Rajamma Project

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PART A
1|Page Department of MBA, RYMEC, Bellary
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EXECUTIVE SUMMARY
As per the curriculum of Visvesvaraya technological university for the partial fulfillment of the post graduate degree, master of business administration, I had undertaken an organizational study of established & growing business organization. The project is entitled A study on the risk management at PRAGATHI GRAMIN BANK , head office, Bellary, Karnataka state. The process of liberalization & globalization have created challenging, competitive & rapidly changing environment in the banking industry. I have undertaken internship study at PRAGATHI GRAMIN BANK. It is one of the Regional rural banks in Karnataka. Pragathi gramin Bank ., which provides services to its customers all the 365 days of the year. It is licensed under reserve bank of India to do the business banking. PRAGATHI GRAMIN BANK has been rendering financial services to growing needs of the people. Their main customers are carrier owners, which is the backbone of the mining activity in this area. And naturally, the mine owners some second in list. Rests are traders, small and medium entrepreneurs & other needy people. For the project I had access to meet the employees of the bank for the considerable time duration which helped me to gain insight about the type of work they do and study the functions of the bank. This report is endeavor to cover the overall organizational structure, procedures, and functions of the organization and also covers industry profile and company profile with their objectives that the bank have. The report gives an insight view about managerial function, operative function towards the services and employees of the organization. The project report
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also covers the various types of loans with their interest rates of the bank, & also know how the bank manages the deposits & loans, fluctuation in the CD-ratio, management of loans and risk management.
INDUSTRY PROFILE:
The world economy today is driven by the way the banks in the world perform. The economical position of the country is also driven by the performance of banks. Banks, by extending their services to areas hitherto untouched and making themselves accessible to the common man, have become a part of our lives. The banking institutions in the past performed very limited functions such as receiving deposits against bank notes and then issuing notes in the country, as the time advanced and with the progress of commerce and industry, the scope of banking also expanded. Modern banking institution is a large corporate giant with large resources and a vast field of activity. Since the nationalization of some big commercial banks in India in the year 1969, there has been a great surge of banking industry throughout the world with the growing number of banking offices. The banking business today has become highly critical and competitive between various classes of banks in offering a greater variety of services nationally and internationally. With globalization setting in, banks are also modernizing operations with a view to satisfying modern customers with an aim to improve bank operations with a view to maintain The Indian banking system can be classified into nationalized, private and specialized banking institutions. The industry is highly fragmented with 30 banking units contributing to almost 50%of deposits and 60% of advances. The Reserve Bank of India is the foremost monitoring body in the high standard banking system that involves applications of better management techniques. India, class banking has given way to mass banking, bringing in its fold very large number of customers. Banks are now looked upon as development agents instead of purveyors of credit to the large industries and big business companies. Apart from providing credit to trade, industry and agriculture it is also involved in offering pension for retired employees, government servants and collection of utility bills.
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Indian Financial sector:

It is a centralized body that monitors discrepancies and shortcomings in the system. Industry estimates indicate that out of 274 commercial banks operating in the country, 223 banks are in the public sector and 51 are in the private sector. These private sector banks include 24 foreign banks that have begun their operations here. The specialized banking institutions that include cooperatives, rural banks, etc. form a part of the nationalized banks category.
The Indian banking system is financially stable and resilient to the shocks that may arise due to higher non-performing assets (NPAs) and the global economic crisis, according to a stress test done by the Reserve Bank of India (RBI). Significantly, the RBI has the tenth largest gold reserves in the world after spending US$ 6.7 billion for the purchase of 200 metric tons of gold from the International Monetary Fund (IMF).The purchase has increased RBIs share of gold holdings from approximately 4% to 6%.
In the annual international ranking conducted by UK- based Brand Finance Plc, 20 Indian banks have been included in the Brand Finance Global Banking 500. The State Bank of India has become the first Indian bank to be ranked among the Top 50 banks in the world, capturing the 36th rank, as per the Brand Finance study. The brand value of SBI Increased from US$ 1.5 billion in 2009 to US$ 4.6 billion in 2010.ICICI Bank also made it to the Top 100 list with a brand value of US$ 2.2 billion. The total brand value of the 20 Indian banks featured in the list stood at US$ 13 billion.
Following the recent financial crisis, new deposits have gravitated towards the public sector banks. According to RBI's ' Quarterly Statistics on Deposits and Credits of Scheduled Commercial Banks: December 2009, nationalized banks, as a group, accounted for 50.9% of the aggregate deposits, while State Bank
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of India and its associates accounted for 23.4%. The share of other scheduled commercial banks, foreign banks and regional rural banks in aggregate deposits were 17.1%, 5.5% and 3% respectively. With respect to gross bank credit, nationalized banks hold the highest share of 50.6% in the total bank credit, with SBI And its associates at23.8% and other scheduled commercial banks at 17.8%. Foreign banks and regional rural banks had a share of 5.3% and 2.5% respectively in the total bank credit. The confidence of non-resident Indians (NR Is) in the Indian economy is reviving again. NR I Deposits have increased by nearly US$ 47.8 billion on March 2010, as per the RBIs June 2011 bulletin. Most of this has come through Foreign Currency Non-resident (FCNR) accounts and Non-resident External Rupee Accounts. Foreign exchange reserves were up by US$ 1.69 billion to US$ 272.8 trillion, for the week ending June 11, on account of revaluation gains. June 21, 2011 The General Bank of India was first Joint Stock Bank to be established in the year 1786. The Reserve Bank of India which is the Central Bank was created in 1935 by passing Reserve Bank of India Act, 1934 which was followed up by the Banking Regulations in 1949.
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STRUCTURE OF BANKING IN INDIA
Key affecting factors of banking industries

I decided to limit my project to just banking sector, because it is one of the most dynamic sector and also availability of time was not permitting me to go beyond this. They can be broadly classified into two: 1. Internal Factors 2. External Factors
Internal factors: As the name suggests, Internal Factors are those which affect the share prices internally, i.e. they are internal to the company or more specifically bank. Some of the major internal factor that affect are as fallows Earnings of the bank
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Investors invest money in the companies who earn well and in turn give good return on investment. Thus, a wealthy and a profitable company have good investors and thus have positive rice movements. Price/Earnings ratio also gives Market capitalization A company or bank with high market capitalization turns out to be more popular among investors. For example, HDFC BANK, ICICI BANK and SBI are more popular among investors than other banks because they have huge market share and market capitalization. As market capitalization increase, the shares price tends to increase and as market capitalization decreases, the share price tends to decrease. Price earnings ratio Price/Earnings ratio pr the P/E ratio gives us a fair idea of how companys share price compares to its earnings. If the price of the share is too much lower than the earnings of the company the stock is has the undervalued and it has the potential to rise in the near future.
External Factors: Economic factors: includes the structure of the company the industrial, agricultural, tariffs, transport and trade policies of the country, the growth and pattern of national income and distribution, the condition obtaining in the primary, secondary and tertiary sector, the situation obtaining in to balance of payment and balance trade and various economic policies, these all affect will stock broking industry. Government changes rules regulation in business Technological factor: now a day the technology has change day by day all the companies adopting in terms banks now installed their own ATM, through the country convenient location. Debit card, net banking, phone banking. Environment factor: Environment factors will also affect the banking industry
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Other factors: Other factors like growth of the company, figures of deposits, advances, balance sheet, profit and loss account, etc. also affect the share prices drastically for the same is done in later part of the report
Company profile:
Pragathi Gramina Bank (PGB) is Regional Rural bank sponspored by Canara Bank operating in 8 districts of Karnataka State. It is a pioneer bank for extending financial support mainly to agriculturirsts, artisans, self help groups and traders. The market share of the bank in the operating districts is around 20%. The bank has to its credit many innovative schemes and has the achievement highest number of rural godowns (more than 800 godowns ) in Karnataka state
BACKGROUND & INCEPTION OF THE COMPANY

The first RRB in south India was established by Canara Bank on 25.01.1976, by name Tungabhadra Gramin Bank. Subsequently, Canara Bank established and sponsored Chitradurga Gramin Bank, Kolar Gramin Bank and Sahyadri Gramin Banks in Karnataka State. All the above mentioned four RRBs were amalgamated and Pragathi Gramin Bank came into existence on 12.09.2005.
Nature of the business carried:

Pragathi Gramin Bank, a Bellary based regional rural bank, opened 32 branches as part of financial outreach in Kolar and seven other districts.
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According to Mr M.G. Bhat, Chairman, Pragathi Gramin Bank, In short period of bank's existence, business has touched Rs 9,000 crore, covering a clientele base of over 37 lakh.
400 branches
With today's branch opening, the bank's total branch tally has touched 400. This has been done to reach out to more people and more areas, bank opened two branches each at Bellary and Kolar, five branches at Chitradurga, Raichur and Davanagere, three branches at Chikkaballapur, six at Koppal and four at Shimoga, he added.
sampoorna solar villages

PGP along with its sponsor (Canara bank) declared three villages and four villages of Canara Bank as Sampoorna Solar Villages'. Earlier, opening one of the Pragathi Gramin Bank branches, the Union Minister of State for Finance, Mr Namo Narain Meena, urged the bank to increase assistance to agriculture and allied sectors and bring prosperity among the farmers in particular and rural populace in general.
e-products launch
Mr Meena also launched e-products ATM cards and NEFT facility offered by PGB and distributed loans sanction papers under KCC, GCC, SHG, Solar lighting system, smart cards.
Kolar gramin bank

The Union Minister of State for Railways, Mr K.H. Muniyappa, recalled his association with Kolar Gramin Bank as its director, which is now merged with Pragathi Gramin Bank. PGB staff members are cordial and helping the farmers and the issuance of two lakh Kissan Credit Cards is the testimony of their services.
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Kolar is known for milk, silk, mango, flowers and the bankers have to make helping hand to the farmers by liberally sanctioning loans. Mr R.Varthur Prakash, Karnataka Minister for Textiles, Ms Archana S. Bharghava, Executive Director, Canara Bank, and Mr S.N.A. Jinnah, Chief General Manager, Nabard, were present.
Vision, Mission, Quality policy: VISION

Placing our Organization at the Highest Altitude among the RRB's in the country and making it financially strong, viable, vibrant and an effective proactive instrument of social change, with an eye to work for overall development of the people and the economy of the operational area, through aggressive banking.
MISSION
To increase the business on a sustainable manner with consistent efforts and bring all the house holds in the operational area into banking folds. To fine tune the existing products and design new products and services to match the competition prevailing in the market. To mould the staff of the bank as computer literate and technologically savvy and to achieve hundred percent computerization of branches. To continue to be a true friend, philosopher and guide to customers with dedicated service and accelerate the pace of development of the operational area for accomplishing the Bank's Objectives.
Quality policy
Taking the banking services to the doorstep of rural masses, particularly to unbanked rural areas.
10 | P a g e Department of MBA, RYMEC, Bellary
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ii. Making available institutional credit to the weaker sections of the society who had by far little or no access to cheaper loans and had perforce been depending on the private money lenders. iii. Mobilize rural savings and channelize them for supporting productive activities in rural areas. iv. To create a supplementary channel for the flow the central money market to the rural areas through refinance v. Generating employment opportunities in rural areas and bringing down the cost of providing credit to rural areas.
PRODUCTS/SERVICES PROFILE DEPOSIT SCHEMES Savings Bank Account:

Save while you can, draw when you need it. An account for individuals, non-trading organizations and permitted institutions etc. Minimum amount: Rs.100/- without cheque book facility (Rs.500/- with Cheque Book facility)
No Frill Account ( Savings Bank Account)

Basic bank account to all house holds Savings account with basic facilities can be opened with an initial deposit of Rs.10/- or nil balance.
The objective is to enable under privileged house-holds to have access to financial, insurance and extension schemes for socio-economic development.
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New Nitya Nidhi Deposit

A Scheme which suits poor and rich alike

Collection of your daily savings at your door steps Scheme period 5 years closer before maturity permissible No restrictions/ceilings for daily savings.
Saving Bank A/c with Personal Accident Insurance cover 3 schemes to choose from:
Schemes Amt. to be Int. to be earned Annual premium Amount to be deducted Insurance Coverage 17.00 35.00 70.00 8 16 32 25,000 50,000 1,00,000 of
maintained in the for one year A/c. SJJND PSJND PSJND - II 500 I 1000 2000
Hassle-free and uninterrupted renewal. The interest earned every year taken care of premium to be paid. Customers in the age group of 12-70 years are eligible to open accounts under the above schemes.
Fixed Deposit It is safe, Liquid and fetches high returns

When you want to invest your hard earned money for a longer period of time and get a regular income, our Fixed Deposit Scheme is ideal.
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How much can you Minimum : Rs.100/invest Period of Deposit Maximum : No ceiling Minimum : 15 days Maximum : 120 months High Returns Interest Payment Easy Liquidity Attractive rates as applicable from time to time Monthly, Quarterly, Half-yearly at depositors choice Loan against deposit. Closure before maturity permissible
Pragathi Tax Saver Deposit (Term Deposit Account)

Benefits of Section 80 C of the I.T Act 1961 extended to this deposit Investment upto Rs.1.00 Lakh deductable from Income under Section 80C of the I.T. Act 1961
Scheme available to individuals/firms/Institutions Fixed period of 5 years. No closure before maturity No loans against the pledge of deposit
Not accepted as security/collateral security to any loan.
Kamadhenu Deposit:
Our re-investment plan that multiplies your money Apart from safety and liquidy, it offers you the highest growth option (Compound interest) How invest much can you Minimum : Rs.100/Maximum : No ceiling
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Period of Deposit
Minimum : 05 months Maximum : 120 months (can be for odd period also)
High Returns Interest Payment Easy Liquidity
Attractive rates as applicable from time to time Interest calculated at quarterly rests and added to the principal Closure Before maturity permissible. Loan against deposit available.
Deposit Scheme for Senior Citizens: Fixed Deposits and Kamadhenu Deposits:
We respect senior people not by words alone. But in deeds too! We offer 0.5% more interest to them on the above deposit schemes.
Recurring Deposit
Make saving habit a rewarding recurring habit. Ideal for convenient savings. Enables to build up a sizeable capital in a regular and systematic way. Amount of Deposit As low as Rs. 50/- per month (in multiples of Rs.50/-) No ceiling on maximum limit. High Returns Attractive rates as applicable from time to time. compounded every quarter. Liquidity

Interest
Closure before maturity permissible Loan against deposit permissible
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RATE OF INTEREST ON DEPOSITS

Preferential Period of Deposit Base interest rate of rates Senior Citizens 7 days to 14 days 15 days to 30 days 31 days to 45 days 46 days to 60 days 61 days to 90 days 91 days to 179 days 180 days to 269 days 270 days to less than 1 year 1 year to less than 18 months 18 months Above 18 months and up to 5 years 5 years and above up to 10 years Pragathi Tax Saver [5 years period] 4.00 % 4.00 % 5.00 % 7.25 % 7.00 % 7.25 % 8.50 % 8.50 % 9.60 % 9.80 % 9.50 % 9.25 % 9.00 % 4.50 % 5.00 % 5.50 % 7.75 % 7.50 % 7.75 % 9.00 % 9.00 % 10.10 % 10.30 % 10.00 % 10.25 % to
INSURANCE COVERAGE ON DEPOSITS

All Deposits made by our Customers are covered under Deposit Insurance scheme of Deposit Insurance and Credit Guarantee Corporation (DICGC), Mumbai up to Rs. 1 lakh per party. Hence the Deposits with our Bank are Safe and Secure
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SERVICES:
Pragathi Gramin Bank Services:
Pragathi Gramin Bank is involved in deposits, loans and insurance sector. It offers schemes and ROI in deposit services. Agriculture investment finance, trade finance, personal finance and ROI loans are the main services of Pragathi Gramin Bank loan schemes. It offers life insurance, safe deposit of lockers and transfer of funds in services area.
LIFE INSURANCE SCHEMES MARKETED BY ALL OUR BRANCHES Life insurance coverage is one of the integral components of the Financial Inclusions. Life insurance products not only provide social security to the insured but also enable to use the same as a saving cum wealth creation tool.
Our Bank has entered in to life insurance business as a Corporate Agent of Canara HSBC OBC Life
insurance company Ltd., (Corporate Office : Gurgaon). The stake holders and ownership pattern of the Company is as under.
NON - LIFE INSURANCE

CORPORATE AGENT WITH UNITED INDIA INSURANCE COMPANY LTD. Assets held as security to the Bank finance are to be adequately covered under Insurance. For example, livestock, Vehicles, machineries, building and Stock in trade, etc. Our Bank has entered into an MOU with M/s United India Insurance Company Ltd., for undertaking non-life insurance business as Corporate Agent. Under this arrangement, insurance business can be mobilized not only from existing lanes but also from non-loanees and non-customers.
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In the event of any claim arising in the insured cases, the insured (customer) will have to contact our branch who in turn would contact the branch office of the company with the details of the policy. Branches would provide prior intimation to the company over phone regarding the claim of the insurer. The company would initiate the necessary steps to settle the claim thereby making the process a hassle-free one.
TRANSFER OF FUNDS
All our Branches are permitted to issue Demand Drafts/Money Transfers on all our Bank Branches. Additionally, we have made DD drawing arrangement with the following Branches of Canara Bank. DEMAND DRAFT DRAWING ARRANGEMENT ON CANARA BANK BRANCHES For the benefit of our Customers our Bank is issuing DDs on all Branches of Canara Bank within the State of Karnataka and the following designated 36 Branches outside Karnataka up to Rs. 5 lakh per day per party Sl.No. Name of the Place (State) 1 2 3 4 5 6 7 8 9 10 11 12 Adoni (Andhra Pradesh) Ahmedabad (Gujarath) Agra (Uttar Pradesh) Ananthapur (Andhra Pradesh) Bhavani (Tamil Nadu) Bhopal (Madhya Pradesh) Chandigarh(Punjab/Haryana) Chennai (Tamil Nadu) Coimbatore (Tamil Nadu) Delhi (NCR) Ernakulam (Kerala) Erode (Tamil Nadu) Designated Center Branch Accounts Section Accounts Section Branch Branch Berasia Road, Main Accounts Section Accounts Section Accounts Section Accounts Section Accounts Section Cutchery Road, Main D.P. Code 601 1310 1746 659 1237 360 1995 1760 1165 1745 1730 1104
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13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 .
Goa(Goa) Guntakal (Andhra Pradesh) Hyderabad(Andhra Pradesh) Jalandar (Punjab) Kanpur (Uttar Pradesh) Kolkatta (West Bengal) Kurnool (Andhra Pradesh) Kolhapur (Maharashtra) Ludhiana (Punjab) Madurai (Tamil Nadu) Mumbai (Maharashtra) Pune (Maharashtra) Panaji (Goa) Rajahmundry (Andhra Pradesh) Salem (Tamil Nadu) Sangli (Maharashtra) Sholapur (Maharashtra) Sivakasi (Tamil Nadu) Surat (Gujarath) Tiruppur (Tamil Nadu) Trichy (Tiruchirapalli) (TN) Trivandrum (Tiruvanthapuram) Vadodara (Gujarath) Vijayawada (Andhra Pradesh)
Sanquelim Branch Accounts Section Accounts Section Accounts Section Accounts Section Branch Laxmipuri Accounts Section Accounts Section Accounts Section Accounts Section Panaji Branch Accounts Section Branch Chatigalli Branch Accounts Section Main Branch Accounts Section Accounts Section Raopura (Main) Accounts Section
342 778 622 2484 2302 279 661 304 1996 1060 101 1591 308 642 1739 1613 310 921 1997 1246 2303 1729 343 2300
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Designated Branches of Canara Bank Branches in Karnataka (where there are more than one Branch) for the purpose of drawing DD by Pragathi Gramin Bank SL. NAME OF THE BRANCH Bellary Tq. 1 2 3 BANAPUR BELLARY COWL BAZAAR BELLARY GANDHINAGAR Wednesday ----------NPBW DAY SL. NAME OF THE BRANCH NPBW DAY HOSPET Tq. 1 2 3 DEVASAMUDRA DHARMASAGARA HOSPET ANANTHASAYANA GUDI 4 BELLARY STREET 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 BELLARY MILLERPET BELLARY MOTHI CIRCLE BELLARY S G NAGAR CHELLAGURKI GENIKEHAL KAMMARCHEDU KOLUR KORLAGUNDI KUDATHINI KURUGODU MOKAGONAL SANGANKAL SIDARAGADDA SIDDAMMANAHALLI SINDHIGERI SIRIGERE (BELLARY) ----------Wednesday Wednesday Wednesday Wednesday Wednesday Wednesday -----Wednesday Wednesday Wednesday Wednesday Wednesday Thursday 5 6 7 8 9 10 11 HOSPET COLLEGE ROAD Thursday HOSPET DAM ROAD -------KALAMMA -----4 HOSPET BELLARY ROAD -------Thursday Thursday -
HOSPET INDIRA NAGAR -KAMPLI --------
MARIYAMMANAHALLI Thursday METRI RAMASAGARA Thursday Thursday
HUVINAHADAGALI Tq. 1 2 3 4 5 6 7 8 HARAVI HIREHADAGALI HUVINAHADAGALI ITTIGI (BELLARY) KOMBLI MAGALA MAKARABBI MYLAR Wednesday Wednesday --------Thursday Wednesday Wednesday Wednesday Wednesday
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21 22
SIRIVARA (BELLARY) SOMASAMUDRA
Wednesday Wednesday
SOGI
Thursday
KUDLIGI Tq. 1 2 3 4 5 6 7 BANAVIKAL HOSAHALLI KOTTUR KUDLIGI OOJEIN RAMADURGA THAYAKANAHALLI Wednesday Wednesday ----Wednesday Wednesday Wednesday
HAGARIBOMMANAHALLY Tq. 1 2 3 4 5 6 7 BACHIGONDANAHALLI HAGARIBOMMANAHALLY Friday HAMPAPATNA HAMPASAGARA HANSI KOGALI MOREGERE Friday Friday Friday Friday Friday
SIRUGUPPA Tq. 1 HATCHOLLI K BELAGAL KARUR MUDDATANUR RARAVI SIRUGUPPA TALUR Wednesday Wednesday Wednesday Wednesday Wednesday --Wednesday
SANDUR Tq. 1 2 3 4 5 BANDRI CHORNOOR NEW DAROJI SANDUR TARANAGAR Thursday Thursday Thursday Thursday Thursday
2 3 4 5 6 7
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Market Share (in %) as at March 2011 (Amt. In Crore) District No.of Branches Bellary Chitradurga Davanagere Kolar Chikkaballapura Koppal Raichur Shimoga 68 65 45 35 31 42 54 28 Branch Network Deposits (in %) 30.00 45.77 27.37 29.91 28.03 37.50 34.83 12.78 (in %) 17.49 29.46 15.03 23.50 25.26 32.03 24.49 6.21 Advances (in %) 11.66 32.80 17.22 23.80 23.14 22.02 33.72 5.36 O/s Total Business (in %) 14.60 31.52 16.11 23.63 24.34 26.37 29.43 5.86
Bank's Business Position (Amt. In Crore) Year/Month Agg. Deposits 12th 2005 March 2006 March 2007 March 2008 March 2009 March 2010 March 2011 1642.94 2006.19 2548.63 3222.32 4122.46 4812.60 1614.49 2025.29 2400.00 2986.66 3878.93 4349.51 3257.43 4031.48 4948.63 6208.98 8001.39 9162.11 20.62 23.76 22.75 25.47 28.87 14.50 Sept. 1326.49 Advances O/s 1374.05 Total Business 2700.54 % Increase
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COMPETTIORS INFORMATION :
1) State Bank of India: The State Bank Group, with over 16000 branches, has the largest branch network in India And the bank has 141 overseas offices spread over 32 countries. State Bank of India is one of the Big Four Banks of India with ICICI Bank, Axis Bank and HDFC Bank. The State bank of India is 29th most reputable company in the world according to Forbes. The products of the bank are Loans Credit Cards, Savings, Investment, vehicles, SBI Life Insurance etc.
2) ICICI Bank: It is India's largest private sector bank by market capitalization and second largest overall in terms of assets. The Bank also has a network of 1,640 branches and about 4,816 ATMs in India and presence in 18 countries, as well as some 24 million customers. ICICI Bank offers a wide range of banking products and financial services to corporate and retail customers through a variety of delivery channels. ICICI Bank is also the largest issuer of credit cards in India.
3) Bank of India: It was established on 7 September 1906 is with its headquarters in Mumbai. Government-owned since nationalization in 1969,It is one of India's leading banks, with about 3101 branches including 27 branches outside India. Bank of India is a founder member of SWIFT (Society for Worldwide Inter Bank Financial Telecommunications) in India which facilitates provision of cost-effective financial processing and communication services.
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INFRASTRUCTURAL FACILITY
Pragathi Gramin Bank is located in the centre of the city where the bank has multi-floor building where it has separate partition for all the departments.
The bank is fully computerized and well furnished with air condition facility to the employees
The bank provides medical facilities to its employees
It also provides educational facility to the employees and their children.
The bank also provides vehicle faculty or traveling allowances to their employees
The bank also has provided with quarters facilities to its employees (officers).
The bank has established its own training centre to develop the employees knowledge, skill & attitude.
WORK FLOW MODEL :

The bank has a two way approach in its work flow pattern. Lets consider a loan sanction model, the person who requires the loan needs to fill an application and submit it to the respective branch authority. Each branch has certain limitations regarding the loan amount; bank needs to check the authentication of the details and information produced by the party. Loan can be sanctioned only if the securities pledged are valid and are free
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from legal considerations. The loan is sanctioned by the bank authorities if the requirements are fulfilled; else if the loan amount is exceeding the limits of the branch, the request is forwarded to the circle office or the head office. The circle or the head office verifies and approves or rejects the proposal. The order (approved/rejected) is sent back to the respective branch, and hence sent to the person. The figure above provides a clear understanding of the same
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AWARDS & ACHIEVEMENTS :

NABARD has been recognizing Best Performing Branch/RRB annually under Farmers Club and SHG linkage. Bank has received the following Awards for excellence under promotion of SHGs and Farmers Clubs.
Sri Sharana Muddanna Raitha Koota Farmers club promoted by our Kumbalur branch of Davanagere District is adjudged as the Best Farmers Club in the State.
Bank secured State Level Award under SHG Bank linkage programme for Higest Average Loan per Group Account unde RRB
FUTURE GROWTH AND PROSPECTUS

Business finance. Measures to improve the economic condition of minority community. Government sponsored schemes. Investment.
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McKinneys 7s FRAMEWORK
The 7-s frame work of McKinney is a value based management (VBM) model that describes how one can holistically and effectively organizes a company. Together these factor determine the way in which a corporate operation.
SHARED VALUE
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Contribution to the rural productivity & prospective is one of the stated objectives of the cooperative bank. The following two illustration studied by me could be quoted as testimony to the banks achievements. Farmers in rural areas generally found taking their agriculture produce to make for selling, immediate after investing. The commission agents also make outright purchases & pick up the produce directly from the framer land after investing. As most farmers dont have accommodation for storage, they cant take the advantage of holding the produce for a couple of months in anticipation of remunerative prices. The bank took decision to help the farmers community with financial assistance for construction of commodity storage go down in agriculture land/ village. The bank introduced special schemes in the year 2005 for above purpose. An extensive canvassing of the scheme was undertaking by the bank, organization customers meets / village it floted a special schemes to advance loans to farmers, who stored their agriculture produces in their own hours or go downs for want of remunerative price. The Commodity pledge to the bank.
STRATEGY
Loans /advance strategies. Reserve bank of India & national bank for agriculture & rural development is the guiding authority to the bank in the matter of loans/ advances policy/ scheme. The procedural aspects are guided by sponsor bank be canara bank. Every guideline from RBI/NABARD that suggests adoption of particular policy as put up to the board for decision. The board of directors after examining the pros & cons of the guideline resolve either for implementing of the guideline or defer it. If the policy is expected by the board for implementation, then the head office comes out with detailed guidelines which are communicated to authorities for implementation.
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STRUCTURE
The bank is operating with three tier Organization structure. The bank has the head office at Bellary, 7 Regional Offices and 365 Branches around the Karnataka. There are 3 General Managers for the bank who are looking after seven different wings of the bank. They are 1. Development Wing 2. Personnel Wing 3. Premises staff and Information Technology Wing
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4. General Administration Wing 5. Recovery and Legal Wing 6. Inspection Wing 7. Credit Wing
SYSTEM Fixing of interest rates for various deposits schemes offered to the customers by the bank is one of the important functions of the above said department. The fixing of interest rates on deposits on following factors. Demand for loans from the customers. Loans recovery position. Other sources of borrowing & interest rate on such borrowings. Interest bun on bank both for outside borrowing & for raising deposit from customers. Managing of profit available at the end.
Whenever other competing banks make either an upward/downward revision in their existing interest rates on deposits, this department studies the market trend & it own funds positions & thereafter comes out with alteration in the existing rates, wherever needed.
STYLE
Cultural of the organization and how key managers behave in achieving the organizational goals. Management style
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As such the style adopted is naturally a top- down approach of participative approach on the sense that the board of directors, managers, which is constituted with representation from government official & public representative (2 directors nominated from among the public). It is top down management & authoritarian. The bank is established by the government of India. Therefore, it is require functioning within the frame work of guidelines communicated by government of India, RBI&sponsor bank.
STAFF
The bank is motivated to harness the unique assets of the human resources for growth of the institution and to imbibe team spirit for self and mutual development among banks staff. The bank has made inroads towards establishment of quality circle concept among its employees. Training & Development Canara bank has been a fore runner in establishment of its own training college at Bangalore, supported by 13 regional training centers spread over length & breadth of the country. These centers take care of knowledge, skill & attitudinal development of the employees.
SKILL
A skill refers to the fact employees have the skills needed to carry out the companys strategy. Training and development ensuring people known to do their jobs and stay to date with the latest development & techniques .Some of the training programs conducted to the employees in the bank are as follows; Project management training Advanced risk management training System appreciation training Leadership development training Behavioral training Professional skills training.
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SWOT ANALYS
SWOT mean analysis and assessment of comparative strengths and weakness of a firm in relation with their competition and environment opportunities and threats, which a company may likely to face. SWOT analysis is as such a systematic study and identification of those aspect and strategies that best suit the individual company position in a given situation. It should be based on logic and rational thinking such that a proper strategy improves an organization business strengths and opportunities and at the same time reduces its weakness and threats
STRENGT
Good & quick service Good Recovery Deposits have been ensured with DICGC Customer oriented approach Staff members are committed and respond well to the queries of the customer. Customer identification
WEAKNESS . ATM systems need to be installed all over Karnataka. Online Banking is required.
OPPORTUNITIES Only 8 districts of the Karnataka has been covered by the bank hence there is great scope for expansion. No much competition in the villages.
THREATS
Credit risk Government policies Credit policies
Many competitors in the urban and

semi-urban areas.
BALANCE SHEET AS ON 2010

RISK MANAGEMENT ____________________________________________________________________________________ PARTICULARS MARCH2O1O MARCH2009 INCREASE/DECREASE %INCREASE/DE CREASE CAPITAL &LIABILITIES Capital Share capital deposit Reserves Deposits Borrowings Other &provisions TOTAL Assests: Cash and balances with RBI Balance with banks 4329670 and maney at call and short noties investments advances Fixesed assets 12979068 33797459 154997
1957217 56691836 91984 165802
40000 399079 4254009 41224582 7376125 liabilities 3398041
40000 399079 33704460 32223204 3400098 2833094
56691836
42599935
14091901
1.33
3473425 2542237 2011560
9894428 26993572 107721

1050417 42599935 72943 382348 14091901 1.33
other assets
Total
Contingent liabilities Bills of collection
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BALANCE SHEET AS AT 31st MARCH 2011

PARTICULORS MARCH 2011 Capital liabilities capital Share deposit reserves deposits borrowings Other liabilities and provisions total Assets: Cash and balances with RBI Balance with banks and maney at call and short noties investments advances Fixesed assets other assets total Contingent liabilities Bills of collection
144060 165802 21973530 34931504 140908 2024339 65806986 143912 12979068 33797459 154997 1957217 56691836 91984 9115150 1.16 2961200 4329670 3775505 3473425 65806986 56691836 9115150 1.16 4782693 48125974 9578994 2880246 4254009 41224582 7376125 3398041 40000 40000 399079
MARCH 2010
INCREASE/D ECREASE
%INCREASE/DECRE ASE
and
capital
399079
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PROFIT AND LOSS ACCOUNT

PARTICULARS INCOME Interest Earned Other income TOTAL EXPENDITURE Interest expended Operating expenses Provision & contigencies TOTAL SURPLUSE NET PROFIT FOR THE PERIOD APPROPRIATIONS TO statutory reserves To reserve for long term finance To floating reserve towards investment Transfer to govt./proposed dividend 110000 32500 110000 --------110000 59000 50000 ---------75000 59300 50000 --------528684 549549 359802 3137286 1387165 340468 4864919 2599423 928110 317785 3845318 1897010 802819 311130 3010958 5145478 248125 5393603 4209997 184870 4394867 3169599 201162 3370761 MARCH2011 MARCH2010 MARCH2009
To floating reserve towards NPA TO General Reserve
200000 75000
90000 240000 549
100000 75000 502
Balance of carried over to balance 1184 sheet TOTAL 528684
549549
359802
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LEARNING EXPERIENCE
The banking sector currently is the emerging sector and it is a fast changing and very dynamic. Banks in the country are every effort to meet the expectations and needs of the customers more than nationalized banks by offering the superior and innovative product and services. The study highlights that the bank is focusing mainly on customer satisfaction through various innovative products and services. In the present business world, each and every bank is making their possible best efforts to attract more number of customer towards their bank, which resulted in aggressive competition in the banking sector. As the future managers of the bank world, we need to know everything about the functioning of the organization and it is strongly believed institution learning is different from that of the particle learning. And that is why in plant training helps us to know a complete functioning of the organization. During this in plant training, I got the opportunity to study and know exactly the various strategies adopted by the organization and also to understand the duties, responsibilities, etc.., of the various department and its functioning. In fact I was exposed to the systems followed by the organization, the style of management. In plant training program to a greater extent has helped me to understand the aspects such as different products and services offered by the bank, area of operation, work flow model, overall organization functioning, etc., Apart from these things, I was also able to understand the organization in depth with the application of Mckensys 7s frame work with special reference to organization understudy namely structure, skill, style, system, staff, shared value, and lastly the aspect of SWOT analysis of the organization. All and all, this in plant training was the most useful and valuable program in my education life, where I got many things to learn and understand very practically and the program has given me
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inputs about the process or the whole functioning of the organization. In fact this in plant training was much valuable and added more value to my knowledge and to my career as well. Lastly I thank our institute and university as well for providing such an opportunity of learning and understanding the various functions and process of the organization practically, where it is possible for me to make an attempt to apply theoretical aspect in the organization and most importantly decision making aspect in the organization.
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PART-B
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GENERAL INTRODUCTION :
Risk is broadly
defined as a threat that an event or occasion that will adversely affect
organisation`s ability to achieve its business objectives and successfully execute its strategy and an adverse impact on profitable of several distinct source of uncertainty. Risk is the probability of non-fulfilment of commitment to stakeholders on account of non realization of assets. While the recovery in loans and investments would depend on the capabilities of proper recovery machinery under risk management system, the payment to the stakeholders i.e. Depositor is mandatory. Thus a mismatch between the inflow through recovery and out go to the depositors could become very difficult if the risk management tools fails to deliver. With opening up of the economy and widening of the banking operation, varied market condition diverse regulatory requirement have to been necessarily inter related by adapting a proper policy in risk management.
STATEMENT OF THE PROBLEM

The project helps in understanding the clear meaning of Risk Management in P. G.bank. It explain about the most obvious risk derivatives participants face is risk. For both purchasers and sellers of protection, Risk derivatives should be fully incorporated within risk management process
OBJECTIVES OF THE STUDY

To study the trend in loans and advances of the bank To analyze how the pragathi gramin Bank is adopting strategies to attract towards their product.
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To make comparative study of product/ services of pragathi Bank with other Bank. To evaluate about the various credit facilities offered by bank To know the different kinds of loans provided by the pragathi gramin bank. To analyze how the pragathi gramin Bank is adopting strategies to attract towards their product.
SCOPE OF THE STUDY

The scope of the study is identified during the study is conducted. The project is based on tools like credit risk, return and management. Further, the study is based on information of last three years.
The scope of the study is limited in bellary other division The scope is limited to only the risk management
METHODOLOGY
Hence a project is understood on risk management and advising PG bank on how to recover the due from the borrowers. The quality of the project work depends on the methodology adopted for the study. Methodology in turn depends on the nature of the project work. The use of proper methodology is an essential part of any research. In order to conduct the study scientifically, suitable methods & measures are to be followed. The type of research used for the collection & analysis of the data is Historical Research Method. The main source of data for this study is the past records of the bank. The focus of the study is to determine the non-performing assets of the bank since its inception & to identify the ways in which the performance especially the non-performing assets of the State Bank of India can be improved. The data regarding bank history & profile are collected through Exploratory Research Design particularly through the study of secondary sources and discussions with individuals.
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Title of the Project

Risk Management in pragathi gramin bank Bellary
Data Collection Method Primary Data

The data directly collected by the researcher with respect to the problem under study is known as Primary data. Primary data is also the first hand data collected by the researcher for the immediate purpose of the study
Sources of Primary Data

Having face to face discussions with the bank officials By taking guidance from bank guide & departmental guide.
Secondary Data
The secondary data is mainly obtained from company manual and annual report. Secondary data are statistics that already exist. They have been gathered not for immediate use. This may be described as those data that have been compiled by some agency other than the users
Limitation of the study :

The study is based only on risk management. The study is based on the data given by the officials and reports of the bank. The confidentiality of some facts and figures is a limitation. The non-availability of relevant information is one of the limitations.
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DATA COLLECTION AND ANALYSIS THEORITICAL BACKGROUND OF RISK MANAGEMENT POLICY

Risk is broadly defined as a threat that an event or occasion that will adversely affect organisation`s ability to achieve its business objectives and successfully execute its strategy and an adverse impact on profitable of several distinct source of uncertainty. Risk is the probability of non-fulfilment of commitment to stakeholders on account of non realization of assets. While the recovery in loans and investments would depend on the capabilities of proper recovery machinery under risk management system, the payment to the stakeholders i.e. Depositor is mandatory. Thus a mismatch between the inflow through recovery and out go to the depositors could become very difficult if the risk management tools fails to deliver. With opening up of the economy and widening of the banking operation, varied market condition diverse regulatory requirement have to been necessarily inter related by adapting a proper policy in risk management. In order to achieve disciplined and transparent system a scientific risk management covers all risk information systems, reporting and subsequent action. The basic principles of risk management are: 1. The management rules should not constrain the risk taking process too much. Being too prudent slows down the decision making process and limits the volume of business. 2. There should be a separation of the risk taker from the risk controller. The risk takers have an interest in volume of business and profitability and both targets can be met at the expenses of additional risk. The risk taker, therefore cannot be the risk controller. 3. There should be incentives to disclose the risks when they exists rather than to encourage the managers to hide them. In order to achieve the objectives of the above principles a policy on risk management is being put its place. Earlier to this the bank has been practicing certain risk management function by adapting very strong review system, adoption of ALM system though ALM was
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not mandatory to RRBs. With this prudent approach the bank has been addressing issues in risk management. However as a policy in order to fall in line with market standards in banking operation, compete with other institution and to maintain stability we are presenting the policy on risk management.
RISK MANAGEMENT FUNCTIONS:

The broad parameters of the risk management encompass the following: Organisational structure. Comprehensive risk measurement approach Risk management policies approved by the board which shall be consistence with broader strategies, financial strength, management experience and overall willingness to assess risk A strong MIS for reporting , monitoring and controlling. Effective procedures, perfect control and comprehensive risk reporting framework. Separate risk management frame work independent of operational departments and with clear delineation of levels of responsibility for management of risk. Periodical review and evaluation of risk management system. Risk management is both top-down and bottom up process. At the top level target earnings and risks level are defined. From top to bottom the overall goals are translated in to signals to business unites(branches) and to managers in charge of transaction with customers. The monitoring and reporting of risk are bottom up oriented, starting with transaction and ending with consolidated risks revenues and volume of transactions. Thus the functions in managing these risks involve following processes.
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RISK MANAGEMENT PROCESSES
1. Risk identification :
Risk identification involves the understanding the nature of various kinds of risks. The circumstances that lead to risk situation and knowing the causes due to which the risk can arise. This should be done as under: a) Periodical review of the asset portfolio b) Risk rating of credit and investment exposures c) Analysis of loss arising out of human and system failures like frauds, wrong posting of credit and consequent of withdrawal of funds by persons non entitled for the same. d) Technology issues.
2. Risk measurement or quantification :

Risk being probabilistic in nature, measuring it in accurate terms is difficult. At a time quantification becomes difficult. However risk quantification is an assessment of the degree of the risk to which a particular transaction or any activity is exposed. We can attempt to quantify it in approximate terms by having a data base of loss events and by default and probability of default different methodology and techniques are suggested and these can be adopted to quantify various risks. Such techniques are suggested in the ensuring passages.
3. Evaluation and control :

Monitoring and evaluation of the risks identified should be on continuous basis by way of analysis and supervision of various drawn periodically by the risk management committee at
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apex level basing the data collected. The risk matrics normally high risks, medium risk and low risks. The risk management department at apex level shall appraise the top management about quantitative qualitative information and take steps to plug the gaps if any noticed in the existing controls. In order to focus attention on areas of greater risk to the bank an activity wise and location wise identification and assessment of risk shall be under taken. Previous internal audit reports and compliance Proposed changes in loan policy or credit policy Significant change in management Latest inspection report of NABARRD/ RBI/ SPONSOR BANK/ Other approved agencies Report of external auditors. Sectoral trends and other environmental factors. Volume of business and risk prone credit Substantial performance variations from the budgeted levels. Proper MIS and data integrity The internal audit section should be kept informed of all the development such as introduction of new schemes, change in accounting practices and policies 4. Risk mitigation :
In order to mitigate the risk identified different strategies to be adapted for each type of risk, For example: for credit transaction oriented shall be done with the help of internal audit, and intrinsic risk shall be controlled by understanding various factors typical to particular industry, activity or business to which u nit belongs by collecting information about the industry. Risk mitigation in case of market risk shall be controlled by adopting ALM exercise. In our bank we have ALM concept. However ALCO committee shall periodically review and appraise the top management. When risk cannot be controlled, managed/ contained or absorbed or it can not be prudently transferred. Such events are normally those on which bank has little control like fire, flood,
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acts of God etc. The effective way of transferring of such risk is by way of recourse to insurance cover. One of the effective tools the bank shall adopt in mitigating the risk is gradually to move towards risk based internal audit which will in addition to selective transaction testing. This would mean that the roll of internal auditor is higher in mitigation risks. Suggestions from internal auditor should be obtained periodically. This will help in mitigation of current risk and avoid future risk. The bank has already adopted risk based supervision and risk based audit in its system
Types of risk:
The principal banking risks are : Credit risk Liquidity risk Market risk Interest rate risk Foreign exchange risk Solvency risk Operational risk
Credit risk :
Credit risk as the losses in the event of default of the borrowers or in the event of detoriati on of the borrowers` credit worthiness. The credit risk emanates when the counter party/ borrower is unwilling or unable fulfill the contractual obligation/ commitment leading to default. The credit risk can be subdivided in to 3 risks. Default risk. Exposure risk Recovery risk
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Or it can also be classified into following factors Internal factor (application to borrowers) Internal factor (Application to bank) External factor
Internal factors (Applicable to barrowers) include in adequate to technical know-how location advantages, outdated production process, high cost inputs, break even points is too high, uneconomic size of the project, large investment in fixed assets, over estimation of demand, wide swings in commodities. Internal factor(Application to bank) include deficiency in loan policies, absence of prudential credit concentration limits, in adequately defined delegation of powers to loan officers, deficiencies in appraisal of borrowers financial position, excessive dependence on collateral`s, in adequate risk pricing, absence of review mechanism and post sanction surveillance. There are also other external factors, which are applicable both for banks barrowers. Credit worthiness of the counter party, concentration risk, portfolio risk, transaction risk, government policies, trade restrictions. However among the above factors in credit risks, following are the important factors in credit risks. Default risk :
The default risk may be on account of missing a payment obligation for certain period, going down in the economic value of the assets. Exposure risk :
This is generated by uncertainty prevailing with future amounts at risks. For the credit limits with repayment schedule the exposure risk can be considered as small or negligible. In case of operative limits like overdraft , cash credit where bank is committed where lending money up to some maximum amount of risk varies at the initiatives of the client. Recoveries in the event of default are not predictable
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Recovery risk :
recovery risk as three components i,e. (i) Collateral risk credit risk can be minimised if the collateral is easily convertible into cash and credit towards the liability. Therefore the bank has to be more prudent in taking collateral`s. (ii) Third party guarantee risk in this segment credit risk prevails if both guarantor and guarantee fails to honor the commitment (iii)Legal risk this arises on account of bank not being able to sell the collateral or enforce the guarantee legally. The other types of factors influencing (external or internal ) credit risk are : Interest rate risk: Stipulation of lending rates for any activity should be reasonable, acceptable, and affordable to the barrower based on his cash generation and repaying capacity. Fixation of any unreasonable interest rate that is not matched by adequate cash generation by the barrower may lead to defaults is meeting the agreed commitments. This shall be addressed by the bank by fixing reasonable lending rates arrived by scientific calculations (ALM) The other type of credit risk on account of external factor is Forex risk. This includes volatility in foreign exchange rates on account of which the ability to repay the counter party is affected. If the rupee value depreciates more of India currency may have to be bought in and ultimately lead to default. If rupee strengthens against foreign currency the rupee equalant of export earnings gets reduce which leads to eroded profits.
Country risk : the prevailing economic situation in different country determine the risk which the bank is exposed to. If the importers country has imposed an embargo on repatriation, then, our exporter will not be in a position to receive the export proceeds, which may leads to default.
Concentration risk :
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Credit concentration is probably the single largest cause of major credit problems. It includes conventional, concentration such as credits to single barrower, a group of connected, counter parties, sectors or industries and the concentration based on common or core related risk factors.
Portfolio risk :
This is on the lines of concentration risk, where the banks takes credit and or investment exposure on certain sectoral activities like housing, textile sugar industries etc. The success or failure of the credit and or investment exposure directly depends on the success rate of these segments. If these segments are not performing well and which may cause hardship to the parties, in turn, this may result in default of payments. This is a major credit risk which bank has to face.
Transaction risk : In this type of risk the nature of transaction some times has an intrinsic risk like granting of clean/ unsecured loan, discounting of supply bill, book debt finance to individuals and proprietary concerns. Economic scenario/ government policies, trade restriction etc. The change in the economic scenario or the government policies or trade restrictions imposed by various authorities are beyond the control of either the bank or the counter party. This may adversely affect the business, which may cause default leading to credit risk.
Credit risk management :

After knowing the details of the credit risk and cause of the credit risk it is necessary to understand and implement a sound credit risk management techniques by the bank in order to mitigate the risk . according to the basle committee core principals following the factors, which
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have direct bearing on the credit risk management functions of the bank. These are called basic requirements for effective credit risk management. 1) Laying down sound credit granting standards and credit granting process. This includes maintenance of prudent return lending policies, loan approval and administrative procedures, appropriate loan documentation etc. Lending and investment activities shall be based on prudent under writing standard duly approved by the board and clearly communicated to the bank officers and the staff dealing with credit functions.
Bank shall also have sound, well defined credit granting process with proper delegation of sanctioning powers to various functionaries of the bank. Bank shall fix prudential exposure ceiling to individuals, group borrowers various industries, activities, sectors etc.
2) Effective credit administration :
In order to mitigate the credit risk bank shall have in place. a. A system of on going administration of credit
b. An effective monitoring mechanism of loan portfolio c. Develop and utilise internal credit risk rating systems. d. Appropriate machineries to collect accurate management information. e. With the MIS evolving proper techniques to address the credit risk. The monitoring mechanism should also take into consideration the potential future changes in the economic policies, government policies etc. Prevailing in various parts to address the credit risk.
MECHANISMS OF CREDIT RISK MANAGEMENT :

i) Credit approving authority : The board of director of the bank shall ensure that, prudential limits are fixed to restrict bank exposures to single barrowers or groups of barrowers. Bank shall have carefully formulated guidelines for delegation of powers. Bank may also consider
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setting up of approval grid or committee of 3 or 4 officers including one from credit risk management department who as no volume and profit targets. Such approval grid shall be formed at various levels like large branches, regional offices etc. ii) Benchmark financial ratios : Bank shall stipulate benchmark current/ debt equity and profitability ratios, DSCR, other ratios with flexibility`s for deviation to be permitted by the loan policies of the bank.
iii) Prudential limits : The supervisory authority of the bank sets prudential limits to restrict banks exposure to single borrower, groups of related borrowers and other significant risk concentration through CMA guidelines. These exposure limits shall be well defined as per the RBI/NABARD guidelines issue from time to time. These exposure limits shall not generally exceed 25% of the capital found or any thresh hold limit fixed by the board from time to time of capital founds.
iv) Connecting lending :
The Banks lending policy must be able to prevent abuses arising from connected and related party lending. This will require ensuring that such lending is conducted only on an arms length basis that the amount of credit extended is closely monitored.
1) RISK RATING :
Bank may have a comprehensive risk scoring / rating system for all borrowers. This shall serve as a single point indicator of diverse risk factor of a counter party. This shall also make the bank take credit decision in a consistent manner. The risk rating system shall be drawn relevant to the RRBs and their credit exposure.
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2) RISK PRICING :
Risk return pricing is a fundamental tenant of risk management. The pricing of loans shall be normally linked to risk rating or credit quality. In a risk return setting barrowers with weak financial are placed in high credit category and hence to be charged high. Bank shall evolve scientific system to price the credit risk. The probability of the default based on the passed behaviour of the credit portfolio should be an indicator to price the credit risk.
3) LOAN REVIEW MECHANISM :

The loan mechanism is an effective tool for constantly evaluating the quality of the loan assets. This is aimed at to bring about qualitative improvement in credit administration. A proper loan review mechanism shall be placed for large volume of account. The objective of the loan review mechanism shall include a) Assessing adequacy and adherence to loan policies and procedure as per RBI guidelines and monitoring compliance with relevant laws and regulation of RBI/NABARD/Sponsor bank. b) To provide top management with information on credit administration c) To promptly identify loans which develop credit weakness and corrective action. d) To evaluate portfolio quality and to isolate problems areas e) To provide information for determining adequacy of loan loss provisions. f) To evaluate portfolio quality and isolate potential problem areas g) Bank shall have a proper credit grading system, which includes quality of credit identification of problem loans and risk ratings. h) Bank shall have a loan review policy and it shall be reviewed annually by the board.
to initiate timely
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4) CREDIT RISK AND INVESTMENT BANKING :Significant magnitude of credit risk, in addition to market/ interest rate/ liquidity risk is inherent in investment banking. The proposals for investment should therefore be subjected to the same degree of credit risk analysis as any loan proposals, which are not rated and should ensure comprehensive risk evaluation. The rating migration of the issuers and the consequent diminution in the portfolio quality should also be periodical intervals.
5) CREDIT RISK MANAGEMENT TECHNIQUES ADOPTED BY THE BANK :

a) Adoption of comprehensive credit policy b) Delegation of appropriate credit sanctioning power to various authorities. c) Fixation of exposure limits as per RBI guidelines. d) Ensuring strong appraisal system e) Adopting benchmark financial f) Proper pricing mechanism for loan products g) Having an effective roll review mechanism. h) Monitoring of the accounts by way of mid term review , periodical review (quarterly) at various sanctioning level. Reviewing is being done by next sanctioning authority. Sanction by the board are placed for review periodically. i) Monitoring of accounts through various PRPs, stock statement, MOSD statement etc.
6) PROPOSED STEPS TO STRENGTHEN RISK MANAGEMENT TECHNIQUES : Fixing exposure limits to various industries/ sectors/activities Constituting credit policy committee at head office to formulate and
evaluate sound credit policies.
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Regular meeting of risk management committee to address the matters

relating to among others credit risk.
Evolving credit risk rating system for borrowal accounts beyond certain
limits.
Further refining review system wherever required
LIQUIDITY RISK :
Liquidity risk is considered a major risk. It is offen defined in different ways. Liquidity is the safety cushion provided by the portfolio of the liquid assets or the banks ability to raise funds at normal cost. Liquidity risk is the potential inability on the part of the banks to meet the liabilities as and when they become due. Basically, liquidity risk originates, from mismatches in the maturity pattern of the assets and liabilities. Liquidity risks arises on accounts of market forces. Extreme liquidity results in bankruptcy. Hence liquidity risk is fatal risk. Another common meaning of the liquidity risk is that short- term assets values are not sufficient to match short-term liabilities or unexpected out flows. i.e. mismatch. Liquidity risk arises on account of following market forces. If the realisability of assets is either nil or low Premature withdrawal of deposits/ borrowed funds. No fresh inflows of deposits Funding of contingent liabilities ( like development of LCs/bank guarantees)
Measurement of liquidity risk :

Measuring and managing liquidity needs are vital for effective operation of the bank. By assuring banks ability to meet its ability to meet its liabilities as they become due, liquidity
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management can reduce the probability of an adverse situation developing. Following are the techniques of measuring liquidity risks. a) Analysis of liquidity position of the bank on an on going basis b) Examining affect of funding requirements under crisis situation c) Analysing assets liabilities based on assumptions of future behaviour of assets and liabilities based on time buckets and then calculating net flows. d) Analysis of future cash flows under what if scenarios so as to assess significant positive/ negative liquidity swings on day to day basis.
Dimensions of liquidity risk in banks : Following are the nature of liquidity risk in banks
Funding risksneed to replace net out flows due to unanticipated withdrawals/ non renewal of deposits. Time risk --- need to compensate for non receipt of expected inflows of funds i,e. Performing assets turning into non performing assets Call risk --- due to crystallisation contingent liabilities and in ability to undertake profitable business opportunities when desirable.
Measuring the liquidity risks :

The liquidity risk is difficult to be measured. This can be measured through stock or cash flow approaches. Following are some of the important techniques in measuring the liquidity risk.
a) Identifying and applying key ratios adopted in the banking system i,e. Loans to total assets, loans to core deposits, large liabilities, less temporary investment to earning assets , less temporary investment, borrowed funds to total assets , loan losses on net loans, i.e tracking of cash flow mismatches.
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b) The bank shall analyse the behavioural profile of various components of on / of balance sheet items on the basis of assumption and trend analysis supported by time series analysis c) Bank shall study the impact of pre payment of loans /pre-mature closure if deposits, option of built in i.e put/call operation after specified times. Thus the difference between cash inflow and outflow each time bucket shall indicate banks future liquidity position. d) Banks shall have a system for monitoring high value deposits (other than inter bank deposit) say Rs 5.00 lakh or more to track the volatile liabilities. The liquidity profile of the bank shall be analysed on a static basis. e) Banks shall also estimate the liquidity profile on a dynamic way by giving due importance to seasonal pattern of deposits/ loans f) Potential liquidity needs for meeting new/ seasonal loan demand, unavailed credit limits potential deposit losses, investment obligation statutory obligation etc
Management of liquidity risk:

The first steps towards liquidity management is to put in place an effective liquidity management policy, which, interalia should spell out the funding strategies, liquidity planning under alternative scenarios, prudential limits, liquidity reporting/ reviewing etc. The liquidity risk can be controlled and managed by applying following measures.
Raising a proportion of bankfunds committed to readily marketable assets (SLR) Refinance from lender of fast resort / NABARD/SIDBI/NHB. Reliance on funds on large number of small deposits Drawing up of maturity profile of assets and liabilities.
It shall be noted that the maturity profile can not assess /does not take into account the
followings:
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The ability of the bank to borrow and raise resources Quality of assets Contingent liabilities.
MARKET RISK
Market risk can be defined as the risk of adverse deviation of the mark to-market value of trading portfolio during the period required to liquidate the transaction it may also be defined as the possibility of loss of bank caused by changes in the market variables i.e changes in the rates in fundamental economic markets. Ex. Equities and fixed interests bearing securities and other external factors which will negatively impact on the market value on the banks investments/ trading portfolio. As per the core principal enumerated by the Basel committee the bank shall have in place, systems that accurately measure monitor and adequately control market risk. The market risk normally arises on account of the following factor Liquidity risk : This is a risk that the potential inability on part of the bank to meet the liabilities as and when become due. It is basically on account of mis-matches in maturity pattern of assets and liabilities. Interest rate risk : It is the risk where changes in the market interest rate might adversely affect the net interest
income (NII). A continuous impact on NII may reduce the banks net worth as also the economic value of banks assets, liabilities and balance sheet positions. The earning on assets and cost of liabilities are closely related to market interest rates volatility. Foreign exchange risk : It is the risk that bank may suffer losses as a result of adverse exchange rate movements.
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Equity risk:
This risk is arises on account of holding or taking position in equities as also lending there against. The value of the equities are very sensitive to the market fluctuation and there would be constant threat of fluctuation in equity rates.
MANAGEMENT OF MARKET RISK:

The most important aspect in management of market risk is a constant and vigilant studies on the behavior of the market specially investment portfolio and liquidity management. The liquidity management process of the bank shall have the following aspects: The funding strategies Liquidity planning under alternative scenario Prudential limits Liquidity reporting/ reviewing
In order to effectively place a policy of managing market risk is the adaption of sound ALM system as prescribed by RBI. Among others the bank shall have certain prudential limits to avoid liquidity risk. In order to manage the market risk bank shall prepare contingency plans to measure their ability to withstand bank specified and market crisis scenario. There should be plan/ provision for back up liquidity support. At present the bank is following ALM system and also daily studying the market as far as investment portfolio is concerned. However the ALM system shall be further refined in order to measure and manage market risk. The bank shall adopt the following important strategis in managing the market risk.
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1) The bank shall have clearly and articulated market risk management policy, procedure, prudential risk limits review mechanism, and reporting and auditing systems. 2) Operating prudential limits and the accountability of line management shall be Clearly defined. 3) Bank shall have comprehensive dynamic, frame work for measuring and managing liquidity, interest rates, foreign exchange, equity and commodity prices . the policies on these aspects shall be closely integrated with the banks business policy. 4) The bank shall have the following organisational set up for market risk management The board of directors Risk management committee Assets liability management committee(ALCO) ALM support group.
5) The bank shall constitute an independent risk management committee to study and implement market risk. The main function of the committee to study and implement market risk. The main function of the committee setting policies and guidelines for market risk measurement, management and reporting. Reviewing and approving market risk limits. The policy of the bank shall be studied carefully from time to time. 6) The ALCO committee shall be responsible for ensuring adherence to the limit set by the board and business policies of the bank. It is responsible for balance sheet planning from risk return perspective including management of interest rate and liquidity risk. The major functions of the ALCO shall be; Product pricing for deposits and advances Deciding on the mix of incremental assets and liabilities Articulating interest rate view of the bank and deciding on the future business policy/ strategies Reviewing funding policy Reviewing economic and political impact on the balance sheet.
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OPERATIOAL RISK :
Operational risk are defined as those of the mal functioning of the information system, reporting system and of the internal risk monitoring rules. The Basel committee on the bank supervision has come up with a comprehensive definition of operational risk, which reads as under The operational risk is the risk of loss from inadequate or failed internal process, people and systems and from external events From the above definition we can make out the causes of the operational riskj and as such can help in managing and ultimately the measuring the operational risk. The operational risk appears at two different levels, which are The technical level--- when the information risk or the risk measures of the bank are deficient The organizational level--- reporting and monitoring of risk and all related rules and policies. The ultimate consequence of the above are similar. Any deficiencies potentially generates losses of an unknown magnitude given that no corrective action is taken during the time span when the risk remains ignored.
Measurement of operation risk :

There is no uniformity of approach in measurement of operational risk in the banking systems. In the absence of any sophisticated models, banks should evolve simple benchmarks based on an aggregate measure of business activity such as revenue, fee income operating costs, total assets adjusted for off- balance sheet exposures or a combination of these variables. To measure the operational risk it is necessary to understand the framework of operational risk and process. For this purpose the operational risk management can be measured and managed by addressing the following ways. 1.Organizational set up:
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A risk management committee to be constituted which designs the policies and its implementation. Risk management committee and the concerned department shall work in close coordination with internal inspection section which looks after risk based supervision. It also monitors the review system and controls by various departments at head office/ regional offices.
2.Operational risk mapping : It is an exercise of identifying and listing out all the risks perceived in the entire gamut of bank`s operations. It provides a common risk language that should be used though out the organization it is dynamic component in the operational risk management chain. It needs to be reviewed constantly to add fresh loss types under various forms of operational risks.
3. Operational risk assessments :

This involves categorisation
of the risk identified/ listed to low, medium and high depending
upon the degree of loss as also frequency of occurrence. The systems and procedure in force should then be listed out against each of the assessed risks control to should be graded as low, medium and high based on there adequacy. A comparison should then be made between assessed risk and the existing controls to identify the degree of risks.
Collection of operational risk loss incident dataCollection of the operational risk loss incident is a prerequisite for managing and measuring operational risk. Building up of historical data of loss events enable us to arrive at meaningful estimates of operational risk loss. For this purpose bank shall have following type of collection of data on operational risks. Collecting non fraud related operational loss events
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Collecting fraud related loss event from other department / section like inspection, personnel wing.
Risk quantification : As per Basel committee on banking supervision there are three types of measuring operational risk. Basic indicate approach Standardized approach Advanced measurement approach
Under the basic indicate approach a fixed percentage on the gross income shall be the capital to be held by the bank for operational risk. This shall be decided as per the regulation by the bank from time to time. Under the standardised approach banks activities are divided into various types of activity based transaction, like corporate finance, retail banking, agency service and custody, trading in sales etc. Capital charge is calculated for each activity by multiplying the gross income by factor percentage assigned to specific activity. The summation of capital charge of all the business lines gives the bank overall capital charge for operational risk.
Control of operational risk:

Bank should have well defined policies on operational management. The policies and procedure should be based on common element across business lien or risks. One of the major tools for managing operational risk is the wellestablished internal control system, which includes segregation of duties, clear management reporting lien and adequate operating procedures. Most of the operational risk events are associated with weak links in internal control systems or laxity in complying with the exiting internal control procedures. Banks should endeavor for detection of operation problem spots rather than their being pointed out by the inspecting officers/ external
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auditors. Audit committees should pay greater role to ensure independent financial and internal control functions. For the purpose bank shall identify loss types under operational risks. This exercise shall be done from time basing on the historical data collected by the bank. However for illustrative purpose following are the groups of losses on account of operational risk. 1. proposing risk. Transaction put though without proper authority/ mandate Erroneous transaction execution Wrong reporting at some point through out the process of business transaction. Erroneous cash movement Omission of tasks Inaccurate /incomplete documentation Frauds both internally and externally Money laundering Unauthorized persons excess to bank records.
2. people risks : Inadequate staff Hiring unsuitable staff. Loss of key personal. Over reliance on few key staff. Insufficient succession and development planning Insufficient training Poor communication Behavior and attitude. 3. system risk: Irrelevant, inaccurate, incomplete MIS.
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IT system failure Telecommunication failure Technology interference Failure of support function Inadequacy of backup systems/ procedure Working under different platform/software environment. 4.External events risks : Nature disasters. War or terrorism. Sabotage. Crime. 5. Legal risks: Breaching if regulatory requirement. Unenforceable contracts/ law suits. Adverse judgements. Executive illegal transaction. Failure to fulfill fiduciary duties.
6. Reputation risks : Negative publicity leading to decline in customer base, costly litigation, or reduction current and prospective earnings and capital. Effect of other risk.
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CONTINGENT RISK :Contingent risks are not new in themselves. Bank have traditionally stood ready to provide certain types of guarantee which involved underwriting the obligation of the third party and which created contingent liabilities for the guarantor bank. But in recent year, contingent risks have become more important as banks have increased off balance sheet business in a search for fee based income without the constraints involved with on-loaning business. New type of business create new type risks. Contingent risk which is on account of the contingent liabilities such as guarantee and other commitments of funds arising out of committed facilities, give rise to credit risk, liquidity risk and interest risk. If the barrower fails to raise funds ( credit risk), it may activate banks`s commitment. It may involve liquidity risk as the bank can not know in advance when it obligation will materialize. The committed bank`s own barrowings rate may change adversely, in between the giving of the commitment and its exercise, thus narrowing or even eliminating the interest margin. Measures to control the contingent risk : Proper selection of barrower. Appropriation ceiling on off balance sheet commitments/exposure Ceiling on the period for which commitment is given, as longer the period, greater is the risk involved.
ACTION POINTES FOR IMPLEMENTING OF RISK MANAGEMENT POLICY IN THE BANK :

1) In terms of NABARD guidelines NB. DoS. HO. POL/219/J.1/2005-06, Circular No 67/DoS-09/2005 dated 06.04.2005 we have furnished detailed concepts of the risk management policy to be adopted in the bank.
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2) For implementation of this policy the action points are as under. These action points are drawn up as per the policy guidelines and also check list provided by the NABARD circular. 3) The bank has been practicing certain system in turn with the risk management policy already. In the checklist we have furnished the status/the present practice for information.
a) Action points :
i.
Adoption of the risk management policy by the bank by placing the matter before the Board.
ii. iii.
Sending the policy to the sponsor bank for information and guidance Constitution of subcommittee of the board for reviewing the risk management practices of the bank.
iv.
Constitution of risk management committee in the bank by co-ordinating with the concerned wings.
v. vi.
Reconstitution of existing ALCO committee and revising existing ALM system Circulation of the guidelines among the branches/ offices.
Formation of the subcommittee of the board for implementation of risk management policy and for reviewing the risk management practices of the bank.
1) As per the NABARD guidelines on the implementation of the Risk management, it is suggested that the sub committee of the board shall be constituted in order to ensure risk management process in the bank. 2) Accordingly we proposed the constitution of the sub-committee in the policy. 3) We propose the constitution of subcommittee of the board as under: Board of directorNominated from NABARD. Board of directorNominated from Sponsor bank.
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Chairman/ Representative of the chairman.
4) The role and responsibilities of the subcommittee will be in tune with the policies as advised & RBI from time to time, which will be as under;
i. ii. iii. iv. v.
Implementing of the risk management policy in bank. Periodically review i.e once in quarter, the process of the risk management function. Placing a review and action taken to the Board of directors once in six months. Suggested measures to be adopted by the bank to mitigate the risk as a when necessary. Reviewing the functions of risk management committee and ALCO committee periodically.
vi.
Advising the bank specific action plan to mitigate high risk areas.
Formation of risk management committee at Head Office

1) As per the guidelines Risk management shall be constituted in order to assist the subcommittee of the board to prepare and review the functioning of the risk management function at various level of the bank. For the purpose of committee of the following functionaries of the bank can be constituted : a. General manager, credit wing & G A Wing chairman of the committee.
b. Senior manager, G A Wing-- convenor. c. Senior manager , credit wingmember. d. Senior manager, inspection Wing members. e. Officers, accounts sectionmember.
The role and responsibilities committee will be in tune with the policies as advised by NABARD & RBI from time to time, which will as under; Periodical review i.e monthly meeting. Placing a review and action taken to the risk management sub committee. Implementation of the policy guidelines. Periodical review of the risk rating for each segment.
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Risk weightage to various types of activities. Review of market condition and advising the top management. Issue of necessary guidelines from time to time Placing a periodical not to the chairman of the bank on various aspects of the risk management Suggesting the changes in risk management policies of the bank, if any to the sub committee. Framing the ground rules for implementing the risk management policy. Assisting the ALCO committee in addressing the mismatched in assets and liabilities of the bank. All connected matters.
SUGGETIONS: After studding in detail the concept of risk management policy in pragathi gramin bank the following are suggestion for the further improvements Bank should adopted risk rating mechanism to all the accounts The group exposure norms are to be further improved in order to ascertain the quantum of risk in credit group management. The bank should take the lead by obtaining membership of credit rating agencies like Icar etc. For the purpose of information system. Bank can check the credibility of a former like the proper identification and also his/ her reputation in the village Banks have to find out original reasons for the loan.
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Proper identification of the guarantor should check by the bank and his/her wealth also, so that he/she cant mislead the bank Sarpanch of the village should also inquire before the disbursement of the loan amount
Agriculture loan comes in priority sector, so banks are bound to achieve the targets set by government. In this situation government has to relax some norms about the priority sector. The stocks and receivables are to check randomly by the bank, so that the banks are aware of position of the firms.
Banks have to be assure that the collateral security should not disputed asset and neither any other loan is taken on that security. Banks have to make a separate department, whose duty is only inquire the personnel goodwill in the city apart from the financial asset.
In the export related loan, banks have to check the authenticity of the firm with the export house. Banks should have to consider the market condition of economy before disbursement of loan in case of export and import. Banks also have to consider market conditions of that product, which going to export or import.
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The recovery process is very slow, so the governments have to update the process which is fast and effective. And last not the least, the bank officers shouldnt forget ethics doing the job.
FINDINGS :
365days services given to the customers
Majority of the respondents those who are taken loan and opened their a/c in the Pragathi gramin bank is because of the good services in rural area what they are providing.
Respondents are ready to recommend others to open an a/c with this Bank, because of its good response to customer requirements and maintaining good relationship with costumers.
Pragathi gramin bank is improving day by day because of its customized products and services provided by it to satisfy its customers.
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Conclusion:As per our study pragathi gramin bank is one of the well managed bank with lot of the vision and rural development as a mission to achieve this mission the bank as successfully implemented various prudential measures. One of such measure is implemented action of Risk Management policy. Pragathi gramin bank is successfully implemented the risk management concept as applicable to the financial institution namely, As for the credit risk management is concerned bank as in place the credit risk management policy the bank periodically review takes a measures or credit assessment as under credit risk Thus pragathi gramin bank as successfully implemented to Risk management policy effectively. To conclude, it can be stated that the PRAGATHI GRAMIN BANK has been following wellestablished systems, policies, and procedures with respect to Risk management. The Bank has recovered the loans in a systematic manner, However, as suggested, the Bank should consider some additional strategies and policies to face challenges of the competitors in future, to improve the quality of its service of lending and recovery. Apart from the said conclusions, large advances and more attention needs to be paid for strategies planning by employees with self set goals educating borrowers. In sum the present, Risk management assignment has been very useful in getting firsthand experience with respect to the management of in the Banks, with an insight into one of the important segments of recovery. Which I have discussed in detail in the earlier pages, thus finally the Risk Management concept in pragathi gramin bank is one of the modern and highly balanced and effective risk management tools.
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RISK MANAGEMENT ____________________________________________________________________________________

1|Page Department of MBA, RYMEC, Bellary

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3|Page Department of MBA, RYMEC, Bellary

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Indian Financial sector:

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5|Page Department of MBA, RYMEC, Bellary

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STRUCTURE OF BANKING IN INDIA

Key affecting factors of banking industries

6|Page Department of MBA, RYMEC, Bellary

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7|Page Department of MBA, RYMEC, Bellary

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BACKGROUND & INCEPTION OF THE COMPANY

Nature of the business carried:

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sampoorna solar villages

Kolar gramin bank

9|Page Department of MBA, RYMEC, Bellary

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Vision, Mission, Quality policy: VISION

10 | P a g e Department of MBA, RYMEC, Bellary

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PRODUCTS/SERVICES PROFILE DEPOSIT SCHEMES Savings Bank Account:

No Frill Account ( Savings Bank Account)

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New Nitya Nidhi Deposit

Fixed Deposit It is safe, Liquid and fetches high returns

12 | P a g e Department of MBA, RYMEC, Bellary

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Pragathi Tax Saver Deposit (Term Deposit Account)

Not accepted as security/collateral security to any loan.

13 | P a g e Department of MBA, RYMEC, Bellary

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High Returns Interest Payment Easy Liquidity

Closure before maturity permissible Loan against deposit permissible

14 | P a g e Department of MBA, RYMEC, Bellary

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RATE OF INTEREST ON DEPOSITS

INSURANCE COVERAGE ON DEPOSITS

15 | P a g e Department of MBA, RYMEC, Bellary

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NON - LIFE INSURANCE

16 | P a g e Department of MBA, RYMEC, Bellary

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17 | P a g e Department of MBA, RYMEC, Bellary

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18 | P a g e Department of MBA, RYMEC, Bellary

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HOSPET INDIRA NAGAR -KAMPLI --------

MARIYAMMANAHALLI Thursday METRI RAMASAGARA Thursday Thursday

19 | P a g e Department of MBA, RYMEC, Bellary

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SIRIVARA (BELLARY) SOMASAMUDRA

20 | P a g e Department of MBA, RYMEC, Bellary

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21 | P a g e Department of MBA, RYMEC, Bellary

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22 | P a g e Department of MBA, RYMEC, Bellary

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The bank provides medical facilities to its employees