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A PROJECT REPORTON
OVERALL WORKING OFPUNJAB NATIONAL BANK
ForPUNJAB NATIONAL BANK
SUBMITTED IN PARTIAL FULLFILLMENT OF
THE REQUIREMENTS FOR AWARD OF
MASTERS OF BUSINESS ADMINISTRATION OF
TILAK MAHARASTRA UNIVERSITY, PUNE
SUBMITTED BY
SHWETA SRIVASTAVA
PRN:07208014820
INSTITUTE OF BUSINESS STUDIES AND
RESEARCH, NAVI MUMBAI
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DECLARATION
I, Shweta Srivastava, Student of III-semester (Finance) Institute of Business
Studies and Research declare that the project on Overall Working of
Punjab National Bank is the result of my own efforts and it is based on
data collected and guidance given to me.
I have prepared it during my Summer Internship period June-
August 2009 and the Project was completed on 31 august 2009 .This report
is correct to best of my knowledge and so far has not been published
anywhere else.
SHWETA SRIVASTAVA
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ACKNOWLEDGEMENT
It is said No learning is possible without proper guidance and
encouragement. Endeavor a solo exercise and some contribution is
performed by various individuals. Concentration, dedication and
application are necessary but not sufficient to achieve any goal. These
must be awarded by guidance, assistance and cooperation of many people
to make it enable. My sincere gratitude goes to Mr. Bharadwaj, Area
General Manager (AGM) for providing us an opportunity to join internship
at their esteemed organization. I am highly indebted to the Senior Manager
Mr. P.C Upadhyay (HRD) for his inevitable help and proficient guidance.
I am extremely thankful to Mr. Ginilal burhil whose efforts made a place for
us at a reputed organisation for internship. I also take this opportunity to
thank all the teachers for the knowledge they imparted. I am especially
thankful to Dean of IBSAR and my faculty guide Prof.Shukla for his
valuable guidance, and timely help and support. He has given me his
constant support and guidance during the course of project work and I feel
extremely fortunate to work under him.
I would like to express my gratitude to all the employees of the bank Mr.
Arun Rai, Mr. Pankaj, Mr. Wallia and Mr. Charu Bhattacharya. They had
been a great help and support at every step. They guided me and were
quite patient to teach me all the routine tasks during banking transactions.
Therefore I would like to thank every employee of the bank for their co-
operation.
With pleasure I acknowledge the help, support and prayers offered to me
by my families and friends.
Last but not the least i would love to thank almighty God for being with
me.
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CONTENTS
CHAPTER 1 : RATIONALE OF THE STUDY
5-6
CHAPTER 2 : OBJECTIVE OF THE STUDY 7-8
-TITLE OF THE PROJECT
-OBJECTIVE OF THE STUDY
-SCOPEOF THE STUDY
CHAPTER 3 : PROFILE OF THE COMPANY.9-23
CHAPTER 4 : REVIEW OF LITERATURE. 24-45
CHAPTER 5 : RESEARCH METHODOLOGY.. 46-49
-RESEARCH DESIGN
-DATA COLLECTION METHODS AND SOURCES
-SAMPLING PLAN
CHAPTER 6 : DATA ANALYSIS AND ITERPRETATION. 50-67
CHAPTER 7 : FINDINGS. 68-70
CHAPTER 8 : RECOMMENDATION AND SUGGESTION.. 71-73
CHAPTER 9 : LIMITATION.. 74-75
COPY OF QUESTIONNAIRE..76-79
BIBLIOGRAPHY 80
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CHAPTER 1
Rationale Of
The Study
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RATIONALE OF THE STUDY
Summer training is one of the most important segment of any MBA
program. It helps to enhance the knowledge of the student and also
provide a platform where an individual tastes the real happening of thecorporate world and market.
Intending to specialize in marketing I took up this project which is titled as
OVERALL WORKING OF PUNJAB NATIONAL BANK.
The reason behind picking up this topic was to get into a scene of banking
sector in India. How the bank works what are its significance and role
,various services provided by the bank to their customers and its day to
day business. Banking sector is a sector which is full of new opportunities
in terms of career prospects and economic knowledge.
This project would not only be beneficial for my career but it would also be
of great help for the organization as well. Working in banking sector in
present economic meltdown helped me to understand the present
economic situation as well as how this industry is still keeping up with it.
With the help of this project company would be able to make out the
strategies and its scope of improvement in regard of services provided to
its customers.
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CHAPTER 2
OBJECTIVE OF
THE STUDY
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OBJECTIVES OF THE RESEARCH
The primary objective of this research project is to understand, analyze and
interpret the banking sector dynamics, its working in the trade, its
customer services and various case studies.
My job was to identify the key factors which a customer see in their bank or
expect to have from their bank.
Secondary objective of the research is:
To understand the day to day working of the bank.
To understand the formalities and other things to be executed before
issue of any kind of loan or any other grant.
Scope of study
The study pertains to the customer of PNB as well as the internal
working of the same.
The study shows the customer expectation from PNB and scope of
improvement.
The brief study about risk management, assets liability management.
The study also shows various things that affect customer-banker
relationship.
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CHAPTER3
PROFILE OF
THE COMPANY
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INDUSTRY PROFILE
The banking section will navigate through all the aspects of the Banking
System in India. It will discuss upon the matters with the birth of the
banking concept in the country to new players adding their names in the
industry in coming few years.
The banker of all banks, Reserve Bank of India (RBI), the Indian Banks
Association (IBA) and top 20 banks like IDBI, HSBC, ICICI, ABN AMRO, etc.
has been well defined under three separate heads with one page dedicatedto each bank.
However, in the introduction part of the entire banking cosmos, the past
has been well explained under three different heads namely:
History of Banking in India
Nationalization of Banks in India
Scheduled Commercial Banks in India
The first deals with the history part since the dawn of banking system in
India. Government took major step in the 1969 to put the banking sector
into systems and it nationalized 14 private banks in the mentioned year.
This has been elaborated in Nationalization Banks in India. The last but not
the least explains about the scheduled and unscheduled banks in India.
Section 42 (6) (a) of RBI Act 1934 lays down the condition of scheduled
commercial banks. The description along with a list of scheduled
commercial banks are given on this page.
With years, banks are also adding services to their customers. The Indian
banking industry is passing through a phase of customers market. The
customers have more choices in choosing their banks. A competition has
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been established within the banks operating in India.
With stiff competition and advancement of technology, the services
provided by banks has become more easy and convenient. The past days
are witness to an hour wait before withdrawing cash from accounts or a
cheque from north of the country being cleared in one month in the south.
This section of banking deals with the latest discovery in the banking
instruments along with the polished version of their old systems.
Major Key players
Public SectorBanks
Allahabad BankAndhra BankBank of BarodaBank of IndiaBank of MaharastraCanara BankCentral Bank of
IndiaCorporation BankDena BankIndian BankIndian OverseasBankOriental Bank ofCommercePunjab & Sind BankPunjab NationalBankState Bank of India
Syndicate BankUCO BankUnion Bank of IndiaUnited Bank of IndiaVijaya Bank
Private SectorBanks
Centurian BankCity Union BankFederal BankCatholic SyrianBankSaraswat BankDhanLakshmi Bank
Kotak BankCosmos BankLakshmi VilasBankBank of RajasthanBank of PunjabING-Vysya BankKalyan BankKarur Vysya BankUnited WesternBankSouth Indian Bank
IndusInd BankHDFC BankJammu & KashmirBank
Foreign Banks inIndia
Standard CharteredBankAmerican ExpressBankBanque NationaleDe ParisCiti Bank
ABN Amro BankAsian DevelopmantBankAbu Dhabi C.BankANG BankHSBC
InternetBanking
ICICI BankFederal BankState Bank of IndiaIDBI BankBank of Baroda Bankof BarodaHDFC Bank
State Bank ofTravancoreHSBCPunjab National BankIndusInd BankUTI BankBank of PunjabCanara BankCorporation BankING-Vysya
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Table 1
Total Income Wise Listing
Bank NameNumber ofBranches
No.ofEmployees
TotalIncome(Rs
Mn)
Net Profit(Rs Mn)
State Bank of India 9143 198774 431836 44067ICICI Bank Limited 557 25479 187676 25401
Punjab National Bank 4066 58047 108153 14393
Canara Bank 2532 46893 100890 13432
Bank of Baroda 2687 38737 82917 8270
Bank of India 2563 41808 82131 7014
Industrial DevelopmentBank of India Limited
173 4548 66612 5609
Union Bank of India 2095 25421 64888 6752
Central Bank of India 3143 37241 59164 2574
HDFC Bank Limited 515 14878 55993 8708Indian Overseas Bank 1523 24178 51345 7834
UCO Bank 1749 24510 48183 1966
Oriental Bank of Commerce 1161 14962 46717 5572
Syndicate Bank 1897 24624 46420 5365
Allahabad Bank 1932 18742 43739 7061
Table 2
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3.1 COMPANY PROFILE
Banking in India originated in the first decade of 18th century. The General
Bank of India came into existence in 1786. Punjab National Bank (PNB),was registered on May 19, 1894 under the Indian Companies Act with its
office in Anarkali Bazaar, Lahore. The Bank is the second largest
government-owned commercial bank in India with about 4,500 branches
across 764 cities. It serves over 37 million customers.
The bank has been ranked 248th biggest bank in the world by Bankers
Almanac, London. The bank's total assets for financial year 2007 were
about US$60 billion. PNB has a banking subsidiary in the UK, as well as
branches in Hong Kong and Kabul, and representative offices in Almaty,
Shanghai, and Dubai. A professionally managed bank with a successful
track record of over 110 years.
PNB also has the Largest branch network in India - 4525 Offices including
432 Extension Counters spread throughout the country.
In 2001-2002, PNB embarked upon a transformation journey unparalleled in
the country in terms of scale and technology. The bank became the first
public sector bank in India to opt for a new generation core banking
platform Finacle from Infosys. Since then, Finacle has enabled the bank
to consolidate and centralize its operations,improving branch efficiency
and productivity per employee. Consolidation has also resulted in
reduction of revenue leakage and cost, while increasing ease of technical
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support and maintenance at branches.
With over 38 million satisfied customers and 4668 offices, PNB has
continued to retain its leadership position among the nationalized banks.
The bank enjoys strong fundamentals, large franchise value and good
brand image. Besides being ranked as one of India's top service brands,
PNB has remained fully committed to its guiding principles of sound and
prudent banking. Apart from offering banking products, the bank has also
entered the credit card & debit card business; bullion business; life and
non-life insurance business; Gold coins & asset management business,
etc.
PNB has always looked at technology as a key facilitator to provide better
customer service and ensured that its IT strategy follows the Business
strategy so as to arrive at Best Fit. The bank has made rapid strides in
this direction.
PNB has achieved significant growth in business which at the end of March
2009 amounted to Rs 3,64,463 crore. Today, with assets of more than Rs
2,46,900 crore, PNB is ranked as the 3rd largest bank in the country (after
SBI and ICICI Bank) and has the 2nd largest network of branches (4668including 238 extension counters and 3 overseas offices).During the FY
2008-09, with 39% share of low cost deposits, the bank achieved a net
profit of Rs 3,091 crore, maintaining its number ONE position amongst
nationalized banks. Bank has a strong capital base with capital adequacy
ratio as per Basel II at 14.03% with Tier I and Tier II capital ratio at 8.98%
and 5.05% respectively as on March09. As on March09, the Bank has the
Gross and Net NPA ratio of only 1.77% and 0.17% respectively. During the
FY 2008-09, its ratio of priority sector credit to adjusted net bank credit at
41.53% & agriculture credit to adjusted net bank credit at 19.72% was also
higher than the respective national goals of 40% & 18%.
Amongst Top 1000 Banks in the World, The Banker listed PNB at 250thplace. Further, PNB is at the 1166th position among 48 Indian firms making
it to a list of the worlds biggest companies compiled by the US magazine
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Forbes.
3.2 VISION AND MISSION OF THE BANK
VISION
To be a Leading Global Bank with Pan India footprints andbecome a household brand in the Indo-Gangetic Plains,
providing entire range of financial products and services underone roof.
MISSION
Banking for the unbanked
3.3 Financial Performance:
Punjab National Bank continues to maintain its frontline position in the
Indian banking industry. In particular, the bank has retained its NUMBER
ONE position among the nationalized banks in terms of number of
branches, Deposit, Advances, total Business, operating and net profit in
the year 2008-09. The impressive operational and financial performance
has been brought about by Banks focus on customer based business with
thrust on SME, Agriculture, more inclusive approach to banking; better
asset liability management; improved margin management, thrust on
recovery and increased efficiency in core operations of the Bank. The
performance highlights of the bank in terms of business and profit are
shown below: (Rs. In Crore)
Parameters Mar'07 Mar'08 Mar'09 CRAR
Operating Profit* 3617 4006 5744 26.02
Net Profit* 1540 2049 3091 41.67
Deposit 139860 166457 209760 22.47
Advance 96597 119502 154703 26.55
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Total Business 236456 285959 364463 24.15
3.4 ORGANISATIONAL STRUCTURE:
Executive cards of the organization. They are Executive Director, General
Manager (GM), Deputy General Managers (DGM), assistant General
Managers (AGM), Chief Managers (CM), Managers and other officers are in
the hierarchy at the head office level functioning in various Departments.
The Zonal Manager and regional Managers head the Zonal Offices and
Regional Officers respectively who are assisted by other down in the
hierarchy. The Branch is headed by AGM\CM\ Senior Managers\Managers
depending upon the size of the Branch activities and rendering of
satisfactory customer service.The bank has a very good system of delegating power to the different
functionaries in the hierarchy to facilitate speedy decision- making process
even up to the branch Level.
Head Office
Circle Offices (58)
Branches (4267)
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3.5 HIERACHY
Chairman
Executive director (ED)
General Manager (GM)
Deputy GM
Assistant GM
Chief Manager
Senior manager
Manager
Officers
Subordinate/ Clerical staff
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3.6 Present heads
Chairmen and Managing Director
Dr. K.C Chakrabarty
Executive Directors:
Sh. M.V.TanksaleSh. Nagesh Pydah
Chief General Manager:
R. I. S. SidhuL. P. Agarwal
Ranjan DhawanI. D. Singh
General Manager:
P. K. MitraB. P. Chopra
V.K SoodS. Ranganathan
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3.7 HIGHLIGHTS OF THE BANK FOR THE YEAR 2008-09;
1) Delhi Circle has unique distinction in many parameters. Total
business of Delhi Circle is to the tune of Rs. 55000 Crores (Rs. 30000
crore as Deposits and Rs. 25000 crore as advances).
2) PNB has very strong foothold with customer base of 35 lacs i.e.
every 4th citizen of Delhi is connected to PNB. He also mentionedthat, Delhi Circle is having 279 ATMs covering almost all Metro
stations, Railway. Stations, domestic & international airport. All
major PSUs are associated with PNB.
3) BSNL-PNB joined hands & launched BSNL Bill payment through
PNB ATMS.
4) Delhi Circle has recently opened over 67000 No Frill accounts under
financial inclusion at various locations in Delhi.
5) Bank has achieved ALL prescribed national goals under Priority
sector lending :-
6) Priority sector (PS) advances crossed the landmark of Rs.50,000
crore, accounting for 41.53% of the Adjusted Net Bank Credit (ANBC)
as against the national goal of 40%;
7) Despite the implementation of Debt Wavier, credit to direct
agriculture increased by a robust 33.3 %. Total agriculture credit as
percent to ANBC was 19.72 % as against the national goal of 18%.
8) Credit to weaker section was 11.19% of ANBC as against the national
goal of 10%.
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9) SME which is the thrust area of the bank registered a growth of
30.2% bank has adopted a number of measures to facilitate credit
delivery to the SME sector, as recommended by the RBI appointed Dr
K.C Chakrabarty Working Group on Rehabilitation of sick SME;
10)Education loan, a thrust area of the bank increased by 50.6%;
11)Despite the aggressive rate cuts, Net Interest Margin expanded to
3.62% from 3.58% last year;
12)Return on equity improved to 23.5% from 19.0% last year
13)Return on assets improved to 1.39% from 1.15% last year
14)Earning Per Share (EPS) improved to Rs.98.03 from Rs.64.98 last
year
15)Staff productivity measure in terms of business per employee
increased to Rs. 6.55 crore from Rs. 5.05 crore last year;
16)Introduction of door-step banking in New Delhi
17)Launching of e-governance in Bihar for common service center for
village level entrepreneurs(VLE)
18)Six pilot projects for financial inclusion of rickshaw pullers in
Varanasi, Allahabad, Lucknow, Patna, Meerut, Surat and Bangalore.
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3.8 MILESTONES:-
During the year bank has also crossed several other milestones of
great significance including:
1 PNB is the first Bank in India to introduce Core Banking
Solution (CBS) on Finacle. During 2008-09, Bank achieved the
landmark of becoming the first Nationalized Bank to bring ALL
branches / extension counters into CBS.
2 Recording the highest total business of Rs. 1,54,703 crore as
at March 31, 2009 amongst the Nationalized Banks.
During the year 2008-09, bank remained focused and delivered a sterling
performance despite the turbulent financial environment. The year 2008-09
proved beyond doubt that the fate of nations is intrinsically interlinked with
that of their financial systems. Bank is fundamentally sound and strong.
Bank earned an Operating Profit of Rs.5744 crore and Net Profit of Rs.
3091. PNB registered this impressive performance, after making an
additional tax provision of Rs. 85.27 crore relating to Income Tax of
previous years and Rs.500 crore towards wage revision [cumulative Rs.600
crore]. PNB is the first Nationalised Bank to book Rs. 1000 crore as net
profit in a single quarter (Oct-Dec 2008).
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3.9 AWARDS AND ACHEIVEMENT BY PNB:
Best IT Team of the Year Award at the IDRBT Banking Technologyawards for the year 2005-06.
SKOTCH Challenger Award for Change Management for the year2005-06
Best IT User in Banking & FinancialServices Industry - 2004
by NASSCOM in partnership withEconomic Times
Golden Peacock Award for Excellence in CorporateGovernance - 2005 by Institute ofDirectors
FICCI's Rural Development Award for Excellence in Rural Development 2005
Skotch Challenger Award forExemplary use of Technology
for becoming a pioneer in PublicBanks 2005
Golden Peacock National Training -2004 & 2005
by Institute of Directors
National Award for Excellence in SSILending
Ranked 2nd for 4 consecutive years- 2002, 2003, 2004 & 2005
Banking Technology Awards 2004Runner up in 'Best IT Team of the
Year Award 2005'
Jointly Adjudged by IBA, Finacle &TFCI
Money Outlook Award 2004 Runner up in 'Best Bank (publicSector) of the year Award' -2005
Niryat Bandhu Gold Trophy for excellence in export perforamncefor 3 consecutive years 2001, 2002 &2003by Federation of Indian ExportersOrganization (FIEO)
21st Amongst Top 500 Companies by the leading Financial Daily TheEconomic Times, June 2005
9th amongst India's Top 50 MostTrusted Service Brands
A.C Nielson Survey, The EconomicTimes Dec 2004
3rd Rank amongst Banking Sector inIndia323rd Rank in the World
The Bankers' Almanac, January 2006
368 amongst Top 100 The Banker, London July 2005
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Global Banks
3.10 Products and services
1 Corporate banking2 Personal banking3 Industrial finance4 Agriculture finance5 Financing of trade6 International banking7 Home loan8 Auto loan9 ATM/Debit card10 Deposits interest rates11 Credit interest rates
12 Other services:-Locker facility, senior citizen scheme, merchant banking.
3.11 NEW VISION & MISSION STATEMENTS(2013)
VISION & MISSION statements are powerful and give a strong message to
all employees of an organization. Normally, they are static in nature but any
large scale change in beliefs and thoughts would require suitable re-
orienting these statements. The new VISION & MISSION of the Bank is
given below:
VISION
To be a Leading Global Bank with Pan India footprints and become a
household brand in the Indo-Gangetic Plains, providing entire range of
financial products and services under one roof.
MISSION
Banking for the unbanked
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CHAPTER 4
REVIEW OF
LITERATURE
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REVIEW OF LITERATURE
4.1 BANKING
Banking, the business of providing financial services to consumers and
businesses. The basic services a bank provides are checking accounts,
savings accounts and time deposits that can be used to save money for
future use; loans that consumers and businesses can use to purchase
goods and services; and basic cash management services such as check
cashing and foreign currency exchange.
4.2 TYPES
Four types of baSnks specialize in offering these basic banking services:
1) commercial banks,
2) savings and loan associations,
3) savings banks, and
4) credit unions.
A broader definition of a bank is any financial institution that receives,
collects, transfers, pays, exchanges, lends, invests, or safeguards money
for its customers. This broader definition includes many other financial
institutions that are not usually thought of as banks . These institutions
include finance companies, investment companies, investment banks,
insurance companies, pension funds, security brokers and dealers,
mortgage companies, and real estate investment trusts.
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4.3 PURPOSE
Banking services serve two primary purposes. First, by supplying
customers with the basic mediums-of-exchange (cash, checking accounts,
and credit cards),
Second, by accepting money deposits from savers and then lending the
money to borrowers, banks encourage the flow of money to productive use
and investments. This in turn allows the economy to grow.
Enabling the flow of money from savers to investors is called financial
intermediation, and it is extremely important to a free market economy.
4.4 DIFFERENT KINDS OF LOAN ACCOUNTS:
A loan is a type of debt. Like all debt instruments, a loan entails the
redistribution of financial assets over time, between the lender and the
borrower.
In a loan, the borrower initially receives or borrows an amount of money,
called the principal, from the lender, and is obligated to pay back or repay
an equal amount of money to the lender at a later time. Typically, the
money is paid back in regular installments, or partial repayments; in an
annuity, each installment is the same amount. The loan is generally
provided at a cost, referred to as interest on the debt, which provides anincentive for the lender to engage in the loan. In a legal loan, each of these
obligations and restrictions is enforced by contract, which can also place
the borrower under additional restrictions known as loan covenants.
Although this article focuses on monetary loans, in practice any material
object might be lent.
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Banks sanction credit facilities to the borrowers according to their use and
requirement. It is essential for the banks that the nature of credit facilities
to be sanctioned is the one which takes care of the requirement of the
borrower. For instance sanction of a cash credit limit for financing fixed
assets or sanction of cash credit stock limit for financing fixed assets or
sanction of cash credit stock limit for financing book-debts or receivables
of the borrower, may actually not be of any use to the borrower.
The various kinds of credit facilities may be as under:
1) OVERDRAFT
Overdrafts are allowed by the banks to such customers who maintain
accounts in the nature of current accounts with frequent operations. In this
kind of account, a limit is fixed up to which the customer can overdraw his
account. The overdrafts are generally granted against the security of bank
deposits, life policies, document of title, saving certificates, shares and
debentures etc.
At times the overdrafts are also allowed without any security which are of a
very temporary nature and are called clean overdrafts. On such account
interest is charged on the amount drawn on day to day basis.
1. CASH CREDIT
A cash credit account like an overdraft account is a running account but
with a fixed drawing limit. This drawing limit is fixed keeping in view thevalue of the security. Cash credit accounts may be against :
1 Hypothecation of stocks of raw material, stock in process or finished
goods or stores, spares etc.
2 Hypothecation of book debts or receivables.
3 Pledge of stocks of raw material or finished goods or documents of
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title to goods, bullion etc.
2. DEMAND LOANS
Demand loans are the loans for a further amount (unlike cash credit) where
no further debits (except for interest) are permitted once the initially fixed
advance is availed. Demand Loans are allowed for short term durations
say, one year and are required to be repaid on falling due. Interest is also
charged on the amount outstanding on the close of each day and debited
quarterly. As per RBI guidelines on loan system of delivery of bank credit,the bank sanction working capital demand loans repayable over a period of
one year by bifurcating the working capital limits into cash credit and
demand loans. Such loans generally carry same rate of interest which is
charged to cash credit advance. The security for such advances is also
common security for such advances is also common security with cash
credit accounts.
3. TERM LOANS
As the name suggested, these loans are given for fixed period of time with
the provision that its repayment shall also come in regular pre-fixed
periodical installments which may be equated or graduated. These loans
are generally sanctioned for acquiring fixed assets by the persons engaged
in business and trade or in manufacturing or servicing etc. Interest on
these accounts is charged on the daily products and is debited on a
quarterly basis, except in case of agriculture related activities and small
scale industrial activities, where interest is debited, generally on half-yearly
basis. Term loans are generally sanctioned for a period of more than 3
years and less than 10 years by the banks. Term loans up to 7 years
repayment are called medium term loans and beyond that, loan term loans.
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4. WORKING CAPITAL TERM LOANS
Banks also sanction term loans meant to be utilized not for creation of
fixed assets but for creation and maintenance of current assets to support
the working capital requirement. These term loans are normally up to five
years duration and they carry the same interest rate as the normal term
loans. The repayment is fixed keeping in view the liquidity constraints and
cash generation capacity of the borrower. These are secured by charge on
the current assets along with working capital credit limits.
5. CASH CREDIT PLEDGE
Who can pledge, The owner of goods, the agent of the owner, the joint
owner with the consent of other co-owner and a person having limited
interest in the goods can pledge the securities.
The pledgee has certain rights such as:
1 He may retain the goods until the payment of the debt or
performance of the promise is fulfilled.
2 Pledgee steps in the shoes of the pledger.
3 To recover charges incurred for preservation of the goods pledged.
Duties of the Pledgee
1 To return the goods once the money is paid back by the pledger.
2 To take that much care of the goods, which he would have beentaking had the goods belonged to him.
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6. CASH CREDIT HYPOTHECATION
Where the credit facilities are sanctioned in the form of hypothecation, the
bank should take care of the following aspects;
1 Firm is not enjoying similar facilities with other banks on the
security of same goods.
2 Borrowers enjoys facilities from one bank only and an
undertaking in writing should be obtained from him.3 Bank name board should be displayed where the securities are
located stating that bank has charge over such goods.
4 Borrowers should submit a stock submit a stock statement
periodically,
5 Such stocks should be insured for fire and other risks.
If borrowers fail to return the advance against the hypothecation of goods,
the bank should take possession of the goods with consent of the
borrower and should become a pledgee. On becoming pledgee, the bank
get all the rights of a pledgee.
7. BILLS PURCHASE OR DISCOUNTING
Banks also allow advances by purchasing the demand documentary bills
or discounting the usance documentary bills and negotiating the bills
drawn under letters of credit, covering genuine sale of commodities in
trade and movement thereof. Bills not covering the goods are called
accommodate each other and they dont represent genuine transactions.
These bills are negotiable instruments under NI Act and advance there
against is of self liquidating nature, since payment is received either on
demand or after fixed time period. The advances against demand bills are
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considered to be relatively safe since the document of title to goods remain
with the bank till the payment is received. Not only this, the banks facing
liquidity constraints can also approach RBI for allowing refinance against
the bills discounted.
The bills may be of varying types such as:
1 Documentary bills
2 Clean bills and
3 accommodation bills
4.5 What is the Credit Cycle?
The Credit Cycle refers to the expansion and contraction of access to
credit.
During period of expanding access to credit, asset prices rise. More people
have access to increasing amounts of credit. This can cause speculative
behavior where individuals make highly leveraged investments justified by
the assumption that asset values will continue to rise.
During a period of contracting access to credit, the opposite happens.
Fewer people have access to decreasing amounts of credit. Asset values
unwind as highly leveraged positions are liquidated. This in turn, causes
further declines in asset values.
A cycle involving the access to credit by borrowers. Credit cycles first go
through periods in which funds are easy to borrow; these periods
are characterized by lower interest rates, lowered lending requirements andan increase in the amount of available credit. These periods are followed by
a contraction in the availability of funds. During the contraction period,
interest rates climb and lending rules become more strict, meaning
that less people can borrow. The contraction period continues until risks
are reduced for the lending institutions, at which point the cycle starts
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again. During the upward phase in the credit cycle, asset prices experience
bouts of competitive, leveraged bidding, inducing assets price inflation in a
particular asset market due to the recursive "ballooning" nature inherent in
fractional reserve banking. This can then cause an unsustainable,
speculative price "bubble" to develop. As this upswing in new debt
creation also increases the money supply and stimulates economic
activity, it tends to temporarily raise economic growth and employment.
When new borrowers cannot be found to purchase at inflated prices, a
price collapse can occur in the market segment inflated by excess debt,
along with a dramatic reduction in liquidity in that market. This can then
cause insolvency, bankruptcy and foreclosure for those borrowers who
came in late to that market. If widespread, this can then damage the
solvency and profitability of the private banking system itself, resulting in a
dramatic reduction in new lending as lenders attempt to protect their
balance sheet from further losses. This in turn results in a contraction in
the growth of the money supply, often referred to as a "credit squeeze" or a
"drying up of liquidity".
Prime examples of this "boom-bust" cycle of credit creation and
destruction can be found in the United States housing bubble and the
subsequent subprime mortgage crisis, the dot-com bubble and the
Japanese asset price bubble.
4.6 TERM LOAN
A term loan is sought with a view to finance mainly the acquisition of fixed
assets which are expected to be used to enable the enterprise to earnprofits over a long period of time. Term loans almost always
mature between one and 10 years.
A term loan is a monetary loan that is repaid in regular payments over a set
period of time. Term loans usually last between one and ten years, but may
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last as long as 30 years in some cases. A term loan usually involves
unfixed interest rates that will add additional balance to be repaid.
Term loans can be given on an individual basis but are often used for small
businessloans. The ability to repay over a long period of time is attractivefor new or expanding enterprises, as the assumption is that they will
increase their profit over time. Term loans are a good way of quickly
increasing capital in order to raise a business supply capabilities or range.
For instance, some new companies may use a term loan to buy company
vehicles or rent more space for their operations.
The sources from which such loan is expected to be liquidated is the net
cash generation of the project from year to year. All this calls for a detailsappraisal of the project to establish its long term viability i.e. ability to pay
interest on the loan as and when these fall due, besides getting an
appropriate amount of return on owned funds and dividend or drawings so
as to keep entrepreneur interest intact in continuation of the enterprise.
The aspects in project appraisal include examination of the need for
establishment of the project, systematic review of the technical, economic,
financial and organization aspects of the project to ensure that it is
technically sound and consistent with the overall economic objectives of
economy and would yield appropriate financial returns.
The appraisal of the term loan covers four broad aspects of the project i.e.
a) Financial viability.
b) Technical feasibility.
c) Economic viability.
d) Managerial competence.
4.7 WORKING CAPITAL FINANCE :Working capital for any manufacturing unit means the total amount of
circulating funds required for the continuous operations of the unit on an
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ongoing basis.
In other words for an uninterrupted functioning of a unit at a given capacity
(to achieve a particular turnover level to remain viable and operate much
above the break even level to earn profits), it requires a specified minimum
level of current assets namely raw materials, stock in process, finished
goods and receivables apart from reasonable cash in hand and certain
other current assets.
In other words, the cost of working capital comprises:
1. amount of raw material of various kinds in store or in transportation ;
2. amount of consumable stores and other material required for
production purpose ;
3. value of stock in process;
4. value of all finished goods including in transit ;
5. amount of receivables or sundry debtors;
The means of finance this cost of working capital would be:
A: credit available on purchase
B: current liabilities other than above and bank borrowing
C: surplus of long term funds over the long term uses (i.e., net workingcapital)
D: short term bank borrowing.
FIXING THE QUANTUM OF WORKING CAPITAL
Various components of working capital namely, raw material, stock in
process, finished goods and receivables can be calculated, on the basis
of operating cycle:
The level of raw material taking into account the said factors, can be
worked out as under:
a) work out the monthly consumption (opening raw material stock +
purchases closing raw materials stock/12) taking into account
the accepted turnover level and raw materials need for that
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turnover level;
b) determine the average stock maintained in past on the basis of
closing and opening stocks in the profit and profit and loss
account and the stock reports submitted to the bank or the
practice being followed by similar units in the industry;
c) workout the stocking period taking in consideration the factors as
given in the operating cycle concepts , to determine past
trends/norms, by dividing the average stock by monthly
consumption.
d) Fix up norm for future, based on past/prescribed norms or norms
i.e., norm x accepted per month consumption.
e) Calculate the value of the stock for the accepted norm.
4.8 DETERMINING THE QUANTUM OF BANK FINANCE:
The sum total of anticipated current assets and also reasonable level of
other current assets as worked out in the above manner,would be the level
of working capital required. Thereafter the amount of bank credit,can be
determined as
under:
i. Assess the level of net working capital (surplus of long term sources
over long term uses) available, which normally should not be less
than 25% of total current assets.
ii. Work out bank finance to be sanctioned being gap of total current
assets less NWC and other current liabilities.
The detailed calculation of levels of each component of working capital and
creditors has been explained in the case studies, which may be referred ,if
required.
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4.9 FIXATION OF FUND-BASED AND NON-FUND BASED LIMITS:
After arriving at the MPBF on the basis of Inventory and Receivables
Norms and appropriate method of Lending, we may decide about the
various Fund-based and Non-fund based Limits and Sub-limits. The fund-
based limits should not exceed the MPBF.
The bulk of the inventory limits are released generally in the shape of Cash
Credit based on projected levels of the borrowers operations and holding
of raw-materials, stock-in-process and finished goods. The receivables
limits may be either by way of C/C against Book Debts or by way of bills
limits. Within the sanctioned limit, drawing power may be allowed on the
basis of monthly stock statements/statements received under QIS
depending upon the regularity and reliability and with the permission of
Zonal Manager and to ensure there is no double financing.
In addition to the fund-based limits, non-fund based limits like Inland and
Foreign L/C, Guarantees and Acceptances are given keeping in viwew the
needs as well as the capacity of the borrowers.
4.10 ASSESSMENT OF WORKING CAPITAL FINANCE
For assessment of borrowers working capital needs the projections
submitted for the following year are relevant. The first step in assessing the
quantum of working capital finance is to find out whether the projections
given by the borrowers are reasonable. The reasonableness of borrowers
projections can be determined as under:
1. The bank can use with advantage the past data given by the
borrower's as well as the data available with it. What has been the
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bank's past experience in dealing with that particular borrower? to
what extent the earlier projections have come true? Did they
compare favorably with the actual when the results were complied?
If earlier projections had compared favorably with actuals, in that
case it will increase the banks faith in that particulars borrowers and
the bankcan presume that the borrower is following sound practices
and he is having a realistic view of the future. The borrower is also
not trying to get higher bank finance by inflating the figures. If in the
past the projections did not compare favorably with the results, the
bank needs to be careful. The bank in such a situation will also be
required to look into the gap between actuals is narrowing or
widening over a period of time. If the gap is widening, this is
necessarily a cause of concern. Still greater care needs to be
exercised in accepting the projections in such cases.
2. The projections should be studied in close conjunction with past
data. How the unit has fared in the past? What has been the rate of
growth? What relationship the different items of past bear to sales
and cost of production? What has been the level of current assets orcurrent liabilities, other current liabilities and net working capital
(NWC) etc.? The comparison has to be made between the past
performance and the future projections. If the future projections are
markedly different from the past trend in relation to projected rate of
growth, the reasons for the same have to be ascertained before
accepting the various projections.
3. The borrower based his projections on certain assumptions as to
various factors affecting his operations, e.g. market demand, cost of
raw materials, price, availability of inputs and other environmental
factors. The bank has to assess how far these assumptions are
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realistic and likely to materialize.
4. How are limits already sanctioned by the bank have been utilized by
the borrowers in the past? Have the accounts been particularly
conducted as per terms of sanction or these have been frequently
violated. Is the borrower particular in honoring his commitments?
What is the position of the various accounts? Did he submitted the
required data for follow-up and renewal of his facilities in time?
5. There is a limit upto which the operations of the unit can be
efficiently carried out. Beyond this the operations will start giving
negative results. This level has to be identified. There may be one
single factor which may restrict further expansion in operations
notwithstanding that all the facilities in other areas exist. This factor
inhibiting further growth has to be identified. While accepting the
borrowers projections, it has to be ensured that projections do not
go beyond this factor which may be termed as the choking factor
as this choke further expansion.
6. CRITICAL ANALYSIS OF SALES PROJECTIONS:
In determining the quantum of bank finance, the projections relating
to sales, production, cost of production, cost of sales, current
assets, current liabilities and net working capital have direct
relevance.
The most important area to be looked into is sales. All other aspects
are directly related to the projected level of sales. Therefore,
determining the projected level of sales is the first level step in
assessing the working capital needs of a borrower. Once the level of
sales has been determined, the other data can be easily determined
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in relation to sales. The projected level of sales depends upon:
what is the installed and licensed capacity? Does it have any idle
capacity which can now be utilized?
Is the unit undertaking any expansion, modernization or
diversification programme?
Are essential inputs available to take care of projected production
figures?
What are the present market conditions and terms of sales?
From what sources increase in NWC will be met?
Are there any pending orders in hand etc.?
A higher than normal sales estimated for the following year can be
accepted only after the bank is satisfied on the basis of the above
scrutiny that the projected level of sales can be achieved and the
available past data and future plans give positive indications in this
regard. The bank has to ensure that the borrowers are willing to
create the necessary support to achieve the sales target.
7. The bank satisfied itself as to the projected level of sales can
determine the other data:
a. The relationship between different items constituting cost of
production can be studied in relation to sales and cost of sales.
Valuation of various items should be based on current costs.
b. After the projections relating to items constituting cost of
production, the level of production and sales have been finalized,
the holding period of items of current assets is to be determined
based on the rule that the projected holding should be preferably
lower of norms or past practice.
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c. The levels of other current assets can also be estimated on the
basis of the borrowers contribution.
d. The bank is to bridge the gap between current assets and current
liabilities after ensuring the borrowers contribution. Therefore,
the quantum of bank finance is very much depending upon
availability of short term credit from other sources i.e. other
current liability.
e. The projected level of NWC should at least be 25% of total
current assets under second method of lending.
f. Further NWC should be maintained in absolute terms.
8. Once the borrower's overall projections for the year have been
accepted by the Bank, the actual requirement of working capital and
bank finance can be worked out on the basis of steps given in Form
V. The steps broadly are: The actuals requirement of working capital can be arrived at on
the basis of position of current assets and other current liabilities from
Form IV.
The bank is to partly meet the difference between current assets
and other current liabilities
If available NWC is more than the minimum stipulated working
capital under the second method of lending, the available NWC is to be
taken into account for arriving at the permissible level of bank finance
i.e. Permissible Bank Finance will be reduced, accordingly.
It has been observed by RBI that banks while pruning the projected
levels of inventory and receivables to the prescribed levels for the
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purpose of arriving at Permissible Bank Finance make adjustments in
the projected. RBI has clarified that the projected NWC represents long
term surplus available to support current operations and therefore, does
not need to be adjusted as a result of pruning the level of current
assets. As such, adjustments should not be made in the projected NWC
in such suitation but level of bank finance should be reduced
necessitated by the reduction in the level of current assets.
4.11 RISK MANAGEMENT IN BANKS
RBI issued final guidelines on risk management in banks on Oct 20, 1999which broadly cover management on credit, market and operational risk in
the banking sector. The banks are advised to adopt proper systems to
measure, monitor and control operational risk that is emerging in the wake
of phenomenal increase in the volume of financial transactions. The banks
should give credit risk prime attention and should put in place a loan policy
to be cleared by their Boards, that covers the methodology for
measurement, monitoring and control of credit risk.
The highlights are:
1 Banks to set up a comprehensive risk rating system for counter
parties.
2 Banks have to fix a definite time frame for moving over to value-at-
risk(VaR)
3 Banks should evaluate portfolio quality on an ongoing basis instead
of near balance-sheet date.
4 Investment proposals to be subjected to same credit risk analysis asin case of loan proposals.
5 Investment proposals to be included in the total risk evaluation.
6 For off-balance sheet exposure, the current and potential credit
exposure to e measured on a daily basis.
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7 For managing liquidity risk, banks should place limits on inter-bank
borrowings which include call funding, purchased funds, core
deposits to assets, off balance sheet commitments, swapped funds
etc.
8 Banks have to provide a contingency plan to meet adverse swings in
the liquidity conditions.
4.12 RISK MANAGEMENT IN BANK LENDING OPERATIONS.
Risk connotes chances of damages that may be caused by unforeseen
events and its consequences for operations of organization. Banks
operates in an environment which, has lot many uncertainties due to whichthere could be threat to viability and sustainability of activities which banks
finance.
Risk management can be thought of as an important toll of managing the
credit related affairs to achieve the organizational objectives of earning
better yield from deployment by not allowing the lending to become non-
performing advance, which involves extra prudence on the part of the
bankers. It is the rational handling of a situation after properly
understanding all the issues/risks involved, so as to avoid the losses which
may arise because of existence of some elements un-favorable to the
transaction proving to be a profit earning one.
In context of bank lending operations, it begins with a scientific
identification of the risk involved in the loan transactions along with the
nature and frequency of such risks, understanding and analyzing the
causes of the risk, formulating strategies and talking actions to avoid the
risk and monitoring the situations to see that the risk avoidance succeeds.
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Various kinds of risks:
1. Market risk
2. Liquidity risk
3. Counter party (credit) risk
4. Political and country risk
5. Currency exchange rate risk
6. Hedging risk
7. Funding risk
8. Operational risk legal, jurisdiction, litigation and documentation
risks
9. Aggregation risk
10.Systemic risk
4.13 PROCESS OF RISK MANAGEMENT:
Broadly, the process of risk management for lending operations can
comprise the following functions:
1 Risk perception,
2 Understanding risk factors,
3 Risk assessment or quantification,
4 Risk control measures,
5 Monitoring.
The risk monitoring has to be regular exercise to be undertaken on an
ongoing basis for taking a view of:
chances in the position of the supported organizations,
fix up exposure limits for fixed assets requirement, for working capital
needs and for non-fund based requirements,
modify information requirements and their periodicity and nature and
to determine cost to be fixed for the borrowings in terms of interest
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It need not be over-emphasized that risk management in lending operations
in banks is an important job to be performed, if a better revenue yield
through lending is the objective. In present day context, the delay in
recovery of bank loans is as harmful as the non-recovery, in a limited way,
when seen in the light of income recognition guidelines.
Since delay in recovery or non-recovery is the effect of various risk factors,
the banker can do well to look into these risk factors to manage them.
Hence, in order to achieve their objectives of better yields from deployment
of funds, banks will be under obligation to take risk factors and take into
account these risk factors and take measure to control such risks.
4.14 Key Ratios
FY 08 FY 09Return on Assets 1.39% 1.15%
Return on Equity 23.5% 19.0%
Earning Per Share Rs.98.03 Rs.64.98
Net Interest Margin 3.62% 3.58%
Book Value Per Share Rs.416.73 Rs.341.98
Yield on Advances 11.46% 10.36%
Average Cost of Deposits 6.25% 6.26%
Cost to Income Ratio 42.27% 46.81%
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4.15 PROJECT FINANCE RISKS
Development: Bid risk
Resources risk
Cost estimation risk
Credit risk
Operation:
Market/off take risk
Liability risk
Operating risk
Input risk
Construction:
Completion risk
Technology risk
Non-commercial political risk:Environment risk
Force major risk
Economic environment:
Inflation risk
Interest rate and currency risk
International price movement risk
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CHAPTER 5
RESEARCH
METHODOLOGY
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RESEARCH METHODOLOGY
5.1 MEANING OF RESEARCH: -
Research is an art of scientific investigation.
Research means a careful investigation or inquiry specially through
search for new facts in any branch of knowledge.
According to Clifford Woody: -
Research comprises defining and redefining problems,
formulating, hypothesis or suggested solutions, collecting, organizing and
evaluating data, making deductions and reaching conclusions and at last
carefully testing the conclusions to determine whether they fit the
formulating hypothesis.
Research means the systematic method consisting of
enunciating the problem, formulating a hypothesis, collecting the facts or
data, analyzing the facts and reaching certain conclusions either in form of
solutions towards the concerned problem or in certain generalization forsome theoretical formulation.
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The project titled, as OVERALL WORKING OF PUNJAB NATIONAL BANK
required research to be done. The comparison required the collection of
Primary Data as well as the Secondary data. The credibility literally means
the market value and the profitability of a particular brand or a company
among its competitors. PUNJAB NATIONAL BANK is one of the popular
public sector bank in India. A detailed study has been done on working
capital, risk management, assets liability management and various other
services provided by the bank.
5.2 RESEARCH DESIGN
NON-PROBABILITY
EXPLORATORY & DISCRIPTIVE EXPERIMENTAL RESEARCH
The research is primarily both exploratory as well as descriptive in nature.
The sources of information are both primary & secondary.
A well-structured questionnaire was prepared and personal interviews were
conducted to analyze the services offered by the bank and the ways it
could be improved.
SAMPLING METHODOLOGY
Sampling Technique: Initially, a rough draft was prepared keeping in mind
the objective of the research. A pilot study was done in order to know the
accuracy of the Questionnaire. The final Questionnaire was arrived only
after certain important changes were done. Thus my sampling came out to
be judgmental and continent
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5.3 Sampling Unit:
The respondents who were asked to fill out questionnaires are the
sampling units. These comprise of customers of Punjab National Bank.
Sample size:
The sample size was restricted to only 100, which comprised of mainly
people from different regions of Varanasi.
Sampling Area :
The area of the research was VARANASI ZONE, UTTAR PRADESH.
Secondary data:
(i) Data collected for companies from various site available of the
companies included in research.
(ii) Data collected from reports prepared earlier by PNB research
department and the reports of financial team.
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CHAPTER 6
DATA ANALYSIS
ANDINTERPRETATION
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DATA ANALYSIS AND INTERPRETATION
CASE STUDY:WORKING CAPITAL ASSESMENT (UPTO RS. 10 LAC)
M/s. ABC Agri-Autos, a proprietary concern was established about two
years ago by Sh. Sunil Kumar a qualified mechanical engineer. Before
establishment of the unit, he served in a tractor manufacturing unit as
production supervisor for 3 years. Not satisfied with his job and having
intention to have his own business, he established this unit as an ancillary
to three Tractors and Eicher Tractors by raising a term loan of Rs. 2.50 lac
from the bank, repayable in five years beginning from first quarter
repayable of second year in equal quarterly instalments and with the help
of funds from his parent and friends and relatives on a lease-hold plot
along with building valuing Rs.3 lac which is mortgaged to bank in addition
to guarantee of his father (NMs- Rs. 3 lac) who is having his own cloth shop
in the town.
In viewing of his qualification and connections in these tractor
manufacturing units, he is a position to push his product which has been
found to be of good quality as compared to his competitors. He is
purchasing most of the raw material from nearby town and all items of raw
materials, stores and spares are available easily, although there is always afear of fluctuation in the prices of these inputs. Other inputs like power,
fuel and labour are also easily available and so far he has not faced any
problem. There is growing demand for tractors in the region/country and he
is also doing some sale in the replacement market (directly to dealers) to
expand his market base.
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During the stock inspection, the bank inspection had identified finished
goods stocks worth Rs. 35,000 purchased in order o execute an urgent
order during the 1st year which remained unsold due to quality problem.
The supplier of these stocks is not ready to take back the stocks and repay
back the payment. The party makes an effort to keep the level of finished
goods lower particularly at he time of closing of the financial year
particularly at the time of closing of the financial year on account of tax
planning, while the normal level of finished stocks with the party is 20-30%
higher than the level shown in the balance-sheet.
There is no regular system of placement of orders by the buyers but they
keep on requisitioning the finished products on an ongoing basis. The
average monthly turnover of the party during the last three months is Rs. 2
lac and they are about to close their second year of operations.
The party has requested for enhancement of their working capital limits
from existing level of Rs.3 lac(temporarily enhanced to Rs. 4 lac) to Rs.7
lac. Following is their financial information:
1st yractuals
2nd yrestimates
3rd yrprojection
Opening stocks:Raw material - 90 130Stock in process - 40 55Finished goods - 115 220Purchase of:Raw materials 645 900 1285Finished goods 290 390 580
Wages to workers 65 85 105Depreciation 55 50 70Power and fuel 40 60 80Other expenses 80 95 120Selling expense 120 170 190Interest/bank charges 105 125 200Other expenses 30 30 40
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Profits 45 80 150Total 1475 2230 3225Sales 1200 1800 2600Closing stocks of:Raw material 90 130 170
Stock in process 40 55 75Finished goods 115 220 360Other income 30 25 20Total income 1475 2230 3225
BALANCE SHEETProprietors capital 275 350 345Reserves (inclusive of depreciationreserve)
70(55)
140(105)
250(175)
Loans from friend/relative 60 85 170Term loan from bank 250 240 200Cash credit: stocks 250 350 600
Cash credit: book debts/bills 50 50 100Sundry creditors 40 155 130Other liabilities 30 35 30TOTAL LIABILITIES 1025 1405 1825Cash in hand/bank 15 25 20Loans & advances( including advancesto building contractor
40_
90(30)
110(80)
Security: phone/ electricity 35 45 50Stocks 245 405 605Receivables 150 260 330Fixed assets 540 580 710TOTAL ASSETS 1025 1405 1825
EXAMINATION OF BORROWERS ESTIMATES FOR WORKINGCAPITAL
From the information provided as above, the following basis can be
taken to examine the estimates given by the borrower for the purpose of
making assessment of working capital requirements:
The turnover has been estimated for the 3rd year by the borrower
at Rs. 26 lac which is Rs. 26 lac which is 44% more than the
turnover expected to be achieved during the 2nd year. The
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borrower has based his estimates on the actual average monthly
turnover achieved by him during the last 3-4 months at the rate of
Rs. 2 lac per month. The borrower is supplying finished goods to
tractor manufacturing units, for which he is working as an
ancillary. In addition, he is also catering to replacement market.
All this shows that he is trying to expand his market on a sound
footing having diversified buyers pockets. The production
capacity, he has spare capacity available with him which is not
going to be handicap in achievement of the estimated production
level. As for the availability of the inputs is concerned, these are
also available easily. The quality of his product is also good as
compared to his competitors. Hence taking into account the
selling aspects and production, as also his management capacity,
the turnover at the level of Rs. 26 lac for the 3rd year can be very
safely assumed to be achievable and the assessment of working
capital can be considered at that level.
The profitability statement given by the borrower also reflects thatthe raw material consumption or cost of production have been
estimated by the borrower at a level which is commensurate to
the level of turnover for the 1st and 2nd year. During the 1st year the
raw material consumption, which is major part of the cost
structure is 46% and the cost of production 63% while for the 2nd
year these are 48% and 63% and for the 3rd year these are 48%
and 62%. Similarly the amount of selling expenses, administrative
expenses appears to be in line with the expansion of the activity
and the financial expenses have been estimated in line with the
proposed level of borrowing. In view of this the profitability level
can also taken as achievable.
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While having a look at the projected balance sheet, particularly
the current assets, the levels for the 1st, 2nd and 3rd year can be
compared as under:-
Operating parameters:
Raw materials consumption 555(46.3) 860(71.7)1245(103.8)
Cost of sales 755(62.9) 1135(94.9)1600(133.3)
Sales 1200(100) 1800(150.5)2040(170)
(Figures in brackets represent per month data)
Raw material 1.95 1.861.64
Stock in process 0.64 0.590.56
Finished goods 1.48 1.591.91
Receivables 1.50 1.731.52
The level (holding) of various current assets components, as would be
observed, appear to be in line with the past trends except for the
finished goods, which the borrowers has estimated at a much higher
level. For this the party has given justification that the year end level of
finished goods is kept low by them because of tax planning where as,
usually the level is higher in the stock reports by 20-30%. If the plea of
the party is accepted based on the average stock to be verified from the
stock reports, there will not be any problem in accepting partys view
point. Otherwise also, the borrower has estimated substantially lower
levels of raw material, stock in process and receivables which are major
components of the working capital.
Hence we can accept the profitability statement along with the levels of
current assets as estimated and need based.
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Working Capital Needed:
Raw materials (1.64 months consumption) 170
Stock in process (0.56 months cost of production) 75
Finished goods (1.91 months cost of sales) 325
Receivables (1.52 months sales) 330
Sub total 900
10% contingency on the sub-total 90
Other current assets 50
Total Current Assets/ Working Capital
1040
Beside the above case study, a survey was also executed taking a sample
of customers of Punjab National Bank. The main purpose of this survey
was to know how well this bank satisfies its customers need and what
exactly are the expectations of the customers from this bank. This survey
will surely act like a boon to the organization as it is the first hand data
gathered on our part. Response and analysis of every question are
depicted below. Every question is represented with relevant graph as
under:
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Analysis And interpretation of questionnaire:
1) Age Group: -a) 20yrs to 25yrsb) 25yrs to 30yrsc) 30yrs to 40yrsd) 40yrs to 50yrse) Above 50yrs
Age Group Number
20-25 yrs 13
25-30 yrs 1730-40 yrs 35
40-50 yrs 28
Above 50 yrs 7
0
5
10
15
20
25
30
35
Percentag
20 -25 yrs 25 -30 yrs 30 -40 yrs 40 -50 yrs Above 50 yrsAge Grou
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2) What is Your Occupation.a) Serviceb) Business Man
c) House Wifed) Studente) Other
Occupation Number
Service 34
Business man 27
House wife 4
Student 28
Other 7
0
5
10
15
20
25
30
35
Numbe
Service Business
man
House wife Student Other
Occupatio
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3) What Type Of Account you Are Holdinga)Saving Accountb) Current Accountc) Recurring Accountd) Joint Accounte) Fixed Deposit Account
Type of Account Number
Saving Account 36
Current Account 20RecurringAccount 15
Joint Account 18
FD Account 11
0
5
10
15
20
25
30
35
40
Numbe
SavingAccount
CurrentAccount
RecurringAccount
JointAccount
FD Acc ount
Type Of Accou
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4) In Which bank Do You Have account Other than Punjab National Bank.a) State Bank Of Indiab) ICICIc) Union Bankd) HDFCe) Other
Bank Number
SBI 36
ICICI 23Union Bank 12
HDFC 9
Other 20
0
5
10
15
20
25
30
35
40
Numbe
S B I ICICI Union B ank HDFC Other
Bank
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5) Do You Have Taken Any Loan.If Yes Which One.a) Business Loanb) Home Loanc) Education Loand) Personal Loane) Other
Type Of Loan Number
Business Loan 25
Home Loan 38
Education Loan 32Personal Loan 0
Other 5
0
5
10
15
20
25
30
35
40
Numbe
Business
Loan
Home Loan Education
Loan
Personal
Loan
Other
Type Of Loa
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6) Which of the following Facilities Given by your bank is Most Preferred
by You .a) ATMb) E-Bankingc) Overdraft Facilitiesd) Minimum Balancee) Agent Facilitiesf) Security Locker
Facilities Number
ATM 50E-banking 24OverdraftFacilities 15
Minimum Balance 2
Agent Facility 0
Security Locker 9
0
5
10
15
20
25
30
35
40
45
50
Numbe
ATM E-bankingOverdraft
Facil it ies
Minimum
Balance
Agent
Facil ity
Security
Locker
Prefered Faci l
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7) Which Type Of ATM you Havea) Gold ATMb) Silver ATMc) Platinum ATMd) Maestro ATM
Type Of ATM Number
Gold ATM 10Silver ATM 13
Platinum ATM 11
Maestro ATM 35
Master Card 31
0
5
10
15
20
25
30
35
numbe
Gold ATM Silver ATM PlatinumATM
Maes tro A TMMas ter Card
Type Of AT
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8) Have you ever tried E- Bankinga) Yesb) No
E-Banking Number
yes 24
No 76
E-Banking Facili
yes, 2
no, 7
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11 Are You Aware Of The Recent Services Offered By Punjab NationalBank.
a) Yesb) No
Awareness Number
Yes 62
No 38
Awareness Of Recent Servi
Yes, 62
No, 38
CHAPTER 7
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FINDINGS
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FINDINGS:
1. Out of the sample size taken the major account holder falls in the
segment of 3040 year age group followed by 40-50 year age
group. A significant observation in respect of this question was
that 30 customer fall in a cumulative age group of 20-30 years.
This signifies that students are also quiet aware of holding bank
accounts.
2. This was one of the main question in the survey which signifies
the occupation of people holding the account. It depicts that
people involved in service occupation amounts to the major
segment in this question. This is just because people working in
MNCs holds it compulsory to have a salary account. There is also
a very significant observation in this segment that housewives
are also much involved in banking.
3. Third question was about the kind of account the surveyed
people hold. It was a subsequent observation that people tend to
hold saving bank account the most. There can be a valid reason
supporting to it that as the major surveyed population was
service class and service class people are always tempted to
saving.
4. This question tell us clearly that people dont really hold a single
account. They tend to have different accounts in different banks.
The only reason to support the response can be that customers
just want to capitalize the service and scheme of different bank. It
also tells that SBI is also one of the most sought after bank in
banking sector.
5. People surveyed are much attracted or have a clear tendency to
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acquire loans. This can be very clearly deduced by the response
of the fifth question. People are very much keen to acquire home
loans and education loan.
6. Its a very obvious kind of deduction from this question, anyindividual holding any kind of account are always supposed to
have a ATM in their pocket. This is what this response depicts the
most likeable service provided by banks is the ATM service. E-
banking is also emerging to be one of the most likeable service
both in youngster as well as service class people.
7. People are still not so aware of the e-banking service as in the
surveyed population only 24 people have ever experienced e-
banking. This doesnt tells that the rest of the population are
unaware of the e-banking, its just the kind of thing that this
segment have never tried using e-banking.
8. People holding a PNB account are quiet satisfied with its
services. This can be the reason why PNB is one of the most
reliable bank having a terrific public image.
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CHAPTER 8
RECOMMENDATION
AND
SUGGESTION
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SUGGESTIONS AND RECOMMENDATIONS
It has been observed that to put a new organization into a running position is
much more difficult than to handle a already working organization, managers
task is difficult in a banking industry he is the person who is completely liable for
the working of branch. To put a right person at a right job is not an easy task for
the manager.
I observed some of the factors in my branch such as:
Lack of staff
lack of Efficient staff
Lack of speed
Lack of quality service
Complicated work procedure
Not providing service on time
There were even some problems regarding financial transaction which were
encountered by me during my training period:
Lengthy loan processing time
Need of high documentation
Difficulty in assessing the working capital
Problem in maintaining the data base
Observation regarding problem faced by customers
Improper attention towards non working class
Lack in providing proper documentation knowledge
Lack in creating awareness of internet banking
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Lack in educating customers for new schemes
Beside all these factors the branch has also achieved some achievements such
as 12000 accounts in 2 days and distribute micro loan of around 5 crore rupees to
different 55 Self Help Groups to start their small businesses.
Opening of 1st Micro branch in India is also a achievement and it is a starting of
new type of banking revolution which can change the life of villagers which
depends on the MAHAJAN to lend them money at high interest rate.
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CHAPTER 9
LIMITATIONS
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LIMITATION OF STUDY
1. The research is confined to a certain parts of Varanasi and does not
necessarily shows a pattern applicable to all of Country.
2. Some respondents were reluctant to divulge personal information which
can affect the validity of all responses.
3. In a rapidly changing industry, analysis on one day or in one segment can
change very quickly. The environmental changes are vital to be considered in
order to assimilate the findings.
Following were the difficulties faced during the completion of project:
Non filling up of certain questions of the questionnaire which led to the
cancellation of that particular questionnaire.
Non understanding of certain parameters in the questionnaire.
Taking a sample size of 50 people does not reflect the mindset of all kinds
of people from different backgrounds, different age groups and income
groups.
Again research study of 3 months is a time constraint and covering whole of
Varanasi population by taking a sample size of 100 is not feasible.
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CONCLUSION
While working in Punjab National Banks 1st Micro Branch of India I got in-depth
knowledge about Micro finance. I recognize that there is a lot more to discover
and learn, I learned to be more responsible, have more patience and most
important it helped me to learn how to handle the work pressure.
Punjab National Bank continues to maintain its frontline position in the Indian
banking industry. In particular, the bank has retained its NUMBER ONE position
among the nationalized banks in terms of number of branches, Deposit,
Advances, total Business, operating and net profit in the year 2008-09.
PNBs endeavor is to provide excellent, courteous and world class technology
based services to one and all. Banks proven customer-centric initiatives,
business processes in tandem with the emerging market trends are bringing
fructuous results.
As Indias largest nationalized bank with a nationwide network of 4604 branches
including 249 ECs at 2557 locations and 4 foreign offices, PNBs leadership has
always stood the test of time.
PNB has always looked at technology as a key facilitator to provide better
customer service and ensured that its IT strategy follows the Business strategy
so as to arrive at Best Fit. The bank has made rapid strides in this direction.
I would like to express my gratitude to all the employees of the bank they guided
me and were quite patient to teach me all the routine tasks during banking
transactions. Therefore I would like to thank every employee of the bank for their
co-operation.
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QUESTIONNAIRE
Dear Respondant,
I am the student of MBA,Institute of Institute of Business Studies And
Research doing survey on the topic Overall Working Of Punjab National Bank
I would be highly if you kindly give your precious time in filling up thisquestionnaire.
Name: ______________________________________________________
Address: ______________________________________________________
__________________________________________________
Mobile No.: _______________________________________________________
E-Mail ID: ______________________________________________________
1) Age Group: -a) 20yrs to 25yrs
b) 25yrs to 30yrs
c) 30yrs to 40yrs
d) 40yrs to 50yrs
e) Above 50yrs
2) What is Your Occupation.
a) Service
b) Business Man
c) House Wifed) Student
e) Other
3) What Type Of Account you Are Holding
a) Saving Account
b) Current Account
c) Recurring Account
d) Joint Account
e) Fixed Deposit Account
4) In Which bank Do You Have account Other than Punjab National Bank.
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a) State Bank Of India
b) ICICI
c) Union Bank
d) HDFC
e) Other
5) Do You Have Taken Any Loan.If Yes Which One.
a) Business Loanb) Home Loan
c) Education Loan
d) Personal Loan
e) Other
6) Which of the following Facilities Given by your bank is Most Preferred by You .
a) ATM
b) E-Banking
c) Overdraft Facilities
d) Minimum Balancee) Agent Facilities
f) Security Locker
7) Which type of ATM do you have
a) Gold ATM
b) Silver ATM
c) Platinum ATM
d) Maestro ATM
8) Have you ever tried E- Banking
a) Yes
b) No
9) The Customer Services Provided By your Bank is.
a) Highly Satisfied
b) Satisfied
c) Average
d) Unsatisfied
e) Poor
10) How did you got associated with the bank.
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a) Advertisement
b) Reference
c) Deliberate Tie Ups
d) Word Of mouth
e)Other
11 Are You Aware Of The Recent Services Offered By Punjab National Bank.
a) Yesb) No
12 Any Suggestions
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BIBLOGRAPHY
Books-
--- Financial management by Prasann Chandra
---C.R. Kothari, Research Methodology, Methods &
Techniques New age
International publishers 2008
WEBSITES
www.pnbindia.co.in
www.pnb.com
www.google.com
Training module of PNB employees.