INDUSTRY PROFILE

Indian Banking Industry

The banking sector is the lifeline of any modern economy. It is one of the important
Financial pillars of the financial sector, which plays a vital role in the functioning of
an economy. It is very important for economic development of a country that its
financing requirements of trade, industry and agriculture are met with higher degree
of commitment and responsibility. Thus, the development of a country is integrally
linked with the development of banking. In a modern economy, banks are to be
considered not as dealers in money but as the leaders of development. They play an
important role in the mobilization of deposits and disbursement of credit to various
sectors of the economy
.
The banking system reflects the economic health of the country. The strength of an
Economy depends on the strength and efficiency of the financial system, which in turn
depends on a sound and solvent banking system. A sound banking system efficiently
mobilized savings in productive sectors and a solvent banking system ensures that the
bank is capable of meeting its obligation to the depositors

Scope of Banking Industry in future:

Indian Economy is on the brink of a major transformation due to several policy

initiatives that are likely to be implemented soon. Positive business sentiments,
controlled inflation and increased consumer confidence are likely to lift the economic
growth of the country. Increased spending on infrastructure, speedy implementation of
projects and reforms will further add to the growth. All these factors indicates that
Indian Banking Sector will also witness a major growth as the rapidly growing business
would turn to banks to fulfil their credit needs.

Also advancement in technology has brought mobile and internet banking to the fore.
Banks today are focusing on providing quality service to their customers and upgrading
their technology in order to serve their customers in a better way.
Recent measures by the bank

The government and the Reserve Bank of India, the banking regulator, have undertaken
several measures to strengthen the Indian banking sector. Here are some of the steps as
listed by the India Brand Equity Foundation.

• In July 2016, the government allocated Rs 22,915 crore ($3.4 billion) as capital
infusion in 13 public sector banks, which is expected to improve their liquidity and
lending operations, and shore up economic growth in the country.

• RBI has released the Vision 2018 document, aimed at encouraging greater use of
electronic payments by all sections of society by bringing down paper-based
transactions, increasing the usage of digital channels, and boosting the customer base
for mobile banking.

• RBI has issued guidelines for priority sector lending certificates (PSLCs), according
to which banks can issue four different kinds of PSLCs—those for the shortfall in
agriculture lending, lending to small and marginal farmers, lending to micro enterprises
and for overall lending targets – to meet their priority sector lending targets.

• RBI has allowed additional reserves to be part of tier-1 or core capital of banks, such
as revaluation reserves linked to property holdings, foreign currency translation
reserves and deferred tax assets, which is expected to shore up the capital of state-run
banks and privately owned banks by up to Rs 35,000 crore ($5.14 billion) and Rs 5,000
crore ($734 million) respectively.

• Scheduled commercial banks can grant non-fund based facilities including partial
credit enhancement (PEC), to those customers, who do not avail any fund based facility
from any bank in India.

• To reduce the burden of loan repayment on farmers, a provision of Rs 15,000 crore ($

2.2 billion) has been made in the Union Budget 2016-17 towards interest subvention.

• Under Pradhan Mantri Jan Dhan Yojna (PMJDY), 250.5 million accounts have been
opened and 192.2 million RuPay debit cards have been issued as of October 12, 2016.
 These new accounts have mustered deposits worth almost Rs 44,480 crore ($ 6.67
billion).

• The Government of India is looking to set up a special fund, as a part of National

Investment and Infrastructure Fund (NIIF), to deal with stressed assets of banks. The
special fund will potentially take over assets which are viable but don’t have additional
fresh equity from promoters coming in to complete the project.

• RBI plans to soon come out with guidelines, such as common risk-based know-your-
customer (KYC) norms, to reinforce protection for consumers, especially since a large
number of Indians have now been financially included post the government’s massive
drive to open a bank account for each household.

• To provide relief to the state electricity distribution companies, Government of India

has proposed to their lenders that 75 per cent of their loans be converted to state
government bonds in two phases by March 2017. This will help several banks,
especially public sector banks, to offload credit to state electricity distribution
companies from their loan book, thereby improving their asset quality.

• Government of India aims to extend insurance, pension and credit facilities to those
excluded from these benefits under PMJDY

The Reserve Bank of India plans to soon come out with guidelines such as common
risks based know your customer norms to reinforce protection for consumers
Major Players in Indian Banking Sector:
 HDFC Bank
 ICICI Bank Limited
 State Bank of India
 Axis Bank
 Kotak Mahindra Bank
 Indusind Bank
 Bank of Baroda
 Yes Bank
 Punjab National Bank
 Canara Bank
Evolution of Banking in India:

Present day saving money in India could be followed back to the foundation of Bank
of Bengal (Jan 2, 1809), the primary joint-stock bank supported by Government of
Bengal and administered by the regal sanction of the British India Government. It was
trailed by foundation of Bank of Bombay (Apr 15, 1840) and Bank of Madras (Jul 1,
1843). These three banks, known as the administration banks, denoted the start of the
constrained obligation and joint stock managing an account in India and were likewise
vested with the privilege of note issue.

In 1921, the three administration banks were converged to frame the Imperial Bank
of India, which had numerous parts and duties and that worked as a business bank, a
financier to the legislature and a banker’s bank. Following the foundation of the
Reserve Bank of India (RBI) in 1935, the focal saving money duties that the Imperial
Bank of India was doing arrived at an end, driving it to wind up plainly even more a
business bank. At the season of freedom of India, the capital and stores of the Imperial
Bank remained at Rs. 118 million, stores at Rs. 2751 million and advances at Rs. 723
million and a system of 172 branches and 200 sub workplaces spread everywhere
throughout the nation.

In 1951, in the setting of focal arranging and the need to stretch out bank credit to the
country zones, the Government constituted All India Rural Credit Survey Committee,
which prescribed the production of a state supported foundation that will stretch out
managing account administrations to the rustic regions. Following this, by a
demonstration of parliament gone in May 1955, State Bank of India was built up in
Jul, 1955. In 1959, State Bank of India assumed control over the eight previous state-
related banks as its auxiliaries. To additionally quicken the credit to stream to the
provincial ranges and the key segments of the economy, for example, farming, little
scale industry and so forth., that are of national significance, Social Control over
banks was declared in 1967 and a National Credit Council was set up in 1968 to survey
the interest for credit by these areas and decide asset portions. The time of 1960s
likewise saw critical solidification in the Indian Saving money industry with more
than 500 banks working in the 1950s lessened to 89 by 1969.
For the Indian saving money industry, Jul 19, 1969, was a point of interest day, on
which nationalization of 14 noteworthy banks was declared that each had at least Rs
500 million or more of total stores. In 1980, eight more banks were nationalized. In
1976, the Regional Rural Banks Act appeared, that permitted the opening of specific
local provincial banks to solely take into account the credit prerequisites in the country
regions. These banks were set up together by the focal government, business banks
and the individual neighborhood legislatures of the states in which these are found.

The period following nationalization was portrayed by quick ascent in banks business
and aided in expanding national investment funds. Investment funds rate in the nation
jumped from 10-12% in the two many years of 1950-70 to around 25 % post
nationalization period. Total stores which enlisted yearly development in the scope of
10% to 12% in the 1960s rose to more than 20% in the 1980s. Development of bank
credit expanded from a normal yearly development of 13% in the 1960s to around
19% in the 1980s. Branch arranges extended altogether prompting increment in the
keeping money scope.

Indian saving money, which experienced quick development following the

nationalization, started to confront weights on resource quality by the 1980s. At the
same time, the saving money world wherever was outfitting towards new prudential
standards and operational models relating to capital sufficiency, bookkeeping and
hazard administration, straightforwardness and exposure and so forth. In the mid
1990s, India set out on a goal-oriented monetary change program in which the
managing an account division changes shaped a noteworthy part. The Committee on
Financial System (1991) all the more famously known as the Narasimham Committee
arranged the blue print of the changes. A couple of the real parts of change included:

 Moving towards universal standards in wage acknowledgment and

provisioning and other related parts of bookkeeping,
 Liberalization of passage and leave standards prompting the foundation of a
few New Private Sector Banks and passage of various new Foreign Banks,
 Freeing of store and loaning rates (aside from the sparing store rate),
  Allowing Public Sector Banks access to open value markets for raising capital
and weakening the administration stake,
 Greater straightforwardness and revelation measures in money related
detailing,
 Suitable reception of Basel Accord on capital ampleness,
 Introduction of innovation in saving money operations and so on.

The changes prompted significant changes in the approach of the banks

towards angles, for example, rivalry, gainfulness and efficiency and the need
and extension for harmonization of worldwide operational benchmarks and
appropriation of best practices. More prominent concentration was given to
determining efficiencies by change in execution and legitimization of assets
and more prominent dependence on innovation incorporating advancing bigly
computerization of saving money operations and presentation of electronic
managing an account.

The changes prompted huge changes in the quality and maintainability of Indian
managing an account. Notwithstanding noteworthy development in business, Indian
banks experienced sharp development in gainfulness, more prominent accentuation
on prudential standards with higher provisioning levels, decrease in the non-
performing resources and surge in capital sufficiency. All bank branches saw sharp
development in execution and gainfulness. Indian keeping money industry is get
ready for smooth move towards more serious rivalry emerging from encourage
progression of managing an account division that was conceived in the year 2009 as
a piece of the adherence to advancement of the monetary administrations industry.
 Structure of Indian Banking Industry:

1. Reserve Bank of India:

The country had no central bank prior to the establishment of the RBI. The
RBI is the supreme monetary and banking authority in the country and
controls the banking system in India. It is called the Reserve Bank‟ as it keeps
the reserves of all commercial banks.

2. Commercial Banks:
A commercial bank is a financial institution that provides services, such as
accepting deposits, giving business loans and auto loans, mortgage lending,
and basic investment products like savings accounts and certificates of
deposit.

3. Regional Rural Banks:

 The Regional Rural Banks (RRBs) the newest form of banks, came into existence
in the middle of 1970s (sponsored by individual nationalised commercial banks)
with the objective of developing rural economy by providing credit and deposit
facilities for agriculture and other productive activities of all kinds in rural
areas. The emphasis is on providing such facilities to small and marginal
farmers, agricultural labourers, rural artisans and other small entrepreneurs in
rural areas.

4. Cooperative Banks:
These banks are organized under the provisions of the Cooperative Credit
Societies Act of the states. The major beneficiary of the Cooperative Banking is
the agricultural sector in particular and the rural sector in general. The cooperative
credit institutions operating in the country are mainly of two kinds:
agricultural (dominant) and non-agricultural. There are two separate cooperative
agencies for the provision of agricultural credit: one for short and medium-term
credit, and the other for long-term credit. The former has three tier and federal
structure.

KOTAK MAHINDRA BANK LIMITED

Kotak Mahindra Bank is an Indian private sector bank headquartered in Mumbai. In
February 2003, Reserve Bank of India gave license to Kotak Mahindra Finance Ltd to
carry on banking business. It offers a wide range of Banking and Financial Products to
corporate and retail customers through a variety of delivery channels and its
subsidiaries.
Date Of Establishment 21-11-1985
 Revenue Rs. 27,974.52 crore (US$4.3 billion)

Products Deposit accounts Loans, Investment services

Corporate Address 27 B K C, C 27, G Block, Bandra Kurla

Complex Bandra (E) Mumbai-400051,
Maharashtra
www.kotak.com

Business Operation Bank- Private

Total Income- Rs.3,431.12 crore
Financials (US$530 million)(2016)

Net Profit- Rs. 2090 crore (Year Ending

March 2016)

Company Secretary Bina Chandarana

Bankers No Bankers Details in A.R

Auditors SR Batliboi & Co LLP

 In 2014, Kotak Bank acquired ING Vysya Bank in a deal valued at ₹15,000 crore
(US$2.3 billion). With the merger, total employment will jump to almost 40,000, and
the count of branches reached 1261.Post the merger, ING Group which controlled ING
Vysya Bank, will own a 7% share in Kotak Mahindra Bank
CORPORATE IDENTITY

The symbol of the infinite Ka reflects our global Indian personality. The Ka is uniquely Indian
while its curve forms the infinity sign, which is universal. One of the basic tenets of economists
is that man's needs are unlimited. The infinite Ka symbolises that we have infinite number of
ways to meet those needs.
The symbol of Kotak Mahindra Group is the 'Ka', of distinctly Indian origin; while its curves
form the universal 'infinity' sign, thus reflecting our uniquely global Indian personality.

Awards

ICAI Award – Excellence in Financial Reporting under Category 1 – Banking Sector for the
year ending 31st March, 2010

Asiamoney – Best Local Cash Management Bank 2010

IDG India – Kotak won the CIO 100 'The Agile 100' award 2010

IDRBT

 Banking Technology Excellence Awards Best Bank Award in IT Framework and

Governance Among Other Banks' – 2009
 Banking Technology Award for IT Governance and Value Delivery, 2008

IR Global Rankings – Best Corporate Governance Practices – Ranked among the top 5
companies in Asia Pacific, 2009

Finance Asia – Best Private Bank in India, for Wealth Management business, 2009

Kotak Royal Signature Credit Card – Was chosen 'Product of the Year' in a survey
conducted by Nielsen in 2009

Vision of the Company:

To be the most trusted Global Indian Financial Services mark and the most favored
money related administrations boss with concentrate on making esteem.

Mission of the Company:

1. Promoting and supporting education and other interventions for the under
privileged section of the society.
2. Encouraging employee volunteering.
3. Supporting NGO‟s and other institutions with financial support and other required
resources to collectively deliver community initiatives.

Businesses of Kotak Group:

 Kotak Group offers a wide range of financial services through its subsidiaries which
are as follows:

1. Consumer Banking (Kotak Mahindra Bank Limited):

 Under Consumer Banking Kotak Mahindra Bank provides bouquet of products
and services like innovative digital solutions, savings account, investment
services, transactional services and loan products.

 Provides liabilities and asset products to retail customers and small business.

 To the business community, the bank provides comprehensive business
solutions such as current account, trade services, cash management services
and credit facilities.

 For Non-Residents, it provides investment and insurance solutions,


2. Commercial Banking (Kotak Mahindra Bank Limited):
 Under Commercial Banking Kotak provides range of purchase and operations
of commercial vehicles and construction equipment and contributes to India‟s
development.

 Meets a substantial portion of the priority sector lending requirement
including agricultural and tractor financing.
 3. Corporate Banking (Kotak Mahindra Bank Limited):
 Caters to the diverse needs of major Indian corporate bodies, financial
institutions, public sector undertakings, multinational companies, mid-market
companies and realty businesses across nine key locations in India.

 Comprehensive portfolio of products and services like working capital
financing, medium term finance, export credit, transaction banking, custody
services, debt capital markets, forex and treasury services.


4. Wealth Management (Kotak Mahindra Bank Limited):
Kotak is one of the largest and most respected wealth management businesses in
India providing customised financial solutions to high net worth families (covers
40% of India‟s top 100 families in Forbes India Rich List 2015).

5. Car Loans (Kotak Mahindra Prime Limited):

 It offers car finance options in the form of loans and lease for the entire range
of passenger cars and multi-utility vehicles.

 Provides complete finance solutions through single window to car dealers for
their working capital & infrastructure set up requirements in the form of
inventory funding and term loans.


6. Life Insurance (Kotak Mahindra Old Mutual Life Insurance Limited):
 Kotak is among the early private life insurers to break even. The company has
robust management practices and customer-centric philosophy. Emphasis is on
fulfilling the need of the customer through a wide range of innovative insurance
products.

 Company focuses on enhancing value proposition of customers through a
meaningful product suite that combines protection and long-term savings,
multimodal outreach and superior services.


7. General Insurance (Kotak Mahindra General Insurance Company Limited):
Here the initial focus is on retail line of business, with steady growth in
commercial over
a period of time. Following are the four strategic pillars to achieve growth:
  Underwriting and Risk Management

 Distribution

 Customer Centricity and Claims Servicing

 Cost Management


8. Asset Management (Kotak Mahindra Asset Management Company Limited):
The company offers various schemes that cater to investors with varying risk-return
profiles. It has diversified product portfolio across a wide range of equity, debt and
exchange traded funds (ETFs).

9. Brokerage (Kotak Securities Limited):

Kotak offers investment opportunities in equities, derivatives, distribution of IPOs,
Gold ETFs and mutual funds and has emerged as India‟s leading
Institutional broker. In addition to this it offers secondary market broking services
and Indian equity offerings to domestic and foreign institutional investors. It has a
full-fledged, highly ranked research division, engaged in macro-economic studies,
and industry and company-specific equity research.

10. Investment Banking (Kotak Mahindra Capital Company Limited):

A leading full-service investment bank in India, offering integrated solutions
encompassing high-quality financial advisory services and financing solutions. The
service provided by the company includes Equity Capital Market Issuances, M&A
Advisory and Private Equity Advisory.

11. Alternate Assets (Kotak Investment Advisors Limited):

Kotak Investment Advisors Limited has built its business successfully across five
verticals i.e. Private Equity, Realty Fund, Infrastructure Fund, Listed Equity
Strategies and the Special Situations Credit Fund – all led by independent
investment teams.
 Products and Services

 The bank offers complete financial solutions for infinite needs of all individual and
non–individual customers depending on the customer's need – delivered through a state
of the art technology platform. Investment products like Mutual Funds, Life Insurance,
retailing of gold coins and bars etc are also offered. The bank follows a mix of both
open and closed architecture for distribution of the investment products. All this is
backed by strong, in–house research on Mutual Funds.
 The bank’s savings account goes beyond the traditional role of savings, and allows us
to put aside a lot more than just money. The worry–free feature of Savings Account
provides a range of services from funds transfer, bill payments, 2–way sweep through
our ActivMoney feature and much more. We can place standing instructions for
investment options that can be booked through Internet or through Phone banking
services. The Savings Account thus provides for attractive returns earned through a
comprehensive suite products and services that offer investment options, all delivered
seamlessly to the customer by well integrated technology platforms.
 Apart from Phone banking and Internet banking, the Bank offers convenient banking
facility through Mobile banking, SMS services, Netc@rd, Home banking and BillPay
facility among others.
 The Depository services offered by the Bank allows the customers to hold equity shares,
government securities, bonds and other securities in electronic or Demat forms.
 The Salary 2 Wealth offering provides comprehensive administrative solutions for
Corporate with features such as easy and automated web based salary upload process
thereby eliminating the paper work involved in the process, a dedicated relationship
manager to service the corporate account, customized promotions and tie – ups and
many such unique features. The whole gamut of investment products and investment
advisory services is available to the salary account holders as well.
 For the business community, the bank offer comprehensive business solutions that
include the Current Account, Trade Services, Cash Management Service and Credit
Facilities. The bank’s wholesale banking products offer business banking solutions for
long–term investments and working capital needs, advice on mergers and acquisitions
and equipment financing. To meet special needs of the rural market, the bank has
dedicated business offerings for agricultural financing and infrastructure. Its
 Agriculture Finance division delivers customised products for capital financing and
equipment financing needs of our rural customers.
 For financial liquidity the bank offers loans that meet personal requirements with quick
approval and flexible payment options. To complete the personal financial offerings
space, the bank now offers Kotak Credit Card which is a hassle–free, transparent
product that also happens to be the first vertical credit card in the industry.
 Kotak Mahindra Bank addresses the entire spectrum of financial needs of Non–Resident
Indians. The bank has tie–up with the Overseas Indian Facilitation Centre (OIFC) as a
strategic partner, which gives them a platform to share their comprehensive range of
banking and investment products and services for Non Resident Indians (NRIs) and
Persons of Indian Origin (PIOs). Their Online Account Opening facility and Live Chat
service helps to get in touch at the comfort of homes and at the convenience. These
offerings are specifically designed to suit the overseas Indian's personal financial needs
and give the global Indians a near to home feel.
Corporate Social Responsibility:
1. Blood Donation:
The Bank organizes week long blood donation camps across its offices in 13 cities
to commemorate Kotak Mahindra Group Day. 1367 units of blood collected in
November 2014.

2. Building Homes for the Needy:

The Bank sponsored 60 employees to volunteer in Habitat for Humanity‟s Build
programme to construct decent and affordable homes for rural families in crucial
need of shelter.

3. Providing Aid to Cancer Patients:

The Bank conducts a monthly newspaper collection drive, in association with
Dhanwantari Medical Trust. Proceeds from sale of newspapers are used for
nutrition and treatment of cancer affected children. In FY 2014-15, KMBL
collected Rs.34,275/- for 3,626 kgs of newspapers. On the occasion of its annual
Reward and Recognition programme „Star Trek‟, the Bank‟s Customer Contact
Centre (CCC) at Kotak Infiniti, organised a Fun „n‟ Fair and donated proceeds of
the event to Cancer Patients Aid Association. Rs.1, 07,173/- was donated to the
NGO.

4. Payroll giving Programme:

There are various NGO;s supported by the bank like The Akanksha Foundation,
Cancer Patients Aid Association (CPAA), National Association for the Blind
(NAB), Dignity Foundation, Make-A-Wish Foundation of India and Society of
Parents of Children with Autistic Disorders (SOPAN).

5. Swacch Bharat Abhiyaan Initiatives:

KMBL launches the initiative of Swacch Bharat Abhiyaan on December 2014 at
Chennai Marathon wherein the employees as well as the senior members cleaned
the venue after the Marathon. Similar clean drives were organised at the Powai
Marathon (Mumbai), Bangalore Cyclothon, and Clean BKC (Mumbai).
 6. Pinkathon:
134 women employees in Mumbai and 13 women employees in New Delhi
participated in Pinkathon – a run for women to spread awareness on breast cancer.

7. Financial Literacy Camps:

KMBL conducted Financial Literacy Camps where over 60 activities were
conducted in different locations across Maharashtra (Jalgaon District), Rajasthan,
(Nimbhaira, Sumerpur Districts), Gujarat (Rabod, Khandach Districts), Madhya
Pradesh (Hoshangabad District) and Bihar (Muzaffarpur, Begusarai Districts).
These activities were conducted in the form of customer meets at bank branches
and nearby villages, schools and local markets. Door-to- door activities were also
conducted. Overall 1,100 people participated in these activities. They were briefed
about the importance of savings and banking activities and advantages of financial
planning were also explained. Participants‟ reviews on Financial Literacy Camps
were positive. They were keen to understand various non-essentials where money
was spent, and learned how to save money.

Services offered to SME’s:

1. Accounts:
 Current Account


2. Loans and Overdrafts:
 Business Banking Solutions

 Tractor Finance

 K-Value

 Rural, Auto and Farm Equipment Finance

 Strategic Business Loan

 Facility against Credit Card Receivables

 Commercial Vehicle Finance

 Infrastructure Finance

 Unnati Auto Finance

 Credit Access

 Business Loans
 3. Working Capital Finance:
 Working Capital Finance

 Channel Finance

 MSME


4. Dealer Finance:
Bank provides end to end solutions for the financial requirements of
Commercial Vehicle and Construction Equipment dealers.

5. Trade Finance:
Following Trade Services are provided by the bank
 Bank Guarantee

 International Imports

 Domestic

 International Exports


6. Convenience Banking:
 Net Banking

 SMS Banking

 Immediate Payment Service

 Kotak Payment Gateway

 Mobile Banking

 Cash Depositing Machine


7. Government Business:
 Delhi VAT and CST

 Gujarat Commercial Tax

 Andhra Pradesh Commercial Tax

 Punjab VAT and CST

 Bihar VAT and CST

 Odisha VAT and CST
Unsecured Business Loans by Kotak Mahindra Bank

Unsecured Business Loans are taken by the borrower to begin or upgrade a business
with no insurance. Under this kind of credit the borrower require not to promise any
property or resource. To the extent the Business Loans are viewed as Kotak Mahindra
Bank Limited gives unsecured loaning to SME‟s. The principle purpose behind giving
Unsecured Loans is Intense Competition that is because of extensive number of Public
and Private Sector Banks. Keeping in mind the end goal to build their business banks
are giving unsecured credits in order to give away however much advances as could
reasonably be expected. The opposition is not quite recently limited to banks just but
rather there are numerous little back organizations which give loaning offices to their
clients. Unsecured Lending is the most dangerous loaning as the banks don't know
whether the borrower will have the capacity to reimburse the advance back or not. In
this way an appropriate investigation of every single borrower is required so as to limit
the hazard. So as to choose whether the advance ought to be given to a specific client
or not, the banks need to break down different reports and points of interest which
guides them to know the credit value of a client. According to my experience as an
understudy in Kotak Mahindra Bank I have come to realize that Kotak requests 2 year
money related points of interest of the organization and most recent 6 month managing
an account subtle elements of the client to check his/her credit value. The credit
administrators examine customer’s budgetary points of interest and check his record of
loan repayment with the assistance of CIBIL Score.
A CIBIL score of 700 is thought to be a decent score. In the wake of examining every
one of these points of interest credit administrators at last choose whether to allow the
advance or not and how much sum ought to be conceded.
Key Officials

S.No. Name Designation

1. Shankar Acharya Chairman

2. Uday Kotak Managing Director

3. Bina Chandarana Company Secretary

4. N P Sarda Non Executive Director

5. Mark Edwin Newman Non Executive Director

6. C Jayaram Non Executive Director

7. Dipak Gupta Joint Managing Director

8. Farida Khambata Independent Non-Executive Director

9. Amit Desai Independent Non-Executive Director

10. S Mahendra Dev Independent Non-Executive Director

11. Prakash Apte Independent Non-Executive Director

 SWOT Analysis of Kotak Mahindra Bank:

Strength:
 Despite losing market share over the four last years, KMB’s investment
banking and stock broking franchises are amongst the best in India.

 KMB has one of the most stable top management teams with almost the entire
top management team being employed with the bank for more than a decade.

 A diversified business model across lending, asset management, capital markets
and insurance helps the company to capture the entire value chain in the
Financial Services sector and helps maintaining earnings growth.

 KMb is a market leader in car and commercial vehicle finance with strong
appraisal skills in these businesses.

 KMB has negligible exposure to stressed sectors such as Power, Infra,
Aviations and Textiles.

Weaknesses:

 KMB has a weak liability franchise. Its CASA ratio (at only 28% of its total
deposits and 17% of its total borrowings) is amongst the lowest for Indian
Banks. When it comes to sticky savings deposits. KMB is weaker still SA at
12% of total deposits and-7% of its total liabilities.

 KMB has weak presence in corporate banking (it is essentially a retail bank on

Assets side of the balance sheet). However, increasingly the company is
focusing on corporate banking.

 KMB is heavily reliant on the interbank market on the „liability‟ side of the
balance sheet.

Opportunities:
 KMB has the opportunity to strengthen its liability franchise by increasing its
CASA deposits (through widening of its branch network).

 The recent deregulation of the savings rate by the RBI gives KMB an
opportunity to tap new customers and strengthen its CASA base.
  It has the opportunity to diversify on the „asset‟ side of the balance sheet by
increasingly market share in corporate banking (currently 1% of the market
share).

 KMB can use its presence across asset management; capital markets and
insurance to cross sell its products.
Threats:
 Convergence of regulations for NBFCs in line with banks could affect
profitability of the company by 6%-7% given that 27% of its lending business
is through NBFC which has lower regulatory obligation than banks (no SLR
requirement, no CRR requirement, lower employee expenses and easy branch
expenses).

 Continued weakness is non-lending businesses (insurance, asset management
and capital markets) could affect KMB‟s earnings growth if the lending
business is unable to maintain its momentum.

Scope of the Project

The division in which I am doing my internship currently is the backbone of every bank
i.e. Credit. Granting loan is the main priority of every bank as the main source of
revenue of any bank is interest that they charge on the amount lend.

The scope of this project is wide and is not restricted to just banks only but is also
applicable to all the financial institutions that provide credit facilities to their
consumers.

Current economic conditions and the startup boom that our country is witnessing
currently is going to increase the demand for unsecured loans. In order to promote
entrepreneurship, more banks and financial institutions should provide unsecured loans
because funding a startup is a major problem that entrepreneurs face. They cannot fund
the entire amount through equity as raising more money through this source will reduce
the stake of the promoters in the company, therefore businesses has to depend upon
banks for funding their ventures and projects. Unsecured loans help promoters in easily
 availability of funds as they don’t have to give any collateral security for the amount
borrowed.

Implications:
The project is important as it gives practical insight into the banking operations of a
reputed bank and gives the knowledge on the various processes that banks follow to
approve credit of any particular customer. This project also provides learning on the
analysis of financial statements which can be used not just in banks but can be used in
various other fields like in Investment, Equity Research etc.

BANKING PRODUCTS
 NORMAL KOTAK PRODUCTS
 5 TO 15
 SENP – SELF EMPLOYED NON PROFESSIONAL
 FCCR – FACILITY AGAINST CREDIT CARD
 RETAIL FCCR – RETAIL FACILITY AGAINST CREDIT CAR
 NET MARGIN
 SEP – SELF EMPLOYED PROFESSIONAL

 SURROGATE
 CREDIT ACCESS
 PL PTR – PERSONAL LOAN PAYMENT TRACK RECORD
 OD/CC – OVERDRAFT AND CASH CREDIT
 HL/PTR – HOME LOAN PAYMENT TRACK RECORD
 LAP PTR – LOAN AGAINST PROPERTY PAYMENT TRACK RECORD
 CASA- CURRENT ACCOUNT SAVING ACCOUNT.

CUSTOMERS
1. SOLE PROPRIETERSHIP
2. PARTNERSHIP
3. PRIVATE LIMITED COMPANY

MANDOTARY DOCUMENTS REQUIRED FOR ALL THE CUSTOMERS

1. PHOTO ID PROOF
2. RESIDENCE PROOF
3. IDENTITY PROOF
4. OWNERSHIP PROOF
5. LATEST 2 YEARS FINANCIAL
6. INCOME TAX RETURN – 2 Years (Current and Previous Year)
7. BANK STATEMENT –
DOCUMENTS CHECKLIST REQUIRED FOR SENP, SEP AND FCCR
1. PHOTO ID PROOF
2. RESIDENCE PROOF
3. IDENTITY PROOF
4. OWNERSHIP PROOF
5. LATEST 2 YEARS FINANCIAL
6. INCOME TAX RETURN – 2 Years (Current and Previous Year)
7. BANK STATEMENT
8. FIRM CONSTITUTION
9. SELF ATTESTATION OF CUSTOMERS ON THE DOCUMENTS

DOCUMENTS CHECKLIST REQUIRED FOR SURROGATE

1. PHOTO ID PROOF
2. RESIDENCE PROOF
3. IDENTITY PROOF
4. OWNERSHIP PROOF
5. LATEST 2 YEARS FINANCIAL
6. INCOME TAX RETURN – 2 Years (Current and Previous Year)
7. BANK STATEMENT
8. FIRM CONSTITUTION
9. SELF ATTESTATION OF CUSTOMERS ON THE DOCUMENTS

DOCUMENTS SPECIFIED FOR SOLE PROPREITER

No extra documents required other than mentioned above
DOCUMENTS SPECIFIED FOR PARTNERSHIP FIRMS
1. PARTNERSHIP DEED

DOCUMENTS SPECIFIED FOR PRIVATE LIMITED COMPANY

1. ARTICLE OF ASSOCIATION
2. MEMORANDUM OF ASSOCIATION
3. INDEPENDENT AUDIT REPORT ( IF TURNOVER IS ABOVE 10 CRORE)

STAGES OF LOAN PROCESSING

1. FILE CHECKING
2. CIBIL SCORE – Credit information Bureau India limited checking credit history
3. DEDUPE – Internal search
4. LOGIN – As per Policy.
5. LOAN ORGINATION SYSTEM – Data Entry
6. FINANCIAL ANALYSIS TOOL
7. RISK CONTROL UNIT
8. CREDIT
A) REJECT – NOT FURTHER PROCESSED
B) SANCTIONED – IF APPROVED , FURTHER PROCESS
AQB – AVERAGE QUARTER BALANCE
NDC –
 APAC
BCIF
9. FINAL NDC
 DISBURSMENT
10. FINAL PAYMENT

CONDITIONS FOR PROCESSING

Criteria for checking banking growth
FOR 5 TO 15 - -40%
FOR SENP – -30%
FOR FCCR – -30%
FOR NET MARGIN- -25%
FOR SEP - NOT REQUIRED

Process of Loan Appraisal:

1. Source of Loan Applications:
There are generally three sources from where the loan application of a customer comes
to the backend staff for processing. These are as follows:
  Direct Sales Agents:

Direct Sales Agents develops new business prospects in specific geographic
areas through cold calls. They interact with existing customers to increase sales
of the bank's products and services. Familiar with standard concepts, practices,
and procedures within a particular field. They performs a variety of tasks and
works under general supervision. They need to report to a supervisor or
manager. These are the agents hired by the banks to bring in the new business
and get commission in return.

 Direct Sales Team:

The job responsibility of direct sales team is similar to direct sales Agents. They
also have the responsibility to bring new clients and applications and create new
business for the company. But unlike Direct Sales Agents, they are not required
to visit the clients. They are required to contact the clients through call only.
They are also required to maintain the existing clients and try to bring
applications from them also.

 Bank Branches:

All the branches of Kotak Mahindra Bank are required to collect the loan
application from customers and pass them to the backend for further process.
Branches are the most convenient place for customers to apply for loan as they
can find the branch near their residence.

Code of Conduct to be followed by Direct Sales Agents (DSA) and Direct Sales
Team (DST) as issued by Indian Banks Association. These conducts are as
follows:

1. Sales Agents of banks can contact the customer under the following
circumstances:
a) When prospect has expressed a desire to acquire a product through the
bank's internet site/call centre/Branch or through the Relationship
Manager at the bank or has been referred to by another
prospect/customer or is an existing customer of the bank who has given
consent for accepting calls on other products of the bank.
b) When the Telephone and Address of the prospect is available and the
agent has taken it from the list or database approved by the DSA
Manager or Team Leader after taking his/her consent.
2. When to contact the prospect on telephone:
Telephonic contact must normally be limited between 0930 Hrs and 1900
Hrs. However, it may be ensured that a prospect is contacted only when
the call is not expected to cause inconvenience to him/her. Calls earlier or
later than the prescribed time period may be placed only under the
following conditions: When the prospect has expressly authorized the
agent to do so either in writing or orally.

3. The Agent should respect the prospect‟s privacy. The prospect‟s interest must
be discussed only with the prospect and the persons authorised by him like
Family Member, Accountant, and Secretary.

4. The Agent must not be indulged in the following activities:

a) Misleading the prospect on any service/product offered.
b) Mislead the prospect about their business or organization's name, or
falsely represent themselves.
c) Make any false/unauthorized commitment on behalf of Bank for any
facility/service.

5. Tele-Marketing Etiquettes:
a) PRE CALL:
i) No calls prior to 0930 Hrs or post 1900 Hrs unless specifically
requested.
ii) No serial dialling.
iii) No calling on lists unless list is cleared by team leader.

b) DURING CALL:
i) Identify yourself, your company and your principal.
ii) Request permission to proceed.
iii) If denied permission, apologize and politely disconnect.
iv) State reason for your call.
v) Always offer to call back on landline, if call is made to a cell
number.
vi) Never interrupt or argue.
vii) To the extent possible, talk in the language which is most
comfortable to the prospect.
viii) Keep the conversation limited to business matters.
ix) Check for understanding of "Most Important Terms and
Conditions”.
x) Reconfirm next call or next visit details.
xi) Provide your telephone number, your supervisor's name or
your bank officer contact details if asked for by the customer.
xii) Thank the customer for his/her time

c) POST CALL:
i) Customers who have expressed their lack of interest for the
offering should not be called for the next 3 months with the
same offer.
ii) Provide feedback to the bank on customers who have
expressed their desire to be flagged "Do Not Disturb".
iii) Never call or entertain calls from customers regarding
products already sold.
iv) Advise them to contact the Customer Service Staff of the
bank.

d) Gifts or Bribes:
The Agent must not accept gifts from prospects or bribes of
any kind. Any TME/BDE offered a bribe or payment of any
kind by a customer must report the offer to his/her
management.

e) Precautions to be taken on visits/contacts:

The Agent should:
i) Respect personal space - maintain adequate distance from
the prospect.
ii) Not enter the prospect's residence/office against his/her
wishes.
 iii) Not visit in large numbers - i.e. not more than one BDE
and one supervisor, if required.
iv) Respect the prospect's privacy.
v) If the prospect is not present and only family
members/office persons are present at the time of the visit,
he/she should end the visit with a request for the prospect
to call back.
vi) Provide his/her telephone number, supervisor's name or the
concerned bank officer's contact details, if asked for by the
customer.
vii) Limit discussions with the prospect to the business -
Maintain a professional distance.

f) Other Important Aspects (Appearance and Dress Code):

Business Development Executives must be properly
dressed. For men this means:
i) Well Ironed Trousers .
ii) Well ironed shirt, shirt sleeves preferably buttoned
down.

For Women this means:

i) Well ironed formal attire (Saree, Suit etc.)
ii) Well-groomed appearance.

Jeans, T-Shirts, Open Sandals are not considered

appropriate.

g) Handling of Letters and Other Communication:

Any communication sent to the prospect should be in the
format approved by the bank. (Kotak Mahindra Bank, New
Delhi)
2. Dedupe:
Dedupe is an application matching logic used to catch the applications of the same
applicant who had applied earlier for a loan. Dedupe is a software used by Kotak
Mahindra Bank to find out the past track record of the customer.
Dedupe are of two types i.e. Internal and External. Dedupe will be done with the
probability of using applicant name, residence address, office address, DOB and
PAN.
This software helps credit managers a lot to track the customer performance in his
previous loans as well as the area in which customer resides. This software also
helps the bank to know whether there is any default from the client‟s family member
or relatives.

Internal Dedupe:
This is basically an internal search conducted by Kotak Mahindra Bank to find out
whether the applicant has any bank history with Kotak or not. If customer name or
other characteristics match with in CSA team then it will show the result. Bank
maintains the data since 2004 i.e. from the year when bank was incorporated. Data
can be emerged in four ways if customer has past relation or applied with KMBL
CASA team.
i. Reject:- Matches like name, DOB, Residence address etc., RM name,
Amount of Loan applied and tenure for which loan has been applied. Credit
manager name, reason for rejection like not eligible less than 5 to 15, Very
low DCSR, High number of bounces, etc.
ii. Sanction:- Matches like DOB, off add, residence address, pan number, etc.,
Relationship Manager Name, Amount of Loan applied and tenure for which
loan has been applied. Credit manager name for loan approved e.g. Rs.
12,00,000 for 12 to 36 months with condition, latest utility bills, RCU
positive, Guarantor Mr.X, Borrower Mr.Y, Latest financial with clear stamp
etc.
iii. Disbursed:- Matches like DOB, off add, residence address, pan number,
etc., Relationship Manager Name, Amount of Loan applied and tenure for
which has been applied. Credit manager name for loan approved e.g.
12,00,000 for 12 to 36 months with condition, latest utility bill, RCU
positive, Guarantor MR X, Borrower Mr.Y, Latest financial with clear
stamp etc., BL# 212, APAC# 215, we will get the details of this loan in LOS
if we search with BL#.
iv. More info:- Matches like DOB, off add, residence address, pan number,
etc., Relationship Manager Name, Amount of Loan applied and tenure for
 which has been applied. In this case mail has been sent to RM for providing
a more documents like financials of subsidiary company, more banking etc.

External Dedupe:
As far as external search is considered Kotak Mahindra Bank has outsourced this
job to Hi-Tek. This company is responsible to find out the information about the
loan that the customer had taken in past from other banks. With the help of these
results bank can also know whether the application of the customer was rejected or
accepted and in case if it was rejected what was the reason for rejection. Therefore
from these results credit managers can predict the ability of the client to repay the
loan amount and interest.

3. Window Login:
Under this process KYC is required from the applicant. KYC stands for know your
customer. It is the responsibility of the Relationship Manager to ensure that the
documents are there in the file. If in case there are some documents that are not
there in the file then approval from the credit manager is required. All the
documents are checked physically that whether the file contains all the documents
as per the policy or not. Certain things are also checked apart from the documents
for example it is necessary that all the documents of the customer are self-attested,
all the documents must have OSV stamp which stands for originally seen and
verified. KYC consists of the documents that are mentioned below:
a) Completely filled application form.
b) One property should be at the name of the applicant i.e., residence or office
address one should be owned by applicant or his spouse.
c) Ownership proof is electricity bills, water bills or sale deed but in industrial
areas or Old Delhi areas will be considered this as ownership proof. Election
card never considered as ownership proof or identity proof.
d) Photocopy of pan card is mandatory.
e) One latest mobile phone bill.
f) Bank usually gives a loan to those applicants whose turnover is greater than
1cr and exists in business from at least 3 years.
 g) In case of Proprietorship Company, Certificate of Registration with VAT
authority will be considered as Date of Incorporation (DOI). In case of private
limited company MOA will be considered as DOI. In case Of trust Form 10 B
will be attached.
h) In MOA first seven points are very important, if company had converted from
proprietorship or taking over the business of other company will be get verified
with these points.
i) In MCA portion we can get the details through PAN like Shareholding pattern
of the company, Present Directors of company are also directors in how many
other companies.
j) Under financial details, Individual tax return should be there with computation
of income, if it‟s not there RM will be asked to bring the Computation of
Income.
k) 3CA, 3CB and 3CD are very important as it shows the Auditors Report, where
we can find the auditors observation, payments about 43 B i.e. statutory dues
like service tax, VAT, ESI & PF payments. About the payment of debtors or
creditors, where the company books of accounts has been kept etc.
l) Along with the company return, all schedules are also required. It helps us to
know the financial strength of the firm or co which is looking for loan.

4. Risk Control Unit (RCU):

RCU stand for risk control unit. Before logging a file in to LOS file will be sent to
RCU team where they will verify the authenticity of the documents given by the
customer to the bank. All documents like PAN, electricity bill, VAT returns or
MOA and all financials is verified by the RCU team. On every document RCU
stamps mentioning reviewed is written, if stamp stated sample we will take the
report from RCU team before disbursal. In disbursal conditions all credit manager
write RCU should be positive.

5. Loan Organization System:

In retail loans there is a loan origination systems (LOS) on which cases are tracked
for completion and policy deviations if any. KYC checks are done by the Sales team
and the Risk Containment Unit (RCU). Post RCU check, Credit team
 does tele verification / personal verification, if required, evaluates the proposal
based on documents and as per laid down process.

6. Field Investigation will be initiated on same day once file is log in:
Once the file is login Field Investigation is initiated on the same day. A request is
sent to the agency which conducts Field Investigation for Kotak Mahindra Bank.
Field Investigation is very important before processing the file further. Field
Investigation helps to know banks various things that cannot be known with the
help of documents. Field Investigation is basically a proof to verify that the person
is financially stable not only in financial papers but also in reality.
FI is done for both address i.e. residence address and office address. It plays a very
important role in decision making. As per bank policy, bank will not lend money in
negative areas like Najafgarh or community dominated areas because collections in
these areas are very tough.
Agency provides the details of Field Visit of both address (Office and Residence)
to the bank. These details are as follows.
a) Residence Address:
Employee of Agency visits the client at his residence address and interacts
with him/her and family members to confirm the detail that the customer
has given in the documents. Employee also gives details about the locality
where the customer lives and how he find their lifestyle to be, what was
the condition of the house i.e. whether the applicant is living in an
independent house or flat, whether the premise is owned him or not. Based
on the area agency also tries to find out whether the customer belongs to
Middle Class, Upper Middle Class or Upper Class. Copy of Pan Card of
applicant is taken as the proof of visit.
Field Visit also helps to disclose certain things that were not present in the
documents. For Example: In one case, with the help of field investigation,
the agency came to know that the customer belongs to a political party and
that case was rejected on the basis of that detail only because as per the
bank policy no loan will be provided to politicians.
 b) Office Address:
Employee of the agency visits the office address of the applicant. The
purpose of this visit is to find out the details like overall working
environment of the office, condition of the office, number of employees
working. It also includes little interaction with the employees of the
client‟s company. If the customer is manufacturer or trader, the employee
of the agency also like to find out how much stock does the customer keeps,
where he stores his inventories and the nature of business.
If the customer has given details of guarantor then field investigation
would be conducted for that guarantor also.

7. Extraction of NCIF and CIBIL Report:

NCIF means Negative customer information form. This can be extracted by
using applicant Name, Address; Mother‟s Name and PAN Number, etc. in
NCIF application. This record has been maintained at PAN India level i.e. if
customer was involved in fraudulent activities like terrorist or smuggling
activity then same is updated on NCIF. So, it prevents us to lend to those
applicants who had either done a fraud or involved in illegal activities. If anyone
wants to update any customer profile on NCIF then he/she has to take approval
with national head with all details, then only it will be updated.

Credit Information Bureau (India) Limited or CIBIL is a Credit Information

Company (CIC) founded in August 2000 and plays a critical role in India‟s
financial system. CIBIL collects and maintains records of an individual„s
payments pertaining to loans and credit cards. These records are submitted to
CIBIL by banks and other lenders, on a monthly basis. This information is then
used to create Credit Information Reports (CIR) and credit scores which are
provided to lenders in order to help evaluate and approve loan applications.

The credit score helps loan providers quickly determine, who they would like
to evaluate further to provide credit. The CIBIL Trans Union Score ranges from
300 to 900. According to CIBIL data loan providers prefer credit scores which
are greater than 750. Once the loan provider has decided which set of
loan applicants to evaluate, it analyses the CIR in order to determine the
applicant's eligibility. Eligibility basically means the applicant's ability to take
additional debt and repay additional outflows given their current commitments.
It helps the bank to know performance of the applicant in different types of
loans such as:
a) Home Loan
b) Personal Loan
c) Auto Loan
d) Business Loan
e) Credit Card

CIBIL report of the applicant can be extracted on the basis of Applicant‟s

Name, Address, Mobile Number and Pan Number.
The CIBIL score can be reduced every time the bank checks, therefore bank has
to take written consent from the applicant that he/she authorises bank to check
his/her CIBIL. In CIBIL report loans are arranged from latest to oldest i.e. the
loan which has been taken recently will appear first & so on. The last page of
the report shows how many times CIBIL of this applicant has been checked, too
many queries implies that the person is credit hungry or his/her loan has been
rejected from other institutions.
Under CIBIL reports if the loan has been taken from Kotak Mahindra Bank,
then the name of bank appears under the heading of Financial Institution, but if
the loan has been taken from other Bank or NBFC, then “other” is mentioned
under Financial Institution heading.
CIBIL report consists of Information like credit history of the customer, total
amount of loan taken and outstanding amount of the loan. In case if outstanding
loan amount appears to be zero, it means that the loan has been written off. This
report also shows the instalments of the loan and whether the customer has paid
all the instalments on time or not, if he has not paid on time then how many
days from the due date he/she has delayed the payment. If instalments show
DPD i.e. Delay per date as STD, XXX or 000, the it means that the customer
has paid the instalments on time. If the applicant has delayed in any loan then
bank has to check the track of that loan i.e. reason of delay in
 payment, whether the customer is in the habit to delay payments, cheque bounce
etc. If the payment is delayed due to cheque bounce than the credit managers
has to take approval from the deviation as per the policy. This process is
considered to be very important because it immediately tells about the nature of
the applicant.
CIBIL report as well as the banking of the customer helps the bank to calculate
the existing amount of EMI‟s.

8. Financial Analysis Tool (FAT) and Banking:

Financial Analysis Tool is a format prepared by Kotak Mahindra Bank under which the
financial details of the client are entered i.e. details regarding Income Statement and
Balance Sheet. FAT is considered to be very important as it helps credit managers
analysing the financials of the applicant. It facilitates comparative analysis of the
financials of the client with the previous years. It contains all the details of Income
Statement as well as Balance Sheet. CPA team just have to enter the details in the given
format and it automatically calculates the percentage change in figures and all the ratios
as it contains formula for everything. FAT is required in Non-Surrogate products only
because under Surrogate products only latest 6 months banking is required for analysis
while Non-Surrogate products requires banking as well as the financials of the
company.
My Industry Mentor had told me that this very important part in the credit approval
process, therefore you should devote some in learning how to prepare FAT. For the first
20 days of my internship I have learned and prepared FAT of loan applicants. The
Format of the FAT has been shown below.
Company Name

Profit and Loss Account 31-Mar-17 31-Mar-16 31-Mar-15 Inc/dec

Sales-Local
Sales-Export
Commission & Brokerage
Received
Rent Receipts (income)
Services Charges Received
Job Work Charges Received
Professional Fees Received
Freight Charges Received
Interest and Dividend
Received

Speculation Profit Received

Other Operating Income
Received

Total Income
Cost of Goods Sold
Direct manufacturing cost
Gross Profit
Gross Margins %
Personnel Cost
Administrative Expenses
Selling and Distribution
Expenses
Business Margins
(C+D+d1+d2)

Business Margins %
Interest to Partners
Salary to Partners/ Directors
Other Income
PBDIT (for DSCR)
PBDIT
Depreciation
Bad Debts Written off
Preliminary Expenses written
off

Others
PBIT
Interest on Loans to Family
& Friends
Interest on Loans
Total interest Paid
PBT
Tax (TDS)
PAT
Dividend
Other Appropriations
Profit Available for
Appropriations

Cash Profit

Balance Sheet 31-Mar-17 31-Mar-16 31-Mar-15 Inc/Dec

Share Capital
Proprietor‟s/ Partners Capital
Res & Surplus / Dr Balance
in P/L A/c

Miscellaneous Expenditure
Networth
Loan to Promoters/ Relatives
Laon from Promoters/
Relatives

Total Promoters Funds

Long term Debts- Secured-
Banks
Long term Debts- Unsecured-
Banks

Total Outside Debts

Total funds Employed

Fixed Assets
Gross Block
Capital Work In Progress
Net Block
Investments and Deposits
Current Assets
Closing Stock
Debtors
Debtors exceeding 6 months
Loans and Advances
Cash and Bank Balances
Advances Tax and Tax
Deducted at so

Current Liabilities
Sundary Creditors
Customers Advances
Other Liabilities
Provisions
Working Capital
Sources of Working Capital

Bank Overdraft
Bills Discounting
Other short term facilities
Net Working Capital
Application of funds
Deferred Tax Asset/
Liabilities
Differences In B/S
Average Rate of Return

Apart from these details various other things are also included which helps credit
mangers in analysis like various ratios, existing and new EMI‟s of the clients, Total
Commitments, Debtors Collection Period, Creditors Collection Period, VAT details,
Service Tax details, Operating Profit and Net Profit Margins. Following are the ratios
which are included under FAT are:
1. Profitability Ratio Analysis:
a. Gross Margins Ratio:
Gross margin ratio is a profitability ratio that compares the gross margin of a
business to the net sales. This ratio measures how profitable a company sells its
inventory or merchandise.

b. Net Operating Margin Ratio:

This is a profitability ratio that measures what percentage of total revenues is
made up by operating income. In other words, the operating margin ratio
demonstrates how much revenues are left over after all the variable or operating
costs have been paid.

c. Net Profit Margins:

Net profit margin is the percentage of revenue remaining after all operating
expenses, interest, taxes and preferred stock dividends (but not common stock
dividends) have been deducted from a company's total revenue.

d. Interest Coverage Ratio:

This ratio holds a lot of importance as it tells about the ability of any business
to pay its finance cost. Creditors and investors use this computation to
understand the profitability and risk of a company. Banks uses Interest
Coverage Ratio to identify whether a company would be able to support
additional debt. If a company can’t afford to pay the interest on its debt, it
certainly won’t be able to afford to pay the principle payments.

e. Debt Service Coverage Ratio:

The debt service coverage ratio is a financial ratio that measures a company's
ability to service its current debts by comparing its net operating income with
its total debt service obligations. In other words, this ratio compares a
company's available cash with its current interest, principle, and sinking fund
obligations.

This ratio is very important ratio for the lenders because creditors not only want
to know the cash position and cash flow of a company, they also want to know
how much debt it currently owes and the available cash to pay the current and
future debt.
2. Ratio Analysis from Balance Sheet:
a. Debt-Equity Ratio:
The debt to equity ratio is a financial, liquidity ratio that compares a company's
total debt to total equity. The debt to equity ratio shows the percentage of
company financing that comes from creditors and investors. A higher debt to
equity ratio indicates that more creditor financing (bank loans) is used than
investor financing (shareholders). Banks generally avoid to give loans to any
business who has high debt-equity ratio as it implies that the business has
already other commitments to fulfil.

b. Asset Turnover Ratio:

The asset turnover ratio is an efficiency ratio that measures a company's ability
to generate sales from its assets by comparing net sales with average total assets.
In other words, this ratio shows how efficiently a company can use its assets to
generate sales.

3. Ratio Analysis: Working Capital

a. Debtors Collection Period:
It is the approximate amount of time that it takes for a business to receive
payments owed, in terms of receivables, from its customers and clients.

b. Creditors Payment Period:

An indicator measures the average time it takes a company to settle its debts
with trade suppliers (accounts payable). Thus, among other things, it gives
information about payment habits and also whether a business is taking full
advantage of trade credit available.
Details regarding the analysis part are shown below.

Financial Analysis Tool Ver.

1.25

Loan Amount (in Lakhs) Months

DSCR Calculations - Current year, Post
Disbursement

PBDIT
Interest

Debts Falling due this year

Existing EMIs

New EMIs
Total Commitments

DSCR
Base Strength Ratio

Post Disb. Debt Equity

Commitment % of PBDIT

Working Capital Turnover

High Cost Borrowings

Current Ratio

Running PBDIT

Previous Year's PBDIT

Growth
Growth in Turnover according
to Bank

Ratio Analysis: Profitability

Gross Margins
Business Margins

Net Business Margins

Net Operating Margins

Net Profit Margins

Interest Coverage Ratio
ROE (Post tax)

Ratio Analysis: Balance Sheet

Debt Equity
Total Borrowings/ Equity
L/Term Debts / Fixed Assets
Turnover/ Current Assets
Turnover/ Fixed Assets
Turnover/ Total Assets

Ratio Analysis: Working

Capital
% of loans and Advances to Equity in Business
Debtors Collection Period
Creditors Payment Period
Stock Replenishment Period
Working Capital Gap
Cash Credit Days
Other Exp. Payment Days

Loans, if used for the Working

Capital
Buying Raw Material days in
Inventory
Converting into debtors days as debtors
Converting into Cash/Bank days after the
Loan
Margin earned for the Period
Annualised Margins
Annualised Interest
Net Gain after Interest Annually

Returned Inc. and IT paid 31-Mar-17 31-Mar-16 Inc./Dec.

Returned Inc. of Partner/Dir.
Tax Paid by Partner /Director

VAT Details Amount

1st Quarter
2nd Quarter
3rd Quarter
4th Quarter
Total

Service Tax Amount

1st Half Year

2nd Half Year

Total

Banking Observation:
Apart from all these financial details Banking is also required for Surrogate as well as
Non-Surrogate products. Banking is important because it is required to support the
financial statements provided by the client and often disclose some details which are
not there in other documents. For Example: Kotak Bank requires 2 year financials,
when I was working on a file, the client has provided Financial Statements for 2 years
i.e. one from April 2015 to March 2016 and second from April 2014 to March 2015
and latest 6 months banking. After observing his banking I have founded a loan that he
has taken in May 2016 which was not there in the financial statements provided by him.
Banking is a crucial in credit analysis because the lender can know about the major
business activities that has taken place in client‟s business like deposits, withdrawals,
transfers, interest earned, penalties paid.

Lender can also know about the EMI‟s that the client is paying currently and whether
he/she is paying at regular intervals or not and whether the latest 6 months banking
supports the top line that the customer has mentioned. Sometimes it may happen that 6
months banking do not supports the top line, in such cases credit managers look whether
the applicant is doing some business which is seasonal. In such situation credit manager
tells the relationship manager to bring 1 year banking of the applicant.
Points of Banking Analysis:
a. EMI:
An equated monthly installment (EMI) is a fixed payment amount made by a
borrower to a lender at a specified date each calendar month. Equated monthly
installments are used to pay off both interest and principal each month, so that over
a specified number of years, the loan is paid off in full. With the help of CIBIL we
can know how much EMI is the applicant is paying on his loan and then it can be
verified from the banking statement that he is paying his EMI at regular intervals.

b. Transfer Entries:
There are many transfer entries which can be seen in banking statements, the job of
credit manager at this stage is to find out how many transfers are there which have
been used for business purpose. Sometimes to show more credit amount in his/her
banking statements, people transfers money from their other accounts. Transfers
Entries can also help credit managers to get an idea of the nature of client’s business
and who are the main suppliers and buyers.

c. Inward Returns:
Sometimes it can happen that the client has given cheque for payment and the bank
returns back the amount to the applicant account due to some reasons. Now the
reasons can be Insufficient Fund in the account or any technical default.
Too many Inward Returns in the banking statement is not good for the applicant as
it gives the image that the applicant is not able to maintain enough balance in his
account so that he can make payments.
Following is the table which shows how inwards is shown in banking statement
 Kotak Mahindra Bank A/c No. 00001010

DATE PARTICULARS WITHDRAW DEPOSIT BALANCE

Opening Balance 50000
01-01-2017 Praveen Kumar 35000 15000
02-01-2017 Raj Kumar 15000 30000
03-01-2017 Manoj 50000 -20000
03-01-2017 I/W returns 50000 30000
Reason
insufficient fund
05-01-2017 Ram 40000 -10000
05-01-2017 I/W returns 40000 30000
reason
insufficient fund
05-01-2017 Cash 20000 10000
05-01-2017 Rahul 40000 -30000
09-01-2017 Naman Kumar 100000 70000
10-01-2017 Ratnesh 50000 20000

d. Outward Returns:
Outwards returns are somewhat similar to Inward Returns. The difference is that
here the payment that the client was supposed to receive has been cancelled, reasons
being the same i.e. Insufficient funds or any other technical default. Inwards returns
are more important as compared to Outward Returns because the client is not at
fault in outward returns but he is responsible for Inward Returns.
Following is the table which shows how outward returns appear in banking
statements:
KOTAK MAHINDRA BANK

DATE PARTICULARS WITHDRAW DEPOSIT BALANCE

Opening Balance 50000

01-01-2017 Ramesh Kumar 35000 85000

02-01-2017 Ramesh Kumar 15000 70000

03-01-2017 Raju 50000 120000

03-01-2017 O/W returns reason 50000 20000

Technical
05-01-2017 Rajesh 40000 110000

05-01-2017 O/W returns reason IF 40000 70000

05-01-2017 Rajesh 40000 110000

e. Sweep Transfers:
A sweep account is a bank account that automatically transfers amounts that exceed,
or fall short of, a certain level into a higher interest-earning investment option at the
close of each business day. Commonly, the excess cash is swept into money market
funds. In a sweep program, a bank's computers analyse customer use of checkable
deposits and "sweep" funds into money market deposit accounts. Sweep accounts
are a typical business tool, especially for small businesses that rely on daily cash
flow but want to maximize earning potential on sitting cash reserves. A business
sets a minimum balance for its main checking account, over which any funds are
swept into a higher interest investment product. If the balance ever dips below the
threshold, the funds are swept back into the checking account from the investment
account. Therefore incomes generated from such transfers are not considered as
business income.
f. Overdraft and Cash Credit:
Overdrafts and Cash Credit is required by small businesses for arranging amount
for their working capital, in return the business is liable to pay interest to lender for
availing these services. In such cases bank will require sanction letter from the
applicant and would also like to know how much amount has been utilised by the
company. Credit Mangers would also ensure that whether the applicant has paid
interest on overdraft timely or not with the help of banking.
Case Analysis

Product SENP
Borrower XYZ Trading Company
Background The Applicant is a Proprietorship concern managed by Ms.
Bhawna Arora who has experience of 14 years in the business.
She is a Post Graduate and living in a parental house owned by
mother in Rohini , New Delhi. There are 4 members in
applicant’s family and she is the only working member.

She is a distributer of Computer & spare parts & electric goods

like Microwave Ovens, Electric Smoothening Irons, Water
Heaters, Toasters, Food Grinders and Mixers, Vaccum
Cleaner and Fans etc. and sells them to retailers mostly in
North and South Delhi. She works in a 400sq.ft office
located in Nirman Market , Dwarka which is also owned
by her mother. She is purchasing directly from the company
and selling to retailers.

Applicant has total 10 employees in his organization and pays

Salary Rs. 60000 per month on an average basis.

Financial Analysis 1. The Firm did the following turnover in the last financial
year.

Period Turnover ( In lakhs)

FY 2016-17 350.60
FY 2015-16 307.97

2. The turnover of current year is Rs. 600 lakhs till Dec 16.
The increase in turnover is because the customer has received
distributorship of various companies like Lenovo , Samsung,
Apple and HP. Previously she was trading in business i.e.,
purchasing from distributors and selling to retailers. Now she
is directly purchasing from the company and selling to retailers,
therefore her profit margin and credits in the bank account has
also increased.

3. Margins over the last 2 years are as follows:

FY 2015-16 (%) FY 2016-17 (%)

Gross Profit 5.80 6.87
Margin
Net Profit Margin 3.20 4.05

4. No long term borrowing as on 31st March 2017.

5. No long term and short term provisions as on 31st March

2017.

6. Breakup of short term borrowings is as follows:

Amount (Lakhs)
Cash Credit Limits 80
Total 80

7. Breakup of other Current Liabilities.

Amount (Lakhs)
Outstanding Expenses 1.15
Total 1.15
8. Breakup of Long Term Loans and Advances.

Amount (Lakhs)
Suppliers Advance 30
Total 30

9. No Short Term Loans and Advances.

10. Loan amounting to Rs.8 lakhs taken from State Bank of

Patiala as Housing Loan.

11. Major Customers:

Name of Client Working since Avg. Monthly

Sales
Vijay Sales 2010 15.50 lakhs
Sunder Electricals 2015 12 lakhs
Om Electricals 2012 05 Lakhs

12. Major Supplier:

Name of Supplier Working Since Avg. Monthly

Purchase
Lenovo 2013 22 lakhs

Samsung 2008 15 lakhs

HP 2010 7 lakhs

13. Auditor Remarks:

As per form 3CB for the year 2016-17 there are no adverse
observations or comments by the statutory auditor.
 Statutory Auditor: Sumit Agarwal
M No. 500032
Loan Required KMBL Unsecured Position

Exposure Details Amount (in lakhs)

Present Exposure 0
Proposed Exposure 15
Total Exposure 15
Deviations 1. L3: Current CIBIL Score of Guarantor is -1
2. L3: Internal Dedupe negative due to case was rejected as
there was dip in banking and thereafter rejected by RM as
Customer was not interested.
3. L3: External Dedupe is Negative on account of electricity
Default in October 2014 in the name of applicant.
4. L3: DPD exists in loan of Rs. 2.05 lakh against personal loan
During the period of june 2013 to july 2014. However we
have documented the NOC from Tata being dues completely
paid.
5. L3: HL from SBOP showing 1 DPD in the month of August
2015. However we have documented the last one year track
which is showing regular payment of EMI for the month of
August 2015.
6. L3: FI is negative for negative area, reported as lower
middle class. Collection feedback has been sought and same is
satisfactory except locality belongs to lower middle class and
other things like Living Standard, Property Built and
approachable is average.
Conditions 1. Borrower: Navneet Tandon
2. Guarantor: Sunita Tandon
3. ABC Trading Company
4. CA, PAN, BSV, ITR to be verified
5. Ownership Proof
 6. Positive RCU and 2 references
7. PDC from SBP limit account 6376
8. CIBIL, NICF and FI to be documented
9. Score Card and Offline Approval
10. Financials to be couriered
Existing Exposure Present Exposure: NIL
Assets The WDV of Fixed Assets as on 31-03-2017 is Rs. 0.25 Lakhs

Banking The firm uses CC Limit of Rs. 80 Lakhs from SBOP and
Maintains a current account for its day to day operations.
Liabilities Loans as per the loan sheet.
Strengths 1. Good Financials
2. Good turnover of Rs. 485 lakhs in the current year up to
November 2016
3. High growth in turnover according to bank of 77%.
4. Experience of 14 years in the industry.
5. Recently received distributorship causing high increase in
Sales and credits in bank account in the current year.
6. Good growth potential and customer base of the firm.
Issues 1. As mentioned in the deviations.
2. Moderate GP and NP Margin in previous year.
3. Recurring penal interest charged in the CC Limit
maintained by the customer as it is fully utilized and
sometimes over utilized, but no inward returns seen in
banking.
4. Several enquiries for Housing Loan, Loan against property
and business loans in the recent past.
5. As per reporting in CIBIL poor PTR of closed auto loan
during April 2012 to July 2013.