Chapter 1

Introduction

1.1 MEANING
Credit appraisal is an investigation/assessment done by the bank prior to providing any loans
& advances. It involves checking the commercial, financial & technical viability of the
project proposed its funding pattern & further checks the primary & collateral security cover
available for recovery of such funds. It involves obtaining the credit information of the client
and critically evaluating it to come to a decision.
The objective is to understand measure and manage the credit risk and aims at ensuring
sustained growth of healthy loan portfolio while dispensing the credit and managing the risk.
Credit Risk Management, most of the banks (if not all) are found performing several
activities like Industry study, periodic credit calls, periodic plant visits, developing MIS, risk
scoring and annual review of accounts
It is generally carried out by the financial institutions which are involved in providing
financial funding to its customers. The credit managers of the financial institutions are duty
bound to accept or reject a proposal on the basis of its viability or non - viability.

1.2 SCOPE OF THE STUDY:

The Credit appraisal is a holistic exercise which starts from the time a prospective borrower
walks into the branch and culminates in credit delivery and monitoring with the objective of
ensuring and maintaining the quality of lending and managing credit risk. The project helps
to understand give an exact view of the evaluation process followed in the bank and thus
helps in reducing the processing time and without any compromise on the risk involved in it.

1.3 OVERVIEW OF THE PROJECT

This project is a study to understand the concept of credit appraisal process adopted by Kotak
Mahindra Bank. The process is analyzed with the help of secondary data available during the
course of time. The process is understood with the help of case analysis done for financing
the working capital requirement of a company. This has been done by evaluating and
analyzing the documents provided by the company to bank. Internal credit risk rating is also
covered to know the parameters on the basis of which the client is assessed and scored by the
bank in order to accept or reject a particular proposal.

Chapter 2
Industry Profile

2.1 INDUSTRY PROFILE

The core operating income of a bank is interest income (comprises 75-85% in the total
income of almost all Indian Banks). Besides interest income, a bank also generates fee-based
income in the form of commissions and exchange, income from treasury operations and other
income from other banking activities. As banks were assigned a special role in the economic
development of the country, RBI has stipulated that a portion of bank lending should be for
the development of under-banked and under-privileged sections, which is called the priority
sector. Current rules stipulate that domestic banks should lend 40% and the foreign banks
should lend 32% of their net credit to the priority sector.
We know that in order to better manage our financial life; we should have both a checking
and savings account at a minimum. We also know their services are similar across the board
for most banks. Some of these services include:

Accepting deposits
Making auto, home, and business loans
Reporting what you paid and earned
Issuing credit cards
Online bill payment

Providing investments
The list can go on and on, but those are basic things most banks will offer. However, what
vary from bank to bank are the terms and conditions. That is why everyone should consider
their unique needs and then select the bank that best meets those needs.
Comparing Your Choices
There are national, regional, and local community banks around the country. These banks are
further categorized into the following segments:

Commercial Banks
Savings & Loans (S&C)
Credit Unions
Mutual Funds and Brokerage Firms

Virtual (Online) Banks

Commercial Banks
Commercial Banks serve both individuals and businesses. They typically have multiple, welllocated branches throughout a region, and offer broad range of services. Deposits are FDICinsured up to $100,000 per type of depositors account. The only con is that fees at these
banks can be the highest.

Savings and Loans Banks (S&L)

S&L banks tend to have lower fees than commercial banks. In some cases, service can be
better due to the lower number of clients at the especially smaller banks. Most are FDICinsured. The only con would be that they sometimes require you inform them of a withdrawal
you intend to make. They often have fewer branches; therefore you can rack up lots of ATM
fees for using non-partner banks.

Credit Unions
Credit Unions typically have the lowest fees and loan rates because they are non-profit.
Earnings are paid out to members at the end of the year. The main con is that as few as 1 or 2
percent happen to be federally insured. Like S&Ls, they often have fewer branches; therefore
you can rack up lots of ATM fees for using non-partner banks.

Mutual Fund and Brokerage Firms

Mutual Fund and Brokerage Firms often offer very limited banking services with low-cost or
free checking linked to some interest-paying money market funds. The most notable con is
that they often require larger minimum balances and they are not FDIC-insured, but have
private insurance.

Virtual(Online)Banks
Virtual Banks are all online, thus there are no branches. In many cases, they dont even send
paper statements. Clients are emailed their monthly statements to view or print from online.
They are FDIC-insured. They have started to lose some of their appeal as many commercial
banks and even credit unions offer 100 percent online banking. The primary con here is that
there are a limited number of ATM machines. Thus, if clients cant find partner ATMs they
can pay lots of money annually in ATM fees.

Chapter 3
Company Profile

3.1 COMPANY PROFILE

Kotak Mahindra Bankis the fourth largest Indian private sector bank by market
capitalization, headquartered in Mumbai, Maharashtra. The banks registered office
(headquarters) is located at 27BKC, Bandra Kurla Complex, Bandra East,Mumbai,
Maharashtra,India.
In February 2003, Kotak Mahindra Finance Ltd, the group's flagship company was given the
license to carry on banking business by theReserve Bank of India(RBI). Kotak Mahindra
Finance Ltd. is the first company in theIndian banking historyto convert to a bank.
As on September 30, 2014, Kotak Mahindra Bank has over 641 branches and over 1,159
ATMs spread across 363 locations in the country. The bank, before merger with ING Vysya
had around 29,000 employees.
Kotak Mahindra group, established in 1985 by Uday Kotak, is one of Indias leading financial
services conglomerates. In February 2003, Kotak Mahindra Finance Ltd. (KMFL), the
Groups flagship company, received a banking license from the Reserve Bank of India (RBI).
With this, KMFL became the first non-banking finance company in India to be converted into
a bank Kotak Mahindra Bank Limited (KMBL).
In a study by Brand Finance Banking 500, published in February 2014 by the Banker
magazine (from The Financial Times Stable), KMBL was ranked 245th among the worlds
top 500 banks with brand valuation of around half a billion dollars ($481 million) and brand
rating of AA+. KMBL is also ranked among the top 5 Best Ranked Companies for Corporate
Governance in IR Global Ranking.

3.2 TIMELINE OF KMBL

Year Milestone
198
5
198
7
199
0
199
1

Kotak Mahindra Finance Limited commences bill discounting business

Kotak Mahindra Finance Limited enters leasing and hire purchase business
Starts the auto finance division for financing passenger cars
Launches investment banking business


199
2
199
5

Enters the funds syndication business

Commenced joint venture with Goldman Sachs Group Inc.
Investment Banking division incorporated into a separate company - Kotak
Mahindra Capital Company
The auto finance business is hived off into a separate company - Kotak Mahindra

199

Prime Limited (formerly known as Kotak Mahindra Primus Limited).

Kotak Mahindra takes a significant stake in Ford Credit Kotak Mahindra Limited,
for financing Ford vehicles.

199

Launches mutual fund through Kotak Mahindra Asset Management Company

(KMAMC).

200
0

Kotak Securities launches online broking business (now www.kotaksecurities.com.

200

Launches insurance business, partners Old Mutual from South Africa to form Kotak

Mahindra Old Mutual Life Insurance Ltd.

Kotak Mahindra Finance Ltd. (KMFL), the group's flagship company, receives

200

banking license from the Reserve Bank of India (RBI). With this, KMFL becomes

the first non-banking finance company to be converted into a commercial bank Kotak Mahindra Bank Ltd.

200
4
200
5
200
5

Enters alternate assets business with the launch of a private equity fund.
Kotak Mahindra Group realigns joint venture in Ford Credit; takes 100% ownership
of Kotak Mahindra Prime (formerly known as Kotak Mahindra Primus Limited) and
sells its stake in Ford credit Mahindra to Ford.
Launches a real estate fund

200

Buys out Goldman Sachs' equity stake in Kotak Mahindra Capital Company and

Kotak Securities Ltd.

200
8
200
9
201

Launched a Pension Fund under India's National Pension System (NPS)

Kotak Mahindra Bank Ltd. opens a representative office in Dubai
Kotak Mahindra Bank Ltd. becomes anchor investor in Ahmedabad Commodities
Exchange (ACE)
ING Vysya Bank has merged with Kotak Mahindra Bank with effect from April 1,
8

2015.

Table 3.1: Timeline of KMBL

Merger with ING Vysya Bank

In 2015, Kotak Bank acquired ING Vysya Bank for a deal valued at 15000 crore
(US$2.4 billion). With the merger, the total human resource count will jump to almost
40,000 heads and the branch was expected to rise over 1200. Post the merger, ING
Group which controlled ING Vysya Bank will own 7% share in Kotak Mahindra Bank.

Background
KMBL was converted into a commercial Bank from a nonbanking financial company in 200
3.It is one of Indias leading providers of financial services.
The Bank services its customers base through its network of 249 retail branches and over
497 ATMs across 145 locations in the country. The Bank is also engaged in investment
banking, equity broking, securities-based lending, and car finance through its subsidiaries. As
on march 31, 2010, KMBL had a Tier I capital adequacy ratio (CAR) of 15.4% while overall
CAR of 18.4% while the Banks net worth stood at Rs. 79.8 billons. KMBL sold a 4.5% stake
in the Bank to SMBC in August 2010; this has added Rs. 13.66 billon to its net worth .KMBL
has healthy earnings profile given the different types of business that it operates. The Bank's
gross spreads are higher than the industry average as it operates primarily in the higher yield
retails and midcorporate segments.
It has a high fee income level contributed mainly by its broking and investment banking
business. In the equity broking business, KMBL is among the top equity brokers, with a
market share of 4% with 1281 offices across 435 towns. The Bank established presence
across investment banking segments such as debt and equity capital market issuances,
mergers and acquisitions, and financial advisory services. Its gross non-performing assets
(NPA) stood at 2.2% while net NPAs stood at 1.5% as on March 2010.
The Bank's healthy earnings profile supports its capitalization levels which provide adequate
cushion on against assetside risks

3.3 BUSSINESS OF KOTAK


Kotak Mahindra is one of India's leading banking and financial services group, offering a
wide range of financial services that encompass every sphere of life. It is a one stop shop for
all banking needs. The bank offers personal finance solutions of every kind from savings
accounts to credit cards, distribution of mutual funds to life insurance products. Kotak
Mahindra Bank offers transaction banking, operates lending verticals, manages IPOs and
provides working capital loans. Kotak has one of the largest and most respected Wealth
Management teams in India, providing the widest range of solutions to high net worth
individuals, entrepreneurs, business families and employed professionals.

Kotak
Kotak
Kotak
Kotak
Kotak
Kotak
Kotak
Kotak

Securities Ltd
Mahindra Capital Company (KMCC)
Mahindra Prime Ltd (KMPL)
International Business
Mahindra Asset Management Company Ltd (KMAMC)
Private Equity Group (KPEG)
Realty Fund
Mahindra old mutual life Insurance Ltd

3.4 PRODUCTS AND SERVICES

1. Accounts & Deposits : Savings Accounts
Current Accounts
Term Deposits
Safe Deposit Lockers
Financial Inclusion
2.

Cards :Credit Cards

Global Debit Cards
Best Compliments Card
Kotak net card
Kotak Multi Currency World Travel Card

3.

4.

Investments :Mutual Funds

Demat
Kotak Gold Eternity
New Pension SystemInsurance
ASBA and insurance
Loans :10

Home Loans
Personal Loans
Car Loans
Loan against property
Home Improvement Loans
Home Loan Balance Transfer
Kotak Stock Ace
Gold Loan
Education Loan

Convenience Banking
Anywhere, Anytime Banking
In today's day and age time is money. You work hard and have a busy schedule. Doing
your bankingshould be easy and convenient and not add to your worries.
We at Kotak Mahindra Bank realize this and have specially tailored a wide range of value
addedproducts and services to make your money work for you. These, coupled with the
highest standard of customer care will make your life simpler and easier.

Net Banking

View details across Accounts, Term Deposits, Demat Accounts - 24x7

Immediate Payment Service

Fastest way to send and receive money

Kotak Payment Gateway

Instant, convenient and secure way of shopping and making payments online.
Mobile Banking
Experience online banking - without a pc or internet connection Unstructured Supplementary
Service Data (USSD)

SMS Banking

Carry your bank on your phone!

Alerts

Get Alerts on your mobile or by email for events that you would like to keep track of.
Phone Banking

Our 24 hr customer service centre is at your service!

ATM Network

Our constantly growing ATM network brings the bank within your easy reach.
Government Business
Cash Deposit Machine
Cheque Deposit Kiosk
11

3.5 WORKING CAPITAL FINANCE

Concept of Working Capital:

Funds Deployed For Managing Business Operations

Firms Capital Which Is Required For Financing Short-Term ( Current assets Such as Cash

, Debtors , And Inventories)

Funds Thus Invested In Current Assets Keep Revolving Fast

Working Capital Is The Life-Blood of any business. A business requires optimal cash flow to
survive on a regular basis. Working capital is also required to further sustain a firms growth,
improve business operation and stay ahead of competition.
At Kotak , We assist business financially with different types of working capital finance in
the form of various fund and non fund based products. We have nationwide presence through
our branches and enjoy correspondent relationship with a large network of overseas banks.

Types of Working Capital Finance:1. Fund Based Finance

2. Non Fund Based Finance

Secured Business Loans

1.
2.
3.
4.
5.
6.

Cash Credit Facility

Overdraft Facility
Loan Against Property
Bank Guarantee
Letter of Credit
Export Packing Credit

Cash Credit
Cash credit is a running account facility which enables the customer to withdraw amounts
from the current account, up to the extent of the sanctioned limit. Cash credit is provided to
bridge the working capital gap in business. It is extended against hypothecation of stock,
receivables, short term deposits and other current assets which generally hold the liquidity of
a business.
We offer cash credit on an annual renewal basis. Our cash credit program is highly flexible to
12


meet the needs of various business segments.
Key Features:

Seamless account features like net banking, international debit card, RTGS/NEFT, DD and

pay-order etc.
Competitive interest rate
One stop shop for all trade services
Free at par cheques payable across the country
Foreign transaction made easy through online platform FX live variants

Customer Profile: Manufactures

Retail/wholesale traders importers/exporters
Service providers
Eligibility: Assessed working capital requirement
Cash profit in the current and previous year
Availability of real estate collateral business operating since at least 3 years.
Acceptable collaterals:

Current assets pertaining to business

Fixed deposits
Residential/ commercial and industrial property
Bonds/ Debt Funds/ LIC surrender Value

Conditions In cash credit: Monthly Stock statement is required.

Stock Insurance Is required.
Audit is required
Money use in only day to day business activities
Working Capital GAP is Required
DP (Drawing power)=Stock + Debtors Creditors = Working capital GAP

Overdraft Facility
A credit agreement made with a financial institution that permits an account holder to use or
withdraw more than they have in their account, without exceeding a specified maximum
negative balance.

Establishing

an

overdraft

facility

with

a bank can

help

an individual or small business with short term cash flow problems, although the negative
13


balance typically needs to be repaid within a month.
Key Features:

Seamless account features like net banking, international debit card, RTGS/NEFT, DD and

pay-order etc.
Competitive interest rate
One stop shop for all trade services
Free at par cheques payable across the country
Foreign transaction made easy through online platform FX live variants

Customer Profile:

Manufactures
Retail/wholesale traders importers/exporters
Service providers

Eligibility:

Assessed working capital requirement

Cash profit in the current and previous year
Availability of real estate collateral business operating since at least 3 years.

Acceptable collaterals:

Current assets pertaining to business

Fixed deposits
Residential/ commercial and industrial property
Bonds/ Debt Funds/ LIC surrender Value

Loan Against property

Unlock the potential in your property by availing a Loan against Property (LAP). A LAP is a
loan given against the security of your existing property. The benefit is that interest rates on
LAP are generally lower than rates on other consumer loans.
Key Features

High loan eligibility for businessmen

Loans amounts ranging from Rs.25 lakh - Rs.10 crore!
Loans against residential as well as commercial properties
EMI based loan

Acceptable Collaterals:14

Residential / Commercial Property

Industrial Property

Maximum Tenure of loan:

10 years

Bank Guarantee
There are three parties to a contract guarantee.

Person who guarantees the performance of a promise or liability of a third person is called

guarantor.
Person on whose behalf the guarantee is given is the principal debtor.
Person to whom guarantee is given is the creditor.

Guarantee given by the bank:

On behalf of its client

To the beneficiary
Guaranteeing the performance of the applicant against an underlying contract.
Performance could be financial or contractual.

Types of Bank Guarantee:1. Financial Guarantee:

All guarantees guaranteeing financial commitments, and in the nature of credit substitute are
classified as financial guarantees.
Bank guarantee takes only financial liability. Financial guarantee are normally issued in lieu
of payment of tender deposits, earnest money deposits, customer duty/ excise duty/ income
tax and guaranteeing payment of goods purchased on credit.
2. Performance guarantee:
The customer, on whose behalf the guarantee is given, will perform the contract undertaken.
On his failing to perform the same, the banker shall make good, the loss caused to the
beneficiary, by limiting him financially to a sum not exceeding the amount undertaken in the
guarantee.
Conditions and charges:

Commission 1.5% to 2.5%

20% margin is required
Collateral is required

15

Letter of credit
This is used for buying raw material / capital goods on credit, both domestic and foreign.
Working capital LC is issued for a maximum period of 3 years.
Benefits:

Seller :Assured payment if documents are in order as per LC terms.

Gets ready funds by getting the bills under LC discounted with his banker.
Buyer :Receive the goods within a specified time
Gains credit

Key Features:

Our LCs are globally accepted.

Large network of correspondent banks across the world.

Export packing credit

Packing credit is an export credit normally sanctioned for purchasing / procuring, processing
and packing goods meant for export.
Key features:

Available in rupee and foreign currency(attractive rates)

Facility to obtain credit reports for overseas buyers through international rating agencies.

Customer Profile:

Export manufacturing entities

Eligibility:

Based on export orders in hand & in addition to existing working capital limits.

16

Chapter 4
Objectives

17


4.1 OBJECTIVE OF STUDY
1. The purpose of study is to understand and analyze the various aspects of financing the
projects of the borrowers which are beyond the powers of the branches and within the
ambit of the Kotak Mahindra Bank.
2. This study covers the process followed by Kotak Mahindra for assessing the credit
worthiness of its clients and granting funds to meet their day to day operations i.e.
assessment of working capital limit loans.
3. To study the procedure adopted in evaluating credit proposal by using case analysis. And
also the credit risk rating parameters used in the particular case.

4.1 STATEMENT OF THE PROBLEM:

To evaluate and understand the procedure bank follows in evaluating the loan sanctioning
process bank.

18

Chapter 5
Project Design &Methodology

19

5.1PROJECTMETHODOLOGY

The data includes some important points noted down from the various client meetings during
the project. Since the research carried out for this project is purely descriptive and analytical
in nature, the documents provided by the client and the official file would require for
understanding the credit appraisal procedure of the bank.
Data Type:
The data used for the study is secondary data to find out
1. Financial statements

Audited Profit and loss account of the last 3 years.

Audited Balance Sheet of last 3 years

Provisional for the current year and the financial projections in case of term
loans

Group Companys Financial Statements

2. Account Conduct Report

3. Cross Check of month wise sales
4. Sanction terms & conditions of existing banker
5. Suppliers / Customers Check
6. Past track record from CIBIL / RBI
7. Verification of Authentication of Data provided by cross checking various sites like

CA check

PAN No. check

20

5.2 TOOLS OF DATA COLLECTION:

Secondary sources of Information:
1. Interaction and discussions with the staff of the credit department to understand the credit
process followed in the bank
2. Loan Policy and Internal Circulars of the bank.
3. Past and Present Financial Statements:

Balance Sheet

Profitability Statements

4. Projected Financial Statements

5. CMA data i.e. Credit Monetary Arrangement data which has the following 6 forms:

Particulars of existing/proposed limits for banking system

Operating Statement

Analysis of Balance Sheet

Comparative Statement of current assets and current liabilities

Computation of MPBF

Funds Flow Statement

5.3 INTORDUCTION TO SMEs:

The Micro, Small and Medium Enterprise Development, MSMED Act 2006 has now defined
Micro, Small and Medium enterprises in specific terms.
Classification of Enterprises:
Micro, Small & Medium Enterprises Development Act 2006
Classification
Manufacturing
Services
Micro Enterprise
25 lacs
10 lacs
Small Enterprise
>25 to =< 5 Cr
>10 to =< 2 Cr
Medium Enterprise
>5 Cr to =< 10 Cr
>2 Cr to =< 5 Cr
Manufacturing :- Maximum investment in Plant & Machinery for manufacturing
or production of goods is pertaining to industry
Services: - Maximum investment in equipments, for enterprise engaged in
providing or rendering of services.
21


Table 5.1: MSMEs classification

Chapter 6
Analysis

22

6.1 CREDIT APPRAISAL

Credit information of the borrowing company can be obtained by the following sources:
1.

Database of Banks and Financial Institution

2. References given by Banks

3. References given by traders
4. Agencies which rate the companies
5. Published Books: Basic information about a company may be taken from printed sources
like the Stock Exchange Year book, Corporate Path finders data base, etc.
6. Company Financial Reports
7. Press Reports
8. Charges Registered: Charges created on the assets of a company have to be registered with
the Registrar of Companies.
9. Personal discussion
10. Factory Visit
11. Study of Financial Statements: Financial analysis determines the significant operating and
financial characteristics of a firm from accounting data and financial statements. Analysis can
be done through:

Ratio Analysis

Trend analysis: Trend analysis can be through:

Intra firm comparison that is review of the trend of the ratios over the years within the firm
and Inter firm comparison.

Reading of notes to accounts and other information: Careful reading and analysis of the
notes on accounts, one can gauge the policies of the management, performance of the
company, and its future planning.

Information required to be submitted by the Company (Borrower) to the Bank

The company should make sure that the following information required for processing credit requests
are collected by the company for submitting it to the bank or financial institution in order to obtain the
required credit facility:

23


1. Basic background information on the company:
2. Required facility
3. Key industry dynamics
4. Management
5. Management information system: Details of the planning, controlling and monitoring
systems which have been put in place have to given.
6. Financials
7. Details of the Security to be pledged
8. Present banking relationship: The bank requires full details of the present credit facilities
being enjoyed at the moment.

CREDIT APPRAISAL PROCESS AT KOTAK

Receipt of application from applicant
Receipt of documents
(KYC papers, Balance sheet, MOA, AOA, Reg No., Property Documents etc)
Pre-Sanction visit by bank officer

Check for RBI Defaulter List, Willful Defaulter List

CIBIL Data, Caution List

Title Clearance Report of report to be obtained from valuer or engineer

Preparation of financial data

24

Proposal of preparation

Assessment of proposal

Sanction approval Proposed by appropriate sanctioning authority

Documentation, agreement, mortgages

Disbursement of Loan
Figure6.1: Credit Appraisal Process

6.2 PRE SANCTION APPRAISAL

When a credit proposal is presented to a branch by a prospective borrower for sanction by an
appropriate authority, the appropriate authority may either sanction or reject the proposal. The
decision to sanction or reject the proposal has to be based on a careful analysis of various
facts and data presented by the borrower concerning him and the proposal. Such an objective
and in-depth study of the information and data should convince the sanctioning authority that
the money lent to the borrower for the desired purpose will be safe and it will be repaid with
interest over the desired period ,if the assumptions and terms and conditions on which it is
sanctioned, are fulfilled. Such an in-depth study is called the pre-sanction credit appraisal. It
provides the sanctioning authority with the reasons and justifications for either sanctioning or
rejecting a credit proposal. It, thus, helps in the decision making process of the sanctioning
authority.
The entire gamut of credit appraisal can be segregated into 7 sections is under:
1. Borrower Appraisal.
2. Technical Appraisal.
3. Management Appraisal.

25


4.
5.
6.
7.

Financial Appraisal.
Economic Appraisal.
Environmental Appraisal.
Market Appraisal

BORROWER

APPRAISAL/KNOW

YOUR

CUSTOMER

(KYC)

NORMS:
The borrower is appraised on the following parameters also known as the 3 Cs of the
borrower i.e. character, capacity and capital.

1. Character:
Character is the greatest and the most important asset, which any individual can have. Even if
a borrower has the capacity and capital to repay a loan, it is the character of the borrower
which indicates his intention to repay. If the character or integrity of a borrower is known to
be questionable, every banker would avoid him even if backed by sufficient collaterals.

2. Capacity:
It deals with the ability of the borrower to manage an enterprise or venture successfully with
the resources available to him. His educational, technical and professional qualifications, his
antecedents, present activity, experience in the line of business, experiences of the family,
special skill or knowledge possessed by him, his past record etc. would give a hindsight into
his capacity to manage the show successfully and repay the loan.

3. Capital:
It is his ability to meet the loss, if any, sustained in the business or venture from his own
investment or capital without shifting it to his creditor or banker. Unless a borrower has some
Stake in the business, he may not take much interest in its success.

Key Elements of the KYC Policy:

Customer Acceptance Policy

Customer Identification Procedures

26

Monitoring of Transactions

Risk Management

TECHNICAL APPRAISAL:
The technical appraisal of a credit proposal involves a detailed study of the following aspects:

Availability of basic infrastructure.

Licensing/registration requirements.

Selection of technology.

Availability of suitable technical process, raw material skilled labor etc.

MANAGEMENT APPRAISAL:
In case of projects, units or enterprises run by individuals as sole proprietors or partnership
firms, it is usually one or two persons who manage the entire project, unit or the enterprise
whether it be of manufacturing or trading.
However, in case of corporate borrowers and also in case of large borrowal accounts, it is
usually a set of professionals who manage the entity each specialized in a specific area of
management i.e. production, finance, marketing, personnel etc. Unless there is a complete
integration of all these functions within an organization, it cannot function effectively.

FINANCIAL APPRAISAL:
The term financial appraisal refers to the study of the following aspects of the project/unit:

Determination of the cost of the project.

Assessment of the source of funds/means of financing the project

Profitability estimates.

Break even analysis.

Cash flow projections.

Projected balance-sheet.

ECONOMIC APPRAISAL:
27


The performance of a project is influenced by a variety of other economic, social and cultural
factors. Even if a project is technically feasible and financially viable, it may not satisfy the
economic needs viz. employment potential, development of industrially backward areas,
environmental pollution etc. Further as capital is a scarce resource, it is necessary that it must
be allocated in such a way that it yields best possible return to the society in general and the
investor in particular. As such a detailed appraisal of the project in terms of the return it
generates to the investor and the lending institutions is necessary before a decision is taken to
commit resources. One of the most important methods of appraising this is the computation
of the Internal Rate of Return of the project.

Internal Rate of Return (IRR):

IRR is defined as the discount rate at which the present values of all investments made in a
project are equal to the present value of all future returns from the project over the assumed
life period of the project.

Sensitivity Analysis:
The actual results differ from the projected results. If the actual results are plus/ minus 10%
of projections, it can be considered that the projections have been made very well. DebtService coverage ratio, break-even point and many other ratios have to be calculated on the
basis of these financial projections. If the financial projections go wrong and the expected
cash accruals are not available with the unit, the repayment of term loan will face difficulties.
The appraising officers should ascertain the most sensitive areas of the project. If the working
results of the project are highly sensitive to a particular variable, sufficient study should be
done to find out the probability of change in that variable and its impact on the viability of the
project.

MARKET APPRAISAL:
While appraising a proposal it is not only necessary to find out whether it is technically
feasible and financially viable, but also important to ascertain the marketability of the product
manufactured/sold. If goods produced cannot be sold there would be no point in producing
them. Hence the marketability or salability of goods is of great importance. Existence of a
market for the product provides the rationale for its production. If the product sought to be
manufactured is the only one of its kind for which there are no substitutes, the marketing of
the same may not be a problem excepting when it can be freely imported and that too at a
lesser cost. However, if there are many competitors, the entrepreneur may find the going
28


tough. However a combination of the factors like man behind the show, the quality of the
product and the strategy for its sale will result in its successful marketing

6.3 FINANCIAL RATIOS

While analyzing the financial aspects of project, it would be advisable to analyze the
important financial ratios over a period of time as it may tell us a lot about a units liquidity
position, managements stake in the business, capacity to service the debts etc. The financial
ratios which are considered important are discussed as under:

LIQUIDITY RATIOS
Liquidity refers to the ability of a firm to meet its short-term (usually up to 1 year)
obligations. The ratios, which indicate the liquidity of a company, are Current ratio,
Quick/Acid-Test ratio, and Cash ratio.
Sr.

Ratios

Formula

Current ratio

current

Remarks

No.
1.

assets

/ This ratio compares the current assets

with the current liabilities. It is also

current liabilities

known as working capital ratio or

solvency ratio. It is expressed in the
form of pure ratio. It defines the ability
of a firm to meet its current liabilities
from its current assets. Higher the
current ratio, greater is the short term
2.

Quick Ratio

Quick

Assets

solvency
/ Quick ratio is also known as acid test

Current Liabilities
Where ,Quick Assets

ratio or liquid ratio. Quick ratio

compares the quick assets with the
quick liabilities. It is expressed in the

= Current Assets form of pure ratio. It is a measure of the

firms ability to convert its assets

InventoriesDoubtful Debtors

29

quickly into cash in order to meet its

current liabilities. Generally, 1:1 ratio is


Prepaid Expenses + considered satisfactory
Advance Tax
3.

CASA Ratio

CASA Deposits =

CASA

Demand Deposits +

Account Saving Account ratio.

Savings

share of current account and saving

Bank

ratio

stands

for

Current
The

Deposits

account in total deposits of a bank is

CASA Ratio (%) =

termed as CASA ratio. In other words,

CASA

it tells the share or portion of current

Deposits/Total

account and saving account in total

Deposits

deposits of a bank. Banks have to pay

less interest on CASA as compared to
other deposits. Therefore, higher CASA
Ratio is preferable.

Table 6.2 liquidity ratios

PROFITABILITY RATIOS
These ratios help measure the profitability of a firm. A firm, which generates a substantial
amount of profits per rupee of sales, can comfortably meet its operating expenses and provide
more returns to its shareholders. The relationship between profit and sales is measured by
profitability ratios. There are different types of profitability ratios.
Sr.No. Ratios
1.

Formula

Remarks

Return

on (PAT/Net

It is the amount of net income returned as a

Equity

or Worth ) * 100

percentage of shareholders equity. Return on

Return

on

equity measures a corporation's profitability by

Net Worth

revealing

how

much profit

company

generates with the money shareholders have

invested.
2.

Operating

(Operating

This ratio indicates the profitability of a firm

30


Profit

Profit

Net from its main operating activities. A higher

Margin

Sales ) * 100

operating profit margin indicates better sales

realization and effective cost control

3.

Net

Profit (PAT / Sales ) Net Profit ratio indicates the relationship

Ratio

* 100

between the net profit & the sales it is usually

expressed in the form of a percentage.

Table 6.3 profitability ratios

LEVERAGE RATIOS
It shows the relationship between proprietors funds & debts used in financing the assets of
the concern e.g. capital gearing ratios, debt equity ratios, & Proprietary ratios.
Sr.No
1.

Ratios
Interest

Formula
Remarks
(PAT + Interest) / The interest coverage ratio is used to determine

Coverage

Interest

how easily a company can pay interest expenses

on outstanding debt. The lower the ratio, the

Ratio

more the company is burdened by debt expense.

When a company's interest coverage ratio is only
1.5 or lower, its ability to meet interest expenses
may be questionable.

2.

Debt-

Debt

(Term It indicates what proportion of equity and debt

Equity

Liabilities)

the company is using to finance its assets.

Ratio

Equity

Compares assets provided by creditors to assets

(Where, Equity =

provided by shareholders. There cannot be a

Share capital, free

rigid rule to satisfactory debt- equity, lower the

reserves, premium

ratio higher is the degree of protection

on shares, , etc.

enjoyed by the creditors. These days the debt

after adjusting loss

equity ratio of 2:1 is considered reasonable. It,

balance)

however, is higher i.e. 1.5:1 in respect of capital

intensive projects. But it is always desirable that
owners have a substantial stake in the project.
Other features like quality of management
31


should be kept in view while agreeing to a less
favorable ratio.

In financing highly capital

intensive projects like infrastructure, cement, etc.

3.

TOL

the ratio could be considered at a higher level.

/ Tangible Net Worth This ratio gives a view of borrowers capital

TNW

(Paid up Capital + structure. If the ratio shows a decreasing trend,

Ratio

Reserves
Surplus

and it indicates that the borrower is relying more on

-

Intangible Assets)
Total

his own funds and less on outside funds and vice

versa

outside

Liabilities
4.

Debt-

Tangible Net Worth

Debt
+ DSCR is the ratio of cash available for debt

Service

Depreciation + Net servicing

Coverage

Profit (After Taxes) payments. It is a popular benchmark used in the

Ratio

+ Annual interest measurement

on long term debt

to

interest,
of

an

principal
entitys

and
(person

lease
or

corporation) ability to produce enough cash to

Annual interest on cover its debt (including lease) payments. The

long term debt + higher this ratio is, the easier it is to obtain a
Repayment of debt

loan. This ratio of 1.5 to 2 is considered

reasonable. A very high ratio may indicate the
need for lower moratorium period/repayment of
loan in a shorter schedule. This ratio provides a
measure of the ability of an enterprise to service
its debts i.e. `interest and `principal repayment
besides indicating the margin of safety. The ratio
may vary from industry to industry but has to be
viewed with circumspection when it is less than
1.5.

Table 6.4 leverage ratios

32

ACTIVITY RATIOS
These ratios are used to analyze how well a company uses its assets and liabilities
internally. It measures how quickly certain current assets are converted into cash or how
efficiently the assets are employed by a firm.
Sr.No.

Ratios

Formula

Remarks

1.

Fixed Asset Net

Sales/ It measures sales per rupee of investment in

Turnover

Net

Fixed fixed assets.In other words,how efficiently

Ratio

Assets

fixed assets are employed.A higher Fixed

Asset Turnover Ratio is preferred.

2.

Total Assets Net Sales / It measures how efficiently all types of

Turnover
Ratio

Total Assets

assets are employed by the organization.It is

measured in absolute terms.

Table 6.5 activity ratios

6.4 POST SANCTION AND FOLLOW UP OF LOANS

Supervision and Follow-up of bank credit has assumed considerable significance particularly
after introduction of new norms of assets classification, provisioning and de recognition of
interest income on NPAs, affecting profitability. System of supervision and follow up can be
defined as the systematic evaluation of the performance of a borrower account to ensure that
it operates at viable level and, if problems arise, to suggest practical solutions. It helps in
keeping a watch on the conduct and operational/financial performance of the borrowal
accounts. Further, it also helps in detecting signals/symptoms of sickness and deteriorations,
if any, taking place in the conduct of the account for initiating timely corrective actions to
check slippage of accounts to NPA category.
The goals and objectives of monitoring may be classified into fundamental and
supplementary goals. Fundamental goals help a bank to ensure safety of funds lent to an
enterprise while, supplementary goals are directed towards keeping abreast of problems
33


arising out of changes in both the internal and the external environment for initiating timely
corrective actions.
Some of the important goals of monitoring are listed as under:
1. To keep a watch on the project during implementation stage so that there are no time & cost
overruns.
2. To ensure that the funds released are utilized for the purpose for which these have been
provided and there is no diversion of such funds.
3. To evaluate operational and financial results, such as production, sales, profit/loss, flow of
funds, etc. and comparing these with the projections/estimates given by the borrower at the
time of sanction of credit facilities.
4. To ensure that the terms and conditions as stipulated in the sanction have been complied with.
5. To monitor operations in the account particularly cash credit facilities which indicate health
of the account.
6. To obtain market report on the borrower, to gather information like reputation/financial
standing etc.
7. To detect signals and symptoms of sickness or deterioration taking place in
conduct/performance of the account.
8. To ensure that the unit's management and organizational set-up is effective.
9. To keep a check on aspects like accumulation of statutory liabilities, creditors, debtors, rawmaterial, stocks-in-process, finished goods, etc.
10. To ensure charging of applicable rate of interest/penal interest/ commitment charges as per
bank's guidelines.
System of supervision & monitoring of credit as laid down by the Bank needs to be
meticulously followed by the branches/controlling offices which, inter alia, covers the
following:
1. Conveying the sanction
2. Maintenance of Loan Document File
34


3. Quarterly Review Sheet
4. Preventive Monitoring System
5. Quarterly Monitoring System
6. Inspection and Physical Verification of stocks Stock Audit
7. Inspection and physical Verification of Securities

6.5 CREDIT RISK

Definition: Credit Risk is the possibility of loss associated with changes in the credit
quality of the borrower or counter parties. The counter parties may include an individual,
small & medium enterprise, corporate, bank, financial institution, or a sovereign. In a banks
portfolio, losses stem from outright default due to inability or unwillingness of a borrower or
counter party to honor commitments in relation to lending, settlement & other financial
transactions.
Framework: The overall framework of credit risk management in the bank would comprise
of following building blocks:

Credit Risk Management Structure

Credit Risk Policy & Strategy

Processes & Systems

CREDIT

RISK

RATING

MODEL

DEVELOPED

BY

KOTAK

MAHINDRA
Models
S.No

Credit Risk Rating Model

Large Corporate

Applicability
Total Limits
Sales
Above Rs.15 Crore Above

Mid Corporate

(OR)
except Trading concerns
Above Rs.5 Cr and Above Rs.25 Cr and upto

upto

Rs.15

Rs.100

Crore,

Cr Rs.100 Cr

(OR)
All trading concerns falling in the Large
Corporate category shall also be rated under this
35

model
Above Rs.50 lakh Upto Rs.25 Cr

Small Loans

& upto Rs.5 Cr

Small Loans II

(AND)
Above Rs.2 lakh &

NBFC

upto Rs.50 lakh

All Non Banking

New Projects Rating Model

irrespective of Limit
Above Rs.5 Cr Cost

(OR)
Entrepreneur New Business Borrower

Model

Financial

Companies

of project

above

Rs.15 Cr.
setting Cost of project upto Rs.15

up new business Cr.

and

requiring

finance

above

Rs.20 lakh upto

Rs.5 Cr (AND)
However, all new trading business irrespective
8

Half

Yearly

Review

of limits shall be rated under this model

of I ) All listed companies rated on large/ mid

Rating

corporate rating models

II ) Other borrowal accounts rated on large/ mid
corporate

Facility Rating Framework

rating

models

availing

limits

(FB+NFB) above Rs.50 Cr from the bank

Assigning rating to facility sanctioned to the
borrower based on default rating and securities

10

available
Credit Risk Rating models All Banks & Financial Institutions

11

for Banks/FI
NPA Model

For marking NPA accounts in on-line Kotak

12

Future Lease Rental Model

Trac Credit Risk Rating System

Advances to property owners against future
lease rentals

Table 6.6: Credit Risk Rating Models

AREAS FOR EVALUATION

All the models have four areas of evaluation Financials, Business & Industry, and
Management & Conduct of Account.
The weightage under various risk areas vary from model to model as under:
36

Models

Financials

Business

Large
Medium
Small
Small II

40%
40%
40%
36%

Industry
25%
25%
20%
16%

& Management
25%
20%
20%
28%

Conduct of A/c
10%
15%
20%
20%

Table 6.7: Areas of Evaluation

CASE STUDY
Here is a case of Bhilwara Agro Auto Services Pvt Ltd for which personal description report
is prepared with the help of documents collected under KYC.
PROSPECT NO.:
BORROWER
Bhilwara Agro Auto Service Pvt CONTACT

Vaibhav Jain

NAME :
PRODUCT :

Cash credit limit and

Ltd
WCG

PERSON :
SCHEME :

37


WCTL

Personal detail: Captioned case is sourced by Bhilwara bank branch for funding working
capital facilities in the form of cash credit and WCTL by takeover of working capital facility
with Induslnd Bank. The Ladha family roots from Bhilwara and having strong business setup.
The family is associated with Mahindra from last 40 years as they were having dealership of
Mahindra Tractor which was taken over by cousins on family division.
Shareholding patterns:Name of share

Holdin

S No

holders

Relationship
Director-

1
2
3
4

Mr. Vinod Ladha

Mr. Anil Ladha
Mr. Manish Ladha
Mrs. Nidhi Ladha
Total

applicant
Director- son
Director-son
son's wife

g
35.17%
32.28%
32.28%
0.28%
100%

Transactions: Presently, applicant is availing working capital facility in the form of CC

limit of RS.550 Lacs with sub limit of WCDL of Rs.500 Lacs from Induslnd Bank. The limit
is secured against following securities:

EM over commercial showroom situated at 391/1, Noorbagh, Ajmer Road,

Bhilwara.

EM over residential property at 15, Kamla Nagar, Ajmer Road, Bhilwara

EM over residential plots no 10, 11, 12 and 24, Kamla Nagar, Bhilwara.

Personal guarantee of Mr. Vinod Ladha, Mr. Anil Ladha, Mr. Manish Ladha and
Mrs. Geeta Devi Ladha (w/o Vinod Ladha)

Charge over current assets.

The customer is having sole banking with Induslnd bank from last 3 years but customer is
willing to shift banking facility with us for enhancement and better rate of interest.
38

Proposed loan structure recommended as under:-

Bank

Induslnd
Bank

KMBL

EXISTING /PROPOSED FACILITIES

(Rs. in Lacs)
Existing
Limits /
Type of
Propose Total
o/s
Tenure
takeove
facility
d Credit Exposure
r
CC
550
550
Nil
Nil 12 Mths
WCDL (Sub
30-180
(500) (500)
Nil
Nil
limit of CC)
days
CC
Nil
Nil
600
600 12 Mths
WCDL (Sub
limit of CC)
WCTL

Total Fund
Base

(500)

30-90

Nil

Nil

(500)

Nil

Nil

100

100 60 Mths

550

550

700

700

days

Pricing
12.25%

11.85%
On
drawl
basis
11.85%

LTV calculation:Exposure
(Rs in
Products
CC limit
WCTL for 60 mths
collateral required
Collateral available
Commercial Showroom at Araji No. 391/1, National

Lacs)

collateral

LTV required
600.00
1.00
600.00
100.00
0.60
166.67
700.00
766.67

Highway, Ajmer Road, Bhilwara. (owner Bhilwara

Agro Auto Service Pvt Ltd)
Residential property at Plot NO - 25, Kamla Vihar,

460.99

1.00

460.99

Bhilwara (owner Vinod Ladha)

Residential property at Plot NO - 24, Kamla Vihar,

217.89

1.00

217.89

73.18

1.00

73.18

Bhilwara (owner Vinod Ladha)

39


Residential property Plot No.- 15, Kamla Vihar, Araji
No.- 373 to 377, Revenue Gram- Jodhdas, Distt.Bhilwara (owner Vinod Ladha)
Open land at Plot No.- 10, Araji No.- 392, Revenue

93.90

1.00

93.90

83.00

0.40

33.20

Gram- Jodhdas, Distt.- Bhilwara (owner Vinod

Ladha)
Total collateral

928.96

879.16

LTV
Effective LTV

75.35%
87.20%

Income: During FY2012-13, the firm has achieved a turnover of Rs.91.36 Cr against
previous year turnover of Rs.59.19 Cr in FY 2011-12 and reflects a growth of 54% over the
corresponding last year. Significant growth in turnover was due to launch of new models and
overall growth in auto industry. Turnover achieved in FY 2014 is approx. 88.63 Cr with
marginal drop of 5% over the previous year. The minor drop in turnover in FY 2014 was due
to slowdown in automobile industry. The turnover is estimated for FY 2015 is Rs.95.00 Cr.
Below is the breakup of sales :Particular
Sales of vehicles &
spares
Services Charges
Total

FY 2014

FY 2013

87.1
1.53
88.63

90.4
0.96
91.36

FY

FY

2012

2011

58.43
0.75
59.18

43.78
0.71
44.49

Profit and Profitability: The firm has recorded a PBDIT margin of 2.40% in FY2012-13
as compared to 2.60% in FY 2011-12. We have considered income like commission on
insurance and various other discounts under operating income as they are part of
companys regular operations. PAT margin of 0.82% was achieved in FY2012-13 which
was increased as compare to previous year. Margins are maintained at same level in the
provisional financials till Feb 2014.

40

Interest coverage Ratio: The firm has interest coverage of 2.17 times for FY 2013 as
compared to 1.89 times in FY 2012. Interest coverage is seems to be comfortable.
Increase in interest cost in prov. financial 2014 was due to increase in CC limit from
Rs.480 to Rs.550 Lacs and availed fresh channel finance limit of Rs.200 Lacs from Axis
bank.

Interest cost includes interest paid to relative/directors of Rs.22.31 L in FY 2013 and

Rs.16.74 Lacs in FY 2012 and same was disclosed under tax audit report.

TNW, Leverage/Non-operating income and sustainability: The firms gearing ratio has
been reduced to 2.37 as on FYE 2013 from 1.84 as on FYE 2012. Increase in equity in
FY 2013 was due to retention of profit and increase in unsecured loan from relatives. It is
estimated to remain at same levels in coming years. The same can be considered
acceptable.

Fixed assets: - Fixed assets include showroom land and building at Bhilwara and
Rajsamand, furniture, workshop tools, vehicles and misc. fixed assets. Addition in FA in
FY 2013 was towards building construction for expansion, vehicles and workshop tools.

Cash flow/liquidity: The current ratio for FY 2013 was 1.165 as compared to 1.258
times in FY 2012. Other loan and advances include advances for capital goods and
suppliers.

Other liabilities: below is the breakup of other liabilities

(Rs in Lacs)
FY 2014
Particular
Statutory dues
Trade advances
advance from
customer
other liabilities

Prov.
39.49
411.44

FY
FY 2013 2012
10.69
36.89
254.66 145.83

46.10
9.56

129.67
17.30
41

0.00
16.00


Deferred tax liability
Total

16.85
523.44

16.85
429.17

12.98
211.7

CC assessment:
CC Assessment

Particulars
Average Sales
Average purchases
Average Debtors (Avg sales* Drs days/30)
Average stock (Avg Purchases * Inventory

(Rs. in lakhs)
Eligible limit

Eligible limit

(based on last

(considering 20%

6M avg)

growth)
725.84
694.72
162.11

871.01
833.67
194.53

holding period/30)

1083.43

1300.11

Gross working capital

Avg Creditors (Avg purchases* Creditors

1245.54

1494.64

21.05

25.26

1224.49
306.12
200.00
382.00
336.36

1469.38
367.35
200.00
382.00
520.04

600.00

600.00

days/30)
Net working capital gap
Less: Margin from Promoters (25%)
Less:- Inventory Finance against stock
Less :- Average trade advance
Balance requirement
Proposed funding from KMBL ( as a CC
limit)

DSCR calculation:DSCR
PBDIT
Existing obligations
Interest on proposed FB facility of Rs.600 L
Proposed EMI of WCTL of Rs. 100 Lacs for

Prov. -2014 FY 2013

FY 2012
252.82
219.08
151.52
37.92
37.92
37.92
81.00
81.00
81.00

60 mths
Total obligations
DSCR

27.61
146.53
1.73

Strength of the case:

42

27.61
146.53
1.50

27.61
146.53
1.03


Following are the strength in the case:1. Mahindra being the market leader in the sports utility segment and a better performer,
the firm stands to benefit from the same.
2. Comfortable key financial ratios viz gearing and liquidity during FY 13.
3. No major borrowing except proposed funding.
4. Banking habits are healthy.
5. Decent capital in the firm.
6. RL sourced customer and will get sole baking.
7. Comfortable DSCR.
8. Reference check is positive.

Deviation Required:1. Cibil of Mr. Vinod Ladha showing overdue of Rs.12 Lacs in non-fund based facility
of Rs.12 Lacs. This is BG limit availed from SBBJ against 100% FD. Overdue
reflecting in cibil due to non-renewal at bank end. Clarification letter from SBBJ
attached for reference.
2. Cibil of Mr. Vinod Ladha showing overdue of Rs.4K in AL of Rs.5.50 Lacs availed
from SBBJ. The repayment of account is proper and overdue in cibil is due to updated
till Feb 2014.

Overall rating for the case: positive

Loan was sanctioned

43

Chapter7
Findings & Suggestions

44

7.1 FINDINGS

Electronic database should be designed carrying all the available and important information
related to the proposals accepted. This will help reduce paperwork and loss of information.

Financial Analysis is not the only requirement-overall analysis is must.

Updating on technology and tools is a must be it individual or organization.

Understanding the nature of business and the market conditions is crucial for effective
credit appraisal

Decent understanding of the credit appraisal techniques.

7.2 SUGGESTIONS
Bank should charge such a nominal rate of interest from the customers so that they get
attracted to avail the facility at once.
Secondly, Bank should minimize the transaction cost.
Bank should also consider financing new upcoming projects such as infrastructure,
manufacturing industries and big brands business.
Bank should also introduce new loan products which can assist small scale enterprises.
Bank should focus on spreading its network by opening new branches in smaller locations.

45

Chapter8
Learning

46

8.1 LEARNING
The study at Kotak Mahindra gave a vast learning experience to me and has helped to
enhance my knowledge. During the study I learnt how the theoretical financial analysis
aspects are used in practice during the working capital finance and term loan assessment. I
have realized during my project that a credit analyst must own multi-disciplinary talents like
financial, technical as well as legal know-how.
The credit appraisal for business loans has been devised in a systematic way. It is a process of
appraising the credit worthiness of loan applicants. Thus it extremely important for the lender
bank to assess the risk associated with credit; thereby ensure the security for the funds
deposited by the depositors. There are clear guidelines on how the credit analyst or lending
officer has to analyze a loan proposal. It includes phase-wise analysis which consists of 6
phases:
1. Financial statement analysis
2. Working capital and its assessment techniques
3. Techno Economic Feasibility Analysis
4. Credit risk assessment
5. Documentation
6. Loan administration
Kotak Mahindras adoptions of the Projected Balance Sheet method

of assessment

procedures are based on sound principles of lending. This method of assessment has certain
flexibility required to avoid any rigid approach to fixing quantum of finance. The PBS
method have been rationalized and simplified to facilitate complete flexibility in decisionmaking.

47

Chapter9
Bibliography

48

9.1 BIBLIOGRAPHY

Loans and advances instruction manual

Internal circulars
http://www.kotakmahindra.com/

49

ANNEXURE

50

51

52

53