Retail Credit
-
Upload
bablu-inampudi -
Category
Documents
-
view
219 -
download
0
Transcript of Retail Credit
-
8/4/2019 Retail Credit
1/55
TABLE OF CONTENTS
TOPIC PAGES
Chapter I 06
1.1 Introduction ----------- 07
1.2 Objective of the Study ----------- 09
1.3Need of the Project ----------- 101.4Scope of the Project ----------- 11
1.5 Research Methodology ----------- 121.6 Limitations of the Project ----------- 13
Chapter II 14
2.1 Company Profile ----------- 15
2.2 Organization Chart ----------- 262.3 Benefits given by Company ----------- 29
Chapter III 31
3.1 Theoretical Background ----------- 323.2 Data Analysis & Interpretations ----------- 44
Chapter IV 57
4.1 Findings ----------- 584.2 Suggestions / Recommendations ----------- 59
Bibliography ----------- 60
Annexure ----------- 61
-
8/4/2019 Retail Credit
2/55
CHAPTER I
IntroductionObjective of the StudyNeed of the ProjectScope of the ProjectResearch MethodologyLimitations of the Project
-
8/4/2019 Retail Credit
3/55
INTRODUCTION
The banking sector has under gone turbulent changes in the past few years. The financial sector
reforms have provide Nationalized bank with an opportunities to get entered an era of fierce
competition, posing tall challenges. The conventional banking as outlined above hasgiven way for professional and high-tech banking. There has been a paradigm
shift from the monopolies of nationalized banks to competitive banking. Nationalized banks can
no longer remain complacent with their conventional products and services. With walk in
business virtually being ruled out, banks are now scouting for quality consumers both for
building their resources and assets. There were times when the corporate clientele occupied the
centre stage and the retail ones were pushed to the back seat. The slowdown of the economy,
sluggish industrial growth and slump in agricultural activities have pushed the commercial banks
to look to the retail customers.
Retail Credit Lending is one of the main functions of banking business and so an importantsource of working fund for the bank. Retail credit is an indispensable factor to increase the
source of the Banks to serve effectively. The importance of credit facilities of the nationalized
banking structure is to provide satisfactory service to the retail customers in order to fulfill their
Economical or Financial needs and ultimately their social needs. The success of the banking
greatly lies on the Credit Lending performance of the bank as the Credits are normally
considered as a cost effective source of working fund. The bank is operating various Retail
Credit Lending schemes such as Housing, Education, Vehicle, Personal and other special
schemes to meet the varying requirement of the customers. Credit Lending to the public provide
low cost working fund for the bank. When it is not fully augmented, the performance of the bank
is affected. Innovative business has become more essential for the banks to stay and to progressin this aggressive, ever-changing, competition-packed marketing environment.
For a bank, Lending of Credit is as much essential as Oxygen for Life. In the post liberalization
scenario, the number of players in banking industry has increased considerably which developed
competition in bank marketing. The survival of the fittest has made applicable for the banks.
To enhance profitability, banks take appropriate steps to minimize the Cost and Time for lending
the credit. In the present context banks efficiency can be measured with respect to Cost,
Profitability and the Time taken for lending.
Banking is a business of taking risks. One of the important, all pervasive risks that Bankers haveto face at all points of functioning is the operational risk and supersedes other risks. It is the risk,
arising out of human or technical error. Functionaries not being fully aware of the latest
information regarding operations tend to make errors which may prove costly for an individual
and also for the bank. It is in this context that there is a need for everyone to be abreast of the
latest developments and extant operational guidelines so that the bank could lend the credit
facilities to its customer as per their requirements and thereby satisfying them beyond their
-
8/4/2019 Retail Credit
4/55
expectations. This will significantly minimizes the risk and therefore help the bank to achieve its
goal more efficiently and effectively.
OBJECTIVE OF THE PROJECT
The main objectives of the study are as follows:
y To study the Concept on which bank can practice active Retail Credit Lendingy To analyze the need for Retail Credit and the techniques & procedures used for the
processing of Retail Loans
y To provide the details of different modes of lending along with the steps involved in theCredit lending
y To describe the various methods and techniques and important measures which are used forprocessing of the Retail Credit Lending
y To study about Banks investment, Credit Deployment, and NPAsy To provide the details of the Risks which are involved in the Retail Credit Lendingy To study about the Risk Management & vigilance of the risks which are associated with
Retail Credit Lending
NEED OF THE PROJECT
To fulfill the Requirement of Summer Internship which is a part of our curriculum To know the concept of Retail Credit Lending To describe the different types of Retail Credit To describe the different ways of Credit lending To study the Deployment of Retail Credit Analysis and interpretation of the data collected
-
8/4/2019 Retail Credit
5/55
To study the processing of Retail Credit and Risk associated with them To study the various methods and techniques used for management of the Retail Credit To know the income, expenditure and profitability of the bank. To study how the Retail Credit is profitable to the Bank
SCOPE OF THE PROJECT
Following are the scope of the project:
y Source of funds in Banksy Different ways of Retail lendingy Reasons for Retail Lendingy Tools and Techniques for managing Retail Loansy Guidelines for Retail Credit Lendingy Risks involved in Retail Loansy Describes the Risk Management
-
8/4/2019 Retail Credit
6/55
RESEARCH METHODOLOGY
Methodology is to collect the important data through secondary sources like
internet, books, circulars and journals. I approached each and every officers of the
bank and I obtained very useful information from them. To give a present scenario
on the topic I also spoke to the Asstt.General Manager of the bank and his Team
who also act like a secondary source of data for the completion of my project
report.
LIMITATIONS OF THE PROJECT
Following Problems were encountered during this project:
Time constraint Collection of real time data Survey within the bank Bank staff could not provide the detailed information due to banks Policy.
-
8/4/2019 Retail Credit
7/55
CHAPTER - II
COMPANY PROFILEORGANISATIONAL CHART
- BOARD OF DIRECTORS- TOP MANAGEMENTBENEFITS GIVEN BY THE COMPANY
-
8/4/2019 Retail Credit
8/55
COMPANY PROFILE
Name of the Bank : BANK OF MAHARASHTRA
Area of Operation : Nationwide
No. of Branches : 1,421
Class : A Class
Chairman : SHRI. ALLEN C.A. PEREIRA
Managing Director : SHRI. ALLEN C.A. PEREIRA
Executive Director : SHRI. M.G. SANGHVI
Staff Members : 13,631
-
8/4/2019 Retail Credit
9/55
Company Profile in Tabular Form
Parameter Mar 2007 Mar 2008 Mar 2009
Total Business 57381.62 71556.36 87072.20
Total Deposits 33919.34 41758.33 52254.92
Aggregate Deposits 33663.20 41580.37 52219.43
Gross Advances 23462.28 29798.03 34817.28
Net Bank Credit 23220.87 29285.81 34290.77
CD ratio 69.70 71.66 66.67
% of Priority Sector Adv.41.24 48.63 41.06
% of Agricultural Adv. 16.73 21.04 18.21
Total Investments 11298.40 12282.95 18382.14
Gross NPAs 820.28 766.27 798.41
% to Gross Advances 3.50 2.57 2.29
Net NPAs 277.38 254.05 271.90
% to Net Advances 1.21 0.87 0.79
Operating Profit 613.20 672.63 793.52
Net Profit 271.84 328.39 375.16
Other Income
(incl. treasury profits)378.52
380.28 500.02
Capital Adequacy Ratio 12.06 10.75 12.05
P. E. B. ( in lacs ) 413.03 526.54 638.78
No. of Branches 1345 1375 1421
Of which Metro 264 351 368
Urban 290 257 271
Semi Urban 202 251 262
Rural 589 516 520
-
8/4/2019 Retail Credit
10/55
ABOUT BANK OF MAHARASHTRA
ESTABLISHED IN 1935
Bank of Maharashtra is a common mans bank. Prof. V.G. Kale and the late Shri D. K.
Sathe registered as a banking company on the 16th of September, 1935 at Pune with an
authorized capital of Rs. 10.00 Lakh and issued capital of Rs. 5 Lakhs by a visionary group of
middle class men with the sole aim to serve the common man from Maharashtra who was
neglected in the field of banking at that time. Their vision was to reach out to and serve the
common man and meet all their banking needs. The bank started functioning on 8th
February
1936. In July 1969 when it was nationalized with 13 other major Bank had developed its roots in
entire Maharashtra and it enjoyed complete confidence of the common man. Even before the
government issued guidelines about deployment of 40% advances to priority sector, the Bank
was following the principle of serving common and neglected people of the society, since its
inception and it continues even today. Successive leadership of the Bank and the employees has
endevoured to fulfill their vision.
Rapid expansion after Nationalization
After Nationalization, the Bank expanded rapidly in other states and also reached the
nook and corner of Maharashtra. Around 38% of its branches are in rural area. Today the bank is
spread in 22 states and 2 union territories. It has already acquired the status of an all India bank.
At the same time it has gained predominance in Maharashtra state through 883 branches. The
Bank has migrated 831 branches under CBS as against 773 branches as on 31.03.2009 and 798 branches as on 30.06.2009. The Bank thus holds the record of having highest number of
branches of any nationalized Bank in a single State. The mission of the bank is To be Best in
Maharashtra and most liked in other states.
Milestones
Milestones: Pre Nationalization1936 : Commenced business on February 8th.
1945 : Deposits crossed Rs. 1.00 crore marks.
1946 : Maharashtra Executor and Trustee Company (METCO) established.
1958 : Listed on Bombay Stock Exchange.
-
8/4/2019 Retail Credit
11/55
Milestones: Since Nationalization1969 : The Bank was nationalized with 153 branches.
1978 : Set up first Regional Rural Bank (RRB) 'Marathwada Gramin Bank' with
headquarters at Nanded. The Bank was appointed as Convener to the State
Level Bankers Committee (SLBC)
1979 : Bank's business crossed Rs.1,000 crore.
1980 : 500th branch of the Bank at Nariman Point, Mumbai inaugurated by the late
Smt. Indira Gandhi, the then Prime Minister of India.
1981 : Set up the second RRB Aurangabad Jalna Gramin Bank.
1984 Dr Manmohan Singh, the then Governor, Reserve Bank of India, launched the
Bank'sGolden Jubilee Celebration.
1986 : Set up the third RRB Thane Gramin Bank
1987 : 1000th branch of the Bank opened at Indira Vasahat, Pune.
1996 : Bank's Diamond Jubilee Celebration launched by the then RBIG
overnor, Dr.C. Rangarajan
2004 : Bank came up with Initial Public Offering (IPO)
2006 : 1. Launched ATM-cum-International Debit Card
2. Commenced Bancassurance business
3. Commenced distribution of Mutual Fund products.
4. Surpassed business landmark of Rs. 50,000 crore.
5. 1st CBS branch rolled out on 13th November at Karve Nagar, Pune.
2009 : 1444 branches, 345 ATMs, Total Business over Rs. 90,000 crore, 902 CBS
branches
2nd Mar 2010 : The Bank achieved 100% CBS coverage.
Vision 2010
To be a vibrant, forward looking, techno-savvy, customer centric bank serving diverse
sections of the society, enhancing shareholders and employees value while moving
towards global presence.
Mission
To ensure quick and efficient response to customer expectations To innovate products and services to cater to diverse sections of society To adopt latest technology on a continuous basis To build proactive, professional and involved workforce To enhance the shareholders wealth through best practices and corporate governance To enter international arena through branch network
-
8/4/2019 Retail Credit
12/55
Our Logo
The Deepmal- With its many lights rising to greater heights.
The Pillar- Our institution - Symbolizing strength
The Diyas- Our Branches- Symbolizing service.
The 3 M's symbolizing- Mobilisation of Money- Modernisation of Methods and- Motivation of Staff.
Our Aim
The bank wishes to cater to all types of needs of the entire family, in the whole country. Its
dream is "One Family, One Bank, Bank of Maharashtra ".
Secured Autonomy
The Bank is one of the progressive Nationalized Banks that got autonomy in the year 1998 and
continues to enjoy the status as a result of excellent performance. It helps in giving more and
more services with simplified procedures without intervention ofGovernment. The Bank has
earned profit for consecutive five years.
-
8/4/2019 Retail Credit
13/55
SOCIAL BANKING for equitable economic development
The bank excels in social Banking, overlooking the profit aspect having the highest share of
priority sector in net Advances and it derives strength from the common man, as its savings
deposit are 29% of its deposits. Around 90% of its depositors are having deposits below
Rs.25000/-. The Bank provides an array of banking services that satisfy changing needs of
depositors as well as small and big borrowers. The bank has entered into correspondent
arrangement with Overseas Bankers also. It provides finance to various sectors ranging from
Agriculture to Industry and from Trade to Export.
The Bank has established Rural Development Centres at Hadapsar and Bhigwan in Maharashtra
to carry out Research, Technical Support, Education, Demonstration and Rural Development
Activities. The Bank has also established to trust under RDC, namely Gramin Mahila VA
Balvikas Mandal (GMVBM) and Maha Bank Agricultural Research and Rural Development
Foundation (MARDEF) Both are NGOs and are engaged in improvement of women and
children in the rural and in transfer of technology in Agricultural sector.
-Priority Sector Lending
It has been the constant endeavor of the Bank to facilitate equitable and sustainable development
by making credit available to productive purposes to Small Borrowers, Small & Marginal
Farmers, Micro & Small Enterprises, Retail Traders, Professional & Self Employed, Women
Entrepreneurs and economically weak but with entrepreneurial leanings. The outstanding
advances under Priority Sector as of March 2009 aggregated to Rs. 12,236 crore, constituting
41.06 per cent of the Adjusted Net Bank Credit of the previous year as against the stipulated
minimum target of 40 per cent. The rise in Priority Sector Advances was Rs. 826 crore over
March 2008 in absolute terms.
-Agriculture sowing to reap
The Bank disbursed Rs. 3,143 crore under agriculture during the year 2008-09. The outstanding
advances increased to Rs. 5,427 crore showing an increase of Rs. 471 crore. As on March 2009,
total advances to agriculture are 18.21 per cent of Adjusted Net Bank Credit. The Bank
undertook awareness programmes for all branches for increasing agriculture advances.
The Bank successfully implemented Agriculture Debt Waiver and Debt Relief Scheme of the
Government of India, by reaching out to 87,157 eligible small and marginal farmers for debtwaiver involving Rs. 218.32 crore. The number of farmers eligible for debt relief is 48,237.
-Micro, Small and Medium Enterprises (MSME) for sustainable growth
SMEs are recognized as major growth engines for the Indian economy. They generate
opportunities for direct and indirect employment by facilitating use of natural resources and local
skills to stem the tide of migration to urban areas and promote low investment enterprises. The
-
8/4/2019 Retail Credit
14/55
Banks lending to MSMEs which was at the level of Rs. 2643 crores as at March 31, 2008, has
increased to Rs. 3074 crores as at 31st March 2009. Following the special package announced by
the Government in September 2008, fresh credit facilities to the tune of Rs. 1170 crores have
been extended to MSMEs between September 2008 and March 2009.
Convener of State Level Bankers Committee
The Bank is the convener of State level Bankers committee and is successfully handling the
convenorship of state Level Bankers committee for the State of Maharashtra. It is also convener
of SLBC for Rajbhasha. It is entrusted with the responsibility of being the Lead Bank under Lead
District scheme in six districts namely Aurangabad, jalna, Nasik, Pune, Satara and Thane, all
from Maharashtra. The Bank has sponsored three Regional Rural Banks with their head quarters
in Nanded, Auraangabad and Thane, namely Marthwada Gramin Bank, (MGB) Aurangabad
Jalna Gramin Bank & Thane Gramin Bank. MGB happens to be the biggest RRB in the country
and covers 6 District in Maharashtra.Bank offers Depository services and Demat facilities at 131branches. Bank has a tie up with LIC of India and United India Insurance Company for sale of
Insurance policies. All the branches of the Bank are fully computerized.
Computerization
Computerization activity in the Bank started a way back in 1982. By December 2000, 380
branches were computerized and the total business handled by these branches was more than
69%. The Bank has also introduced sophisticated facilities like ATM, E-mail, Tele-Banking,
Query Terminal etc. at various branches/offices.
Highlights
Autonomy secured in the year 1998 continues. Total business more than Rs. 91000.00 crore of which total deposits more than Rs. 54400
crore and Gross advances more than Rs36600 crore as of 30.9.2009
Branch network comprises of 1433 branches spread over 22 states and 2 union territories. CBS Branches
Bank has migrated 831 branches under CBS as against 773 branches as on 31.03.2009
and 798 branches as on 30.06.2009 ATM Network
Bank has 345 ATMs. Bank has installed 11 Biometric ATMs.
Card base crosses 10 lakh
Mahabank Insta International Visa Debit CardMahabank International Debit Card is issued in collaboration with VISA
-
8/4/2019 Retail Credit
15/55
ATM Card along with PIN is given to the customer as Welcome Kit at the time ofopening of the current and SB account in all CBS branches. The customer can start using
ATM Insta card after 36 hours from date of issue. ( 36000 Insta Cards are issued since
July 09)
Utility Bill Payment through Internet Banking Facility.The customers can do on line shopping / e-commerce and utility bill payment transaction
through Internet Banking facility.( 37000 Customer are using Internet Banking
facility)
Maha e-StatementCustomers can get their statement of account on registering their e-mail id and desired
frequency of statement with the Bank.
Straight Through Processing (STP) STP of NEFT/ RTGS transactions has beenimplemented for instant processing of inward and outward remittances through RTGS
and NEFT. (800 branches are offering RTGS/NEFT facility)
Specialized branches:
S M E branches - 14 Agro High-Tech branches - 4 Industrial Finance branches - 2 Overseas branches - 2 Treasury & international Banking - 1 Pension Branch -1 Govt. Business Branch - 1
Bank has 28 FEX centers to handle FEX business. Toll Free telephones at 11 major Metro centers. The bank is shouldering the responsibility of lead bank in six districts viz. Satara, Pune,
Thane, Nasik, Aurangabad and Jalna. Our bank is also convening State Level Bankers
Committee and various development issues are taken up to implement the state credit
plan and achieving the targets under various Government sponsored schemes.
The Bank has set up a Trust viz. Mahabank Agricultural Research and RuralDevelopment Foundation (MARDEF), which is engaged in providing Credit Plus
services to the farmers in specific specialized fields like commercial dairy, Emu farming,sericulture, organic farming, etc.
The Rural Development Centers at Bhigwan and Hadapsar in Pune District undertakevarious labs to landprograms on improved technologies. A fully fledged soil-testing lab
is being set up for the benefit of the farmers to go in for high-tech agriculture.
-
8/4/2019 Retail Credit
16/55
To provide activity specific training to educated unemployed youth, Bank has set up fiveMahabank Self Employment Training Institutes (MSETI) at Pune, Aurangabad, Nagpur,
Nasik & Amravati for providing training to rural youth for enabling them to acquire skills
for self-employment.
Bank has formed a Trust by the name Gramin Mahila va Balak Vikas Mandal(GMBVM), which is primarily engaged in formation, nurturing, training and linkage of
self-help groups to various banks, GMBVM has its area of operation in nine districts and
has been recognized by Government of Maharashtra as Mother NGO. It also markets
various products made by SHGs through its two retail outlets by name SAVITRI in
Pune district. The GMBVM is now in the process of scaling up viable SHGs to SMEs.
The Bank has floated a subsidiary company- The Maharashtra Executor & TrusteeCompany Ltd. (METCO) which undertakes Trustee Business, Property Management and
Tax Consultancy as well.
Bank is the Convener for Town Official Language Implementation Committee (TOLIC)at Mumbai, Pune & Solapur. The Bank secured the First Prize for better implementation
of Hindi in both A and B Region and the Fourth Prize for implementation of Hindi in
C Region under Reserve Bank of India Rajbhasha Shield Scheme for the year 2007-
2008. The Bank also secured the Second Prize under R.B.I. Bi-lingual House Magazine
Competition for the year 2009.
-
8/4/2019 Retail Credit
17/55
M-SETI
M-SETI (Mahabank Self-Employment Training Institute) is an institute established under the
aegis of Mahabank Agricultural Research & Rural Development Fund (MARDEF), a trust
established by Bank of Maharashtra and co-sponsored by the National Bank for rural
development (NABARD). The institute is recognized by the Department of employment & self-
employment ofGovt. of Maharashtra.
The institute trains unemployed youth from the districts of Pune, Kolhapur, Satara, Sangli,
Nashik, Ahmednagar, Jalgaon, Dhule and Nandurbar.
The objectives of the Institute are:
To train the unemployed youth. To promote rural entrepreneurship. To increase self-esteem of participants and To help trainees in improvement, placement and counseling them for Bank facilities and
their subsequent status.
The following are the training programs identified by M-SETI:
Entrepreneurship development programmes (EDPs) on technical courses viz. twowheelers, TV and VCR and domestic appliances, repairs, motor rewinding, photography
and video shooting, beauty parlor, commercial painting, tailoring etc.
EDPs specific to the Government sponsored schemes viz. PMRY, SGSY, SJSRY, SHGs, Information technology; Electronic data processing, electronic data entering and
computer awareness programmes.
The said training is free of cost.MAHABANK INFO CENTER
1. Mahabank Info Center is a retail banking boutique set up by Bank of Maharashtrahaving the following activities.
Providing information on services provided by the bank at its various branches and
specialized branches,
2. Mobilizing deposits for various branches in Pune city,3. Marketing to increase ATM card base Directing prospective clients to respective
branches for financial aid on housing, vehicle, consumer durables, education & foreign
-
8/4/2019 Retail Credit
18/55
tours, etc.
4. Development of business through bringing in instructional accounts.5. Image building exercises.
-
8/4/2019 Retail Credit
19/55
ORGANIZATIONAL STRUCTURE
BOARD OF DIRECTORSTOP MANAGEMENT
-
8/4/2019 Retail Credit
20/55
BOARD OF DIRECTORS
Shri.V. P. Bharadwaj Shri. S.K. Gogia Shri. A. K. Pandit
Shri. C. Patwari Shri. T. Parameswara Rao Shri. S. H. Kocheta
Dr. D. S. Patel Shri. S. U. Deshpande
-
8/4/2019 Retail Credit
21/55
TOP MANAGEMENT
Shri. A. S. Banerjee Shri. B. K. Piparaiya Shri. K. H. Waze
Shri. V. Kannan Shri. V. E. Dalvi Shri. V. Y. Chapekar
Shri. R. H. Kulkarni Shri. M. V. Dhoble Shri. M. C. Goyal
Shri.S. D. Arya Shri. V. R. Gupta Shri. Dilip. R. Harnagle
-
8/4/2019 Retail Credit
22/55
Benefits Given By the Company
Following are the Services Provide By Bank of Maharashtra:-
Bank Deposits Lending of Loans ATM Services Credit Cards Demat Services Bancs Bancassurance Distribution Of Mutual Funds Executors And Tustee Services MAHAbill Pay Mahabank Insta Remit Scheme Capital Market Application (ASBA)NEFT MAHAeTRADE (ON LINE trading facility)
Roles and Responsibility:-
During my summer internship in the Retail Hub ofBank of Maharashtra, I have learned about
the Retail Loans as much as I can. Especially Mr. Rajan Korgaonkar, Asstt.General Manager
of the bank and his Team helped me a lot in learning the Retail Credit operation and the Risks
involved in Lending Credit. The staff was really very helpful, supportive, coordinating and
friendly as well. I also got to realize the importance of know your customer (KYC) norms
According to which Bank opens an account or give loans & advances to the customer. Banks
completely follows the RESERVE BANK OF INDIA guidelines for deposit and advances.
In Bank of Maharashtra, I Learned how to deal with the following four types of RetailLoans :
- Home Loan- Education Loan- Vehicle Loan and- Personal Loan
-
8/4/2019 Retail Credit
23/55
I am feeling benefited after learning the following operations in the Bank ofMaharashtra :-
- Assessment of the loan documents.- Preparing the Assessment sheet.- Reporting to Concerned officer about the Assessment.- Preparing the Housing Loan Processing Note.- Preparing the Loan Appraisal forms.- Preparing the Sanctioning Note.- Criteria or Conditions for Sanctioning Loan.- How to verify the Loan documents?- How bank deals with Different Loan Requests?
I have learned all these operations by completing 24 Loan Proposals which includes all the four
types of Retail Loans like Housing, Education, Personal and Vehicle loan.
-
8/4/2019 Retail Credit
24/55
CHAPTER-III
Theoretical BackgroundData Analysis & Interpretations
-
8/4/2019 Retail Credit
25/55
THEORETICAL BACKGROUND
GENERAL
Lending of funds to the constituents comprising of traders, businessman, agriculturists
etc. constitutes the main business of Banking Company. Bank has to ensure that in granting of
loans and advances, the deployment of funds is made in a most profitable manner. Yet this
business of lending is not without inherent risks. The test of a banks strength and its success or
failure depends on the nature and quality of its advances. Therefore while lending, bank follows
prudent policies and conduct its business on the basis of principles of sound lending in order to
minimize risks.
Safety, liquidity and profitability are the cardinal principles of lending. After
nationalization banks have been functioning as an instrument of social change. The GOI and the
RBI, during the last two decades have issued a number of directives in this regard highlighting
the social/economic purpose which they have to sub-serve. The traditional principles of lending
have come under stress. With regard to certain type of lending particularly under priority sector
the concept of security and profitability have undergone a radical change and have been
subordinated to social objectives.
A) Yet a banker has also to remember that he is dealing in funds collected frompublic by way of deposits and is working as a trustee of their funds. Therefore the
basic principles of good and sound lending which are fundamental observed by
Banks. The principles may vary depending on situation, however, basic frame will
remain the same.
B) It needs to be borne in mind that advances form the most important component ofbanks business. The advances portfolio needs to be monitored with due care and
responsibility, because of the risk involved in lending operations.
C) Safety, liquidity and profitability are the three basic principles of lending. Sincethe amount to be advanced mainly consists of depositors funds, bank has to
ensure and safeguard depositors interest. Bank should also remember that some
of banks deposits are withdrawable on demand or at short notice. It would be in
banks interest to see that the advances which bank grant are easily liquidated.The canon of liquidity is more important. Bank should also know that bulk of
banks profit accrues from the advances. However, profitability should not
override the other two principles of lending i.e. safety and liquidity. Therefore, the
crux of banks lending lies in reconciling these conflicting requirements by
striking a good balance between these conflicting principles.
-
8/4/2019 Retail Credit
26/55
COMPOSITION OF CREDIT PORTFOLIO
It is equally relevant to mention here that bank should diversify their advances and should
not concentrate such lending to any group or sector of industry/business in one particular
area/sector. The maxim all eggs should not be kept in one basket should be borne in mind. The
purpose for which the advances are to be sanctioned/recommended should be legal andacceptable to the bank and the type of business activity to be financed by the bank should be
within broad lending policies framed by the Central Office. Bank should ensure that the purpose
of the advance is productive which will generate internal surplus and provide definite source of
repayment. The aspect of security (wherever applicable) should not be lost sight of. Tangible
security acceptable to the bank should be considered as an insurance or cushion to fall back upon
in case of emergency. Even after application of all principles of lending, a particular proposal
may not be acceptable to the bank, if it is not in the National Interest. GOI and the RBI issue
various directives from time to time in this regard. These should be kept in view while
sanctioning/recommending any advance/s. Every proposal should conform to
RBI/government/banks guidelines and national policy.
Summary
Bank summarize below the principles of sound lending which should be observed while
sanctioning/recommending any advance.
1. Safety2. Liquidity/Economic Viability/Technical Feasibility of the activity of the borrower3. Profitability4. Purpose5. Security6. Diversification of risks7. National Policy/RBI Credit policy8. Banks credit policy.
SIGNIFICANT ASPECTS FOR EXAMINING THE ADVANCES
-Advances Portfolio
1. The manager/officer should study the composition and distributive pattern of thecredit portfolio of the branch and examine as to whether the branch has been
following the guidelines enunciated in credit policy of RBI / Bank.
The manager / officer should also ascertain as to whether the efforts made by the
branch in extending credit to the priority and weaker sectors of society are adequate
and that potential offered by the area of its operation for various types of advances
has been properly tapped.
-
8/4/2019 Retail Credit
27/55
2. It should be seen as to whether the branch has proper infrastructure facilities andadequate arrangements for proper credit appraisals, post disbursement supervision
and follow up of advances/problematic/sick, weak accounts, more particularly for
recovery of non-performing advances/large overdues in these accounts.
3. The manger should examine that he is exercising the delegated sanctioning powers judiciously and there is proper and timely reporting of sanctions to the competent
authorities. As far as possible the Branch Manager is expected to refrain from
exceeding the delegated powers and it should be seen that in unavoidable cases
confirmation I obtained from the competent authority at the earliest specifically
giving the reasons as to why it was so necessary to extent ad
hoc/temporary/additional credit facility without obtaining prior sanction.
4. It should be verified that the guidelines on advances issued by RBI/HO from time totime are strictly followed by the branch.
5. The assets acquired by the borrowers are available as security for banks dues and thebranch is taking adequate and necessary timely steps to safeguard interest of the bank.
- Applications for credit Facilities
The managers/officers should ensure that:
1. The applications as far as possible are obtained in appropriate forms for differentcategories of borrowers and types of credit facilities, prescribed by the Head Office.
2. The applications are accompanied by documents relating to the status of the applicant i.e.individual/sole proprietorship/ society/trust deed, Memorandum and Articles of
association etc. are obtained and kept on record. The Branch Manager should obtainfinancial statements for at least past 3 years, wherever so applicable, true copies of latest
income tax/sales tax and wealth tax returns and assessment orders. For societies/local
bodies/limited companies, certified copies of appropriate resolutions authorizing the
signatures/office bearers to operate the accounts and borrow the funds from the bank be
obtained and kept on record.
- Credit Reports
1. Credit reports on individual borrowers/company/obligant/guarantors are obtained and arekept on record.2. The Branch Manager has independently verified the correctness of the informationfurnished by the borrowers/guarantors in personal information form and has prepared
confidential report in the prescribed form (F.85). the credit reports are updated annually
and fresh reports wherever required are obtained and held on record.
3. Brief particulars of immovable properties owned by the individual/firm together with theconservative estimates of their market value are kept on branch board. Wherever required
-
8/4/2019 Retail Credit
28/55
and found necessary fixed assets charged to the bank must be got valued from approved
Valuer and such valuation reports be kept on record.
4. That the nature and extent of credit facilities, if any, enjoyed by the applicant/borrowersat different offices of the bank as also at other bank/banks are obtained and kept on
record at the branch., while arriving at the credit needs of the applicant care is taken to
take into account all such other credit facilities enjoyed by the borrower
CREDIT APPRAISAL/PREPARATION OF APPRAISAL NOTES FOR
SANCTION/REVIEW/RENEWAL OF ADVANCES
The manager/officers should examine the quality of credit appraisal done at the branch and
ascertain to
1. Whether the branch has been following generally accepted sound lending norms and isexamining carefully various aspects like proposed activity, diversification of activity
viability of the project, creditworthiness of the applicant/guarantors, purpose and types of
the credit facilities requested, competence of the borrowers to manage the business
activity etc.
2. Whether the past conduct of the accounts, compliance of terms and conditions ofsanctions submission of information like stock statements, QMR, financial statements
etc. have been taken into account.
3. Whether notes on review/renewal based on audited financial data contain details andcritical observations on performance of the unit, financial position of the unit and its
constituents, working results vis--vis Projections.4. Whether status of the security charged to the bank has been re-examined. Wherevereligible i.e. in respect of credit facilities of Rs.50.00 Lakhs and over, whether the same
has been verified by independent C.A. firm.
5. Whether operations in the account and availment of various credit facilities have been tothe satisfaction of the bank and the appraisal note contains comments about the same.
6. Whether exercise for PBF/NWC etc. has been carried out correctly / critically.7. Whether the branch is complying with RBI/IBA/Head office guidelines/instructions
regarding sanctions, review and renewal of advances.\
8. Whether Nayak Committee/ Ghosh Committee/ Selective credit control norms etc. arefollowed.
9. In case the borrower has been banning/availing credit facilities with other banks, whetherlatest opinion reports from such banks have been obtained.
10.Whether search with Registrar of Companies has been obtained beforesanction/review/renewal of credit facilities.
11.Whether it is ensured that partnership firm is registered with registrar of firms andcertificate for the same is held on record.
-
8/4/2019 Retail Credit
29/55
12.Whether necessary certificates which are required for commencement of business activityhave been obtained.
DOCUMENTATION
Themanager/officers should verify that the branch has obtained all necessary documentsadequately stamped and properly executed as stipulated by the central office for the facilities
granted to the borrower. In case of advances above Rs.50.00 Lakhs certificate from the
correctness of documents taken is obtained and is held on record. In case law officer is not
available, certificate from the local panel advocate be obtained.
REPORTING SYSTEM
The manager/officers should verify that the credit facilities made available are correctly and
timely reported to the competent authority. The control returns submitted depict true picture of
the information incorporated.
IMPORTANT SCHEMES / PROJECTS OF THE BANK
- Retail Financing
The Bank is providing retail loans to Individuals, who are salaried persons, professionals,
businessmen and pensioners for purchase of consumer durables, two/four wheeler vehicles and
also for other personal needs. During the year, the Retail lending portfolio grew by 8.19 per cent.
- Housing loan to public
To promote the housing in rural and urban parts of India, the Bank has taken the housing as a
thrust area and has been lending under the Housing Loan to Public Scheme, on a priority basis.
The scheme is simplified and is customer-friendly. Housing loans are also made available to
NRIs. The Bank is also implementing Golden Jubilee Rural Housing Finance Scheme in rural
areas, having population not exceeding 50,000 (as per 1991 census). The Banks lending to
housing sector has grown by 13.28 per cent during the year.
- Model Educational Loan scheme from learning to earning
With the objective of ensuring that no deserving student is denied an opportunity to pursue
higher education for financial reasons, the Bank implements a Model Educational Loan Scheme.As of March 2009, the Banks educational loans stood at Rs. 347.19 crore to 19249 students. The
Bank has provided the facility of submission of online application for education loan through
web-access.
-
8/4/2019 Retail Credit
30/55
CHARACTERISTICS OF RETAIL LOANS
- All these Retail Loans are considered as Fund-based Credit Facilities.- They are also known as Term Loan- It is an arrangement wherein the credit facility is sanctioned to a borrower for a
fixed period but repayable in installments.
- Once the loan amount is disbursed in full no subsequent debit is to be allowedexcept by way of interest, insurance charges, DICGC guarantee fees or expenses
incurred for protection of the security charged to the bank etc. interest is charged
on the amount outstanding from time to time. Interest chargeable is worked out on
daily products and applied on quarterly basis/half yearly basis.
- As there is no possibility of a loan account showing credit balance or fluctuatingdebit balance unlike the operative cash credit account, the operational cost of
maintenance of loan account is lower as compared to cash credit account.
However, the period for which such loans are considered is longer (ranging fromfive to seven years)
ADVANTAGES OF RETAIL LOANS
- Better yield and improved bottom line- Risk calculation and NPA perception- Builds customer base-
Helps economic revival of the nation through- increased production activity- Improves lifestyle and fulfills aspirations of the people through affordable credit.- Innovative product development- Minimum marketing efforts in a demand-driven economy- Risk weight in certain segments like housing loan
BORROWER AND CONFIDENTIAL REPORT
- Borrower SelectionBank should have personal knowledge about the borrower/s and their business. As a
condition precedent to any advances we should make discreet enquiries about the position and
status of the borrower, security offered and repayment proposed etc. Care should be exercised in
selection of borrower and advances are to be sanctioned / recommended for borrowers, whose
integrity, reputation, capacity to conduct the business and credit-worthiness are established to our
satisfaction.
-
8/4/2019 Retail Credit
31/55
Three Cs: Character, Capacity and Capital are the basic principles for consideration
of an advance. The character of a borrower indicates his intention to repay the advances and his
capital and capacity indicate his ability to repay. To sum up integrity of the borrower should be
unquestionable. If the borrowers integrity is questionable (doubtful) Bank should refrain from
sanctioning credit facility/ies even if a collateral security is offered. Any amount of security
cannot substitute integrity of a borrower. The ability of a borrower to utilize the credit facility
sanctioned by the Bank Profitably and to repay the same with interest within a reasonable period
needs to be looked into. Likewise Bank should enquire into the financial position of the
borrower. The lending should be in proportion to the borrowers own resources.
- Banking relations
We may ordinarily recommend/sanction credit facilities only to applicants who agree to
bank with us exclusively and that too with one branch unless the borrower has offices at different
places and his business warrants maintaining accounts with more than one branch. A number of
complications viz. Double financing, kite flying etc. arise when borrower deals with more than
one branch/bank and hence such precaution is necessary.
- Confidential Report
A) A confidential report of the borrower and/or guarantor needs to be scrutinizedcarefully. Scrutiny should lead to some firm conclusions. Information furnished by
the borrower/guarantor needs to be independently verified. A conservative estimate of
the means of the borrower/guarantor should be formed in order to determine the
extent to which they may be considered creditworthy. If these borrowers/guarantors
are banking with other banks confidential opinion from all such banks should be
obtained when they propose to switch over to our bank to their existing bankers.
B) Detailed scrutiny of all such repots compiled and/or collected need to be made bymanagers to ascertain whether there is a significant variation in net worth of
borrowers/guarantors under the review period. Adverse features noticed during
annual review should be communicated to the controlling office/central office to
enable them to suggest remedial measures to be initiated. However, it should be
ensured by the Branch while compiling/collecting such reports or taking annual
review of such report/s that it exercises all possible tact and discretion to avoid
inconvenience to good customers of long standing while calling for elaborate details.
Our form No.157 in respect of collection of information from the borrower and the
guarantor should be got filled in and his latest income tax /wealth taxreturns/assessment orders should be perused all Personal information forms should be
updated on yearly basis.
-
8/4/2019 Retail Credit
32/55
RISK MANAGEMENT SYSTEMS IN BANKS
In the process of globalization and financial disintermediation, banks are now forced with
the prospect of facing a wide variety of risks, viz. credit, interest Rate, Forex, Liquidity, legal
Regulator, Reputational, operational and so on. These risks have assumed significance, as the
ability to identify measure, monitor and control the overall level of risks have become crucial to
the long-term viability and perspective of the banks.
Recognizing the significance of these risks as well as the need for their effective
management, RBI had issued risk management guidelines in October 1999 for implementation of
Risk Management Systems in banks. The RBI guidelines broadly cover the management of
credit, market and operational risks and, together with the earlier guidelines on asset liability
Management, are to serve as benchmarks for the establishment of an integrated Rise
Management System, which is to be operationalised by March 2001.
- What is risk Management all about?The broad parameters of a risk management function should encompass:
i. Organizational structureii. Comprehensive risk management approachiii. Broad approved risk management policiesiv. Board approved risk management policiesv. Strong M.I.Svi. Well-defined procedures and a comprehensive risk reporting framework.vii. Separate risk management framework independent od operational departments.viii. Periodical review and evaluation.
The RBI guidelines focus upon setting up of departments/committees for Risk
Management, development of credit rating models to identify risk and risk pricing, quantification
of risk arising out of expected/unexpected losses, estimation of provisioning requirement,
calculation of risk capital requirement, monitoring and control of credit portfolio management
and Loan Review Mechanism (LRM), risk analysis of investments proposal and database for
credit risk modeling.
RISK MANAGEMENT EFFECTIVE AND PROACTIVE
1. General
As of March 2009 all SCBs in India have come under the purview of Basel II capital adequacy
norms notified by the Reserve Bank of India. Banks are required to have sufficient capital to
cover credit risk, market risk and operational risk. In order to calculate capital requirement under
the Basel II norms, banks have to put in place a comprehensive risk management frame work
-
8/4/2019 Retail Credit
33/55
across the organization. The Banks approach to risk management is proactive. The primary goal
of risk management is to identify, assess the impact of the risks inherent in the business and
adopt risk management / mitigating measures, so as to achieve business growth with improved
safety, soundness and profitability.
The Bank has also formulated a Risk Management Policy on the basis of the guidelines issued by
RBI recognizing the need to effectively identify measures, monitor and control various risks in
view of their implications on the Banks business growth and financial soundness.
RISK MANAGEMENT SYSTEMS CO-ORDINATE AND COMPREHENSIVE
Credit Risk
The Bank has in place a comprehensive Lending Policy and Loan Review Policy, which
prescribe instruments of Credit Risk Management. Various aspects of Credit Risk, like asset
concentration, norms for industry exposure, prudential limits and various financial parameters,substantial exposure limits, standards for collaterals, and review of portfolio etc. are spelt out in
the above policies in line with the Risk Management Policy prescriptions. The Bank has also set
up Credit Approval Grids at various levels and at Treasury & International Banking Division
(TIBD) Mumbai to obtain preliminary clearance on credit proposals from the risk perception
view point. The Bank has put in place a comprehensive credit policy and internal credit rating
system under which all the borrowable accounts with exposure of Rs. 2.00 lakh and above are
rated on various parameters. An in-house developed Credit Risk Rating Framework (CRRF)
comprising of risk rating models for existing as well as entry level borrowers recognizes the
classes of asset as desired under Basel II, like corporate, banks, commercial real estate and retail.
The Bank has prescribed bench-mark ratings for entry level exposures. In addition, as credit riskmanagement measures, substantial exposure limits and very large exposure limits have been
prescribed in the Risk Management Policy.
The Bank has undertaken migration analysis of credit risk rating and estimated probability of
default in line with Basel II requirements. Risk based pricing framework has been implemented.
Portfolio reviews and industry studies have been undertaken during the year to assess the risks
lying in the credit portfolio and to adopt strategies to improve credit quality and reduce the
potential adverse impact of concentration of exposure to particular borrowers, sectors or
industries. Policy on Stress Testing has been put in place and reports on stress testing results are
placed before the appropriate authorities for periodical review.
Interest Rate Risk Dynamic Pricing
The Bank has put in place a system for regular review of lending and deposit rates in order to
minimize the interest rate risk. The Bank has put in place an Asset Liability Management (ALM)
Policy which is reviewed regularly. The Asset Liability Management Committee (ALCO) of the
-
8/4/2019 Retail Credit
34/55
Bank reviews the risk on a regular basis. Continuous Risk Management measures are initiated
depending upon the movement of interest rates in the market. The movement in the interest rates
is closely monitored for appropriate action.
Liquidity Risk prudence adopted
The Bank ensures effective management of liquidity through the statements of Structural
Liquidity and Short Term Dynamic Liquidity. Models based on behavioral studies of assets and
liabilities have been adopted for maturity gap analysis. ALCO reviews the liquidity position on
an on-going basis and decides the strategy for funding and deployment. The Bank has put in
place a contingency plan for managing liquidity.
Investment Risk Portfolio Quality of Essence
The Investment Policy is in place, covering various aspects relating to Investment decisions,
operations and monitoring thereof, from a risk management perspective including Minimum
rating/quality standard for investment in corporate.
Foreign Exchange Risk Well Controlled
The Bank has adequate systems like prudential limits for open foreign exchange position, set
limits on the aggregate gap position. Prudential limits like Daylight limit, Overnight limit, Net
open overnight position, Stop loss limit, Limit for undertaking swaps/investment/ borrowing
overseas, interbank exposure limits are in place. These limits are monitored on daily basis.
Operational Risk Business Continuity At The Core
For mitigating and controlling the operational risk, the Bank has a well established internal
control system and an administrative structure to formulate, implement and monitor systems andprocedures. The Bank has put in place a Business Continuity Planning Policy and Operational
Risk Management Policy. The Bank is in the process of collecting data on operational risk. The
Bank has also put in place a policy on outsourcing which facilitates using the expertise available
in the market and also as a means of risk transfer.
Regulatory Risk
The field functionaries will have to adhere to the guidelines of the regulatory authority and it
should be made clear that such guidelines / directive are to be adhering to their totality.
Legal Risk
Documentation has to be completed as per sanction terms and law officer wherever prescribed as
per the extant system of getting of borrowable accounts with limits of Rs. 50.00 Lakhs and
above.
-
8/4/2019 Retail Credit
35/55
Environment Risk
Field staff should keep themselves abreast of the changes in the environment. Detailed guidelines
on such matters should be adhered to by the field functionaries and exposures monitored even in
cases where the limit is available. Deviations/expectations in such exposures should be promptly
reported to the component Authority.
Reputation Risk
The Banks business derived from the branches and it is, therefore, the duty of the field staff to
maintain the reputation of the bank high by ensuring extremely cordial relations while observing
the statutory guidelines scrupulously. Whether the Banks reputation would be at stake while
entering into a business relationship & transaction should be analyzed while discharging duties.
STEPS PROPOSED BY RESERVE BANK OF INDIA IN IMPLEMENTING RISK
MANAGEMENT SYSTEM
In moving towards the development and implementation of an integrated riskmanagement system, the bank would be required to:
1. Set up Risk Management Committee2. Set up Credit Policy Committee(CPC)3. Establish Credit Risk Management Department4. Achieve integration of ALCO and CPC5. Designate Portfolio / Relationship Managers6. Establish Mid Office for Treasury Function7. Develop a robust MIS8. Set up approvalGrids9. Arrange for training to core staff.
STATUS OF IMPLEMENTATION OF RBI GUIDELINES IN THE BANKS AND
PROGRESS MADE
1. Asset liability management is already in place.2. Credit appraisal form redesigned so as to cover risk perception is introduced.3. Credit Rating System duly revised has already been approved by the board.4. Benchmark ratios finalized for credit analysis have been approved.5. Board approved loan policy is in place.6.
Present lending policy articulates industry wise exposure limits on historical data. Asystem utilizing scientific methods is in the process of formulization.
7. Setting up of the following has been approved by the Board.a) Credit Risk Management Departmentb) Risk Management Committeec) Credit Policy Committeed) Mid Office for Treasury Function
-
8/4/2019 Retail Credit
36/55
e) Approval Grid8. Loan Review Mechanism is in operation.
VIGILANCE PREVENTION IS THE KEYVigilance activity in the Bank is an integral part of the managerial function. Its objective is to
efficient administration, where officials can perform the duties without any fear or favour.
Vigilance in the Bank is maintaining a proper balance between flexibility and accountability.
Preventive Vigilance is the most important aspect of vigilance. With a view to improve
functioning at all levels, the Bank has taken the necessary steps as under:
1. In accordance with CVC directives, Vigilance Committees have been formed at theBranches having staff of 20 and more, to review/ monitor sensitive and fraud prone areas
and report irregularities observed therein, if any.
2. High value transactions are scrutinized at more than one level.3. Field staff at branches is periodically educated through internal communication about the
modus operandi adopted in various cases of fraud and precautions to be taken to avert
similar kind of frauds.
4. Vigilance Awareness Week is observed in the Bank every year during which periodlectures / talks by the eminent personalities are held for the members of staff and general
public at branches / offices, emphasizing the need for transparency, ethical conduct and
personal integrity besides preventive vigilance.
5. Sessions on Preventive Vigilance are included in the training programmes conducted bythe Staff College.
6. A Fraud Risk Management Policy has been framed and communicated to staff andfield functionaries. It is a guide on prevention, detection, classification and reporting of
frauds including action to be taken.
-
8/4/2019 Retail Credit
37/55
DATA ANALYSIS AND INTERPRETATIONS
INVESTMENTS PROFITABLE GROWTHThe Net investment of the Bank stood at Rs. 18382 crore as on 31.03.2009 as against Rs.
12283 crore as on 31.03.2008, registering a growth of 49.66 percent. 70.00 percent of the
portfolio was held under Held to maturity (HTM) Category, 29.27 percent in Available For Sale
(AFS) and balance 0.73 percent in Held for Trading (HFT) categories. The net interest income
from investment increased by 17.02 percent to Rs.989.84 crore from Rs.845.85 crore during the
last year.
Particulars Amt in cr. As on
31.03.2008
Amt in cr. As on
31.03.2009
Total increase
Net investment 12283 18382 49.66 %
Net interest income from
investment
845.85 989.84 17.02 %
Interpretation:
The net interest income from investment increased by 17.02 percent to Rs.989.84 crore from
Rs.845.85 crore during the last year.
Amt in cr. As on 31.03.2008
Total increase
0
5000
10000
15000
20000
Amt in cr. As on 31.03.2008
Amt in cr. As on 31.03.2009
Total increase
-
8/4/2019 Retail Credit
38/55
CREDIT DEPLOYMENTThe Bank has put in place a lending policy with an emphasis on qualitative credit growth. The
policy is fully in conformity with the guidelines issued by RBI and also the Priority Sector
lending norms of the Government of India. The policy enunciates the thrust areas, risk factors
and also sets out prudential exposure limits to facilitate qualitative expansion of credit. TheGross Advances increased from Rs.29,798 crores as on 31.3.2008 to Rs. 34,817 crores as on
31.3.2009 with a growth of 16.84 per cent. The Credit Deposit Ratio as on 31.3.2009 was 66.63
per cent.
Sectoral deployment of credit - diversified risk and balanced growth:
The Bank has continued its efforts to support core, manufacturing and priority sectors as well as
infrastructure projects, which serve to drive economic growth. This focus of the Bank will
continue in future, in the light of the national economic growth priorities.
Interpretation:
The Gross Advances increased with a growth of 16.84 per cent. The Credit Deposit Ratio has
also increased.
37.88
15.598.83
11.92
13.05
8.5
1 2.04
5.11
Credit Deployed
infrastructure,petroleum,iron,textile
s,engineering,chemicals
Agriculture
MSME
Other prioritysector
retailsector
housing
education
Exports
commercial real estate
-
8/4/2019 Retail Credit
39/55
RISK CATEGORY WISE COUNTRY EXPOSURE(Rs. In Crore)
Risk Category Exposure (net) as
at March 31 ,
2009
Provision
held as at
March 31,
2009
Exposure
(net) as at
March 31,
2008
Provision
held as at
March 31,
2008
Insignificant 970.13 0.00 774.49 0.00
Low 391.01 0.00 293.59 0.00
Moderate 73.23 0.00 77.06 0.00
High 23.25 0.00 4.31 0.00
Very high 8.51 0.00 11.71 0.00
Restricted 0.11 0.00 0.00 0.00
Off-credit 0.00 0.00 0.00 0.00
Total 1466.24 0.00 1161.16 0.00
Interpretation: Since Banks net funded exposure for risk category-wise exposure for each
country is less than 1% of banks total assets as on 31.03.2009, no provision is required in terms
of a particular RBI Circular.
0
200
400
600
800
1000
1200
1400
1600
Exposure (net)asat March 31
, 2009
provision held asatmarch 31, 2009
Exposure (net)asat March 31
, 2008
provision held asatmarch 31, 2008
-
8/4/2019 Retail Credit
40/55
NON-PERFORMING ASSETS Non-Performing Assets (NPA)
Particulars 31.03.2010 31.03.2009
(i) Net NPAs to Net Advances (%) 0.79 0.87
(ii) Movement of NPAs (Gross)
(a) Opening balance 766.27 820.27
(b) Additions during the year 368.56 252.12
(c) Reductions during the year 336.42 306.12
(d) Closing balance 798.41 766.27
(iii) Movement of net NPAs
(a) Net opening balance 254.05 277.38
Add: ECGC/DICDC Settled
amount
26.29 22.75
Gross: Opening Balance 280.34 300.13
(b) Additions dduring the year 181.39 167.80
(c) Reductions during the year 167.63 187.60
(d) Gross closing balance 294.10 280.34
Less: ECGC/DICGC Settled
amount
22.20 26.29
Net Closing Balance 271.90 254.05
(iv) Movement of provisions for NPAs
(excluding provisions on standard assets)
(a) Opening balance 485.93 520.14
(b) Provisions made during the year 187.17 84.31
(c) Write-back of excess provisions 168.79 118.52
(d) Closing balance 504.31 485.93
Interpretations:
The ratio of Net NPAs has improved from 0.87 percent to 0.79 percent.
-
8/4/2019 Retail Credit
41/55
Details of Loan Assets subjected to Restructuring during the year.(Rs. In crore)
Category Particulars CDR SME debt
Restruc-turing
Others
Standard
Advances
restructured
No. of Borrowers 3 3084 4029
Amount Outstanding 46.28 461.61 552.73
Sacrifice (Diminution in the fair
value )
3.67 13.16 12.79
Sub-Standard
Advancesrestructured
No. of Borrowers 0 96 134
Amount Outstanding 0.00 7.67 21.46
Sacrifice (Diminution in the fair
value )
0.00 0.22 1.94
doubtful Advances
restructured
0 3 3
0 7.85 4.86
0 0.24 0.01
Total No. of Borrowers 3 3138 4166
Amount Outstanding 46.28 477.13 579.05
Sacrifice (Diminution in the fair
value )
3.67 13.62 14.74
Interpretations:
NPA coverage has also improved from 65.54 percent 63.16 percent.
-
8/4/2019 Retail Credit
42/55
Additional disclosure in respect of Restructuring(In terms of RBI circular dated 17.04.2009)
Sr. No Disclosures Number Amount
1 Applications received for restructuring, in respectof accounts which were standard as on September
1, 2009.
6662 1145.82
2 Of (1), proposal approved and implemented and
thus became eligible for special regulatorytreatment and classified as standard assets as on
the date of the balance sheet.
6373 1033.07
3 Of (1), proposal approved and implemented butcould not be upgraded to the standard category.
222 41.48
4 Of (1), proposal under process/ implementedwhich were standard as on March 31,2010
64 70.21
5 Of (1), proposal approved and implemented which
turned NPA but are expected to be classified asstandard assets on full implementation of the
package.
3 1.06
Details of financial assets sold to securitization/Reconstruction Companyfor Asset Reconstruction
(Rs. In Crore)
Particulars 31.03.2010 31.03.2009
(i) No. of accounts 0 36
(ii) Aggregate value(net of provisions) of accounts
sold to Securitization / ReconstructionCompany
0.00 0.00
(iii) Aggregate consideration 0.00 13.25
(iv) Additional consideration realized in respect ofaccounts transferred in earlier years
0.00 0.00
(v) Aggregate gain over net book value 0.00 13.25
Interpretations: Bankhas now started the practice of restructuring and reconstructing the NPAseffectively and efficiently.
-
8/4/2019 Retail Credit
43/55
BRANCH NETWORK AND EXPANSIONDuring the year, the Bank opened 43 new branches besides upgrading 3extension counters into
full fledged branches. As on 31.03.2010, the total branch network comprised of 1421 branchesspread over 22 states and 2union territories. The branch network included specialized branches in
the areas of foreign exchange, government business, treasury and international banking,
industrial finance, small-scale industry, hi-tech agriculture, Pension Payment Branch and CentralPension Processing Cell. The area wise classification of branches as on 31.03.10 is given in thetable below:
Sr.No. Classification As On 31.03.09 As On 31.03.10
1 Rural 516 520
2 Semi-Urban 251 262
3 Urban 257 271
4 Metropolitan 351 368
Total 1375 1421
Interpretation:
The Bank opened 43 new branches besides upgrading 3extension counters into full fledged
branches and like this it is continuously expanding its network in allover India.
As On 31.03.09
As On 31.03.100
100
200
300
400
500
600
RuralSemi-Urban
Urban
Metropolitan
As On 31.03.09
As On 31.03.10
-
8/4/2019 Retail Credit
44/55
ASSET PERFORMANCE IMPROVEDThe ratio ofGross Advances has improved from 2.57 percent as on 31.03.2008 to 2.29 percent as
on 31.03.2009. The ratio of Net NPAs has improved from 0.87 percent at 31.03.2008 to 0.79
percent at 31.03.2009. NPA coverage has also improved from 65.54 percent as on 31.03.2008 to
63.16 percent as on 31.03.2009.
Particulars 31.03.2008 31.03.2009
Ratio of NPAs 2.57% 2.29%
Ratio of Net NPAs 0.87% 0.79%
NPA coverage 65.54% 63.16%
Interpretations: The ratio ofGross Advances has improved 2.57 percent to 2.29 percent and the
ratio of Net NPAs has improved from 0.87 percent to 0.79 percent. NPA coverage has also
improved from 65.54 percent 63.16 percent.
31.03.2008
31.03.2009
0
10
20
30
40
50
60
70
Ratio of NPAs
Ratio of Net NPAsNPA coverage
31.03.2008
31.03.2009
-
8/4/2019 Retail Credit
45/55
INCOME, EXPENDITURE AND PROFITABILITY Income
Incomes 2008-2009 2009-2010 Variations (%)
Interest on bills 2561.12 3266.60 27.55Income on
investments
845.85 989.84 17.02
Total interest income 3440.47 4291.56 24.75
Non-interest income 380.28 500.02 31.48
Total income 3820.76 4791.58 25.41
Interest on
borrowings
191.27 251.82 31.65
Interpretations:
The income factors of the bank has grown in a very positive and in a very significant manner as
compare to previous year and this indicates the sound health of the bank.
0
500
1000
1500
2000
2500
3000
3500
4000
4500
5000
2008-2009
2009-2010
variations ()%
-
8/4/2019 Retail Credit
46/55
OPERATING INCOME RISES 11.88% TO RS 1246.49 CRORENet profit of Bank of Maharashtra rose 1.26% to Rs 139.06 crore in the quarter ended March
2010 as against Rs 137.33 crore during the previous quarter ended March 2009. Total operating
income rose 11.88% to Rs 1246.49 crore in the quarter ended March 2010 as against Rs 1114.15crore during the previous quarter ended March 2009.
For the audited full year, net profit rose 17.17% to Rs 439.57 crore in the year ended March 2010
as against Rs 375.17 crore during the previous year ended March 2009. Total operating income
rose 10.35% to Rs 4735.56 crore in the year ended March 2010 as against Rs 4291.56 crore
during the previous year ended March 2009.
Particulars Quarter Ended Year Ended
Date Mar. 2010 Mar. 2009 % Var. Mar. 2010 Mar. 2009 % Var.
Sales 1246.49 1114.15 12 4735.56 4291.56 10
OPM % 66.15 67.46 -2 72.15 70.98 2
PBDT 142.33 130.04 9 568.82 511.06 11
PBT 142.33 130.04 9 568.82 511.06 11
NP 139.06 137.33 1 439.57 375.17 17
-
8/4/2019 Retail Credit
47/55
OPERATING INCOME RISES 11.88% TO RS 1246.49 CRORE
Interpretations:
Net profit of Bank of Maharashtra rose 1.26% to Rs 139.06 crore in the quarter ended March 2010
as against Rs 137.33 crore during the previous quarter ended March 2009.
% Var. Of Quarter Ended march 2010
-2
0
2
4
6
8
10
12
14
16
18
sales OPM PBDT PBT NP
% Var. Of Quarter Ended march 2010
% Var of Year Ended 2009
-
8/4/2019 Retail Credit
48/55
ExpenditureExpenses 2008-2009 2009-2010 Variations (%)
Interest on deposits 2,120.52 2783.22 31.25
Interest expenditure 2311.79 3035.03 31.28
Staff expenses 485.29 579.62 19.44
Non-staff expenses 351.04 383.40 9.22
Total non-interest expenses 836.34 963.02 15.14
Total operating expenses 3,148.13 3998.06 27.00
Interpretations:
Due to the very high competition and in order to capture more and more market share, the bank
had to incur more expenses to make its facilities more attractive and more worthy so that the
bank can retain its customer and it also helps in acquiring new customers.
0
500
1000
1500
2000
2500
3000
3500
Intereston
deposits
Interest
expenditure
Staff expenses Non-staff
expenses
2008-2009
2009-2010
Variations (%)
-
8/4/2019 Retail Credit
49/55
ProfitabilityProfitability 2008-2009 2009-2010 Variations (%)
Operating Profit 672.63 793.52 17.97
Provisions And
Contingencies
344.24 418.36 21.53
Net Profit 328.39 375.16 14.24
Interpretations:
Above figure shows that there is a positive and consistent increase in the banks profitability
because the banks business and income has also moved up towards a positive direction.
0
100
200
300
400
500
600
700
800
Operating Profit ProvisionsAnd
Contingencies
Net Profit
2008-2009
2009-2010
Variations (%)
-
8/4/2019 Retail Credit
50/55
CHAPTER IV
- Findings
- Suggestions / Recommendations
-
8/4/2019 Retail Credit
51/55
FINDINGS
1.In todays era of heavy competition and the fight to sustain in the market, the bank had to incur
more expenses to make its facilities more attractive and more worthy so that the bank can retain
its customer and it also helps in acquiring new customers which will not only increase the
income of the bank but also leads to capture more and more market share.
2.
There is a positive and consistent increase in the banks profitability because the banks business
has increased and the income of the bank has also moved up towards a positive direction because
the bank has started capturing more and more market share.
3.
The ratio ofGross Advances has improved from 2.57 percent to 2.29 percent. The ratio of Net
NPAs has improved from 0.87 percent at 31.03.2008 to 0.79 percent. NPA coverage has also
improved from 65.54 percent to 63.16 percent. The asset performance has significantly changed
and it has not changed but also improved in a positive way.
4.
The investment of the bank is also proved to be a significant source of income because the net
income from investment has made a large contribution to the profit of the bank
5.
While financing the various segments of the economy, the Bank has endeavoured to maintain a
diversified credit portfolio, with a view to ensuring credit-dispersion across sectors. This will
minimize the risk and ultimately increase the profit of the bank.
-
8/4/2019 Retail Credit
52/55
SUGGESTIONS / RECOMMENDATIONS
The data in the tables have clearly shown that how the Bank of Maharashtra hasconsistently increased its profit by managing its credit but the bank needs to deploy itscredit in a more diversified manner which will minimize the risk of losses and also
increase the profitability of the bank.
The overall inference from the table and Chart is that the Retail Financing of Bank ofMaharashtra is healthy as compare to other nationalized banks. But it needs to be brought
up in order to sustain the financial position of the bank. The Housing and Education Loan
must be increased to more than 30 per cent while other loan schemes can also be
amended.
The NPAs are reducing in a very positive way which is the result of avoiding high-risklending and high monitoring of the credit disbursed. The bank needs to study and analyze
from its past losses because it will help in future lending by avoiding high risk proposals
and ultimately let the bank to grow more efficiently and effectively.
Loan products are the ideal Products for the bank to ensure the profitability and therefore,the bank should continuously adapt itself to the changed situation in search of new
markets and to provide new attractive schemes and services for the existing customers to
retain its market share and at the very same time acquire new customers to expand its
market share.
Efforts are to be oriented towards verifying and processing the loan request. In case ofdeposits, an added advantage available to the bank is to improve clientele base but in case
of borrowings such an advantage does not exist. So the bank must work out some
effective strategies for their Loan Products in order to make the clientele base for
borrowings.
The increased number of deposit customers and the increased number of individualmembership provide a comfortable clientele base for the bank to choose good borrowers
to whom the bank can provide credit facilities. Good borrowers with integrity are asimportant to the bank as the depositors.
Raising individual membership, mobilizing more low-cost deposits and avoiding high-risk borrowings are the strategies which could be followed by the bank to improve its
efficiency, market share, productivity and profitability.
-
8/4/2019 Retail Credit
53/55
BIBLIOGRAPHY
Name of Book/Site Author Publication
Bank Credit Management Dr.G.Vijayaragavan Himalaya Publication Promotion Examination Bank of Maharashtra Bank of Maharashtra www.iibf.co.in www.iba.org www.rbi.org www.bankofmaharashtra.in www.financial.indiamart.com
Annual Report:
Bank of Maharashtra
-
8/4/2019 Retail Credit
54/55
ANNEXURE
ATM Automated Teller Machine
GOI Government Of India
RBI Reserve Bank Of IndiaNPA Non-Performing Assets
MSME Micro, Small And Medium Enterprises
NP Net Profit
HTM Held To Maturity
HFT Held For Trading
AFS Available For Sale
CVC Core Vigilance Committee
KYC Know Your Customer
MGB MarthwadaG
ramin BankRRB Regional Rural Bank
LIC Life Insurance Corporation
SLBC State Level Bankers Committee
SMES Small And Medium Enterprises
NBC Net Bank Credit
RDC Rural Development Centres
GMBVM Gramin Mahila Va Balak Vikas Mandal
MARDEF Maha Bank Agricultural Research And Rural Development
Foundation
NGO Non-Government Organizations
CBS Core Banking Solutions
IPO Initial Public Offer
METCO Maharashtra Executor And Trustee Company
STP Straight Through Processing
NEFT National Electronic Fund Transfer
RTGS Real Time Gross Settlement
MSETI Mahabank Self Employment Training Institutes
TOLIC Town Official Language Implementation Committee
NABARD National Bank For Agricultural And Rural DevelopmentEDPS Entrepreneurship Development Programmes
PMRY Prime Ministers Rozgar Yojana
SGSY Swarna Jayanti Gram Swarojgar Yojana
SJSRY Swarna Jayanti Shahari Rozgar Yojana
MIS Management Information System
-
8/4/2019 Retail Credit
55/55
LRM Loan Review Mechanism
CPC Credit Policy Committee
ALM Asset Liability Management
ALCO Asset Liability Management Committee
TIBD Treasury & International Banking DivisionCRRF Credit Risk Rating Framework
TIBD Treasury & International Banking Division
CRRF Credit Risk Rating Framework