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ON
A STUDY OF CREDIT ASSESSMENT IN DENA BANK
FOR THE PARTIAL FULFILLMENT
OF
MASTER OF MANAGEMENT STUDIES
SUBMITTED BY
MR. SAGAR ASHOK SURWADE
SPECIALIZATION: FINANCE
(2012-2014)
ROLL NO:
UNDER THE GUIDANCE OF
PROF. KARTIK MHAVARKAR
ACKNOWLEDGEMENT
support and the timely guidance required for the successful completion of this
project.
I further express my thanks to Mr. (Company project guide name) at DENA
BANK for giving me the opportunity to carry out my project in the respective
department which has further enhanced my knowledge of the subject both
theoretically and practically Last but not the least, I would also like to thank
my parents for their consistent presence and help at all times.
SAGAR ASHOK
SURWADE
DECLARATION
CERTIFICATION
_______________________
_____
________________
Internal Project Guide
Director
Date:
______________
EXECUTIVE SUMMARY
Credit risk is defined as the potential that a bank borrower or
counterparty will fail to meet its obligations in accordance with agreed terms, or
in other words it is definedas the risk that a firms customer and the parties to
which it has lent money will fail tomake promised payments is known as credit
risk.
The exposure to the credit risks large in case of financial
institutions, such commercial banks when firms borrow money they in turn
expose lenders to credit risk, the risk that the firm will default on its promised
payments. As a consequence, borrowing exposes the firm owners to the risk that
firm will be unable to pay its debt and thus be forced to bankruptcy.
The project helps in understanding the clear meaning of credit Risk
Management In Dena Bank. It explains about the credit risk scoring and Rating
of the Bank. And also Study of comparative study of Credit Policy with that of
its competitor helps in understanding the fair credit policy of the Bank and
Credit Recovery management of the Banks and also its key competitors.
Table of contents:
Page Nos.
Chapter 1:
I)
II)
III)
IV)
V)
VI)
Introduction
Objective Of the Study
Need Of the Project
Scope Of the Project
Research Methodology
Limitations Of the project
1
3
3
4
5
6
Company Profile
Organization Chart
Benefits given by the Company
7
12
13
Chapter II:
I)
II)
III)
Chapter -III:
I)
II)
Theoretical Background
Data Analysis & Interpretation
16
22
Chapter - IV:
I)
II)
Bibliography
Findings
Suggestions
37
40
41
BANKING INDUSTRY
OVERVIEW
INDUSTRY OVERVIEW
History:
Banking in India has its origin as carry as the Vedic period. It is
believed that the transition from money lending to banking must have occurred
even before Manu, the great Hindu jurist, who has devoted a section of his work
to deposits and advances and laid down rules relating to the interest. During the
mogal period, the indigenous bankers played a very important role in lending
money and financing foreign trade and commerce. During the days of East India
Company, it was to turn of the agency houses top carry on the banking business.
The general bank of India was the first joint stock bank to be established in the
year 1786.The others which followed were the Bank of Hindustan and the
Bengal Bank. The Bank of Hindustan is reported to have continued till 1906,
while the other two failed in the meantime. In the first half of the 19th Century
the East India Company established three banks; The Bank of Bengal in 1809,
The Bank of
Bombay in 1840 and The Bank of Madras in 1843.These three banks also
known as presidency banks and were independent units and functioned well.
These three banks were amalgamated in 1920 and The Imperial Bank of India
was established on the 27 Jan 1921, with the passing of the SBI Act in 1955, the
th
undertaking of The Imperial Bank of India was taken over by the newly
constituted SBI. The Reserve Bank which is the Central Bank was created in
1935 by passing of RBI Act 1934, in the wake of swadeshi movement, a
number of banks with Indian Management were established in the country
namely Punjab National Bank Ltd, Bank of India Ltd, Canara Bank Ltd, Indian
Bank Ltd, the Bank of Baroda Ltd, The Central Bank of India Ltd .On July 19th
1969, 14 Major
Banks of the country were nationalized and in 15th April 1980 six more
commercial private sector banks were also taken over by the government. The
Indian Banking industry, which is governed by the Banking Regulation Act of
India 1949, can be broadly classified into two major categories, non-scheduled
banks and scheduled banks.Scheduled Banks comprise commercial banks and
the co-operative banks.
The organized banking system in India can be broadly classified into three
categories: (i)Commercial Banks (ii) Regional Rural Banks and (iii) Cooperative banks. The Reserve Bank of India is the supreme monetary and
banking authority in the country and has the responsibility to control the
banking system in the country. It keeps the reserves of all commercial banks and
hence is known as the Reserve Bank.
The Indian Banking Regulation Act of 1949 defines the term Banking
Company as "Any company which transacts banking business in India" and the
term banking as "Accepting for the purpose of lending all investment of
deposits, of money from the public, repayable on demand or otherwise and
withdrawal by cheque, draft or otherwise".
Banks play important role in economic development of a country, like:
Banks mobilise the small savings of the people and make them available
for productive purposes.
another.
Bank acts as an intermediary between the depositors and the investors.
Bank also acts as mediator between exporter and importer who does
foreign trades.
Thus Indian banking has come from a long way from being a sleepy business
institution to a highly pro-active and dynamic entity. This transformation has
been largely brought about by the large dose of liberalization and economic
reforms that allowed banks to explore new business opportunities rather than
generating revenues from conventional streams (i.e. borrowing and lending).
The banking in India is highly fragmented with 30 banking units contributing to
almost 50% of deposits and 60% of advances.
BANKING IN INDIA
Central Bank
of
Baroda,
Bank
of
India,
Bank
of
OBJECTIVES OF PROJECT
Bank.
To Study criteria for corporate loan.
To study condition for loan approval.
RESEARCH METHODOLOGY
Primary Data :
Personal interviews
Questioneries
Survey,etc
Secondary data: The data is collected from the Magazines, Annual reports,
Internet, Text books.
The various sources that were used for the collection of secondary data are
LIMITATIONS
1. The time constraint was a limiting factor, as more in depth analysis could not
be carried.
2. Some of the information is of confidential in nature that could not be revealed
for the study.
DENA BANK
INTRODUCTION
V I S I O N M I S S I O N AN D VAL U E
Vision
Dena Bank will emerge as the most preferred Bank of customer choice in its
area of operations, by its reputation and performance.
Mission
VALUES:
ABOUT LOGO
The logo of Dena Bank depicts Goddess Lakshmi, the Goddess of Wealth,
according to Hindu mythology.
It was the desire of the founding fathers of the Bank that the Bank should be a
symbol of prosperity for all its clients, and the logo represents this promise.
The contemporary 'D' in the logo reflects the dynamism, dedication and
the drive towards customer satisfaction.
ORGANISATION STRUCTURE
PRODUCTS
Dena Bank renders varieties of services to customers through the following
products:
Loan Product
o
o
o
o
o
SERVICES
Mobile Banking
Phone Banking
Demat Service
D i r e c t Tax C o l l e c t i o n
I n d i r e c t Tax
Distribution Of Mutual Fund
LOAN PRODUCTS
1) DENA NIWAS HOUSING FINANCE SCHEME:
The doorway to your Dream Home
A Loan for different needs
You can avail of Dena Niwas Home Loan to purchase a plot, construct a house,
buy a ready built house or buy one under construction. The loan even helps you
build an extension to your existing house or purchase a house that is up to 50
years old provided the remaining life of the house is more than 25 years.
Besides you can take this loan for repairs and upgradation, which includes the
cost of fixtures, POP works, retiling, fittings etc.
It even gives you the option to shift an existing home loan with any other Bank
or Financial Institution.
You are eligible if:
Your age on the maturity of the loan is less than retirement age if you are
a salaried employee & below 65 years, if you have a business.
The total deductions do not exceed 60% of your gross income, including
the loan installment of the proposed loan.
Any other expense to complete the course like study tours, project work,
thesis etc.
Margin
Upto Rs. 4 lakhs- NIL for study in India and abroad.
Above Rs. 4 lakhs- 5% for study in India and 15% for study abroad.
Rate of Interest
Please Check out the Interest Rates Section to find latest Interest Rates
applicable.
1% interest concession if interest is serviced as and when due during the
moratorium period when repayment holiday is specified.
SIMPLE INTEREST CHARGED DURING MORATORIUM PERIOD.
Process Fees
Rs.1000/- for studies abroad which is refundable on availing the limit.
Repayment
For loans upto Rs.7.50 lakhs
: Upto 10 years
unforeseen event. Dena Suvidha (Personal) Loan is always there for all your
needs.
You are eligible if:
You are a permanent employee between 24 to 55 years having worked for at
least 2 years in a Govt. or PSU/ reputed organization.
You have a gross monthly income of at least Rs. 15,000/-. Income of any other
earning member ( co-applicants) can be clubbed for enhanced eligibility.
You can have a salary disbursement arrangement with us or provide an
undertaking form your employer.
Loan Amount
Minimum- Rs. 15,000/Upto- Rs. 1 lakh or 9 times the net monthly income whichever is less.
Margin
NIL
Rate of Interest
Please Check out the Interest Rates Section to find latest Interest Rates
applicable.
Process Fees
1% of loan amount
Repayment
Upto 36 EMIs
Mode of disbursement
By credit to your Savings Bank account.
Rate of Interest
Please Check out the Interest Rates Section to find latest Interest Rates
applicable
INTEREST CHARGED ON DAILY REDUCING BALANCE
NO PREPAYMENT CHARGES
Security
CC limit : Hypothecation of Stock and Book Debts
Term Loans : Hypothecation of security created out of term loan
Equitable mortgage of immovable property or any other liquid assets (other than
equity shares, debentures) with minimum realisable market value of 100% of
sanctioned limit as collateral
Process Fees
CC Hypothecation - As applicable for normal CC / Hypothecation account
Term Loan - 1.25% of the limit sanctioned. At the time of review, review fees of
0.10% of the outstanding amount
Commission on Non-fund based limits (BG & LC) to be charged as per Bank's
extant guidelines.
Commitment Charges as applicable for normal CC Hypothecation accounts as
prescribed in Loan Policy.
Repayment
CC limit / Non-fund based limit : To be reviewed on yearly basis
Nature of Loan
Demand Loan
Loan Amount
The loan amount will be linked to the value of gold jewellery/ gold coin/ gold
(other than bullion) to be pledged.
Minimum Rs.10000/- & Maximum Rs. 5.00 lacs
Margin
Margin to be maintained @ 30% of the value of the Gold jewellery / gold coin /
gold (other than bullion) to be pledged.
Rate of Interest
Please Check out the Interest Rates Section to find latest Interest Rates
applicable.
Process Fees
Upto Rs.50,000/- - Nil
Above Rs.50,000/- : 0.75% of sanctioned limit.
Charges of appraiser are to be borne by the borrower.
Repayment
Up to 24 months, to be repaid in EMIs or quarterly/ half-yearly/ annual
installments or on lump sum basis, as may be agreed uponby the borrower/s. In
case of repayment in installments other than EMIs, interest debited in the loan
account from time to time is to be paid as and when debited.
Market risk is the risk of adverse deviation of the mark to market value of the
trading portfolio, due to market movement, during the period required to
liquidate the transactions.
OPERTIONAL RISK:
Operational risk is one area of risk that is faced by all organization s. More
complex the organization more exposed it would be operational risk. This risk
arises due to deviation from normal and planned functioning of the system
procedures, technology and human failure of omission and commission. Result
of deviation from normal functioning is reflected in the revenue of the
organization, either by the way of additional expenses or by way of loss of
opportunity.
Credit rating is the process of assigning a letter rating to borrower indicating
that creditworthiness of the borrower.
Rating is assigned based on the ability of the borrower (company). To repay the
debt and his willingness to do so. The higher rating of company the lower the
probability of its default.
CREDIT RISK:
Credit risk is defined as the potential that a bank borrower or counterparty will
fail to meet its obligations in accordance with agreed terms, or in other words it
is defined as the risk that a firms customer and the parties to which it has lent
money will fail to make promised payments is known as credit risk The
exposure to the credit risks large in case of financial institutions, such
commercial
banks when firms borrow money they in turn expose lenders to credit risk, the
risk that the firm will default on its promised payments. As a consequence,
borrowing exposes the firm owners to the risk that firm will be unable to pay its
debt and thus be forced to bankruptcy.
Credit rating helps the bank in making several key decisions regarding credit
including
1. whether to lend to a particular borrower or not; what price to charge?
2. what are the product to be offered to the borrower and for what tenure?
3. at what level should sanctioning be done, it should however be noted that
credit rating is one of inputs used in credit decisions.
There are various factors (adequacy of borrowers, cash flow, collateral
provided, and relationship with the borrower) Probability of the borrowers
default based on past data.
CREDIT FILES:Its the file, which provides important source material for loan supervision in
regard to information for internal review and external audit. Branch has to
maintain separate credit file compulsorily in case of Loans exceeding Rs 50
Lakhs which should be maintained for quick access of the related information.
Contents of the credit file: basic information report on the borrower
milestones of the borrowing unit
credit approval memorandum
financial statement
copy of sanction communication
security documentation list
Dossier of the sequence of events in the accounts
Collateral valuation report
Latest ledger page supervision report
Half yearly credit reporting of the borrower
The term credit policy is used to refer to the combination of three decision
variables: (1) credit standards, (2) credit terms, and (3) collection efforts, on
which the financial manager has influence.
(1) Credit Standards:
Credit Standards are criteria to decide the types of customers to whom goods
could be sold on credit. If a firm has more slow-paying customers, its
investment in accounts receivable will increase. The firm will also be exposed
to higher risk of default.
(2) Credit Terms:
Credit Terms specify duration of credit and terms of payment by customers.
Investment in accounts receivables will be high if customers are allowed
extended time period for making payments.
(3) Collection Efforts:
Collection efforts determine the actual collection period. The lower the
collection
period, the lower the investment in accounts receivable and higher the collection
period, the higher the investment in accounts receivable.
Adoption
160
140
120
100
80
Dena Suvidha
(Personal Loan)
Scheme
60
40
20
0
41438
Interpretation:
In the particular month (june 2013) the dena housing finance scheme was
highly adopted as compare to other scheme .
2) Data analysis based on loan product that are sold in july 2013:
product
dena education loan
Dena Gold Loan Scheme
Dena Trade Finance Scheme
Dena Suvidha (Personal Loan) Scheme
Dena Niwas Housing Finance Scheme
100
90
80
70
60
50
Dena Suvidha
(Personal Loan)
Scheme
40
30
20
10
0
41456
Interpretation:
In the particular month (july 2013) the sales volume of dena housing finance
scheme was decreases as compare to other scheme .
HYPOTHESIS
ANOVA: single factor
Perticulars
Yes
No
40
39
21
18
33
12
20
29
summary
Groups
Yes
Count
Sum
Average
Variance
212
26.5
106
0
1
19
22
7
28
20
11
No
108
Source of variation
Between Groups
SS
676
DF
1
MS
676
Within Group
Total
1484
2160
14
15
106
13.5
106
F
6.377358
P-value
0.024249
F crit
4.60011
Interpretation:
In the given data the P value= 0.024249 is less than 0.5 in the that is positive
factor for given data.
1
0.9 1
5
0.0 0.1
Simplicity of loan process
5
satisfied with Adherance
-0.1 0.0
5
satisfied with Disbursement
0.6 0.6
5
loan provided by the bank are comparable 0
0.0
to other bank
5
are you satisfied with the overall loan 0.4
service
5
Interpretation:
0.4
1
0.
3
0.
1
0.
2
0
1
1
-0.6
0.0
5
0.3
5
0.5
0.2
5
FINDINGS
D
ENA BANK is granting credit in all sectors in an Equated Monthly
Installments so that any body can borrow money easily.
Project findings reveal that DENA BANK is lending credit or
sanctioning more loans.
D
ENA BANK is expanding its Credit in the following focus areas:
Dena bank should open their branches in foreign countries too which
would help them to expand their business like some of their peer group
banks like SBI,BOB etc .
Instead of annual recruitment policy Dena bank should switch to half
yearly recruitment policy.
They should have more aggressive Marketing strategies to promote their
services in different offices,organizations etc.
CONCLUSION
The bank has focused more on rural areas.
The
bank
has
started
various
schemes
for
rural
BIBLIOGRAPHI
WEB SITES
1. www.dena bank.co.in
2. www.rbi.org