CREDIT RISK MANAGEMENT: A

STUDY WITH REFERENCE TO

SOUTH INDIAN BANK LTD


Report of the Project Study submitted in partial fulfilment of the
requirements for the MBA (Full time) Degree of the
Mahatma Gandhi University


Submitted by
YESMITHA A JAIN
Reg. No:
2009-11 Batch





ALBERTIAN INSTITUTE OF MANAGEMENT
(A UNIT OF ST. ALBERTS COLLEGE)
Banerji Road, Cochin-682018.
JUNE 2011



TABLE OF CONTENTS

ACKNOWLEDGE
DECLARATION

Sr. No. Ratio Pg.
No.
1
1.1
1.2
1.3
1.4
1.5
1.6
1.7
Introduction
Nature of Study
Scope of Study
Objective of the study
Sources of data collection
Tools used for Data Collection
Period of Study
Limitations of the study
1
2
2
3
3
4
4

2
2.1
2.2
2.3
2.4
2.5
2.6
2.7
Industry Profile
Recent Development in Global Banking Industry
Historical Background of Banking in India
Indian Banking Industry
Current Scenario
Highlights of the Banks Performance
Challenges Facing Banking Industry in India
Major Players in Indian Banking Industry
5
6
6
7
3
3.1
Company Profile
Introduction
10
11
3.2
3.3
3.4
3.5
3.6
3.7
3.8
3.10
3.11
3.12
3.13
Vision
Mission
Objective
Technology Promotion Drive of South Indian
Bank
Milestones
Future Perfect
Awards and Recognition
The Structure of South Indian Bank
Main Objectives and Business of the banks
Various Departments of Bank
Logo and Corporate Colour
12
12
12
12
12
12

13
13
15
15
4
4.1
4.2
4.3
4.4
4.5
4.6
4.7
Credit Risk Management
Theoretical Background
Aim of Credit Risk Management
Objective of Credit Risk Management
Measurement of Risk through credit rating/scoring
Committee for Credit Risk Management
Credit Risk Management Department
Methods of Credit Risk
19
5
5.1
5.2
5.3
5.4
5.5
Analysis and Interpretation
Analysis of Data
Capital Adequacy Ratio
Asset Quality
Earning per Non Performing Assets
Correlation
20
22
23
24

5.4

Analysis of Deposit Mix
6
6.1
6.2
Findings and Suggestions
Findings
Suggestions
41
42
42
7 Conclusion
LIST OF CHARTS


Sr. No. PARTICULARS Pg.
No.
2.1
3.1
5.1
5.2
5.3
5.4
5.5
5.6
5.7
5.8
5.9
5.10
5.11
5.12
5.13
Indian Top Five Players in Banking
Organization Chart
Capital Adequacy Ratio
Total Advances to total Assets
Total Investments to Assets
Net NPAs to Total Assets
Net NPAs to Total Advances
Earning per Non Performing Assets
Correlation between Deposits and Advances
Correlation between Deposits and Net Profit
Correlation between Advances and Net Profit
Analysis of Deposit Mix
Percentage of Demand Deposits to Total Deposit
Percentage of Savings Deposits to Total Deposits
Percentages of Term Deposits to Total Deposits
19
22
23
25
26
29
42
47
48
52
53
55
63
65






LIST OF TABLES
Sr. No. PARTICULARS Pg. No.
5.1
5.2
5.3
5.4
5.5
5.6
5.7
5.8
5.9
5.10
5.11
5.12
5.13

Capital Adequacy Ratio
Total Advances to total Assets
Total Investments to Assets
Net NPAs to Total Assets
Net NPAs to Total Advances
Earning per Non Performing Assets
Correlation between Deposits and Advances
Correlation between Deposits and Net Profit
Correlation between Advances and Net Profit
Analysis of Deposit Mix
Percentage of Demand Deposits to Total Deposit
Percentage of Savings Deposits to Total Deposits
Percentages of Term Deposits to Total Deposits
13
13
14
15
















ACKNOWLEDGEMENT

First of all I express my sincere gratitude to God Almighty for giving me strength and power
to complete my project. I extend my sincere thanks to Prof. George Sleeba, Director,
Albertian Institute of Management, who gave me an opportunity to do an organization study.

I greatly acknowledge my indebtedness to my faculty guide Mrs. Shamsy Sukumaran, Faculty
Lecturer, Albertian Institute of Management, Kochi, for her constant support and timely
suggestions.
I would also thank my Parents and friends whose cooperation, assistance and involvement was
a constant source of inspiration for me.







Yesmitha A Jain





DECLARATION



I hereby declare that, the Research Project Report entitled Credit Risk Management: A
study with reference to South Indian Bank Ltd is a record of bona-fide work done by me in
South Indian Bank Ltd from June to August 2011 under the supervision of Mr. John
Abraham, Manager, South Indian Bank Ltd, Ekm and Ms. Indu George, Faculty Lecturer,
Albertian Institute of Management and that no part of this report has formed the basis for
award of any degree, diploma, associateship, fellowship or any other similar title or
recognition in any other institution.









Kochi
10-11-2010 Yesmitha A Jain













CHAPTER 1
INTRODUCTION










Introduction:

This project study has been undertaken under the Corporate Financial Management
Department and Integrated Risk Management Department to develop an insight in
to the risk management practices of the South Indian Bank Ltd with special
references to Credit Risk Management. The study focuses on the implementation
of tools like Maturity Gap Sensitivity


Scope of the Study

This study covers advance, loans, payables, receivables and income, and risk
management system of South Indian Bank ltd and also an overall aspect of capital
adequacy, Non Performing Asset and Asset quality.


Nature of the Study

A descriptive study is conducted to study the Credit Risk Management of
South Indian bank Limited, Ernakulam.





Objective of the Study

Primary Objectives:
To study the credit risk management operations (assessment & procedures)
in South Indian Bank Ltd.
To study different kinds of risks existing in South Indian Bank Ltd.

Secondary Objectives:
To study the effect on risk management in capital adequacy ratio of South
Indian Bank.
To identify the effect of Basel II norms regarding risk management in banks.
To study the impact of asset quality on credit risk management of the bank.
To analyze actual credit exposure of the bank.


Sources of data

Data collection from secondary sources
Annual Reports
Company Records
Data published on websites
Journals
Websites
Manual book of Bank
Brochures
RBI website
Tools used for Data Collection

Capital Adequacy Ratio
Asset Quality
ENPA
Correlation
Bar diagram
Pie-chart


Period of Study

The period of study was completed in the month of June and August, 2011.


Limitation of the Study

Availability of literature is limited. The data for the project is mainly
compiled from the Credit Risk Management Statements of bank.
A comprehensive outlook of Credit Risk Management could be projected.
Lack of availability of confidential data
Unavailability of Financial Data restricted to know the financial status of the
company
Time constraint

















INDUSTRY PROFILE










BANK

A Bank is a financial institution that serves as a financial intermediary. Banker or
Bank is a financial institution that acts as a payment agent for customers, and
borrows and lends money. Banks act as payment agents by conducting checking or
current accounts for customers, paying cheques drawn by customers on the bank,
and collecting cheques deposited to customers' current accounts. Banks also enable
customer payments via other payment methods such as telegraphic transfer,
Electronic Fund Transfer at Point Of Sales, and automated teller machine (ATM).


BANKING INDUSTRY
The Banking Industry was once a simple and reliable business that took deposits
from investors at a lower interest rate and loaned it out to borrowers at a higher
rate. However deregulation and technology led to a revolution in the Banking
Industry that saw it transformed. Banks have become global industrial
powerhouses that have created ever more complex products that use risk and
securitization in models. Through technology development, banking services have
become available 24 hours a day, 365 days a week, through ATMs, at online
bankings, and in electronically enabled exchanges where everything from stocks to
currency futures contracts can be traded .

The Banking Industry at its core provides access to credit. In the lenders case,
this includes access to their own savings and investments, and interest payments on
those amounts. In the case of borrowers, it includes access to loans for the
creditworthy, at a competitive interest rate.
Banking services include transactional services, such as verification of account
details, account balance details and the transfer of funds, as well as advisory
services that help individuals and institutions to properly plan and manage their
finances. Online banking channels have become key in the last 10 years. Mortgage
banking has been encompassing for the publicity or promotion of the various
mortgage loans to investors as well as individuals in the mortgage business. Online
banking services has developed the banking practices easier worldwide.
The collapse of the Banking Industry in the Financial Crisis, however, means that
some of the more extreme risk-taking and complex securitization activities that
banks increasingly engaged in since 2000 will be limited and carefully watched, to
ensure that there is not another banking system meltdown in the future.







RECENT DEVELOPMENTS IN THE GLOBAL BANKING
INDUSTRY
A total asset of global banking industry is about hundred trillion in US $. Banking
and Insurance industry was affected by financial crisis of 2008. The crisis began
with the collapse of Lehman Brothers in the US, which rapidly spread all over the
world resulting to great economic recession after post war era. The credit crunch
and liquidity situation further worsen the market resulting too volatile market
condition. Government and central banks all over the world took necessary steps to
save global economy and market condition.
Global banking and insurance industry is expected to recover rapidly from
current economic recession supported by the growth in emerging market
economies. BRIC nations offer great potential to insurance industry due to their
huge population.
Critical to success in the banking and insurance is the knowledge of market trends,
product mix shifts, customer needs and effective market strategies. Our continuous
networking with customers and competitors creates complete visibility thus
helping our customers make confident business decisions.
The global financial crisis will bring about the most significant changes to the
American and European banks have seen in decades. There will be fundamental re-
regulation of the industry, ownership structures are shifting towards heavier state
involvement and investor scrutiny is rising strongly. Equity ratios will be
substantially higher. As a result, growth and profitability of the banking sector as a
whole are likely to decline.


INDIAN BANKING INDUSTRY

The Indian banking sector has witnessed wide ranging changes under the influence
of the financial sector reforms initiated during the early 1990s. The approach to
such reforms in India has been one of gradual and non-disruptive progress through
a consultative process. The emphasis has been on deregulation and opening up the
banking sector to market forces. The Reserve Bank has been consistently working
towards the establishment of an enabling regulatory framework with prompt and
effective supervision as well as the development of technological and institutional
infrastructure. Persistent efforts have been made towards adoption of international
benchmarks as appropriate to Indian conditions. While certain changes in the legal
infrastructure are yet to be effected, the developments so far have brought the
Indian financial system closer to global standards.







Historical Background of Banking in India

From the early Vedic period the giving and taking of credit in one form or the
other have existed in Indian Society. The bankers are the pillars of the Indian
society. Early days bankers were called as indigenous bankers. The development
of modern banking has started in India since the days of East India Company.
These banks mostly had no capital of their own and depended entirely on deposits
in India.
Indian banking comprises of players who include public sector banks, State bank
of India and its associates, private sector banks, scheduled banks, cooperative
banks, regional rural banks, foreign banks etc. The banking industry worldwide is
transformed concomitant with a paradigm shift in the Indian economy from
manufacturing sector to nascent service sector. Indian banking as a whole is
undergoing a change. Indian banks have always proved beyond doubt their
adaptability to mould themselves into agile and resilient organizations.
The first bank in India, General Bank of India was established in 1786. From 1786
till today, the journey of Indian banking system can be segregated into three
distinct phases.
They are as follows
Early phase from 1786 to 1969 of Indian Banks.
Nationalization of Indian banks and up to 1991 prior to Indian banking
sector reforms.
New phase of Indian banking system with the advent of Indian Financial &
Banking sector Reforms after 1991.
Journey of Indian Banking system can be segregated into 3 distinct phases:
PHASE I:
1786- The General Bank of India, Bank of Hindustan, Bengal Bank
1809- East India Company established Bank of Bengal
1840- Bank of Bombay
1843- Bank of Madras
1865- Allahabad Bank
1894- Punjab National Bank Ltd.
1906-1913- Bank of India, Central bank of India, Bank of Baroda, Canara
Bank, Indian Bank, Bank of Mysore
1920- Imperial Bank of India
1935- RBI
Growth was slow & experienced periodic failures b/w 1913- 1948.
Approximately 1,100 banks, mostly small
The Banking Companies Act, 1949
Banking Regulation Act, 1949
PHASE II:
Nationalization of Indian banks & up to 1991 prior to Indian Banking sector
reforms.
1955- Nationalized Imperial Bank of India
1960- 7 subsidiaries of SBI nationalized
19
th
July, 1969- 14 banks nationalized
1980- 7 banks nationalized (80% of banking segment Gov. owned)
Nationalization lead to increase in deposits & advances.

PHASE III:
New phase of Indian Banking system with advent of Indian Financial &
Banking Sector Reforms after 1991.
Introduced many products & facilities in banking sector.
1991- Narasimham Committee was setup
New phase brought in many changes:
Foreign banks
ATM stations
Customer service
Phone banking
Net banking









CURRENT SCENARIO
Business Environment:

The Indian economy is on a growth path with the real GDP growth upwards
of 9%. Industrial and services sectors have accelerated growth while growth
in agricultural sector has continued to remain moderate. Inflation remained
an area of concern. There was however robust build up of foreign exchange
resources - close to $ 200 bn. Stock markets were buoyant while the Indian
Rupee continued to appreciate against US Dollar.

Banking Scenario:

The future of the banking sector appears quite promising though there are
quite a few challenges to contend with. The customer is more discerning and
has a much wider access to technology and knowledge. Hence the
imperative need to roll out innovative customized products which will be the
key differentiator amongst banks. Time and distance have shrunk and the
internet has greatly facilitated global reach and therefore, evolution of
delivery channels and interactive services have been a boon to banking. The
core banking solution platform is being increasingly adopted by the banks to
fully realize the opportunity thrown up by technology.
Unlike the previous year, credit growth of the system was not as profound but quite
robust nonetheless and resources though not really scarce, were a bit expensive.
RBI initiated various measures such as increase of reverse repo rate, higher CRR
prescriptions etc. which were aimed at moderating credit growth. To certain sector
specific instructions have also been issued by RBI to rein in expansion of Bank
credit to such sectors. All this ushered in a period of increasing cost, declining
yields and consequently pressure on margins. Healthy rebalancing of the credit
portfolio was the answer to this syndrome.





















HIGHLIGHTS OF THE BANKS PERFORMANCE
The year gone by was an exceptional year for the Bank in terms of most
parameters. Net profit surged by 60% from Rs. 701 crores to Rs. 1123 crores and
the global business mix crossed the milestone mark of Rs. 200,000 crores to touch
Rs. 207,000 crores. While deposits grew by 27.6% to Rs. 119882 crores, the share
of low cost deposits hovered at 40% and your bank continues to be one of the few
banks with such a large share of low cost deposits. Credit expansion was a robust
30% touching an aggregate level of Rs.86791 crores. The growth has been quite
broad based encompassing various segments such as agriculture, industry, SME
and retail. Foreign branches accounted for a smart rise of 34% in advances.
Priority Sector not only constitutes the Bank's social commitment, but is
recognized today as a profitable business opportunity. With almost two third
branches in rural and semi urban areas, the bank has ably risen to the occasion.
While agriculture clocked a growth of 25% and constituted 18.5% of net bank
credit, priority sector grew by almost 23% and accounted for 45.5% of net bank
credit. The Bank could for the first time record net NPA below 1%. In fact on the
back of robust cash recoveries of Rs. 752 crores and upgradation of Rs. 132 core,
gross NPA slid by Rs. 379 crores to Rs. 2100 crores. Recoveries together with
prudent provisioning saw Net NPA falling sharply to Rs. 632 crores from Rs. 970
crores resulting in a healthy loan loss coverage ratio.3




Challenges facing Banking Industry in India
The banking industry in India is undergoing a major transformation due to changes
in economic conditions and continuous deregulation. These multiple changes
happening one after other has a ripple effect on a bank (Refer fig. 2.1) trying to
graduate from completely regulated seller market to completed deregulated
customers market.

Deregulation:
This continuous deregulation has made the Banking market extremely
competitive with greater autonomy, operational flexibility and decontrolled
interest rate and liberalized norms for foreign exchange. The deregulation of
the industry coupled with decontrol in interest rates has led to entry of a
number of players in the banking industry. At the same time reduced
corporate credit off take thanks to sluggish economy has resulted in large
number of competitors batting for the same pie.

New rules:
As a result, the market place has been redefined with new rules of the game.
Banks are transforming to universal banking, adding new channels with
lucrative pricing and freebees to offer. Natural fall out of this has led to a
series of innovative product offerings catering to various customer segments,
specifically retail credit.




Efficiency:
This in turn has made it necessary to look for efficiencies in the business.
Banks need to access low cost funds and simultaneously improve the
efficiency. The banks are facing pricing pressure, squeeze on spread and
have to give thrust on retail assets.

Diffused Customer loyalty:
This will definitely impact Customer preferences, as they are bound to react
to the value added offerings. Customers have become demanding and the
loyalties are diffused. There are multiple choices, the wallet share is reduced
per bank with demand on flexibility and customization. Given the relatively
low switching costs; customer retention calls for customized service and
hassle free, flawless service delivery.

Misaligned mindset:
These changes are creating challenges, as employees are made to adapt to
changing conditions. There is resistance to change from employees and the
Seller market mindset is yet to be changed coupled with Fear of uncertainty
and Control orientation. Acceptance of technology is slowly creeping in but
the utilization is not maximized.

Competency Gap:
Placing the right skill at the right place will determine success. The
competency gap needs to be addressed simultaneously otherwise there will
be missed opportunities. The focus of people will be on doing work but not
providing solutions, on escalating problems rather than solving them and on
disposing customers instead of using the opportunity to cross sell.

Strategic options with banks to cope with the challenges

Leading players in the industry have embarked on a series of strategic and tactical
initiatives to sustain leadership. The major initiatives include:

Investing in state of the art technology as the back bone to ensure reliable
service delivery
Leveraging the branch network and sales structure to mobilize low cost
current and savings deposits
Making aggressive forays in the retail advances segment of home and
personal loans
Implementing organization wide initiatives involving people, process and
technology to reduce the fixed costs and cost per transaction
Focusing on fee based income to compensate for squeezed spread, (e.g.
CMS, trade services)
Innovating Products to capture customer mind share to begin with and later
the wallet share
Improving the asset quality as per Base II norms

In this era of increasing competition, banks will have to benchmark themselves
against the best in the world. For a resilient and strong banking and financial
system, the banks need to tackle issues like increase in profitability, efficiency, and
productivity while achieving economies of scale through consolidation and
exploring available cost-effective solutions.


Major Players in the Indian Banking Industry:
Indian banking has grown much stronger than its Asian counterparts in recent
years, in terms of both performance indices and product range. The continued
deregulation of deposits and interest on loans have led to a greater understanding
of capital structure, increased competition and autonomy, as well as technological
upgradation.
56 of Indias domestic banks account for 95% of assets. In terms of net profit, the
State Bank of India is the main bank followed by ICICI bank, Punjab National
bank and Canara Bank (Figure 7.30) .



Fig: 2.1 Indian Top Five Player in Banking






















COMPANY PROFILE













SOUTH INDIAN BANK

One of the earliest banks in South India, "South Indian Bank" came into being
during the Swadeshi movement. The establishment of the bank was the fulfillment
of the dreams of a group of enterprising men who joined together at Thrissur, a
major town (now known as the Cultural Capital of Kerala), in the erstwhile State of
Cochin to provide for the people a safe, efficient and service oriented repository of
savings of the community on one hand and to free the business community from
the clutches of greedy money lenders on the other by providing need based credit
at reasonable rates of interest.
Translating the vision of the founding fathers as its corporate mission, the bank has
during its long sojourn been able to project itself as a vibrant, fast growing, service
oriented and trend setting financial intermediary.

Vision
To emerge as the most preferred bank in the country in terms of brand, values,
principles with core competence in fostering customer aspirations, to build high
quality assets leveraging on the strong and vibrant technology platform in pursuit
of excellence and customer delight and to become a major contributor to the stable
economic growth of the nation.

Mission
To provide a secure, agile, dynamic and conducive banking environment to
customers with commitment to values and unshaken confidence, deploying the best
technology, standards, processes and procedures where customer convenience is of
significant importance and to increase the stakeholders value.
Objectives

To provide a secure, agile, dynamic and conducive banking environment to
customers
To provide best technology
To provide standards, processes and procedures where customer convenience
is of significant importance and to increase the stakeholders value

The Banks shares are listed on
The Cochin Stock Exchange Ltd (CSE)
The Stock Exchange Mumbai (BSE)
The National Stock Exchange of India Ltd Mumbai (NSE)

Technology Promotion Drive of South Indian Bank

Our bank had embarked upon a massive technology up gradation drive by
introduction of a Centralized Core banking solution. For this a modern Data Center
has been set up at Kochi, connecting all branches with all the Departments at Head
Office, all Regional Offices, the Treasury Dept at Mumbai and the IBD at Kochi.
This robust network facilitates anywhere banking, Networked ATMs, Internet
Banking, Mobile Banking, Global debit cum ATM card operations, Online trading,
online shopping etc. The Sibertech project was launched with a target of
connecting the 200 odd branches in two phases by March 2004. Towards this
endeavor, the bank has concluded a technology partnership with M/s Infosys
Technologies Ltd for Finacle, the Core Banking Solution, M/s HCL Infosystems
Ltd. for Network Integration and M/s WIPRO for Data Centre set up and
Maintenance. The Sibertech Project was formally launched on January 17,2001 by
Sri.N.R.Narayana Murthy, Chief Mentor, Infosys Technologies Ltd in a colorful
function at Kochi.
The state of the art Data Center of international standards at Kochi, is the only one
of its kind in the banking industry in Kerala. A number of dignitaries have visited
this Data Center, including Sri.Azim.H.Premji, Chairman & Managing Director,
Wipro Ltd.
Per se bank has achieved 100% Core Banking Solutions by 24th March,
2007.Further to strengthen the ATM reach and global acceptability Bank has
introduced Master Card Global Debit- cum- ATM card, which can be used at
ATMs and merchandise all over the world. We have launched internet banking
primarily focusing the individual as well as corporate clients. The Bank has also
introduced Mobile banking for customers as a value addition.
The aim of the Bank is to offer the latest technology driven value added services to
the customers without compromising our motto - Blending Tradition with
Technology.

Milestones
The FIRST among the private sector banks in Kerala to become a scheduled bank
in 1946 under the RBI Act.
The FIRST bank in the private sector in India to open a Currency Chest on behalf
of the RBI in April 1992.
The FIRST private sector bank to open a NRI branch in November 1992.
The FIRST bank in the private sector to start an Industrial Finance Branch in
March 1993.
The FIRST among the private sector banks in Kerala to open an "Overseas
Branch" to cater exclusively to the export and import business in June 1993.
The FIRST bank in Kerala to develop an in-house, a fully integrated branch
automation software in addition to the in-house partial automation solution
operational since 1992.
The FIRST Kerala based bank to implement Core Banking System.
The THIRD largest branch network among Private Sector banks, in India, with
all its branches under Core banking System.

Future Perfect
The South Indian Bank with a new logo and image, marches on. With branches all
over India and a clientele across the world, the bank is considered one of the most
pro active banks in India with a competent tech savvy team of professional at the
core of services.






Awards and Recognition
South Indian Bank has bagged the Businessworld Indias Best Bank 2010
Award
South Indian Bank has also bagged the best web site award from Kerala
Management Association.
receives the award for the Best Bank in the old generation banks category
receives the award for the best bank in asset quality among all private sector
banks in India
South Indian Bank (SIB) bagged the best Asian Banking Web Site award
from the Charlton Media Group, Singapore under the banner Asian
Banking & Finance Retail Banking Awards-2008. Among the 100+
nominations for the Best Web Site category from various banks in Asia, SIB
emerged victorious to receive this award as the owner of the Best Web Site
South Indian Bank has won a special award for excellence in Banking
Technology from IDRBT (Institute for Development and Research in
Banking Technology) the technical arm of the Reserve Bank of India. This
award was presented to our Bank as a national level recognition to the
excellent contribution made in the area of Information Systems Security
Policies and Procedures. Competing against top level banks in India across
all categories such as Public Sector Banks, Private Sector Banks, Foreign
Banks and Co-operative Banks, the recognition from IDRBT is really a
feather in the cap.
In the ASSOCHAM-ECO PULSE study, the bank had been rated as a
Top NPA Manager for having reduced Net NPA substantially within one
year
The Structure of South Indian Bank
The structure of South Indian a bank is Head Office, Regional Office, Branch
Office, Extension Counters and ATM Counters.

Head Office:
South Indian Banks functions are controlled and co-ordinated by the Head
office. The Head Office of South Indian Bank is in Trichur, Kerala. It
controls the activities of regional offices and branch offices. All most all the
departments are there in the Head Office. Every decision is taken here. Since
all the departments are there in the Head Office, every function is done here.
The main functions of Head office are given below. It controls all the
activities of bank: The managing Directors Secretariat is there in the head
office. So all most all the decisions pertaining to the smooth administration
of the bank is taken here. It checks all the accounts of different Regional
Offices and Branch Offices through its accounts departments. Strong and
sound DICT is there to make proper communication. It deals with all the
legal issues of the bank through the legal departments. It checks the NRI
account portfolio through its NRI division. It checks and reviews the
customer relationship management.

Regional Office:
To make the administration and functions easier, Regional Offices are set up
for each region. It acts as a link between branches and head office. In each
region, certain number of branches and extension counters are there.
Administration is very difficult according to the increase of the branches.
Regional office makes the function of head office lesser through its co
responsibility. The Regional Offices of South Indian Bank is given below:
Bangalore, Chennai, Coimbatore, Delhi, Ernakulum, Hyderabad, Kolkata,
Kottayam, Kozhikode, Mumbai, Pathanamthitta, Palakad, Trivandrum,
Trichur, and Madurai.

Branch Office:
There are 580 branches for South Indian Bank. They come under specific
Regional office. To make personal contact with the customers, branches are
very useful. In branch offices, we cant see all the departments. But every
function of the bank such as accepting deposits, issuing loan and clearing is
there. Job rotation is there in branch offices.

Extension Counter:
It is same as branch. It also has the similar functions of branches except
issuing of loans. As of now, there are only three extension counters are
there. It is the preceding stage to make a branch.

ATM Counters:
The main purpose of the bank is to reduce the burden of the customer. So the
banks have opened ATM Counters at different places to avoid the wastage
of time and different formalities. South Indian Bank has set up 375 ATM
Counters all over India. South Indian Banks Global ATM-Cum-Debit Cards
are now acceptable in the Master Card International Network System as well
as in the domestic National Financial Switch (NFS) Network System owned
by IDRBT, the technical arm of RBI. Provide on-line access to Savings
Bank or Current accounts of South Indian Bank. Tied up with the world-
renowned service provider, MasterCard International; can be used in 8,
30,000 ATMs & 7 million Point of Sale (POS) terminals worldwide. South
Indian Bank being a member of NFS network, South Indian Bank cards are
acceptable in other member banks ATMs. It can be used in 31000+ ATMs in
India. The Maestro Debit card is a PIN based card and operates similar to
ATM making it 100% secure, even in POS terminals. Global Cards are
issued free of cost to the customers of South Indian Bank. Nominal fee is
charged to the users at other Banks ATMs. Cash withdrawal limits through
ATMs is up to Rs.20, 000/- per day.



















ORGANIZATION CHART



























MAIN OBJECTIVES AND BUSINESS OF THE BANK

1. To establish and carry on the business of banking al registered office of the
company and at such branches
2. Carrying on the business of accepting deposit of money on current account
and to carry on the business of banking
3. The borrowing, raising or taking up money, the lending or advancing of
money either upon or without security, the drawing, making, accepting,
discounting, buying, selling, collecting and dealing in the Bill of exchange,
promissory notes, coupons and other instruments and securities, the buying,
selling and dealing in bullion and foreign exchange, dealing in other
instruments like share, bond, etc.
4. Contracting for public and private loans and negotiating the issuing it
5. Acts as the agent of the Government or local authorities or any other than
the business of managing agent.
6. Carrying out all such things as are incidental or conductive to te promotion
or advancement of the business of the company
7. To undertake and carry on all other forms of business as may be permissible
for banking company
From the modest beginning of the bank in 1929, today the bank has reached to the
status of one of the most performing private sector banks in the country working
through network of 584 branches. Just like any other bank, reforms made its
impacts on South Indian Bank also.
There are a number of departments functioning in the working of the bank. Every
department is having its own functional areas, powers and responsibilities.

The Various Departments Include:

Human Resource Development Department
Training and Development Department
Support Service Department
Corporate Financial Management Department
Integrated Risk Management Department
Computer Department
Secretarial Department
Credit Control Department
Inspectiogn Department & Vigilance Department
Accounts Department
Marketing Department
Legal Department


Logo and Corporate colour

New logo and corporate colour of the bank was launched in 5
th
March, 2007. The
new logo should pronounce the birth of next generation bank and the corporate
colour should match bank work to the stake holders and services to bank
customers.
S projects a Safe, Solid, Smart, Strong, Secular, Shinning, Schooled, Seasoned,
and Straight forward bank, Cardinal Red represents Energy, Creativity, Warmth,
and Love.

The credit rating system is essentially one point indicator of an individual credit
exposure and is used to identify, measure, and monitor the credit risk of individual
proposal. At the whole bank level, credit rating system enables tracking the health
of banks entire credit portfolio.

Most banks in India have put in place the system of internal credit rating. While
most of the banks have developed their own models, a few banks have adopted
credit rating models designed by rating agencies. Credit rating models take into
account various types of risks viz. financial, industry and management, etc
associated with a borrowal unit. The exercise is generally done at the time of
sanction of new borrowal account and at the time of review/renewal of exercising
credit facilities.






















CREDIT RISK
MANAGEMENT









THEORITICAL BACKGROUND

In course of banks lending involves a number of risks. In addition to the risks
related to creditworthiness of the counterparty, the banks are also exposed to
interest rate, forex and country risks.
Unlike market risks, where the measurement, monitoring, control etc. are to a great
extent centralized. Credit risks management is a decentralized function or activity.
This is to say that credit risk taking activity is spread across the length and breadth
of the network of branches, as lending is a decentralized function. Proper a
sufficient care has to be taken for appropriate management of credit risk.

Credit risk is an investor's risk of loss arising from a borrower who does not make
payments as promised. Such an event is called a default. Another term for credit
risk is default risk.
Credit risk or default risk involves inability or unwillingness of a customer or
counterparty to meet commitments in relation to lending, trading, hedging,
settlement and other financial transactions.

Definition:

Credit Risk may be defined as, the risk of default on the part of the borrower.
The lender always faces the risk of the counter party not repaying the loan or not
making the due payment in time. This uncertainty of repayment by the borrower is
also known as default risk.


Aim of CRM:

The main aim of CRM is to maximize a bank's risk-adjusted rate of return by
maintaining credit risk exposure within acceptable parameters.

Objective of CRM:

The objective of credit risk management is to minimize the risk and maximize
banks risk adjusted rate of return by assuming and maintaining credit exposure
within the acceptable parameters.
The Credit Risk is generally made up of:-
1. Transaction risk or default risk, and
2. Portfolio risk.
The portfolio risk in turn comprises intrinsic and concentration risk.

The credit risk of a banks portfolio depends on:-
1. External factors: The external factors are the state of the economy, rates and
interest rates, trade restrictions, economic sanctions, wide swings in
commodity/equity prices, foreign exchange rates and interest rates, trade
restrictions, economic sanctions, Government policies, etc.
2. Internal factors: The internal factors are deficiencies in absence of prudential
credit concentration limits, loan policies/administration, inadequately defined
lending limits for Loan Officers/Credit Committees, deficiencies in appraisal of
borrowers financial position, excessive dependence on collaterals and inadequate
risk pricing, absence of loan review mechanism and post sanction surveillance, etc.

Another variant of credit risk is counterparty risk. The counterparty risk arises
from non-performance of the trading partners. The non-performance may arise
from counterpartys refusal/inability to perform due to adverse price movements or
from external constraints that were not anticipated by the principal. The
counterparty risk is generally viewed as a transient financial risk associated with
trading rather than standard credit risk.

The management of credit risk should receive the top managements attention and
the process should encompass:


Measurement of risk through credit rating/scoring:

(a) Quantifying the risk through estimating expected loan losses i.e. the amount of
loan losses that bank would experience over a chosen time horizon (through
tracking portfolio behavior over 5 or more years) and unexpected loss (through
standard deviation of losses or the difference between expected loan losses and
some selected target credit loss quantile);
(b) Risk pricing on a scientific basis; and
(c) Controlling the risk through effective Loan Review Mechanism and portfolio
management.







Committee for CRM:

The credit risk management process should be articulated in the banks Loan
Policy, duly approved by the Board. Each bank should constitute a high
level Credit Policy Committee, also called Credit Risk Management
Committee or Credit Control Committee etc. to deal with issues relating to
credit policy and procedures and to analyze, manage and control credit risk on a
bank wide basis.
The Committee should be headed by the Chairman/CEO/ED, and should comprise
heads of Credit Department, Treasury, Credit Risk Management Department
(CRMD) and the Chief Economist.
The Committee should, inter alia, formulate clear policies on standards for
presentation of credit proposals, financial covenants, rating standards and
benchmarks, delegation of credit approving powers, prudential limits on large
credit exposures, asset concentrations, standards for loan collateral, portfolio
management, loan review mechanism, risk concentrations, risk monitoring and
evaluation, pricing of loans, provisioning, regulatory/legal compliance, etc.







Credit Risk Management Department (CRMD)

Concurrently, each bank should also set up Credit Risk Management
Department (CRMD), independent of the Credit Administration Department. The
CRMD should enforce and monitor compliance of the risk parameters and
prudential limits set by the CPC. The CRMD should also lay down risk assessment
systems, monitor quality of loan portfolio, identify problems and correct
deficiencies, develop MIS and undertake loan review/audit.
Large banks may consider separate set up for loan review/audit. The CRMD
should also be made accountable for protecting the quality of the entire loan
portfolio. The Department should undertake portfolio evaluations and conduct
comprehensive studies on the environment to test the resilience of the loan
portfolio.

The effective management of credit risk is essential to the long-term success of any
banking organization.










Methods of Credit Risk:

Some of the commonly used methods to measure credit risk are:

1. Ratio of non performing advances to total advances;
2. Ratio of loan losses to bad debt reserves;
3. Ratio of loan losses to capital and reserves;
4. Ratio of loan loss provisions to impaired credit;
5. Ratio of bad debt provision to total income; etc.

Managing credit risk has been a problem for the banks for centuries. As had been
observed by John Medlin, 1985 issue of US banker.
Balancing the risk equation is one of the most difficult aspects of banking. If you
lend too liberally, you get into trouble. If you dont lend liberally you get
criticized.
Over the tears, bankers have developed various methods for containing credit risk.
The credit policy of the banks generally prescribes the criteria on which the bank
extends credit and, inter alia, provides for standards.


















ANALYSIS &
INTERPRETATION












Analysis of Data


1) CAPITAL ADEQUACY RATIO

Capital adequacy ratios (CAR) are a measure of the amount of a bank's core
capital expressed as a percentage of its risk-weighted asset.
Capital adequacy ratio is the ratio which determines the bank's capacity to meet the
time liabilities and other risks such as credit risk, operational risk, etc. In the most
simple formulation, a bank's capital is the "cushion" for potential losses, and
protects the bank's depositors and other lenders. Banking regulators in most
countries define and monitor CAR to protect depositors, thereby maintaining
confidence in the banking system.
CAR can be viewed from two aspects:
a) Total advancement to total assets
b) Total investment to total assets

Capital Adequacy Ratio is defined as,
CAR = Capital
Risk Weighted Assets




Table No:5.1Capital Adequacy Ratio
YEAR 2006-2007 2007-2008 2008-2009 2009-2010 2010-2011
BASEL I 11.08 13.8 13.89 14.73 13.17
BASEL II 14.76 15.39 14.01

Interpretation: The CRAR has declined to 13.17 in 2010-11 which was 14.73 in
2009-10. Thus, it is showing slight inefficient management of credit risk as per
Basel norms.

Chart No:5.1 Capital Adequacy Ratio








0
2
4
6
8
10
12
14
16
18
2006-2007 2007-2008 2008-2009 2009-2010 2010-2011
BASEL I
BASEL II
a) Total Advances to Total Assets
Table No:5.2 Total Advances to total assets

(Crore)
Year Advances Assets Ratio
2006-2007 7,919 13,653 0.58
2007-2008 10,454 17,090 0.61
2008-2009 11,848 20,379 0.58
2009-2010 15,823 25,534 0.62
2010-2011 20,489 32,820 0.62

Interpretation: The ratio is showing an increasing trend at 0.62 in 2010-11 which
implies proper balancing of advances & assets.
Chart No:5.2 Total Advances to total assets





0.58
0.61
0.58
0.62 0.62
0.55
0.56
0.57
0.58
0.59
0.6
0.61
0.62
0.63
2006-2007 2007-2008 2008-2009 2009-2010 2010-2011
Ratio
Ratio
b) Total Investment to Assets
Table No:5.3 Total Investments to Assets

(Crore)
Year Investment Assets Ratio
2006-2007 3430 13,653 0.25
2007-2008 4572 17,090 0.27
2008-2009 6075 20,379 0.3
2009-2010 7156 25,534 0.28
2010-2011 8924 32,820 0.27

Interpretation: The ratio is showed an increasing trend till from 2006-07 to 2008-
09 and from 2009-10 it decreased; it shows inefficiency in maintenance of
investments & assets
Chart No: 5.3: Total Investments to Assets




0.25
0.27
0.3
0.28
0.27
0
0.05
0.1
0.15
0.2
0.25
0.3
0.35
2006-2007 2007-2008 2008-2009 2009-2010 2010-2011
Ratio
Ratio


2) ASSET QUALITY

Asset quality is related to the left-hand side of the bank balance sheet. Bank
managers are concerned with the quality of their loans since that provides
earnings for the bank. Loan quality and asset quality are two terms with
basically the same meaning. Government bonds and T-bills are considered as
good quality loans whereas junk bonds, corporate credits to low credit score
firms etc. are bad quality loans. A bad quality loan has a higher probability of
becoming a non-performing loan with no return.

This can be calculated using two ratios:
a) Net NPAs to total assets, and
b) Net NPs to total advances.








a) Net NPAs to Total Assets
This ratio helps in identifying the quality of the asset of the bank. It can be
calculated by dividing Net NPA by Total assets. Lesser the ratio shows the
good quality of the asset.
Table No:5.4:Net NPAs to Total Assets
(Crore)
Year Net NPA Total Assets Percentage
2006-2007 77.81 13,653 0.56
2007-2008 33.97 17,090 0.19
2008-2009 134.31 20,379 0.66
2009-2010 61.57 25,534 0.24
2010-2011 60.02 32,820 0.18

Interpretation: The percentage of Net NPA to Total assets has decreased to 0.18%
during 2010-11. This indicates a sound asset quality.
Chart No:5.4: Net NPAs to Total Assets


0.56
0.19
0.66
0.24
0.18
0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
2006-2007 2007-2008 2008-2009 2009-2010 2010-2011
Percentage
Percentage
b) Net NPAs to Total Advances
Net NPA shows the level of net NPA on net advances given by the bank. It
can be calculated by dividing net NPA by net advances. Higher the ratio
more will be the alarming situation for the bank and vice-versa.
Table No:5.5: Net NPAs to Total Advances
(Crore)
Year Net NPA Advances Percentage
2006-2007 77.81 7,919 0.98
2007-2008 33.97 10,454 0.32
2008-2009 134.31 11,848 1.13
2009-2010 61.57 15,823 0.39
2010-2011 60.02 20,489 0.29

Interpretation: The percentage is showing an decreasing trend from the period
2008-2009 to 2010-11, 0.29% due to good management.
Chart No: 5.5: Net NPAs to Total Advances


0.98
0.32
1.13
0.39
0.29
0
0.2
0.4
0.6
0.8
1
1.2
2006-2007 2007-2008 2008-2009 2009-2010 2010-2011
Percentage
Percentage

3) EARNING PER NON PERFORMING ASSETS

An NPA is defined as a loan asset, which has ceased to generate any income for
a bank whether in the form of interest or principal repayment.
Exposure to Credit Risk

The bank can quantify the credit risk on the basis of the level of NPAs. The
following expression quantifies the credit risk of the bank.

Earning per Non Performing Asset ( ENPA) can be calculated using the following
formulae:

ENPA = (EBT/TA) / (NPAs/ TA)


ENPA- Earning per Non Performing Assets
NPA Non Performning Assets
TA - Total Assets
EBT Earnings before tax






Credit Risk ratio of South Indian Bank
Table No:5.6: Earning per Non Performing Assets
(Crore)
Year EBT TA NPA ENPA
2006-2007 160.33 13,653 77.81 2.2
2007-2008 246.95 17,090 33.97 7
2008-2009 303.23 20,379 134.31 2.14
2009-2010 381.32 25,534 61.57 7.2
2010-2011 467.05 32,820 60.02 7

Interpretation: The ENPA during 2010-11 has come down to 7 from 7.2
Chart No:5.6: Earning per Non Performing Assets







2.2
7
2.14
7.2
7
0
1
2
3
4
5
6
7
8
2006-2007 2007-2008 2008-2009 2009-2010 2010-2011
ENPA
ENPA

4) CORRELATION

Correlation refers to any of a broad class of statistical relationships involving
dependence. The correlation coefficient is a measure of linear association
between two variables. Use the Correlation transformer to determine the
extent to which changes in the value of an attribute (such as length of
employment) are associated with changes in another attribute (such as
salary).

Following are some of the correlation analysis made:
a) Correlation between deposits and advances:
It shows the relationship between deposits and advances in the bank over a
period of time.

b) Correlation between deposits and net profit:
It shows the relationship between deposits and net profit in the bank over a
period of time.

c) Correlation between net profit and advances:
It shows the relationship between net profit and advances in the bank over a
period of time.



a) Correlation between Deposits and Advances

Table No: 5.7: Correlation between Deposits and Advances
(Crore)
Year Deposits Advances
2006-2007 12240 7,919
2007-2008 15156 10,454
2008-2009 18093 11,848
2009-2010 23011 15,823
2010-2011 29720 20,489

Interpretation: The deposits have increased over the years thus leading to an
increase in the advances.

Chart No: 5.7: Correlation between Deposits and Advances



12240
15156
18093
23011
29720
7,919
10,454
11,848
15,823
20,489
0
5000
10000
15000
20000
25000
30000
35000
2006-2007 2007-2008 2008-2009 2009-2010 2010-2011
Deposits
Advances
b) Correlation between Deposits and Net Profit
Table No:5.8: Correlation between Deposits and Net Profit
(Crore)
Year Deposits Net Profit
2006-2007 12240 104.12
2007-2008 15156 151.62
2008-2009 18093 194.75
2009-2010 23011 233.76
2010-2011 29720 292.56

Interpretation: Increase in deposits has also lead to an increase in the Net profit
during 2010-11.
Chart No: 5.8: Correlation between Deposits and Net Profit





12240
15156
18093
23011
29720
104.12 151.62 194.75 233.76 292.56
0
5000
10000
15000
20000
25000
30000
35000
2006-2007 2007-2008 2008-2009 2009-2010 2010-2011
Deposits
Net Profit
c) Correlation between Advances and Net Profit
Table No:5.9:Correlation between Advances and Net Profit








Interpretation: The Net profit has increased to 292.56 in 2010-11 while it was
only 104.12 in 2006-07.

Chart No: 5.9: Correlation between Advances and Net Profit




7,919
10,454
11,848
15,823
20,489
104.12 151.62 194.75 233.76 292.56
0
2,500
5,000
7,500
10,000
12,500
15,000
17,500
20,000
22,500
2006-2007 2007-2008 2008-2009 2009-2010 2010-2011
Advances
Net profit
Year Advances Net profit
2006-2007 7,919 104.12
2007-2008 10,454 151.62
2008-2009 11,848 194.75
2009-2010 15,823 233.76
2010-2011 20,489 292.56
5) Analysis of Deposit Mix

Table No:5:10: Analysis of Deposit Mix
(Crore)
Year
Demand
deposits
Savings
deposit Term deposits
Total
deposits
2006-2007 619 2311 9310 12240
2007-2008 773 2876 11507 15156
2008-2009 846 3460 13787 18093
2009-2010 1052 4271 17688 23011
2010-2011 1201 5203 23316 29720


Chart No: 5:10: Analysis of Deposit Mix





0
5000
10000
15000
20000
25000
30000
35000
Demand deposits
Savings deposit
Term deposits
Total deposits
a) Percentage of Demand Deposits to Total Deposit
Table No:5.11:Percentage of Demand Deposits to Total Deposit
(Crore)
Year
Demand
deposit total deposit % of deposits
2006-2007 619 12240 5.06
2007-2008 773 15156 5.1
2008-2009 846 18093 4.68
2009-2010 1052 23011 4.57
2010-2011 1201 29720 4.04

Interpretation: The proportion was 5.06% in 2006-07 & is 4.04% in 2010-11,
which is shows an decreasing trend in percentage


Chart No: 5.11:Percentage of Demand Deposits to Total Deposit


5.06 5.1
4.68
4.57
4.04
0
1
2
3
4
5
6
% to total deposits
% to total deposits


b) Percentage of Savings Deposits to Total Deposits
Table No: 5.12:Percentage of Savings Deposits to Total Deposits
(Crore)
Year
Saving
deposit Total deposit
% of total
deposit
2006-2007 2311 12240 18.88
2007-2008 2876 15156 18.98
2008-2009 3460 18093 19.12
2009-2010 4271 23011 18.56
2010-2011 5203 29720 17.51

Interpretation: The proportion was 18.88% in 2006-07 & has increased to 19.12
in 2008-09.and later during 2009-10 to 2010-2011 it has decreased.

Chart No: 5.12:Percentage of Savings Deposits to Total Deposits

18.88
18.98
19.12
18.56
17.51
16.5
17
17.5
18
18.5
19
19.5
% to total deposit
% to total deposit
c) Percentages of Term Deposits to Total Deposits
Table No: 5.13: Percentages of Term Deposits to Total Deposits
(Crore)
Year
Term
deposit total deposit
% of total
deposit
2006-2007 9310 12240 76.06
2007-2008 11507 15156 75.92
2008-2009 13787 18093 76.2
2009-2010 17688 23011 76.87
2010-2011 23316 29720 78.45

Interpretation: The proportion is showing a consistent relation from 2006-07
from 76.06 to 2010-11 78.45.

Chart No: 5.13: Percentages of Term Deposits to Total Deposits


76.06
75.92
76.2
76.87
78.45
74.5
75
75.5
76
76.5
77
77.5
78
78.5
79
% of total deposit
% to total deposit






FINDINGS &
SUGGESTIONS



FINDINGS
The CRAR has declined to 13.17 in 2010-11 which was 14.73 in 2009-10.
Thus, it is showing slight inefficient management of credit risk as per Basel
norms.
The ratio is showing an increasing trend at 0.62 in 2010-11 which implies
proper balancing of advances & assets.
The ratio is showed an increasing trend till from 2006-07 to 2008-09 and
from 2009-10 it decreased; it shows inefficiency in maintenance of
investments & assets
The percentage of Net NPA to Total assets has decreased to 0.18% during
2010-11. This indicates a sound asset quality.
The percentage is showing a decreasing trend from the period 2008-2009 to
2010-11, 0.29% due to good management.
The ENPA during 2010-11 has come down to 7 from 7.2
The deposits have increased over the years thus leading to an increase in the
advances.
Increase in deposits has also lead to an increase in the Net profit during
2010-11.
The Net profit has increased to 292.56 in 2010-11 while it was only 104.12
in 2006-07.
The percentage of demand deposits to total deposits was 5.06% in 2006-07
& is 4.04% in 2010-11, which is shows an decreasing trend in percentage
The percentage of savings deposits to total deposit was 18.88% in 2006-07
& has increased to 19.12 in 2008-09.and later during 2009-10 to 2010-2011
it has decreased.
The percentage of term deposits to total deposits is showing a consistent
relation from 2006-07 to 2010-11 from 76.06 to 78.45.


SUGGESTIONS

Bank should establish a system that helps identify problem loan ahead of
time when there may be more options available for remedial measures.
Banks should disclose to the public, information on the level of risk and
policies for risk management.
Bank should take measures to improve its asset quality, so that the credit risk
can be minimized.
The bank must put maximum effort to attract the fixed deposits which
contribute significantly towards the enhancement of banks profitability.
The bank should maintain a good proportion in their deposits and advances.






CONCLUSION





CONCLUSION

The South Indian Bank with a new logo and image marches on. With branches all
over India and a clientele across the world, the bank is considered one of the most
pro active banks in India with a competent tech savvy team of professional at the
core of services. In 2009-10 South Indian Bank could present an outstanding
performance which was beyond market expectations despite the challenging
economic scenario where the bank operates. South Indian Bank, the bank that
focuses on technology and service delivery, has always come up with innovative
banking products to meet the growing demands of the customers.

Largely concentrated in the semi-urban areas of the Southern states of India, SIB's
profitable, cost-efficient and technologically up-to-date network constitutes a
reasonably attractive stand alone franchise. The Bank's Deposit franchise includes
a niche NRI customer base that contributes a meaningful 17% of deposits and
gives it a distinguishing cost advantage over several of its peers. At the same time,
the Bank is trading at the cheapest valuations among peers.

Even though, the banking sector all over the world has been affected by the
recession due to the global meltdown in economy, especially the US banking
system, South Indian Bank proved its competence not only in terms of increased
profit but also in providing boundless customer service. Among so many players
and competitive products, South Indian Bank could maintain its premier and
prestigious position only with the support of the customers. This show how bank
functions and how the bank fulfills its mission and mission.

SIB's overall strategy and execution has been creditable over the past few years,
with the Bank maintaining its market share even in CASA deposits. While bank
expects a loss in market share for the peer group that the Bank belongs to,
however, based on the Bank's track record, and keeping in mind the importance of
customer loyalty in the Banking Industry, South Indian Bank expects the bank to
deliver profitable growth above the average growth rate of its peer group

The effectiveness of credit risk management rests where the credit quality is
maintained by the bank.
Basel III is likely to improve the risk management systems of banks as the
banks aim for adequate capitalization to meet the underlying credit risks and
strengthen the overall financial system of the country
Formerly, people were not much bothered about the banking services but
now they are comparing banks based on the services offered.













Annexure I Financial Statements

PROFIT AND LOSS A/C OF SOUTH INDIAN BANK LTD.

Mar 2011
Rs. Cr.
Mar 2010
Rs. Cr
Mar 2009
Rs. Cr
Mar 2008
Rs. Cr
Mar 2007
Rs. Cr
INCOME :
Interest Earned 1935.72 1686.92 1291.23 976.61
Other Income 255.61 167.62 147.73 121.54
Total 2191.33 1854.54 1438.96 1098.15
Total 1957.57 1659.79 1287.34 994.03
II. Expenditure
Interest expended 1367.43 1164.04 915.10 609.09
Payments to/Provisions for
Employees

226.32 214.18 146.35 133.23
Operating Expenses &
Administrative Expenses

85.19 71.60 62.05 51.93
Depreciation 16.76 13.90 12.19 11.78
Other Expenses, Provisions &
Contingencies

128.35 89.46 71.54 145.71
Provision for Tax 142.92 88.54 47.28 25.29
Fringe Benefit tax 0.00 0.75 0.40 0.75
Deferred Tax -9.40 17.32 32.43 16.25
Total 2191.33 1854.54 1438.96 1098.15
Total 1957.57 1659.79 1287.34 994.03
III. Profit & Loss
Reported Net Profit 233.76 194.75 151.62 104.12
Extraordinary Items -0.03 0.50 -0.11 17.69
Adjusted Net Profit 233.79 194.25 151.73 86.43
Prior Year Adjustments 0.00 0.00 0.00 0.00
Profit brought forward 14.67 9.08 8.19 6.48
IV. Appropriations
Transfer to Statutory Reserve 58.45 49.00 38.00 26.81
Transfer to Other Reserves 120.24 100.50 81.00 55.01
Trans. to Government
/Proposed Dividend

52.71 39.66 31.73 20.59
Balance carried forward to
Balance Sheet

17.03 14.67 9.08 8.19
Equity Dividend % 40.00 30.00 30.00 25.00
Earnings Per Share-Unit Curr 20.02 16.72 16.26 14.36
Earnings Per Share(Adj)-Unit
Curr

20.02 16.72 13.01 11.49
Book Value-Unit Curr 129.83 113.76 126.34 100.10
Annexure II BALANCE SHEET



BALANCE SHEET OF SOUTH INDIAN BANK LTD.

Mar 2011
Rs. Cr
Mar 2010
Rs. Cr
Mar 2009
Rs. Cr
Mar 2008
Rs. Cr
Mar 2007
Rs. Cr
SOURCES OF FUNDS :
Capital 113.01 113.01 90.41 70.41
Reserves Total 1372.28 1191.00 1070.58 653.55
Equity Share Warrants 0.00 0.00 0.00 0.00
Equity Application Money 0.00 0.00 0.00 0.00
Deposits 23011.52 18092.33 15156.12 12239.21
Borrowings 330.96 412.01 27.58 32.51
Other Liabilities & Provisions 706.27 571.06 745.24 656.90
TOTAL LIABILITIES 25534.04 20379.41 17089.93 13652.58
APPLICATION OF FUNDS :
Cash & Balances with RBI 1390.94 997.74 973.65 699.67
Balances with Banks & money
at Call

596.73 1038.13 729.00 1245.81
Investments 7155.61 6075.20 4572.23 3430.13
Advances 15822.92 11847.91 10453.75 7918.91
Fixed Assets 152.54 136.32 112.75 89.59
Other Assets 415.30 284.11 248.55 268.47
Miscellaneous Expenditure not
written off

0.00 0.00 0.00 0.00
TOTAL ASSETS 25534.04 20379.41 17089.93 13652.58
Contingent Liability 2729.74 2194.05 2105.35 1640.58
Bills for collection 257.46 222.29 181.85 168.15