1. The document discusses the various types of credit facilities sanctioned by banks including fund based facilities like cash credit, term loans, etc. and non-fund based facilities like letters of credit and guarantees.
2. It provides details on the credit appraisal process undertaken by banks which involves collecting documents from applicants, conducting risk ratings, verification checks, site visits and analysis of viability before sanctioning loans.
3. The key aspects of credit appraisal covered are the different types of loans, the process flow from application to sanction, checks and validations performed.
1) The banking industry in India has become highly competitive which has increased the need for banks to focus on customer retention through high quality services.
2) It is important for banks like ICICI Bank to understand customer satisfaction levels and the key drivers of satisfaction to improve services, gain a competitive advantage, and increase customer retention.
3) Analyzing ICICI Bank's financial performance and service quality allows them to identify areas for improvement and better meet customer needs and expectations.
This document provides an overview of the research methodology used in a study on the e-banking facilities of Kotak Mahindra Bank. It outlines the objectives of studying customer satisfaction and awareness of e-banking services. A descriptive research method was used with a sample of 200 e-banking customers of Kotak Bank in Ahmedabad collected through a questionnaire. The document introduces Kotak Mahindra Bank and the importance of studying their e-banking services to better understand customer usage and perceptions.
State Bank of India (SBI) is India's largest bank with over 14,000 branches and 32,000 ATMs. It was established in 1955 and nationalized in 1969. SBI has a large domestic and international presence with over 180 overseas offices. Some key points:
- Deposits have risen to Rs. 12 trillion with 15% annual growth, while advances crossed Rs. 10 trillion with 21% growth.
- It has expanded its branch network by 719 branches to a total of 14,816 branches, with 66% located in rural/semi-urban areas.
- SBI has subsidiaries in Canada, California, and several other countries around the world.
- Major
Summer internship report submitted to State Bank of India on the topic - “Yo...Deepanjan Das
A Summer internship report submitted to State Bank of India on the topic - “Youth and SBI - Connected or Disconnected”.
Research work done from May 15th 2013 to July 15th 2013.
60 days/ 2 months internship program.
This document is a research project report submitted in partial fulfillment of a Master of Business Administration degree. It examines the service quality of HDFC Bank through a survey conducted at two of its branches. The report includes an introduction, company profile of HDFC Bank, literature review on service quality in banks, research objectives, methodology, data analysis, findings, conclusions, and recommendations. It was supervised by Dr. Bhupinder Chahal and submitted by Prikshit Chauhan in April 2017 at Chandigarh University.
The document is a project report on the financial analysis of ICICI Bank submitted by Gaurav Narang to HP University, Shimla in partial fulfillment of a Bachelor of Business Administration degree. It includes a certification letter signed by the project guide, Mr. Ankur Mahajan, acknowledging Gaurav Narang's work. There is also an acknowledgement section thanking various people for their assistance and support. The table of contents outlines the various chapters to be included in the analysis of ICICI Bank's financial performance.
General banking activities and financial analysis of Agrani Bank LtdShah Meraz Rizvi
This internship report summarizes the general banking activities and financial analysis of Agrani Bank Limited conducted by Md. Shah Meraz Rizvi for his Bachelor's degree. The report includes an analysis of ABL's organizational structure, general banking operations across departments like cash, clearing and remittance. It also performs a financial analysis of ABL using ratios like return on equity, assets, net interest margin and earnings per share. The concluding chapters discuss Rizvi's internship experience, findings on ABL's shortcomings and recommendations to address them.
1) The banking industry in India has become highly competitive which has increased the need for banks to focus on customer retention through high quality services.
2) It is important for banks like ICICI Bank to understand customer satisfaction levels and the key drivers of satisfaction to improve services, gain a competitive advantage, and increase customer retention.
3) Analyzing ICICI Bank's financial performance and service quality allows them to identify areas for improvement and better meet customer needs and expectations.
This document provides an overview of the research methodology used in a study on the e-banking facilities of Kotak Mahindra Bank. It outlines the objectives of studying customer satisfaction and awareness of e-banking services. A descriptive research method was used with a sample of 200 e-banking customers of Kotak Bank in Ahmedabad collected through a questionnaire. The document introduces Kotak Mahindra Bank and the importance of studying their e-banking services to better understand customer usage and perceptions.
State Bank of India (SBI) is India's largest bank with over 14,000 branches and 32,000 ATMs. It was established in 1955 and nationalized in 1969. SBI has a large domestic and international presence with over 180 overseas offices. Some key points:
- Deposits have risen to Rs. 12 trillion with 15% annual growth, while advances crossed Rs. 10 trillion with 21% growth.
- It has expanded its branch network by 719 branches to a total of 14,816 branches, with 66% located in rural/semi-urban areas.
- SBI has subsidiaries in Canada, California, and several other countries around the world.
- Major
Summer internship report submitted to State Bank of India on the topic - “Yo...Deepanjan Das
A Summer internship report submitted to State Bank of India on the topic - “Youth and SBI - Connected or Disconnected”.
Research work done from May 15th 2013 to July 15th 2013.
60 days/ 2 months internship program.
This document is a research project report submitted in partial fulfillment of a Master of Business Administration degree. It examines the service quality of HDFC Bank through a survey conducted at two of its branches. The report includes an introduction, company profile of HDFC Bank, literature review on service quality in banks, research objectives, methodology, data analysis, findings, conclusions, and recommendations. It was supervised by Dr. Bhupinder Chahal and submitted by Prikshit Chauhan in April 2017 at Chandigarh University.
The document is a project report on the financial analysis of ICICI Bank submitted by Gaurav Narang to HP University, Shimla in partial fulfillment of a Bachelor of Business Administration degree. It includes a certification letter signed by the project guide, Mr. Ankur Mahajan, acknowledging Gaurav Narang's work. There is also an acknowledgement section thanking various people for their assistance and support. The table of contents outlines the various chapters to be included in the analysis of ICICI Bank's financial performance.
General banking activities and financial analysis of Agrani Bank LtdShah Meraz Rizvi
This internship report summarizes the general banking activities and financial analysis of Agrani Bank Limited conducted by Md. Shah Meraz Rizvi for his Bachelor's degree. The report includes an analysis of ABL's organizational structure, general banking operations across departments like cash, clearing and remittance. It also performs a financial analysis of ABL using ratios like return on equity, assets, net interest margin and earnings per share. The concluding chapters discuss Rizvi's internship experience, findings on ABL's shortcomings and recommendations to address them.
This document is a summer project report submitted by Sapna Sharma to HDFC Bank in Jaipur, India to fulfill requirements for a post-graduate business management program. The report analyzes HDFC Bank's mortgage and gold loan processes and customer satisfaction with gold loans. It includes an introduction, company profile of HDFC Bank, analysis of HDFC's loan against property and gold loan products, a comparison of these products to other banks, a customer satisfaction survey, SWOT analyses, findings, suggestions and conclusions.
The document discusses the research methodology used for a study on consumer awareness of SBI Bank. It involved a survey of 150 respondents using a structured questionnaire. The objectives were to understand consumer preference for banks, awareness of SBI Bank's products and services, and to identify potential customers. A descriptive research design with cross-sectional approach was used. The study aims to help SBI Bank identify new customer segments and improve their services.
State Bank of India (SBI) is India's largest bank with over 200 years of history. It has a large network of over 14,000 branches across India and 73 overseas offices. SBI offers a wide range of corporate, commercial, and retail banking services. Some key points about SBI include its large size and market share in India, acquisition of banks in other countries, and recognition as one of the oldest and most established banks in India. The document provides an overview of SBI's history, operations, management, products, and awards.
The document presents a study on customer satisfaction with banks in India. It outlines the objectives to analyze attributes that influence customer satisfaction and compare satisfaction levels between public and private sector banks. The study uses a survey methodology to collect primary data from 120 bank customers in Hyderabad on their satisfaction with initial experiences, service delivery, relationships, and more across various banks.
The document is a project report submitted by Rajesh Kumar to the National Institute of Technology on retail banking with reference to Allahabad Bank. It includes an executive summary, introduction, company and industry profiles, data collection methodology, findings, suggestions and conclusions. The report analyzes various aspects of Allahabad Bank's retail banking operations including its products and services, workflow, McKinsey's 7S framework, research methodology and customer feedback.
This document provides an overview of State Bank of India (SBI), including its history, operations, subsidiaries, competitors, and awards. Some key points:
- SBI is India's largest bank by assets and has a network of over 17,000 branches across India and 180 international offices.
- It has roots dating back to 1806 and was formed by the merger and nationalization of various state-associated banks.
- In addition to traditional banking, SBI has numerous non-banking subsidiaries and five associate banks that operate under the SBI brand.
- Major competitors in the public sector space include Punjab National Bank and major private sector competitors include HDFC Bank.
- SBI has received
“A study on the Service quality of HDFC bank & SBI bank.”Vatsal Patel
This document provides an overview of the banking industry in India. It discusses key topics such as the major services offered by banks including payment services, financial intermediation, financial services, and ancillary services. It also outlines some of the major players in the industry, how banking contributes to India's GDP, the growth drivers of the industry including rising incomes and population, key sectors such as housing and personal finance, and trends in banking like increasing digitization and the rise of mobile banking. The document serves as an introduction to understanding the Indian banking landscape.
Internship Report On Green Banking (A study on EXIM Bank Limited)Tan E mul Adnan
This document provides an overview of EXIM Bank Bangladesh Limited, including its history, vision, mission, objectives, products and services. EXIM Bank was established in 1999 and provides both conventional and Islamic banking services. The document outlines the bank's organizational structure and describes the intern's responsibilities and learning experience working in the bank's general banking department at the Dohazari branch for two months. It also introduces the concept of green banking and EXIM Bank's activities to promote environmental sustainability.
This document analyzes the SWOT of private sector banks in India. It discusses their evolution since the early 20th century and present scenario. Private banks have strengths like professional manpower, efficiency, and compliance with regulations. Their weaknesses include limited geographic reach and high employee turnover. Opportunities exist in decision making autonomy and technology, while threats include competition from foreign and public sector banks. Specific SWOT analyses are also provided for ICICI Bank, Kotak Bank, and Axis Bank.
All about the Bajaj Finserv, BOD's, Loan Procedure, scope Of study, Need of study, Vision and Mission, Organisational structure, product, all about EMI card of Bajaj finserv, CBC
A Project Report on Public Sector Bank (Punjab National Bank & UCO Bank)Anant Kumar Behera
This document provides an overview of a project report on public sector banks in India, specifically Punjab National Bank and UCO Bank. It includes an introduction, objectives, research methodology, background on the banking industry and its history in India. It then profiles each bank individually, covering their introduction, history, mission, branches, products/services, awards, and financial analysis. Finally, it includes a comparative analysis of the two banks and discusses findings. The document contains the typical sections one would expect to see in an academic project report.
This document provides details about a project report submitted to Balaji Institute of Telecom and Management. The project focuses on the impact of non-human banking channels like net banking on customer engagement. It acknowledges those who provided guidance and support. It then outlines the objectives, research methodology, data collection process and analysis plan for the project. The document also provides background information on HDFC Bank, including its history, operations, management and distribution network.
The document is an internship report submitted by Mayank Mulchandani to Medi-Caps University for their MBA program. It details their 8 week internship at State Bank of India in the Credit Division. It includes sections on the company profile of SBI, describing it as a major public sector bank in India. It provides information on SBI's history dating back to 1806, its current position and services offered which include personal, rural, SME and corporate banking. The report was prepared under the supervision of Mr. Prakash Kumar Shukla, Branch Head of SBI's MG Road branch.
This document is a project report submitted by Ashish Kumar Yadav to Indira Institute of Business Management in partial fulfillment of a Master of Management Studies degree from the University of Mumbai. The project analyzes investments in Birla Sun Life Insurance. It includes a declaration by Ashish Kumar Yadav that the work is original, a certificate from the project guide confirming completion of the work, and an acknowledgements section thanking various individuals and organizations for their support and contributions. The report also includes an executive summary, table of contents, and outlines the objectives, scope, and limitations of the study.
summer internship project report on union bank of indiaabhishek rane
The document is a summer internship report submitted by Abhishek Krishnakumar Rane for their Master of Management Studies program through BES's Institute of Management Studies and Research. The report discusses a project conducted at Union Bank of India on opportunities in the power sector and assessing credit viability of power projects. It provides an overview of Union Bank of India, including its vision, mission, history and products/services. It also examines the bank's financial performance, strategies, and departments like marketing, finance, and HR. The report aims to gain comprehensive knowledge of the power sector and analyze various aspects of power project financing in India.
Credit appraisal in sbi bank project6 report Babasab Patil
The document discusses the banking sector in India. It notes that the Reserve Bank of India closely monitors the financial sector, which is dominated by scheduled commercial banks including public, private, foreign, and regional rural banks. It then focuses on providing details about the State Bank of India, noting that it is the largest bank in India with over 8,500 branches and that it is undergoing changes to modernize and expand its services to compete better. The document also provides a brief overview of the classification and reforms of the banking system in India.
Term loans provided by Indian banks can be used to finance the acquisition of fixed assets and working capital. They typically have fixed interest rates and repayment schedules between 1 to 10 years. Banks consider various factors when evaluating term loan applications such as the creditworthiness, reputation, profitability, and financial ratios of the borrower. If approved, loans are disbursed after a thorough financial appraisal of the borrower's cash flows, credit needs, and ability to repay the loan. Syndicated loans involve a group of lenders organized by one or more arranging banks.
This document is a summer project report submitted by Sapna Sharma to HDFC Bank in Jaipur, India to fulfill requirements for a post-graduate business management program. The report analyzes HDFC Bank's mortgage and gold loan processes and customer satisfaction with gold loans. It includes an introduction, company profile of HDFC Bank, analysis of HDFC's loan against property and gold loan products, a comparison of these products to other banks, a customer satisfaction survey, SWOT analyses, findings, suggestions and conclusions.
The document discusses the research methodology used for a study on consumer awareness of SBI Bank. It involved a survey of 150 respondents using a structured questionnaire. The objectives were to understand consumer preference for banks, awareness of SBI Bank's products and services, and to identify potential customers. A descriptive research design with cross-sectional approach was used. The study aims to help SBI Bank identify new customer segments and improve their services.
State Bank of India (SBI) is India's largest bank with over 200 years of history. It has a large network of over 14,000 branches across India and 73 overseas offices. SBI offers a wide range of corporate, commercial, and retail banking services. Some key points about SBI include its large size and market share in India, acquisition of banks in other countries, and recognition as one of the oldest and most established banks in India. The document provides an overview of SBI's history, operations, management, products, and awards.
The document presents a study on customer satisfaction with banks in India. It outlines the objectives to analyze attributes that influence customer satisfaction and compare satisfaction levels between public and private sector banks. The study uses a survey methodology to collect primary data from 120 bank customers in Hyderabad on their satisfaction with initial experiences, service delivery, relationships, and more across various banks.
The document is a project report submitted by Rajesh Kumar to the National Institute of Technology on retail banking with reference to Allahabad Bank. It includes an executive summary, introduction, company and industry profiles, data collection methodology, findings, suggestions and conclusions. The report analyzes various aspects of Allahabad Bank's retail banking operations including its products and services, workflow, McKinsey's 7S framework, research methodology and customer feedback.
This document provides an overview of State Bank of India (SBI), including its history, operations, subsidiaries, competitors, and awards. Some key points:
- SBI is India's largest bank by assets and has a network of over 17,000 branches across India and 180 international offices.
- It has roots dating back to 1806 and was formed by the merger and nationalization of various state-associated banks.
- In addition to traditional banking, SBI has numerous non-banking subsidiaries and five associate banks that operate under the SBI brand.
- Major competitors in the public sector space include Punjab National Bank and major private sector competitors include HDFC Bank.
- SBI has received
“A study on the Service quality of HDFC bank & SBI bank.”Vatsal Patel
This document provides an overview of the banking industry in India. It discusses key topics such as the major services offered by banks including payment services, financial intermediation, financial services, and ancillary services. It also outlines some of the major players in the industry, how banking contributes to India's GDP, the growth drivers of the industry including rising incomes and population, key sectors such as housing and personal finance, and trends in banking like increasing digitization and the rise of mobile banking. The document serves as an introduction to understanding the Indian banking landscape.
Internship Report On Green Banking (A study on EXIM Bank Limited)Tan E mul Adnan
This document provides an overview of EXIM Bank Bangladesh Limited, including its history, vision, mission, objectives, products and services. EXIM Bank was established in 1999 and provides both conventional and Islamic banking services. The document outlines the bank's organizational structure and describes the intern's responsibilities and learning experience working in the bank's general banking department at the Dohazari branch for two months. It also introduces the concept of green banking and EXIM Bank's activities to promote environmental sustainability.
This document analyzes the SWOT of private sector banks in India. It discusses their evolution since the early 20th century and present scenario. Private banks have strengths like professional manpower, efficiency, and compliance with regulations. Their weaknesses include limited geographic reach and high employee turnover. Opportunities exist in decision making autonomy and technology, while threats include competition from foreign and public sector banks. Specific SWOT analyses are also provided for ICICI Bank, Kotak Bank, and Axis Bank.
All about the Bajaj Finserv, BOD's, Loan Procedure, scope Of study, Need of study, Vision and Mission, Organisational structure, product, all about EMI card of Bajaj finserv, CBC
A Project Report on Public Sector Bank (Punjab National Bank & UCO Bank)Anant Kumar Behera
This document provides an overview of a project report on public sector banks in India, specifically Punjab National Bank and UCO Bank. It includes an introduction, objectives, research methodology, background on the banking industry and its history in India. It then profiles each bank individually, covering their introduction, history, mission, branches, products/services, awards, and financial analysis. Finally, it includes a comparative analysis of the two banks and discusses findings. The document contains the typical sections one would expect to see in an academic project report.
This document provides details about a project report submitted to Balaji Institute of Telecom and Management. The project focuses on the impact of non-human banking channels like net banking on customer engagement. It acknowledges those who provided guidance and support. It then outlines the objectives, research methodology, data collection process and analysis plan for the project. The document also provides background information on HDFC Bank, including its history, operations, management and distribution network.
The document is an internship report submitted by Mayank Mulchandani to Medi-Caps University for their MBA program. It details their 8 week internship at State Bank of India in the Credit Division. It includes sections on the company profile of SBI, describing it as a major public sector bank in India. It provides information on SBI's history dating back to 1806, its current position and services offered which include personal, rural, SME and corporate banking. The report was prepared under the supervision of Mr. Prakash Kumar Shukla, Branch Head of SBI's MG Road branch.
This document is a project report submitted by Ashish Kumar Yadav to Indira Institute of Business Management in partial fulfillment of a Master of Management Studies degree from the University of Mumbai. The project analyzes investments in Birla Sun Life Insurance. It includes a declaration by Ashish Kumar Yadav that the work is original, a certificate from the project guide confirming completion of the work, and an acknowledgements section thanking various individuals and organizations for their support and contributions. The report also includes an executive summary, table of contents, and outlines the objectives, scope, and limitations of the study.
summer internship project report on union bank of indiaabhishek rane
The document is a summer internship report submitted by Abhishek Krishnakumar Rane for their Master of Management Studies program through BES's Institute of Management Studies and Research. The report discusses a project conducted at Union Bank of India on opportunities in the power sector and assessing credit viability of power projects. It provides an overview of Union Bank of India, including its vision, mission, history and products/services. It also examines the bank's financial performance, strategies, and departments like marketing, finance, and HR. The report aims to gain comprehensive knowledge of the power sector and analyze various aspects of power project financing in India.
Credit appraisal in sbi bank project6 report Babasab Patil
The document discusses the banking sector in India. It notes that the Reserve Bank of India closely monitors the financial sector, which is dominated by scheduled commercial banks including public, private, foreign, and regional rural banks. It then focuses on providing details about the State Bank of India, noting that it is the largest bank in India with over 8,500 branches and that it is undergoing changes to modernize and expand its services to compete better. The document also provides a brief overview of the classification and reforms of the banking system in India.
Term loans provided by Indian banks can be used to finance the acquisition of fixed assets and working capital. They typically have fixed interest rates and repayment schedules between 1 to 10 years. Banks consider various factors when evaluating term loan applications such as the creditworthiness, reputation, profitability, and financial ratios of the borrower. If approved, loans are disbursed after a thorough financial appraisal of the borrower's cash flows, credit needs, and ability to repay the loan. Syndicated loans involve a group of lenders organized by one or more arranging banks.
The document discusses credit appraisal in the banking sector. Credit appraisal is the process used by banks to evaluate a loan applicant's creditworthiness before providing a loan. It involves investigating the applicant's financial condition, repayment capacity, collateral, and other factors. Banks consider the 3Cs - character, capacity, and collateral. The credit appraisal process at State Bank of India involves preliminary assessment, documentation, sanctioning/approval, disbursement, and post-sanction monitoring. SBI has quantitative and qualitative standards for credit appraisal and uses a rating scale to assess risk levels of borrowers.
Credit appraisal at central bank of indiaMayank Tailor
The document provides an overview of the global and local banking sector scenarios. It discusses that the Indian banking system has remained resilient amidst the global economic crisis while continuing to provide growth. It highlights that stress tests show that Indian banks are resilient to credit, market and liquidity risks. The survey results indicate that most respondents view the performance and shape of the Indian banking industry positively and feel it compares well with other sectors of the Indian economy. They also expressed positive views about the growth potential of the banking industry in the coming years.
This document is a declaration by Arpan Bhowmick, a student at IMIS Bhubaneswar, regarding their summer internship project report on credit appraisal at Bank of India. Bhowmick declares that the report was solely prepared by them and does not reveal any critical bank information. They also acknowledge that all secondary source information is properly cited in the report.
Credit appraisal for term loan and working capital financing with special ref...Sandeep Singh
This document appears to be a student project report submitted for a post-graduate diploma program. It discusses credit appraisal for term loans and working capital financing, with a focus on consortium banking. The report includes an acknowledgements section, table of contents, and 14 main sections discussing topics like the banking industry, Punjab National Bank, types of lending, methodology, case studies, and recommendations. The case study analyzes a term loan provided to an energy company and discusses India's power sector scenario.
CREDIT APPRAISAL PROCESS OF HDB FINANCIAL SERVICES pptsHarpreet Singh
This document appears to be a presentation summarizing an internship project studying credit appraisal policy at HDB Financial Services. The presentation covers the non-banking financial company industry and HDB Financial Services company profile. It then discusses the objectives of studying credit appraisal process, tools used, research design involving a survey, findings, recommendations, and conclusions. The objectives were to understand credit appraisal, the process, required tools, and loan terms and conditions. A survey of 50 loan applicants examined customer perceptions of HDB's services and funding. Findings included some loans being sanctioned due to strong financial statements despite higher risk. Recommendations included exceeding branch credit limits to reduce workload and strictly following policies. The conclusion was that
This document is a dissertation report submitted to Savitribai Phule University of Pune in partial fulfillment of a Master of Business Administration degree. The report studies the credit appraisal process of Shri Bhausaheb Thorat Amrutvahini Sahakari Bank Ltd. and The Sangamner Merchant Co-operative Bank Ltd. in Sangamner, India. It analyzes the banks' deposits, loans, non-performing assets, and profits for the year 2014. The report finds that The Sangamner Merchant Co-operative Bank has higher deposits, loans, and profits compared to Amrutvahini Bank. It also has a lower non-performing asset rate, indicating more
Credit Appraisal System IN Commercial Vehicle loans Undertaken at INDIA INFOL...Danish Dhaar
Summer Training Project Report on
Credit Appraisal System IN Commercial Vehicle loans
Undertaken at
INDIA INFOLINE FINANCE LTD
Submitted in Partial Fulfilment of the Requirement for the Award of the Degree of
Master of Business Administration
By
Danish Showkat Dhar
Roll No.14036113030
Reg. No.:-29437-IC-2011
Under The Supervision of
MR. Sachin Gupta
(AVP: CREDIT & OPS)
INDIA INFOLINE FINANCE LTD
DEPT. OF MANAGEMENT STUDIES
SOUTH CAMPUS UNIVERSITY OF KASHMIR
ANANTNAG
This document discusses credit ratings and the credit rating agencies in India. It provides information on:
- What credit ratings are and how they estimate creditworthiness
- The four major credit rating agencies in India: CRISIL, ICRA, CARE, and FITCH India
- The regulation of credit rating agencies by SEBI and the requirements for registration
This document discusses credit appraisal for working capital finance provided to small and medium enterprises (SMEs) by State Bank of India (SBI). It outlines various methods used by SBI to assess working capital needs and provide financing, including the Tandon Committee method, projected annual turnover method, and projected balance sheet method. The document analyzes SBI's loan policies, credit appraisal standards, and the use of financial ratios to evaluate credit risk. It also provides recommendations to improve SBI's support for SME working capital needs through measures like a rating system, relationship lending, and an IT-enabled application and monitoring system.
This document discusses credit appraisal systems for small and medium enterprises (SMEs) in India. It outlines the banking industry landscape and classifications. The research methodology involves analyzing case studies of loan applications using various financial tools and ratios to evaluate capital budgeting, risk, and overall financial position. The findings show the case studies were positively assessed based on financials. Suggestions include improving rating mechanisms, personnel skills, and customizing products while revising credit policies periodically. The conclusion is credit appraisal considers multiple factors beyond just financials, including business viability, industry, management quality and loan conduct.
The document discusses the process of credit appraisal at Dhanlakshmi Bank, which involves initially appraising the borrower/business through background checks and assessing managerial, commercial, technical, and financial capabilities. It then discusses appraising the credit requirement by structuring delivery, security, covenants. The appraisal process differs based on the segment - retail, small business, farming, MSMEs, or corporates. Key aspects of appraisal include the borrower's background, commercial factors, technical review, and financial analysis through computing key ratios. The document outlines various check points for due diligence like licenses, website, resumes, brochures, ROC searches, pre-sanction inspections, and
This document discusses various methods for analyzing agricultural credit and farm finance, including net present value (NPV) analysis, benefit-cost ratio (BCR) analysis, and internal rate of return (IRR) analysis. It provides examples of calculating NPV, BCR, and IRR for a fish farming project. It also discusses limitations of different methods and the importance of sensitivity analysis and considering distributional impacts.
HDFC Bank is a public bank founded in 1994 and headquartered in Mumbai, India. As of August 2008, it has over 1,200 branches, 2,500 ATMs, and serves over 440 cities across India. It has a diverse portfolio of banking products and services, including savings accounts, loans, insurance, and investment products. HDFC Bank has experienced significant growth in recent years, with sales increasing from Rs. 4,475 crore in FY2006 to Rs. 10,115 crore in FY2008.
This document provides an overview of credit rating agencies in India and their rating methodology. It discusses:
1) The history and need for credit rating agencies, which emerged in the US in the 19th century to address financial crises and provide transparency to investors.
2) The regulatory framework and prominent credit rating agencies in India, including CRISIL, ICAI, CARE and FITCH, which are regulated by SEBI.
3) The methodology adopted by these agencies for bond ratings and IPO gradings. Bond ratings consider various financial factors, while IPO gradings in India provide an indication of the potential of companies.
4) A case study of IPO grading for Ratn
1) The banking industry in India comprises of 27 public sector banks, 31 private banks, and 29 foreign banks. State Bank of India is the largest bank with over 17,000 branches across India and 190 foreign offices.
2) The study examines job satisfaction among employees of the Malegaon branch of State Bank of India. Factors like remuneration, training, communication, goals, teamwork, and work environment were assessed.
3) Most employees reported being satisfied with remuneration, medical benefits, and training facilities. Some felt communication with superiors could be improved. Suggestions included improving computer skills, rewarding teamwork, and conducting informal social events for employees.
Axis Bank is the third largest private sector bank in India that offers financial services to customers including large and mid-sized corporations, MSMEs, agriculture, and retail businesses. It has its headquarters in Mumbai, Maharashtra and was one of the first private banks to begin operations in 1994 under the original name of UTI Bank. Axis Bank operates over 2,400 branches across India and has the largest ATM network among private banks in India.
This document provides information on credit ratings in India. It discusses the historical origins and development of credit ratings starting in the 1840s in the US in response to financial crises. It notes that credit ratings were introduced more recently in India, with the first agency, CRISIL, established in 1988. It outlines the importance of credit ratings for investors, issuers, intermediaries and regulators. It also examines factors that contribute to the success of credit rating agencies in India such as analytical credibility and independence from interested market forces.
The document discusses the steps involved in credit appraisal and disbursal. It begins by providing an overview of credit appraisal, which involves evaluating a customer's creditworthiness and ability to repay a loan. It then describes the credit appraisal process, which includes receiving an application, documents, site visits, risk checks, valuation reports, proposal preparation, sanctioning, and disbursement. Key factors considered are character, capacity and collateral of the borrower. The document also briefly discusses types of loans and credit before detailing the loan administration and pre-sanction process.
This document provides an internship report on the credit risk management of Best Capital Services Limited in Jaipur, India. It begins with an acknowledgment section thanking various individuals and organizations for their support and contributions. It then includes an executive summary that overviews the report's objectives, methodology, findings on the company's credit processes and risk management procedures, and recommendations. The document also contains sections on the organization's profile, credit risk management principles and tools, an analysis of the company's loan portfolio, and a SWOT analysis. In under 3 sentences, this internship report examines the credit risk management practices of an Indian financial services company and provides recommendations based on the author's analysis during their internship.
This document provides details about Pratik Parulekar's summer internship project at the Overseas Branch of Bank of Maharashtra. The objectives of the project were to study credit appraisal and analysis through hands-on experience with domestic and foreign currency cases. The project involved analyzing client accounts and financial feasibility of loan requests. The document provides background information on Bank of Maharashtra and discusses different types of lending arrangements like sole banking, consortium lending, and their advantages and disadvantages. It also includes a literature review covering credit appraisal process, risk assessment, and key terms related to lending.
Analysis of Deposit Schemes and Investment Mode of Pubali Bankakashcreation
This document provides an overview of an internship report submitted by Bristi Dey Joya to fulfill the requirements of a Bachelor of Business Administration degree. The report analyzes the deposit schemes and investment modes of Pubali Bank Limited's Chakbazar branch in Chattogram. The summary includes an introduction to Pubali Bank, acknowledgments, table of contents, and outlines of each chapter. Key points covered are the bank's background, management structure, vision and mission, financial position, literature review on deposit management and investment policies, theoretical aspects of PBL's deposit schemes and investment modes, and analysis of deposit schemes and investments at the Chakbazar branch.
An Internship report on Evaluation of Credit Risk managementSohag Jafrul
Vice Chairman
Managing Director
Deputy Managing Director
Senior Executive Vice President
Executive Vice President
Senior Vice President
Vice President
Senior Assistant Vice President
First Assistant Vice President
Assistant Vice President
Senior Principal Officer
Principal Officer
Senior Executive Officer
Executive Officer
Senior Officer
Officer
Junior Officer
Trainee Assistant Officer
2.9 Organization Structure:
The organizational structure of Southeast Bank Limited is divided into two broad categories:
1. Head Office
2. Branches
Head Office:
The head office is located in Dhaka. All policy decisions, planning & development, monitoring &
An internship report on evaluation of credit risk managementSohag Jafrul
Vice Chairman
Managing Director
Deputy Managing Director
Senior Executive Vice President
Executive Vice President
Senior Vice President
Vice President
Senior Assistant Vice President
First Assistant Vice President
Assistant Vice President
Senior Principal Officer
Principal Officer
Senior Executive Officer
Executive Officer
Senior Officer
Officer
Junior Officer
Trainee Assistant Officer
2.9 Organization Structure:
The organizational structure of Southeast Bank Limited is divided into two broad categories:
1. Head Office
2. Branches
Head Office:
The head office is located in Dhaka. All policy decisions, planning & development, monitoring &
This document is an internship report submitted by Sabiha Akter to analyze the credit risk management of Shimanto Bank Ltd. It contains 5 chapters that discuss the introduction, company overview, conceptual framework, analysis, and findings. The report aims to evaluate Shimanto Bank's credit risk management performance using various ratios and trend analysis related to credit risk. It provides an overview of the bank's vision, mission, products, and credit risk grading system. The analysis chapter contains calculations of financial leverage, capital adequacy ratio, classified loans, and other metrics to assess the bank's credit risk management. Overall, the report analyzes Shimanto Bank's credit risk management policies and practices.
Credit Analysis and Risk Management of Standard Bank LimitedAriful Saimon
An Internship Report
On
“Credit Analysis and Risk Management of Standard Bank Limited”
Submitted to:
Mrs. Tanbina Tabassum
Assistant Professor
Department of Finance
Faculty of Business Studies
Premier University, Chittagong.
Submitted by:
Md. Shahadat Hossain
ID: 1502220802160
Major: Finance
Program: MBA (1 year), Batch: 22nd
Premier University
Date of Submission:
The document summarizes the credit appraisal process at Kotak Mahindra Bank Ltd. It discusses collecting financial and background information on borrowers, checking for any negative history, analyzing the industry and competitors, evaluating financial projections and security, conducting site visits and reference checks, assessing credit limits, and ongoing credit monitoring and reviews. The goal is to thoroughly evaluate borrowers' creditworthiness, structure facilities appropriately, and safeguard against risks of default.
An Internship Report on Clearing System of Dhaka Bank Limited, Kakrail Brach. Which is the mandatory task of Accounting & Information Systems of Jagannath University, Dhaka. In this report, I tried my best to make this perfect & informative & enough exposure to my 3 month internship period.
The Basel Committee on Banking Supervision introduced stricter Basel III regulations after the 2008 financial crisis to strengthen banks' capital requirements and promote a more resilient banking sector. The key changes included higher minimum capital requirements, a capital conservation buffer, a countercyclical capital buffer, strengthened capital treatment for trading book exposures and securitizations, more stringent counterparty credit risk rules, and the introduction of a non-risk-based leverage ratio. The regulations aimed to reduce systemic risk, improve risk management practices, and promote a safer banking system overall.
Sarah Alam, a student of MBA, ID; 14164019 has completed internship report on “Deposit Analysis of Mercantile Bank Ltd.” as a partial requirement for obtaining MBA degree. I have read the report and found that it meets the standard of MBA internship reports Sarah Alam has completed the report by herself under my supervision
The document provides background information on a report about the loan disbursement and recovery system of NCC Bank Limited in Bangladesh. It discusses the objectives, scope, methodology and limitations of the study. The study aims to understand NCC Bank's lending activities, products, terms and conditions as well as identify processes, problems and make recommendations for loan disbursement and recovery. It uses interviews and a survey of 30 officers and customers for primary data collection and analysis.
This document provides information about an internship report submitted by Nishat Tasnim to their supervisor Ummahani Akter on the credit risk management system of National Bank Limited. The report includes an introduction, organization profile of National Bank Limited, analysis of their financial performance from 2011-2015, overview of credit risk and its management, and National Bank Limited's approach to credit risk management. It also discusses their credit policy, risk assessment process, credit approval process, monitoring, and recovery. The document aims to analyze National Bank Limited's credit risk management system based on information from their website and annual reports.
This report summarizes the credit risk management system of National Bank Limited (NBL) in Bangladesh. It provides background on NBL, including its vision, mission, management structure, products and financial performance from 2011-2015. The report then discusses credit risk and NBL's credit risk management policies, including its credit guidelines, risk assessment process, credit approval process, and credit recovery procedures. It analyzes NBL's credit portfolio mix and risk management strategies. Finally, the report provides recommendations to strengthen NBL's credit risk management and concludes with key findings.
The study is to analyze the credit management-A Study on Prime Bank Ltd.Ariful Saimon
INTERNSHIP REPORT
ON
The study is to analyze the credit management
A Study on Prime Bank Ltd
PREPARED FOR
Mr.Rajib Datta
Assistant Professor
Department Of Finance
Faculty of Business Administration
Premier University
Chittagong
PREPARED BY
Md Ariful Islam Saimon Chowdhury
ID. No: 150-22080-2147
Section: A
Major: Finance
Batch: 22nd
MBA Program
Premier University
Date of Submission: 11/05/2017
Customers Perception on General Bamking Activities Of Prime Bank Limited 3.pdfShuvoDey12
The document includes a letter of transmittal, approval certificate, letter of student's declaration, and acknowledgement regarding an internship report submitted by Shuvo Dey on customers' perceptions of general banking activities at Prime Bank PLC's Patuatuly Branch. Shuvo completed a 90-day internship and concentrated efforts to achieve the report's objectives. The practical experience gained will benefit his future career. The approval certificate confirms Shuvo performed the internship properly under supervision.
This document provides an overview of HDB Financial Services Limited, a non-banking financial company subsidiary of HDFC Bank. It discusses the types of loans offered (secured and unsecured personal loans), business operations, and regulatory registration. The summary focuses on key details about the company's loan products, target customer segment of small borrowers under Rs 3 Crores, and status as a registered NBFC with the Reserve Bank of India.
The principal function of each and every bank is to acquire deposits and provide loan. Every people
have faith on the bank and save their money for securities and getting some interest. Bank performs
truthful position to maintain its functions properly. They collect cash from them as credit score
and provide loan to the needy people in exchange of some interest. The profitability of bank in the
mainly rely on well management of the bank. For ensuring its suitable functions, banks need to
maintain its liquid assets and liabilities.
Throughout this internship report I’m going to speaking about the liquidity management of Janata
Bank Ltd. and its corresponding aspect. My internship report has been divided in some chapter on
the basis of understanding the study. Additionally, I’ve discussed the management method of
Janata Bank Ltd. and structure of the bank that will help to get primary notion about the Janata
Bank Ltd and scope and limitations that I confronted in times of getting ready this report. I tried
my best to encompass some introductory contents about the report I have selected. I firmly think
that this will assist to get a clear view about the exclusive functions of Janata Bank Ltd.
As my topic is about liquidity management of Janata Bank Ltd. so it’s required to give view about
the core issue of the liquidity management of the Janata Bank Ltd. Additionally, I’ve brought the
liquidity management guideline of Bangladesh Bank and tried my best to collect facts about the
liquidity management of Janata Bank Ltd. that the bank has conducted. All these records about the
SLR and CRR condition of Janata Bank Ltd have considered in preparing the report. Liquidity
management refers the management of the liquid assets and maintains reserves to attain goals
following the rules and regulations of the Bangladesh Bank. Loan and advances management of a
bank has significant effect on the liquidity risk of the bank. So Janata Bank Ltd. evaluates the
applicant for a loan carefully to provide loan a right person. In every stages of works of Janata
Bank Ltd. have to follow the guidelines and regulations of central bank of Bangladesh. The
internship program helps me to know the management process of the Janata Bank Ltd.
Finally, I would like say that, Liquidity management is core issue of bank financial management,
so every bank should keep careful attention on the liquidity management of the bank.
1. 1 | P a g e
A
PROJECT REPORT
ON
“TO STUDY THE PROCESS OF CREDIT APPRAISAL,
RISK RATING & CREDIT MONITORING SYSTEM IN PUNJAB
NATIONAL BANK”
By:-
Sayan Sarkar
Enrolment No: 14BSPHH010638
UNDERTAKEN AT –
PUNJAB NATIONAL BANK (Circle Office), KOLKATA
2. 2 | P a g e
A REPORT ON
“TO STUDY THE PROCESS OF CREDIT APPRAISAL,
RISK RATING & CREDIT MONITORING SYSTEM IN PUNJAB NATIONAL
BANK”
By:-
Sayan Sarkar
Enrolment No: 14BSPHH010638
A report submitted in partial fulfillment of the requirement of MBA program,
IBS Hyderabad
Submitted to:
Mrs. Sharmistha Dasgupta, Senior Manager, PNB, CO, Kolkata
Mrs. Swatee Das, Senior Manager, PNB, CO, Kolkata
Prof. Dipanjan Kumar Dey
Faculty Guide
3. 3 | P a g e
AUTHORIZATION
11th
May 2015
(To whomsoever it May Concern)
This is to certify that, Sayan Sarkar, Enrol No: 14BSPHH010638 student of IBS-Hyderabad, has
undertaken his Summer Internship Program (SIP) from our bank at Circle Office at A.G. Towers (3rd
Floor) 125/1,Park Street,Kolkata-700017 from 23/02/2014 -11/05/2014 for the project titled “To study
the process of Credit Appraisal, Risk Rating and Credit Monitoring System in Punjab National
Bank” under our supervision.
The bank has no objection if Sayan Sarkar:
1. Participates for IBS Alumni Federation Award (IBSAF) for Excellence in SIP-2015,being
conducted by IBS and share findings of the project for academic purposes and
2. Uses the bank name for the abstract of the above project in public domain, if selected for the
award.
We wish him well for all his future endeavors.
Sharmistha Dasgupta Swatee Das
Senior Manager, Credit Senior Manager, Credit Risk Management
Punjab National Bank Punjab National Bank
Circle Office Circle Office
Kolkata Kolkata
4. 4 | P a g e
ACKNOWLEDGEMENT
I would take this opportunity to express my sincere gratitude to all the people who for their
valuable assistance and continuous support during my Summer Internship Program.
Firstly, I would like to thank B.S. Mann, Circle Head, Punjab National Bank, and Mr.
Sagnik Chatterjee, Deputy General Manager (FGM office) Kolkata for their confidence in
me and giving me opportunity to work in the organization.
I am highly grateful and obliged to my bank guides, Mrs. Sharmistha Dasgupta, Senior
Manager - Credit and Mrs. Swatee Das, Senior Manager – Credit Risk Management,
Punjab National Bank, Kolkata for their guidance and support at each and every stage
during development of the project. Their guidance, inputs and suggestions have played a
crucial role at every stage in the development of the project and I had gained a lot of
knowledge from them.
I would also like to thank Mr. Suvro Dasgupta, Manager, PNB (Barabazar Branch), for his
insights and guidance in learning “Preventive monitoring system” which is a part of post
sanction follow up. His inputs also helped in the development of the project.
A heartfelt gratitude to Prof. Dipanjan Kumar Dey, Faculty IBS Hyderabad, my faculty
guide, with his continuous guidance throughout the program helped me to complete this
project in a timely and systematic manner.
.
5. 5 | P a g e
DECLARATION
This is to certify that the thesis titled “TO STUDY THE PROCESS OF CREDIT
APPRAISAL, RISK RATING & CREDIT MONITORING SYSTEM IN PUNJAB
NATIONAL BANK” is a bonafide work done by Sayan Sarkar, Enrolment Number:
14BSPHH010638 in partial fulfillment of the requirements of MBA Program and
submitted to IBS Hyderabad.
I also declare that this project is a result of my own efforts and that it has not been copied
from anyone and I have taken only citations from the literary resources which are
mentioned in the Bibliography section.
Place: Kolkata
Date: 11th
May, 2015
6. 6 | P a g e
TABLE OF CONTENT
Sr. No. Particulars Page
Number
i. Authorization 3
ii. Acknowledgement 4
iii. Declaration 5
iv. Executive Summary 8-9
1. Credit Appraisal 10
1.1 Facilities sanctioned by banks 10
1.1.1 Fund Based 10-11
1.1.2 Non fund based 11
1.2 Process followed for Credit Appraisal 12
1.3 Checklist for Pre Sanction Appraisal 13
2. Credit Risk Rating 14
2.1 Credit Rating Model 14-15
2.1.1 Evaluation in Risk Rating 16-18
2.2 Credit Risk Rating Grades and Pricing 18
3. Credit Monitoring 19
3.1 Preventive Monitoring System 19-20
3.1.1 Objective of PMS 20
3.1.2 Modules of PMS and Score 20-21
3.2 Audit 21
3.3 Inspection 22
3.4 Bank Checklist for Post-Sanction Follow Up 22
3.4.1 Cash Credit 22
3.4.2 Packing Credit 22-23
3.4.3 Cheques/ Bills Purchased 23
3.4.4 Term Loan 23
3.4.5 Overdraft 23
3.4.6 Demand Loan 23
3.4.7 Duty Drawback 24
3.4.8 Letter of Credit 24
3.4.9 Letter of Guarantee 24
3.4.10 Consortium Lending 24
Glossary 25-26
Citations and Bibliographies 27
Feedback 28
7. 7 | P a g e
LIST OF ACRONYMS
AOA Article of Association
BG Bank Guarantee
BO Branch Office
CC Cash Credit
CMA Credit Monitoring Arrangement
CO Circle Office
CRMD Credit Risk Management Division
CRMD Credit Risk Management Division
CRs Confidential Report
DD Demand Draft
DGM Deputy General Manager
DP Drawing Power/ Delivery against Payment
ECGC Export Credit Guarantee Corporation
FB Fund Based
FGM Field General Manager
GRs Goods Receipt
HO Head Office
IPs Immovable Property
KYC Know Your Customer
L&A Loans & Advances
LCBs Large Corporate Banks
LCs Letter Of Credit
LIC Life Insurance Corporation
MFIs Micro Finance Institutions
MOA Memorandum of Association
MPBF Maximum Permissible Bank Finance
MTRs Money Transport receipt
NA Not Applicable
NBFC Non Banking Financial Companies
NFB Non Fund Based
NPA Non Performing Asset
O/Ds Overdrafts
PC Packing Credit
PMS Preventive Monitoring System
RBI Reserve Bank of India
ROC Registrar of Companies
RRs Railway Receipts
TL Term Loan
TNW Total Net Worth
TOL Total Liabilities
TRs Transport Receipts
UTI United Trust of India
WC Working Capital
8. 8 | P a g e
Executive Summary
“To Study the Process of Credit Appraisal, Risk Rating and Credit Monitoring System in Punjab National
Bank” is the topic of study in the entire internship program. Commercial banks play an important role in
the financial system and the economy. As a key component of the financial system, banks allocate funds
from savers to borrowers in an efficient manner. Thus help in the creation of new money and growth in
the economy.
Finance has been the life blood of any organization whether it is a Manufacturing, Trading or Service
Sector. Organizations require fund either for their day to day operations known as “Working Capital” or
for the creation of assets through “Term Loan”. Commercial Banks provide credit to different activities in
an economy like agriculture, industry, transport, retail, small business, NBFC, leasing etc. To provide
credit facilities to cover all sectors, it has proposed different credit appraisal models. Credit Appraisal
involves the collection of different data and information. The data are analysed with the help of different
tools and techniques for credit decision.
Any amount of finance (Loans & advances) of a Bank is an asset in its books. It is a major source of
bank’s revenue (Income). Since a bank needs to grow and survive, it needs income. So, utmost care is
taken while financing so that the risk becomes minimum and their assets remain performing (revenue
generating).
Basically, both proposed or existing borrower furnishes with the CMA data which includes past 3 years
audited financial statements, estimates for current year, projections for the next year, project report, if any
and other relevant information/data along with loan application. Credit appraisal is an analysis of viability
and calculation of Maximum Permissible Bank Finance (MPBF) based on submitted data and other
relevant information.
There is a prescribed Format of Punjab National Bank called “Board Format” where relevant information
is placed for fresh as well as for renewal of credit limits. Board Format is designed in such a manner so
that different important aspects of the borrowing unit are analysed like promoter’s past experience &
capability, past performance, conduct of account, financial capability/health , project viability, security
offered, marketing of product, competition, future prospect based on economic scenario, statutory
compliance and compliance of existing terms and conditions etc to enable the authorities to judge credit
worthiness of a proposal keeping in mind the risk factor and to take judicious and speedy decision.
In Indian banking system, several banks pool together their banking resources and provides fund to a
single borrower, generally for large advance with a common appraisal, common documentation and a
system of joint supervision and follow up. Such an advance is called Consortium lending. The main
objective of Consortium lending is to diversify the risk and to maintain maximum capital exposure norms
as stipulated by RBI. The consortium selects a leader which is called lead bank. Lead bank takes
maximum exposure and carries out certain task like appraising the various aspects of credit proposal,
convenes the consortium meeting etc. Even as a consortium member bank, Punjab National Bank has to
follow the credit appraisal procedures as per its own bank guidelines.
Risk factor is involved in every credit decision. To minimise the risk, bank takes the help of a tool called
“Risk Rating”. Rating is done in all types of accounts with limit 2 lacs and above. Punjab National Bank
has introduced 13 such rating models covering all categories of loan such as Large Corporates, Mid
Corporates, New Entrepreneur, Small loans, NBFCs etc. It is based on evaluation method. Evaluation is
made in the following four field’s viz., Financial Evaluation, Business Evaluation, Management
Evaluation and Conduct of Account Evaluation. These models are automated and designed by experts. It
9. 9 | P a g e
requires specific inputs to get system generated score. The maximum score is 100. The score indicates the
level of lending risk. Accordingly, pricing of the bank i.e., lending rate of interest is fixed linked with is
linked with Risk Rating. Higher rated (lower risk) accounts are charged with lower rate of interest than
lower rated (higher risk) account. Pricing (rate of interest) is fixed for any advance by adding risk
premium with the base rate. Base rate is the minimum lending rate.
Once the loan is sanction and disbursed the bank has to follow up and monitor the conduct of account
which is called Post Sanction Follow Up. The bank needs to prevent the misuse of funds and monitor the
progress of the project/account as per terms of sanction. For monitoring the misuse of funds and slippage
of the account to be an NPA (bad account) the bank uses “Preventive Monitoring System (PMS)”. Like
other tools, PMS is used as an indicator which gives early warning of any kind of danger that the account
is turning out to be bad. It is an automated model which evaluates conducts of accounts, compliance of
terms and conditions of sanction, status of project completion and risk rating for comparison and
generates PMS Score which helps to understand the level of risk in the account/proposal. Here, lower the
score, lower is the risk. However there are other monitoring systems like “Audit” and “Inspection”. There
are two parts of Audit viz., Quarterly concurrent audit and statutory audit. During inspection and audit
each loan account is thoroughly checked and observation is made on the deficiencies keeping in mind the
compliance of terms and conditions of sanction and other relevant aspects. The very object of
inspection/audit is to set right the deficiencies observed to safeguard bank’s interest and to prevent the
account to be an NPA. Provisions need to be made from profit of the bank for NPA accounts and thereby
adversely affect the income of the bank. NPA accounts are sometimes restructured after its viability study
as per RBI guidelines. The objective of such restructure is to upgrade the account. However, monitoring
will continue like any other account.
10. 10 | P a g e
1. CREDIT APPRAISAL
Credit appraisal means an investigation/assessment done by the bank prior providing any loans &
advances/project finance & also checks the commercial, financial & technical viability of the proposed
project, its funding pattern & further checks the primary & collateral security cover available for recovery
of such funds. It is a process carried by bank to ascertain the risks associated with the extension of the
credit facility.
1.1 Facilities Sanctioned by Banks
LOAN
Fund Based Non-Fund Based
Letter of Credit Letter of Guarantee
Cash Credit/ Cheques/Bill Term Loan Overdraft Demand Loan Duty Drawback
Packing Credit Purchase
1.1.1 Fund Based:
In fund based loan, fund is released and withdrawal is made as per requirement of the business. Loan
sanctioned by bank is either short term loan (repayable within a period of 12 months) to create current
assets or long term loan (repayable over a period of 12 months) to create fixed assets. Therefore, the
primary security of the loan is the relevant short term assets (current asset) or the relevant long term asset
(fixed asset) created out of the short term or long term bank finance.
Cash Credit: Cash Credit is ‘working capital’ finance. Limit is set up based on working capital
gap and business cycle. Withdrawal is allowed upto the limit sanctioned and within the drawing
power of the client whichever is lower.
Packing Credit: A borrowing facility provided by a financial institution to help an exporter to
finance the costs of buying or making a set of products, and then packing and transporting them
before shipment occurs. A packing credit loan will often be extended if a letter of credit has been
issued by a purchaser of the products that is based in another country or a confirmed order for
exporting the goods exists.
Cheques/ Bill Purchase: When the cheque or bill is drawn favoring the borrower, the same is
purchased or discounted (Usance bill) and fund is released instantly. Bank collects the payment of
the cheque/bill in due course.
11. 11 | P a g e
Term Loan: The loan which is provided for the purchase of Assets and is repaid in regular
payments over a set period of time (generally over 12 months).
Overdraft: It is a temporary facility over and above the limit to meet the demand in exigency.
However, overdraft limit can be sanctioned against security of Bank deposit, LIC policies and
government securities.
Demand Loan: It is a short term loan which is payable on demand. The loan is sanctioned against
banks fixed deposit, shares and government securities mainly for the purpose of consumption.
Duty Drawback: A refund that can be obtained when an import fee has already been paid for a
good, but the good is then subsequently exported. Since refund of import duty takes times, bank
sanction loan against the refundable duty as duty drawback. After receipt of the amount from the
government the loan is adjusted.
1.1.2 Non Fund Based:
In Non Fund Based loan, banks fund is not involved but equivalent amount of bank risk may be involved
in future when letter of credit is invoked or letter of guarantee is devolved. Letter of credit and letter of
guarantee are issued by bank on behalf of the borrower/client for purchase of goods and fulfilment of
promise respectively. Since the liability of the bank in these cases may or may not arise, the liability is
treated as contingent liability.
Letter of Credit: It is a document from a bank guaranteeing that a seller will receive payment in
full as long as certain delivery conditions have been met. In the event that the buyer is unable to
make payment on the purchase, the bank will cover the outstanding amount.
Letter of Guarantee: A guarantee issued by a bank on behalf of a customer for the purpose of
purchase of goods or fulfilment of promise/contractual obligation/financial obligations. Banks
liability arises in the event of default by the borrower.
12. 12 | P a g e
1.2 Process followed for Credit Appraisal
Receipt of application from applicant
Receipt of documents
(Balance sheet, KYC papers, Different govt. registration no., MOA, AOA, and Properties documents)
Credit Risk rating of the borrower
Pre-sanction visit by bank officials & obtaining required clarifications/papers.
Checking from RBI defaulters list, wilful defaulters list, CIBIL data, ECGC caution list, etc for borrowers’
and guarantors..
Title Deed verification reports of the properties to be obtained from empanelled advocates
Valuation reports of the properties to be obtained from empanelled valuer/engineers
Analysis of financial data and preparation of proposal with calculation of MPBF and recommendation
Verification of pre-sanction checklist of bank
Sanction of proposal by appropriate sanctioning authority
Execution of Loan Documentations
Disbursement of loan
13. 13 | P a g e
1.3 Checklist for Pre Sanction Appraisal
While dealing with pre-sanction Credit Appraisal, it is sometimes felt that the branches at the time of
submitting the loan proposals to the Controlling Offices, many a times, do not include all the critical
meaningful information for speedy and hassle free disposal of the cases, resulting in a unavoidable
correspondence and delay.
To obviate this, Pre-Sanction checklist is followed by bank, which would help in minimising queries from
Sanctioning Authorities, will facilitate prompt disposal of loan proposals. The recommending official
should ensure that the points enumerated in the Checklist are duly addressed/ covered at the time of
submission of Credit Proposal.
Accordingly, Punjab National Bank has made a guideline as prerequisite verification and scrutiny of
different aspects of pre-sanction appraisal for new sanction as well as renewal sanction of existing unit
which are summarized as under. on-Compliance of points of checklist is to incorporated in the proposal.
Sl. No. Checklist
1. Assessment Part
That all required documents have been submitted and duly verified by the borrower.
Justification of acceptance of projected sales keeping in view of production plan, actual
sales, market trend and peak and non-peak level market share.
Modification in plant and machinery, if any.
Proper classification of Current Assets & Current Liabilities.
Valuation of stock and its realizability as per laid down guidelines.
Scrutiny of fund flow statement for exact requirement.
Installed/licensed capacity with projections.
Proper classification of current assets.
Borrower’s activities, market reputation and collection of CR along with CR of
guarantor.
Vetting of Credit Rating report.
All documents are signed by the borrower.
Report of Allied concerns and facilities with other banks.
2. Verification of Antecedents of Borrower/Guarantor/Supplier
Whether spot verification of the factory/business premises/IP securities/ collateral
securities has been done before sanction of limits.
Statutory clearance like pollution clearance and other approvals from regulatory
authority.
3. Additional Safeguards for Existing Accounts.
Any change of management from last sanction, analysis of past track records/conduct.
Irregularities observed by Auditor/Inspector/Stock should be removed.
If there are wide variations between the provisional and the audited accounts, whether
the same are properly analysed / examined.
4. Documentation/ Creation of Charge
All cuttings in documents have been authenticated by the executants(s). Verification of
document by legal counsel, where necessary.
Proper stamping of document and creation/modification of charge with ROC.
Search and valuation of IPs with proper insurance.
5. Disbursement
Obtaining approval from authorities for non compliance of any terms of sanction
before disbursement.
Direct payment to the suppliers and no cash disbursement without sanction.
14. 14 | P a g e
2. Credit Risk Rating
Reserve Bank of India has laid down guidelines on Risk Management Systems in Banks for
implementation by the banks. In terms of these guidelines, banks should have a comprehensive risk
scoring / rating system that serve as a single point indicator of diverse risk factors of a counter party and
for taking credit decisions in a consistent manner. The risk rating system is designed to reveal the overall
risk of lending, for setting pricing and non-pricing terms of loans and also to present meaningful
information for review and management of loan portfolio.
Credit Risk Rating is the primary activity that is carried out after the approval of Techno Economic
Viability report. The rating evaluates a loan on four aspects namely Financial Aspects, Management
Aspects, Industry Aspects and Conduct of Accounts Aspects. These are the four main pillars on which it
determines the rating. The rating is of utmost importance since it categorises the loan into high, moderate
or low risk. Falling short of achieving the minimum required rating would inevitably stop further
proceedings of loan appraisal.
The various steps taken by the bank to comply with the above RBI guidelines, inter-alia, include
development of various Credit Risk Rating Models for different categories of borrowers to measure the
risks inherent in individual loans in its credit portfolio. All borrowers having (FB+NFB) limits of above
Rs.2 Lacs excluding borrowers covered under PNB Score/Scoring models (i.e., excluding all retail loans,
Trading & SME loans up to Rs.50 Lacs and all Direct Agriculture loans) should invariably be rated on
these models.
2.1 Credit Rating Models: . PNB has devised and implemented Eight Default Rating models, two
Transaction Rating Model, one Half Yearly Rating model & one NPA Marking Model as discussed
below:
Sr. No Credit Risk Rating Model Applicability
Total Limit Sales
1. Large Corporate Above Rs. 15 Crore
OR
Above Rs.100 Crore
except Trading Concerns.
2. Mid Corporate Above Rs.5 Crore and
upto Rs.15 Crore
OR
Above Rs.25Crore and
upto Rs.100Crore
All trading concerns falling in the Large Corporate category shall also be rated under
this model.
3. New Projects Rating Above 5Cr OR Cost of Project above
15Cr
4. Small Loans Above Rs.50laks and
upto 5 Cr Upto Rs.25 Cr
5. Small Loans II Above Rs. 2laks and upto
Rs.50laks
6. NBFC All Non Banking Financial Companies irrespective
of limits.
7. Entrepreneur New Business
Model
Borrower setting up new
business and requiring
finance above Rs 20 lacs
upto Rs. 5 Cr (AND
Cost of Project upto
Rs.15 Cr.
However, all new trading business irrespective of
limits shall be rated under this model.
15. 15 | P a g e
New Non Banking Financial Companies
(NBFCs)/New Micro Finance Institutions (MFIs).
New borrower entities, setting up new business
requiring only working capital/NFB limits of above
Rs.5 crore but not involving setting up of any project
as such.
Projects already completed with own finance, audited
results for first year of operations are not yet
available and proposal is only for sanction of
WC/NFB facilities.
8. Credit Risk Rating Model for
Banks/FI
All Banks and Financial Institutions.
Sr. No Transaction Rating Model Applicability
1. Facility (Expected Loss)
Rating Framework
Assigning rating to facility sanctioned to the borrower
based on default rating and securities available
2. Future Lease Rental Model Advances to property owners against future lease
rentals.
Sr. No Half Yearly Rating Model Applicability
1. Half Yearly Rating Model i) All listed companies rated on large /mid corporate
rating models. ii) Other borrowal accounts rated on
large / mid corporate rating models availing limits
(FB+NFB) above Rs.50.00 crores from our bank
Sr. No NPA Model Applicability
1. NPA Model For marking NPA accounts in on-line PNBTrac
Credit Risk Rating System
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2.1.1 Evaluation in Risk Rating
Credit risk rating models evaluate the default risk of a borrower on four broad aspects viz. Financial
Aspect, Management Aspect, Industry Aspect and Conduct of Account Aspect. These areas are bifurcated
into sub-areas and each sub-area is further split into a number of parameters as per details as under:
A. Financial Evaluation: The evaluation shows the financial stability and soundness of the
business enterprise. With the help of different ratios the same is evaluated as shown as under:
Category Parameter
Growth Rate Gross Sales growth rate (%)
Profitability OPBDIT/Sales (%)
Short term bank borrowings/Net sales (%)
Cash Flows Operating Cash Flows/Total Debt (%)
Net Operating Cash Flow/Total Debt (%)
Solvency Ratio Debt Equity Ratio
TOL/TNW
Liquidity Ratios Current Ratio
Interest Coverage
Debt Coverage
Ratios
DSCR
Profitability Ratio Return on Capital Employed (%)
B. Management Evaluation: To understand how far the management is efficient in doing the
business is evaluated with different parameters like sales, PBT, debt repayment etc. as per
details as under:
Parameters
Actual Gross Sales
Targeted Sales
Actual PBT
Targeted PBT
Management Set-up and Corporate Governance
Commitment and sincerity
Track record in execution of projects
Track record in debt repayment
Track record in Industrial relations
Financial strength/ flexibility /Group support
Capital market perception
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C. Business/Industry Evaluation: Every unit is business/industry specific. Thus to understand
its competitive position in present market scenario in different aspects, the evaluation is done
as per details as under:
D. Conduct of Account Evaluation: It shows the actual business operation and its efficiency.
Therefore evaluation of conduct of account is of utmost importance in risk rating. Account
evaluation is judged on the following points:
Preventive monitoring system rating
Status of account
Operations in account
Submission of financial data/ statements
Parameters
Operating leverage
Inventory turnover
Net sales/Op. Assets
Raw material consumed/Net Sales
Credit period allowed
Competitive Position :
Expected sales growth
Market dominance /Market share
Trend in market share
Input Related Risk :
Availability of raw material and other critical inputs
Proximity to raw material
Status of backward integration
Production Related Risk :
Capacity utilization
State of technology used
Flexibility in product manufacturing
Product Related Risk :
Product range
Product quality
Price Competitiveness :
Economies of scale
Pricing flexibility
Marketing :
Selling and distribution network
Proximity to market
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Total Score and Weights assigned to each parameters of the above evaluation are as under:
Financial Evaluation 40%
Business & Industry
Evaluation 25%
Management Evaluation 25%
Conduct Evaluation 10.00%
2.2 Credit Risk Rating Grades and Pricing
Based on the above parameters, system generates score for each credit rating and assigns rating on the
basis of score obtained as under. However rating of each account must be vetted by appropriate authority
of the bank as per bank guidelines.
Score Obtained Rating Description
Above 80.00 PNB-A1 Minimum Risk
Above 70.00 upto 80.00 PNB-A2 Marginal Risk
Above 64.00 upto 70.00 PNB-A3 Modest Risk
Above 58.00 upto 64.00 PNB-A4 Lowest Risk
Above 52.00 upto 58.00 PNB-B1 Average Risk
Above 46.00 upto 52.00 PNB-B2 Marginally Acceptable Risk
Above 40.00 upto 46.00 PNB-B3 Cautiously Acceptable Risk
Above 35.00 upto 40.00 PNB-C1 High Risk
Above 25.00 upto 35.00 PNB-C2 Very High Risk
25.00 and below PNB-C3 Exceptionally High Risk
Minimum lending rate (except loan against bank’s own deposit) is the base rate of the bank which is
changed from time to time. Pricing of the bank i.e., rate of interest charged by bank is linked with Risk
Rating. Higher the credit rating score, lower is the credit risk. Risk premium is added with the base rate
according to the rating/credit risk to fix lending rate. Risk premium is different for different types of
accounts and may be changed from time to time.
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3. Credit Monitoring
A significant aspect of effective management in lending is proper monitoring of credit. The success of
credit monitoring largely depends on two factors viz., a) Co-operation of the borrower clients in
furnishing the required data and statements like monthly stock statements, half yearly and yearly balance
sheet and profit and loss accounts, monthly statement of sales and purchases with outstanding creditors
and debtors, etc. to the bank on time and b) the capacity and knowledge of the credit monitoring
authorities to take timely decisions and corrective steps to keep the borrowal account in good health. Had
there been proper and effective monitoring, it could prevent many accounts from becoming NPA.
Thus Punjab National Bank has devised few credit monitoring techniques which will reduce the
conversion of good accounts turning into bad accounts. Such measures are as under.
Credit Monitoring
Preventive Monitoring System Audit Inspection Post-Sanction Checklist
Stock Audit Concurrent Audit Statutory Audit CARD Audit
3.1 Preventive Monitoring System(PMS)
Post-sanction Credit Monitoring of borrowal accounts is an important ingredient of a sound Credit
Management System and calls for monitoring of the health/conduct of accounts on a continuous basis.
Credit Risk Policy, Credit Appraisal and Credit Monitoring are the three pillars of Credit Management.
The quality of bank’s credit portfolio can be significantly improved with the help of proper systems,
processes and tools of credit monitoring. The early detection of deterioration in the quality of a borrowal
account and timely action may minimize the possible losses to the bank. Once the account becomes an
NPA, it is difficult for the bank to recover its entire dues.
For the purpose, Bank has in place Preventive monitoring system (PMS) for post sanction monitoring of
borrowers having sanctioned limits (FB plus NFB) above Rs. 1 crore applicable for all corporate
Borrowal Accounts, except for the following:
NPA Accounts.
Advances against Life Insurance Policies.
Advances against Bank’s own deposit.
Advances against Shares.
Advances against Deposits, Govt. Securities, Units of UTI.
Advances against bullion and jewellery.
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PMS is a credit monitoring tool which covers a number of signals/ indicators, that are material for
evaluating the conduct or health of a borrowal account and seeks to measure the performance of the
account on the said signals on a continuous basis. It assigns numerical score to each signal and captures
the conduct of an account in a single total numerical value called PMS Index Score on indicators covering
timeframe of past one year. Its focus is on prevention of loan loss by focusing on borrowal accounts
showing ‘early warning’ signs of deterioration. However success of the system depends on generation of
report at regular interval and taking remedial action in time.
PMS model is based on Behavioural scoring which helps to automatically segment and rate accounts,
customers and portfolios thus allowing efficient management of a particular borrower’s credit account as
well as the entire credit portfolio. The system seeks to improve efficiency, efficacy and compliance level
in the borrowal accounts.
3.1.1 Objectives of PMS
PMS is an imperative credit monitoring tool. It seeks to track & evaluate the health of borrowal accounts
on a continuous basis. The objectives of the system are listed below:
A. To detect unsatisfactory/adverse signals/indicators at an early stage in a comprehensive manner
for which compliance of the following points to be looked into.
Compliance with terms & conditions of sanction
Status of Project Implementation
Conduct of account
Adherence of other bank guidelines and statutory requirements
B. To emphasize thorough probe into reasons behind observed signals and analysis thereof. Some of
the causes can be:-
Incorrect business decisions
Adverse market conditions
Unplanned expansion etc.
Malafide intentions.
C. To propose speedy corrective/remedial actions/steps to prevent the account from becoming NPA
as well as to minimize the loan losses. Some of the actions which can be taken are:-
Stipulating higher margin on Primary Security.
Asking for more collateral.
Influencing business decision of the borrower.
Infusion of fresh funds.
Inserting more banks into the consortium.
Efforts for recovery of dues.
Exit from the account.
3.1.2 Modules of PMS and Score
The Preventive Monitoring System (PMS) is a post sanction credit-monitoring tool consisting of a
number of signals/parameters for evaluating the health of a borrowal account on a continuous basis. It
consists of three parameters.
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Compliance of terms and conditions of sanction- This module evaluate the compliance part i.e.,
adherence of all the terms and conditions of the sanction. The score in this module is assigned on
the basis of selected options out of the available options in PMS.
Project Implementation- This module of PMS seeks to monitor the progress of implementation
of projects financed by the bank and also to capture warning signals, which can tell upon the
health of the account.
Conduct of Account- This is the automated module which calculates score on the basis of data
pertaining to operations in the borrowal account, which is directly derived from transaction system
and ladder. Each and every credit facility of the borrower is analysed to detect any kind of
delinquency or negative signals in the account.
On successful submission of inputs in all the three modules as above, PMS report is generated with score.
Lower score indicates lower risk and vice versa as per details as under. However correctness of score
depends on correct feeding of data. There are Benchmarks and weights which are assigned to the facilities
availed like Term Loan, Cash Credit, Overdraft, Packing Credit, Bills Purchased, Letter of Credit, Letter
of Guarantee and so on. Based on those parameters, benchmark and weights, the system will work out
score, cumulative scores which shall be translated into PMS rank of the corporate in following categories:
PMS Score PMS Rank PMS Indicator
0-25% 1 Healthy
>25-50% 2 Satisfactory
>50-65% 3 Early Warning
>65-80% 4 Warning
>80% 5 NPA
3.2 Audit
It is one of the most important methods of monitoring credit portfolio by Punjab National bank. Audit is
conducted to ensure the validity & reliability of information and the information is free from material
error.PNB conducts the following types of audit:
(a) Quarterly Concurrent Audit: In large and exceptionally large branches, auditors verify the
workings of the branch on day-to-day basis and submit quarterly report. The irregularities pointed
out in the report needs to be rectified by branch and to report to the higher authorities.
(b) Statutory Audit: It is conducted once in a year. The irregularities pointed out in the report needs
to be removed by branch .Removal to be apprised to the higher authorities.
(c) Stock Audit: The auditor reports their observations after physical checking of stock of borrower.
Any adverse observation needs to be rectified immediately after taking up the matter with the
borrower and compliance to be reported to higher authorities.
(d) CARD Audit: CARD audit is conducted by Credit Audit Review division of Head office where
credit limits of a borrower is Rs. 5.oo cr and above. The irregularities pointed out in the Card
report pertaining to the account to be got removed as early as possible and compliance to be
reported to higher authorities.
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3.3 Inspection
The main object of inspection is checking of documents, records and facilities to verify adequacy of
system control, ensure compliance with established bank guidelines and operational procedures. The
system of annual Inspection in Punjab National Bank is very important as each branch is graded based on
reported outstanding irregularity and its gravity.
On the basis of Inspection/audit report,, the sanctioning authorities monitor the account(s).In case of need,
proper instruction/guidance is provided to branch level to safeguard the interest of the bank. The
outstanding irregularities pointed out in the Audit/Inspection report pertaining to an account needs to
incorporate in the loan proposal of the borrower to bring it to the knowledge of sanctioning authorities to
enable them to monitor the account.
3.4 Bank Checklist for Post-Sanction Follow Up
Lending decisions are based on sound appraisal and assessment of credit worthiness. Past record of
satisfactory performance and integrity are no guarantee for future thought they serve as a useful guide to
project the trend in performance. A loan granted on the basis of sound appraisal may go bad due to the
failure of the borrower to meet its promise of performance. Thus post sanction follow up monitors the end
use of funds and whether the businessmen are continuing to do their business according to their
projections and in terms of sanction. The main objective of post sanction follow up is to prevent the
slippage of an account to NPA. Thus it is very important to monitor the account continuously.
Keeping the point in view, Punjab National Bank has made post sanction follow up checklist separately
for each category of loan which is summarised as under:
3.4.1 Cash Credit(Hypothecation/Pledge)
Submission of stock/ book debt statement should be regular and to be verified/ checked
physically from borrower’s record on periodical basis by bank official in terms of sanction
and valuation as per banks guidelines.
Book debt should be out of genuine trade transaction. Power of Attorney to be obtained
incase of advance against book debt.
No DP will be allowed against old and obsolete stock and stocks received under LC and
unpaid for stock. DP should not be over the limit without proper sanction.
Turnover in account should be satisfactory. Frequent overdrawn is not allowed. Overall
ceiling of limit should be maintained.
Stocks to be insured fully in the joint name of bank and borrower and all terms and
conditions are to be adhered.
Necessary documents should be got executed in time including Balance Confirmation
letter.
Pledged stock to be properly stored and to be attended by Godown Keeper/ Chowkidar.
3.4.2 Packing Credit(PC)
Each PC will be allowed against sanctioned LC of approved bank.
Submission of stock statement should be regular and to be verified/ checked physically
from borrower’s record on periodical basis by bank official in terms of sanction. Valuation
to be done as per banks guidelines. Stock under PC to be kept segregated.
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Separate account to be maintained for each PC and to be got adjusted within a period of
180 days, if not got extended.
Stocks to be insured as per bank guidelines and party to deal with the bank exclusively.
No PC will be allowed against expired LC and no shipment will be allowed by an
unapproved clearing agent.
3.4.3 Cheques/Bill Purchased
Cheques must be in favour of the borrower and apparently in order.
Cheques are purchased for good clients only.
Genuine bill to be purchased accompanying RR/TRs. TR must be of approved transport
company.
Bills drawn on allied or associated concerns should not be purchased.
Cite bill is preferable and purchase of bill of longer period (Usance bill) should be
avoided.
Incase of frequent returning of bill, prompt action to be taken to realise the money and
further purchase in such accounts to be avoided.
CR of the drawee should be collected from the banker.
For Usance bill (bill with future due date) drawee wise record with limit to be maintained
and no excess purchase over the limit is to be allowed without proper sanction.
3.4.4 Term Loan
Preferably payments are made directly to the suppliers for procurement of asset which are
to be insured as per bank guidelines in the joint name of the bank and the borrower.
Time of project completion and commencement of production as per schedule to be
adhered.
Instalment payments should be regular and in case of default proper steps to be taken and
the matter to be brought to the notice of the sanctioning authority.
3.3.5 Overdraft
Securities to be endorsed in the favour of the bank incase of post office/UTI certificates
and owner to be got verified.
Third party advance is also allowed with proper sanction and documentation.
Incase of advance without security i.e., clean overdraft, bank should try to adjust the
account as early as possible.
Procedural compliance should be made in all cases.
3.3.6 Demand Loan
Demand loans are sanction against fixed deposit, LIC, shares and government securities
which are to be pledged with the bank.
Incase of shares and government securities, the same to be transferred in the name of the
bank.
Third party demand loan is also granted as per banks stipulation.
Proper documentation must be made as per bank guidelines before release of the loan.
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3.3.7 Duty Drawback
Documentary evidence to be furnished for import of goods and duty paid for the same by
the clients.
Amount to be released under proper documentation and adhering to the guidelines of RBI.
3.3.8 Letter of Credit
LC to be issued against sanction limits keeping stipulated margin. Issue of LC over the
sanction limit to be got approved.
Party to ensure that LC is retired promptly.
Stock under LC to be insured as per terms of sanction.
Incase of Revolving LC the maximum number and amount per LC to be as per terms of
sanction.
Incase of devolvement (non compliance of terms of LC by borrower) of LC, prompt action
to be taken.
Incase of foreign LC, valid import license to be obtained and FLC is opened strictly in
terms of sanction.
3.3.9 Letter of Guarantee
LG is issued with proper sanction and within the limit keeping stipulated margin.
Expired LGs to be reversed in the books of the bank. Incase of invocation (failure of
borrower to comply terms of LG) of LGs, matter to be dealt appropriately and to be
brought to the notice of the sanctioning authority.
Bank should avoid issue of LGs on behalf of the party where invocation is frequent.
3.3.10 Consortium Lending
In Indian banking system, several banks pool together their banking resources and provides fund to a
single borrower, generally for large advance with a common appraisal, common documentation and a
system of joint supervision and follow up. Such an advance is called Consortium lending. The main
objective of Consortium lending is to diversify the risk and to maintain maximum capital exposure norms
as stipulated by RBI. The consortium selects a leader which is called lead bank. Lead bank takes
maximum exposure and carries out certain task like appraising the various aspects of credit proposal,
convenes the consortium meeting etc.
Punjab National Bank has stipulated to following checklist for Consortium Lending.
Consortium agreements to be got executed by the consortium leader and attested copy
thereof is held.
Consortium meetings are held periodically and letter are exchanged by the participating
bank intimating balances in the account periodically.
Undertaking (as per terms of sanction) to be taken from the borrower agreeing to deposit
sale proceeds, book debts realised, etc. on pro rata basis has been obtained.
Stocks to be periodically checked by participating banks and reports to be exchanged.
All terms and conditions governing the consortium advance as per sanction to be complied
with.
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Glossary
Bank Guarantee: It is a kind of guarantee from a lending institution which ensures that the
liabilities of a debtor will be met and incase the debtor fails to settle a debt, the bank will cover it.
Base Rate: It is the minimum interest rate at which a bank can lend except for loans to its own
employees, its retired employees and against bank’s own deposits.
Cash Flows to Debt Ratio (Operating Cash Flow/Total Debt): This coverage ratio compares a
company’s operating cash flow to its total debt. Is provides an indication of a company’s ability to
cover total debt with its yearly cash flows from operation. The higher the percentage ratio, the
better the company’s ability to carry its total debt.
Credit Enhancement: A method whereby a company attempts to improve its debt or credit
worthiness. Through credit enhancement, the lender is provided with reassurance that the
borrower will honor the obligation through additional collateral, insurance, or a third party
guarantee. Credit enhancement reduces credit/default risk of a debt, thereby increasing the overall
credit rating and lowering interest rates.
Debt Service Coverage Ratio (Net Operating Income/ Total Debt Serviced): It is the amount
of cash flow available to meet annual interest and principal payments on debt, including sinking
fund payments. A DSCR of less than 1 would mean a negative cash flow. A DSCR of less than 1,
say .95, would mean that there is only enough net operating income to cover 95% of annual debt
payments.
Debt to Equity Ratio (Debt/Equity): It is the debt to equity ratio which show the ratio
of both the component in the capital structure.
Door to Door Tenor: It indicates the total period within which the total debt borrowed is to be
paid which includes the period of moratorium, i.e., the period for which payment has been
postponed.
Escrow Account: An escrow account is a temporary pass through account held by a third party
between the processes of transaction between two parties. This is a temporary account as it
operates until the completion of the transaction process, which is implemented after all the
conditions between a buyer and a seller are settled.
Hypothecation: It is a mode of creating an equitable charge on a property to secure the payment of a
debt in which the property itself continues to be in the possession of the debtor. It is a legal transaction
whereby a merge charge is given on the goods for the amount of the debt but the hypothecated goods
remain in the actual possession of the borrower. And neither possession nor ownership passes to the
lender. The instrument which creates a charge is known as Letter of Hypothecation.
Interest Service Coverage Ratio (EBIT/ Interest expense): The interest coverage ratio is used
to determine how easily a company can pay interest expenses on outstanding debt. The lower
the ratio, the more the company is burdened by debt expense. When a company's interest
coverage ratio is only 1.5 or lower, its ability to meet interest expenses may be questionable.
Inventory Turnover: A ratio showing how many times a company's inventory is sold and
replaced over a period. The days in the period can then be divided by the inventory turnover
formula to calculate the days it takes to sell the inventory on hand or "inventory turnover days."
Lead Bank: A bank that oversees the arrangement of loan syndication and is paid an additional
fee for this service, which involves recruiting the members and negotiating the financing terms.
Lien: The legal right of a creditor to sell the collateral property of a debtor who fails to meet the
obligations of a loan contract.
Liquidity Ratios: A class of financial metrics that is used to determine a company's ability to pay
off its short-terms debts obligations. Generally, the higher the value of the ratio, the larger the
margin of safety that the company possesses to cover short-term debts.
Loan Syndication: The process of involving several different lenders in providing various
portions of a loan. Loan syndication most often occurs in situations where a borrower requires a
large sum of capital that may either be too much for a single lender to provide, or may be outside
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the scope of a lender's risk exposure levels. Thus, multiple lenders will work together to provide
the borrower with the capital needed, at an appropriate rate agreed upon by all the lenders.
Moratorium: It is an agreement between a creditor and a debtor to allow additional time for the
settlement of a debt.
Mortgage: A legal agreement that conveys the conditional right of ownership on an asset or
property by its owner (the mortgagor) to a lender (the mortgagee) as security for a loan. The
lenders security interest is recorded in the register of title documents to make it public
information, and is voided when the loan is repaid in full.
Multiple Banking: Multiple banking is a banking arrangement where a borrowal avails finance
independently from more than one bank. Thus, there is no contractual relationship between
various bankers of such borrower. Also in such arrangement each banker is free to do hid own
credit assessment and old security independent of other bankers.
Operating Leverage (% change in EBIT/ % change in Sales): The Degree of Operating
Leverage (DOL) is the leverage ratio that sums up the effect of an amount of operating leverage
on the company’s earnings before interests and taxes (EBIT). Operating Leverage takes into
account the proportion of fixed costs to variable costs in the operations of a business. If the degree
of operating leverage is high, it means that the earnings before interest and taxes would be
unpredictable for the company, even if all the other factors remain the same.
Pari Passu: A Latin phrase meaning "equal footing" that describes situations where two or more
assets, securities, creditors or obligations are equally managed without any display of preference.
An example of pari-passu occurs during bankruptcy proceedings when a verdict is reached, all
creditors can be regarded equally, and will be repaid at the same time and at the same fractional
amount as all other creditors. Treating all parties the same means they are pari-passu.
Pledge: It is delivery of goods by a borrower to a lender as security for the payment of a debt or
the performance of a promise. The ownership remains with the borrower but the possession of the
goods is with the lender until the debt is paid.
Profitability Ratios: A class of financial metrics that are used to assess a business's ability to
generate earnings as compared to its expenses and other relevant costs incurred during a specific
period of time. For most of these ratios, having a higher value relative to a competitor's ratio or the
same ratio from a previous period is indicative that the company is doing well.
Solvency Ratios: The solvency ratio indicates whether a company’s cash flow is sufficient to
meet its short-term and long-term liabilities. The lower a company's solvency ratio, the greater the
probability that it will default on its debt obligations.
Working Capital (Current Asset-Current Liabilities): The capital which is required to run its
day to day operation in a business is known as working capital. It is the excess of Current Asset
over its Current Liabilities.
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Citations & Bibliographies
Study Material
IRMD, Risk Rating Manual. Cir. No: 12/2014, New Delhi, March 14, 2014
IRMD, PMS Manual. New Delhi.
Pre- Sanction and Post- Sanction Credit Appraisal Manual.
Credit Appraisal files and correspondence.
Websites
www.investopedia.com. May 6, 2015
www.businessdictionary.com. May 6, 2015
Books
Toor, NS. Analysis of Balance Sheet. New Delhi: Skylark, 2006.