SUMMER INTERNSHIP PROJECT REPORT

Credit Appraisal Process at ING Vysya BankFor

FOR THE PARTIAL FULFILLMENT OF THE REQUIREMENT FOR THE AWARD OF POST GRADUATE DIPLOMA IN MANAGEMENT

UNDER THE GUIDANCE: Prof. Sumesh Raizada Mentor (JIMS)

UNDER THE SUPERVISION: Mr. K. G. Singh (Branch Manager, ING Vysya Bank Ltd, Allahabad)

SUBMITTED BY:

ZAHEER USMANPGDM (IB) 2010-2012

JAGAN INSTITUTE OF MANAGEMENT STUDIES (APPROVED BY AICTE, MINISTRY OF HRD, GOVT OF INDIA) 3, Institutional Area, Sector - 5, Rohini, Delhi - 110085.

ACKNOWLEDGEMENTSummer training is an integral part of any Post Graduate Diploma Program and for that purpose I had joined a company what else can be as good as ING Vysya Bank Ltd, Indias leading banking company . I take the opportunity to express my gratitude to all of them who in some or other way helped me to accomplish this challenging project in ING Vysya Bank Ltd. No amount of written expression is sufficient to show this my deepest sense of gratitude to them. I thank my Institute who has given me an opportunity to show my skills. I also thank all my nearer and dearer ones without whose support this project would not been possible.

I would like to thank Mr K. G. Singh who allowed me to do this project in ING Vysya Bank Ltd .

I would like to thank my faculty guide Prof. Sumesh Raizada the guiding source of light in this vast journey of learning experience while doing the project that really made me learn the real application and management principles of the project. His continuous advice has really transformed me into a much mature personality. Their everlasting support and guidance on the ground of which I have acquired a new field of knowledge. The course structure created for this curriculum has benefited with the inclusion of recent development in the organizational and managerial aspects

Above all I would like to thank all contacted persons of firm who took out valuable time to answer my queries and gave me full information related to my project. I extend my sincere gratitude towards my parents, who have always encouraged me and gave suggestions as how to work on project. They always stand by me in solving all my queries. Their support has always motivated me. Above all it gives me immense pleasure to thank authors of various books who indirectly helped me in gaining knowledge about banking industry.

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DECLARATIONI Zaheer Usman Declare that this project Report titled Credit Appraisal process at ING Vysya Bank is an original work done by me under the guidance of Mr K. G. Singh. I further declare that it is my Original Work as a part of my Academic course.

Place: Allahabad

ZAHEER USMAN

Prof. Sumesh Raizada (Mentor JIMS)

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PREFACEI did my summer internship in ING Vysya bank. It was a business banking department and it was located in Civil lines, allahabad. On the first day I met the branch manager of the bank Mr. K G Singh. He was my mentor too. In the first week he gave me two files of the company which he himself completed. Reading those files I learnt how banks give loans, what are the important documents needed to get the sanction letter. On the second week I was assigned to do cold calling. I was given a data of another private bank. In my whole internship I made 10 customers who gave me time to meet them. And out of those 10 I converted 1 myself with the help of my mentor. The client is Arshad Transports. They have big chain of vehicles running in and around Allahabad area. On a daily routine , my time was divided. From 10 to 1 pm I use to do cold calling. After lunch I used to meet all those people who have approved and would like to meet me. After meeting them I used to come back to my office and had to report to my mentor. The client that I converted was Arshad Transports. They needed a working capital of 90 lakhs to purchase a Volvo bus to run between Allahabad and lucknow in partnership with UPSRTC. After checking there balanced sheet, profit and loss account statement and there last six month bank account. I gave his case to my mentor, who finally approved his loan. The financials of ING Vysya is in a very healthy stage. All the ratios are showing vast improvements, be it the capital adequacy ratio, the net profit margin. All of the financial ratios has done better than the previous years. There total assets, market cap have also gone up from the previous years. The key learning that I learnt was the fact that I saw the real corporate world. What is the pressure that each employee faces each day. I was working in a professional working environment with professional working people. This was my real learning. Apart from that I worked on real projects, learned how banks gives business loans to there customers. I also learnt how to communicate with different types of clients. Working on the real time project made me learnt how to read a bank statement. This internship also helped me

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make new friends like Mr. K G Singh who was my boss. I would thank them to give me such a immense opportunity to work with them.

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Table of ContentS NO. 1 2 3 4 5 6 7 8 9 Title Chapter 1: Corporate Internship Objectives Chapter 2: Industry Analysis Chapter 3: Company Profile Chapter 4: Financial Statement Analysis Chapter 5: Credit Appraisal Process at INGVysya Bank

Page No 7 7 24 49 53 63 68 70 75

Chapter 6: Survey Chapter 7: Findings Chapter 8: Conclusion & Recommendation Chapter 9: AnnexureQuestionnaire

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Objectives of the Corporate Internship

The purpose of Corporate Internship for a minimum time of 8 weeks is to connect theory and practice, obtain knowledge & awareness of the functioning of various departments of the corporate and its environment which is utmost necessary for the success of the budding managers. The basic objectives of this summer internship programme for the MBA students are:

1. 2.

To understand the business and competitive environment of ING Vysya Bank. To analyze and understand the financial position of ING Vysya Bank viza viz competitors.

3. 4. 5. skills.

To study the Business Banking Department of ING Vysya Bank and its practices. To facilitate in testing what I have learnt in the foundation courses in the first year. To get a feel of corporate life and its functioning & understand various interaction

BANKING INDUSTRY ANALYSIS

STRUCTURE

BANKS IN INDIA:

In India banks have separated in different groups. Each group has its own benefits and limitation operating in India. Each has its own dedicated target market. Few of them work in rural sector while others work in both rural and urban. Many of them are catering in cities. Some of them are of Indian origin while others are of foreign origin. The banks in India are7

GROWTH TRENDS

The Indian banking market is growing at an astonishing rate, with assets expected to reach US$1 trillion by 2010. An expanding economy, middle class, and technological innovations are all contributing to this growth. The countrys middle class accounts for over 320 million people. In correlation with the growth of the economy, rising income levels, increased standard of living, and affordability of banking products are promising factors for continued expansion. The Indian banking Industry is in the middle of an IT revolution, focusing on the expansion of retail and rural banking. Players are becoming increasingly customer-centric in their A approach, which has resulted in innovative methods of offering new banking products and services. Banks are now realizing the importance of being a big player and are beginning to focus their attention on mergers and acquisitions to take advantage of economies of scale and/or comply with Basel II regulation. Indian banking industry assets are expected to reach US$1 trillion by 2010 and are poised to receive a greater infusion of foreign capital, says Prathima Rajan, analyst in Celent's banking group and author of the report. The banking industry should focus on having a small number of large players that can compete globally rather than having a large number of fragmented players."

TECHNOLOGY IN BANKING

In the six decades of independence banking has evolved in four different phases. During the fourth phase important initiatives were taken with regard to improve the banking system. The entry of foreign banks resulted in a paradigm shift in the way banking was done in India. The arrival of foreign banks and private banks with there superior state of the art technology pushed the Indian banks to adopt latest technology in market, so that they could retain there customer base.

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Information technology has been used under two different avenues in banking. One is communication and connectivity and other is Business process reengineering. Information technology enables sophisticated product development, better market infrastructure, implementation of reliable techniques for control of risks and help the financial intermediaries reach geographically distant and different market. In India banks as well as other financial entities entered the world of information technology and with Indian financial network(INFINET). INFINET, a wide area satellite network (WAN) using VSAT(very small aperture technology) was jointly set up by Reserve Bank of India and Institute for Development and research for banking in1999. INFINET which was initially comprised only public sector banks was opened for participation by other categories of members. The information technology act 2000 has given legal recognition for creation, transmission, and retention of electronic data to be treated as a valid proof in the court of law The Reserve Bank of India has assigned priority to the up gradation of technology in the banks. Substantial progress has been made for developing a modern, efficient, integrated and secure payment and settlement system for the financial service sectors. Modernization of clearing and settlement system through MICR based cheque clearing, popularizing electronic clearing services (ECS) and integration of RBI-EFT scheme with funds transfer schemes of bank, introduction of centralized fund management system (CFMS) are significant milestones in this regard. The coverage of electronic clearing services has been significantly effective to encourage non paper based fund and develop a centralized facility for effective payment. The scheme for electronic fund transfer operated by the reserve bank has been augmented and now it is present in 13 cities. The centralized fund management system (CFMS) which would enable banks to obtain account wise and centre wise position of their balances has been implemented in a phased manner from November 2001.

Membership of INFINET has been opened to all the banks in addition to those in the public sector banks. At the base of all the interbank message transfers using the INFINET9

is the structured financial messaging system (SFMS). It would serve as a secure communication carrier with templates for intra and interbank messages in a strict message format that will facilitate straight through messaging. All the interbank messages will be stored and switched to central hub at Hyderabad while the intra bank messages will stored in the bank gateway. Security standards of SFMS will match the international standards. Information technology has immense untapped potential in banking. Strengthening the information technology in banks could improve the effectiveness of asset liability of banks. Building up of a related data base would strengthen and enhance the forecasting of liquidity of banks at the branch level. This could enhance the risk management capabilities of banks.

LEGAL/ REGULATORY ISSUES RELATED TO BANKING

Banks works under various legal frameworks most important of them are, the Banking regulation act 1949, Basel II norms, RBI act, Negotiable Instruments act.

BANKING REGULATION ACT 1949

The banking regulation act was passed as banking companies act and it came into force in 16/3/49. Subsequently it was changed to Banking regulation act on 1/3/66.

BASEL II NORMS

Basel II is the second of the Basel accords which are recommendation on the banking laws and regulations issued by banking committee on banking supervision. The purpose10

of Basel II norms is to create international standards that banking regulators can use when creating regulations about how much capital does banks needs to put aside to guard against the types of financial and operational risks banks face. Advocates of Basel II believe that such an international system can help protect the international financial system from many types of problem that arise should a bank or a series of banks collapse. In practice Basel II attempts to accomplish this by setting up rigorous risks and capital management requirement designed to ensure that the banks hold capital reserves appropriate to the risks the banks exposes itself to through its investment and lending practices. Generally speaking this rules says that the greater the risk the bank exposes itself, the greater the capital bank requires to safeguard its solvency and overall economic stability. OBJECTIVES OF BANK REGULATION

The objectives of bank regulation, and the emphasis, vary between jurisdiction. The most common objectives are

1. Prudential -- to reduce the level of risk bank creditors are exposed to (i.e. to Protect depositors) 2. Systemic risk reduction -- to reduce the risk of disruption resulting from Adverse trading conditions for banks causing multiple or major bank failures 3. Avoid Misuse of Banks -- to reduce the risk of banks being used for criminal Purposes, e.g. laundering the proceeds of crime 4. To protect banking confidentiality 5. Credit allocation -- to direct credit to favored sector GENERAL PRINCIPAL OF BANK REEGULATION

Banking regulations can vary widely across nations and jurisdictions. This section of the article describes general principles of bank regulation throughout the world.

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MINIMUM REQUIREMENT

Requirements are imposed on banks in order to promote the objectives of the Regulator. The most important minimum requirement in banking regulation is Minimum capital ratios.

SUPERVISIORY REVIEW

Banks are required to be issued with a bank license by the regulator in order to carry on business as a bank, and the regulator supervises licensed banks for compliance with the requirements and responds to breaches of the requirements through obtaining undertakings, giving directions, imposing penalties or revoking the bank's license.

MARKET DISCIPLINE

The regulator requires banks to publicly disclose financial and other information, and depositors and other creditors are able to use this information to assess the level of risk and to make investment decisions. As a result of this, the bank is subject to market discipline and the regulator can also use market pricing information as an indicator of the bank's financial health.

BANKING STANDARDS Recognizing that it is necessary, in the public interest, to ensure that banks evolve comprehensive codes and standards for fair treatment of customers of banks It is necessary to have an independent watch dog to ensure that banks deliver services in accordance with such codes and standards; It is necessary to ensure that the institutional mechanism is autonomous, independent and effectively monitors and enforces the compliance of such Codes and Standards.

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In November 2003, RBI constituted the Committee on Procedures and Performance Audit of Public Services under the Chairmanship of Shri S.S.Tarapore (former Deputy Governor) to address the issues relating to availability of adequate Banking Services to common man. The mandate to the Committee included identification of factors that inhibited the attainment of best customer services and suggesting steps to improve the quality of banking services to individual customers. The Committee felt that in an effort to continuously upgrade the package of services that banks offered to their customers there was a need of benchmarking of such services. After in depth study at the grass root level the Committee concluded that there was an institutional gap for measuring the performance of banks against a bench mark reflecting the best practices (Code and Standards). Therefore, the Committee recommended setting up of the Banking Codes and Standards Board of India broadly on the lines of Banking Codes and Standards Board functioning in U.K. The Banking Codes and Standards Board of India has been registered as a separate society under the Societies Registration Act, 1860. Therefore, it would function as an independent and autonomous body. The Banking Codes and Standards Board of India is not a Department of the RBI. Reserve Bank has agreed to lend it financial support for a limited period. It is an independent banking industry watch dog to ensure that the consumer of banking services get what they are promised by the banks. To ensure that the Board really functions as an autonomous and independent watchdog of the industry, the Reserve Bank also decided to extend financial support to the Board by way of meeting its full expenses for the first five years. This was to enable the Board to reach its economic critical mass that will make it truly independent in its functioning and take a view on any bank without its existence coming under any threat. On its part, RBI would derive supervisory comfort in case of banks which are members of the Board. In substance, the Board has been set up to ensure that common man as a consumer of financial services from the banking Industry is in a no way at a disadvantageous position and really gets what it has been promised.

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MARKET ANALYSIS

MACRO vs MICRO ECONOMIC ANALYSIS PROBLEMS FACED BY INDIAN ECONOMY

1)FALL IN SAVINGS RATIO The savings ratio is the % of income that is saved not spent. A fall in the savings ratio implies that consumer spending is increasing; often this is financed through increased borrowing.

EFFECTS OF FALL IN SAVINGS RATIO

i.

HIGHER LEVEL OF CONSUMPTION: This results in increase in Aggregate Demand. The increase in AD will cause an increase in economic growth and lower unemployment. However, rising Aggregate Demand may cause inflation. Inflation will occur when growth is faster than the long run trend rate. This is now a potential problem in the India. Inflation has recently gone above 12%

ii.

BOOM AND BUST: A fall in the savings ratio is usually accompanied by a rise in confidence. It is the rise in confidence which encourages borrowing and consumers to run down savings. Therefore, there is always a danger that a falling savings ratio can be a precursor to a boom and bust situation.

iii.

ECONOMY MORE SENSITIVE TO INTEREST RATES: With a fall in the savings ratio interest rate changes will have a bigger effect in reducing spending. This is because levels of borrowing are higher and therefore a rise in interest rates has a significant impact on increasing interest repayments. Also, higher rates will not be increasing incomes from savings as much.14

iv.

BALANCE OF PAYMENT: With higher levels of consumer spending, there will be an increase in imports. Therefore this will lead to deterioration in the current account. The current account deficit could put downward pressure on the exchange rate in the long term. However, some people argue a fall in the savings ratio is not a problem, but, it is just a reflection of strong economy and booming housing market, which increases scope for equity withdrawal.

GLOBAL RECESSION

It appears that Europe, Japan and the US are entering into recession. Falling house prices, crisis in the financial system, and lower confidence could lead to a sharp downturn, with the worst still to come. Many argue that Indias growth is not so dependent on growth in the West. However, the Indian stock markets have been hit by the global crisis. Indias growing service sector and manufacturing sector would be adversely impacted by a global downturn.

RISE IN CRUDE PRICES

How global crude prices would behave probably has no easy answers; however we believe that the current challenging and uncertain macro-economic conditions does not lead Indian financials into a state of crisis. But continued rise in crude prices and its resultant impact on inflation, interest rates and government finances has the potential to15

do so. Hence, crude price remains the key risk to our positive stance on the Indian financials.

In the last couple of months oil prices have surged by 45% from US$ 100 to US$ 145 (and now back to US$ 115). India currently imports 70% of its crude requirement, resulting in pressure on government coffers on back of rising crude prices.

IMPACT OF ECONOMIC PROBLEMS ON INDIAN FINANCIALS

The current macro-economic conditions are expected to result in

Slowdown in credit growth Impact on margins of banks Preasure on credit quality

Slowdown in credit growth

While the rise in interest rates should lead to a moderation in demand for credit, Indian banks too are exercising caution while lending. Credit growth of 18% in FY09E and 17% in FY10E vs. 22% in FY08. Risks and uncertainties in the system have increased given the higher crude and commodity prices and its inflationary impact. This would curtail consumption, which would impact economic growth adversely.

Further higher rates will not only impact the profitability of Indian corporate but also impact IRRs of various proposed capex projects. This coupled with elections next year could lead to some postponement of capex plans of corporate, leading to negative impact on demand for credit.

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Higher rates have particularly impacted retail loan growth. As can be seen in the exhibit below, retail loan growth has slowed down significantly from 26.5% in FY07 to ~13% in FY08. SLR Ratio of the system has started rising since mid FY08 and currently stands at 28.7%. Given the expected negative impact on credit growth.

Impact on margins of banks During the past 18 months, CRR has increased by 400 bps to 9.0% currently and RBI has also discontinued with interest payment on CRR balances. Every 50 bps hike in CRR generally negatively impacts margins by ~5 bps. Till June08, most of the banks had restrained from hiking lending rates despite significant monetary tightening. However on account of recent measures by RBI, banks have resorted to hiking PLRs in July/August by 50-150 bps to preserve their margins.

In fact in an environment, where liquidity is tight, interest rates are at elevated levels and risk premiums have increased, the banks tend to regain the pricing power. This would not only help the banks to adequately price in risks but also help protect their margins.

Apart from hiking PLRs, banks are also resorting to reprising (in fact right-pricing) the loans that were sanctioned well below PLRs. Significant portion of fixed rate loans would also get re-priced over the period of 12-18 months.

Pressure on credit quality

Higher lending rates are expected to impact credit quality for the banking system. The extent of the impact on credit quality would also be bank specific given the loan mix17

(retail vs. corporate), proportion of unsecured lending, credit profile of corporate loan book and industry wise exposure. Indian banks fundamentals are relatively resilient with better risk management systems, dramatically improved asset quality, stronger recovery mechanisms (legal provisions) and with adequate capitalization and provisioning. Even Certain sectors (like real estate, airlines industry) might feel the stress due to the changing macro environment and rise in interest rates. Many companies where crude forms a key raw material component are expected to get hit more severely.

Similarly, sectors like real estate and SMEs, which are interest rate sensitive, would face higher delinquencies if interest rates strengthen further by 100-200 bps.

NECESSARY INITIATIVES TAKEN BY RBI & MINISTRY OF FINANCE TO TACKLE ECONOMIC PROBLEMS

As most of economists feel that the most horrible problem which India is facing currently is inflation which has crossed 12%. To come out of these problems RBI and ministry of finance and other relevant government and regulatory entities are taking various initiatives which are as follows...

1)RBI Monitory Policy With the introduction of the Five year plans, the need for appropriate adjustment in monetary and fiscal policies to suit the pace and pattern of planned development became imperative. The monitory policy since 1952 emphasized the twin aims of the economic policy of the government:

Spread up economic development in the country to raise national income and standard of living, and18

To control and reduce inflationary pressure in the economy.

This policy of RBI since the First plan period was termed broadly as one of controlled expansion, i.e.; a policy of adequate financing of economic growth and at the same time the time ensuring reasonable price stability. Expansion of currency and credit was essential to meet the increased demand for investment funds in an economy like India which had embarked on rapid economic development. Accordingly, RBI helped the economy to expand via expansion of money and credit and attempted to check in rise in prices by the use of selective controls.

Objectives of Monitory Policy

Price stability Monitory targeting Interest rate policy

Central banks generally use the three quantitative measures to control the volume of credit in an economy, namely:

Raising bank rates Open market operations and Variable reserve ratio

However, there are various limitations on the effective working of the quantitative measures of credit control adapted by the central banks and, to that extent, monetary measures to control inflation are weakened. In fact, in controlling inflation moderate monetary measures, by themselves, are relatively ineffective.

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On the other hand, drastic monetary measures are not good for the economic system because they may easily send the economy into a decline. In a developing economy there is always an increasing need for credit. Growth requires credit expansion but to check inflation, there is need to contract credit. In such a encounter, the best course is to resort to credit control, restricting the flow of credit into the unproductive, inflation-infected sectors and speculative activities, and diversifying the flow of credit towards the most desirable needs of productive and growth-inducing sector. It should be noted that the impression that the rate of spending can be controlled rigorously by the contraction of credit or money supply is wrong in the context of modern economic societies.

In modern community, tangible, wealth is typically represented by claims in the form of securities, bonds, etc., or near moneys, as they are called. Such near moneys are highly liquid assets, and they are very close to being money. They increase the general liquidity of the economy. In these circumstances, it is not so simple to control the rate of spending or total outlays merely by controlling the quantity of money.

Thus, there is no immediate and direct relationship between money supply and the price level, as is normally conceived by the traditional quantity theories. When there is inflation in an economy, monetary restraints can, in conjunction with other measures, play a useful role in controlling inflation.

FISCAL POLICY

Fiscal policy is another type of budgetary policy in relation to taxation, public borrowing, and public expenditure. To curve the effects of inflation and changes in the total expenditure, fiscal measures would have to be implemented which involves an increase in taxation and decrease in government spending.

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During inflationary periods the government is supposed to counteract an increase in private spending. It can be cleared noted that during a period of full employment inflation, the aggregate demand in relation to the limited supply of goods and services is reduced to the extent that government expenditures are shortened.

Along with public expenditure, governments must simultaneously increase taxes that would effectively reduce private expenditure, in an effect to minimise inflationary pressures. It is known that when more taxes are imposed, the size of the disposable income diminishes, also the magnitude of the inflationary gap in regards to the availability of the supply of goods and services. In some instances, tax policy has been directed towards restricting demand without restricting level of production.

For example, excise duties or sales tax on various commodities may take away the buying power from the consumer goods market without discouraging the level of production. However, some economists point out that this is not a correct way of combating inflation because it may lead to a regressive status within the economy.

As a result, this may lead to a further rise in prices of goods and services, and inflation can spread from one sector of the economy to another and from one type of goods and services to another. Therefore, a reduction in public expenditure, and an increase in taxes produces a cash surplus in the budget. Keynes, however, suggested a programme of compulsory savings, such as deferred pay as an anti-inflationary measure. Deferred pay indicates that the consumer defers a part of his or her wages by buying savings bonds (which, of course, is a sort of public borrowing), which are redeemable after a particular period of time, this is sometimes called forced savings.

Additionally, private savings have a strong disinflationary effect on the economy and an increase in these is an important measure for controlling inflation. Government policy should therefore, include devices for increasing savings. A strong savings drive reduces21

the spendable income of the consumers, without any harmful effects of any kind that are associated with higher taxation. Furthermore, the effects of a large deficit budget, which is mainly responsible for inflation, can be partially offset by covering the deficit through public borrowings. It should be noted that it is only government borrowing from nonbank lenders that has a disinflationary effect.In addition, public debt may be managed in such a way that the supply of money in the country may be controlled. The government should avoid paying back any of its past loans during inflationary periods, in order to prevent an increase in the circulation of money. Anti-inflationary debt management also includes cancellation of public debt held by the central bank out of a budgetary surplus.

DIRECT MEASURES

Direct controls refer to the regulatory measures undertaken to convert an open inflation into a repressed one. Such regulatory measures involve the use of direct control on prices and rationing of scarce goods. The function of price control is a fix a legal ceiling, beyond which prices of particular goods may not increase. When ceiling prices are fixed and enforced, it means prices are not allowed to rise further and so, inflation is suppressed. Under price control, producers cannot raise the price beyond a specified level, even though there may be a pressure of excessive demand forcing it up.

In times of the severe scarcity of certain goods, particularly, food grains, government may have to enforce rationing, along with price control. The main function of rationing is to divert consumption from those commodities whose supply needs to be restricted for some special reasons; such as, to make the commodity more available to a larger number of households. Therefore, rationing becomes essential when necessities, such as food grains, are relatively scarce. Rationing has the effect of limiting the variety of quantity of goods available for the good cause of price stability and distributive impartiality.

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Another control measure that was suggested is the control of wages as it often becomes necessary in order to stop a wage-price spiral. During galloping inflation, it may be necessary to apply a wage-profit freeze. Ceilings on wages and profits keep down disposable income and, therefore the total effective demand for goods and services. On the other hand, restrictions on imports may also help to increase supplies of essential commodities and ease the inflationary pressure.

However, this is possible only to a limited extent, depending upon the balance of payments situation. Similarly, exports may also be reduced in an effort to increase the availability of the domestic supply of essential commodities so that inflation is eased.

In general, monetary and fiscal controls may be used to repress excess demand but direct controls can be more useful when they are applied to specific scarcity areas. As a result, anti-inflationary policies should involve varied programmes and cannot exclusively depend on a particular type of measure only.

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COMPANY PROFILE

ING Vysya is the joint venture between ING & Vysya

ING Group INGs mission is to be a leading, global, client-focused, innovative and low-cost provider of financial services through the distribution channels of the clients preference in markets where ING can create value. ING group originated in 1990, from the merger between Nationale Nederlanden NV (the largest Dutch Insurance Company) and NMB Post Bank Group NV. Combining roots and ambitions, the newly formed company called Internationale Nederlanden Group. Market circles soon abbreviated the name to I-N-G. The company followed suit by changing the statutory name to ING Group N.V.. Since 1991, ING has grown from a Dutch company with some international business to a multinational with Dutch roots.

ING Group is a global financial services company of Dutch origin with 150 years of experience, providing a wide array of Banking, insurance and asset management services in over 50 countries.

Over 1,20,000 employees work daily to satisfy a broad customer base: individuals, families, small businesses, large corporations, institutions and governments.

Based on market capitalization, ING is one of the 20 largest financial institutions worldwide and in the top-10 in Europe.

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ING is the number one financial services company in the Benelux home market. ING services its retail clients in these markets with a wide range of retail-banking, insurance and asset management.

ING Direct is a leading direct bank with over 11 million customers in nine large countries. In the growth markets of Asia, Central Europe and South America they provide life insurance. ING distinguishes itself internationally as a provider of employee benefits, i.e. arrangements of non-wage benefits, such as pension plans for companies and their employees

Another specialization is ING Direct, an Internet and direct marketing concept with which ING is rapidly winning retail.

Furthermore, the company differentiates itself from other financial service providers by successfully establishing life insurance companies in countries with emerging economies, such as Korea, Taiwan, Hungary, Poland, Mexico and Chile.

Vysya Bank

Vysya bank came into existence in the year 1930. When the team of visionaries came together to found a bank that would extend a helping hand to those who weren't privileged enough to enjoy Banking services.

Vysya Bank opened its very first branch and started its operations from Bangalore city .With a span of time it gained its strong existence in south India.25

Its been a long journey since then and the Bank has grown in size and stature to encompass every area of present-day banking activity and has carved a distinct identity of being India's Premier Private Sector Bank. The Bank made rapid strides to reach the coveted position of being the number one private sector Bank.

ING Vysya group in India

In India ING Vysya is into following areas of services:-

Banking.

Life insurance.

Mutual fund.

ING Vysya Bank

CORPORATE STATEMENT

ING Vysya Bank will be an entrepreneurial integrated financial services institution where innovation and transformation are the way of life.

BANK PROFILE

ING Vysya Bank Limited is an entity formed with the coming together of erstwhile, Vysya bank ltd, a premier Bank in the Indian Private Sector and a global financial powerhouse, ING of Dutch origin, during Oct 2002.26

The immediate benefit to ING Vysya Bank ltd was the pride of having become a member of global financial services giant.

Bank has an asset base of 1313 billion euros.

It has net profit of 9.24 billion euros.

With total business turnover of over Rs.12000 crores.

It has capital adequacy of 9.8%.

Bank has an extensive network with almost 450 branches. And has a network of more than 5000 ATMs.

Strong and loyal client base in corporate, trade and retail segment. And more than three million satisfied customers.

Is also a part of bankex an index launched by BSE.

Further, the presence of the group in over 50 countries, employing over 1,20,000 people, serving over 85 million customers across the globe, only multiplies the credibility, not only across the country but also across the globe. The pride of this global identity, the back up of a financial power house and the status of being the first Indian International Bank, would also greatly enhance productivity, profitability resulting in improved performance for the Bank to translate into higher returns, to all the stake holders.

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ING Vysya Bank deals in following area of Banking Corporate Banking Commercial Banking Treasury management Retail Banking Rural Banking Private Banking

ING Vysya life insurance

The company offers entire range of life insurance plans to meet all the financial needs of an individual- protection, saving and investment.

With 50 branches across the country. With sum assured of almost of Rs 800 crore. And assets worth Rs 100 crore.

ING Vysya Mutual Fund

It aims to provide practical and secure investment opportunity to retail investors. Operating in 15 cities.28

And Rs.2800 crores plus fund house.

BUSINESS ACTIVITIES CARRIED OUT BY ING VYSYA The various products offered by ING Vysya bank are

1)

ACCOUNTS AND DEPOSITS

a. Current accounts b. Saving accounts c. Term deposits d. DMAT accounts

a)CURRENT ACCOUNT

The various sub-products in current account which ING Vysya gives are

ORANGE CURRENT ACCOUNT: In today's fast-paced world, your business

regularly requires you to receive and send funds to various cities in the country. ING Orange Current Account gives you the power of inter-city banking with a single account and access to more than 200 cities.

ADVANTAGE CURRENT ACCOUNT: In today's fast-paced world, your

business regularly requires you to receive and send funds to various cities in the country. ING Advantage Current Account gives you the power of inter-city banking with a single account and access to more than 300 cities. From personalized cheques that get treated at par with local ones in any city where we have a branch, to Free collection (if instruments are lodged directly) of outstation cheques

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(payable at branch locations), to free inter-city funds transfers of up to Rs.50 lakhs p.m., our priority services have become the benchmark for banking industry

GENERAL CURRENT ACCOUNTS: With ING Vysya general current account

you can access your account anytime, anywhere. Withdraw and deposit cash, issue and encash cheques, make balance enquires and ask for mini statements anytime, anywhere.

COMFORT CURRENT ACCOUNT: ING's Comfort Current Account lets you

save as much as Rs. 60,000 p.a. for remittance up to Rs. 25 lakhs. This is in addition to a range of other attractive benefits, as well.

b)SAVING ACCOUNTS

The Savings accounts are primarily meant to inculcate a sense of saving for the future and take care of individuals day to day banking requirements. These accounts are meant to help individual customers protect their money. The Savings Accounts also help individuals to handle their financial transactions through a systematic banking channel. This increases the safety as customers need not carry physical cash with them. The various products in saving accounts are Orange saving account Advantage salary account Freedom account Geeral saving account Solo saving account Saral saving account ING formula saving account Aspira corporate salary solution.

30

c)TERM DEPOSITS

The various term deposits are

FIXED DEPOSITS: If you believe in the long term investments and wish to earn

long term interest on your deposits, than invest in ING fixed deposits. With ING your money will not only be secured but will earn a good interest.

CUMULATIVE DEPOSITS: With ING cumulative deposits you can invest

small amounts of money that ends up large saving on maturity

TAX ADVANTAGE DEPOSITS: TAD is eligible for tax exemption under

section 80C of the income tax act 1981. The deposit is in the form of fixed deposit or reinvestment form of 5 year duration. The rate of interest will be according to the 5 year interest rate which will be declared by RBI from time time.

AKSHAYA DEPOSITS: your deposit with interest will be reinvested every

quarter to earn a higher yield.

d)DEMAT ACCOUNT

With practically all trading being conducted electronically, most settlements happen through Demat (Dematerialisation of securities). The ING Demat Account offers you a secure and convenient way to keep track of your shares and investments, how much you've bought and sold over a period of time, without the hassle of handling physical documents that get mutilated or lost in transit.

31

2) LOANS

a. HOME LOAN b. HOME EQUITY LOAN c. NRI LOAN d. MODEL POLICY

3) NRI SERVICES

a. RUPEE SAVING ACCOUNT b. RUPEE CURRENT ACCOUNT c. RUPEE FIXED DEPOSITS d. ACCOUNTS FOR RETURNING INDIANS e. FOREIGN CURRENCY DEPOSITS f. MI REMIT

4) CARDS

a. DEBIT CARDS b. CREDIT CARDS c. REMMITANCE CARD d. REWARD CARD

WHOLESALE BANKING

Wholesale Banking is a reflection of ING's ability to provide its corporate clients in India a full range of commercial, transactional and electronic banking products. The bank offers a wide array of client-focused corporate banking services, including working

32

capital finance, trade and transactional services, foreign exchange and cash management, to name a few.

A well-integrated approach to relationship management and innovative product development helps the bank achieve the above. The offerings take into account a client's risk profile and specific needs. The bank has made significant inroads into the formal banking consortia of a number of Indian companies including multinationals, domestic business houses and prime public sector companies, based on our superior product delivery, industry benchmark service levels and strong customer orientation.

The various offerings by the bank in the wholesale banking services are

a. Cash management services b. Corporate and investment banking

The 'C&IB' manages Relationships with large Corporate in both the private and public sector. However, the primary focus of the group is to market the bank's products and services to the client base, including Lending Products, Fee Based Products, Treasury Services, Cross Border Products from ING Group, apart from also cross selling the bank's retail Products and Services.

The group also crosses sells products of ING Vysya Life Insurance and ING Vysya Mutual Funds.

C&IB Group is organized on a regional basis with relationship managers covering:

Western Region and Eastern Region out of Mumbai; Southern Region out of Bangalore, Chennai and Hyderabad; and Northern out of Delhi33

BANKS AND FINANCIAL INSTITUTION GROUPS:

"BFIG" works with renewed focus on the financial intermediaries in the country. BFIG's clientele includes scheduled commercial banks i.e. nationalized, private and foreign banks, some select large co-operative banks and other financial intermediaries including mutual funds, insurance companies and housing finance companies.

The group also seeks to build relationship with banks that are not present in the country but the relationship can be leveraged for trade and guarantee business.

The major areas of thrust for the group are fund mobilization both onshore as well as offshore, origination of ECB mandates, distribution of debt/loans, cash management services, capital market services, trade finance related transactions, asset buyouts and sell downs, distribution of ING products to Indian banks and cross sell of financial market / asset management / insurance products etc.

EMERGING CORPORATES: The "EC" manages relationships with business units engaged in Manufacturing, Processing and Services sector. It also provides Commercial Banking Services with specific focus to Industries, relating to Diamond & Textiles. "EC", also markets the bank's Products, including cross sell of Products and Services to Retail Customers of our Corporate Clients and their Employees. Sales of Cross Border Products of ING Group and other ING entities in India are also marketed.

The wide range of products comprehensively meets the business requirements with special focus on Export Credit, regular Working Capital Finance, Term Loans, Non Fund based limits like Letters of Credits, Guarantees and certain structured finance products.

34

Restructuring of money market Regulation of foreign exchange market

Weapons of Monitory Policy

FINANCIAL MARKET

ING Financial Markets, based out of Mumbai is a leading player in the Indian Financial Markets providing one of the widest ranges of products for large corporate, small and medium enterprises as well as individual needs. Supported by state-of-the-art systems and the capabilities of the ING Group, we offer competitive pricing and efficient execution across markets and a comprehensive suite of products.

Financial Markets unit is an active market maker on most rupee interest rate and currency products. Within the bank, we play a key role in the Asset Liability Management and ALM strategy. To our corporate and institutional clients, we offer a comprehensive range of products for transactions and risk management needs through the sales desks at Mumbai, Delhi, Bangalore & Chennai. The Financial Markets business is driven by a highly qualified and knowledge driven team that brings together a deep understanding of local and global markets as well as complex financial products.

The offering in ING financial are:

1)

MARKET MAKING AND TRADING: The Market Making unit provides

competitive prices on all major currency and interest rate products to the client facing Financial Market Sales teams as well as to other market participants. The product range includes the Indian Rupee, all major currencies, FX Swaps, Government of India35

Securities, Corporate Debt and most Rupee Interest Rate benchmarks including the Overnight Index Swaps and MIFOR. ING is one of the largest and most competitive price makers in Indian Rupee.

The Trading team is driven by knowledge, focus and discipline and seeks to find value across various permitted assets and instruments for the bank's proprietary account.

2)

ASSET LIABILITY MANAGEMENT: The ALM unit of Financial Markets

plays a pivotal role in the formulation and implementation of the bank's Asset Liability Management strategy. The ALM team manages the banks statutory and investment portfolios. It is also responsible for managing liquidity and interest rate risk and plays an active role in the management of Transfer Pricing within the bank.

3)

FINANCIAL MARKET SALES: Financial Markets Sales team offers solutions

to clients for their varied risk management needs. The Sales team is geographically distributed across offices in Delhi, Mumbai, Bangalore and Chennai to keep us closer to our clients. Strong client relationships acquired over the bank's 75 years of service in the Indian markets augment our understanding of customer needs and risk management requirements. Our highly qualified relationship managers offer the most appropriate solutions for these needs drawing on the knowledge and expertise within the ING Group. The sales team is supported at each location by information systems providing comprehensive and up-to-date market information, tools for analysis and access to research from the ING Group. The sales teams use some of the most advanced pricing systems so as to be able to structure and price across a wide range of products. We also draw from the robust product and pricing capabilities of the ING Group and its various desks across the world to offer the best solutions for our clients.36

Appropriate market timing and efficient execution is a key to product delivery in Financial Markets. To aid this the Sales team is supported by a niche Structuring desk that, apart from helping in product structuring based on both client needs and market opportunities, helps in efficient execution of mandates.

AGRICULTURE AND RURAL BANKING

1)

TERM LOAN: ING have identified rural banking as products and services. The

term loans are categorized in these segments.

Poultry Dairy Wells Pump sets Tractors Plantation crops Horticulture crops Rural housing Rural godowns Micro finance institutions Swarjogar credit card.

2)

SHORT TERM LOAN: short term loan are categorized into following segments

KISSAN credit card Working capital loan to poultry Gold loans for agriculture Produce loans against warehouse receipts37

COMPERATIVE ANALYSIS OF ING VYSYA BANKS SAVING ACCOUNT WITH OTHER BANKS SAVING ACCOUNT

1)ING VYSYA BANK VS YES BANK

FEATURES Number of Product

ING VYSYA BANK Two: account account orange and

YES BANK

savings Two: savings account, gold freedom savings account.

Average quarterly account Rs.5,000 on orange, and nil Rs.10,000 balance for freedom

for

savings

account and Rs.100000 for gold savings account.

Fee for non maintenance Rs.600 per quarter of quarterly average

Rs.300 for savings account and Rs.600 for gold saving account.

balance Statement of account

Quarterly free, and monthly Quarterly free for both. e-statement free (if asked for).

ATM usage

4 free for freedom account, Unlimited free on all the unlimited free on cirrus for banks in India. orange account holders ;un limited from ING Vysya

Regular debit card

Free for first year, then Rs.149 for savings account,38

Rs.150 there after.

free

for

gold

savings

account.

Gold debit card

Rs.799

Rs.799

D.D.

Rs.50

for

amt

up

to Min Rs.50 then Rs.2.5 per

Rs.10,000;Rs.2.50 per 1000 1000 for savings account for amt up to 50,000;Rs 2 and Rs.1.5 per 1000 for per 1000 for amt greater gold savings account. than 50,000 Pay order (P.O.) Same as above. 5 free for savings account and 10 free for gold savings account, per year Branch transaction Free for both the account 5 transactions for savings holders account and 10 transactions for gold savings account are free per year Personalized cheque books Free Free

Balance enquiry

Free

Free

2) ING VYSYA V/S ICICI BANK

FEATURES

ING VYSYA BANK

ICICI BANK

39

Number of Product

Two: account account

orange and

savings Three: category A, B and C. freedom

Average quarterly account Rs.5,000 on orange, and nil Rs.5000 for A, Rs.2000 for balance for freedom B, and Rs.1000 for C. Rs.750 per qtr for A & B and Rs.100 per qtr for C.

Fee for non maintenance Rs.600 per quarter of quarterly average

balance Statement of account Quarterly free, and monthly Free physical statement per e-statement free (if asked qtr otherwise Rs.200 per for). month for physical form. Free e-statement per month. ATM usage 4 free for freedom account, Rs.20/month for cash

unlimited free on cirrus for withdrawal & and Rs.60 for orange account holders ;un same limited from ING Vysya banks. with non partner

Regular debit card

Free for first year, then Rs.99 per annum for all the Rs.150 there after. products.

D.D.

Rs.50

for

amt

up

to Rs.2 per thousand rupees or

Rs.10,000;Rs.2.50 per 1000 part thereof, subject to a for amt up to 50,000;Rs 2 minimum of Rs.50 per 1000 for amt greater than 50,000 Branch transaction Free for both the account Rs.2.50/ holders thousand, subject to min of Rs.30

40

and max of Rs.10000

Personalized cheque books Free

2

payable

at

par

cheque books of 25 leaves each free in a quarter, Rs.50/for additional

cheque book of 25 leaves. Balance enquiry Free Rs.10 with partner banks & Rs.25 with non partner banks.

3) ING VYSYA V/S HDFC BANK

FEATURES Number of Product

ING VYSYA BANK Two: account account orange and savings

HDFC BANK Three products:

freedom regular, savings plus & savings max; each of which are further divided into option 1 and 2.(I have taken comparative product that is option 1 of regular savings acc.)

Average quarterly account Rs.5,000 on orange, and nil Rs.5000 balance for freedom Rs.750 per qtr.

Fee for non maintenance Rs.600 per quarter of quarterly average

41

balance Statement of account Quarterly free, and monthly Monthly statements to be e-statement free (if asked Collected for). from branch.

Quarterly statements sent by post

ATM usage

4 free for freedom account, First 4 withdrawals free of unlimited free on cirrus for cost from any cirrus

orange account holders ;un network ATM limited from ING Vysya Regular debit card Free for first year, then Rs.100 plus taxes Rs.150 there after. D.D. Rs.50 for amt up to Rs.50 for amt up to 10000,

Rs.10,000;Rs.2.50 per 1000 Rs.75 for amt greater than for amt up to 50,000;Rs 2 10000 and up to up 50000, per 1000 for amt greater Rs. 2.50 per 1000 or part than 50,000 thereof (Min Rs.150) for amt greater than 50000 Pay order (P.O.) Branch transaction Same as above. Same as above.

Free for both the account Free 3 free in the qtr & Rs. holders 60 per additional transaction on non-maintenance of Min balance deposit/withdrawal) (cash

Personalized cheque books Free

3 free in the qtr & Rs. 60 per additional transaction on non-maintenance balance deposit/withdrawal) of Min (cash

42

Balance enquiry

Free

Free

COMPERATIVE ANALYSIS OF ING VYSYA BANKS CURRENT ACCOUNT WITH OTHER BANKS SAVING ACCOUNT

I) ING VYSYA V/S HDFC BANK

FEATURES Number of Product

ING VYSYA BANK

HDFC BANK

Three: general, advantage Four: plus, trade, premium, and orange and regular for for plus, trade,

Average quarterly account balance

Rs.10000 for general Rs.100000 CA, Rs.50000 for advantage Rs.40000 CA, & Rs.100000

for Rs.25000 for premium, & Rs.10000 for regular

orange CA Fee for non maintenance Rs.750 of quarterly pq for

GCA, Rs.6000 for plus, Rs.1200 trade, Rs.900 for

average Rs.1500 pq for ACA, & for Rs.4000 pq for OCA.

balance

premium and Rs.750 for regular.

Statement of account

Free

once

in

a

month Free once in a month

(physical or e-mail) Issue of cheque book Rs.2.5 per cheque leaf for PAP cheque books; 300 GCA and free for others leaves free pm for plus, 200 leaves free pm for trade, 100 leaves free pm for premium and Rs.2 per leaf

43

for regular ATM usage Free usage of ING Vysya, Free usage of HDFC bank Rs.45 on withdrawal from ATMs. other banks Regular debit card Free for first year, then Rs.100 plus taxes Rs.150 there after. Transfer account (intercity) D.D/P.O. Free as per schedule for Free up to 50 DDs per GCA, free up to 50 lkhs per month. Above 50 from to one Free for all other Free for all

month then charges as per transactions, charges @ Rs. schedule for rest, in case of 25/- per DD for plus, Free ACA and for OCA free up up to 30 DDs per month. to 200 lkhs then charges as Above 30 transactions,

per schedule on the greater charges @ Rs. 25/- per amount. DD for trade DD Amount Up to Rs. DD Amount Up to

50,000 charges Rs. 40/- per Rs.50,000 charges Rs.40/DD, Above Rs. 50,000 and per DD, Above Rs.50,000 up to Rs. 100,000- Rs. 25/-, and up to Rs.100,000-

Above Rs. 100,000- Free Rs.25/-, Above Rs.100,000for premium Free for regular.

Balance enquiry

Rs.15 for all

Rs.25 for all

44

2) ING VYSYA V/S YES BANK

FEATURES Number of Product

ING VYSYA BANK

YES BANK

Three: general, advantage Four: CA 25, CA 75, CA and orange 200 and CA 500.

Average quarterly account Rs.10000 for general CA, Rs.25000, balance

Rs.75000,

Rs.50000 for advantage CA, Rs.200000 and Rs.500000 & Rs.100000 for orange CA respectively for the above products.

Fee for non maintenance Rs.750 of AQB

pq

for

GCA, Rs.1000, Rs.1500, Rs.2000,

Rs.1500 pq for ACA, & and Rs.4000 respectively Rs.4000 pq for OCA for the above products month Free once in a month

Statement of account

Free

once

in

a

(physical or e-mail) Issue of cheque book Rs.2.5 per cheque leaf for Rs.2 per leaf for CA 25 and GCA and free for others unlimited free for the rest.

ATM usage

Free usage of ING Vysya, Information not available. Rs.45 on withdrawal from other banks

Issue

of

international Free for first year, then Information not available. Rs.150 there after. from to one Free for all other Rs.25 lakhs per 0.50 month per

debit card Transfer account

subsequent

45

(intercity)

Rs.1000 for CA 25, Rs.50 lakhs per month subsequent 0.50 per Rs.1000 for CA 75, and unlimited for the rest

D.D/P.O.

.

Free as per schedule for DD:2 Free Per Month GCA, free up to 50 lkhs per month then charges as per schedule for rest, in case of ACA and for OCA free up to 200 lkhs then charges as per schedule on the greater amount.

DD for trade

DD Amount Up to Rs. DD

Amount

Up

to

50,000 charges Rs. 40/- per Rs.50,000 charges Rs.40/DD, Above Rs. 50,000 and per DD, Above Rs.50,000 up to Rs. 100,000- Rs. 25/-, and up to Rs.100,000-

Above Rs. 100,000- Free Rs.25/-, Above Rs.100,000for premium Free for regular.

Balance enquiry

Rs.15 for all

Information not available

46

FINANCIAL ANALYSIS

This section will show, how ING Vysya has done financially over the last three years(2005-2008). We will calculate all the financial ratios including the banking ratios also, to show how ING Vysya fair up against its competitors. To do that I will be using the last three years balance sheet, profit and loss account, and cash flow statement of ING Vysya.

BALANCE SHEET FROM THE YEAR (2005-2008) Mar '06 12 mths Total Capital Equity Capital Share Application 0.00 Money Preference Capital Reserves Revaluation Reserves Net Worth Deposits Borrowings Total Debt 1,019.67 13,335.26 1,107.45 14,442.71 1,103.28 15,418.59 843.55 16,262.14 1,920.87 1,535.66 20,498.06 1,249.81 21,747.87 2,256.3947

Mar '07 12 mths 90.90

Mar '08 12 mths 102.47

Share 90.72

Share 90.72

90.90

102.47

0.00

0.00

Share 0.00

0.00

0.00

817.41 111.54

901.60 110.78

1,323.67 109.52

Other Liabilities & 1,304.29

Provisions Total Liabilities 16,766.67 19,286.29 25,539.92

Mar '06 12 mths Cash & Balances 841.65 with RBI Balance with 281.68

Mar '07 12 mths 945.81

Mar '08 12 mths 2,263.53

645.89

921.23

Banks, Money at Call Advances Investments Gross Block Accumulated Depreciation Net Block 293.21 286.73 109.24 277.51 121.70 10,231.53 4,372.34 676.23 383.02 11,976.17 4,527.81 681.06 394.33 14,649.55 6,293.32 706.82 429.31

Capital Work In 112.20 Progress Other Assets Total Assets Contingent Liabilities Bills for collection Book Value (Rs) 2,850.13 100.10 634.06 16,766.67 10,986.42

794.65 19,286.30 17,462.28

1,013.06 25,539.90 32,959.36

3,033.30 109.18

3,096.69 139.17

PROFIT AND LOSS ACCOUNT FROM 2005-2008 Profit & Loss account of ING Vysya Bank -48

------------------- in Rs. Cr. -----------------

Mar '06 12 mths Interest Earned Other Income Total Income 1,222.43 190.31 1,412.74

Mar '07 12 mths 1,401.38 248.57 1,649.95

Mar '08 12 mths 1,680.44 418.57 2,099.01

Interest expended Employee Cost

741.25 234.19

859.31 238.48 170.16

1,182.05 302.39 140.70

Selling and Admin 161.58 Expenses Depreciation Miscellaneous Expenses Preoperative Capitalised Operating Expenses Provisions Contingencies Total Expenses 1,403.69 & 90.27 572.17 Exp 0.00 37.20 229.47

37.98 255.10

38.93 279.99

0.00

0.00

576.51

645.49

125.21

116.52

1,561.03

1,944.06

49

Mar '06 12 mths Net Profit for the 9.06 Year Extraordinary Items Profit forward Total Preference Dividend Equity Dividend Corporate Dividend Tax 0.00 0.00 -25.54 0.00 brought -34.60 0.00

Mar '07 12 mths 88.91

Mar '08 12 mths 154.95

0.00

0.00

1.29

18.44

90.20 0.00

173.39 0.00

5.91 1.00

15.37 2.61

Earning Per Share 1.00 (Rs) Equity (%) Book Value (Rs) 100.10 Dividend 0.00

9.78

15.12

6.50

15.00

109.18

139.17

Transfer

to -26.84

64.85

53.85

Statutory Reserves Transfer to Other 0.00 0.01 0.0050

Reserves Proposed Dividend/Transfer to Govt Balance c/f to 1.29 18.44 103.53 0.00 6.91 17.98

Balance Sheet Total -25.55 90.21 175.36

CASH FLOW STATEMENT

Cash Flow of ING Vysya Bank

------------------- in Rs. Cr. -------------------

Mar '06 12 mths Net Profit Before 21.52 Tax Net Cash From -202.67

Mar '07 12 mths 127.63

Mar '08 12 mths 251.46

308.12

1426.23

Operating Activities Net Cash (used -74.90 -17.62 -35.55

in)/from Investing Activities Net Cash (used 286.41 177.87 202.38

in)/from Activities Net

Financing

8.84

468.37

1593.06

(decrease)/increase In Cash and Cash Equivalents51

Opening

Cash

& 1114.50

1123.33

1591.70

Cash Equivalents Closing Cash & 1123.33 1591.70 3184.76

Cash Equivalents

52

PROJECT

Credit appraisal process

Login of the credit file.

a. To watch out that weather the case is doable or not. b. Preparation of the note. c. Appraisal by the risk department. d. Sanction letter.

STEP FIRST: LOGIN OF THE CREDIT FILE In this very first step, the marketing team of the bank gets the cases on the basis of their references and the data in their hand .After that the marketing will handle over the case to the credit department along with the necessary documents for further process of the case.

Following is the list of necessary documents required to log in a case

i. ii. iii. iv.

Duly filled application form. Audited financials of last three years. Provisional financials of last year (if audited is not available) Bank statement of last six months(through which bank A/c the firm does the maximum banking)

v. vi. vii. viii.

ITR (Income Tax Return) of Promoter/ Property owner. Vintage proof. Sanction letter of prevailing limit (if any). CIBIL FORM

53

Once all the documents are completed for log in .The case is shown in MIS as a log in by credit department.

STEP TWO: DEPARTMENT

DECISION OF GO-NO-GO CRITERIA BY THE CREDIT

Once all the login documents are completed the process of checking of do ability (GO/NO GO) is done.

In this very step the dedupe checkup is to be done. In this dedupe checkup we do a check out weather there is any overdue or default on the borrower side or not.

Once the dedupe checkup is clear the credit team prepare the finspred (software for analyzing the financials) for the case with the help of the audited financials .And also check out the track record in the bank statement of client .We can check the track record with the help of the following things.

i. ii. iii. iv. v. vi. vii.

Counts of credit transactions Total amount of credit transactions (%of the ratio to turnover) Counts of debit transactions Total amount of debit transactions (%to the ratio of expenditure) Number of INWARD cheque returns Number of OUTWARD cheque returns Timely payment of EMIs and Interest.

After preparing the finspread on the basis of certain ratios and track record of bank statement the credit team decides that the case is doable or not.

54

Following are the some of the main parts or ratios on which the bank gives more emphases while to judge that the case is doable or not.

i.

LEVERAGE of the company must have the leverage of 6 according to the bank norms(i.e.TOL/TNW total outstanding liability, tangible net worth)

ii. iii. iv. v.

CURRENT RATIO of the company MPBF (Maximum Permissible Bank Finance) DSCR (debt security coverage ratio) in case of term loan Profitability ratio (like gross profit margin, EBIDTA rate, PAT margin)

THIRD STEP: NOTE PREPARATION

Once the case is to be approved as doable a set query is send to the marketing team for further movement of case or we can say for the preparation of note

In the note the credit team summarizes up all the details of the borrower.

NOTE WRITING INCLUDES THE FOLLOWING

Business background Process of business. comment on financial statement of the company Future plan of the company and comments on the projection. Bank statement analysis Promoters background Market reference of the client Industry scenario

55

Detailed terms & condition of the sanction including: Type of limit to be sanctioned (fund based CC / OD/ TL/ PC/ WCDL etc & non fund based LC/BG/For ex limit etc.) Amount of Limit to be sanctions Rate of interest (for fund based facility) and rate of commission (for non fund based facility) and processing fee Detail of security (primary and collateral) Detail of Personal guarantee.

Other terms & conditions as required and other information specific to case to case.

Once the note is prepared the case is sent to the centralized risk management department (CRMD).the risk department is totally independent from credit department the credit department sent the prepared note to risk department to examine the proposal.

STEP FOUR: APPRAISAL BY THE RISK DEPARTMENT

In this step the risk department scrutinizes the whole proposal and they bring out the observations, and send a list of query to the credit department.

As and when credit department will get a list of query raised by the risk department they replies on the same with help of the marketing department start working on them to solve out the quires along with the help of marketing department.

After solving all the observation the case s uploaded for sanction to the appropriate authority as per the delegation of power by the bank.

56

STEP FIVE: SANCTION After the uploading of the case, the case is presenting by the credit department along with marking department to the appropriate author for the sanction of the case. During the presentation of the case various observation are raised by the appropriate sanction author and on the basic of discussion, the authority decide to approve / reject or withdrawn for modification.

If case is withdrawn for modification for the adding of some information or document. The credit department along with mark modifies the proposal as required by authority and again uploads the same and discuss with the authority to get it approved or rejected.

Once the case got sanctioned minutes are generated. On the basis of minutes the CAL (Credit Agreement Letter) are prepared and issued to customer.

The credit appraisal process at ING Vysya bank

The credit appraisal process at ING Vysya bank is considered very thorough and conservative the bank undertakes the above steps to complete the credit appraisal process.

1.

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.

2.

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.57

3.

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.

4.

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.

5.

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.

6.

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.

7.

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.

8. sought

Approval by ZCC: If the credit limit is below Rs5oo lakhs then the approval is 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

58

ECC(electronic credit committee) depending upon the policy compliance failed by the client.

9.

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.

10.

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

Research Methodology

Objective of the study

Project study, which is being conducted by me for the last two month, is not only a formality for the fulfillment of the two-year full time Post Graduate Diploma in Management. But being a management student and a good employee I tried my best to extract best of the information available in the market for the use of society and people. The objectives areTo know about environmental factors affecting ING-Vysya Banks performance. To analyze the role of advertisement for bank performance. To know the perception and conception of customers towards banking products and specially focused for ING Banks product.

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To explore the potential areas for the new bank branches which will provide both price and people to the bank with constant promotion and placing strategy.

Scope of the Study

Each and every project study along with its certain objectives also has scope for future. And this scope in future gives to new researches a new need to research a new project with a new scope. Scope of the study not only consist one or two future business plan but sometime it also gives idea about a new business which becomes much more profitable for the researches then the older one.

Scope of the study could give the projected scenario for a new successful strategy with a proper implementation plan. Whatever scope I observed in my project are not exactly having all the features of the scope,which I described above, but also not lacking all the features.

Research study could give an idea of network expansion for capturing more market and customer with better services and lower cost, with out compromising with quality.

In future customer requirements could be added with the product and services for getting an edge over competitors.

Consumer behavior could also be used for the purpose of launching a new product with extra benefits which are required by customers for their account (saving or current) and/or for their investments.60

Factors, which are responsible for the performance for bank, can also be used for the modification of the strategy and product for being more profitable.

Factors which I observed while doing project study are following-

1. Competitors

2. Customer Behavior

3. Advertisement/promotional activities

4. Attitude of manpower and

5. Economic conditions

These all could also be interchanged with each other for each other in banks strategies for making a final business plan to effect the market with a positive way without disturbing a lot to market, customers and competitors with disturbance in market shares .

Sources of Primary and Secondary data:

For the purpose of project data is very much required which works as a food for process, which will ultimately give output in the form of information. So before mentioning the source of data for the project I would like to mention that what type of data I have collected for the purpose of project and what it is exactly.

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Primary Data:

Primary data is basically the live data which I collected on field while doing cold calls with the customers and I shown them list of question for which I had required their responses. In some cases I got no response form their side and than on the basis of my previous experiences I filled those fields.

Source: Main source for the primary data for the project was questionnaires, which I got filled by the customers or some times filled myself on the basis of discussion with the customers.

Secondary Data:

Secondary data for the base of the project I collected from intranet of the Bank and from Internet, RBI Bulletin etc.

Statistical Analysis In this segment I will show my findings in the form of graphs and charts. All the data which I got form the market will not be disclosed over here but extract of that in the form of information will definitely be here.

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SURVEY

Table1: Correlation between awareness of customers about ING

NO. OF RESP 15 25 5 10 11 10 12 12

AGE 20-25 25-30 30-35 35-40 40-45 45-50 50-60 60-ABOVE

TABLE 2: PERCEPTION OF ING AS A BANK

TYPE OF BANK PRIVATE PUBLIC PRIVATE/PUBLIC DON'T KNOW

RESPONSES 50 15 25 10

TABLE 3 : RATING OF CUSTOMERS FOR ING BANK AS A GOOD BANK63

PARAMETER EFFICIENCY INTERNET BANKING/ATMs PRODUCT RANGE NETWORK PHONE BANKING

RESPONSES 75% 5% 10% 5% 5%

TABLE 4: MARKET SHARES OF ING IN ALLAHABAD IN COMPARISION TO COMPETITORS

BANK NAME SBI IDBI ICICI PNB HDFC ING

% OF SHARE 30% 15% 25% 10% 5% 5%

TABLE 5: FACTORS RESPONSIBLE FOR PERFORMANCE OF ING BANK IN ALLAHABAD

PARAMETERS PRODUCT ADVERTISMENT MANPOWER

% OF SHARE 50% 5% 25%64

NET-BANKING PHONE BANKING INVESTMENT SCHEME NETWORK

2% 5% 10% 3%

TABLE 6: THE EFFECTIVENESS OF COMMERCIALS OF ING BANK

DAYS AFTER THE AD IS SEEN 0-5 days 6-10 days 11-15 days More than 15 days

POSITIVE RESPONSE

45 15 25 15

Table 7:Products/Services the customers are presently availing

Savings account Current Account FDR Life Insurance Mutual Fund SIP Lockers Demat Account

35 25 15 5 7 2 5 6

Table:8 Satisfaction level of the respondents from their respective banks

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Highly satisfied Satisfied Neither satisfied nor Dissatisfied Dissatisfied Highly Dissatisfied

2 75

15 6 2

Table 9: No.of Respondents know about ING Bank

Never heard Heard few times Heard frequently

80 15 5

Table: 10 Kind of Banking services the respondents wish to use

High priority services Preferred services Normal services

25 35 40

Table 11:Type of investment the respondents like to invest

FDR, NSC Mutual Fund SIP LI Shares

55 5 5 15 566

Gold Govt. & Tax saving Bonds

5 10

Table 12: No.of Respondents availing the facility of

Locker Yes No 65 35

Table 13: Preferences of the respondents at the time of hiring the locker

Safety/Security Operating time Rental/Security charges Locker Size Parking space outside Bank

35 15 35 10

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Table 14: Categorization of respondents on the basis of Annual Income < 60000 60000-100000 100000-500000 500000-1500000 >1500000 2 25 65 6 267

Table 15: Categorization of respondents on the basis of Education

Under-Graduate Graduate Post-Graduate

5 85 10

Table 16: General impression of the respondents about

ING-Vysya Bank High Quality services & Reliability 5

Average quality services & Dependability 90

Low quality services & Reliabilty 5

Findings

1.ING bank has potential a tapped market in Allahabad and hence has opportunities for growth.

2.The products of ING bank have good credibility in the region compare to its competitors.

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3.The advertisement of the bank was very effective from the first day of its airing till the fifth day and there after it starts declining. 4.The initial balance for A/C opening is Rs, 5000/- and thats why people are reluctant in opening the same.

5. ING is very much compliance to follow the KYC norms.

6. The size of the locker provided by the ING-Vysya Bank is big in size as compared to other banks.

7. The residents of allahabad like the products of INGVysya Bank. Most of them need some change. So, they can be the new potential customers for ING Bank.

8. Even today, the people of Allahabad believe in the government banks. For them, ING Bank is a private bank.

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Conclusions and Recommendations Conclusions

1. Customers of Allahabad have enough awareness level about ING Vysya bank as well as about its services and products.

2. The advertising campaign has successfully been able to increase the market share of ING in Allahabad .

3. The modern days technology like Internet banking, phone banking, used by ING bank for providing banking services has sent positive signals in the mind of consumers.

4. The network of ING in Allahabad is lagging behind a little than its competitors like ICICI bank and HDFC bank.

5. It can be distilled from data that ING bank has good market share as compared to its competitors considering the amount of resources deployed by them in the market.

6. It has a very good potential to have the new customers especially the youth because it has the Formula a/c, which is very much liked by the youth in the other cities. 7. Most of the residents of Allahabad dont know about the establishment of ING-Vysya Bank in Allahabad.

8. Most of the persons having contacts in big cities know about ING-Vysya Bank very well and also the products.

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9. ING-Vysya Bank is providing more facilities to its customers in comparison to other banks such as hospital scheme, investment scheme etc

10. Locker facilities in ING-Vysya Bank are more modernized in comparison to other banks.

11. Commercials of ING-Vysya Bank have a very deep impact on the minds of people. Even they can remember the name after the 15 days of the telecast of the commercials on television.

12. Operating time for cash counter is from 10 in the morning till 6 in the evening. This is much more than any other bank in Allahabad.

13. ULIP plans are beneficial from the long-term perspective whereas customer should invest in mutual funds if he wants quick returns. Most of the market is still unaware about the ULIP plans and hence by making proper promotional strategy companies can increase there sales.

Recommendations

1) More resources should be allocated in the market of Allahabad as there is big untapped market in Allahabad, so it becomes necessary for ING bank for taking an edge over the competitors. 2) A short advertising campaign in Allahabad has produced good results in a short span of times, so to gain long term benefits is very necessary for ING bank to carry on this campaign with more intensity.

3) Besides opening more branches it should also look for opening some extension counter in D.D.Puram.71

4) As a number of colleges are going to be opened in Allahabad in the next few years, so ING should try to gain some contacts with these colleges.

5) Most of the people in Allahabad wants that they should not stand in queue in bank . If we can convince them on this, than this can open a vast potential market for ING Bank in Allahabad

6) The cash withdrawal time can be one of the aspects to gain popularity in Allahabad.

7) The benefits provided by the ING Bank to its customers should be advertise so that people can understand that customers satisfaction is the main aim for the persons working in ING.

8) The businessman should be convinced on the cash operating time. This makes ING to tap the huge market of Allahabad . LIMITATIONS

1. The sample size is very less, hence the responses of just 100 respondents does not imply for the complete population.

2. There was lack of time and resources that prevented from carrying out an in depth study.

3. The findings of the survey are based on the subjective opinion of the respondents and there is no way of assessing truth of the statements. 4. There is some respondents bias, which cannot be removed.72

5. Lastly, some amount of error exists in the data filling process because of the following reasons:

Influence of others.

Misunderstanding of the concept.

Hurried filling of the questionnaire.

RECOMMENDATIONS

Process should be made faster. All the documents required to appraise the project should be asked at the time of application only rather than later by the bank The bank must bring more transparency in appraisal of the project there should be explanation for a appraisal of the project that was sanctioned by higher authority. The bank must not rely on software or information provided by the client the bank should dig in for other sources in order to draw a real picture for the company. At the time of projections due to lack of documents, the projections are done Without any basis like depreciation in the audited years is not accumulated depreciation KEY LEARNINGS

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Through this project of mine I got exposure of working in professional environment which in itself was a great experience. I also felt that there is vast difference between academic theory and its practical applicability.

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I found that summer training project provides a lot of learning opportunities. I gained a lot of knowledge about the practical aspect of fieldwork.

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I also got familiarized with the credit appraisal process for SMEs.

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My exposure to the outer world through my training had given me a chance to relate my theoretical knowledge with its practical applicability.

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I have become more confident and I have also improved on my sense of appreciation.

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ANNEXURE & REFERENCES

LINKS

www.worldbank.org.in

www.ingvysyabank.com

www.rbi.org.in

www.mospi.nic.in

www.moneycontrol.com

www.indiainfoline.com

www.bankinginfo.com

BOOKS

Financial Management- Theory & Practice by Prasana Chandra, Tata McGRAW HILL. (7th Edition)

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Marketing Management-by Philip Kotler, Pearson Education Ltd. (13th Edition) es in the following situationsublic School, Shalimar Bagh, New

Questionnaire 1) Name ________________

2) Age ________________

3) Sex _________________

4) Contact No._______________

5) Education__________________

6) Marital Status ______________

7) Occupation: Salaried Business Self-Employed Student Others(specify)_________ Retired House-wife Agriculture

8) Income P.A.: 1500000

9) Your current Bank __________________________

10) What products/services you are presently availing Saving a/c Mutual Fund Current a/c SIP FDR Equity Life Insurance Lockers Demat a/c Credit card Loans 11) How happy you are with the services provided by your existing bank. Highly satisfied Satisfied Neither satisfied nor dissatisfied Dissatisfied Highly dissatisfied

12) Before this survey, how often had you heard of ING Vysya Bank Ltd. Ive never heard before Ive seen or heard a few times I see or hear frequently

13) How you came to know about ING Vysya Bank Ltd. TV Commercials Word of Mouth Billboards77

14) What are your general impressions of ING Vysya Bank High quality services and reliability Average quality services and dependability Low quality services and reliability

15) Are you associated with ING Vysya bank Yes No If yes, then please specify _____________________________

16) What kind of banking services you generally wish to use High priority services Preferred services Normal services

17) In which form of investment you invest the most FDR Equity Mutual Funds Shares SIP Gold Life Insurance Government and tax saving bonds78

18) If you invest in mutual funds more frequently, would you like all your funds to be managed and controlled at a single point rather than scattered Yes of course I am not sure Its not possible

19) Have you hired a safe deposit locker in any of the bank Yes No If yes, then please specify________________________

20) If you would hire a locker, what will be your preferences (Please rate on 1-5 scale) Safety/Security Operating Time Rental/Safety charges Locker Size Parking Space outside Bank

21) Please give us some references ______________________________________________ ______________________________________________ ______________________________________________79

______________________________________________ ______________________________________________ ______________________________________________ ______________________________

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