Overview of industry as whole

Introduction
A bank is a financial institution that provides banking and other financial
services to their customers. A bank is generally understood as an institution
which provides fundamental banking services such as accepting deposits
and providing loans. There are also non banking institutions that provide
certain banking services without meeting the legal definition of the bank.
Banks are the subset of the financial sector industry.
A banking system also refers as a system provided by the bank which
offers cash management services for customers, reporting the transaction
of the account and portfolio, throughout the day. The banking system in
India should not only be hassle free but it should be able to meet the new
challenges posted by the technology and any other external and internal
factor. For the past three decades India banking industries have several
outstanding achievements to its credit. The banks are the main participant
of the financial system in India. The banking sector offer several facilities
and opportunities to it customer. The entire bank safeguards the money
and valuable and provides loans, credit and payment services such as
checking account, money order and cashiers cheque. The bank also offers
investment and insurance product. As a variety of models and cooperation
and integration among financial industries have emerged, some of the
traditional distinction between the banks, insurance company and securities
of the firm has diminished. In spite of these changes, banks continue to
maintain and perform their primary role accepting deposits and lending
funds from these deposits.

Features

Dealing in money
Agency
Acceptance of deposits
Grant of loan and advances

 Payment and withdrawal

Commercial nature
Minor saving scheme

Objective of banking industries

Social welfare: it was the need for an hour to direct the funds for
the needy and required sectors of the Indian economy. Sector
such as agriculture, small and village industries were in need of
funds for the expansion and further economic development.
Reducing regional imbalance: in a country like India where we
have a urban rural divide it was necessary for banks to go in
the rural areas where the banking facilities were not available. In
order to reduce this regional imbalance nationalization was
justified.
Priority sector lending: in India, the agriculture sector and its
allied activities were the largest contributor to the national
income. Thus these were labeled as the priority sectors. But
unfortunately they were deprived of their due share in credit.
Nationalization was urgently needed for catering funds to them.
Developing banking habits: in India more than 70% population
used to stay in rural areas. It was necessary to develop the
banking habits among such a large population.

Need of the banks

Before the establishment of banks, the financial activities are handled by
the money lenders and individuals. At that time the interest rate were very
high. Again there were no security for public savings and no uniformity
regarding the same. So as to overcome such problems the organized
banking sector was established which was fully regulated by the

government. The organized banking sector works within the financial

system to provide loans, accept deposits and provide others services to
their customers. The following fluctuations of the bank explain the need of
the bank and its importance.
To provide the security to the saving customers
To control the supply of money and credit
To encourage public confidence in the working of financial
system, increase saving speedily and efficiently
To avoid focus of financial power in the hands of the few
individuals and institutions
To set equal norms and conditions (i.e. rate of interest,
period of lending etc) to all types of customer
.

Profile of the company

History
1. Dena Bank was founded on 26th May, 1938 by the family of
Devkaran Nanjee under the name Devkaran Nanjee Banking
Company Ltd
2. It became a Public Ltd. Company in December 1939 and later the
name was changed to Dena Bank Ltd.
3. In July 1969 Dena Bank Ltd. along with 13 other major banks was
nationalized and is now a Public Sector Bank constituted under the
Banking Companies (Acquisition & Transfer of Undertakings) Act,
1970. Under the provisions of the Banking Regulations Act 1949,
in addition to the business of banking, the Bank can undertake
other business as specified in Section 6 of the Banking
Regulations Act, 1949.

Milestones

1. One among six public sector banks selected by the world bank for
sanctioning a loan of Rs. 72.3 crores for augmentation of Tier- II
capital under financial sector development project in the year
1995.
2. One among the few banks to receive the world bank loan for
technological up gradation and training
3. Launch a bonus issue of Rs. 92.13 crores in November 1996
4. Maiden banking issue of Rs. 180 crores in November 1996
5. Introduce tele banking facility of selected metropolitan centers.

Dena bank has been the first bank to introduce

1. Minor saving scheme
2. Credit card in rural India known as DENA KRISHI SAKH
PATRA (DKSP)
3. Drive in atm counter of juhu, Mumbai
4. Smart card at selective branch in Mumbai
5. Customer rating system for rating the bank service

Logo

The logo of Dena bank depicts Goddess Lakshmi, the goddess

of wealth, according to Hindu mythology. The contemporary D in
the logo reflects the dynamic, dedication and the drive towards
customer satisfaction.

Vision
Dena bank will emerge as the most preferred bank of customers
choice in its area of operations by its reputation and performance.

Mission
1. Customers premier financial services of great value
2. Staff positive work environment and opportunity for growth
and achievement.
3. Shareholders superior financial returns
4. Community economic growth

Functions
Primary functions
1. Accepting deposits
The bank collects deposits from the public. These deposits can
be of different types, such as
A. Saving deposits
B. Fixed deposits

C. Current deposits
D. Recurring deposits

2. Granting of loans and advances

The bank advances loans to the business community and other
members of the public. The rate charged is higher than what it
pays on deposits. The difference in the interest rate (lending rate
and deposit rate) is its profit.
The type of bank loans and advances are
A. Overdraft
B. Cash credit
C. Discounting of bills of exchange
D. Loans

Secondary functions
The banks perform number of secondary functions. The important
secondary functions are explained below
1. Agency functions
The bank act as a agent of the customers. The bank performs
numbers of agency functions which includes
A. Transfer of funds
B. Collection of cheques

C. Periodic payments
D. Portfolio management
E. Periodic collections
F. Other agency functions

2. General utility functions

The bank also performs general utility functions such as
A. Issue of draft, letter of credit etc
B. Locker facility
C. Underwriting of shares
D. Dealing in foreign exchange
E. Projects reports
F. Social welfare programmers
G. Other utility functions

Products and services:

DEPOSITS

LOANS

Premium
Dena
saving account
niwas
scheme
housing
finance
Premium
scheme
current

SERVICES

Core banking solution

Dena ATM services
Verified by visa services
Internet banking
Dena e- tax pay

account
scheme
Dena jeevan
SB account
Dena maha tax
bachat yojana
Dena
super
premium
current
account.
D
e
n
a
pl
at
in
u
m
c
ur
re
nt
a
c
c
o
u
nt
s
c
h
e
m

Dena
vidya
laxmi
educatio
nal loan
scheme
Dena
suvidha
(persona
l
loan)
scheme
Dena
auto
finance
scheme
Dena
consume
r durable
loan
Dena
trade
finance
scheme
Dena
senior
citizen
pensione
rs loan
scheme
Dena
mortgag
e
loan
scheme
Dena

Mobile banking
Phone banking
Dena alert services
Dena bill pay
RTGS/NEFT
Dena India remit
Inbound remittances
Direct tax collection
Indirect tax
Bancassurance
Distribution of mutual
funds
Demat services
ASBA
Visa bill pay
Go recharge

e
D
e
n
a
fr
e
e
d
o
m
d
e
p
o
si
t
s
c
h
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m
e
D
e
n
a
s
a
m
ru
d
d
hi

rent
scheme
(finance
against
rent
receivabl
es)
Dena
doctor
Dena
gold loan
scheme.

d
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c
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e
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or
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at
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ic
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Total employees
The number of employees scale-wise is as under:
Cadre/Grade
General Manager - Scale - VII
Dy. General Manager - Scale VI
Asst. General Manager Scale - V
Chief Manager - Scale - IV
Senior Manager - Scale - III
Manager - Scale - II
Officer - Scale - I
TOTAL OFFICERS

No. of employees
13
43
110

462
834
1508
3356
6326

 Clerks
Sub-Staff & Part Time (PTC)
TOTAL EMPLOYEES

5312
2105
13743

Directors of Dena bank

Shri Ashwani Kumar

Chairman & Managing Director

Smt. Trishna Guha

Executive Director

Shri Ramesh S
Singh
Executive Director

Shri Ashok Kumar

Singh
Government Nomine
e Director

Shri S C. Murmu
RBI Nominee
Director

Shri Bankim R. Desai

Workmen Employee
Director

Shri A. Subramanya
Director

Shri G.
Gopalakrishna
Director

Shri Amit Chatterjee

Director

Dr. Umesh Bellur

Shareholder
Director

Shri V.
Chandrasekaran
Shareholder Director

Dr. Yasho
Verdhan Verma
Shareholder
Director

Growth of the industry

In 2015 2016 credit growth was around 8% and deposits growth was
nominal at 1.3% since the bank try to hovering around 74 75%. Bank is
targeting credit growth in the range of 13 15% and deposit growth of 10%
for 2016 2017. Going forward, it will be more sustainable growth since we
have shed bulk deposits. Secondly, credit that is given is not of temporary
in nature, except for some large withdrawals that happened in the last
month of fiscal 2015 2016.

Players in industry

Public
State bank of India
Punjab national bank
Bank of Baroda
Bank of India
Allahabad bank
Canara bank

Private
HDFC bank
ICICI bank
IDBI bank
Indusland bank
Axis bank
Yes bank

Size

Contribution in GDP

Competition information
1. State bank of India
It is the largest Indian banking industry and financial services company
with its headquarters in Mumbai, India. It is state owned. The bank traces
its ancestry to British India through the imperial bank of India, to the
founding in 1806 of the bank of Calcutta, making it the oldest commercial
bank in the Indian sub continental. Bank of madras merged into the other
two presidency banks, bank of Calcutta and bank of Bombay to form
imperial bank of India, which in turn became state bank of India. The
government of India nationalized the imperial bank of India, which in turn
became state bank of India in 1995, with the reserve bank of India. 2008,
the government took over the state held by the reserve bank of India
The state bank of India is the largest of the big four banks of India along
with ICICI bank, Punjab national bank, HDFC bank and bank of Baroda.

2. Andhra bank
It was registered on 20 November 1923 and commenced business on 28
November 1923 with a paid up capital of Rs. 1 lakh and an authorized
capital of Rs. 10 lakh. The bank crossed many mile stones and the bank is
rendering services through 2139 business delivery channel consisting of
1371 branches, 66 extensions counter, 38 satellite offices and 664 ATMs
spread over 21 state and 2 union territories as at the end of June 2008. All
branches were 100% computerized, 1186 units via, 1101 branches, 68
extensions counters, 15 service centers network under cluster banking
solution and providing any branch banking (ABB). Real time gross
settlement (RTGS) facility and national electronic fund transfer (NEFT)
facility has been introduce in 723 branches. To provide value added
services to the customer, the bank has set up its own 664 ATMs as
30.06.2008. of which 03 mobile ATMs and two with biometric access.

3. Allahabad bank
Bank which began operations in 1865 now has its head-quarters in Kolkata.
Currently the bank has 2402 branches across the country. The chairman
and managing director of the bank is Shri J P dua. The bank has a branch
in Hong Kong and a representative office in Shenzhen.

4. Punjab national bank

It was founded in 1894 and today is the second largest state- owned
commercial bank in India with about 5000 branches across 764 cities. It
serves over 37 million customers. The bank has been ranked 248 th biggest
bank in the world by the bankers almanac, London. The banks total asset

for financial year 2007 was about us$60 billion. PNB has a banking
subsidiary in the UK, as well as branches in Hong Kong, Dubai, Kabul and
representative offices in almaty, Dubai, Oslo, and shanghai. The Punjab
national bank is one of the big four banks of India, along with ICICI bank,
state bank of India and HDFC and its main competitor is Allahabad bank.

5. Bank of Baroda
It is the largest bank in India, after the state bank of India and the Punjab
national bank and a head of ICICI bank. Bank of Baroda has total asset in
excess of Rs. 2.27 lakh crores, or Rs. 2274 billion, a network of over 3403
branches and offices, and about 1100 ATMs. IT plans to open 400 new
branches in the coming year. It offers a wide range of banking products and
financial services to corporate and retail customers through variety of
delivery channels and through its specialized subsidiary and affiliates in the
area of investment banking, credit card and asset management. Its total
business was Rs. 4402 billion as of June 30.
As of august 2010, the bank 2010, the bank has 78 branches abroad and
by the end of FY11 the number should claimed to 90. In 2010, bank of
Baroda opened branch in Auckland, New Zealand, and its tenth branch in
united kingdom. The bank also plans to open three outlets in the Persian
Gulf region that will consist of ATMs with a couple of people.
The maharajah of Baroda, sir sayaijrao gaekwad III founded in the bank on
20july 1908 in the princely state if Baroda in Gujarat. The bank, along with
13 other major commercial banks of India, was nationalized on 19 July
1969, by the government of India

SWOT analysis
The SWOT analysis of Dena bank provides a strategic SWOT analysis of
the company business and operations. The profile shows a comprehensive
view of the companys key strength weakness and the potential
opportunities and threats.

Strength
Monetary assistance provided
Skilled workforce
Domestic market
Experienced business unit
Reduced labor cost
Government schemes implementation
Innovative schemes for different groups like drive in ATMs
Introduce minor saving scheme
Customer rating system for rating the bank service

B. Weakness
Less penetration as compare to other banks

 Limited advertising in comparison with leading banks.

Less emphasis on IT sector

C. Opportunities
Growing economy
New product and services
Investment in research and development
High loan rates are possible
Small business unit
International banking
Favorable government schemes

D. Threats
Growing competition and lower profitability
Economic crisis and fluctuating economic scenarios
Highly competitive environment with foreign banks.

Chapter-2
DURATION OF THE COMPANY, JOB TITLE
WHO WERE YOU REPORTING
WHAT RESPONSIBILITIES WERE GIVEN TO YOU, WHAT BASIC
QUALIFIATION ARE REQUIRED FOR DOING THE WORK
As I am from the credit department the responsibilities which are given to
me is assessment of working capital.
While sanctioning loan assessment must be done for checking the position
of the company.

Working capital means total of current asset, gross current asset employed
in the operation of the firm to enable it to produce trade in goods. The
working capital i.e. Gross current asset are funded mainly through current
liabilities viz. sundry creditors, short term borrowing, borrowing, provision
along with promoters contribution in the form of net working capital.
After receiving proposal for working capital loans, as a precaution banks
need to assess the amount of working capital loan which can be granted
and also to determine the interest rate at which the loan can be provided.
The RBI and its committee have introduced new method for the calculation
of credit eligibility for the working capital financing of firms. The newer
methods are firmer on risk management front and also the stability of
economy in the case of any excess default rate.

HOW THE JOB IS DONE IN THE ORGANISATION

Loans are sanctioned in the organization with given format
Step1: Customers goes to the branch and give the application regarding
the loan to be sanctioned.
Step 2: assessment of customer need is done.
Step 3: customer ask for the details required for loan to sanctioned
Step 4: branch manager or dealers who are dealing with the customer ask
for the necessary documents from customer required to the bank for
sanctioning of loan.
Step 5: branch make the proposal regarding the loan to be sanctioned
Step 6: branch forward the proposal to the zonal office
Step 7: in zonal office proposal will be analyses
Step 8: if the proposal is up to the requirements, loan will b sanctioned else
rejected

VARIOUS DEPARTMENTS IN THE ORGANISATION ARE:

Corporate credit
Legal
Retail credit
Credit monitoring
Inspection
Marketing
Establishment
Hindi
Customer complaint
Rural development
Information technology
Security
Risk management
Human resource development
Small and medium enterprise
Planning & Management information system
Resource mobalisation

Chapter-3
How you did the various jobs during internship

My Job during internship is assessment of working capital

What is Working Capital?

"Working capital" is gross current assets employed in the operation of the
firm to enable it to produce / trade in goods. The working capital i.e. gross
current assets are funded mainly through current liability viz. sundry
creditors, short term borrowing, and provision along with promoters
contribution in the form of Net Working Capital (NWC).

Assessment of working capital:

As per operational freedom given by RBI to banks, in evolving methods of
assessment of working capital, our bank has revised the earlier methods
of assessment.
The process of assessment of Working Capital Limits broadly includes the
following:

Collection of Data
Classification of Current Assets and Current Liabilities
Financial Analysis
Method of Assessment
Supervision and Follow up

Committee:
Daheja committee (1968): As a sequel to committees recommendation,
RBI issued guidelines for systematic appraisal of Working Capital.

Tandon committee (1975): Suggested three methods of MPBF.

Chore committee (1978): Working Capital limit above Rs. 10 crore
should compulsory brought under second method of MPBF.
D. Nayak committee (1993): For Working Capital limit of village
industries, tiny industries & small scale industries, upto credit of Rs.50
lacs should be computed on the basis of minimum of 25% of their
projected annual turnover, this method has been rechristened as
Turnover method.
In house committee (October, 1993): Working Capital limit upto Rs. 5
crore (w.e.f April 1999) should be calculated on the basis of minimum of
20% of their projected annual turnover.

Assessment of the Working Capital requirement of a borrower shall

generally be made under any of the following three methods:

Turnover method (P R Nayak committee recommendation)

Maximum Permissible Bank Finance (MPBF) system (Tandon/chore
committee recommendation)
Cash budget method

Turnover Method (P R Nayak Committee recommendation):

For SSI up to requirement of Rs. 5 crore and for others upto Rs.
2 crore the Working Capital limit calculated as minimum of 20 %
of projected annual turnover (PAT).
The total WC requirement of a small scale industry unit, pegged
at 25% of PAT (1/5th Margin & 4/5th bank finance), assumes an
average WC cycle of 3 months. Holding period method (small
loan) should be used.
Under this method current ratio would be 1.25.
If the holding period method of appraisal result in lower credit
limit, the minimum prescribe 20% PAT should be provided.

 If the credit requirement based on MPBF method is higher than

the one assessed on projected turnover basis, the same may be
sanctioned.

Example:

Working Capital Assessment

1. Accepted level of PAT

2. Working Capital Fund -@25%
of PAT
3. Borrowers Contribution
5% of PAT
Projected N.W.C
Higher of 3 (a) & 3
(b)
4. Bank Finance
20% of PAT
2-3 (c)

Yr
(previous)

Yr
(current)

Yr
(projected)

5. Permissible Bank Finance

Lower of 4 (a) 4 (b)
WCG (Working Capital Gap) = TCA-OCL (Other than bank borrowing)
NWC (Net working capital) = TCA-TCL
Margin=NWC=Contribution=Long Term Source-Long Term Uses

Maximum Permissible Bank Finance (MPBF) system (Tandon/Chore

Committee recommendation)
Assessment of Working Capital limit of over Rs. 5 crore, but up to
Rs. 25 crore shall be assessed based on the MPBF system
The Bench mark current ratio for borrower whose working capital
limit is assessed under MPBF method shall be 1.33.
Recommended three method of MPBF Calculation:

1st
method
MPBF=

of (CA-OCL) 25% of (CA-OCL)

2nd method
MPBF=

of (CA-OCL) 25% of CA

3rd
method
of (CA-OCL) CCA 25% of (CA-OCL) Now withdrawn
MPBF=
by RBI)
Example on calculation of MPBF:
Assumption

1st method of 2ndmethod

3rd method

CA
Less: Other CL

MPBF
1000
400

MPBF
1000
400

of MPBF
1000
400

of

WCG(Working
gap)
Less: Core CA
Less: Margin

capital 600
150
25% of WCG

MPBF
450
Current Ratio
1:18
Excess Borrowing (over 25

600

600

250
25% of CA

200
200
25%

350
1.33
125

CCA)
200
1.67
275

of

(CA-

450)
Core Current Assets:
Current Ratio: CA/CL, where CL considered as (=CA-Margin)
Net Working Capital=CA-CL
Working Capital Gap=CA-Other current liabilities (other than bank
borrowing & TL installment due within 1 year.)

Before the MPBF method is explained, it is necessary to explain the

erstwhile

second

method

of

lending

under

tendon

committee

recommendations. Under method II the borrower should bring in minimum

of 25% of margin of all current assets from the owned fund and long term
liabilities and balance i.e. 75% be financed by the bank.

The example given below will illustrate this

Current Liabilities

Current Assets

Credit for purchase

Other current liabilities

100
50
150
Bank borrowing including bill 200

Raw Material
Stock-in-process
Finished goods
Receivables including

discounted

discounted
Other Current Assets

350
Method II
a. Current Assets
Less :
b. Current liabilities

370
other 150

than bank borrowing

c. Working Capital Gap
220
d. Minimum stipulated net 92
working capital i.e. 25% of
current assets.
e.
Actual/projected

net 20

working capital (total current

asset

current

370

minus

liabilities

total

350

including bank borrowing

200)
f. item c minus d
g. item c minus e
h. Max Permissible
Finance

(item

128
200
Bank 128
or

whichever is lower)
i.
Excess
borrowing 72
(representing shortfall in net
working capital item d

200
20
90
bill 50
10
370

minus e)
As per past practice, current assets and current liabilities are revoked in
accordance with the usually accepted approach of bank.
The borrower is required to bring 25% of current assets. Against the
MPBF of Rs. 128 lakh. The actual borrowing is Rs. 200 lakh resulting in
excess borrowing of Rs. 72 lakh. This excess borrowing is required to be
brought from the long term source i.e. equity, unsecured loans, long term
borrowing. In absence of any support from the borrower, the deficit in the
long term source would be termed as working capital term loan repayable
by the borrower by installment to be fixed while sanctioning the next year
limits.
Based on kannan committee recommendations, RBI has allowed freedom
to the banks to decide the holding levels of various components of current
assets for the financial support to ensure efficient functioning of the unit.

Classification of current assets and current liabilities

(A few important classification are furnished hereunder)
All short term / temporary investment in money market instrument
like commercial paper, certificate of deposits can be considered as
current assets. However other investment likes ICDs (inter corporate
deposits) investment in listed shares & debentures including
investment in subsidiaries and associates are to b considered as
noncurrent assets.
Cash margin for non fund based limits (like LCs/ Guarantees) may
be treated as part of current assets for the purpose of MPBF and

Current Ratio. However, such margin held for deferred payment

guarantee should be considered as noncurrent assets.
All term loan installment, fixed deposit, debenture etc, repayable
within next 12 months should be considered as Current Liabilities for
computation of Current Ratio and MPBF.
Inter Corporate Deposits taken are to be considered as Current
Liabilities.
Cash Budget System
Working capital limit of Rs. 25 crores and above & is determined at
the peak level of the annual cash flow deficit as projected in the
cash flow statement. However the release of working capital finance
by bank is generally in tune with the quarterly cash flow.
Generally used for the purpose of determining the working capital
needs of seasonal industries i.e. Sugar, Tea etc, construction
companies and service companies.
It required the borrower to submit the CASH FLOW STATEMENT to
the banks.
Assessment of all the limit under the cash budget system is done by
arriving at the deficit between cash inflow and cash outflow during a
period of time.
For calculating the working capital sugar pledge limit we use CI, CII,
CIII format of Cash Flow.
Structure of cash flow statement
It shows the expected inflow and outflow of cash and deficit and
surplus in generation of cash.
The Cash Flows are under three heads:
1. Cash Flow from Operating Activities

2. Cash Flow from Investing Activities

3. Cash Flow from Financing Activities
Operating Activities:
These activities include producing and delivering goods and
providing services. Cash inflow from operating activities includes
receipt from customers for sale of goods and services, including
receipt from collection of debtors. Cash outflow from operating
activities includes payment to employees for services, payment to
supplier for goods, payment to government for taxes and duties
and services.
Investing Activities:
These activities involve extending and recovering loans and
acquiring and disposing of debt and equity instruments and fixed
assets. Cash inflow from investing activities include receipt from
loan collections, receipts from sales of debt and equity instrument
of other enterprises and receipt from sale of fixed assets. Cash
outflows from investing activities include disbursements of loans,
payments to acquire debt and equity instruments of other
enterprises

and

payments

(including

advances

or

down

payments) to acquire fixed assets.

Financing Activities:
These activities includes obtaining resources from owners and
provide them with a return on and return of their investment,
borrowing and repaying amounts borrowed and obtaining and
paying for other resources obtained from creditors on long term
credit. Cash inflow from financing activities includes proceeds
from issuing equity instruments, debentures, mortgages, bills and

from other long term and short term borrowing. Cash outflow from
financing activities are payment of dividends, repayment from
amount borrowed and principal payable to creditors who have
extended long term credit.
Assessment of the limit under the cash budget system is done by
arriving at the deficit between inflow and cash outflow during a
period of time. The various segments of cash budgets are as
under:

Chapter: 4
What all things you learned during internship
During my internship the task I had to perform is assessment of working
capital. Assessment of working capital is a part of proposal. Proposal is
made for sanctioning of the loan.
As I am from the credit department of the zonal office of Dena bank we
need to analyze the proposal for working capital loans received from the
branch.
Dena bank has a format of the proposal in which the necessary information
is being filled regarding the customer and requirement of loan which is to
be sanctioned. While making proposal necessary things are needed to be
learned

 Checking the rating of the company

There are two types of rating
o Internal rating system
o External rating system
Internal rating system: Internal rating system is the system where rating
is done when the loan amount is less than 5 crore. It is done within the
banks only.
Internal ratings are:
1.
2.
3.
4.
5.
6.

Factsheets
Financial
Obligor risk rating
Facility risk rating
Rate adjustment return on capital
work flow
External rating system: External rating system is rating system where
rating is done when the loan amount is more than 5 crore. These rating are
approved by the Reserve bank of India.
External ratings are:

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

Brickwork
Care
Crisil
Icra
India rating
Smera

How we use to quote rate of interest to the customer

ROI= (BR + S + TP)
BR= base rate

S=spread
TP=term premium
Before levering rate of interest on the loan amount we need to look the
rating of the company and according to that rate of interest is levied. Better
the rating less will be the rate of interest.
Example:
If the rating of the company is DB7 according to the type of rating system
you have choose
The rate of interest will be
BR=9.70
SP=5.25
TP=.50
Therefore ROI = 15.45 (9.70+5.25+.50)
Now this rate will be levied to the loan amount.

MCA(managerial of corporate)
MCA regulates corporate affairs in India through the Companies Act, 1956,
2013 and other allied Acts, Bills and Rules. MCA also protects investors
and offers many important services to stakeholders. This site is your
gateway to all services, guidance, and other corporate affairs related
information.
MCA helps in viewing the companys master data which contain the legal
charges where the bank can find the name of other banks from where the
customer has already borrowed money. It also helps in finding the signatory
detail of the company i.e. who all are the directors of the company it helps
in identifying the DIN (direct identification number) of the directors.

 How to identify the defaulter customers who are

demanding for
loan
Reserve bank of India provides RBI defaulter list to all the banks in every
financial year.
By looking at the MCA site we can identify the details of the company and
directors and can search for the same in the list provided by the RBI. If the
name appears in the defaulter list the bank will not finance the loan.
However there are many cases that similar names are appeared in the
defaulter list, to cross check the same we need to check the name of the
customer by its DIN. With the help of DIN the bank can know about further
companies in which he/she is indulged in. If there appears the same
company which is there in the defaulter list with his/her name than he will
be considered as defaulter and will not be financed loan. If the company
name is not the same which is appeared in the defaulter list then bank asks
to the customer to give an affidavit regarding the same only then the loan
will be financed.

CIBIL
CIBIL stands for credit information bureau limited. It is Indias first credit
information company founded in august 2000. It helps in collecting and
maintaining records of an individual payment to loans and credit credit. The
company records credit related information of individual as submitted by
registered member institute.
To find out CIBIL we required individual name, company name, address,
PAN number etc.
CIBIL helps in finding out the credit history of the customer it helps in
finding the due amount which is not paid by the customer. CIBIL has two
major score segments viz. the consumer bureau and the commercial
bureau. The consumer bureau maintains credit report of individual while the
commercial bureau maintains credit records of the institution/companies. In

case of individual CIBIL score can be find out. If the CIBIL score is -1 of an
individual then it means he/she has no credit history.
If the CIBIL score is 300-400 then it will be a risk management score. If the
CIBIL score is 700 then will be a better score i.e. better credit history. If the
CIBIL score is 0, this means there are no overdue.
In case of possible range for CIBIL transunion score version, consumer
with more than 6 months credit history is 300(high risk) to 900(low risk).
Consumer having less than 6 months credit history is 1(high risk) to 5(low
risk).

Bank guarantee:
Bank guarantee is guarantee taken by the bank on behalf of the buyer that
he will make the payment to the seller.
Example:
Suppose company A is the selling company and company B is the
purchasing company. Company A does not know company B and as such
is concerned whether company B will make the payment or not. In such
circumstances, D who is the bank of company B, opens the bank
guarantee in favor of company A in which it undertakes to make the
payment to company A. if company B fails to honour its commitment to
make the payment in future. As such, interest of company A are protected
as it is assured to get the payment, either from company B or from bank D.
As such bank guarantee is the mode which will be found typically in sellers
market. As far as bank D is concerned while issuing the guarantee in favor
of company A. it does not commit any outflow of funds. As such, it is non
fund based lending for bank D. if on due date bank D is required to make
payment to company A due to failure on account of company B to make the
payment, this non fund based lending become the fund based lending for
bank D which can be recovered by bank D from company B. for issuing the
bank guarantee. Bank D charges the bank guarantee from company B
which gets decided on the basis of two factors what is the amount of
bank guarantee and what is the period of validity of bank guarantee. In
case of this conventional for bank guarantee, both company A as well as
company B get benefited as it is able to make the credit purchase from

company A without knowing company A . As such, bank guarantee

transaction will be applicable in case of credit transaction. In some cases,
interest of purchasing company are also to be protected, suppose company
A which manufactured capital goods takes some advanced from company
B. If company A fails to fulfill its part of contract to supply the capital goods
to company B. if company A, their need to some protection available to
company B. In such circumstances, bank C who is the banker of company
A opens a bank guarantee in favor of company B in which it undertakes
that if company A fails to fulfill its part of the contract, it will reimburse any
losses incurred by company B due to this non fulfillment of contractual
obligation. Such bank guarantee is technically referred to performance
bank guarantee and it ideally found in the buyers market.