate
 Big ticket financeBig ticket finance
 Usually for working capital requirementsUsually for working capital requirements
 Largest lender is consortium leader which alsoLargest lender is consortium leader which also
handles credit appraisal work and convener ofhandles credit appraisal work and convener of
consortium meetingsconsortium meetings
 Earlier, RBI guidelines stipulated formation ofEarlier, RBI guidelines stipulated formation of
consortium when credit facilities exceed Rs 200consortium when credit facilities exceed Rs 200
crores and also member bank share to be minimumcrores and also member bank share to be minimum
10% but not mandatory now10% but not mandatory now

17. PSB
JKBOBC
CORPORATE
BOM
CITI BANK
CONSORTIUM LENDING

18. Consortium LendingConsortium Lending
COMMON
APPRAISAL
SECURITIES
DOCUMENTATION
INSPECTION

19. Syndicated LoanSyndicated Loan
 The corporate gives mandate to aThe corporate gives mandate to a
Bank based upon the evaluation ofBank based upon the evaluation of
various ‘Expression of Interest’various ‘Expression of Interest’
submitted by various bankssubmitted by various banks
 The lead Arranger/Manager is theThe lead Arranger/Manager is the
entity which wins the mandateentity which wins the mandate
 The lead manager preparesThe lead manager prepares
Information Memorandum [ IM ]Information Memorandum [ IM ]

20. Syndication loanSyndication loan
 The IM is circulated by the Lead ManagerThe IM is circulated by the Lead Manager
for seeking commitments of different banksfor seeking commitments of different banks
 Based upon the response, Syndicate isBased upon the response, Syndicate is
formed of Banks/ FIs interested in lendingformed of Banks/ FIs interested in lending
to the Corporateto the Corporate
 Syndicate agrees for common secuirities,Syndicate agrees for common secuirities,
rate of interest, margin, commonrate of interest, margin, common
documentation common date for fundingdocumentation common date for funding
generally after a specific period from thegenerally after a specific period from the
signing ceremonysigning ceremony

21. Syndicated loanSyndicated loan
 Signing ceremony is attended by theSigning ceremony is attended by the
corporate borrower, and all thecorporate borrower, and all the
members of the Syndicate. All themembers of the Syndicate. All the
documents are signed in this meetingdocuments are signed in this meeting
 Funding of the Loan account by theFunding of the Loan account by the
syndicate members.syndicate members.
 Sharing of Syndicate commissionSharing of Syndicate commission
 Release of Tomb stone’ advertisementRelease of Tomb stone’ advertisement

22. CORPORTE BORROWER
BEAUTY PARADE
Invites bids
Syndicate Manager
INFORMATION MEMORANDUM
SYNDICATE FORMATION
SIGNING CEREMONY
TOMB STONE ADVERTISEMENT
SYNDICATE LOAN PROCEDURE

23. Non Funded ServicesNon Funded Services
 Letter of CreditLetter of Credit
Letter from a bank guaranteeing that a buyer's payment to a sellerLetter from a bank guaranteeing that a buyer's payment to a seller
will be received on time and for the correct amount.will be received on time and for the correct amount.
 Bank guaranteeBank guarantee
A bank guarantee is a one-way contract between a bank as theA bank guarantee is a one-way contract between a bank as the
guarantor and a beneficiary as the party to whom a guarantee isguarantor and a beneficiary as the party to whom a guarantee is
mademade

24. Non Funded ServicesNon Funded Services
 Collection of documentsCollection of documents
Full-fledged trade finance set-up catering to all trade relatedFull-fledged trade finance set-up catering to all trade related
requirements which offers the following advantagesrequirements which offers the following advantages
 Better turn around time through timely processing of documentsBetter turn around time through timely processing of documents
 Faster payments: constant follow-ups with correspondent banksFaster payments: constant follow-ups with correspondent banks
ensure timely recovery of funds from buyers as well as timelyensure timely recovery of funds from buyers as well as timely
payments to supplierspayments to suppliers
 Lower cost Access to vast correspondent banking network forLower cost Access to vast correspondent banking network for
better reachbetter reach
 Excellent trade support Arrangement of credit reports of overseasExcellent trade support Arrangement of credit reports of overseas
partiesparties
 Specialized advice on international trade related issues as well asSpecialized advice on international trade related issues as well as
technical issues such as ECM requirements, RBI reporting, latesttechnical issues such as ECM requirements, RBI reporting, latest
circulars and latest international developmentscirculars and latest international developments

25. Value Added ServicesValue Added Services
 Loan SyndicationLoan Syndication
 Real time Gross SettlementReal time Gross Settlement
For settling transactions of financial institutions,For settling transactions of financial institutions,
especially banks.especially banks.
 Cash Management ServiceCash Management Service
The management of the cash balances of an enterprise inThe management of the cash balances of an enterprise in
such a fashion as to maximize the availability of cash notsuch a fashion as to maximize the availability of cash not
invested in fixed assets or inventories and also so as to avoidinvested in fixed assets or inventories and also so as to avoid
the risk of insolvencythe risk of insolvency
 Channel FinancingChannel Financing
Channel Finance is to provide integrated commercial andChannel Finance is to provide integrated commercial and
financial solutions to the supply and distribution channels of afinancial solutions to the supply and distribution channels of a
given industry. Channel Finance gives support to the commercialgiven industry. Channel Finance gives support to the commercial
relationship between clients and their suppliers and customersrelationship between clients and their suppliers and customers

27. Import Trade CreditImport Trade Credit
●
Credit extended for importsCredit extended for imports
directly bydirectly by
●
Banks/FIs abroadBanks/FIs abroad
●
overseas suppliersoverseas suppliers
●
For original maturity of less thanFor original maturity of less than
three yearsthree years

28. IMPORT TRADE CREDITIMPORT TRADE CREDIT
●
ADs permitted to approve trade credits forADs permitted to approve trade credits for
imports in to India up to USD 20 m perimports in to India up to USD 20 m per
Import transaction with maturity period up toImport transaction with maturity period up to
one year[from the date of shipment],for allone year[from the date of shipment],for all
permissible itemspermissible items
●
Ads can approve trade credits up to USD20mAds can approve trade credits up to USD20m
for import of capital goods with maturity offor import of capital goods with maturity of
more than one year and less than 3 yearsmore than one year and less than 3 years

29. ALL IN COSTSALL IN COSTS
●
Up to one yearUp to one year
maturitymaturity
●
More than oneMore than one
year and lessyear and less
than threethan three
yearsyears
●
LIBOR+200bpLIBOR+200bp
●
LIBOR+200bpLIBOR+200bp

30. ADs GUARANTEESADs GUARANTEES
Ads may issue any guarantee,Ads may issue any guarantee,
letter of undertakingletter of undertaking
or letter of comfortor letter of comfort
in favour of overseas lendersin favour of overseas lenders
without RBI approvalwithout RBI approval

31. External Commercial
BorrowingsBorrowings by Business Community from Foreign
Sources
ECBs are defined to include
 commercial banks loans.
Buyer’s credit, supplier’s credit
 securitised instruments such as floating rate notes,
fixed rate bonds etc.
 from eligible lenders with minimum average maturity
of 3 years
ECB policy for fiscal year as a part of prudent debt
management has ceiling of USD 15 bn announced for the
year 2006-07 [USD12 bn in2005-06] with a sub limit of
USD 250m of corporate debt buying by FIIs

32. Purpose
ECB can be raised for investment [import of capital
goods] in new projects or expansion ,modernisation of
existing production capacity in real sector-industrial
sector including SMEs and infrastructure sector in
India
prepayments of previous high costs ECBs up to
USD200m
Housing Finance companies can issue FCCBs with
approval from RBI
 for investments in the Disinvestment programme of
the Govt

33. Automatic Route
All in cost ceilings for ECB
3-5 years maturity ----------300bp over LIBOR
>5 years maturity ----------500bp over LIBOR
All in cost includes Rate of interest, Other fees,
Expenses in FC
All in cost excludes Commitment fees ,prepayment fees
and fee payable in Indian Rupees

34. Amount and Maturity ofAmount and Maturity of
ECBECB
 < $20m< $20m
 >$20m < $500m>$20m < $500m
 $ 500m$ 500m
 $ 5m$ 5m
 Minimum averageMinimum average
maturity of 3 yearsmaturity of 3 years
 5 years5 years
 Corporate limit toCorporate limit to
raise ECB in araise ECB in a
financial yearfinancial year
 NGOs engaged inNGOs engaged in
MicrofinanceMicrofinance

35. FO REIGN C U RRENC Y :FO REIGN C U RRENC Y :
C APITALC APITAL
GDRs
ADRs
FCCBs
JV Partners
Private Equity Investors
F.D. I.
FIIs

36. Thank YouThank You