“A STUDY ON CREDIT RISK MANAGEMENT AT CANARA BANK”

DONE FOR

Project report submitted in partial fulfilment of the requirement of

PONDICHERRY UNIVERSITY for the award of the degree of
MASTER OF BUSINESS ADMINISTRATION

Submitted By
BHASWANI DANA
(Reg. No. 11397020)

Under The Guidance Of

Dr.B.CHARUMATHI
Associate Professor,
Department Of Management Studies,
Pondicherry University.

DEPARTMENT OF MANAGEMENT STUDIES

SCHOOL OF MANAGEMENT
PONDICHERRY UNIVERSITY
PONDICHERRY-605014

MARCH-APRIL 2013
 DEPARTMENT OF MANAGEMENT STUDIES
SCHOOL OF MANAGEMENT
PONDICHERRY UNIVERSITY
PONDICHERRY-605014

CERTIFICATE

This is to certify that this project entitled “A STUDY ON CREDIT RISK MANAGEMENT
AT CANARA BANK” is submitted by BHASWANI DANA, MBA II year to the
DEPARTMENT OF MANAGEMENT STUDIES, SCHOOL OF MANAGEMENT,
PONDICHERRY UNIVERSITY in partial fulfilment of the degree requirement for the award
of the degree MASTER OF BUSINESS ADMINISTRATION and is certified to be an original
and bonafide work.

Dr.T.NAMBIRAJAN Dr.B.CHARUMATHI
Professor & Head Of The Department Associate Professor
Department Of Management Studies, Department Of Management studies
Pondicherry University. Pondicherry University.

Place: Pondicherry
Date:
 DECLARATION

I hereby declare that this project report entitled “A STUDY ON CREDIT RISK
MANAGEMENT AT CANARA BANK” in CANARA BANK, NIDADAVOLE,ANDHRA
PRADESH submitted in the partial in partial fulfilment of the degree requirement for the award
of the degree MASTER OF BUSINESS ADMINISTRATION (MBA) Of DEPARTMENT
OF MANAGEMENT STUDIES, SCHOOL OF MANAGEMENT, PONDICHERRY
UNIVERSITY, PUDUCHERRY-605014 is based on second data found by me in various
departments, websites, annual reports & Collected by me under the guidance of Mr.ANIL
KUMAR, Sr Manager, CANARA BANK, NIDADAVOLE,ANDHRA PRADESH.

Date: BHASWANI DANA

MBA (II YEAR)
Pondicherry University
 ACKNOWLEDGEMENT

It’s a great privilege that I have done project in such a well-organized & diversified
organization. I am very grateful to all those who helped and supported me in completing the
project.

First of all I would like to thank Mr. ANIL KUMAR, (Sr Manager,) for giving me an
opportunity to work as winter trainee in CANARA BANK, NIDADAVOLE, ANDHRA
PRADESH & also I would like to thank to all the staff members for their cooperation & help
given by them. Their experiences & feedback kept me on track and helped me produce much
better results.

I am also thankful to our Head of the Department Dr.T.NAMBIRAJAN, and my Project

guide Dr.Charumathi who guided me and helped me a lot in completing the project.

I would also like to thank to all college staff and my friends for helping me directly or
indirectly in project.

BHASWANI DANA
 EXECUTIVE SUMMARY

Credit risk is defined as the possibility of losses associated with diminution in the credit
of quality of borrowers or counter parties. In a banks portfolio, losses stem from outright default
due to inability or unwillingness of a customer or counter party to meet commitments in relation
to lending, trading, settlement and other financial transactions.

As credit risk is one of the challenging tasks to banks I have selected this topic for my
study in order to know the various types of risk and the types of strategies the banks use to
mitigate the risk.

As part of its vision of using technology to provide affordable banking services to the
vast rural population of India, Canara bank has extend the performance and cost benefits of
enterprises Linux to its customers. With a modernized branch infrastructure, Canara bank hopes
to serve customers in a timely and efficient manner, reinforcing its image of being a customer
savvy bank
 TABLE OF CONTENTS

CHAPTER DESCRIPTION PAGE

NO.
ACKNOWLEDGEMENT 4
EXECUTIVE SUMMARY 5
LIST OF TABLES 8
LIST OF CHARTS 9
1 INTRODUCTION 10
1.1Introduction To The Topic 11
1.2 Need For The Study 12
1.3 Statement Of The Problem 12
1.4 Objectives Of The Study 12
1.5 Research Methodology 12
1.6 Limitations Of The Study 13
1.7 Chapterization 13
2 PROFILE OF INDIAN BANKING 14
INSUSTRY & HDFC BANK
2.1 Introduction 15
2.2 Historical Background 15
2.3 General Banking Scenario 16
2.4 Structure of Indian Banking Industry 17
2.5 Profile of HDFC bank 21
2.5.1 Promoter 21
2.5.2 Business Focus 21
2.5.3 Capital Structure 22
2.5.4 Times Bank Amalgamation 22
2.5.5 Distribution Network 22
2.5.6 Management 23
2.5.7 Technology 23
2.5.8 Business Focus 24
2.5.9Rating 24
2.5.10 Product Scope 25
2.5.11 Products & Services at a glance 25
2.5.12 Merger 30
2.5.13 Quality Policy 32

3 EXPOSURE NORMS 33
3.1 Introduction 34
3.2Guidelines 34
3.2.1 Credit Exposures to Individual / Group 34
 Borrowers
3.2.2 Credit Exposure to Industry or Certain Sectors 41
3.2.3 Banks' Exposure to Capital Market 45
3.2.4 Financing of equities and investments in
50
shares
3.2.5. Risk Management and Internal Control
57
System
3.2.6 Valuation and Disclosure 58
3.2.7 Cross holding of capital among banks /
58
financial institutions
3.2.8 Margin Requirements 59
3.2.9 Limits on exposure to unsecured guarantees
60
and unsecured advances
3.2.10 'Safety Net' Schemes for Public Issues of
61
Shares, Debentures, etc
3.2.11 The definition of infrastructure lending and
the list of the items included under infrastructure 61
sector
DATA ANALYSIS & INTER PRETATION
4 63
5 SUMMARY OF FINDINGS AND SUGGESTIONS 96
5.1 General findings 97
5.2 Specific findings 97
5.3 Suggestions and recommendations 98
REFERENCES 99
 LIST OF TABLES

TABLE PAGE
TITLE
NO. NO.

1.1 Sample Size For Each Sector And Parameter 14

2.1 Category Wise Banks In India 19
3.1 CCF for market related off-balance sheet items 38
Bank Wise Credit Exposure To Capital Market Sector (Rs In Lakhs)
4.1 64
(2007 - 2011)
4.2 ANOVA performed YEAR WISE to capital market sector 65
4.3 ANOVA performed BANK WISE to capital market sector 65
Trend Analysis For Exposure To Capital Market Sector of old private
4.4 66
banks (2007 is base year)
Trend Analysis For Exposure To Capital Market Sector of new
4.5 67
private banks (2007 is base year)
Comparative Analysis For Exposure To Capital Market Sector of old
4.6 68
private banks (previous year is base year)
Comparative Analysis For Exposure To Capital Market Sector of new
4.7 69
private banks (previous year is base year)
Bank Wise Credit Exposure To Real Estate Sector (Rs In Lakhs)
4.8 70
(2007 – 2011)
4.9 ANOVA performed YEAR WISE to REAL ESTATE sector 71
4.10 ANOVA performed BANK WISE to REAL ESTATE sector 71
Trend Analysis For Exposure To Real Estate Sector of old private
4.11 72
banks (2007 is base year)
Trend Analysis For Exposure To Real Estate Sector of new private
4.12 73
banks (2007 is base year)
Comparative Analysis For Exposure To Real Estate Sector of old
4.13 74
private banks (previous year is base year)
Comparative Analysis For Exposure To Real Estate Sector of new
4.14 75
private banks (previous year is base year)
Bank Wise DIRECT Credit Exposure To Real Estate Sector
4.15 76
(Rs In Lakhs) (2007 - 2011)
Trend Analysis For DIRECT Exposure To Real Estate Sector of old
4.16 77
private banks (2007 is base year)
Trend Analysis For DIRECT Exposure To Real Estate Sector of new
4.17 78
private banks (2007 is base year)
Comparative Analysis For DIRECT Exposure To Real Estate Sector
4.18 79
of old private banks (previous year is base year)
Comparative Analysis For DIRECT Exposure To Real Estate Sector
4.19 80
of new private banks (previous year is base year)
 Bank Wise INDIRECT Credit Exposure To Real Estate Sector
4.20 81
(Rs In Lakhs) (2007 - 2011)
Trend Analysis For INDIRECT Exposure To Real Estate Sector of
4.21 82
old private banks (2007 is base year)
Trend Analysis For INDIRECT Exposure To Real Estate Sector of
4.22 83
new private banks (2007 is base year)
Comparative Analysis For INDIRECT Exposure To Real Estate
4.23 84
Sector of old private banks (previous year is base year)
Comparative Analysis For INDIRECT Exposure To Real Estate
4.24 85
Sector of new private banks (previous year is base year)
4.25 Risk Category Wise Country Exposure-2011 86
4.26 Risk Category Wise Country Exposure-2010 87
4.27 Risk Category Wise Country Exposure-2009 88
4.28 Risk Category Wise Country Exposure-2008 89
4.29 Risk Category Wise Country Exposure-2007 90
4.30 Bank wise High risk country exposure 91
Backward trend analysis to Bank wise High risk country exposure
4.31 91
considering 2011 as base year
4.32 Bank wise Very High risk country exposure 92
Backward trend analysis to Bank wise Very High risk country
4.33 93
exposure considering 2011 as base year
4.34 Bank wise restricted risk country exposure 94
Backward trend analysis to Bank wise restricted risk country
4.35 94
exposure considering 2011 as base year
List of Private Banks Which Are Compiled And Not Complied
4.36 95
Exposure Norms
 LIST OF CHARTS

PAGE
CHART
TITTLE N
NO.
O.
2.1 Structure Of Indian Banking Industry 21
Trend Analysis For Exposure To Capital Market Sector of old
4.1 66
private banks (2007 is base year)
Trend Analysis For Exposure To Capital Market Sector of new
4.2 67
private banks (2007 is base year)
Comparative Analysis For Exposure To Capital Market Sector of
4.3 68
old private banks (previous year is base year)
Comparative Analysis For Exposure To Capital Market Sector of
4.4 69
new private banks (previous year is base year)
Trend Analysis For Exposure To Real Estate Sector of old private
4.5 72
banks (2007 is base year)
Trend Analysis For Exposure To Real Estate Sector of new
4.6 73
private banks (2007 is base year)
Comparative Analysis For Exposure To Real Estate Sector of old
4.7 74
private banks (previous year is base year)
Comparative Analysis For Exposure To Real Estate Sector of
4.8 75
new private banks (previous year is base year)
Trend Analysis For DIRECT Exposure To Real Estate Sector of
4.9 77
old private banks (2007 is base year)
Trend Analysis For DIRECT Exposure To Real Estate Sector of
4.10 78
new private banks (2007 is base year)
Comparative Analysis For DIRECT Exposure To Real Estate
4.11 79
Sector of old private banks (previous year is base year)
Comparative Analysis For DIRECT Exposure To Real Estate
4.12 80
Sector of new private banks (previous year is base year)
Trend Analysis For INDIRECT Exposure To Real Estate Sector
4.13 82
of old private banks (2007 is base year)
Trend Analysis For INDIRECT Exposure To Real Estate Sector
4.14 83
of new private banks (2007 is base year)
Comparative Analysis For INDIRECT Exposure To Real Estate
4.15 84
Sector of old private banks (previous year is base year)
Comparative Analysis For INDIRECT Exposure To Real Estate
4.16 85
Sector of new private banks (previous year is base year)
Backward trend analysis to Bank wise High risk country 92
4.17
Exposure considering 2011 as base year
Backward trend analysis to Bank wise Very High risk country 93
4.18
exposure considering 2011 as base year
Backward trend analysis to Bank wise restricted risk country 94
4.19
exposure considering 2011 as base year