CHAPTER-1 INTRODUCTION

1.1 Introduction about the sector:BANKING

Banking, the business of providing financial services to consumers and
business. The basic services a bank provides are checking accounts, savings
accounts and time deposits that can be used to save money for future use;
loans that consumers and businesses can use to purchase goods and services;
and basic cash management services such as check cashing and foreign
currency exchange.
TYPES
Four types of banks specialize in offering these basic banking services:
1) Commercial banks,
2) Savings and loan associations,
3) Savings banks, and
4) Credit unions.
A broader definition of a bank is any financial institution that receives, collects,
Transfers, pays, exchanges, lends, invests, or safeguards money for its
customers. This broader definition includes many other financial institutions that
are not usually thought of as banks. These institutions include finance
companies, investment companies, investment banks, insurance companies,
pension funds, security brokers and dealers, mortgage companies, and real
estate investment trusts.

PURPOSE
Banking services serve two primary purposes.
First, by supplying customers with the basic mediums-of-exchange (cash,
checking accounts, and credit cards),
Second, by accepting money deposits from savers and then lending the money
to borrowers, banks encourage the flow of money to productive use and
investments. This in turn allows the economy to grow. Enabling the flow of
money from savers to investors is called financial intermediation, and it is
extremely important to a free market economy.

1.2 Industry Profile:a. Origin and Development of industry:Banking in India

Banking in India originated in the first decade of 18th century. The General
Bank of India came into existence in 1786. This was followed by Bank of
Hindustan. Both these banks are now defunct. The oldest bank in existence in
India is the State Bank of India being established as "The Bank of Bengal" in
Calcutta in June 1806. A couple of decades later, foreign banks like Credit
Lyonnais started their Calcutta operations in the 1850s. At that point of time,
Calcutta was the most active trading port, mainly due to the trade of the British
Empire, and due to which banking activity took roots there and prospered. The
first fully Indian owned bank was the Allahabad Bank, which was established in
1865. By the 1900s, the market expanded with the establishment of banks such
as Punjab National Bank, in 1895 in Lahore and Bank of India, in 1906, in
Mumbai - both of which were founded under private ownership. The Reserve

Bank of India formally took on the responsibility of regulating

the Indian banking sector from 1935. After India's independence in 1947, the
Reserve Bank was nationalized and given broader powers. The banking in India
was controlled and dominated by the presidency banks, namely, the Bank of
Bombay, the Bank of Bengal, and the Bank of Madras - which later on merged
to form the Imperial Bank of India, and Imperial Bank of India, upon India's
independence, was renamed the State Bank of India. The presidency banks
were like the central banks and discharged most of the functions of central
banks. They were established under charters from the British East India
Company. The exchange banks, mostly owned by the Europeans, concentrated
on financing of foreign trade. Indian joint stock banks were generally under
capitalized and lacked the experience and maturity to compete with the
presidency banks, and the exchange banks. There was potential for many new
banks as the economy was growing. Under these circumstances, many Indians
came forward to set up banks, and many banks were set up at that time, and a
number of them set up around that time continued to survive and prosper even
now like Bank of India and Corporation Bank, Indian Bank, Bank of Baroda, and
Canara Bank.

b. Growth and Present Status of the Industry:By the 1960s, the Indian banking industry has become an important tool to
facilitate the development of the Indian economy. At the same time, it has
emerged as a large employer, and a debate has ensued about the possibility to
nationalize the banking industry. Indira Gandhi, the-then Prime Minister of India
expressed the intention of the GOI in the annual conference of the All India
Congress Meeting in a paper entitled "Stray thoughts on Bank Nationalisation."
The paper was received with positive enthusiasm. Thereafter, her move was
swift and sudden, and the GOI issued an ordinance and nationalised the 14
largest commercial banks with effect from the midnight of July 19, 1969.
Jayaprakash Narayan, a national leader of India, described the step as a
"masterstroke of political sagacity." Within two weeks of the issue of the
ordinance, the Parliament passed the Banking Companies (Acquition and
Transfer of Undertaking) Bill, and it received the presidential approval on 9th
August, 1969. A second dose of nationalisation of 6 more commercial banks
followed in 1980. The stated reason for the nationalisation was to give the
government more control of credit delivery. With the second dose of
nationalisation, the GOI controlled around 91% of the banking business of
India. After this, until the 1990s, the nationalised banks grew at a pace of
around 4%, closer to the average growth rate of the Indian economy.

c. Future of the Industry:A healthy banking system is essential for any economy striving to achieve good
growth and yet remain stable in an increasingly global business environment.
The Indian banking system, with one of the largest banking networks in the
world, has witnessed a series of reforms over the past few years like the
deregulation of interest rates, dilution of the government stake in public sector
banks (PSBs), and the increased participation of private sector banks. The
growth of the retail financial services sector has been a key development on the
market front. Indian banks (both public and private) have not only been keen to
tap the domestic market but also to compete in the global market place. New
foreign banks have been equally keen to gain a foothold in the Indian market.
The momentum in credit growth has been maintained during 2005-06 due to
two factors: The corporate sector has stepped up its demand for credit to fund
its expansion plans; there has also been a growth in retail banking. However,
even as the opportunities increase, there are some issues and challenges that
Indian banks will have to contend with if they are to emerge successful in the
medium to long term. This report discusses these issues and challenges -- both
intrinsic and external, such as
Consolidation
Consolidation, which has been on the counter over the last year or so, is likely
to gather momentum in the coming years. Post April 2009, when the restrictions
on operations of foreign banks will go, the banking landscape is expected to
change dramatically. Foreign banks, which currently account for 5% of total
deposits and 8% of total advances, are devising new business models to

capture the Indian market. Their full-fledged entry is expected to transform the
business of banking in many ways, which would be reflected in terms of greater
breadth of products, depth in delivery channels and efficiency in operations.
Thus Indian banks have less than three years to consolidate their position.
Despite the stiff resistance from certain segments, consolidation holds the key
to future growth. This view is underpinned by the following:
Owing to greater scale and size, consolidation can help save costs and
improve operational efficiency.
Banks will also have to explore different avenues for raising capital to meet
norms under Basel-II
Owing to the diversified operations and credit profiles of merging banks,
consolidation is likely to serve as a risk-mitigation exercise as much as a growth
engine.
Though there is no confirmation yet, speculative signals arising from the market
point to the prospect of consolidation involving banks such as Union Bank of
India, Bank of India, Bank of Baroda, Dena Bank, State Bank of Patiala, and
Punjab and Sind Bank. Further, the case for merger between stronger banks
has also gained ground a clear deviation from the past when only weak
banks were thrust on stronger banks. There is a case being made for mergers
between banks with a distinct geographical presence coming together to
leverage their respective strengths.

CHAPTER-2 PROFILE OF THE ORGANIZATION

2.1 Origin of the Organization:-

Dena Bank was founded on 26th May, 1938 by the family of Devkaran
Nanjee under the name Devkaran Nanjee Banking Company Ltd.
It became a Public Ltd. Company in December 1939 and later the name was
changed to Dena Bank Ltd.
In July 1969 Dena Bank Ltd. along with 13 other major banks was nationalized
and is now a Public Sector Bank constituted under the Banking Companies
(Acquisition & Transfer of Undertakings) Act, 1970. Under the provisions of the
Banking Regulations Act 1949, in addition to the business of banking, the Bank
can undertake other business as specified in Section 6 of the Banking
Regulations Act, 1949.

Milestones
One among six Public Sector Banks selected by the World Bank for
sanctioning a loan of Rs.72.3 crores for augmentation of Tier-II
Capital under Financial Sector Developmental project in the year
1995.
One among the few Banks to receive the World Bank loan for
technological upgradation and training.
Launched a Bond Issue of Rs.92.13 crores in November 1996.
Maiden Public Issue of Rs.180 Crores in November 1996.
Introduced Tele banking facility of selected metropolitan centers.

Dena Bank has been the first Bank to introduce:

Minor Savings Scheme.
Credit card in rural India known as "DENA KRISHI SAKH PATRA"
(DKSP).
Drive-in ATM counter of Juhu, Mumbai.
Smart card at selected branches in Mumbai.
Customer rating system for rating the Bank Services.

2.2 Growth and Development of the Organization:To evolve and position the bank as a world class, progressive, cost-effective
and customer friendly institution providing comprehensive financial and related
services: integrating frontiers of technology and serving various segment of
society especially the weaker section of the society: committed to excellence in
serving the public and also excelling in the corporate values. Corporate
excellence emanate from good corporate governance exercised by adopting
standard

of

transparency,

accountability,

professionalism,

social

responsiveness, and ethical business practices with this in view, the has been
making efforts for adopting the best practices. The bank commitment towards
corporate governance is to bestow greater transparency and openness in the
management and to ensure best performance by staff at all the levels to
maximize the operational efficiency. Adopting the corporate governance as a
work ethos, the bank is committed to enhancing the stakeholders value.

2.3 Present Status of Organization:Dena bank might just be another case of bank in trouble. Going by the recent
observations of the accounting department of the bank itself, the banks capital
adequacy ratio (CAR) and profitability in serious doubts.
An analysis of the financial position of the bank for the year 2002-03, by the
accounts department of dena bank, copy of which is in the possession of Indian
Express, showed that the banks CAR stood at 9.33% would go down as low as
6.02% as per the latest RBI guidelines. In simple terms, a low CAR implies that
the bank would be trouble there is a run on it since it has overexposed itself.
9

Further, miscellaneous income, which also accounted for the

increase in profits, went up by Rs. 32.92 crore to Rs. 86.06 crore for the year
2002-03. However, the review showed that Rs. 19.50 crore of the
miscellaneous income was due to
transfer of old credits over five years lying with the bank in suspense receipts/
unclaimed credits.
Another element of doubts in the results is the fact that the bank had reversed
an amount of Rs. 18.40 crore to the balance sheet as disputed tax liability. This
was based on the expert opinions received by bank on tax consultants and also
on a high court decision in the case of American Express Bank. The above
three aspects are taken together accounted for Rs. 83.40 crore of profit.

2.4 Functional Departments of the Organization:Dena Bank deals with the following functional departments:

1. Personal

In the Dena Bank Personal Banking section, the organization offer its services
with a personal touch by reaching out to all in various manners, one of them is
through offering a basket of our Deposit Schemes which delivers a strong
return on all your personal savings and our Loan Schemes which provides the
required financial assistance in your times of need.
10

2. Corporate

Corporate Finance
Dena Bank provides financial assistance to the business entities engaged in
various activities of manufacturing, trading and service.
The Financial assistance is provided for setting up new projects, acquiring
assets and also for meeting day to day working capital requirements of the
constituents. These assistances are termed as Long Term Finance & Short
Term Finance respectively.

Term Finance
Term Loan/Finance covers funds required for acquiring means of production
such as land, building and plant and machinery etc. These could be for setting
up new projects or expanding the present activities. Term finance is generally
given for a longer period and is repayable in installments over the period with or
without Moratorium. The period and the installments are determined based on
the repayment capacity of the project / borrower.

Working Capital Finance

11

Working Capital Finance (WCF) is extended for carrying out

normal trading/ manufacturing activities.The working capital finance is provided
for a relatively shorter period generally for a period of 1 year and renewed on
yearly basis considering the performance of the borrower.
The WCF is considered only after project nearing completion and after full tie up
of term loan requirement.
The Working Capital limits of the borrower are assessed by adopting various
methods

such

as

Projected

Turnover

Method

(Nayak

Committee

Recommendation), Permissible Bank Finance Method, Cash Budget Method

etc. depending upon the aggregate working capital limit required / enjoyed from
the banking system, nature of activity, production cycle etc. Working Capital
finance is in the form of pre-sale and post-sale limits. In Pre Sale Finance the
advance is granted for acquiring Inventory for production / processing or
Trading purpose while the Post-Sale Finance is extended against the
receivables. Dena Bank encourages Post-sale finance in the form of
purchase/discounting of bills etc.
Pre Sales Finance :
1. Cash Credit Hypothecation / Pledge against Stocks
2. Packing Credit Hypothecation / Pledgeagainst Stocks
3. Clean Packing Credit Limit
4. Trust Receipts
5. Working Capital Loan (Demand / Term)
Post Sales Finance :
1. Bills discounting / purchase Inland / Foreign
2. Cash Credit Hypothecation against Book Debts

12

3. Advances against Export Incentives

4. Purchase of Cheques/Demand Draft
Non Fund Based Credit Assistance
The Business units also require Credit Assistance for procurement of Goods,
where the funds are not involved.Such facilities are available against the
assured commitments / guarantee from the Lending Institutions.
Dena Bank is extending such Non Fund Based assistance to the eligible units in
the form of :
1. Issuance of Guarantee of various types like Performance, Financial, Bid
Bond, Tender Deposit / Earnest Money etc. and
2. Issuance of Letter of Credit
3. Deferred Payment Guarantee

Export Credit
Bank extends credit to Exporters at Competitive rates, at both Pre-shipment
and Post-shipment stages.
Recently, Bank has introduced Gold Card Scheme which provides cheaper
export credits to the eligible borrowers. Selected Clients engaged in exports are
also suitably rewarded in the form of Export Credit Denominated in Foreign
Currency viz. PCFC (Pre Shipment) / REBA (Post Shipment Credit).

Specific Schemes
The Bank has devised specific schemes for the following Sectors :
1. Educational Institutions,
2. Builders & Developers,

13

3. Hospitals,
4. Hotels & Restaurants &
5. Entertainment Industry.

3. NRI Desk

With over 1100 branches spread across the country, Dena Bank is your ideal
banking partner if you are a Non-Resident Indian.
All transactions by NRIs in Indian Banks are governed by RBI Rules and
Regulations .
4. Priority & SME

These are the sectors where Dena Bank has taken special care to ensure
instant sanctions and approvals for all applicants.

14

Priority Sector Schemes:

1. Dena Rural Internet Kiosk Scheme
2. Dena Shakti Scheme
3. Dena Laghu Udyami Card Scheme
4. Dena Rural Artisan Credit Card Scheme
5. Dena Swarozgar Credit Card Scheme
5. Dena Billpay:-

AutoPay
Just give us your bill details, specify your bank account and we will pay your bill
for you every month from that account. You can specify an upper limit and bills
above this limit will be paid only on your specific instructions.
PhonePay
Get a SMS alert when bill is due and issue payment instructions in accordance.
Internet
If you have access to the internet, you can view and pay your bills online at
www.denabank.com. You will receive new bill notifications, due date reminders
and payment confirmations via email.

15

6. Dena ATM Services

Dena Bank always stands in forefront in understanding it customers need.

Dena Bank Debit cum ATM Card offers you an easy and convenient way to do
all your transactions and that too within a fraction of seconds. Presently we
have more than 380 ATMs all across India. Dena Debit cum ATM Card is your
Bank Account in your pocket. Get your Dena Bank Debit cum ATM Card today
and avail round the clock uninterrupted service. Below is the simple procedure
to use this facility:
1. Contact your Branch.
2. If you dont have Saving or Current Account, first open your account.
3. Get the Debit/ATM Card Application form from the Branch, fill it up and
submit it to your Branch.
4. Within 10 days, you will receive your Debit cum ATM Card along with PIN
(Personal Identification Number) and Debit cum ATM Card Booklet.
5. Activate your card immediately by withdrawing cash from from Dena
Bank ATM. After that you can use your card on POS Terminal ( Merchant
Establishments)

16

7. Other Services:Dena Bank, your trusted family bank, now is proud to offer a range of
sophisticated banking services by way of Any-branch banking, Multi City
cheque, Dena ATM's, Dena Cards, online remittance, Internet Banking, Mobile
banking, Tele banking, Online utility Bill Payment, Value added Service through
ATM, Kiosks, loans and many more. With over 1100 branches across the
country, we are always ready to serve our customers, and to offer them the
best of the technology-enabled banking products and services.

2.5 Organization Structure and Organization Chart:Organization Structure:HEAD OFFICE

REGIONAL OFFICE

BRANCHES

17

Executive cards of the organization. They are Executive Director,

General Manager (GM), Deputy General Managers (DGM), assistant
General Managers
(AGM), Chief Managers (CM), Managers and other officers are in the
hierarchy at the head office level functioning in various Departments.
The regional Managers heads the Regional Officers who are assisted
by other down in the hierarchy. The Branch is headed by AGM\CM\
Senior Managers\Managers depending upon the size of the Branch
activities and rendering of satisfactory customer service. The bank
has a very good system of delegating power to the different
functionaries in the hierarchy to facilitate speedy decision- making
process even up to the branch Level.

Organization Chart:As mentioned above, the organization chart for a regional office is different from
organization charts of a Head Office as well as Branches. The organization
chart for the regional office where the training has taken place consists of
various designations and responsibilities. The various designations and the
persons responsible for that designations responsibilities are described as
under through the charts.

18

A. C. Katial
(DGM)

S.J. Majumdar
(AGM)

Devi Singh Channokar

(Chief Manager)

G.D. Sinha
(Senior Manager)

Hakeem Alam
(Manager)

Deepika Kansal
(Officer)

2.6 Product and Service Profile of the Organization Competitors:-

State Bank Of India:The Bank is actively involved since 1973 in non-profit activity called Community
Services Banking. All our branches and administrative offices throughout the

19

country sponsor and participate in large number of welfare

activities and social causes. Our business is more than banking because we
touch the lives of people anywhere in many ways. Our commitment to nationbuilding is complete & comprehensive.

Punjab National Bank:Established in 1895 at Lahore, undivided India, Punjab National Bank (PNB)
has the distinction of being the first Indian bank to have been started solely with
Indian capital.The bank was nationalised in July 1969 along with 13 other
banks. From its modest beginning, the bank has grown in size and stature to
become a front-line banking institution in India at present.
A professionally managed bank with a successful track record of over
110 years.
Largest branch network in India - 4525 Offices including 432 Extension
Counters spread throughout the country.
Strategic business area covers the large Indo-Gangetic belt and the
metropolitan centres.
Ranked as 248th biggest bank in the world by Bankers Almanac ,
London.
Strong correspondent banking relationships with more than 217
international banks of the world.
More than 50 renowned international banks maintain their Rupee
Accounts with PNB.
Well equipped dealing rooms; 20 different foreign currency accounts are
maintained at major centres all over the globe.
20

Bank of India:-

Bank of India was founded on 7th September, 1906 by a group of eminent

businessmen from Mumbai. The Bank was under private ownership and control
till July 1969 when it was nationalised along with 13 other banks.
Beginning with one office in Mumbai, with a paid-up capital of Rs.50 lakh and
50 employees, the Bank has made a rapid growth over the years and
blossomed into a mighty institution with a strong national presence and sizable
international operations. In business volume, the Bank occupies a premier
position among the nationalised banks.
The Bank has 3021 branches in India spread over all states/ union territories
including 136 specialised branches. These branches are controlled through 48
Zonal Offices . There are 28 branches/ offices (including three representative
offices) abroad.
The Bank came out with its maiden public issue in 1997 and follow on Qualified
Institutions Placement in February 2008. . Total number of shareholders as on
31/03/2009 is 2,35589.
While firmly adhering to a policy of prudence and caution, the Bank has been in
the forefront of introducing various innovative services and systems. Business
has been conducted with the successful blend of traditional values and ethics
and the most modern infrastructure. The Bank has been the first among the
nationalised banks to establish a fully computerised branch and ATM facility at
21

the Mahalaxmi Branch at Mumbai way back in 1989. The Bank

is also a Founder Member of SWIFT in India. It pioneered the introduction of the
Health Code System in 1982, for evaluating/ rating its credit portfolio.

Bank of baroda:-

Bank of Baroda believes in the strength and integrity of relationships built with
its customers like you. With over 101 years of experience in the banking
industry and a wide network of over 3000 branches all over the country, it has
always been active in extending financial support and adapting to customers
changing needs.
Its Deposit Products, Retail Loans, Credit Cards and Debit Cards help the
customers with their growing financial needs. With facilities like Lockers it
ensure that customers valuables are safe with it. Its countrywide branches offer
the customers convenience and ease in operating them account wherever they
are. Its 24-hour ATMs enable them to withdraw cash, check their account
balance and request for a new cheque book even after banking hours.

Faster technology for better service:Baroda Internet Banking / Baroda Mobile Banking, its latest Internet and Mobile
banking initiatives enable them to operate their account just as they would in
any of its branches. The customers can through the Internet check their
balance, request for chequebooks and print account details. Choose from its

22

various products and services, that the bank sincerely feel will
put a smile on customers face; an investment it would like to bank on forever.

Different Bank Parameters:Name of the Bank

SBI
PNB
Bank Of India
Bank Of Baroda

Last
Price
2,266.45
917.45
387.50
499.50

Market Cap.
(Rs. Cr.)

Net Interest
Income

Net Profit

Total Assts

143,892.43
28,927.43
20,350.54
18,195.11

63,788.43
19,326.16
16,347.36
15,091.58

9,121.24
3,090.88
3,007.35
2,227.20

964,432.08
246,918.62
225,501.75
227,406.73

Table No- 1

2.7 Market Profile Of The Organization:Dena Bank is an India-based company which is engaged in treasury,
corporate/wholesale banking, retail banking, and other banking operations. The
deposit schemes offered by the Company include Premium Savings Account
Scheme, Premium Current Account Scheme, Dena Savifix Deposit Scheme,
Dena Freedom Deposit Scheme, Dena Samruddhi Deposit Scheme, Dena
Fixed Deposit Scheme, Dena Senior Citizen Scheme, Dena Recurring Deposit
Scheme, Dena Loan Linked Recurring Deposit Scheme, Dena Minor Savings
Scheme, and Dena Alpa Bachat Khata. It offers services, such as any branch
banking, multi city cheque, automated teller machines (ATMs), Dena Cards,
online remittance, Internet banking, mobile banking, tele-banking, online utility
bill payment, and value-added service. During the fiscal year ended March 31,
2009, the total number of branches comprised of 1184.

23

Dena Bank. The Company's principal activity is to provide

commercial banking and other related services. The Company also provides in
merchant banking, asset management and other related services. The
company's banking products and services are provided through 1184 branches
offices, 387 ATMs all over India. The Company operates only in India.
The Company's principal activity is to provide commercial banking and other
related services. The Company also provides in merchant banking, asset
management and other related services. The company's banking products and
services are provided through 1184 branches offices, 387 ATMs all over India.
The Company operates only in India.

Dena Bank- Key Data:Ticker:

532121

Country:

INDIA

Exchanges:

BOM

Major Industry:

Financial

Sub Industry:

Commercial Banks

Employees:

9,883

2009 Sales

38,783,302,000
(Year Ending Jan 2010).

Currency:

Indian Rupees

Market Cap:

25,340,829,720

Fiscal Yr Ends:

March

Shares Outstanding:

286,823,200

Share Type:

Ordinary

Closely Held Shares:

146,820,000

Table No- 2

24

CHAPTER-3 DISCUSSIONS ON TRAINING

3.1 Students Work Profile:-

The summer training was held in the Regional

office of Dena Bank. The work profile at the office was based on the loans and
advances given to small and median enterprises (SME). Hence the whole work
was based on the Pre-sanction formalities of credit given to a particular
enterprise. The responsibilities handled at the office were started from reading
the companys project file (sent by the company to whom the loan is to be
sanctioned) and continued till the loan is sanctioned by the responsible
authority according to the limit to be sanctioned. The loan is sanctioned by
keeping in mind the various instructions and conditions.

General Instructions on Loans and Advances: Efficient management of loans and advances portfolio has assumed
greater significance as it is the largest asset of the bank having direct
impact on its profitability. In the wake of the continued tightening of
norms of income recognition, asset classification and provisioning,
increased competition and emergence of new types of risks in the
financial sector, it has become imperative that the credit functions are
strengthened. RBI has also been emphasizing banks to evolve suitable
guidelines for effective management and control of risk credits.
With a view to ensure a healthy loan portfolio, our bank has taken
various steps to bring its policies and procedures in line with the
changing scenario which also aim at effective management & dispersal
of credit risks, strengthening of pre-sanction appraisals and post-

25

sanction monitoring systems. Further, bank has been

continuously endeavoring to strengthen the organizational set up by opening
Specialized Branches to meet the credit requirements of specific types of
borrowers, imparting intensive credit management training to staff and
deployment of the trained staff at branches/offices having potential for credit
growth. Bank has laid down detailed guidelines to be followed while
considering credit proposals, some of the important ones are listed as
under:
1. All loan facilities be considered after obtaining loan applications from the
borrower and compilation of Confidential Report on him and guarantors.
The borrowers should have the desired background, experience to run
their business successfully.
2. Project for which the finance has been granted should be technically
feasible and economically viable i.e. it should be able to generate
enough surplus as to service the debts within a reasonable period of
time.
3. Cost of the project and means of financing the same should be properly
assessed and tied up. Both under-financing and over-financing can have
an adverse impact on the successful implementation of the project.
4. Borrowers should be financially sound, enjoy good market reputation and
must have their stake in the business i.e. they should possess adequate
liquid resources to contribute to the margin requirement.
5. Loan should be sanctioned by the competent sanctioning authority as
per the delegating loaning powers and should be disbursed only after
execution of all the required documents.

26

6. Projects financed must be closely monitored during implementation

stage to avoid time and cost overruns and thereafter till the adjustments
of the banks loan.

Bank extends loan facilities by way of fund based facilities and/or non
fund based facilities. The fund based facilities are usually allowed by way
of term loans, cash credit, bills discounted/purchased, demand loans,
overdrafts etc. Further, the bank also provides non fund facilities by way
of issuance of guarantees, deferred payment guarantees, bills
acceptance facility under various schemes.
The foregoing list contains the usual types of facilities undertaken by the
bank. In case loan application is received for any particular facility which
is not specifically mentioned above, the same should be forward to
controlling offices for considerations, provided the same can be
transacted within the overall policy of the bank.
The usual types of facilities sanctioned by the bank to the borrowers, as
also other aspects like Project appraisal, Post-sanction follow up,
Management of NPAs, Documentation, and Limitation etc. are discussed
later. These are the briefly explanations hereunder:

TERM LOANS:-

Term loans are sanctioned for acquisition of

fixed assets like land, building, plant, machinery, office equipments,

furniture/fixture etc. for purchase of transport vehicles and other vehicles,
for purchase of agriculture equipments, machinery and other movable
27

assets, under various schemes of agriculture advances

introduced from time to time for purchase of house, consumer durables,
under special schemes. The term loan would be a loan, which is not a
demand loan and is repayable in terms i.e. in installments irrespective of
period or security cover.
Term loans are normally granted for periods varying from 3-7 years and
in the exceptional cases beyond 7 years. Term loans for infrastructure
projects can be allowed even with a longer repayment period.

CASH CREDIT ADVANCES:- Cash credit account is a drawing

account against credit granted by the bank and is operated in exactly the
same way as a current account on which an overdraft has been
sanctioned. The various types of securities against which the cash
credits are allowed are pledge/hypothecation of goods or produce,
pledge of documents of title to goods, mortgage of immovable property,
book debts, trust securities etc. in cash credit accounts the borrower is
allowed to draw on account within the prescribed limit, as and when
required.

PACKING CREDIT:- Packing credit is an advance given to an

exporter who holds a code number assigned to him by the Directorate

General Of

Foreign Trade (DGFT), for financing the purchase,

processing, manufacturing or packing of goods prior to shipment, on the

basis of letter of credit opened in his favor on in favor of some other
person by an overseas buyer or a confirmed order for the export of
28

goods from India or any other evidence of an order for

export from India having been placed on the exporter or some other
persons, unless lodgment of export orders or letter of credit with the bank
has been waived.

LETTER OF CREDIT:- Letter of credit is issued by the bank at

the request of its customers on favour of a third party informing him that
the Bank undertakes to accept the bills drawn on its customers upto the
amount stated in the LC, subjected to the fulfillment of the conditions
stipulated therein. Therefore, when bank issues LC, it assumes
responsibility to pay its beneficiary on production of bills drawn in
accordance with terms and conditions of LC.

GUARANTEES:-

Guarantees is a contract to perform the

promise or discharge the liability of third person in case of his default. In

the ordinary course of business, banks often issues guarantees on
behalf of its customers in favour of third parties. When bank issues such
a guarantee, it assumes a responsibility to pay the beneficiary, in the
event of a default made by the customers.

NON PERFORMING ASSETS (NPAs):-

NPAs act as drag on

banks profitability and need urgent attention at all levels. The action
points and strategies for reducing NPAs has to be two pronged (i)
recovery/ reduction in existing NPA accounts and (ii) checking slippage
of fresh accounts from performing (Standards) to NPA category. The
29

action points may vary depending upon the area, nature of activity and
intention of borrower etc.

3.2 Description of Live Experiences:Training in Credit Department (SME) of the bank is very much informative. I felt
glad when first time I got a companys project file. My senior handover it to me
to read it carefully and analyze it. After reading the file, I started completing the
Pre-sanctioned formalities of making a credit proposal for that company. The
proposal was to be made on the banks specific format. I handled my
responsibilities carefully and made the proposal as my knowledge and
perceptions according to the project file. I transferred the data to my senior. He
read the proposal and made necessary corrections in it. Then he again gave
me the proposal to come to know about the mistakes. I analyzed the proposal
made by my senior sincerely and wrote down the doubts in a diary. I learnt a lot
from this first experience. After this I got about 5-6 proposals in my whole
training and learning period and completed the training with a great expertise
and knowledge.

30

CHAPTER-4 STUDY OF SELECTED RESEACH PROBLEMS

4.1 Statement of Research Problem:DENA Bank is powering its way through a market that is still to unleash its true
potential, as barely two percent of the population has been penetrated so far!
It is not surprising that the bank is not in the mood to take its hands off the
throttle. At Dena Bank, our goal is to satisfy the customers in every way
whatever a customer wants. The goal is to help the customers in every step of
the way in making their world a better place to live in. Besides its will is to
provide a high quality service to all of its customers, Dena Bank takes a stand
as a socially responsible enterprise respectful to its environment and respectful
of the important issues. Dena bank has been strongly committed not only to
environmental conservation programmes but also expresses the increasingly
inseparable balance between the economic concerns and the environmental
and social issues faced by a business. A bank must not grow at the expense of
mankind and man's future but rather must serve mankind.

4.2 Statement of Research Objectives:The project was done with the objective to study effective management of
Loans and Advances. As the Loans and Advances portfolio is the largest asset
of the bank having direct impact on its profitability. With a view to ensure a
healthy loan portfolio, my study is concerned to ensure various steps to bring
the policies and procedures in line with changing scenario which also aim at

31

effective management and dispersal of credit risks, strengthening of presanction appraisals and post sanction monitoring system.
The objective is to study the various types of facilities appraised by the bank to
the borrower such as Term Loan, Cash Credit Limit, Packing Credit Limit, Bank
Guarantee etc. After this the objective is to learn about the whole procedure
adopted by the bank to sanction a loan, such as Documentation, Credit Risk
Management, CIBIL Report, Mortgages- Immovable properties, Pricing of Credit
(Interest Rates) and Credit Rating System etc.

4.3 Research Design and Methodology:The research process or methodology is the approach to the entire study it is
the master plan. It is the blueprint for achieving your objectives, one of which is
the production of the dissertation.
The Process
1. Formulating a research problem
2. Conceptualizing a research design
3. Constructing an instrument for data collection
4. Selecting a sample
5. Writing a research proposal
6. Collecting the data
7. Processing the data
8. Writing a research report.

32

This is the simple way to perform the functions of research design and
methodology. But in the premises of the bank, no such research has been taken
place. The whole research has been done on the credit appraisal procedures
on the banks specific format.

4.4 Analysis of Data:DENA BANK, SME CELL, REGIONAL OFFICE, NEW DELHI
PROPOSAL NO.: RO/NDR/SME/12/2009

Date: 12.10.2009

Proposal
received at Branch

Proposal
received at RO

Complete
Proposal received at HO

Date :08.10.09

Date 23.10.09

Date

FOR APPROVAL- GENERAL MANAGER

GIST OF THE PROPOSAL:
Proposal for :
a.
Renewal
of Rs.250.00 lacs

of existing CCH (Stocks-cum-Book

Debts)

limit

b. Renewal of existing Negotiation of Bills under LC limit of Rs. 150.00

lacs.
c. Renewal of existing Performance/Financial/Bid Bond Guarantee
limit of Rs. 350.00 lacs.

1.

PROFILE
Name
of borrower

M/s Paragon Cable India.

33

29, Rajasthan Udhyog Nagar,

G T Karnal Road, New Delhi-110033
Tel- 011- 27691333, 27692333
Address
Fax- 011-27691129
(Regd. Office
E-mail: pci@vsnl.net, mail@elektron.com

Branch: Wazirpur

Region: New Delhi

Established on

05.03.1991

Whether appearing in

Dealing
with us since

1991

Standard B List

No

Group:

No.

Willful Defaulter List

No

Line of Activity

Manufacturing,
Trading and J
ob Work of
Defaulter / CIBIL List
Electric Wires
& Power
Cables

Key
Key Person
Person/Promoter

No

Sh. Vikas Nagpal

Sh. Vikas Nagpal

Promoter
Multiple / Consorti
Sole
um

EXISTING PROPOSED

Leader Bank

N.A.

Asset Classification

Standard

Standard

Our share:

[Rs. In Lakhs]

Asset
Category as per CMC Gui
delines

P1

P1

FB - %

400.00

D2K Codes & Description

34

NFB- %

350.00

Activity

STL-

Nil

Sector

TL-

Nil

Special Category

Priority

No

BSR Code:

8010

Insulated
Wires & Cables
Electrical.

15

SME

Basel II Code:

Risk Weightage

100%

Cr Credit Risk Rating

BBB

Provisioning:

0.25%

Risk
Grade as per ABS Dt 31.03.2009

Best BPLR+ 0
.75%

3. NAMES OF PARTNERS & NET WORTH

(Rs. in Lacs)

Sr.

Name

Net Worth

As on

Basis

Shri Vikas Nagpal

486.76

31.03.09

Audited B/S

Smt Anjana Nagpal

151.88

31.03.09

Audited B/S

No
Whether Proprietor / Partner/ Director / Guarantor
has any relationship with any Director or
Senior Official (Scale IV & above) of
the Bank. If so give details (Refer to Guidelines)
4. Major Shareholders: N.A. (Since it is Partnership A/c)
5. BRIEF HISTORY OF SANCTIONS INCLUDING REVIEWS
AND ADHOCS DURING THE PAST TWELVE MONTHS.
Sanctions Dt. Gist
Renewal of existing limits by GM(Credit)

08.05.2008

35

6. PRESENT PROPOSAL:
Renewal of the existing limits, as under :
(Rs in lacs)
Facility

Existing

Limit

a)

Margin (%)

Limit

Stock-25%

b)

250.00
cum
Book Debts)

Book

135.82

250.00

250.00

c)

d)

e)

Nil
Book
Debts-40%

Negotiation of
Bills under L/C

150.00

0.00

150.00

150.00

Nil

Total

400.00

135.82

400.00

400.00

Nil

Non
- Fund Base
d
Per-10%,

Margin (%)

Stock-25%

Debts-40%

2.

Variation

Fund Based
CCH(Stock

Outstanding DRAWING Irregular/ Proposed

as on 22-10- POWER
Overdue
2009
amount

Bank
Guarantee

350.00

Total
Forward
cover

Per-10%,

47.10

350.00

350.00

350.00

47.10

350.00

350.00

Nil

Nil

Nil

Nil

Nil

Nil

Grand
750.00
Total (a+b+c)

182.92

750.00

750.00

Nil

Investment
Exposure

Nil

Nil

Nil

Nil

182.92

750.00

750.00

Nil

Nil

TOTAL EXPOSURE 750.00

Fin/BidBond25%

Fin/BidBond25%

II. SECURITY / DOCUMENTATION:Prime security

Nature

(Rs. in lacs)
Value
36

Basis

Nil

Proposed
Hyp. of Stock and Book Debts

Rs.312.36.00(Inventory) Stock Statement as of

Aug.2009

Rs.195.98
(Receivables)

Collateral Security
Nature of Security

1.
Equitable Mortgage
of Land and Building at
plot No. 11, Sector-6, IMT
Maneshar, HSIDC,
Gurgoan, Haryana adme
asuring 4050 Sq Mtr in
the name of Shri Vikas
Nagpal
partner
of
M/s Paragon Cable India.

Type of Value
Charge

Basis / Source

Equilate
ral
Mortgag
e

Valuation
No
Report by our Panel
Valuer, M/s Accurate
Valuers dated 23.03.
09.

2.Hypothecation
Hypothe
of Plant and Machinery,
cation
Furniture & Fixture and
other equipments existing
as well to be acquired in
future.
Aggregate Collateral
Security

Book Debt Statement as

of Aug 2009.

The market
value of the
property
is
Rs. 653.46
lacs whereas
the Distress
value @80%
is Rs.522.78
lacs

Rs.
lacs

Whether
eligible
under
CRM
(Basel II
Norms)

Search Report by
our Panel Advocate,
Shri Vineet Sharma
dated 09th April 2009
states that the
subject property is
unencumbered
and marketable.
21.74 WDV
as
per No
Audited B/S as of 31.
03.09

Rs. 544.52
lacs

i) Percentage coverage of collateral security:

1

Total value of Collateral Security

Rs. 544.52 Lakhs

Of which our share

Rs. 544.52 Lakhs

Total limits proposed from our Bank

Rs. 750.00 Lakhs

Collateral coverage

72.06%
37

ii) Reasons in case of dilution of security coverage:

Collateral Coverage at the time of last renewal was 77.20%. Reason for
dilution of security coverage is that Market value of property (collateral) was
considered whereas distress sale value of property is considered in the
present case. In case Market value is considered in the present case,
collateral coverage would be 90.03%
c) Date of creation of Charge: N.A. since partnership firm.
d) Date of subsequent modification of charge: N.A.
e) Date of vetting of documents by legal officer /Panel Advocate:18-072008
f) Name of Guarantors & their net worth (Rs. in lakh)
Name

Relationship

Net Worth

As of

Basis

Shri Vikas Nagpal

Partner

486.76

31.03.09

Audited B/S

Smt Anjana Nagpal

Partner

151.88

31.03.09

Audited B/S

Shri D L Nagpal

Guarantor

1000.00

26.11.07

Annexure CC

Shri Prem Nagpal

Guarantor

300

26.11.07

Annexure CC

* Branch to obtain and keep on record C.A. certified Personal Balance Sheet/ Net
Worth Statement of the guarantors as of 31-03-2009 and ensure there is no significant
decline in Net Worth of the individual persons vis-a vis last sanction.

III. CREDIT RATING & Pricing:

Pricing

Existing

Proposed

Credit Rating Score Based on ABS [ March 09]

BBB

Applicable interest rate as per Credit Rating

BPLR+0.50% BPLR+0.75%

Interest rate presently Charged and Proposed

BPLR+0.75% BPLR+0.75%

Concession if any

N.A.

Interest Rate charged by Lead Bank

N.A.
38

N.A.

Commission on NFB Limits

As per norms

Processing Charges

1.25% of the
sanctioned
limit.

Factors contributing to the up gradation / slippage in credit rating:

Major factor contributing to decline in credit rating is due to decline in collateral
coverage on account of factors already discussed in the note.

Justification for proposing lower rate of interest/concession in charges/

process fees: N.A.
IV.Permissions for Deviations, Issue of NOCsetc & Concessions in
service charges

No Existing
1

Proposed

N.A., since no concessions/deviations are proposed.

9. Ratifications required for actions, exceeding

permitted etc. beyond discretionary powers: N.A.

10. COMPANY PROFILE (in brief)

(DETAILS OF MANAGEMENT, PRODUCTS MANUFACTURED, USER
INDUSTRIES & COMPANYS MAJOR CUSTOMERS)
M/s Paragon Cable India a Partnership Firm, established in 1991, is engaged in
manufacturing, trading and job work of electric wires and power cables.

Managing Partner Shri Vikas Nagpal is having good experience of 15 years in

the line of business. The Firm is selling its product to various State Electricity
Boards ,Power Corporations and various Central Govt. Departments.
Further, the Firm also sells its major products to private organization/
institutions viz Reliance Group,Tata Group,IVRCL, AREVA.
The firm is enjoying credit facilities with our Bank since January 1991. The
conduct of the account is satisfactory.

39

11. INDUSTRY SCENARIO

I Industry Categorisation

Insulated Wires and Cables.

Demand and supply situation of the

product present and projected
(source of information)

Demand for the product

is satisfactory.

Major players & their market share

There are various

manufacturers in this line
but the company is known for i
ts products.
Rs. 2729.47 lacs

Banks exposure in this industry

Rs. 6.91 lacs i.e. 0.25% of the
aggregate exposure

NPA position
f.

Cyclical trends

There are no cyclical trends

affecting the industry.

Govt. policies

The policy of Govt. is

favourable.

Whether the product is an import

substitute, if so, what is the landed cost of
import and what is the production cost
of the indigenous manufacture

N.A.

Availability of raw materials, labour,

infrastructural advantages

Raw material, labour etc.

easily available at the site.

What are internal & external advantages of

the borrower/technology used

The company is using latest

technology.

What are the weaknesses

Market uncertainties.

What are the relative opportunities

The firm is looking for Govt.

order & better opportunities.

m. What are the threats

Chinese imports of cheaper

quality goods, market
uncertainties and fluctuations.
40

Any other information

Nil

12. PRODUCTION CAPACITY

Production Capacity

Existing

Proposed

Installed

2000 KM

2000KM

Utilised

1000KM

1000KM

% Utilisation

50%

50%

13. MARKET CAP: N.A. (Since it is a partnership account.)

14. FINANCIAL INDICATORS

As on
i. Capital

[Rs in lakhs]

Audited

Audited

Estimate

Projection

31.03.08

31.03.09

31.03.10

31.03.11

342.35

343.15

380.00

425.00

ii. Reserves & Surplus

0.00

0.00

0.00

0.00

iii. Intangible Assets

0.00

0.00

0.00

0.00

Tangible Net worth

342.35

343.15

380.00

425.00

Net Working Capital

227.92

234.43

320.00

374.00

1.44

1.39

1.58

1.62

Net Block

143.48

167.03

154.00

145.00

Net Sales

2947.04

3347.76

2900.00

3200.00

Current Ratio
Gross Block

- of which exports

41

147.00

144.00

116.71

112.00

114.00

63.91

101.91

77.00

80.00

6.37

9.19

10.00

9.00

70.28

111.10

87.00

89.00

PBDIT/ Gross Sales

0.04

0.05

0.05

0.05

Gross Profit Margin

2.66

3.49

3.86

3.56

Net Profit Margin

2.17

3.04

2.66

2.50

TDER (TOL/TNW)

1.90

2.18

1.79

1.72

Interest Coverage Ratio

2.56

3.67

3.49

3.97

Current Assets to
Turnover Ratio

4.37

4.25

3.89

3.79

PBDIT

123.69

158.35

Gross Profit - PBDT

78.52

Net Profit / Loss PAT

Depreciation
Cash Accruals

Comments on financial performance:

Sales :
The existing Fund Based limit of Rs 400.00 and Non-Fund Based Limit of Rs 250.00
lacs was earlier assessed on an estimated Sales Turnover of Rs 2850.00 during FY

2007-08 against which the actual achievement is Rs 2947.04 lacs i.e. achievement
index of 103.40%. Sales registered 15.52% during FY 2007-08 over the previous
financial year, while the growth registered during FY 2008-09 is 13.60%.
The borrower has now estimated and projected a sales turnover of Rs 2900.00 lacs
and Rs 3200.00 lacs during FY 2009-10 and FY 2010-11 respectively.
The borrower has attributed lower raw material as consequently lower finished good
prices as the main reason for lower sales projections during FY 2009-10. The global
financial crisis leading to depressed market conditions also partly contributed to the
lower sales projections.
During the first half of the current financial year i.e. Sept09, the borrower has achieved
a sales turnover of Rs 1075.00 lacs. The same translates into annualized turnover of

42

Rs 2150.00 lacs i.e. 74.14% vis--vis target. However, based on

orders on hand and improving market sentiments, the borrower is optimistic of
achieving the estimated/projected sales turnover. In fact, the borrower has a track
record of surpassing the projections.
In view of the above, the estimated and projected sales turnover is considered realistic
and achievable and is hence accepted by us.
Capital/Net Worth :
The Capital/Net Worth of the borrower stood at Rs 343.15 lacs as of 31.03.09 and
shows increasing trend over the years due to induction of capital/plough-back of profits
in business.
Unsecured Loans :
As per existing terms of sanction, Unsecured Loans were stipulated to be maintained
at the level of Rs 51.00 lacs against which the level of Unsecured Loans stood at Rs
87.75 lacs as of 31.03.09. The same is estimated and projected to be maintained at the
level of Rs 80.00 lacs during FY 2009-10 and FY 2010-11.
Branch should obtain and keep on record an undertaking from the borrower to the
effect that level of unsecured loans would be maintained at least at the level of Rs
80.00 lacs during the currency of bank finance and would not be withdrawn without the
express consent of the Bank. The Unsecured Loans would also remain subordinated to
Bank Finance.
Profitability :
Gross Profit and Net Profit Margin registered increase to 3.49% and 3.04%
respectively.during the FY 2008-09 over the previous financial year.

Gist of Financial indicator of the Firm as of 30-09-2009 is as under-

(Rs. In lacs)
Sales

1075.00

Capital

362.00

Unsecured loan

82.00

Fixed Assets

162.00

Net Profit

36.00

Auditors remarks and Management replies : No such qualifications/remarks.

43

Current performance trends:

Rs in lacs

Estimated sales turnover for the year

2,900.00

Achievement till September 2009

1075.00

Pro-rata achievement

74.13%

INTER-FIRM COMPARISON (PEER GROUP)

N.A. (Since the proposed credit exposure is less that Rs 5000.00 lacs )

16. ASSESSMENT OF WORKING CAPITAL REQUIREMENTS

A. Projection of sales as per last CMA DATA for the year ended 3103.09- Rs.2850.00
lacs
Actual sales for the year ended 31.03.09__Rs.3347.76 lacs
Last Year
Current
Following
Actual as
Year
Year
per audited Estimates Projections
Balance
Regular
Peak Level
Sheet
Year ending
Net Sales
3347.76
2900.00
3200.00
Total Current Assets
843.15
870.00
974.00
Less Current Liabilities (other than Bank
borrowing for working capital)
369.47
300.00
350.00
Working Capital Gap
473.68
570.00
624.00
Minimum Stipulated margin 25% of current
assets/projected NWC (whichever is
higher)
210.79
217.50
243.50
Max. Permissible Bank Finance
239.40
250.00
250.00
Total Existing Working Capital limits
239.40
250.00
25.00
Excess borrowing, if any, to be converted
Nil
Nil
Nil
into Working Capital Term Loan
B INVENTORY AND RECEIVABLE LEVELS:
Actual
Inventory

(Rs in lakh)
Estimate

Projection

Last
accepted 31.3.2009

31.3.2010

31.3.2011

Level

Mths Value

Mths Value

Mths Value

Raw Materials
Work in Progress

44

Finished Goods

1.27

320.00

455.00

1.97

525.00

284.00

1.39

333.00

1.22

320.45 1.27

290.00

1.68

467.53 1.88

1.24

325.13 1.33

Receivables
- Domestic
- Export
Stores & Spares
Creditors

C. COMMENTS ON ASSESSMENT OF WORKING CAPITAL WITH

JUSTIFICATION
The existing Fund Based limit of Rs 400.00 and Non-Fund Based Limit of Rs 250.00
lacs was earlier assessed on an estimated Sales Turnover of Rs 2850.00 during FY
2007-08 against which the actual achievement is Rs 2947.04 lacs i.e. achievement
index of 103.40%. Sales registered 15.52% during FY 2007-08 over the previous
financial year, while the growth registered during FY 2008-09 is 13.60%.
The borrower has now estimated and projected a sales turnover of Rs 2900.00 lacs
and Rs 3200.00 lacs during FY 2009-10 and FY 2010-11 respectively. The borrower
has attributed lower raw material as consequently lower finished good prices as the
main reason for lower sales projections during FY 2009-10. The global financial crisis
leading to depressed market conditions also partly contributed to the lower sales
projections.
During the first half of the current financial year i.e. Sept09, the borrower has achieved
a sales turnover of Rs 1075.00 lacs. The same translates into annualized turnover of
Rs 2150.00 lacs i.e. 74.14% vis--vis target. However, based on orders on hand and
improving market sentiments, the borrower is optimistic of achieving the
estimated/projected sales turnover. In fact, the borrower has a track record of
surpassing the projections.
In view of the above, the estimated and projected sales turnover is considered realistic
and achievable and is hence accepted by us.
The borrower has now estimated holding levels as under :
Amount
S.N.

Particulars

Months
(Rs in lacs)

1.

Finished Goods

1.27

290.00

2.

Receivables

1.88

455.00

45

3.

Creditors

1.33

284.00

The holding levels as above are in tune with the actual holding levels of FY 2008-09
and are considered need-based and reasonable. Hence, the same is accepted by us.
Based on the accepted levels of inventory and receivables as above, the Drawing
Power is calculated as under :
Amount
D.P.
Particulars
Months
Margin
(Rs in lacs)
(Rs in lacs)
Finished Goods

1.27

290.00

Less : Sundry Creditors

1.33

284.00

Paid Stocks
Receivables

25%

4.50

40%

273.00

6.00
1.88

455.00

Total

277.50

The borrower has requested for renewal of the existing CCH limit of Rs 250.00 lacs
and the same has been recommended by the Branch. As per assessment of limits
under Modified MPBF Method, the permissible limit of Rs 250.00 lacs. The requisite
D.P. is also available, as per the aforesaid table.
In view of the above, we recommend for renewal of the existing CCH (Stocks-cumBook Debts) limit of Rs 250.00 lacs.
Renewal of Negotiation of Bills under L/C Limit :
The borrower is presently enjoying Bills Negotiation (under L/C) limit of Rs 150.00 lacs,
outside the overall MPBF, which it has requested for continuation. Branch has informed
that no Bills have being negotiated under the aforesaid limit during FY 2008-09.
However, looking to contingent requirement and based on the borrowers request,
Branch has recommended for renewal of the Bills Negotiation under L/C limit of Rs
150.00 lacs. We endorse the Branch recommendation.

17. ASSESSMENT OF TERM LOAN/ DEFERRED PAYMENT

GUARANTEE: N.A.
A. LETTER OF CREDIT: N.A.
B. BANK GUARANTEE

46

Purpose of the Limit

Participation in Bidding Process for Tenders

b. Nature & amount of limit sanctioned

Performance/ Financial /Bid Bond Guarantee

limits of Rs. 350.00 lacs.

Outstanding as on 30-09-2009

Rs 47.10 lacs

Whether the existing limit is proposed

to be continued, if so, justification

The Borrower is required to furnish Bank

Guarantee for participation in Tenders. The
borrower has requested for the Renewal of
the existing B.G. limit.

In view of the above & since there has been

no instances of invocation of B.G. in the past,
we recommend for the renewal of existing
B.G. limit of Rs. 350.00 lacs.

Name of the beneficiary / ies in whose

favour guarantees to be issued

Various beneficiaries
such as Reliance,
Tata Group, IVRCL, AREVA,etc

Nature
of the guarantee limit required i.e.
performance/ financial/ Bid Bond etc.

Performance/Financial/Bid Bond Guarantee

No. of BG s issued during FY 2008-09

Assessment
and justification for the limit proposed

Amount of Bank Guarantees (Rs in lacs)

Instances of invocation of BG,if any

10
47.10
No

In view of the above and based on Branch

recommendation, we recommend for renewal of
existing Bank Guarantee Limit of Rs 350.00 lacs.
10% on Performance Bank Guarantee

Margin proposed

25% on Financial Bank Guarantee

[HO,
vide its
sanction note
no.
DCC/SME/267/2009 dated 29.07.2009 by General
Manager, has sanctioned with the margin of
15% to only specific institute NSIC
in the form of Financial/Other Guarantee and the
same is proposed to be continued].

Security

Extension

47

of

charge

over

the

stock,

receivables and fixed assets of the borrower.

ECGC cover for export performance

guarantees

N.A.
Net Fixed Assets as of 31-03-09- Rs. 167.03 lacs.

Asset coverage for NonFund Based limits

B.G. limit

- Rs. 350.00 lacs

Asset coverage:47.72%

Views/comments on the conduct of the account

A. Comments on utilisation of both fund and Non fund based limits
Whether
stock statements are submitted every month. Yes
If not submitted regularly mention the date of last stock statement
Whether operations are within sanctioned limits

Yes

Whether limits are utilised optimally /satisfactorily

Yes

Frequency of inspection of stocks. Date of the

last inspection and irregularity/adverse features,
if any observed and steps taken to set right the same.
Insurance cover - Whether securities adequately insured
and in force

Yes, as reported by the

Branch.
Branch to ensure that the
securities charged to the
Bank (both Prime and
Collateral)
are
adequately
and
comprehensively insured
(with Bank Clause) and
copy of the Policy should
be kept on Branch
record.

48

Whether
terms and conditions of previous sanction Yes, as reported by
Branch
have been complied with, if not, specify
time frame to complete (with explanation)
& permission obtained from competent authority
Whether
been obtained.

certificate from Pollution Control Board has N.A.

Whether
the borrower is facing any litigation No.
from banks /FIs/creditors/ Govt. Deptt./
Statutory bodies etc., if so, state in brief.
In
case of consortium advance, whether our N.A.
bank is getting proportionate share of business
Additional
/ temporary limits sanctioned subsequent to N.A.
the last regular sanction and whether
same is liquidated on due date or not
Outstanding
amount of unhedged Foreign Currency Exposures

B. Income Value of account

N.A.

(Rs. in Lakh)
Last year

Current year

Interest earned

18.82

11.20

Exchange income

nil

Nil

Commission earned

0.82

2.56

Value of account (Deposits)

Process Fee recovered

Income from Third party products / insurance

49

Others (Lead Bank Fee, Commitment fee, Penal

Interest, Syndication fee)
Total

19.64

13.76

Turnover in Foreign Exchange Business

Deposits placed (Owner Directors/ partners or Family
Members, Relatives & Friends)
- Current
- Savings
- Term Deposits

a. Adverse features affecting credit decision and action

proposed (including non compliance to terms and conditions of

sanction and present position)

Sr No

Pending Matters

Present position

Steps taken / Remarks

Nil

b. MAJOR INSPECTION / AUDIT IRREGULARITIES POINTED OUT

IN THE LAST INSPECTION REPORT

Credit Audit Report dated 05-02-2009 :
S.N
1.

2.
3.
4.
5.

Observations in Credit Audit Report

Certificate of Documentation and compliance
of terms and conditions of sanction not
submitted

Unit inspected but report not prepared. Give

the date of report preparation and report any
adverse observations if any
Observations in FFR to be analyzed and
reported to Regional Office
Valuation of Collateral not done once in two
years as per guidelines
Inadequate Insurance of Stocks and

50

Branch reply
Scrutiny of Documents carried out by Shri
Kalim Ur Rehman (Banks Panel
Advocate) on 18.07.08.
Compliance of terms and conditions have
been submitted.
Latest Stock Inspection Report dated
No major/adverse observations.
FFR is being obtained/scrutinized and
forwarded to Regional Office.
Valuation done on 23-03-2009
Insurance taken from 17-3-2009

6.

7.

8.

insurance expired on 14/3/2009

Half- yearly review of Credit rating not done
as per extant guidelines.
Branch to do credit rating exercise on the
basis of Audited Balance Sheet for the year
2007-08.
Branch to get the External Credit rating
done, inform the status of External Credit
rating

Branch to ensure ostentation of CA Certified

Book Debts Statement age-wise and ensure
periodical inspection

Credit Rating based on the Audited B/S

as of 31.03.09 is being carried out with
the present proposal.
The borrower has obtained Credit Rating
from SMERA (SMERA C3) on 05.12.08.
However, in terms of BASEL-II guidelines,
the borrower has been advised to obtain
External Credit Rating from any of the
approved Rating Agencies i.e. CRISL,
CARE, ICRA, FITCH..
received on 30-4-2009

Stock Inspection Report dated 24-10-2008 from M/s D.P. Gupta &
Co. Charted Accountant.
Auditor Remarks

Branch Reply

1. Hypothecation agreement for collateral

security for Plant and Machinery , furniture
and fixtures and other equipments existing
as well as to be acquired in future is not
obtained by the branch. Insurance of the
same has also not been taken.
2. Audited B/s of the march, 2008 was not
available for verification

Audited B/S as of 31-03-2008 and31-032009 has been obtained and kept on

Branch Record.

3. Details of Collateral Security of property Details of Collateral Security of property at

at Manesar is not recorded in Title Deed Manesar is recorded in Title Deed
Register.
Register.
4. Banks name plate showing stock Banks name plate showing stock
hypothecated with Dena Bank not hypothecated with Dena Bank is now
displayed
being displayed.
5. Vetting of latest documents has not
been done.( Documents vetted 05-062008)

Vetting of latest documents has been

done.

6. One Bank guarantee of Rs. 2.69 lacs

issued on behalf of the party has expired
on 13-07-2008.
7. FFR-I & FFR-II has not been obtained
by the branch from the Firm

FFR-I & FFR-II is now being obtained and

scrutinized by the branch and submitted to

51

Regional Office has not been obtained by

the branch from the Firm

c. Directors name figuring in RBI/ Wilful Defaulters /

CIBIL / SAL ECGC list and comments

thereon. Impact on taking exposure where
names are appearing in the defaulters list: NIL

d. Position of statutory dues and incentives receivables:Provident Fund, ESI and Superannuation contribution paid upto
Wages and salaries paid upto
Sales Tax paid upto
Service Tax paid upto
Income Tax Assessment completed upto and for the year ending #
Advance Tax paid for the year ending
Excise duty paid upto
Municipal Tax, Octroi etc.
Incentives from the Government and other agencies
Disputes not acknowledged as debts
Contingent Liabilities (Likely to turn into Liabilities)
Reconciliation of Debtors/ creditors

Branch is
advised to
obtain and
keep in record
the Statutory
Due Certificate
from the
borrower duly
certified by the
C.A. of latest
date and
Branch
Manager
should ensure
that there are
no Statutory
overdues.

CA certificate to be obtained and kept on record

# wherever borrowers encounter tax disputes, searches, raids by tax authorities, details
along with proceedings and present status should be reported.

e. Group dealings/experience & desirability of further exposure:

f. RISK ASSESSMENT
Risk

Risk Factor

Risk Mitigation

1.Industry/Activity
Risk

There are large numbers of

manufacturers both in
the organized as well as
unorganized sector and the
expansion in their capacity
could lead to recession/oversupply.

On account of growing
economy and infrastructure
development, the demand is likely
to absorb the supply on account
of capacity increase.

52

2.Borrower/Borrower
Risk
The firm may face competition
from the unorganized sector
in the regular cable products.

The firm will be able to withstand

the competition on the basis of
quality and business experience.

3.Security Risk

The product is prone to theft and The firm to take comprehensive

fire.
insurance, with Bank clause, to
cover such type of risk.

4. Other Risk

Nil

20. Compliance oF RBI / Bank Loan Policy guidelines

Deviation if any with justification
The proposal is as per RBI / Banks Loan Policy guidelines.

21. MODIFICATION IN EXISTING TERMS OF SANCTION IF ANY:N.A.

22. VIEWS/RECOMMENDATIONS OF THE CREDIT COMMITTEE:
N.A. since it is a renewal proposal.

23. DISCRETIONARY POWER FOR SANCTION AND FOR APPROVAL

OF DEVIATION, IF ANY:
The proposal falls within the overall discretionary powers of GM (Credit).
24. RECOMMENDATION:
Branch has recommended for renewal of existing fund based limit of Rs. 400.00
lacs and Non fund based limit of Rs. 350.00 lacs as per existing terms and
conditions.
25. REGIONAL OFFICE RECOMMENDATION:
It is an existing SME client of the branch. SME sector is
presently one of the thrust areas of finance of the Bank.
The Borrower is dealing with us since 1991 and the
overall track record is satisfactory.
The partners have experience of more than 15 years in
the line of business.
The borrower is having profit making track record.
Collateral base of the exposure is 72.60%, which may be
considered satisfactory.
53

The limits are justified under Modified MPBF

method.

Branch has recommended for renewal of the existing limits.

PUT UP FOR APPROVAL.

Officer
SME

Manager
SME

Sr. Manager
SME

AGM
SME

DGM
SME

ANNEXURE 'A'
Ref No. NDR/ICFD/SS/ 01
Date : 23-10-2009
Name of the unit/borrower : M/s Paragaon Cable India
1) Nature of arrangement : Cash Credit Hypothecation
(Stock-cum-Book Debts)
2) Limit
: Rs. 250.00 lacs [Rupees Two Hundred & Fifty LacsRenewal of existing limit
3) Margin

: 25% (Against stock of raw material and finished goods)

33.33%(Against work in progress)

4) Interest

: BPLR+0.75%-0.50% (concession in terms of H.O.

circular no. 282/06/2008-09 dated 18.12.08) i.e. at present
12.75% p.a. presently, subject to change in BPLR from
time to time. The concessional interest of 0.50% is at the
sole discretion of the Bank and may be withdrawn at any
point without notice.

TERMS AND CONDITIONS:1. Our usual documents to be executed by the firm and all the partners/proprietor in
their personal capacity. In the case of limits companies, documents are to be
executed under the common seal of the company backed by proper resolution.
2. Our advance to be guaranteed by the partners Viz. Shri Vikas Nagpal and Smt.
Anjana Nagpal in their personal capacity alongwith Shri D.L.Nagpaland, and Shri
Prem Nagpal
3. All the assets charged to the Bank to be fully insured against fire, theft, burglary,
SRCC, breakdown of machinery with bank clause.
4. The unit/company to submit stock statement and monthly selected operational
data (MSOD) every month.
5. The unit/company to submit QIS/FFR statement regularly.

54

6. Our advance is restricted to manufacturing/trading activities.

7. Interest/Commisison rates are subject to revision as per RBI/HO guidelines or as
decided by consortium.
8. Process fee and Supervision Charges to be recovered as per HO guidelines.
9. Branch to ensure that there are no inter-firm transfer of funds except for genuine
sales transactions.
10. Bank will have a right to examine all the times firm's/company's books of accounts,
assets etc. and have the company's workings and operations examined from time
to time by the officers of the bank/or technical experts and/or management
consultancy and fees to be borne by the firm/company.
11. Bank may charge penal rate of interest over and above the rate applicable under
the following circumstances:a) delay in submission of stock statement, MSOD, QIS statement.
b) delay in submission of renewal papers.
12. Guidelines issued by HO/RA from time to time are to be strictly adhered to.
13. The borrower be informed of the terms and conditions of sanction and
confirmation be obtained to the effect thereof in writing.
14. Date of reconsideration - one year after sanction.

the

_____________________________________________________________________
SENIOR MANAGER

4.5 Summery of Findings:From the above analysis, it is found how a credit limit has been appraised to a
borrower. Starting from the loan application from the borrower till the
disbursement of the loan and after it the close monitoring till the adjustment of
the banks loan.
The procedure which is to be followed to sanction a loan in an SME department
is somewhat lengthy process, but it is the best method to sanction a loan as it
goes as a parallel to the safe side of the bank as in case of the borrowers
default or inability to repay the loan.

55

CHAPTER-5 SUMMERY AND CONCLUSIONS

5.1 Summery of Learning Experience:The summery just states that it was a great experience to join a Nationalized
Bank for training and learning things. I learnt a lot in the Credit Department
(SME) of Dena Bank. Here I worked on many appraisals, which are beyond the
scope of this project. The new day in the premises of the bank was started with
a new project report in the hands. After reading carefully the whole project
report, I had to make proposals on a format of crediting appraisal of the bank.
Various proposals were look after by me. After making the proposals, I handed
over all the work done to my senior. He used to make necessary corrections in
the work done and hence it was an opportunity for me to learn more and more.
Even for more learning, my senior gave me an opportunity to attend a Credit
Committee-Meeting held by other persons of the bank to clear the doubts
about a particular proposal.

56

Hence the whole experience of working in such a place was

amazing. I leant here to a great extant about the whole procedures to sanction
a limit to the different different borrowers.

5.2 Conclusions and Recommendations:Conclusions:The project gives the detailed knowledge of the whole process of sanction a
limit which Dena Bank performs.
Starting from the loan application from the borrower and compilation of
Confidential Reports on him and the guarantor, the process continues till the
disbursement of loan and after it the close monitoring till the adjustments of
Banks Loan.
The project was an attempt to understand and perform the work in the credit
transaction and the credit appraisal which I had included in this project is just an
example of it.
I had worked on many such appraisals, which are beyond the scope of this
project. Hence the whole experience of working in such a Nationalized Bank
was amazing. I found lots of things to learn and understand here. Hence to

57

conclude, I just state that it was a great job done in a

Nationalized Bank with the experienced employees.

Recommendations:The bank is well doing in its field and having good reputation in Domestic as
well as International Market. There are some of the recommendations that I
would like to suggest to the Bank: These are:
The head office, regional office and the branches should work on EDI
(Electronic Data Interchange), since transaction of letters between these
offices is still manual which lead to repetition of work as well as wastage
of time.
Dena Bank is too conservative in its dealing and hence people are
attracted towards private sector banks. Thus an Aggressive Marketing is
recommended to the Bank.
Dena bank should also appoint Customer Relation Officer so as to solve
various problems of customers which will help in retaining the customers.

58

 There is also lack in the initiation of officers. The officers

should take initiative to work with new changes.

APPENDIX
A) Credit Rating:Definition of Credit Risk:- Credit Risk is the risk of default by borrower due to
inability or unwillingness to repay his debts in accordance with the agreed terms
and conditions.
Need for Credit Risk Management: The liberalization of the Indian Economy has brought about sweeping
changes in the economic environment. Changes in the economic
environment have induced new anticipated and unforeseen risks in
lending. The assessment of these risks is essential to facilitate prudent
credit decisions.
The terms and conditions of loans and advances sanctioned to
borrowers determine the profit that accrues to the bank from that loan. If
59

the terms are decided without proper assessment of the

credit risk, the bank might be charging low interest rates from poor
quality customers thereby sustaining losses due to default and charging
high rates from good quality customers thereby driving them away to
other banks.

Credit Risk Rating:- Credit risk rating is a rating assigned to borrowers,

based on an analysis of their ability and willingness to repay the debt taken
from the bank. This rating is assigned on a scale, which generally have 6-8
levels. Companies falling in the same credit risk category have similar
probability of default. Better the rating, lower is the probability of default. The
probability of default increases in an exponential manner as the credit risk
rating deteriorates.

Uses of Credit Risk Rating:Whether to lend to a borrower or not:- The credit risk rating of a
borrower determines the appetite of the bank in determining exposure
level. A bank would be willing to lend to highly rated borrowers but
would not like to exposure to borrowers with very poor credit rating.
Pricing:- The risk premium to be charged to a borrower should be
determined by its credit risk rating. Borrowers with poor credit rating
should be priced high and vice-versa.
Risk Mitigates:- The extent of collateral security required and need
to step up margin requirement are linked to credit risk rating of a

60

borrower. The higher the risk category, the greater

should be the value of collateral and margins.

Assessment of Credit Risk Rating:Credit risk rating tools involve analysis of a company on various
parameters such as financials, industry characteristics, business
performance, management quality etc. different scales can be used and
the above parameters can be combined with the appropriate weightages
to arrive at a final score. The credibility of credit risk rating to a large
extent depends on the skills of the persons using the rating tools and his
integrity in using the model equitable for all concerns.

B) Summery Definitions of Ratios:1. Current Ratio:Current Assets

Current Liability
Current Assets= cash and bank balances+ investment in Government
securities+ sundry debtors+ bills discounted+ inventories+ loans and
advances+ advance payment of tax+ pre-paid expenses+ other current assets.
Current Liabilities= short term bank borrowings+ commercial paper+ loan from
corporate bodies+ bills discounted+ sundry creditors+ unmatured financial
charges+ advance against work in progress+ other current liabilities.
2. Debt Equity Ratio:Debt
Equity

61

Debt= total borrowings+ preference capital- short term bank

borrowing- commercial paper- loans from corporate bodies.
Equity= Tangible net worth.
3. Interest Coverage Ratio:EBIDT
Total Interest
EBIDT (Earning before interest, depreciation and tax) = profit before
depreciation, interest and tax+ extra ordinary expenses- extra ordinary income.
Total Interest= Gross interest+ interest capitalized.

List of Tables

S. No.
1.
2.

Table No.
1.
2.

Table Title
Different bank Parameters
Dena Bank- Key Data

62

Page No.
23
24

BIBLIOGRAPHY
Various internal circulations issued by bank from time to time.
Various sites such as
www.denabankindia.com
www.sebi.gov.in
www.moneycontrol.com
www.pnbindia.com
www.bobindia.com

63