FInal report 13BSP1416.docx

Mogaveera Bank Co-op ltdayuri Munot

Unit No 23/24, Indraprastha Industrial Estate, Hariyali Village, Lbs Marg, Vikhroli West, Vikhroli West, Mumbai

Over

A REPORTON

“OVER VIEW OF BANKING OPERATIONS”

BY:-MAYURI MUNOT

13BSP1416

view of Banking operations2

Mogaveera Bank IBS - Mumbai

A REPORT ON“OVER VIEW OF BANKING OPERATIONS”

BY:-MAYURI MUNOT (13BSP1416)

MOGAVEERA CO-OPERATIVE BANK LTD.

A report submitted in partial fulfilment of the requirements of PGPM Program of IBS MUMBAI

Date of Submission:- 30th May 2014

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DECLARATION

I, Mayuri Munot student of IBS Business School, Mumbai (2013-2015 batch), hereby declare that this report entitled “Overview of banking operations” a project of Mogaveera Bank co-op Ltd., has been prepared by me and has not been submitted earlier to any University or Institution for the award of any Degree or Diploma.

Mayuri Munot Master of Business Administration,

Enroll. No. - 13BSP1416,IBS Business School, Mumbai

Maharashtra



ACKNOWLEDGEMENTI take this opportunity with much pleasure to thank m y p a r e n t s a n d all the people who have helped me through the course of my journey for completion of the Internship.To start with, I would like to thank the organization M o g a v e e r a C o -o p e r a t i v e B a n k L t d . , for providing me the chance to undertake this internship , allowing me to use the data and exploring and preparation area which would prove out to be very beneficial to me in my future assignments, my studies and my career ahead. The numbers displayed in report are fictitious to maintain confidentiality.I would like to thank Mr. Samuel Bangera , Mr. Jayaraman and Mr. Deepak Shetty who gave me a chance and encouraged me to work on projects. I am especially grateful to them for their guidance, advice and encouragement without which this summer internship could never have been completed.I wish to place on records, my deep sense of gratitude and sincere appreciation to my Faculty Guide from IBS Mumbai, Prof. Davinder Suri for her guidance, help and motivation. I am thankful to her for the reviews and many helpful comments throughout the internship.I would also like to express my deep sense of gratitude towards all management, staff, & to all those who directly or indirectly helped me in successfully execution of my work.

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ABSTRACTMogaveera co-operative Bank Ltd is one of the leading Co-operative Bank which was incorporated in the year 1946 in Mumbai with the business of the Rs.1000 crores. The bank is into financial services like demand draft, RTGS/NEFT facilities, safe deposit lockers, forex, tax payment, insurance, pan card services, Rupay card services and other major transaction services.

The purpose of summer internship is to cater to the following assignments/analysis as given by the Mogaveera co-operative bank are topography description, Deposit products, loan products, various services offered by the banks. Bach end operations, customer satisfaction, credit analysis, credit score model, financial statement analysis, loan and advances. At the completion of the internship, there were some recommendation suggested to the bank for increasing its effeciency, productivity, profitability and customer satisfaction.



TABLE OF CONTENDS

Chapter Topic Page No.1 1.1 Purpose of the project 9

1.2 Scope of the project 91.3 Approach and Methodology 91.4 Limitations of the studies 101.5 SWOT analysis 10

2 2.1 World Banking Industry 122.2 Indian Banking Industry 132.3 Mogaveera Co-operative Bank Ltd. 15

3 3.1 Assignment - Topography research 173.2 Assignment - Sales strategy for Banks deposit & loan products and other services

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3.3 Assignment - NEFT employee training 193.4 Assignment - Education loan promotion 203.5 Assignment – Back end banking operations 213.6 Assignment - Loans and advances 223.7 Assignment - Individual credit rating 223.8 Assignment – Financial Statement Analysis of Mogaveera bank

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3.9 Assignment - Operations to staff ratio 254 Student learning 265 Glossary 286 Reference 297 Appendix 30

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Chapter-1

1.1 Purpose of the project:

Summer Internship Program, the project assigned by the company guide, introduction about the company, the structure of report and the expectations of the company guide towards this project.

The Summer Internship Program (SIP) forms an important component of management education. It is an attempt to bridge the gap in the student’s perception between theory in books and practise in the corporate world. Internship Program is a vehicle for introducing interns to real-life situation, which cannot be simulated in the classroom. Internship enables a student to find solutions to various problems confronted in the multi-disciplinary and goal oriented project which involves team work, analytical thinking, processing and decision making in the face of insufficient data parameters and uncertain situations.

1.2 Scope of the project:This project aims to learn and understand various banking operations and also to find opportunity scanning of various financial services offered by the Mogaveera Co-operative Bank Ltd. This project also demands for devising a sales and marketing strategy in sync with financial strategy of the bank. Thus summer internship programme will include following aspects in Mogaveera Co-operative Bank Ltd.

1.3 Approach and Methodology: Case study Opportunity scanning Competitive analysis

view of Banking operations

Deposit products

Topography description

Loan Products

Other services

offered by the banks

Credit analysis and creation of credit score

model

Operations

Financial statement analysis

Loans and

advances

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Banking sector market research Microsoft excel modeling Training and Development Web and social media tools

All the methodologies and approaches are explained in the project.

1.4 Limitations of the studies: Convenient sampling. In some analysis unavailability of authentic data. Competitors did not share the data so there is some amount of assumptions made

on past trends and unrecorded interactions.

1.5 SWOT analysis of banking sector:

STRENGTH

Indian banks have compared favorably on growth, asset quality and profitability with other emerging economies banks over the last few years.

Policy makers have made some notable changes in policy and regulation to help strengthen the sector. These changes include strengthening prudential norms, enhancing the payments system and integrating regulations between commercial and co-operative banks.

Bank lending has been a significant driver of GDP growth and employment. Extensive reach: the vast networking & growing number of branches & ATMs.

Indian banking system has reached even to the remote corners of the country. In terms of quality of assets and capital adequacy, Indian banks are considered to

have clean, strong and transparent balance sheets relative to other banks in comparable economies in its region.

Foreign banks will have the opportunity to own up to 74 per cent of Indian private sector banks and 20 per cent of government owned banks.

WEAKNESS PSUs need to fundamentally strengthen institutional skill levels especially in sales

and marketing, service operations, risk management and the overall organizational performance ethic & strengthen human capital.

Old private sector banks also have the need to fundamentally strengthen skill levels.

The cost of intermediation remains high and bank penetration is limited to only a few customer segments and geographies.

Structural weaknesses such as a fragmented industry structure, restrictions on capital availability and deployment, lack of institutional support infrastructure, restrictive labour laws, weak corporate governance and ineffective regulations Scheduled Commercial Banks (SCBs), unless industry utilities and service bureaus.

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Refusal to dilute stake in PSU banks: The government has refused to dilute its stake in PSU banks below 51% thus choking the headroom available to these banks for raining equity capital.

OPPORTUNIY The market is seeing discontinuous growth driven by new products and services

that include opportunities in credit cards, consumer finance and wealth management on the retail side, and in fee-based income and investment banking on the wholesale banking side. These require new skills in sales & marketing, credit and operations.

With increased interest in India, competition from foreign banks will only intensify.

Given the demographic shifts resulting from changes in age profile and household income, consumers will increasingly demand enhanced institutional capabilities and service levels from banks.

New private banks could reach the next level of their growth in the Indian banking sector by continuing to innovate and develop differentiated business models to profitably serve segments like the rural/low income and affluent/HNI segments; actively adopting acquisitions as a means to grow and reaching the next level of performance in their service platforms. Attracting, developing and retaining more leadership capacity

Foreign banks committed to making a play in India will need to adopt alternative approaches to win the “race for the customer” and build a value-creating customer franchise in advance of regulations potentially opening up post 2009. At the same time, they should stay in the game for potential acquisition opportunities as and when they appear in the near term. Maintaining a fundamentally long-term value-creation mindset.

Reach in rural India for the private sector and foreign banks. With the growth in the Indian economy expected to be strong for quite some

time-especially in its services sector-the demand for banking services, especially retail banking, mortgages and investment services are expected to be strong.

Reserve Bank of India (RBI) has approved a proposal from the government to amend the Banking Regulation Act to permit banks to trade in commodities and commodity derivatives.

Hybrid capital: In an attempt to relieve banks of their capital crunch, the RBI has allowed them to raise perpetual bonds and other hybrid capital securities to shore up their capital. If the new instruments find takers, it would help PSU banks, left with little headroom for raising equity.

THREATS Threat of stability of the system: failure of some weak banks has often

threatened the stability of the system. Rise in inflation figures which would lead to increase in interest rates. Increase in the number of foreign players would pose a threat to the PSB as well

as the private players.



Chapter-2

2.1 World Banking Industry

The financial crisis severely impacted the asset and profitability growth of the global banking sector, which started to recover during 2009 and 2010. The growth rate of assets for the top 1000 banks grew by 5.9% during 2009–11, reaching well above the pre-crisis level. However, during 2011–12 the growth moderated to 4.9% due to the ongoing Eurozone crisis, which was to some degree compensated by the growth of assets in the Asia-Pacific and Latin American regions. Profits-before-tax (PBT) of the banking sector also witnessed strong growth during 2009 and 2010. The PBT of the Top 1000 banks increased by $553 billion between 2008 and 2011, and further increased by 4.6% in 2012, primarily due to the efforts taken by the banks to reign in their costs and disposition of non-core assets and unprofitable assets. However, due to the effects of the Eurozone crisis, European banks faced significant pressure regarding profitability. The financial crisis underscored the sharp differences in the performance of the banking sector across emerging and developed markets. Emerging markets such as Latin America and Asia-Pacific remained resilient to the crisis in contrast to developed markets where the banking sector experienced sharp losses. The income-to-assets ratio of top global banks declined by 10 basis points in 2012. Although Europe had a huge 45% share of total assets, its smaller share in total pre- tax profits (8%) was a result of significant losses and write-downs from the ongoing Eurozone crisis. On the other hand, the Asia-Pacific region had a 37% share in total assets but 62% share in total pre-tax profits due to strong macro-economic fundamentals. North American banks had a 16% share of total assets but a share of 24% in total pre-tax profits, as most of them continue to improve their profitability after the subprime crisis.

Figure 1 Profits-Before-Tax ($bn) and Income-to-Assets Ratio (%) of Top 1000 Global Banks (by Assets), 2008–2012

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2.2 Indian Banking Industry

India is one of the top 10 economies globally, with vast potential for the banking sector to grow. The last decade witnessed a tremendous upsurge in transactions through ATMs, and Internet and mobile banking. In 2014, the country’s Rs. 81 trillion (US$ 1.34 trillion) banking industry is set for a greater change. Two new banks have already received licenses from the government. Furthermore, the Reserve Bank of India’s (RBI) new norms will provide incentives to banks to spot potential bad loans and take corrective steps that will curb the practices of rogue borrowers. The Indian government’s role in expanding the banking industry has been significant. Through the Financial Inclusion Plan (FY 10–13), banking connectivity in the country increased more than three-fold to 211,234 villages in 2013 from 67,694 at the beginning of the plan. Banks are also looking at new ways to attract customers. In September 2013, ICICI bank leveraged the popularity of the social platform, and launched its Facebook banking service, Pockets. The service enables customers to transfer funds and pay bills from within the website.

Market SizeThe revenue of Indian banks increased four-fold from US$ 11.8 billion to US$ 46.9 billion during the period 2001–2010. In the same period, the profit after tax increased from US$ 1.4 billion to US$ 12 billion. In 2012–13, Indian banks had 170 overseas branches (163 in 2011–12) while foreign banks had 316 branches in India (309 in 2011–12). Credit to housing sector grew at a compound annual growth rate (CAGR) of 11.1 per cent during the period FY 2008–13. Total banking sector credit is expected to grow at a CAGR of 18.1 per cent (in terms of INR) to touch US$ 2.4 trillion by 2017.

Recent DevelopmentsInfrastructure Development Finance Company (IDFC) and Bandhan Financial Services Pvt. Ltd. have been chosen among a field of 25 banks by the RBI to set up banks. ‘In-principle’ approval has been given to the banks, which are both non-banking finance companies. While Mumbai-based IDFC is categorized as an infrastructure finance company, Kolkata-based Bandhan is a microfinance establishment. Bandhan covers 5.5 million customers, nearly all of them women whose loans average Rs. 10,000. The bank seeks to continue catering to a rural and unbanked customer base from its current branch network. Banks and housing finance companies (HFCs) together enjoyed a 20% growth in home loans in FY 2013–14. Home loans disbursed by banks and HFCs collectively grew by Rs. 1.60 trillion (US$ 26.59 billion) in FY 2013–14 to reach Rs. 9.60 trillion (US$ 159.58 billion) at the end of the fiscal. Jammu and Kashmir (J&K) Bank is looking at opportunities to increase its presence outside the country. The bank is likely to establish branches in London and Dubai to strengthen its relationships with current customers who have business interests in Europe and West Asia.Indian banks operating abroad enjoyed a higher credit growth in comparison to foreign banks operating in India, as per an RBI survey on international trade in banking services for 2012–13. According to the survey, growth of credit extended by Indian banks’ branches operating overseas grew by 31.7% to Rs. 585,570 crore (US$ 97.36 billion); credit extended by foreign banks based in India increased 27.5% to touch Rs. 307,700 crore ($51.15 billion).Strong growth in agriculture and services sectors as well as the personal loans segment has helped push bank credit growth during the period April–November, 2013 to 7.2 per cent,



compared to 6.6 per cent during the same period of 2012, according to a report by credit rating agency CARE Ratings. During the period, loans to the agriculture sector grew by 5.2 per cent compared to 2.3 per cent in 2012. ICICI Bank is looking at different ways to maximize the digital opportunity for growth. The bank is doubling the number of cities it covers with 'tablet banking' and offering its customers services such as video conferencing, so they can talk to the money managers from the comfort of their homes. Bank of India (BoI) launched its card-less cash withdrawal facility in March 2014. Under this service, a BOI customer can transfer money to anyone, using the bank’s ATMs or through Internet banking. The sender has to provide the beneficiary’s mobile number, a sender code, and the amount through Internet banking or text message. The beneficiary, after receiving a code from the bank can visit any BOI ATM with instant money transfer facility and withdraw the money within a fortnight of the transfer.Simple steps such as memorizing one's PIN, lowering credit limits on cards, using virtual cards and deactivating transactional services connected to a mobile number could bring down bank frauds, says experts. Regular changing of the password can also save an account from attacks.

Government InitiativesThe RBI has issued extra guidelines for banks giving gold metal loans (GMLs). To safeguard against fraud, the central bank has asked lenders to check the credit worthiness of borrowers; collateral securities against the loan; and trade cycle of the manufacturing activity, before sanctioning the loans. The Cabinet Committee on Economic Affairs (CCEA) has given the green signal to a proposal to increase foreign holding in Axis Bank from 49 per cent to 62 per cent. The move could bring in overseas investment of nearly Rs. 7,250 crore (US$ 1.20 billion) into the country. The CCEA nod is dependent on FIIs’ holding capped at 49 per cent.

Road AheadIndia’s banking sector has the potential to become the fifth largest banking sector globally by 2020 and the third largest by 2025. The industry has witnessed discernable development, with deposits growing at a CAGR of 21.2 per cent (in terms of INR) in the period FY 06–13; in FY 13 total deposits stood at US$ 1,274.3 billion. Today, banks are turning their focus to servicing clients. Banks in the country, including those in the public sector, are emphasizing on enhancing their technology infrastructure, in order to improve customer experience and gain a competitive edge. The popularity of internet and mobile banking is higher than ever before, with Customer Relationship Management (CRM) and data warehousing expected to drive the next wave of technology in banks. Indian banks are also progressively adopting an integrated approach to risk management. Most banks already have in place the framework for asset–liability match, credit and derivatives risk management.

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2.3 Mogaveera Bank

Mogaveera Bank was established in 1946 having 11 branches in Mumbai registered under Maharashtra Co Operative Society Act and Reserve Bank Of India Act. The Bank’s performance during the fiscal year 2012-13 was progressive. The bank has made all round progress in most of the key financial parameters. The Deposits of the Bank has increased from Rs.485.03 crores to Rs.559.10 crores, an increase of Rs.74.07 crores and a growth of 15.27% over the previous year. Likewise the Advances have also increased from Rs.297.92 crores to Rs.342.64 crores. Accounting for a growth of Rs.44.72 crores over the previous year. The bank has deployed the funds judiciously which has improved the operating margins and due to which the Net Profit has increased significantly to Rs.4.66 crores as against 2.45 crores last year. This year too, the bank have made an additional provision of Rs.2.00 crores towards Bad and doubtful debts to strengthen the reserves which would be useful against any future impairment in Assets. The bank has been able to bring down the Gross NPA to 8.99% and the Net NPA to 3.30%. Although all efforts are being made to reduce it further, it shall be the endeavour to bring down the Net NPA to zero level. The Bank now stands on a sound footing and is steadily marching towards the Rs.1000 crores business mix.

The Bank has a long and cherished history and has stood the test of time and weathered many a storm during its long journey that started 67 years back. The bank having treaded cautiously in earlier years, the growth was at a slow pace but in the last few years the progress has been quite significant. This is because of some key initiatives and decisions taken by the management which was well supported by the staff members. There has been lot of transformation taking place in the Banking sector. Technology is playing a dominant role in driving down costs, building efficiency and working as an enabler to make available the best possible services to the customer. Mogaveera Bank has kept pace with the fast growing changes and has been quick to put in place value added services like ATMs, RTGS/NEFT facility and SMS alerts.

During the year, the bank also introduced ancillary services like issuance of Pan-card, facilitating purchase/sale of foreign exchange and payment of utility bills. This has helped this bank to generate more fee based income as well as cross sell our other products and services. Also on the anvil are services like Demat Services and Net / Mobile Banking. The Rupay Debit ANNUAL REPORT 2012-2013 5 cum ATM Card which is a domestic card like the Visa or Master is ready to be launched soon as all pre-launch checks have been successfully conducted. This card will give access to all our customers to more than one lakh ATMs across the country.



MOGAVEERA CO-OPERATIVE

DEPOSIT LOAN OTHER

H

-Saving Account

-Sakhi

-Vidya

-Kiddoz A/C

- Unnathi

-Current Account

-Society Plus A/C

-Aksaya Deposit

-Recurring Deposit

-Home Loans

-Home Renovation/Improvement

-Mortgage

-Against Gold

-Against Tangible Securities

-Easy Loan (Employed Person)

-For Working Capital Requirement

-Loan for Purchase of Fixed assets

-Demand Draft

-RTGS/NEFT

-Safe deposit locker

-Foreign Exchange

-Tax Payment

-Life & General insurance

-PAN card

-Rupay card

-Electricity bills

-Postpaid Mobile bill payments

-Recharge of Dish TV, Tata sky, Airtel digital, Sun TV & Vediocone.

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Chapter 3

This chapter will include the various projects and survey undertaken in SIP and various recommendations made to the Mogavvera bank to increase its effeciency, productivity and most important profitability.

3.1 Assignment: Topography research

Purpose: To have 360 degree view opportunity scanning of Vikhroli (west) branch location

Methodology:

For any organisation to grow and develop it first need to understand its customer, customer needs and customer proximity. Mogaveera bank faces the same problem of not fully indersatnding its customer requirement and their proximity to the services and products from the bank. Thus the SIP required to find the potential Small and Medium scale customers and potential customer segments within the vicinity of 2km in Mogaveera bank, Vikhroli branch primary survey, google maps, just dial and telephonic conversation were used to assemble the data and analyse the data. After obtaining the data the potential customers were segmented into local traders, retailors, workshop owners and small enterprises. The survey was also done to determine the exsisting preference of the potential customers for the Mogaveera’s competitors.

Recommendation Bank needs to improve customer networking, personal selling strategy and

communication channel medium. Bank needs aggressive sales promotion strategy for eg: sales events like Insurance

claim clinic held at Vikhroli branch on 5th March. The bank has a strong branch network in central and western line region of Mumbai

but it lacks in harbor line region. Thus the management needs to think of increasing its branches at harbor line region to increase its customer presence and also service facility.

The bank needs to introduce ATM facility to its customers. Bank can also start a massage alert service for customers on demand. The survey has proved that Vikhroli branch has a large of customer potential and

with right strategy; the bank has high potential of increasing its customer conversion ratio.

For its existing customer base, the bank should take survey and also strive for maximum customer satisfaction.



Figure 2 Target geographical customer potential area

3.2 Assignment - Sales strategy for Banks deposit & loan products and other services

Purpose: Improving business and sales of Mogaveera bank

Methodology:

The first and the foremost to develop any sales strategy of a company, the employs should know in detail about the products and services offered by the organization. The Mogaveera interns implemented same strategy by gaining detail knowledge about all products and services offered by the Mogaveera bank.

Know Your Customer (KYC) documentation requirement and process Making Facebook fan page and making online awareness campaign. Updating Mogaveera Facebook page and posting about products and schemes Creating buzz about the banks products Updates about banks events on Facebook page Updates about RBI circulations on face book page

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With aggressive Facebook promotion, Mogaveera bank was able to increase 43 to 200+.

This gave Mogaveera bank a chance and opportunity to present its business and services to over 400 million active Facebook and twitter accounts.

On Facebook if anyone have query about any product or service of the bank then there is an option where they can ask their queries. This helps to improve customer satisfaction.

Figure 3 Admin facebook page of Mogaveera bank

Conclusion:

Information technology and social media are one of the necessary tools required for any business to reach greater customer segment.

Using the social media platform can help bank to understand constantly changing customer requirement and satisfaction, as this media provide real time data.

Staff should be motivated once in a month so that they will enjoy efficiently working for eg arranging some motivational sessions for them.

Bank should improve their service in terms of customer satisfaction. Buzz in market is important. Small amount of advertisement is necessary. Hording and Public awareness are needed.

3.3 Assignment - NEFT employee training



Purpose: To train branch staff and implementation of new software in system for NEFT transactions.

Methodology:

The National Electronic Fund Transfer (NEFT) system is a nation-wide system that facilitates individuals, firms and corporates to electronically transfer funds from one bank branch to any individual, firms or corporate having an account with any other bank branch in the country. For being part of the NEFT fund transfer network, a bank branch has to b NEFT enable. As at the end of January 2013, 84680 branches/offices of 100 and one bank in the country are NEFT enabled.

Mogaveera bank was one of the banks to implement this NEFT technology in some of its branches successfully. Since this was a new technology and interface for the bank’s employee, it was necessary for the bank to impart NEFT training to its employees and other required officials. To achieve this purpose Mogaveera bank joined hands with NEFT software implementer and intern of each branch was asked to attend this training workshop. After attending the training and development workshop, each intern was asked to give corresponding training to his/her respective branches. Successfully trained 6 employees of the vikhroli branch. The NEFT training consisted of modules like NEFT login, customer information form, transaction process, report generation, etc.

Xpirian group have developed this software for Mogaveera bank Xpirian group have given training to each branch’s summer intern and these summer

intern have gave training to other staff in their respective branch. For trial and practice basis each staff and summer intern have done 5 transactions

each of them.

Conclusion:

Staff is needs repetitive training to unable them to accept new technology. Also making bank staff realize the switching of technology from orthodox to NEFT

will increase productivity and efficiency. Since the installation of new software takes nearly 2months the bank should clearly

plan its implementation strategy. With introduction of NEFT, the banking facility will become more customers friendly

and secure transactions will take place.

3.4 Assignment - Education loan promotion

Purpose: Promoting education loan scheme for students in IBS Mumbai campus

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Methodology:

The majority of loan takers at Mogaveera bank are of low income profile and bank is not able to achieve the desire profitability due to high rate of NPS. Thus is was a decision to have an aggressive marketing strategy for its education loan services. I was asked to set up the education loan kiosk at IBS Mumbai campus and explained its education loan scheme to all prospective students. To assist students and to understand the different options available with different range of education loans, a Microsoft excel sheet model was prepared by me. In this excel model if a student wishes to take certain amount of loan for his/her education and for a specific period, the excel sheet will generate the loan schedule with information like EMI, loan amount, rate of interest etc. to further understand this model I request evaluators to open the attached Microsoft excel file.

Mr. Putran, Vikhroli branch manager have arranged a loan promotion kiosk at IBS Mumbai campus with the help of Prof. Meenaxi Dhadiwal.

Mogaveera bank has given a desk/stall in IBS Mumbai campus where they can promote our loan scheme for students.

For this loan EMI calculation financial model has been created which helps to calculate interest amount as well as EMI amount.

Detail knowledge about education loan scheme was given.

Conclusion:

Mogaveera bank conducted an awareness campaign about various student loan facility and services offered by the bank.

Potential student candidates’ personal information was taken and bank pitched them for education loan facility.

The bank to promote its education loan services did Marketing and promotion events.

This activity helped Mogaveera bank to increase its business potential and also gave an opportunity to have a tie up with IBS Mumbai.

3.5 Assignment – Back end banking operations

Purpose: To understand back end banki office activities

Methodology:

SIP included visiting Kurla competency center where back end bank office work is done.

A rigorous training was given to the interns about customer request processing like opening a saving account, maintaining transaction history, loan history and rating, document verification and documentation of various activities.

A trial customer’s unique identification code was generated in this competency center and was shown to interns about the same.



A streamline process of how a customer’s KYC documentation and all transactions records are maintained were shown.

Each case whether its loan, opening fixed deposit account, opening saving account, opening recurring deposit account or current accounts have been opened and record has been maintained.

Conclusion:

This competency center has all analytics, intelligence and efficient staff, which keeps this department productively working.

Each account opening take atleast 2 working days and if Mogaveera able to reduce this time then it will help in improving customer request processing time and efficient working.

3.6 Assignment - Loans and advances

Purpose: To know and understand about Loans and advances

Methodology:

A discussion session has been arraigned with Mr. Parekh sir, head of loan department in Mogaveera bank covering topics

o Loan applicants history and credit rate analysiso Financial statement analysis of customer’s business.o Determining rate of interest according to the customer profileo Security valuation

Questions and answer session was held after the session. Case studies like gold loan, mortgage loan and business expansion loan and above

topics were analyzed by the interns.

Conclusion:

The interns learnt various parameters, which should be undertaken while giving loans like credit history, cash flow history, valuation of security, borrower’s character, etc.

The interns learnt about risk analysis and customer valuation.

3.7 Assignment - Individual credit rating

Purpose: Understanding individual credit rating and its importance

Methodology:

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Experian credit Information Company of India Private Limited conducted training session on credit rating:

o Credit serviceso Decision Analyticso Marketing Serviceso Business information

In simplest terms, credit is money you borrow and promise to pay back with interest. Types of credit include revolving credit, such as credit cards; automobile and personal loans; and home purchase, refinance and equity loans.

Having access to credit is important, as it can be useful in times of emergencies, is sometimes more convenient than cash, and allows you to make large purchases. However, misusing credit can cause financial problems.

A credit score based on five major factors:

view of Banking operations

Credit Score

pursuit of new credit

time credit has been in

use

previous credit

performancecurrent level

of indebtedness

types of credit available

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Figure 4 Modules included in training

Conclusion:

In Mogaveera bank doesn’t use individual credit rating for giving any loans; it is beneficial to them to use it.

This would enable them to decrease customer fraud and risk profile. Mogaveera bank has access to many of its services but they does not use it

efficiently and wasting its resources. Mogaveera bank should focus on these services, to improve its banking services.

3.8 Assignment – Financial Statement Analysis of Mogaveera bank

As a financial intermediaries, banks assume three types of risk as they manage the flow of money through their business.

A. Interest rate risk: Interest rate risk is the management of the spread between interest paid on deposits and received on loans over time.

B. Credit risk: Credit risk is the borrower will default on a loan or lease which causes the bank to lose potential interest earn as well as the principal that was given as loan to borrower.

C. Market risk: Market risk is calculated on comparing world’s economy as well as country’s economy.

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On these three types banks analysis their financial statements, profit & loss account and balance sheet.

Ratio and analysis

1. Capital to risk asset ratio:2012: 11.98%2013: 12.14%Capital to risk asset ratio restrains the growth of banks because it restricts how many debt securities a bank can issue. Another way of looking at it is the amount of leverage a financial institution can take on. A financial regulatory body can use the capital to risk asset ratio to set a minimum level of capital that bank must have.Here in 2012 capital to risk asset ratio is 11.98% and it has been increased to 12.14% in 2013.

2. Average cost of deposit2012: 7.28%2013: 7.71%The banks pay different rates of interest depending upon the nature and term of deposit. Therefore cost of deposits depends upon deposit-mix of the bank. Average cost of deposits = Interest paid + payable/ Average deposits * 100Here comparing average cost of deposit between 2012 and 2013, it has been increased by 0.43, which indicates that bank is paying more interest than deposits which is bad for the bank.

3. Return on assets2012: 0.44%2013: 0.74%This is an indicator of how profitable a bank is relative to its total assets. Return on assets gives an idea as to how efficient management is at using its assets to generate earnings.Return on assets = Net income/ Total assetsHere in bank ROI has been increased by 0.30% in 2013, which indicates, bank is better at concerting its investment in to profit.

4. Operating profit ratio2012: 0.92%2013: 1.09%Operating profit ratio measures bank’s efficiency. The higher the operating profit, the more profitable a bank’s core business is.Operating profit = Operating Income/ Working funds * 100



Here in Mogaveera bank operating ratio has been increased to 1.09% in 2013 from 0.92% in 2012, which indicates good and healthy efficiency of the bank.

5. Non-interest income as percentage of working funds2012: 0.53%2013: 0.97%This is the income derived from non-financial assets and service and includes commission and brokerage on remittance facilities, locker rentals and other service charges.Non-interest income = Total non-interest income/ Average working funds * 100Here Mogaveera bank has been increased its Non-interest income from 0.53% in 2012 to 0.97% in 2013, which indicates better income efficiency of the bank.

6. Interest income as a percentage of working funds2012: 9.45%2013: 9.55%This is the income, which is derived from bank’s financial assets and service.Interest income = Total interest income/ Avg. working funds * 100Here as mentioned above, interest income has been increased by 0.05%, which is very low increment, and it should be increase with high increment.

3.9 Assignment - Operations to staff ratio

Purpose: To determine the working efficiency of bank staff

Methodology:

There are three types of voucher available in the bank i.e. o Deposit voucher, o Withdrawal voucher and o Transfer slip.

SIP includes calculating all three vouchers of 3years and analyzing the trend. Daily average vouchers calculations was 198 and in Vikhroli branch there was 9

employees was working, thus for every one employee there were 22 vouchers to be processed everyday. The industry standard is 56 vouchers per employee.

This helps to determine about the working efficiency of the banks staff. And scope of improvement.

Conclusion:

Vouchers to employees are less. So there is need that staff strength to be reduced or their efficiency should be

increased.

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Chapter 4

Student learning:

Working with Mogaveera bank have taught me lot of things and it was an amazing experience with Mogaveera bank.

Internship gave an opportunity to test comfort zone, whether student never know my capabilities. Sometimes it takes a burst bubble to really get a grasp of student’s full potential.

Someone needs to be responsible - projects move slowest when no one has ultimate authority or responsibility.

Now when to cut losses or continue the fight - if a project is going nowhere, there comes a time to decide when to run and when to stand.

I have learnt about analysis of credit worthiness of individual client and business basis. To understand this some case studies have been studied.

Some calculators have been made which are helpful to calculate EMI amount, interest amount etc. To make this calculator, formulas of ‘Time value and money’ have been used, which studied in semester 1 of PGPM program.

I have even learnt that some time we have tried our best but all honey is not yours sometime you have to leave some things to achieve one goal. In my internship I have tried to make Mogaveera bank’s web site page more interactive and helpful for customers but eventually my ideas have lost in heavy work load and have not took place. So failures are also teach us many things.

SIP taught how to groom and behave in corporate word as well as how to keep difference between personal life and professional life.

I have learnt so many personality things looking at my all senior members and all other interns.

SIP taught the importance of Financial statement analysis and the actual analysis of balance sheet of Mogaveera bank.

Analysis/comments of Balance sheet: Total deposits: 5590953881

Total loan: 3426444574Deposits are 1.63 times more than loans which indicates more of cash has been blocked into the bank which should be given as loan or need to invest somewhere.

In borrowing column, all amounts are in negative (-) but only IDBI Bank Ltd. have positive (+) balance. This indicates Mogaveera bank have a big amount from IDBI Bank Ltd. about other banks Mogaveera bank have huge amount with other banks.

Interest receivable: 125862016Interest payable: 13323551Interest receivable are 9.44 times more than interest payable which indicates bank is weak while collecting its interest from borrowers and from their customers.



In fixed assets, safe deposit lockers are valued at 730851 which is very less comparing to other assets where as safe deposit lockers are profit maker asset. So more of investment should be done in safe deposit locker. And it will also help bank to improve service for the customers.

ATM machine’s valuation is zero at the year end of 2013. So re-investment should be done in ATM machines. This will help to improve services and customer satisfaction.

Locker rent receivable:2012: 236642013: 104071Locker rent receivable has been increased in 2013 by 80407 which is great increase in locker rent receivable. This amount should be collected on time or else it should not increase from last year and it should be fall.

Tax penalties on assessment:2012: 12200042013: 6852384Tax penalties has been increased in 2013 by 5632380 which is great increase in tax penalties which needs to be received immediately.

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Glossary

NEFT: National electronic fund transfer RTGS: Real time gross settlement PBT: Profit before tax ATM: Automated teller machine PIN: Personal Index numbers NPA: Nonperforming assets EMI: Equated monthly installments



Refrences

1. http://www.capgemini.com/resource-file-access/resource/pdf/ trends_in_the_global_banking_industry_2013.pdf

2. http://www.ibef.org/industry/banking-india.aspx 3. Mogaveera Bank internal records and statements.

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http://www.ibef.org/industry/banking-india.aspx

http://www.capgemini.com/resource-file-access/resource/pdf/trends_in_the_global_banking_industry_2013.pdf

http://www.capgemini.com/resource-file-access/resource/pdf/trends_in_the_global_banking_industry_2013.pdf

Appendix

Figure 5 Screen shot of loan calculator in excel sheet


FInal report 13BSP1416.docx

Documents

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