Chapter-1 INTRODUCTION

In the present situation, banking in India has attained fair amount of maturity in terms of supply, product range and reach-even though reach in rural India still remains a challenge for the private sector and foreign banks. 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. Since Indian economy is witnessing strong growth the demand for banking services, especially retail banking, mortgages and investment services are expected to be strong. One may also expect M&As, takeovers, and asset sales. Currently, India has 83 scheduled commercial banks (SCBs) - 25 public sector banks (that is with the Government of India holding a stake), 22 private banks (these do not have government stake; they may be publicly listed and traded on stock exchanges) and 36 foreign banks. They have a combined network of over 63,000 branches and 37,000 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.

Bank Definition:
Under Indian Law: According to Banking Regulation Act, 1949(Vide Section 5b, c) as follows: A) Accepting for the purpose of lending or investment of deposits of money from the public, repayable on demand or otherwise & withdrawal by cheque draft & order or otherwise (Sec. 5b) B) A banking company is a company which transacts the business of banking in India (Sec. 5c) Banks are institutions that accept various types of deposits & use those funds for granting loans. The business of banking is that of an intermediary between the saving & investment units of the economy. It collects the surplus funds of millions of individual savers who are widely scattered & channelizes them to the investors.

Business of Banking

Role of Banks in an Economy:

Banks play an important & active role in the economic development of a country. If the banking system is a country is effective, efficient & disciplined it brings about rapid growth in the various sectors of the economy. The following is the significance of banks in the economic development of a country: 1. Banks promote capital formation: Commercial banks accept deposits from individuals & businesses, these deposits are then made available to the businesses which make use of them for productive purposes in the country. The banks are therefore not only the store houses of the countrys wealth, but also provide financial resources necessary for economic development. 2. Investment in new enterprise: Businessman normally hesitates to invest their money in risky enterprises. The commercial banks generally provide short & medium term loans to entrepreneurs to invest in new enterprise & adopt new methods of production. The provision of timely credit increases the productive capacity of the economy. 3. Promotion of trade & Industry: With the growth of commercial banking there is vast expansion in trade & industry. The use of bank draft, check, bill of exchange, credit cards & letters of credit etc has revolutionized both national & international trade. 4. Development of Agriculture The commercial banks particularly in developing countries are now providing credit for development of agriculture & small scale industries in rural areas. The provision of credit to agriculture sector has greatly helped in raising agriculture productivity & income of the farmers. 5. Implementation of Monetary policy:

The central bank of the country controls & regulates volume credit through the active cooperation of the banking system in the country. It helps in bringing price stability & promotes economic growth within the shortest possible period of time. 6. Monetization of the economy: The commercial banks by opening branches in the rural & backward areas are reducing the exchange of goods through barter. The use of money has greatly increased the volume of production of goods. The non monetized sector (barter economy) is now being converted into monetized sector with the help of commercial banks.

Chapter-2 OBJECTIVES OF THE STUDY

The main objective of the research is to understand the concept of credit (Loan) appraisal. What is the process of credit appraisal? How can it function and control? What are the important things in credit appraisal? How banks do credit ratings? How banks fix the interest rates for different sectors? Under this project I have also studied overview of banking industry. I have included overview of banking sector as well as types of bank.

Chapter-3 Scope of the Study

To provide necessary information to prospective customers providing loans To help customers in the form filling procedure. To inform customers about the different products offered by the bank.

Chapter-4 Limitations of the study:

As the credit rating is one of the crucial areas for any bank, some of the technicalities are not revealed which may have cause destruction to the information and our exploration of the problem. As some of the information is not revealed, whatever suggestions generated, are based on certain assumptions. Credit appraisal system includes various types of detail studies for different areas of analysis, but due to time constraint, our analysis was of limited areas only.

Chapter-5

State Bank of India

The State Bank of India, the countrys oldest Bank and a premier in terms of balance sheet size, number of branches, market capitalization and profits is today going through a momentous phase of Change and Transformation the two hundred year old Public sector behemoth is today stirring out of its Public Sector legacy and moving with an ability to give the Private and Foreign Banks a run for their money. The bank is entering into many new businesses with strategic tie ups Pension Funds, General Insurance, Custodial Services, Private Equity, Mobile Banking, Point of Sale Merchant Acquisition, Advisory Services, structured products etc each one of these initiatives having a huge potential for growth. The Bank is forging ahead with cutting edge technology and innovative new banking models, to expand its Rural Banking base, looking at the vast untapped potential in the hinterland and proposes to cover 100,000 villages in the next two years. It is also focusing at the top end of the market, on whole sale banking capabilities to provide Indias growing mid/large Corporate with a complete array of products and services. It is consolidating its global treasury operations and entering into structured products and derivative instruments. Today, the Bank is the largest provider of infrastructure debt and the largest arranger of external commercial borrowings in the country. It is the only Indian bank to feature in the Fortune 500 list. The Bank is changing outdated front and back end processes to modern customer friendly processes to help improve the total customer experience. With about 11448 of its own branches and another 6500+ branches of its Associate Banks already networked, today it offers the largest banking network to the Indian customer. Banking behemoth State Bank of India is planning to set up 15,000 ATMs in the country by March 2010 investing more than Rs 1,000 crores. RP Sinha, deputy managing director (information technology) of the bank, said: "We plan to have 25,000 ATMs in the country by March 2010. We will add 15,000 ATMs to the existing ones by end of this fiscal." The bank has almost 10,300 ATMs in the country at present.

According to a senior SBI official, the spot for an ATM counter is taken on lease. It requires Rs 5.2-5.5 lakh to set up the infrastructure and almost Rs 3.5 lakh for an ATM machine. "All put together, the cost is around Rs 9 lakh per counter," he said. Going by the estimate, SBI would require a whopping Rs 1,350 crores for setting up 15,000 ATMs. The Bank is also in the process of providing complete payment solution to its clientele with its ATMs, and other electronic channels such as Internet banking, debit cards, mobile banking, etc. With four national level Apex Training Colleges and 54 learning Centers spread all over the country the Bank is continuously engaged in skill enhancement of its employees. Some of the training programs are attended by bankers from banks in other countries. The bank is also looking at opportunities to grow in size in India as well as internationally. It presently has 82 foreign offices in 32 countries across the globe. It has also 8 Subsidiaries in India SBI Capital Markets Ltd, SBI Mutual Funds, SBI factor and commercial services Ltd, SBI DFHI Ltd, SBI Cards and Payment Services Ltd, SBI Life Insurance Company Ltd, SBI Fund Management Pvt. Ltd, SBI Canada - forming a formidable group in the Indian Banking scenario. It is in the process of raising capital for its growth and also consolidating its various holdings.

KEY AREAS OF OPERATION:

The business operations of SBI can be broadly classified into the key income generating areas such as National Banking, International Banking, Corporate Banking, & Treasury operations. The functioning of some of the key divisions is enumerated below: a) Corporate banking The corporate banking segment of the bank has total business of around Rs1, 193 bn. SBI has created various Strategic Business Units (SBU) in order to streamline its operations. These SBUs are as follows: 1) Corporate Accounts 2) Leasing

3) Project Finance 4) Mid Corporate Group 5) Stressed Assets Management b) National banking The national banking group has 14 administrative circles encompassing a vast network of 9,177 branches, 4 sub-offices, 12 exchange bureaus, 104 satellite offices and 679 extension counters, to reach out to customers, even in the remotest corners of the country. Out of the total branches, 809 are specialized branches. This group consists of four business group which are enumerated below: 1) Personal Banking SBU 2) Small & Medium Enterprises 3) Agricultural Banking c) International banking SBI has a network of 73 overseas offices in 30 countries in all time zones and correspondent relationship with 520 international banks in 123 countries. The bank is keen to implement core banking solution to its international branches also. During FY06, 25 foreign offices were successfully switched over to Pinnacle software. SBI has installed ATMs at Male, Muscat and Colombo Offices. In recent years, SBI acquired 76% shareholding in Guiro Commercial Bank Limited in Kenya and PT Indamines Bank Ltd. in Indonesia. The bank incorporated a company SBI Botswana Ltd. at Gaborone. d) Treasury The bank manages an integrated treasury covering both domestic and foreign exchange markets. In recent years, the treasury operation of the bank has become more active amidst rising interest rate scenario, robust credit growth and liquidity constraints. The bank diversified its operations more actively into alternative assets classes with a view to diversify the portfolio and build alternative revenue streams in order to offset the losses in fixed income portfolio. Reorganization of the treasury processes at domestic and global levels is also being undertaken to leverage on the operational synergy between business units and network. The reorganization seeks to enhance the 4) Government Banking

efficiencies in use of manpower resources and increase maneuverability of banks operations in the markets both domestic as well as international. e) Associates & Subsidiaries The State Bank Group with a network of 14,061 branches including 4,755 branches of its seven Associate Banks dominates the banking industry in India. In addition to banking, the Group, through its various subsidiaries, provides a whole range of financial services which includes Life Insurance, Merchant Banking, Mutual Funds, Credit Card, Factoring, Security trading and primary dealership in the Money Market.

1) Associates Banks: SBI has six associate banks namely State Bank of Indore State Bank of Travancore State Bank of Bikaner and Jaipur State Bank of Mysore State Bank of Patiala State Bank of Hyderabad 2) Non-Banking Subsidiaries/Joint Ventures i) ii) iii) iv) v) vi) vii) SBI Capital Markets Ltd, SBI Mutual Funds, SBI factor and commercial services Ltd, SBI DFHI Ltd, SBI Cards and Payment Services Ltd, SBI Life Insurance Company Ltd, SBI Fund Management Pvt. Ltd, SBI

Chapter-6 OVERVIEW OF CREDIT APPRAISAL

Credit appraisal means an investigation/assessment done by the bank prior before providing any loans & advances/project finance & also checks the commercial, financial & technical viability of the project proposed its funding pattern & further checks the primary & collateral security cover available for recovery of such funds.

Brief overview of credit:

Credit Appraisal is a process to ascertain the risks associated with the extension of the credit facility. It is generally carried by the financial institutions which are involved in providing financial funding to its customers. Credit risk is a risk related to non repayment of the credit obtained by the customer of a bank. Thus it is necessary to appraise the credibility of the customer in order to mitigate the credit risk. Proper evaluation of the customer is performed this measures the financial condition and the ability of the customer to repay back the loan in future. Generally the credits facilities are extended against the security know as collateral. But even though the loans are backed by the collateral, banks are normally interested in the actual loan amount to be repaid along with the interest. Thus, the customer's cash flows are ascertained to ensure the timely payment of principal and the interest. It is the process of appraising the credit worthiness of a loan applicant. Factors like age, income, number of dependents, nature of employment, continuity of employment, repayment capacity, previous loans, credit cards, etc. are taken into account while

appraising the credit worthiness of a person. Every bank or lending institution has its own panel of officials for this purpose.

However the 3 C of credit are crucial & relevant to all borrowers/ lending which must be kept in mind at all times.

Character Capacity Collateral

If any one of these is missing in the equation then the lending officer must question the viability of credit. There is no guarantee to ensure a loan does not run into problems; however if proper credit evaluation techniques and monitoring are implemented then naturally the loan loss probability / problems will be minimized, which should be the objective of every lending officer. Credit is the provision of resources (such as granting a loan) by one party to another party where that second party does not reimburse the first party immediately, thereby generating a debt, and instead arranges either to repay or return those resources (or material(s) of equal value) at a later date. The first party is called a creditor, also known as a lender, while the second party is called a debtor, also known as a borrower. Credit allows you to buy goods or commodities now, and pay for them later. We use credit to buy things with an agreement to repay the loans over a period of time. The most common way to avail credit is by the use of credit cards. Other credit plans include personal loans, home loans, vehicle loans, student loans, small business loans, trade. A credit is a legal contract where one party receives resource or wealth from another party and promises to repay him on a future date along with interest. In simple terms, a credit is an agreement of postponed payments of goods bought or loan. With the issuance of a credit, a debt is formed.

Basic types of credit

There are four basic types of credit. By understanding how each works, you will be able to get the most for your money and avoid paying unnecessary charges. Service credit is monthly payments for utilities such as telephone, gas, electricity, and water. You often have to pay a deposit, and you may pay a late charge if your payment is not on time. Loans let you borrow cash. Loans can be for small or large amounts and for a few days or several years. Money can be repaid in one lump sum or in several regular payments until the amount you borrowed and the finance charges are paid in full. Loans can be secured or unsecured. Installment credit may be described as buying on time, financing through the store or the easy payment plan. The borrower takes the goods home in exchange for a promise to pay later. Cars, major appliances, and furniture are often purchased this way. You usually sign a contract, make a down payment, and agree to pay the balance with a specified number of equal payments called installments. The finance charges are included in the payments. The item you purchase may be used as security for the loan. Credit cards are issued by individual retail stores, banks, or businesses. Using a credit card can be the equivalent of an interest-free loan--if you pay for the use of it in full at the end of each month.

Brief overview of loans:

Loans can be of two types fund base & non-fund base:

Fund Base includes:

Working Capital Term Loan

Non-Fund Base includes:

 Letter of Credit Bank Guarantee Bill Discounting

Fund Base: Working Capital:
General The objective of running any industry is earning profits. An industry will require funds to acquire Fixed assets like land, building, plant, machinery, equipments, vehicles, tools etc., & also to run the business i.e. its day to day operations. Funds required for day to-day working will be to finance production & sales. For production, funds are needed for purchase of raw materials/ stores/ fuel, for employment of labor, for power charges etc., for storing finishing goods till they are sold out & for financing the sales by way of sundry debtors/ receivables. Capital or funds required for an industry can therefore be bifurcated as fixed capital & working capital. Working capital in this context is the excess of current assets over current liabilities. The excess of current assets over current liabilities is treated as net working capital or liquid surplus & represents that portion of the working capital, which has been provided from the long-term source. Definition: Working capital is defined as the funds required carrying the required levels of current assets to enable the unit to carry on its operations at the expected levels uninterruptedly. Thus Working Capital required is dependent on (a) The volume of activity (viz. level of operations i.e. Production & sales) (b) The activity carried on viz. mfg process, product, production program, the materials & marketing mix. Methods & Application

SEGMENT Small Scale Industries

LIMITS Upto Rs 5 cr Above Rs 5 cr

METHOD Traditional Method & Nayak Committee method Projected Balance Sheet Method Traditional / Turnover Method Traditional Method for Trade & Projected Turnover Method Projected Balance Sheet Method & Projected Turnover Method Projected Balance Sheet Method Traditional Method Projected Balance Sheet Method & Projected Turnover Method Projected Balance Sheet Method

Small Business Finance Commercial & Industrial Trade & Services

All loans Upto Rs 1 cr Above Rs 1 cr & upto Rs 5 cr Above Rs 5 cr Below Rs 25 lacs Rs 25 lacs & Over but upto Rs 5 cr Above Rs 5 cr

C & I Industrial Units

Operating cycle method Any manufacturing activity is characterized by a cycle of operations consisting of purchase of purchase of raw materials for cash, converting these into finished goods & realizing cash by sale of these finished goods. Diagrammatically, the OPERATING CYCLE is represented as under The time that lapses between cash outlay & cash realization by sale of finished goods & realization of sundry debtors is known as the length of the operating cycle.

That is, the operating cycle consists of:

cash

debtors

Raw materials

Finished goods

Work-inprogress

Time taken to acquire raw materials & average period for which they are in store. Conversion process time Average period for which finished goods are in store & Average collection period of receivables (Sundry Debtors)

Operating cycle is also called the cash-to-cash cycle & indicates how cash is converted into raw materials, stocks in process, finished goods, bills (receivables) & finally back to cash. Working capital is the total cash that is circulating in this cycle. Therefore, working capital can be turned over or redeployed after completing the cycle.

The length of the operating cycle = a+b+c+d (as in 4.4)

If a = 60 days b = 10 days c = 20 days d = 30 days The operating cycle is 120 days (nearly 4 months). This means there are 365/120 = 3 cycles of operations in a year. Sales = Rs. 1, 00,000 per annum Operating expenses = Rs. 72,000 per annum But the working capital requirement, as you know, is not Rs. 72,000. In these cases, there are 3 operating cycles in a year. That means each rupee of working deployed in the unit is turned over 3 times in a year. (This is also known as working capital turnover ratio). Therefore WCR = Operating Expenses = Rs. 72,000/- = Rs. 24,000/No. of cycles per annum 3

WCR is therefore not Rs. 72,000/- but only Rs. 24,000/-

Assessment of Working Capital Requirement & Permissible Bank Finance using Operating Cycle Concept

Let us consider a case of a unit where: Sales Raw Materials Wages Other manufacturing = Rs. 20,000 pm (A) = Rs. 14,000 pm = Rs. 2,000 pm

Expenses Total expenses Profit

= Rs. 3,000 pm = Rs. 19,000 p.m. (B) = Rs. 1,000 P.m. (C)

The operating cycle is Raw Materials Stock in Process Finished Goods Sundry Debtors The total length of Operating cycle = 15 days = 2 days = 3 days = 15 days = 35 days (D)

WCR = B * D = 19,000 * 35 = Rs. 22,167/- (approx.) 30 30 Where B = Operating Expenses; & D = Length of Operating cycle

The length of the operating cycle is different from industry to industry and from one firm to another within the same industry. For instance, the operating cycle of a pharmaceutical unit would be quite different from one engaged in the manufacture of machine tools. The operating cycle concept enables us to assess the working capital need of each enterprise keeping in view the peculiarities of the industry it is engaged in and its scale of operations. Operating cycle is an important management tool in decision-making.

Traditional Method of Assessment of Working Capital Requirement The operating cycle concept serves to identify the areas requiring improvement for the purpose of control and performance review. But, as bankers, we require a more detailed analysis to assess the various components of working capital requirement viz., finance for stocks, bills etc. Bankers provide working capital finance for holding an acceptable level of current assets, viz. raw materials, stocks-in-process, finished goods and sundry debtors for achieving a predetermined level of production and sales. Quantification of

these funds required to be blocked in each of these items of current assets at any time will, therefore provide a measure of the working capital requirement (WCR) of an industry.

It can thus be summarized as follows:

Projected Annual Turnover Method for SSI units (Nayak Committee) For SSI units which enjoy fund based working capital limits up to Rs.5 cr, the minimum working capital limit should be fixed on the basis of projected annual turnover. 25% of the output or annual turnover value should be computed as the quantum of working capital required by such unit .The unit should be required to bring in 5% of their annual turnover as margin money and the Bank shall provide 20% of the turnover as working capital finance. Nayak committee Guidelines correspond to working capital limits as per the Operating Cycle method where the average production / processing cycle is taken to be 3 months (i.e. working capital would be turned over 4 times in a year).

Projected Annual Turnover Method for C & I industrial units (limits upto Rs 5 cr) Bank has decided to extend Nayak Committee approach for assessment of limits to C&I industrial units requiring credit limits upto Rs.5 cr. That is, credit requirement up to Rs.5

crores of C&I borrowers (industrial units) may be assessed at a minimum of 20% of projected annual turnover. In other words, the working capital requirement will be assessed at 25% of projected annual turnover, of which 5% should be borne by entrepreneur as margin and 20% would be allowed as Bank Drawings. While accepting projected annual sales turnover, a cap of 25% over actual annual sales turnover in the immediately preceding year should be set, except where production capacity has been substantially increased.

Projected Annual Turnover Method for Business Enterprises in Trade & Services Sector: i) For working Capital limits up to Rs. 5 cr to C&I(Trade) sector, the assessment of credit limit is to be based upon annual turnover. Thus, an across the board credit limit equal to 15% of projected annual turnover be offered to business enterprises in the T&S sector. It would be available for utilization generally as a cash credit limit. However, where needed an LC limit (as a sub-limit of total), may also be allowed. ii) The credit limit would be secured by hypothecation charge on the current assets of the enterprise. Periodical stock statements are to be obtained and margin of 25% be retained. iii) Credit limits under this assessment method may be offered to established (at least 3 years old) profit making business enterprises, eligible for credit rating of SB-4 and above. Mortgage of property valued at least at 33% of the limit is to be prescribed. Further, an interest rebate of 0.50% p.a. may be given to borrowers who offer mortgage of property valued at over 75% of the credit limit. iv) While accepting projected annual sales turnover, a cap of 25% over actual annual sales turnover in the immediately preceding year should be set. When circumstances warrant its breach, reasons therefore should be recorded. v) Where borrowers indicate need for credit limits which are higher than the amount indicated above, assessment under the traditional PBS method may be resorted to. Projected Balance Sheet Method (PBS) The PBS method of assessment will be applicable to all C&I borrowers who are engaged in manufacturing, services, and trading activities, including merchant exports and who

require fund based working capital finance of Rs. 25 lacs and above. In the case of SSI borrowers, who require working capital credit limit up to Rs.5 cr, the limit shall be computed on the basis of Nayak Committee formula as well as that based on production and operating cycle of the unit and the higher of the two may be sanctioned. Fund based working capital credit limits beyond Rs 5 cr for SSI units shall be computed in the same way as for C&I units. For business enterprises in Trade and Services Sector, where the projected turnover method is not applicable, PBS method shall be followed. In the Projected Balance Sheet (PBS) method, the borrowers total business operations, financial position, management capabilities etc. are analyzed in detail to assess the working capital finance required and to evaluate the overall risk of the exposure. The following financial analysis is also to be carried out: Analysis of the borrowers Profit and Loss account, Balance Sheet, Funds Flow etc. for the past periods is done to examine the profitability, financial position, financial management, etc. in the business. Detailed scrutiny and validation of the projected income and expense in the business, and projected changes in the financial position (sources and uses of funds) are carried out to examine if these are acceptable from the angle of liquidity, overall gearing, efficiency of operations etc.

There will not be a prescription like mandatory minimum current ratio or maximum level of a current asset (inventory and receivables holding level norms) under PBS method. Under the PBS method, assessment of WC requirement will be carried out in respect of each borrower with proper examination of all parameters relevant to the borrower and their acceptability.

TERM LOAN:
1. A term loan is granted for a fixed term of not less than 3 years intended normally for financing fixed assets acquired with a repayment schedule normally not exceeding 8 years. 2. A term loan is a loan granted for the purpose of capital assets, such as purchase of land, construction of, buildings, purchase of machinery, modernization,

renovation or rationalization of plant, & repayable from out of the future earning of the enterprise, in installments, as per a prearranged schedule. From the above definition, the following differences between a term loan & the working capital credit afford by the Bank are apparent: The purpose of the term loan is for acquisition of capital assets. The term loan is an advance not repayable on demand but only in installments ranging over a period of years. The repayment of term loan is not out of sale proceeds of the goods & commodities per se, whether given as security or not. The repayment should come out of the future cash accruals from the activity of the unit. The security is not the readily saleable goods & commodities but the fixed assets of the units. It may thus be observed that the scope & operation of the term loans are entirely different from those of the conventional working capital advances. The Banks commitment is for a long period & the risk involved is greater. An element of risk is inherent in any type of loan because of the uncertainty of the repayment. Longer the duration of the credit, greater is the attendant uncertainty of repayment & consequently the risk involved also becomes greater. However, it may be observed that term loans are not so lacking in liquidity as they appear to be. These loans are subject to a definite repayment programme unlike short term loans for working capital (especially the cash credits) which are being renewed year after year. Term loans would be repaid in a regular way from the anticipated income of the industry/ trade. These distinctive characteristics of term loans distinguish them from the short term credit granted by the banks & it becomes necessary therefore, to adopt a different approach in examining the applications of borrowers for such credit & for appraising such proposals. The repayment of a term loan depends on the future income of the borrowing unit. Hence, the primary task of the bank before granting term loans is to assure itself that the anticipated income from the unit would provide the necessary amount for the repayment of the loan. This will involve a detailed scrutiny of the scheme, its financial aspects, economic aspects, technical aspects, a projection of future trends of outputs & sales & estimates of cost, returns, flow of funds & profits.

3.

4.

5.

6.

Appraisal of Term Loans

Appraisal of term loan for, say, an industrial unit is a process comprising several steps. There are four broad aspects of appraisal, namely Technical Feasibility - To determine the suitability of the technology selected & the adequacy of the technical investigation & design; Economic Feasibility - To ascertain the extent of profitability of the project & its sufficiency in relation to the repayment obligations pertaining to term assistance; Financial Feasibility - To determine the accuracy of cost estimates, suitability of the envisaged pattern of financing & general soundness of the capital structure; & Managerial Competency To ascertain that competent men are behind the project to ensure its successful implementation & efficient management after commencement of commercial production.

Technical Feasibility:
The examination of this item consists of an assessment of the various requirement of the actual production process. It is in short a study of the availability, costs, quality & accessibility of all the goods & services needed. a) The location of the project is highly relevant to its technical feasibility & hence special attention will have to be paid to this feature. Projects whose technical requirements could have been taken care of in one location sometimes fail because they are established in another place where conditions are less favorable. One project was located near a river to facilitate easy transportation by barge but lower water level in certain seasons made essential transportation almost impossible. Too many projects have become uneconomical because sufficient care has not been taken in the location of the project, e.g. a woolen scouring & spinning mill needed large quantities of good water but was located in a place which lacked ordinary supply of water & the limited water supply available also required efficient softening

b)

c)

d)

e)

treatment. The accessibility to the various resources has meaning only with reference to location. Inadequate transport facilities or lack of sufficient power or water for instance, can adversely affect an otherwise sound industrial project. Size of the plant One of the most important considerations affecting the feasibility of a new industrial enterprise is the right size of the plant. The size of the plant will be such that it will give an economic product, which will be competitive when compared to the alternative product available in the market. A smaller plant than the optimum size may result in increased production costs & may not be able to sell its products at competitive prices. Type of technology An important feature of the feasibility relates to the type of technology to be adopted for a project. A new technology will have to be fully examined & tired before it is adopted. It is equally important to avoid adopting equipment or processes which are absolute or likely to become outdated soon. The principle underlying the technological selection is that a developing country cannot afford to be the first to adopt the new nor yet the last to cast the old aside. Labor The labor requirements of a project need to be assessed with special care. Though labor in terms of unemployed persons is abundant in the country, there is shortage of trained personnel. The quality of labor required & the training facilities made available to the unit will have to be taken into account Technical Report A technical report using the Banks Consultancy Cell, external consultants, etc., should be obtained with specific comments on the feasibility of scheme, its profitability, whether machinery proposed to be acquired by the unit under the scheme will be sufficient for all stages of production, the extent of competition prevailing, marketability of the products etc., wherever necessary.

Economic Feasibility
An economic feasibility appraisal has reference to the earning capacity of the project. Since earnings depend on the volume of sales, it is necessary to determine how much output or the additional production from an established unit the market is likely to absorb at given prices.

a) A thorough market analysis is one of the most essential parts of project investigation. This involves getting answers to three questions. How big is the market? How much it is likely to grow? How much of it can the project capture? The first step in this direction is to consider the current situation, taking account of the total output of the product concerned & the existing demand for it with a view to establishing whether there is unsatisfied demand for the product. Care should be taken to see that there is no idle capacity in the existing industries. b) Future possible future changes in the volume & patterns of supply & demand will have to be estimated in order to assess the long term prospects of the industry. Forecasting of demand is a complicated matter but one of the vital importance. It is complicated because a variety of factors affect the demand for product e.g. technological advances could bring substitutes into market while changes in tastes & consumer preference might cause sizable shifts in demand. c) Intermediate product The demand for Intermediate product will depend upon the demand & supply of the ultimate product (e.g. jute bags, paper for printing, parts for machines, and tyres for automobiles). The market analysis in this case should cover the market for the ultimate product.

Financial Feasibility
The basis data required for the financial feasibility appraisal can be broadly grouped under the following heads i) ii) iii) Cost of the project including working capital Cost of production & estimates of profitability Cash flow estimates & sources of finance.

The cash flow estimates will help to decide the disbursal of the term loan. The estimate of profitability & the breakeven point will enable the banker to draw up the repayment programme, start-up time etc. The profitability estimates will also give the estimate of the Debt Service Coverage which is the most important single factor in all the term credit analysis.

A study of the projected balance sheet of the concern is essential as it is necessary for the appraisal of a term loan to ensure that the implementation of the proposed scheme. Break-even point: In a manufacturing unit, if at a particular level of production, the total manufacturing cost equals the sales revenue, this point of no profit/ no loss is known as the break-even point. Break-even point is expressed as a percentage of full capacity. A good project will have reasonably low break-even point which not be encountered in the projections of future profitability of the unit. Debt/ Service Coverage: The debt service coverage ratio serves as a guide to determining the period of repayment of a loan. This is calculated by dividing cash accruals in a year by amount of annual obligations towards term debt. The cash accruals for this purpose should comprise net profit after taxes with interest, depreciation provision & other non cash expenses added back to it. Debt Service = Cash accruals Coverage Ratio Maturing annual obligations This ratio is valuable, in that it serves as a measure of the repayment capacity of the project/ unit & is, therefore, appropriately included in the cash flow statements. The ratio may vary from industry to industry but one has to view it with circumspection when it is lower than the benchmark of 1.75. The repayment programme should be so stipulated that the ratio is comfortable. Managerial Competence In a dynamic environment, the capacity of an enterprise to forge ahead of its competitors depends to a large extent, on the relative strength of its management. Hence, an appraisal of management is the touchstone of term credit analysis. If there is a change in the administration & managerial set up, the success of the project may be put to test. The integrity & credit worthiness of the personnel in charge of the management of the industry as well as their experience in management of industrial concerns should be examined. In high cost schemes, an idea of the units key personnel may also be necessary.

Non-Fund Base:
Letter of Credit: Introduction The expectation of the seller of any goods or services is that he should get the payment immediately on delivery of the same. This may not materialize if the seller & the buyer are at different places (either within the same country or in different countries). The seller desires to have an assurance for payment by the purchaser. At the same time the purchaser desires that the amount should be paid only when the goods are actually received. Here arises the need of Letter of Credit (LCs). The objective of LC is to provide a means of payment to the seller & the delivery of goods & services to the buyer at the same time. Definition A Letter of Credit (LC) is an arrangement whereby a bank (the issuing bank) acting at the request & on the instructions of the customer (the applicant) or on its own behalf, i. ii. iii. is to make a payment to or to the order of a third party (the beneficiary), or is to accept & pay bills of exchange (drafts drawn by the beneficiary); or authorizes another bank to effect such payment, or to accept & pay such bills of exchanges (drafts); or Authorizes another bank to negotiate against stipulated document(s), provided that the terms & conditions of the credit are complied with.

Basic Principle: The basic principle behind an LC is to facilitate orderly movement of trade; it is therefore necessary that the evidence of movement of goods is present. Hence documentary LCs is those which contain documents of title to goods as part of the LC documents. Clean bills which do not have document of title to goods are not normally established by banks. Bankers and all concerned deal only in documents & not in goods. If documents are in order issuing bank will pay irrespective of whether the goods are of expected quality or not. Banks are also not responsible for the genuineness of the documents & quantity/quality of goods. If importer is your borrower, the bank has to advice him to convert all his requirements in the form of documents to ensure quantity & quality of goods.

Parties to the LC 1) 2) 3) 4) 5) 6) 7) 8) Applicant The buyer who applies for opening LC Beneficiary The seller who supplies goods Issuing Bank The Bank which opens the LC Advising Bank The Bank which advises the LC after confirming authenticity Negotiating Bank The Bank which negotiates the documents Confirming Bank The Bank which adds its confirmation to the LC Reimbursing Bank The Bank which reimburses the LC amount to negotiating bank Second beneficiary The additional beneficiary in case of transferable LCs

Confirming bank may not be there in a transaction unless the beneficiary demand confirmation by his own bankers & such a request is made part of LC terms. A bank will confirm an LC for his beneficiary if opening bank requests this as part of LC terms. Reimbursing bank is used in an LC transaction by an opening bank when the bank does not have a direct correspondent/branch through whom the negotiating bank can be reimbursed. Here, the opening bank will direct the reimbursing bank to reimburse the negotiating bank with the payment made to the beneficiary. In the case of transferable LC, the LC may be transferred to the second beneficiary & if provided in the LC it can be transferred even more than once.

Bank Guarantee:
A contract of guarantee is defined as a contract to perform the promise or d ischarge the liability of the third person in case of the default. The parties to the contract of guarantees are: a) Applicant: The principal debtor person at whose request the guarantee is executed b) Beneficiary: Person to whom the guarantee is given & who can enforce it in case of default. c) Guarantee: The person who undertakes to discharge the obligations of the applicant in case of his default. Thus, guarantee is a collateral contract, consequential to a main contract between the applicant & the beneficiary.

Purpose of Bank Guarantees Bank Guarantees are used to for both preventive & remedial purposes. The guarantees executed by banks comprise both performance guarantees & financial guarantees. The guarantees are structured according to the terms of agreement, viz., security, maturity & purpose. Branches may issue guarantees generally for the following purposes: a) In lieu of security deposit/earnest money deposit for participating in tenders; b) Mobilization advance or advance money before commencement of the project by the contractor & for money to be received in various stages like plant layout, design/drawings in project finance; c) In respect of raw materials supplies or for advances by the buyers; d) In respect of due performance of specific contracts by the borrowers & for obtaining full payment of the bills; e) Performance guarantee for warranty period on completion of contract which would enable the suppliers to realize the proceeds without waiting for warranty period to be over; f) To allow units to draw funds from time to time from the concerned indenters against part execution of contracts, etc. g) Bid bonds on behalf of exporters h) Export performance guarantees on behalf of exporters favoring the Customs Department under EPCG scheme. Guidelines on conduct of Bank Guarantee business Branches, as a general rule, should limit themselves to the provision of financial guarantees & exercise due caution with regards to performance guarantee business. The subtle difference between the two types of guarantees is that under a financial guarantee, a bank guarantees a customer financial worth, creditworthiness & his capacity to take up financial risks. In a performance guarantee, the banks guarantee obligations relate to the performance related obligations of the applicant (customer). While issuing financial guarantees, it should be ensured that customers should be in a position to reimburse the Bank in case the Bank is required to make the payment under the guarantee. In case of performance guarantee, branches should exercise due caution & have sufficient experience with the customer to satisfy themselves that the customer

has the necessary experience, capacity, expertise, & means to perform the obligations under the contract & any default is not likely to occur. Branches should not issue guarantees for a period more than 18 months without prior reference to the controlling authority. Extant instructions stipulate an Administrative Clearance for issue of BGs for a period in excess of 18 months. However, in cases where requests are received for extension of the period of BGs as long as the fresh period of extension is within 18 months. No bank guarantee should normally have a maturity of more than 10 years. Bank guarantee beyond maturity of 10 years may be considered against 100% cash margin with prior approval of the controlling authority. More than ordinary care is required to be executed while issuing guarantees on behalf of customers who enjoy credit facilities with other banks. Unsecured guarantees, where furnished by exception, should be for a short period & for relatively small amounts. All deferred payment guarantee should ordinarily be secured. Appraisal of Bank Guarantee Limit Proposals for guarantees shall be appraised with the same diligence as in the case of fund-base limits. Branches may obtain adequate cover by way of margin & security so as to prevent default on payments when guarantees are invoked. Whenever an application for the issue of bank guarantee is received, branches should examine & satisfy themselves about the following aspects: a) The need of the bank guarantee & whether it is related to the applicants normal trade/business. b) Whether the requirement is one time or on the regular basis c) The nature of bank guarantee i.e., financial or performance d) Applicants financial strength/ capacity to meet the liability/ obligation under the bank guarantee in case of invocation. e) Past record of the applicant in respect of bank guarantees issued earlier; e.g., instances of invocation of bank guarantees, the reasons thereof, th e customers response to the invocation, etc. f) Present o/s on account of bank guarantees already issued g) Margin h) Collateral security offered

Format of Bank Guarantees Bank guarantees should normally be issued on the format standardized by Indian Banks Association (IBA). When it is required to be issued on a format different from the IBA format, as may be demanded by some of the beneficiary Government departments, it should be ensured that the bank guarantee is a) b) c) d) e) f) g) for a definite period, for a definite objective enforceable on the happening of a definite event, for a specific amount in respect of bona fide trade/ commercial transactions, contains the Banks standard limitation clause not stipulating any onerous clause, & not containing any clause for automatic renewal of the bank guarantee on its expiry

Chapter-7 SBI NORMS FOR CREDIT APPRAISAL

Credit appraisal means an investigation/assessment done by the bank prior before providing any loans & advances/project finance & also checks the commercial, financial & technical viability of the project proposed its funding pattern & further checks the primary & collateral security cover available for recovery of such funds.

Loan policy an Introduction

State Bank of Indias (SBI) Loan Policy is aimed at accomplishing i ts mission of retaining the banks position as a Premier Financial Services Group, with World class standards & significant global business, committed to excellence in customer, shareholder & employee satisfaction & to play a leading role in the expanding & diversifying financial services sector, while continuing emphasis on its Development Banking role. The Loan Policy of the any bank has successfully withstood the test of time and with inbuilt flexibilities, has been able to meet the challenges in the market place. The policy exits & operates at both formal & informal levels. The formal policy is well documented in the form of circular instructions, periodic guidelines & codified instructions, apart from the Book of Instructions, where procedural aspects are highlighted. The policy, at the holistic level, is an embodiment of the Banks approach to sanctioning, managing & monitoring credit risk & aims at making the systems & controls effective. The Loan Policy also aims at striking a balance between underwriting assets of high quality, and customer oriented selling. The objective is to maintain Banks undisputed leadership in the Indian Banking scene. The Policy aims at continued growth of assets while endeavoring to ensure that these remain performing & standard. To this end, as a matter of policy the Bank does not take over any Non-Performing Asset (NPA) from other banks.

 The Central Board of the Bank is the apex authority in formulating all matters of policy in the bank. The Board has permitted setting up of the Credit Policy & Procedures Committee (CPPC) at the Corporate Centre of the Bank of which the Top Management are members, to deal with issues relating to credit policy & procedures on a Bank-wide basis. The CPPC sets broad policies for managing credit risk including industrial rehabilitation, sets parameters for credit portfolio in terms of exposure limits, reviews credit appraisal systems, approves policies for compromises, write offs, etc. & general management of NPAs besides dealing with the issues relating to Delegation of Powers. Based on the present indications, following exposure levels are prescribed: Individuals as borrowers Maximum aggregate credit facilities of Rs. 20 crores ( Fund based & non-fund based ) Maximum aggregate credit facilities of Rs. 80 crores ( Fund based & non-fund based ) Maximum aggregate credit facilities as per prudential norms of RBI on exposures

Non-corporate ( e.g. Partnerships, HUF, Associations ) Corporate

Term Loans (loans with residual maturity of over 3 years) should not in the aggregate exceed 35% of the total advances of SBI. The Bank shall endeavor to restrict fund based exposure to a particular industry to 15% of the Banks total fund based exposure. The Bank shall restrict the term loan exposure to infrastructure projects to 10% of Banks total advances. The Bank shall endeavor to restrict exposure to sensitive sectors (i.e. to capital market, real estate, and sensitive commodities listed by RBI) to 10% of Banks total advances. The Banks aggregate exposure to the capital markets shall not exceed 5% of the total outstanding advances (including commercial paper) as on March 31 of the previous year.

Credit Appraisal Standards

Qualitative:

At the outset, the proposition is examined from the angle of viability & also from the Banks prudential levels of exposure to the borrower, Group & Industry. Thereafter, a view is taken about our past experience with the promoters, if there is a track record to go by. Where it is a new connection for the bank but the entrepreneurs are already in business, opinion reports from existing bankers & published data if available are carefully pursued. In case of a maiden venture, in addition to the drill mentioned heretofore, an element of subjectively has to be perforce introduced as scant historical data weight age to be placed on impressions gained out of the serious dialogues with the promoter & his business contacts.

Quantitative:
(a) Working capital:

The basis quantitative parameters underpinning the Banks credit appraisal are as follows:Sector/ Parameters Liquidity Current Ratio (min.) Mfg 1.33 Others 1.20(For FBWC above Rs. 5 cr.) limits

1.00(For FBWC limits upto Rs. 5 cr.)) Financial Soundness TOL /TNW (max.) DSCR Net (min.) Gross (min.) Gearing D/E (max.) Promoters contribution (min.) 2:1 30% equity 2:1 of 20% of equity 2:1 1.75:1 2:1 1.75:1 3.00 5.00

 Liquidity:
Current Ratio (CR) of 1.33 will generally be considered as a benchmark level of liquidity. However the approach has to be flexible. CR of 1.33 is only indicative & may not be deemed mandatory. In cases where the CR is projected at a lower than the benchmark or a slippage in the CR is proposed, it alone will not be a reason for rejection for the loan proposal or for the sanction of the loan at a lower level. In such cases, the reason for low CR or slippage should be carefully examined & in deserving cases the CR as projected may be accepted. In cases where projected CR is found acceptable, working capital finance as requested may be sanctioned. In specific cases where warranted, such sanction can be with the condition that the borrower should bring in additional longterm funds to a specific extent by a given future date. Where it is felt that the projected CR is not acceptable but the borrower deserves assistance subject to certain conditions, suitable written commitment should be obtained from the borrower to the effect that he would be bringing in required amounts within a mutually agreed time frame.

Net Working Capital:

Although this is a corollary of current ratio, the movements in Net Working Capital are watched to ascertain whether there is a mismatch of long term sources vis--vis long term uses for purposes which may not be readily acceptable to the Bank so that corrective measures can be suggested. Financial Soundness: This will be dependent upon the owners stake or the leverage. Here again the benchmark will be different for manufacturing, trading, hire-purchase & leasing concerns. For industrial ventures a Total Outside Liability/ Tangible Net worth ratio of 3.0 is reasonable but deviations in selective cases for understandable reasons may be accepted by the sanctioning authority.

Turn-Over:
The trend in turnover is carefully gone into both in terms of quantity & valve as also market share wherever such data are available. What is more important to establish a steady output if not a rising trend in quantitative terms because sales realization may be varying on account of price fluctuations.

 Profits:
While net profit is ultimate yardstick, cash accruals, i.e., profit before depreciation & taxation conveys the more comparable picture in view of changes in rate of depreciation & taxation, which have taken place in the intervening years. However, for the sake of proper assessment, the non-operating income is excluded, as these are usually one time or extraordinary income. Companies incurring net losses consistently over 2 or more years will be given special attention, their accounts closely monitored, and if necessary, exit options explored.

Credit Rating:
Wherever the company has been rated by a Credit Rating Agency for any instrument such as CP / FD this will be taken into account while arriving at the final decision. However as the credit rating involves additional expenditure, we would not normally insist on this and only use this tool if such an agency had already looked into the company finances.

Term Loan
(i) In case of term loan & deferred payment guarantees, the project report is

obtained from the customer, (ii) This may be compiled either in-house or by a firm of consultants/ merchant bankers. The technical feasibility & economic viability is vetted by the bank & wherever it is felt necessary, the Credit Officer would seek the benefit of a second opinion either from the Banks Technical Consultancy cell or from the consultants of the Bank/ SBI Capital Markets Ltd. (iii)Promoters contribution of at least 20% in the total equity is what we normally expect. But promoters contribution may vary largely in mega projects. Therefore there cannot be a definite benchmark. The sanctioning authority will have the necessary discretion to permit deviations. (iv) The other basic parameter would be the net debt service coverage ratio i.e. exclusive of interest payable, which should normally not go below 2. On a gross basis DSCR should not be below 1.75. These ratios are indicative & the sanctioning authority may permit deviations selectively. (v) As regards margin on security, this will depend on Debt: Equity gearing for the project, which should preferably be near about 1.5: 1 & should not in any case be above 2:1, i.e., Debt should not be more than 2 times the Equity contribution.

The sanctioning authority in exceptional cases may permit deviations from the norm very selectively. (vi) Other parameters governing working capital facilities would also govern Term Credit facilities to the extent applicable. Lending to Non-Banking Financial Companies (NBFCs) Financing of infrastructure projects Lease Finance Letter of Credit, Guarantees & bills discounting Fair Practices for lenders Documentation standards 1: The systems and procedures for documentation have been laid down keeping in view the ultimate objective of documentation which is to serve as primary evidence in any dispute between the Bank and the borrower and for enforcing the Bank's right to recover the loan amount together with interest thereon (through a court of law as a final resort), in the event of all other recourses proving to be of no avail. In order that this objective is achieved, our documentation process attempts to ensure that: The owing of the debt to the Bank by the borrower is clearly established by the documents. The charge created on the borrower's assets as security for the debt is maintained and enforceable The Bank's right to enforce the recovery of the debt through court of law is not allowed to become time-barred under the Law of Limitation.

2: Documentation is not confined to mere obtention of security documents at the outset. It is a continuous and ongoing process covering the entire duration of an advance comprising the following stages: (i) Pre-execution formalities:

These cover mainly searches at the Office of Registrar of Companies and search of the Register of Charges (applicable to corporate borrowers), also capacity of borrowers to borrow and the formalities to be completed by the borrowers, searches at the office of the sub-Registrar of Assurances or Land Registry to check the existence or otherwise of prior charge over the immovable property offered as security, besides taking other precautions before creating equitable / registered mortgage. (ii) Execution of Documents This covers obtention of proper documents, appropriate stamping and correct execution thereof as per terms of the sanction of the advance and the internal directives of a corporate borrower such as Memorandum and Articles of Association, etc. (iii) Post-execution formalities This phase covers the completion of formalities in respect of mortgages, if any, registration with the Registrar of Assurances, wherever applicable, and the registration of charges with the Registrar of Companies within the stipulated period, etc.. (iv) Protection from Limitation / Safeguarding Securities These measures aim at saving the documents from getting time-barred by limitation and protecting the securities charged to the Bank from being diluted by any charge that might be created by the borrower to secure his other debts, if any. These objectives are sought to be achieved by: (a) Ostentation of revival letter within the stipulated period (b) Obtention of Balance Confirmation from the borrower at least at annual intervals (c) Making periodical searches at the Office of the Registrar of Companies. (d) Insurance of Assets charged - (unless specifically waived) to insure the Bank against the risk of fire, other hazards, etc.. 3. Keeping the above broad objectives and the documentation process in view, the Bank has devised standard documents in most cases for various types of loans given to the borrowers. Wherever standard specimens have not been evolved, these are suitably drafted on a case-by-case basis with the help of in-house legal department and, on occasions, with the help of reputed outside solicitors. Furthermore, changes in the documentation procedures and the implications involved are circularized from time to time to all the branches/offices so that those who are responsible for obtaining and

safeguarding the documents are made fully conversant with them. This is further strengthened through on-the-job training at the branches as well as at the Bank's training colleges / centers, where the officials are briefed on the documentation procedures so that the Bank's interest is protected in this crucial area. 4. In respect of consortium advances, the documents are generally executed in consultation with the other member banks in accordance with the guidelines laid down by RBI /IBA in the matter. Similarly, where advances are extended jointly with the financial institutions, documents are specially drafted in consultation with the solicitors / in-house legal experts to ensure pari passu charge and / or second charge, whichever is applicable, of the movable / immovable assets of the borrower to protect the Bank's interests. 1. While it is the Bank's endeavor to standardize documents for all types of facilities, in cases where documents have to be specially drafted, the Local Head Offices are empowered to vet and approve such documents for facilities which are sanctioned at their level. For facilities requiring sanction of COCC / ECCB, such specially drafted documents are cleared by the Corporate Centre. 3. Requirement of documents for process of loan 1. Application for requirement of loan 2. Copy of Memorandum & Article of Association 3. Copy of incorporation of business 4. Copy of commencement of business 5. Copy of resolution regarding the requirement of credit facilities 6. Brief history of company, its customers & supplies, previous track records, orders in hand. Also provide some information about the directors of the company 7. Financial statements of last 3 years including the provisional financial statement for the year 2010-11 8. Copy of PAN/TAN number of company

9. Copy of last Electricity bill of company 10. Copy of GST/CST number 11. Copy of Excise number 12. Photo I.D. of all the directors 13. Address proof of all the directors 14. Copies related to the property such as 7/12 & 8A utara, lease/ sales deed, 2R permission, Allotment letter, Possession 15. Bio-data form of all the directors duly filled & notarized 16. Financial statements of associate concern for the last 3 years

Chapter -9 Research Methodology:

Data Collection:
Primary Data: Informal interviews with Branch Manager and other staff members at SBI bank. E-circulars of SBI Secondary Data: Books and magazines Database at SBI Internal reports of the banks

 Library research Websites

Expected contribution of the study: This study will help in understanding the credit appraisal system at SBI & to understand how to reduce various risk parameters, which are broadly categorized into financial risk, business risk, industrial risk & management risk associated in providing any loans or advances or project finance. Beneficiaries: Researcher: This report will help researcher in improving knowledge about the credit appraisal system and to have practical exposure of the credit appraisal scenario in SBI. Management student: The project will help the management student to know the patterns of credit appraisal in SBI bank.

SBI Bank: The project will help bank in reducing the credit risk parameters and to improve its efficiencies. It will also help to reduce risk associated in providing any loans & advances or project finance in future and to overcome the loopholes.

Short write-up on the researcher and reason for taking up the project:
The researcher are MBA 2nd year students, studying in N.R.INSTITUTE OF BUSINESS MANAGEMENT(GLS),AHMEDABAD.
The reason for taking up the project is to know and understand the credit appraisal system in banking sector.

Credit appraisal is the major focus of banking industries these days, so the project will help in understanding and analyzing the situation prevailing currently.