Credit Management & Appraisal System

EXECUTIVE SUMMARYEXECUTIVE SUMMARYBanks are the indispensable part of business, industry and economic growth of the country. Banks collect deposits from individuals, organizations, industries and government and render services in the form of loans and money transfers to the individuals, firms, business class, industries etc... Banks are classified into two categories i) Nationalized bank ii) Private Bank. State Bank of India (SBI) comes under nationalized bank category. SBI is oldest and biggest banking sector in the India.

State Bank of India is the largest commercial bank in India in terms of assets, deposits, profits, branches and employees. The State Bank of India is the only Indian bank to rank among the top 100 banks in the world and is also among the top 20 banks in Asia according to The Banker (UK) annual survey. SBI is the sixth Indian company to feature in the Fortune Global 500 companies.

Banking Industry is undergoing tremendous changes in the last 4-5 years. The basic technology initiatives in State Bank of India are: Introduction and implementation of Business Process Re-Engineering (BPR), because of these Services like Automated Teller Machine (ATM), Internet Banking (INB), Mobile Banking, Core Banking, and so on are available. Introduction of RACPC, SMECCC, RASMECCC and so on at urban centers RCPCs for the Regions for quick disposal of loan proposals.

In the normal course of banking business SBI has made finance to all sectors like individuals, business class, industries and institutions at an agreed rate of interest rates. The finance made by the bank is as per the laid down norms of Reserve Bank of India and also the rules and regulations of the Bank (SBI). The interest earned on these finance accounts for the profit of the Bank (SBI).

Credit management is a term used to identify accounting functions usually conducted under the umbrella of Accounts Receivables. Essentially, this collection of processes involves qualifying the extension of credit to a customer, monitors the reception and logging of payments on outstanding invoices, the initiation of collection procedures, and the resolution of disputes or queries regarding charges on a customer invoice. When functioning efficiently, credit management serves as an excellent way for the business to remain financially stable.

Credit Management is a big process. Credit proposals begins with a thorough verification of application given by applicant, pre-sanction process includes appraisal, assessment and ends with sanction of loan, and post-sanction process includes documentation, disbursement, and follow-up

Credit Management includes the following:- Credit Appraisal Credit Rating Recovery Management NPA management

KLE’s INSTITUTE OF MANAGEMENT STUDIES & RESEARCH, HUBLIKLE’s INSTITUTE OF MANAGEMENT STUDIES & RESEARCH, HUBLI Page 1

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Introduction to the Project Topic:-

Financial institutions follow certain well-defined systems and practices to appraise credit proposals. These systems and practices are strictly followed by SBI, so that the funds are sanctioned to those entrepreneurs who have the ability to repay and the money sanctioned is not misused.

On the basis of Borrowers Repayment ability the banks are provided various types of credit facility like, Business Loan, Agriculture Loan, Housing Loan, Car Loan, Education Loan, etc.

To give credit facility to individual, institutions or business, Banks will follow certain procedures n formalities. The system and practices regarding appraisal of credit proposals begins with a thorough verification of application given by applicant and ends with sanction of loan. In this process, the Corporation collects verifies necessary inputs, i.e. financial statements of the applicant, security taken for project and other related documents, and establishes the viability of the projects viz., financial viability, market viability and technical feasibility.

To reduce the risk, it is required to verify that the customer is not a fraud or black listed within the bank or with other institutes. The banks have to verify the information supplied by the customer is correct and authentic. Another method of validation of information is to collect and verify documentary proofs for income, residence, age and other information. After these procedures are completed, if the project sanction committee/sanctioning authority accept the feasibility of the project, the loan will be sanctioned.

The present report describes and analyses the Credit Management and Appraisal system as observed at State Bank of India, Administrative Network II. Hubli.

Design of the study

1. Title of the project “Credit Management and Appraisal System”, at State Bank of India, Administrative Network II, Hubli.

2. Objectives of the study:

a. The main objective is to study about the “Finance Department” by analyzing its process, strategy, & so on.

b. To know the bank profile including introduction, brief history, nature of the bank, mission, vision & values of the bank.

c. To gain insights into the credit management activities of the State Bank of India.d. To know the different aspects considered for credit appraisal process at SBI.e. To get the comprehensive knowledge about credit procedure & appraisal System

followed by SBI.f. To know the different methods available for credit Rating.


3. METHODOLOGY:

The study is Descriptive research. In this research the attempt has been made to analyze the performance of the funds and also how much risk associated with the Sources of Data.

Data Collection Method:

To fulfill the objectives of my study, I have taken both into considerations they are primary & secondary data.

Primary data: Primary data has been collected through personal interview of the staff & borrowers of the Bank.

Secondary Data: Secondary Data is been collected from Organization reports like Research reports, Annual Report, Bank Manuals, SBI News, Circulars Sent to The Branches and from SBI website.

www.sbi.co.in www.sbitimes.com www.google.co.in www.sbi.com

4. DURATION OF THE STUDY :-

From 1st June 2010 to 31st July 2010

5. LIMITATIONS OF THE STUDY :-

The study is restricted to only one Branch.

Time constraint-that is, the study is restricted to 2months.

Getting secondary data is restricted.

Credit management is a big process it is not possible cover all the task within a

short time.

OVERVIEW OF STATE BANK OF INDIA:-


http://www.sbi.com/

http://www.google.co.in/

http://www.sbitimes.com/

http://www.sbi.co.in/

State Bank of India is the largest and one of the oldest commercial bank in India, in existence for more than 200 years. The bank provides a full range of corporate, commercial and retail banking services in India. Indian central bank namely Reserve Bank of India (RBI) is the major share holder of the bank with 59.7% stake. The bank is capitalized to the extent of Rs.646bn with the public holding (other than promoters) at 40.3%. SBI has the largest branch and ATM network spread across every corner of India. The bank has a branch network of over 14,000 branches (including subsidiaries). Apart from Indian network it also has a network of 73 overseas offices in 30 countries in all time zones, correspondent relationship with 520 International banks in 123 countries. In recent past, SBI has acquired banks in Mauritius, Kenya and Indonesia. The bank had total staff strength of 205,896 (2010). Of this, 29.51% are officers, 45.19% clerical staff and the remaining 25.30% were sub-staff. The bank is listed on the Bombay Stock Exchange, National Stock Exchange, Kolkata Stock Exchange, Chennai Stock Exchange and Ahmedabad Stock Exchange while its GDRs are listed on the London Stock Exchange. SBI group accounts for around 25% of the total business of the banking industry while it accounts for 35% of the total foreign exchange in India. With this type of strong base, SBI has displayed a continued performance in the last few years in scaling up its efficiency levels. Net Interest Income of the bank has witnessed a CAGR of 13.3% during the last five years. During the same period, net interest margin (NIM) of the bank has gone up from as low as 2.9% in FY02 to 3.40% in FY06 and currently is at 3.32%.

MANAGEMENT OF STATE BANK OF INDIA:-

The bank has 14 directors on the Board and is responsible for the management of the Bank’s business. The board in addition to monitoring corporate performance also carries out functions such as approving the business plan, reviewing and approving the annual budgets and borrowing limits and fixing exposure limits. Mr. O. P. Bhatt is the Chairman of the bank. The five-year term of Mr. Bhatt will expire in March 2011. Prior to this appointment, Mr. Bhatt was Managing Director at State Bank of Travancore. Mr. T S Bhattacharya is the Managing Director of the bank and known for his vast experience in the banking industry. Recently, the senior management of the bank has been broadened considerably. The positions of CFO and the head of treasury have been segregated, and new heads for rural banking and for corporate development and new business banking have been appointed. The management’s thrust on growth of the bank in terms of network and size would also ensure encouraging prospects in time to come.

HISTORY OF STATE BANK OF INDIA:-

Banking in India has its origin as carry as the Vedic period. It is believed that the transition from money lending to banking must have occurred even before Manu, the great Hindu jurist, who has devoted a section of his work to deposits and advances and laid down rules relating to the interest. During the mogal period, the indigenous bankers played a very important role in lending money and financing foreign trade and commerce. During the days of East India Company, it was to turn of the agency houses top carry on the banking business. The general bank of India was the first joint stock bank to be established in the year 1786.The others which followed were the Bank of Hindustan and the Bengal Bank. The Bank of Hindustan is reported to have continued till1906, while the other two failed in the meantime. In the first half of the 19th Century the East India Company established three banks; The Bank of Bengal in 1809, The Bank of Bombay in 1840 and The Bank of Madras in 1843.These three banks also known as presidency banks and were independent units and


functioned well. These three banks were amalgamated in 1920 and The Imperial Bank of India was established on the 27th Jan 1921, with the passing of the SBI Act in 1955, the undertaking of The Imperial Bank of India was taken over by the newly constituted SBI. The Reserve Bank which is the Central Bank was created in 1935 by passing of RBI Act 1934, in the wake of swadeshi movement, a number of banks with Indian Management were established in the country namely Punjab National Bank Ltd, Bank of India Ltd, Canara Bank Ltd, Indian Bank Ltd, The Bank of Baroda Ltd, The Central Bank of India Ltd .On July 19th 1969, 14 Major Banks of the country were nationalized and in 15th April 1980 six more commercial private sector banks were also taken over by the government. The Indian Banking industry, which is governed by the Banking Regulation Act of India 1949, can be broadly classified into two major categories, non-scheduled banks and scheduled banks. Scheduled Banks comprise commercial banks and the co-operative banks The first phase of financial reforms resulted in the nationalization of 14 major banks in 1969 and resulted in a shift from class banking to mass banking. The next wave of reforms saw the nationalization of 6 more commercial banks in 1980 since then the number of scheduled commercial banks increased four- fold and the number of bank branches increased to eight fold. After the second phase of financial sector reforms and liberalization of the sector in the early nineties. The PSB’s found it extremely difficult to complete with the new private sector banks and the foreign banks. The new private sector first made their appearance after the guidelines permitting them were issued in January 1993.

Mission, Vision& Values Of State Bank of India:-

VISION My SBI. My Customer first. My SBI: First in customer satisfaction.

MISSION We will be prompt, polite and proactive with our customers. We will speak the language of young India. We will create products and services that help our customers achieve their goals. We will go beyond the call of duty to make our customers feel valued. We will be of service even in the remotest part of our country. We will offer excellence in services to those abroad as much as we do to those in

India. We will imbibe state of the art technology to drive excellence.

VALUES We will always be honest, transparent and ethical. We will respect our customers and fellow associates. We will be knowledge driven. We will learn and we will share our learning. We will never take the easy way out. We will do everything we can to contribute to the community we work in. We will nurture pride in India Profit orientation. Belonging and commitment to the bank. Fairness in all dealings and relations. Risk-taking and innovation. Team-playing.


Learning and renewal. Integrity. Transparency and discipline in policies & systems.

SWOT ANALYSIS OF SBI

STRENGTH: WEAKNESSES: Efficient management. Qualified and talented personnel. Wide net work of branches. Largest market share. Largest in terms of assets and customer base. Well established system and procedure. Good capital adequacy ratio. Major corporates being clientele of bank & Good research and development.

1. High NPAs.

2. Decline in market share.

3. Shrinking interest rate spread.

4. Low return on assets.

OPPORTUNIES: THREATS:

Operating in an open / globalised economy. Opening of Insurance sector to Banks. Diversification by way of factoring. Hire purchase, Leasing. Merchant banking. Depository. Non-fund based business etc. Marketing of ATMs. Tele-banking services. Redeployment of staff and. Recruiting it savvy personnel.

1. Intensive competition from new private banks and foreign banks.

2. Dissatisfied customers3. Introduction of new products by

competitors.4. Frauds.5. Stringent regulations.6. NPAs and provisions

requirements and7. Disclosure of defaulters.

State Bank of India


http://en.wikipedia.org/wiki/File:SBI-logo.svg

TYPE : Public (BSE: SBI, NSE: SBID)

Industry : Banking, Financial services.

Founded : Calcutta(1806).

Headquarters : Mumbai, Maharashtra, India.

Key people : O. P. Bhatt (Chairman).

Products : Investment Banking Consumer Banking Commercial Banking

Retail Banking Private Banking Asset Management Pensions Mortgages Credit Cards

Revenue : Rs 113,535.99 crore (US$ 25.32 billion) (2009)

Profit : Rs 10,998 crore (US$ 2.45 billion)(2009)

Total Asset : Rs 1,188,060 crore (US$ 264.94 billion)(2009)

Total Equity : Rs 65,912 crore (US$ 14.7 billion)(2009)

Owner(s) : Government Of India

Employees : 205,896 (2010)

Website : Statebankofindia.com

ORGANISATION STUDY



CIRCLE ORGANIZATION-POST REDESIGNCircle

CGM

GMs (Networ

k)

DGM (PBBU)

DGM (SME)

AGM/ DGM (RBU)

AGM/ CM

(Agri)

AGM/ CM

(Non-Agri)AGM/

CM (P-

Segment)AGM/ CM

(Alliances,

channels)

CDOCCFO

AGM (GBU)

AGM (Alterna

te Channel

s)AGM (Circle Securit

y)AGM

(Disciplinary

Proceedings)

CM (Procure

ment)

CM (Official Languag

es)State Bank

Learning

CentersAGM (ITSS)

AGM (Law)**

*

AGM (IOR)

AGM Audit

AGM (FSLO

)

AGM (BPMM

)

AGM (PR & CSB)*

DGM (Vigilanc

e)

DGM (Law)*

**

AGMs (Administratio

n)

RM- (Urban Region)- BPR RBO

RM- (Semi

Urban -Rural

Region)

Chief Mana

ger (BOPM)**

DGM (O & C)

Manager (P&HR)

Officer I&A, IOR

etc., Complian

ce and ReturnsOfficer

Infrastructure &

General Matters

MPST

HLST

Branch

Managers

Dy. Manager

(Marketing

CM (Rural CPCs)

Branch

Managers

CM (RURA

L)

Channel

Manager

MRT Team

Leader

* Public Relations and Community Services Banking** Business and Operations Performance monitoring

*** Depending on the legal support required by the circle either the AGM (Law) or a DGM (Law) will be present

CMs (Admn

.)

Dy. Manage

r (Market

ing)

Modified / enhanced roles

CM (Lead Bank Cell)

AGM/C

M (Credit

and Perform

ance Monitor

ing)CM (MIS and

Performance)

AGM (PPG)

AGM (HR)

CM (HR)

Security

Officer

CPCs

AGM BPRIT

Oper. Risk Mgr

CCC Sectt.MM-III

AGM (Prem. & Est.)

CM (HR)

Dy.Manager -

(I & A & other

support)

Dy. Manager

-(I & A &

Other Support)

AGM(NPA Mgt)

Recent additios

RM(HYBRID

RBO)

Potential

Specific

structure

New roles

Credit and Performance Monitoring Ensure Credit quality in respect of loans sanctioned / maintained at the CPCs Monitor performance of the CPCs in qualitative matters. Ensure prompt processing of high value proposals emanating semi urban, rural

branches, and also metro urban branches which are not covered by BPR Monitoring of NPAs in the network. preparing proposals for rehabilitation and

compromise for branches not linked to BPR entities Furnish required data to Corporate Centre, Circle Management and other user

departments on the performance of the CPCs Assisting the DGM CPC in preparing the credit policy guidelines – on the basis of

directions received from the Corporate Centre. Circulating credit policy guidelines to operating units. Developing credit skills in the Network

Functions: Scrutinise Control Returns received from the CPCs and submit them to the DGM

(CPC) / Network Credit Committee for approval OR Circle Level credit committees Ensure that the processes / sub-processes are carried out as per design parameters to

ensure the quality of loans sanctioned Undertaking all activities under “Monitoring” function as per the credit policy and

procedures. Ensuring that high quality presentations are made by CM CPC for proposals put up

to the respective credit committees and proposals are dealt with expeditiously


STRUCTURE OF DGM (O & C) DGMOPERATIONS AND

CREDIT (nee NCM- Network Credit

Management)CM (MIS & PERFORMA

NCE)

CPCs

AGM (CREDIT & PERFORMANCE MONITORING)

Control function for advances sanctioned by all RMs including Semi-Urban/ Rural and Hybrid RBOs will be performed by DGM (O & C) of network. Responsible for overall Credit management/ NPA management of the Network

HEAD OF NETWORK CREDIT COMMITTEE

DY. MANAGER DY. MANAGERS 2DY. MANAGER

AGM (NPA Mgt)

CAC will report to local CM (Admin) DGM(O&C) will be reviewing Authority

AGM (CREDIT & PERFORMA

NCE MONITORIN

G

STRUCTURE OF AGM (ADMINISTRATION)’s OFFICEAGM

(Administration)

CM (Admin) –

Regions/CPCs/

LHO- On Locale Manager

(HR)

Dy Manager (Compliance, reconciliation, returns & misc.)

Deputy Manager (Infrastructure & General Matters)

Support award staff

Support award staff

Support award staff

There will be a separate CM (Administration) who will handle administrative activities related to LHO staff reporting to local AGM (Admin)There will also be a CM (Administration) for all CPCs in the network located under DGM(O & C)- deals with I &A Reports of CPCs also. General administration including salary payouts will be done by CM (Admin) of the area where CPC is situated

CM (HR)

Security Officer*

Contact point for IR matters to Union & Associations

Ensure processing of high value proposals emanating from semi urban and rural branches and aso metro urban branches not covered by BPR. If necessary submit to NWCC or Circle level credit committees through DGM CPC

Reporting and obtaining confirmation of irregularities permitted. Identifying early warning signals. Attending consortium meetings. Keeping track of non-fund based business. Scrutinizing reports in regard to :-Irregularities in accounts -FFS data submission -

Review and renewals.-Inspection of units.-Documentation. Monitor the NPA levels and progress of recovery processes Arrange for the skill upgradation in respect of personnel in credit related matters Ensure quality of proposals received from sourcing units to keep returns/rejections

within laid down parameters. Conduct meetings of NWC

The chart of AGM administration office, with the other departments are managing the Net Work functioning.

H R DepartmentThe department functions are, Recruitment of staff , promotion to staff, training to staff, staff-welfare activity, mediator for maintaining industrial relation with staff union and officer association federations etc are the few important function of the HR dept.

Staff StrengthThe Bank had a total strength of 2,00,299 on the 31st March 2010. Of this, 35.26% were officers, 43.61% clerical staff and the remaining 21.13% were sub-staff.


Total Number of Employees Working in the Network II (Bangalore LHO)1. Supervising Staff [Officers] : 10412. Award Staff [Clerical] : 12193. Sub – ordinate & Watch & Ward : 613

Computer & communication Dept(C&C Dept)As the Bank has provided the benefit of the anywhere banking to its customers through Core Banking, the department is taking care by solving the problems of computers, computer programmes and system related problems as and when arises at branches.

ITSS: are available to render support and services, the bank have set up department manageable technically qualified persons known as ITSS department, at their local Head Office and administrative offices.

In addition to front end operation related to customer services. Bank still needs a set of analyze the data, thus accumulated for purposes like audit and inspection for this purposes the Bank has setup data Data Processing Centers at their Local Head Office centers and administrative offices.

Security OfficerSecurity officer is looking after security aspect of the branches in the net work, i.e. supervisionof Armed Guards, CC TV, Smoke Detecting Machine; Security Arrangements at the branches are few important functions of the Security Officer.

Other Departments are also contribute for the day to day smooth functioning of the bank transactions at the branches.


RBO structure of Semi Urban & Rural Centres and Urban and metro canters is to control the branches in the net work. The semi urban, rural, urban & metro centre branches will be


Regional Manager-

(Semi-urban and

Rural) Chief Manager (RURAL)

Branch Managers

CM (Rural CPCs) MRT

Team Leaders~ 10-15

Channel Managers~ 10BCs/

BFsMROs

Responsible for operations in the CPC Monitoring and tracking of processing, sanctioning and recovery targetsCoordination with branches where needed

CM Rural to manage alternate channels, ~10-15 MRTs and ~10 Channel Managers

RBO-STRUCTURE (SEMI-URBAN AND RURAL CENTERS)

+45

Manager (NPA)

Dy. Manager

(Marketing)

Dy. Manager(I & A and other support)

Regional Manager-Metro and Urban)-

(BPR) RegionMPST Branch

ManagersRM-PB/ RM-

ME*

HLST (With

exception in metros)

The MPST and HLST which used to report to the erstwhile DGM (Module), to be broken down into smaller teams reporting to the Regional Managers, to allow him/her to be the real driver of business in the region.

RBO - STRUCTURE (METRO AND URBAN CENTERS)

Dy. Manager (Marketin

g)

In case the RM-ME sales hub model is implemented in the circle, the RM-MEs will report directly to the Regional Manager

~25

Dy. Manager(I & A and

other support)


(BPR) Region

MPST Branch Managers

HLST (With

exception in metros)

Dy. Manager (Marketin

g)

Dy. Manager(I & A and

other support)


(BPR) Region

MPST


(BPR) Region

MPST

segregated area wise and allotted to the AGMs. The AGMs will be monitoring the functioning of the branches under their control and also ensure the business development so as to achieve the allotted budgetary goal.

BOARD OF DIRECTORSCentral Board of State Bank of India

PROJECT TITLE:- CREDIT MANAGEMENT & APPRAISAL SYSTEM

CREDIT MANAGEMENTCreditA credit is a legal contract where one party receives resource or wealth from another party and promises to repay him on a future date along with interest. In simple terms, a credit is an agreement of postponed payments of goods bought or loan. With the issuance of a credit, a debt is formed

Credit ManagementCredit management is a term used to identify accounting functions usually conducted under the umbrella of Accounts Receivables. Essentially, this collection of processes involves qualifying the extension of credit to a customer, monitors the reception and logging of payments on outstanding invoices, the initiation of collection procedures, and the resolution of disputes or queries regarding charges on a customer invoice. When functioning efficiently, credit management serves as an excellent way for the business to remain financially stable.

Process of Credit ManagementThe process of credit management begins with accurately assessing the credit-worthiness of the customer base. This is particularly important if the company chooses to extend some type of credit line or revolving credit to certain customers. Proper credit management calls for setting specific criteria that a customer must meet before receiving this type


Sr. No. Name of Director1. Shri O.P. Bhatt (Chairman)2. Shri S.K. Bhattacharyya (MD & CC&RO)3. Shri R. Sridharan [MD & GE(A&S)]4. Dr. Ashok Jhunjhunwala(DMD)5. Shri Dileep C. Choksi(DMD)6. Shri S. Venkatachalam(DMD)7. Shri. D. Sundaram(DMD)8. Dr. Deva Nand Balodhi(DMD)9. Prof. Mohd. Salahuddin Ansari(DMD)

10. Dr.(Mrs.) Vasantha Bharucha(DMD)11. Dr. Rajiv Kumar(DMD)12. Shri Ashok Chawla(DMD)13. Smt. Shyamala Gopinath(DMD)

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of credit arrangement. As part of the evaluation process, credit management also calls for determining the total credit line that will be extended to a given customer.

Several factors are used as part of the credit management process to evaluate and qualify a customer for the receipt of some form of commercial credit. This includes gathering data on the potential customer’s current financial condition, including the current credit score. The current ratio between income and outstanding financial obligations will also be taken into consideration. Competent credit management seeks to not only protect the vendor from possible losses, but also protect the customer from creating more debt obligations that cannot be settled in a timely manner.

After establishing the credit limit for a customer, credit management focuses on providing the client with accurate and timely statements or invoices. The invoices must be delivered to the customer in a reasonable amount of time before the due date, thus providing the customer with a reasonable period to comply with the purchase terms. The period between delivery of the invoice and the due date should also allow enough time for the customer to review the invoice and contact the vendor if there are any questions or concerns about a line item on the invoice. This allows all parties concerned time to review the question and come to some type of resolution.

When the process of credit management functions efficiently, everyone involved benefits from the effort. The vendor has a reasonable amount of assurance that invoices issued to a client will be paid within terms, or that regular minimum payments will be received on credit account balances. Customers have the opportunity to build a strong rapport with the vendor and thus create a solid credit reference.

LOAN POLICY – AN INTRODUCTION

1. State Bank of India’s (SBI) Loan Policy is aimed at accomplishing its mission of retaining the bank’s position as a Premier Financial Services Group, with class standards and significant global business, committed to excellence in customer, shareholder and employee satisfaction and to play a leading role in the expanding and diversifying financial services sector, while continuing emphasis on its Development Banking role.

2. The Loan Policy of the bank has successfully withstood the test of time and with in-built flexibilities, has been able to meet the challenges in the market place. The policy exists and operates at both formal and informal levels. The formal policy is well documented in the form of circular instructions, periodic guidelines and codified instructions, apart from the Book of Instructions, where procedural aspects are highlighted.

3. The policy, at the holistic level, is an embodiment of the Bank’s approach to sanctioning, managing and monitoring credit risk and aims at making the systems and controls effective.

4. The Loan Policy also aims at striking a balance between underwriting assets of high quality, and customer oriented selling. The objective is to maintain SBI’s undisputed leadership in the Indian Banking scene.

5. The basic tenets of SBI’s Loan Policy are as follows: a. The Policy applies to all domestic lendings. Foreign branches have their own

policies which have been framed as per the Banking regulations of the concerned


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countries, subject to the general or special directives of RBI / Government of India, as also the prudential guidelines applicable to all corporate credit exposures of SBI.

b. It aims at spotting and seizing opportunities and revamping our products and delivery mechanism as well as innovating new products ahead of competition.

c. The Policy establishes a commonality of approach regarding credit basics, appraisal skills, documentation standards and awareness of institutional concerns and strategies, while leaving enough room for flexibility and innovation.

d. It envisages an effective training system in all areas of ‘Credit Management’ which reflects SBI’s commitment to upgrade skills of all members of staff on a continuous basis.

e. Computerization, management information system based on a reliable database and development of faster communication as tools for better overall credit risk management are accorded due priority in the Policy.

f. Optimum exposure levels are set out in the Policy to different sectors in order to ensure growth of assets in an orderly manner.

g. The Policy sets out minimum scores / hurdle rates (in terms of Credit Risk Assessment parameters) for new additional exposures.

h. Bank’s general approach to Export Credit and Priority Sector Advances is set out in the Policy.

i. The Policy lays down norms for take over of advances from other banks/FIs.j. Bank’s stand on granting credit facilities to companies whose directors are in the

defaulter’s list of RBI is covered in the Policy.k. The Policy aims at continued growth of assets while endeavoring to ensure that

these remain performing and standard. To this end, as a matter of policy the Bank does not take over any Non-Performing Asset (NPA) from other banks.

6. The Central Board of the Bank is the apex authority in formulating all matters of policy in the Bank. The Board has permitted setting up of a Credit Policy & Procedures Committee (CPPC) at the Corporate Centre of the Bank of which the Top Management are members, to deal with issues relating to credit policy and procedures on a Bank-wide basis. The CPPC sets broad policies for managing credit risk including industrial rehabilitation, sets parameters for credit portfolio in terms of exposure limits, reviews credit appraisal systems, approves policies for compromises, write offs, etc. and general management of NPAs besides dealing with the issues relating to Delegation of Powers.

ADVANCES – GENERALGiven below is the general description of various types of credit facilities granted by the Bank to its customers. 1. FUND BASED FACILITIES The different types of fund-based credit facilities made available by the Bank

I. Overdrafts Overdrafts may be granted against(a) government or other securities as specified in the Scheme of Delegation of Financial

Powers,

(b) debentures or other securities of certain district boards, municipalities, port trusts and improvement trusts,

(c) debentures and fully paid shares of limited liability companies,


(d) fully paid shares and debentures of public corporations other than companies with limited liability,

(e) the Bank’s own deposit,

(f) the surrender value of life insurance policies,

(g) Gold Deposit Certificates, or

(h) Other securities advised by the Bank from time to time.

II. Demand loans Demand loans may be granted againsta) Any of the types of security enumerated under 'Overdrafts', except without security,b) Pledge of gold ornaments,c) Pledge of other goods or produce or documents of title thereto (including warehouse

receipt),d) Demand promissory notes bearing two or more names,e) Demand promissory notes bearing two or more names, collaterally secured by:

Debentures or fully paid shares of limited liability companies, Immovable property or documents of title thereto. Units of mutual funds /units of UTI

III. Cash Credits Cash credit may be given againsta) Pledge of goods or produce or documents of title thereto,b) Pledge of goods or produce or documents of title thereto, with the additional security

of demand promissory notes bearing two or more names,c) Demand promissory notes bearing two or more names,d) Demand promissory notes bearing two or more names, collaterally secured by:

Hypothecation of stocks of goods or produce (sometimes supported by hypothecation of other assets),Debentures or fully paid shares of limited liability companies, orImmovable property or documents of title thereto;

e) Hypothecation of book debts and other assets.IV. Bills Discounted and Purchased

The following types of bills may be discounted or purchasedi.Discount of local or inland bills of exchange or promissory notes, whether clean or

documentary, the currency not exceeding six months at the time of discount or fifteen months if drawn for the purpose of financing seasonal agricultural operations, or

ii.Purchase of inland demand drafts, whether clean or documentary.iii.Short-term credit bills arising from normal trade transactions of regular customers

of the Bank may be discounted and finance against receivables be provided to the seller by discounting the usance bills/promissory notes. The document of title to goods becomes the security for such discounted bills.

iv.Under a contract for sale of machinery on deferred payment basis, payment for sale may involve:

a) A down payment being insisted upon by seller - say, 10% at the time of signing the contract and another 10% at the time of delivery of machinery; and


b) The balance, say 80% being permitted to be paid in convenient half-yearly or yearly instalments over a period of time, ordinarily 3 to 5 years.

V. Term Loans The types of term assistance extended by the Bank can be broadly classified into

a. Term Loans (including foreign currency loans), b. Deferred Payment Guarantees (DPGs),c. Underwriting of Shares/ Debentures.

A term loan is an advance, usually against security of the borrowers’ fixed assets, for a fixed period to a business or an industrial undertaking whether a firm, company or co-operative society and may be drawn by the borrower either in a lump sum or in instalments. A term loan may be granted for any period in excess of three years but normally not exceeding seven years for the purpose of acquisition of fixed assets, viz., land, buildings and plant and machinery for setting up new industrial units or expansion or modernisation of existing undertakings. While loans with deferred payment period up to three years will be termed as short-term loans (STLs), loans with maturity exceeding three years but up to seven years will be termed as medium term loans (MTLs) and those with longer maturity will be known as long term loans or simply term loans (TLs).

2. Non-Fund Based Facilities Bank guarantees including deferred payment guarantees, letters of credit, or its variants

e.g., stand-by LC, letters of comfort, etc. are the different forms of non-fund based credit facilities extended by the Bank. Guarantees and letters of credit issued by the Bank constitute part of its contingent liabilities. In respect of these facilities, though it does not have to lay out funds immediately, commitments there under contain inherent risks inasmuch as if the customers do not meet the related obligations when due, the Bank has to meet them and the concerned commitments would turn into fund-based exposures.

SMECCC

The all SME loans processed under SMECC (Small & Medium Enterprises City Credit Centre)

Small and Medium Enterprises City Credit Centre has been established to take care of various activities of Small Enterprises (SE) and Medium Enterprises (ME).

The SMECCC will be headed by a under the administrative control of the Deputy General Manager of the Network or DGM.

In cities with more than one Network, Head of the SMECCC will report to only one of the Deputy General Manager of the Network, which will be decided by the Circle Management Committee


A Small Enterprise is defined as a unit falling under C&I/SIB Segments with a projected income/turnover up to Rs.5.00crores in a financial year or as defined by the Bank from time to time.

A Medium enterprise is defined as a unit falling under C&I/SIB Segments with a projected income/turnover more than Rs.5.00crores and up to Rs.50.00crores in a financial year or as defined by the Bank from time to time.

This Role Manual is meant for the pilot stage of working of Small and Medium City Credit Centre (SMECCC), It is an upgraded version of Small Enterprises Credit Cell (SECC) which will take care of the following activities of Small and Medium Enterprises (SE & ME

Process chart of SME loan

0

Working D

raft -Last M

odified 7/28/2005 11:49:57 AM

Printed

Entered into received register

Scanned and allocated to

processing officers

Preliminary scrutiny (checking for completeness,

documents)

Pre-Sanction visit and filling out

application form

Sanction / Rejection

Verification/ clarifications/ corrections, if

required

Appraisal, incl. CRA, CMA

Sending for Search / Valuation

Document collection

Assistant(Day 1)

Sanctioning Officer(Day 8)

Sanctioning Officer(Day 7)

Processing Officer

(Day 7-8)

Processing Officer (Day 3-6)

Processing officer(Day 1)

DocumentationEntry into document

execution register

Documentation Officer(Day 12)

Documentation Officer(Day 9-12)

Inflow

1 2 3 4

5679

8

10 11

Processing Officer(Day 2-4)

AGM(Day 1)

Assistant(Day 3-6)

A SINGLE APPLICATION WOULD GO THROUGH THE FOLLOWING PHASES

Outflow

MARKETING OF SME PRODUCTSSME products are

1) SME smart score 2) SME credit plus3) SBI Shoppee 4) SME credit card

SME SMART SCORE

Target group Individually managed proprietary/partnership firm or closely held public/private limited companies in the small and medium industrial


& trading sector under C&I and SIB segments Eligibility The chief promoter/chief executive should be below 66

years of age The applicant must obtain a minimum score of 60% with a

minimum of 50% under each sub head of business & personal details and a minimum of 10% under collateral details

Purpose 1) Working capital needs 2) Acquisition of fixed assed

Type of facilities Cash credit/term loanQuantum of finance RS.5lacs to below RS.25lacs. 20% of annual turnover for working

capital loan and 67% of projected cost for TLMargin 25% for working capital component & 33% for TL componentRate of interest As applicable to SSI loans up to RS.25lacsSecurity

PrimaryCollateral

Hypothecation of stocks and assets Financed by bankAs per banks extent norms or WC & TLS

Processing fees As applicable to SSI/SBF/C&I unitsRepayment 1) Working capital loan to be received annually

2) TL not more than 5years excluding moratorium not excluding 6months

Documentation As applicable to SSI/C&I segmentSpecial features 1) A simplified appraisal model(enclosed) has been developed

to standardise the appraisal process2) A special application from has been designed to capture all

the require information at one instance

SME CREDIT PLUS Target group Existing SSI borrowers with excellent track record & have been

standard assets for the past consecutive years and also new borrowers Eligibility Units with C&A rating of SB4 & above and/or standard assets for the

past two years Purpose 1) For meeting bulk order

2) Repairs to machinery3) Tax payments 4) Any other contingency

Type of facilities Clean cash creditQuantum of 20% of aggregate working capital limit subject to a maximum of


finance RS.25lacs Margin Not applicableRate of interest At the rate applicable the working capital limitsProcessing fees As applicableRepayment Each amount withdrawnd should be repaid within 2 months

There should be a gap of 15 days between the last date of repayment of outstanding & the next withdrawal

Documentation As applicable to clean cash credit Special features No cheque book to be issuedSBI SHOPPETarget group Present & prospective owners of shops/offices/showrooms/ training

centers / service centers/garages/offices for charted accountants /consultants.

Eligibility Individuals/firms/partnerships/trusts/franchisees.Purpose 1) Purchase of new/old shops/establishments/offices/ dealers

showrooms etc.2) Repairs/renovation/modernization3) Furniture/fixtures/electrical fitting/accessories for the shop/office

etc.Type of facilities

Term loan

Quantum of finance

Maximum of 20lacs

Margin 25% & 40% for purchase old premises Rate of interest As applicable to SIB TLS below RS.25lacsSecurity PrimaryCollateral

Hyp./pledge/mortgage assignment of the assets purchasedOut of banks finance

Processing fees As applicable to SSI/SBF units Repayment 3 to 7 years excluding a maximum moratorium period of 6 months Documentation As applicable to SSI/SBF term loanSpecial features 1) No obligation certificate & lien letter to be invariably obtained

from the owner-lessor of the property in the case of rented property

2) Repayment period should well within the lease period in the case of rented property

3) Opening of SB/current account is mandatory 4) DSCR to be minimum 1.755) Property on hire purchase /lease from government

departments/PSUs should not be financed

SME CREDIT CARD Target group SSI units, tiny units, village industries, retail traders, professionals,

self-employed, etcEligibility Customer of the following segment with a satisfactory track record

for the last two year.Small industrial unit,Small retail traders, Professionals, Self employed persons, Small business enterprises.


Purpose To meet any kind of credit requirementsType of facilities Cash credit and/ or term loanQuantum of finance Maximum of RS.10 lacs

Margin 20%Rate of interest As applicable to the market segmentSecurity

Primary Secondary

Hypothecation of stock in trade receivables, monitory, office equipmentsSSI-no collateral is to be insisted uponSBF- charge movable/ immovable property/third party guarantee

processing fees As applicable to SSI units Repayment a) The working capital component should be reviewed every

year provided the credit summation is not less then 50% of the projected turnover, if the credit summation is less then 50% then a repayment schedule should be fixed for the outstandings in suitable monthly instalments

b) The term loan component should be repayable in a maximum of 5 years in suitable instalments

Documentation As per the nature of the facilitySpecial features Assessment A scoring module has been designed and those units

which score a minimum of 60% quality under the scheme for which the assessment will be made as under

1) For small business, retail traders etc, 20% of their annual turnover of 20% 0f the turnover of the last 12 months in their accounts whichever is higher,

2) For self employed and professionals 50% of gross annual income as declared in their income tax return

3) For SSI units As per Nayak committee norms ie.20% of annual turnover validity the limit will be valid for 3 years but is subject to annual review

Methodology & operation of the account

The borrower will be issued a photo identity card indicating sectioned limit and validity of the limit

cheque book to be marked as SME credit card pass book to be issuedsubmission of stock statements should be waived but may be obtained once in the last quarter to meet RBI stipulationsbrief opinion report should be recorded

RETAIL LOANSThe all retail loans processed under Retail Asset Credit processing Centre (RACPC)RACPC is a city level centralized unit set up to appraise and sanction Housing Loans, Car Loans, Education Loans, Rent Plus and Mortgage Loans. The focus of RACPC is efficient credit delivery to the customer, better customer satisfaction and resultant improvement in market share.

RACPC has been designed with the following objectives: To reduce the turn-around-time for sanction of loans To improve the quality of credit appraisal by pooling skills

o Expertise built up through repetition & exception handling o Standardization of processes


What are the benefits of RACPCo Efficient credit delivery and better customer satisfactiono Branches freed to focus on sales and marketing o Business accretion and increased market shareo Performance monitoring of RACPC staffo Process integrityo Adherence of TATo Non-accumulation of applications

ROLE OF THE RETAIL ASSETS CENTRAL PROCESSING CENTERi. Products covered by a Retail assets Central Processing Center

The products / services that are covered by the Retail assets center are as under:

1. Housing loan.2. Car loan3. Education loan4. Rent plus5. Personal Loan6. Loans against shares & debentures

ii. Processes/sub processes covered by a Retail assets Central Processing Center:

iii. The Description of the processes / sub processes covered is as under:1. Preparation of appraisal for all loan accounts (for products mentioned

above)2. Pre-sanction and post-sanction / pre-disbursement inspections 3. Sanctioning of all loan accounts (for products mentioned above)4. Documentation 5. Disbursement for all loans sanctioned6. Account maintenance for all loans sanctioned which includes

a. Formalities like insurance, RTO formalities, lien on Dematted sharesb. PDC Collections and maintenancec. Obtaining Revival letterd. Change in EMI / Rate of Intereste. Other maintenance activities.

7. Closure of account, release of documents and cancellation of loan documents

Key operating / sub-operating entities within the Retail assets Central Processing Center

A Retail asset CPC will have the following operating/sub operating entitiesa) AGM (RACPC)b) Control officer’s sectionc) Loan Account Processing and Sanction d) Loan account maintenance section

TURNAROUND TIME FOR VARIOUS PROCESSES S. NO PROCESS/LOANS TIME


1 Courier 1 day2 Preliminary scrutiny 2 days3 Inspection/site visit 2 days4 Legal report 4 days5 Valuation report 2 days6 Disbursement 2 days7 Home loan 6 days8 Rent plus 6 days9 Mortgage loan 6 days10 Car loan 2 days11 Educational loan 5 days12 Personal loan 3 days

SBI HOUSING LOAN SCHEMEEligibility

Minimum age Maximum age

Individuals with steady source of income including persons engaged in agriculture & allied activities.

18 years and above Loan to be fully repaid by the age of 70 years and by 75 years

under PAL scheme Purpose 1) To purchase/construct a new house/flat

2) To purchase an existing (old) house/flat or 3) To extend an existing house4) Repair/renovate an existing house/flat5) Reimbursement of investment made in housing from own

resources 6) Purchase furnishings / consumer durables as part of the project

cost.7) One or more loans may be granted to an individual if he has the

capacity to repay Maximum loan

EMI/NMI ratio

Monetary ceilings

Loan eligibility is determined by EMI/NMI ratio, irrespective of borrower’s age i.e. the loan amount is decided by the repayment capacity of borrowers, which comes out as a ratio of EMI to NMI.Maximum Permissible Loan Amount (MPLA) is subject to the following income-wise graded ratio

Net annual income EMI/NMI ratioUpto Rs.2lacs 40%Above Rs.2 to 5lacs 50%Above Rs. 5lacs 55%

Increase upto 5% in the above ratios may be permitted by the sanctioning authority, depending on the availability of disposable surplus income after meeting expenditure towards maintenance of family MPLA is also subject to following monetary ceilings:

For repairs/renovation: RS. 10lacs [loans above RS. 10lacs require prior administrative clearance of network GM]

For furnishings and consumer durables: 10% of the project


Total project cost

cost or Rs. 3lacs whichever is less where check off facility or additional security or 3rd party guarantee good for the amount is available.

Income of spouse/son/unmarried daughter and expected rental of proposed house can be clubbed.

Regular income from other sources (with proof) can be considered.

Total project cost to be include cost of land. Additional amenities, insurance premium, stamp duty & registration charges for purchase/construction of new or old property.

Margin !) loan upto Rs. 30lacs :25%!!) above Rs. 30lacs upto Rs. 75lacs : 30%!!!) above Rs. 75lacs :40%

Security Equitable or Registered Mortgage of property. If neither is possible, than sanctioning authority may accept at it description tangible security of adequate value like Insurance policies, GPN, shares, debentures, Gold ornaments or any other tangible security of adequate value.

Processing fees 0.5% of loan amount with a capital of Rs. 10000Interest Loans at fixed/floating rates and combination of fixed and floating

rates. Loans above RS. 1crore at floating rates only. Risk based premium/discount graded as per loan amount based on margin and EMI/NMI Ratio parameters. Also see interest rates annexure.

Pre-EMI interest

One time irrevocable option to be given to pay as & when applied OR capitalise within the overall loan eligibility

Type of loan Term Loan(or OD under max-gain)Repayment period Mode

Maximum period including moratorium:Upto 25 years subject to liquidation of the loan before the borrowers reaches the age of 70 years.Ability of the borrower(s) to generate sufficient income to service the loan throughout the loan tenure to recorded to the satisfaction of the sanctioning authority.Stating from the month following the month of full disbursement of the loan.Through EMI. If checkoff is not available, PDCs should be obtained. Flexible payment options available in tailor-made housing loan. Customised repayment options through equated instalments at monthly / quarterly / half yearly / yearly intervals through PDCs / SI for agriculturists.

Moratorium For construction of new house/flat or purchase of house/flat on instalments, a moratorium period (repayment holiday) till 2 months after completion of construction or 18 months from the disbursement of 1st instalments of loan, whichever is earlier, may be permitted at the request of the borrower.

Insurance Compulsory insurance of property. Optional life cover from SBI life & free accident insurance cover for borrower available.The house/flat to be insured against the risk of fire/ riots/ earthquakes / lighting / floods etc. in the joint names of the borrower and the bank for the actual project cost after netting off the cost of land (including undivided share of land in case of flats), stamp duty and registration


charges.Inspection For standard assets:

Initial inspections at the time of disbursement/release of instalments during construction

Thereafter once every 3 year If repayments are arrears for two successive months, inspection

should be conducted immediately For NPAs: at half-yearly intervals Inspections should be recorded in inspection register.Properly inspection is to be carried out and recorded at each stage of disbursement

Service charges Payable to builders who have been engaged as marketing associates

PAPERS AND DOCUMENTATIONChecklist of documents to be obtained in respect of applicant

Completed loan application 3 passport size photos Proof of identity: electoral ID card/passport/driving license/PAN card Proof of residence: electoral ID card/passport/electricity/telephone bill Proof of business address, in case non salaried borrowers Statement of bank account for the last six months Signature identification from present banker Personnel assets and liabilities statement on bank’s standard format Brief write up of securities charged in respect of others loans availed from our bank/other banks/housing and auto finance companies/other sources

Guarantor:a. Personnel assets and liabilities statement b. Passport size photographs c. Proof of identificationd. Proof of residence e. Proof of business address f. Signature identification from his/her present bankers

Income documents: for salaried applicants:a. Original salary certificate from the last month b. TDS certificate-form 16 or copy of I.T. Returns for the last two financial years, duly

acknowledged by I.T. Dept

Property documentsa. Sale deed, agreement of sale, original share certificate(S) issued by the society.b. Land & building tax paid receipts, possession certificate. Location sketch of

property certified by revenue authorities.c. Letter of allotment from Housing Board/Society/Private Builder d. Original receipts of advance payments towards purchase of flat. e. Non encumbrance certificate for the last 13 year.


f. Original of land tax paid receipt and possession certificate issued by the revenue authorities.

g. Copy of permission from Appropriate Authority and approved building plan h. Original NOC under ULCR Act 1976i. Copy of the relative order in case of conversion of agricultural land j. Original No Objection certificate [NOC] from Housing Society/builderk. Detailed estimate of cost of construction of house l. Letter from the builder/society/Housing Board intimating their a/c and the name of

their bankers, for remittance of instalments

SBI CAR LOAN SCHEME

Purpose Term loans for purchase of: new passenger cars, Multi Utility Vehicles (MUVs) and SUVs. Used car, MUV, SUV upto 5 years old. No financing of old vehicles on the basis of duplicate Registration books. Reimbursement of cost of unencumbered, single ownership vehicle not more than 2 years old

Eligibility :Occupation

Age

Minimum income p.a.

Permanent employees of State/Central Govt., Pvt. sector companies, PSUs, corporations & reputed establishments.

Professionals/self-employed & others who are IT assesses. Persons engaged in agriculture and allied activities. High net worth salaried executives of multinationals. 21 – 65 years. (For sanction of loan). Loan to be fully repaid before borrower attains age of 70 years. [Loans can be sanctioned to individuals who have sufficient, regular and continuous source of income for servicing the loan repayment beyond 65 years.]

Salaried: NAI of applicant and/or co-applicant, if any, together to be Rs.1 lac and above.

NMI of applicant (s) should be atleast 2 times of EMI.Self-employed and Professionals: NAI of applicant and/or co- applicant, if any, together to be Rs.1 lac and above for the last year as per income tax return. Persons engaged in agriculture and allied activities: Same as for Self-employed and Professionals except that income tax return will not be required.

Maximum Loan amount& Clubbing of income

New vehicles: no ceiling. Used/refurbished vehicle: Rs.15 lacs. Maximum loan restricted to: 30 times NMI for salaried & 2.5 times for NAI for others.Regular income from all source with satisfactory proof considered. Income of spouse/father/mother/brother/sister may be included if he/she joins as co-borrower. EMI/NMI percentage not to exceed 50% except in some cases.

Margin & Total cost

For new & used / refurbished vehicles: 15% of ‘on road’ price. Margins may be reduced in certain cases. Total cost to include onetime road tax, octroi, registration charges, insurance premium and accessories. [Any consumer offer/discounts by the manufacturers/dealers should be reduced from the ‘on-road price’]. Maximum cost of accessories not to exceed 5% of cost of vehicle or Rs.25,000/- whichever is less.

Penal rate 2% on entire loan o/s for period of default if a/c remains irregular beyond 30 days from due date for any reason. [notice to be sent]


Repayment period and mode

New vehicles: max. upto 7 years for Salaried and upto 5 years for Self-employed and professionals.Old vehicles: max. repayment period to be fixed as per age of vehicle. Recovery should be such that loan gets repaid within 7/5 years from the date of original sale.Old & New vehicles: customer to have option for payment in shorter duration.Repayment in equated installments preferably through check-off fpr salaried / PDCs where check-off not available /SI/ ECS with 6 undated cheques to cover the loan amount.Customized repayment through equated installments for agriculturists.

Repayment cycle For loans disbursed on or before 15th of the month and on or after 16th of the month, the repayment date should be fixed as 10th and 20th of the following month respectively

Prepayment Penalty

Prepayment fee of 2% of the amount of loan prepaid if the loan is taken over by any other bank/financial institution or it is repaid before expiry of half of the agreed repayment period or partial repayment is being made in the first year. No pre-payment penalty if loan is foreclosed for taking a freshcar loan for new or used car from Bank

Security Hypothecation of vehicle and noting of hypothecation charge in the books of R.T.O.No other security to be obtained. Any other security incl. third party guarantee to be obtained only when there is a need for credit enhancement e.g. credit score below threshold limit, any other business consideration

Insurance The vehicle to be kept comprehensively insured in the name of borrower for the market value or at least 10% above the loan amount outstanding, whichever is higher. Bank’s interest as a hypothecatee should be noted in the Insurance certificate & policy, a copy of which is to be retained with the loan documents. Insurance register is to be maintained

Inspection For Standard Assets: waived after the initial inspection. But required if there is a default of 2 monthly instalments.NPAs: twice a year. Inspection register is to be maintained

Service charge to car dealers

Payable to authorised dealers of all major car manufacturers for business sourced by them. The rates are based on quantum of business directed by a car dealer.Vehicles / loan amount per month from one dealer outlet

Total service charge payable

Upto 10 vehicles or loan amount upto Rs. 30lac

1 % of loan amount per car

Above 10 and upto 25 vehicles or amt.>Rs.30lac upto Rs.60lac

1.25% of the loan amount.

Above 25 vehicles or amt. above Rs.60Lac

1.50% of the loan amount

Service Charge is payable only if repayment period is at least two years. Not payable for vehicles financed to SBI staff. To First choice


[Automartindia] & Maruti True Value dealers, service fee is to be paid at flat 2% of sanctioned loan amount for used cars. Service fee is inclusive of service tax which is paid to govt. by car dealer. The additional incentive to Dealer’s Sales Executives [DSEs] to be paid at RACPCs only.

Processing Fee 0.50% of loan amount [inclusive of service tax] min.500/-& max.10000/- GM [Network] can reduce it upto 50%, during short promotional drives and wherever bulk finance is involved with check-off from reputed employer. 25% of the fee to be retained if application is rejected after presanction survey [subject to min. of Rs. 500/- and max. of Rs. 2500/-]

Interest Loans only on floating rates which [for new loans] may also be revised without a change in SBAR.

Authorised Branches

All Metro / Urban Branches/ all PBBs, all Super Circle of Excellence Branches, all district headquarter branches, project area branches and branches specially authorised by the AGM (Region)

SBI EDUCATION LOAN Purpose To extend financial assistance to deserving /meritorious students for

pursuing higher education in India and abroad Eligible courses:Studies in India

Graduation /post graduation courses and Ph.d/professional courses

Diploma /computer courses /evening courses offered by approved Institutes /universities.

The clerical GM (Network) can enter into tie-ups with institutions and specific courses for which loans may be granted

Studies Abroad Graduation: For job oriented professional/technical courses offered by reputed universities.

Post graduation: MBA, MCA, MS. etc Courses conducted by CIMA-London, CPA in USA etc Charted institutes of management Accountants.(Certified Public

Accountants)Student Eligibility Should be an Indian National

Secured admission to professional/technical courses through Entrance Test/ selection process

Secured admission to foreign university/institution.Students who are required to deposit part of the admission fee on the day they go for counseling and Students who are to deposit part of the fee before admission is

formallygranted may also apply[subject to conditions]No minimum qualifying marks in the last qualifying exam stipulated No maximum age limit. Students getting admission colleges/institutions on Management Quota also considered.

Eligible expenses Fee payable to college/school/hostel Examination/Library/Laboratory fee. Purpose of books /equipments/instruments/uniforms/

maintenance costs Caution deposit /building fund /refundable deposit supported by


institution bills/receipts[not exceed 10% of tuition fees for the entire course]

Travel expenses/passage money for studies abroad Purchase of computers, essential for completion of course. Any other expenses required to complete the course like study

tours, project work, thesis, etc. Boarding & loading expenses, if own arrangements are made Cost of two wheeler, premium for edu-shield, capitation fee Subject to certain conditions.

Type of loan Term loan in joint names of student and coborrower Quantum of finance Amount financed is need based subject to the parent’s /student’s

repayment capacity and following ceilings:For studies in India: Max. Rs. 10.00lacs For studies abroad: Max. Rs. 20.00lacs

Margin Up to Rs. 4lacs: Nil.Above Rs. 4lacs: Studies in India: 5% : Studies abroad: 15%Scholarship / assistantship to be included in margin.Margin to be brought in on year-to-year basis and as and when disbursements are made on a pro-rata basis. Students applying for above Rs. 4lacs for study abroad to deposit Rs. 5000/- by B/C, which will be adjusted later towards margin/ interest or commission a/c if loan not availed.For studies abroad: while arriving at the margin for loan, only those expenses which are to be funded through the loan account may be considered. A letter to be obtained from the student/parent to the effect that the other expenses/part of the expenses will be taken care of by them. The student borrower/parent should bring minimum 15% margin on the amount that he wants to be funded by the bank at the time of each disbursement

Interest Loans may be given only on a floating rate basis.Simple interest to be charged during moratorium period penal interest @ 2% for loans above Rs. 4lacs on the amount default for the period of default, over and above the applicable rate if the EMIs remain unpaid for 30days from the due date, for any reason, including a bounced cheque.1% concession in rate of interest for entire period of loan if full interest is paid during moratorium. As the concession is available for servicing the interest during moratorium period, the interest in the loan a/c should be reset when the repayment starts and excess interest of 1% p.a. pertaining to the moratorium period should be refunded /credited to the loan a/c.

Security Amount Studies in India Studies abroadUp to Rs. 4lakh No security No securityRs. 4 lakh to Rs 7.5 lakh

Third party guarantee

Third party guarantee

Rs. 7.5 lakh to Rs. 10 lakh(India)

Tangible collateral security

Tangible collateral, security of suitable value


Rs.15lakh(Abroad) for full value of loan

of loan or third party guarantee

Rs. 15lakh to Rs.20lakh

_ Tangible collateral, security for full value of loan

Documentation required

Completed Education loan application form. Marks sheets of last qualifying examination. Proof of admission scholarship, studentship etc. Schedule of expenses for the specified course. 2 passport size photographs. Borrower’s Bank account statement for the last six months. Income tax assessment order of last 2 years. Brief statement of assets and liabilities, of the co-borrower. Proof of income (i.e. salary slips/ Forms 16 etc.)

Sanction & Disbursal

As per delegation of powers preferably by the branch nearest to the place of domicile / permanent residence of student / parent. In case a parent has a transferable job, the “address for correspondence” must be meticulously is transferred, the Bank will be a position to track the loan. Loan to be disbursed in stages as per the requirement /demand directly to the Institution/vendors of books/equipments/instruments.

Repayment holiday/ moratorium

Course period + 1 year, or 6 months after getting job, whichever is earlier. Accrued interest during the moratorium to be added to the principal and repayment in EMI fixed.

Repayment For studies in India and Abroad: 5-7 years after commencement of repayment.

RENT PLUSPurpose Finance against assignment of future rentals to owners of residential

buildings / commercial property to meet their liquidity mis-matchEligible customers Applicability [coverage]

Owners of residential buildings and commercial properties which are to be rented or already rented to MNCs / Banks / large & Medium size Corporates. (For all other type of lessees the network GM of the circles is vested with the discretion to consider the case.) Metro/urban/ semi-urban/rural centre. CMC may identify individual branches to handle loans irrespective of loan amount & constitution of owner [i.e individual, proprietor, partnership, company etc.]


Quantum of finance Min. & Max. Loan Amount

Minimum: Rs. 50,000/-Maximum:Property located in metro areas Non-metro areas

Rs 7.50crores Rs 5.00crores

Subject to:85% of the gross Rental value less property tax, advance deposit and any other statutory liability or 85% of the market value of the property (as per Bank's approved valuer's latest valuation report) whichever is less

Margin 40%Type of facility Term loanProcessing Fees 2% of loan amount. Maximum Rs. 100,000/Repayment Period & Mode

Maximum of 7 years or residual lease period whichever is lower. EMI. Where advance rent is received the Equated Installment [EI] to be for same frequency at which rent is received & EI to be front ended i.e. recovered at beginning of the period.

Prepayment 1% of the loan amount prepaidPrimary Security Clean. Assignment of rental receivable and recording of power of

attorney with the lessee is a must.Collateral Security First charge on building against the rentals of which the loan

is sanctioned OR any other acceptable property. Market value of the property to be atleast 120% of the loan

amount. Personal guarantee of partners/ directors in case of

partnership firm / company.

Inspection Half yearly by FO and yearly by MOD/BMInsurance To cover value of assets charged to the BankExit Route Loan to be recalled if the account remains irregular for 3 consecutive

months Review Annually Documentation Application, Appraisal, Arrangement Letter, Agreement for Loan &

Power of Attorney (charge to be registered with ROC in the case of Company).Tripartite agreement for payment of monthly rent between lessor, lessee and the Bank.Irrevocable Power of Attorney from lessor [where lessee is not agreeable to execute the Tripartite agreement] for collection of rent from lessee - to be registered with lessee and his concurrence obtained therefor. The POA to be suitably modified as per requirement in each particular case and registered as per procedure applicable to jurisdiction of respective state / Union TerritoryEquitable mortgage of property offered as collateral (along with search report and valuation report)Deed of guarantee where required.

Rate of Interest As per current rate of interest of SBI


LOANS AGAINST SHARES/DEBENTURES TO INDIVIDUALSEligibility Existing individual customers with good past relationship either

singly or as joint account with spouse (in ‘Either or Survivor’ / Former or Survivor mode).

Purpose For meeting contingencies and needs of personal nature. For subscribing to rights or new issue of shares / debentures against security of existing shares /debentures. [max. Rs 10 lacs for subscribing to IPOs] Loan not for speculative purposes/ inter-corporate investments/ acquiring controlling interest in companies

Maximum Amount per individual

Rs 10 lacs if securities are held in physical form and Rs 20 lacs if securities are in demat form. Loans to any individual from the banking system against shares / convertible bonds convertible debentures / units of equity oriented mutual funds/ PSU bonds not to exceed Rs 10 lac if purpose is for subscribing to IPOs [

Margin 50% of the prevailing market price of shares / nonconvertible debentures in the Stock Exchanges as reported in the Economic Times

Interest As per current rate Essential parameters for acceptance of equity shares/ debentures as security

a) Shares/Debentures should be fully paid. b) Preference shares will not be acceptable as security. They must

be in a demat form. c) The shares should be of a company listed in BSE 100 Index,

except those of SBI. d) The market price of the security should not have fallen below

par for preceding 52 weeks. e) The market price of the security should not be at variance with

the arithmetical average of preceding 52 weeks high low by more than 25% in downward direction.

f) P/E ratio of the company should not exceed 40 as published in Economic Times.

g) In case P/E ratio is not available the shares should not be accepted as security.

h) The total number of shares of the company traded on the NSE and BSE should exceed 25000 on the day of financing and on each preceding 2 days.

i) Security where the market price of 52 week high is 4 times of the 52 week low should not be accepted.

Rating Debentures must have been rated AA+ or higher by CRISIL or equivalent rating by any other reputed rating agency like ICRA etc.

Security Pledge of the demat shares/debentures against which overdraft is granted

Nature of loan Overdraft / Demand Loan with a Repayment programmeRepayment Programme

To be liquidated in maximum period of 30 months. Fixed repayment programme for DL. Reducing DP programme for overdrafts

Declaration A declaration should be obtained from the borrower indicating: Details of loans availed from other banks / branches for

acquiring shares / debentures.


Details of loans availed from other banks/branches against security of shares/debentures. (To ensure that there is no large exposure in securities of a single company or against a single borrower)

Procedure for creating pledge

The branch should open an account with our DP unit. The applicant should be advised to instruct his DP to pledge the securities to the branch. To facilitate this, the applicant should be provided by the branch its DP ID and DP account number. The applicant should instruct his DP in the prescribed format of his DP. The branch should advise its consent to accept the specified securities as pledge to its DP. The branch should keep the pledge advice received fromthe DP with the documents.

Transfer of shares Shares/debentures must be transferred in the name of the Bank in case of a default or if the outstanding is over Rs20 Lacs

Opinion report Brief opinion report should be compiled in the prescribed format.Administrative

Clearance

Prior approval from Corporate Centre, preferably through email should be obtained before disbursal of loan. The Dept. should also be advised (by e-mail) whenever such shares are released from securities after liquidation of loan. This is to help monitor the compliance of certain legal requirements.

Other conditions DP should be monitored on weekly basis.For shares having high fluctuations, they should be monitored on regular basis and the borrower should be requested to replace them immediately by an acceptable security. In the event of margin shortfall on account of market price variation for the security and the consequent irregularity in the account, the borrower will liquidate the irregularity immediately. Failure to do so would result in the branch initiating necessary action in getting the securities transferred in its own name and thereafter arrange for its sale, without any further reference to the borrower.

SBI SARAL PERSONAL LOAN:1. Purpose The loan will be granted for any legitimate purpose whatsoever

(e.g. expenses for domestic or foreign travel, medical treatment of self or a family member, meeting any financial liability, such as marriage of son/daughter, defraying educational expenses of wards, meeting margins for purchase of assets etc.)

2. Eligibility You are eligible if you are a Salaried individual of good quality corporate, self employed engineer, doctor, architect, chartered accountant, MBA with minimum 2 years standing.

3. Loan Amount Your personal loan limit would be determined by your income and repayment capacity. Minimum: Rs.24,000/- in metro and urban canters Rs.10,000/- in rural/ semi-urban centersMaximum: 12 times Net Monthly Income for salaried individuals and pensioners subject to a ceiling of Rs.10 lacs in all centers

4. Documents Required

Important documents to be furnished while opening a Personal Loan Account:


Passport size photographLatest salary slip and Form 16

5. Margin We do not insist on any margin amount6. Interest Rates 3.25% above SBAR floating i.e. 15.50% p.a.7. Repayment The loan is repayable in 48 EMI. You are allowed to pay more

than the EMI if you wish to, without attracting any prepayment penalty.

8. Security NIL9. Processing Fee Processing charges are 1-2% of the loan amount. This is amongst

the lowest fees in the industry. Processing fees have to be paid upfront. There are no hidden costs or other administrative charges.

GUIDELINES FOR AGRICULTURAL ADVANCES 1. While granting loans to borrowers/activities falling in agricultural segment, the ceiling on

credit/investment and eligible purpose as mentioned against each activity will be strictly adhered to. Branches should follow the following guidelines for agricultural advances to the extent they are common and to be followed by the branches throughout the country. The instructions issued by the circles pertaining to the area-specific agricultural practices or activities/lending schemes specific to different states depending on the agro-climatic zones will be codified and made available by the circle authorities to their branches.

2. Application forms and loan procedure Application forms together with the enclosures thereto and interview-cum-appraisal forms prescribed by the Bank for different types of loans to various agricultural and allied activities should be used. Application form will serve as account opening form and as such no separate account opening form is required. Along with the application, the applicant should submit: a. three passport size photographs (in case of new borrower)b. land records to establish ownership, possession, cultivation rights, c. No dues certificate’ where applicable, andd. If the loan is for purchase of equipment, quotation therefor, or if civil work is

involved, plan and cost estimate therefor. Allied activities should be encouraged to supplement the income of small and marginal farmers. An integrated view of the credit needs of the farmer should be, as far as possible, taken so that over/under financing does not take place and the scope for misutilisation is reduced. Farmers availing term loans may be encouraged to avail crop loans so that loans would be better utilised and result in consequent improved flow of recovery.

3. Repayment and Recovery For both short-term and term loans the repayment schedule should coincide with the time when majority of the cultivators would have harvested and sold their produce and are in possession of funds inasmuch as the source of repayment is largely the income from crops cultivated by them. The due date for payment of a loan should be fixed after giving a reasonable period of say 2 months for marketing the produce in case of seasonal crops. Similarly, in case of allied activities, where cash inflow is more frequent, the repayment of instalments may be fixed at monthly/quarterly intervals depending on the cash accrual.

4. Margin


No margin is to be stipulated for loans up to Rs.10000/-, be it crop loan or term loan. For crop loans and short-term loans exceeding Rs.10000/-, the borrower has to bring in margin money to the extent of 15 to 25 per cent of the total funds requirement depending on the purpose, the risk perception and quantum of loan. Margin money need not be stipulated in case of conversion of crop loan to term loan or rephasement of repayment of term loan. For term loans exceeding Rs.10000/-, the margin requirements will be 15 to 25 per cent of the project cost depending on purpose and quantum of loan and subject to NABARD’s requirement, where refinance is contemplated. In respect of high value loan proposals, margin money @ 25% of the project cost should be brought in by the promoters. Where subsidy equal to or more than the stipulated margin money is available, the same should be treated as margin and no further margin money should be stipulated.

While fixing the margin it is necessary to find out the following: Amount of margin to be brought in by the borrower. Source(s) from where the borrower would bring the margin. The cost at which the borrower would bring the margin

5. Security norms a). The prescribed security norms for different types of loans are detailed below:

Loan type Amount of credit limit Security to be furnished Crop loan Up to Rs.1000/- DP Note or loan agreement

only. More than Rs.1000/- up to Rs.25,000/-

Hypothecation of crops

Over Rs.25,000/- (a) Hypothecation of crops, and (b) mortgage of land or third

party guaranteeInvestment loan wheremoveable assets are created

Up to Rs.25000/- Hypothecation of assets. Above Rs.25000/- (a) Hypothecation of assets and

(b) mortgage of land or third party guarantee

Investment loan where movable assets are not created (e.g.dugwell, development of land etc)

Up to Rs.10000/- Only DP Note/loan agreement Over Rs.10000/- Mortgage of land

6. Application of interest on agricultural advances: As farmers do not have a steady flow of income through-out the year, the following instructions should be followed at the time of application of interest in respect of agricultural loans:

a. Interest on crop loan accounts, including long duration crops, will be charged on due dates of loans. The due dates will be fixed reasonably after taking into consideration the period of harvesting and the time (of, say, 2 months) allowed for the purpose of marketing the produce. Payment of interest should be insisted upon only at the time of repayment of loan/instalments so fix

b. Interest on term loans should also be debited to the accounts on the due dates. Here again, the due dates should be fixed in a manner that these coincide with the availability of funds with the farmers; in other words, these should have relation to the harvesting and marketing pattern followed by the farmers in the locality.


c. In case of term loans for allied agricultural activities, where repayment is fixed at shorter frequencies than half-yearly, interest should be charged at half-yearly intervals for loans up to Rs.25,000/- and in other cases at monthly/ quarterly intervals as per the Bank's extant instructions.

d. Interest on converted loans should be charged on due dates of the instalments, which in turn should be fixed based on the cropping pattern followed by the concerned farmers.

e. Interest on overdue crop loans/term loans should be charged at half-yearly intervals. f. In case of direct agricultural advances, interest on current dues, i.e., crop loans and

instalments not falling due in respect of term loans should not be compounded. g. Interest should not be compounded on dues from PACS ceded to the Bank. Penal

interest on the principal amount in default may be charged to the ceded societies from the date of default at the same rates as charged by the District Central Cooperative Bank in the area.

h. When crop loans or instalments under term loans become overdue, branches can add interest outstanding to the principal and compound the interest. However, total interest debited to an account should not exceed the principal amount in respect of short-term advances to small and marginal farmers.

7.Loan passbooks issued to beneficiaries Loan passbooks in regional language should be issued to all borrowers, containing details of loan such as the date of sanction of loan, the amount of loan sanctioned, subsidy, if any, received, rate of interest, amount due under each installment, due date of installment

CREDIT FACILITIES PROVIDED TO AGRICULTURE 1. Advances Against Gold And Silver Ornaments :

Demand loans against the security of Gold/Silver ornaments/wares may be granted to the farmers to enable them to meet their short-term and long-term agricultural credit needs. Such loans are reckoned as part of direct agricultural advances of the Bank.

2. Agricultural Term Loans : Agricultural term loans can be sanctioned for financing capital expenditure to be incurred in a project, the benefits of which are to accrue over a period of more than three years, for any one or more of the purposes mentioned in paragraph 5, Chapter 32. The tenor of the loans would be for a fixed period exceeding 3 years.

3. Crop Loans : Crop loans may be sanctioned to meet all seasonal expenses connected with raising, harvesting and marketing of crops. These loans can be granted as short-term working capital loans or by way of revolving cash credit. All crop loans are accounted for under Agricultural Cash Credit (ACC) head in the General Ledger. Crop loans are repayable after the relative crop is harvested and the produce is marketed. Normally, a period of two months may be provided after the harvesting for marketing of the produce

4. Produce Marketing Loa n: Produce marketing loan, a short-term loan, provides farmers liquidity and enables them to avoid distress sale of their farm produce at the time of harvest. Branches may, therefore, encourage farmers to avail such loans and liquidate the relative crop loans. This will help the branch in improving its recovery performance while providing the farmer with some liquidity for sustenance.

5. Kisan credit card schemeFarmers may avail of loans by way of revolving cash credit for crop production purposes under the Kisan Credit Card (KCC) Scheme. Such loans will be accounted for under the 'Agricultural Cash Credit (ACC)' account in the General Ledger Existing farmer-borrowers having good track record for the last two years and who require


production credit limit of Rs.5000/- and above are eligible. However, if the Branch Manager is satisfied about the creditworthiness of a prospective borrower, the facility may also be extended to the new loan applicants. Credit requirements for the ancillary activities related to crop production, such as maintenance of agricultural machinery/implements, electricity charges, etc. The assessment under KCC should include credit requirements for allied activities and non-farm credit needs of the borrower.

CREDIT RATINGS CREDIT rating is the process of assigning a letter rating to borrower indicating the credit worthiness of the borrower.Rating is assigned based on the ability of the borrower/company. To repay the debt and his willingness to do so, The higher rating of borrower/company the lower the profitability of its default.

Basic Application of Credit Rating:-The system of credit rating is applicable for any borrower. It can be used for the purpose of finding out the creditworthiness of an individual, a particular business entity or even a whole nation. Credit ratings are normally done by third parties.

Important Uses of Credit RatingThe system of credit rating is useful in several ways. However, its most crucial use is in the fact that it gives an indication of the ability of the borrower to pay the entire credit back in a proper time. As such the process of credit rating can be used in order to see if there is any possibility of the borrower being a defaulter. Other than its conventional uses the system of credit rating is also applied in the following areas:

Making alterations in the premiums of insurances Finding out the eligibility of a person in terms of jobs Determining the sum of a leasing deposit or a utility deposit

Basic Importance of Credit RatingThe credit rating of a borrower is one of the most crucial aspects for him or her as the prospect of procuring a loan depends upon his credit rating. It has often been seen that if the credit rating of a person is good, the particular borrower would have no problem in getting the amount of money he wants. On the other hand, if the credit rating of the borrower happens to be below the mark then there is a chance that the lenders might not entertain him. Otherwise he might have to pay extremely high rates of interest.

Use in decision making:-Credit rating helps the bank in making several key decisions regarding credit including

1. Whether to lend to a particular borrower or not, what price to charge?2. What are the product to be offered to the borrower and for what tenure?3. At what level should sanctioning be done, it should however be noted that credit

rating is one of inputs used in credit decisions.There are various factors (adequacy of borrowers, cash flow, collateral provided, and relationship the borrower) Probability of the borrowers default based on past data.


Main features of the rating tool:- Comprehensive coverage of parameters Extensive data r equirement Mix of subjective and objective parameters Includes trend analysis 13 parameters are benchmarked against other players in the segment Captions of industry outlook 8 grade ratings broadly mapped with external rating agencies prevailing data.

Rating tool for SME:-Internal credit ratings are the summary indicators of risk for the bank’s individual credit exposures. It plays a crucial role in credit risk management architecture of any bank and forms the cornerstone of approval process. Based on the guidelines provided by Boston Consultancy Group (BCG), SBI adopted credit rating tool.

S. NO Parameters Weightages (%)1 Financial performance XXXXX2 Operating performance XXXXX3 Quality of management XXXXX4 Industry outlook XXXXX

SCORING MODEL- SMALL & MEDIUM ENTERPRISES

S. No

Parameters Max. Marks

Marks Scored

Criteria Marks

1 Age 3 18-3031-4546& above

321

2 Owning house 3 Own(NM)Own(M)Not owning a house

320

3 Academic qualification 5 Technical Professional Graduate Less than graduate

4321

4 Experience in the line of trade

4 More than 5 year3-5 year1-3 yearLess than one year

4321

5 Loyalty(deposit/advances) 3 Dealing with SBIMore than 3 year 1-3 yearLess than one year

321

6 Spouse details 2 Employed Home-maker

20

7 Assessed for IT 2 Assessed Not- assessed

20


8 Has life insurance policy 2 Yes No

20

9 Track record of repayment of personal loan

3 Prompt /No loan Irregular

30

10 Continuous profits 5 Last 5 yearLast 3 yearLast year

531

11 Sales show raising trend 5 Last 5 yearLast 3 yearLast year

531

12 Marketing 3 Tie-up arrangement in operation Ancillary Others

3

21

13 TOL/TNW 5 Less than 11 to 2 2 to 4 More than 4

5430

14 CA/CL 5 More than 1.331 to 1.33Less than 1

530

15 DSCR 5 More than 2 1.5 to 21 to 1.5Less than 1

5320

16 Routing of sales turnover through the account

5 100%75%50%>50%

5431

Total 60NB: in case any of the above parameters is not applicable, the scoring should be nominalised out of 60.

FORMATS OF CREDIT SCORING CREDIT SCORING CRITERIA FOR RETAIL LOANS Kum./Smt./shri…………………………………………………………… ACCOUNT NUMBER……………………PERSONAL INFORMATION:S. No Parameters Total

marks EX G AA A Criteria

1 Age 5 5 4 3 1 EX < 50 and > 35 yearsG > 25 and < 35 years AA > 50 and < 55 years


A > 55 years 2 Educational

qualifications 5 5 3 2 2 EX – post

graduate/professional G – graduateAA/A – under graduate

3 No of dependents/ children’s

5 5 3 2 2 EX – upto 2G - 3 or 4AA/A-more then 4

4 Spouse’s income(gross)

5 5 3 2 1 EX - >Rs. 120000G - >Rs. 100000- < 120000AA- >Rs. 80000- < 100000A - <Rs. 80000

INCOME INFORMATIONS. NO Parameters Total

Marks EX G AA A Criteria

5 Net annual income

15 15 10 8 5 EX > Rs. 175000G > Rs. 125000-< Rs. 175000AA > Rs. 75000-< Rs. 125000A < Rs. 75000

6 Monthly installment of loan or net monthly income

20 20 16 12 8 EX < 20%G < 30%AA< 40%A > 40%

NET WORTH INFORMATION S. No Parameters Total

MarksEx G AA A Criteria

7 Owning house 10 10 5 0 0 EX – own(not mortgaged)G - own(mortgaged)

8 Has phone 2 2 0 0 0 EX- yes G/AA/A- no

9 Owning of vehicle

5 5 3 2 0 EX- four wheeler fully owned/ Company providedG - hypothecated four wheelerAA- two wheelerA - does not own a vehicle

10 Net assets (total assets, total liabilities )

10 10 8 6 4 EX- market value >RS.400000G - market value >Rs. 300000AA-market value > Rs. 200000A - market value >RS. 100000

ORGANAISATION INFORMATIONS. NO PARAMETERS Total EX G AA A CRETERIA


Score11 Organization 5 5 4 0 0 EX- government / public

sector undertaking/ MNCG- public limited company

12 Designation 3 3 2 1 1 EX - Executive/ senior managerG - officerAA/A- others

13 Length of service in present job

5 5 3 2 1 EX > 5years G > 4 years AA > 3 years A > 2 years

INFORMATION ON BANKING S. NO

PARAMETERS TOTAL MARKS

EX G AA A CRITERIA

14 Banking with SBI/ A/c with SBI

5 5 2 2 2 EX- yes G/AA/A- No

Total marks 100 100 66 42 27

CREDIT RATING Point No Maximum score Marks scored

1 52 53 54 55 156 207 108 29 510 1011 512 313 514 5

CREDIT APPRAISALThe Bank has in place a well established process of credit appraisal that has developed and evolved over a period of time. The fundamental purpose of credit appraisal in the Bank has been two fold. First, to be able to take an informed decision as to the credit worthiness of any proposal; that is, whether it is at all prudent, worthwhile and desirable for the Bank to take a credit exposure on the applicant entity. And thereafter, where a positive decision is arrived at in this regard, to be able to assess the extent and nature of such credit exposure, the conditions on which such exposures is acceptable and the pricing at which it is considered prudent to operationalise such a credit relationship.


A decision as to the credit worthiness of a proposal is arrived at after considering a combination of several factors including: An assessment of the promoter , covering their background and relevant

experience in the area of the proposed entity The previous experience of the bank with these promoters or their group The perceived prospects of the industry or activity proposed The already existing extent and quality of the exposure of the Bank to this industry

or activity on the one hand and to the promoters/ group on the other Policy relating to exposure levels and norms prescribed by the regulators and by

the bank for the proposed activity / industry The perceived financial strength and the risk rating of the promoters, the

borrowing entity and / or the group The extent and nature of credit risk mitigants proposed, etc.

ASSESSMENT

The assessment of working capital is done through the Projected Balance Sheet Method (PBS), Cash Budget Method or Turnover Method.

Under the PBS method, the fund requirement is computed on the basis of borrower’s projected balance sheet, the funds flow planned for the current/ following year and examination of the profitability, financial parameters etc. The key determinants for the limit can, interalia, be the extent of financing support required by the borrower and the acceptability of the borrower’s overall financial position including the projected level of liquidity. The projected Bank borrowing thus arrived at, is termed as ‘Assessed Bank Finance (ABF). This method is applicable for borrowers who are engaged in manufacturing, services and trading activities and who require fund based WC finance of above Rs 5 crores.

Cash budget method is used for assessing WC finance for seasonal industries like sugar, tea and construction activity. This method is used for sanction of ad hoc WC limits. In these cases, the required finance is quantified from the projected cash flows and not from the projected values of current assets and current liabilities. Other aspects of assessment like examination of funds flow, profitability, financial parameters, etc., are also carried out.

Under the turnover method, working capital requirement is computed at a minimum 25% of output value, of which, at least four-fifths is provided by the Bank and balance one-fifth represents the borrowers contribution towards margin for working capital. This method is applicable for sanction of fund based working capital limit of upto Rs.5 crore.

In respect of term loans, the computation of cost estimates is scrutinized very carefully to ensure that the total project cost arrived at is accurate, comprehensive, reasonable and realistic. Then the proportion of debt and equity components i.e. the project debt/ equity gearing, envisaged in the tie up of the means of financing of the project is examined to ascertain whether it is reasonable and acceptable. There is no standard project debt/ equity (D/E) ratio that can be prescribed for any project. The stipulation of this ratio for a particular project will be based on a number of factors such as the nature and size of the project, location, capital intensity, gestation period, promoters’ capacity, state of the capital markets, importance to the national economy,


government policies, etc. Though there are no rigid norms for the project debt/equity ratios, however, one of the deciding factors of the D/E ratio will be the debt servicing ability of the project. After taking into consideration the above-mentioned factors and the suitability of the various sources of finance with due regard to the financial leverage envisaged for the project, the term finance arrived at is validated and accepted.

After due appraisal and assessment, the appropriate authority, as laid down in the Scheme of Delegation of Financial Powers for advances, sanctions the credit facilities. Such sanctions, if not availed within a period of three months in respect of working capital facilities and within six months in the case of term loans, from the date of sanction, would lapse and require revalidation. This provision has been introduced in order to ensure against changes in market conditions and / or industry prospects adversely impacting on terms of sanction such as quantum of exposure, security covenants, pricing, etc.; especially pricing.

THE CREDIT APPRAISAL PROCESS IN STATE BANK OF INDIA

The credit appraisal process at SBI is considered very thorough and conservative the bank undertakes the above steps to complete the credit appraisal process. a) Meet the client : The bank has appointed various Relationship managers( RM) and

executives who find the clients with credit requirements for their business, if the RM are satisfied with the client and its expectation with the bank the case goes to the regional office for a complete check and evaluation.

b) Take KYC Documents& Application form : The RM after the first course of interaction with the client asks for the various document required to appraise the project. KYC documents as mentioned in the policy guidelines are Know your customer(KYC) the customer can be best known with his financials and other vintage proofs mentioned in the requirement list.

c) Initial Dedupe Check : This is better known as initial de-duplication checks in this the bank checks the credit reporting of the client whether he holds any over-dues etc. The bank also checks the client in RBI defaulter list.

d) Check the Banking : The first thing the bank checks is the banking of the existing limit account if any, the bank tries to check the existing performance of client with the other banks, and in case more number of inward returns due to in-sufficiency of funds. Then this is also a deviation and if there is over utilization of the limit on all the days then this calls for accountability by the client.

e) Audited financial test: The bank under takes a complete check of financials as mentioned in the requirements, these audited financials are put in finspread software of the bank and then projections are made on the basis of financials and then various profitability ratios are analyzed and the financial soundness of the company is analyzed. The financial viability of the company is checked on various parameter as mentioned.

f) Deviation check : The bank after checking the financial soundness of the company goes for the verification of the deviation check of policy compliance, if any in case of major deviations the case is presented in front of the zonal credit committee, their decision stands the final verdict on the approval f the case.

g) Internal Verification : The bank through its various sources makes a complete thorough investigation of the handling of business of the clients, this enables the bank to make sure that the client is not forging with the financials of the company.

h) Approval by ZCC : If the credit limit is below Rs500 lacs then the approval is sought by Zonal head of the business banking and if the amount exceeds the above stated amount


then the case is first discussed by ZCC and is then presented on ECC (electronic credit committee) depending upon the policy compliance failed by the client.

i) Decision on disbursal of loan : When the case is presented to risk department it analyses the variety of risk involved in the sanctioning of loan if it crosses the parameters then the possibility of disbursal of loan declines then the ZCC makes its final approval on the limits required by the client and the limit deserved by the client, the bank makes it final way to the approval of the loans.

j) Discussion between client &Bank on approval : The banks proposes its terms and conditions to the client and the amount of loan that is approved to the client at what rate of interest and what proportion of collateral is kept by the bank, when the client agrees on all these terms then only the case reaches the sanctioning stage.

RECOVERY MANAGEMENT

Recovery Management is the process of planning, testing, and implementing the recovery procedures and standards required to restore service in the event of a component failure; either by returning the component to normal operation, or taking alternative actions to restore service.

OBJECTIVES OF RECOVERY MANAGEMENT OF SBI

NPA REDUCTION:Now a days NPA is a great issue that the banks are facing. Before loans and advances were granted without proper guarantee so as result default occurs and those loan account are converted into non performing assets as no revenue could be generated from it. So now a days various Assets Liability Management Committee (ALMC) are being appointed so that such default does not arise. Now a days also proper scrutiny of the loan holder is done and rating is given then only loans and advances are provided.

DEPOSIT GROWTH:If NPA occurs then lots of bank assets are being blocked and they are converted into bad debts so it reduces the assets of the bank which creates a lot of problem in generating the banks business. So if Debt recovery is done properly then it will help the bank to generate the outstanding amount that is due from the customer and it will increase its deposit growth and do its business efficiently without any problem.

ADVANCE GROWTH:If recovery is being properly made then it will help to generate fund and then the bank will have sufficient fund and it could provide loans and advances to its customer and generate its business. So it could be said that if recovery is properly done then it will help in all round development of the bank.

AIM OF RECOVERY MANAGEMENT

Indicative Non Performing Assets (NPA) to be brought to zero.


No NPA in staff loans, loans against specified securities, loans to pensioners, KCC/ ACC. NPA in staff loans, loans against specified securities and loans to pensioners should be upgraded by 20th January 2009.

No account should be NPA for non renewal/non review In case of salary account if the account are in arrear but the salary now is being received,

the branches should effect recovery so that arrear outstanding do not in any case exceed two installment.

In case the salary is not credited to savings bank account, branches to advice controllers so that DDO’s can be contacted by AGM (rural) and the matter escalated to the DDO’s controller. In case of salary accounted default, attachment of salary on selective basis may be considered and in case of PDC’s, criminal action may be initiated on selective basis so that the message is conveyed to delinquent borrowers.

OMRs are to be utilized for NPA recovery with specified targets and their performance is to be monitered.

BMs must visit ITS site on daily basis and understand details. They must also ensure that FO’S and other concerned officials are utilizing their data to reduce their NPA on day to day basis.

BMs and FO’s should have full awarness of stamped, indicative and probable NPAs under various categories e.g Housing Loans, Car Loans,Cash Credit.

NPA recovery through bank adalat should be organized once in a month.Bakijai cases where they have been filed should be followed up vigorously.

Up – gradation, write off and compromise to be given top priority and full provision should be utilized. Wherever sufficient securities are available, SARFEASI Act to be implemented services of enforcement agents, seizure agents and recovery agents should be utilized.

NPA accounts in Housing Loans are to rephrased in all eligible cases with top priority. People at grass root level need to understand what is to be done and proper

communication of instructions is the key for better performance.

NON PERFORMING ASSET [NPA]Asset means loan /advance. Every loan / advance is expected to be repaid or properly serviced by meeting periodical interest then only it will be construed as a performing asset.

All such advances are loans which are not being repaid as per prescribed repayment programme will be designated as Non Performing Asset.

NPA means loans that are not being serviced i.e., either the principal or interest or both are not paid by borrowers within 90 days of due date.

As per the existing IRAC norms of RBI, interest income cannot be reckoned in respect of NPA’s.

IRAC norms introduced Income should be recognized only on actual basis and not on accrual basis. In order to provide a basis for determining provisions for loan assets, taking into

account credit weaknesses and the extent of dependence on collateral security for realization of dues.


It is an internationally accepted practice. It determines and ensures follow-up action.

Types of NPA:A] Gross NPA:

Gross NPAs are the sum total of all loan assets that are classified as NPAs as per RBI guidelines as on Balance Sheet date. It can be calculated with the help of following ratio:Gross NPAs Ratio = Gross NPAs

Gross AdvancesB] Net NPA:

Net NPAs are those type of NPAs in which the bank has deducted the provision regarding NPAs. It can be calculated by followingNet NPAs = Gross NPAs – Provisions

Gross Advances – Provisions

IMPACT OF NPAs ON BANKS’ PROFITS AND LENDING PROWESS

The efficiency of a bank is not always reflected only by the size of its balance sheet but by the level of return on its assets. NPAs do not generate interest income for the banks, but at the same time banks are required to make provisions for such NPAs from their current profits.

NPAs have a deleterious effect on the return on assets in several ways –

They erode current profits through provisioning requirements. They result in reduced interest income. They require higher provisioning requirements affecting profits and accretion to capital

funds and capacity to increase good quality risk assets in future, and They limit recycling of funds, set in asset-liability mismatches, etc.

NPAs - CAUSESINCIDENCE AND IMPACT OF DIRECTED LENDING TO STOCK OF NPAs

In all forums of interactions the global multilateral institutions and rating agencies had with RBI and the Government, directed lending concept gets quoted as an important attribute and a contributory factor for the build up of NPAs in banks in India. It is a different matter that RBI and the Government are accused of soft attitude towards banks which do not fulfill the prescribed targets for priority sector lending, particularly agriculture and small scale sector. To put matters on a proper perspective. Recovery of dues by banks is directly related to the performance of the borrowal unit/industrial segments. An internal study conducted by RBI shows that in the order of prominence, the following factors contribute to NPAs.

INTERNAL FACTORS: Diversion of funds for

o Expansion / diversification / modernization.o Taking up new projects.o Helping/promoting associate concerns.

Time/cost overrun during the project implementation stage. Business (product, marketing, etc.) failure. Inefficient management.


Strained labor relations. Inappropriate technology/technical problems. Product obsolescence, etc.

EXTERNAL FACTORS Recession. Non-payment in other countries. Inputs/power shortage. Price escalation. Accidents, and natural calamities, etc. Changes in government policies in excise/import duties, pollution control orders, etc., Contribution to NPAs by factors like siphoning off funds thorough fraud/misappropriation was less significant in comparison with other factors.

Incidence of NPAs on account of deficiencies on the part of banks such as delay in sanction and disbursement of funds whereby borrowing units are starved of funds when in need, and delay in settlement of payments/subsidies by the Government bodies was on the low side in proportion to other factors.

Lack of effective co-ordination between banks and financial institutions in respect of large value projects does contribute to the emergence of NPAs even at the implementation stage. RBI had, in February 2000, drawn up certain ground rules in this regard in consultation with banks, financial institutions and IBA and circulated the same among banks and financial institutions for implementation.

Susceptibility of the sanctioning authorities to external pressure, failings of the CEOs and the ineffectiveness of the Board to check his ways also contributed in no small measure to the unusual build up of NPAs in some of the banks.

One of the most prominent causes for NPAs, as often observed by RBI Inspectors, is the slackness on the part of the credit management staff in their follow up to detect and prevent diversion of funds in the post-disbursement stage.

IMPORTANCE GIVEN FOR NPA MANAGEMENTThe importance is given for NPA Management because it has the following positions

a) NPA reduces the yield on advances as income cannot be booked on them.b) Huge provisions and write off affects profitability.c) Bank’s funds are blocked and recycling of funds not possible.d) NPAs are high risk weighted assets which affects the Capital Adequacy Ratio.e) Huge cost is involved in follow-up and supervision.f) To guard against deterioration of Bank’s image in the minds of depositors /

investors.

Main reasons for accounts becoming NPAs: Units closed Borrower Absconding Sale of Assets Diversion of Funds Willful Default Non Renewal of the Limits Interest/Installments not paid.


Non repayment of loans due to natural calamities such as drought, floods, earthquakes etc.

Lack of verification of his/her securities.

Often stated reasons for NPAs in India: Corruption Judicial system flaws Nonexistent fear of penalties Inefficient credit appraisal systems Lack of technology, methodology and data support for scientific credit appraisal

Different Types of Mode of Recovery: 1. Actual recovery by way of Cash:

Recovering cash by persuasion / follow up & counseling.

2. Recovery by way of seizure of assets finance by the Bank: The loan would have financed for purchase of primary assets required for the activity

under taken. Further, sometimes additional securities viz., by way of Cash deposit, mortgage of immovable property etc if obtained, such assets are at the discretion of the financing Bank may seize & sell the same so as to realize the amount for credit to the loan account.

3. Compromise settlement of dues:The Bank may pursue the borrower in cases where primary (hypothecated) assets or collateral assets are not are available & there is loss in the business & where there are no hopes of recovery in the normal course, the Bank may pursue the borrower for settling the dues under compromise with mutual negotiation. In the process the borrower is benefited closer of loan account with some concession in the interest and or part of the principal on merit of the case. The Bank is benefited by recovery of bad debt which adds to the profit of the bank.

4. One Time Settlement: At the banks level or RBI level the schematic recovery procedure may adopt envisaging recovery of bad debts. The schemes provided are non discretionary and non- discriminatory. Such schemes are normally provided to the borrowers of SME sector and Agricultural sectors. In the process the banks are benefited by recovery of bad & age-old loans.

5. Recovery by filing civil suits in the court: The Bank’s normally take it as a last resort of recovery; in cases the borrowers have not come forward for settling the dues despite follow up by the Banks. In such cases, the Banks will obtain decree by the court legally to recover the dues. Further, if considered necessary, the court cases may be referred to the Lok Adalat arranged by the court for obtaining consent decrees, wherein borrower will be given some concession out of the suit amount. In the process the banks can realize the dues early instead of prolonged process of recovery.

6. Recovery by way of invoking SARFEASI Act 2002:It is an act passed in the parliament to facilitate the banks to recover their mounting dues. In some cases the loans are primarily or collaterally secured by mortgage of immovable properties. Viz., loans sanctioned for construction / purchase of ready built houses, SME sector loans collaterally secured by immovable properties etc. In such


cases, when the loan becomes bad / NPA, the banks may resort to the recovery by invoking the said act to recover the Banks dues (the process involves taking possession of property & selling in public auction

LIVE EXAMPLES OF NPA ACCOUNT:-1. Business loan

Name Nirmala Shankar BhavikattiAddress: Walmiki chawl, Kalyan Nagar, DharwadDate of sanction 11/12/2003Limit Rs. 50000Interest rate 10.50%Account classified NPA as on

30/08/2009

Interest applied up to 30/11/2009Staff accountability Staff accountability has been examined and there are no lapses

found during pre-sanction process or post sanction follow-uppurpose Small Business – supplying of tea, tiffin and meals to Gurudit

factory, which is located in Dharwad near to her housePerformance of past two year

Years Sale Profit2003 60% 8%2004 90% 13%

Reasons for account becoming NPA

1. Because of children’s education 2. She invested money on purchase of house3. No of workers reduced 4. Slack in business due to closures of the factory on

migration of factory workers affected the canteen business.

2. Housing loan Name Sri. Basavaraj K ReddyAddress: 1st cross, venketesh colony, Bengeri, Hubli. Ph: 2285256Date of sanction 18/02/2002Limit 4,00,000/-Interest rate 9.50%


Account classified NPA as on

01/01/2010

Staff accountability Staff accountability has been examined and there are no lapses found during pre-sanction process or post sanction follow-up

Purpose Housing loanRepayment schedule 168 EMI of Rs. 991/- from oct- 2004Branch Old Hubli Occupation Floor millOutstanding 4,14,553/-Reasons for account becoming NPA

a. Marriage in homeb. Because of not correct post-sanction follow-up function

from bankc. The place which his floor mill business took place, that

place was acquired by Govt. & Low business 3. Car Loan

Name Sri. Bashirahmmad M SangreshkopAddress Byali plot, Mantoor Road, HubliDate of sanction 29/10/2004Limit 2,80,000/-Interest rate 10%Account classified NPA as on

12/07/2007

Purpose Car loanBranch S R NagarOccupation Business, flower merchant, jewellery shop.Outstanding 2,03,304/-Reasons for account becoming NPA

1. He availed loan from many banks ie.Bank of BarodaCanara Bank,Syndicate bank, etc

2. He availed loan of Rs. 7,60 crore from all these bank3. One of the bank seized his Kohinoor jewellery shop4. He cheated bank and people by using duplicate

certificates.5. Presently he is not in India 6. And also car is not found by bankers7. And he is also wilful defaulter

1. AGRICULTURE LOAN


Year Account Amount(In Crores)

2006 124687 105763.022007 14172 156083.912008 153628 184596.322009 159450 214154.182010 186539 265869.35

CHART

Interpretation:-

By this Chart The loan sanction for Agriculture Sector is increasing year by year in 2006 the number of accounts were 1,24,687 and the amount is Rs. 105763.02 crores but in 2007 the number of accounts were very less i.e. 14172 but the amount sanctioned is more than the previous year i.e. 156083.91 crores. After 2007 the number of accounts and also the amount sanctioned to agriculture loan is increasing continuously finally in the year 2010, the number of accounts are 1,86,539 and the amount sanctioned is 265869.35 crores.

2. VEHICLE LOAN


2006 2007 2008 2009 20100

50000

100000

150000

200000

250000

300000

124687

14172

153628159450

186539

105763.02

156083.91

184596.32

214154.18

265869.35

Account Amount

Year Account Amount2006 476 811.822007 1222 2067.72008 1020 1545.822009 1324 2080.452010 1787 3395.58

CHART

Interpretation:-

The

loan amount sanctioned to vehicle loan is also increasing year by year if the number of accounts are less or more. In the year 2006 the number of accounts were only 476, amount sanctioned to vehicle loan is Rs. 811.82 crores. In the year 2007 the number of accounts were 1222 and the sanctioned amount is Rs. 2067.7 crore there is a big difference in amount and also number of accounts its nearly more than 4 times of previous year(in amount). And in the year 2008 the no of accounts and amount sanctioned is also decrease, its less than the year of 2007. In next year2009 its increasing nearly 25% in terms of amount. After that in the year 2010 there is nearly 50% of sanction amount is increasing.

3. HOUSING LOAN

Year AccountAmount(in

crores)

2006 19986 47640.82

2007 22292 58526.03


2006 2007 2008 2009 20100

500

1000

1500

2000

2500

3000

3500

4000

476

12221020

1324

1787

811.82

2067.7

1545.82

2080.45

3395.58

Account Amount

2008 24105 70947.1

2009 28230 95909.552010 32975 120495.27

CHART

2006 2007 2008 2009 20100

20000

40000

60000

80000

100000

120000

140000

19986 22292 24105 28230 32975

47640.8258526.03

70947.1

95909.55

120495.27

No. of Accounts Amount

Interpretation:-

Housing loan is one of the most important credit facility available in SBI. By considering the chart of housing we can see that there is a continuously increasing in terms of number of accounts and also in terms of amount sanctioned. In the year 2006 the number of accounts were 19986 and the amount sanctioned is Rs. 47640.82, after that it is increasing continuously both in terms of number of accounts & in terms of amount also. By this chart I came to know that the demand for housing loan is more and more along with the year after year. There is a big demand for SBI Housing loan in the market.

4. PERSONAL LOAN

Year Account Amount

2006 79079 79290.12


2007 88558 99654.29

2008 96482 121809.01

2009 115670 167984.23

2010 124306 200240.25

CHART

2006 2007 2008 2009 20100

50000

100000

150000

200000

250000

7907988558 96482

115670 124306

79290.12

99654.29121809.01

167984.23

200240.25

Account Amount

Interpretation:-

This is also one of the most demanded loan of SBI, the personal loan is also increasing year by year in terms of number of accounts and also in terms of amount also, in the year 2006 the no of accounts were 79079, the loan amount sanctioned was Rs. 79290.12 crores, and after this its continuously increasing year by year lastly in 2010 the amount sanctioned for personal is Rs. 200240.25 for 124306 accounts. In this chart we came to know that the demand is increasing year by year for personal loan.

5. BUSINESS LOAN


Year Account Amount()2006 16653 16807.712007 17705 23317.782008 18138 25461.692009 17559 272772010 16356 27913.17

CHART

1 2 3 4 50

5000

10000

15000

20000

25000

30000

16653

17705 18138 175591635616807.71

23317.78

25461.6927277 27913.17

Interpretation:-

Business loan give more importance in all the loans and this chart shows that the amount sanctioned for Business loan is increasing year by year if the number of accounts were less also. In 2006 the number of accounts were 1663, the loan amount is Rs. 16807.71 crores. And in next 2 years number of accounts and also increased continuously in the fourth year i.e. 2009 the accounts were became decrease but loan amount is increased to Rs. 27277 crores, in the 5th year i.e. 2010 the number of accounts are 16356, amount sanctioned is Rs.27913.17 crores, it means the demand for business loan is decreasing.

6. Education Loan


Account Amount

Year AccountAmount(in

crore)2006 1709 1608.912007 2227 2720.352008 3005 4239.472009 5998 8671.312010 7420 12220.4

CHART

Interpretation:-

SBI education loan is one of the most demand full loan in the current years, earlier in the year 2006, the loan accounts were only 1709, the amount sanctioned for the purpose of education is Rs. 1608.91 crores. In these years there is no much demand for education loan. After 2006 the demand is continuously increasing, in the years 2007 & 2008 the demand is increased slowly after that 2009 the demand is increased rapidly. At the time of 2010 the demand is increased more than 7 times in terms of account and more than 10 times in terms of amount i.e. 7420 and Rs.12220.4 crores respectively.

NPA FIGURES OF ALL THE LOANS OF NETWORK II REGION:-


2006 2007 2008 2009 20100

2000

4000

6000

8000

10000

12000

14000

17092227

3005

5998

7420

1608.91

2720.35

4239.47

8671.31

12220.4

Account Amount

Year No. of Accounts Amount (in Rs )

2006 13714 80,36,59,7382007 11356 85,84,09,1022008 14550 109,48,18,9572009 10393 110,22,82,2922010 11550 114,20,25,190

CHART

2006 2007 2008 2009 20100

200000000

400000000

600000000

800000000

1000000000

1200000000

803659738858409102

1094818957 1102282292 1142025190

Net NPA Amount

Amount

Interpretation:-

Increasing in sanction of loan amount is profitable to the banks, but increasing the amount of NPA is loss to the bank. According to the RBI guidelines the Bank net NPA is 3%. This NPA chart clearly shows that the amount is increasing year by year, it is not good for bank. In the year 2006 the NPA amount is RS. 803659738, and next year i.e. 2007 it was Rs. 858409102, so on finally in the year 2010 the net NPA amount is Rs. 1442025190. By increasing the amount in NPA reduces the profit of the Bank. However the sanction of loan amount is increasing the amount of NPA also increasing year by year.

FINDINGS:-

1. The interest rate is increasing along with the duration of the repayment. Ex. If the rate

of interest is at 8.5% in first year, then the 2nd year it will be 9.5%.and so on.


2. The facility of agriculture loan to farmers is not available in any of the Hubli

Branches.

3. Turn-Around-Time of SME Loans takes more number of days, sometimes more than

6 months.

4. Penalty of 2% on prepayment / pre-closure of loan accounts.

5. It is observed that in case of Personal/ Retail loans only primary security is taken,

They will not consider collateral security.

6. EMI does not suit for SME advances, but in some of the cases of SBI SME loans they

are providing loans on the basis of EMI.

7. Moratorium period given to borrowers is less, ie. 6 months for SME loans & 2months

for Retail loans in some cases.

8. NPA increasing trends year by year.

9. Opinion report and customer profile are not found in many number of cases.

10. It is observed that periodical inspections are not carried regularly.

11. It is observed that delay in processing the application, sanctioning of Loan and

Disbursement of loan in all the cases.

12. In many of the cases the Govt. sponsored schemes are becoming more NPA.

13. Many customers are not well known about SBI advanced products.

SUGGESTIONS & RECOMMENDATIONS:-

1. In case of reducing the rate of interest SBI must be charge Fixed rate of interest

through-out the repayment period.


2. SBI should be avoid penalty on Pre-payment / pre closure of loan accounts.

3. The loans given in Govt. sponsored schemes should be reduced.

4. The business loans should be provided on the basis Monthly Installments rather than

providing on the basis of Equated Monthly Installments.

5. Customer awareness programme is required so that more people should attract towards

advance product.

6. Turn-Around-Time should be reduced in case of SME Loans.

7. Rather than considering the primary security for Personal Loan/ Car Loan, SBI must

also consider Collateral security also. In this case the SBI has reduced the NPA.

8. SBI must take some steps so that customers can get their loan in time. Like phone

verification by customer care that one customer is got their loan on time or not .It must

be before a certain date so necessary steps can be taken.

9. SBI should more concern about physical verification rather than phone verification so

it will avoid fraud or cheating.

10. SBI customer care should more concern about the fastest settlement of customer

problems.

11. Before deducting or charging any monetary charge SBI must consult with customer.

12. Agents should be trained, well educated & proper trained to convince the people about

different advance product.

13. It is the duty of the bank to disclose all the material facts regarding advance product,

like interest charged, repayment period, other types of charges, etc.

14. The bank should increase the period for repayment of loan. And also must increase

Moratorium period.

15. SBI should more focus on Retaining existing customers.

16. SBI must focus on Segmentation based on customer knowledge Product offering based

on customer demand.

17. SBI must take feedbacks of customers regarding features & services.

LIMITATIONS OF THE STUDY:-

The study is restricted to only one Branch.

Time constraint-that is, the study is restricted to 2months.


Getting secondary data is restricted.

Credit management is a big process it is not possible cover all the task within a

short time.

CONCLUSION:-

To conclude, I can say that I had a wonderful experience in the finance department

of the State Bank. The level at which the State Bank stands now is only because of

the hard effort, forthrightness & enthusiasm of all the staffs working in the State

Bank. The SBI is doing good performance with new generation Banks. As per the

analysis it shows that the bank is doing healthy business and good sanction of loans.

The role of credit management becomes important. Credit management is the area

which mainly deals with sanctioning and disbursement of Retail & SME Loans, so

the bank should evaluate the financial risk involved in lending properly and they

need to know the credibility of the borrower.

Based on the above findings and a glance at State Bank of India, I am sure that the

State Bank of India is becoming strong day by day by its development programmes

and expansion of business. The staff commitment to customers satisfaction with the

Bank Moto of My SBI: First in Customer satisfaction, enables the Bank to win

several National & Internal Awards. The Banks profit is increasing year by year.

The larger customer base and expansion of branches generates more employment

opportunities, thereby it paves way for the country development by enlightening the

standard of living of the people.

BIBLIOGRAPHY


Books Referred

Bank Manuals.

Banks Annual Report.

Circulars Sent to The Branches.

WEBSITE

www.sbi.co.in www.sbitimes.com www.google.co.in www.sbi.com


http://www.sbi.com/

http://www.google.co.in/

http://www.sbitimes.com/

http://www.sbi.co.in/

Credit Management & Appraisal System

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