Project Report

Muthoot Capital Service Ltd, Ernakulam
Marthoma College of Management & 1echnology 1

1.1 INTRODUCTION
Organization may be studied in two perspectives ie. Micro and macro aspects. In
micro perspective the Iocus oI study is on the individual human being. It concerns itselI with
each individual`s psychological makeup, his interaction with other individuals and groups,
variables that determine how a person is likely to react in a given situation. The macro view
considers organization as the unit oI analysis in place oI an individual. The Iollowing are the
deIinition oI an organization.

Non-banking Iinancial companies (NBFCs) are Iast emerging as an important segment
oI Indian Iinancial system. It is an heterogeneous group oI institutions (other than co-
operative and commercial banks) perIorming Iinancial intermediation in a variety oI ways,
like accepting deposits, making loans and advances, leasing, hire purchase, etc. they raise
Iunds Irom the public, directly or indirectly, and lend them to ultimate spenders. They
advance loans to the various wholesale and retail traders, small scale industries and selI-
employed persons. Thus they have broadened and diversiIied the range oI product and
services oIIered by a Iinancial sector. Gradually, they are being recognized as complementary
to the banking sector due to their customer-oriented services; simpliIied procedures; attractive
rate oI return on deposits; Ilexibility and timeliness in meeting the credit needs oI speciIied
sectors; etc.

Starting as a small chit company way back in 1939 and making many a land mark in
its long journey through the history spanning generations, the MUTHOOT PAPPACHAN
GROUP has over the years grown into a multiIaceted business conglomerate and one oI the
leading Iamily promoted corporate house in south India. Maintaining consistent and healthy
growth in all its spheres oI activities and constantly endeavoring to oIIer excellent customer
service, the GROUP has today made a visible presence across India with a strong hold in rural
and semi-urban areas. The GROUP has Iocused interests in multiIarious economic activities
such as retail Iinancial service, automobile dealerships, real estate, hospitality, it inIrastructure
and power generation, with a loyal customer base oI over one million.


Muthoot Capital Service Ltd (MCSL) is a Public Limited Non-Banking Financial
Company (NBFC) registered with the Reserve Bank oI India and listed in the Bombay Stock
Exchange.Established in February 1994 in Kerala, MCSL oIIers Capital Market Solutions
which include Leasing and Hire Purchase, Automobile Loans and Bonds. The Company has
diversiIied into Iund and non-Iund based activities giving equal importance to Corporate and
Non-Corporate Sectors in Kerala.

In the secondary market, MCSL through its oIIices, which are situated at strategic
locations in Kerala, has been executing large number oI orders Ior investors oI Kerala through
Cochin, Coimbatore, Madras and Bombay Stock Exchanges. This in turn has helped the
Company to develop a large portIolio oI investors who have availed oI the Share Discounting
and Advance against Shares schemes.

The Advance against Shares scheme oIIered by MCSL enables the investors to take
advance against the securities held by them on relatively nominal terms than what is oIIered
by other upcountry Iinance companies and even many banks. The Share Discounting scheme
oIIers an unique Iacility oI Iaster pay out on securities sold at Bombay and Madras Stock
Exchanges.

Your Company continued its good perIormance during the year also, basing its
activities on the time tested values and principles. The success oI the Company is dependent
to a great extent on its Iocus on customer service and its ability to Iormat and introduce
products in accordance with the demand in the market. The Company's diversiIication into
two-wheeler loan segment proved a success. The Company is planning to introduce many
more new products in the retail Iinance and SME segments


1.2 NEED FOR THE STUDY
A business organization is a system which comprises oI diIIerent departments and sub
departments which Iacilitate management oI day to day operations oI an organization in an
eIIective manner. Departments are also helpIul Ior classiIication and distribution oI work
which actually leads to eIIectiveness in business operations without overlapping oI business
activities. It also enables in deIining the authority and responsibility oI each individuals who
all are working in an organization Ior the achievement oI the ultimate goal oI the organization.
Usually in a business organization we can see a number oI departments working Ior
the organization. It includes Iinance department, marketing department, human resource or
personnel department, production department, research and development department etc.
The main Iunctions oI Iinance and accounting department include making Iinancial
decisions, investment decisions, liquidity decisions and budgeting etc. Accounting department
is concerned with recording oI business transactions in a systematic way in order to ascertain
the Iinancial position and proIitability oI the business by preparing proIit and loss account and
balance sheet.
Sales and marketing department is concerned with identiIying the changing consumer
needs and wants and providing goods and services in order to satisIy those needs and wants. It
usually said that marketing starts and ends with consumer. It is a broad term including sales,
advertisements, sales promotion, marketing research, salesmanship etc.
Human Resource is the biggest asset and liability oI a Iirm. So, most care and
diligence is required while dealing with human resources oI an organization. Human Resource
department is mainly deals with manpower planning, selection, training and development,
promotion, transIer, counseling, maintaining good Industrial Relation etc.
So it is a humble attempt to study the working oI an organization in a real liIe situation
and how the department enables the organization in achieving its goals.


1.3 OB1ECTIVES OF THE STUDY

To understand the Iunctions and activities oI various departments in the organization.

To understand the inIormation is used in organization Ior decision making at various
levels.

To understand the key business are carried out in the organization.

To make an organization chart Ior the organization and understand the Iunctions oI
managers /oIIicers and supervisors in diIIerent departments.

To understand the value - added services provided by the company Ior the beneIit oI
the customers.

To know how diIIerent departments in an organization are working together Ior the
achievement oI organizational goal.

To bridge the gap between theories Irom text books and its application.

To understand the competence, creativity, Ilexibility, reliability, and experience oI the
company.

To understand the Iuture plans oI the Iirm.


1.4 RESEARCH METHODOLOGY
RESEARCH METHODOLOGY
Research methodology is a way to systematically solve the research problem. It is
necessary Ior research methods or techniques but also the methodology. Research
methodology is a description, explanation, and justiIication oI various methods oI conducting
research.
MEANING OF RESEARCH
Human beings are interested to acquire inIormation Irom diIIerent sources. They are
always eager to know more. These urge oI acquiring inIormation is ever present in every
individual. These urge has contributed to development oI human being in all spheres oI liIe
such as economical, social, commercial, scientiIic and cultural aspects.
According to PliIIord Woody, 'Research comprises deIining and redeIining problems,
Iormulate hypothesis or suggest solution, collecting, organizing and evaluating data making
deduction and ready conclusion and at the least careIully testing the conclusions to determine
whether they Iormulate hypothesis.
Research is a careIul, patient, systematic, diligent, enquiry or examination in some
Iield oI knowledge undertaken to establish Iacts oI principles. This research study was
conducted among some respondents with in a period oI one month to understand more about
the working oI diIIerent departments in Muthoot Capital Service Ltd.

METHODS OF DATA COLLECTION
For the purpose oI this organizational study both primary and secondary data has been
collected. For collecting interview schedules are prepared. Data collection is the Iirst step in
the investigation. The data are collected Irom various published and unpublished sources. The
methods used Ior the collection oI data are the Iollowing:


1. Primary Data
2. Secondary Data

1. PRIMARY DATA
Primary Data are collected directly Irom the Iield. These are those data which are
collected Ior the Iirst time. Primary data are original in nature. The researcher prepare
questionnaire and interview schedules transIerred to the people and collected inIormation Ior
them and analyses the inIormation and also identiIied the Ieedback oI these inIormation.
Direct personal interview method oI collecting data. In this method oI data collection the
investigator conducted a Iace to Iace interview with the inIormants.
2. SECONDARY DATA
Secondary Data are those data which are already collected by someone else. Internet
sources are used Ior collecting the secondary data. It provides more and latest inIormation
about the company. The main sources oI collection oI secondary data are as Iollows:
a. Published sources
b. Unpublished sources


1.5 LIMITATIONS OF THE STUDY

The study is good enough to understand the real Iunctioning oI an organization. The
working oI diIIerent departments in a cordial way Ior the organization is very much
visible in case oI Muthoot Capital Service Ltd. A very clear industry exposure became
possible by this study. However the study is not Iree Irom the Iollowing limitations.

Since project duration was only one month has become one oI the main
limitations to study more about the organization.

The response Irom respondents may be biased.

The inIormation collected Irom secondary sources like websites and other
publications are limited.

Lack oI access to head oIIice accounts is another limitation


2.1 INDUSTRY PROFILE
NON BANKING FINANCIAL COMPANIES (NBFCs)
Non-banking Iinancial companies (NBFCs) are Iast emerging as an important
segment oI Indian Iinancial system. It is an heterogeneous group oI institutions (other
than co-operative and commercial banks) perIorming Iinancial intermediation in a
variety oI ways, like accepting deposits, making loans and advances, leasing, hire
purchase, etc. they raise Iunds Irom the public, directly or indirectly, and lend them to
ultimate spenders. They advance loans to the various wholesale and retail traders, small
scale industries and selI-employed persons. Thus they have broadened and diversiIied
the range oI product and services oIIered by a Iinancial sector. Gradually, they are being
recognized as complementary to the banking sector due to their customer-oriented
services; simpliIied procedures; attractive rate oI return on deposits; Ilexibility and
timeliness in meeting the credit needs oI speciIied sectors; etc.

The working and operations oI NBFCs are regulated by Reserve Bank oI
India(RBI) within the Irame work oI the Reserve Bank oI India Act, 1934(Chapter III B)
and the directions issued by it under the Act. As per the RBI Act, a non-banking
Iinancial company` is deIined as :- (i) a Iinancial institution which is a company; (ii) a
non banking institution which is a company and which has as its principal business the
receiving oI deposits, under any scheme or arrangement or in any other manner, or
lending in any manner; (iii) such other non-banking institution or class oI such
institutions as the bank may, with the previous approval oI the Central Government and
by notiIication in the OIIicial Gazette, speciIy.

Under the Act, it is mandatory Ior a NBFC to get itselI registered with the RBI as a
deposit taking company. This registration authorizes it to conduct its business as an
NBFC. For the registration with the RBI, a company incorporated under the Companies
Act, 1956 and desirous oI commencing business oI non-banking Iinancial institution,
should have a minimum Net Owned Fund (NOF) oI Rs.25lakh (raised to Rs.200 lakhs
w.e.I April 21, 1999). The term NOF means, owned Iunds (paid to capital and Iree


reserves, minus accumulated losses, deIerred revenue expenditure and other intangible
assets) less, (i) investments in shares oI subsidiaries/companies in the same group/ all
other NBFCs; and (ii) the book value oI debentures/ bonds/ outstanding loans and
advances, including hire purchase and lease Iinance made to, and deposits with,
subsidiaries/ companies in the same group, in excess oI 10 oI the owned Iunds.
The registration process involves submission oI an application by the company in
the prescribed Iormat along with the necessary documents Ior RBI`s consideration. II the
bank is satisIied that the conditions enumerated in the RBI Act, 1934 are IulIilled, it
issues a certiIicate oI registration` to the company. Only those NBFCs holding a valid
CertiIicate oI Registration can accept/hold public deposits. The NBFCs accepting public
deposits should comply with the Non-Banking Financial Companies Acceptance oI
Public Deposits (Reserve Bank) Directions, 1998, as issued by the bank. Some oI the
important regulations relating to acceptance oI deposits by the NBFC are:-

They are allowed to accept or renew public deposits Ior a minimum period oI 12 months
and maximum period oI 60 months.

They cannot accept deposits repayable on demand.

They cannot oIIer interest rates higher than the ceiling rate prescribed by RBI Irom time
to time.

They cannot oIIer giIts/ incentives or any other additional beneIit to the depositors.

They should have minimum investment grade credit rating.

Their deposits are not insured.

The repayment oI deposits by NBFCs is not guaranteed by RBI.


The Types of NBFCs Registered with the RBI are:-

Equipment Leasing Company:- is any Iinancial institution whose principal
business is that oI leasing equipments or Iinancing oI such an activity.

Hire- Purchase Company:- is any Iinancial intermediary whose principal business
relates to hire purchase transactions or Iinancing oI such transactions.

Loan Company:- means any Iinancial institution whose principal business is that oI
providing Iinance, whether by making loans or advances or otherwise Ior any activity
other than its own (excluding any equipment leasing or hire- purchase Iinance activity).

Investment Company:- is any Iinancial intermediary whose principal business is
that oI buying and selling oI securities.

Now, these NBFCs have been Reclassified into Three Categories:-

O Asset Finance Company (AFC)
O Investment Company (IC) and
O Loan Company (LC)

Under this classiIication, AFC` is deIined as a Iinancial institution whose principal
business is that oI Iinancing the physical assets which support various productive/
economic activities in the country.
Non-banking Financial Institutions carry out Iinancing activities but their resources are not
directly obtained Irom the savers as debt. Instead, these Institutions mobilise the public
savings Ior rendering other Iinancial services including investment. All such Institutions
are Iinancial intermediaries and when they lend, they are known as Non-Banking
Financial Intermediaries (NBFIs) or Investment Institutions.


O UNIT TRUST OF INDIA
O LIFE INSURANCE CORPORATION (LIC)
O GENERAL INSURANCE CORPORATION (GIC)
Apart Irom these NBFIs, another part oI Indian Iinancial system consists oI a large
number oI privately owned, decentralised, and relatively small-sized Iinancial
intermediaries. Most work in diIIerent, miniscule niches and make the market more broad-
based and competitive. While some oI them restrict themselves to Iund-based business,
many others provide Iinancial services oI various types. The entities oI the Iormer type are
termed as non-bank financial companies (NBFCs). The latter types are called "non-
bank Iinancial services companies (NBFCs)".
Non-bank financial companies (NBFCs) are Iinancial institutions that
provide banking services without meeting the legal deIinition oI a bank, i.e. one that does
not hold a banking license. These institutions are not allowed to take deposits Irom the
public. Nonetheless, all operations oI these institutions are still exercised under bank
regulation. However this depends on the jurisdiction, as in some jurisdictions, such as
New Zealand, any company can do the business oI banking, and there are no banking
licenses issued.

Services provided
NBFCs oIIer all sorts oI banking services, such as loans and credit Iacilities, private
education Iunding, retirement planning, trading in money markets, underwriting stocks
and shares, TFCs and other obligations. These institutions also provide wealth
management such as managing portIolios oI stocks and shares, discounting services e.g.
discounting oI instruments and advice on merger and acquisition activities. The number oI
non-banking Iinancial companies has expanded greatly in the last several years as venture
capital companies, retail and industrial companies have entered the lending business. Non-
bank institutions also Irequently support investments in property and prepare Ieasibility,
market or industry studies Ior companies. However they are typically not allowed to
take deposits Irom the general public and have to Iind other means oI Iunding their
operations such as issuing debt instruments.


Regulation
For European NCs the Payment Services Directive (PSD) is a regulatory initiative
Irom the European Commission to regulate payment services and payment service
providers throughout the European Union (EU) and European Economic Area (EEA). The
PSD describes which type oI organizations can provide payment services in Europe (credit
institutions (i.e. banks) and certain authorities (e.g. Central Banks, government bodies),
Electronic Money Institutions (EMI), and also creates the new category oI Payment
Institutions). Organizations that are not credit institutions or EMI, can apply Ior an
authorization as Payment Institution in any EU country oI their URL choice (where they
are established) and then passport their payment services into other Member States across
the EU.nbIc is basically Ior those people who want better service in short period oI time .

Scope of Non Banking Financial Service Industry
With advent oI liberalization, the Non Banking Financial Service industry is the one
oI the Iastest growing segment. The boom in NBFC sector has also seen the entry oI major
industrial groups into this sector, because they can utilize their reserve and excess cash to
enter a growing and proIitable new business. The Iunds collected by NBFCs can also be
utilized proIitably by the group companies. This sector realizes its enormous potential as it
emerges Irom just a lending operation to a sector that oIIers a wide variety oI services
essential Ior all industries and even individuals.
The growth oI various segments like Iinancing oI consumer goods and automobile
has ensured that even a middle class Iamily can now aIIord to buy now and pay later. The
growth oI share market culture has prompted companies to approach the public Ior their
capital requirements, so that they can chalk up exponential growth plans.The new breed oI
Iinancial service companies also brings with them modern management techniques, varied
services and knowledge oI operating around the world. The expertise is brought through
tie ups with Ioreign Iinancial companies or thru subsidiaries oI Ioreign Iinancial
institutions.


Services offered by NBFCs.
The Non-Banking Financial Service sector oIIers a wide variety oI services, some oI
which are used by individuals and some only by organizations. These services are classiIied as
Fund Based services or Non Fund Based services.

Fund Based Services: Any service that involves the use oI money to generate money or any
Iorm oI lending is classiIied as a Iund based service. It includes
1. Deposit Mobilization
2. Lease Financing
3. Hire Purchase
4. Venture Capital
5. Mutual Funds
6. Project Finance
7. Housing Finance
8. Consumer Finance
9. Bill Discounting and Purchasing
10.Inter Corporate Deposits.
Non Fund Based Services are those where the Iinance companies get income without
lending or credit. The income comes Irom oIIering services Ior which customers are charged.
The Iinancial company assumes a risk on behalI oI the customer or the customer pays Ior the
specialised knowledge oI the Iinance company.
Broadly services are
1. Merchant banking Services
2. Stock Exchange Operations
3. PortIolio Management Services
4. Project Counseling
5. Loan Syndication
6. Foreign Exchange Services
7. Equity Research.


Careers in Non Banking Finance Companies The spotlight on careers in NBFC
sector, oI late, has been on the MBAs Irom the premier institutes. Graduates too can Iind
employment in this industry. The NBFC sector oIIers good salaries that compares well
with other careers with clean and neat work environment.

Non banking Iinancial institutions are companies that do not accept deposits or handle
accounts like traditional banks but provide all other Iorm oI services like loans, share
trading accounts, investment banking etc. Since they are not banks but still provide
Iinancial services they are called NBFC's Non Banking Iinancial Companies. Examples oI
these include insurance Iirms, pawn shops, and cashier`s check issuers, check cashing
locations, currency exchanges, and microloan organizations. The main challenge Iaced by
NBFCs is the Iact that, they do not collect customer deposits. Customer deposits is the
main source oI cash Ior banks and that is why in spite oI heavy losses, banks are able to
survive whereas NBFCs had to wind up their operations. Mobilizing Iunds Ior their
operations is the biggest challenge Ior Non Banking Financial Companies.

Core Iinancial services provided by Iinancial intermediaries include payments and
liquidity, maturity transIormation, store oI value, inIormation processing and pooling oI
risks. Banks have traditionally provided most oI these services and are increasingly
diversiIying into other areas. However, banks typically have an edge in providing payment
and liquidity related services and they usually select a portIolio mix with an overriding
objective oI providing a certain return. Non-banking Iinancial institutions (NBFIs), on the
other hand, tend to oIIer enhanced equity and risk based products. NBFIs play a crucial
role in broadening access to Iinancial services, enhancing competition and diversiIication
oI the Iinancial sector. They are increasingly being recognized as complementary to the
banking system capable oI absorbing shocks and spreading risks at times oI Iinancial
distress.

Mobilization oI Iinancial resources outside the traditional banking system has witnessed
tremendous growth all over the world in recent years. The boundaries separating


commercial banks and NBFIs are also getting increasingly blurred. Rapid Iinancial
diversiIication has thus posed new challenges Ior regulators, especially in the area oI
devising appropriate regulatory saIeguards Ior the highly complex NBFI sector. Owing to
their diversiIied nature, NBFIs may require speciIic regulatory prescriptions particular to
their nature oI business, in addition to the general guidelines applicable Ior the Iinancial
sector.

The NBFI sector in India comprises various types oI Iinancial institutions with each one
oI them having its roots at a particular stage oI development oI the Iinancial sector. All-
India Iinancial institutions (AIFIs), largely an oIIshoot oI development planning in India,
were created Ior long-term Iinancing with some oI them having sectoral or regional Iocus.
Non-banking Iinancial companies (NBFCs), on the other hand, are mostly private sector
institutions, which have carved their niche in the Indian Iinancial system.

Primary dealers (PDs), which have come into existence recently, play an important role
in both the primary and secondary Government securities market. Although commonly
grouped as NBFIs`, the nature oI operations oI FIs, NBFCs and PDs is quite diIIerent
Irom one another. The regulatory Iocus in respect oI these three types oI NBFIs is also
diIIerent. Business operations and Iinancial perIormance oI diIIerent types oI NBFIs are
driven mainly by sector-speciIic Iactors.

The Iocus oI regulatory initiatives in respect oI Iinancial institutions (F I s) during 2004-
05 was to strengthen the prudential guide lines relating to asset classiIication,
provisioning, exposure to a single / group borrower and governance norms. Business
operations oI FIs expanded during 2004-05. Their Iinancial perIormance also improved,
resulting Irom an increase in net interest income. SigniIicant improvement was also
observed in the asset quality oI FIs, in general. The capital adequacy ratio oI FIs continued
to remain at a high level, not withstanding some decline during the year.

A developing economy like India always craves Ior Iinancial resources. Demand Ior
credit is great and oIten organized traditional Iinancing institutions (like banks and


Iinancial institutions) do not meet such demand thus creating a space Ior other types oI
Iinancing. Money lender is an age old institution Iilling such space. Opening up oI
economy gave a Iurther boost to the demand Ior credit. At this juncture, NBFCs (Non-
Banking Financial Company), which basically were better organized money lenders
happened in large number. A NBFC is a company that is engaged in the business oI loans
and advances, acquisition oI shares/stock/bonds/debentures/securities, leasing, hire-
purchase, insurance business and chit business. NBFCs do not include any institution
whose principal business is that oI agriculture activity, industrial activity,
sale/purchase/construction oI immovable property.

NBFCs in India have played a useIul role in Iinancing various sectors oI the
economy, particularly those that have been underserved by the banks. In Iact, many banks
are Iorming NBFCs to take advantage oI their greater Ilexibility in dealing with customers.
There are, oI course, some persistent problems Ior NBFCs, apart Irom deposit-taking. These
relate to Ilexible handling oI their capital issues. Both SEBI and the RBI need to revisit their
case Ior relaxations with sympathy, especially since they are rated and supervised. These
speciIic relaxations are more a matter oI conIidence-building.

Parity with banks
One oI the most repeated pleas oI NBFCs on the direct taxes Iront is the issue oI
parity with banks and housing Iinance companies in the areas oI allowing provision on non-
perIorming assets as a deduction. This provision, made in accordance with the prudential
norms oI the RBI, can be claimed as a deduction Ior tax purposes under Section 36(1) (vii a)
oI the Income-Tax Act, subject to overall limits. The banking industry is independently
representing that these limits be Ireed.
Similarly, income deIerred in respect on non-perIorming assets oI NBFCs is unjustly
subject to tax on the basis oI accrual`. However, banks in general are well protected by
Section 43D oI the I-T Act. This dichotomy is drawing the attention oI the courts, including
the apex court. A concrete solution is clearly an amendment to the tax laws to ensure
parity.


Tax deduction at source (TDS) is an eIIective machinery to collect taxes in advance,
also results in litigation. Interest paid to an NBFC on borrowings is subject to a 22.44 per
cent tax deduction at source. Banks, cooperative societies, public Iinancial institutions, etc.,
are given shelter under Section 194A oI the I-T Act, which does not extend to NBFCs.
While tax laws provide Ior a nil or lower with holding, the tax department has shown
resistance in granting this relieI. As a result, the yields on lending have dropped
signiIicantly.
With some NBFCs still actively engaged in leasing oI passenger cars, oIIice
equipment, etc., the TDS on the rentals paid by the lessee to the leasing company is a
dampener. The rate oI deduction in accordance with Section 194-I oI the I-T Act erodes the
entire margins on the transaction.
Leasing as a product has its own sets oI complexities like accounting guidelines,
deIerred tax, etc., and the TDS hurdle imposed Irom 2007 has virtually knocked the oxygen
out oI what was a revival oI sorts to this product in the recent years.
An authority for NBFCs:
The Government should come Iorward to set up an authority exclusively to take
charge oI the development oI the industry. The authority could set itselI as an objective that
over a speciIied period oI time, (say) ten per cent oI Iinancial assets (which today would be
Rs 4 lakh crore) should be under the management oI NBFCs. Such an initiative would
revive the perIormance oI NBFCs.
Non-banking Iinancial companies (NBFCs) have been the subject oI Iocused
attention during the nineties. In particular, the rapid growth oI NBFCs, especially in the
nineties, has led to a gradual blurring oI dividing lines between banks and NBFCs, with the
exception oI the exclusive privilege that commercial banks exercise in the issuance oI
cheques (Chart V.1). SimpliIied sanction procedures, orientation towards customers,
attractive rates oI return on deposits and Ilexibility and timeliness in meeting the credit
needs oI speciIied sectors (like equipment leasing and hire purchase), are some oI the Iactors
enhancing the attractiveness oI this sector.


The total regulated deposits oI NBFCs aggregated Rs.17,390 crore, as at end oI
March 1994, equivalent to 4.0 per cent oI bank deposits. The quantum oI regulated deposits
grew more than three-Iold and as at end-March 1997, at Rs.53, 116 crore constituted 7.9 per
cent oI bank deposits. In the year 1998, a new concept oI public deposits meaning deposits
received Irom public including shareholders in the case oI public limited companies and
unsecured debentures/ bonds other than those issued to companies, banks and Iinancial
institutions, was introduced Ior the purpose oI Iocused supervision oI NBFCs accepting
such deposits. The amount oI such public deposits held by NBFCs, which as at end oI
March 1998 was Rs.23,820 crore, declined to Rs.19,341 crore as at end oI March 2000.

Owing to certain disquieting developments in the NBFC sector, the RBI Act was
amended in 1997, providing Ior a comprehensive regulatory Iramework Ior NBFCs. The
RBI (Amendment) Act, 1997 provides Ior compulsory registration with the Reserve Bank oI
all NBFCs, irrespective oI their holding oI public deposits, Ior commencing and carrying on
business, minimum entry point norms, maintenance oI a portion oI deposits in liquid assets,
creation oI Reserve Fund and transIer oI 20 per cent oI proIit aIter tax annually to the Fund.

The Amendment Act also conIerred powers on Reserve Bank to issue directions to
companies and its auditors, prohibit deposit acceptance and alienation oI assets by
companies and eIIect winding up oI companies. Accordingly, the Reserve Bank issued
directions to companies on acceptance oI public deposits, prudential norms like capital
adequacy, income recognition, asset classiIication, provision Ior bad and doubtIul debts,
exposure norms and other measures to monitor the Iinancial solvency and reporting by
NBFCs. Directions were also issued to auditors to report non-compliance with the RBI
Act and regulations to the Reserve Bank, Board oI Directors and shareholders.


Registration of NBFCs
The registration is compulsory Ior all NBFCs, irrespective oI their holding oI public
deposits. The types oI NBFCs regulated by the Reserve Bank are indicated in Table V.1.
The amended Act, which introduced comprehensive changes in Chapter III-B, III-C and V,
provides Ior an entry point norm oI Rs.25 lakh as the minimum net owned Iund (NOF).
Subsequently, Ior new NBFCs seeking registration with the Reserve Bank to commence
business on or aIter April 21, 1999, the requirement oI minimum level oI NOF was revised
upwards to Rs.2 crore. No NBFC can commence or carry on business oI a Iinancial
institution including acceptance oI public deposit without obtaining a CertiIicate oI
Registration (CoR) Irom the Reserve Bank.

Non-Banking Financial Companies Principal Business
I. Non-Banking Financial Company In terms oI the Section 45-I(I) read with Section 45-
I(c) oI the RBI Act, 1934, as amended in 1997, their principal business is that oI receiving
deposits or that oI a Iinancial institution, such as lending, investment in securities, hire
purchase Iinance or equipment leasing. Equipment leasing company (EL) Equipment
leasing or Iinancing oI such activity. Hire purchase Iinance company (HP) Hire purchase
transaction or Iinancing oI such transactions. Investment company (IC) Acquisition oI
securities and trading in such securities to earn a proIit. Loan company (LC) Providing
Iinance by making loans or advances, or otherwise Ior any activity other than its own;
excludes EL/HP/Housing Finance Companies (HFCs). Residuary non-banking company
(RNBC) Company which receives deposits under any scheme or arrangement, by
whatever name called, in one lump-sum or in installments by way oI contributions or
subscriptions or by sale oI units or certiIicates or other instruments, or in any manner.
These companies do not belong to any oI the categories as stated above.

II. Mutual beneIit Iinancial company (MBFC)
That is, Nidhi Company. Any company which is notiIied by the Central
Government under Section 620A oI the Companies Act1956 (1 oI 1956).


III. Mutual BeneIit Company (MBC)
A company which is working on the lines oI a Nidhi company. However, it has not
yet been so declared by the Central Government, has minimum NOF oI Rs.10 lakh, has
applied to the Reserve Bank Ior CoR and also to Department oI Company AIIairs (DCA)
Ior declaration as nidhi company and has not contravened direction/ regulation oI Reserve
Bank/DCA
IV. Miscellaneous non-banking company (MNBC)
Chit Fund Company Managing, conducting or supervising as a promoter, Ioreman or
agent oI any transaction or arrangement by which the company enters into an agreement
with a speciIied number oI subscribers that every one oI them shall subscribe a certain
sum in installments over a deIinite period and that every one oI such subscribers shall in
turn, as determined by lot or by auction or by tender or in such manner as may be provided
Ior in the arrangement, be entitled to the prize amount. The Reserve Bank received
applications Ior CoR Irom 36,505 NBFCs, oI which, 13,815 applications were approved
and 18,355 were rejected, as at end-August 2001. Out oI the total approvals oI 13,815
applications, only 776 companies have been permitted to accept public deposits.

Supervision of NBFCs
The supervisory Iramework Ior NBFCs is based on three criteria, viz., (a) the size oI
NBFC, (b) the type oI activity perIormed, and (c) the acceptance or otherwise oI public
deposits. Towards this end, a Iour-pronged supervisory strategy comprising (a) on-site
inspection based on CAMELS (capital, assets, management, earnings, liquidity, systems and
procedures) methodology, (b) computerized oII-site surveillance through periodic control
returns, (c) an eIIective market intelligence network, and (d) a system oI submission oI
exception reports by auditors oI NBFCs, has been put in place. The regulation and
supervision is comprehensive Ior companies accepting or holding public deposits to ensure
protection oI interests oI depositors.


Companies holding or accepting public deposits are required to comply with all the
directions on acceptance oI public deposits, prudential norms and liquid assets, and should
submit periodic returns to the Reserve Bank. They are supervised using all the supervisory
tools indicated above. Companies not holding or accepting public deposits are regulated
and supervised in limited manner. They are required to comply only with prudential norms
relating to income recognition, accounting standards, asset classiIication and provisioning
against bad and doubtIul debts. They are less Irequently inspected. Such companies are
presently not required to submit any returns to the Reserve Bank. Thus, market
intelligence and auditors` exception reports constitute the important supervisory tools in
respect oI these companies.
Policy Developments Relating to NBFCs
(a) NBFCs Registered and Regulated by Reserve Bank
Monetary and Credit Policy Statements
The Mid-Term Review oI Monetary and Credit Policy Ior the year 2000-01
announced in October 2000 and the Monetary and Credit Policy Ior 2001-02 announced in
April 2001 Iine tuned the policy environment governing NBFCs. Policy changes, inter alia,
included changes in interest rate on public deposits and introduction oI asset-liability
management system Ior certain categories oI NBFCs. A halI-yearly Financial Stability
Review using Macro prudential Indicators (MPI) data as relevant Ior NBFCs was also
prepared.
Reduction in Interest Rate on Deposits
EIIective Irom April 1, 2001, taking into account the market conditions and changes
in other interest rates in the Iinancial system, the maximum rate oI interest that NBFCs can
pay on their public deposits was reduced Irom 16 per cent to 14 per cent per annum. The
ceiling on interest rate on the deposits accepted by Miscellaneous Non-Banking Companies
(Chit Fund companies) and Mutual BeneIit Financial Companies (Nidhi companies) was
also brought down to 14 per cent. EIIective November 1, 2001, the ceiling on rate oI interest
has been Iurther brought down to 12.5 per cent.


Issuance of Commercial Paper by NBFCs
On October 10, 2000, the Reserve Bank issued guidelines Ior issue oI commercial
paper by companies, inter alia, exempting money received by NBFCs by issue oI
commercial paper (CP) in accordance with this guidelines, Irom the purview oI public
deposits. Asset Liability Management (ALM) System Ior NBFCs 5.13 The Reserve Bank
announced ALM guidelines Ior NBFCs Ior eIIective risk management. All NBFCs with
asset size oI Rs.100 crore or above or with public deposits oI Rs.20 crore or above, as per
their balance sheet as on March 31, 2001, were instructed to have ALM systems in place.
These NBFCs were advised to constitute an ALM Committee, under the charge oI ChieI
Executive OIIicer or other Senior Executive and other specialist members, Ior Iormalizing
ALM systems. The number oI companies likely to be covered by the guidelines is about 70
and they account Ior 75-80 per cent oI total public deposits held by reporting NBFCs. The
ALM system is required to be implemented by NBFCs by March 31, 2002.

In the case oI NBFCs holding public deposits oI Rs.20 crore or above, the Iirst ALM
return, comprising oI statements on structural liquidity, short-term dynamic liquidity and
interest rate sensitivity, as on September 30, 2002, should be submitted to the Reserve Bank
by October 31, 2002. NBFCs not holding public deposits, but having asset size oI Rs.100
crore or above would be advised oI the supervisory Iramework in due course oI time. The
companies have been advised to conduct trial runs during the halI-year ending September
30, 2001 and halI-year beginning October 1, 2001, and report operational diIIiculties in
implementing the system Ior rectiIication.

The Chit Funds and Nidhi companies have, Ior the present, been kept out oI the
purview oI these guidelines. NBFCs not qualiIying presently have also been advised to put
in place an ALM system, as it is the endeavor oI the Reserve Bank to extend these
guidelines to all NBFCs in Iuture. Rationalization oI the Requirement oI Introduction Ior
Depositors oI NBFCs


To rationalize requirements oI introduction Ior depositors stipulated earlier in June
2000, it was clariIied that requirement oI introduction was Ior purpose oI identiIication oI
depositors, so that deposits are not made in Iictitious names. NBFCs were advised to obtain
and keep on record copies oI identiIication oI depositors, viz., passport, ration card, election
identity card, and identiIication by an existing depositor, as prooI oI identity oI the
prospective depositors.

Entry of NBFCs into Insurance Business
Consequent upon issue oI Iinal guidelines Ior entry oI NBFCs into insurance
business in June 2000, the Reserve Bank permitted Iive NBFCs to undertake insurance
business as joint venture participants in insurance companies. OI these, while two NBFCs
were granted permission to undertake both liIe and general insurance business, three NBFCs
were permitted to undertake only liIe insurance business with risk participation. One
company was permitted both to engage in insurance agency business as well as to make
strategic investment in equity oI insurance company up to 10 per cent oI its owned Iund.
Another company was granted permission to conduct only insurance agency business while
a third company could only make strategic investment in equity oI insurance company.

Rationalization of Returns Submitted by NBFCs
In order to improve the reporting oI supervisory inIormation and Iacilitate electronic
processing, the Iormats oI all returns prescribed in terms oI Directions issued under RBI
Act, submitted by the NBFCs and Chit Fund companies at quarterly, halI-yearly and annual
intervals were rationalized. Such a step was also necessitated by the twin concerns oI the
Reserve Bank to take expeditious steps, wherever necessary, as also to intensiIy oII-site
monitoring procedure oI the deposit-taking/ holding NBFCs. A monthly return on
repayment oI deposits was prescribed Ior NBFCs holding public deposits, whose
applications Ior CoR under Section 45-IA oI RBI Act, 1934 were rejected or CoR was
cancelled, iI it was granted earlier. Focus on Large NBFCs with Public Deposit exceeding
Rs. 20 crore


For addressing supervisory concerns and Ior picking up early warning signals oI
deterioration in Iinancial health oI companies (especially those holding a substantial
quantum oI public deposits), the quarterly return Ior compiling monetary aggregates, calling
Ior inIormation on asset-liability position Irom NBFCs holding public deposits oI Rs.20
crore and above, was expanded to include certain critical supervisory inIormation. The
return prescribes companies to Iurnish inIormation on net owned Iund, public deposits,
NPA position, credit rating, cash Ilow, certain key ratios, etc. This is expected to enable
closer monitoring oI large NBFCs holding public deposits oI Rs.20 crore and above.

Residuary Non-Banking Companies (RNBCs)
RNBCs are a class oI NBFCs which cannot be classiIied as equipment leasing, hire
purchase, loan, investment, nidhi or chit Iund companies, but which tap public savings by
operating various deposit schemes, akin to recurring deposit schemes oI banks. The deposit
acceptance activities oI these companies are governed by the provisions oI Residuary Non
Banking Companies (Reserve Bank) Directions, 1987. These directions include provisions
relating to the minimum (not less than 12 months) and maximum period (not exceeding 84
months) oI deposits, prohibition Irom IorIeiture oI any part oI the deposit or interest payable
thereon, disclosure requirements in the application Iorms and the advertisements soliciting
deposits and periodical returns and inIormation to be Iurnished to the Reserve Bank.

In the absence oI any linkage oI deposits to their NOF, to saIeguard the depositors'
interests, these companies have been directed to invest not less than 80 per cent oI aggregate
deposit liabilities as per the investment pattern prescribed by the Reserve Bank, and to
entrust these securities to a public sector bank to be withdrawn only Ior repayment oI
depositors. Subject to compliance with the investment pattern, they can invest 20 per cent oI
aggregate liabilities or ten times its net owned Iund, whichever is lower, in a manner
decided by its Board oI Directors.


The broad proIile oI the NBFC sector Ior 1998-99 and 1999-2000, based on the
regulatory returns submitted by deposit holding/accepting companies is presented. In view
oI the diIIerence in the number oI reporting companies in the two years, the data are not
strictly comparable. As at end-March 1999, the total outstanding public deposits oI the
1,547 deposit holding companies (both registered and unregistered) aggregated Rs.20,429
crore, equivalent to 2.6 per cent oI the outstanding deposits (Rs.7,71,129 crore) oI scheduled
commercial banks (excluding Regional Rural Banks). In the case oI 1,005 reporting
companies, as at end-March 2000, the total quantum oI outstanding public deposits reported
by them was Rs.19,342 crore, equivalent to 2.2 per cent oI the aggregate deposits
(Rs.8,96,696 crore) oI scheduled commercial banks.

The aggregate assets oI the NBFC sector increased to Rs.51,324 crore as on March
31, 2000, Irom Rs.47,049 crore, as on March 31, 1999. The break-up oI public deposits
within the diIIerent categories oI NBFCs is provided. Some oI the companies have
converted themselves into non deposit-holding companies by repaying the deposits held by
them. At the disaggregated level, public deposits with the hire purchase companies and
RNBCs increased by 22.3 per cent and 3.4 per cent, respectively


2.2 COMPANY PROFILE
MUTHOOT PAPPACHAN GROUP
Starting as a small chit company way back in 1939 and making many a land mark in
its long journey through the history spanning generations, the MUTHOOT PAPPACHAN
GROUP has over the years grown into a multiIaceted business conglomerate and one oI the
leading Iamily promoted corporate house in south India. Maintaining consistent and healthy
growth in all its spheres oI activities and constantly endeavoring to oIIer excellent customer
service, the GROUP has today made a visible presence across India with a strong hold in
rural and semi-urban areas. The GROUP has Iocused interests in multiIarious economic
activities such as retail Iinancial service, automobile dealerships, real estate, hospitality, it
inIrastructure and power generation, with a loyal customer base oI over one million.
A. FINANCIAL SERVICES

1. MUTHOOT FINCORP LTD

Muthoot Fincorp Ltd , the Ilagship company oI the group, with strong Iundamentals,
is a most proactive Non-Banking Finance company (NBFC) registered with Reserve Bank oI
India and is today one oI the largest providers oI micro-Iinance in the Iorm oI gold loans.
With nearly 1300 branches spread across the towns and villages in India, the company serves
almost 50000 customers a day. Its long standing experience, expertise and hold in the rural
areas has enabled the company to provide easier Iinance options and to promote investment
products, thereby maximizing returns to the rural population. The loan Products oI Muthoot
Fincorp Ltd is uniquely structured to serve those common people who do not have access to
mainstream commercial Banks.
In addition to the lending operations ,, Muthoot Fincorp Ltd has made tie- ups with
several leading Iinancial institutions and insurance Companies to oIIer a host oI other services
such as General and LiIe Insurance, Home loans, Automobile loans, Mutual Iunds, investment
advisory services, Money TransIer etc.


2. MUTHOOT CAPITAL SERVICES LTD

Muthoot Capital Service Ltd (MCSL) is a Public Limited Non-Banking Financial
Company (NBFC) registered with the Reserve Bank oI India and listed in the Bombay Stock
Exchange.
Established in February 1994 in Kerala, MCSL oIIers Capital Market Solutions
which include Leasing and Hire Purchase, Automobile Loans and Bonds. The Company has
diversiIied into Iund and non-Iund based activities giving equal importance to Corporate and
Non-Corporate Sectors in Kerala.

B.AUTOMOBILE DEALERSHIP

1. MUTHOOT YAMAHA
It is one oI the leading Dealers Ior Yamaha Motors (India) Ior their range oI
Motorcycles. Setting new standards oI excellence in service and Customer relations,
MUTHOOT YAMAHA has scaled new heights in vehicle sales at the local, regional and
national levels.

2. MUTHOOT HONDA
It is one oI the leaders oI Honda Automobiles in Cochin. Muthoot Honda is one oI the
leading dealers Ior Honda two- wheelers in Kerala. We have a loyal Iollowing oI more than
60,000 customers across Kerala. Muthoot Honda has scaled new heights at the local and
national level by providing top class service and Iacilities to customers 24/7.
C.REAL ESTATE

MUTHOOT ESTATE INVESTMENTS
With development oI commercial properties as its business activity, MUTHOOT
ESTATE INVESTMENT has to date developed 1,14,000 sq.It oI commercial oIIice space and
36,000 sq.It oI commercial shopping space strategically located in the nerve centers oI
business in leading cities oI Kerala.


Its landmark buildings are:

MUTHOOT TOWERS, a 6 storeyed building with a total plinth area oI 4200
sq.metres and 20 car parking space at M.G.Road, Cochin.

MUTHOOT SHOPPING CENTRE, with a total plinth area oI 3800 sq. metres
and 15 car parking space at Kayamkulam.

MUTHOOT SHOPPING ARCADE, with a total plinth area oI 2000 sq.metres
and 10 car parking space at Trivandrum

D. HOSPITALITY
Muthoot Pappachan Group has made a mark Ior themselves in the hospitality industry
by putting up
The Muthoot Plaza, 5 star Business class Hotel in Trivandrum.

Taj Green Cove Resort, 5 Star Luxury Resort at Kovalam, Trivandrum District.

The Muthoot SkycheI, In-Ilight catering unit at Trivandrum.

1. THE MUHOOT PLAZA
Located in the heart oI Thiruvananthapuram City, is the best Business Class Hotel
in Kerala with 57 well-appointed rooms and suites, set to international standards. The hotel is
operated by sarovar park Plaza hotels and Resorts, an aIIiliate oI the Carlson Hotels
worldwide, the Iastest growing hotel management Group in India with 35 hotels all over
India.

2. TAJ GREEN COVE RESORT
Located at Kovalam (internationally Iamous Ior its beach) is one among the Iew top
class Beach Resorts in the country conIorming to international standards, providing world
class Iacilities. The Resort with private beach Irontage is operated by the internationally
Iamous and reputed Taj Group


3. THE MUTHOOT SKYCHEF

Located at Thiruvananthapuram just near Irom the Airport, is a state -oI-the-art Ilight
kitchen covering an area oI over 32,000 sq.It speared across 3 Iloors. Designed according to
international speciIications and conIorming to AEA and HACCP standards, the unit has the
capacity to cater 3600 meals a day.
The Muthoot SkycheI caters to many Ioreign airlines, charter Ilights, and vvip Ilights
transiting Thiruvananthapuram besides Air India Express and Indian Airlines.

E. IT INFRASTRUCTURE

MUTHOOT TECHNOPOLIS
The Muthoot Technopolis is a state-oI-the-art IT park oI world-class standard at
Cochin Special Economic Zone with a built-up area oI 3, 55,000 sq.It spread over 9 Iloors.
Designed by the renowned JURONG InIrastructure Ltd, Singapore, the international
Designers oI the best IT parks in the country and abroad, technopolis is the Iirst IT Park under
PPP model in a Special Economic Zone among all the states in the country and it has become
the role-business model Ior the ministry oI commerce, Govt.oI India.

F.WIND ENERGY
The group Iocuses on the conservation oI conventional energy sources by seeking
alternate ones. Wind energy is a clean source Ior electricity production. The group employs
the latest wind generators. The power thus generated is supplied to the southern regional grid.
Starting with wind turbines with capacity oI 1.8 MW at the wind Iarms located at
palavoor village in Tirunelveli district and Aralvaimozhi village in Kanyakumri district in
Tamil Nadu in 1995, the total installed capacity oI the Group in wind power currently is
10.025MW


MUTHOOT CAPITAL SERVICE LTD
Muthoot Capital Services Ltd. (MCSL) is a public limited Non Banking
Financial Company registered with the Reserve Bank oI India and listed on the Bombay
Stock Exchange. Established in February 1994 in Kerala, MCSL oIIers capital market
solutions that include Leasing & Hire Purchase, Vehicle Loans and Bonds & Deposits
among others, with cost-eIIective value-added services Ior the beneIit oI our customers. To
augment its Iund base, MCSL came out with a public issue in February 1995. The issue
was oversubscribed by 8.5 times - at a time when the Indian Capital Market was sluggish.
Almost the entire subscription was received Irom the State oI Kerala.
MSCL has also diversiIied into Iund and non-Iund based activities laying equal
emphasis on the corporate and non-corporate sectors oI Kerala. Promoted by the Muthoot
Pappachan Group, MCSL has today emerged as one oI the leading Iinancial institutions in
the capital market operations, with its Ioundations dating back to the year 1939, with a
stronghold in the banking and Iinance sector especially in the rural and semi-urban areas in
South India.
Board of Directors
Thomas John Muthoot Chairman
Thomas George Muthoot Managing Director
A.P.Kurian Director
Philip Thomas Director
Thomas Muthoot Director
Table 2.1 Board of Directors


Our Commitment To Customer Satisfaction

MCSL is dedicated to ensuring customer satisIaction by pursuing the Iollowing aims:
O To provide customers with the right Iinancing solution at competitive prices and
speedy services.
O To be recognised as a company oI cpetence, creativity, Ilexibility, reliability and
experience.
O To discharge responsibilities in all our proIessional relationships in a manner that
will bring credit to both our company and our industry.
O To develop our staII to their Iull potential.
O To demonstrate absolute integrity in everything we do.
O To epitomize proIessional excellence.
We believe that high quality products and standard solutions are not enough.
For this reason, we have acquired inIormation systems and technologies which enable us to
develop, in close collaboration with our business partners, innovative and creative Iinancial
solutions to help you make the most out oI your business.
The Future
By listening to the demands and needs oI our customers, and investing in our
business to support those needs, MCSL ensures that you are provided with the highest
quality asset Iinance and Iinancial products at an optimum service level.

SERVICES
uy at today's prices with tomorrow's income.
Muthoot Capital Services Ltd (MCSL) is here to rapidly source Iunding Ior businesses or
individuals. We have considerable expertise in Inter Corporate Deposits, Leasing, Hire
Purchase, Bill Discounting and in disbursing Loan against Shares


Over the last decade, MCSL has established itselI as the clear service leader in the
capital market. The MCSL team comprises seasoned business proIessionals and we have
recruited management and support staII with years oI experience in the relevant disciplines
and markets in order to provide our customers with inIormed, competent and responsive
service and advice.
MCSL has actively entered into the areas oI capital market operations, to Iocus
mainly on the potential corporate clients based in Kerala.

FAIR PRACTICE CODE
MUTHOOT CAPITAL SERVICES LIMITED-FAIR PRACTICE CODE FOR THE
COMPANY
The Board oI Directors (the ' Board ' ) oI the Company has adopted the Iollowing
code oI Iair practice to lay down the procedures / practices in dealing with the business
transactions. This code is Iormulated in pursuance oI the notiIication issued by the Reserve
Bank oI India vide its Circular no. DNBS(PD)CC No. 80/03.10.042/2005-06 dated
September 28, 2006.
1.Applications Ior loans and their processing
O Loan application Iorms include necessary inIormation which aIIects the interest oI the
borrower, so that a meaningIul comparison with the terms and conditions oIIered by other
NBFCs can be made and inIormed decision can be taken by the borrower. The loan
application Iorm indicates the documents required to be submitted along with the
application Iorm.
O The company provides acknowledgement Ior receipt oI all loan applications. The
acknowlegement includes the time Irame within which loan applications will be disposed
oII.


2. Loan appraisal and terms / conditions
O The company shall convey in writing to the borrower by means oI sanction letter or
otherwise, the amount oI loan sanctioned along with the terms and conditions including
annualized rate oI interest and method oI application thereoI and shall keep on record the
acceptance oI these terms and conditions by the borrower.

3. Disbursement oI loans including changes in terms and conditions
O The company shall give notice to the borrower oI any change in the terms and conditions
including disbursement schedule, interest rates, service charges, prepayment charges, etc.

O The company ensures that changes in interest rates and charges are eIIected only
prospectively and necessary provisions in this regard are contained in the loan agreement.

O Decision to recall / accelerate payment or perIormance under the agreement shall be in
consonance with the loan agreement.

O The company shall release all securities on repayment oI all dues or on realization oI the
outstanding amount oI loan subject to any legitimate right or lien Ior any other claim the
company shall have against the borrower.

O II the right oI set oII is to be exercised, the borrower shall be given notice about the same
with Iull particulars about the remaining claims and the conditions under the the company
is entitled to retain the securities till the relevant claim is settled / paid.


4. General
O The company shall reIrain Irom interIerence in the aIIairs oI the borrower except Ior the
purposes provided in the terms and conditions oI the loan agreement ( unless new
inIormation, not earlier disclosed by the borrower, has come to the notice oI the lender).

O In case oI receipt oI request Iorm the borrower Ior transIer oI borrowal account, the
consent or otherwise oI the company shall be conveyed within 21 days Irom the date oI
receipt oI request. Such transIer shall be as per transparent contractual terms in consonance
with law.

O In the matter oI recovery oI loans, the company shall not resort to undue harassment viz.
persistently bothering the borrowers at odd hours, use oI muscle power Ior recovery oI
loans.

LOYALTY PROGRAMS
"Muthoot Advantage" is the unique Customer Loyalty/Relationship Program designed
exclusively Ior the customers oI the divisions oI Muthoot Pappachan Group (MPG). This
program unravels the bulk oI advantages than can be acquired by being a member.
Anybody can become a member oI the program by paying a nominal membership Iee oI
Rs.99 only. As a member, you earn points each time you buy Muthoot Pappachan Group
(MPG) product or service Irom the participating divisions.
The number oI points earned by you will depend on the division you have
transacted with. Every time you transact, please remember to present your Membership
Card to the executive attending to you. From time to time you can also earn Bonus Points
by taking part in the various schemes and activities that will be organized as part oI the
program. These Bonus Points will be rewarded to you in addition to the points you will be
earning on regular transactions.


COMPANY HISTORY
Muthoot Capital Services Ltd., (MCSL) was incorporated on 18th February 1994
and obtained its CertiIicate oI Commencement oI Business on 23rd March 1994. MCSL
was initially registered with an authorized capital oI Rs.100.00 lacs which was
subsequently increased to Rs.700.00 lacs.MCSL is presently into Iund and non Iund based
activities, with particular Iocus on the State oI Kerala. Since its incorporation, MCSL has
been actively involved in secondary and primary market operations.

In the secondary market, MCSL through its oIIices, which are situated at strategic
locations in Kerala, has been executing large number oI orders Ior investors oI Kerala
through Cochin, Coimbatore, Madras and Bombay Stock Exchanges. This in turn has
helped the Company to develop a large portIolio oI investors who have availed oI the Share
Discounting and Advance against Shares schemes.

The Advance against Shares scheme oIIered by MCSL enables the investors to
take advance against the securities held by them on relatively nominal terms than what is
oIIered by other upcountry Iinance companies and even many banks. The Share
Discounting scheme oIIers an unique Iacility oI Iaster pay out on securities sold at Bombay
and Madras Stock Exchanges.

MCSL oIIers to purchase the said securities at a discount and gives the payment
to the client across the counter. 2008- Muthoot Capital Services Ltd has inIormed that Mr.
K Parameswaran Nair has resigned Irom the post oI ChieI Executive OIIicer (CEO) w.e.I.
February 29, 2008 and Mr. R Manomohanan, has taken charge thereoI eIIectively Irom
March 01, 2008.Muthoot Capital Services Ltd is a public limited Non Banking Financial
Company registered with the Reserve Bank oI India.


The company oIIer non-convertible debentures, auto loans, small and medium
enterprise loans, gold loans, lease Iinancing and bonds. They also oIIer capital market
services like Iinancial advisory services, wealth management, insurance products oI leading
insurance and mutual Iund companies. The company is one oI the leading Iinancial
institutions in the capital market operations. They have a strong presence in the banking
and Iinance sector in rural and semi-urban areas in South India. The company's shares are
listed on the Bombay Stock Exchange. The company's operations are classiIied into two
reportable business segments, viz. Financing Activities (Advancing oI Gold Loan, Hire
Purchase and Hypothecation Loans, etc.) and Insurance Services (as a corporate agent oI
HDFC Standard LiIe Insurance and data sharing partner oI Birla SunLiIe Insurance) and
the segment inIormation is reported accordingly.

Muthoot Capital Services Ltd was incorporated on February 18, 1994 as a public
limited company. In March 23, 1994, the company obtained the CertiIicate oI
Commencement oI Business. In February 1995, the company came out with the public
issue and their shares were listed on the Bombay Stock Exchange. In the year 1995, the
company started auto loan business. In the year 1998, they obtained the Category A -
Deposit accepting NBFC License.

In the year 2001, they started Gold Loan Business. In the year 2002, they started
disbursing loans based on Demand Promissory Notes. In the year 2007, the company
obtained license Irom IRDA to act as a Corporate Agent. Also, they entered into agreement
with HDFC Standard LiIe Insurance Company Ltd to act as Corporate Agent. In the year
2009, they entered into agreement with Birla Sun LiIe Insurance Company Ltd Ior data
sharing.


OUTLOOK FOR THE COMPANY

Your Company continued its good perIormance during the year also, basing
its activities on the time tested values and principles. The success oI the Company is
dependent to a great extent on its Iocus on customer service and its ability to Iormat and
introduce products in accordance with the demand in the market. The Company's
diversiIication into two-wheeler loan segment proved a success. The Company is
planning to introduce many more new products in the retail Iinance and SME segments

Honda Motorcycle, Muthoot Capital Services tie up

Honda Motorcycle and Scooter India Pvt Ltd have tied up with Muthoot
Capital Services Ltd (MCSL), a division oI Muthoot Pappachan Group, to oIIer instant
'need-based Iinancial services Ior its two-wheeler customers. The tie-up will enable
HMSI to penetrate deep into the semi-urban and rural markets using the services oI
MCSL`s retail outlets and dedicated manpower at every HMSI sub-dealer point.HMSI
has a strong dealer network in Kerala and Tamil Nadu, where the Iinancing options will
be available initially.

The two companies will work closely to bring in operational eIIiciency,
optimize the turnaround time (TAT) and enhance customer satisIaction. The Iinancing
option will be oIIered to customers purchasing two wheelers at the authorized Honda
retail outlets on an equated monthly installment under the innovative Ilexi repayment
options.


COMPETITORS

COMPANY SYMBOL
Aakruti Holdings Ltd. AAKHOL
Aasheesh Securities Ltd. AASSEC
Action Financial Services (India) Ltd. ACTFIN
Adinath Exim Resources Ltd. ADIEXI
Aeonian Investments Company Ltd. AEOINV
Agarwal Holdings Ltd. AGAHOL
Ajcon Global Services Ltd. AJCGLO
Almonds Capital & Management
Services Ltd.
ALMCAP
Alpine Capital Services Ltd ALPCAP

Table 2.2 Competitors of MCSL


MUTHOOT CAPITAL SERVICES LIMITED NET 1UMPS 34.75

The audited Iinancial results oI Muthoot Capital Services Limited Ior the year
ended 31
st
March, 2011 reveal substantially higher perIormance compared to the
corresponding period last year.

The net proIit oI the company increased Irom Rs.717.28 lakhs to Rs.966.55 lakhs,
recording an impressive growth oI 34.75, compared to the last year Iigures. The total
income oI the company registered a growth oI 67.87, Irom 2247.56 lakhs during the
previous year to 3772.92 lakhs in the current year. Commensurate with the increase in
operations, the interest expenses increased by 67.30 to 1157.07 lakhs Irom Rs.691.61
lakhs in the last year. On account oI the substantial increase in manpower and
inIrastructure to support the enhanced level oI activities, the operational expenses during
the corresponding period recorded an increase oI 139.08, Irom Rs.456.93 lakhs to
Rs.1092.44 lakhs. The proIit beIore tax recorded a jump oI 33.40 Irom Rs.1087.42 lakhs
in the previous year to Rs.1450.61 lakhs during the year ended 31
st
march 2011.

During the quarter ended 31
st
March 2011, the net proIit increased to Rs.267.90
lakhs, Irom Rs.206.14 lakhs compared to the corresponding quarter in the previous year,
recording a growth oI 29.96. The total income Ior the company increased to Rs.1153.62
lakhs during the quarter ended 31.03.2011 Irom Rs.662.29 lakhs during the corresponding
period last year, registering a growth oI 74.19.The proIit beIore tax during the
corresponding period increased by 28.64 Irom Rs.313.71 lakhs to Rs.403.57 lakhs.

The company has been expanding the activities in the Iour South Indian Stages and
Goa under the Automobile Iinance segment, mainly two wheeler Iinancing. The company
was able to disburse 35123 loans in the year 2010-2011 amounting to Rs. 138.35 Crores.
The outstanding loan amount increase Irom Rs.39.99 Crores as on 31-3-2010 to Rs.129.79
Crores as on 31-3-2011, with a delinquency ratio oI only 0.18 as on 31-3-2011, which is
the lowest in the industry.


The company is introducing innovative products under the Automobile Finance
Segment. Under the Smart plus Auto Loan, the Iull cost price oI the vehicle is given as
loan, enabling the borrowers to leverage their gold ornaments against the margin
requirement. The company expects very good response to this product Irom the market.

Another innovative product to be introduced by the company in the near Iuture is
loan against Gold Exchange Traded Funds (ETF). The Gold ETFs are securities issued by
Asset Management Companies against 995 purity gold kept by them with depositaries. The
securities are in dematerialized Iorm, easily transIerable, easily encashable, and are traded
in stock exchanges. By introducing this product, the company will be putting to use the
Group`s core competence in granting loan against Gold, to provide liquidity Ior investors
in ETF thereby promoting the popularity oI ETF.


2.3 PRODUCT PROFILE

PRODUCTS & TOOLS
O Lease and Hire Purchase
O Bonds & Deposits
O EMI Calculator
BONDS & DEPOSITS

If you want a financial product tailored to what you are investing in pretty much any
way you want it, it is out there.

Fund-based activities include:

O Inter Corporate Deposits
O Leasing
O Hire Purchasing
O Bill Discounting
O Loan against shares
Non-fund based activities:
O MSCL is a Category-1 Merchant Banker registered with SEBI


LEASING & HIRE PURCHASE
It is flexible finance. Flexible on terms, on repayment periods, flexible patterns and
prices.
The acquisition oI assets - particularly expensive capital equipment - is a
major commitment Ior many businesses. How that acquisition is Iunded requires careIul
planning. Rather than pay Ior the asset outright using cash, it can oIten make sense Ior
businesses to look Ior ways oI spreading the cost oI acquiring an asset, to coincide with
the timing oI the revenue generated by the business.
The most common sources oI medium term Iinance Ior investment in capital
assets are Hire Purchase and Leasing. Leasing and hire purchase are Iinancial Iacilities
which allow a business to use an asset over a Iixed period, in return Ior regular
payments. The business customer chooses the equipment it requires and the Iinance
company buys it on behalI oI the business.
Leasing is very popular, the basic reason being: you don't have to Iind the
money to pay Ior your equipment upIront thereby conserving your cash. The term oI the
lease can match the liIetime oI the asset. ThereIore a loan Ior a desktop computer can
be structured to match its useIul liIe, likely to be much shorter than the liIe oI a machine
tool.
Hire Purchase
With a hire purchase agreement, aIter all the payments have been made, the
business customer becomes the owner oI the equipment. This ownership transIer either
automatically or on payment oI an option to purchase Iee. For tax purposes, Irom the
beginning oI the agreement the business customer is treated as the owner oI the
equipment and so can claim capital allowances. Capital allowances can be a signiIicant
tax incentive Ior businesses to invest in new plant and machinery or to upgrade
inIormation systems. Under a hire purchase agreement, the business customer is
normally responsible Ior maintenance oI the equipment.


Leasing

The Iundamental characteristic oI a lease is that ownership never passes to the
business customer. Instead, the leasing company claims the capital allowances and
passes some oI the beneIit on to the business customer, by way oI reduced rental
charges. The business customer can generally deduct the Iull cost oI lease rentals Irom
taxable income, as a trading expense. As with hire purchase, the business customer will
normally be responsible Ior maintenance oI the equipment.
Muthoot Capital Services Ltd. (MCSL) has already deployed a substantial
amount under its Lease and Hire Purchase Schemes. Items under the schemes include:
O Windmill Electric Generators
O Plant and Machinery
O Diesel Generating Sets
O Commercial Vehicles
O Two Wheelers
O Computers
VEHICLE LOANS
Muthoot has some oI the Iinest Vehicle Loan Schemes to oIIer customers. The '
Eezy Two Wheeler Loan' schemes are careIully designed to suit customer requirements.
They involve easy documentation and quick sanction as well as low interest rates and
easy installments.


Hire Purchase Vehicle Loans:
O Stamp Duty cost is waived (1 coupon)
Special On Going Benefits at MCSL

Bonds:
O Personalized alerts on which type oI scheme to deposit, payment oI premiums.
O Free Advisory Services on SIP Iacility (Systematic Investment Planning) which will
help you to get maximum returns Irom your investments.
Hire / Purchase Vehicle Loans:
O 0.5 waiver on the loan amount
5 waiver on new or renewal oI automobile insurance premium


Chart 3.1 Organization Chart of MCSL
MD
CEO
AVP HR
FM Senior Manager
VP S&M
Company
Secretary
CS
Trainee
Auto loan
Team
Branch staII
Branch Manager (1)
CSE (3)
Sub StaII (3)
Legal OIIicer
Accounts
OIIicer
HR
Executive
SoItware
Engineer
Executive assistant
to CEO-1
Front OIIice (1)
Sub StaIIs (2)
Driver (1)
ORGANISATION CHART


VP S&M
RCM
Sr
Manager
Credit
HR SECRET
ARY
Sr
Manager
Ops
Risk
Manag
er
SRM
Risk
Exe
CREDIT
EXE
ACM
SAM
OPS
MANAGE
R
OFFICE
ASST
SR OPS
EXE
TC
TL
CE
S Co
BDM
SE
BDM
TL
SE
CSE
KERALA
Chart 3.2 Structure of Vehicle Loan Section in Kerala


Chart 3.3 Structure of Vehicle Loan Section in Tamilnadu

TAMILNADU
RM
1
VP S&M
OPS & CREDIT
MANAGER
1
TL
3
OPS & CREDIT
EXECUTIVES
4
TC
4
CSE
59
SE
8
BDM
1
TL
2
AM
1
RCM
1
CE
21
TC
1


Chart 3.4 Structure of Vehicle Loan Section in Andhra Pradesh

AP
VP S&M
CE
14
CM
1
TL
1
TC 2
SR RM
1
AM
1
TL
5
SE
8
SR OPS
MANAGER
1
CSE 42
OPS & CREDIT
MANAGER
1
OPERATIONS
EXECUTIVE
7


Chart 3.5 Structure of Vehicle Loan Section in Karnataka

VP S& M
CREDIT & OPS
MANAGER
1
AM
3
OPS
EXE
4
CREDIT
EXE
2
CSE
27
TC
1
KARNATAKA


Chart 3.6 Structure of Vehicle Loan Section in Goa

GOA
VP S&M
ASST MANAGER
OPS & CREDIT
1
AM
1
COLLECTION
EXE
1
CSE
6


3.2 SALES AND MARKETING DEPARTMENT
Sales & Marketing is a business discipline which is Iocused on the practical
application oI marketing techniques and the management oI a Iirm's marketing resources and
activities. The Sales and Marketing department will be responsible Ior making contact with
customers and obtaining orders Irom those contacts and also responsible Ior market research
and marketing planning.
Sales and marketing department oI a company helps in providing loan to the
customers. Auto Loan should be provided to the two-wheeler, three-wheeler and Iour-
wheeler vehicles. Mainly company is providing loan to the two-wheeler vehicles. The
company have tie up with various companies like Hero Honda, Yamaha etc. The company is
mainly providing loan to the Hero Honda customers. The company has counter sales
executives Ior each Hero Honda showroom. II the customer needs loan Ior purchasing the
vehicle the counter sales executives are contact with that customer. Then the counter sales
executives are communicate it to the tele callers and the process oI loan should be made.
The loan should be provided to the customers on the basis oI any oI the Iollowing
methods:
Income Method
Asset Method
Income Method
Under Income Method, loan should be provided to the customers based on their
salary and other income oI the customer.
Asset Method
Under Asset Method, loan should be provided to the customers based on the assets like
land and other assets oI the customer.


The company is adopting some oI the sales promotional activities Ior the eIIective
and smooth running oI the organization. Sales promotional activities oI the organization are
mainly include the Iollowing:
Advertisements
OIIers
Advertisements are the paid Iorm oI communication which helps in attracting the
customers and capture the market. Advertisement is a non personal presentation and
promotion oI ideas, goods, and services by an identiIied sponsor. Various types oI
advertisements are used by the company Ior promotion oI company`s services. These
include:
O Advertisements in news papers, periodicals, journals etc
O Notices, broachers etc
O Advertisements in tele vision
O Advertisements in internet etc.
The company is providing various types advertisements which are the part oI
company`s promotional activity. The company is also providing various oIIers to the
customers to attract them. The goodwill oI the Iirm is also an important Iactor Ior the sales
promotion.
The eIIectiveness oI a sales and marketing manager may thereIore depend on his or
her ability to make the internal "sale" oI various marketing programs equally as much as the
external customer's reaction to such programs.


STRUCTURE OF SALES AND MARKETING DEPARTMENT

Chart 3.7 Structure of Sales and Marketing Department

CEO
VP S&M
SRM
SAM
BDM
TL
SE
CSE S Co
BDM
SE
2W 3W
MD


3.3 CREDIT DEPARTMENT

Credit department is one oI the important department oI the company. Credit
department determines the Ilow oI Iunds to the customers. That is how much amount should
be given to employees as loan must be determined by the credit department oI a company.
The details oI the customer are checked by the credit department and then determine the Ilow
oI Iunds to them. BeIore providing loan approval to the customers, credit department should
check his details clearly. Also register his name into the CIBIL to understand his or her
previous loan repayment details which they has been taken Irom any other bank or Iinancial
institution. This should give a clear idea about the customer`s loan repayment character. That
is, the details oI his previous loan repayments like the payment oI installments, interest etc.
could be made on the correct date or not, any other loan payment could be pending etc.
Credit department should check the back ground oI the customer. That is, he has
punished by any criminal oIIence or not or he has any criminal back ground etc. should be
checked properly by the credit department oI a company. The income level oI the Iamily and
the customer are also checked by the credit department. The guaranteed person oI the
customer should be the person who has close relationship with the customer. Mainly Iamily
member oI the customer should be taken as guarantor oI his loan. That is, the Iather, mother,
wiIe, husband, etc.
AIter considering the details oI the customer, the credit department should determine
how much amount should be granted as the loan to the customer. The whole amount oI the
vehicle should not be given as loan, only 80 or 75 should be provided to the customers as
vehicle loan. The remaining portion payment should be done initially. The main duty oI the
credit department is to determine the Ilow oI Iunds and check the customers have the ability to
make the payments to the loan.


STRUCTURE OF CREDIT DEPARTMENT

Chart 3.8 Structure of Credit Department

MD
CEO
VP S&M
SR MANAGER
CREDIT
CREDIT EXE


3.4 OPERATIONS DEPARTMENT

The main operation oI Muthoot Capital Service is the Auto Loan Services to the
customers. The Auto Loan Section is based on the Hire Purchase system. Loan should be
provided to the customers on the basis oI this system.
Hire Purchase System

With a hire purchase agreement, aIter all the payments have been made, the business
customer becomes the owner oI the equipment. This ownership transIer either automatically
or on payment oI an option to purchase Iee. For tax purposes, Irom the beginning oI the
agreement the business customer is treated as the owner oI the equipment and so can claim
capital allowances. Capital allowances can be a signiIicant tax incentive Ior businesses to
invest in new plant and machinery or to upgrade inIormation systems. Under a hire purchase
agreement, the business customer is normally responsible Ior maintenance oI the equipment.
For providing vehicle loan to the customers many Iactors are to be taken in to
consideration. These Iactors are:
O Age level oI the customer
O Income level oI the customer
O Back ground oI the customer
O Residential status oI the customer
O Family background oI the customer etc.


BeIore providing loan to the customers, the customers should submit the Iollowing
documents:
O Customer ID proIile
O Customer income certiIicate
O Customer`s latest tax receipt
O Residential certiIicate oI the customer
O Salary certiIicate oI the customer
O Agreement oI the customer
The loan should be mainly provided Ior the 12 months and the installments should
be payable at every month. The rate oI interest will be varied Ior each month. The interest rate
is increased by month by month. In First month interest rate will be less and the installment
amount will be high and in last month interest rate will be high and the installment amount
will be less. The entire amount oI the vehicle should not be given as loan to the customers,
only 75 or 80 should be provided by the company.


STRUCTURE OF OPERATIONS DEPARTMENT

Chart 3.9 Structure of Operations Department

MD
CEO
VP S&M
SR MANAGER
OPS
OPS MANAGER
SR OPS EXE
OFFICE ASST


3.5 RISK DEPARTMENT

For the continued good perIormance oI the Company, Company needs to have good
risk management practices. This is not only to manage risks inherent in business but also
to manage risks arising Irom external economic and Iinancial conditions. Competition
risk, credit risk, interest rate risk, liquidity risk and human risk are some oI the major risks
that Company is Iacing in tine business. Tine strong customer relationships and trust,
which the company continues to enjoy Ior generations, help the Company in Iacing
competition. The brand image oI the Company, which underwent a recent makeover in
asserting its value and presence, its distribution network which is expanding substantially
across the country, strong and loyal customer base and the depth oI the management make
it strong enough to take care oI even the most intense competition.
The main duty oI the risk department oI a company includes two stages. These are
the Iollowing:
Pre- veriIication

Post veriIication

Pre- veriIication

Pre- veriIication should be made beIore sanctioning the loan to the
customers. The customers should submit their income certiIicate, passport, I D prooI,
salary certiIicate etc. to the organization Ior the purpose oI taking the loan. The Operation
department checks all the data submitted by the customer and iI there is any doubts
regarding the data, it will be hand over to the Risk department. The Risk department will
cross check the details to Iind out iI there is any Ialse representation oI data.
Mainly income tax certiIicates are shown Ialse representation and it
should be checked by the risk department. The staIIs oI risk department should visit the
village oIIice Ior veriIying the data is right or wrong. II it is Iound wrong, the loan
application oI the customer should be rejected. Otherwise, it should be considered Ior
Iurther processing.


Post- veriIication

Post veriIication should be done aIter providing loan to the customers. It is one oI
the important duty oI the risk department oI a company. In this the risk department should
check the customers are utilized their loan amount correctly or not. That is, the customers
are utilized their loan amount Ior purchasing vehicle or they used it Ior any other purposes
or they purchased the reported vehicle or not etc. II there is any doubt regarding the
customer on the above Iactors, the staIIs oI the risk department should visit and check it
properly. II it is Iound wrong on the part oI the customer the risk manager report it to the
top authorities and take corrective measures. The company can also make sue against the
customer.
The main duty oI the Risk manager is to conduct Pre- VeriIication and Post-
VeriIication oI the details oI the customers in the Auto loan section oI the company and
handle it properly. The Company Iollows a policy oI keeping suIIicient Iunds by way oI
cash and bank balances to meet any reasonable requirement, ensuring that it is not put to
any liquidity strain. With growing competition Ior acquisition and retention oI talent,
which is ever more important Ior the growth oI the Company, availability oI human
resource is also an important risk Iactor. Selection/recruitment oI staII is also done on a
continuous basis. The Company gives value to its committed and talented personnel by
designing programs and policies tailored to enhance individual and organizational welIare.
The Company's assets and liabilities are well balanced. The Company evaluates the risks
and keeps its assets and liability portIolios diversiIied to reduce and manage the risks.


STRUCTURE OF RISK DEPARTMENT

Chart 3.10 Structure of Risk Department

CEO
VP S&M
MD
RISK MANAGER
RISK EXE


3.6 COLLECTION DEPARTMENT

Collection department oI a company helps in collecting the loan installments and
interests up to date. Firstly prepare the list oI customers Ior the month and classiIy them
into location wise, region wise, executive wise, area wise etc. and on the basis oI this
payment collection should be made.
The customers are classiIied in to two types on the basis oI their repayment oI vehicle
loan provided by the company. These are:
Demand Customers

Overdue Customers

Demand Customers

Demand customers are the current month customers oI the company.
They have no previous month dues or EMA dues. The customers who are not having loan
dues are considered under demand customers.

Overdue Customers

Overdue customers are the customers they have previous month dues.
The customers who are having previous month dues or EMA dues are coming under the
category oI overdue customers. The previous month delayed EMA customers are also
known as bucket cases. According to their dues they are called as Iirst bucket, second
bucket, third bucket etc. That is, iI the customer have only one month due they are called
Iirst bucket customers, iI the customer have two month EMA due they are called second
bucket customers and so on.


Collection on Demand Customers

Collection on Demand customers should be made by the collection department oI a
company. Collection should be made by dividing in to three particular date on the basis oI
loan granted. That is, 5
th
, 10
th
, and 15
th
.
In case oI 5
th
, one day beIore intimation to the customers should be made through
sms. AIter the due date over telecallers call and inIorm to the customers. Other cases over
on roll executives visit and collect the loan amount Irom the customers. The same method is
used Ior the cases 10
th
and 15
th
.

Collection on Overdue Customers

Collection on Overdue customers should be made by the collection department oI a
company. II there are above three pending oI loan payments by the customers are included
in the category oI overdue customers. On roll executives visit and collect iI there are above
three pending oI loan installments. The respective area managers, area oIIicers, and regional
managers also visit and solve the case depends on the status.
Some cases customers also surrendering the vehicle to the company. In such cases the
company is sold through auction. In the Auto loan industry Muthoot Capital Service is
having number one position. 0.18 is the delicacy oI the company.


STRUCTURE OF COLLECTION DEPARTMENT

Chart 3.11 Structure of Collection Department

CEO
VP S&M
MD
RCM
ACM
TL
CE
TC


3.7 LEGAL DEPARTMENT

Legal department is very important Ior an organization. The customers who are not
making the payment to the loan granted are coming under legal department oI a company.
The customers who are not making the payment above two or three installments are
considered in the legal department oI a company.

Firstly the legal department is giving a notice to the customer stating that the
payment should make Ior the month in a particular date. AIter this notice iI the customer
makes the loan payment, they should not be considered in legal department. II the
customer is not responding to the notice oI the company, then a cheque should be issued.
The cheque will be dishonored and there is no reaction or response on the part oI the
customer, then one more notice is issued to the customer. This notice stating that iI the
customer should not makes the payment to the loan granted, the company will take legal
action about the customer. II the customer is not making the loan payment aIter this
notice, then the company has the right to make sue against the customer.

The Legal department oI a company handling the customers who are not makes the
payment to the loan. This is the main duty oI legal department oI the company. The legal
department has the right to Iile the case against the customers who are not making the loan
payments according to section 138.


STRUCTURE OF LEGAL DEPARTMENT

Chart 3.12 Structure of Legal Department

CEO
MD
Senior Manager
Legal OIIicer


3.8 SECRETARIAL DEPARTMENT

The company is registered with the Companies Act 1956. ThereIore the company
should Iollow the rules and regulations under this act. The main duty oI the company
secretary is to see that the company is Iollowing the rules and regulations oI the act.

The share holders are the real owners oI the company. They always expect that the
company is doing the right things and the organization is running in proIit. They think that the
company is going in correct way. So, it is the duty oI the company secretary to protect the
interest oI the share holders.

For the smooth and eIIective running oI the organization, the organization is Iree Irom
all the disputes or grievances. II there is any dispute arising Irom the company the company
secretary should handle it properly. Managing the disputes and maintaining the discipline oI
the organization is an important duty oI the company secretary.

The company secretary also ensures that the company is having ethical code oI
conduct. The organization is doing its business based on the ethical code oI conduct. The
ethical behavior oI the organization is very important Ior the organization. All the activities
and operations oI the organization should be done in an ethical manner is very essential Ior
the success oI an organization. The ethical behavior or social responsibility oI the company
should be analyzed by the company secretary oI the organization.

Muthoot Capital Service is a listed company. So it should Iollow the rules, regulations,
provisions etc under the Companies Act 1956. II there is any violation in the rules and
regulations oI the Companies Act, the company secretary should take corrective measures and
handle it properly Ior eIIective and smooth Iunctioning oI the organization.


STRUCTURE OF SECRETARIAL DEPARTMENT

Chart 3.13 Structure of Secretarial Department

CEO
MD
CS Trainee
Company Secretary


3.9 ACCOUNTS DEPARTMENT

Finance is the science oI Iunds management. The Iield oI Iinance deals with
the concepts oI time, money and risk and how they are interrelated. It also deals with how
money is spent and budgeted. Finance is one oI the most important aspects oI business
management. Without proper Iinancial planning a new enterprise is unlikely to be
successIul. Managing money is essential to ensure a secure Iuture, both Ior the individual
and an organization.
The finance department oI a business takes responsibility Ior organizing the
Iinancial and accounting aIIairs including the preparation and presentation oI appropriate
accounts, and the provision oI Iinancial inIormation Ior managers.
Finance department is responsible Ior the Iinancial administration and
management oI the company in compliance with the Iinancial rules and the Iinancial
guidelines acting in this company. Finance department concerns Iinance Ilow management
oI the company and is aimed to serving staII, managers, the Board oI Directors and
securing the Iinancial health oI the company.
Finance department goal and services
The main goal oI The Department is to provide the internal and external users oI
Iinancial statements with relevant, accurate and timely inIormation and to guarantee that
the required Iinancial revision is closely adhered to in order to protect the assets oI the
company. The Department takes care oI Iinance Ilow to ensure that the company operates
within its Iinancial regulations and satisIies various external Iinancial requirements. It also
ensures that the corporate Iinancial records comply with internal and external audit.
The Iinance is an essential element oI the company. The company has 23 branches
and all the branches are doing Iund based activities. The requirements oI Iunds oI the
company are reported to the head oIIice in Trivandrum. The sources oI Iunds oI the
company are the initial payment oI the customer and the head oIIice Iunds. The main
operation oI the company is the vehicle loan provided to the customers. The amount oI


loan should be raised by utilizing the Iunds Irom Trivandrum oIIice. The vehicle loans are
provided to the customers only up to 80 or 75 only. The remaining portion oI the
amount oI vehicle should be paid by the customer as the initial payment.
The company has expenses like electricity, telephone bill, salary oI employees and
managers etc. These are the main oIIice expenses oI the company. The main accounts
prepared by the company are Income Statement and the Position Statement. That is, proIit
and loss account and balance sheet. Comparing with the last two years Iinancial
statements oI the company shows now the company is running more proIitably.
The Department there can be picked out the Iollowing main services it renders:
O Payment oI expenses
O Income collection and salary management
O Production and assignment oI budgets, capital plans, and cash Ilow Iorecasts
O Monitoring and managing Iinancial plans
O Auditing and reporting Iinancial condition
The Department plays an important role in the company and the relations
between organizational units. It is closely cooperate with such company's divisions as
Sales Department, Administration and Marketing Department in the Iields oI payments,
audit, revision, account and cash Ilow. The eIIective collaboration is the guarantee that all
payments, accounts and deposits will be processed, covered and closed out. This is
important as proper organization oI the Iinance system inside the company brings the
positive and Iundamental eIIect to the company's competitiveness, demand and reputation.


STRUCTURE OF ACCOUNTS DEPARTMENT

Chart 3.14 Structure of Accounts Department

CEO
MD
FM
Accounts OIIicer


3.10 HUMAN RESOURCE DEPARTMENT

HR department is an important department in a company. The Human Resource
Department deals with management oI people within the organization. There are a number
oI responsibilities that come with this title. First oI all, the Department is responsible Ior
hiring members oI staII; this will involve attracting employees, keeping them in their
positions and ensuring that they perIorm to expectation. Besides, the Human Resource
Department also clariIies and sets day to day goals Ior the organization. It is responsible Ior
organization oI people in the entire Company and plans Ior Iuture ventures and objectives
involving people in the Company.

The human aspect oI resources within an organization contributes approximately
eighty percent oI the organization`s value. This implies that iI people are not managed
properly, the organization Iaces a serious chance oI Ialling apart. The Human Resource
Department`s main objective is to bring out the best in their employees and thus contribute
to the success oI the Company.

The department handles all the personnel aspects oI a company as well as training,
paying, and beneIits Ior your employees. The purpose oI having a human resources
department is to establish, develop, maintain, and communicate oIIice policies throughout the
entire company and to represent, help, advise, and consult with the employees, while
simultaneously keeping the overall best interests oI the company in mind. A human resource
department develops hiring plans and recruiting policies, as well as handles compensation
and salary administration. It also works Ior aIIirmative action and handles employee
relations, contracts, perIormance reviews, and beneIits. Human resource departments also
develop oIIicial documentation, workplace ethics/code oI conduct, employee handbooks,
employee training programs, award/reward programs and community connections as well.
Human resource department is devoted to providing eIIective policies, procedures, and
people-Iriendly guidelines and support within company. Additionally, the human resource
Iunction serves to make sure that the company mission, vision, values or guiding principles,


the company metrics, and the Iactors that keep the company guided toward success are
optimized.

Employee Recruitment and Selection Process:
These are the steps to recruiting and selecting qualiIied employees.

Chart 3.15 Selection process

Review
employee
Requirement
Advertisement
Process
Resume
Selection
Squeezed
into best
QualiIications
Interview
Selection


First, a department head must inIorm the HR manager oI an opening in their
department. Then the HR manager must obtain the job description to Iormulate a Job
Description Sheet Ior publication either internally, publicly, or both. Then HR must Iield
the (many) responses to that job announcement to weed out the qualiIied Irom the
unqualiIied applicants. Once that is completed, the interview process must be coordinated.
They prepare the job description, contact the newspaper, run the ad, Iield the calls, compile
a list oI potential candidates, submit that list to the department's hiring manager Ior
approval and selection, contact the chosen candidates to set up preliminary interviews, and
interview the candidates.
The Human Resource is conIerred with the responsibility oI ensuring that all
members oI staII perIorm to their best ability. It could improve this area by Iacilitating
better use oI time in all departments within the organization. Time is one oI the most
crucial yet intangible assets oI the Company. The proper use oI this resource could
maximize proIit and achievement oI organizational goals.

The Department can do this by planning activities to be carried out in the
organization. It can make schedules Ior the various activities that have to be done in the
organization and thus Iacilitate better Ilow oI inIormation. In addition to this, the Company
can also ensure that all members oI staII are held accountable Ior not perIorming a certain
task. This is especially in regard to maintenance oI the schedules. In so doing, human the
Human Resource Department will be ensuring that employees do not simply report to
work and that the time spent at work is directly proportional to output.

Performance appraisal
PerIormance appraisal is necessary to measure the perIormance oI the
employees and the organization to check the progress towards the desired goals and
aims. PerIormance appraisal helps to rate the perIormance oI the employees and evaluate
their contribution towards the organizational goals. II the process oI perIormance
appraisals is Iormal and properly structured, it helps the employees to clearly understand
their roles and responsibilities and give direction to the individual`s perIormance. It helps


to align the individual perIormances with the organizational goals and also review their
perIormance. Annual PerIormance appraisal is usually done by the top management.
Quarterly perIormance is done by line managers. SelI Evaluation is done on daily basis by
individual and, monthly by immediate supervisor.

Self appraisal is an important part oI the PerIormance appraisal process
where the employee himselI gives the Ieedback or his views and points regarding his
perIormance. This is done with the help oI a selI appraisal Iorm where the employee rates
himselI on various parameters, tells about his training needs, iI any, talks about his
accomplishments, strengths, weaknesses, problems Iaced etc.

Handling people are always diIIicult and diIIicult people are always hard to handle,
however with the help oI a human resource department, employees can work together as a
cohesive unit to not only solidiIies the company but to rake in the proIits as well. Human
resource personnel understand the psyche oI a person so that they can motivate and
stimulate employees to work not only more eIIiciently but more eIIectively as well.

Thus ultimately the purpose oI having a human resource department comes down to
wanting a cordial and Iriendly atmosphere where employees can work side by side with
their peers to create an eIIective business mechanism. And also the main Iunction is to
manage people.


STRUCTURE OF HUMAN RESOURCE DEPARTMENT

Chart 3.16 Structure of Human Resource Department

CEO
MD
AVP HR
HR Executive


3.11 INFORMATION TECHNOLOGY DEPARTMENT

InIormation Technology plays an important role in our business Iield. Every
organization is using inIormation technology Ior the eIIective running oI their
organization. Most oI the works oI Muthoot Capital Service is done through the internet.
The company is using mainly three types oI soItware. They are:

Auto Loan Web Application

Desk Top Application

Human Resource Management System (HRMS)

Auto Loan Web Application

Auto Loan Web Application is a website application created by the company itselI.
This web application is used in the Auto Loan Department oI a company. The company
has many branches Ior auto loan in each and every part oI the state. The Auto Loan Web
application helps the organization to know about all the activities carried out in the
branches. That is;

O The details about the customer.

O The documents submitted by the customer.

O The payment oI installments oI the customer

O The payment oI interest oI the customer etc.


Desk Top Application

Desk Top Application is an internal application system oI the company. Desk
Top Application System is used to maintaining internal records oI the company. This
application system is very important Ior the organization because all the internal records
oI the company are maintained in the desk top application system. Desk top application
maintaining the Iollowing records oI the company;

Entering the loan details

Maintaining accounts oI the company. That is, preparation oI balance sheet and
proIit and loss account oI the company

Analysis oI sources and application oI Iunds etc.

Human Resource Management System (HRMS)

Human Resource Management System (HRMS) is a web application
programme oI the company. This web application programme is based on the human
beings or personnel oI the organization. All the details about the human resources are
recorded in the Human Resource Management System. This web application programme
is used mainly Ior making the payroll oI the employees. The Iollowing are the important
details which should be maintained by the Human Resource Management System;
O Salary oI the employees.

O Salary slips

O Employee management

O Payroll oI the employees

O Details about the employees etc.


STRUCTURE OF INFORMATION TECHNOLOGY
DEPARTMENT

Chart 3.17 Structure of Information Technology Department

CEO
MD
Senior Manager
SoItware Engineer


SWOT ANALYSIS

STRENGTHS

Energetic manpower skills

Good working environment

Comparatively less percentage oI non-perIorming assets

Good reputation

Tie up with various companies

Good and diverse customer base

Good discipline

WEAKNESS

Shortage in number oI employees

Work load oI employees is high

Lack oI Induction programme


OPPORTUNITIES

Expanded and diversiIied credit policy

Increase in investment rate

IdentiIy other areas in the retail segment Ior introducing new loan products

THREATS

Increasing competitors

Change in government policy

Change in market demand


FINDINGS

The company have good employer employee relationship

Company maintaining good customer relationship

The authority and responsibility oI the managers are clearly deIined by the company.

Maintaining better co-ordination between every departments oI the company since all
the departments are inter-related.

Most oI the works are done through internet.

The key business oI the company is the two- wheeler loan section.

The company is providing right Iinancial solutions to the customers.

The company ensures that the customers are satisIied with their services.


SUGGESTIONS

New employees need training

Reduce the work load oI employees

Conduct training and selI development programmers to the employees

Increase the number oI employees

Introduce more loan schemes to attract the customers

Provide motivational and entertainment programmers to employees.


CONCLUSION

Muthoot Capital Service Ltd. oIIers capital market solutions that include leasing and
hire purchase, vehicle loans and bonds & deposits among others, with cost eIIective value
added services Ior the beneIit oI the customers. The main advantages oI the company are
unique customer loyalty, good employer and employee relationship, goodwill etc. The key
business area oI the company is the vehicle loan section, which will provide vehicle loans
to the customers in the cost eIIective manner. For providing right Iinancial solutions to the
customers, company is maintaining a better co-ordination between all the departments. The
Company continued its good perIormance during the year also, basing its activities on the
time tested values and principles. The success oI the Company is dependent to a great
extent on its Iocus on customer service and its ability to Iormat and introduce products in
accordance with the demand in the market. The Company's diversiIication into two-
wheeler loan segment proved a success. The Company is planning to introduce many more
new products in the retail Iinance and SME segments.
By the eIIective strategies and eIIicient management oI the company, the brand name
oI the company spreads even abroad. With no doubt within a short span oI time it will
reach big heights in the corporate world.

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Muthoot Capital Service Ltd, Ernakulam

Marthoma College of Management & 1echnology 1

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