TABLE OF CONTENTS

TOPIC Chapter I
1.1 Introduction 1.2 Objective of the Study 1.3Need of the Project 1.4Scope of the Project 1.5 Research Methodology 1.6 Limitations of the Project -------------------------------------------------------------

PAGES 06
07 09 10 11 12 13

Chapter II
2.1 Company Profile 2.2 Organization Chart 2.3 Benefits given by Company -------------------------------

14
15 26 29

Chapter III
3.1 Theoretical Background 3.2 Data Analysis & Interpretations ---------------------

31
32 44

Chapter IV
4.1 Findings 4.2 Suggestions / Recommendations -----------------------------------------

57
58 59 60 61

Bibliography Annexure

CHAPTER I
 Introduction  Objective of the Study  Need of the Project  Scope of the Project  Research Methodology  Limitations of the Project

INTRODUCTION
The banking sector has under gone turbulent changes in the past few years. The financial sector reforms have provide Nationalized bank with an opportunities to get entered an era of fierce competition, posing tall challenges. The conventional banking as outlined above has given way for professional and high-tech banking. There has been a paradigm shift from the monopolies of nationalized banks to competitive banking. Nationalized banks can no longer remain complacent with their conventional products and services. With walk in business virtually being ruled out, banks are now scouting for quality consumers both for building their resources and assets. There were times when the corporate clientele occupied the centre stage and the retail ones were pushed to the back seat. The slowdown of the economy, sluggish industrial growth and slump in agricultural activities have pushed the commercial banks to look to the retail customers. Retail Credit Lending is one of the main functions of banking business and so an important source of working fund for the bank. Retail credit is an indispensable factor to increase the source of the Banks to serve effectively. The importance of credit facilities of the nationalized banking structure is to provide satisfactory service to the retail customers in order to fulfill their Economical or Financial needs and ultimately their social needs. The success of the banking greatly lies on the Credit Lending performance of the bank as the Credits are normally considered as a cost effective source of working fund. The bank is operating various Retail Credit Lending schemes such as Housing, Education, Vehicle, Personal and other special schemes to meet the varying requirement of the customers. Credit Lending to the public provide low cost working fund for the bank. When it is not fully augmented, the performance of the bank is affected. Innovative business has become more essential for the banks to stay and to progress in this aggressive, ever-changing, competition-packed marketing environment. For a bank, Lending of Credit is as much essential as Oxygen for Life. In the post liberalization scenario, the number of players in banking industry has increased considerably which developed competition in bank marketing. The survival of the fittest has made applicable for the banks. To enhance profitability, banks take appropriate steps to minimize the Cost and Time for lending the credit. In the present context banks efficiency can be measured with respect to Cost, Profitability and the Time taken for lending. Banking is a business of taking risks. One of the important, all pervasive risks that Bankers have to face at all points of functioning is the operational risk and supersedes other risks. It is the risk, arising out of human or technical error. Functionaries not being fully aware of the latest information regarding operations tend to make errors which may prove costly for an individual and also for the bank. It is in this context that there is a need for everyone to be abreast of the latest developments and extant operational guidelines so that the bank could lend the credit facilities to its customer as per their requirements and thereby satisfying them beyond their

expectations. This will significantly minimizes the risk and therefore help the bank to achieve its goal more efficiently and effectively.

OBJECTIVE OF THE PROJECT

The main objectives of the study are as follows:

y y To study the Concept on which bank can practice active Retail Credit Lending To analyze the need for Retail Credit and the techniques & procedures used for the processing of Retail Loans To provide the details of different modes of lending along with the steps involved in the Credit lending To describe the various methods and techniques and important measures which are used for processing of the Retail Credit Lending To study about Banks investment, Credit Deployment, and NPAs To provide the details of the Risks which are involved in the Retail Credit Lending

y y

y To study about the Risk Management & vigilance of the risks which are associated with
Retail Credit Lending

NEED OF THE PROJECT

 To fulfill the Requirement of Summer Internship which is a part of our curriculum  To know the concept of Retail Credit Lending  To describe the different types of Retail Credit  To describe the different ways of Credit lending  To study the Deployment of Retail Credit  Analysis and interpretation of the data collected

 To study the processing of Retail Credit and Risk associated with them  To study the various methods and techniques used for management of the Retail Credit  To know the income, expenditure and profitability of the bank.  To study how the Retail Credit is profitable to the Bank

SCOPE OF THE PROJECT

Following are the scope of the project: y y y y y y Source of funds in Banks Different ways of Retail lending Reasons for Retail Lending Tools and Techniques for managing Retail Loans Guidelines for Retail Credit Lending Risks involved in Retail Loans Describes the Risk Management

RESEARCH METHODOLOGY

Methodology is to collect the important data through secondary sources like internet, books, circulars and journals. I approached each and every officers of the bank and I obtained very useful information from them. To give a present scenario on the topic I also spoke to the Asstt.General Manager of the bank and his Team who also act like a secondary source of data for the completion of my project report.

LIMITATIONS OF THE PROJECT

Following Problems were encountered during this project:

 Time constraint  Collection of real time data  Survey within the bank  Bank staff could not provide the detailed information due to banks Policy.

CHAPTER - II

 COMPANY PROFILE  ORGANISATIONAL CHART

- BOARD OF DIRECTORS - TOP MANAGEMENT

 BENEFITS GIVEN BY THE COMPANY

COMPANY PROFILE

Name of the Bank Area of Operation No. of Branches Class Chairman Managing Director Executive Director Staff Members

: : : : : : : :

BANK OF MAHARASHTRA Nationwide 1,421 A Class SHRI. ALLEN C.A. PEREIRA SHRI. ALLEN C.A. PEREIRA SHRI. M.G. SANGHVI 13,631

Company Profile in Tabular Form

Parameter Total Business Total Deposits Aggregate Deposits Gross Advances Net Bank Credit CD ratio % of Priority Sector Adv. % of Agricultural Adv. Total Investments Gross NPAs % to Gross Advances Net NPAs % to Net Advances Operating Profit Net Profit Other Income (incl. treasury profits) Capital Adequacy Ratio P. E. B. ( in lacs ) No. of Branches Of which Metro Urban Semi Urban Rural

Mar 2007 57381.62 33919.34 33663.20 23462.28 23220.87 69.70 41.24 16.73 11298.40 820.28 3.50 277.38 1.21 613.20 271.84 378.52 12.06 413.03 1345 264 290 202 589

Mar 2008 71556.36 41758.33 41580.37 29798.03 29285.81 71.66 48.63 21.04 12282.95 766.27 2.57 254.05 0.87 672.63 328.39 380.28 10.75 526.54 1375 351 257 251 516

Mar 2009 87072.20 52254.92 52219.43 34817.28 34290.77 66.67 41.06 18.21 18382.14 798.41 2.29 271.90 0.79 793.52 375.16 500.02 12.05 638.78 1421 368 271 262 520

ABOUT BANK OF MAHARASHTRA

ESTABLISHED IN 1935
Bank of Maharashtra is a common mans bank. Prof. V.G. Kale and the late Shri D. K. Sathe registered as a banking company on the 16th of September, 1935 at Pune with an authorized capital of Rs. 10.00 Lakh and issued capital of Rs. 5 Lakhs by a visionary group of middle class men with the sole aim to serve the common man from Maharashtra who was neglected in the field of banking at that time. Their vision was to reach out to and serve the common man and meet all their banking needs. The bank started functioning on 8th February 1936. In July 1969 when it was nationalized with 13 other major Bank had developed its roots in entire Maharashtra and it enjoyed complete confidence of the common man. Even before the government issued guidelines about deployment of 40% advances to priority sector, the Bank was following the principle of serving common and neglected people of the society, since its inception and it continues even today. Successive leadership of the Bank and the employees has endevoured to fulfill their vision.

Rapid expansion after Nationalization

After Nationalization, the Bank expanded rapidly in other states and also reached the nook and corner of Maharashtra. Around 38% of its branches are in rural area. Today the bank is spread in 22 states and 2 union territories. It has already acquired the status of an all India bank. At the same time it has gained predominance in Maharashtra state through 883 branches. The Bank has migrated 831 branches under CBS as against 773 branches as on 31.03.2009 and 798 branches as on 30.06.2009. The Bank thus holds the record of having highest number of branches of any nationalized Bank in a single State. The mission of the bank is To be Best in Maharashtra and most liked in other states.

Milestones
 Milestones: Pre Nationalization 1936 1945 1946 1958 : : : : Commenced business on February 8th. Deposits crossed Rs. 1.00 crore marks. Maharashtra Executor and Trustee Company (METCO) established. Listed on Bombay Stock Exchange.

 Milestones: Since Nationalization : The Bank was nationalized with 153 branches. : Set up first Regional Rural Bank (RRB) 'Marathwada Gramin Bank' with headquarters at Nanded. The Bank was appointed as Convener to the State Level Bankers Committee (SLBC) 1979 : Bank's business crossed Rs.1,000 crore. 1980 : 500th branch of the Bank at Nariman Point, Mumbai inaugurated by the late Smt. Indira Gandhi, the then Prime Minister of India. 1981 : Set up the second RRB Aurangabad Jalna Gramin Bank. 1984 Dr Manmohan Singh, the then Governor, Reserve Bank of India, launched the Bank's Golden Jubilee Celebration. 1986 : Set up the third RRB Thane Gramin Bank 1987 : 1000th branch of the Bank opened at Indira Vasahat, Pune. 1996 : Bank's Diamond Jubilee Celebration launched by the then RBI Governor, Dr. C. Rangarajan 2004 : Bank came up with Initial Public Offering (IPO) 2006 : 1. Launched ATM-cum-International Debit Card 2. Commenced Bancassurance business 3. Commenced distribution of Mutual Fund products. 4. Surpassed business landmark of Rs. 50,000 crore. 5. 1st CBS branch rolled out on 13th November at Karve Nagar, Pune. 2009 : 1444 branches, 345 ATMs, Total Business over Rs. 90,000 crore, 902 CBS branches nd 2 Mar 2010 : The Bank achieved 100% CBS coverage. 1969 1978

Vision 2010
To be a vibrant, forward looking, techno-savvy, customer centric bank serving diverse sections of the society, enhancing shareholders and employees value while moving towards global presence.

Mission
      To ensure quick and efficient response to customer expectations To innovate products and services to cater to diverse sections of society To adopt latest technology on a continuous basis To build proactive, professional and involved workforce To enhance the shareholders wealth through best practices and corporate governance To enter international arena through branch network

Our Logo

 The Deepmal
- With its many lights rising to greater heights.  The Pillar - Our institution - Symbolizing strength  The Diyas - Our Branches- Symbolizing service.  The 3 M's symbolizing - Mobilisation of Money - Modernisation of Methods and - Motivation of Staff.

Our Aim
The bank wishes to cater to all types of needs of the entire family, in the whole country. Its dream is "One Family, One Bank, Bank of Maharashtra ".

Secured Autonomy
The Bank is one of the progressive Nationalized Banks that got autonomy in the year 1998 and continues to enjoy the status as a result of excellent performance. It helps in giving more and more services with simplified procedures without intervention of Government. The Bank has earned profit for consecutive five years.

SOCIAL BANKING for equitable economic development

The bank excels in social Banking, overlooking the profit aspect having the highest share of priority sector in net Advances and it derives strength from the common man, as its savings deposit are 29% of its deposits. Around 90% of its depositors are having deposits below Rs.25000/-. The Bank provides an array of banking services that satisfy changing needs of depositors as well as small and big borrowers. The bank has entered into correspondent arrangement with Overseas Bankers also. It provides finance to various sectors ranging from Agriculture to Industry and from Trade to Export. The Bank has established Rural Development Centres at Hadapsar and Bhigwan in Maharashtra to carry out Research, Technical Support, Education, Demonstration and Rural Development Activities. The Bank has also established to trust under RDC, namely Gramin Mahila VA Balvikas Mandal (GMVBM) and Maha Bank Agricultural Research and Rural Development Foundation (MARDEF) Both are NGOs and are engaged in improvement of women and children in the rural and in transfer of technology in Agricultural sector. -Priority Sector Lending It has been the constant endeavor of the Bank to facilitate equitable and sustainable development by making credit available to productive purposes to Small Borrowers, Small & Marginal Farmers, Micro & Small Enterprises, Retail Traders, Professional & Self Employed, Women Entrepreneurs and economically weak but with entrepreneurial leanings. The outstanding advances under Priority Sector as of March 2009 aggregated to Rs. 12,236 crore, constituting 41.06 per cent of the Adjusted Net Bank Credit of the previous year as against the stipulated minimum target of 40 per cent. The rise in Priority Sector Advances was Rs. 826 crore over March 2008 in absolute terms. -Agriculture sowing to reap The Bank disbursed Rs. 3,143 crore under agriculture during the year 2008-09. The outstanding advances increased to Rs. 5,427 crore showing an increase of Rs. 471 crore. As on March 2009, total advances to agriculture are 18.21 per cent of Adjusted Net Bank Credit. The Bank undertook awareness programmes for all branches for increasing agriculture advances. The Bank successfully implemented Agriculture Debt Waiver and Debt Relief Scheme of the Government of India, by reaching out to 87,157 eligible small and marginal farmers for debt waiver involving Rs. 218.32 crore. The number of farmers eligible for debt relief is 48,237. -Micro, Small and Medium Enterprises (MSME) for sustainable growth SMEs are recognized as major growth engines for the Indian economy. They generate opportunities for direct and indirect employment by facilitating use of natural resources and local skills to stem the tide of migration to urban areas and promote low investment enterprises. The

Banks lending to MSMEs which was at the level of Rs. 2643 crores as at March 31, 2008, has increased to Rs. 3074 crores as at 31st March 2009. Following the special package announced by the Government in September 2008, fresh credit facilities to the tune of Rs. 1170 crores have been extended to MSMEs between September 2008 and March 2009.

Convener of State Level Bankers Committee

The Bank is the convener of State level Bankers committee and is successfully handling the convenorship of state Level Bankers committee for the State of Maharashtra. It is also convener of SLBC for Rajbhasha. It is entrusted with the responsibility of being the Lead Bank under Lead District scheme in six districts namely Aurangabad, jalna, Nasik, Pune, Satara and Thane, all from Maharashtra. The Bank has sponsored three Regional Rural Banks with their head quarters in Nanded, Auraangabad and Thane, namely Marthwada Gramin Bank, (MGB) Aurangabad Jalna Gramin Bank & Thane Gramin Bank. MGB happens to be the biggest RRB in the country and covers 6 District in Maharashtra. Bank offers Depository services and Demat facilities at 131 branches. Bank has a tie up with LIC of India and United India Insurance Company for sale of Insurance policies. All the branches of the Bank are fully computerized.

Computerization
Computerization activity in the Bank started a way back in 1982. By December 2000, 380 branches were computerized and the total business handled by these branches was more than 69%. The Bank has also introduced sophisticated facilities like ATM, E-mail, Tele-Banking, Query Terminal etc. at various branches/offices.

Highlights
   

Autonomy secured in the year 1998 continues. Total business more than Rs. 91000.00 crore of which total deposits more than Rs. 54400 crore and Gross advances more than Rs36600 crore as of 30.9.2009 Branch network comprises of 1433 branches spread over 22 states and 2 union territories. CBS Branches Bank has migrated 831 branches under CBS as against 773 branches as on 31.03.2009 and 798 branches as on 30.06.2009 ATM Network Bank has 345 ATMs. Bank has installed 11 Biometric ATMs. Card base crosses 10 lakh Mahabank Insta International Visa Debit Card Mahabank International Debit Card is issued in collaboration with VISA

ATM Card along with PIN is given to the customer as Welcome Kit at the time of opening of the current and SB account in all CBS branches. The customer can start using ATM Insta card after 36 hours from date of issue. ( 36000 Insta Cards are issued since July 09) Utility Bill Payment through Internet Banking Facility. The customers can do on line shopping / e-commerce and utility bill payment transaction through Internet Banking facility.( 37000 Customer are using Internet Banking facility) Maha e-Statement Customers can get their statement of account on registering their e-mail id and desired frequency of statement with the Bank. Straight Through Processing (STP) STP of NEFT/ RTGS transactions has been implemented for instant processing of inward and outward remittances through RTGS and NEFT. (800 branches are offering RTGS/NEFT facility) Specialized branches:
      

S M E branches - 14 Agro High-Tech branches - 4 Industrial Finance branches - 2 Overseas branches - 2 Treasury & international Banking - 1 Pension Branch -1 Govt. Business Branch - 1

  

Bank has 28 FEX centers to handle FEX business. Toll Free telephones at 11 major Metro centers. The bank is shouldering the responsibility of lead bank in six districts viz. Satara, Pune, Thane, Nasik, Aurangabad and Jalna. Our bank is also convening State Level Bankers Committee and various development issues are taken up to implement the state credit plan and achieving the targets under various Government sponsored schemes. The Bank has set up a Trust viz. Mahabank Agricultural Research and Rural Development Foundation (MARDEF), which is engaged in providing Credit Plus services to the farmers in specific specialized fields like commercial dairy, Emu farming, sericulture, organic farming, etc. The Rural Development Centers at Bhigwan and Hadapsar in Pune District undertake various labs to land programs on improved technologies. A fully fledged soil-testing lab is being set up for the benefit of the farmers to go in for high-tech agriculture.

To provide activity specific training to educated unemployed youth, Bank has set up five Mahabank Self Employment Training Institutes (MSETI) at Pune, Aurangabad, Nagpur, Nasik & Amravati for providing training to rural youth for enabling them to acquire skills for self-employment. Bank has formed a Trust by the name Gramin Mahila va Balak Vikas Mandal (GMBVM), which is primarily engaged in formation, nurturing, training and linkage of self-help groups to various banks, GMBVM has its area of operation in nine districts and has been recognized by Government of Maharashtra as Mother NGO. It also markets various products made by SHGs through its two retail outlets by name SAVITRI in Pune district. The GMBVM is now in the process of scaling up viable SHGs to SMEs. The Bank has floated a subsidiary company- The Maharashtra Executor & Trustee Company Ltd. (METCO) which undertakes Trustee Business, Property Management and Tax Consultancy as well. Bank is the Convener for Town Official Language Implementation Committee (TOLIC) at Mumbai, Pune & Solapur. The Bank secured the First Prize for better implementation of Hindi in both A and B Region and the Fourth Prize for implementation of Hindi in C Region under Reserve Bank of India Rajbhasha Shield Scheme for the year 20072008. The Bank also secured the Second Prize under R.B.I. Bi-lingual House Magazine Competition for the year 2009.

M-SETI
M-SETI (Mahabank Self-Employment Training Institute) is an institute established under the aegis of Mahabank Agricultural Research & Rural Development Fund (MARDEF), a trust established by Bank of Maharashtra and co-sponsored by the National Bank for rural development (NABARD). The institute is recognized by the Department of employment & selfemployment of Govt. of Maharashtra. The institute trains unemployed youth from the districts of Pune, Kolhapur, Satara, Sangli, Nashik, Ahmednagar, Jalgaon, Dhule and Nandurbar. The objectives of the Institute are:
   

To train the unemployed youth. To promote rural entrepreneurship. To increase self-esteem of participants and To help trainees in improvement, placement and counseling them for Bank facilities and their subsequent status.

The following are the training programs identified by M-SETI:



  

Entrepreneurship development programmes (EDPs) on technical courses viz. two wheelers, TV and VCR and domestic appliances, repairs, motor rewinding, photography and video shooting, beauty parlor, commercial painting, tailoring etc. EDPs specific to the Government sponsored schemes viz. PMRY, SGSY, SJSRY, SHGs, Information technology; Electronic data processing, electronic data entering and computer awareness programmes. The said training is free of cost.

MAHABANK INFO CENTER 1. Mahabank Info Center is a retail banking boutique set up by Bank of Maharashtra having the following activities. Providing information on services provided by the bank at its various branches and specialized branches, 2. Mobilizing deposits for various branches in Pune city, 3. Marketing to increase ATM card base Directing prospective clients to respective branches for financial aid on housing, vehicle, consumer durables, education & foreign

tours, etc. 4. Development of business through bringing in instructional accounts. 5. Image building exercises.

ORGANIZATIONAL STRUCTURE

 BOARD OF DIRECTORS  TOP MANAGEMENT

BOARD OF DIRECTORS

Shri.V. P. Bharadwaj

Shri. S.K. Gogia

Shri. A. K. Pandit

Shri. C. Patwari

Shri. T. Parameswara Rao

Shri. S. H. Kocheta

Dr. D. S. Patel

Shri. S. U. Deshpande

TOP MANAGEMENT

Shri. A. S. Banerjee

Shri. B. K. Piparaiya

Shri. K. H. Waze

Shri. V. Kannan

Shri. V. E. Dalvi

Shri. V. Y. Chapekar

Shri. R. H. Kulkarni

Shri. M. V. Dhoble

Shri. M. C. Goyal

Shri.S. D. Arya

Shri. V. R. Gupta

Shri. Dilip. R. Harnagle

Benefits Given By the Company

Following are the Services Provide By Bank of Maharashtra: Bank Deposits  Lending of Loans  ATM Services  Credit Cards  Demat Services  Bancs  Bancassurance  Distribution Of Mutual Funds  Executors And Tustee Services  MAHAbill Pay  Mahabank Insta Remit Scheme  Capital Market Application (ASBA)  NEFT  MAHAeTRADE (ON LINE trading facility)

Roles and Responsibility:During my summer internship in the Retail Hub of Bank of Maharashtra, I have learned about the Retail Loans as much as I can. Especially Mr. Rajan Korgaonkar, Asstt.General Manager of the bank and his Team helped me a lot in learning the Retail Credit operation and the Risks involved in Lending Credit. The staff was really very helpful, supportive, coordinating and friendly as well. I also got to realize the importance of know your customer (KYC) norms According to which Bank opens an account or give loans & advances to the customer. Banks completely follows the RESERVE BANK OF INDIA guidelines for deposit and advances.

 In Bank Loans : -

of Maharashtra, I Learned how to deal with the following four types of Retail Home Loan Education Loan Vehicle Loan and Personal Loan

 I am feeling benefited after learning the following operations in the Bank of Maharashtra :Assessment of the loan documents. Preparing the Assessment sheet. Reporting to Concerned officer about the Assessment. Preparing the Housing Loan Processing Note. Preparing the Loan Appraisal forms. Preparing the Sanctioning Note. Criteria or Conditions for Sanctioning Loan. How to verify the Loan documents? How bank deals with Different Loan Requests?

I have learned all these operations by completing 24 Loan Proposals which includes all the four types of Retail Loans like Housing, Education, Personal and Vehicle loan.

CHAPTER-III
 Theoretical Background  Data Analysis & Interpretations

THEORETICAL BACKGROUND

GENERAL Lending of funds to the constituents comprising of traders, businessman, agriculturists etc. constitutes the main business of Banking Company. Bank has to ensure that in granting of loans and advances, the deployment of funds is made in a most profitable manner. Yet this business of lending is not without inherent risks. The test of a banks strength and its success or failure depends on the nature and quality of its advances. Therefore while lending, bank follows prudent policies and conduct its business on the basis of principles of sound lending in order to minimize risks. Safety, liquidity and profitability are the cardinal principles of lending. After nationalization banks have been functioning as an instrument of social change. The GOI and the RBI, during the last two decades have issued a number of directives in this regard highlighting the social/economic purpose which they have to sub-serve. The traditional principles of lending have come under stress. With regard to certain type of lending particularly under priority sector the concept of security and profitability have undergone a radical change and have been subordinated to social objectives. A) Yet a banker has also to remember that he is dealing in funds collected from public by way of deposits and is working as a trustee of their funds. Therefore the basic principles of good and sound lending which are fundamental observed by Banks. The principles may vary depending on situation, however, basic frame will remain the same. B) It needs to be borne in mind that advances form the most important component of banks business. The advances portfolio needs to be monitored with due care and responsibility, because of the risk involved in lending operations. C) Safety, liquidity and profitability are the three basic principles of lending. Since the amount to be advanced mainly consists of depositors funds, bank has to ensure and safeguard depositors interest. Bank should also remember that some of banks deposits are withdrawable on demand or at short notice. It would be in banks interest to see that the advances which bank grant are easily liquidated. The canon of liquidity is more important. Bank should also know that bulk of banks profit accrues from the advances. However, profitability should not override the other two principles of lending i.e. safety and liquidity. Therefore, the crux of banks lending lies in reconciling these conflicting requirements by striking a good balance between these conflicting principles.

COMPOSITION OF CREDIT PORTFOLIO It is equally relevant to mention here that bank should diversify their advances and should not concentrate such lending to any group or sector of industry/business in one particular area/sector. The maxim all eggs should not be kept in one basket should be borne in mind. The purpose for which the advances are to be sanctioned/recommended should be legal and acceptable to the bank and the type of business activity to be financed by the bank should be within broad lending policies framed by the Central Office. Bank should ensure that the purpose of the advance is productive which will generate internal surplus and provide definite source of repayment. The aspect of security (wherever applicable) should not be lost sight of. Tangible security acceptable to the bank should be considered as an insurance or cushion to fall back upon in case of emergency. Even after application of all principles of lending, a particular proposal may not be acceptable to the bank, if it is not in the National Interest. GOI and the RBI issue various directives from time to time in this regard. These should be kept in view while sanctioning/recommending any advance/s. Every proposal should conform to RBI/government/banks guidelines and national policy.

Summary
Bank summarize below the principles of sound lending which should be observed while sanctioning/recommending any advance. 1. 2. 3. 4. 5. 6. 7. 8. Safety Liquidity/Economic Viability/Technical Feasibility of the activity of the borrower Profitability Purpose Security Diversification of risks National Policy/RBI Credit policy Banks credit policy.

SIGNIFICANT ASPECTS FOR EXAMINING THE ADVANCES

-Advances Portfolio
1. The manager/officer should study the composition and distributive pattern of the credit portfolio of the branch and examine as to whether the branch has been following the guidelines enunciated in credit policy of RBI / Bank. The manager / officer should also ascertain as to whether the efforts made by the branch in extending credit to the priority and weaker sectors of society are adequate and that potential offered by the area of its operation for various types of advances has been properly tapped.

2. It should be seen as to whether the branch has proper infrastructure facilities and adequate arrangements for proper credit appraisals, post disbursement supervision and follow up of advances/problematic/sick, weak accounts, more particularly for recovery of non-performing advances/large overdues in these accounts. 3. The manger should examine that he is exercising the delegated sanctioning powers judiciously and there is proper and timely reporting of sanctions to the competent authorities. As far as possible the Branch Manager is expected to refrain from exceeding the delegated powers and it should be seen that in unavoidable cases confirmation I obtained from the competent authority at the earliest specifically giving the reasons as to why it was so necessary to extent ad hoc/temporary/additional credit facility without obtaining prior sanction. 4. It should be verified that the guidelines on advances issued by RBI/HO from time to time are strictly followed by the branch. 5. The assets acquired by the borrowers are available as security for banks dues and the branch is taking adequate and necessary timely steps to safeguard interest of the bank.

- Applications for credit Facilities The managers/officers should ensure that: 1. The applications as far as possible are obtained in appropriate forms for different categories of borrowers and types of credit facilities, prescribed by the Head Office. 2. The applications are accompanied by documents relating to the status of the applicant i.e. individual/sole proprietorship/ society/trust deed, Memorandum and Articles of association etc. are obtained and kept on record. The Branch Manager should obtain financial statements for at least past 3 years, wherever so applicable, true copies of latest income tax/sales tax and wealth tax returns and assessment orders. For societies/local bodies/limited companies, certified copies of appropriate resolutions authorizing the signatures/office bearers to operate the accounts and borrow the funds from the bank be obtained and kept on record. - Credit Reports 1. Credit reports on individual borrowers/company/obligant/guarantors are obtained and are kept on record. 2. The Branch Manager has independently verified the correctness of the information furnished by the borrowers/guarantors in personal information form and has prepared confidential report in the prescribed form (F.85). the credit reports are updated annually and fresh reports wherever required are obtained and held on record. 3. Brief particulars of immovable properties owned by the individual/firm together with the conservative estimates of their market value are kept on branch board. Wherever required

and found necessary fixed assets charged to the bank must be got valued from approved Valuer and such valuation reports be kept on record. 4. That the nature and extent of credit facilities, if any, enjoyed by the applicant/borrowers at different offices of the bank as also at other bank/banks are obtained and kept on record at the branch., while arriving at the credit needs of the applicant care is taken to take into account all such other credit facilities enjoyed by the borrower

CREDIT APPRAISAL/PREPARATION OF SANCTION/REVIEW/RENEWAL OF ADVANCES

APPRAISAL

NOTES

FOR

The manager/officers should examine the quality of credit appraisal done at the branch and ascertain to 1. Whether the branch has been following generally accepted sound lending norms and is examining carefully various aspects like proposed activity, diversification of activity viability of the project, creditworthiness of the applicant/guarantors, purpose and types of the credit facilities requested, competence of the borrowers to manage the business activity etc. 2. Whether the past conduct of the accounts, compliance of terms and conditions of sanctions submission of information like stock statements, QMR, financial statements etc. have been taken into account. 3. Whether notes on review/renewal based on audited financial data contain details and critical observations on performance of the unit, financial position of the unit and its constituents, working results vis--vis Projections. 4. Whether status of the security charged to the bank has been re-examined. Wherever eligible i.e. in respect of credit facilities of Rs.50.00 Lakhs and over, whether the same has been verified by independent C.A. firm. 5. Whether operations in the account and availment of various credit facilities have been to the satisfaction of the bank and the appraisal note contains comments about the same. 6. Whether exercise for PBF/NWC etc. has been carried out correctly / critically. 7. Whether the branch is complying with RBI/IBA/Head office guidelines/instructions regarding sanctions, review and renewal of advances.\ 8. Whether Nayak Committee/ Ghosh Committee/ Selective credit control norms etc. are followed. 9. In case the borrower has been banning/availing credit facilities with other banks, whether latest opinion reports from such banks have been obtained. 10. Whether search with Registrar of Companies has been obtained before sanction/review/renewal of credit facilities. 11. Whether it is ensured that partnership firm is registered with registrar of firms and certificate for the same is held on record.

12. Whether necessary certificates which are required for commencement of business activity have been obtained. DOCUMENTATION The manager/officers should verify that the branch has obtained all necessary documents adequately stamped and properly executed as stipulated by the central office for the facilities granted to the borrower. In case of advances above Rs.50.00 Lakhs certificate from the correctness of documents taken is obtained and is held on record. In case law officer is not available, certificate from the local panel advocate be obtained. REPORTING SYSTEM The manager/officers should verify that the credit facilities made available are correctly and timely reported to the competent authority. The control returns submitted depict true picture of the information incorporated.

IMPORTANT SCHEMES / PROJECTS OF THE BANK - Retail Financing The Bank is providing retail loans to Individuals, who are salaried persons, professionals, businessmen and pensioners for purchase of consumer durables, two/four wheeler vehicles and also for other personal needs. During the year, the Retail lending portfolio grew by 8.19 per cent. - Housing loan to public To promote the housing in rural and urban parts of India, the Bank has taken the housing as a thrust area and has been lending under the Housing Loan to Public Scheme, on a priority basis. The scheme is simplified and is customer-friendly. Housing loans are also made available to NRIs. The Bank is also implementing Golden Jubilee Rural Housing Finance Scheme in rural areas, having population not exceeding 50,000 (as per 1991 census). The Banks lending to housing sector has grown by 13.28 per cent during the year. - Model Educational Loan scheme from learning to earning With the objective of ensuring that no deserving student is denied an opportunity to pursue higher education for financial reasons, the Bank implements a Model Educational Loan Scheme. As of March 2009, the Banks educational loans stood at Rs. 347.19 crore to 19249 students. The Bank has provided the facility of submission of online application for education loan through web-access.

CHARACTERISTICS OF RETAIL LOANS All these Retail Loans are considered as Fund-based Credit Facilities. They are also known as Term Loan It is an arrangement wherein the credit facility is sanctioned to a borrower for a fixed period but repayable in installments. Once the loan amount is disbursed in full no subsequent debit is to be allowed except by way of interest, insurance charges, DICGC guarantee fees or expenses incurred for protection of the security charged to the bank etc. interest is charged on the amount outstanding from time to time. Interest chargeable is worked out on daily products and applied on quarterly basis/half yearly basis. As there is no possibility of a loan account showing credit balance or fluctuating debit balance unlike the operative cash credit account, the operational cost of maintenance of loan account is lower as compared to cash credit account. However, the period for which such loans are considered is longer (ranging from five to seven years)

ADVANTAGES OF RETAIL LOANS Better yield and improved bottom line Risk calculation and NPA perception Builds customer base Helps economic revival of the nation through increased production activity Improves lifestyle and fulfills aspirations of the people through affordable credit. Innovative product development Minimum marketing efforts in a demand-driven economy Risk weight in certain segments like housing loan

BORROWER AND CONFIDENTIAL REPORT - Borrower Selection Bank should have personal knowledge about the borrower/s and their business. As a condition precedent to any advances we should make discreet enquiries about the position and status of the borrower, security offered and repayment proposed etc. Care should be exercised in selection of borrower and advances are to be sanctioned / recommended for borrowers, whose integrity, reputation, capacity to conduct the business and credit-worthiness are established to our satisfaction.

Three Cs: Character, Capacity and Capital are the basic principles for consideration
of an advance. The character of a borrower indicates his intention to repay the advances and his capital and capacity indicate his ability to repay. To sum up integrity of the borrower should be unquestionable. If the borrowers integrity is questionable (doubtful) Bank should refrain from sanctioning credit facility/ies even if a collateral security is offered. Any amount of security cannot substitute integrity of a borrower. The ability of a borrower to utilize the credit facility sanctioned by the Bank Profitably and to repay the same with interest within a reasonable period needs to be looked into. Likewise Bank should enquire into the financial position of the borrower. The lending should be in proportion to the borrowers own resources. - Banking relations We may ordinarily recommend/sanction credit facilities only to applicants who agree to bank with us exclusively and that too with one branch unless the borrower has offices at different places and his business warrants maintaining accounts with more than one branch. A number of complications viz. Double financing, kite flying etc. arise when borrower deals with more than one branch/bank and hence such precaution is necessary. - Confidential Report A) A confidential report of the borrower and/or guarantor needs to be scrutinized carefully. Scrutiny should lead to some firm conclusions. Information furnished by the borrower/guarantor needs to be independently verified. A conservative estimate of the means of the borrower/guarantor should be formed in order to determine the extent to which they may be considered creditworthy. If these borrowers/guarantors are banking with other banks confidential opinion from all such banks should be obtained when they propose to switch over to our bank to their existing bankers. B) Detailed scrutiny of all such repots compiled and/or collected need to be made by managers to ascertain whether there is a significant variation in net worth of borrowers/guarantors under the review period. Adverse features noticed during annual review should be communicated to the controlling office/central office to enable them to suggest remedial measures to be initiated. However, it should be ensured by the Branch while compiling/collecting such reports or taking annual review of such report/s that it exercises all possible tact and discretion to avoid inconvenience to good customers of long standing while calling for elaborate details. Our form No.157 in respect of collection of information from the borrower and the guarantor should be got filled in and his latest income tax /wealth tax returns/assessment orders should be perused all Personal information forms should be updated on yearly basis.

RISK MANAGEMENT SYSTEMS IN BANKS In the process of globalization and financial disintermediation, banks are now forced with the prospect of facing a wide variety of risks, viz. credit, interest Rate, Forex, Liquidity, legal Regulator, Reputational, operational and so on. These risks have assumed significance, as the ability to identify measure, monitor and control the overall level of risks have become crucial to the long-term viability and perspective of the banks. Recognizing the significance of these risks as well as the need for their effective management, RBI had issued risk management guidelines in October 1999 for implementation of Risk Management Systems in banks. The RBI guidelines broadly cover the management of credit, market and operational risks and, together with the earlier guidelines on asset liability Management, are to serve as benchmarks for the establishment of an integrated Rise Management System, which is to be operationalised by March 2001. - What is risk Management all about? The broad parameters of a risk management function should encompass: i. Organizational structure ii. Comprehensive risk management approach iii. Broad approved risk management policies iv. Board approved risk management policies v. Strong M.I.S vi. Well-defined procedures and a comprehensive risk reporting framework. vii. Separate risk management framework independent od operational departments. viii. Periodical review and evaluation. The RBI guidelines focus upon setting up of departments/committees for Risk Management, development of credit rating models to identify risk and risk pricing, quantification of risk arising out of expected/unexpected losses, estimation of provisioning requirement, calculation of risk capital requirement, monitoring and control of credit portfolio management and Loan Review Mechanism (LRM), risk analysis of investments proposal and database for credit risk modeling.

RISK MANAGEMENT EFFECTIVE AND PROACTIVE 1. General As of March 2009 all SCBs in India have come under the purview of Basel II capital adequacy norms notified by the Reserve Bank of India. Banks are required to have sufficient capital to cover credit risk, market risk and operational risk. In order to calculate capital requirement under the Basel II norms, banks have to put in place a comprehensive risk management frame work

across the organization. The Banks approach to risk management is proactive. The primary goal of risk management is to identify, assess the impact of the risks inherent in the business and adopt risk management / mitigating measures, so as to achieve business growth with improved safety, soundness and profitability. The Bank has also formulated a Risk Management Policy on the basis of the guidelines issued by RBI recognizing the need to effectively identify measures, monitor and control various risks in view of their implications on the Banks business growth and financial soundness. RISK MANAGEMENT SYSTEMS CO-ORDINATE AND COMPREHENSIVE Credit Risk The Bank has in place a comprehensive Lending Policy and Loan Review Policy, which prescribe instruments of Credit Risk Management. Various aspects of Credit Risk, like asset concentration, norms for industry exposure, prudential limits and various financial parameters, substantial exposure limits, standards for collaterals, and review of portfolio etc. are spelt out in the above policies in line with the Risk Management Policy prescriptions. The Bank has also set up Credit Approval Grids at various levels and at Treasury & International Banking Division (TIBD) Mumbai to obtain preliminary clearance on credit proposals from the risk perception view point. The Bank has put in place a comprehensive credit policy and internal credit rating system under which all the borrowable accounts with exposure of Rs. 2.00 lakh and above are rated on various parameters. An in-house developed Credit Risk Rating Framework (CRRF) comprising of risk rating models for existing as well as entry level borrowers recognizes the classes of asset as desired under Basel II, like corporate, banks, commercial real estate and retail. The Bank has prescribed bench-mark ratings for entry level exposures. In addition, as credit risk management measures, substantial exposure limits and very large exposure limits have been prescribed in the Risk Management Policy. The Bank has undertaken migration analysis of credit risk rating and estimated probability of default in line with Basel II requirements. Risk based pricing framework has been implemented. Portfolio reviews and industry studies have been undertaken during the year to assess the risks lying in the credit portfolio and to adopt strategies to improve credit quality and reduce the potential adverse impact of concentration of exposure to particular borrowers, sectors or industries. Policy on Stress Testing has been put in place and reports on stress testing results are placed before the appropriate authorities for periodical review. Interest Rate Risk Dynamic Pricing The Bank has put in place a system for regular review of lending and deposit rates in order to minimize the interest rate risk. The Bank has put in place an Asset Liability Management (ALM) Policy which is reviewed regularly. The Asset Liability Management Committee (ALCO) of the

Bank reviews the risk on a regular basis. Continuous Risk Management measures are initiated depending upon the movement of interest rates in the market. The movement in the interest rates is closely monitored for appropriate action. Liquidity Risk prudence adopted The Bank ensures effective management of liquidity through the statements of Structural Liquidity and Short Term Dynamic Liquidity. Models based on behavioral studies of assets and liabilities have been adopted for maturity gap analysis. ALCO reviews the liquidity position on an on-going basis and decides the strategy for funding and deployment. The Bank has put in place a contingency plan for managing liquidity. Investment Risk Portfolio Quality of Essence The Investment Policy is in place, covering various aspects relating to Investment decisions, operations and monitoring thereof, from a risk management perspective including Minimum rating/quality standard for investment in corporate. Foreign Exchange Risk Well Controlled The Bank has adequate systems like prudential limits for open foreign exchange position, set limits on the aggregate gap position. Prudential limits like Daylight limit, Overnight limit, Net open overnight position, Stop loss limit, Limit for undertaking swaps/investment/ borrowing overseas, interbank exposure limits are in place. These limits are monitored on daily basis. Operational Risk Business Continuity At The Core For mitigating and controlling the operational risk, the Bank has a well established internal control system and an administrative structure to formulate, implement and monitor systems and procedures. The Bank has put in place a Business Continuity Planning Policy and Operational Risk Management Policy. The Bank is in the process of collecting data on operational risk. The Bank has also put in place a policy on outsourcing which facilitates using the expertise available in the market and also as a means of risk transfer. Regulatory Risk The field functionaries will have to adhere to the guidelines of the regulatory authority and it should be made clear that such guidelines / directive are to be adhering to their totality. Legal Risk Documentation has to be completed as per sanction terms and law officer wherever prescribed as per the extant system of getting of borrowable accounts with limits of Rs. 50.00 Lakhs and above.

Environment Risk Field staff should keep themselves abreast of the changes in the environment. Detailed guidelines on such matters should be adhered to by the field functionaries and exposures monitored even in cases where the limit is available. Deviations/expectations in such exposures should be promptly reported to the component Authority. Reputation Risk The Banks business derived from the branches and it is, therefore, the duty of the field staff to maintain the reputation of the bank high by ensuring extremely cordial relations while observing the statutory guidelines scrupulously. Whether the Banks reputation would be at stake while entering into a business relationship & transaction should be analyzed while discharging duties. STEPS PROPOSED BY RESERVE BANK OF INDIA IN IMPLEMENTING RISK MANAGEMENT SYSTEM In moving towards the development and implementation of an integrated risk management system, the bank would be required to: 1. Set up Risk Management Committee 2. Set up Credit Policy Committee(CPC) 3. Establish Credit Risk Management Department 4. Achieve integration of ALCO and CPC 5. Designate Portfolio / Relationship Managers 6. Establish Mid Office for Treasury Function 7. Develop a robust MIS 8. Set up approval Grids 9. Arrange for training to core staff. STATUS OF IMPLEMENTATION OF RBI GUIDELINES IN THE BANKS AND PROGRESS MADE 1. Asset liability management is already in place. 2. Credit appraisal form redesigned so as to cover risk perception is introduced. 3. Credit Rating System duly revised has already been approved by the board. 4. Benchmark ratios finalized for credit analysis have been approved. 5. Board approved loan policy is in place. 6. Present lending policy articulates industry wise exposure limits on historical data. A system utilizing scientific methods is in the process of formulization. 7. Setting up of the following has been approved by the Board. a) Credit Risk Management Department b) Risk Management Committee c) Credit Policy Committee d) Mid Office for Treasury Function

e) Approval Grid 8. Loan Review Mechanism is in operation.

VIGILANCE PREVENTION IS THE KEY

Vigilance activity in the Bank is an integral part of the managerial function. Its objective is to efficient administration, where officials can perform the duties without any fear or favour. Vigilance in the Bank is maintaining a proper balance between flexibility and accountability. Preventive Vigilance is the most important aspect of vigilance. With a view to improve functioning at all levels, the Bank has taken the necessary steps as under: 1. In accordance with CVC directives, Vigilance Committees have been formed at the Branches having staff of 20 and more, to review/ monitor sensitive and fraud prone areas and report irregularities observed therein, if any. High value transactions are scrutinized at more than one level. Field staff at branches is periodically educated through internal communication about the modus operandi adopted in various cases of fraud and precautions to be taken to avert similar kind of frauds. Vigilance Awareness Week is observed in the Bank every year during which period lectures / talks by the eminent personalities are held for the members of staff and general public at branches / offices, emphasizing the need for transparency, ethical conduct and personal integrity besides preventive vigilance. Sessions on Preventive Vigilance are included in the training programmes conducted by the Staff College. A Fraud Risk Management Policy has been framed and communicated to staff and field functionaries. It is a guide on prevention, detection, classification and reporting of frauds including action to be taken.

2. 3.

4.

5. 6.

DATA ANALYSIS AND INTERPRETATIONS

 INVESTMENTS PROFITABLE GROWTH The Net investment of the Bank stood at Rs. 18382 crore as on 31.03.2009 as against Rs. 12283 crore as on 31.03.2008, registering a growth of 49.66 percent. 70.00 percent of the portfolio was held under Held to maturity (HTM) Category, 29.27 percent in Available For Sale (AFS) and balance 0.73 percent in Held for Trading (HFT) categories. The net interest income from investment increased by 17.02 percent to Rs.989.84 crore from Rs.845.85 crore during the last year.
Particulars Net investment Net interest income from investment Amt in cr. As on 31.03.2008 12283 845.85 Amt in cr. As on 31.03.2009 18382 989.84 Total increase 49.66 % 17.02 %

20000 15000 10000 5000 Total increase 0 Amt in cr. As on 31.03.2008 Amt in cr. As on 31.03.2008 Amt in cr. As on 31.03.2009 Total increase

Interpretation: The net interest income from investment increased by 17.02 percent to Rs.989.84 crore from Rs.845.85 crore during the last year.

CREDIT DEPLOYMENT The Bank has put in place a lending policy with an emphasis on qualitative credit growth. The policy is fully in conformity with the guidelines issued by RBI and also the Priority Sector lending norms of the Government of India. The policy enunciates the thrust areas, risk factors and also sets out prudential exposure limits to facilitate qualitative expansion of credit. The Gross Advances increased from Rs.29,798 crores as on 31.3.2008 to Rs. 34,817 crores as on 31.3.2009 with a growth of 16.84 per cent. The Credit Deposit Ratio as on 31.3.2009 was 66.63 per cent. Sectoral deployment of credit - diversified risk and balanced growth: The Bank has continued its efforts to support core, manufacturing and priority sectors as well as infrastructure projects, which serve to drive economic growth. This focus of the Bank will continue in future, in the light of the national economic growth priorities.

Credit Deployed
infrastructure,petroleum,iron,textile s,engineering,chemicals Agriculture 1 2.04 5.11 8.5 37.88 13.05 Other priority sector retail sector housing 8.83 15.59 education Exports commercial real estate MSME

11.92

Interpretation: The Gross Advances increased with a growth of 16.84 per cent. The Credit Deposit Ratio has also increased.

 RISK CATEGORY WISE COUNTRY EXPOSURE (Rs. In Crore)

Risk Category Exposure (net) as at March 31 , 2009 970.13 391.01 73.23 23.25 8.51 0.11 0.00 1466.24 Provision held as at March 31, 2009 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 Exposure (net) as at March 31, 2008 774.49 293.59 77.06 4.31 11.71 0.00 0.00 1161.16 Provision held as at March 31, 2008 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

Insignificant Low Moderate High Very high Restricted Off-credit Total

1600 1400 1200 1000 800 600 400 200 0 Exposure (net) as at March 31 , 2008 provision held as at march 31, 2008 Exposure (net) as at March 31 , 2009 provision held as at march 31, 2009

Interpretation: Since Banks net funded exposure for risk category-wise exposure for each country is less than 1% of banks total assets as on 31.03.2009, no provision is required in terms of a particular RBI Circular.

 NON-PERFORMING ASSETS
 Non-Performing Assets (NPA)

Particulars (i) (ii) (a) (b) (c) (d) (iii) (a) Net NPAs to Net Advances (%) Movement of NPAs (Gross) Opening balance Additions during the year Reductions during the year Closing balance Movement of net NPAs Net opening balance Add: ECGC/DICDC Settled amount Gross: Opening Balance Additions dduring the year Reductions during the year Gross closing balance Less: ECGC/DICGC Settled amount Net Closing Balance

31.03.2010 0.79 766.27 368.56 336.42 798.41 254.05 26.29 280.34 181.39 167.63 294.10 22.20 271.90

31.03.2009 0.87 820.27 252.12 306.12 766.27 277.38 22.75 300.13 167.80 187.60 280.34 26.29 254.05

(b) (c) (d)

(iv)

Movement of provisions for NPAs (excluding provisions on standard assets) Opening balance (a) Provisions made during the year (b) Write-back of excess provisions (c) Closing balance (d)

485.93 187.17 168.79 504.31

520.14 84.31 118.52 485.93

Interpretations: The ratio of Net NPAs has improved from 0.87 percent to 0.79 percent.

Details of Loan Assets subjected to Restructuring during the year.

(Rs. In crore) Category Particulars CDR SME debt Restructuring 3084 461.61 13.16 Others

Standard Advances restructured

No. of Borrowers Amount Outstanding Sacrifice (Diminution in the fair value )

3 46.28 3.67

4029 552.73 12.79

Sub-Standard Advances restructured

No. of Borrowers Amount Outstanding Sacrifice (Diminution in the fair value )

0 0.00 0.00

96 7.67 0.22

134 21.46 1.94

doubtful Advances restructured

0 0 0

3 7.85 0.24 3138 477.13 13.62

3 4.86 0.01 4166 579.05 14.74

Total

No. of Borrowers Amount Outstanding Sacrifice (Diminution in the fair value )

3 46.28 3.67

Interpretations: NPA coverage has also improved from 65.54 percent 63.16 percent.

Additional disclosure in respect of Restructuring (In terms of RBI circular dated 17.04.2009)

Sr. No 1

Disclosures Applications received for restructuring, in respect of accounts which were standard as on September 1, 2009. Of (1), proposal approved and implemented and thus became eligible for special regulatory treatment and classified as standard assets as on the date of the balance sheet. Of (1), proposal approved and implemented but could not be upgraded to the standard category. Of (1), proposal under process/ implemented which were standard as on March 31,2010 Of (1), proposal approved and implemented which turned NPA but are expected to be classified as standard assets on full implementation of the package.

Number 6662

Amount 1145.82

6373

1033.07

3 4 5

222 64 3

41.48 70.21 1.06

Details of financial assets sold to securitization/Reconstruction Company for Asset Reconstruction (Rs. In Crore)
Particulars (i) (ii) No. of accounts Aggregate value(net of provisions) of accounts sold to Securitization / Reconstruction Company Aggregate consideration Additional consideration realized in respect of accounts transferred in earlier years Aggregate gain over net book value 31.03.2010 0 0.00 31.03.2009 36 0.00

(iii) (iv) (v)

0.00 0.00 0.00

13.25 0.00 13.25

Interpretations: Bank has now started the practice of restructuring and reconstructing the NPAs effectively and efficiently.

 BRANCH NETWORK AND EXPANSION

During the year, the Bank opened 43 new branches besides upgrading 3extension counters into full fledged branches. As on 31.03.2010, the total branch network comprised of 1421 branches spread over 22 states and 2union territories. The branch network included specialized branches in the areas of foreign exchange, government business, treasury and international banking, industrial finance, small-scale industry, hi-tech agriculture, Pension Payment Branch and Central Pension Processing Cell. The area wise classification of branches as on 31.03.10 is given in the table below: Sr.No. 1 2 3 4 Classification Rural Semi-Urban Urban Metropolitan Total As On 31.03.09 516 251 257 351 1375 As On 31.03.10 520 262 271 368 1421

600 500 400 300 200 100 0 Rural Semi-Urban Urban Metropolitan As On 31.03.10 As On 31.03.09

As On 31.03.09 As On 31.03.10

Interpretation: The Bank opened 43 new branches besides upgrading 3extension counters into full fledged branches and like this it is continuously expanding its network in allover India.

ASSET PERFORMANCE IMPROVED The ratio of Gross Advances has improved from 2.57 percent as on 31.03.2008 to 2.29 percent as on 31.03.2009. The ratio of Net NPAs has improved from 0.87 percent at 31.03.2008 to 0.79 percent at 31.03.2009. NPA coverage has also improved from 65.54 percent as on 31.03.2008 to 63.16 percent as on 31.03.2009. Particulars Ratio of NPAs Ratio of Net NPAs NPA coverage 31.03.2008 2.57% 0.87% 65.54% 31.03.2009 2.29% 0.79% 63.16%

70 60 50 40 30 20 10 31.03.2009 0 Ratio of NPAs Ratio of Net NPAs NPA coverage 31.03.2008 31.03.2008 31.03.2009

Interpretations: The ratio of Gross Advances has improved 2.57 percent to 2.29 percent and the ratio of Net NPAs has improved from 0.87 percent to 0.79 percent. NPA coverage has also improved from 65.54 percent 63.16 percent.

 INCOME, EXPENDITURE AND PROFITABILITY  Income

Incomes Interest on bills Income on investments Total interest income Non-interest income Total income Interest on borrowings
5000 4500 4000 3500 3000 2500 2008-2009 2000 2009-2010 1500 1000 500 0 variations ()%

2008-2009 2561.12 845.85 3440.47 380.28 3820.76 191.27

2009-2010 3266.60 989.84 4291.56 500.02 4791.58 251.82

Variations (%) 27.55 17.02 24.75 31.48 25.41 31.65

Interpretations: The income factors of the bank has grown in a very positive and in a very significant manner as compare to previous year and this indicates the sound health of the bank.

 OPERATING INCOME RISES 11.88% TO RS 1246.49 CRORE

Net profit of Bank of Maharashtra rose 1.26% to Rs 139.06 crore in the quarter ended March 2010 as against Rs 137.33 crore during the previous quarter ended March 2009. Total operating income rose 11.88% to Rs 1246.49 crore in the quarter ended March 2010 as against Rs 1114.15 crore during the previous quarter ended March 2009. For the audited full year, net profit rose 17.17% to Rs 439.57 crore in the year ended March 2010 as against Rs 375.17 crore during the previous year ended March 2009. Total operating income rose 10.35% to Rs 4735.56 crore in the year ended March 2010 as against Rs 4291.56 crore during the previous year ended March 2009.

Particulars

Quarter Ended

Year Ended

Date

Mar. 2010

Mar. 2009

% Var.

Mar. 2010

Mar. 2009

% Var.

Sales

1246.49

1114.15

12

4735.56

4291.56

10

OPM %

66.15

67.46

-2

72.15

70.98

PBDT

142.33

130.04

568.82

511.06

11

PBT

142.33

130.04

568.82

511.06

11

NP

139.06

137.33

439.57

375.17

17

OPERATING INCOME RISES 11.88% TO RS 1246.49 CRORE

18 16 14 12 10 8 6 4 2 0 -2 sales OPM % Var. Of Quarter Ended march 2010 PBDT PBT NP % Var. Of Quarter Ended march 2010 % Var of Year Ended 2009

Interpretations: Net profit of Bank of Maharashtra rose 1.26% to Rs 139.06 crore in the quarter ended March 2010 as against Rs 137.33 crore during the previous quarter ended March 2009.

Expenditure
Expenses Interest on deposits Interest expenditure Staff expenses Non-staff expenses Total non-interest expenses Total operating expenses 2008-2009 2,120.52 2311.79 485.29 351.04 836.34 3,148.13 2009-2010 2783.22 3035.03 579.62 383.40 963.02 3998.06 Variations (%) 31.25 31.28 19.44 9.22 15.14 27.00

3500

3000

2500

2000 2008-2009 2009-2010 1500 Variations (%)

1000

500

0 Interest on deposits Interest expenditure Staff expenses Non-staff expenses

Interpretations: Due to the very high competition and in order to capture more and more market share, the bank had to incur more expenses to make its facilities more attractive and more worthy so that the bank can retain its customer and it also helps in acquiring new customers.

Profitability
Profitability Operating Profit Provisions And Contingencies Net Profit 2008-2009 672.63 344.24 328.39 2009-2010 793.52 418.36 375.16 Variations (%) 17.97 21.53 14.24

800

700

600

500 2008-2009 400 2009-2010 Variations (%) 300

200

100

0 Operating Profit Provisions And Contingencies Net Profit

Interpretations: Above figure shows that there is a positive and consistent increase in the banks profitability because the banks business and income has also moved up towards a positive direction.

CHAPTER IV
- Findings - Suggestions / Recommendations

FINDINGS

1.
In todays era of heavy competition and the fight to sustain in the market, the bank had to incur more expenses to make its facilities more attractive and more worthy so that the bank can retain its customer and it also helps in acquiring new customers which will not only increase the income of the bank but also leads to capture more and more market share.

2.
There is a positive and consistent increase in the banks profitability because the banks business has increased and the income of the bank has also moved up towards a positive direction because the bank has started capturing more and more market share.

3.
The ratio of Gross Advances has improved from 2.57 percent to 2.29 percent. The ratio of Net NPAs has improved from 0.87 percent at 31.03.2008 to 0.79 percent. NPA coverage has also improved from 65.54 percent to 63.16 percent. The asset performance has significantly changed and it has not changed but also improved in a positive way.

4.
The investment of the bank is also proved to be a significant source of income because the net income from investment has made a large contribution to the profit of the bank

5.
While financing the various segments of the economy, the Bank has endeavoured to maintain a diversified credit portfolio, with a view to ensuring credit-dispersion across sectors. This will minimize the risk and ultimately increase the profit of the bank.

SUGGESTIONS / RECOMMENDATIONS

 The data in the tables have clearly shown that how the Bank of Maharashtra has consistently increased its profit by managing its credit but the bank needs to deploy its credit in a more diversified manner which will minimize the risk of losses and also increase the profitability of the bank.  The overall inference from the table and Chart is that the Retail Financing of Bank of Maharashtra is healthy as compare to other nationalized banks. But it needs to be brought up in order to sustain the financial position of the bank. The Housing and Education Loan must be increased to more than 30 per cent while other loan schemes can also be amended.  The NPAs are reducing in a very positive way which is the result of avoiding high-risk lending and high monitoring of the credit disbursed. The bank needs to study and analyze from its past losses because it will help in future lending by avoiding high risk proposals and ultimately let the bank to grow more efficiently and effectively.  Loan products are the ideal Products for the bank to ensure the profitability and therefore, the bank should continuously adapt itself to the changed situation in search of new markets and to provide new attractive schemes and services for the existing customers to retain its market share and at the very same time acquire new customers to expand its market share.  Efforts are to be oriented towards verifying and processing the loan request. In case of deposits, an added advantage available to the bank is to improve clientele base but in case of borrowings such an advantage does not exist. So the bank must work out some effective strategies for their Loan Products in order to make the clientele base for borrowings.  The increased number of deposit customers and the increased number of individual membership provide a comfortable clientele base for the bank to choose good borrowers to whom the bank can provide credit facilities. Good borrowers with integrity are as important to the bank as the depositors.

 Raising individual membership, mobilizing more low-cost deposits and avoiding highrisk borrowings are the strategies which could be followed by the bank to improve its efficiency, market share, productivity and profitability.

BIBLIOGRAPHY

Name of Book/Site
 Bank Credit Management  Promotion Examination  www.iibf.co.in  www.iba.org  www.rbi.org  www.bankofmaharashtra.in  www.financial.indiamart.com

Author
Dr.G.Vijayaragavan Bank of Maharashtra

Publication
Himalaya Publication Bank of Maharashtra

Annual Report:
 Bank of Maharashtra

ANNEXURE
ATM GOI RBI NPA MSME NP HTM HFT AFS CVC KYC MGB RRB LIC SLBC SMES NBC RDC GMBVM MARDEF NGO CBS IPO METCO STP NEFT RTGS MSETI TOLIC NABARD EDPS PMRY SGSY SJSRY MIS Automated Teller Machine Government Of India Reserve Bank Of India Non-Performing Assets Micro, Small And Medium Enterprises Net Profit Held To Maturity Held For Trading Available For Sale Core Vigilance Committee Know Your Customer Marthwada Gramin Bank Regional Rural Bank Life Insurance Corporation State Level Bankers Committee Small And Medium Enterprises Net Bank Credit Rural Development Centres Gramin Mahila Va Balak Vikas Mandal Maha Bank Agricultural Research And Rural Development Foundation Non-Government Organizations Core Banking Solutions Initial Public Offer Maharashtra Executor And Trustee Company Straight Through Processing National Electronic Fund Transfer Real Time Gross Settlement Mahabank Self Employment Training Institutes Town Official Language Implementation Committee National Bank For Agricultural And Rural Development Entrepreneurship Development Programmes Prime Ministers Rozgar Yojana Swarna Jayanti Gram Swarojgar Yojana Swarna Jayanti Shahari Rozgar Yojana Management Information System

LRM CPC ALM ALCO TIBD CRRF TIBD CRRF

Loan Review Mechanism Credit Policy Committee Asset Liability Management Asset Liability Management Committee Treasury & International Banking Division Credit Risk Rating Framework Treasury & International Banking Division Credit Risk Rating Framework