Jaypee Business School

A constituent of Jaypee Institute of Information Technology University

A- 10, Sector 62, Noida (UP) India 201 307

www.jbs.ac.in

Corporate Internship Report

Internship Report submitted as a partial requirement for the award of the Dual Degree
Management Program

Arihant Jain
05104728
DDM 2005-10
E-mail:arihant74@gmail.com

Corporate Internship Supervisor

Name: Anshul Dhamija (Relationship manager)
Contact details: 9999108620
Mailing Address: anshul.dhamija@ingvysyabank.com

Faculty Supervisor:-
Ms. Sujata Kapoor

Start Date for Internship: 1st June 2009

End Date for Internship: 25th July 2009
Report Date: 31st July 2009

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 Self Certification by the Intern

I hereby certify that I Arihant Jain have successfully completed my internship with “ING Vysya
Bank” in the month of June‘09 from (1 June to 25 July). This is also to certify that this report is
an original product and no unfair means like copying etc have been used for its completion.

Arihant Jain
Signature
Date

2
 Certificate from the Corporate Internship Providing Organization

This is to certify that Mr…. has successfully completed his/her internship with us in the month of
----------’09 from (mention start and end date). We wish him/her all the best for all his/her future
endeavors.

Name of the Supervisor:

Signature:
Date:

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 Acknowledgements

No task is a single person effort, same is with this project. Thus I would like to extend my
sincere thanks to all those people who helped me in accomplishing my project. I owe my project
success to all faculty members, especially our Director Prof. Ravi Shanker, for providing me
wonderful opportunity and guidance. I would like to extend my special gratitude to Ms. Sujata
Kapoor and Mrs. Kanwal Anil my faculty supervisor for providing excellent supervision for the
successful completion of this project. This project provided me a platform to increase my
knowledge and empowered me with a better understanding of concepts in the real world
scenario. And last but not the least special thanks to ING Vysya which accepted me in spite of
my inexperience in the field and gave me the opportunity to work and learn with them. My
special thanks are also to my Corporate Internship Supervisor Mr. Anshul Dhamija (Relationship
Manager) who guided and helped me in completing this project inspite of his busy schedule.

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 Table of Contents

S. No. Topic Page Number App no of pages

( not to be
included in report)
1 Corporate Internship Objectives 6

2 Corporate Internship- Abstract 7

3 Internship Organisation’s Profile vis- 8-28

à-vis its competitors

4 Industry Analysis 29-46

5 Financial Statement Analysis 47-60

6 Detailed study on the Marketing, 61-75

Operations and Finance & HR functions
OR
Details of the specific field based project
assigned during the internship
7 Project - Conclusion & 76
Recommendations

8 My Take Away – Key Learning’s 77

9 Annexure & References 78

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 Jaypee Business School
Objectives of the Corporate Internship

The purpose of Corporate Internship for a minimum time of 8 weeks is to connect theory and
practice, obtain knowledge & awareness of the functioning of various departments of the
corporate and its environment which is utmost necessary for the success of the budding
managers. The basic objectives of the summer internship programme for the MBA students are:

1. To understand the business and competitive environment of ING Vysya Bank.

2. To analyze and understand the financial position of ING Vysya Bank viz – a – viz
competitors.
3. To study the Business Banking Department of ING Vysya Bank and its practices.
4. To facilitate in testing what I have learnt in the foundation courses in the first year.
5. To get a feel of corporate life and its functioning & understand various interaction styles.

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 ABSTRACT

I did my summer internship in ING Vysya bank. It was a business banking department and it was
located in Karol Bagh. On the first day I met the branch manager of the bank Mr. Uday
Choudhary. He assigned me my mentor who was the relationship manager of the business
banking division of ING Vysya Mr. Anshul Dhamija. In the first week he gave me two files of
the company which he himself completed. Reading those files I learnt how banks give loans,
what are the important documents needed to get the sanction letter. On the second week I was
assigned to do cold calling. I was given a data of another private bank. In my whole internship I
made 15 customers who gave me time to meet them. And out of those 15 I converted 1 myself
with the help of my mentor. The client is Sahib Textiles. They make ladies suits. On a daily
routine , my time was divided. From 10 to 1 pm I use to do cold calling. After lunch I used to
meet all those people who have approved and would like to meet me. After meeting them I used
to come back to my office and had to report to my mentor.
The client that I converted was Sahib Textiles. They make ladies suits. They needed a working
capital of 4.25 crore. After checking there balanced sheet, profit and loss account statement and
there last six month bank account. I gave his case to my mentor, who finally approved his loan.
The financials of ING Vysya is in a very healthy stage. All the ratios are showing vast
improvements, be it the capital adequacy ratio, the net profit margin. All of the financial ratios
has done better than the previous years. There total assets, market cap have also gone up from
the previous years.
The key learning that I learnt was the fact that I saw the real corporate world. What is the
pressure that each employee faces each day. I was working in a professional working
environment with professional working people. This was my real learning. Apart from that I
worked on real projects, learned how banks gives business loans to there customers. I also learnt
how to communicate with different types of clients. Working on the real time project made me
learnt how to read a bank statement. This internship also helped me make new friends like Mr.
Uday Choudhary and Mr. Anshul Dhamija, who were my boss. I would thank them to give me
such a immense opportunity to work with them.

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 COMPANY PROFILE

ING Vysya is the joint venture between ING & Vysya

ING Group

ING’s mission is to be a leading, global, client-focused, innovative and low-cost provider of

financial services through the distribution channels of the client’s preference in markets where
ING can create value.

ING group originated in 1990, from the merger between Nationale – Nederlanden NV (the
largest Dutch Insurance Company) and NMB Post Bank Group NV. Combining roots and
ambitions, the newly formed company called “Internationale Nederlanden Group”. Market
circles soon abbreviated the name to I-N-G. The company followed suit by changing the
statutory name to “ING Group N.V.”.

Since 1991, ING has grown from a Dutch company with some international business to a
multinational with Dutch roots.

 ING Group is a global financial services company of Dutch origin with 150 years of
experience, providing a wide array of Banking, insurance and asset management services
in over 50 countries.

 Over 1,20,000 employees work daily to satisfy a broad customer base: individuals,
families, small businesses, large corporations, institutions and governments.

 Based on market capitalization, ING is one of the 20 largest financial institutions

worldwide and in the top-10 in Europe.

 ING is the number one financial services company in the Benelux home market. ING
services its retail clients in these markets with a wide range of retail-banking, insurance
and asset management.

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  In their wholesale banking activities they operate worldwide, but also with a primary
focus on the Benelux countries.

 In the United States, ING is a top-5 provider of retirement services and life insurance. In
Canada, they are the top property and casualty insurer.

 ING Direct is a leading direct bank with over 11 million customers in nine large
countries. In the growth markets of Asia, Central Europe and South America they provide
life insurance.

 ING distinguishes itself internationally as a provider of ‘employee benefits’, i.e.

arrangements of non-wage benefits, such as pension plans for companies and their
employees

 Another specialization is ING Direct, an Internet and direct marketing concept with
which ING is rapidly winning retail.

 Furthermore, the company differentiates itself from other financial service providers by
successfully establishing life insurance companies in countries with emerging economies,
such as Korea, Taiwan, Hungary, Poland, Mexico and Chile.

Vysya Bank

Vysya bank came into existence in the year 1930. When the team of visionaries came together to
found a bank that would extend a helping hand to those who weren't privileged enough to enjoy
Banking services. Vysya Bank opened its very first branch and started its operations from
Bangalore city .With a span of time it gained its strong existence in south India. It’s been a long
journey since then and the Bank has grown in size and stature to encompass every area of
present-day banking activity and has carved a distinct identity of being India's Premier Private
Sector Bank. The Bank made rapid strides to reach the coveted position of being the number one
private sector Bank.

ING Vysya group in India

In India ING Vysya is into following areas of services:-

 Banking.

 Life insurance.

 Mutual fund.

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ING Vysya Bank

CORPORATE STATEMENT

ING Vysya Bank will be an entrepreneurial integrated financial services institution where
innovation and transformation are the way of life.

BANK PROFILE

ING Vysya Bank Limited is an entity formed with the coming together of erstwhile, Vysya bank
ltd, a premier Bank in the Indian Private Sector and a global financial powerhouse, ING of Dutch
origin, during Oct 2002.

The immediate benefit to ING Vysya Bank ltd was the pride of having become a member of
global financial services giant.

Bank has an asset base of 1313 billion euros.

 It has net profit of 9.24 billion euros.

 With total business turnover of over Rs.12000 crores.

 It has capital adequacy of 9.8%.

 Bank has an extensive network with almost 450 branches.

 And has a network of more than 5000 ATM’s.

 Strong and loyal client base in corporate, trade and retail segment. And more than three
million satisfied customers.

 Is also a part of bankex an index launched by BSE.

Further, the presence of the group in over 50 countries, employing over 1,20,000 people, serving
over 85 million customers across the globe, only multiplies the credibility, not only across the
country but also across the globe. The pride of this global identity, the back up of a financial
power house and the status of being the first Indian International Bank, would also greatly
enhance productivity, profitability resulting in improved performance for the Bank to translate
into higher returns, to all the stake holders.

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ING Vysya Bank deals in following area of Banking

 Corporate Banking

 Commercial Banking

 Treasury management

 Retail Banking

 Rural Banking

 Private Banking

ING Vysya life insurance

 The company offers entire range of life insurance plans to meet all the financial needs of
an individual- protection, saving and investment.
 With 50 branches across the country.

 With sum assured of almost of Rs 800 crore.

 And assets worth Rs 100 crore.

ING Vysya Mutual Fund

 It aims to provide practical and secure investment opportunity to retail investors.

 Operating in 15 cities.

 And Rs.2800 crores plus fund house.

BUSINESS ACTIVITIES CARRIED OUT BY ING VYSYA

The various products offered by ING Vysya bank are

1) ACCOUNTS AND DEPOSITS

2) Current accounts

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 3) Saving accounts
4) Term deposits
5) DMAT accounts
CURRENT ACCOUNT

The various sub-products in current account which ING Vysya gives are

• ORANGE CURRENT ACCOUNT: In today's fast-paced world, your business

regularly requires you to receive and send funds to various cities in the country. ING
Orange Current Account gives you the power of inter-city banking with a single account
and access to more than 200 cities.

• ADVANTAGE CURRENT ACCOUNT: In today's fast-paced world, your business

regularly requires you to receive and send funds to various cities in the country. ING
Advantage Current Account gives you the power of inter-city banking with a single
account and access to more than 300 cities.
From personalized cheques that get treated at par with local ones in any city where we
have a branch, to Free collection (if instruments are lodged directly) of outstation cheques
(payable at branch locations), to free inter-city funds transfers of up to Rs.50 lakhs p.m.,
our priority services have become the benchmark for banking industry

• GENERAL CURRENT ACCOUNTS: With ING Vysya general current account you
can access your account anytime, anywhere. Withdraw and deposit cash, issue and
encash cheques, make balance enquires and ask for mini statements anytime, anywhere.

• COMFORT CURRENT ACCOUNT: ING's Comfort Current Account lets you save as
much as Rs. 60,000 p.a. for remittance up to Rs. 25 lakhs. This is in addition to a range of
other attractive benefits, as well.

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 SAVING ACCOUNTS

The Savings accounts are primarily meant to inculcate a sense of saving for the future and take care of
individuals day to day banking requirements. These accounts are meant to help individual customers protect
their money. The Savings Accounts also help individuals to handle their financial transactions through a
systematic banking channel. This increases the safety as customers need not carry physical cash with them.
The various products in saving accounts are

• ORANGE SAVING ACCOUNT

• ADVANTAGE SALARY ACCOUNT
• FREEDOM ACCOUNT
• GEERAL SAVING ACCOUNT
• SOLO SAVING ACCOUNT
• SARAL SAVING ACCOUNT
• ING FORMULA SAVING ACCOUNT
• ASPIRA CORPORATE SALARY SOLUTION.

TERM DEPOSITS

The various term deposits are

• FIXED DEPOSITS: If you believe in the long term investments and wish to earn long term interest
on your deposits, than invest in ING fixed deposits. With ING your money will not only be secured
but will earn a good interest.
• CUMULATIVE DEPOSITS: With ING cumulative deposits you can invest small amounts of money
that ends up large saving on maturity
• TAX ADVANTAGE DEPOSITS: TAD is eligible for tax exemption under section 80C of the
income tax act 1981. The deposit is in the form of fixed deposit or reinvestment form of 5 year
duration. The rate of interest will be according to the 5 year interest rate which will be declared by
RBI from time time.
• AKSHAYA DEPOSITS: your deposit with interest will be reinvested every quarter to earn a higher
yield.

DEMAT ACCOUNT

With practically all trading being conducted electronically, most settlements happen through Demat
(Dematerialisation of securities). The ING Demat Account offers you a secure and convenient way to keep

13
track of your shares and investments, how much you've bought and sold over a period of time, without the
hassle of handling physical documents that get mutilated or lost in transit.

2) LOANS

• HOME LOAN
• HOME EQUITY LOAN
• NRI LOAN
• MODEL POLICY

3) NRI SERVICES

• RUPEE SAVING ACCOUNT

• RUPEE CURRENT ACCOUNT
• RUPEE FIXED DEPOSITS
• ACCOUNTS FOR RETURNING INDIANS
• FOREIGN CURRENCY DEPOSITS
• MI REMIT

4) CARDS

• DEBIT CARDS
• CREDIT CARDS
• REMMITANCE CARD
• REWARD CARD

SMALL AND MEDIUM ENETRPRISES

1. BUSINESS LOANS – MPOWER BUSINESS LOAN:

Small business entrepreneurs often encounter problems regarding finance. ING Vysya Bank presents
a unique banking loan, specially customized for Small & Medium Business Enterprises.

These loans are available for Small Business Entrepreneurs, Retailers, Shop owners, Contractors,
Commission Agents and Transport Operators as well as practicing professionals like Doctors,
Lawyers, Consultants, Women Entrepreneurs and any others with a credit requirement ranging from
Rs. 5 lakhs upto Rs. 50 lakhs.

2) BUSINESS LOAN –RENT: The Mpower rent allows loans against the security of your receivables.
Individuals, propietry concerns, partership firms, public and private limited companies, tructs and registered
bodies who will meet the eligibility criteria will be able to secure fast finance .

3) BUSINESS LOANS (SMALL SCALE INDUSTRIES)- CGTSI:

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ING is one of the member lending banks for CGTSI. ING Ltd offers loans of up to Rs 25 lakhs to SSI units
under CGTSI at competitive interest rates without any collateral security and / or third party guarantee. In
addition the guarantee fee payable to CGTSI would be debited to the account.
CGTSI: credit gurantee fund trust for small scale industries.

Minimum Loan Amount: No Minimum Amount

Maximum Loan Amount: Rs 25 lacs

Eligibility:

The SSI units engaged in activities like manufacturing, processing or SSSBEs, including Information
Technology and / or Software industry are eligible.

4) MPOWER BUSINESS ACCOUNT:

MPower truly empowers you to create the business empire of your dreams. It is a working capital account
that enriches small and medium business enterprises by making optimum use of your banking facility, and
meeting the day-to-day needs of your business, quite like you would personally do, if you had more time.
Thus, you are now free to focus on other business needs, while your MPower Business Account works hard,
along with a host of conveniences to give you maximum value and benefits.

WHOLESALE BANKING

Wholesale Banking is a reflection of ING's ability to provide its corporate clients in India a full range of
commercial, transactional and electronic banking products. The bank offers a wide array of client-focused
corporate banking services, including working capital finance, trade and transactional services, foreign
exchange and cash management, to name a few.

A well-integrated approach to relationship management and innovative product development helps the bank
achieve the above. The offerings take into account a client's risk profile and specific needs. The bank has
made significant inroads into the formal banking consortia of a number of Indian companies including
multinationals, domestic business houses and prime public sector companies, based on our superior product
delivery, industry benchmark service levels and strong customer orientation.

The various offerings by the bank in the wholesale banking services are

1) CASH MANAGEMANT SERVICES

2) CORPORATE AND INVESTMENT BANKING:

The 'C&IB' manages Relationships with large Corporate in both the private and public sector. However, the
primary focus of the group is to market the bank's products and services to the client base, including Lending
Products, Fee Based Products, Treasury Services, Cross Border Products from ING Group, apart from also

15
cross selling the bank's retail Products and Services.

The group also crosses sells products of ING Vysya Life Insurance and ING Vysya Mutual Funds.

C&IB Group is organized on a regional basis with relationship managers covering:


Western Region and Eastern Region out of Mumbai;

Southern Region out of Bangalore, Chennai and Hyderabad; and

Northern out of Delhi

3) BANKS AND FINANCIAL INSTITUTION GROUPS:

"BFIG" works with renewed focus on the financial intermediaries in the country.

BFIG's clientele includes scheduled commercial banks i.e. nationalized, private and foreign banks, some
select large co-operative banks and other financial intermediaries including mutual funds, insurance
companies and housing finance companies.

The group also seeks to build relationship with banks that are not present in the country but the relationship
can be leveraged for trade and guarantee business.

The major areas of thrust for the group are fund mobilization both onshore as well as offshore, origination of
ECB mandates, distribution of debt/loans, cash management services, capital market services, trade finance
related transactions, asset buyouts and sell downs, distribution of ING products to Indian banks and cross
sell of financial market / asset management / insurance products etc.

4) EMERGING CORPORATES:

The "EC" manages relationships with business units engaged in Manufacturing, Processing and Services
sector. It also provides Commercial Banking Services with specific focus to Industries, relating to Diamond
& Textiles.
"EC", also markets the bank's Products, including cross sell of Products and Services to Retail Customers of
our Corporate Clients and their Employees. Sales of Cross Border Products of ING Group and other ING
entities in India are also marketed.

The wide range of products comprehensively meets the business requirements with special focus on Export
Credit, regular Working Capital Finance, Term Loans, Non Fund based limits like Letters of Credits,
Guarantees and certain structured finance products.

FINANCIAL MARKET

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ING Financial Markets, based out of Mumbai is a leading player in the Indian Financial Markets providing
one of the widest ranges of products for large corporate, small and medium enterprises as well as individual
needs. Supported by state-of-the-art systems and the capabilities of the ING Group, we offer competitive
pricing and efficient execution across markets and a comprehensive suite of products.

Financial Markets unit is an active market maker on most rupee interest rate and currency products. Within
the bank, we play a key role in the Asset Liability Management and ALM strategy. To our corporate and
institutional clients, we offer a comprehensive range of products for transactions and risk management needs
through the sales desks at Mumbai, Delhi, Bangalore & Chennai.
The Financial Markets business is driven by a highly qualified and knowledge driven team that brings
together a deep understanding of local and global markets as well as complex financial products.

The offering in ING financial are:

1) MARKET MAKING AND TRADING: The Market Making unit provides competitive prices on all
major currency and interest rate products to the client facing Financial Market Sales teams as well as
to other market participants. The product range includes the Indian Rupee, all major currencies, FX
Swaps, Government of India Securities, Corporate Debt and most Rupee Interest Rate benchmarks
including the Overnight Index Swaps and MIFOR. ING is one of the largest and most competitive
price makers in Indian Rupee.

The Trading team is driven by knowledge, focus and discipline and seeks to find value across various
permitted assets and instruments for the bank's proprietary account.

2) ASSET LIABILITY MANAGEMENT: The ALM unit of Financial Markets plays a pivotal role in
the formulation and implementation of the bank's Asset Liability Management strategy. The ALM
team manages the banks statutory and investment portfolios. It is also responsible for managing
liquidity and interest rate risk and plays an active role in the management of Transfer Pricing within
the bank.

3) FINANCIAL MARKET SALES: Financial Markets Sales team offers solutions to clients for their
varied risk management needs.
The Sales team is geographically distributed across offices in Delhi, Mumbai, Bangalore and Chennai
to keep us closer to our clients. Strong client relationships acquired over the bank's 75 years of
service in the Indian markets augment our understanding of customer needs and risk management
requirements. Our highly qualified relationship managers offer the most appropriate solutions for
these needs drawing on the knowledge and expertise within the ING Group.

The sales team is supported at each location by information systems providing comprehensive and
up-to-date market information, tools for analysis and access to research from the ING Group. The
sales teams use some of the most advanced pricing systems so as to be able to structure and price
across a wide range of products. We also draw from the robust product and pricing capabilities of the
ING Group and its various desks across the world to offer the best solutions for our clients.

17
Appropriate market timing and efficient execution is a key to product delivery in Financial Markets.
To aid this the Sales team is supported by a niche Structuring desk that, apart from helping in product
structuring based on both client needs and market opportunities, helps in efficient execution of
mandates.

AGRICULTURE AND RURAL BANKING

1) TERM LOAN: ING have identified rural banking as products and services. The term loans are
categorized in these segments.

• Poultry
• Dairy
• Wells
• Pump sets
• Tractors
• Plantation crops
• Horticulture crops
• Rural housing
• Rural godowns
• Micro finance institutions
• Swarjogar credit card.

2) SHORT TERM LOAN: short term loan are categorized into following segments

• KISSAN credit card

• Working capital loan to poultry
• Gold loans for agriculture
• Produce loans against warehouse receipts

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ORGANISATIONAL STRUCTURE

ING Vysya Bank follows a 3-tier structue

The regional offices are given more powers and jurisdiction so as to enable
them
to act quickly.

Structure of a Bank Branch

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From the structure we can see how the functional relationship works in a branch. He structure
also explains the reporting authority for each cadre of the employees. It indicates the
communication flow in the branch with well-defined accountability on the part of the employees’
roles.

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COMPERATIVE ANALYSIS OF ING VYSYA BANK’S SAVING ACCOUNT WITH
OTHER BANKS SAVING ACCOUNT

1) ING VYSYA V/S YES BANK

FEATURES ING VYSYA YES BANK

NO. OF PRODUCTS Two: orange savings Two: savings account,
account and freedom gold savings account.
account
Average quarterly account Rs.5,000 on orange, and Rs.10,000 for savings
balance nil for freedom account and Rs.100000
for gold savings
account.
Fee for non maintenance Rs.600 per quarter Rs.300 for savings
of quarterly average account and Rs.600 for
balance gold saving account.
Statement of account Quarterly free, and Quarterly free for both.
monthly e-statement free
(if asked for).
ATM usage 4 free for freedom Unlimited free on all the
account, unlimited free banks in India.
on cirrus for orange
account holders ;un
limited from ING Vysya
Regular debit card Free for first year, then Rs.149 for savings
Rs.150 there after. account, free for gold
savings account.
Gold debit card Rs.799 Rs.799

D.D. Rs.50 for amt up to Min Rs.50 then Rs.2.5

Rs.10,000;Rs.2.50 per per 1000 for savings
1000 for amt up to account and Rs.1.5 per
50,000;Rs 2 per 1000 for 1000 for gold savings

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 amt greater than 50,000 account.

Pay order (P.O.) Same as above. 5 free for savings

account and 10 free for
gold savings account,
per year
Branch transaction Free for both the account 5 transactions for
holders savings account and 10
transactions for gold
savings account are
free per year
Personalized cheque Free Free
books
Balance enquiry Free Free

2) ING VYSYA V/S ICICI BANK

FEATURES ING VYSYA ICICI BANK

NO. OF PRODUCTS Two: orange savings Three: category A, B
account and freedom and C.
account
Average quarterly account Rs.5,000 on orange, and Rs.5000 for A, Rs.2000
balance nil for freedom for B, and Rs.1000 for
C.
Fee for non maintenance Rs.600 per quarter Rs.750 per qtr for A & B
of quarterly average and Rs.100 per qtr for
balance C.
Statement of account Quarterly free and Free physical statement
monthly e-statement free per qtr otherwise
(if asked for). Rs.200 per month for
physical form. Free e-
statement per month.

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ATM usage 4 free for freedom Rs.20/month for cash
account, unlimited free withdrawal & and Rs.60
on cirrus for orange for same with non
account holders ;un partner banks.
limited from ING Vysya
Regular debit card Free for first year then Rs.99 per annum for all
Rs.150 per annum. the products.
D.D. Rs.50 for amt up to Rs.2 per thousand
Rs.10,000;Rs.2.50 per rupees or part thereof,
1000 for amt up to subject to a minimum
50,000;Rs 2 per 1000 for of Rs.50
amt greater than 50,000
Branch transaction Free for both Rs.2.50/
thousand, subject to
min of Rs.30
and max of Rs.10000
Personalized cheque Free 2 payable at par
books cheque books of 25
leaves each free in a
quarter, Rs.50/- for
additional cheque book
of 25 leaves.
Balance enquiry Free Rs.10 with partner
banks & Rs.25 with non
partner banks.

3) ING VYSYA V/S HDFC BANK

FEATURES ING VYSYA HDFC BANK

NO. OF PRODUCTS Two: orange savings Three products: regular,
account and freedom savings plus & savings

23
 account max; each of which are
further divided into
option 1 and 2.(I have
taken comparative
product that is option 1
of regular savings acc.)
Average quarterly Rs.5,000 on orange, and Rs.5000
account balance nil for freedom
Fee for non maintenance Rs.600 per quarter Rs.750 per qtr.
of quarterly average
balance
Statement of account Quarterly free and Monthly statements to be
monthly e-statement free Collected from branch.
(if asked for). Quarterly statements
sent by post
ATM usage 4 free for freedom First 4 withdrawals free
account, unlimited free of cost from any cirrus
on cirrus for orange network ATM
account holders ;un
limited from ING Vysya
Regular debit card Free for first year then Rs.100 plus taxes
Rs.150 per annum.
D.D. Rs.50 for amt up to Rs.50 for amt up to
Rs.10,000;Rs.2.50 per 10000, Rs.75 for amt
1000 for amt up to greater than 10000 and
50,000;Rs 2 per 1000 for up to up 50000, Rs. 2.50
amt greater than 50,000 per 1000 or part thereof
(Min Rs.150) for amt
greater than 50000
Pay order (P.O.) Same as above. Same as above.

Branch transaction Free for both Free 3 free in the qtr &
Rs. 60 per additional
transaction on non-
maintenance of Min
balance (cash

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 deposit/withdrawal)

Personalized cheque Free Free, Rs.5 per leaf on non

books maintenance of Min
balance
Balance enquiry Free Free

COMPERATIVE ANALYSIS OF ING VYSYA BANK’S CURRENT ACCOUNT WITH

OTHER BANKS SAVING ACCOUNT

I) ING VYSYA V/S HDFC BANK

FEATURES ING VYSYA HDFC

Number of products Three: general, Four: plus, trade,
advantage and orange premium, and regular
Average quarterly Rs.10000 for general CA, Rs.100000 for plus,
balance Rs.50000 for advantage Rs.40000 for trade,
CA, & Rs.100000 for Rs.25000 for premium, &
orange CA Rs.10000 for regular
Fee for non maintenance Rs.750 pq for GCA, Rs.6000 for plus, Rs.1200
of AQB Rs.1500 pq for ACA, & for trade, Rs.900 for
Rs.4000 pq for OCA. premium and Rs.750 for
regular.
Statement of account Free once in a month Free once in a month
(physical or e-mail)
Issue of cheque book Rs.2.5 per cheque leaf PAP cheque books; 300
for GCA and free for leaves free pm for plus,
others 200 leaves free pm for
trade, 100 leaves free
pm for premium and Rs.2
per leaf for regular
ATM usage Free usage of ING Vysya, Free usage of HDFC bank
Rs.45 on withdrawal from ATMs.

25
 other banks

Issue of international Free for 1st year, Rs.150 Free for first year
debit card there after
Transfer from one Free for all Free for all
account to other
(intercity)
D.D/P.O. Free as per schedule for Free up to 50 DDs per
GCA, free up to 50 lkhs month. Above 50
per month then charges transactions, charges @
as per schedule for rest, Rs. 25/- per DD for plus,
in case of ACA and for Free up to 30 DDs per
OCA free up to 200 lkhs month. Above 30
then charges as per transactions, charges @
schedule on the greater Rs. 25/- per DD for trade;
amount. DD Amount Up to Rs.
50,000 charges Rs. 40/-
per DD, Above Rs. 50,000
and up to Rs. 100,000-
Rs. 25/-, Above Rs.
100,000- Free for
premium and DD Amount
Up to Rs.50,000 charges
Rs.40/- per DD, Above
Rs.50,000 and up to
Rs.100,000- Rs.25/-,
Above Rs.100,000- Free
for regular.
Charges for PAP cheque Rs.0.50/1000 with a min Free in the manner as
payments of Rs.5 per payment in stated above.
case of GCA, free up to
cumulative value of 50
lkhs pm then same is
followed as in GCA, for

26
 OCA free up to a
cumulative value of 200
lkhs pm then same is
followed as in GCA.
Balance enquiry Rs.15 for all Rs.25 for all

2) ING VYSYA V/S YES BANK

FEATURES ING VYSYA YES BANK

Number of products Three: general, Four: CA 25, CA 75, CA
advantage and orange 200 and CA 500.
Average quarterly Rs.10000 for general CA, Rs.25000, Rs.75000,
balance Rs.50000 for advantage Rs.200000 and
CA, & Rs.100000 for Rs.500000 respectively
orange CA for the above products.
Fee for non maintenance Rs.750 pq for GCA, Rs.1000, Rs.1500,
of AQB Rs.1500 pq for ACA, & Rs.2000, and Rs.4000
Rs.4000 pq for OCA. respectively for the
above products
Statement of account Free once in a Free once in a month.
month(physical or e-mail)
Issue of cheque book Rs.2.5 per cheque leaf Rs.2 per leaf for CA 25
for GCA and free for and unlimited free for the
others rest.
ATM usage Free usage of ING Vysya, Information not available.
Rs.45 on withdrawal from
other banks
Issue of international Free for 1st year, Rs.150 Information not available.
debit card there after
Transfer from one Free for all Rs.25 lakhs per month
account to other subsequent 0.50 per
(intercity) Rs.1000 for CA 25, Rs.50

27
 lakhs per month
subsequent 0.50 per
Rs.1000 for CA 75, and
unlimited for the rest.
D.D/P.O. Free as per schedule for DD:2 Free Per Month
GCA, free up to 50 lkhs Min-Rs.100 Max-Rs.5000
per month then charges for CA 25, 5 Free Per
as per schedule for rest, Month
in case of ACA and for subsequent Rs.1.75 per
OCA free up to 200 lkhs rs.1000 or part there of
then charges as per Min- Rs.100 Max-Rs.5000
schedule on the greater for CA 75, 5 Free Per
amount. Month subsequent
Rs.1.50 per rs.1000 or
part there of
Min- Rs.100 Max-Rs.5000
for CA 200 and free for
CA 500.
PO: 2 Free Per Month
Subsequent 0.75 per
Rs.1000. Min- Rs.75 Max-
Rs.5000 for CA 25, 5 Free
Per Month. Subsequent
0.75 per Rs.1000. Min-
Rs.75 Max- Rs.5000 for
CA 75 and free for the
rest.
Charges for PAP cheque Rs.0.50/1000 with a min Free unlimited
payments of Rs.5 per payment in
case of GCA, free up to
cumulative value of 50
lkhs pm then same is
followed as in GCA, for
OCA free up to a

28
 cumulative value of 200
lkhs pm then same is
followed as in GCA.
Balance enquiry Rs.15 for all Information not available.

BANKING INDUSTRY ANALYSIS

STRUCTURE

BANKS IN INDIA:

In India banks have separated in different groups. Each group has its own benefits and limitation
operating in India. Each has its own dedicated target market. Few of them work in rural sector
while others work in both rural and urban. Many of them are catering in cities. Some of them are
of Indian origin while others are of foreign origin. The banks in India are

29
30
GROWTH TRENDS

The Indian banking market is growing at an astonishing rate, with assets expected to
reach US$1 trillion by 2010. An expanding economy, middle class, and technological
innovations are all contributing to this growth. The country’s middle class accounts for
over 320 million people. In correlation with the growth of the economy, rising income
levels, increased standard of living, and affordability of banking products are promising
factors for continued expansion. The Indian banking Industry is in the middle of an IT
revolution, focusing on the expansion of retail and rural banking. Players are becoming
increasingly customer-centric in their A approach, which has resulted in innovative
methods of offering new banking products and services. Banks are now realizing the
importance of being a big player and are beginning to focus their attention on mergers
and acquisitions to take advantage of economies of scale and/or comply with Basel II
regulation. “Indian banking industry assets are expected to reach US$1 trillion by 2010
and are poised to receive a greater infusion of foreign capital,” says Prathima Rajan,
analyst in Celent's banking group and author of the report. “The banking industry should
focus on having a small number of large players that can compete globally rather than
having a large number of fragmented players."

31
TECHNOLOGY IN BANKING

In the six decades of independence banking has evolved in four different phases. During the
fourth phase important initiatives were taken with regard to improve the banking system. The
entry of foreign banks resulted in a paradigm shift in the way banking was done in India. The
arrival of foreign banks and private banks with there superior state of the art technology pushed
the Indian banks to adopt latest technology in market, so that they could retain there customer
base.
Information technology has been used under two different avenues in banking. One is
communication and connectivity and other is Business process reengineering. Information
technology enables sophisticated product development, better market infrastructure,
implementation of reliable techniques for control of risks and help the financial intermediaries
reach geographically distant and different market.
In India banks as well as other financial entities entered the world of information technology and
with Indian financial network(INFINET). INFINET, a wide area satellite network (WAN) using
VSAT(very small aperture technology) was jointly set up by Reserve Bank of India and Institute
for Development and research for banking in1999. INFINET which was initially comprised only
public sector banks was opened for participation by other categories of members. The
information technology act 2000 has given legal recognition for creation, transmission, and
retention of electronic data to be treated as a valid proof in the court of law
The Reserve Bank of India has assigned priority to the up gradation of technology in the banks.
Substantial progress has been made for developing a modern, efficient, integrated and secure
payment and settlement system for the financial service sectors. Modernization of clearing and
settlement system through MICR based cheque clearing, popularizing electronic clearing
services (ECS) and integration of RBI-EFT scheme with funds transfer schemes of bank,
introduction of centralized fund management system (CFMS) are significant milestones in this
regard.

32
The coverage of electronic clearing services has been significantly effective to encourage non
paper based fund and develop a centralized facility for effective payment. The scheme for
electronic fund transfer operated by the reserve bank has been augmented and now it is present in
13 cities. The centralized fund management system (CFMS) which would enable banks to obtain
account wise and centre wise position of their balances has been implemented in a phased
manner from November 2001.

Membership of INFINET has been opened to all the banks in addition to those in the public
sector banks. At the base of all the interbank message transfers using the INFINET is the
structured financial messaging system (SFMS). It would serve as a secure communication carrier
with templates for intra and interbank messages in a strict message format that will facilitate
straight through messaging. All the interbank messages will be stored and switched to central
hub at Hyderabad while the intra bank messages will stored in the bank gateway. Security
standards of SFMS will match the international standards.
Information technology has immense untapped potential in banking. Strengthening the
information technology in banks could improve the effectiveness of asset liability of banks.
Building up of a related data base would strengthen and enhance the forecasting of liquidity of
banks at the branch level. This could enhance the risk management capabilities of banks.

33
LEGAL/ REGULATORY ISSUES RELATED TO BANKING

Banks works under various legal frameworks most important of them are, the Banking regulation
act 1949, Basel II norms, RBI act, Negotiable Instruments act.

BANKING REGULATION ACT 1949

The banking regulation act was passed as banking companies act and it came into force in
16/3/49. Subsequently it was changed to Banking regulation act on 1/3/66.

BASEL II NORMS

Basel II is the second of the Basel accords which are recommendation on the banking laws and
regulations issued by banking committee on banking supervision. The purpose of Basel II norms
is to create international standards that banking regulators can use when creating regulations
about how much capital does banks needs to put aside to guard against the types of financial and
operational risks banks face. Advocates of Basel II believe that such an international system can
help protect the international financial system from many types of problem that arise should a
bank or a series of banks collapse. In practice Basel II attempts to accomplish this by setting up
rigorous risks and capital management requirement designed to ensure that the banks hold capital
reserves appropriate to the risks the banks exposes itself to through its investment and lending
practices. Generally speaking this rules says that the greater the risk the bank exposes itself, the
greater the capital bank requires to safeguard its solvency and overall economic stability.

OBJECTIVES OF BANK REGULATION

The objectives of bank regulation, and the emphasis, vary between jurisdiction. The
most common objectives are

1. Prudential -- to reduce the level of risk bank creditors are exposed to (i.e. to
Protect depositors)
2. Systemic risk reduction -- to reduce the risk of disruption resulting from
Adverse trading conditions for banks causing multiple or major bank failures
3. Avoid Misuse of Banks -- to reduce the risk of banks being used for criminal
Purposes, e.g. laundering the proceeds of crime
4. To protect banking confidentiality
5. Credit allocation -- to direct credit to favored sectors

34
GENERAL PRINCIPAL OF BANK REEGULATION

Banking regulations can vary widely across nations and jurisdictions. This section of the article
describes general principles of bank regulation throughout the world.

MINIMUM REQUIREMENT

Requirements are imposed on banks in order to promote the objectives of the Regulator. The
most important minimum requirement in banking regulation is Minimum capital ratios.

SUPERVISIORY REVIEW

Banks are required to be issued with a bank license by the regulator in order to carry on business
as a bank, and the regulator supervises licensed banks for compliance with the requirements and
responds to breaches of the requirements through obtaining undertakings, giving directions,
imposing penalties or revoking the bank's license.

MARKET DISCIPLINE

The regulator requires banks to publicly disclose financial and other information, and depositors
and other creditors are able to use this information to assess the level of risk and to make
investment decisions. As a result of this, the bank is subject to market discipline and the
regulator can also use market pricing information as an indicator of the bank's financial health.

35
BANKING STANDARDS

Recognizing that it is necessary, in the public interest, to ensure that banks evolve
comprehensive codes and standards for fair treatment of customers of banks It is necessary to
have an independent watch dog to ensure that banks deliver services in accordance with such
codes and standards; It is necessary to ensure that the institutional mechanism is autonomous,
independent and effectively monitors and enforces the compliance of such Codes and Standards.
In November 2003, RBI constituted the Committee on Procedures and Performance Audit of
Public Services under the Chairmanship of Shri S.S.Tarapore (former Deputy Governor) to
address the issues relating to availability of adequate Banking Services to common man. The
mandate to the Committee included identification of factors that inhibited the attainment of best
customer services and suggesting steps to improve the quality of banking services to individual
customers. The Committee felt that in an effort to continuously upgrade the package of services
that banks offered to their customers there was a need of benchmarking of such services. After in
depth study at the grass root level the Committee concluded that there was an institutional gap
for measuring the performance of banks against a bench mark reflecting the best practices (Code
and Standards). Therefore, the Committee recommended setting up of the Banking Codes and
Standards Board of India broadly on the lines of Banking Codes and Standards Board
functioning in U.K.

The Banking Codes and Standards Board of India has been registered as a separate society under
the Societies Registration Act, 1860. Therefore, it would function as an independent and
autonomous body. The Banking Codes and Standards Board of India is not a Department of the
RBI. Reserve Bank has agreed to lend it financial support for a limited period. It is an
independent banking industry watch dog to ensure that the consumer of banking services get
what they are promised by the banks.

To ensure that the Board really functions as an autonomous and independent watchdog of the
industry, the Reserve Bank also decided to extend financial support to the Board by way of
meeting its full expenses for the first five years. This was to enable the Board to reach its
economic critical mass that will make it truly independent in its functioning and take a view on
any bank without its existence coming under any threat. On its part, RBI would derive
supervisory comfort in case of banks which are members of the Board. In substance, the Board
has been set up to ensure that common man as a consumer of financial services from the banking
Industry is in a no way at a disadvantageous position and really gets what it has been promised.

36
MARKET ANALYSIS

THE PRODUCT MIX: The banks primarily deal in services and therefore, the formulation of
product mix is required to be in the face of changing business environmental conditions. The
changing psychology, the increasing expectations, the rising income, the changing lifestyles, the
increasing domination of foreign banks and the changing needs and requirements of customers at
large make it essential that they innovate their service mix and make them of world class.
Against this background, we find it significant that the banking organizations minify, magnify
combine and modify their service mix.

PRODUCT PORTFOLIO: The bank professionals while formulating the product mix need to
assign due weight-age to the product portfolio. By the concept product portfolio, emphasis is on
including the different types of services/ schemes found at the different stages of the product life
cycle. The portfolio denotes a combination or an assortment of different types of products
generating more or less in proportion to their demand. The quality of product portfolio
determines the magnitude of success. It is excellence of bank professionals that help them in
having a sound product portfolio.
We find the composition of a family sound, if members of all the age groups are given due place.
Like this, the composition or blending of a service mix is considered to be sound, if well
established and likely to be profitable schemes are included in the mix. The bank professionals
are supposed to perform the responsibility of composing the same. An organization with a sound
product portfolio gets a conducive environment and successes in increasing the sensitivity of
marketing decisions.
If the banks rely solely on their established services and schemes, the multidimensional problems
would crop up in the long run because when the well established services/schemes would start
saturating or generating losses, the commercial viability of banks would of course, be
questioned. It is in this context, that we find designing of a sound product portfolio essential to
an organisation. We can’t deny that the product portfolio of the foreign banks is found sound
since they keep their eyes moving. The innovation, diffusion, adoption and elimination processes
are taken due care. The public sector commercial banks need to innovate their service and this
makes a strong advocacy in favour of analyzing the product portfolio.
THE PRICE MIX

In the formulation of product mix, the pricing decisions occupy a place of outstanding
significance. The pricing decisions or the decisions related to interest and fee or commission
charged by banks are found instrumental in motivating or influencing the target market. The
Reserve Bank of India and the Indian Banking Association are concerned with the regulations.
The rate of interest is regulated by the RBI and other charges are controlled by the Indian
Banking Association. To be more specific in the Indian setting, we find this component of the
marketing mix significant because the banking organizations are also supposed to sub serve the
interests of weaker sections and the backward regions. The public sector commercial banks in
particular are supposed to play developmental role with societal approach. It is natural that this
specific role of the public sector commercial banks complicates the problem of pricing.

37
Pricing policy of a bank is considered important for raising the number of customers vis-à-vis the
accretion of deposits. Of course, there are a number of factors to influence the process but it is
also right to mention that the key role in the entire process is played by the Reserve Bank of
India. To be more specific when we find a number of domestic and foreign banks working in the
Indian economy, the Reserve Bank of India bears the responsibility of making the business
environment conductive. The non-banking organizations and foreign banks have been found
attracting customers by offering to them a number of incentives. The potential customers or
investors frame their investment plans in the face of pricing decisions made by the banking
organizations. While formulating the pricing strategies, the banks have also to take the value
satisfaction variable into consideration. The value and satisfaction can’t be quantified in terms of
money since it differs from person to person, keeping in view the level of satisfaction of a
particular segment, the banks have to frame their pricing strategies. The policy makers are
required to be sure that the services offered by them are providing satisfaction to the customers
concerned. The pricing decisions may be to bit liberal, if the potential customers are found
shifting to the non-banking investments. In this context, it is pertinent that pricing is used as
motivational tool.

The banking organizations are required to frame two-fold strategies. First, the strategy is
concerned with interest and fee charged and second, the strategy is related to the interest paid.
Since both the strategies throw a vice-versa impact, it is pertinent that banks attempt to establish
a correlation between the two. It is essential that both the buyers as well as the sellers have a
feeling of winning as shown in figure.

The RBI has to be more liberal so that the public sector commercial banks make decisions in the
face of changing business conditions. There is no doubt in it that the commercial banks bear the
responsibility of energizing the social marketing, they are also supposed to bear the social costs.
It is also right that the foreign banks have been found making the business environment more
competitive. These emerging trends necessitate a close look on the pricing problem. The policy
makers find it difficult to bring a change since the regulations of the RBI make things more
critical. The expenses are not regulated by the RBI and the banking organizations are forced to
increase the budgetary provisions. The sources of revenue are regulated which complicates the

38
task of bank professionals. This makes it essential that the Reserve Bank of India, the
Government of India and the banking organizations thing over this complicated issue with a new
vision.

PROMOTION MIX
In the formulation of marketing mix the bank professionals are also supposed to blend the
promotion mix in which different components of promotion such as advertising, publicity, sales
promotion, word-of-mouth promotion, personal selling and telemarketing are given due weight
age. The different components of promotion help bank professionals in promotion the banking
business.
Advertising: Like other organizations, the banking organizations also us this component of the
promotion mix with the motto of informing, sensing and persuading the customers. While
advertising, it is essential that we know about the key decision making areas so that its
instrumentality helps bank organization both at micro and macro levels.
Finalizing the Budget: This is related to the formulation of a budget for advertisement. The
bank professionals, senior executives and even the police planners are found involved in the
process. The formulation of a sound budget is essential to remove the financial constraint in the
process. The business of a bank determines the scale of advertisement budget.
Selecting a Suitable vehicle: There are a number of devices to advertise, such as broadcast
media, telecast media and the print media. In the face of budgetary provisions, we need to select
a suitable vehicle. The latest developments in the print technology have made print media
effective. The messages, appeals can be presented in a very effective way.
Making Possible creativity: The advertising professionals bear the responsibility of making the
appeals, slogans, messages more creative. The banking organizations should seek the
cooperation of leading advertising professionals for that very purpose.
Instrumentality of branch managers: At micro level, a branch manager bears the
responsibility of advertising locally in his / her command area so that the messages, appeals
reach to the target customers of the command area. Of course we find a budget for advertisement
at the apex level but the business of a particular branch is considerably influenced by the local
advertisements. If we talk about the cause-related marketing, it is the instrumentality of a branch
manager that makes possible the identification of local events, moments and make
advertisements condition-oriented.
Public Relations: Almost all the organization need to develop and strengthen the public
relations activities to promote their business. We find this component of the promotion mix
effective even in the banking organizations. We can’t deny that in the banking services, the
effectiveness of public relations is found of high magnitude. It is in this context that we find a bit
difference in the designing of the mix of promoting the banking services. Of course in the
consumer goods manufacturing industries, we find advertisements occupying a place of
outstanding significance but when we talk about the service generating organizations in general
and the banking organizations in particular, we find public relations and personal selling bearing
high degree of importance. It is not meant that the banking organizations are not required to
advertise but it is meant that the bank executives unlike the executives of other consumer goods
manufacturing organizations focus on public relations and personal.

39
Personal Selling: The personal selling is found instrumental in promoting the banking business.
It is just a process of communication in which an individual exercise his/her personal potentials,
tact, skill and ability to influence the impulse buying of the customers. Since we get in
immediate feed back, the personal selling activities energies the process of communication very
effectively.
The personal selling in an art of persuasion. It is a highly distinctive form of promoting sale. In
personal selling, we find inter-personal or two-way communication that makes the ways for a
feed back. There is no doubt in it that the goods or services are found half sold when the
outstanding properties are well told. This are of telling and selling is known as personal selling in
which an individual based on his/her expertise attempts to transform the prospects into
customers.
Sales Promotion: It is natural that like other organisations, the banking organizations also think
in favour of promotional incentives both to the bankers as well as the customers. The banking
organizations make provisions for incentives to the bankers and call this bakers’ promotion. Like
this, the incentives offered to the customers are known as customers’ promotion. There are a
number of tools generally used in the different categories of organizations in the face of the
nature of goods and services sold by them. The gift, contests, fairs and shows, discount and
commission, entertainment and traveling plans for bankers, additional allowances, low interest
financing and retalitary are to mention a few found instrumental in promoting the banking
business.
As and when the banking organizations offer new services and schemes, the tools of sales
promotion are required to be innovated. This is with the motto of stimulating the new and old
customers. An important thing in the very context is the changing needs and requirements of
customers/prospects. The bank professionals bean outstanding task of studying the competitors’
strategies which would he them in initiating the process of innovation. Here it is important to
mention the promotional incentives to the customers would focus on decisions related to the
selection of a tool. There are a number of considerations to streamline the process. The bank
professionals are supposed to study the market conditions and make necessary suggestions,
specially regarding the incentives.
It is a blending process and bank professional have to be sure the whatever the provisions, they
make are fulfilled on priority basis. More incentives more efficiency or a vice-versa conditions
more efficiency, more-incentives motivate bankers substantially.

THE PLACE MIX

This component of the marketing mix is related to the offering of services. The two important
decision making areas are making available the promised services to the ultimate users and
selecting a suitable place for bank branches.
The selection of a suitable place for the establishment of a branch is significant with the
viewpoint of making the place accessible and in addition, the safety and security provisions are
also found important. The banking organizations are not free to open a branch since the Reserve
Bank of India regulates the subject of branch expansion but so far as the management of branch
is concerned, the branch managers have option to select a place which is convenient to both the
parties, such as the users and the bankers. In the Indian perspective, the protection to the bank’s
assets and safety to the users and bankers need due weight age. The vulnerable area or regions
need adequate provisions to make the branch safe. The management of office is also found

40
significant with the viewpoint of making the services attractive. The furnishing, civic amenities
and parking facilities can’t be overlooked.
Another important decision making area is related to the offering of services. This draws our
attention on the behavioral profile of bankers. The bankers in general and the front-line-staff in
particular bear the responsibility of making available the services-promised to the ultimate users
without any distortion often a gap is found generated by front-line-staff that makes an invasion
on the image of bank. The bank professionals or a branch manager is required to be sure that
whatever the promise have been made regarding the quality of services are not distorted. The
RBI and the different public sector commercial banks are required to manage the distribution
process intelligently and professionally. Thus, the place mix is found to be an important decision
making area which requires due attention, both at macro and micro levels. If the banking
organizations sell the promises it is essential that the end users get the same without any
distortion.

THE PEOPLE
Sophisticated technologies, no doubt, inject life and strength to our efficiency but the
instrumentality of sophisticated technologies start turning sour if the human resources are not
managed in a right fashion. Generation of efficiency is substantially influenced by the quality of
human resources. It is against this background that a majority of the management experts make a
strong advocacy in favour of developing quality people and late, the people management has
been include dint he marketing mix of organizations is general and the service generating
organizations in particular.
Not only the public sector commercial banks but almost all the public sector organization and
albeit other government departments, of late, have been facing the problem of quality people
resulting into inefficiency, deceleration in the rate of overall productivity and profitability or so.
The front-line staff are rough and indecent, the branch mangers are helpless and even the bankers
have been found involved in the unfair practices. The public sector commercial banks need to
assign on overriding priority to the development of quality people majority of the management of
the experts have realized the significance of quality people in the development of an organization
and the boardrooms are also found changing their attitudes. The first task before the banking
organizations at the apex level is to overhaul the recruitment processes. While fixing criteria for
selection, they need to assign due weight age to the ethical values. The education and training
facilities are required to be innovated. The process of identification and inculcation need to be
managed carefully.
The foreign banks and the private sector commercial banks reward for efficiency and at the same
time also demotivate the inefficient bankers. This helps them in improving the efficiency of even
the inefficient people. The development of human resources makes the ways for the formation of
human capital. Incentives, of course, inject efficiency and the organizations offering more
incentives succeed in motivating the people.

• Having better and cost-effective control over operations.

• Enriching the job content of employees at all level (by reducing the drudgery of mundane
operations and increasing the analytical content of their work).
• Improving the quality of decision-making, a must in the fast changing environment.

41
MACRO vs MICRO ECONOMIC ANALYSIS

PROBLEMS FACED BY INDIAN ECONOMY

o FALL IN SAVINGS RATIO

The savings ratio is the % of income that is saved not spent. A fall in the savings ratio implies
that consumer spending is increasing; often this is financed through increased borrowing.

EFFECTS OF FALL IN SAVINGS RATIO

 HIGHER LEVEL OF CONSUMPTION

This results in increase in Aggregate Demand. The increase in AD will cause an

increase in economic growth and lower unemployment. However, rising Aggregate
Demand may cause inflation. Inflation will occur when growth is faster than the long run
trend rate. This is now a potential problem in the India. Inflation has recently gone above
12%

 BOOM AND BUST

A fall in the savings ratio is usually accompanied by a rise in confidence. It is the

rise in confidence which encourages borrowing and consumers to run down savings.
Therefore, there is always a danger that a falling savings ratio can be a precursor to a
boom and bust situation.

 ECONOMY MORE SENSITIVE TO INTEREST RATES

With a fall in the savings ratio interest rate changes will have a bigger effect in
reducing spending. This is because levels of borrowing are higher and therefore a rise in
interest rates has a significant impact on increasing interest repayments. Also, higher
rates will not be increasing incomes from savings as much.

 BALANCE OF PAYMENT

With higher levels of consumer spending, there will be an increase in imports.

Therefore this will lead to deterioration in the current account. The current account deficit
could put downward pressure on the exchange rate in the long term. However, some
people argue a fall in the savings ratio is not a problem, but, it is just a reflection of
strong economy and booming housing market, which increases scope for equity
withdrawal.

42
 o INFLATION

Inflation is posing a serious challenge to the economic growth of India. Since

Jan’08 onwards, inflation in the country has surged by 8.2% to hit a 13-year high of
~12%. M3 growth in the economy too continued to remain strong at 20% (in July’08),
well above the RBI’s comfort level of 17%.
The WPI inflation rate flared up during the period driven by significant increase
in the prices of commodities, primary articles and manufactured products, even though
very small part of global crude price increase has been passed on to the Indian
consumers.

o GLOBAL RECESSION

It appears that Europe, Japan and the US are entering into recession. Falling house
prices, crisis in the financial system, and lower confidence could lead to a sharp
downturn, with the worst still to come. Many argue that India’s growth is not so
dependent on growth in the West. However, the Indian stock markets have been hit by
the global crisis. India’s growing service sector and manufacturing sector would be
adversely impacted by a global downturn.

o RISE IN CRUDE PRICES

How global crude prices would behave probably has no easy answers; however
we believe that the current challenging and uncertain macro-economic conditions does
not lead Indian financials into a state of crisis. But continued rise in crude prices and its
resultant impact on inflation, interest rates and government finances has the potential to
do so. Hence, crude price remains the key risk to our positive stance on the Indian
financials.
In the last couple of months oil prices have surged by 45% from US$ 100 to US$
145 (and now back to US$ 115). India currently imports 70% of its crude requirement,
resulting in pressure on government coffers on back of rising crude prices.

o DEPRICIATING INR

Surge in crude prices has severely impacted current account deficit of the country.
This coupled with the outflow of FII investments has resulted in INR to depreciate
sharply against dollar further fueling inflation.

IMPACT OF ECONOMIC PROBLEMS ON INDIAN FINANCIALS

The current macro-economic conditions are expected to result in

o SLOWDOWN IN CREDIT GROWTH

o IMPACT ON MARGINS OF BANKS
o PREASURE ON CREDIT QUALITY

43
 • SLOWDOWN IN CREDIT GROWTH

While the rise in interest rates should lead to a moderation in demand for credit, Indian
banks too are exercising caution while lending. Credit growth of 18% in FY09E and 17% in
FY10E vs. 22% in FY08. Risks and uncertainties in the system have increased given the higher
crude and commodity prices and its inflationary impact. This would curtail consumption, which
would impact economic growth adversely. Further higher rates will not only impact the
profitability of Indian corporate but also impact IRRs of various proposed capex projects. This
coupled with elections next year could lead to some postponement of capex plans of corporate,
leading to negative impact on demand for credit.
Higher rates have particularly impacted retail loan growth. As can be seen in the exhibit
below, retail loan growth has slowed down significantly from 26.5% in FY07 to ~13% in FY08.
SLR Ratio of the system has started rising since mid FY08 and currently stands at 28.7%. Given
the expected negative impact on credit growth.

• IMPACT ON MARGINS OF BANKS

During the past 18 months, CRR has increased by 400 bps to 9.0% currently and RBI has
also discontinued with interest payment on CRR balances. Every 50 bps hike in CRR generally
negatively impacts margins by ~5 bps. Till June’08, most of the banks had restrained from
hiking lending rates despite significant monetary tightening. However on account of recent
measures by RBI, banks have resorted to hiking PLRs in July/August by 50-150 bps to preserve
their margins.
In fact in an environment, where liquidity is tight, interest rates are at elevated levels and
risk premiums have increased, the banks tend to regain the pricing power. This would not only
help the banks to adequately price in risks but also help protect their margins. Apart from hiking
PLRs, banks are also resorting to reprising (in fact right-pricing) the loans that were sanctioned
well below PLRs. Significant portion of fixed rate loans would also get re-priced over the period
of 12-18 months.

• PRESSURE ON CREDIT QUALITY

Higher lending rates are expected to impact credit quality for the banking system. The
extent of the impact on credit quality would also be bank specific given the loan mix (retail vs.
corporate), proportion of unsecured lending, credit profile of corporate loan book and industry
wise exposure. Indian banks’ fundamentals are relatively resilient with better risk management
systems, dramatically improved asset quality, stronger recovery mechanisms (legal provisions)
and with adequate capitalization and provisioning.
Even Certain sectors (like real estate, airlines industry) might feel the stress due to the
changing macro environment and rise in interest rates. Many companies where crude forms a key
raw material component are expected to get hit more severely. Similarly, sectors like real estate
and SMEs, which are interest rate sensitive, would face higher delinquencies if interest rates
strengthen further by 100-200 bps.

44
NECESSARY INITIATIVES TAKEN BY RBI & MINISTRY OF FINANCE TO
TACKLE ECONOMIC PROBLEMS

As most of economists feel that the most horrible problem which India is facing currently
is inflation which has crossed 12%. To come out of these problems RBI and ministry of finance
and other relevant government and regulatory entities are taking various initiatives which are as
follows...

• RBI MONITORY POLICY

With the introduction of the Five year plans, the need for appropriate adjustment in
monetary and fiscal policies to suit the pace and pattern of planned development became
imperative. The monitory policy since 1952 emphasized the twin aims of the economic policy
of the government:

o Spread up economic development in the country to raise national income and standard of
living, and
o To control and reduce inflationary pressure in the economy.

This policy of RBI since the First plan period was termed broadly as one of controlled
expansion, i.e.; a policy of “adequate financing of economic growth and at the same time the
time ensuring reasonable price stability”. Expansion of currency and credit was essential to meet
the increased demand for investment funds in an economy like India which had embarked on
rapid economic development. Accordingly, RBI helped the economy to expand via expansion of
money and credit and attempted to check in rise in prices by the use of selective controls.

OBJECTIVES OF MONITORY POLICY

 PRICE STABILITY
 MONITORY TARGETTING
 INTEREST RATE POLICY
 RESTRUCTURING OF MONEY MARKET
 REGULATION OF FOREIGN EXCHANGE MARKET

WEAPONS OF MONITORY POLICY

Central banks generally use the three quantitative measures to control the volume of
credit in an economy, namely:
o Raising bank rates
o Open market operations and
o Variable reserve ratio

However, there are various limitations on the effective working of the quantitative
measures of credit control adapted by the central banks and, to that extent, monetary measures to
control inflation are weakened. In fact, in controlling inflation moderate monetary measures, by

45
themselves, are relatively ineffective. On the other hand, drastic monetary measures are not good
for the economic system because they may easily send the economy into a decline.
In a developing economy there is always an increasing need for credit. Growth requires
credit expansion but to check inflation, there is need to contract credit. In such a encounter, the
best course is to resort to credit control, restricting the flow of credit into the unproductive,
inflation-infected sectors and speculative activities, and diversifying the flow of credit towards
the most desirable needs of productive and growth-inducing sector. It should be noted that the
impression that the rate of spending can be controlled rigorously by the contraction of credit or
money supply is wrong in the context of modern economic societies. In modern community,
tangible, wealth is typically represented by claims in the form of securities, bonds, etc., or near
moneys, as they are called. Such near moneys are highly liquid assets, and they are very close to
being money. They increase the general liquidity of the economy. In these circumstances, it is
not so simple to control the rate of spending or total outlays merely by controlling the quantity of
money. Thus, there is no immediate and direct relationship between money supply and the price
level, as is normally conceived by the traditional quantity theories. When there is inflation in an
economy, monetary restraints can, in conjunction with other measures, play a useful role in
controlling inflation.

• FISCAL POLICY
Fiscal policy is another type of budgetary policy in relation to taxation, public borrowing,
and public expenditure. To curve the effects of inflation and changes in the total expenditure,
fiscal measures would have to be implemented which involves an increase in taxation and
decrease in government spending. During inflationary periods the government is supposed to
counteract an increase in private spending. It can be cleared noted that during a period of full
employment inflation, the aggregate demand in relation to the limited supply of goods and
services is reduced to the extent that government expenditures are shortened.
Along with public expenditure, governments must simultaneously increase taxes that
would effectively reduce private expenditure, in an effect to minimise inflationary pressures. It is
known that when more taxes are imposed, the size of the disposable income diminishes, also the
magnitude of the inflationary gap in regards to the availability of the supply of goods and
services. In some instances, tax policy has been directed towards restricting demand without
restricting level of production. For example, excise duties or sales tax on various commodities
may take away the buying power from the consumer goods market without discouraging the
level of production. However, some economists point out that this is not a correct way of
combating inflation because it may lead to a regressive status within the economy.
As a result, this may lead to a further rise in prices of goods and services, and inflation
can spread from one sector of the economy to another and from one type of goods and services to
another. Therefore, a reduction in public expenditure, and an increase in taxes produces a cash
surplus in the budget. Keynes, however, suggested a programme of compulsory savings, such as
deferred pay as an anti-inflationary measure. Deferred pay indicates that the consumer defers a
part of his or her wages by buying savings bonds (which, of course, is a sort of public
borrowing), which are redeemable after a particular period of time, this is sometimes called
forced savings. Additionally, private savings have a strong disinflationary effect on the economy
and an increase in these is an important measure for controlling inflation. Government policy
should therefore, include devices for increasing savings. A strong savings drive reduces the
spendable income of the consumers, without any harmful effects of any kind that are associated

46
with higher taxation. Furthermore, the effects of a large deficit budget, which is mainly
responsible for inflation, can be partially offset by covering the deficit through public
borrowings. It should be noted that it is only government borrowing from non-bank lenders that
has a disinflationary effect. In addition, public debt may be managed in such a way that the
supply of money in the country may be controlled. The government should avoid paying back
any of its past loans during inflationary periods, in order to prevent an increase in the circulation
of money. Anti-inflationary debt management also includes cancellation of public debt held by
the central bank out of a budgetary surplus.
Fiscal policy by itself may not be very effective in combating inflation; therefore a
combination of fiscal and monetary tools can work together in achieving the desired outcome.

• DIRECT MEASURES

Direct controls refer to the regulatory measures undertaken to convert an open inflation
into a repressed one. Such regulatory measures involve the use of direct control on prices and
rationing of scarce goods. The function of price control is a fix a legal ceiling, beyond which
prices of particular goods may not increase. When ceiling prices are fixed and enforced, it means
prices are not allowed to rise further and so, inflation is suppressed. Under price control,
producers cannot raise the price beyond a specified level, even though there may be a pressure of
excessive demand forcing it up.
In times of the severe scarcity of certain goods, particularly, food grains, government
may have to enforce rationing, along with price control. The main function of rationing is to
divert consumption from those commodities whose supply needs to be restricted for some special
reasons; such as, to make the commodity more available to a larger number of households.
Therefore, rationing becomes essential when necessities, such as food grains, are relatively
scarce. Rationing has the effect of limiting the variety of quantity of goods available for the good
cause of price stability and distributive impartiality.
Another control measure that was suggested is the control of wages as it often becomes
necessary in order to stop a wage-price spiral. During galloping inflation, it may be necessary to
apply a wage-profit freeze. Ceilings on wages and profits keep down disposable income and,
therefore the total effective demand for goods and services. On the other hand, restrictions on
imports may also help to increase supplies of essential commodities and ease the inflationary
pressure. However, this is possible only to a limited extent, depending upon the balance of
payments situation. Similarly, exports may also be reduced in an effort to increase the
availability of the domestic supply of essential commodities so that inflation is eased.
In general, monetary and fiscal controls may be used to repress excess demand but direct
controls can be more useful when they are applied to specific scarcity areas. As a result, anti-
inflationary policies should involve varied programmes and cannot exclusively depend on a
particular type of measure only.

47
 FINANCIAL ANALYSIS

This section will show, how ING Vysya has done financially over the last three years(2005-
2008). We will calculate all the financial ratios including the banking ratios also, to show how
ING Vysya fair up against its competitors. To do that I will be using the last three years balance
sheet, profit and loss account, and cash flow statement of ING Vysya.

BALANCE SHEET FROM THE YEAR (2005-2008)

Mar '06 Mar '07 Mar '08

12 mths 12 mths 12 mths

Total Share Capital 90.72 90.90 102.47

Equity Share Capital 90.72 90.90 102.47
Share Application Money 0.00 0.00 0.00
Preference Share Capital 0.00 0.00 0.00
Reserves 817.41 901.60 1,323.67
Revaluation Reserves 111.54 110.78 109.52
Net Worth 1,019.67 1,103.28 1,535.66
Deposits 13,335.26 15,418.59 20,498.06
Borrowings 1,107.45 843.55 1,249.81
Total Debt 14,442.71 16,262.14 21,747.87
Other Liabilities & Provisions 1,304.29 1,920.87 2,256.39
Total Liabilities 16,766.67 19,286.29 25,539.92

Mar '06 Mar '07 Mar '08

12 mths 12 mths 12 mths

Cash & Balances with RBI 841.65 945.81 2,263.53

Balance with Banks, Money at Call 281.68 645.89 921.23
Advances 10,231.53 11,976.17 14,649.55
Investments 4,372.34 4,527.81 6,293.32
Gross Block 676.23 681.06 706.82
Accumulated Depreciation 383.02 394.33 429.31
Net Block 293.21 286.73 277.51
Capital Work In Progress 112.20 109.24 121.70
Other Assets 634.06 794.65 1,013.06
Total Assets 16,766.67 19,286.30 25,539.90

48
Contingent Liabilities 10,986.42 17,462.28 32,959.36
Bills for collection 2,850.13 3,033.30 3,096.69
Book Value (Rs) 100.10 109.18 139.17

PROFIT AND LOSS ACCOUNT FROM 2005-2008

Profit & Loss account of ING Vysya Bank ------------------- in Rs. Cr. -------------------
Mar '06 Mar '07 Mar '08
12 mths 12 mths 12 mths

Interest Earned 1,222.43 1,401.38 1,680.44

Other Income 190.31 248.57 418.57
Total Income 1,412.74 1,649.95 2,099.01

Interest expended 741.25 859.31 1,182.05

Employee Cost 234.19 238.48 302.39
Selling and Admin Expenses 161.58 170.16 140.70
Depreciation 37.20 37.98 38.93
Miscellaneous Expenses 229.47 255.10 279.99
Preoperative Exp Capitalised 0.00 0.00 0.00
Operating Expenses 572.17 576.51 645.49
Provisions & Contingencies 90.27 125.21 116.52
Total Expenses 1,403.69 1,561.03 1,944.06
Mar '06 Mar '07 Mar '08

12 mths 12 mths 12 mths

Net Profit for the Year 9.06 88.91 154.95
Extraordinary Items 0.00 0.00 0.00
Profit brought forward -34.60 1.29 18.44
Total -25.54 90.20 173.39
Preference Dividend 0.00 0.00 0.00
Equity Dividend 0.00 5.91 15.37
Corporate Dividend Tax 0.00 1.00 2.61

Earning Per Share (Rs) 1.00 9.78 15.12

49
 Equity Dividend (%) 0.00 6.50 15.00
Book Value (Rs) 100.10 109.18 139.17

Transfer to Statutory Reserves -26.84 64.85 53.85

Transfer to Other Reserves 0.00 0.01 0.00
Proposed Dividend/Transfer to Govt 0.00 6.91 17.98
Balance c/f to Balance Sheet 1.29 18.44 103.53
Total -25.55 90.21 175.36

CASH FLOW STATEMENT

Cash Flow of ING Vysya Bank ------------------- in Rs. Cr. -------------------

Mar '06 Mar '07 Mar '08
12 mths 12 mths 12 mths
Net Profit Before Tax 21.52 127.63 251.46
Net Cash From Operating Activities -202.67 308.12 1426.23
Net Cash (used in)/from -74.90 -17.62 -35.55
Investing Activities
Net Cash (used in)/from Financing 286.41 177.87 202.38
Activities
Net (decrease)/increase In Cash and 8.84 468.37 1593.06
Cash Equivalents
Opening Cash & Cash Equivalents 1114.50 1123.33 1591.70
Closing Cash & Cash Equivalents 1123.33 1591.70 3184.76

RATIO ANALYSIS

LIQUIDITY RATIOS

Liquidity ratios measures the ability of the firm to meet its current obligations (liabilities). The
most common ratios that indicate the extent of liquidity or lack of it are
1) CURRENT RATIOS
2) QUICK RATIOS
3) CASH RATIOS

50
CURRENT RATIOS

Current ratio is calculated by dividing current asset by current liabilities.

Current ratio = current asset

Current liabilities.

For ING VYSYA the current ratios for last three years are.

2005-06 2006-07 2007-08

CURRENT RATIOS 1.66 2.02 2.42

As a conventional rule current ratios of 2: 1 is considered satisfactory. Looking at the current

ratios of ING Vysya we can see that in the year 2005-06 the current ratio was 1.66, which is well
below the standard. This shows that in 2005-06 the bank was not in the position to pay it current
obligations. But in the years 2006-07 and 2007-08 the current ratio of the bank has been
improving. This shows that the bank has higher safety now, because there are more current assets
than current liabilities.

NET WORKING CAPITAL RATIOS

Net working capital is the difference between current assets and current liabilities. It is
considered that the bank having larger NWC has the greater ability to meet its current
obligations.

Net working capital ratios = NWC

Net assets

2005-06 2006-07 2007-08

NWC ratio 1.03 1.11 1.19

From the table above we can see that the net working capital ratio of the bank has been
increasing, which shows that the bank is much more secured now, as it can pay its current
liabilities.

51
 PROFITABILITY RATIOS
Profitability ratios are used to asses a business ability to generate earnings as compared to
expenses over a period over a time. The various profitability ratios that we will use are
1) Return on net worth
2) Interest spread
3) Earning per share
4) Net profit margin

NET PROFIT MARGIN

Net profit divided by net revenues, often expressed as a percentage. This number is an indication
of how effective a company is at cost control. The higher the net profit margin is, the more
effective the company is at converting revenue into actual profit. The net profit margin is a good
way of comparing companies in the same industry, since such companies are generally subject
to similar business conditions. However, the net profit margins are also a good way to to
compare companies in different industries in order to gauge which industries are relatively
more profitable. The profit margin is mostly used for internal comparison. It is difficult to
accurately compare the net profit ratio for different entities. Individual businesses' operating and
financing arrangements vary so much that different entities are bound to have different levels of
expenditure, so that comparison of one with another can have little meaning. A low profit margin
indicates a low margin of safety: higher risk that a decline in sales will erase profits and result in
a net loss

2005-06 2006-07 2007-08

NET PROFIT
MARGIN .87 6.7 7.8

As can be seen that from the data, in 2005-06 the bet profit margin of ING Vysya was just 8.7%
but in 2006-07 and 2007-08( 67% and 78%) the NPM has constantly been increasing. This
shows that the bank is converting its revenues into profit. This shows that the bank is safe and
there is lower risk.

52
 RETURN ON NET WORTH/RETURN ON EQUITY

Return on net worth is used as a measure of a financial institution’s profitability. It reveals how
much profit a company generates with the money a equity shareholders have invested. It is also
called return on equity.

ROE/RONW = net income × 100

Shareholder’s equity

2005-06 2006-07 2007-08

RONW 1.11% 9.36% 11%

As can be seen from the table the return on net worth or return on equity was very less in 2005-
06(1.11%), but after that in the year 2006-07 the bank’s ROE/RONW started increasing. This
means that for each rupee invested by the shareholder’s 9.36% was returned in the form of
earning. In 2007-08 the bank’s RONW increased to 11%.

INTEREST SPREAD

Interest spread is the difference between the average lending rate and the average borrowing
rate for a bank or other financial institution. It is:
interest income ÷interest earning assets) - (interest expense ÷interest bearing liabilities

This is very similar to interest margin. If a bank's lending was exactly equal to its borrowings
(i.e. deposits plus other borrowing) the two numbers would be identical. In reality, bank also
has its shareholder's funds available to lend, but at the same time its lending is constrained
by reserve requirements.
Changes in the spread are an indicator of profitability as the spread is where a bank makes its
money

53
 2005-06 2006-07 2007-08

INTEREST SPREAD 4.51 4.23 5.24

We can see in the table that the interest margin has been swinging. In 2006-07 the interest
margin came down from the previous year which means the bank didn’t made money as
compared to last year. But in 2007-08 the interest margin went to 5.24. this is an indicator of
profitability and proves that the bank is making money.

BALANCE SHEET RATIOS

In banking the two most important ratios that are looked very closely are
1) Capital adequacy ratio
2) Return on assets
3) Loan/advances funds%

CAPITAL ADEQUACY RATIO

CAR is a ratio of bank’s capital to its risk. National regulators tracks banks CAR to ensure that it
can absorb reasonable amount of loss and are complying with the banking statutory capital
requirements. Capital adequacy ratio is the ratio which determines the capacity of the bank in
terms of meeting the time liabilities and other risk such as credit risk, operational risk, etc. In the
simplest formulation, a bank's capital is the "cushion" for potential losses, which protect the
bank's depositors or other lenders. Banking regulators in most countries define and monitor CAR
to protect depositors, thereby maintaining confidence in the banking system

The percent threshold (9% in this case, a common requirement for regulators conforming to
the Basel Accords) is set by the national banking regulator. 9% is for the existing banks.

2005-06 2006-07 2007-08

CAPITAL ADEQUACY 9.32 10.12 11.31

RATIO

54
From the table it can be seen that ING Vysya has always had the minimum requirement capital
adequacy ratio. So in that point it can be concluded that the bank has always been safe.

RETURN ON ASSETS

An indicator of how profitable a bank is relative to its total assets. ROA gives an idea as to how
efficient management is at using its assets to generate earnings. Calculated by dividing a
company's annual earnings by its total assets, ROA is displayed as a percentage. Sometimes this
is referred to as "return on investment".

The formula for return on assets is:

2005-06 2006-07 2007-08

Return on assets .05% .13% .52%

As can be seen from the table that the return on assets has been increasing as the years have gone
by. The ratio is significantly low as compared to other private banks, but it is catching up on it.

LOAN / ADVANCES FUNDS

Loans/advances constitute a major chunk of a bank’s assets. These also yield returns by way of
interest income which contributes the largest percentage of bank’s profits. Lending of funds to
traders, business, enterprises constitutes the main business of banking. Banks are financial
intermediaries and lend the funds of depositors who themselves do not want to lend in the
business directly.

2005-06 2006-07 2007-08

Loan / advances funds 73.12 78.1 81.3

%

It can be seen from the table above that ING Vysya’s loan/ advances funds I % terms have been
increasing. This is a good data. Because the main profit of loans and advances is to earn profit by
way of interest spread. The more the lending percentage will be the more will be profit;

55
 DEBT COVERAGE RATIOS

Also known as the Debt Service Coverage Ratio (DSCR), the debt coverage ratio measures
your ability to pay the property's monthly mortgage payments from the cash generated from
renting the property. Bankers and lenders use this ratio as a guide to help them understand
whether the property will generate enough cash to pay rental expenses and whether you will have
enough left over to pay them back on the money you borrowed.

The DCR is calculated by dividing the property's annual net operating income (NOI) by a
property's annual debt service. Annual debt service is annual total of your mortgage payments
(i.e. the principal and accrued interest, but not your escrow payments).

The various debt coverage ratios are

1) Credit deposit ratio
2) Investment deposit ratio
3) Cash deposit ratio

CREDIT DEPOSIT RATIO

It is the proportion of loan-assets created by banks from the deposits received. The higher the
ratio, the higher the loan-assets created from deposits. Some experts contend that a high credit-
deposit ratio could lead to a rise in interest rates.

Consider Bank X which has deposits worth Rs. 100 crores and a credit-deposit ratio of 60 per
cent. That means Bank X has used deposits worth Rs. 60 crores to create loan-assets. Only Rs.
40 crores is available for other investments. Now, the Indian government is the largest borrower
in the domestic credit market. The government borrows by issuing securities (G-secs) through
auctions held by the RBI. Banks, thus, lend to the government by investing in these G-secs. And
Bank X has only Rs. 40 crores to invest in G-secs.

If more banks like X have lesser money to invest in G-secs, what will the government do? After
all, it needs to raise money to meet its expenditure. The government has two options. One, it can
raise yields to make investment by banks in G-secs attractive. Or two, force the RBI to take the
securities into its books. Both the options have a tendency to push up interest rates in the
economy. Yields on G-secs serve as a benchmark for interest rates on other debt instruments. A
rise in the former, thus, pushes up interest rates on the latter. But why should interest rates rise if
RBI takes G-secs into its books? Because, by doing so, the RBI releases fresh money into the
system. If the money so released is large, ``too much money will chase too few goods'' in the
economy resulting in higher inflation levels. This would prompt investors to demand higher
returns on debt instruments. In other words, higher interest rates.

56
 2005-06 2006-07 2007-08

DEBT COVERAGE RATIO 69.18 73.21 70.12

It can be seen from the table that the debt coverage ratio of ING Vysya has been moving up and
down. A high debt coverage ratio means higher interest rate for the bank. So it can bee see that in
2007-08 the debt coverage ratio has been less than 2006-07, but still it is on the higher side.

CASH DEPOSIT RATIO

Historically, and in banking theory, the cash-deposit ratio is a measure of the liquidity of banks'
assets. Cash consists of cash in the vaults of banks, and balances with the Reserve Bank of India.
The regulatory authorities of central banks would like to fix minimal cash ratios and to vary it
according to macro policy requirements.

In India, there is a minimal requirement of 3 per cent for the cash-deposit ratio. Banks like to
keep the cash ratio higher than the minimum for various understandable reasons. In theory, cash
does not earn banks any interest but when the RBI moves up the ratio, it often tends to pay some
interest on the excess cash maintained with it. This is with a view not to hurt the earnings of
banks too much in the context of regulatory requirement.

2005-06 2006-07 2007-08

CASH DEPOSIT RATIO 5.82 6.94 9.12

As it can be seen from the data, the cash deposit ratio of ING Vysya has been at satisfactory
level. And it has contantantly been increasing.

57
 COMPARISION WITH KOTAK MAHINDRA

Bank Name Last price Market cap Net interest Net profit Total assets
income
ING Vysya 211 2165.11 2239.45 188.8 31858.34

Kotak 668 23158.70 3065.14 276 28711.78

mahindra

RATIO ANALYSIS OF KOTAK MAHINDRA

PROFITABILITY RATIOS

Profitability ratios are used to asses a business ability to generate earnings as compared to
expenses over a period over a time. The various profitability ratios that we will use are
1) Return on net worth
2) Interest spread
3) Net profit margin

NET PROFIT MARGIN

2005-06 2006-07 2007-08

NET PROFIT
MARGIN 17.12 15.65 15.12

58
As can be seen from the table net profit margin of Kotak Mahindra has been decreasing, the
reason can be that they are not able to convert revenue into net profit. That’s the reason the net
profit is going down and the net profit margin is showing low.

RETURN ON NET WORTH/RETURN ON EQUITY

ROE/RONW = net income × 100

Shareholder’s equity

2005-06 2006-07 2007-08

RONW 14.2 11.18 8.7

As can be seen from the table, the return of net worth is going down which suggests that the net
income generated by the bank is very low as compared to the equity invested.

INTEREST SPREAD

2005-06 2006-07 2007-08

INTEREST SPREAD 4.55 5.06 6.3

This shows that the interest margin of kotak Mahindra is going up for consecutive years. The
reason can be that the bank is earning a good margin in the interest rate. That is the difference
between the average lending rate and the borrowing rate. This also shows that the bank is making
money.

BALANCE SHEET RATIOS

In banking the two most important ratios that are looked very closely are
1) Capital adequacy ratio
2) Return on assets
3) Loan/advances funds%

59
 CAPITAL ADEQUACY RATIO

2005-06 2006-07 2007-08

CAPITAL ADEQUACY 11.23 13.12 18.31

RATIO

The capital adequacy ratio of kotak has been constantly increasing. The average CAR which
national banking regulator has set is 8%. This shows that kotak is less risqué.

LOAN / ADVANCES FUNDS

2005-06 2006-07 2007-08

Loan / advances funds 95.34 90 86.3

%

The advances% has been decreasing for kotak. This means that the company is not able to earn
profit by the way of interest spread.

RETURN ON ASSETS

The formula for return on assets is

2005-06 2006-07 2007-08

Return on assets 3.6 3.4 4.5

As can be seen from the table that the return on assets has been increasing as the years have gone
by. The ratio is significantly low as compared to other private banks, but it is catching up on it.

DEBT COVERAGE RATIOS

60
 CREDIT DEPOSIT RATIO

2005-06 2006-07 2007-08

DEBT COVERAGE RATIO 98.43 94.23 96

The credit deposit ratio of kotak mahindra is too much as compared to other banks. A higher
credit deposit means higher interest rate. The average for all banks is around 66%.

CASH DEPOSIT RATIO

2005-06 2006-07 2007-08

CASH DEPOSIT RATIO 6 6.5 8.68

``
As it can be seen from the data, the cash deposit ratio of ING Vysya has been at satisfactory
level. And it has constantly been increasing.

PROJECT

61
CREDIT APPRAISAL PROCESS

1) Login of the credit file.

2) To watch out that weather the case is doable or not.

3) Preparation of the note.

4) Appraisal by the risk department.

5) Sanction letter.

STEP FIRST: LOGIN OF THE CREDIT FILE

In this very first step, the marketing team of the bank gets the cases on the basis of their
references and the data in their hand .After that the marketing will handle over the case to the
credit department along with the necessary documents for further process of the case.

Following is the list of necessary documents required to log in a case

 Duly filled application form.

 Audited financials of last three years.

 Provisional financials of last year (if audited is not available)

 Bank statement of last six months(through which bank A/c the firm does the maximum
banking)

 ITR (Income Tax Return) of Promoter/ Property owner.

 Vintage proof.

 Sanction letter of prevailing limit (if any).

 CIBIL FORM

Once all the documents are completed for log in .The case is shown in MIS as a log in by credit
department.

STEP TWO: DECISION OF GO-NO-GO CRITERIA BY THE CREDIT DEPARTMENT

Once all the login documents are completed the process of checking of do ability (GO/NO
GO) is done.

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In this very step the dedupe checkup is to be done. In this dedupe checkup we do a check out
weather there is any overdue or default on the borrower side or not.
Once the dedupe checkup is clear the credit team prepare the finspred (software for analyzing the

financials) for the case with the help of the audited financials .And also check out the track

record in the bank statement of client .We can check the track record with the help of the

following things.

 Counts of credit transactions

 Total amount of credit transactions (%of the ratio to turnover)

 Counts of debit transactions

 Total amount of debit transactions (%to the ratio of expenditure)

 Number of INWARD cheque returns

 Number of OUTWARD cheque returns

 Timely payment of EMI’s and Interest.

After preparing the finspread on the basis of certain ratios and track record of bank statement the
credit team decides that the case is doable or not.

Following are the some of the main parts or ratios on which the bank gives more emphases while
to judge that the case is doable or not.

 LEVERAGE of the company must have the leverage of 6 according to the bank
norms(i.e. TOL/TNW total outstanding liability, tangible net worth)

 CURRENT RATIO of the company

 MPBF (Maximum Permissible Bank Finance)

 DSCR (debt security coverage ratio) in case of term loan

 Profitability ratio (like gross profit margin, EBIDTA rate, PAT margin)

THIRD STEP: NOTE PREPARATION

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Once the case is to be approved as doable a set query is send to the marketing team for further
movement of case or we can say for the preparation of note
In the note the credit team summarizes up all the details of the borrower.

NOTE WRITING INCLUDES THE FOLLOWING

 Business background

 Process of business.

 comment on financial statement of the company

 Future plan of the company and comments on the projection.

 Bank statement analysis

 Promoters background

 Market reference of the client

 Industry scenario

 Detailed terms & condition of the sanction including:

- Type of limit to be sanctioned (fund based – CC / OD/ TL/ PC/ WCDL etc & non
fund based – LC/BG/For ex limit etc.)
- Amount of Limit to be sanctions
- Rate of interest (for fund based facility) and rate of commission (for non fund based
facility) and processing fee
- Detail of security (primary and collateral)
- Detail of Personal guarantee.
-Other terms & conditions as required.

 And other information specific to case to case.

Once the note is prepared the case is sent to the centralized risk management department
(CRMD).the risk department is totally independent from credit department the credit department
sent the prepared note to risk department to examine the proposal.

STEP FOUR: APPRAISAL BY THE RISK DEPARTMENT

In this step the risk department scrutinizes the whole proposal and they bring out the
observations, and send a list of query to the credit department.

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As and when credit department will get a list of query raised by the risk department they replies
on the same with help of the marketing department start working on them to solve out the quires
along with the help of marketing department.

After solving all the observation the case s uploaded for sanction to the appropriate authority as
per the delegation of power by the bank.

STEP FIVE: SANCTION

After the uploading of the case, the case is presenting by the credit department along with
marking department to the appropriate author for the sanction of the case. During the
presentation of the case various observation are raised by the appropriate sanction author and on
the basic of discussion, the authority decide to approve / reject or withdrawn for modification.

If case is withdrawn for modification for the adding of some information or document. The credit
department along with mark modifies the proposal as required by authority and again uploads the
same and discuss with the authority to get it approved or rejected.

Once the case got sanctioned minutes are generated. On the basis of minutes the CAL (Credit
Agreement Letter) are prepared and issued to customer.

METHODOLOGY USED

Meet the customer

Positive
Take KYC Documents& Application
form
Positive
Initial Dedupe Check Application Rejected

Positive
Check the Banking Application Rejected
Negative
Positive

Audited Financials Test Application Rejected

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 Deviation Check Application Rejected
P
ositive
Internal verifications Approval By ZCC
Decision on disbursal of loan Application Rejected

Positive

Discussion on terms &

conditions on loan to be Not accepted by the customer
sanctioned between client&
bank

The credit appraisal process at ING Vysya bank

The credit appraisal process at ING Vysya bank is considered very thorough and conservative
the bank undertakes the above steps to complete the credit appraisal process.

1. Meet the client: The bank has appointed various Relationship managers( RM) and
executives who find the clients with credit requirements for their business, if the RM are
satisfied with the client and its expectation with the bank the case goes to the regional
office for a complete check and evaluation.

2. Take KYC Documents& Application form: The RM after the first course of
interaction with the client asks for the various document required to appraise the project.
KYC documents as mentioned in the policy guidelines are Know your customer(KYC)
the customer can be best known with his financials and other vintage proofs mentioned in
the requirement list.

3. Initial Dedupe Check: This is better known as initial de-duplication checks in this the
bank checks the credit reporting of the client whether he holds any over-dues etc. The
bank also checks the client in RBI defaulter list.

4. Check the Banking: The first thing the bank checks is the banking of the existing limit
account if any, the bank tries to check the existing performance of client with the other
banks, and in case more number of inward returns due to in-sufficiency of funds. Then

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 this is also a deviation and if there is over utilization of the limit on all the days then this
calls for accountability by the client.

5. Audited financial test: The bank under takes a complete check of financials as
mentioned in the requirements, these audited financials are put in finspread software of
the bank and then projections are made on the basis of financials and then various
profitability ratios are analyzed and the financial soundness of the company is analyzed.
The financial viability of the company is checked on various parameter as mentioned.

6. Deviation check: The bank after checking the financial soundness of the company goes
for the verification of the deviation check of policy compliance, if any in case of major
deviations the case is presented in front of the zonal credit committee, their decision
stands the final verdict on the approval f the case.

7. Internal Verification: The bank through its various sources makes a complete thorough
investigation of the handling of business of the clients, this enables the bank to make sure
that the client is not forging with the financials of the company.

8. Approval by ZCC: If the credit limit is below Rs5oo lakhs then the approval is sought
by Zonal head of the business banking and if the amount exceeds the above stated
amount then the case is first discussed by ZCC and is then presented on ECC(electronic
credit committee) depending upon the policy compliance failed by the client.

9. Decision on disbursal of loan: When the case is presented to risk department it

analyses the variety of risk involved in the sanctioning of loan if it crosses the parameters
then the possibility of disbursal of loan declines then the ZCC makes its final approval on the
limits required by the client and the limit deserved by the client, the bank makes it final way
to the approval of the loans.

10. Discussion between client &Bank on approval: The banks proposes its terms and
conditions to the client and the amount of loan that is approved to the client at what rate of
interest and what proportion of collateral is kept by the bank, when the client agrees on all
these terms then only the case reaches the sanctioning stage.

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PROJECT DETAILS:

Company name: Sahib Textiles Pvt. Ltd.

Type of Firm: Private Limited Company
Kind of business: Manufacturing & Wholesale trading of fabrics
Established in: July 1994.
Limit requirement: Rs.425 lacs.
Date of sanction: 23-06-09
Limits valid till:-30-06-10

BORROWER BACKGROUND

 Sahib Textile Pvt Ltd has been promoted by the Sahib group and was incorporated in July
1994. Currently the company is engaged in the wholesale trading of fabrics.

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 Earlier the company was engaged in doing embroidery job mainly for its sister concern
M/s SDM Fabrics Pvt. Ltd, which got merged in Sahib Textiles Pvt. Ltd w.e.f 01-04-07.
M/s SDM Fabrics was enjoying working capital limits in tune to Rs. 425.0 lacs from
IVBL. Now the same is being extended to M/s Sahib Textiles Pvt. Ltd.

 The company is into wholesale trading of ladies dress material like Georgette, Crepes,
Jacquards, Woven and Embroidered fabrics etc under the registered trademark of
"TACFAB".

 Before merger, Sahib Textile Pvt. Ltd purchases fabrics in SDM Fabrics Pvt. Ltd from
textile mills in Surat, Calcutta and Bombay. The fabric is also purchased through brokers.
Embroidery work was being done on fabrics by Sahib Textile P Ltd. Other jobs like
dyeing or printing on grey fabric are done on job work basis

 After merger the company procure the material from the same suppliers, get it
embroidered and other job works i.e. dying and printing as and if required and sells to
same customers. Only embroidery work to be done on fabrics is done by Sahib Textile P
Ltd. Other jobs like dyeing or printing on grey fabric are done on job work basis.

 The Sahib Group, presently consisting of two firms/companies is engaged in the business
of wholesale trading of fabrics for the last 40 years under the registered trademark of
Tacfab. The Sahib group of companies/concerns is engaged in manufacturing of
embroidery cloth, merchandising of fabrics, wholesale and retail of fabrics and have
maintained a good financial track record of profits and turnovers.

 The registered office of the company is located at 6/65, WEA Laxmi Palace Hotel
Building, Gurudwara Road, Karol Bagh, 110005 is owned by the company.

 Manufacturing unit of the company is located at Khasra No 74, Narela Road, Op Haryana
Power House, Kundli, District Sonipat Haryana, with a carpet area of 5377.77 sq. yards
owned by the company. Presently the company is equipped with 3 embroidery machines,
all 3 are at Kundli, various packing machines, located at Sanjay Gandhi Transport Nagar,
Chandni Chowk and Mumbai.

 The company gets the embroidery done on fabric. The soft copies of the pattern are
loaded on the machineries and embroidery done on fabric.

 After embroidery and other job works like dying or printing, fabric dispatched to
company’s 3 packing and selling pints, details for which is given below:

Sanjay Gandhi transport Nagar: This place is used as packing and selling point.

Mumbai: Building 13Ab, gala 11,Samhita Warehousing Complex, Kurla Andheri

road, Mumbai. This place is also being used as BRANCH OFFICE of the company.

69
 Chandni Chowk: 4805-10, Katra Subhash, Chandni Chowk owned by the directors.
Same place is also being used as CORPORATE OFFICE of the company.

 The goods are then packed and sold from all these centres.

 The company is having staff strength of 200 people to handle all the working of the
company.

DIRECTOR BACKGROUND

 Surjit Singh: aged about 63, is the Managing Director of the company. He has experience of
about 40 years in this line of activity. He is a prominent member of the society and is the
chairman of two well-known public schools in Delhi, namely Mata Jai Kaur Public School,
Ashok Vihar and Jaspal Kaur Public School, Shalimar Bagh, New Delhi. The directors have
combined net-worth in excess of Rs. 1000 lakhs. Mr. Surjit Singh is well supported by his sons,
Mr. Harjot Singh and Mr. Satnam Singh who are also directors in the company. Both have more
than 10 years of experience in the industry.

 Satnam Singh: aged 39, is the director of the company and has experience of 15 years in
this line of activity.

 Harjot Singh, aged 37, is also the director of the company. He has been associated with
the family business for the past 12 years.

B. Ownership And Management

Held by %age as on Board of Relationship Position
Directors, Age,
Experience,
Qualification
Satnam Singh Takkar 22.63% - Director
Surjit Singh Takkar 28.15% - Director
Harcharan Singh Takkar - -
0.001%
Rasnapreet Preet kaur - Director
17.50%
Arshiya Singh - - -
12.00%
Surjit Singh Takkar, - - -
HUF 10.71%
Harjot Singh Takkar - - Director
9.00%

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 Total 100% - - -

CREDIT BASE

The company procures material from textile mills based at Surat, Calcutta, Mumbai and further
sells to other retail traders.

RELATIONSHIP/BUSINESS RATIONALE

i. Relationship Experience
The group is banking with us from last 3 years and was also enjoying working capital
facilities from us.

ii. Business Rationale

i) The group is banking with us for the last 3 years and the conduct of the accounts
is good
ii) We shall be charging processing fee of Rs. 4.25 lacs from the customer.
iii) We shall be earning a gross interest income of appx Rs. 59.5 lacs from the
customer.
iv) The market for ladies dress material is steadily growing with the demand of more
innovative and unique designs in the market. Even with the ever-changing fashion in this
line of activity and pressure from competitors, the Sahib group has established its name
in the market and is well reputed in this line of business.

FINANCIAL ANALYSIS OF CLIENT

Particulars Previous Previous Previous Current Next Year

Year Year Audited Year Projection
(2008) Audited s (2010)
Actual Actual (2009)
(2006) (2007)
1) Sales 476.65 492.80 5,374.11 5,643.00 5,925.00
2) PBDIT 91.29 93.01 467.58 498.00 552.00
3) Interest 1.72 1.77 113.39 104.96 150.00
4) Depreciation 41.89 33.20 59.92 55.00 45.00
5) Taxes 12.74 23.19 108.57 101.41 107.10
6) PAT 34.94 34.86 185.70 236.63 249.90
7) Capital 351.26 387.71 984.08 1,220.71 1,470.61
8) Unsecured Loans 8.29 0.00 588.88 588.88 588.88

71
9) Loans from Other/Our
Banks
a) Term Loans
2.26 1.71 0.00 0.00 0.00
b) OD/CC 0.00 0.00 0.00 425.00 425.00
10) Current Lia. 28.58 25.95 664.62 700.00 655.00
11) Non Current Liabilities 0.00 0.00 0.00 0.00 0.00
12) Fixed Assets 161.60 136.71 265.54 210.54 165.54
13) Current Assets 212.95 261.24 1,903.53 2,230.48 2,480.48
a) Stocks 40.87 62.21 581.22 700.00 775.00
b) Debtors 144.40 174.85 1,199.77 1,392.00 1,528.00
c) Cash & Bank Bal. In 16.95 10.15 71.65 30.00 30.00
current a/cs

14) Non CA 13.59 15.72 68.52 68.52 68.52

15) Current Ratio 7.45 10.07 2.86 3.19 3.79
17) TOL/TNW (without 0.10 0.07 1.27 1.06 0.85
USL)
(With USL) 0.08 0.07 0.42 0.39 0.32

18) Inventory Turnover 56 82 50 57 60

19) Debtors Turnover 111 130 81 90 94

20) Creditors Turnover 36 32 44 22 18
21) NP margin 7.33 7.07 3.46 4.19 4.22
22) EBIDTA margin 19.15 18.87 8.70 8.83 9.32

Current Year Performance:

The company has already achieved turnover of Rs.4501.77 lacs till Dec 08 and is expected to achieve
turnover of Rs. 5643.0 by FY09.

Financial Comments:

Turnover:
The turnover of the company consists of sale of fabric and is showing increasing trend in all
financial years. It was at Rs. 476.65 lacs in FY06, which increased to Rs. 492.80 lacs in FY07
showing an increase of 3.4%. In FY08 the company has achieved turnover of Rs. 5374.11 lacs
i.e. 990.5%. Further the same has been projected at Rs. 5643.0 lacs in FY09, out of which the
company has already achieved 80% of sales. i.e. Rs. 4501.77 lacs till Dec.

Profitability:

72
The EBIDTA Margins of the company was at 19.2 in FY06-07, decreased to 18.9 in FY07-08
due to increase in COGS and further EBIDTA margins have again decreased to 8.7% due to
decrease in Sales and General expenses from 25.6% (FY07-08) to 11.9% (FY08-09).
The same is expected to be at 8.8% in FY09-10.
The PAT margins of the company are following the same trend.

Leverage:

TNW comprises of:

Particulars FY06-07 FY07-08 FY08-09

Capital 351.26 387.71 984.08
Unsecured Loan 8.29 0.00 588.88
TNW 359.55 387.71 1,572.96

TOL of the company comprises of sundry creditors, working capital bank finance

TOL/TNW of the company is satisfactory in all years.

Current Ratio:

The current ratio (3.19) of the company is at comfortable level.

The company is maintaining stock turnover days of 50 days in FY08-09. The stock of the co.
includes cost of raw material, which are fabrics.
Debtor’s turnover days for FY07-08 were 130 days, which decreased to 81 days in FY08-09.
The Creditor Turnover days are lying in between 30-45 days.

RISK APPRAISAL

Business Risk and Future Outlook

Risk lies in the following situations:

 The group is in this business for the last 40 years and the directors have rich experience
in this line.
 Sales have been on the increase and group is well placed to tap the growing consumer
market.
 Being in this line of business for so many years, the group has good reputation in the
market and proven track record.
We perceive low risk in acceding to the request of the company as the company has good track
record of cash flow generations.

Management Risk

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Surjit Singh, the key person behind the success of the group has proven management capability.
He is chairman of two well-known schools in posh North Delhi - namely Mata Jai Kaur Public
School, Ashok Vihar and Jaspal Kaur Public School, Shalimar Bagh, New Delhi.
Surjit Singh is fully supported by his two sons - Satnam Singh and Harjot Singh, who are also
directors of the company. Management set up of the group is quite strong.

Performance Risk1

1Under Performance Risk cover Technical Know-how, Raw material souring/ availability,
Product delivery capabilities and Competition comparatives – cost, product features

i. Structure Risk
The customer shall be offered cash credit limit and does not entail any structural risk.

ii. Industry Sector Concentration

There is no major exposure on the same sector in North India.

iii. Country Risk

No country risk is associated with the lending.

iv. Environmental Risk

The company is into trading only hence no environment risk in perceived.

v. Regulatory Risk
The company complies with all significant statutory and regulatory requirements and no risk is
associated with the same.

vi. ING Vysya Bank’s Reputation Risk

There are no risks associated with the moral or ethical issues. No risk is envisaged with the
lending.

vii. Specific Purpose of Asset Collateral

The commercial property offered to us located at Ground floor, 118E, Kamla Nagar is already
mortgaged with us in through SDM Fabrics Pvt. Ltd, the same will be extended to mortgage with
Sahib Textile Pvt. Ltd

viii. Financial Risk

The turnover of the company is on increasing track; further the client is already enjoying
working capital limits from us.

ix. Transaction Risk

Documentation risk: All documentation as advised shall be carried on and no documentation risk
is envisaged.

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CONCLUSIONS

• The credit appraisal process carried out at ING is sound and bank has good parameters to
appraise the project.

• The credit department thoroughly analyses the credit requirement of the company and the
capacity to service the debt.

• The bank has conservative norms to appraise the project the bank at the max. Allows a
20% hike in projections.

Covers/Collateral valuation Risk: empanelled valuer shall value The collateral and thus no risk is
envisaged with regard to the same.
Interest Rate Risk: The rate of interest is a floating rate linked with IVRR and LIBOR and thus
shall be taken care of.

x. Any Other Risk

The business does not entail any other risks.

SWOT

 It is a family runs concern; promoters are into this business from last 40 years.
 The industry is in healthy shape.
 The company has been dealing with good customers from quite long time has been
getting repeated orders.

Weaknesses:
 The industry can witness problem due to inflationary trends. As fashion industry is
sensitive to it.

Opportunities:
 The market for ladies dress material is steadily growing with the demand of more
innovative and unique designs in the market. Even with the ever-changing fashion in this
line of activity and pressure from competitors, the Sahib group has established its name
in the market and is well reputed in this line of business.

Threats:
 Tough Competition from other players: There are many other players in the market.

HIGHLIGHTS OF CREDIT INVESTIGATION CONDUCTED :

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 • The credit appraisal passes through various stages and evaluations before it is appraised.

RECOMMENDATIONS

• Process should be made faster.

• All the documents required to appraise the project should be asked at the time of
application only rather than later by the bank

The customer has a good track record of payments with its customers / suppliers and has a good
market. There have been no irregularities in bank repayments or payments to suppliers. Thus the
conduct is found to be good.

COMPLIANCE WITH STATUTORY REQUIREMENTS:

The company has filed all Income tax returns till AY2008-09 and further the company has not
received any notice of demand or scrutiny for AY2007-08 and AY2008-09. Further, it is
confirmed that all ST/ PF/ESI payments have been made and there are no Over dues as per the
last audited balance sheet of FY08 and that all statutory approvals have been taken for
conducting the business/ manufacturing activities.

COVER / COLLATERALS AND COVENANTS

Primary

First charge on all present and future stocks of raw material, semi finished and finished goods
and book debts and all other present and future chargeable current assets of the borrower.

Collaterals

Equitable mortgage of:

LandBuildingMachineryOthersTotalCover %Present500.0500.0Proposed500.0--500.0-

NW of Guarantors - Personal / Corporate guarantees:

PromotersOther personsCorporate / Group

concernsTotalPresentNilNilNilNilProposed2205.92 lacs--2205.92 lacs

Specific covenants :

The limits will be distributed in three parts, Rs. 205.0 lacs is to disburse in Chandni Chowk unit
account, Rs. 150. Lacs are to be disbursed in Mumbai unit account no and Rs. 70.0 lac is to be

76
 • The bank must bring more transparency in appraisal of the project there should be
explanation for a appraisal of the project that was sanctioned by higher authority.

• The bank must not rely on software or information provided by the client the bank should
dig in for other sources in order to draw a real picture for the company.

• At the time of projections due to lack of documents, the projections are done

Without any basis like depreciation in the audited years is not accumulated depreciation

given to Sanjay Gandhi Transport Nagar unit.

The Company will provide the undertaking to maintain the unsecured loan of Rs. 588.0 lacs
during the tenor of the loan with our bank..

Risk Rating

As of 13.01-09Previous ratingRisk rating CRR 3NA

Deviations

a. Deviations in Credit Policy Financial Parameters

Parameters MedianThresholdActual as of B/s dated 31.03.08RemarksMinimum EBITDA / Net

Sales0.030.030.09Above median OKMinimum Interest Coverage Ratio (EBITDA / Interest & other finance
charges)1.881.504.12Above median OKMinimum Current Ratio (Current Assets / Current
Liabilities)1.811.02.86Above median OKMaximum Debt Equity (total Interest bearing debt /
TNW)0.522.00.70Above median OKOperating Cash FlowPositive for atleast 2 years in last 3 years-
693FailsMinimum DCSR1.254.06Above median OK

77
 MY TAKE AWAY- KEY LEARNING’S

 Through this project of mine I got exposure of working in professional

environment which in itself was a great experience. I also felt that
there is vast difference between academic theory and its practical
applicability.

 I found that summer training project provides a lot of learning

opportunities. I gained a lot of knowledge about the practical aspect of
fieldwork.

 I also got familiarized with the credit appraisal process for SMEs.

 My exposure to the outer world through my training had given me a

chance to relate my theoretical knowledge with its practical
applicability.

 I have become more confident and I have also improved on my sense

of appreciation.

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 ANNEXURE & REFERENCES

LINKS

• www.worldbank.org.in

• www.ingvysyabank.com

• www.rbi.org.in

• www.mospi.nic.in

• www.moneycontrol.com

• www.indiainfoline.com

• www.bankinginfo.com

BOOKS

Financial Management- Theory & Practice by Prasana Chandra, Tata McGRAW HILL. (7th
Edition)

Marketing Management-by Philip Kotler, Pearson Education Ltd. (13th Edition)

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