Chapter 1 Introduction to industry

INTRODUCTION TO THE INDUSTRY

BANKING
Definition of banking

The accepting for the purpose of lending or investment, of deposits from the public, repayable on demand or otherwise and withdrawal by cheque, draft or otherwise. (Banking Regulation Act)Dr. Paget in Law of Banking states, No one and no body, corporate or otherwise, can be a banker who does not: Conduct Current Accounts Pays cheques drawn on himself Collects cheques for his customers A bank is therefore Any company that transacts the business of banking in Negotiable Instrument Act. India.

Banker: Banker is Any person acting as a banker Negotiable Instrument Act.

Customer: There must be some recognizable course or habit of dealing in the nature of regular banking business. A single transaction can constitute a customer; must have an account; dealing must be of a banking nature; some frequency in transactions is expected but is not essential. A customer brings us his wants. It is our job to handle them properly and profitably both to him and us. A customer makes it possible to pay our salary,whether we are a driver, plant or office employee.

An Overview of Banking Sector in India Till the end of late 18th century, Banks in India, in the modern sense of the term, werent there. During the time of the American Civil War, the supply of cotton to Lancashire (The textile hub of UK) stopped from the Americas. At that time some banks were opened, which functioned as entities to finance industry, including speculative trades in cotton. Most of the banks opened in India during that period could not survive and failed because of the high risk which came with large exposure to speculative ventures. In the year 1786, The General Bank of India was the first bank to come into existence in India. And then, almost a century later, in the year 1870, The Bank of Hindustan became the 2nd bank in India. Unfortunately, both these banks are now defunct.1 The Bank of Bengal which later became the State Bank of India. The oldest bank to be still in existence, that too as the largest bank in India, is the State Bank of India. Albeit, the name was not the same as today rather was "The Bank of Bengal which started its operations in Calcutta in June, 1806. Interestingly, if people think that the entry of foreign banks in India is only a post-reform phenomenon, they are absolutely incorrect. In fact, in as early as 1850s, foreign banks like Credit Lyonnais started their Calcutta (now Kolkata) operations. At that point of time, Calcutta was the most active trading port, thanks to the trade of the British Empire, and due to which banking activity took roots there and prospered. The first bank in India, though conservative, was established in 1786. From 1786 till today, the journey of Indian Banking System can be segregated into three distinct phases. They are as mentioned below: Early phase from 1786 to 1969 of Indian Banks Nationalization of Indian Banks and up to 1991 prior to Indian banking sector Reforms. New phase of Indian Banking System with the advent of Indian Financial & Banking Sector Reforms after 1991. To make this write-up more explanatory, I prefix the scenario as Phase I, Phase II and Phase III.
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Phase I:The General Bank of India was set up in the year 1786. Next came Bank of Hindustan and Bengal Bank. The East India Company established Bank of Bengal (1809), Bank of Bombay (1840) and Bank of Madras (1843) as independent units and called it Presidency Banks. These three banks were amalgamated in 1920 and Imperial Bank of India was established which started as private shareholders banks, mostly Europeans shareholders. In 1865 Allahabad Bank was established and first time exclusively by Indians, Punjab National Bank Ltd. was set up in 1894 with headquarters at Lahore. Between 1906 and 1913, Bank of India, Central Bank of India, Bank of Baroda, Canara Bank, Indian Bank, and Bank of Mysore were set up. Reserve Bank of India came in 1935. During the first phase the growth was very slow and banks also experienced periodic failures between 1913 and 1948. There were approximately 1100 banks, mostly small. To streamline the functioning and activities of commercial banks, the Government of India came up with The Banking Companies Act, 1949 which was later changed to Banking Regulation Act 1949 as per amending Act of 1965 (Act No. 23 of 1965). Reserve Bank of India was vested with extensive powers for the supervision of banking in India as the Central Banking Authority. During those days public has lesser confidence in the banks. As an aftermath deposit mobilization was slow. Abreast of it the savings bank facility provided by the Postal department was comparatively safer. Moreover, funds were largely given to traders.

Phase II:Government took major steps in this Indian Banking Sector Reform after independence. In 1955, it nationalized Imperial Bank of India with extensive banking facilities on a large scale especially in rural and semi-urban areas. It formed State Bank of India to act as the principal agent of RBI and to handle banking transactions of the Union and State Governments all over the Country. Seven banks forming subsidiary of State Bank of India was nationalized in 1960 on 19th July, 1969, major process of nationalization was carried out. It was the effort of the then Prime Minister of India, Mrs. Indira Gandhi. 14 major commercial banks in the country was Nationalized. Second
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phase of nationalization Indian Banking Sector Reform was carried out in 1980 with seven more banks. This step brought 80% of the banking segment in India under Government ownership. The following are the steps taken by the Government of India to Regulate Banking Institutions in the Country: 1949: Enactment of Banking Regulation Act. 1955: Nationalization of State Bank of India. 1959: Nationalization of SBI subsidiaries. 1961: Insurance cover extended to deposits. 1969: Nationalization of 14 major banks. 1971: Creation of credit guarantee corporation. 1975: Creation of regional rural banks. 1980: Nationalization of seven banks with deposits over 200 crore. After the nationalization of banks, the branches of the public sector bank India rose to approximately 800% in deposits and advances took a huge jump by 11,000%. Banking in the sunshine of Government ownership gave the public implicit faith and immense confidence about the sustainability of these institutions.

Phase III:This phase has introduced many more products and facilities in the banking sector in its reforms measure. In 1991, under the chairmanship of M Narasimham, a committee was set up by his name which worked for the liberalization of banking practices. The country is flooded with foreign banks and their ATM stations. Efforts are being put to give a satisfactory service to customers. Phone banking and net banking is introduced. The entire system became more convenient and swift.

The financial system of India has shown a great deal of resilience. It is sheltered from any crisis triggered by any external macroeconomics shock as other East Asian Countries suffered. This is all due to a flexible exchange rate regime, the foreign reserves are high, the capital account is not yet fully convertible, and banks and their customers have limited foreign exchange exposure.

Current Situation:Today, the banking sector in India is fairly mature in terms of supply, product range and reach. As far as private sector and foreign banks are concerned, the reach in rural India still remains a challenge. In terms of quality of assets and capital adequacy, Indian banks are considered to have clean, strong and transparent balance sheets relative to other banks in comparable economies in its region. The Reserve Bank of India is an autonomous body, with minimal pressure from the government. The stated policy of the Bank on the Indian Rupee is to manage volatility but without any fixed exchange rate. Till now, there is hardly any deviation seen from this stated goal which is again very encouraging. With passing time, Indian economy is further expected to grow and be strong for quite some time-especially in its services sector. The demand for banking services, especially retail banking, mortgages and investment services are expected to grow stronger. Therefore, it is not hard to forecast few M&As, takeovers, and asset sales in the sector. Consolidation is going to be another order of the day. The significant change in the policy and attitude that is currently being seen is encouraging for the banking sector growth. In March 2006, the Reserve Bank of India allowed Warburg Pincus, a private foreign investor, to increase its stake in Kotak Mahindra Bank to 10%. Notably, this is the first time that a foreign individual investor has been allowed to hold more than 5% in a private sector bank since 2000. Earlier, RBI in 2005 announced that any stake exceeding 5% by foreign individual investors in the private sector banks would need to be vetted by them. Currently, India has 88 scheduled commercial banks (SCBs) - 28 public sector banks (that is with the Government of India holding a stake), 29 private banks (these do not have government stake; they may be publicly listed and traded on stock exchanges) and 31 foreign banks. They have a combined network of over 53,000 branches and 17,000 ATMs. According to a report by ICRA Limited, a rating agency, the public sector banks hold over 75 percent of total assets of the banking industry, with the private and foreign banks holding 18.2% and 6.5% respectively.3

Banking System in India:In India the banks are being segregated in different groups. Each group has their own benefits and limitations in operating in India. Each has their own dedicated target market. Few work in rural sector while others in both rural as well as urban. Many even are only catering in cities. Some are of Indian origin and some are foreign players.

Public Sector Bank: Among the Public Sector Banks in India, United Bank of India is one of the 14 major banks which were nationalised on July 19, 1969. Its predecessor, in the Public Sector Banks, the United Bank of India Ltd., was formed in 1950 with the amalgamation of four banks viz. Comilla Banking Corporation Ltd. (1914), Bengal Central Bank Ltd. (1918), Comilla Union Bank Ltd. (1922) and Hooghly Bank Ltd. (1932). Private Sector Bank: The first Private bank in India to be set up in Private Sector Banks in India was Indusind Bank. It is one of the fastest growing Private Sector Banks in India. IDBI ranks the tenth largest development bank in the world as Private Banks in India and has promoted world class institutions in India. The first Private Bank in India to receive an in principle approval from the Reserve Bank of India was Housing Development Finance Corporation Limited, to set up a bank in the private sector banks in India as part of the RBI' s liberalisation of the Indian Banking Industry. It was incorporated in August 1994 as HDFC Bank Limited with registered office in Mumbai and commenced operations as Scheduled Commercial Bank in January 1995. Co operative Banks in India: The Co operative banks in India started functioning almost 100 years ago. Though the co operative movement originated in the West, but the importance of such banks have assumed in India is rarely paralleled anywhere else in the world. The cooperative banks in India play an important role even today in rural financing. The businesses of cooperative bank in the urban areas also have increased
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phenomenally in recent years due to the sharp increase in the number of primary cooperative banks. Co operative Banks in India are registered under the Co-operative Societies Act. The cooperative bank is also regulated by the RBI. They are governed by the Banking Regulations Act 1949 and Banking Laws (Co-operative Societies) Act, 1965. This exponential growth of Co operative Banks in India is attributed mainly to their much better local reach, personal interaction with customers, and their ability to catch the nerve of the local clientele. Rural Banking: Rural banking in India started since the establishment of banking sector in India. Rural Banks in those days mainly focussed upon the agro sector. The Haryana State Cooperative Apex Bank Ltd. commonly called as HARCOBANK plays a vital role in rural banking in the economy of Haryana State and has been providing aids and financing farmers, rural artisans, agricultural labourers, entrepreneurs, etc. in the state and giving service to its depositors. National Bank for Agriculture and Rural Development (NABARD) is a development bank in the sector of Regional Rural Banks in India. It provides and regulates credit and gives service for the promotion and development of rural sectors mainly agriculture, small scale industries, cottage and village industries, handicrafts. Foreign Banks in India: Foreign Banks in India always brought an explanation about the prompt services to customers. After the set up foreign banks in India, the banking sector in India also become competitive and accurative. New policies are introduced by RBI for them The policy conveys that foreign banks in India may not acquire Indian ones (except for weak banks identified by the RBI, on its terms) and their Indian subsidiaries will not be able to open branches freely.

Reserve Bank of India as a Regulatory Institution in Banking Sector:The RBI was established under the Reserve Bank of India Act, 1934 on April 1, 1935 as a private shareholders' bank but since its nationalization in 1949, is fully owned by the Government of India. The Preamble of the Reserve Bank describes the basic functions as 'to regulate the issue of Bank notes and keeping of reserves with a view to securing monetary stability in India and generally, to operate the currency and credit system of the country to its advantage'. The twin objectives of monetary policy in India have evolved over the years as those of maintaining price stability and ensuring adequate flow of credit to facilitate the growth process. The relative emphasis between the twin objectives is modulated as per the prevailing circumstances and is 24 articulated in the policy statements by the Reserve Bank from time to time. Consideration of macroeconomic and financial stability is also subsumed in the mandate. The Reserve Bank is also entrusted with the management of foreign exchange reserves (which include gold holding also), which are reflected in its balance sheet. While the Reserve Bank is essentially a monetary authority, its founding statute mandates it to be the manager of market borrowing of the Government of India and banker to the Government. The Reserve Bank's affairs are governed by a Central Board of Directors, consisting of fourteen non-executive, independent directors nominated by the Government, in addition to the Governor and up to four Deputy Governors. Besides, one Government official is also nominated on the Board who participates in the Board meetings but cannot vote. Important Functions Played by Reserve Bank of India 1. Main Functions Monetary Authority Regulation and Supervisor of Financial System Manager of Exchange Control Issuer of the Currency Developmental Role Banker to The Government 2. Supervisory Functions 3. Promotional Functions
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RECENT INNOVATIONS IN INDIAN BANKING Foreign Direct Investment (FDI) Non-Performing Assets (NPAs) Priority Sector Lending Merger/Amalgamation of Banks Branch Expansion Gross Domestic Product (GDP) Online Banking Net Banking Real Time Gross Settlement (RTGS) Technology ATM Before getting into the details of how CRM actually works in the financial sector, it is very important to know your customer. Know Your Customer (KYC) It is very important to know the customer before having any kind of relationship with him (especially in the banking sector).This is important because of drugs smuggling/ trafficking, money laundering and terrorism coming up. If one has to build a

relationship with the customer one should follow all the KYC norms laid down by RBI.

Under the KYC a customer is:

A person or entity that maintains an account and/ or has a business relationship with the bank

One on whose behalf an account is maintained Any person/ entity connected with financial transaction which can pose significant reputation or other risks.

The RBI States: KYC must be the key principle for identification of an individual/ corporate for opening an Account. This would entail verification through an introductory reference from an existing Account holder, through a person known to the bank or on the basis of documents provided by the customer.
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CONCLUSION We can conclude that the financial sector is a nerve system of Indian economy. Banking plays an important role in development of economy. For steady growth in economy innovations and development in financial sector is very important. Economy of any country faces lots of challenges and problems. To tackle those problems financial sector plays a vital role. The financial sector makes the economy efficient to the extent where it can rival other developed economies in the world. Financial sector also faces lots of problems but it should develop certain strategies to come out of these problems which is very important for healthy growth of economy.

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Chapter 2 Organizational Profile

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About the Organization

Union Bank of India (UBI) was registered on 11 November 1919 as a limited company in Mumbai and was inaugurated by Mahatma Gandhi. At the time of India's Independence in 1947, UBI only had four branches - three in Mumbai and one in Saurashtra, all concentrated in key trade centers. After Independence UBI accelerated its growth and by the time the government nationalized it in 1969, it had grown to 240 branches in 28 states. After nationalization, UBI merged in Belgaum Bank, a private sector bank established in 1930. Then in 1985 UBI merged in Miraj State Bank, which had been established in 1929. In 1999 the Reserve Bank of India requested UBI to acquire Sikkim Bank in a rescue after extensive irregularities had been discovered at the non-scheduled bank. Sikkim Bank had eight branches located in the North-east, which was attractive to UBI. UBI began its international expansion in 2007 with the opening of representative offices in Abu Dhabi, United Arab Emirates, and Shanghai, Peoples Republic of China. The next year, UBI established a branch in Hong Kong, its first branch outside India. In 2009, UBI opened a representative office in Sydney, Australia. Today, with its efficient, value-added services, sustained growth, consistent profitability and development of new technologies, Union Bank has ensured complete customer delight, living up to its image of, GOOD PEOPLE TO BANK WITH. Anticipative banking- the ability to gauge the customer's needs well ahead of real-time - forms the vital ingredient in value-based services to effectively reduce the gap between expectations and deliverables. The key to the success of any organization lies with its people. Union Bank's unique family of about 26,000 qualified / skilled employees is and ever dedicated and delighted to serve the discerning customer with professionalism and wholeheartedness. Union Bank is a Public Sector Unit with 55.43% Share Capital held by the Government of India. The Bank came out with its Initial Public Offer (IPO) in August 20, 2002 and Follow on Public Offer in February 2006. Presently 44.57 % of Share Capital is presently held by Institutions, Individuals and Others. The Bank is one of the largest
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Public Sector Banks in India with business of Rs. 292000 Crores and a branch network of 2800+ branches across India. Over the years, the Bank has earned the reputation of being a techno-savvy and is a front runner among public sector banks in modern-day banking trends. It is one of the pioneer public sector banks, which launched Core Banking Solution in 2002. In March 2008, Union Bank became the first large Public Sector Bank to network all its branches under the Core Banking Solution (CBS). Mr.M.V.Nair(Chairman & MD) successfully introduced a change process called Project NavNirman by leveraging technology, changing processes and empowering people, thereby transforming the Bank into a customer Centric marketing organization. Business of the bank has grown from Rs. 291289 Crores in Mar 2010 to Rs. 355483 Croresas of Mar 2011 - a growth of 22.04%.

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Historical Background of the Organization

Union Bank of India (UBI) was registered on 11 November 1919 as a limited company in Mumbai and was inaugurated by Mahatma Gandhi. At the time of India's Independence in 1947, UBI only had four branches - three in Mumbai and one in Saurashtra, all concentrated in key trade centers. After Independence UBI accelerated its growth and by the time the government nationalized it in 1969, it had grown to 240 branches in 28 states. After nationalization, UBI merged in Belgaum Bank, a private sector bank established in 1930. Then in 1985 UBI merged in Miraj State Bank, which had been established in 1929. In 1999 the Reserve Bank of India requested UBI to acquire Sikkim Bank in a rescue after extensive irregularities had been discovered at the non-scheduled bank. Sikkim Bank had eight branches located in the North-east, which was attractive to UBI. UBI began its international expansion in 2007 with the opening of representative offices in Abu Dhabi, United Arab Emirates, and Shanghai, Peoples Republic of China. The next year, UBI established a branch in Hong Kong, its first branch outside India. In 2009, UBI opened a representative office in Sydney, Australia. Today, with its efficient, value-added services, sustained growth, consistent profitability and development of new technologies, Union Bank has ensured complete customer delight, living up to its image of, GOOD PEOPLE TO BANK WITH. Anticipative banking- the ability to gauge the customer's needs well ahead of real-time - forms the vital ingredient in value-based services to effectively reduce the gap between expectations and deliverables. The key to the success of any organization lies with its people. Union Bank's unique family of about 26,000 qualified / skilled employees is and ever dedicated and delighted to serve the discerning customer with professionalism and whole heart endness Union Bank is a Public Sector Unit with 55.43% Share Capital held by the Government of India. The Bank came out with its Initial Public Offer (IPO) in August 20, 2002 and Follow on Public Offer in February 2006. Presently 44.57 % of Share Capital is presently held by Institutions, Individuals and Others. The Bank is one of the largest Public Sector Banks in India with business of Rs. 292000 Crores and a branch network of 2800+ branches across India. Over the years, the Bank has earned the reputation of being a techno15

savvy and is a front runner among public sector banks in modern-day banking trends. It is one of the pioneer public sector banks, which launched Core Banking Solution in 2002. In March 2008, Union Bank became the first large Public Sector Bank to network all its branches under the Core Banking Solution (CBS). Mr.M.V.Nair(Chairman & MD) successfully introduced a change process called Project NavNirman by leveraging technology, changing processes and empowering people, thereby transforming the Bank into a customer Centric marketing organization. Business of the bank has grown from Rs. 291289 Crores in Mar 2010 to Rs. 355483 Croresas of Mar 2011 - a growth of 22.04%.

Different Departments of the Organization

There are different departments in the Union Bank of India for every specialized work depending upon the nature of work they perform.

The major departments can be classified as follows-: Treasury Management Department. Risk Management Department Financial Inclusion Department Loan Department Credit Department o Retail Credit Department o Micro Finance Department o Small & Medium Enterprises Department (SMEs)

Recovery Department Investment Banking Department Mergers and Acquisitions Department

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Organizational Structure

Regional Offices of Bank has a lean three-tier structure. The delegated powers have been enhanced. The decentralized power structure has accelerated decision making process and thereby Bank quickly responds to changing needs of the customers and has also been able to adjust with the changing environment.

Bank has nine General Manager Offices at Ahmedabad, Pune, Lucknow, Delhi, Bangalore, Bhopal, Mumbai, Calcutta and Chennai which function as an extended arm of corporate office.

It also has two Zonal Offices at Bhopal and Pune. Tier 3 comprises of 54 Regional Offices at various geographical center of the country.

Awards and Statements of the Organization

The Bank was awarded the SKOCH Financial Inclusion Award 2011 for its project Financing Farmer Members of Primary Agricultural Cooperative Societies under BC Model. The award was given away by Dr. K.C.Chakrabarty, Dy. Governor, Reserve Bank of India at the function held in New Delhi. The Bank received the Outlook money award for the best home loan provider in Jan11. The award was given away by the Honable Chief Minister of Maharashtra, Shri. Prithvi raj Chouhan. The Bank received the 'Best Middleware Implementation Award' a the Asian Banker's Technology Implementation Awards 2011 at a function held in Hong Kong on 7th April, 2011.

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CREDIT APPRAISAL
Credit Appraisal is done to evaluate the credit worthiness of a borrower. The credit proposal is prepared to indicate the need based requirements and the rationale for its recommendation. Bank has in place a well-defined framework for approving credit limit of different segments. Request for credit facilities from the prospective borrowers shall be on the prescribed format and the full-fledged proposal should be prepared for submission to the appropriate sanctioning authority for approval. These proposals analyze various risks associate with banking lending i.e. business risks, financial risks, management risks, etc. and clarify the process by which such risks such risks will be managed on and on-going basis. The credit appraisals for any organization basically follow the following process-: Assessment of credit need. Financial Statement Analysis. Financial Ratios of the Company. Credit Rating. Working capital Requirement. Term Loan and Sensitivity Analysis. NPA classification and recovery

ASSESSMENT OF CREDIT NEED

The first step in the process of credit appraisal is to assess the need for loan to the borrower. In the first step the need of financial requirement is to be understood, i.e. for which purpose the loan is required. The bank basically provides two types of credit facilities to their clients. Fund Based Facility Fund based facilities provided by the banks are basically term loan and working capital loan. Non-Fund Based Facility Non-Fund based facilities provided by the banks are letter of credit, letter of guarantee, packing credit.

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 FINANCIAL STATEMENT ANALYSIS

In case of Companies, Sole Proprietorship Firms and Partnership Firms, the bank will grant them loan facility based on their position shown in their audited financial statements, on the basis of which different ratings are assigned to them and the limit of bank finance is calculated. For this an excel sheet is present in the system which

needs to be filled and it will automatically calculates the desired ratio of the concerned party, which will be more easy and accurate. The format of the excel sheet is as follows -: Account: M/s NiyojitNir man Co. Pvt. Ltd. LIABILITI ES 20 09 Au d. 201 0 Aud . 20 11 Es t. 201 2 Pro j. ASSETS 20 09 Au d. 20 10 Au d. 20 11 Es t. Proj. 2012

Capital Share Applicatio n Money Reserves Def. Tax Liability Quasi Capital (USLFamily)

A B

Net Block Constructio n in Progress

C D

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(-) Accumulat ed Losses (-) Prel. Exp. Not written off Tangible

[A+

Total Fixed Assets

Net Worth B+ (X) C+ D+ E(F+ G)]

Long Term Liabilities Unsecure d Loan (Others) Term LoansUBI Term LoansOthers Term LoansOthers Car Loans Total L [H+ K J I H

MISC. ASSETS

Book Debts>6mo nth Loans & Adv.

Security Deposits

Investments - NSC, Shares

Total Misc.
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Term Liabilities (Y) Long Term Sources

I+J +K +L] (X+ Y)

Assets

Long Term Uses

CURREN T LIABILITI ES ST Bank BorrowCC/PC ST Bank BorrowBills CreditorsLC 3 2 1

CURRENT ASSETS

Cash & Bank Balance Term Deposits (Net) Book Debts old up to 6 month

Sundry CreditorsGoods (others) Sundry Creditors (Expenses ) Advances from Customer

Stocks

Advance to Suppliers

Prepaid Insurance/E xp.

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s Provisions 7 Advance IT/TDS/VAT Earnest Money Deposits

OCL Total Current Liabilities

8 (1+ 2+ 3+ 4+ 5+ 6+ 7+ 8)

OCA Total Current Assets

GRAND TOTAL

(X+ Y)+ (1+ 2+ 3+ 4+ 5+ 6+ 7+ 8)

GRAND TOTAL

Sales

11

Required NWC-25%

Net Profit (PAT) Taxes

12

Actual/Proj . NWC

13

Current
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Paid Depreciat ion Int. Paid 15 14

Ratio DER (TOL/TNW) DER (TL/TNW)

PBDIT

(12 +1 3+ 14 +1 5)

TCA to sales%

Int. Service Coverage Ratio

(12 +1 3+ 14 +1 5)/ 15

Debtors to sales (Days)

OCL

[(1 +2 +3 +4 +5 +6 +7 +8) (1+ 2)]

NWC to TCA%

W.C. Gap

OCL to TCA%
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FBF

FBF to TCA%

SOD(TDR )- Gross Amt. Bank Borrowin g-UBDLC Outstandi ng LCs

TDRs with banks (Gross) DebtorsUBD-LC

Outstandin g LGs

Financial Ratios of the Company

For doing credit appraisal, the bank needs to study the financial statements of the customers and calculate the different financial ratios depending upon the figures shown by those financial statements so that the financial position of the company may be clear to the bank, because bank need to know that whether that customer is able to repay the loan amount with the interest applicable to it in time. It also helps to show the growth rate of the business of that particular firm or enterprise. Some of the major financial ratios which are calculated are-: Current Ratio Quick Ratio Interest Service Coverage Ratio Debt Equity Ratio (TOL/TNW) Debt Equity Ratio (TL/TNW) Total Current Assets *100/ Sales Net Working Capital*100/Total Current Assets

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 Credit Rating
Credit rating is done through the bank based on certain different criterias for which the bank has to prepare a depth analysis report of the customers overall performance and a chart is prepared in which the marks are given for each and every activity separately and then all the individual marks are summed up to get the aggregate score and on the basis of that score the rating is assigned to each and every customer individually. This rating helps the customer to avail some additional benefits and services from the bank based on their credit rating assigned to them by the bank and this will be also modified at regular intervals of time period.

The rating chart goes like this-: CR-1 CR-2 CR-3 CR-4 CR-5 CR-6 More than 90 86-90 81-85 76-80 71-75 66-70, and so on

Working Capital Requirement

In every business unit to work properly and to run its operations smoothly the need of working capital arises. For this the bank can grant loan and finance those operations but it needs to check the amount of capital actually required for that business unit and to check whether the business is able to re-pay it with interest applicable to it, and for this an analysis of financial statements of the previous years of that business are studied and on the basis of those results the credit is sanctioned to them for the purpose of working capital.
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 Term loan and Sensitivity analysis

Term loan is provided for a short-term period to the small and medium enterprises which is of a less amount as compared to the amounts of other loans. They generally attracts high rate of interest as they are for a short period of time. In these types of loans a Sensitivity Analysis is carried out by the bank on its level to know the risk involved in the type of business which is carried out by the loan applicant which will certainly decide the rate of interest at which the bank may grant the loan to the applicant.

NPA Classification and Recovery

NPA (Non-Performing Assets) are those assets which are not working properly or in banking terms it means those customers who are not able to re-pay the loan amount i.e. the installment amount. So the process of identifying those customers and putting them together in one group and making strategy to recover the amount from them is known as NPA Classification and Recovery process.

Objective and Significance of the Study To know the actual working of the credit department in Union Bank of India. To know how the credit department contributes in expanding the business
operations of the bank and thus adds to the profit for the organization.

To understand the procedure of providing the different types of credit to the

customers.

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Limitations of the study

Limited Area Limited Time Limited Interest of the Respondents Biasness of the Respondents

Limited Area-:
The main limitation of the study is that the area where the research is done is very limited and the variations may arise in the findings and the data collected as the area of research is increased.

Limited Time-:
The other main limitation of the study is the time constraint. As the study and observation made by me will only depends on what I seen and learn by working in the organization during the period of two months only which may be not as accurate as it shows.

Limited Interest of the Respondents-:

The respondents some time are not interested in answering the questions and thus cannot gave proper and true opinion which can result in wrong conclusions and thus act as a limitation of the research made and data collected as the wrong data may leads to wrong conclusions.
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 Biasness of the Respondents-:

The respondents some time get biased and thus the information collected from them is not true and thus leads to wrong interpretation and conclusion.

Future Scope -:
It helps the bank to know their lacking and can able to work on them so that the bank can able to satisfy the needs of its customers.

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Chapter 3 Concepts and Methodology

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Review of Literature

A literature review is a body of text that aims to review the critical points of current knowledge including substantive findings as well as theoretical data for the project. A literature review is an account of what has been published on a topic by accredited by scholars and researchers. Besides enlarging the knowledge about the topic, writing a literature review help us gain and demonstrate skills in two areas: Information Seeking- the ability to scan the literature efficiently using manual and computerized methods. Critical Appraisal- the ability to apply principles of analysis to identify unbiased and valid studies. Here in this project it was studied that how the credit department in Union Bank of India actually works and also it helps to gain the practical knowledge which is very necessary in every field of study. It also helps to apply the theoretical knowledge which was gained during the classroom study during the course of my management program.

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Research Methodology

Research methodology:The success of the analysis mostly depends on the methodology on which it is carried out. The appropriate methodology will improve the validity of the findings.

Area of the study:The study was mainly concentrated on the credit department of Union Bank of India in Jaipur at M.I. Road Branch in which I have studied the working of that department and how they carry out different marketing and financial strategies to make their business grow and provide the satisfaction to the customers through its different services.

Research Design:Descriptive Research: Descriptive research includes survey and fact-findings enquire of different kinds. The major purpose of descriptive research is description of the state affairs, as it exists at present.

Data Collection:The study is based on the data collected through primary and secondary sources.

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Sources of Data-:

Primary Data:I have used questionnaire as a primary tool for collecting data.

Secondary Data:Secondary data was collected from journals, magazines, web sites and from other relevant publications.

Sampling Design:The sampling design mainly consists of the sample taken for the study along with the sample size, sample frame and sampling method.

Sample Size:From the universe, sample sizes of 100 customers were selected for the purpose of the study.

Sample Frame:The customers were selected on a random basis from which the respondents were selected based on convenience. Sampling Method:Convenience sampling was used, based on the willingness and availability of the respondents. The study was conducted on customers with different type of accounts maintained in the bank.

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CHAPTER 4 DATA ANALYSIS AND INTERPRETATION

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1. Age Group

A). Less than 25 Years B). 25-40 Years C). 40-55 Years D). More than 55 Years

Objective-:

To take a clear idea of the age group of people who undertake banking products.

Analysis-: Table No.1

Age Group

No. of Respondents

% of Respondents

Less than 25 years 25-40 years 40-55 years More than 55 years Total

26 43 27 4 100

26% 43% 27% 4% 100%

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No. of Respondents
Age
4 27 26 Less than 25 years 25-40 years 40-55 years more than 55 years

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Fig.No.1

Interpretation-:
It is quite clear from the above graph that mostly the person who belongs to the age group of 25-40 years is undertaking the services and products offered through banks. 2. What is your Profession?

A). Salaried B). Self Employed

Objective-:

To take a clear idea about the profession of the customer.

Analysis-:

35

Table No.2

Profession

No. of customers

% of Customers

Salaried Self Employed Total

38 62 100

38 62 100%

Salaried
0 0 Salaried 38

62

Fig. No.2

Interpretation-:

It is clear from the above graph that most of the customers of the bank are self-employed as compared to the salaried customer.

36

3. Income Group

A).Less than 10,000/month B).10,000-15,000/month C).15,000-20,000/month D). More than 20,000/month

Objective -:

To take a clear idea about investment capacity of a person.

Analysis-:

Table No.3

Income Group
Less than 10,000 10,000-15,000 15,000-20,000 More than 20,000

No. of Customers
23 26 26 25 100

% of Customers
23% 26% 26% 25% 100%

Total

37

Sales
23 Less than 10,000 1000015000 1500020000

25

26

26

Fig. No.3
Interpretation-:
It is clear from the above graph that the investment capacity of the customer will increases as its income increases but it changes due to some other related factors also which are associated with the individual customers and their way of spending and saving.

4. How much can you invest per annum? Objective-:

Less than 10,000 10,000-15,000 15,000-20,000 More than 20,000

To get the close idea about the investment power.

Analysis-:

38

Table No.4

Investment/annum
Less than 10,000 10,000-15,000 15,000-20,000 More than 20,000

No. of Customers
32 30 24 14

% of Customers
32% 30% 24% 14%

Total

100

100%

% of Customers with different level of investements/annum

14% 24% 30% 32% Less than 10,000 10,000-15,000 15,000-20,000 More than 20,000

Fig. No.4

Interpretation-:
Most of the customers i.e. 32% in all are able to invest up to Rs. 10,000 only whereas 30% of customers are able to invest between the range of Rs.10,000 to Rs.15,000 and 24% of them lies in the range of Rs.15,000-Rs. 20,000, whereas only 14% among all are able to invest more than Rs.20,000/annum.

39

5. Whether you invest in Mutual Fund?

Yes No

Objective-:

To get an idea whether the customers are willing to invest as more risk is associated with mutual funds, this shows their investment motive.

Analysis-:

Table No.5

Response Yes No Total

No. of Customers 70 30 100

% of Customers 70 30 100

Whether you invest in Mutual Fund

0 30 70 0 y

Fig. No.5

40

Interpretation-: Although mutual funds are associated with high risk factor but still as
they are also giving high returns that is why 70% of the respondents are still invest in the mutual fund irrespective of the risk associated with it.

6. Do you invest in Mutual Fund, if yes, to which income group you belong?

A). Less than 10,000/month B). 10,000-15,000/month C). 15,000-20,000/month D). More than 20,000/month

Objective-:

To know which income group of customers will like to invest more in mutual funds scheme. Analysis -:

Table No.6

INCOME GROUP Less than 10,000/month 10,000-15,000/month 15,000-20,000/month More than 20,000/month Total

No. of Respondents 0 21 24 25 70

% of Respondents 0 30 34 36 100

41

Under 2.5 Lac/annum 2.5 Lacs to 3.5 Lacs/annum 3.5 Lacs to 4.5 Lacs/annum Above 4.5 Lacs/annum 39

8 20

33

Fig No.6

Interpretation-: The customers who are having an income of more than Rs.4.5 lac per
annum are interested to invest more in mutual fund scheme.

7. Which age of customers is more interested to invest in mutual fund scheme?

A). Under 25 years B). 25-39 years C). 40-54 years D). 55 years & above

Objective-:

To know the group which is more interested in buying the mutual fund so that the bank can able to target that specific group only.

42

Analysis -:

Table No.7

AGE Under 25 25-39 40-54 55 & above Total

No. of Respondents 14 37 16 3 70

% of Respondents 20 53 23 4 100

No. of Respondents
4 23 20 Under 25 25-39 40-54 55 & above 53

Fig. No.7
Interpretation-:
The person who belongs to the age group of 25 to 39 years of age are interested more in buying the mutual funds.

43

8. Do you prefer to invest in Bank (F.D.)?

Yes No

Objective-:

To know whether the customers are preferred to take the fixed deposit schemes offered by bank.

Analysis -:

Table No.8

Do you prefer to invest in Bank (F.D.)

Total

Yes No. of Customers 60

No 40 100

44

Sales
0 40 60 0 yes no

Fig. No.8

Interpretation-:
There is no major difference between the no. of people who prefer keeping their money in F.D. and who dont opt for it. There is however a growing concern about the falling interest rate in banks in F.D.

45

CHAPTER -5 SWOT ANALYSIS

46

Union Bank of India

Logo

Parent Company Category Sector Tagline/ Slogan USP

Government of India Banking & financial services Banking and finance Good people to bank with Innovative banking for social welfare

STP
Segment Target Group Positioning Individual and Industry banking Individuals and corporates Complete Banking solutions

SWOT Analysis
1. Financial products for agricultural sector 2. Products aligned to Government schemes 3. Emphasis on Customer Satisfaction 4. Union bank of India has over 27,700 employees 5. It has representative offices in Abu Dhabi, United Arab Emirates, and Shanghai, Peoples Republic of China, Australia and a branch in Hong Kong. 6. Online Telebanking facility are available to all its Core Banking Customers - individual as well as Strength corporate
47

1. Nominal International presence as compared to leading players 2. Advertising is lesser which leads to lower brand Weakness presence 1. Small scale business banking 2. More global penetration through International banking Opportunity 3. Acquisition of smaller local banks 1. Economic crisis 2. Highly competitive environment Threats 3. Stringent Banking Norms

Competition
1. Indian bank 2. Corporation Bank Competitors 3. Dena bank

48

CHAPTER-6 Findings, Suggestions and Conclusion

49

FINDINGS

The bank has a sound credit appraisal system so that the customers are properly entertained and their satisfaction will be achieved. Although the bank is trying their level best to communicate their policies but still some lacking are found. The bank has tie-ups with some B-schools also, so that the students taking admission in those B-schools should be financed through the bank only, which will enhance its coverage area.

At regular intervals of time the bank is organizing the customer meet, so that the valuable suggestions on the part of customer can be heard and implemented.

50

CONCLUSION

The Union Bank of India is generating more and more revenues and profits out of its operations. As it is well known that for every banking organization the main source of income is through the interest which it earns by extending various types of credits to its customers which in return gave them a huge income in the form of interest and thus it helps to grow other departments as the credit which is given to the customers needs to be monitored and also before providing the various types of credits to the customers the credit department needs to compile some documentation process in order to extend credit to the customers. For this they have to follow certain principals of documentation procedure which is as follows-:

DOCUMENTATION

General Principals of Documentation -:

CONTENTS Part I Part II Part III Part IV Part V Documentation Purpose & Formalities Stamping of Documents Law of Limitation & Renewal of Documents Registration With Registrar of Assurances Registration of Charges with Registrar of Companies

51

SUGGESTIONS

The documentation process is too complicated which should be replaced with a more understandable and simple manner. The bank should focus on their products and prepare them according to the needs and requirements of the customer. I also suggest bank to encourage the trainees like us to give a P.P.T. presentation on the day of customer meet so that we can able to gain the knowledge about the current strategies and plans of the bank, which will be beneficial for the bank and as well as for us.

52

BIBLIOGRAPHY

53

BIBLIOGRAPHY

Reference Book -:

Research Methodology (2nd Revised Edition 2004) New age International (Pvt.) Ltd. Publications

Banks Publications -:

Union Bank of India Annual Report published by the bank. Union Miles published by Union Bank of India recently.

Websites :

www.unionbankofindia.com www.ampfi.com www.nse.com

54

55

Annexure

QUESTIONNAIRE

56

NAME

SEX

AGE

PROFFESSION:

1. Which age group you belong?

A). Less than 25 Years

B). 25-40 Years

C). 40-55 Years

D). More than 55 Years

2. What is your Profession?

A). Salaried

B ). Self Employed

3. From which income group you belong to?

A).Less than 10,000/month

B).10,000-15,000/month

57

C). 15,000-20,000/month

D). More than 20,000/month

4. How much can you invest per annum?

A).Less than 10,000

B).10,000-15,000

C). 15,000-20,000

D).More than 20,000

5. Whether you invest in Mutual Fund?

A). Yes

B). No

6.

Do you invest in Mutual Fund, if yes, to which income group you belong?

A). Yes

B). No

A). Less than 10000/month

B). 10000-15000/month

C). 15000-20000/month

D). More than 20000/month

58

7. Do you invest in Mutual Fund, if yes, to which age group do you belong?

A). Yes

B). No

A). Under 25 years

B). 25-40 years

C). 40-55 years

D). 55 years & above

8.

Do you prefer to invest in Bank (F.D.)?

A). Yes

B).

No

59