retail credit

8/4/2019 Retail Credit

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TABLE OF CONTENTS

TOPIC PAGES

Chapter I 06

1.1 Introduction ----------- 07

1.2 Objective of the Study ----------- 09

1.3Need of the Project ----------- 101.4Scope of the Project ----------- 11

1.5 Research Methodology ----------- 121.6 Limitations of the Project ----------- 13

Chapter II 14

2.1 Company Profile ----------- 15

2.2 Organization Chart ----------- 262.3 Benefits given by Company ----------- 29

Chapter III 31

3.1 Theoretical Background ----------- 323.2 Data Analysis & Interpretations ----------- 44

Chapter IV 57

4.1 Findings ----------- 584.2 Suggestions / Recommendations ----------- 59

Bibliography ----------- 60

Annexure ----------- 61


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CHAPTER I

IntroductionObjective of the StudyNeed of the ProjectScope of the ProjectResearch MethodologyLimitations of the Project


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INTRODUCTION

The banking sector has under gone turbulent changes in the past few years. The financial sector

reforms have provide Nationalized bank with an opportunities to get entered an era of fierce

competition, posing tall challenges. The conventional banking as outlined above hasgiven way for professional and high-tech banking. There has been a paradigm

shift from the monopolies of nationalized banks to competitive banking. Nationalized banks can

no longer remain complacent with their conventional products and services. With walk in

business virtually being ruled out, banks are now scouting for quality consumers both for

building their resources and assets. There were times when the corporate clientele occupied the

centre stage and the retail ones were pushed to the back seat. The slowdown of the economy,

sluggish industrial growth and slump in agricultural activities have pushed the commercial banks

to look to the retail customers.

Retail Credit Lending is one of the main functions of banking business and so an importantsource of working fund for the bank. Retail credit is an indispensable factor to increase the

source of the Banks to serve effectively. The importance of credit facilities of the nationalized

banking structure is to provide satisfactory service to the retail customers in order to fulfill their

Economical or Financial needs and ultimately their social needs. The success of the banking

greatly lies on the Credit Lending performance of the bank as the Credits are normally

considered as a cost effective source of working fund. The bank is operating various Retail

Credit Lending schemes such as Housing, Education, Vehicle, Personal and other special

schemes to meet the varying requirement of the customers. Credit Lending to the public provide

low cost working fund for the bank. When it is not fully augmented, the performance of the bank

is affected. Innovative business has become more essential for the banks to stay and to progressin this aggressive, ever-changing, competition-packed marketing environment.

For a bank, Lending of Credit is as much essential as Oxygen for Life. In the post liberalization

scenario, the number of players in banking industry has increased considerably which developed

competition in bank marketing. The survival of the fittest has made applicable for the banks.

To enhance profitability, banks take appropriate steps to minimize the Cost and Time for lending

the credit. In the present context banks efficiency can be measured with respect to Cost,

Profitability and the Time taken for lending.

Banking is a business of taking risks. One of the important, all pervasive risks that Bankers haveto face at all points of functioning is the operational risk and supersedes other risks. It is the risk,

arising out of human or technical error. Functionaries not being fully aware of the latest

information regarding operations tend to make errors which may prove costly for an individual

and also for the bank. It is in this context that there is a need for everyone to be abreast of the

latest developments and extant operational guidelines so that the bank could lend the credit

facilities to its customer as per their requirements and thereby satisfying them beyond their


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expectations. This will significantly minimizes the risk and therefore help the bank to achieve its

goal more efficiently and effectively.

OBJECTIVE OF THE PROJECT

The main objectives of the study are as follows:

y To study the Concept on which bank can practice active Retail Credit Lendingy To analyze the need for Retail Credit and the techniques & procedures used for the

processing of Retail Loans

y To provide the details of different modes of lending along with the steps involved in theCredit lending

y To describe the various methods and techniques and important measures which are used forprocessing of the Retail Credit Lending

y To study about Banks investment, Credit Deployment, and NPAsy To provide the details of the Risks which are involved in the Retail Credit Lendingy To study about the Risk Management & vigilance of the risks which are associated with

Retail Credit Lending

NEED OF THE PROJECT

To fulfill the Requirement of Summer Internship which is a part of our curriculum To know the concept of Retail Credit Lending To describe the different types of Retail Credit To describe the different ways of Credit lending To study the Deployment of Retail Credit Analysis and interpretation of the data collected


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To study the processing of Retail Credit and Risk associated with them To study the various methods and techniques used for management of the Retail Credit To know the income, expenditure and profitability of the bank. To study how the Retail Credit is profitable to the Bank

SCOPE OF THE PROJECT

Following are the scope of the project:

y Source of funds in Banksy Different ways of Retail lendingy Reasons for Retail Lendingy Tools and Techniques for managing Retail Loansy Guidelines for Retail Credit Lendingy Risks involved in Retail Loansy Describes the Risk Management


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RESEARCH METHODOLOGY

Methodology is to collect the important data through secondary sources like

internet, books, circulars and journals. I approached each and every officers of the

bank and I obtained very useful information from them. To give a present scenario

on the topic I also spoke to the Asstt.General Manager of the bank and his Team

who also act like a secondary source of data for the completion of my project

report.

LIMITATIONS OF THE PROJECT

Following Problems were encountered during this project:

Time constraint Collection of real time data Survey within the bank Bank staff could not provide the detailed information due to banks Policy.


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CHAPTER - II

COMPANY PROFILEORGANISATIONAL CHART

- BOARD OF DIRECTORS- TOP MANAGEMENTBENEFITS GIVEN BY THE COMPANY


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COMPANY PROFILE

Name of the Bank : BANK OF MAHARASHTRA

Area of Operation : Nationwide

No. of Branches : 1,421

Class : A Class

Chairman : SHRI. ALLEN C.A. PEREIRA

Managing Director : SHRI. ALLEN C.A. PEREIRA

Executive Director : SHRI. M.G. SANGHVI

Staff Members : 13,631


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Company Profile in Tabular Form

Parameter Mar 2007 Mar 2008 Mar 2009

Total Business 57381.62 71556.36 87072.20

Total Deposits 33919.34 41758.33 52254.92

Aggregate Deposits 33663.20 41580.37 52219.43

Gross Advances 23462.28 29798.03 34817.28

Net Bank Credit 23220.87 29285.81 34290.77

CD ratio 69.70 71.66 66.67

% of Priority Sector Adv.41.24 48.63 41.06

% of Agricultural Adv. 16.73 21.04 18.21

Total Investments 11298.40 12282.95 18382.14

Gross NPAs 820.28 766.27 798.41

% to Gross Advances 3.50 2.57 2.29

Net NPAs 277.38 254.05 271.90

% to Net Advances 1.21 0.87 0.79

Operating Profit 613.20 672.63 793.52

Net Profit 271.84 328.39 375.16

Other Income

(incl. treasury profits)378.52

380.28 500.02

Capital Adequacy Ratio 12.06 10.75 12.05

P. E. B. ( in lacs ) 413.03 526.54 638.78

No. of Branches 1345 1375 1421

Of which Metro 264 351 368

Urban 290 257 271

Semi Urban 202 251 262

Rural 589 516 520


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ABOUT BANK OF MAHARASHTRA

ESTABLISHED IN 1935

Bank of Maharashtra is a common mans bank. Prof. V.G. Kale and the late Shri D. K.

Sathe registered as a banking company on the 16th of September, 1935 at Pune with an

authorized capital of Rs. 10.00 Lakh and issued capital of Rs. 5 Lakhs by a visionary group of

middle class men with the sole aim to serve the common man from Maharashtra who was

neglected in the field of banking at that time. Their vision was to reach out to and serve the

common man and meet all their banking needs. The bank started functioning on 8th

February

1936. In July 1969 when it was nationalized with 13 other major Bank had developed its roots in

entire Maharashtra and it enjoyed complete confidence of the common man. Even before the

government issued guidelines about deployment of 40% advances to priority sector, the Bank

was following the principle of serving common and neglected people of the society, since its

inception and it continues even today. Successive leadership of the Bank and the employees has

endevoured to fulfill their vision.

Rapid expansion after Nationalization

After Nationalization, the Bank expanded rapidly in other states and also reached the

nook and corner of Maharashtra. Around 38% of its branches are in rural area. Today the bank is

spread in 22 states and 2 union territories. It has already acquired the status of an all India bank.

At the same time it has gained predominance in Maharashtra state through 883 branches. The

Bank has migrated 831 branches under CBS as against 773 branches as on 31.03.2009 and 798 branches as on 30.06.2009. The Bank thus holds the record of having highest number of

branches of any nationalized Bank in a single State. The mission of the bank is To be Best in

Maharashtra and most liked in other states.

Milestones

Milestones: Pre Nationalization1936 : Commenced business on February 8th.

1945 : Deposits crossed Rs. 1.00 crore marks.

1946 : Maharashtra Executor and Trustee Company (METCO) established.

1958 : Listed on Bombay Stock Exchange.


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Milestones: Since Nationalization1969 : The Bank was nationalized with 153 branches.

1978 : Set up first Regional Rural Bank (RRB) 'Marathwada Gramin Bank' with

headquarters at Nanded. The Bank was appointed as Convener to the State

Level Bankers Committee (SLBC)

1979 : Bank's business crossed Rs.1,000 crore.

1980 : 500th branch of the Bank at Nariman Point, Mumbai inaugurated by the late

Smt. Indira Gandhi, the then Prime Minister of India.

1981 : Set up the second RRB Aurangabad Jalna Gramin Bank.

1984 Dr Manmohan Singh, the then Governor, Reserve Bank of India, launched the

Bank'sGolden Jubilee Celebration.

1986 : Set up the third RRB Thane Gramin Bank

1987 : 1000th branch of the Bank opened at Indira Vasahat, Pune.

1996 : Bank's Diamond Jubilee Celebration launched by the then RBIG

overnor, Dr.C. Rangarajan

2004 : Bank came up with Initial Public Offering (IPO)

2006 : 1. Launched ATM-cum-International Debit Card

2. Commenced Bancassurance business

3. Commenced distribution of Mutual Fund products.

4. Surpassed business landmark of Rs. 50,000 crore.

5. 1st CBS branch rolled out on 13th November at Karve Nagar, Pune.

2009 : 1444 branches, 345 ATMs, Total Business over Rs. 90,000 crore, 902 CBS

branches

2nd Mar 2010 : The Bank achieved 100% CBS coverage.

Vision 2010

To be a vibrant, forward looking, techno-savvy, customer centric bank serving diverse

sections of the society, enhancing shareholders and employees value while moving

towards global presence.

Mission

To ensure quick and efficient response to customer expectations To innovate products and services to cater to diverse sections of society To adopt latest technology on a continuous basis To build proactive, professional and involved workforce To enhance the shareholders wealth through best practices and corporate governance To enter international arena through branch network


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Our Logo

The Deepmal- With its many lights rising to greater heights.

The Pillar- Our institution - Symbolizing strength

The Diyas- Our Branches- Symbolizing service.

The 3 M's symbolizing- Mobilisation of Money- Modernisation of Methods and- Motivation of Staff.

Our Aim

The bank wishes to cater to all types of needs of the entire family, in the whole country. Its

dream is "One Family, One Bank, Bank of Maharashtra ".

Secured Autonomy

The Bank is one of the progressive Nationalized Banks that got autonomy in the year 1998 and

continues to enjoy the status as a result of excellent performance. It helps in giving more and

more services with simplified procedures without intervention ofGovernment. The Bank has

earned profit for consecutive five years.


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SOCIAL BANKING for equitable economic development

The bank excels in social Banking, overlooking the profit aspect having the highest share of

priority sector in net Advances and it derives strength from the common man, as its savings

deposit are 29% of its deposits. Around 90% of its depositors are having deposits below

Rs.25000/-. The Bank provides an array of banking services that satisfy changing needs of

depositors as well as small and big borrowers. The bank has entered into correspondent

arrangement with Overseas Bankers also. It provides finance to various sectors ranging from

Agriculture to Industry and from Trade to Export.

The Bank has established Rural Development Centres at Hadapsar and Bhigwan in Maharashtra

to carry out Research, Technical Support, Education, Demonstration and Rural Development

Activities. The Bank has also established to trust under RDC, namely Gramin Mahila VA

Balvikas Mandal (GMVBM) and Maha Bank Agricultural Research and Rural Development

Foundation (MARDEF) Both are NGOs and are engaged in improvement of women and

children in the rural and in transfer of technology in Agricultural sector.

-Priority Sector Lending

It has been the constant endeavor of the Bank to facilitate equitable and sustainable development

by making credit available to productive purposes to Small Borrowers, Small & Marginal

Farmers, Micro & Small Enterprises, Retail Traders, Professional & Self Employed, Women

Entrepreneurs and economically weak but with entrepreneurial leanings. The outstanding

advances under Priority Sector as of March 2009 aggregated to Rs. 12,236 crore, constituting

41.06 per cent of the Adjusted Net Bank Credit of the previous year as against the stipulated

minimum target of 40 per cent. The rise in Priority Sector Advances was Rs. 826 crore over

March 2008 in absolute terms.

-Agriculture sowing to reap

The Bank disbursed Rs. 3,143 crore under agriculture during the year 2008-09. The outstanding

advances increased to Rs. 5,427 crore showing an increase of Rs. 471 crore. As on March 2009,

total advances to agriculture are 18.21 per cent of Adjusted Net Bank Credit. The Bank

undertook awareness programmes for all branches for increasing agriculture advances.

The Bank successfully implemented Agriculture Debt Waiver and Debt Relief Scheme of the

Government of India, by reaching out to 87,157 eligible small and marginal farmers for debtwaiver involving Rs. 218.32 crore. The number of farmers eligible for debt relief is 48,237.

-Micro, Small and Medium Enterprises (MSME) for sustainable growth

SMEs are recognized as major growth engines for the Indian economy. They generate

opportunities for direct and indirect employment by facilitating use of natural resources and local

skills to stem the tide of migration to urban areas and promote low investment enterprises. The


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Banks lending to MSMEs which was at the level of Rs. 2643 crores as at March 31, 2008, has

increased to Rs. 3074 crores as at 31st March 2009. Following the special package announced by

the Government in September 2008, fresh credit facilities to the tune of Rs. 1170 crores have

been extended to MSMEs between September 2008 and March 2009.

Convener of State Level Bankers Committee

The Bank is the convener of State level Bankers committee and is successfully handling the

convenorship of state Level Bankers committee for the State of Maharashtra. It is also convener

of SLBC for Rajbhasha. It is entrusted with the responsibility of being the Lead Bank under Lead

District scheme in six districts namely Aurangabad, jalna, Nasik, Pune, Satara and Thane, all

from Maharashtra. The Bank has sponsored three Regional Rural Banks with their head quarters

in Nanded, Auraangabad and Thane, namely Marthwada Gramin Bank, (MGB) Aurangabad

Jalna Gramin Bank & Thane Gramin Bank. MGB happens to be the biggest RRB in the country

and covers 6 District in Maharashtra.Bank offers Depository services and Demat facilities at 131branches. Bank has a tie up with LIC of India and United India Insurance Company for sale of

Insurance policies. All the branches of the Bank are fully computerized.

Computerization

Computerization activity in the Bank started a way back in 1982. By December 2000, 380

branches were computerized and the total business handled by these branches was more than

69%. The Bank has also introduced sophisticated facilities like ATM, E-mail, Tele-Banking,

Query Terminal etc. at various branches/offices.

Highlights

Autonomy secured in the year 1998 continues. Total business more than Rs. 91000.00 crore of which total deposits more than Rs. 54400

crore and Gross advances more than Rs36600 crore as of 30.9.2009

Branch network comprises of 1433 branches spread over 22 states and 2 union territories. CBS Branches

Bank has migrated 831 branches under CBS as against 773 branches as on 31.03.2009

and 798 branches as on 30.06.2009 ATM Network

Bank has 345 ATMs. Bank has installed 11 Biometric ATMs.

Card base crosses 10 lakh

Mahabank Insta International Visa Debit CardMahabank International Debit Card is issued in collaboration with VISA


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ATM Card along with PIN is given to the customer as Welcome Kit at the time ofopening of the current and SB account in all CBS branches. The customer can start using

ATM Insta card after 36 hours from date of issue. ( 36000 Insta Cards are issued since

July 09)

Utility Bill Payment through Internet Banking Facility.The customers can do on line shopping / e-commerce and utility bill payment transaction

through Internet Banking facility.( 37000 Customer are using Internet Banking

facility)

Maha e-StatementCustomers can get their statement of account on registering their e-mail id and desired

frequency of statement with the Bank.

Straight Through Processing (STP) STP of NEFT/ RTGS transactions has beenimplemented for instant processing of inward and outward remittances through RTGS

and NEFT. (800 branches are offering RTGS/NEFT facility)

Specialized branches:

S M E branches - 14 Agro High-Tech branches - 4 Industrial Finance branches - 2 Overseas branches - 2 Treasury & international Banking - 1 Pension Branch -1 Govt. Business Branch - 1

Bank has 28 FEX centers to handle FEX business. Toll Free telephones at 11 major Metro centers. The bank is shouldering the responsibility of lead bank in six districts viz. Satara, Pune,

Thane, Nasik, Aurangabad and Jalna. Our bank is also convening State Level Bankers

Committee and various development issues are taken up to implement the state credit

plan and achieving the targets under various Government sponsored schemes.

The Bank has set up a Trust viz. Mahabank Agricultural Research and RuralDevelopment Foundation (MARDEF), which is engaged in providing Credit Plus

services to the farmers in specific specialized fields like commercial dairy, Emu farming,sericulture, organic farming, etc.

The Rural Development Centers at Bhigwan and Hadapsar in Pune District undertakevarious labs to landprograms on improved technologies. A fully fledged soil-testing lab

is being set up for the benefit of the farmers to go in for high-tech agriculture.


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To provide activity specific training to educated unemployed youth, Bank has set up fiveMahabank Self Employment Training Institutes (MSETI) at Pune, Aurangabad, Nagpur,

Nasik & Amravati for providing training to rural youth for enabling them to acquire skills

for self-employment.

Bank has formed a Trust by the name Gramin Mahila va Balak Vikas Mandal(GMBVM), which is primarily engaged in formation, nurturing, training and linkage of

self-help groups to various banks, GMBVM has its area of operation in nine districts and

has been recognized by Government of Maharashtra as Mother NGO. It also markets

various products made by SHGs through its two retail outlets by name SAVITRI in

Pune district. The GMBVM is now in the process of scaling up viable SHGs to SMEs.

The Bank has floated a subsidiary company- The Maharashtra Executor & TrusteeCompany Ltd. (METCO) which undertakes Trustee Business, Property Management and

Tax Consultancy as well.

Bank is the Convener for Town Official Language Implementation Committee (TOLIC)at Mumbai, Pune & Solapur. The Bank secured the First Prize for better implementation

of Hindi in both A and B Region and the Fourth Prize for implementation of Hindi in

C Region under Reserve Bank of India Rajbhasha Shield Scheme for the year 2007-

2008. The Bank also secured the Second Prize under R.B.I. Bi-lingual House Magazine

Competition for the year 2009.


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M-SETI

M-SETI (Mahabank Self-Employment Training Institute) is an institute established under the

aegis of Mahabank Agricultural Research & Rural Development Fund (MARDEF), a trust

established by Bank of Maharashtra and co-sponsored by the National Bank for rural

development (NABARD). The institute is recognized by the Department of employment & self-

employment ofGovt. of Maharashtra.

The institute trains unemployed youth from the districts of Pune, Kolhapur, Satara, Sangli,

Nashik, Ahmednagar, Jalgaon, Dhule and Nandurbar.

The objectives of the Institute are:

To train the unemployed youth. To promote rural entrepreneurship. To increase self-esteem of participants and To help trainees in improvement, placement and counseling them for Bank facilities and

their subsequent status.

The following are the training programs identified by M-SETI:

Entrepreneurship development programmes (EDPs) on technical courses viz. twowheelers, TV and VCR and domestic appliances, repairs, motor rewinding, photography

and video shooting, beauty parlor, commercial painting, tailoring etc.

EDPs specific to the Government sponsored schemes viz. PMRY, SGSY, SJSRY, SHGs, Information technology; Electronic data processing, electronic data entering and

computer awareness programmes.

The said training is free of cost.MAHABANK INFO CENTER

1. Mahabank Info Center is a retail banking boutique set up by Bank of Maharashtrahaving the following activities.

Providing information on services provided by the bank at its various branches and

specialized branches,

2. Mobilizing deposits for various branches in Pune city,3. Marketing to increase ATM card base Directing prospective clients to respective

branches for financial aid on housing, vehicle, consumer durables, education & foreign


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tours, etc.

4. Development of business through bringing in instructional accounts.5. Image building exercises.


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ORGANIZATIONAL STRUCTURE

BOARD OF DIRECTORSTOP MANAGEMENT


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BOARD OF DIRECTORS

Shri.V. P. Bharadwaj Shri. S.K. Gogia Shri. A. K. Pandit

Shri. C. Patwari Shri. T. Parameswara Rao Shri. S. H. Kocheta

Dr. D. S. Patel Shri. S. U. Deshpande


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TOP MANAGEMENT

Shri. A. S. Banerjee Shri. B. K. Piparaiya Shri. K. H. Waze

Shri. V. Kannan Shri. V. E. Dalvi Shri. V. Y. Chapekar

Shri. R. H. Kulkarni Shri. M. V. Dhoble Shri. M. C. Goyal

Shri.S. D. Arya Shri. V. R. Gupta Shri. Dilip. R. Harnagle


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Benefits Given By the Company

Following are the Services Provide By Bank of Maharashtra:-

Bank Deposits Lending of Loans ATM Services Credit Cards Demat Services Bancs Bancassurance Distribution Of Mutual Funds Executors And Tustee Services MAHAbill Pay Mahabank Insta Remit Scheme Capital Market Application (ASBA)NEFT MAHAeTRADE (ON LINE trading facility)

Roles and Responsibility:-

During my summer internship in the Retail Hub ofBank of Maharashtra, I have learned about

the Retail Loans as much as I can. Especially Mr. Rajan Korgaonkar, Asstt.General Manager

of the bank and his Team helped me a lot in learning the Retail Credit operation and the Risks

involved in Lending Credit. The staff was really very helpful, supportive, coordinating and

friendly as well. I also got to realize the importance of know your customer (KYC) norms

According to which Bank opens an account or give loans & advances to the customer. Banks

completely follows the RESERVE BANK OF INDIA guidelines for deposit and advances.

In Bank of Maharashtra, I Learned how to deal with the following four types of RetailLoans :

- Home Loan- Education Loan- Vehicle Loan and- Personal Loan


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I am feeling benefited after learning the following operations in the Bank ofMaharashtra :-

- Assessment of the loan documents.- Preparing the Assessment sheet.- Reporting to Concerned officer about the Assessment.- Preparing the Housing Loan Processing Note.- Preparing the Loan Appraisal forms.- Preparing the Sanctioning Note.- Criteria or Conditions for Sanctioning Loan.- How to verify the Loan documents?- How bank deals with Different Loan Requests?

I have learned all these operations by completing 24 Loan Proposals which includes all the four

types of Retail Loans like Housing, Education, Personal and Vehicle loan.


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CHAPTER-III

Theoretical BackgroundData Analysis & Interpretations


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THEORETICAL BACKGROUND

GENERAL

Lending of funds to the constituents comprising of traders, businessman, agriculturists

etc. constitutes the main business of Banking Company. Bank has to ensure that in granting of

loans and advances, the deployment of funds is made in a most profitable manner. Yet this

business of lending is not without inherent risks. The test of a banks strength and its success or

failure depends on the nature and quality of its advances. Therefore while lending, bank follows

prudent policies and conduct its business on the basis of principles of sound lending in order to

minimize risks.

Safety, liquidity and profitability are the cardinal principles of lending. After

nationalization banks have been functioning as an instrument of social change. The GOI and the

RBI, during the last two decades have issued a number of directives in this regard highlighting

the social/economic purpose which they have to sub-serve. The traditional principles of lending

have come under stress. With regard to certain type of lending particularly under priority sector

the concept of security and profitability have undergone a radical change and have been

subordinated to social objectives.

A) Yet a banker has also to remember that he is dealing in funds collected frompublic by way of deposits and is working as a trustee of their funds. Therefore the

basic principles of good and sound lending which are fundamental observed by

Banks. The principles may vary depending on situation, however, basic frame will

remain the same.

B) It needs to be borne in mind that advances form the most important component ofbanks business. The advances portfolio needs to be monitored with due care and

responsibility, because of the risk involved in lending operations.

C) Safety, liquidity and profitability are the three basic principles of lending. Sincethe amount to be advanced mainly consists of depositors funds, bank has to

ensure and safeguard depositors interest. Bank should also remember that some

of banks deposits are withdrawable on demand or at short notice. It would be in

banks interest to see that the advances which bank grant are easily liquidated.The canon of liquidity is more important. Bank should also know that bulk of

banks profit accrues from the advances. However, profitability should not

override the other two principles of lending i.e. safety and liquidity. Therefore, the

crux of banks lending lies in reconciling these conflicting requirements by

striking a good balance between these conflicting principles.


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COMPOSITION OF CREDIT PORTFOLIO

It is equally relevant to mention here that bank should diversify their advances and should

not concentrate such lending to any group or sector of industry/business in one particular

area/sector. The maxim all eggs should not be kept in one basket should be borne in mind. The

purpose for which the advances are to be sanctioned/recommended should be legal andacceptable to the bank and the type of business activity to be financed by the bank should be

within broad lending policies framed by the Central Office. Bank should ensure that the purpose

of the advance is productive which will generate internal surplus and provide definite source of

repayment. The aspect of security (wherever applicable) should not be lost sight of. Tangible

security acceptable to the bank should be considered as an insurance or cushion to fall back upon

in case of emergency. Even after application of all principles of lending, a particular proposal

may not be acceptable to the bank, if it is not in the National Interest. GOI and the RBI issue

various directives from time to time in this regard. These should be kept in view while

sanctioning/recommending any advance/s. Every proposal should conform to

RBI/government/banks guidelines and national policy.

Summary

Bank summarize below the principles of sound lending which should be observed while

sanctioning/recommending any advance.

1. Safety2. Liquidity/Economic Viability/Technical Feasibility of the activity of the borrower3. Profitability4. Purpose5. Security6. Diversification of risks7. National Policy/RBI Credit policy8. Banks credit policy.

SIGNIFICANT ASPECTS FOR EXAMINING THE ADVANCES

-Advances Portfolio

1. The manager/officer should study the composition and distributive pattern of thecredit portfolio of the branch and examine as to whether the branch has been

following the guidelines enunciated in credit policy of RBI / Bank.

The manager / officer should also ascertain as to whether the efforts made by the

branch in extending credit to the priority and weaker sectors of society are adequate

and that potential offered by the area of its operation for various types of advances

has been properly tapped.


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2. It should be seen as to whether the branch has proper infrastructure facilities andadequate arrangements for proper credit appraisals, post disbursement supervision

and follow up of advances/problematic/sick, weak accounts, more particularly for

recovery of non-performing advances/large overdues in these accounts.

3. The manger should examine that he is exercising the delegated sanctioning powers judiciously and there is proper and timely reporting of sanctions to the competent

authorities. As far as possible the Branch Manager is expected to refrain from

exceeding the delegated powers and it should be seen that in unavoidable cases

confirmation I obtained from the competent authority at the earliest specifically

giving the reasons as to why it was so necessary to extent ad

hoc/temporary/additional credit facility without obtaining prior sanction.

4. It should be verified that the guidelines on advances issued by RBI/HO from time totime are strictly followed by the branch.

5. The assets acquired by the borrowers are available as security for banks dues and thebranch is taking adequate and necessary timely steps to safeguard interest of the bank.

- Applications for credit Facilities

The managers/officers should ensure that:

1. The applications as far as possible are obtained in appropriate forms for differentcategories of borrowers and types of credit facilities, prescribed by the Head Office.

2. The applications are accompanied by documents relating to the status of the applicant i.e.individual/sole proprietorship/ society/trust deed, Memorandum and Articles of

association etc. are obtained and kept on record. The Branch Manager should obtainfinancial statements for at least past 3 years, wherever so applicable, true copies of latest

income tax/sales tax and wealth tax returns and assessment orders. For societies/local

bodies/limited companies, certified copies of appropriate resolutions authorizing the

signatures/office bearers to operate the accounts and borrow the funds from the bank be

obtained and kept on record.

- Credit Reports

1. Credit reports on individual borrowers/company/obligant/guarantors are obtained and arekept on record.2. The Branch Manager has independently verified the correctness of the informationfurnished by the borrowers/guarantors in personal information form and has prepared

confidential report in the prescribed form (F.85). the credit reports are updated annually

and fresh reports wherever required are obtained and held on record.

3. Brief particulars of immovable properties owned by the individual/firm together with theconservative estimates of their market value are kept on branch board. Wherever required


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and found necessary fixed assets charged to the bank must be got valued from approved

Valuer and such valuation reports be kept on record.

4. That the nature and extent of credit facilities, if any, enjoyed by the applicant/borrowersat different offices of the bank as also at other bank/banks are obtained and kept on

record at the branch., while arriving at the credit needs of the applicant care is taken to

take into account all such other credit facilities enjoyed by the borrower

CREDIT APPRAISAL/PREPARATION OF APPRAISAL NOTES FOR

SANCTION/REVIEW/RENEWAL OF ADVANCES

The manager/officers should examine the quality of credit appraisal done at the branch and

ascertain to

1. Whether the branch has been following generally accepted sound lending norms and isexamining carefully various aspects like proposed activity, diversification of activity

viability of the project, creditworthiness of the applicant/guarantors, purpose and types of

the credit facilities requested, competence of the borrowers to manage the business

activity etc.

2. Whether the past conduct of the accounts, compliance of terms and conditions ofsanctions submission of information like stock statements, QMR, financial statements

etc. have been taken into account.

3. Whether notes on review/renewal based on audited financial data contain details andcritical observations on performance of the unit, financial position of the unit and its

constituents, working results vis--vis Projections.4. Whether status of the security charged to the bank has been re-examined. Wherevereligible i.e. in respect of credit facilities of Rs.50.00 Lakhs and over, whether the same

has been verified by independent C.A. firm.

5. Whether operations in the account and availment of various credit facilities have been tothe satisfaction of the bank and the appraisal note contains comments about the same.

6. Whether exercise for PBF/NWC etc. has been carried out correctly / critically.7. Whether the branch is complying with RBI/IBA/Head office guidelines/instructions

regarding sanctions, review and renewal of advances.\

8. Whether Nayak Committee/ Ghosh Committee/ Selective credit control norms etc. arefollowed.

9. In case the borrower has been banning/availing credit facilities with other banks, whetherlatest opinion reports from such banks have been obtained.

10.Whether search with Registrar of Companies has been obtained beforesanction/review/renewal of credit facilities.

11.Whether it is ensured that partnership firm is registered with registrar of firms andcertificate for the same is held on record.


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12.Whether necessary certificates which are required for commencement of business activityhave been obtained.

DOCUMENTATION

Themanager/officers should verify that the branch has obtained all necessary documentsadequately stamped and properly executed as stipulated by the central office for the facilities

granted to the borrower. In case of advances above Rs.50.00 Lakhs certificate from the

correctness of documents taken is obtained and is held on record. In case law officer is not

available, certificate from the local panel advocate be obtained.

REPORTING SYSTEM

The manager/officers should verify that the credit facilities made available are correctly and

timely reported to the competent authority. The control returns submitted depict true picture of

the information incorporated.

IMPORTANT SCHEMES / PROJECTS OF THE BANK

- Retail Financing

The Bank is providing retail loans to Individuals, who are salaried persons, professionals,

businessmen and pensioners for purchase of consumer durables, two/four wheeler vehicles and

also for other personal needs. During the year, the Retail lending portfolio grew by 8.19 per cent.

- Housing loan to public

To promote the housing in rural and urban parts of India, the Bank has taken the housing as a

thrust area and has been lending under the Housing Loan to Public Scheme, on a priority basis.

The scheme is simplified and is customer-friendly. Housing loans are also made available to

NRIs. The Bank is also implementing Golden Jubilee Rural Housing Finance Scheme in rural

areas, having population not exceeding 50,000 (as per 1991 census). The Banks lending to

housing sector has grown by 13.28 per cent during the year.

- Model Educational Loan scheme from learning to earning

With the objective of ensuring that no deserving student is denied an opportunity to pursue

higher education for financial reasons, the Bank implements a Model Educational Loan Scheme.As of March 2009, the Banks educational loans stood at Rs. 347.19 crore to 19249 students. The

Bank has provided the facility of submission of online application for education loan through

web-access.


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CHARACTERISTICS OF RETAIL LOANS

- All these Retail Loans are considered as Fund-based Credit Facilities.- They are also known as Term Loan- It is an arrangement wherein the credit facility is sanctioned to a borrower for a

fixed period but repayable in installments.

- Once the loan amount is disbursed in full no subsequent debit is to be allowedexcept by way of interest, insurance charges, DICGC guarantee fees or expenses

incurred for protection of the security charged to the bank etc. interest is charged

on the amount outstanding from time to time. Interest chargeable is worked out on

daily products and applied on quarterly basis/half yearly basis.

- As there is no possibility of a loan account showing credit balance or fluctuatingdebit balance unlike the operative cash credit account, the operational cost of

maintenance of loan account is lower as compared to cash credit account.

However, the period for which such loans are considered is longer (ranging fromfive to seven years)

ADVANTAGES OF RETAIL LOANS

- Better yield and improved bottom line- Risk calculation and NPA perception- Builds customer base-

Helps economic revival of the nation through- increased production activity- Improves lifestyle and fulfills aspirations of the people through affordable credit.- Innovative product development- Minimum marketing efforts in a demand-driven economy- Risk weight in certain segments like housing loan

BORROWER AND CONFIDENTIAL REPORT

- Borrower SelectionBank should have personal knowledge about the borrower/s and their business. As a

condition precedent to any advances we should make discreet enquiries about the position and

status of the borrower, security offered and repayment proposed etc. Care should be exercised in

selection of borrower and advances are to be sanctioned / recommended for borrowers, whose

integrity, reputation, capacity to conduct the business and credit-worthiness are established to our

satisfaction.


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Three Cs: Character, Capacity and Capital are the basic principles for consideration

of an advance. The character of a borrower indicates his intention to repay the advances and his

capital and capacity indicate his ability to repay. To sum up integrity of the borrower should be

unquestionable. If the borrowers integrity is questionable (doubtful) Bank should refrain from

sanctioning credit facility/ies even if a collateral security is offered. Any amount of security

cannot substitute integrity of a borrower. The ability of a borrower to utilize the credit facility

sanctioned by the Bank Profitably and to repay the same with interest within a reasonable period

needs to be looked into. Likewise Bank should enquire into the financial position of the

borrower. The lending should be in proportion to the borrowers own resources.

- Banking relations

We may ordinarily recommend/sanction credit facilities only to applicants who agree to

bank with us exclusively and that too with one branch unless the borrower has offices at different

places and his business warrants maintaining accounts with more than one branch. A number of

complications viz. Double financing, kite flying etc. arise when borrower deals with more than

one branch/bank and hence such precaution is necessary.

- Confidential Report

A) A confidential report of the borrower and/or guarantor needs to be scrutinizedcarefully. Scrutiny should lead to some firm conclusions. Information furnished by

the borrower/guarantor needs to be independently verified. A conservative estimate of

the means of the borrower/guarantor should be formed in order to determine the

extent to which they may be considered creditworthy. If these borrowers/guarantors

are banking with other banks confidential opinion from all such banks should be

obtained when they propose to switch over to our bank to their existing bankers.

B) Detailed scrutiny of all such repots compiled and/or collected need to be made bymanagers to ascertain whether there is a significant variation in net worth of

borrowers/guarantors under the review period. Adverse features noticed during

annual review should be communicated to the controlling office/central office to

enable them to suggest remedial measures to be initiated. However, it should be

ensured by the Branch while compiling/collecting such reports or taking annual

review of such report/s that it exercises all possible tact and discretion to avoid

inconvenience to good customers of long standing while calling for elaborate details.

Our form No.157 in respect of collection of information from the borrower and the

guarantor should be got filled in and his latest income tax /wealth taxreturns/assessment orders should be perused all Personal information forms should be

updated on yearly basis.


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RISK MANAGEMENT SYSTEMS IN BANKS

In the process of globalization and financial disintermediation, banks are now forced with

the prospect of facing a wide variety of risks, viz. credit, interest Rate, Forex, Liquidity, legal

Regulator, Reputational, operational and so on. These risks have assumed significance, as the

ability to identify measure, monitor and control the overall level of risks have become crucial to

the long-term viability and perspective of the banks.

Recognizing the significance of these risks as well as the need for their effective

management, RBI had issued risk management guidelines in October 1999 for implementation of

Risk Management Systems in banks. The RBI guidelines broadly cover the management of

credit, market and operational risks and, together with the earlier guidelines on asset liability

Management, are to serve as benchmarks for the establishment of an integrated Rise

Management System, which is to be operationalised by March 2001.

- What is risk Management all about?The broad parameters of a risk management function should encompass:

i. Organizational structureii. Comprehensive risk management approachiii. Broad approved risk management policiesiv. Board approved risk management policiesv. Strong M.I.Svi. Well-defined procedures and a comprehensive risk reporting framework.vii. Separate risk management framework independent od operational departments.viii. Periodical review and evaluation.

The RBI guidelines focus upon setting up of departments/committees for Risk

Management, development of credit rating models to identify risk and risk pricing, quantification

of risk arising out of expected/unexpected losses, estimation of provisioning requirement,

calculation of risk capital requirement, monitoring and control of credit portfolio management

and Loan Review Mechanism (LRM), risk analysis of investments proposal and database for

credit risk modeling.

RISK MANAGEMENT EFFECTIVE AND PROACTIVE

1. General

As of March 2009 all SCBs in India have come under the purview of Basel II capital adequacy

norms notified by the Reserve Bank of India. Banks are required to have sufficient capital to

cover credit risk, market risk and operational risk. In order to calculate capital requirement under

the Basel II norms, banks have to put in place a comprehensive risk management frame work


33/55

across the organization. The Banks approach to risk management is proactive. The primary goal

of risk management is to identify, assess the impact of the risks inherent in the business and

adopt risk management / mitigating measures, so as to achieve business growth with improved

safety, soundness and profitability.

The Bank has also formulated a Risk Management Policy on the basis of the guidelines issued by

RBI recognizing the need to effectively identify measures, monitor and control various risks in

view of their implications on the Banks business growth and financial soundness.

RISK MANAGEMENT SYSTEMS CO-ORDINATE AND COMPREHENSIVE

Credit Risk

The Bank has in place a comprehensive Lending Policy and Loan Review Policy, which

prescribe instruments of Credit Risk Management. Various aspects of Credit Risk, like asset

concentration, norms for industry exposure, prudential limits and various financial parameters,substantial exposure limits, standards for collaterals, and review of portfolio etc. are spelt out in

the above policies in line with the Risk Management Policy prescriptions. The Bank has also set

up Credit Approval Grids at various levels and at Treasury & International Banking Division

(TIBD) Mumbai to obtain preliminary clearance on credit proposals from the risk perception

view point. The Bank has put in place a comprehensive credit policy and internal credit rating

system under which all the borrowable accounts with exposure of Rs. 2.00 lakh and above are

rated on various parameters. An in-house developed Credit Risk Rating Framework (CRRF)

comprising of risk rating models for existing as well as entry level borrowers recognizes the

classes of asset as desired under Basel II, like corporate, banks, commercial real estate and retail.

The Bank has prescribed bench-mark ratings for entry level exposures. In addition, as credit riskmanagement measures, substantial exposure limits and very large exposure limits have been

prescribed in the Risk Management Policy.

The Bank has undertaken migration analysis of credit risk rating and estimated probability of

default in line with Basel II requirements. Risk based pricing framework has been implemented.

Portfolio reviews and industry studies have been undertaken during the year to assess the risks

lying in the credit portfolio and to adopt strategies to improve credit quality and reduce the

potential adverse impact of concentration of exposure to particular borrowers, sectors or

industries. Policy on Stress Testing has been put in place and reports on stress testing results are

placed before the appropriate authorities for periodical review.

Interest Rate Risk Dynamic Pricing

The Bank has put in place a system for regular review of lending and deposit rates in order to

minimize the interest rate risk. The Bank has put in place an Asset Liability Management (ALM)

Policy which is reviewed regularly. The Asset Liability Management Committee (ALCO) of the


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Bank reviews the risk on a regular basis. Continuous Risk Management measures are initiated

depending upon the movement of interest rates in the market. The movement in the interest rates

is closely monitored for appropriate action.

Liquidity Risk prudence adopted

The Bank ensures effective management of liquidity through the statements of Structural

Liquidity and Short Term Dynamic Liquidity. Models based on behavioral studies of assets and

liabilities have been adopted for maturity gap analysis. ALCO reviews the liquidity position on

an on-going basis and decides the strategy for funding and deployment. The Bank has put in

place a contingency plan for managing liquidity.

Investment Risk Portfolio Quality of Essence

The Investment Policy is in place, covering various aspects relating to Investment decisions,

operations and monitoring thereof, from a risk management perspective including Minimum

rating/quality standard for investment in corporate.

Foreign Exchange Risk Well Controlled

The Bank has adequate systems like prudential limits for open foreign exchange position, set

limits on the aggregate gap position. Prudential limits like Daylight limit, Overnight limit, Net

open overnight position, Stop loss limit, Limit for undertaking swaps/investment/ borrowing

overseas, interbank exposure limits are in place. These limits are monitored on daily basis.

Operational Risk Business Continuity At The Core

For mitigating and controlling the operational risk, the Bank has a well established internal

control system and an administrative structure to formulate, implement and monitor systems andprocedures. The Bank has put in place a Business Continuity Planning Policy and Operational

Risk Management Policy. The Bank is in the process of collecting data on operational risk. The

Bank has also put in place a policy on outsourcing which facilitates using the expertise available

in the market and also as a means of risk transfer.

Regulatory Risk

The field functionaries will have to adhere to the guidelines of the regulatory authority and it

should be made clear that such guidelines / directive are to be adhering to their totality.

Legal Risk

Documentation has to be completed as per sanction terms and law officer wherever prescribed as

per the extant system of getting of borrowable accounts with limits of Rs. 50.00 Lakhs and

above.


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Environment Risk

Field staff should keep themselves abreast of the changes in the environment. Detailed guidelines

on such matters should be adhered to by the field functionaries and exposures monitored even in

cases where the limit is available. Deviations/expectations in such exposures should be promptly

reported to the component Authority.

Reputation Risk

The Banks business derived from the branches and it is, therefore, the duty of the field staff to

maintain the reputation of the bank high by ensuring extremely cordial relations while observing

the statutory guidelines scrupulously. Whether the Banks reputation would be at stake while

entering into a business relationship & transaction should be analyzed while discharging duties.

STEPS PROPOSED BY RESERVE BANK OF INDIA IN IMPLEMENTING RISK

MANAGEMENT SYSTEM

In moving towards the development and implementation of an integrated riskmanagement system, the bank would be required to:

1. Set up Risk Management Committee2. Set up Credit Policy Committee(CPC)3. Establish Credit Risk Management Department4. Achieve integration of ALCO and CPC5. Designate Portfolio / Relationship Managers6. Establish Mid Office for Treasury Function7. Develop a robust MIS8. Set up approvalGrids9. Arrange for training to core staff.

STATUS OF IMPLEMENTATION OF RBI GUIDELINES IN THE BANKS AND

PROGRESS MADE

1. Asset liability management is already in place.2. Credit appraisal form redesigned so as to cover risk perception is introduced.3. Credit Rating System duly revised has already been approved by the board.4. Benchmark ratios finalized for credit analysis have been approved.5. Board approved loan policy is in place.6.

Present lending policy articulates industry wise exposure limits on historical data. Asystem utilizing scientific methods is in the process of formulization.

7. Setting up of the following has been approved by the Board.a) Credit Risk Management Departmentb) Risk Management Committeec) Credit Policy Committeed) Mid Office for Treasury Function


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e) Approval Grid8. Loan Review Mechanism is in operation.

VIGILANCE PREVENTION IS THE KEYVigilance activity in the Bank is an integral part of the managerial function. Its objective is to

efficient administration, where officials can perform the duties without any fear or favour.

Vigilance in the Bank is maintaining a proper balance between flexibility and accountability.

Preventive Vigilance is the most important aspect of vigilance. With a view to improve

functioning at all levels, the Bank has taken the necessary steps as under:

1. In accordance with CVC directives, Vigilance Committees have been formed at theBranches having staff of 20 and more, to review/ monitor sensitive and fraud prone areas

and report irregularities observed therein, if any.

2. High value transactions are scrutinized at more than one level.3. Field staff at branches is periodically educated through internal communication about the

modus operandi adopted in various cases of fraud and precautions to be taken to avert

similar kind of frauds.

4. Vigilance Awareness Week is observed in the Bank every year during which periodlectures / talks by the eminent personalities are held for the members of staff and general

public at branches / offices, emphasizing the need for transparency, ethical conduct and

personal integrity besides preventive vigilance.

5. Sessions on Preventive Vigilance are included in the training programmes conducted bythe Staff College.

6. A Fraud Risk Management Policy has been framed and communicated to staff andfield functionaries. It is a guide on prevention, detection, classification and reporting of

frauds including action to be taken.


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DATA ANALYSIS AND INTERPRETATIONS

INVESTMENTS PROFITABLE GROWTHThe Net investment of the Bank stood at Rs. 18382 crore as on 31.03.2009 as against Rs.

12283 crore as on 31.03.2008, registering a growth of 49.66 percent. 70.00 percent of the

portfolio was held under Held to maturity (HTM) Category, 29.27 percent in Available For Sale

(AFS) and balance 0.73 percent in Held for Trading (HFT) categories. The net interest income

from investment increased by 17.02 percent to Rs.989.84 crore from Rs.845.85 crore during the

last year.

Particulars Amt in cr. As on

31.03.2008

Amt in cr. As on

31.03.2009

Total increase

Net investment 12283 18382 49.66 %

Net interest income from

investment

845.85 989.84 17.02 %

Interpretation:

The net interest income from investment increased by 17.02 percent to Rs.989.84 crore from

Rs.845.85 crore during the last year.

Amt in cr. As on 31.03.2008

Total increase

0

5000

10000

15000

20000



Total increase


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CREDIT DEPLOYMENTThe Bank has put in place a lending policy with an emphasis on qualitative credit growth. The

policy is fully in conformity with the guidelines issued by RBI and also the Priority Sector

lending norms of the Government of India. The policy enunciates the thrust areas, risk factors

and also sets out prudential exposure limits to facilitate qualitative expansion of credit. TheGross Advances increased from Rs.29,798 crores as on 31.3.2008 to Rs. 34,817 crores as on

31.3.2009 with a growth of 16.84 per cent. The Credit Deposit Ratio as on 31.3.2009 was 66.63

per cent.

Sectoral deployment of credit - diversified risk and balanced growth:

The Bank has continued its efforts to support core, manufacturing and priority sectors as well as

infrastructure projects, which serve to drive economic growth. This focus of the Bank will

continue in future, in the light of the national economic growth priorities.

Interpretation:

The Gross Advances increased with a growth of 16.84 per cent. The Credit Deposit Ratio has

also increased.

37.88

15.598.83

11.92

13.05

8.5

1 2.04

5.11

Credit Deployed

infrastructure,petroleum,iron,textile

s,engineering,chemicals

Agriculture

MSME

Other prioritysector

retailsector

housing

education

Exports

commercial real estate


39/55

RISK CATEGORY WISE COUNTRY EXPOSURE(Rs. In Crore)

Risk Category Exposure (net) as

at March 31 ,

2009

Provision

held as at

March 31,

2009

Exposure

(net) as at

March 31,

2008

Provision

held as at

March 31,

2008

Insignificant 970.13 0.00 774.49 0.00

Low 391.01 0.00 293.59 0.00

Moderate 73.23 0.00 77.06 0.00

High 23.25 0.00 4.31 0.00

Very high 8.51 0.00 11.71 0.00

Restricted 0.11 0.00 0.00 0.00

Off-credit 0.00 0.00 0.00 0.00

Total 1466.24 0.00 1161.16 0.00

Interpretation: Since Banks net funded exposure for risk category-wise exposure for each

country is less than 1% of banks total assets as on 31.03.2009, no provision is required in terms

of a particular RBI Circular.

0

200

400

600

800

1000

1200

1400

1600

Exposure (net)asat March 31

, 2009

provision held asatmarch 31, 2009

Exposure (net)asat March 31

, 2008

provision held asatmarch 31, 2008


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NON-PERFORMING ASSETS Non-Performing Assets (NPA)

Particulars 31.03.2010 31.03.2009

(i) Net NPAs to Net Advances (%) 0.79 0.87

(ii) Movement of NPAs (Gross)

(a) Opening balance 766.27 820.27

(b) Additions during the year 368.56 252.12

(c) Reductions during the year 336.42 306.12

(d) Closing balance 798.41 766.27

(iii) Movement of net NPAs

(a) Net opening balance 254.05 277.38

Add: ECGC/DICDC Settled

amount

26.29 22.75

Gross: Opening Balance 280.34 300.13

(b) Additions dduring the year 181.39 167.80

(c) Reductions during the year 167.63 187.60

(d) Gross closing balance 294.10 280.34

Less: ECGC/DICGC Settled

amount

22.20 26.29

Net Closing Balance 271.90 254.05

(iv) Movement of provisions for NPAs

(excluding provisions on standard assets)

(a) Opening balance 485.93 520.14

(b) Provisions made during the year 187.17 84.31

(c) Write-back of excess provisions 168.79 118.52

(d) Closing balance 504.31 485.93

Interpretations:

The ratio of Net NPAs has improved from 0.87 percent to 0.79 percent.


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Details of Loan Assets subjected to Restructuring during the year.(Rs. In crore)

Category Particulars CDR SME debt

Restruc-turing

Others

Standard

Advances

restructured

No. of Borrowers 3 3084 4029

Amount Outstanding 46.28 461.61 552.73

Sacrifice (Diminution in the fair

value )

3.67 13.16 12.79

Sub-Standard

Advancesrestructured

No. of Borrowers 0 96 134



value )

0.00 0.22 1.94

doubtful Advances

restructured

0 3 3

0 7.85 4.86

0 0.24 0.01

Total No. of Borrowers 3 3138 4166



value )

3.67 13.62 14.74

Interpretations:

NPA coverage has also improved from 65.54 percent 63.16 percent.


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Additional disclosure in respect of Restructuring(In terms of RBI circular dated 17.04.2009)

Sr. No Disclosures Number Amount

1 Applications received for restructuring, in respectof accounts which were standard as on September

1, 2009.

6662 1145.82

2 Of (1), proposal approved and implemented and

thus became eligible for special regulatorytreatment and classified as standard assets as on

the date of the balance sheet.

6373 1033.07

3 Of (1), proposal approved and implemented butcould not be upgraded to the standard category.

222 41.48

4 Of (1), proposal under process/ implementedwhich were standard as on March 31,2010

64 70.21

5 Of (1), proposal approved and implemented which

turned NPA but are expected to be classified asstandard assets on full implementation of the

package.

3 1.06

Details of financial assets sold to securitization/Reconstruction Companyfor Asset Reconstruction

(Rs. In Crore)

Particulars 31.03.2010 31.03.2009

(i) No. of accounts 0 36

(ii) Aggregate value(net of provisions) of accounts

sold to Securitization / ReconstructionCompany

0.00 0.00

(iii) Aggregate consideration 0.00 13.25

(iv) Additional consideration realized in respect ofaccounts transferred in earlier years

0.00 0.00

(v) Aggregate gain over net book value 0.00 13.25

Interpretations: Bankhas now started the practice of restructuring and reconstructing the NPAseffectively and efficiently.


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BRANCH NETWORK AND EXPANSIONDuring the year, the Bank opened 43 new branches besides upgrading 3extension counters into

full fledged branches. As on 31.03.2010, the total branch network comprised of 1421 branchesspread over 22 states and 2union territories. The branch network included specialized branches in

the areas of foreign exchange, government business, treasury and international banking,

industrial finance, small-scale industry, hi-tech agriculture, Pension Payment Branch and CentralPension Processing Cell. The area wise classification of branches as on 31.03.10 is given in thetable below:

Sr.No. Classification As On 31.03.09 As On 31.03.10

1 Rural 516 520

2 Semi-Urban 251 262

3 Urban 257 271

4 Metropolitan 351 368

Total 1375 1421

Interpretation:

The Bank opened 43 new branches besides upgrading 3extension counters into full fledged

branches and like this it is continuously expanding its network in allover India.

As On 31.03.09

As On 31.03.100

100

200

300

400

500

600

RuralSemi-Urban

Urban

Metropolitan

As On 31.03.09

As On 31.03.10


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ASSET PERFORMANCE IMPROVEDThe ratio ofGross Advances has improved from 2.57 percent as on 31.03.2008 to 2.29 percent as

on 31.03.2009. The ratio of Net NPAs has improved from 0.87 percent at 31.03.2008 to 0.79

percent at 31.03.2009. NPA coverage has also improved from 65.54 percent as on 31.03.2008 to

63.16 percent as on 31.03.2009.

Particulars 31.03.2008 31.03.2009

Ratio of NPAs 2.57% 2.29%

Ratio of Net NPAs 0.87% 0.79%

NPA coverage 65.54% 63.16%

Interpretations: The ratio ofGross Advances has improved 2.57 percent to 2.29 percent and the

ratio of Net NPAs has improved from 0.87 percent to 0.79 percent. NPA coverage has also

improved from 65.54 percent 63.16 percent.

31.03.2008

31.03.2009

0

10

20

30

40

50

60

70

Ratio of NPAs

Ratio of Net NPAsNPA coverage

31.03.2008

31.03.2009


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INCOME, EXPENDITURE AND PROFITABILITY Income

Incomes 2008-2009 2009-2010 Variations (%)

Interest on bills 2561.12 3266.60 27.55Income on

investments

845.85 989.84 17.02

Total interest income 3440.47 4291.56 24.75

Non-interest income 380.28 500.02 31.48

Total income 3820.76 4791.58 25.41

Interest on

borrowings

191.27 251.82 31.65

Interpretations:

The income factors of the bank has grown in a very positive and in a very significant manner as

compare to previous year and this indicates the sound health of the bank.

0

500

1000

1500

2000

2500

3000

3500

4000

4500

5000

2008-2009

2009-2010

variations ()%


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OPERATING INCOME RISES 11.88% TO RS 1246.49 CRORENet profit of Bank of Maharashtra rose 1.26% to Rs 139.06 crore in the quarter ended March

2010 as against Rs 137.33 crore during the previous quarter ended March 2009. Total operating

income rose 11.88% to Rs 1246.49 crore in the quarter ended March 2010 as against Rs 1114.15crore during the previous quarter ended March 2009.

For the audited full year, net profit rose 17.17% to Rs 439.57 crore in the year ended March 2010

as against Rs 375.17 crore during the previous year ended March 2009. Total operating income

rose 10.35% to Rs 4735.56 crore in the year ended March 2010 as against Rs 4291.56 crore

during the previous year ended March 2009.

Particulars Quarter Ended Year Ended

Date Mar. 2010 Mar. 2009 % Var. Mar. 2010 Mar. 2009 % Var.

Sales 1246.49 1114.15 12 4735.56 4291.56 10

OPM % 66.15 67.46 -2 72.15 70.98 2

PBDT 142.33 130.04 9 568.82 511.06 11

PBT 142.33 130.04 9 568.82 511.06 11

NP 139.06 137.33 1 439.57 375.17 17


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OPERATING INCOME RISES 11.88% TO RS 1246.49 CRORE

Interpretations:

Net profit of Bank of Maharashtra rose 1.26% to Rs 139.06 crore in the quarter ended March 2010

as against Rs 137.33 crore during the previous quarter ended March 2009.

% Var. Of Quarter Ended march 2010

-2

0

2

4

6

8

10

12

14

16

18

sales OPM PBDT PBT NP

% Var. Of Quarter Ended march 2010

% Var of Year Ended 2009


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ExpenditureExpenses 2008-2009 2009-2010 Variations (%)

Interest on deposits 2,120.52 2783.22 31.25

Interest expenditure 2311.79 3035.03 31.28

Staff expenses 485.29 579.62 19.44

Non-staff expenses 351.04 383.40 9.22

Total non-interest expenses 836.34 963.02 15.14

Total operating expenses 3,148.13 3998.06 27.00

Interpretations:

Due to the very high competition and in order to capture more and more market share, the bank

had to incur more expenses to make its facilities more attractive and more worthy so that the

bank can retain its customer and it also helps in acquiring new customers.

0

500

1000

1500

2000

2500

3000

3500

Intereston

deposits

Interest

expenditure

Staff expenses Non-staff

expenses

2008-2009

2009-2010

Variations (%)


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ProfitabilityProfitability 2008-2009 2009-2010 Variations (%)

Operating Profit 672.63 793.52 17.97

Provisions And

Contingencies

344.24 418.36 21.53

Net Profit 328.39 375.16 14.24

Interpretations:

Above figure shows that there is a positive and consistent increase in the banks profitability

because the banks business and income has also moved up towards a positive direction.

0

100

200

300

400

500

600

700

800

Operating Profit ProvisionsAnd

Contingencies

Net Profit

2008-2009

2009-2010

Variations (%)


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CHAPTER IV

- Findings

- Suggestions / Recommendations


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FINDINGS

1.In todays era of heavy competition and the fight to sustain in the market, the bank had to incur

more expenses to make its facilities more attractive and more worthy so that the bank can retain

its customer and it also helps in acquiring new customers which will not only increase the

income of the bank but also leads to capture more and more market share.

2.

There is a positive and consistent increase in the banks profitability because the banks business

has increased and the income of the bank has also moved up towards a positive direction because

the bank has started capturing more and more market share.

3.

The ratio ofGross Advances has improved from 2.57 percent to 2.29 percent. The ratio of Net

NPAs has improved from 0.87 percent at 31.03.2008 to 0.79 percent. NPA coverage has also

improved from 65.54 percent to 63.16 percent. The asset performance has significantly changed

and it has not changed but also improved in a positive way.

4.

The investment of the bank is also proved to be a significant source of income because the net

income from investment has made a large contribution to the profit of the bank

5.

While financing the various segments of the economy, the Bank has endeavoured to maintain a

diversified credit portfolio, with a view to ensuring credit-dispersion across sectors. This will

minimize the risk and ultimately increase the profit of the bank.


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SUGGESTIONS / RECOMMENDATIONS

The data in the tables have clearly shown that how the Bank of Maharashtra hasconsistently increased its profit by managing its credit but the bank needs to deploy itscredit in a more diversified manner which will minimize the risk of losses and also

increase the profitability of the bank.

The overall inference from the table and Chart is that the Retail Financing of Bank ofMaharashtra is healthy as compare to other nationalized banks. But it needs to be brought

up in order to sustain the financial position of the bank. The Housing and Education Loan

must be increased to more than 30 per cent while other loan schemes can also be

amended.

The NPAs are reducing in a very positive way which is the result of avoiding high-risklending and high monitoring of the credit disbursed. The bank needs to study and analyze

from its past losses because it will help in future lending by avoiding high risk proposals

and ultimately let the bank to grow more efficiently and effectively.

Loan products are the ideal Products for the bank to ensure the profitability and therefore,the bank should continuously adapt itself to the changed situation in search of new

markets and to provide new attractive schemes and services for the existing customers to

retain its market share and at the very same time acquire new customers to expand its

market share.

Efforts are to be oriented towards verifying and processing the loan request. In case ofdeposits, an added advantage available to the bank is to improve clientele base but in case

of borrowings such an advantage does not exist. So the bank must work out some

effective strategies for their Loan Products in order to make the clientele base for

borrowings.

The increased number of deposit customers and the increased number of individualmembership provide a comfortable clientele base for the bank to choose good borrowers

to whom the bank can provide credit facilities. Good borrowers with integrity are asimportant to the bank as the depositors.

Raising individual membership, mobilizing more low-cost deposits and avoiding high-risk borrowings are the strategies which could be followed by the bank to improve its

efficiency, market share, productivity and profitability.


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BIBLIOGRAPHY

Name of Book/Site Author Publication

Bank Credit Management Dr.G.Vijayaragavan Himalaya Publication Promotion Examination Bank of Maharashtra Bank of Maharashtra www.iibf.co.in www.iba.org www.rbi.org www.bankofmaharashtra.in www.financial.indiamart.com

Annual Report:

Bank of Maharashtra


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ANNEXURE

ATM Automated Teller Machine

GOI Government Of India

RBI Reserve Bank Of IndiaNPA Non-Performing Assets

MSME Micro, Small And Medium Enterprises

NP Net Profit

HTM Held To Maturity

HFT Held For Trading

AFS Available For Sale

CVC Core Vigilance Committee

KYC Know Your Customer

MGB MarthwadaG

ramin BankRRB Regional Rural Bank

LIC Life Insurance Corporation

SLBC State Level Bankers Committee

SMES Small And Medium Enterprises

NBC Net Bank Credit

RDC Rural Development Centres

GMBVM Gramin Mahila Va Balak Vikas Mandal

MARDEF Maha Bank Agricultural Research And Rural Development

Foundation

NGO Non-Government Organizations

CBS Core Banking Solutions

IPO Initial Public Offer

METCO Maharashtra Executor And Trustee Company

STP Straight Through Processing

NEFT National Electronic Fund Transfer

RTGS Real Time Gross Settlement

MSETI Mahabank Self Employment Training Institutes

TOLIC Town Official Language Implementation Committee

NABARD National Bank For Agricultural And Rural DevelopmentEDPS Entrepreneurship Development Programmes

PMRY Prime Ministers Rozgar Yojana

SGSY Swarna Jayanti Gram Swarojgar Yojana

SJSRY Swarna Jayanti Shahari Rozgar Yojana

MIS Management Information System


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LRM Loan Review Mechanism

CPC Credit Policy Committee

ALM Asset Liability Management

ALCO Asset Liability Management Committee

TIBD Treasury & International Banking DivisionCRRF Credit Risk Rating Framework

TIBD Treasury & International Banking Division

CRRF Credit Risk Rating Framework

retail credit

Documents