SUMMER INTERNSHIP PROJECT REPORT

ON

FINANCING PROFESSIONALS

AT

THE CORPORATION BANK, RAJKOT

Submitted to

Institute code: 778

Institute name: Som-Lalit Institute of business management

Under the Guidance of

Company guide Institute guide

Mr. Rahul Satish Ms. Reshmi Banerjee

In partial fulfilment of the requirement of the award of the degree of

Master of Business Administration (MBA)

Offered by

Gujarat Technological University

Ahmedabad

Prepared by:

Shruti Amitbhai Nirmal

177780592054

MBA (Semester – III)

Month & Year:July, 2018.

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 DECLARATION

I hereby declare that the Summer Internship Project Report titled “Financing Professionals”
in (The Corporation Bank, Rajkot) is a result of my own work and my indebtedness to
other work publications, references, if any, have been duly acknowledged. If I am found
guilty of copying from any other report or published information and showing as my original
work, or extending plagiarism limit, I understand that I shall be liable and punishable by the
university, which may include ‘Fail’ in examination or any other punishment that university
may decide.

Enrollment no. Name Signature

177780592054 Shruti Amitbhai Nirmal

Place: Date:

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Page |3
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 PREFACE

Bank is the financial institution which helps in the circulating the money in the market through various
financial and monetary activities. As a result it helps a country’s economy to grow and develop.

Commercial banks are the intermediaries which move money from capital markets to the business and
institutions. The main source of the income for the commercial bank is the difference between the two rates
that they charge to the borrowers and pay to the depositors.

Commercial banks make possible the reliable transfer of funds and serving the businesses with the
international financing services globally. It helps in boosting the import and exports which in return, results
into the growth of the economy of our country.

With the developing economy, there is increase in the proportion of the services by the professionals in our
country. So, the financial institutions like bank help them with their special schemes to them for their
development.

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 ACKNOWLEDGEMENT

I am pleased to present this report on the industrial training which I took from The Corporation Bank,
Rajkot. Also it is a matter of great pleasure to undertake this project with the SLIBM (Som-Lalit Institute
of Business Management), Ahemdabad. I am thankful to all the faculty members for their constant support
and the assistance in preparing the project report.

I express my gratitude to Mr. Rahul Satish – Chief Manager (The corporation bank – Rajkot) for being my
company guide for guiding me throughout the project. I am also thankful to the members of the loan
department for their constant support and guide.

I also thank my faculty guide Ms. Reshmi Banerjee.

Date:

Yours faithfully,

Shruti Nirmal.

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 EXECUTIVE SUMMARY

The project ‘FINANCING PROFESSIONALS’ is a detailed study of the procedure of the loan provided to
the professionals by the commercial bank (Corporation bank). This research is carried out with objective to
study the problems faced by the professionals seeking for loan and the whole procedure from application till
the disbursement of the loan by the bank.

The project has explored the need for finance and introduced some of the most common sources of
professional loan. Banks play a critical role in providing finance for professionals’ better future. Banks are
preferred for larger Amount of loan, and banks are also check professionals’ financial data like; Balance
sheet, various account, CIBIL score. Banks are usually use two methods of calculation of loan amount. That
is Repayment capacity and DSCR Method. If loan amount is above 10 Lac then it is compulsory calculate as
per DSCR Method. Repayment capacity method is generally based on past years data it means actual data, as
well as DSCR method is based on future data it means projected years. This bank can provide finance to
professionals of maximum rs.6 crore.

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 Index

Sr No Particular Page No
(i) Title Page 01
(ii) Declaration 02
(iii) Institute Certificate 03
(iv) Company Certificate 04
(v) Plagiarism Report 05
(vi) Preface 06
(vii) Acknowledgement 07
(viii) Executive Summery 08
 Index 09
1 General information 10
1) Industry overview 11
2) Company overview 15
3) Product and service overview 21
2 Research work 31
4) Objective of the study 32
5) Literature Review 33
6) Case study 34
7) Research Methodology 40
8) Data analysis and interpretation 41
9) Findings 53
10) Limitations of study 54
11) Conclusion 55
12) Suggestions 56
13) References 57
 Annexure 1 58
 Annexure 2 59

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 PART – 1

GENERAL

INFORMATION

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 1. INDUSTRY OVERVIEW

1.1 HISTORY OF BANKING

The word bank is arrived from the Italian word named ‘BANCO’. The word banco means
the bench. In earlier middle ages, Italians used to carry on their commercial and the business related
transactions, sitting on the bench. So, from this concept, the word ‘BANK’ came into existence.

Initially the banking started as the lending of the money by the Jews. Later on the merchants started
giving the surplus money to the goldsmith. And those goldsmiths gave the receipts like bank note to the
merchants for the cash they used to deposit with them. Initially banks had only two major function: 1)
Accepting the deposits.
2) Lending the money on interest.

The modern banking system started in VENICE in 1587. People could deposit the money into it and
withdraw the money whenever needed. Also people can deposit their gold and silver with the bank and
in return bank will give the receipts to the depositor which he can use as the currency notes also.

Whether it be any country, the development of trade and the industry became possible due
to the invention of the money and proper financial system or banks. So, bank can be considered as the
root cause of the economic development and proper functioning of the finance in the economy in the
country.

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1.2 INDIAN BANKING STRUCTURE

RBI

SCHEDULED UNSCHEDULED
BANKS BANKS

CO-
COMMERCIAL OPERATIVE
BANKS
BANKS

PUBLIC PRIVATE REGIONAL

SECTOR FOREIGN RURAL
SECTOR SECTOR
BANKS BANKS BANKS
BANKS

SBI & OTHER OTHER

ASSOCIATE NATIONALIZED PUBLIC
BANKS BANKS SECTOR
BANKS

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1.3HISTORY AND EVOLUTION OF INDIAN BANKING SYSTEM

Banking system has mainly three functions in the economy of a country:

(i) Operations of payment system
(ii) Depositor and protector of people’s savings
(iii) Issue loans to the individuals and the companies.

There are many evolutions in the banking system of India after the liberalization policy of1991. Shri M
Narsimham committee was set in order to revolutionize the profitability of the Indian banking system and
specially the public sector banks. The committee suggested that the public and private sector bank both
should be treated equally. This decision of the committee helped in the growth and the development of the
banking sector in the country.

Also the RBI gave the licence to the private players and helped in growth of the private sector bank in
the developing economy. Some of the private players who got licence from the RBI were: ICICI Bank,
HDFC Bank, Axis Bank, IDBI Bank.As a part of the LPG(liberalization, privatizationand globalization)
policy of 1991, the foreign banks were also allowed to open offices in India as either as branch or
subsidiaries. The Indian and the foreign banks are allowed to start the joint ventures in this and also can form
other financing institute.

It was emphasised to the banks to stop their traditional system of the banking and initiate the merchant
banking, underwriting, and the retail banking system. It helped the modernization in the banking sector.
Nowadays the retail banking is more in the trend of modern banking.

Today, Indian Banking industry is the most flourishing industries. Banking system in any country
needs to be effective and efficient as it plays an important role in the working of the economy and its
development.

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1.4 VARIOUS MARKET PLAYERS IN THE INDUSTRY:

 Allahabad Bank
 Andhra Bank
 Bank of India
 Bank of Baroda
 Bank of Maharashtra
 Canara Bank
 Central Bank of India
 Corporation Bank
 Dena Bank
 Indian Bank
 Vijaya Bank
 Indian Overseas Bank
 IDBI Bank
 Oriental Bank of Commerce
 Punjab & Sindh Bank
 Punjab National Bank
 State Bank of India
 Syndicate Bank
 UCO Bank
 Union Bank of India
 United Bank of India

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 2. COMPANY OVERVIEW

2.1HISTORY AND DEVELOPMENT OF BANK

 Corporation Bank came into existence as Canara banking corporation (Udupi) Limited on 12th
March, 1960 in Udupi.
 The bank started the functioning with just rupees 5000/- as its capital.
 The founder of the corporation bank was Khan Bahadur Haji Abdulla Haji Kasim Saheb Bahadur
was having the wish in mind to open a financial institution that would bring prosperity to the society
and the result was the establishment of the Canara banking corporation (Udupi) Limited.
 The first branch of the bank was opened at Kundapur in 1923. The second branch was at Mangalore
in 1926.
 In 1939, the bank’s name was changed to ‘Canara banking corporation Ltd.’
 The second change in the name was done in the 1972, which was ‘Corporation Bank Ltd.’ and finally
the bank’s name was kept ‘Corporation Bank’ following it’s nationalization on 15th April 1980.
 Presently, the Bank has a network of 2501 fully automated CBS branches, 3169 ATMs and 4724
Branchless Banking Units across the country. The Bank has Representative Offices at Dubai and at
Hong Kong.
 As on 30th September 2017, Net worth rose to Rs.11737 crore.
 The growth of the net worth of 11737 crore from 5000 rupees only is great evolution of the bank and
can be said as the success story of the bank.
 At the end of first phase of banking reforms in India, the Corporation bank emerged as the most
innovative and dynamic bank in the public sector.
 The tremendous amount of confidence and loyalty reposed by the public in general and customers in
particular, manifested itself in the overwhelming response to the IPO of the Bank in the year 1997.

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2.2 COMPANY MISSION AND VISION:

MISSION:

 To expand our reach to meet the financial needs of people.

 To provide full range of banking services with innovative products.
 To continue to adopt modern technology for superior banking experience.
 To create a rewarding environment for all stakeholders.
 To continue as a model organisation for transparent and ethical practices.

VISION:

 "Emerge as a Model for Inclusive Growth and Innovative Banking Services."

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2.3 COMPANY DETAILS:

 Type: Public
 Traded as: BSE :532179
NSE: CORPBANK
 Industry : Banking
 Founded: Udupi, 12 March 1906;110 years ago
 Headquarters : Mangalore, Karnataka, India
 Key People: Jai Kumar Garg ( CEO, MD )
 Products: Loans, Credit Cards, Savings, Investment vehicles, etc.
 Operating Income : Increase ₹14,510.40 crore (equivalent to ₹190 billion or US$2.8 billion in 2016)
 Net income: ₹1,506.04 crore (equivalent to ₹20 billion or US$300 million in 2016)
 Owner: Government of India
 Slogan: Prosperity for all
 Website: www.corpbank.com

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2.4 RATINGS OF BANK

CARE CRISIL

TEIR 1
CRISIL AA+/
PERPETUAL CARE AA+
NEGATIVE
BONDS

UPPER TIER 2 CRISIL AA+/

CARE AA+
BONDS NEGATIVE

LOWER TIER 2 CRISIL AAA/

CARE AAA
BONDS NEGATIVE

CARE – CREDIT ANALYSIS AND RESEARCH

CRISIL – CREDIT RATING AND INFORMATION SERVICE OF INDIA

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2.5 AWARDS AND ALLOCADES

 The Bank won the “Best SME Lending -2017” award during Fifth ASSOCHAM SMEs Excellence
Award 2017 instituted by The Associated Chambers of Commerce & Industry of India
(ASSOCHAM).
 The Bank was awarded the SKOCH Financial Inclusion Award 2017, and SKOCH Order-Of-Merit
Award, 2017 for Financial Inclusion, instituted by SKOCH Group at the 48th SKOCH Summit held
in Mumbai on 20th June, 2017.
 The Bank bagged three Runner up awards under Social Banking Excellence Awards instituted by the
Associated Chambers of Commerce & Industry of India (ASSOCHAM). The bank bagged the
awards for Agriculture Banking, Priority Sector Lending and Best Social Bank under Large Bank
category for 2016.
 The Bank won "Excellence Award on Empowering MSMEs 2016".
 The Bank got "SKOCH Achiever Award - 2016" for National SME enablement.

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2.6 SWOT ANALYSIS

Strengths:

 The bank is having equal presence in rural and urban areas.

 Employee base of over 19000+ people. (As on 2016)
 Customized banking solutions.
 Preaching of human values and ethical standards.

Weakness:

 Lack of publicity.
 Lack of branding with leading banks.

Opportunities:

 The corporation bank is awarded many a times for various aspects. And also is was the most
innovative and dynamic bank after first phase of banking reforms and even now it is foremost in the
innovation among the other public sector banks.
 Government funding is available to them.

Threats:

 There are always the threat of economic crisis and volatile markets due to the developing Indian
economy.
 Changing RBI policy.
 Presence of other competitive banks.

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 3. PRODUCT AND SERVICE OVERVIEW OF THE BANK

Various loans provided by the bank can be classified into two types. The bank provides many facilities to
different kind of people in the society:

1. Commercial loans

2. Retail loans

There are various types of the loan provided under this retail and commercial loans. The bank
provides the term loan as well as the loan for the working capital requirements.

3.1 VARIOUS FORMS OF COMMERCIAL LOANS:

1) Term loan
2) Bank overdraft facility
3) Lease finance
4) Commercial vehicle loans
5) SME credit cards

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3.2 VARIOUS RETAILLOAN SCHEMES PROVIDED BY THE BANK:

1) CORP VEHICLE
2) CORP DOCTOR PLUS
3) CORP DEMAT
4) CORP VYAPAR
5) CORP VIDYA
6) CORP TUTOR FEE
7) CORP MITRA
8) CORP SUBH VIVAH
9) CORP PERSONAL
10) CORP GHARSANSAR
11) CORP MORTGAGE
12) CORP CA/CS
13) CORP SHELTHER

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3.3SCHEMES FOR PROFESSIONALS

3.3.1 CORP PROFESSIONALS

3.3.1.1 INTRODUCTION:

Professionals represent a niche market under retail lending. In order to tap the potential of this
segment of the borrowers, it is required to build a long term relationship with them. Keeping this in view, the
Bank has formulated a special mortgage loan scheme that enables the practising professionals to purchase
office premises in commercial places.

3.3.1.2 ELIGIBILITY:

 Professionals, individually / jointly or as a partnership firm having an established practice, with a

minimum experience of three years in the age group of 25- 65 years.
 The applicant(s) should be Income Tax Assesses with a minimum NET annual income of Rs.1.50
Lac.
 The applicant shall not have any outstanding statutory dues.
 Businessmen are not eligible for financing under this scheme.
 Spouse having regular/independent income may also join as co applicant to supplement repayment
capacity.

3.3.1.3 PURPOSE:

 To finance acquisition of office premises for self-occupation by / of the Registered Medical

Practitioners, Practising Advocates, Chartered Accountants, Company Secretaries, consulting
Engineers & Architects etc.,
 For outright purchase of ready built / existing office premises or premises under construction in
commercial complexes / independent buildings and construction of office premises in the land
already owned. OR purchase of site and construction of office premises thereon. Where loan is for
purchase of site and construction of office premises, value of the land shall not exceed 50% of the
project cost.
 Loan for purchase of office furniture & fixture, solar water/ electricity systems shall be considered
only for the office premises acquired under the Scheme. Maximum age of the ready built property
shall be 30 years.

3.3.1.4 NATURE OF LOAN FACILITY PROVIDED UNDER THE SCHEME:

 Loan in the form of Term Loan is provided to the loan seeker.

 Only term loan is available under this scheme.
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3.3.1.5 QUANTUM OF LOAN:

RURAL SEMI URBAN URBAN METRO & PORT TOWN

Rs. 5 Lac Rs. 25 Lac Rs. 50 Lac Rs. 100 Lac

 However, the loan amount is determined on the basis of financial viability and income / repayment
capacity of the professional concerned.
 Loan amount mentioned above shall be based on the location of the property and not category of the
Branch.

3.3.1.6 MARGIN TO BE KEPT:

 Uniform margin of 35% on cost of construction/purchase consideration [the agreement value

inclusive of stamp duty/ registration, etc...]
 40 % for furniture and fixtures etc. [Only if office premises is acquired under the scheme]

3.3.1.7 RATE OF INTEREST:

 Floating rate -linked to the MCLR Rate. (w.e.f. 1st April 2016) [Fixed rate option is not available]

3.3.1.8 REPAYMENT:

 The loan is repayable in EMI, in maximum period of 10 years, including initial repayment holiday of
up to 12 months.
 Repayment capacity is arrived at based on DSCR, irrespective of loan amount.
 Where a ready-built office premise is purchased, the repayment holiday is restricted to 2 months
only for furnishing purposes, if necessary.

3.3.1.9 PROCESSING CHARGES:

 0.75 % of loan amount subject to a minimum of Rs.5000/- +Tax

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3.3.2 CORP CA/CS

3.3.2.1 INTRODUCTION:

The Bank has entered into MOU with The Institute of Chartered Accountants of India for garnering
business through IT products and also other products. Therefore, "Corp CA", a variant of Corp Professional
Scheme has been introduced to cater to the entire professional needs of Chartered Accountants.

A Company Secretary is an integral part of corporate governance and touches the life of Corporate
and Individuals directly or indirectly in one or the other way. Company Secretary, being a practising
professional, requires financial assistance to provide his various professional services. In order to cater to all
the professional needs, it is decided to introduce "Corp CS" a premium product as a variant of Corp
Professional Scheme, specially designed for Company Secretaries.

3.3.2.2 ELIGIBILITY:

 In case of Individual /proprietorship, the age of the individual /proprietor shall not exceed 65 years.
[where age of the applicant/proprietor is above 65 years, such case shall be considered on case to
case basis based on the merits of the case ]
 The applicants/firms/partners name shall not appear in the RBI defaulter‘s list/ CICs report.
 In case of Firm, all partners shall join as co applicants.
 The members/firms should not have been subjected to disciplinary action by the Institute. The
borrower's name shall appear in the list of members of the Institute.

3.3.2.3 PURPOSE:

 To part finance the cost of acquisition of new office premises, partly or fully constructed for the
purpose of occupation of business/profession of the firm. OR to part finance the cost of acquisition
of ready built office premises for the purpose of occupation of business/profession of the firm. and
/or
 To part finance the cost of construction of office premises for the purpose of profession of the firm
(where the land is already acquired by the firm/partners.)
 To finance a part of the cost of land & construction thereon for constructing office premises for the
purpose of profession of the firm.

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  Finance a part of the cost of purchase of furniture & fixture, fittings of office
equipment/computers/other accessories which are required for the purpose of professional activities
etc.
 To finance a part of working capital for running the profession and /or financing receivable and
other current assets.

3.3.2.4 NATURE OF THE LOAN FACILITY PROVIDED UNDER THE SCHEME:

 Demand /Term Loan for the purpose of acquisition of fixed assets for the purpose of profession.
 Cash Credit/Overdraft for working capital requirements.

3.3.2.5 QUANTUM OF LOAN:

 Applicable for fresher:

OTHER
METRO URBAN CENTERS
(i) Maximum eligibility Rs. 20 Lac Rs. 15 Lac Rs. 10 Lac
Out of For office premises Rs. 15 Lac Rs. 12 Lac Rs. 8 Lac
which For furnishing and other asset Rs. 5 Lac Rs. 3 Lac Rs. 2 Lac
(ii) For working capital requirement Rs. 2 Lac Rs. 1 Lac Rs. 1 Lac

 Applicable for existing firms (having practice for 3 years and above):
OTHER
METRO URBAN CENTERS
(i) Maximum eligibility Rs. 30 Lac Rs. 20 Lac Rs. 15 Lac
Out of For office premises Rs. 20 Lac Rs. 15 Lac Rs. 12 Lac
which For furnishing and other asset Rs. 10 Lac Rs. 5 Lac Rs. 3 Lac
(ii) For working capital requirement Rs. 2 Lac Rs. 1 Lac Rs. 1 Lac

 Applicable for those having gross annual income above 10 Lacs:

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 OTHER
METRO URBAN CENTERS
(i) Maximum eligibility Rs. 125 Lac Rs. 65 Lac Rs. 30 Lac
Out of For office premises Rs. 100 Lac Rs. 50 Lac Rs. 25 Lac
which For furnishing and other asset Rs. 25 Lac Rs. 15 Lac Rs. 5 Lac
(ii) For working capital requirement NEED BASED*

NOTE (*): Working capital shall be need based and is arrived at based on cash flow statement with
margin of 25% on such requirement.

3.3.2.6 MARGIN TO BE KEPT:

 For Term Loan/Demand Loan:

Uniform margin of 20% on cost of construction/purchase consideration [the agreement value
inclusive of stamp duty/ registration, etc.]
20 % for furniture and fixtures/furnishing /other assets etc.
 For working Capital:
25% for Book Debts/Receivables for cash credit OR clean overdraft.
If loan is for purchase of site and construction of office premises, value of the land shall not
exceed 50% of the project cost.

3.3.2.7 RATE OF INTEREST:

 Rate of interest is offered at floating rate - linked to the MCLR Rate and subject to revision from
time to time. (w.e.f. 1st April 2016)
 Before April 2016, floating rate was linked to the base rate.
 Fixed rate option is not available.

3.3.2.8 REPAYMENT:

 Term Loan shall be repayable in EMI/PMI/ or any other mode, in a maximum period of 10 years,
including initial repayment holiday of upto 18 to 24 months.
 Demand Loan shall be repayable in EMI/PMI/ or any other mode, in maximum repayment period of
3 years, including initial repayment holiday of 6 months.

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  Repayment period shall commence from the date of commercial operations or after completion of
initial repayment holiday or as per the terms of sanction.
 No initial repayment holiday is permitted for running account facility. Monthly interest debited shall
be promptly serviced.

3.3.2.9 PROCESSING CHARGES:

 Term /Demand Loan: 0.25% of loan amount subject to a minimum of Rs.5000/- +Tax
 Running a/c : 0.25% of loan amount subject to a minimum of Rs.5000/- +Tax to be collected
on sanction and at the time of every renewal.

3.3.3 CORP DOCTOR PLUS

3.3.3.1 INTRODUCTION:

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As a part of our contribution towards providing better health care and with a view to enabling Medical
Practitioners to equip their clinics with the state-of- the-art medical technology, the Bank formulated a
scheme called CORP DOCTOR PLUS.

3.3.3.2 ELIGIBILITY:

 Any Registered Medical Practitioner /Physiotherapist, in the age group of 25 to 60 years with a
minimum experience of 12 months.
 Loan for new Doctor/s may also be considered on a case to case basis, based on the merits of the
case, subject to approval from Zonal Office.
 Close relatives may join as co- applicant/s if they are also Doctors.
 Repayment period shall not exceed 70 years of age of the applicant unless co-applicant has
independent income to service the loan.
 Two or more registered medical practitioners jointly OR a Firm managed by Doctors.
 A Company owned by at least upto 50% by Doctors.
 Hospitals which are being run/managed by Trusts / Companies/ Institutions, where the ownership
is at least up to 50% with Doctors.
 Professionals managing Medical Diagnostic Centres & Testing Labs.

3.3.3.3 PURPOSE:

 Loan is for purchase of Brand new Electro Medical & other sophisticated equipment including OT
equipment, Air conditioners, Generators, Ambulance, Refrigerators, Personal Computers and
accessories with related software and UPS etc. (If loan is sought for Ambulance alone, the same
may be considered under Corp Vehicle Scheme)
 In the case of setting up of clinics, purchase of furniture & fixtures, furnishing, Air conditioning,
Electrification may also be financed.
 Purchase/installation of Lift/Elevator, Solar water heating system, Solar Electrification system, Wind
Mill Generator etc., may also be considered.
 Loan under the scheme may also be considered for purchase of ready built premises for
hospital/clinic OR construction of clinic/hospital in own site OR purchase of site & construction of
hospital/clinic thereon.
 Where loan is for purchase of site and construction of hospital/clinic, value of the land shall not
exceed 50% of the project cost.
 In case of purchase of ready built property for Hospital/Clinic, age of the property shall not exceed
20 years.

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3.3.3.4 QUANTUM OF LOAN:

 Maximum of Rs.5 crore. However, for Medical equipment: Maximum of Rs.2.50 crore.
 For Physiotherapist, maximum loan for purchase of physiotherapy equipment is restricted to Rs.50
lacs.
 Where composite loan is sought for purchase of ready built premises for hospital/clinic OR
construction of hospital/clinic in own site OR purchase of land and construction of hospital/clinic
thereon , and also for purchase of Medical Equipment, in such cases, cost of medical equipment
shall not exceed 50% of total project cost.

3.3.3.5 MARGIN TO BE KEPT:

 For purchase / construction of Hospital/Clinic : 35%

 For purchase of Medical equipment‘s/Other items: 15%

3.3.3.6 RATE OF INTEREST:

 Floating rate – linked to the MCLR Rate. (w.e.f. 1st April 2016) [Fixed rate option is not available]

3.3.3.7 REPAYMENT:

 Where loan is for construction/purchase of Hospital/Clinic, repayment period may be upto a

maximum 10 years including initial repayment holiday, if any.
 Where the loan is for purchase of medical equipment‘s, repayment period shall be a maximum of 84
months in EMIs, including initial repayment holiday of 3 months depending on the durability and
useful life of the asset.
 EMI shall be revised at the time of annual review taking into account applicable interest rate, balance
outstanding [excluding over dues] in relation to remaining repayment tenor.

3.3.3.8 PROCESSING CHARGES:

 0.50% of the loan amount sanctioned subject to a minimum of Rs.1000/- +Tax

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 PART 2

RESEARCH

WORK

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 4. OBJECTIVES OF THE STUDY

 To study various tools for financing professionals used by the bank.

 To learn how professional take a loan and how they arrange for their financial needs.
 To think critically and solve professionals’ loan problems.
 To study the professional financing from every aspect.

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 5. LITERATURE REVIEW

1. Neuberger, D., & Räthke, S focused on professionals as a special group of microenterprises. It

explains their characteristics and financial relationships, using data from a survey conducted in
Germany in 2002. Consistent with the theory of asymmetric information and relationship lending, he
found that these firms maintain a small number of bank relationships, which increases in firm size
and age. They tend to choose multiple banking relationships to overcome credit rationing and finance
larger loans. Credit risk and the structure of the banking market do not seem to matter the
development of the professionals in the market.

2. Iroham, C. O., Okagbue, H. I., Ogunkoya, O. A., &Owolabi, J. D. (2017),. In this article, two sets
of questionnaires were administered to professionals and clients (commercial banks) on their
willingness to negotiate the professional fees charged by the Estate Values assuming that the
mortgage in valuation was financed by bank loan. A range of fees options were provided. Other
factors such as the business environment and mortgage valuation can influence the negotiated fees
when the data obtained from the survey data is analysed.

3. Markand (1979), in his book titled, “Social Priority Index of Public Sector Banks” evaluated the
performance of public sector banks. With the help of performance index consisting six quantitative
indicators such as branch expansion, priority sector credit, and wage cost, he concluded that the
priority sector financing was essential, and necessary. For better performance in this sector he
suggested that lending power should be delegated to the branch managers.

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 6. CASE STUDY

6.1 FINANCE

6.1.1 MEANING OF FINANCE:

Finance is the procurement of the funds from various sources, allocation and proper utilization of
that fund. Finance is the life blood of the economy of any country. Also finance can be termed as the
management of money and other valuables which can be easily converted into cash.

6.1.2 SOURCES OF FINANCE:

There are mainly two sources of finance in any of the business in the economy. They can be classified as:

(i) Owner’s fund

(ii) Borrower’s fund

6.1.2.1 OWNER’S FUND:

 Sale of assets
 Retained profits
 Reduction in the working capital

6.1.2.2 BORROWER’S FUND:

 Short term
o BOD ( Bank overdraft)
o Trade credit
 Medium term
o Hire purchase
o Leasing
o Medium term bank loan
 Long term
o Issue of shares
o Debentures
o Long term bank loans
o Unsecured loans

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6.2 PROFESSIONALS:

6.2.1 MEANING OF PROFESSIONALS:

A Professional is the member of any profession (E.g.: Doctor, CA, CS etc.) who earns his living through
practising that particular profession in which he/she is a member. The professionals have to practice under
the rules and the regulation of that profession headed by the association. (E.g.: ICAI for CA)

6.2.2 SOURCES OF FINANCE FOR PROFESSIONALS:

There can be many sources for finance available for the professionals or any other businessmen. But the
most reliable and the affordable source of finance can be considered as the commercial bank loans. As
discussed above the Corporation bank provides special schemes for financing the professionals.

 Corp professionals
 Corp Doctor Plus
 Corp CA/CS

All these loan facilities are provided to the eligible professionals who apply for the schemes. There
are different criteria for the different professionals to apply for loan and be eligible for the same. The
purpose of the loan is also to be seen before providing the loan to the applicant.

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6.3 PROJECT ANALYSIS:

Here a case of DR. ABC is taken to understand the whole procedure from loan application till the
disbursement at the end of the process. The doctor has applied for the loan in the bank with purpose of
purchasing the mobile interventional suite Zeihm Imaging, Germany. It has a cost of Rs. 121 Lac. He has
requested for the loan of Rs. 110 Lac under the DOCTOR PLUS SCHEME of the Corporation Bank.

Under this Doctor Plus Scheme, there is the rule of 15% margin for purchase of the equipment and
so from the loan amount sought by the applicant, the 15% (Rs. 18.15 Lac) of that amount applied for has to
be borne by the applicant.

It is the rule under the scheme that for the loan of the purchase of the equipment, minimum 15%
margin is mandatory and hence the loan was sanctioned for the remaining 85% amount of the loan i.e.
102.58 Lac is disbursed by the bank to the doctor.

The valuation of the property is to be done as that is to be taken as the security. The doctor has the
office and the valuation was done by the external valuers who measures the value of the property and then
gives the report and the proof of the visit he/she made to that property.

Also the external due diligence agency is empanelled with the bank and it does the due diligence
report and submits it to the bank. All these process take a long time and is also expensive to some extent.

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FORMALITIES TO BE FULFILLED BEFORE PASSING THE LOAN:

 Check on the KYC guidelines

KYC (Know your customer) is the platform on which the banking system operates to avoid the
risk and consequently the losses for opening an account in the bank.
The bank has prescribed the various norms under the KYC guidelines:
o Customer identification and customer profile
For the identification of the customer profile there should be proper documents
provided such as, if the customer is businessman, he should provide the business details and
the business related documents for proof of its existence.
o Correct address of the customer
Certain identity proof like electricity bill, municipal tax bill, etc are required for the
identification of the customer.
o Photograph of the customer
Passport size photograph is required.
o PAN/ GIR No./ Aadhar of the customer
PAN (Permanent account number), Adhar number are the documents which are
reliable and hence they are needed for the proof of the existence of the applicant person.

All these guidelines must be verified first before taking any decision regarding the loan disbursement.

 Due Diligence report

Credit investigation, Due Diligence and compilation of credit report are integral components of pre-
sanction appraisal of credit proposals. The Credit Report generated after conducting credit
investigation and Due Diligence exercise shall be the basis on which the bank will decide the
desirability of entertaining credit proposals received.

 Check on CIBIL score

CIBIL stands for the Credit Information Bureau (India) Ltd. The company collects and maintain the credit
records of the individual and the commercial entity also. The information on the website is gives by the
member banks of CIBIL.

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The CIBIL credit score is the three digit number which is the summary of your entire credit history. It is
prepared on the basis of the information provided by the CIR (Credit information report). The score
normally ranges from 300 to 900.

Where: 300 - High risk

900 - Low risk

-1 - The customer not in the database of CIBIL or having insufficient information.

 Factors affecting the CIBIL scores:

o Payment history
o Increased credit limit
o Unsecured loans
o Multiple loans and credit cards

 How to improve the CIBIL score:

o Never delay your payments
o Don’t max out your credit
o Mix your credit

 APPLICATION FORM CUM APPRAISAL FORM

The application form is to be filled by the applicant when applying for the loan. The bank prepares the
appraisal note in return for its own reference.

 PROJECTED FINANCIAL REPORTS OF THE YEARS

The year, till which the loan would be repaid, the projected financial statements should be obtained.
This information called the CMA data. It is used for the estimated calculation of the ratios and the
profitability of the company so as to decide upon the disbursement of the loan.

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 AUDITED FINANCIAL REPORTS AND IT RETURNS
The audited reports for the last 2 years from the date of application should be obtained. And also the
IT Returns of those years should be obtained for the verification. After all these verification the loan
can be disbursed by the bank.

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 7. RESEARCH METHODOLOGY

7.1 TYPE OF RESEARCH:

The research type used in this research work carried out for financing professionals are:

 Descriptive research

7.2 SAMPLING TECHNIQUE:

The data collected in this research is the secondary data. It is the case of the Corporation bank, which
lended loan to DR. ABC for purchasing the equipment useful for office development from Germany.

7.3 COLLECTION METHOD:

Convenient Random Sampling

7.4SOURCES OF DATA:

 Websites
 Published articles
 Renowned journals
 Official site of the Corporation bank
 Manuals provided by the bank

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 8. DATA ANALYSIS AND INTERPRETATION

Here the case is of DR. ABC which is mentioned above. He applied for the loan of 110 Lac and the amount
disbursed by the bank is 102.58 Lac and the balance is to be brought by the applicant.

8.1 COMPUTATION OF THE LOAN AMOUNT

The loan amount is calculated based on the two factors. The two instruments used for the calculation are:

 Repayment capacity
 DSCR (Debt service coverage ratio)

8.1.1 REPAYMENT CAPACITY

 FOR SALARIED CLASS:

Last 3 months salary slip / certificate, duly attested to be obtained. However, repayment capacity is
arrived at as per the latest salary slip / certificate.

 OTHER THAN SALARIED CLASS:

Last 3 years IT returns to be obtained to verify the consistency of income & regular filing of the
returns. The repayment capacity shall be arrived at as per the latest IT return. If variation in the
income is more than 25%, the average net income as per last 3 years IT returns shall be considered.

 OTHER THAN SALARIED CLASS (Where the borrower is not an IT Assessee i.e. income is less
than IT exemption limit):
Last 3 years P&L A/c and the B/S are to be obtained to verify the consistency of income. The
repayment capacity is to be arrived at as per the latest P&L A/c and the B/S.If variation in the income
is more than 25%, the average net income as per last 3 years P&L A/c and the B/S shall be
considered.

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RETAIL LOAN OF PROFESSIONAL ON THE BASIS OF EMI:

Profile : Professional

Nature of Proposal : CORP PROFESSIONAL-Floating

Purpose of loan : To purchase commercial office

Amount of Loan : 920000.00

Cost of Project : 1400000.00

Own Funds : 480000.00

Minimum Margin : 15.00%

Margin bought by the applicant : 34.00 %

Debt Equity Ratio : 1.92:1

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DEBT EQUITY RATIO:

For banks, the average debt/equity is higher, about 3:1. The debt/equity ratio is a leverage ratio that
represents what amount of debt and equity is being used to finance a company's assets.

Here is the debt-to-equity ratio formula:

Debt-to-Equity Ratio = Total Debt / Total Equity

Cost of project 1400000

Less: Amount of loan 920000 (Debt)

480000 (Equity)

So, Debt Equity Ratio = Debt / Equity

= 920000/480000

= 1.92: 1

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COMPUTATION OF ELIGIBLE LOAN AMOUNT BASED ON REPAYMENT CAPACITY:

Net annual income of the borrower : 1615000.00

Total cost of project : 1400000.00

Minimum margin to be brought in by the applicant : 15.00%

Permissible loan amount based on margin [A] : 1400000.00

Maximum permissible loan under the scheme [B] : 50000000.00

Loan amount sought by the Applicant [C] : 1200000.00

Permissible Loan amount based on Repayment capacity [D]*:1130500.00

Least Amount of A, B, C or D : 1130500.00

Maximum Permissible Repayment Period in months : 84

Note [*]: The amount 1130500 came from the calculation according to the rule of repayment capacity. [70%
of the net annual income if the income is above 10 Lac]

[1615000*70/100] = 1130500

Nowadays, banks mostly prefer DSCR method of calculation for determining the amount of the
loan even if the loan amount is less than 10 Lac. As the loan amount can be calculated more accurately under
this DSCR method.

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8.1.2 DSCR (DEBT SERVICE COVERAGE RATIO):

 ASSUMPTIONS UNDER THIS CASE:

1. Their income of the F.Y.2016-17 is Rs.135.76 Lac and the increase in income expected to be around
199.58 Lac and hence they are capable of repaying the loan amount borrowed.

2. Rate of interest applicable for DSCR is 12.00% per annum. And bank recommended rate of interest
11.55 % per annum. So DSCR will applicable for next 6 years.

3. Bank recommended repayment period 60 months so DSCR will better option for next 6 years.

8.1.2.1 Statement Showing Profitability and Net Cash Accruals:

As discussed about the case in the introduction about the DR. ABC seeking loan for the purchase
of machinery from Germany, now in order to arrive at the DCSR, the statement of profitability and the net
cash accruals is to be prepared.

Here in this table, the actual years the current years, while the Operating years are the projected years. The
projected years are used for the calculation of the DSCR as the DSCR is calculated on the projected financial
data.

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 ACTUALS OPERATING YEARS
2014- 2015- 2016- 2017- 2018- 2019- 2020- 2021-
PARTICULARS 15 16 17 18 19 20 21 22
Revenue/ Income
Gross Professional income 87.17 118.05 135.76 156.12 174.86 195.84 215.42 236.96
Less: Excise Duties - - - - - - - -
Net Professional income 87.17 118.05 135.76 156.12 174.86 195.84 215.42 236.96
Total revenue/ Income 87.17 118.05 135.76 156.12 174.86 195.84 215.42 236.96

Expenses
Medicine expenses 17.81 21.42 19.54 22.47 25.16 28.18 31.00 34.10
Employees expenses 9.79 15.69 16.64 19.14 21.44 24.01 26.41 29.05
Electricity expenses 4.53 5.19 6.50 7.48 8.38 9.38 10.32 11.35
Depreciation 12.60 12.32 37.33 31.95 27.36 23.43 20.08 17.22
Cost of goods sold 44.73 54.62 80.01 81.04 82.34 85.00 87.81 91.72

Gross profit 42.44 63.43 55.75 75.08 92.52 110.84 127.61 145.24
Administration expenses 12.55 12.58 17.00 19.55 21.89 24.52 26.97 29.67
Financial charges
Long/med. Term borrow - - 13.69 12.43 9.13 5.83 2.53 0.10
Equated installments 3.50 2.55 - - - - - -
Wkg. Capital borrow - - - - - - - -
Total financial charges 3.50 2.55 13.69 12.43 9.13 5.83 2.53 0.10
Total Cost of sales 60.78 69.75 110.70 113.02 113.36 115.35 117.31 121.49

Net profit before taxes 26.39 48.30 25.06 43.10 61.50 80.49 98.11 115.47
Tax on profit - - 5.77 11.18 16.70 22.40 27.68 32.89
Net profit after taxes 26.39 48.30 19.29 31.92 44.80 58.09 70.43 82.58
Depreciation added back 12.60 12.32 37.33 31.95 27.36 23.43 20.08 17.22
Net cash accruals 38.99 60.62 56.62 63.87 72.16 81.52 90.51 99.80

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 .1.2.2 STATEMENT SHOWING FINANCIAL RATIOS:

ACTUALS OPERATING YEARS

2014- 2015- 2016- 2017- 2018- 2019- 2020- 2021-
PARTICULARS 15 16 17 18 19 20 21 22
Profit percentages to net
sales
Gross profit 42.44 63.43 55.75 75.08 92.52 110.84 127.61 145.24
% of GP to net sales 48.69 53.73 41.07 48.09 52.91 56.60 59.24 61.29
P.B.I.D.T 42.49 63.17 76.08 87.48 97.99 109.75 120.72 132.79
% of PBIDT to net sales 48.74 53.51 56.04 56.03 56.04 56.04 56.04 56.04
Net profit before taxes 26.39 48.30 25.06 43.10 61.50 80.49 98.11 115.47
% of NPBT to net sales 30.27 40.91 18.46 27.61 35.17 41.10 45.54 48.73
Net profit after taxes 26.39 48.30 19.29 31.92 44.80 58.09 70.43 82.58
% of NPAT to net sales 30.27 40.91 14.21 20.45 25.62 29.66 32.69 34.85
Net cash accruals 38.99 60.62 56.62 63.87 72.16 81.52 90.51 99.80
% of cash accr to net sales 44.73 51.35 41.71 40.91 41.27 41.63 42.02 42.12

Debt service coverage

ratio (DSCR)
Funds available to debts
NPAT 26.39 48.30 19.29 31.92 44.80 58.09 70.43 82.58
Depreciation 12.60 12.32 37.33 31.95 27.36 23.43 20.08 17.22
Interest on loan 13.69 12.43 9.13 5.83 2.53 0.10
Interest on Eq. Install 3.50 2.55
Total(A) 42.49 63.17 70.31 76.30 81.29 87.35 93.04 99.90
Debt service obligations
Repayment of borrow 22.48 29.06 29.06 29.06 29.06 6.58
Repayment of Eq. Install
Interest on loan 13.69 12.43 9.13 5.83 2.53 0.10
Interest on Eq. Install 3.50 2.55
Total(B) 3.50 2.55 36.17 41.49 38.19 34.89 31.59 6.68

DSCR [ A/ B] 12.14 24.77 1.94 1.84 2.13 2.50 2.95 14.96

Average DSCR 4.38

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Graphical presentation of DSCR:

DSCR (Debt service coverage ratio)

14.96

2.95
2.13 2.5
1.94 1.84

2016-17 2017-18 2018-19 2019-20 2020-21 2021-22

DSCR

Interpretation:

The DSCR according to the bank norms should be 1.50:1. If it is less than the prescribed amount, the loan
amount should be proportionately reduced. Here it can be seen that every year, the DSCR id above the rate
decided by the bank (i.e. 1.94, 1.84, 2.13, 2.5, 2.95, 14.96). According to the bank norms, the yearly DSCR
must be more than 1.10:1. Here, this norm is satisfied as every year the DSCR is above the decided bank
norms.

So the amount of the loan should be decided on the basis of the DSCR method only. Also the bank
considers the average DSCR in the calculation of the loan amount. Here the average DSCR is 4.38 which
will be applicable for the calculation.

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8.3 REPAYMENT CHART (AMORTIZATION SCHEDULE):

Loan taker: DR. ABC

Loan giver: Corporation bank

Nature of loan: Term loan

Nature of proposal: Corp doctor plus

Loan amount: 102.85 Lac

Date of sanction: 13/06/2016

Repayment term (in years): 5 years

Repayment instalments : 60 months

Interest rate (MCLR+spread): 11.55%

EMI: 2, 26,453

Average DSCR (Debt service coverage ratio): 4.38

The Repayment schedule is to be made in order to know about the timing and the installments of the
loan to be repaid. Here the interest and the principal amount are bifurcated and hence the whole schedule of
repayment along with the payment of interest and the principal amount can be known. This table of
repayment schedule is also known as the amortization schedule.

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Repayment schedule (Amortization schedule):

Opening Principal Closing

Months amount EMI Interest repayment amount
2016-17
1
2
3
4
5
6
7 10285000 226453 98993 127460 10157540
8 10157540 226453 97766 128687 10028853
9 10028853 226453 96528 129925 9898928
10 9898928 226453 95277 131176 9767752
11 9767752 226453 94015 132438 9635314
12 9635314 226453 92740 133713 9501601

2017-18
1 9501601 226453 91453 135000 9366601
2 9366601 226453 90154 136299 9230302
3 9230302 226453 88842 137611 9092691
4 9092691 226453 87517 138936 8953755
5 8953755 226453 86180 140273 8813482
6 8813482 226453 84830 141623 8671859
7 8671859 226453 83467 142986 8528873
8 8528873 226453 82090 144363 8384510
9 8384510 226453 80701 145752 8238758
10 8238758 226453 79298 147155 8091603
11 8091603 226453 77882 148571 7943032
12 7943032 226453 76452 150001 7793031

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2018-19
1 7793031 226453 75008 151445 7641586
2 7641586 226453 73550 152903 7488683
3 7488683 226453 72079 154374 7334309
4 7334309 226453 70593 155860 7178449
5 7178449 226453 69093 157360 7021089
6 7021089 226453 67578 158875 6862214
7 6862214 226453 66049 160404 6701810
8 6701810 226453 64505 161948 6539862
9 6539862 226453 62946 163507 6376355
10 6376355 226453 61372 165081 6211274
11 6211274 226453 59784 166669 6044605
12 6044605 226453 58179 168274 5876331

2019-20
1 5876331 226453 56560 169893 5706438
2 5706438 226453 54925 171528 5534910
3 5534910 226453 53274 173179 5361731
4 5361731 226453 51607 174846 5186885
5 5186885 226453 49924 176529 5010356
6 5010356 226453 48225 178228 4832128
7 4832128 226453 46509 179944 4652184
8 4652184 226453 44777 181676 4470508
9 4470508 226453 43029 183424 4287084
10 4287084 226453 41263 185190 4101894
11 4101894 226453 39481 186972 3914922
12 3914922 226453 37681 188772 3726150

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2020-21
1 3726150 226453 35864 190589 3535561
2 3535561 226453 34030 192423 3343138
3 3343138 226453 32178 194275 3148863
4 3148863 226453 30308 196145 2952718
5 2952718 226453 28420 198033 2754685
6 2754685 226453 26514 199939 2554746
7 2554746 226453 24589 201864 2352882
8 2352882 226453 22647 203806 2149076
9 2149076 226453 20685 205768 1943308
10 1943308 226453 18704 207749 1735559
11 1735559 226453 16705 209748 1525811
12 1525811 226453 14686 211767 1314044

2021-22
1 1314044 226453 12648 213805 1100239
2 1100239 226453 10590 215863 884376
3 884376 226453 8512 217941 666435
4 666435 226453 6414 220039 446396
5 446396 226453 4297 222156 224240
6 224240 226453 2158 224240 -
(224295)

Note: Bank calculates the repayment chart in the software. Here it is calculated manually so there may be
slight variation in the calculation.

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 9. FINDINGS

 The procedure for the loan is time consuming for both the applicant and the bank.
 Fixed interest rate option is not available and hence the floating rate of interest is applicable and its
calculation is not so simple for the loan seeker.
 The documents to be given to bank by the applicant are in large numbers, so it may be cumbersome
collecting every document and submit it to the bank.
 The procedure of the loan is very long and hence there are chances of switching of the loan seekers to
the other banks.

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 10. LIMITATIONS OF THE STUDY

 The interest rate is determined on the basis of the MCLR (Marginal cost of funds based lending rate)
and it depends on the monetary policy of RBI. So it is difficult to forecast the interest rate trend in the
upcoming years.
 The research was carried out for the 37 days and hence this time period is not enough to do depth
study on the topic.

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 11. CONCLUSION

At the end it can be concluded that there is very significant role of commercial bank in the financing the
professionals. The role of the credit department in the commercial bank for providing the loan to the various
loan seekers is very essential.

Commercial banks help in providing the facility of the loan to the person who becomes eligible
for the loan. The Corporation bank is one of the commercial bank which provides great service to the
society. Also the bank is reliable for the easy transfer of the funds.

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 12. SUGGESTIONS:

 There should be easy procedure for the loan procurement and hence it will generate more and more
customers for the bank.
 The loan seekers must be provided the timely and accurate services.
 There should be more usage of the online applications and the other instruments which makes the
work of verification of the documents accurate and speedy.

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 13. REFERENCES

 REFERENCES:

1. Doris Neuberger, Small Business Economics (2009), Volume 32, Pg. No. 207-299, Retrieved from:
https://www.researchgate.net/profile/Doris_Neuberger/publication/23779274_Microenterprises_and_
Multiple_Bank_Relationships_The_Case_of_Professionals/links/00b495297a077bafe4

2. Iroham, C. O., Okagbue, H. I., Ogunkoya, O. A., &Owolabi, J. D.Ikeja, Lagos State, Nigeria,
Data in brief (2017), Volume 12, Pg. No. 447-452, Retrieved from:
http://www.sciencedirect.com/science/article/pii/S2352340917301798

3. Markand (1979), in his book titled, “Social Priority Index of Public Sector Banks”, Retrieved
from:
http://shodhganga.inflibnet.ac.in/bitstream/10603/4270/9/09_chapter%202.pdf

 WEB REFERENCES:

https://business.mapsofindia.com/finance-commission/institutions/commercial-banks.html

https://www.quora.com/When-did-banks-first-come-into-existence

https://www.google.co.in/search?q=indian+banking+structure&rlz=1C1AVUC_enIN767IN767&source=ln
ms&sa=X&ved=0ahUKEwj0nvTzgtXbAhXJQo8KHeR_CMAQ_AUICSgA&biw=1280&bih=635&dpr=1.2
5

https://www.jagranjosh.com/articles/history-of-indian-banking-system-an-overview-1495540364-1

https://corpbank.com/history

https://www.google.co.in/search?q=number+of+employees+in+corporation+bank&rlz=1C1AVUC_enIN767
IN767&oq=number+of+employees+in+cor&aqs=chrome.1.69i57j0l5.26630j0j8&sourceid=chrome&ie=UT
F-8
https://www.mbaskool.com/brandguide/banking-and-financial-services/787-corporation-bank.html
http://kalyan-city.blogspot.com/2011/11/what-is-finance-meaning-definition.html
P a g e | 57
http://www.dineshbakshi.com/igcse-business-studies/financial-information-and-decision/revision-notes/414-
sources-of-finance

https://www.paisabazaar.com/credit-score/factors-that-affect-your-credit-score/

Manuals and the data provided by the bank.

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 ANNEXURE 1

SEVERAL TERMINOLOGIES USED IN THE RESEARCH:

 EMI:
An Equated Monthly Instalment (EMI) is usually a fixed amount of money that you need to pay
your bank or lender every month as repayment of a loan taken, until your loan is totally repaid. It is
essentially made up of two parts, the principal amount and the interest on the principal amount,
divided across each month of the loan tenure.

 MCLR (Marginal cost of funds based lending rate):

Marginal cost of funds based lending rate (MCLR) is the minimum interest rate, below which the
bank is not permitted to lend, barring a few exceptional cases as permitted by the Reserve bank of
India (RBI). [W.e.f April 2016].

 DSCR (Debt Service Coverage Ratio):

In corporate finance, DSCR refers to the amount of cash flow available to meet annual interest and
principal payments in debt. The bank calculates DSCR in order to know whether the borrower can
repay the loan amount with the future increase in the income against the loan provided.

 Floating interest rate:

The floating interest rate is the rate of interest derived after adding spread to the MCLR [w.e.f April
2016].
Interest rate= MCLR + applicable spread

 Margin:
The certain predefined amount of the loan amount is to be brought by the borrower, which is known
as the margin of the loan amount.

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ANNEXURE 2

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