DENA BANK INVITES EXPRESSION OF INTEREST

FOR PROVIDING CONSULTANCY ON RISK MANAGEMENT

The Expression of Interest document is presented in following

pages for interested parties to download.

Responses to Invitation for Expression of Interest should be

submitted in duplicate in sealed envelopes addressed to General
Manager (IT & IRM) at Dena Bank Head Office, Dena Corporate
Centre, C-10, G Block, Bandra Kurla Complex, Bandra East,
Mumbai 400 051 before 4.00 PM on 3rd January 2006. Offers
received after the specified date and time will not be entertained.

The Bank will issue Request for Proposal at a later date only to
parties shortlisted after evaluation of Expression of Interest.

The Bank reserves its right to reject any or all of the responses to
Invitation for Expression of Interest received without assigning
any reasons.

General Manager
Information Technology &
Risk Management

23rd December 2006

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 Dena Bank
Consultancy Services for an Integrated Risk Management
Framework
Request for Expression of Interest [EoI]

0.000 Information on the Bank:

0.001 Dena Bank, founded in May 1938 is now a leading listed bank and is
a Government of India enterprise. The Bank had 1122 branches
as at 31st March 2006 (1122 as at 30th June 2006) including 98
satellite offices spread over 21 states and 3 Union Territories. Of
these, 518 branches were located in Gujarat, 249 in Maharashtra
and 74 in Chhattisgarh. The Bank had presence in almost all
major cities / towns elsewhere. Of the 1122 branches, 491
(including 98 satellite offices) were located in rural areas, 191 in
semi-urban, 236 in urban and 204 in Metro areas. The Bank does
not have any branch outside the country. The Bank has 37
authorized dealer branches to undertake forex related business.
The Bank has also set up 5 Asset Recovery Branches to focus on
recovery efforts in large NPA accounts. The Bank has set up over
50 FINMARTS for marketing of its retail products and services.
0.002 The Bank has a large bouquet of products and services to offer its
customers. Apart from traditional asset & liability products and
ancillary services like Safe Deposit Vaults, the Bank also has a
number of Retail Banking schemes for housing loans, consumer
durables, educational loans, mortgage loans etc. The Bank also
offers its services in the form of Credit cards, ATM cum Debit
cards, Kisan Credit Cards, Dena Laghu Udyami Credit Card, Dena
General Credit Card etc. The Bank also had a special deposit
scheme Dena Alpa Bachat Katha aimed at financial inclusion. The
Bank has been active in corporate credit, agricultural credit, SME
& SSI loans, retail credit and export credit. The loan book of the
bank is well diversified covering a wide of sectors / industries of
the economy. The Bank also offers non fund business like Letters
of Credit, Guarantees etc. The Bank also distributes third party
products like insurance (both life and non-life) and mutual funds.
The Bank had entered into a number of tie-ups for this purpose.
0.003 The balance sheet size of the Bank as at 31st March 2006 was Rs
26545.33 crores (Rs 24028.59 as at 31st March 2005). The assets
of the Bank included a loan book of Rs 14231.24 crores (Rs
11308.59 crores in previous year) and investments books of Rs
8570.67 crores (Rs 9696.95 crores in previous year) (figures are
on net basis). The fixed assets of the Bank stood at Rs 460.53
crores as against Rs 293.27 crores in previous year. The Bank has
posted operating profits in all years since its inception.

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0.004 Organisationally, the Bank has a three tier structure with Corporate
Office at Mumbai, 18 Regional Offices and 1122 branches. The
Regional Offices play the role of first level of control structure. In
view of the large number of branches in Gujarat, the Bank has
opened a general Manager’s Office in Gujarat to control and
coordinate branches in the state.
0.005 All branches of the Bank are computerized (partial / fully
computerized, on stand alone basis) covering 98.3% of its
business. The Bank has so far net worked 955 of its branches
through its intranet facility, dial-up modem lines etc.
0.006 In keeping with the universal trend of introducing ATMs as the most
popular and convenient mode of delivery channels, a total of 240
ATMs have been installed all over the country as at 31st March
2006 and more ATMs are being added regularly. As of 31st
March, 2006 the installation base of 240 ATMs covered 110
centres including 42 at offsite locations. Since then 15 more ATMs
are in the process of installation in April 2006.
0.007 The Bank is a member of VISA, thus facilitating the Bank’s
cardholders to access their accounts from more than 1,00,000
Merchant Establishments (MEs) and VISA ATMs, all over India and
more than 13 million MEs and 890,000 ATMs, internationally. In all
312 branches covering more than 100 centres have been
technologically enabled to issue ATM / Debit cards. Apart from
any VISA enabled & POS terminals, these cards can be used at
any of the Corporation Bank ATMs, SBI ATMs as well as ATMs
belonging to CASHTREE / CASHNET group of Banks. The Bank has
recently joined National Financial Switch initiated ATM sharing
arrangement. The Bank has a number of value added services
over the ATMs like, Mobile Pre-paid Top-up. Any Branch Banking &
Multi-City Cheque Facility has been introduced at 138 branches
across 50 centres.
0.008 In order to meet the emerging challenges in the banking arena,
implementation of Basel II accord and risk management as well as
customer focus in mind, the Bank has embarked upon a very
important and strategic endeavor of conceptualizing and
implementing a state of the art ‘Core Banking Solution’ (CBS).
Apart from the basic core Banking solution the Bank is also
proposing to implement a boutique of third party applications
which will change the way we Bank, keeping in mind the
customer need. A host of third party applications are also slated
for implementation as part of core banking that includes Risk
Management (from M/S SAS), ALM (from M/S Oracle Corporation),
Integrated Treasury Management (Credence Solution) etc. The
Bank is adopting a complete end to end Outsourcing model with a
10 year contract period and has planned to rollout 850 branches
under CBS environment in the next two years.
1.000 Introduction:

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1.001 Dena Bank [hereinafter called “The Bank” or “Bank”] intends to
have consultancy services for developing and implementing an
enterprise wide integrated Risk Management Framework covering
Credit, Market & Operational Risks to comply with Basel II norms
& RBI guidelines and for benchmarking the proposed framework,
systems & procedures etc against international best practices in
Banking and implementing across Bank-wide units.
1.002 The Bank invites reputed consultants satisfying the prescribed
eligibility criteria to indicate their interest in providing their
services.
1.003 Consultants having required capabilities and ability to deliver the
Bank’s requirements alone need to apply.
2.000 Scope of Work:
2.100 Diagnostic Study & Gap Analysis:
2.101 To conduct a Diagnostic Study and Gap Analysis followed by
formulating and implementing Credit, Market & Operational Risk
Management Frameworks and also a Framework for enterprise
wide integrated risk management to comply with Basel II norms &
RBI Guidelines and benchmarked against the international best
practices and achieving the following objectives:
 Review of Policies, Processes and Organization Structure
pertaining to credit, market & operational risk management;
 Adopting Simplified Standardized Approach for Credit, Duration
cum Maturity Approach for Market Risk & Basic Indicator
Approach for Operational Risk Capital computation by March 2008
and suggesting ways of optimizing capital requirements;
 Recommending a MIS Framework, which will enable the Senior
management to take decisions based on the risk taken in terms of
Credit, Market & Operational risks involved;
 Introduction of Comprehensive RAROC approach and transfer
pricing mechanisms;
 Framework for preparing the bank for Risk based Supervision by
Reserve Bank of India including comprehensive risk profiling of
the Bank, tools for aggregation of risk assessment on enterprise
basis and strengthening the risk based internal audit process;
 Introduction of Internal Capital Adequacy Assessment Process for
Credit, Market and Operational Risks separately; and
 Road map & Framework for Economic Capital computation from
the Regulatory Capital computation.

2.200 Credit Risk Management:

 Review of Policies, processes and Organization Structure
pertaining to Credit Risk Management;

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  Adopting Simplified Standardized Approach for Credit Risk Capital
computation by March 2008 and suggesting ways of optimizing
capital requirements;
 Road map for credit risk to migrate from standardized to
Advanced Internal Ratings based Approach through Foundation
Internal Ratings based Approach in a time-bound manner;
 Rating Migration Analysis including the data base needs, model
building etc and calculation of segment wise Probability of
Default, Exposure at Default and Loss Given Default parameters;
 Extension of the present Credit Rating Model of the bank to cover
all exposures of Rs 2 lakh and above;
 Formulation of industry wise credit rating models at least for
industries with major exposures and separate scoring models for the
major segments like Retail & SME ;
 Identification of core areas of risk origination from credit risk
perspective covering on and off balance sheet exposures;
 Framework for Risk based Pricing, Risk based delegation of credit
approval authority, Risk based credit review process etc;
2.300 Market Risk Management:
 Framework for Cost to Close Analysis for efficient Funds /
Liquidity Management;
 Framework for introduction of VaR analysis, Back-testing etc to
cover State Government Securities, non-SLR portfolio including
Equities & Forex Exposures and integration VaR as part of
decision making process in Treasury;
 Framework for Stress Testing and Sensitivity Analysis in
Investments Portfolio including Forex Operations;
 Framework for introducing Hedging for market risk by way of
derivatives handling;
 Revisiting the Bank’s existing Credit Rating Model for non-SLR
investments;
 Framework for establishing a separate Market Risk Management
unit and strengthening of Mid-Office/s; and
 Framework for migrating to VaR based Approach of capital
allocation for market risk.
2.400 Operational Risk Management:
 Framework for Improvements in Identification of core areas of
operational risk origination, Assessing, Controlling, Monitoring
and Mitigation of Operational Risk;
 Identification of core areas of risk origination from an operational
risk perspective;
 Road map for operational risk to migrate from Basic Indicator
Approach to Advanced Measurement Approach through
Standardized Approach in a time-bound manner; and
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  Framework for the data base needs, model building etc for
capture, collation and analysis of data on Potential and Actual
Loss Events to facilitate migration to Advanced Measurement
Approach.
3.000 Eligibility Criteria:
3.001 The eligibility criteria for the consultants to participate in the bid
process are as follows:
 The Consultant should have experience in developing &
implementing credit, market, operational risk management
frameworks and Integrated Risk Management system in at least
one Bank in India [Private/Public] of comparable size (i.e. with a
branch net work of around 1000 branches and a business-mix of
at least Rs 40,000 crore) or at least in 2-3 international financial
institutions / Banks, preferably abroad.
 The Consultant should involve international experts in the
consultancy process and modeling.
 The Consultant should have a sizeable team [at least 100 experts
with domain knowledge in various aspects of risk management /
financial services
 The Consultant should have knowledge of the latest
developments in the industry in managing credit, market &
operational risk including Basel II norms, Regulatory guidelines
applicable to banks operating in India and international best
practices.
 The Consultant should be of international repute, and should have
sufficient expertise in related areas like process re-engineering,
internal audit including risk based internal audit, and quantitative
modeling in Banks.
 The Consultant should have ready-to-deploy tools/framework for
benchmarking against international best practices and exhaustive
coverage of Basel II requirements. The Bank is procuring the
requisite software (as detailed elsewhere) through a
separate selection process and out of scope of this EoI.
Software vendors who would like to provide consultancy services
may be eligible consultancy subject to their fulfilling the eligibility
criteria as stated in this document and as per the CVC guidelines.
 The Consultant should have complete understanding of Basel II
and RBI Guidelines.
 The Consultant should have the capacity to execute the project
through out the implementation cycle.
 The Consultant should be a profit-making firm for the last two
years, and should’ve an annual turnover of minimum Rs 25
crores in each of the last two years (i.e. financial years 2004-05
and 2005-06 or calendar years 2004 and 2006 as per the
published accounts of the consultant).

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  The Consultant should enclose documentary proof of all the above
criteria along with their technical proposal. Proposals of
Consultants, which do not comply with the above, will be rejected
without assigning any reasons for the same. Bank reserves the
right to amend the criteria without information to the consultants
and at any stage of selection.
4.000 Deliverables:
The Deliverables from the Scope of consultancy as defined hereinabove
will cover the following, among others:
 A detailed report on the findings from Diagnostic Study and a
Gap Analysis Report from a credit & operational risk
perspective that should cover the existing governance
structure, policies, procedures, and systems. The Gap Analysis
report for migration to increasingly more risk sensitive
approaches for credit, market and operational risk for capital
allocation should be separate and should address the issues
separately, in detail.
 Hand-on assistance to the Bank in addressing the gaps by
designing new processes & policies, wherever needed.
 Assistance to the Bank in re-organizing the Risk Management
Department at Corporate level and requisite structure at the
level of Controlling Offices; creation of a separate cadre of
Risk Managers; and provide necessary training to Risk related
personnel and trainers of the Bank.
 Assist the Bank in achieving Basel II norms compliance under
Pillar I, II and III in accordance with the date lines that are /
may be set by Reserve Bank of India including migration to
increasingly more risk sensitive approaches for Credit, Market
and Operational Risk factors for capital allocation.
 Delivery of standard templates for data collection and
mapping, and training the team from Bank on the usage and
applicability of such templates to aid migration to
increasingly more risk sensitive approaches for Credit, Market
and Operational Risk factors for capital allocation. Consultant
should help the Bank in designing data collection templates
for estimation of Probability of Default [PD], Loss given Default
[LGD] and Exposure at Default [EAD], Operational Risk VaR
etc
 Assistance to the Bank in designing scoring models [PD] for
Basel II specified asset classes.
 Assistance to the Bank in conducting a Risk & Control Self
Assessment [RCSA], which should include identifying risk
categories, risk owners, controls, control ownerships, and
prioritizing risks based on judgment.

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  Assistance to the Bank to develop a frame work of Key Risk
Indicators [KRI] that includes identification, documentation
and application of KRIs.
 Assistance to the Bank in designing report templates and
devise a methodology for comparing the KRIs with Loss-event
data and recalibrating the thresholds kept, wherever
necessary.
 Design for a Loss-event Database framework to capture loss
events, possible loss events and near-miss events with field
level description.
 All MIS related templates to address Pillar II & III requirements
for reporting to Senior Management / Board / Reserve Bank of
India.
 Separate road maps for the transition from standardized
approach to advanced approaches in credit risk and
standardized approach to advanced measurement approach
in operational risk. Consultant should also prepare a road map
for the transition from regulatory capital to economic capital.
 Consultant should develop functional and technical
specification document for a CRM solution for Capital
computation, based on the framework and strategy
implemented.
 Assist the Bank in designing a comprehensive MIS framework
to help the management in taking pro-active steps to
minimize risks by individual business lines.
 Consultant should develop functional and technical
specification document for an ORM solution for Capital
computation, based on the framework and strategy
implemented.
 Consultant should develop the functional and technical
specification documents for Credit, Market & Operational Risk
Management solutions for Capital computation, based on the
framework and strategy implemented.
4.002 The above deliverables are only indicative and not exhaustive. For
completeness, the above list of deliverables should be taken
together with the Scope of the Consultancy as defined at Para
2.000 hereinabove along with sub paras thereunder.
4.003 The information furnished herein is only indicative and must be
considered only as advance information to assist the prospective
bidders to decide whether or not to apply for pre-qualification.
4.002 The time frame for providing the solutions shall be mutually decided
between the Bank and successful bidder.
5.000 Criteria for Shortlisting:
5.001 Detailed Request For Proposal (RFP) will be issued as the next step,
only to the short-listed parties. The Bank intends to shortlist the

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 interested parties based the responses to this Expression of
Interest and on the following items:
a) Meeting the eligibility criteria,
b) Experience in consulting on risk management,
c) Previous engagements of similar nature,
d) Understanding of Basel and RBI Guidelines.
5.002 The Bank reserves its right to accept or reject any or all of the
responses to this Expression of Interest without assigning any
reason at its discretion.

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