Project Synopsis Details

Title of the project

“CREDIT APPRAISAL AND RISK MANAGEMENT” IN ICICI Bank HOUSING LOANS

Introduction
This project will be undertaken at the ICICI Housing Loan, at the Credit Department. Financial
requirements for housing loan purposes are taken care of at the Credit Department. Companies
that intend to seek credit facilities approach the bank. Project Financing discipline includes
understanding the rationale for project financing, how to prepare the financial plan, assess the
risks, design the financing mix, and raise the funds. In addition, one must understand some
project financing plans have succeeded while others have failed. A knowledge-base is required
regarding the design of contractual arrangements to support project financing; issues for the host
government legislative provisions, public/private infrastructure partnerships, public/private
financing structures; credit requirements of lenders, and how to determine the project's
borrowing capacity; how to analyze cash flow projections and use them to measure expected
rates of return; tax and accounting considerations; and analytical techniques to validate the
project's feasibility
Human beings have tried to manage risks faced in their day-to-day life. Keeping inflammable
material away from fire, saving for possible future needs, creation of a legal will are all examples
of attempts at managing risk. Risk is the possibility of the actual outcome being different from
the expected outcome. It includes both the downside and the upside potential. Downside
potential is the possibility of the actual results being adverse compared to the expected results.
On the other hand, upside potential is the possibility of the actual results being better than the
expected results.

Objectives of the project

The study is focused with the following objectives:
1. To highlight and understand the Credit Appraisal System in Home Loans
2. To highlight the organization profile of Credit and Fraud Risk Process in ICICI Bank
Home Loans.
3. To describe the significance of the housing loan documentation and loan eligibility
calculations.
4. To evaluate the housing loan process in ICICI Bank Home Loans.
5. To summarize the report and provide appropriate suggestions to ICICI Home Loans.

Problem Statement
The company was facing the problem of abandoned housing loan project. The main cause of the
problem faced was from financial problems. The problems rose from a weak management
decision making in the management of the company. The crisis they faced is categorized as
human error. The weakness of management had caused the financial department to have
difficulties thus resulting errors in balancing the cash out flow and the cash in flow for the
expenses of the project. Furthermore, the problem caused from the weak management also
causes arise of another problem. Which was the failure to claim back their matured investments?

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This study helped in understanding the credit appraisal system at ICICI & to understand how to
reduce various risk parameters, which are broadly categorized into financial risk, business risk,
industrial risk & management risk associated in providing any loans or advances or project
finance.

LITERATURE REVIEW
BASEL ACCORD & RISK MANAGEMENT
The Basel accord/accords refer to the banking supervision accords namely Basel I and Basel II
issued by the Basel Committee on Banking Supervision (BCBS).

BASEL I ACCORD
The 1988 Basel Accord primarily addressed banking in the sense of deposit taking and lending.
The main focus was Credit Risk. It described the strength of the Bank as measured by the Capital
employed. Accordingly it put a minimum level of capital adequacy (Capital to Credit Risk
Weighted Assets ratio) at 8%. Basel I allocated 4 risk weights i.e. 0%, 20, 50% and 100% to
different exposure types, based on the risk perceived on the exposure types under the credit
portfolio.

BASEL II ACCORD
Banking has changed dramatically since the Basel I document of 1988. Advances in risk
management and the increasing complexity of financial activities / instruments prompted
international supervisors to review the appropriateness of regulatory capital standards under
Basel I. To meet this requirement, the Basel I accord was amended and refined which came out
as the Basel II document. The Basel II document is structured into three parts. Each part is called
as a pillar.

Research Methodology
Methodology is a systematic procedure of collection information in order to analyze and verify a
phenomenon. The collection of information is done through two principal sources, viz.,

1. Data Collection
1. Primary Data: It is the information that will be collected directly without any
reference in this study it is to gathered through interviews with concerned officers and
staff either individually or collectively some of the information will be verify and
supplement through personal observation.
2. Secondary Data: The secondary data will be collect from already published sources
such as pamphlets of annual reports, returns, internal records and company website.

2. Area of study
ICICI Bank Housing Loan department

3. Sampling plan
1. Sampling Technique: Convenience sampling technique will be used.
2. Sample Size: The sample size will be taken 30 Managers from different branches.

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4. Research instrument
Data will be collect with the help of questionnaire having close -ended questions. Interviewees
will be provided a questionnaire which they could fill up as per their choice.

5. Analysis of data
Collected data will be coded, classified, tabulated and interpreted, based on the response received
from respondent appropriate statistical tools like average, percentage, ranking will be used and
inferences be made. For representation, information charts, graphs will be used.

Limitations of study
Like any other study this study to be not free from limitations. The major limitations of the study
are listed below:
1. The major limitations are the shot span available for the study.
2. Reliability on usage of secondary data is another limitation.
3. The complexity and confidentially of various operations will also limitations to the study.
4. There will be bioscope of gathering current information
5. The major limitation of this study shall be data availability as the data is proprietary and
not readily shared for dissemination.
6. The credit appraisal decision are more of intuition and experience and since the time
period will be limited, hence best efforts will be made to grasp the process as much as
possible

REFERENCES

Books Referred
 Mckinsey & Company. “India Banking 2010 - Towards a High-performing Sector”
 Richard Loth. The Working Capital Position. Investopedia
 Naila Iqbal. Paradigms of Working Capital Management.
 Jagdish Capoor. Risk Management in Financial Institutions.
 Principles for the Management of Credit Risk,
 M.Y.Khan & P.K.Jain, Financial Management, Seventh Edition
 Asset Liability Management by T. Ravi Kumar.
 Credit Risk Management & Basel II by Mohan Bhatia.
 Financing and Risk Management by Brealey And Myers.
 Financial Risk Management by Dun, Bradstreet.
 Guide To Risk Management In Imports And Exports In India by Ajay Gupta.
 Introduction to Foreign Exchange & Financial Risk Management by Ramesh Lakshman.
 Managerial Accounting 7E by Ronald Hilton, G Ramesh, M Jayadev.
 Managing Indian Banks, 3E by Vasant C Joshi.
 Risk Management by IIBF.
 Theory & Practice of Treasury & Risk Management in Banks by Indian Institute Of Banking
& Finance.

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RBI Circulars and Guidelines
 Guidelines on Credit Appraisal
 Basel II Accord
 Base Rate

NEWSPAPER
 Economic times
 Times of India
 The Hindu

MAGAZINES
 Business world
 Business today
 Outlook (Magazine).

Websites References
 www.icicibank.com
 ww.icicibank.com/Personal-Banking/loans/home-loan
 www.icicibank.com/privilege-banking/personal/home-loan
 www.icicibank.com/calculator/home-loan-emi-calculator
 www.myinsuranceclub.com
 www.google.co.in
 http://civilengineerblog.com/risks-construction-projects/
 www.weekipedia.com
 www.rbi.org.in
 www.iirmworld.org.in/
 www.garp.org/
 www.theirm.org/
 www.palgrave-journals.com/rm/