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A REPORT

ON

CREDIT APPRAISAL

BY

ROHIT JASOO

(10BSP0121)

ING VYSYA BANK LIMITED

1



A REPORT

ONCREDIT APPRAISAL

By

ROHIT JASOO

10BSP0121

ING VYSYA BANK LIMITED

A report !"#$tte% $& p'rt$' !$#e&t o

t*e re+!$re#e&t o

PGPM pro,r'# o

IBS BENGAL-R-

S!"#$$o& D'te

10t* M'. 2011

De/'r't$o&

2



I Rohit Jaiprakash Jasoo hereby declare that the project entitled ―Cre%$t Appr'$'

submitted to IBS A*#e%'"'% in partial fulfillment of the requirements of the MBA

Program is an original and bonafide ork done by me!

And also I hereby declare that I ha"e not submitted the project report to any other uni"ersity

for the aard of any degree or diploma!

Rohit Jaiprakash Jasoo

#$B%P$#&#

#$th May' &$##

3



A/&oe%,e#e&t

3E4pre$o& o ee$&, ". or% #'e t*e# e $,&$$/'&t *e& $t /o#e to #'e

t'te#e&t o ,r't$t!%e5

I ould like to e(press my gratitude to all those ho ga"e me the possibility to complete this

interim report! )irst of all I thank to Mr6 R'#e* C M$r' *Relationship Manager' I+,

-ysya Bank. for his cooperation during this period! /e as alays there to pro"ide me the

judicious judgment' logical thinking' procedure and in nut shell e"erything! /is inspiration

and precious guidance did play a key role to complete my ork at ease and ell ithin time!

I ish my deepest gratitude for his support throughout!

I am deeply indebted to my faculty guide Mr6 K'#' S'*' hose help' stimulating

%uggestions and encouragements helped me in all the times of research and for riting the

Interim report!

I e(press my profound sense of respect and deepest gratitude to each and e"eryone! I thank

all my ell0ishers ho helped me directly or indirectly in carrying out this ork!

D'te7 1080982011 (Ro*$t J'oo)

P'/e7 A*#e%'"'%

4



A"tr'/t7

Cre%$t Appr'$' of a business unit in"ol"es analy1ing its financial statements and health' its

management and competiti"e ad"antages and its competitors and markets! 2ffering credit is

an operation fraught ith risk!

Before offering credit to an organi1ation' its financial health must be analy1ed! 3redit should

be disbursed only after ascertaining satisfactory financial performance! Based on the financial

health of an organi1ation' banks assign credit ratings! 4hese credit ratings are used to fi( the

interest rate and quantum of instalment!

4his project is to get insights of Indian Banking industry and analysis of the 3redit Appraisal

process taken by I+, -ysya Bank before lending to business units! Moreo"er to study the

Business Banking 5epartment of I+, -ysya Bank 6 its practices!

4his interim reports contains parts as introduction to company' introduction to project' all

basic of credit appraisal' and tools to be used to do credit appraisal!

Introduction to company contains mission' products and ser"ices offered by I+, -ysya Bank

limited! Introduction to project is about the objecti"es' research methodology and limitations

of the project!

4he main te(t contains the theoretical details of 3redit Appraisal! It also contains strengths

and eakness associated ith 3redit Appraisal!

5



T'"e o Co&te&t

5eclaration 7

Acknoledgement 8

Abstract 9

16 I&tro%!/t$o&7

7Me'&$&, o B'& :

7B'&$&, H$tor. :0;

7Roe o RBI #$

7D$:er$$/'t$o& $& B'&$&, #$0#7

7I#p'/t o L$"er'$;'t$o& o& t*e I&%$'& <$&'&/$' Se/tor #8

7B'&$&, Se/tor Reor# #80#9

7 I&tro%!/t$o& to Co#p'&. #<0#:

26 Det'$e% t!%. o ING V..' B'&7 #:0&$

7 Ret'$ B'&$&, &#0&9

7 =*oe'e B'&$&, &90&:

7 Te/*&oo,. -e% &:0&;

7 A/*$e:e#e&t > M$eto&e &;

?6 Pro@e/t Det'$7

7 I&tro%!/t$o& to Pro@e/t &;07$

6



7 O"@e/t$:e o t*e Pro@e/t 7$

7 L$#$t't$o& o t*e Pro@e/t 7$

7 Ree'r/* Met*o%oo,. 7$

6 M'$& te4t7

7 Me'&$&, o Cre%$t Appr'$' 7#

7 B!$&e B'&$&, Pro/e 7#07<

96 A&'.$ > Co#p'r$o&7

7 R't$o A&'.$ 7=07:

7 ING :8 HD<C $& Cre%$t Appr'$' Pro/e 7;087

7 S=OT A&'.$ 87088

6 Pro@e/t Co&/!$o& > Re/o##e&%'t$o& 89

6 M. T'e A'.7 Ke. e'r&$&, 8<

6 Reere&/e 8<08=

7



1. INTRODUCTION:-

BANKING A bank is a financial institution hose primary acti"ity is to act as a payment agent for

customers and to borro and lend money! Banks are important players in financial markets

and offer financial ser"ices such as in"estment funds! In some countries such as ,>RMA+?'

banks are the primary oners of industrial corporations! @hile in other countries such as the

+I4>5 %4A4>% banks are prohibited from oning non0financial companies!

HISTORY OF BANKING4he first banks ere probably the religious temples of the ancient orld! It as probably

established sometime during the third millennium B!3! Banks probably predated the

in"ention of money! 4here are e(tant records of loans from the #:th century B3 in Babylon

that ere made by temple priests or monks to merchants!

MAJOR PLAYERS IN INDIAo %tate Bank of India

o /5)3 Bank

o I3I3I Bank

o /%B3 Bank

o I5BI Bank

o 3iti Bank

o A(is Bank

o Punjab national Bank

o I+, -ysya Bank

o nion Bank of India

8



INDIAN BANKING INDUSTRY

BANKING IN INDIA

Banking in India originated in the last decades of the #:th century!

4he first banks ere THE GENERAL BANK O< INDIA' hich started in #=:<' and

BANK O< HIND-STAN' both of hich are no defunct!

4he oldest bank in e(istence in India is the %4A4> BA+ 2) I+5IA' hich originated in

the BA+ 2) 3AC344A in June #:$<!

4he first fully Indian oned bank as the ACCA/ABA5 BA+' established in #:<9!

4he &'t$o&'$;'t$o& of banks in India took place in #;<; by Mr6 I&%$r' G'&%*$ the then

prime minister! It nationali1ed #8 banks then! 4hese banks ere mostly oned by

businessmen and e"en managed by them!

• 3entral Bank of India

• Bank of Maharashtra

• 5ena Bank

• Punjab +ational Bank

• %yndicate Bank

• 3anara Bank

• Indian Bank

• Indian 2"erseas Bank

• Bank of Baroda

• nion Bank

• Allahabad Bank

• nited Bank of India

• 32 Bank

• Bank of India

Before the steps of nationali1ation of Indian banks' only %tate Bank of India *%BI. as

nationali1ed! It took place in July #;99 under the %BI Act of #;99! +ationali1ation of %e"en

%tate Banks of India *formed subsidiary. took place on #;th July' #;<$!

4he second phase of nationalisation of Indian banks took place in the year #;:$! %e"en more

banks ere nationalised ith deposits o"er &$$ crores! 4ill this year' appro(imately :$D of

the banking segment in India as under ,o"ernment onership!

9

http://finance.indiamart.com/investment_in_india/central_bank_india.html

http://finance.indiamart.com/investment_in_india/punjab_national_bank.html

http://finance.indiamart.com/investment_in_india/canara_bank.html

http://finance.indiamart.com/investment_in_india/indian_overseas_bank.html

http://finance.indiamart.com/investment_in_india/allahabad_bank.html

http://finance.indiamart.com/investment_in_india/united_bank_india.html

http://finance.indiamart.com/investment_in_india/bank_of_india.html

http://finance.indiamart.com/investment_in_india/central_bank_india.html

http://finance.indiamart.com/investment_in_india/punjab_national_bank.html

http://finance.indiamart.com/investment_in_india/canara_bank.html

http://finance.indiamart.com/investment_in_india/indian_overseas_bank.html

http://finance.indiamart.com/investment_in_india/allahabad_bank.html

http://finance.indiamart.com/investment_in_india/united_bank_india.html

http://finance.indiamart.com/investment_in_india/bank_of_india.html



After the nationalisation of banks in India' the branches of the public sector banks rose to

appro(imately :$$D in deposits and ad"ances took a huge jump by ##'$$$D!

• #;99E +ationalisation of %tate Bank of India!

• #;9;E +ationalisation of %BI subsidiaries!

• #;<;E +ationalisation of #8 major banks!

• #;:$E +ationalisation of se"en banks ith deposits o"er &$$ crores!

ntil the early #;;$s' the Indian financial system as strictly controlled! Interest rates ere

administered' formal and informal parameters go"erned asset allocation' and strict controls

limited entry into and e(pansion ithin the financial sector! 4he ,o"ernmentFs economicreform program' hich began in #;;#' encompassed the financial sector! 4he first phase of

the reform process began ith the implementation of the recommendations of the 3ommittee

on the )inancial %ystem' the +arasimham 3ommittee I! 4he second phase of the reform

process began in #;;;!

Roe o RBIF7

RBI' established in #;79' is the central regulatory and super"isory authority for the Indian

financial system! RBI manages IndiaFs money supply and foreign e(change and also ser"es as

a bank for the ,o"ernment and for IndiaFs commercial banks!

RBI issues guidelines on "arious areas including e(posure standards' income recognition'

asset classification' pro"isioning for non0performing and restructured assets' in"estment

"aluation and capital adequacy standards for commercial banks' long0term lending

institutions and non0bank finance companies! RBI requires these institutions to furnish

information relating to their businesses to RBI on a regular basis!

D$:er$$/'t$o& $& B'&$&,F7

Co##er/$' B'&

3ommercial banks in India ha"e traditionally focused only on meeting the short0term

financial needs of industry' trade and agriculture! 3ommercial banks can be classified into

to categories namely %cheduled 3ommercial Banks and +on0%cheduled 3ommercial Banks

*Cocal Area Banks.! %cheduled 3ommercial Banks are banks that are listed in the schedule to

10



the Reser"e Bank of India Act' #;78' and may further be classified as public sector banks'

pri"ate sector banks' correspondent banks' foreign banks and regional rural banks!

%cheduled commercial banks ha"e a presence throughout India' ith appro(imately 0 of

bank branches belonging to the public sector banks are located in rural or semi0urban areas of

the country!

P!"$/ Se/tor B'&

Public sector banks constitute the largest category in the Indian banking system! 4hey include

the %tate Bank of India and its = associate banks' #; nationalised banks and #;< regional rural

banks! As of June 7$' &$$8' apart from the regional rural banks' the other public sector banks

ha"e o"er 8<'9$$ branches! Public %ector Banks collecti"ely account for appro(imately

?62 of the outstanding gross bank credit and 6 of the aggregate deposits of the

scheduled commercial banks! 4he large netork of public sector bank branches enables them

to fund themsel"es out of lo cost deposits!

4he %tate Bank of India is the largest public sector bank in India! As of June 7$' &$#$' the

%tate Bank of India and its = associate banks had #7'9$9 branches' accounting for 269 of

the aggregate deposits and 2969 of the outstanding gross bank credit of all scheduled

commercial banks!

Pr$:'te Se/tor B'&

After the first phase of bank nationali1ation as completed in #;<;' public sector banks made

up the largest portion of Indian banking! In July #;;7' as part of the banking reform process

and as a measure to induce competition in the banking sector' RBI permitted entry by the

pri"ate sector into the banking system! 4his resulted in the introduction of nine pri"ate sector

banks! 4hese banks are collecti"ely knon as the GneH pri"ate sector banks! 4here are tenGneH pri"ate sector banks at present! In addition' &$ pri"ate sector banks e(isting prior to

July #;;7 are currently operating as on June &$#$!

As of end0March &$#$' pri"ate sector banks accounted for #=D of the aggregate deposits and

#;!:D of gross bank credit outstanding of the scheduled commercial banks! 4heir netork of

9'=7= branches as on June 7$' &$#$ accounted for appro(imately :!99D of the total branch

netork of scheduled commercial banks in India!

11



<ore$,& B'&

As of June 7$' &$#$' there ere 7& foreign banks ith &#9 branches operating in India! As on

end0March &$#$' foreign banks account for 9!#D of aggregate deposits and =D of

outstanding gross bank credit of scheduled commercial banks! As part of the liberali1ation

process' RBI has permitted foreign banks to operate more freely' subject to requirements

largely similar to those imposed on domestic banks! )oreign banks operate in India through

branches of their parent banks! In fiscal &$$7' the ,o"ernment announced that foreign banks

ould be permitted to incorporate subsidiaries in India! %ubsidiaries of foreign banks ill

ha"e to adhere to all banking regulations' including priority sector lending norms' applicable

to domestic banks!

4he primary acti"ity of most foreign banks in India has been in the corporate segment!

/oe"er' in recent years' some of the larger foreign banks ha"e started to make consumer

financing a larger part of their portfolios based on the groth opportunities in this area inIndia! 4hese banks offer products such as automobile' finance' home loans' credit cards and

household consumer finance! 4he go"ernment has also announced that foreign banks ha"ing

branch presence in India ill be permitted subject to certain conditions to acquire up to

60 shareholding in pri"ate sector banks in India!

Cooper't$:e B'&

3ooperati"e banks cater to the financing needs of agriculture' small industry and self0

employed businessmen in urban and semi0urban areas of India! 4he state land de"elopment

banks and the primary land de"elopment banks pro"ide long0term credit for agriculture! In

the light of liquidity and insol"ency problems e(perienced by some cooperati"e banks in

fiscal &$$#' RBI undertook se"eral interim measures' pending formal legislati"e changes'

including measures related to lending against shares' borroings in the call market and term

deposits placed ith other urban cooperati"e banks! Presently' RBI is responsible for

super"ision and regulation of urban co0operati"e societies' and the +ational Bank for

Agriculture and Rural 5e"elopment *+ABAR5. for %tate 3o0operati"e Banks and 5istrict

3entral 3o0operati"e Banks!

An 2rdinance to amend the Banking Regulation Act' #;8; as promulgated on %eptember

&8' &$#$ to enable the Reser"e Bank to issue license to Multi %tate 3o0operati"e %ocieties to

carry on banking business! 4his as in response to de"elopments folloing the %upreme

3ourt judgment dated 2ctober &;' &$$7 that the Reser"e Bank could not issue banking

licenses to a society registered under the Multi %tate 3o0operati"e %ocieties Act *M%3% Act.'

&$$&! 4he %upreme 3ourt ruling raised doubts about the legality of the licenses issued to the

e(isting multi %tate 3o0operati"e Banks by the Reser"e Bank under the Banking Regulation

Act' #;8;! 4his amendment ould enable the Reser"e Bank to issue licences to co0operati"esocieties registered under the Multi %tate 3o0operati"e %ocieties Act' &$$&! 4he multi %tate

12



co0operati"e banks ha"e also become eligible banksF under %ection &*gg. of the 5I3,3 Act

so that their deposits can be insured by the 5eposit Insurance 3redit ,uarantee 3orporation

in the interest of the small depositors!

No&7B'& <$&'&/e Co#p'&$e

4here are o"er 1?1 non0bank finance companies in India as at end0June &$#$' mostly in

the pri"ate sector! All non0bank finance companies are required to register ith RBI in terms

of the Reser"e Bank of India *Amendment. Act' #;;=! 4he nonbank finance companies' on

the basis of their principal acti"ities are broadly classified into four categories namely

>quipment Ceasing' /ire Purchase' Coan and In"estment 3ompanies and deposits and

business acti"ities of Residuary +on0Banking 3ompanies *R+B3s.! 4he Reser"e Bank has

put in place a set of directions to regulate the acti"ities of +B)3s under its jurisdiction! 4he

directions are aimed at controlling the deposit acceptance acti"ity of +B)3s! 4he +B)3s

hich accept public deposits are subject to strict super"ision and capital adequacy

requirements of RBI! 2ut of #7'<=# +B)3s registered ith RBI as at end0June &$#$' 9:8

+B)3s accept Public 5eposits! 4he scope and acti"ities of non0bank finance companies ha"e

gron significantly o"er the years! 4he primary acti"ities of the non0bank finance companies

are consumer credit including automobile finance' home finance and consumer durable

products finance' holesale finance products such as bill discounting for small and medium0si1ed companies' and fee0based ser"ices such as in"estment banking and underriting! I&

200? Kot' M'*$&%r' <$&'&/e L$#$te% ' 'r,e &o&7"'& $&'&/e /o#p'&. '

,r'&te% ' "'&$&, $/e&e ". RBI '&% /o&:erte% $te $&to Kot' M'*$&%r' B'&6

Ho!$&, <$&'&/e Co#p'&$e

/ousing finance companies form a distinct sub0group of the non0bank finance companies and

are regulated by +ational /ousing Bank *+/B.! As a result of the "arious incenti"es gi"en by the ,o"ernment for in"esting in the housing sector in recent years' the scope of their

business has gron substantially! ntil recently' /ousing 5e"elopment )inance 3orporation

Cimited as the premier institution pro"iding housing finance in India! In recent years'

se"eral other players including public and pri"ate sector banks ha"e entered the housing

finance industry! 4he +ational /ousing Bank and the /ousing and rban 5e"elopment

3orporation Cimited are the to ,o"ernment0controlled financial institutions created to

impro"e the a"ailability of housing finance in India! 4he +ational /ousing Bank Act

pro"ides for refinancing and securiti1ation of housing loans' foreclosure of mortgages and

setting up of the Mortgage 3redit ,uarantee %cheme! RBI has directed commercial banks to

lend at least 7!$D of their incremental deposits in the form of housing loans! )urther' RBI has

reduced the risk eight for loans for residential properties to 9$!$D for the purpose of

13



determining capital adequacy! /ousing loans up to certain limits prescribed by RBI as ell as

mortgage0backed securities qualify priority sector lending under RBIFs directed lending rules!

Spe/$'$;e% <$&'&/$' I&t$t!t$o&

In addition to the long0term lending institutions' there are "arious speciali1ed financial

institutions that cater to the specific needs of different sectors! 4hey include the +ational

Bank for Agricultural and Rural 5e"elopment *+ABAR5.' >(port Import Bank of India'

%mall Industries 5e"elopment Bank of India' Risk 3apital and 4echnology )inance

3orporation Cimited' 4ourism )inance 3orporation of India Cimited' +ational /ousing

Bank' Poer )inance 3orporation Cimited and the Infrastructure 5e"elopment )inance

3orporation Cimited!

I#p'/t o L$"er'$;'t$o& o& T*e I&%$'& <$&'&/$' Se/torF7

ntil #;;#' the financial sector in India as hea"ily controlled and commercial banks and

long0term lending institutions' the to dominant financial intermediaries' had mutually

e(clusi"e roles and objecti"es and operated in a largely stable en"ironment' ith little or no

competition! Cong0term lending institutions ere focused on the achie"ement of the

,o"ernmentFs "arious socio0economic objecti"es' including balanced industrial groth and

employment creation' especially in areas requiring de"elopment! Cong0term lending

institutions ere e(tended access to long0term funds at subsidi1ed rates through loans and

equity from the ,o"ernment and from funds guaranteed by the ,o"ernment originating from

commercial banks in India and foreign currency resources originating from multilateral and

bilateral agencies!

4he focus of the commercial banks as primarily to mobili1e household sa"ings through

demand and time deposits and to use these deposits to meet the short0term financial needs of

borroers in industry' trade and agriculture! In addition' the commercial banks pro"ided a

range of banking ser"ices to indi"iduals and business entities! %ince #;;#' "arious financial

sector reforms ha"e transformed the operating en"ironment of the banks and long0term

lending institutions! In particular' the deregulation of interest rates' emergence of a liberali1ed

domestic capital market' and entry of ne pri"ate sector banks' along ith the broadening of

long0term lending institutionsF product portfolios' ha"e progressi"ely intensified the

competition beteen banks and long0term lending institutions! RBI has permitted the

transformation of long term lending institutions into banks subject to compliance ith the

prudential norms applicable to banks!

B'&$&, Se/tor Reor#F7

14



Most large banks in India ere nationali1ed in #;<; and thereafter ere subject to a high

degree of control until reform began in #;;#! In addition to controlling interest rates and

entry into the banking sector' these regulations also channelled lending into priority sectors!

Banks ere required to fund the public sector through the mandatory acquisition of lo

interest0bearing ,o"ernment securities or statutory liquidity ratio bonds to fulfil statutoryliquidity requirements! As a result' bank profitability as lo' non0performing assets ere

comparati"ely high' capital adequacy as diminished' and operational fle(ibility as

hindered!

Co##$ttee o& t*e <$&'&/$' S.te# (N'r'$#*'# Co##$ttee I)

4he 3ommittee on the )inancial %ystem *4he +arasimham 3ommittee I. as set up in

A!,!t 11 to recommend measures for reforming the financial sector! Many of the

recommendations made by the committee' hich addressed organisational Issues' accounting

practices and operating procedures' ere implemented by the ,o"ernment! 4he major

recommendations that ere implemented included the folloingE

• @ith fiscal stabili1ation and the ,o"ernment increasingly resorting to market

borroing to raise resources' the statutory liquidity ratio or the proportion of a bankFs

net demand and time liabilities that ere required to be in"ested in ,o"ernment

securities as reduced from 7:!9D in the pre0reform period to &9!$D in 2ctober

#;;=! 4his meant that the significance of the statutory liquidity ratio shifted from

being a major instrument for financing the public sector in the pre0reform era to

becoming a prudential requirement

• %imilarly' the cash reser"e ratio or the proportion of a bankFs net demand and time

liabilities that ere required to be deposited ith RBI as reduced from #9!$D in the

pre0reform period to 8!9D currently

• %pecial tribunals ere created to resol"e bad debt problems

• Most of the restrictions on interest rates for deposits ere remo"ed! 3ommercial

banks ere alloed to set their on le"el of interest rates for all deposits e(cept

sa"ings bank deposits

• %ubstantial capital infusion to se"eral state0oned banks as appro"ed in order to bring their capital adequacy closer to internationally accepted standards! By the end of

15



fiscal &$$&' aggregate recapitalisation amounted to Rs! &#=!9 crore! 4he stronger

public sector banks ere gi"en permission to issue equity to further increase capital

and

• Banks ere granted the freedom to open or close branches!

Co##$ttee o& B'&$&, Se/tor Reor# (N'r'$#*'# Co##$ttee II)

4he second 3ommittee on Banking %ector Reform *+arasimham 3ommittee II. submitted its

report in April #;;:! 4he major recommendations of the committee ere in respect of capital

adequacy requirements' asset classification and pro"isioning' risk management and merger

policies! RBI accepted and began implementing many of these recommendations in 2ctober

#;;:!

I&tro%!/t$o&7

ING V..' B'& Lt%F

I+, -ysya is the joint "enture beteen I+, 6 -ysya!

M$$o&F

ING’s missio is to be a leading' global' client0focused' inno"ati"e and lo0cost pro"ider

of financial ser"ices through the distribution channels of the clientFs preference in markets

here I+, can create "alue!

ING Gro!pF7

I+, group originated in #;;$' from the merger beteen +ationale K +ederlanden +- *the

largest 5utch Insurance 3ompany. and +MB Post Bank ,roup +-! 3ombining roots and

ambitions' the nely formed company called GInternational +ederland ,roupH! Market

circles soon abbre"iated the name to I0+0,! 4he company folloed suit by changing the

statutory name to GI+, ,roup +!-!H!

%ince #;;#' I+, has gron from a 5utch company ith some international business to a

multinational ith 5utch roots!

I+, ,roup is a global financial ser"ices company of 5utch origin ith #9$ years of

e(perience' pro"iding a ide array of Banking' insurance and asset management

ser"ices in o"er 9$ countries!

16



2"er #'&$'$$$ employees ork daily to satisfy a broad customer baseE indi"iduals'

families' small businesses' large corporations' institutions and go"ernments!

Based on market capitali1ation' I+, is one of the &$ largest financial institutionsorldide and in the top0#$ in >urope!

In the nited %tates' I+, is a top09 pro"ider of retirement ser"ices and life insurance!

In 3anada' they are the top property and casualty insurer!

I+, 5irect is a leading direct bank ith o"er ## million customers in nine large

countries! In the groth markets of Asia' 3entral >urope and %outh America they

pro"ide life insurance!

I+, distinguishes itself internationally as a pro"ider of employee benefitsF' i!e!

arrangements of non0age benefits' such as pension plans for companies and their

employees

)urthermore' the company differentiates itself from other financial ser"ice pro"iders

by successfully establishing life insurance companies in countries ith emerging

economies' such as orea' 4aian' /ungary' Poland' Me(ico and 3hile!

@ith =8 years of e(perience in the Indian banking segment and ith I+, ,roupFs acti"e

participation in managing the affairs of the Bank' they are uniquely positioned as an Indian

madeF )oreign Bank!

V..' B'&

-ysya bank came into e(istence in the year #;7$! @hen the team of "isionaries came

together to found a bank that ould e(tend a helping hand to those ho erenLt pri"ileged

enough to enjoy Banking ser"ices! -ysya Bank opened its "ery first branch and started its

operations from Bangalore city !@ith a span of time it gained its strong e(istence in south

India! ItFs been a long journey since then and the Bank has gron in si1e and stature toencompass e"ery area of present0day banking acti"ity and has car"ed a distinct identity of

17



being IndiaLs Premier Pri"ate %ector Bank! 4he Bank made rapid strides to reach the co"eted

position of being the number one pri"ate sector Bank!

In India I+, -ysya is into folloing areas of ser"icesE0

Banking!

Cife insurance!

Mutual fund!

ING V..' B'& Corpor'te St'te#e&tF7

GI+, -ysya Bank ill be an entrepreneurial integrated financial ser"ices institution here

inno"ation and transformation are the ay of life!H

26 Det'$e% t!%. o ING V..' B'&

BANK PRO<ILEF7

I+, -ysya Bank Cimited is an entity formed ith the coming together of ersthile' -ysya

bank ltd' a premier Bank in the Indian Pri"ate %ector and a global financial poerhouse' I+,

of 5utch origin' during 2ct &$$&!

4he immediate benefit to I+, -ysya Bank ltd as the pride of ha"ing become a member of

global financial ser"ices giant!

Bank has an asset base of #7#7 billion euros!

It has net profit of ;!&8 billion euros!

@ith total business turno"er of o"er Rs!#&$$$ crores!

18



It has capital adequacy of ;!:D!

Bank has an e(tensi"e netork ith almost 89$ branches!

And has a netork of more than 9$$$ A4MFs!

%trong and loyal client base in corporate' trade and retail segment! And more than

three million satisfied customers!

Is also a part of banke( an inde( launched by B%>!

I+, -ysya Bank deals in folloing area of BankingE0

3orporate Banking

3ommercial Banking

4reasury management

Retail Banking

Rural Banking

Pri"ate Banking

19



Being a ell knon name in the domain of financial and banking ser"ices in the country' the

ING V..' B'& Ctd has come up ith a number of financial solutions and ser"ices in a

number of areas! %ome of the ell knon segments in hich the bank offers customi1ed and

speciali1ed ser"ices areE

• Accounts and deposits

• %hort and long term loans

• Pri"ate banking

• +RI ser"ices

Pero&' B'&$&,F 4he personal banking department of I+, -ysya Bank Ctd offers highquality ser"ices and solutions to cater to the financial needs and preferences! 4he high end

solutions make them a one stop organi1ation to fulfill the needs and requirements of the

customers! %ome of the ell knon ser"ices offered in the segment of personal banking areE

• Mutual )unds

• 4a( %a"ings Bonds

• %a"ings Account

• +RI %er"ices

• 3redit 6 5ebit 3ard

• Internet Banking

• Phone Banking

• Mobile Banking

• %elf Banking

• 4erm deposits

• 5emat accounting

• @ealth management

• 5ebit and credit card accounting

• Payment ser"ices

=e't* M'&',e#e&t er:$/eF 4he ealth management ser"ices of the I+, -ysya Bank

Ctd offers the best ser"ices in order to take care of the needs and preferences of the

consumers in "arious ealth management sectors! 4he secure ser"ices offered by the bank

20



also minimi1e the risk processes and also offer the best of returns!

In addition to these' I+, -ysya Bank Ctd also offers business banking facilities and ser"ices

of high standards! 4he ser"ices are meant to take care of the business needs and also pro"ide

high degree of financial stability to the "arious corporate organi1ations and business sectors!

%ome of the ell knon ser"ices that are offered includeE

• Cong and term loans in the agro based sector

• %M>0 Poer Business account and loans

• )inancial market analysis

• Market trading

• Asset liability management ser"ices

• )inancial market sales

• 3ash management ser"ices

• 3orporate and in"estment banking ser"ices

• 2ff shore borroing ser"ices

• 4rade and community finance ser"ices

I+,Fs RETAIL BANKING business comprises four business units namelyE0

#! 3onsumer Banking'

&! %mall and Medium >nterprises *%M>.

7! Agriculture and %ocial Banking nit *A%B. and8! Pri"ate Banking!

1. Cos!m"# B$%i&

4he 3onsumer Banking business consists of 3onsumer Cending and 3onsumer Ciabilities'

hich offers to retail consumer both asset based products such as home loans' personal loans'

credit cards and liability products' such as sa"ings accounts' salary accounts and term

deposits! @e ha"e focused our efforts' resources and talent to ensure that e capitali1e fully

on the opportunities a"ailable to us!

21



(') Co&!#er Le&%$&,

3onsumer lending deals ith granting secured loans to indi"iduals' partnership firms'

and companies' as ell as unsecured loans to indi"iduals for "arious purposes! 4heir

business is primarily dri"en through #; Asset Booking 3entres spread o"er thecountry' here consumer finance loans are disbursed!

4hey ha"e folloing consumer lending products in our portfolioE0

• Ho#e Lo'&F In the year &$$7' they introduced customi1ed home loans ith built in

free life insurance for the full loan term and amount and a floating rate based on

market determined rate! 4hey belie"e that compared to their competitors' this is auniquely featured product' hich has already resulted in "olumes of Rs! ==!=8 crores

co"ering ::8 accounts' as of %eptember 7$' &$#$! Additionally' they are planning to

add further features and fle(ibility to meet the demands of the customer!

• Cre%$t C'r%F 4heir credit card charges a relati"ely lo nominal rate of #!9D on

cash ithdraals! 4hey do not charge any transaction fee on fuel purchased and also

enables global access to o"er 7$ million merchant establishments orldide! 4he

card is issued in partnership ith 3itibank' hich allos the bank and its customers to

benefit from the 3itibankFs e(perience in processing credit cards! As of %eptember 7$'

&$#$' the number of our credit cardholders stood at ;;'<=:!

• Pero&' Lo'&F 4hese are unsecured loans pro"ided to customers for "arious

purposes such as higher education' medical e(penses' social e"ents and holidays!

Introduced in &$$&' this product has itnessed groth oing to their customer

programs and distribution team! As on %eptember 7$' &$#$ they ha"e a customer base

of =='8$; and our business stood at Rs! =77!7 crores!

• A%:'&/e ','$&t De#'t e/!r$t$eF 4hey introduced Ad"ance against 5emat

%ecurities in &$$7' hich has resulted in "olumes of Rs! 9!:: crores' co"ering 99:

accounts' as of %eptember 7$' &$#$!

• Lo'& or !"/r$"$&, to IPOF 4he loans for subscribing to IP2s came in &$$7'

hich has resulted in "olumes of Rs! &!$9 crores as of %eptember 7$' &$#$!

•

Co##er/$' Ve*$/e Lo'&F 4he 3ommercial -ehicle Coans as introduced in&$$#! 4hey e(tend loans for purchase of ne and used 3ommercial -ehicles 0 MA-s

22



*Multi A(le -ehicles.' /3-s */ea"y 3ommercial -ehicles.' M3-s *Medium

3ommercial -ehicles. and C3-s *Cight 3ommercial -ehicles.' hich include Buses'

4rucks' )ully built "ehicles 6 4ippers! 4he loan is generally granted for a ma(imum

term of 8: months! 4heir business stood at Rs! <<7!;7 crores as of %eptember 7$'

&$#$!

(") Co&!#er L$'"$$t$e

Resource mobili1ation in Retail Banking is a core acti"ity of bank! Bank has

customer base' of nearly four million ith o"er Rs!#$' $$$ crores of deposits' ith a

mi( of %a"ings' 3urrent and 4erm deposits!

4hey ha"e the folloing consumer liability products in their portfolioE0

• Or'&,e S':$&, A//o!&tF 4he 2range %a"ings Account as introduced in August

&$$7! It has secured more than #&9'$$$ ne customers! 4he key features of 2range

%a"ings Account are ree pero&' '//$%e&t $&!r'&/e co"er including medical

e(penses for three years' free unlimited A4M transactions in o"er ;'$$$ Master3ard

netorked A4Ms in India and o"erseas' free membership to %martser"*Personal

assistance ser"ice. and other facilities like Internet Banking' 4ele banking' Anyhere

Banking and other pri"ileges!

• Or'&,e C!rre&t A//o!&tF 4he 2range 3urrent Account as launched in 5ecember

&$$7! %ome of the distinct features of the account are free personal accident insurance

co"er' free cash in transit insurance' free A4M transactions in Master3ard netork'

free 55s' cheques upto Rs #!9 crore per month and many other facilities! %ince

5ecember &$$7' this product has secured more than &'9$$ customer accounts and

mobili1ed o"er Rs #9$ crores!

• Mpoer S''r. A//o!&tF Introduction of the Mpoer %alary Account came in

+o"ember &$$&' hich e(pedites the process of salary payments' facilitating both

employer and employees!

• A%:'&t',e S':$&,F In %eptember &$$8 they launched a scheme e(clusi"ely for the

customers of non netorked branches ith accident Insurance as the key feature! 4he

scheme en"isages co"erage of sa"ings bank account holders under personal accident

insurance to a ma(imum of Rs!$!$7 crores!

23



• Ter# Depo$tF 4hey offer fi(ed' rein"estment and recurring deposits ith all the

facilities for easy transferability' different modes of interest payments' ad"ance

against deposit' premature ithdraal facility' acceptance in units and nomination

facility! A si1eable portion of the portfolio is skeed toards rein"estment deposits

amounting to o"er Rs! ='7$$ crores!

• De"$t C'r%F 4hey ha"e tied0up ith Master 3ard Internationals to issue the

International 5ebit 3ard ith Maestro3irrus connecti"ity! 4his enables their debit

card holders to access o"er ;$$$ A4Ms of Maestro3irrus member banks and o"er

=$'$$$ merchant establishments o"er India! 4he Bank has tie0up ith 3orporation

Bank for A4M sharing hich gi"es additional reach!

'. Sm$(( $) M")i!m E*"#+#is"s ,SME

4raditionally their focus has been on the %mall and Medium >nterprises business' hich has

accounted for a si1eable proportion of their total ad"ances! 4his segment focuses on the needs

of all business enterprises in trading of goodsser"ices ith annual sales turno"er up to Rs! =9

crores for both domestic 6 e(port credit requirements! 4hey ha"e a large number of

relationships hich is a core strength enabling them to cross sell other products like

%a"ings3urrent4erm deposits' Insurance and Mutual )und in"estments' 3redit 3ard' -ys0

5P etc!

. A&#i/!(*!#" 0 So/i$( B$%i& Ui* ,ASBU

A%B deals ith all banking business in rural branches and business related to Agricultural

acti"ities and lending to go"ernment sponsored schemes in other non0rural branches!

. P#i2$*" B$%i&

In India' the ersthile I+, Bank as one among the firsts to offer pri"ate banking ser"ices!

After I+, ,roup in"ested in the Bank' the pri"ate banking arm of I+, Bank as integrated

24



into I+, -ysya Bank! 4heir Pri"ate Banking manages the ealth of o"er 8$$ families! 4he

team currently comprises 89 members *including &$ Relationship Managers.! 4he client

management team is supported by a product de"elopment team' and a research team headed

by the 3hief In"estment 2fficer!

4he folloing key products and ser"ices are in the domain of our pri"ate bankingE

• I&:et#e&t So!t$o&F 4heir portfolio management ser"ices are nondiscretionary in

nature and include construction restructuring of the portfolios' monitoring them and

e(ecuting clientFs requests! 2ur in"estment products include debt' equity' mutual

funds and insurance!

• =e't* Str!/t!r$&, or D$:ere Nee%F @ealth structuring ser"ices embrace ills

trusts and other ell0established means of protecting and distributing assets! 4hey

also pro"ide real0estate ad"isory ser"ices that focus on broad0basing the clientFs

ealth allocation and income streams' as ell as ta( and legal planning ser"ices

through speciali1ed partners!

I+, -ysya BankFs =HOLESALE BANKING is organi1ed into three groupsE

• 3lient 3o"erage'

• Products and %er"ices and

• )inancial Markets!

@hile the 3lient 3o"erage group is responsible for managing relationships ith identified

client sub0groups' the Products and %er"ices and )inancial Markets groups are responsible for

product and ser"ice deli"ery to the entire @holesale Banking client base!

34o("s$(" B$%i& P#o)!/*s $) S"#2i/"s

4hey pro"ide a range of commercial banking products and ser"ices to IndiaFs leading

corporations and groth0oriented middle market businesses! 4heir key commercial banking

products and ser"ices to corporate customers include *a. 3redit Products and %tructured

)inance *b. 3ash Management *c. 4rade and 3ommodity )inance *d. In"estment Banking'

Cocal 5ebt %yndication and %ecuritisations' *e. )inancial Markets and *f. 3orporate

5eposits!

(') Cre%$t Pro%!/t '&% Str!/t!re% <$&'&/e

25



3redit Products of Bank include products like @orking 3apital )inance' 4erm )inance and

%tructured )inance! 4heir corporate loan portfolio primarily consists of term loans for project

and corporate finance' and orking capital credit facilities!

($) =or$&, C'p$t' <$&'&/eE nder orking capital finance' they offer the folloing

products and ser"ices to our customersE0

• C'* Cre%$t 8 O:er%r't <'/$$t$eF 3ash credit facilities are the most common form

of orking capital financing in India! nder the cash credit facility' a line of credit is

pro"ided up to a pre0established amount based on the borroerFs projected le"el of

in"entories' recei"ables and cash deficits! p to this pre0established amount'

disbursements are made based on the actual le"el of $&:e&tor$e '&% re/e$:'"e!

3ash credit 2"erdraft facilities are running account facilities here the borroer

may remit and dra funds freely! 4hese are typically gi"en to companies in the

manufacturing' trading and ser"ice sectors on a floating interest rate basis! Interest is

earned on this facility on a monthly basis' based on the daily outstanding amounts!

4he facility is generally gi"en for a period of up to #& months' ith a re"ie after that

period! 4heir cash credit facility is generally fully secured ith full recourse to the

borroer! In most cases' bank has a first charge on the borroerFs current assets'

hich normally are in"entory and recei"ables! Additionally' in some cases' it may

take further security of a first or second lien on fi(ed assets including real estate' a

pledge of financial assets like marketable securities' corporate guarantees and

personal guarantees! 3ash credit facilities are e(tended to borroers by a single bank'

multiple banks or a consortium of banks ith a lead bank! 4he nature of the

arrangement is usually agreed beteen the bank or banks and the borroer anddepends upon the amount of orking capital financing required by the borroer' the

risk profile of the borroer and the amount of loan e(posure a single bank can take on

the borroer! Bank is focused on rated large and emerging corporations and ha"e

participated in multiple bank and consortium arrangements! Regardless of the

arrangement' it undertake its on due0diligence and follo their credit risk policy to

determine hether it should lend money to the borroer and' if so' the amount to be

lent to the borroer and the rate of interest to be charged!

• Co##er/$' p'perF A commercial paper is an unsecured' short0term corporate paper

in the nature of a usance promissory note ith fi(ed maturities and is negotiable byendorsement and deli"ery! nder current guidelines' commercial paper can be issued

for a minimum tenor of #9 days and a ma(imum tenor of 7<9 days! 3ommercial

papers are generally issued by highly rated borroers and since they are trade able'

they offer bank a liquid in"estment opportunity!

• B$ D$/o!&t$&,F Bill discounting in"ol"es the financing of short0term trade

recei"ables through negotiable instruments! 4hese negotiable instruments can then be

discounted ith other banks if required' pro"iding bank ith liquidity! In addition to

traditional bill discounting' bank also pro"ides customised solutions to its corporate

customers ha"ing large dealer netorks! Coans are appro"ed to dealers in the form oforking capital lines of credit' based on analysis of credit risk profiles of dealers!

26



• S*ort7ter# o'&F %hort0term loans are demand loans ith a maturity of three to si(

months pro"ided by bank to corporate borroers to meet their temporary cash flo

mismatches or to a"ail of interest rate arbitrage! 4hey can be denominated 87 in either

rupee or foreign currency and can be disbursed as fi(ed rate loans or floating rateloans linked to BankFs reference rate called I-RR or money market benchmark rates!

%hort term loans are usually pro"ided to highly rated corporate and may be unsecured!

• E4port Cre%$tF 4he RBI requires banks to make loans to e(porters at concessional

rates of interest! Bank pro"ides e(port credit for pre0shipment and post0shipment

requirements of e(porter borroers in rupees and foreign currencies! 4he RBI

pro"ides e(port credit refinancing for an eligible portion of total outstanding e(port

loans at the bank rate pre"ailing from time to time! 4he interest income earned on

e(port credits is supplemented through fees and commissions earned from these

e(porter customers from other fee0based products and ser"ices a"ailed by them fromthe bank' such as foreign e(change products!

• Letter o Cre%$tF Cetter of credit facilities are being pro"ided to banks orking

capital loan customers both for meeting their orking capital needs as ell as for

capital equipment purchases! )or orking capital purposes' bank issue letters of

credits on behalf of borroers for the sourcing of their ra materials and stock inputs!

Cines of credit for letters of credit are appro"ed as part of a orking capital loan

package pro"ided to a borroer! 4hese facilities' like cash credit facilities' are

generally gi"en for a period up to #& months' ith re"ie after that period! 4ypically'

the line is dran don on a re"ol"ing basis o"er the term of the facility' resulting in a

fee payable to bank at the time of each dradon' based on the amount and term of

the dradon!

Bank issue letters of credit on behalf of borroers both for domestic and foreign purchases!

Borroers pay a fee to bank based on the amount dran don from the facility and the term

of the facility! 4his facility is generally secured by the same collateral a"ailable for cash

credit facilities! Bank may also take collateral in the form of cash deposits' in the range of

9!$D to &$!$D of the dradon amount' from its borroers before each dradon of the

facility!

• G!'r'&teeF ,uarantees are being pro"ided' hich can be dran don any number

of times up to the committed amount of the facility! Bank issue guarantees on behalf

of its borroers in fa"our of corporations and go"ernment authorities! ,uarantees are

generally issued for the purpose of bid bonds' guaranteeing the performance of its

borroers under a contract as security for ad"ance payments made to its borroers by

project authorities and for deferral of an e(emption from the payment of import duties

granted to its borroers by the go"ernment against fulfilment of certain e(port

obligations by the borroers! 4he term of these guarantees is generally up to 7<

months though in specific cases' the term could be higher! 4his facility is generallysecured by collateral similar to that of letters of credit! In addition' as a part of its

27



project financing acti"ity' bank issue guarantees to foreign lenders' e(port credit

agencies and domestic lenders on behalf of its clients!

Te/*&oo,. !e% 't ING V..' B'&F7

4hey seek to be at the forefront of technology usage in the financial ser"ices sector!

Information technology is a strategic tool for its business operations to gain competiti"e

ad"antage and to impro"e o"erall producti"ity and efficiency of the organi1ation! All of itstechnology initiati"es are aimed at enhancing "alue' offering customer con"enience and

impro"ed ser"ice hile optimi1ing costs!

4hey e(pect to continue ith its strategy of le"eraging technology to achie"e a significant

competiti"e ad"antage! 4his ill be done by I+, -ysya Bank le"eraging on the systems and

processes that ha"e already been de"eloped by I+, orldide!

4hese co"er many functions in the bank' including risk management *credit' market'

operational.' financial markets' MI%' etc!

4he key objecti"es behind its information technology strategy includeE

• Building a cost0efficient distribution netork in India to accelerate the de"elopment

of its retail distribution capability!

• >nhancing cross selling and client segmentation!

• Impro"ing credit and market risk management!

• Introduction of customer centric products!

• Pro"iding added "alue ser"ices to 4ier # corporate clients by also le"eraging on the

global product and ser"ice deli"ery capabilities of I+,!

• 3apitalising on the banksF legacy in the %M> business!

28



ACHIE5EMENTS AND MILESTONES:-

5etails of key milestones achie"ed by us so far are as follosE

• March #;7$' Incorporation of the -ysya Bank Cimited' Bangalore!

• )ebruary #;8:' became a scheduled bank in terms of the RBI Act!

• %eptember #;:9' achie"ed the &!#"er o&e position among pri"ate sector banks as on

5ecember 7#' #;:9!

• March #;:=' Incorporation of 4he -ysya Bank Ceasing Cimited *no knon as I+,

-ysya )inancial %er"ices Cimited. for leasing and merchant banking acti"ities along

ith arur -ysya Bank Cimited!

• January #;::' Introduced co0branded credit cards by ay of an affiliation ith

3entral Bank of India!

• +o"ember #;;$' Incorporation of -ysya Bank /ousing )inance Cimited for housingfinance acti"ities!

• March #;;#' 4otal deposits in the Bank crossed Rs!#$$$ crores!

?6 PROJECT DETAILSF7

INTROD-CTION O< PROJECT IN BRIE<F7

4he project is aimed at describing the credit appraisal processes i!e! starting from identifying

the borroer till disbursement of the facilities! Moreo"er through this project one can get to

kno about the process of credit appraisal used by the bank hen the client comes for

borroing! It ill be an attempt to detail the processes of appraisal for credit step by step till

the final disbursement is made! 2ne can also get the learning of different techniques used atthe time of doing 3redit Appraisal!

29



OBJECTIVE O< THE PROJECTF7

4o understand the processFs used for 3redit Appraisal by the bank!

4o get information related to the tools used for 3redit Appraisal by the bank!

Moreo"er to get o"erall learning of the 3redit Appraisal in the bank!

L$#$t't$o& o t*e Pro@e/tF7

4rue 6 3orrect Information on the proposal recei"ed for Appraisal!

Incomplete information due to una"ailability of the records!

Appraisal skill 6 knoledge of the appraiser!

3oncealment of the information by the applicant!

Met*o%oo,.F I ill ork together ith the concerned official on practical cases

starting from the meeting ith the borroer till disbursement of the facilities!

6 MAIN TET

30



=*'t $ Cre%$t Appr'$'

3redit Appraisal is a process to ascertain the risks associated ith the e(tension of thecredit facility!

It is generally carried by the financial institutions hich are in"ol"ed in pro"iding

financial funding to its customers!

3redit risk is a risk related to non repayment of the credit obtained by the customer of

a bank!

4hus it is necessary to appraise the credibility of the customer in order to mitigate the

credit risk!

Proper e"aluation of the customer is performed this measures the financial condition

and the ability of the customer to repay back the loan in future!

,enerally the credits facilities are e(tended against the security kno as collateral!

But e"en though the loans are backed by the collateral' banks are normally interested

in the actual loan amount to be repaid along ith the interest!

4hus' the customerLs cash flos are ascertained to ensure the timely payment of the

principal and the interest!

31



B!$&e B'&$&, Pro/e 't INGF7 B!$&e B'&$&, is the core acti"ity of any bank! /ere' at I+, the Business Banking

as further bifurcated in to di"isionsE0

#!. BC4

&!. >merging 3orporate!

4he bifurcation as on the basis of amount of loan granted to the borroers! 4he BC4

di"ision has a sanction limit from &$ lakhs to & 3r!

And abo"e & 3r! %anction' it as >merging 3orporate!

My learning as constrained to BC4!

%25 0 BC4 *%ecured 2"er0draft K Bank Coan and 4rade. pro"ides necessary @orking

3apital and 4erm loans 3omposite loans to the %mall and Medium >nterprises engaged

in 4rading' %mall Businesses and %er"ice acti"ities ith simplified procedures processes

appraisal and at concessional pricing! 4his product does not co"er manufacturing

acti"ities including %%I units! 4he ma(imum e(posure under this product is capped at

I+R &$$ lakhs per borroer!

4he key factors considered for the credit decision under this product ill beE0

a! 4rack RecordK Promoter should ha"e background e(perience of at least 7 years to consider

the e(posure! /oe"er' splitting of accounts among family members or starting of ne units

in same line of business to a"ail loans under the scheme is not permissible!

b! Acceptable le"el of trade acti"ity and its consistency!

c! Market reputation of the borroer!

d! BorroerFs stake in the business!

e! Banking transactions in the past!

f! Adequate securities for the proposed e(posure!

32



4he main objecti"e of the product is to enable the Bank to build a qualitati"e asset book

and pro"ide the customer finance ith attracti"e rate of interest and timely finance ith

minimum difficulty!

A//ept'"e ',e ,ro!p

4he age of the indi"iduals proprietors partners directors should not be belo &# years

and abo"e <9 years! In case of partnerships companies' the loan can be considered if any

one of the main partners directors is abo"e &# years or belo <9 years!

D!e D$$,e&/e

4he due diligence of the ne clients should be conducted to establish the genuineness of

customerFs background' business' identity etc! by collectingE0

a! 3IBIC report on the proprietor' partner' director'

b! PA+ copy of partner firm company

c! I4R of firm company

d! %er"ice ta( registration certificate of firm company if applicable

e! %ales ta( -A4 registration certificate

f! -A4 returns copies assessment orders

g! ?3 of the third party here third party property is mortgaged

P!rpoe o t*e Lo'&

1. 4he purpose of the loan should be strictly for business purposes for orking capital oracquiring assets and not to be utili1ed for unproducti"e speculati"e purposes!

&! 4he facilities are to be directly made a"ailable to the business unit and not to the proprietor

partners directors for the purpose of in"esting elsehere!

7! As such' facilities sanctioned should be reflected in the Balance %heet of the borroing

entity!

8! nder no circumstances' personal loans of any kind should be considered under this

scheme!

33



9! @hile folloing BC4 norms scrupulously' the normal credit prudence has to be e(ercised

hile considering the limits besides ensuring that the capital in the business and the limits

appro"ed are utili1ed for appro"ed business purpose only!

NAT-RE O< <ACILITIES

Fund Based Limits –

1. 4erm Coans

&! 3omposite Coans co"ering both @orking 3apital as ell as 4erm Coan! >(isting 2"erdraft

Accounts may also be considered for con"ersion as 4erm Coans

7! 3heque purchase Bill purchase limits

Non Fund Limits –

1. Bank ,uarantees fa"oring ,o"t! Nuasi ,o"t! bodies' Public %ector ndertakings

reputed Public Cimited 3ompanies ho supply goods to our borroers

&! Performance as ell as )inancial ,uarantees are permitted!

7! ,uarantees are to be issued in appro"ed B, formats only!

8! Ma(imum period of B, is & years including the claim period!

9! Inland Cetter of 3redit *5A0;$ days 5P. facility can be sanctioned ithin the o"erall

limit' subject to &$D margin!

<! %ol"ency 3ertificates to the 3ontractors ho ha"e a"ailed credit facilities under BC4 to

the e(tent of #$$D net orth as per the latest financial statements can be issued by

folloing the e(tant guidelines! Issuing such certificates' hoe"er does not add to the

credit e(posure!

QUANTUM OF LOAN

<or Se/!re% O:er%r't' the e(posure should be lower of the following e4/ept or Go% >

Jeeer. tr'%erE

#! &$D of ,ross Projected %ales other than 3ommission Agents Oor

&! 7 times of the promotersF +et 2ned )unds in the business!

7! )or computation of +et 2ned )unds *+2).' eligible Nuasi 3apital component deployed

in the business on a long term basis can be included!

34



8! +2) Q 4+@ %ubordinated debt O%C of promoters K +on0business related in"estments'

loans 6 ad"ances and miscellaneous items

9! 2ut of promotersF +et oned funds' at least 79D should be by ay of 4+@!

5irect enquiries should also be made ith the suppliers of the equipments machineries

materials regarding the costs of "arious inputs' to ensure their correctness!

Ot*er I!eF

#! Borroer should deal e(clusi"ely ith our Bank' as their %2C> BA+>R%' and routetheir transactions through us! /oe"er' in e(ceptional cases' sanctioning authority may

permit to maintain current accounts ith other Banks!

&! Borroer should ha"e necessary licenses on hand to run the business!

7! %tocks and Book 5ebts to be hypothecated to the Bank!

8! Insurance of the properties offered as security!

9! %tocks to be insured

<! Branch should get the securities "alued from the BankFs appro"ed "aluer and also obtain

legal opinion and ascertain their genuineness! Branches should satisfy about their

marketability!

=! In case of take o"er accounts branch should ensure that the account has no o"er dues and

the operations in the account are satisfactory and is a standard account! Branch should

obtain P63 opinion from the e(isting banker before releasing the limits! In case here

e are not able to obtain P63 opinion' the sanctioning authority could ai"e the same!

:! Interest on the limits to be collected on monthly basis and in case of 4erm Coans reco"ery

through >MIs!

;! A25s to be obtained once in & years *first A25 to be ithin & years from the date of

disbursal.!

#$! 3ompulsory registration of partnership firm is ai"ed for loans sanctioned up to I+R &9

lakhs backed by collateral securities of not less than #&9D' subject to other sanction

conditions being complied ith!

35



Ot*er p'per re+!$re% ro# t*e /!to#erF

#! 3opy of the latest Partnership 5eed Memorandum of Assoc! and Articles of Association!

&! %maller nits to submit their financial statements projections duly signed by the

promoters

7! 3ertified copies Accounts and Projected )inancials in respect of business units

8! )orm +o!8=;8:$ Assets and Ciabilities statements of the Promoters and ,uarantors!

9! )orm +o!7## for the Properties offered as security!

<! 2ther BankFs sanction copies in case of take o"er accounts!

=! Catest A"ailable Income 4a( %ales 4a( Returns of the unit and promoters here"er

applicable!

SECURITY

Primary

/ypothecation of the %tocks Book 5ebts Assets financed

Co'ter'F

E+!$t'"e Mort,',e

>quitable Mortgage of the Immo"able Canded Properties' *other than Agricultural

Properties.' situated in Metro rban %emi rban areas' in such a ay that #&9D of the

limit sanctioned is co"ered!

Re'$;'"e *$,*. $+!$% e/!r$t$e

If easily reali1able Ohighly liquid securities like 5eposits of our bank' +%3Fs hichha"e come out of the lock0in0period *Paid up -alue Accrued Interest only should be

considered.' Cife Insurance Policies *%urrender -alue. and ,o"ernment %ecurities are

offered as collateral' then the collateral co"er could be #$$D of the credit e(posure!

4hese securities are to be charged to the bank as per the prescribed documentation

procedures!

!UARANTORS"!UARANTEES

1. Personal ,uarantee of all the promoters "i1!' Partners 5irectors Members' etc!

&! Personal ,uarantee of all the Property 2ners taken as security as per norms of the Bank!

36



4he clients ha"e to e(clusi"ely bank ith us! /oe"er' permitted to maintain account

ith other banks for the reasons such as suppliers need' I-BC not ha"ing branch at some

centers' term loans ha"e been a"ailed and P53s must ha"e been issued' credit card sales'

traders ith huge cash receipts *especially small denomination currency. may be strain on

the Branch etc! In "ie of the abo"e' sanctioning authority may permit to maintaincurrent accounts ith other Banks!

Application 3um Process +ote and %core 3ard are to be used as per the prescribed formats

designed e(clusi"ely for this product! @hile the same can be used for the limits up to I+R

&$$ lakhs' for proposals abo"e I+R #$$ lakhs' the )inancial %preads i!e! Basic data and

3ommon si1e %ummary' )inancial ratios ha"e to be filled' analy1ed and enclosed to the

regular BC4 appraisal note in place of financial performance in the enclosed Appraisal

+ote!

In case of takeo"er of e(isting facilities from other bank' the repayment track record has to be "erified by collecting the statement of account for a minimum period of si( months!

9! Analysis 6 3omparisonsE0

Ratio AnalysisE0

4he bank also calculates the folloing ratios 6 than does analysis of them!

Ciquidity Ratios measures the ability of the firm to meet its current obligations *liabilities.!

4he most common ratios that indicate the e(tent of liquidity or lack of it are

#. 3RR>+4 RA4I2%

&. NI3 RA4I2%

7. 3A%/ RA4I2%

C-RRENT RATIOS

3urrent ratio is calculated by di"iding current asset by current liabilities!

37



3urrent ratio Q 3urrent asset3urrent liabilities

NET =ORKING CAPITAL RATIOS

+et orking capital is the difference beteen current assets and current liabilities! It is

considered that the firm ha"ing larger +@3 has the greater ability to meet its current

obligations!

PRO<ITABILITY RATIOS

Profitability ratios are used to asses a business ability to generate earnings as compared to

e(penses o"er a period o"er a time! 4he "arious profitability ratios that e ill use are

#. Return on net orth

&. Interest spread

7. >arning per share

8. +et profit margin

NET PRO<IT MARGIN

+et profit di"ided by net re"enues' often e(pressed as a percentage! 4his number is an

indication of ho effecti"e a company is at cost control! 4he higher the net profit margin is'

the more effecti"e the company is at con"erting re"enue into actual profit! 4he net profit

margin is a good ay of comparing companies in the same industry' since such companiesare generally subject to similar business conditions! /oe"er' the net profit margins are also

a good ay to compare companies in different industries in order to gauge hich industries

are relati"ely more profitable! 4he profit margin is mostly used for internal comparison! It is

difficult to accurately compare the net profit ratio for different entities! Indi"idual businessesL

operating and financing arrangements "ary so much that different entities are bound to ha"e

different le"els of e(penditure' so that comparison of one ith another can ha"e little

meaning! A lo profit margin indicates a lo margin of safetyE higher risk that a decline in

sales ill erase profits and result in a net loss

38



RET-RN ON NET =ORTH8RET-RN ON E-ITY

Return on net orth is used as a measure of any organi1ationFs profitability! It re"eals ho

much profit a company generates ith the money the equity shareholders ha"e in"ested! It isalso called return on equity!

R2>R2+@ Q net income S #$$%hareholderFs >quity

DEBT COVERAGE RATIOS

Also knon as the 5ebt %er"ice 3o"erage Ratio *5%3R.' the debt co"erage ratio measures

your ability to pay the propertyLs monthly mortgage payments from the cash generated from

renting the property! Bankers and lenders use this ratio as a guide to help them understand

hether the property ill generate enough cash to pay rental e(penses and hether you ill

ha"e enough left o"er to pay them back on the money you borroed!

4he 53R is calculated by di"iding the propertyLs annual net operating income *+2I. by a

propertyLs annual debt ser"ice! Annual debt ser"ice is annual total of your mortgage payments

*i!e! the principal and accrued interest' but not your escro payments.!

I+, "s /5)3

B!$&e B'&$&, Pro/e 't HD<C B'&F7

CREDIT APPRAISAL PROCESS

1) Cogin of the credit file!

&. 4o atch out that eather the case is doable or not!

39



7. Preparation of the note!

8. Appraisal by the risk department!

9. %anction letter!

STEP <IRSTF LOGIN O< THE CREDIT <ILE

In this "ery first step' the marketing team of the bank gets the cases on the basis of their

references and the data in their hand !After that the marketing ill handle o"er the case to the

credit department along ith the necessary documents for further process of the case!

)olloing is the list of necessary documents required to log in a caseE0

T 5uly filled application form!

T Audited financials of last three years!

T Pro"isional financials of last year *if audited is not a"ailable.

T Bank statement of last si( months *through hich bank Ac the firm does the

ma(imum banking.

T I4R *Income 4a( Return. of Promoter Property oner!

T %anction letter of pre"ailing limit *if any.!

T 3IBIC )2RM

2nce all the documents are completed for log in !4he case is shon in MI% as a log in by

credit department!

STEP T=OF DECISION O< GO7NO7GO CRITERIA BY THE CREDIT

DEPARTMENT

40



2nce all the login documents are completed the process of checking of do ability *,2+2

,2. is done!

In this checkup e do a check out hether there is any o"erdue or default on the borroerside or not!

2nce the check up is clear the credit team prepare the finspread *softare for analy1ing the

financials. for the case ith the help of the audited financials !And also check out the track

record in the bank statement of client !@e can check the track record ith the help of the

folloing thingsE

T 3ounts of credit transactions

T 4otal amount of credit transactions *Dof the ratio to turno"er.

T 3ounts of debit transactions

T 4otal amount of debit transactions *Dto the ratio of e(penditure.

T +umber of I+@AR5 cheque returns

T +umber of 24@AR5 cheque returns

T 4imely payment of >MIFs and Interest!

After preparing the finspread on the basis of certain ratios and track record of bank statement

the credit team decides that the case is doable or not!

)olloing are the some of the main parts or ratios on hich the bank gi"es more emphases

hile to judge that the case is doable or notE

T C>->RA,> of the company must ha"e the le"erage of < according to the bank

norms *i!e! 42C4+@ total outstanding liability' tangible net orth.

T 3RR>+4 RA4I2 of the company

T MPB) *Ma(imum Permissible Bank )inance.

T 5%3R *debt security co"erage ratio. in case of term loan

T Profitability ratio *like gross profit margin' >BI54A rate' PA4 margin.

41



THIRD STEPF NOTE PREPARATION

2nce the case is to be appro"ed as doable a set query is send to the marketing team for

further mo"ement of case or e can say for the preparation of note!

In the note the credit team summari1es up all the details of the borroer!

+24> @RI4I+, I+3C5>% 4/> )2CC2@I+,E0

T Business background

T Process of business

T 3omment on financial statement of the company

T )uture plan of the company and comments on the projection

T Bank statement analysis

T PromoterFs background

T Market reference of the client

T Industry scenario

T 5etailed terms 6 condition of the sanction includingE

0 4ype of limit to be sanctioned *fund based K 33 25 4C 6 non fund based.

0 Amount of Cimit to be sanctions

0 Rate of interest *for fund based facility. and rate of commission *for non fund

based facility. and processing fee!

0 5etail of security *primary and collateral.

0 5etail of Personal guarantee!

02ther terms 6 conditions as required!

2nce the note is prepared the case is sent to the centrali1ed risk management department

*3RM5.! 4he risk department is totally independent from credit department the credit

department sent the prepared note to risk department to e(amine the proposal!

42



STEP <O-RF APPRAISAL BY THE RISK DEPARTMENT

In this step the risk department scrutini1es the hole proposal and they bring out the

obser"ations' and send a list of query to the credit department!

@hen credit department ill get a list of query raised by the risk department they reply on the

same ith help of the marketing department! 4hey start orking on them to sol"e out the

queries along ith the help of marketing department!

After sol"ing all the obser"ation the case is uploaded for sanction to the appropriate authority

as per the delegation of poer by the bank!

STEP <IVEF SANCTION

After the uploading of the case' the case is presented by the credit department along ith

marketing department to the appropriate authority for the sanction of the case! 5uring the

presentation of the case "arious obser"ation are raised by the appropriate sanction authority

and on the basic of discussion' the authority decide to appro"e reject or ithdran for

modification!

If case is ithdran for modification for adding of some information or document than thecredit department along ith marketing department modifies the proposal as required by

authority and again uploads the same and discuss ith the authority to get it appro"ed!

2nce the case gets sanctioned minutes are generated! 2n the basis of minutes the 3AC

*3redit Agreement Cetter. are prepared and issued to customer!

Co&/!$o&F

43



After going through the /re%$t 'ppr'$' process at ING V..' B'& 6 at HD<C B'& e

can conclude that there is no difference hile e"aluating the credit appraisal in both the

banks! All the steps as one can see from abo"e are same! As /re%$t 'ppr'$' is "ery

important for any bank' so there are "ery less chances that there ill be any difference in the

process!

%@24 Analysis of I+, -ysya BankE0

%@24 analysis is a simple frameork for generating strategic alternati"es from a situation

analysis! 4he %@24 analysis is useful hen a "ery limited amount of time is a"ailable to

address a comple( strategic situation!

4he %@24 analysis classifies the internal aspects of the company as strengths or eaknesses

and the e(ternal situational factors as opportunities or threats!

%trengths can ser"e as a foundation for building a competiti"e ad"antage' and eaknesses

may hinder it! By understanding these four aspects of its situation' a firm can better le"erage

its strengths' correct its eaknesses' capitali1e on golden opportunities' and deter potentially

de"astating threats!

%@24 helps a company to set itself for better and for orse! %@24Fs are a means by hich

a company can better understand hat it does "ery ell and here its shortcomings are!

STRENGTHS

#! Instant Pre0generated it *includes 5ebit card' cheque book and +et Banking PI+.

&! A4M pin number security

7! 3o0 operati"e %taff

8! Personali1ed %er"ices 5oor step facilities

9! 3ash access ser"ices till 9E7$pm

<! Cocker facility

=! I+, Cife )oundation *%ocial Responsibility.

:! I+, Cife Insurance

;! >(perienced Management 4eam

44



#$! 2n0spot solution for any grie"ances of employees

=EAKNESS

#! Cack of trained sales e(ecuti"es!

&! Cess promotional Acti"itiesAd"ertising!

OPPORT-NITIES

#! ,roth in consumer base!

&! 2ffer home loans' education loans' auto loans' etc U!!

7! Acquisition of accounts of e(isting employees of its competitors!

8! 4o come up ith any %P product!

9! Cabelling *4eller counter' 3ustomer 3are UU!.

<! @eekend 4raining in terms of analysis *causes of unclosed calls. and future plans!

=! 4o le"erage ide netork of branches' that are increasingly sales and ser"ice oriented!

THREAT

#! /igh le"el of competition!

&! A competitor has a ne inno"ati"e product or ser"ice!

45



6 Pro@e/t Co&/!$o& > Re/o##e&%'t$o&

CONCL-SIONSF7

• 4he credit appraisal process carried out at I+, is sound and bank has good parameters to

appraise the project!

V 4he credit department thoroughly analyses the credit requirement of the company and the

capacity to ser"ice the debt!

V 4he bank has conser"ati"e norms to appraise the project! 4he bank at the ma( allos a &$Dhike in projections!

V 4he credit appraisal passes through "arious stages and e"aluations before it is appraised!

RECOMMENDATIONSF7

• Process should be made faster!

V All the documents required to appraise the project should be asked at the time of application

only' rather than later by the bank!

V 4he bank must bring more transparency in appraisal of the project! 4here should be

e(planation for appraisal of the project that as sanctioned by higher authority!

V 4he bank must not rely on softare or information pro"ided by the client! 4he bank should

dig in for other sources in order to dra a real picture for the company!

V At the time of projections due to lack of documents' the projections are done ithout any

basis!

46



6 MY TAKE A=AY7 KEY LEARNINGSF7

• 4hrough this project of mine I got e(posure of orking in professional en"ironment

hich in itself as a great e(perience! I also felt that there is "ast difference beteen

academic theory and its practical applicability!

• I found that summer training project pro"ides a lot of learning opportunities! I gained

a lot of knoledge about the practical aspect of fieldork!

•I also got familiari1ed ith the credit appraisal process for %M>s *%mall Medium>nterprises.!

• My e(posure to the outer orld through my training had gi"en me a chance to relate

my theoretical knoledge ith its practical applicability!

• I ha"e become more confident and ha"e also impro"ed on my sense of application!

6 Reere&/eF7

Boo

• )inancial Management0 4heory 6 Practice by Prasana 3handra' 4ata Mc,RA@

/ICC! *=th >dition.

• 5/A+>%/ MAR /A4RI' &$$;! In"estment management and %ecurity analysis!

Macmillan publishers India!

47



=e"$te

• ! indianmoney!com

• ! money!rediff!com

• ! moneycontrol!com

• !rbi!org!in%criptsB%WPressRelease5isplay!asp(

• !banknetindia!comdefault9!htm

• !hdfc!com

• !ikepedia!com

• !tradeeconomics!com

• !orldbank!org!in

• !ing"ysyabank!com

• !mospi!co!in

• !indiainfoline!com

• !bankinginfo!com

48



Documents

credit appraisal.doc