Escolar Documentos
Profissional Documentos
Cultura Documentos
ON
RETAIL BANKING
AND
SMEs LENDING AT ING VYSYA BANK
Guided by
Submitted by
Nipun Kesari
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CERTIFICATE
This is to certify that the project work done on RETAIL BANKING AND SMEs LENDING
AT ING VYSYA BANK is an original work carried out by Mr. NIPUN KESARI under my
supervision and guidance. The project report is submitted towards the partial fulfillment of two
year, full time post graduate diploma in management.
This work has not been submitted anywhere else for any other degree/diploma. The work was
carried out from 02-05-2011 to 30-06-2011 in ING VYASA BANK.
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Nipun Kesari
Roll no.-FC10149
ACKNOWLEDGEMENT
At the outset, I wish to express my sincere thanks to almighty for showering his blessing on
me to develop this project.
I express my sincere thanks to MR. ASEEM ANAND, BRANCH HEAD for giving
permission to carry out this study in his esteemed organization.
I would take this opportunity to express my sincere-most gratitude to Mr. Sumit Khari,
Area Head- Business Banking, New Delhi for giving me this opportunity to complete my
internship in his esteemed organization and his kind support. I also thank him for his help and
valuable guidance and supervision
I am extremely thankful to MR DEEPAK GUPTA, RM, Punjabi Bagh Branch, New Delhi
for his expert guidance, cooperation and help. With great sense of gratitude, I also thank him for
his constant encouragement without which it would not have been possible for me to accomplish
the project successfully.
I am deeply indebted to the Dr. J K Goyal, Director and Dr. Madan Mohan, Dean,
JAGAN INSTITUTE OF MANAGEMENT STUDIES for enabling me to do this project.
I express my gratitude towards my college mentors Dr. Navneet Joshi and Mr. Arnab
Ghosh for their help and guidance in making my report.
Nipun Kesari
FC10149
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DECLARATION
I hereby declare that this project report titled
RETAIL BANKING AND SME LENDING AT ING VYSYA BANK
submitted by me to Jagan Institute is a bonafide work undertaken by me and it is
not submitted to any other University or Institute for the award of any Degree /
Diploma / Certificate or published any time before.
.
NIPUN KESARI
(FC10149)
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CONTENT
S.No.
Content
Page Number
1.
CERTIFICATE
2.
ACKNOWLEDGEMENT
3.
DECLARATION
4.
7-11
5.
12
6.
RESEARCH METHODOLOGY
13
7.
RETAIL BANKING
14-23
8.
BACKGROUND
24
25-30
30
BUSINESS LOAN
31-37
38
39-57
CASE DETAILS
II RECOMMENDATION
C
10.
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58-69
69
70
BIBLIOGRAPHY
71
INTRODUCTION
Contents:
1. Introduction
2. Objective
3. Research Methodology
Research Design
Nature of Data
Methods Data Collection
Research Tools
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INTRODUCTION
ABOUT ING VYSYA BANK
ING Vysya Bank Ltd., 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. The origin of the erstwhile Vysya Bank was pretty humble. It
was in the year 1930 that a team of visionaries came together to form a bank that would extend a
helping hand to those who weren't privileged enough to enjoy banking services. It's 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.
In 1980, the Bank completed fifty years of service to the nation and post 1985, the Bank made
rapid strides to reach the coveted position of being the number one private sector bank. In 1990,
the bank completed its Diamond Jubilee year. At the Diamond Jubilee Celebrations, the then
Finance Minister Prof. Madhu Dandavate, had termed the performance of the bank Stupendous.
The 75th anniversary, the Platinum Jubilee of the bank was celebrated during 2005.
Set up in Bangalore
1948
Scheduled Bank
1985
1987
1988
1990
1992
1993
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1998
2000
2001
State
-of
the
-art
Date
Centre
at
ITPL,
Bangalore.
2002
2002
2002
2003
2004
2005
2006
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ING takes over the Management of the Bank from October 7th , 2002
RBI clears the new name of the Bank as ING Vysya Bank Ltd, vide their
letter of 17.12.02
Introduced customer friendly products like Orange Savings, Orange Current
and Protected Home Loans
Introduced Protected Home Loans - a housing loan product
Introduced Solo - My Own Account for youth and Customer Service Line
Phone Banking Service
Bank has networked all the branches to facilitate AAA transactions i.e.
Anywhere, Anytime & Anyhow Banking
In terms of pure numbers, the performance over the decades can better be appreciated
from the following table:
Rs. in millions
Year
Networth
Deposits
Advances
Profits
Outlets
1940
0.001
0.400
0.400
0.001
1950
1.40
5.30
3.80
0.09
16
1960
1.60
20.10
13.50
0.13
19
1970
3.00
91.50
62.80
0.74
39
1980
11.50
1414.30
813.70
1.13
228
1990
162.10
8509.40
4584.80
50.35
319
2000
5900.00
74240.00
39380.00
443.10
481
2001
6527.00
81411.10
43163.10
371.90
484
2002
6863.24
80680.00
44180.00
687.50
483
2003
7067.90
91870.00
56120.00
863.50
456
2004
7473.20
104780.00 69367.30
590.01
523
2005
7094.00
125693.10 90805.90
(381.80) 536
2006
10196.70
133352.50 102315.20
90.6
562
2007
11101.90
154185.70 119761.70
889.0
626
2008
14260.00
204980.00 146500.00
1569.00 677
2009
15940.00
248900.00 167510.00
1888.00 857
2010
2223.00
258650.00 185070.00
2422.00 866*
*Outlets comprises of 468 branches, 13 ECs, 28 Satellite Offices and 357 ATMs as of
March 31st 2010. Additionally the bank also has Internet Banking, Mobile Banking
and Customer Service Line for Phone Banking Service.
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Profile
ING has gained recognition for its integrated approach of banking, insurance and asset
management. 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. Another specialisation is ING Direct, an Internet and direct marketing concept
with which ING is rapidly winning retail market share in mature markets. Finally, ING
distinguishes itself internationally as a provider of employee benefits, i.e.
arrangements of nonwage benefits, such as pension plans for companies and their
employees.
Mission
ING`s 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.
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RESEARCH METHODOLOGY:
Research design:
The descriptive form of research method is adopted for study.
The major purpose of descriptive research is description of state of affairs of the institution as it
exists at present. The nature and characteristics of the Advances and Loans have been described
in this study.
Nature of data
The data required for the study has been collected from secondary source .The relevant
information were taken from annual reports, journals and internet.
Tools applied:
To have a meaningful analysis and interpretation of various data collected, the following tools
were made for this study.
Annual report of the applicant
Financial Statements Analysis
Credit Rating Technique (Credit Rating and Information Services of India Ltd. (CRISIL)
Interest Rate Calculation
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RETAIL BANKING
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RETAIL BANKING
Retail banking refers to banking in which banking institutions execute transactions directly with
consumers, rather than corporations or other banks. Services offered include: savings and
transactional accounts, mortgages, personal loans, debit cards, credit cards, and so forth.
The Retail Banking environment today is changing fast. The changing customer demographics
demands to create a differentiated application based on scalable technology, improved service
and banking convenience. Higher penetration of technology and increase in global literacy levels
has set up the expectations of the customer higher than never before. Increasing use of modern
technology has further enhanced reach and accessibility.
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DISADVANTAGES
Designing own and new financial products is very costly and time consuming for the
bank.
Customers now-a-days prefer net banking to branch banking. The banks that are slow in
introducing technology-based products, are finding it difficult to retain the customers
who wish to opt for net banking.
.Customers are attracted towards other financial products like mutual funds etc.
Though banks are investing heavily in technology, they are not able to exploit the same
to the full extent.
A major disadvantage is monitoring and follow up of huge volume of loan accounts
inducing banks to spend heavily in human resource department.
Long term loans like housing loan due to its long repayment term in the absence of
proper follow-up, can become NPAs.
The volume of amount borrowed by a single customer is very low as compared to
wholesale banking. This does not allow banks to to exploit the advantage of earning huge
profits from single customer as in case of wholesale banking.
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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.
All you need is to maintain an average balance of Rs. 1,00,000/- per quarter. When the QAB is
less than 1 lakh there is a service charge of Rs. 4000/- per quarter. Besides, free facilities
become chargeable as per schedule of service charges. Charges indicated exclude applicable
Service Tax
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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.
All you need is to maintain an average balance of Rs. 10000/- per quarter. (Non-maintenance of
this balance entails a nominal charge of Rs. 750/- per quarter).
Charges indicated exclude applicable service tax.
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
All you need is to maintain an average balance of Rs. 25,000/-per quarter. (Nonmaintenance of which entails a charge as per the following)
When the QAB is less than 25,000 there is a service charge of Rs. 1000 plus applicable
service taxes, per quarter. Besides, free facilities become chargeable as per schedule of
service charges. Charges indicated exclude applicable Service Tax.
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
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1) 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, then 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 to time.
AKSHAYA DEPOSITS: your deposit with interest will be reinvested every quarter to earn a
higher yield.
2) LOANS
HOME LOAN
HOME EQUITY LOAN
NRI LOAN
3) NRI SERVICES
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4) CARDS
DEBIT CARDS
CREDIT CARDS
REMMITANCE CARD
OPERATIONS
1) RTGS REAL TIME GROSS SETTLEMENT
RTGS can be defined as the continuous (real-time) settlement of funds transfers
individually on an order by order basis. 'Real Time' means the processing of
instructions at the time they are received rather than at some later time. 'Gross
Settlement' means the settlement of funds transfer instructions occurs individually (on
an instruction by instruction basis). Considering that the funds settlement takes place
in the books of the Reserve Bank of India, the payments are final and irrevocable.
The RTGS system is primarily meant for large value transactions. The minimum
amount to be remitted through RTGS is 2 lakhs. There is no upper ceiling for RTGS
transactions.
Under normal circumstances the beneficiary branches are expected to receive the
funds in real time as soon as funds are transferred by the remitting bank. The
beneficiary bank has to credit the beneficiary's account within two hours of receiving
the funds transfer message.
The remitting bank receives a message from the Reserve Bank that money has been
credited to the receiving bank. Based on this the remitting bank can advise the
remitting customer that money has been delivered to the receiving bank.
If the money cannot be credited for any reason, the receiving bank would have to
return the money to the remitting bank within 2 hours. Once the money is received
back by the remitting bank, the original debit entry in the customer's account is
reversed.
With a view to rationalize the service charges levied by banks for offering various
electronic products, a broad framework has been mandated as under:
a) Inward transactions Free, no charge to be levied
b) Outward transactions
2 lakh to 5 lakh - not exceeding Rs. 25 per transaction.
Above 5 lakh not exceeding Rs. 50 per transaction.
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CHEQUE CLEARING
Clearing is a process by which banks exchange instruments. Funds are transferred from the
drawer of the cheque to the payee. At ING, it is done thrice everyday at 10:00 AM, 12:00 PM
and 4:00 PM.
Maximum duration for local cheques 3 days
Maximum duration for outstation cheques 4 days
CLEARING PROCESS
Things to do at the desk
Accept
Cheque
Ensure
Process
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Outstation Outside NCR Region and payable at par is not written on the
cheque.
RCC RCC is the place in Karol Bagh, New Delhi where all cheques from all the branches of
ING VYSYA BANK are receieved and further distributed according to the addresses on the
respective cheques.
Return/Bouncing of cheques where Instant Credit was given and cheques sent for
local/outstation clearing :
If a cheque sent for collection for which immediate credit was provided by the Bank is returned
unpaid, the value of the cheque will be immediately debited to the account where the credit was
given. The customers will also be advised immediately about the bouncing of cheques.
On receipt of information about the return / non-payment of cheques sent for collection, the
customers will be immediately notified about the same and the appropriate charges as per the
schedule of charges, as applicable, will be recovered from the customers account, under advice
to the customers.
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BACKGROUND
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Micro
Enterprises
Small
Enterprises
Medium
Enterprises
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More than twenty five lakh rupees but does not exceed five
crore rupees
More than five crore rupees but does not exceed ten crore
rupees
Service Sector
Enterprises
Investment in equipments
Micro
Enterprises
Small
Enterprises
Medium
Enterprises
More than ten lakh rupees but does not exceed two crore
rupees
More than two crore rupees but does not exceed five core
rupees
S.No.
Particular
Value
140 Lakhs
Employment
600 Lakhs
Share in GDP
8-9%
45%
Share in exports
40%
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Small and Medium Enterprises (SMEs) sector in India is definitely growing at an exceptional
rate. Still, there are some important things that need to be focused upon so that best out of these
enterprises can be obtained. Here is a brief analysis of the Indian SME sector.
There are around 14 million SME units in India that produce more than 8,000 products.
Nearly 90 percent of the Indian industrial units belong to the sector of small and medium
enterprises.
The SMEs contribute 40 percent to the overall industrial output of the country.
The sector accounts for about 39% of the manufacturing output and around 40% of the
total export of the country. The major advantage of the sector is its employment potential
at low capital cost.
As per available statistics, this sector employs an estimated 60 million persons and the
labour intensity in the MSE sector is estimated to be almost 4 times higher than the large
enterprises.
Finally, these enterprises are estimated to grow at the rate of 20 percent per year for
upcoming years. In recent years the MSE sector has consistently registered higher
growth rate compared to the overall industrial sector.
Foreign and local fund providers are taking huge interest in the small and medium
enterprises of India.
Banking sector has also shown a keen interest in lending credit to these enterprises.
The sector has significantly contributed towards the domestic production as well as the
export earnings.
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The sector has contributed impressively towards job creation and increase in individual
incomes.
Technological growth is also a factor for growth of SME's in India as there are several
trade portals and business directories available online with huge database of buyers,
sellers, manufacturers who are basically back bone of SME's.
The SMEs are dominant players in some of Indias major export sectors namely Textiles
and Garments, Leather products, Sports goods, Gems and jewellery, Handicrafts among
others. They also contribute substantially in industrial goods segments in sectors such as
electrical, engineering, rubber and plastics.
Challenges Ahead
Even after recording an impressive growth in the recent years, the small and medium enterprises
of India face many challenges:
Infrastructure needs to be developed for setting up the SMEs in the rural sector of the
country. Transportation, electricity and communication are the main parts of the
infrastructure required.
Technology need to be evolved so that quality products are manufactured by the sector.
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Lack of information about the inputs, including raw material, machinery and skills, is one
critical challenge in front of the owners of these enterprises.
Small
and
Medium
Enterprises.
The Ministry of Micro, Small and Medium Enterprises (MSME) is the administrative Ministry
in the Government of India for all matters relating to Micro, Small and Medium Enterprises. It
designs and implements policies and programmes through its field organizations and attached
offices for promotion and growth of MSME sector. The Office of the Development
Commissioner (MSME) is an attached office of the Ministry of MSME, and is the apex body to
advise, coordinate and formulate policies and programmes for the development and promotion of
the MSME Sector. The office also maintains liaison with Central Ministries and other
Central/State Government agencies/organizations financial institutions.
In view of the Government of Indias ambitious target of average GDP growth rate of 9% during
the 11th Five Year Plan, SMEs are playing a vital role in achieving this target. It is imperative
for the government to address the major issues plaguing the sector and take further inclusive
growth oriented policy initiatives to boost the sector. This includes measures addressing
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BUSINESS LOAN
Assets of banks consist mainly of loans to businesses and consumers and their liabilities
comprise of various forms of deposits from consumers. Their main source of income is from
what is called as the interest rate spread, which is the difference between the lending rate (rate at
which banks earn) and the deposit rate (rate at which banks pay). Banks generally do not lend
100% of their deposits. They are statutorily required to maintain a certain portion of the deposits
as cash and another portion in the form of liquid and safe assets (generally Government
securities), which yield a lower rate of return. These requirements, known as the Cash Reserve
Ratio (CRR ratio) and Statutory Liquidity Ratio (SLR ratio) in India, are stipulated by the
Reserve Bank of India and banks need to adhere to them.
Bank gives loan to companies to meet their working capital requirement or as guarantee.
Working Capital refers to that part of the firms capital, which is required for financing short
term or current assets such as cash marketable securities, debtors and inventories. Funds thus,
invested in current assets keep revolving fast and are constantly converted into cash and this cash
flow out again in exchange for other current assets. Working Capital is also known as revolving
or circulating capital or short-term capital.
_ Demand of Industry
_ Cash requirements
_ Production Cycle
_ Credit control
_ Manufacturing time
_ Volume of Sales
_ Inventory Turnover
_ Business Turnover
_ Business Cycle
_ Repayment ability
_ Cash reserves
_ Operation efficiency
_ Change in Technology
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An overdraft allows the individual to continue withdrawing money even if the account
has no funds in it. Basically the bank allows people to borrow a set amount of money. As
security is always taken from the client against overdraft limit, it is a secured limit and
thus it is also called Secured Overdraft facility (SOD).
Cash Credit (CC) is same as Overdraft facility, Only difference between cash credit and
over draft is that in cash credit both stock and debt are considered while in overdraft
facility only debt is considered. Thus, client has to send monthly stock statements and list
of debtors to the bank from with monthly drawing power is calculated.
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Bill Discounting
Bill discounting is a major activity with some of the smaller Banks. In case of
discounting of a bill, a bank buys the bill (i.e. Bill of Exchange or Promissory Note)
before it is due and credits the value of the bill after discount charges to the customers
account. The transaction is practically an advance against the security of the bill and the
discount represents the interest on the advance from the date of purchase of the bill until
it is due for payment. Only usance bills are discounted.
Under this particular type of lending, Bank takes the bill drawn by borrower on
his(borrower's) customer and pay him or her immediately deducting some amount as
discount/commission. The Bank then presents the Bill to the borrower's customer on the
due date of the Bill and collects the total amount. If the bill is delayed, the borrower or his
customer pays the Bank a pre-determined interest depending upon the terms of
transaction.
Term Loan
Term Loan are the counter parts of Fixed Deposits in the Bank. Banks lend money in this mode
when the repayment is sought to be made in fixed, pre-determined installments. This type of loan
is normally given to the borrowers for acquiring long term assets i.e. assets which will benefit the
borrower over a long period (exceeding at least one year). Purchases of plant and machinery,
constructing building for factory, setting up new projects fall in this category. Financing for
purchase of automobiles, consumer durables, real estate and creation of infra structure also falls
in this category.
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Non-Fund based
Non-fund based facilities are such facilities extended by banks which do not involve outgo of
funds from the bank when the customer avails the facilities but may at a later date crystallise into
financial liability if the customer fails to honour the commitment made by availing these
facilities.
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Letter of credit
A Letter of Credit (LC) is a letter from a bank guaranteeing that a buyer's payment to a
seller will be received on time and for the correct amount. In the event that the buyer is
unable to make payment on the purchase, the bank will be required to cover the full or
remaining amount of the purchase.
LC are of two types- usance and sight. The main difference between the two is that in
Sight LC where the purchaser is not provided any credit period while in Usance LC
credit period is provided by the seller to make payment for the goods. Thus in Sight LC
the bank send the LC first and then the goods arrive whose papers remain with the bank
till the time the buyer make payment to the bank and signs these papers. On the sellers
side, the LC will be payable only once the goods are under the possession of bank and on
buyers side goods can be received only after the payment is done to the bank. In case of
Usance LC, goods are first dispatched and then the client is given a credit period in which
he has to make the payment to the seller. If the client does not make payment in the given
credit period, bank send the LC to the seller.
LC can be used for buying material from its own country or from foreign country. If the
goods are bought from its own country, in our case from India, it is called Inland Letter
of Credit (ILC). If the goods are bought from a foreign country i.e. imported, it is called
Foreign Letter of Credit (FLC).
Bank Guarantee
Bank Guarantee (BG) is a guarantee from a lending institution ensuring that the liabilities
of a debtor will be met. In other words, if the debtor fails to settle a debt, the bank will
cover it.
A bank guarantee and a letter of credit are similar in many ways but they're two different
things. Letters of credit ensure that a transaction proceeds as planned, while bank
guarantees reduce the loss if the transaction doesn't go as planned. A letter of credit is an
obligation taken on by a bank to make a payment once certain criteria are met. Once
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these terms are completed and confirmed, the bank will transfer the funds. This ensures
the payment will be made as long as the services are performed. A bank guarantee, like a
line of credit, guarantees a sum of money to a beneficiary. Unlike a line of credit, the
sum is only paid if the opposing party does not fulfil the stipulated obligations under the
contract. This can be used to essentially insure a buyer or seller from loss or damage due
to non performance by the other party in a contract.
While giving loans bank does the analysis of various parameters to check the risk associated with
the repayment of loan. One of the major parameter is financial analysis where key ratios are
analysed. In general the levels and risk associated with these key ratios are:
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Particulars
Current Ratio
Formula
Current Assets
Low
Medium
High
Risk
Risk
Risk
>1.40
1.20-1.40
<1.20
<2.00
2.00-3.50
<3.50
>3.50
2.00-3.50
<2.00
Current Liability
TOL/TNW
Total Outstanding
Liabilities
Total Net Worth
Interest Coverage
EBITDA
Interest & other
finance charge
PAT/Sales %
(PAT/Sales)*100
>10.00
4.00-10.00
<4.00
Inventory (N o.
Ending Inventory
<60
60-90
>90
<45
45-90
>90
<1.25
1.25-1.75
>1.75
>2.00
1.25-2.00
<1.25
Of days)
Debtors (No. of
days)
Average Gross
Receivables
Annual Net Sales /
365
Debt-Equity Ratio
Total Debt
Total Equity
EBITDA
Interest+Current
maturities in long term
debt
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SME LENDING
AT
ING VYSYA BANK
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2)
3)
4)
5)
Sanction letter.
record in the bank statement of client .We can check the track record with the help of the
following things.
1.
2.
3.
4.
5.
6.
7.
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.
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.
1. 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)
2. CURRENT RATIO of the company
3. MPBF (Maximum Permissible Bank Finance)
4. DSCR (debt security coverage ratio) in case of term loan
5. Profitability ratio (like gross profit margin, EBIDTA rate, PAT margin)
6.
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
1. Business background
2. Process of business.
3. Comment on financial statement of the company
4. Future plan of the company and comments on the projection.
5. Bank statement analysis
6. Promoters background
7. Market reference of the client
8. Industry scenario
9. Detailed terms & condition of the sanction including:
10. Type of limit to be sanctioned (fund based CC / OD/ TL/ PC/ WCDL etc & non fund
based - LC/BG/For ex limit etc.)
11. Amount of Limit to be sanctions
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12. Rate of interest (for fund based facility) and rate of commission (for non fund based
facility) and processing fee
13. Detail of security (primary and collateral)
14. Detail of Personal guarantee.
15. Other terms & conditions as required.
16. 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.
41 | P a g e
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.
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 parameters 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. Approval by ZCC: If the credit limit is below Rs5oo lakhs then the approval is sought
by Zonal head of the business banking and if the amount exceeds the above stated
42 | P a g e
amount then the case is first discussed by ZCC and is then presented on ECC(electronic
credit committee) depending upon the policy compliance failed by the client.
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.
43 | P a g e
Whole of my internship can be divided into three stages. At stage one I worked on drawing
power. This helped me to understand the significance of drawing power and method of its
calculation. At stage two I did OPERATIONS. This stage is a very important part of banking as
through this track banks real customer orientation is seen by doing fast and accurate work. Stage
three of my internship is credit appraisal. All these stages are described below in detail:
Drawing Power
Drawing Power tells us the monthly requirement of client having Cash Credit facility. For this
stock statements are analyzed and checked to see whether the given creditors and debtors are in
accordance with the details given by clients to the bank. The method used to calculate DP is:
1. We take monthly information of stock, Creditors and debtors from the client
2. We find the eligible debtors from the information given. This is found by calculating the
number of debtors less than certain days, specified by the bank during approval of loan.
3. Then we find the DP on Debt by the formula: eligible Debt x (1- margin on debt)
4. Similarly we find value of paid stock by subtracting creditors from total stock.
Once paid stock is found, we find DP on stock by the formula: Paid stock x (1-margin on stock)
6. Then we subtract this total DP by the outstanding facility enjoyed by the client from other bank. This
gives us net DP
If the net DP is less than the limit given by us then the Available DP is equal to net DP, otherwise
Available DP is equal to the credit limit given by IVBL.
44 | P a g e
45 | P a g e
300
500
300
75
200
60
400
1200
200
2.
3.
4.
5.
6.
7.
8.
9.
lakhs)
(in
Limit
1.
Case
174.1
5926.5
557.01
153.68
259.85
1052.7
2258
424.91
154.08
Stock
46.36
2303.67
787.12
253.506
33.71
1071.48
2714
241.19
0.00
127.74
3622.9
-230.11
-99.826
226.14
-18.74
-456
183.72
154.08
Stock
Creditor Paid
25%
25%
25%
25%
25%
25%
25%
25%
25%
249.48
257.8
1382.8
3249
462.12
518.21
504.00
2717.1
1612
3234.5
-172.58 222.19
-74.87
169.61
-14.06
-342
137.79
115.56
Days
90
Days
90
Days
90
Days
90
Days
90
Days
90
Days
90
Days
180
Days
90
upto
Dedt
n%
Stock
Valid
Margi DP on Total
1612
2699.8
22.19
249.48
190.51
1155.5
2617
461.78
468.37
Debt
Valid
35%
25%
40%
25%
35%
35%
25%
25%
35%
n%
Margi
1047.8
2024.9
13.31
187.11
123.83
751.12
1962.7
346.34
304.44
Debt
0.00
O/s
al
00
80
1551. 400
09
80
1151.
09
7
2242.
7
4742. 250
159.2
0.00
112.2
293.4
387.0
720.7
484.1
420
159.2
112.2 0.00
293.4 0
737.0 350.
75
1620. 900
484.1 0.00
420
DP
600.00
1200.0
0.00
60.00
200.00
75.00
300.00
484.13
300.00
Availabl
Credit Appraisal
What is the difference between fresh sanction and enhanced limits. For this we first make CAM,
Credit Appraisal Memo. The purpose of this memo can be:
1. Fresh Proposal The proposal of the company which has approached the bank for the first time, i.e.
which does not have any previous relationship with the bank.
2. Enhancement When a company is already enjoying one or more of the FB or NFB facilities from the
bank and wants to increase the limit for the same then enhancement proposal is made.
3. Adhov Sometimes for a certain period the given limit is not sufficient for the company to meet its
requirements. In such case Adhov limit, over and above the average sanction limit, is provided to the
client. Adhov is provided for maximum 90 days.
4. Review If the client is new or the performance of the company as per projected is doubtful then a mid
review date is decided while approving fresh/enhancement proposal. Is such case mostly the client asks
for more limit as predicted by bank to fullfill its requirement. So post sanction conditions are put to the
proposal, for example company has to maintain a turnover of 12 million and its TOL/TNW should not be
more than 6. To monitor whether these conditions are meet review proposals are made before the end
mid review month. The facility limit will remain same after sanction of review proposal only if all the
condition are fulfilled.
5. Renewal If the client wants to keep the facility limit same as existing limit, renewal proposal is made
before the end of existing facility.
46 | P a g e
I. Borrowers Background
This include details about line of activity and end product of client, business process of the factory,
promoters background, information about promoters share in the company and their experience,
infrastructure details of the company i.e. name and address of factories/offices/godowns of the clients
and information about the FB and NFB loan facilities enjoyed by the client from different banks.
III. Relationship/Business Rationale This includes details about relationship experience if the client is
already having relationship with the bank. Business rationale include the estimates of the earning
that the bank will get after the proposal is passed in the form of processing fee and gross interest.
IV. Financial Analysis of Client This includes the financial summary of the client for current year, audited
details of previous year and projections for next year. In this financial summary some ratios are also
included, they are TOL/TNW, inventory turnover, debtors turnover, creditors turnover and NP
margin. This financial summary is used to analyse various parameters about the company and
reason behind any major change in the company. The parameters that are analysed are turnover,
profitability, leverage and liquidity of the company.
V. Risk Appraisal - Once the proposal comes we analyse the profile of the company to calculate the risk
involved in giving the asked facility to it. The risk appraisal is done based on following risks:
47 | P a g e
1. Business Risk and outlook - It covers Market Dynamics, Competitive Positioning, Supply Chain
Management, Technological Development/ Obsolescence Risks, Dependence on Single Supplier,
Dependence on single Buyer and Products are dependent on a Single industry.
2. Management Risk - It covers Management capabilities, Dependence on few individuals, Presence of
professionals and succession plan.
3. Performance Risk - It covers Technical know-how, Raw material souring/availability, Product delivery
capabilities and Competition comparatives - cost, product features.
4. Structure Risk - It covers Product Structure, Document structure and Process Structure.
5. Industry Sector Concentration - It concentrates over exposure to a Particular industry by the Bank.
6. Country Risk - It covers convertibility, bans/sanctions on the country, Currency Risk.
7. Environment Risk - It covers the risks arising out of dealing with hazardous materials, disposal of
waste/effluent, Activities/Location dealing with social/environment issues.
8. Regulatory Risk - It covers compliance with statutory/Regulatory requirements, legal requirement and
lending regulations.
9. ING Vysya Banks Reputation Risk - It covers Moral and Ethical issues and Social/Governance Issues.
10. Specific Purpose of Asset Collateral - It cover the risks arising out of assets put to specific usage and
tailor made assets and the problems in disposal in case of need.
11. Financial Risks - It covers Operating Efficiency, Financial Stability and Cash Flows.
12. Transaction Risk - It covers Documentation Risk, Covers/Collateral Valuation Risk and Interest Rate Risk.
13. Any other Risk
VI. Take Out It covers both primary and secondary takeouts. It is the hypothecation and collateral
securities kept by the company with the bank which can be taken by the bank in case of default.
VII. SWOT It includes the strength, weakness, opportunities and threat of the company.
VIII. Policy Deviation Deviation from credit policy is also checked for the clients. There are three parameters
across which deviation is analysed and observed. They are deviation in credit policy financial
parameters, deviation in policy other parameters and verification of defaulter list.
(a) Deviation in Credit Policy Financial Parameters: The limits for the financial parameters
are decided by IVBL, across which deviation is to be calculated. Under this explanation /
48 | P a g e
justification for considering the request despite deviation has to be mentioned along with the
time frame within which the deviation has to be corrected and brought within the threshold level
has to be mentioned. The parameters and its limits are:
Parameter
Median
Threshold
0.03
Interest
(EBITDA/Interest
Coverage
&
Ratio 1.75
other
0.02
1.50
finance
charges)
Minimum
Current
Ratio
(Current 1.15
1.00
Assets/Current Liabilities)
Maximum Debt Equity (Total interest 2.00
3.00
bearing Debt/TNW)
3.50
4.50
1.25
Maximum TOL/TNW
(b) Deviation in Other Credit Policy Parameters: It includes exposure norms in unit and
industry/sector, tenor norms for exposure & rating, regulatory restrictions, takeover norms,
FEMA/FERA requirements and Sec 19(2) of Firm act. All these are supposed to be compiled
with the proposal and if not compiled then time lines has to mentioned within which compliance
will be done. This is important as it states various norms to be followed by the firm across which
deviations are checked to insure that in future company would not be facing any legal issues
related to these norms. This information also helps to understand the firm better and thus if any
change occurs in future the bank would be in a better position to examine the risk associated with
it and problems that bank could face in future.
49 | P a g e
(c) Verification of Defaulters List: We also check for the promoters in the default lists and take
out their cibil to check the credibility of the promoters. These defaulter lists are RBI Defaulters
list, Wilful defaulters list, RBI Caution list, ECGC and Special Approval list. CIBIL Database is
also checked.
IX. Highlights of credit investigation done It contains the summary of credit investigation report. CIR
includes:
- Observations made on statement of account of the client
- Personal enquiries made with banks/financial institutions
- Market opinion with customer of the client, creditors of the clients and independent sources.
- Details about visit to factory/office
- Information through any other source
- Conclusion to credit investigation.
have been made and there are no overdue and that all statutory approvals have been taken for
conducting the business/ manufacturing activity
XI. Summary of conduct of the account It is done in case enhancement/review/renewal. It includes very
short summary of Account performance and covered in detail in Account relationship and
monitoring sheet. Summary of account performance include earning of bank from this relationship
and detail about utilization of working capital limit. Utilization of working capital is found from MIS
system of IVBL.
XII. Cover/Collaterals and covenants It includes details about primary cover, collaterals and net worth of
the guarantees. This is done to insure that in case of default in repayment of facility, cover and
collaterals provided by the firm to the bank are sufficient to overcome losses.
XIII. Risk rating/Risk-reward/Profitability Bank earns profit from the facilities given in the form of the
gross interest and income through commission.
50 | P a g e
Clients Growth
51 | P a g e
and
growing
modest,
i.e.
>5%
change/
price
Excellent
Strong
Good
Satisfactory
Adequate
Marginal
Vulnerable
Parameter
(1)
(2)
(3)
(4)
(5)
(6)
(7)
Unfavourable
swings/ Hazardous
3 years
growth
annually
Good track record or more than 5 years Mature industry but with modest
years
Good track record for more than 10 Industry well established and
years
annually
Good track record for more than 15 Industry well eastablished and
stablished
Status
25 years
well
Industry/Business
Business Risk
Interest rate is decided at the time of approval of facilities. This interest rate varies from client
to client depending on their credit rating and previous relationship with bank. Base Rate of the
bank, IVBR ( ING Vysya Base Rate), is the minimum interest rate that can be enjoyed by the
customer.
Liquidity
52 | P a g e
with
established suppliers.
place.
in place.
comprtition
customers.
unimportant
to
<0.75
<1.0
is
relationship is unimportant.
> 1.0
one/
business.
on
large
with
market
share
or
>10%
player
compared to competition
Insignificant
player
market share
Supplier- Less than 5% market share
two
suppliers.
> 1.20
suppliers.
Dependant
customers.
> 1.33
Current Ratio Borrower is very important to the Borrower is very important to the Client has significant market
> 1.5
Current Ratio Long term contract with customers is in Long term contract with suppliers is Local market leader. Weak
established Customers.
relationship
Customers
> 2.0
term
Suppliers
Risk
Financial
Competitive Position
Family
History
53 | P a g e
Standing/
Members
established
family.
member
of DSCR
2.0
for DSCR
No No adverse reports.
1.25
DSCR
reports available.
1.0
or evidence available
1.0
Known familt fueds. New rich Integrity suspect but no proof DSCR
adverse reports.
Well
respected
2.5
family. Prominent
3.0
integrant. DSCR
independentaly.
established
Well
history.
regarded
Well
inters. family with a long Generally
cultural
Highly respectable.
DSCR
growth > 5%
< 1.5
fluctuating
Negative
< PBDIT
5%
< 2.5
No sales history
> 4.0
TOL/TNW
> 2.5
show TOL/TNW
declining trend
5%
< 2.0
widely TOL/TNW
10%
15%
< 1.0
average TOL/TNW
20%
average TOL/TNW
< 0.5
average TOL/TNW
growth > 20%
25%
PBDIT/Sales
Integrity
integrity. DSCR
Sales Growth
Management Risk
Leverage
is
the
only
Management
Commitment
54 | P a g e
in finance/ administration.
Fair liquidity.
need.
this business.
minority
susceptible.
is
thinking.
Commitment is unclear.
This
year to year.
Level of commitment changing from Average competence. Lacks strategic Free assets available but liquidity is
Commitment is adequate.
This is one of the several activities. Good business sense, but perhaps weak Free assets > 50% gross Liabilities.
Satisfactory liquidity.
Good liquidity.
enterprising
Strong liquidity.
knowledgeable.
competent,
Highly enlightened.
Competence
Management
Unwavering commitment.
This
Financial Standing
internal
Internal Controls
55 | P a g e
issue.
management.
Succession
no
step-in.
controls
exist
questionable loyalty.
employees,
lacks motivation.
takeover.
experienced.
have
Not formal internal controls. Employees are new and/or not One man show. But professional managers
succession plan.
largely untested.
Internal
Good internal control systems. Motivated and loyal employees Owner/s have well defined and practical
Good internal controls. Have Highly qualified and motivated Successor is already identified and ready to
Employee Quality
Excellent
Succession
extensions sought.
Attitude to compliance is lax or New A few payments delayed upto
or
few days
conditions can not be complied with. delayed for a
occasionally
are
when Payments
approval
prior
Seeks
complied with.
All major/ critical conditions are All payments are made on time.
covenants.
Occasionally prepays.
record.
record of payment.
repayment
Complies with all conditions and Good
prepays
Compliance Record
always
Repayment Record
The Commission earned by the bank depends on the type of proposal/facility. IVBL charges 0.5%
on the renewal of the existing limit. While if it is a case of enhancement of limit or fresh
proposal, 1% is charged on the limit provided.
Credit Risk Rating is an important part of Credit Appraisal as it determines the risk associated
with the bank and thus profitability of the bank. To do credit risk rating we first calculate the
credit risk which is further divided into three heads Business Risk, Financial Risk and
Management Risk.
While calculating cumulative risk of the firm, we give marks to the firm on the basis of various
parameters under each head and find risk in respective head. Once individual risks are found, we
56 | P a g e
do weighted summation to find the overall score of the firm based on which Credit Risk Rating
is given to the firm.
Credit Risk rating varies from CRR1 to CRR7. The parameters are rated based on following
condition:
After giving score to each parameter, risk rating is calculated for business risk, Financial risk and
management risk. It is a average of all sub parameter under a particular group.
The final score of the firm is the cumulative summation of all twenty parameters. On the basis of
this cumulative score overall Credit Risk Rating of the firm is done as follows:
Total Score
Remark
20 to 29
Excellent
30 to 49
Strong
50 to 69
Good
70 to 89
Satisfactory
90 to 109
Adequate
110 to 129
Marginal
130 to 140
Vulnerable
Credit Risk Rating of a firm is always done based on the details of latest available audited Balance Sheet
and Profit & Loss statements.
57 | P a g e
CASE DETAILS
ABC INDIA PVT. LTD
Application No.
Borrower Name
Banking arrangement
Line of activity
Constitution
Sub-section for PSA
Type of Exposure
Approval Authority
Limits valid till
No of Policy deviations
Control Information
10/06/10
Application date
ABC India Pvt. Ltd.
Sole
Standard
Asset Classification
Manufacturing of
No
Priority Sector
Auto Dies
Private Limited
New customer
Banking with IVBL
company
since
Manufacturing
Service Enterprise
Micro
Small
Renewal
Review
Enhancement
Fresh Ad hoc
Others
ZCC
NA
Last approval on
30.06.11
Mid review date (if any) None
1
NA
Grmeoup N
Particulars
Remark
(Financial Information per last audited
accounts as on 31-Mar-10)
Industry/Business Status
Clients
History-Growth
in
Suppliers
Customers
Liquidity
0.74
Leverage [TOL/TNW]
2.04
58 | P a g e
Sales Growth
PBDIT/Sales
>5%
DSCR
Integrity
Family Standing/History
Financial Standing
Good Liquidity
Management Competence
Very competent
Management Commitment
Strong commitment.
Succession
Employee Quality
Motivated employees
Internal Controls
Repayment Record
New Relationship
Compliance Record
New Relationship
4.0
4.6
3.2
Total
75
CRR
Proposed
Borrower
Group
Borrower
Group
Exposure
Nil
Nil
900.0
900.0
CRR
59 | P a g e
PURPOSE OF APPLICATION:
i. Credit facilities recommended
Nature of
facility1
1.
TERM LOAN
2.
CC
200.0
200.0
3.
Bank
Guarantee
200.0
200.0
Total
900.0
900.0
60 | P a g e
Existi
ng
Limit
Sl No
TermsRoI,
margin,
tenor, usance period,
commission details, etc)
Existing Proposed
4.25 % below
IVRR
i.e.11.50%p.a.
(Currently IVRR
is at 15.75%)
Margin: 25%
Repayable in 60
monthly
installments of
Rs. 8.33lacs
along with
interest, starting
from Jan 2011
onwards
4.25 % below
IVRR
i.e.11.50%p.a.
(Currently IVRR
is at 15.75%)
Margin: 25%
0N STOCK
AND BOOK
DEBTS
Commission: 1.2%p.a., Cash
Margin: 20%,
Tenor max 36
Months
1) Sales
2) PBDIT
3) Interest
4) Depreciation
5) Taxes
6) PAT
7) Capital
8) Unsecured Loans
9) Loans from Other/Our Banks
1,530.98
349.88
65.65
153.67
0.00
130.56
1,087.96
0.00
2,194.00
592.00
95.00
250.00
74.10
172.90
1,260.86
0.00
495.24
1,026.85
1,487.76
a) Term Loans
558.46
b) OD/CC
10) Current Lia.
11) Non Current Liabilities
12) Fixed Assets
13) Current Assets
a) Stocks
b) Debtors
c) Cash & Bank Bal. In current a/cs
453.75
653.43
650.00
650.00
450.00
600.00
1,465.11
557.78
1,667.78
1,102.61
524.95
497.93
51.56
1,804.32
451.76
1,630.68
1,446.62
873.76
410.95
51.97
1,387.34
493.25
1,595.96
1,043.20
441.90
327.05
133.16
1,262.16
1,012.76
2,084.03
1,203.33
896.74
99.08
139.73
1,481.00
1,387.76
2,508.83
1,549.84
974.00
225.00
110.00
125.96
0.75
2.32
60.77
0.80
2.56
165.78
0.75
2.04
74.94
0.95
2.09
70.46
1.05
2.28
(With USL)
2.32
2.56
2.04
2.09
2.28
130
1163
167
432
305
91
164
72
24
37
34
120
171
194
110
21) NP margin
22) EBIDTA Margin
-1.8
0.9
2.13
8.53
7.88
9.1%
24.7%
16.8%
23.1%
27.0%
14) Non CA
15) Current Ratio
17) TOL/TNW (without USL)
61 | P a g e
26%
1.39
2.32
70%
1.25
2.91
42%
1.24
3.00
50%
1.36
5.23
Turnover:
The Turnover of the company has shown fluctuating trend in past few years. It was at Rs.
1994.45 lacs in FY07, which decreased by 54% to Rs. 913.85 lacs in FY08. Then in FY09 the
turnover has increased by 82% to Rs. 1664.90 lacs. The increase in turnover of the company is
increased due to complete makeover of the work culture at the shop floor by adopting top to
bottom and bottom to top managerial systems.
The company has worked on 209 small and big dies /fixtures/DBO tools as compared to 191
small and big dies /fixtures/DBO tools during last year.
The reason for decline in sales during 2007-08 was mainly due to increase in inventory as at
March 31, 2008 as compared to inventory as at March 31, 2007 which could not be billed even
though the Dies were ready. The delay in billing is sometimes due to request received from the
customer also, if there is delay in launch of new model or new variant of the vehicle at their end.
The major jump in turnover during 2006-07 was due to complete outsourcing of dies from
Thailand and Pune for some orders received from customers, however, due to quality problems
in those outsourced dies, this practice was totally discontinued in subsequent years. The
additional work required to be done in house on those outsourced dies caused the loss incurred
during 2006-07.
Similarly, the decline in sales during 2009-10 was also due to increase in inventory as at March
31, 2010 as compared to inventory as at March 31, 2009 which could not be billed even though
the Dies were ready.
In provisional year 2010 the same has been decreased marginally by 8% to Rs. 1530.98 lacs due
to the tough economic condition
Further the same has been projected at Rs. 2194.0 lacs for FY11 and at Rs. 3500.0 lacs for FY12.
As stated above, the company is into manufacturing of sheet metal dies, from 2012 onwards the
company will be producing proto dies, welding jigs, stamping compone NTS.
62 | P a g e
47%
1.66
5.43
Sales bifurcation for sales of dies and sales of proto, jigs and welding fixtures:
Particular
2011
Sales of Dies
2194.0
Sales of proto, jigs and welding fixtures
Total
2194.0
2012
2300.0
1200.0
2013
2415.0
1500.0
2014
2550.0
1875.0
2015
2800.0
2062.50
3500.0
3915.0
4425.0
4862.50
2 quarter
3rd quarter
4th quarter
Total
Sales in Rs Lacs
445.0
550.0
310.0
226.0
1531.0
Profitability:
EBIDTA margins of the company also following the fluctuating trend. It was at 25% in FY08,
which decreased to 17% in FY09 due to fluctuation in COGS and sales and admin expense. In
provisional year 2010 EBIDTA margins increased to 23% due to decrease in COGS from 57% to
49%. In order to reduce cost of productions the company has obtained 700 KVA electricity
connections from Dakshin Haryana Bijli Vitran Nigam Ltd. The company has been able to save
rupees 10.54 lacs during first four month of current year. Further the same has been projected at
26% for FY11 and at 23% for FY12.
Net profit is increasing year on year, it was at 0.9% in FY08, which increased to 2.15 in FY09
Variation in Profit after tax from year to year is due to varied mark ups given by the different
customers on the orders received. The dies manufactured for different customers are also
different from each other as the complexity of each die varies. Further till 2008-09 any change in
price of diesel had affected the profitability as the plant was being run on self generated power
through generators. Moreover, the varied percentage in annual salary review also causes
variation in Profit. It is submitted that during 2009-10, the profitability has increased mainly due
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to two reasons. Firstly, the company got an electricity connection of 700 KVA from Haryana
Government because of which the electricity and fuel cost has gone down from Rs. 80.21 lacs to
Rs. 48.20 lacs as appearing in schedule of Manufacturing Expenses. Secondly, during 2009-10,
Rs. 200 lacs out of total credit facilities from Mizuho Corporate Bank were converted from
Working Capital Demand Loan to Cash Credit. This has enabled the company to save interest, as
during major part of the year, the cash credit facility was not fully utilized. The finance cost had
gone down from Rs. 90.90 lacs to Rs. 65.65 lacs during 2009-10.
Further interest cost is projected at Rs. 95.0 lacs for FY11 as almost 3 months gone in this
financial years and the disbursement will also take another 1-2 months and will be in phases,
hence we took the interest at Rs. 95.0 lacs in FY11 and further proposed at Rs. 130.0 lacs for
FY12.
Further the same has been projected at 7.3% for FY11 and further on projected around 7.5%.
Leverage:
TNW of the company comprises of share capital, reserve and surplus.
TOL of the company comprises of sundry creditors, working capital bank finance and short-term
loan from banks and financial institutions.
The TOL/TNW of the company is at comfortable level in all the years. It was at
and at 2.09 for FY10. Further the same has been projected at same levels for next years.
Liquidity:
Current assets of the company comprises of inventory, debtors and cash & bank balance. Current
liabilities of the company comprises of sundry creditors and working capital bank finance and
other term liabilities.
The current ratio of the company is on lower side. It was at 0.58 in FY09 and at 0.98 in FY10
and the same has been projected at 1.05 for FY11.
As explained earlier that the reason of carrying high value of inventory is some times due to
delay in accepting the dies by customers, which are ready for billing. Further, when the company
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is executing orders worth about Rs. 20-25 lacs, then inventory of semi finished dies at different
stages of completion is bound to add to high value of inventory. None of the inventory is waste
inventory.
Stock Debtor creditor position of last 3 months is as follows
MONTH
Jan 2010
Feb 2010
2.
Debtors
Stock
632.53
768.96
431.95
353.52
Creditors
656.92
773.55
RISK APPRAISAL
i.
Management Risk
Both Japanese and Indian directors have good competence and required know
how to manage the company.
iii.
Performance Risk
The company has requisite technical knowhow acquired over a period of time
and has the required knowledge required to manufacture the dies
one of the key success ingredient in the industry.
iv.
Structure Risk
The customer shall be mainly offered with cash credit, term Loan, Bank
Guarantee, It does not entail any structural risk
3.
TAKE OUT
Primary: - Companies all past and future current assets.
Secondary: - Industrial property in Manesar
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4.
SWOT
Strength:
The strength of company is Good knowledge and experience in the field. Established
existing loyal customer base developed with relationship of several decades.
Strong backing of parent company in Japan.
Presently all car manufacturers are frequently launching new models or are modifying the
existing ones, therefore, the requirement of new dies is increasing.
Weakness: Dependency on auto industry.
Opportunity: Auto industry has shown good growth in India. Further the prototype designing is also
picking up.
Threat: Major threat in the segment is competition as there are many players in the segment and
the retention of customer is a tough ask. But keeping in mind the experience of the
company and relationship it has with customer it has been able to retain its share and
grow steadily.
5.
POLICY DEVIATION:
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As per the last audited financial statements, all IT/ST/ PF/ESI payments have been made and
there are no overdue and that all statutory approvals have been taken for conducting the business/
manufacturing activity.
8. SUMMARY OF THE CONDUCT OF ACCOUNT
We have verified the bank statements of the company for last 6 months and have found the
conduct of the account to be good.
9.
i. Primary
Pari passu charge on the entire current assets of the company.
First charge on fixed assets created by the proposed term loan
ii. Collaterals
Land
Present
Proposed
Nil
Building Machinery
Nil
Others
Nil
Nil
Total
Nil
Rs.1300.0lakhs
Cover
%
Nil
144%
Present
Promoters
Other persons
Corporate / Group
concerns
Nil
Nil
Nil
Proposed
Total
Nil
a. Risk Rating
Risk rating
As of 31.03.09
CRR4
Previous rating
NA
b. Rewards / Profitability
Gross
Interest
Revenue projected last year
Actual last year
Revenue projected current 9000000
year
Actual Current year YTD
Other benefits including FTP from
deposits
Commission
Other
charges
Total
200000
500000
9700000
12. CONCLUSION/RECOMMENDATION
In view of the submissions above, the proposed limits are recommended.
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BIBLIOGRAPHY
Books :
WEBSITES: http://www.wikipedia.com
http://www.investorwords.com
http://www.ing.in
http://www.economictimes.indiatimes.com
http://www.investopedia.com
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