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Submitted By
A.BALASHANMUGAM
09BA203
Under the Guidance of
Prof. DR.C.DHRAMARAJ
TABLE OF CONTENTS
Chapter No. Contents Page No.
1. INTRODUCTION 1- 45
• Introduction to Banking 1 – 20
•Company Profile of HDFC Bank 21 – 45
2. RESEARCH DESIGN 46 - 48
• Title 46
• Statement of the Problem 46
LIST OF TABLES
Sl. No. Table Page No.
3.1 Growth in Loans and Advances 49
3.2 Sector/Scheme-Wise Increase/Distribution of Credit 51 – 53
3.3 Geographical Distribution of Credit and its 54
Percentage to Total Advances
3.4 Classification of Advances and its Percentage to 56
Total Advances
3.5 Gross NPA and its Percentage to Total Advances 58
3.6 Net NPA and its Percentage to Net Advances 60
3.7 NPA Provision Coverage Ratio 62
3.8 Percentage of Achievement of Targeted Gross NPA 64
3.9 Percentage of Achievement of Targeted Recovery 66
of NPA
LIST OF GRAPHS
Sl. No. Graphs Page No.
3.1a Comparison of Loans and Advances 50
3.3a Geographical Distribution of Credit and its 55
comparison for two years
3.4a Classification of Advances and its comparison for 57
two years
3.5a Comparison of Gross NPA and Total Advances for 59
two years
3.6a Comparison of Net NPA and Net Advances for two 61
years
3.7a Comparison of Total NPA and Total Provisions for 63
two years
3.8a Comparison of Targeted and Actual level of Gross 65
NPA for two years
3.9a Comparison of Targeted and Actual Recovery of 67
NPA for two years
CHAPTER 1
INTRODUCTION
BANKING
The merchant: In olden days the highly reputed merchants having wide
spread net work of business collected money from public for financing their
operations and issued certificates acknowledging receipt of money. These
certificates were accepted as title to money and used for transferring money
from one place to another place. Such certificates were the predecessor
modern demand draft issued by commercial banks.
1
The moneylender: Moneylenders used to lend money to public out of their
own resources find it difficult to extend their operations due to lack of
liquid
money. They started accepting deposits at a lower rate of interest and made
profit by lending it at a higher rate of interest. Thus the moneylenders laid
foundation of modern banking.
The gold smith: When precious metals were used as money, the Gold
smiths in England used to accept precious stones and metals for safe
keeping. As documentary evidence, they have issued Gold Smiths
Certificates, which were accepted as title to money and transferred from
person to person.. Gold Smiths Certificates are the predecessor of modern
cheque.
Banks have influenced economies and politics for centuries. Historically, the
primary purpose of a bank was to provide loans to trading companies. Banks
provided funds to allow businesses to purchase inventory, and collected
those funds back with interest when the goods were sold. For centuries, the
banking industry only dealt with businesses, not consumers. Commercial
lending today is a very intense activity, with banks carefully analysing the
financial condition of their business clients to determine the level of risk in
each loan transaction. Banking services have expanded to include services
directed at individuals, and risk in these much smaller transactions are
pooled.
The name bank derives from the Italian word banco "desk/bench", used
during the Renaissance by Florentines bankers, who used to make
their transactions above a desk covered by a green tablecloth.[5]
However, there are traces of banking activity even in ancient times.
In fact, the word traces its origins back to the Ancient Roman Empire, where
moneylenders would set up their stalls in the middle of enclosed courtyards
called macella on a long bench called a bancu, from which the words banco
and bank are derived. As a moneychanger, the merchant at the bancu did not
so much invest money as merely convert the foreign currency into the only
legal tender in Rome- that of the Imperial Mint. [6]
Traditional Banking Activities
Banks provide almost all payment services, and a bank account is considered
indispensable by most businesses, individuals and governments. Non-banks
that provide payment services such as remittance companies are not
normally considered an adequate substitute for having a bank account.
Commercial Banking
However the commercial role of banks is wider than banking, and includes:
Economic functions
Banking channels
Banks offer many different channels to access their banking and other
services:
• This normally includes bill payments for bills from major billers (e.g.
for electricity).
Banks' activities can be divided into retail banking, dealing directly with
individuals and small businesses; business banking, providing services to
mid-market business; corporate banking, directed at large business entities;
private banking, providing wealth management services to High Net Worth
Individuals and families; and investment banking, relating to activities on
the financial markets. Most banks are profit-making, private enterprises.
However, some are owned by government, or are non-profits.
Central banks are normally government owned banks, often charged with
quasi-regulatory responsibilities, e.g. supervising commercial banks, or
controlling the cash interest rate. They generally provide liquidity to the
banking system and act as Lender of last resort in event of a crisis.
10
On the basis of functions performed, banks can be classified into the
following categories:
1. Commercial Banks: These banks accept deposits, which are repayable
on demand or otherwise and lend money to customers in times of need.
These banks allow customers to withdraw money by issuing cheques.
Modern commercial banks deals in a large variety of financial products like
insurance policies, mutual funds etc.
2. Agricultural Banks: Banks specialized in agricultural financing are
called agricultural banks. They provide long term or short term finance for
agricultural operations.
3. Savings Banks: Banks, which pool the small and scattered savings of the
people, are called savings banks. Such banks try to promote habit of thrift
among the public. Eg. Post Office Savings Bank.
4. Industrial Banks: Those banks, which provide long-term and/ or short-
term loans to industrial units, are called industrial banks. For Eg. SIDBI,
KFC.
5. Exchange Banks: Financial institutions that facilitate the conversion of
foreign currencies into home currency.
6. Universal Banks: They are the financial super markets, which provide all
financial products and services under one roof. ICICI Bank is the first Indian
Universal Bank.
7. Central Banks: These are the apex monetary institution in an economy,
which issues currency notes, control credit, and act as a regulator of money
market.
11
Banking Industry
Banking Industry has revolutionized the transaction and financial services
system worldwide. Through the development in technology banking services
has been availed to the customers at all times, even after the normal banking
hours, on a 24x7 basis. Banking Industry services is nothing but the access
of most of the banking related services (such as verification of account
details, going with the transactions, etc.). In todays world, progress of online
services is available to all customers of the concerned bank and can be
accessed at any point of time and from anywhere provided the place is
equipped with the Internet facility. Now-a-days, almost all the banks all over
the world, especially the multinational ones, provide their customers with
Online Banking facility.
The US had by far the most banks (7,540 at end-2005) and branches
(75,000) in the world. The large number of banks in the US is an indicator of
12
13
branches increased eight-fold.
After the second phase of financial sector reforms and liberalization of the
sector in the early nineties, the Public Sector Banks (PSB) s found it
extremely difficult to compete with the new private sector banks and the
foreign banks. The new private sector banks first made their appearance
after the guidelines permitting them were issued in January 1993. Eight new
private sector banks are presently in operation. These banks due to their late
start have access to state-of-the-art technology, which in turn helps them to
save on manpower costs and provide better services.
During the year 2000, the State Bank Of India (SBI) and its 7 associates
accounted for a 25 percent share in deposits and 28.1 percent share in credit.
The 20 nationalized banks accounted for 53.2 percent of the deposits and
47.5 percent of credit during the same period. The share of foreign banks
(numbering 42), regional rural banks and other scheduled commercial banks
accounted for 5.7 percent, 3.9 percent and 12.2 percent respectively in
deposits and 8.41 percent, 3.14 percent and 12.85 percent respectively in
credit during the year 2000.
14
Bank Loans
Bank loans refers to the different types of banking loans offered by banks.
Banking loans may be availed of for various purposes. Banking loans are
governed by banking laws and banking regulations. Depending on the need
of an individual, banking loans should be applied for. The banking loans are
provided by different banking institutions after an individual satisfies certain
criteria.
A loan is a type of debt. This article focuses exclusively on monetary loans,
although, in practice, any material object might be lent. Like all debt
instruments, a loan entails the redistribution of financial assets over time,
between the lender and the borrower.
The borrower initially does receive an amount of money from the lender,
which they pay back, usually but not always in regular installments, to the
lender. This service is generally provided at a cost, referred to as interest on
the debt. A borrower may be subject to certain restrictions known as loan
covenants under the terms of the loan.
15
Types of loans
Secured
A secured loan is a loan in which the borrower pledges some asset (e.g. a car
or property) as collateral for the loan.
A mortgage loan is a very common type of debt instrument, used by many
individuals to purchase housing. In this arrangement, the money is used to
purchase the property. The financial institution, however, is given security
— a lien on the title to the house — until the mortgage is paid off in full. If
the borrower defaults on the loan, the bank would have the legal right to
repossess the house and sell it, to recover sums owing to it.
In some instances, a loan taken out to purchase a new or used car may be
secured by the car, in much the same way as a mortgage is secured by
housing. The duration of the loan period is considerably shorter — often
corresponding to the useful life of the car. There are two types of auto loans,
direct and indirect. A direct auto loan is where a bank gives the loan directly
to a consumer. An indirect auto loan is where a car dealership acts as an
intermediary between the bank or financial institution and the consumer.
16
A stock hedge loan is a special type of securities lending whereby the stock
of a borrower is hedged by the lender against loss, using options or other
hedging strategies to reduce lender risk.[citation needed]
Unsecured
Unsecured loans are monetary loans that are not secured against the
borrowers assets. These may be available from financial institutions under
many different guises or marketing packages:
The interest rates applicable to these different forms may vary depending on
the lender and the borrower. These may or may not be regulated by law. In
the United Kingdom, when applied to individuals, these may come under the
Consumer Credit Act 1974.
17
The bank advances are classified on the basis of the degree of well-defined
credit worthiness and the extent of dependence on the collateral security for
the realization of the dues.
1. Standard Assets: These assets do not disclose any problem and also
period not exceeding two years, where installment of term loans are
overdue for a period exceeding one year. It ensures enough recovery
of bank advances from the securities.
3. Doubtful Assets: An asset which has remained NPA for a period
exceeding 2 years and wherein the assets are not covered with
collateral security in full. In other words, the collateral security
provided against the advances are weak in realising or liquidating at
acurrent basis.
4. Loss Assets: They are assets which are being identified by the bank or
18
19
8. A bank's credit risk assessment process for loans should provide the
bank with the necessary tools, procedures and observable data to use
for assessing credit risk, accounting for impairment of loans and for
determining regulatory capital requirements.
20
COMPANY PROFILE
HDFC BANK
HDFC Bank is a Nationalised Scheduled Commercial Bank. The Bank is
celebrating its Platinum jubilee during the current financial year as it was
established in 1931. The Bank was nationalised on 15.04.1980 under the
Banking Companies (Acquisition & Transfer of Undertakings) Act, 1980
and Nationalised Banks (Management & Miscellaneous Provisions) Scheme
1980. The Bank is also governed by the Banking Regulation Act, 1949 and
is engaged in various businesses as fully defined under Section 6 of the said
Act. Presently the Govt. of India’s share in the Bank’s equity works out to
53.87%. The Bank is managed by a duly constituted Board of Directors. The
present strength of Board of Directors of the Bank is 12, comprising of 2
Executive and 10 Non-Executive Directors having expertise in various
fields.
HDFC Bank, was founded on 23rd October 1931 by late Shri A.B.Shetty
and other enterprising farmers in Mangalore, Karnataka. The objective of the
founders was essentially to promote banking habit, thrift and
enterpreneurship among the farming community of Dakshina Kannada
district in Karnataka State. The bank became a scheduled bank in 1958.
HDFC Bank steadily grew into a large All India bank, with nine smaller
banks merging with it during the 1963-68. The credit for this merger as well
as growth goes to late Shri M.Sunder Ram Shetty, who was then the Chief
Executive of the bank. The bank was nationalised on 15th April 1980.
21
The bank has built a network of 1061 branches,46 Extention Counters and
337 ATMs as at 04.10.2008, that span all 28 states and 4 union territories in
the country.Each branch provides effective and efficient services and
significantly contributes to the growth of the individual, and the
nation.HDFC Bank has the highest number of branches in its home state
Karnataka. During the Current Half Year, the bank has opened 10
Branches, of which 1 extension counter was upgraded .
In line with the prevailing trends, the bank has been giving greater thrust
towards technological upgradation of its operations.The bank has network
of 1061 branches, 46 Extention Counters and 337 ATMs. 823
branches,38 extention counters, 12 service branches are functioning on CBS
platform, and at 442 centers, covering 96.4 % of Bank's business.
Realising your constantly evolving and diverse needs, the bank has
diversified too. Entering several new areas such as credit card, merchant
banking, hire purchase and leasing, and electronic remittance services.
HDFC Bank is one among the few banks in the country to take up principal
membership of VISA International and MasterCard International. The
driving force behind HDFC Bank's every initiative has been its 11896 strong
dedicated workforce.
22
Management
Today, living up to the ideals of the visionaries of the bank, the management
includes dedicated professionals, who bring with them a considerable
amount of expertise and experience in the banking industry. Board of
Directors comprising of nominees from the government of India, the RBI,
representatives of Officers and Workmen, and directors (non-offcio)
representing the shareholders manage the affairs of the bank. The Board is
constituted in accordance with the Banking Companies (Acquisition and
Transfer of Undertakings) Act, 1980. The directors have been contributing
their knowledge, experience and expertise in the respective areas of their
specialization for the development of the bank.
Organization Structure
23
Executive Director
General Managers
Regional Heads
Branch Heads
24
25
2. V Mortgage Loan
To meet the genuine financial needs of the borrowers of varied purpose
other than speculative purpose by taking the immovable property as a
primary security.
To provide loan against the security of equitable mortgage of property -Land
& Building (against vacant site is not permissible/ineligible) for meeting
the genuine needs of varied purpose other than speculative purpose
3. V Wheels
4. V Equip Scheme
For purchase of consumer durables like Refrigerator, Airconditioner,
Furniture, Kitchen appliances, Vacuum cleaner, Electrical appliances, Home
appliances, Solar water heater, Sound system, Television, CD/VCD Players,
Personal computer, Portable generator, Electric motor etc. and Equipments
required for professional and self employed persons.
5. V Rent Scheme
Owners of the property who have let out the same to reputed Companies,
Commercial / Industrial, Software, Multinational companies, Banks, eputed
26
institutions, etc. This loan is available to the owners (lessors) of the property
only.
6. V Cash Scheme
V-CASH is a very convenient scheme that one can avail of to meet short-
term credit needs for individuals / working women /
For meeting unforeseen short time credit needs of the applicants / family
members which includes medical expenses, marriage of applicant / family
members, purchase of consumer durables, etc
7. V-Rakshak
An honour in recognition and appreciation of the role of Defence Personnel
to the nation. To meet the credit needs of the Defence Personnel
(serving/retired) for purchase of consumer durable/ motor vehicles, for
meeting any type of household expenses such as repairs/ renovations of the
house, educational / marriage/ medical expenses/ family functions, etc/
traveling expenses in India and abroad, etc.
8. V-Shikshak
An honour in recognition and appreciation of the role of teachers in serving
the society by imparting knowledge
Teachers can avail any of the following schemes under concessional rate :-
V-Cash
HDFC Home Loan
HDFC Wheels
V-Equip
27
9. V Swashakti
To expand the employment and Income Generating Schemes and
Programme so as to make women Self-reliant and economically
independent.
Offering assistance to Women Entrepreneurs for economic pursuits in Small
Business, Professional or Professional or Self Employed and Retail Trade
and Credit facilities to Women Entrepreneurs (Term Loan / Working capital)
for the following :
Tailoring
Canteen and Catering
Pickle and Masala Making
Clinics
Papad Making
Beauty Parlour
Creche and Playschool
Tuitions and Coaching Class
Library
Ceramics
Departmental Stores
Handicrafts
Medical Shop
Counseling
Doctors / Chartered Accountants
28
Candle Making
Health Center
Laundry
Bakery
florist
Travel Agency
Milk Booth
10. V - PROFESSIONAL
Loans for the purpose of purchasing of equipments / vehicles for business,
repairing or renovating the existing equipments and / or acquiring and
repairing business premises or for purchasing tools and / or for working
capital requirements to eligible professionals to set up practice / business in
rural / semi urban centers.
11. V - SOLAR
Financing purchase and installation of domestic Solar home lighting system
including electrification Financing purchase and installation of domestic
solar water heating system including electrification
29
12. V - IPO
A) Studies in INDIA
the course period should be one year and above & the
courses conducted by reputed Institutions and the Institute to fulfil any
of the following criteria:
(i) NASSCOM rated/certified
(ii) AICTE affiliated
(iii) Accredited to any UGC affiliated university in India
(iv) Affiliated to reputed Foreign Universities
Computer certificate courses of reputed institutes accredited to Dept.,
of Electronics or institutes affiliated to University.
Courses like ICWA, CA, CFA etc.
Courses conducted by IIM, IIT, IISc, XLRI.NIFT etc.
Professional courses with ICFAI National College.
Coursed offered by M/s. Frankfinn Institute of Air Hostess.
31
B) Studies Abroad
1. Agriculture
a) Agricultural Advances - Direct
35
36
37
i) Micro (Manufacturing) Enterprises: The are Enterprises engaged in the
manufacture, production ,processing, preservation of goods and whose
investment cost in Plant & machinery does not exceed Rs.25.00 lakhs *.
ii) Small (Manufacturing) Enterprises: They are Enterprises engaged in
the manufacture, production , processing, preservation of goods and whose
investment cost in Plant & machinery does not exceed Rs.5.00 Crores.
iii) Micro (Service) Enterprises: Enterprises engaged in providing /
rendering of services, whose investent in equipment does not exceed Rs.
10.00 lakh **
iv) Small (Service) Enterprises: Enterprises engaged in providing /
rendering of services, whose investent in equipment does not exceed Rs.
2.00 Crores
The Micro and Small Service Enterprises will include Small Road and Water
Transport Operators, Small Business, Professional and Self-employed
persons and all other service enterprises as per the above definition.
Advances rendered to units in teh KVI Sector will also come under Micro &
Small Enterprises.
v) Medium (Manufacturing) Enterprises: Enterprises engaged in the
manufacture, production , processing, preservation of goods and whose
investment cost in Plant & machinery is above Rs.5.00 Crores & up to
Rs.10.00 crore
38
vi) Medium (Service) Enterprises: Enterprises engaged in providing /
rendering of services, whose investent in equipment is above Rs. 2.00
Crores and upto Rs.5.00 crore
** original Cost excluding Land and Building and furniture fittings and
other items not directly related to the service rendered or as may be notified
under the MSMED Act.2006.
Loans to Micro and Small Enterprises will come under Priority Sector,
whereas loans to Medium Enterprises will come under Non-Priority Sector
b) Indirect Finance
3. Others
a) Retail Traders
i) Retail traders dealing in essential commodities (Fair Price shops)
consumer co-operative stores.
39
ii) Advances granted to Private Retail Traders with credit limits not
exceeding Rs.20.00 lakh
b) Micro Credit
c) Educational Loans
Educational loans granted to individuals for educational purposes upto
Rs.10.00 lakh for studies
40
ii) Loans for repairs to damaged dwelling units upto Rs. 1.00 lakh in
Rural & Semi Urban areas and upto Rs.2.00 lakh in Urban &
Metropolitan areas.
iii) Assistance given to any Governmental agencies for construction of
dewelling units or for slum clearence and rehabilitation of slum
dewellers, subject ot a ceiling of Rs.5.00 lakh of loan per dewelling
unit.
iv) Assistance given to a Non-Governmental agency approved by NHB
for the purpose of re-finance for construction / reconstruction of
dewlling units or for slum clearence and rehabliation of slum
dewellers subject to a ceiling of Rs.5.00 lakh per dewelling unit
1. Product information
40
2. Interest rates
41
Our Bank would notify clearly about the default interest/penal interest rates
to the prospective customers.
5. Charges
a. Our Bank would notify details of all charges payable by the customers
in relation to their loan account.
b. our bank would make available for the benefit of prospective
customers all the details relating to charges generally in respect of
retail products in the media as specified in para2(i).
c. Any revision in charges would be notified in advance and would also
be made available in the media as listed in para2(i).
d. Our bank would clearly specify the charge account for interest and
charges, wherever necessary and get a mandate for debiting the said
charge account alongwith the document.
42
b. Immediately after the decision to sanction the loan, our Bank would
show draft of the documents that the customer is required to execute
and would explain, if demanded by the customer, the relevant terms
and conditions for sanction and disbursement of loan,
c. Loan application forms, draft documents or such other papers to be
signed by customer should compre-henslvely contain all the terms and
conditions relating to the product or service of his choice.
d. Wherever possible, reasons for rejection of loan would be conveyed to
the customers.
e. Before disbursement of loan and on immediate execution of the loan
documents, our Bank would deliver a copy of the duly executed
documents to the customers.
7. Account Practices
8. Information Secrecy
9. Financial distress
CHAPTER 2
RESEACH DESIGN
Title
HDFC Bank offers various loans which includes retail lending schemes like
V Trade Finance, V Cash, V Housing Loan ,etc. and others like Agriculture
loan, SME Credit, etc. It follows the RBI guidelines in formulating its
lending policy. This study is undertaken to analyse the loans & advances
made, ascertain the level of NPA, study the lending policy of the bank and
thereby to assess the credit position of HDFC Bank.
• Analysis of the loan disbursements for two financial years and related
items like NPA, etc.
• Study of the credit risk assessment document of the bank.
• Study of the credit policy of the bank.
46
Methodology
The study is done by analysing the loan and financial statements, credit
management and assessment documents and lending policies of the bank.
This would be done by using secondary data. The data would be collected
from both published and unpublished sources.
• Lending policies
• Loan and credit management documents
• Loan and financial statements
• Internet, etc.
47
Limitations
CHAPTER 3
ANALYSIS AND
INTERPRETATION
ANALYSIS OF LOANS AND ADVANCES
30,000
25,000
Fig. 3.1a Comparison of Loans and Advances
INTERPRETATION
The total loans and advances has increased by Rs.7582 cr. as on 31-3-
07.
The bank has a growth of 44.44 % in the total loan disbursements
from 31-3-06.
50
2. SECTOR/SCHEME-WISE DISTRIBUTION OF CREDIT
INTERPRETATION
The above analysis shows that there is a constant growth in majority
of the sectors/schemes.
There has been a decrease in the total loan disbursement from 31.3.06
in areas like Engineering and Cement and schemes like V-Cash, V-
Equip, V-Professional, V-Mangala, V-Kanyadan, V-IPO and V-
Nivesh.
The increase in loans and advances is highest in the industrial sector,
i.e., an increase of Rs.2146.99 cr. having a growth of 109.6%.
The V-Solar (heat) scheme has recorded the highest growth among the
various sectors and schemes, i.e., 414.7%.
53
The increase in loan disbursement is lowest in the V-Arogya scheme
having an increase of only Rs.0.02 cr.
In the SSI sector the growth is lowest having an increase of only
12.69% in the total advances.
54
18000
16000
Fig. 3.3a Geographical Distribution of Credit and its comparison for
two years
14000
INTERPRETATION
There is a constant increase in the gross credit in all the geographical
regions from 05-06 to 06-07.
The demand for credit is the highest in the metropolitan places and
lowest in the rural and semi-urban areas.
For both the years, the metropolitan places comprise the major portion
of the gross credit while the rural and semi-urban areas comprise the
12000
lowest.
55
4. CLASSIFICATION OF ADVANCES AND ITS PERCENTAGE TO
TOTAL ADVANCES
56
30000
Fig. 3.4a Classification of Advances and its comparison for two years
INTERPRETATION 25000
The standard advances comprise the major portion of the total
advances of the bank for both the years.
The doubtful advances have decreased by Rs.29.07cr. from 31.3.06 to
31.3.07 and comprises of only 0.85% of the total advances as on
31.3.07.
57
However, there is an increase in the loss advances by Rs.31.72cr.
The standard and sub-standard advances comprise the major portion
of the total advances of the bank while the doubtful and loss advances
constitute only a small portion of the total advances.
Fig. 3.5a Comparison of Gross NPA and Total Advances for two years
INTERPRETATION
25000
The percentage of gross NPA to total advances has reduced from 3.17%
to 2.29% from 31.3.06 to 31.3.07.
The total gross NPA has increased to Rs.564.31cr. from Rs.540.15cr.
with the increase in total advances.
59
6. NET NPA AND NET ADVANCES
60
30000
Fig 3.6a Comparison of Net NPA and Net Advances for two years
INTERPRETATION 25000
The percentage of net NPA to net advances has reduced to 0.59%
from 0.85%.
The total net NPA has increased to Rs.143.96cr. from Rs.142.32cr.
with the increase in net advances.
61
7. NPA PROVISION COVERAGE RATIO (Provision as a
Percentage to Total NPA)
62
600
Fig. 3.7a Comparison of Total NPA and Total Provisions for two years
INTERPRETATION
500
The coverage ratio has improved to 74.49% from 72.54%, as on
31.3.06.
The total provisions against NPA have increased to Rs.420.35cr. from
Rs.391.83cr. with the increase in NPA.
63
8. TARGET AND ACTUAL LEVEL OF GROSS NPA
64
600
Fig. 3.8a Comparison of Targeted and Actual level of Gross NPA for
500two years
INTERPRETATION
The target set for Gross NPA level has not been achieved for both the
years, i.e., the actual level is more than the targeted level.
The percentage of achievement has also reduced to 76.25% from
83.31% in the year 06-07.
For the year 06-07, the target set for NPA was lower than the previous
year but the actual gross NPA was higher than the previous year.
65
400
9. TARGET AND ACHIEVEMENT FOR RECOVERY OF
NPA
66
300
Fig 3.9a Comparison of Targeted and Total Recovery of NPA for two
250 years
INTERPRETATION
The target set for recovery of NPA has been under achieved for the
year 05-06 and over achieved for 06-07.
The percentage of achievement of NPA recovery has improved to
102.22% from 83.9%
67
200
STUDY OF THE CREDIT MANAGEMENT POLICY
The credit management policy of the bank is divided into two main
parts. They are:-
1. General Controls for Credit Risk Management or Risk
Management Architecture
2. Credit Risk Management Controls
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1. Management committee
2. Audit committee
3. Directors promotion committee
4. Risk management committee
5. Committee to review the fraud cases of above Rs.1cr
6. Shareholders /investors grievances committee
7. Share transfer committee and
8. Customer service committee.
71
f) Adequacy of IT support for Credit Risk Management
Bank is implementing core banking solution with a centralized database
through WAN. This will improve the information flow for taking timely
decisions by the management. Also, currently the bank is in the process of
procuring software models, which will enhance the adequacy of MIS and
other support for effective credit risk management system.
72
iii) Pre-sanction appraisal
Lending policy of the bank stipulates the appraisal standards and criteria to
be followed while a credit process is initiated. The policy stipulates various
criteria, inter-alia, minimum risk rating for entertaining proposals, various
financial ratios, benchmark ratios, etc to be considered during the pre-
sanction appraisal.
v) Creation of charges
Charge creation is made within the stipulated time and monitoring of the
same is done through compliance of sanction terms through various review
reports.
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CHAPTER 4
FINDINGS
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CHAPTER 5
CONCLUSION
With a view to meeting increased competition, the bank has given greater
thrust for mobilizing low cost deposits, disbursing retail credit, recovery of
NPAs, controls over operating expenses, etc., so that there is a constant
improvement in the profitability front. The bank is also giving importance to
enlarge coverage of core banking and develop new products so as to meet
the customer expectations. Single Window concept has been introduced to
enhance the customer service.
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