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CHAPTER NO.

1 RESEARCH DESIGN
1.1 Introduction
Abhyudaya Co-op. Ban !td." one of the leading Urban Co-operative Banks in India, in its outlook and approach, has the objective of progress and prosperity of all. From a humble beginning in anuary !"#$ as a Co-operative Credit society %ith a share capital of a merelyR#.$"%%%&- held by &' members, today (bhyudaya Co-op bank has become one of the large Urban Co-operative Banks %ith a )*cheduled Bank) status. +he bank has been converted into a ' (u)ti-Stat* Sch*du)*d +rban Co-op. Ban ' %.e.f. !!th anuary, ,--.. +he area of operation %hich %as restricted to the *tate of /aharashtra has no% been e0tended to 1arnataka 2 3ujarat *tate. Currently, the capital base of the bank stands at R#. ,- cror*# and 4eserves and surpluses at R#..%/.1. cror*# as on '!.-'.,-!!. +he bank has 1"0."%%% members and more than 1/ )a hdepositors. +he Bank has seen a tremendous gro%th in deposits. +he deposits of the bank are over R#. $-1%.10 cror*# as on '!.-'.,--!!, %hich %ere R#. /1,%.1- cror*# as at the end of the financial year ,--"-,-!-. +he loans and advances stood at R#. 0/$0.11 cror*# as on '!.-'.,-!!. +he bank had posted a N*t pro2it o2 R#.,,.1$ Cror*# as on '!.-'.,-!!. ) +he gro%th rate of the bank compares %ell %ith that of others in the sector. +he Bank has maintained a steady gro%th. +he bank has been paying dividend 5 !67 to its members %hich is ma0imum permissible as per the /C* (ct.

+he Bank has launched different loan schemes tailor-made to suit the needs of various customers. +he schemes aim at providing loans for purchase or construction of residential premises, repair8renovation of house property, purchase of car, seeking higher education and for purchase of household consumer durable. 9ne of the loan schemes, vi:. )Udyog ;ikas <ojana) is specially designed for the benefit of small entrepreneurs and businessmen. +he procedure for sanctioning of loans under the

Industrial Finance In (bhyudaya Co-operative Bank schemes has been simplified and rela0ed %ith a vie% to attract ne% customers and facilitating speedy sanction of loans.

Innovative Banking is another area of operation that (bhyudaya is currently focusing on for a sustainable long term gro%th. +he Bank has al%ays endeavored for providing satisfactory customer service the help of the latest technology. +he Bank has provided fully computeri:ed services to its valued clients. Bank is offering !! =ours fully computeri:ed services and . days %orking at !6 branches and ,$ hours (+/ service at 6" branches.

Industrial Finance In (bhyudaya Co-operative Bank

1.- Ob3*cti4* o2 Study


+o study the concept of Industrial Finance. +o study the loan procedure and scrutiny procedure of the bank. +o study the %ays to reduce the risk of bad debts +o study the analysis of financial statement for different loan proposals.

1.0 !i5itation o2 #tudy


are not fully disclosed. *ome of the records regarding my project %ere available at branches, so that records %ere not available to me for refernce. +hough some data %as provided to me, but due to company secrecy policy I am unable to put it in my project. /any records related to my project is very confedential and hence bank records

1./ (*thodo)o6y7
;arious fact finding techni>ue used in system are? !. Pri5ary Sourc*7 /ost of the data is collected through unstructured intervie%s 8discussion %ith project guide and bank employees. -. S*condary Sourc*7

!ibrary7 ;arious project related books %ere referred especially to analy:e the system. (lso various books from college library referred. Company in-house documents such as branch scrutiny, credit rating report, :onal '

Industrial Finance In (bhyudaya Co-operative Bank office report %ere referred. ;isted the site: http://www.abhyudaya.com/ Credit @olicy, and 4ules 2 procedure of year ,-!--11

Industrial Finance In (bhyudaya Co-operative Bank

CHAPTER NO. -.1 Achi*4*5*nt#


ABCACCAD+ U4B(D C9-9@. B(D1) (E(4F ,--.-,--& /aharashtra 3aurav (%ard ,nd best co-operative bank a%ard ,--6--#.

-.- Or6ani8ation Chart7

B o a r d O f D ir e c to r s

C h a ir m a n M a n a g in g D ir e c to r G e n e ra l M a n a g e r P e r s o n n e l O ffic e r P e rs o n n e l D e p t. I n s p e c t io n D e p t . A d d l. G e n e r a l M a n a g e r ! r. M a n a g e r D e v e lo p m e n t D e p t . A G M " eg al & # ecover

D e p t.

A c c o u n t a n d V ig ila n c e D e p t .

D G M I n fo r m a t io n T e c n o lo g A s s t.G e n e ra l M a n a g e r " o a n s & A d v a n c e s D e p t. ! r. M a n a g e r M anager P r o $e c t T r a in e e

D G M In v e s tm e n ts & T re a s u r

D e p t.

P r in c ip a l ! t a ff T r a in in g C o lle g e

& o n a l o ffic e s D G M % e s te rn & o n e D G M C e n tra l & o n e D G M ' avi M um ( ai & on e D G M P une &one

A G M " a rg e ( ra n c h e s

! r. M a n a g e r M e d iu m ) r a n c h e s

M anager ! m a ll ( r a n c h e s

M anager ) a n * ! ta ff

Industrial Finance In (bhyudaya Co-operative Bank

CHAPTER NO. 0
CONCEPT+A! BAC9GRO+ND O: ST+D; 0.1 Ana)y#i# o2 2inancia) #tat*5*nt7 ( basic limitation of the traditional statements comprising the Balance sheet and the profit and loss account is that they do not give all the information related to financial operation of the firm. Deverthless, they provide some e0tremely useful information to the e0tent that the balance sheet mirrors the financial statement on a particular date in terms of structure of assets, liablities and o%ner,s e>uity, and so on and the profit and loss account sho%s the results of operations during a certain period of time in terms of the revenues obtained and the cost incurred during the year. +hus, financial statements provide a summari:ed vie% of the financial position and operations of a firm. +herefore, much can be learnt about a firm from a careful e0amination of of its financial statements as invaluable documents8 performance reports. +he analysis of financial statements is, thus, an important aid to financial analysis. +he focus of financial analysis is on key figures in the financial statementsand the significant relationship that e0ists bet%ee them.+he analysis of financial statements is a process of evaluating the relationship bet%een component parts of financial statements to obtain better understanding of the firmGs position and performance. +he first task of the financial analyst is to select the information relevant to the decision under consideration from the total information contained in the financial statements. +he second step is to arrange the information in a %ay to highlight significant relationships. +he fnal step is interpretation and dra%ing of infernces and conclusions, In brief, financial analysis is the process of selection,relation and evaluation.

Industrial Finance In (bhyudaya Co-operative Bank

0.- <or in6 Capita) (ana6*5*nt Eorking Capital /anagement is concerned %ith the problems that arise in attempting to amnage the current assets, the current liabilities and the interrelationship that e0ists bet%een them. +he term, current asset, refer to thse asset %hich in ordinary course of business can be, or %ill be, converted into cash %ithin one year %ithout undergoing a dimunition in value and %ithout disrupting the operations of the firm. +he major current assets are cash, marketable securities, accounts receivable 2 inventory. Current Ciabilities are those liabilities %hich are intended, at their inception, to be paid in the ordinary course of business, %ithin a year, out of the current asstes or earnings of the concern. +he basic current liabilities are accounts payable, bills payable, bank overdraft and outstanding e0penses. Th* 6oa) o2 =or in6 capita) 5ana6*5*nt i# to 5ana6* th* 2ir5># curr*nt a##*t# and )iabi)iti*# in #uch a =ay that a #ati#2actory )*4*) o2 <or in6 Capita) i# 5aintain*d. +his is so because if the firm cannot maintain a satisfactory level of %orking capital, it is likely to become insolvent may even forced into bankruptcy. +here are t%o concepts of Eorking Capital ? gross and net +he term 6ro## =or in6 capita) means the total current assts and the term n*t =or in6 capita) means the differnce bet%een current assets and current liabilities. Ca)cu)ation o2 <or in6 Capita) r*?uir*5*nt#& T*r5 !oan. Branches should calculate all types of Eorking Capital re>uirements for ne0t one year. It should be based on projected @rofit and Coss account and Balance submitted by the applicant. +he projected figures should be compared %ith the actual figures based on (udited Balance sheets submitted by the party. +he projection to be acceptable to the Bank must be realistic8 achievable. If there is major deviation on *undry Febtors, Creditors, stock etc., proper e0planation should be obtained from the applicant and branches should satisfy themselves about the genuineness of the projections. If the branch8 Honal office are not satisfied %ith the given projections, they should recalculate the projections based on past trend and their perception and decide actual %orking capital re>uirement. +he re>uirements of CC, bills facility, against clearing and che>ue discounting should be %ithin the projected the projected ma0imum permissible Bank finance limit. Dormally, no separate (gainst clearing and .

Industrial Finance In (bhyudaya Co-operative Bank Che>ue Fiscounting facility to be sanctioned and this should be part of %orking capital facility sanctioned to the borro%er. (s per 4BI guidelines, Bank may consider the total %orking capital limit to a borro%er up to ,-7 of the projected *ales +urnover. =o%ever, the bank to allo% operations al%ays %ithin Fra%ing @o%er based on the monthly stock and Book Febts less Credit @urchases ICreditors for goodsJ after maintaining a margin of $-78,67 for traders and manufacturers respectively. +o make the facilities sanctioned under K(gainst ClearingL and KChe>ue FiscountingL secured it should be ensured that the borro%er should have sufficient Fra%ing @o%er to cover them along%ith the Cash Credit and FBF limits. It shall be noted that all credit limits for %orking capital purpose like Cash Credit, Bills Fiscounting, Cetter of Credit for purchase of ra% material on continuous basis etc. %ill form a part of /@BF. <or in6 @Capita)&Ca#h Cr*dit#&DBD&SBD&<CT!&Chann*) Cr*dit&!CA !i5it#. (J Upto 4s.!.-- Crore for Borro%ers other than */A units and 4s.6.-- Crore for */A units? aJ +he (ssessment of %orking capital re>uirements of borro%ers other than */A Units re>uiring fund based Eorking Capital Cimits upto 4s. !.-- Crore and */A units re>uiring fund based Eorking Capital limit upto 4s 6.-- Crore from banking system be made on the basis of their realistic projected annual +urnover. bJ +he %orking Capital re>uirement is assessed at ,67 of the realistic projected turnover to shared bet%een the borro%er and the Bank i.e. +he borro%er contributing 67 of the turnover as Det %orking Capital and bank providing minimum of ,-7 of the turnover. cJ Fra%als against the limit should ho%ever be allo%ed on the basis of the dra%ing po%er calculated based on timely submission of monthly statements of stocks, reveicables and sundry creditos and also periodical verification of such statements vis-M-vis physical stocks by Branch 9fficials. BJ (bove 4s. !.-- crore for borro%ers other than */A Units and 4s. 6.-- Crore for */A Units7 =ere the Bank may adopt Eorking Capital 3ap /ethod or @roduction 8@rocess Cycle /ethod for assessing the Eorking Capital re>uirements. &

Industrial Finance In (bhyudaya Co-operative Bank a. <or in6 Capita) Gap (*thod7Eorking Capital 3ap IEC3JN Current (ssets O Current Ciabilities Aligible /@BF N EC3 O ,67 of EC3

b. Production & Proc*##in6 Cyc)* (*thod *r. /anager 8 /anager Industrial Finance Fept. %ill visit the industrial unit and %ork out re>uirement of %orking capital based on the e0isting production 8 processing cycle. =e %ill take into account credits received on purchase of ra% material, credits allo%ed on sales, inventory levels of ra% materials, %ork in process, finished goods etc. In order to arrive at the future re>uirements of the unit, he %ill scrutini:e the projected sales for ne0t t%o years and %ork out the re>uirement of the %orking capital. It is necessary for him to discuss %ith the loanee 8 officials of the unit and ascertain need based %orking capital limit. =e %ill also compare the %orking capital ascertained under /ethod-I and +urnover method and give his recommendations. c. :or N*= Pro3*ct#7 Eorking Capital for ne% projects %ill be %orked out on the basis of projections, production 8 processing cycle. =ence, F3/ and IF Fept. %ill take into account realistic projections, industry standards etc.

"

Industrial Finance In (bhyudaya Co-operative Bank 0.0 !oan Proc*##7 +he follo%ing flo% chart sho%s the process of loan?

Coan @roposal from the borro%er

(cceptance, *crutiny and 4ecommendation of Coan @roposal

*anction of credit facilities

Focumentation 2 4elease

/onitoring, 4evie% and @ost *anction follo-up

Cet us discussed it in detail? I. !oan Propo#a) +he first step in the loan proposal is borro%er %ill approach the bank and he has to submit preliminary documents to branch. Branch %ill scrutini:e that the borro%er provides follo%ing documents for CC8+C8EC+C facilities? !. ,. '. $. 6. #. .. &. ". Check Cist 8 Inde0. Cash Credit security note. ;isit report of Branch /anager. Ciability Information sheet of (pplicant. Ciability Information sheet of *urety. (ccount Information of (pplicant. (ccount Information of *urety. CC *anction sheet8 *crutiny note of previous year. Copy to previous year Fisbursement (dvice. !-

Industrial Finance In (bhyudaya Co-operative Bank !-. !!. !,. !'. Copy to insurance policy. Cash Credit (pplication form duly filled in and signed by all @artners 8 Firectors 8 @roprietor of the firm 8 company. @roof of business place- office 8go do%n8 factory? Copy of (greement for sale 8 lease and license. (greement 8 4ent 4eceipt 8 electricity bill etc. @roof of residence. @roprietor 8 partner 8 Firector? 4ation card8 electricity bill 8 4eceipt. !$. Trad* !ic*n#*#? (J BJ !6. *hop and establishment **I 4egistration Certificate. 4ent

Copy of @artnership Feed 8 /emorandum and (rticles of (ssociation etc. (J Board 4esolution for availing credit facility from bank in case of @rivate and @ublic Cimited companies.

!#. !.. !&. !". ,-.

Bio-Fata of @roprietor8 @artner8Firector. In case of ne% application. *tatements of Collateral *ecurities Certified by manager. /ortgaged 4egistration receipt8 /ortgage Feed, if property is already mortgaged. 9riginal documents of propertyP if offered for mortgaged. 49C change registration certificate Iin case of @rivate and @ublic Cimited

companiesJ. ,!. *tock statement and age %ise Book Febt statement of latest visit date. ,,. *tatement of account for current year and previous year (udited *tatement of accountP if *ales 8turnover is more than 4s. $-.-- lacs. Facility applied is more than 4s. !-.-- Cacs. In case of @rivate and @ublic Cimited companies.

,'. Up-to-date sales and purchase figures subse>uent to last balance sheet on record. ,$. *ale ta0 challan copy 8 assessment order copy. ,6. Income ta0 challan for current year and previous year assessment order or ackno%ledged copy of return. ,#. Computation of Income8+F* Certificate. ,.. Copy of professional ta0 challan. ,&. Credit from other bankers ,". (ny other documents as per the proposal. !!

Industrial Finance In (bhyudaya Co-operative Bank

Docu5*nt# o2 Sur*ty7 !. *urety consent letter duly filled in and signed by all partner 8 proprietor of surety firm 8company. ,. Board resolution to stand as surety Iif surety firm is ltd.8private ltd. companiesJ. '. @roof of business place. $. @roof of residence. 6. Copy of @artnership Feed8 /emorandum and (rticles of (ssociation etc. #. *hop establishment license8 **I registration certificate. .. *tatement of account for current year. &. *ales ta0 8 Income ta0 papers. ". Credit from the bank if surety is operating account %ith some other bank. !-. (ny other documents as per the proposal. Borro%er should provide at least one surety for loan proposal upto 4s. 6 lacs and t%o sureties above 4. 6 lacs %ith their documents mentioned above.

IB Pri5ary Docu5*nt# +hese determine our rights to recover the amount lent by us together %ith interest thereon. !. Femand @romissory Dote ,. Coan (greement. '. Cetter of guarantee. $. Counter guarantee. IIB S*curity Docu5*nt# +hese are obtained for changing the property of the borro%er to the bank as security. !. =ypothecation Feed. ,. Bills (greement. '. Cetter of Cien. !,

Industrial Finance In (bhyudaya Co-operative Bank $. /ortgaged Feed and its original registration receipt8 /emorandum of e>uitable mortgage. IIIB AuCi)iary Docu5*nt# +hese are supplementary to the primary and security documents. !. (pplication for facility. ,. Consent letter of surety. '. @artnership Feed, duly registered8 /emorandum and (rticles of (ssociation8 +rust Feed. $. Irrevocable po%er of attorney. 6. 4esolution of company8trust. #. @ermission from charity commissioner etc. Att*#tation +he follo%ing documents are to be compulsorily %itnessed by at least t%o %itnesses. !. ,. '. $. 6. #. .. (ssignment on the instrument itself Ie.g. CIC policyJ (ssignment on separate instrument. *ale Feed. /ortgage Feed. (ny other documents re>uiring Ad-valorem stamp duty. ( gift Feed of immovable property. ( %ill. Follo%ing documents do not re>uire to be %itnessed? !. ,. '. $. 6. #. Femand @romissory Dote. Cetter of Cien. (greement for hypothecation of goods and book debts, vehicles, plant and machineries etc. Cetter of guarantor. D*C8 3old loan agreement. B.F.8B.@. (greement. (fter scrutini:ing the documents branch %ill make the visit and submit scrutiny note. II. Acc*ptanc* Scrutiny and R*co55*ndation# o2 )oan propo#a) !'

Industrial Finance In (bhyudaya Co-operative Bank !. (ll the loan proposals continue to be accepted by the branches and scrutini:ed at branch level e0cept loans and advances application from ne% applicants of above 4s.6-.-- lacs. ,. Ehenever prospective borro%ers ask for loan application, they should be properly guided and correct set of application forms8(nne0ure be given to them and properly briefed8guided about the documents to be submitted along %ith the application. '. 9n receipt of the application duly filled-up, the loan receipt should be fully scrutini:ed and re>uired documents to be obtained and file to be sent to ne0t higher authorities %ithin '- days from the receipt of the file in the branch. In case, the file is kept pending for more than '- days, the reasons for doing so along %ith the detailed e0planation giving reason for keeping the file pending be sent to ne0t higher authorities. A0isting guidelines for scrutini:ing be follo%ed like re>uired documents and compulsory visit to the applicants residence and business places etc. as advised from time to time. Inordinate delay in file processing %ill not be tolerated. Fetails of re>uirements to be informed %ithin ' %orking days. 9n receipt of the application duly filled-up, branch should inform all details of re>uirements to the loanee in %riting %ithin ' %orking days. $. Ehenever the file is received %ith incomplete documents, the file should be accepted and re>uirements of documents should be informed to the applicant in %riting giving time limit of . days %ithin %hich they should be submitted. In case the documents are not received %ithin . days, reminder should be sent giving further time of . days. +hus loanee %ill be given period of !$ days for submission of documents from the date of receipt of loan application. If loanee fails to submit the same, the file should be for%arded to ne0t higher authority for rejection %ithin ,- days from the receipt of application %ith detailed reasons. It should be our endeavor to also contact loanee over telephone, guide him and ensure that loan is granted to applicants on the basis of repayment capacity. 6. @roposals upto the delegated po%er of the branch-in-charge be sanctioned at branches. @roposals beyond branch-in-charge delegation but upto delegated po%ers of F3/ IHonesJ be sent to :onal offices for sanction. +he loans and advances proposals !$

Industrial Finance In (bhyudaya Co-operative Bank beyond the delegated po%ers of F3/ and upto 4s.!-.-- lacs %ould continue to be sent to =ead 9ffice directly. +he proposals above 4s. ,6.-- lacs %ould be routed through Honal offices for scrutiny and recommendations of the Fy. 3eneral /anager. #. +he Honal offices should scrutini:e the loans and advances proposals %ith limits of above 4s. ,6.-- lacs and upto 4s.'6 lacs, and for%ard the same to =ead office along %ith their scrutiny, recommendations and grading of the accounts. .. Branches should use the proper application forms as %ell as scrutiny forms for different types of advances. +here are different forms for loans upto 4s. !6.-- lacs, CC facility upto 4s. !6.-- lacs and facility above 4s. !6.-- lacs. In the form for the facilities above 4s. !-.-- lacs, there are separate forms of fund based limits, for +erm Coan, loans for contractors and manufacturing units. Branches should fill-up the appropriate scrutiny forms %hile scrutini:ing the application. &. ( borro%er enjoying fund based limit above 4s. !--.-- lacs and fund plus non-fund based limit of 4s. ,--.-- lacs have to be a @rivate Ctd.8 Ctd. Company. =ence @roprietary8@artnership firms should take necessary steps to convert them into @vt. Ctd.8Ctd. Companies in due course. ". For obtaining credit information of party and C4 from other banks, verification of (udited Balance *heet, Income +a0 4eturns etc. for ne% proposals above 4s. ,.-Crore, Bank may take the help of @rofessionals by fi0ing the fees if any and as decided by the /anaging Firector. !-. If it is observed from the balance sheet that the finance given by the bank is diversified for any purpose other than for business purpose or the capital is %ithdra%n substantially affecting the debt e>uity ratio adversely, enhancement of facility should not be considered unless the said diversion or %ithdra%n funds are restored. +he loans and advances proposals above 4s. 6-.-- lacs from associate firm of our e0isting borro%er account %ill be accepted and scrutini:ed at branches and for%arded to :onal offices for further scrutiny and on%ard submission to =ead 9ffice. +hus, these proposals %ill not re>uire in principle scrutiny. !6

Industrial Finance In (bhyudaya Co-operative Bank

III. Sanction o2 Cr*dit :aci)iti*# !. (ll the applications for credit facilities above 4s. 6-.-- Cacs %ill be sanctioned8 rejected by the Board as per the e0isting practice. ,. D*)*6ation o2 Po=*r#7 +he board has delegated the po%ers to sanction facilities upto 4s. 6-.-- lacs to the /anaging Firector, 4s. '6.-- lacs to the 3eneral /anager8(ddl. 3eneral /anager, 4s. ,6.-- lacs to the F3/s of Eestern, Central and Davi /umbai Hones. *imilarly, Board has delegated the po%ers to the branch (3/, *r. /anagers and /anagers to sanction surety loans upto 4s. ,.-- lacs Cash Credit limit and *ecured Coans upto 4s. ..-- lacs, 4s. 6.-- lacs, 4s. '.-- lacs respectively including housing loans, vehicles, consumer durables, furniture8 fi0tures, repairs and maintenance etc. '. +he statement of the loans and advances sanctioned by the Branch /anagers should be sent to Honal 9ffice on monthly basis, %hich in turn %ill consolidate the same and send to =ead 9ffice for placing the same before the Board. Honal 9ffices should also send monthly statement of loans8CC facilities8 other facilities sanctioned by them to =ead 9ffice for placing the same before the Board. =ead office %ill also place the statement of credit facilities sanctioned by (ddl. 3eneral /anager8 3eneral /anager 8 /anaging Firector on monthly basis before the Board. $. If the sanctioning authority sanctions amount mare than the recommendation, specific reasons for the same should be mentioned in the sanction note. 6. *anctioning authority is responsible for sanction of loans and advances based on the facts given by the scrutini:ing and recommending authorities. +he scrutini:ing officials are responsible for giving full facts in the *crutiny note. (ny hiding of the facts in scrutiny and subse>uent loss to the Bank %ill attract disciplinary action against the concerned recommending officials. #. +he sanctioning authorities are also authori:ed to make subse>uent alterations in the sanction %ithin sanctioning po%er like change of sureties, change of >uotations, suppliers, e0change of securities etc. as per prevailing practice. !#

Industrial Finance In (bhyudaya Co-operative Bank

.. +he (ddl. 3eneral /anager8 3eneral /anager 8 /anaging Firector at the =ead 9ffice are authori:ed to make deviations even for the loans sanctioned by the Board considering the urgency of situation, but it should be later ratified by the Board. &. +he sanction and rene%al of fund based and non-fund based Eorking Capital limits are valid for a period of ! year. ". +he applications for reconsideration for sanction or enhancement of facilities are normally to be entertained after a period of si0 months from documentation. !-. Branch /anagers are authori:ed to e0change the collateral securities of e>uivalent amount. +he decision shall be noted by the Honal F3/s. 9ther cases should be referred to =ead 9ffice %here (ddl. 3eneral /anager8 3eneral /anager 8 /anaging Firector are authori:ed to take decision based on merit of each case. ID. Docu5*ntation and R*)*a#* !. +he sanction letter should be prepared and sent by the disbursement authorities giving all the +erms and Conditions of sanction. +he borro%er and the sureties should give a letter accepting unconditionally all the terms and conditions of sanction and it should be kept along%ith other documents. +he copy of sanction letter should be sent to all sureties.

,. (ll documents should be e0ecuted as per the manual of documentation. It should be ensured that proper documents are e0ecuted %ith right amount of stamp duty as per =.9. guidelines issued from time to time. It should be ensured that loanee fulfills all terms and conditions stipulated by the Board8 sanctioning authorities. '. (ll the credit facilities upto 4s. 6-.-- lacs %ill be disbursed at =9 branches. Focumentation of @vt. Ctd.8Ctd. companies8 +rusts %ill also be done at branches %ith limit upto 4s. 6-.-- lacs. Branches shall submit copies of documents for creating charge %ith 49C to loans and (dvances Fept. %ithin 6 days of e0ecution of documents. !.

Industrial Finance In (bhyudaya Co-operative Bank

$. (ll other facilities %ill be documented and released at =ead office after compliance of terms and conditions of sanction and adhering to the guidelines issued from time to time. 6. +he releasing of loan should be after the borro%er brings the proportionate margin in the account. #. +he releasing officials should make the payment directly to the suppliers and obtain the stamped receipts for the same. Eherever the borro%ers have already paid to the suppliers, the details of such payment should be verified like %hether che>ue is debited in the account etc. and satisfy themselves that suppliers have already received the payment against the order for supply of articles8machinery etc. Cash payment above 4s. 6-,---8- to the supplier cannot normally be treated as payment to the supplier unless their Chartered (ccountant certifies that such payment is made and it %ill be accounted in the Books of account of the borro%er to be prepared for the year. +he @ay 9rder should be dra%n in favor of K Bank, Branch name of the supplier (ccount Do.L. +he pay 9rder of payment to the supplier should not be given to the loanee. It should be sent by 4egd. (.F.8 *peed @ost or By deputing staff. +he copy of @ay 9rder be handed over to the loanee. .. For ;ehicle8*hop83ala8/achinery loan, reimbursement is allo%ed if application is made %ithin one year from the date of purchase only to the e0tent of payment made by che>ue8 eligible amount. Do reimbursement against cash payment is allo%ed. &. Dormally no payment shall be made to the borro%er directly. If the Bank is fully satisfied that they have made payment to the supplier and the supplier and the suppliers have already supplied the goods in good condition, the Bank may consider reimbursement to the borro%er after verification of the above.

!&

Industrial Finance In (bhyudaya Co-operative Bank ". (ll the Focumentation done at =ead office %ill be verified by the Cegal Fept. at =ead 9ffice. =o%ever, in case of complications, the documentation be prepared and approved by the BankGs approved (dvocates and *olicitors. !-. +he branches and disbursement staff at =ead 9ffice should prepare and keep a certificate in the file duly signed by the Focumentation clerk, In-charge of Fisbursement *ection as %ell as the /anager8*r. /anager8 (sst. 3eneral /anager certifying that all the documents are e0ecuted as per the terms of sanctionand specify if any further compliance is re>uired to be done in this regard. *uch further compliance should be done %ithin reasonable time to ensure that Focumentation is complete and up-to-date in all respect. !!. Branches should at the time of rene%al 8 revie%s verify the security documents and confirm themselves that all security documents are available in the branch. !,. Branches should obtain Cetter of (ckno%ledgement of Febt for all the facilities including +erm Coans atleast once in a year. If only +erm Coan is availed, C(F should be obtained every year preferably for '! st /arch of the year during the month of (pril. +he Cegal Fept. shall make necessary changes in the Focumentation in consultation %ith BankGs (dvocates considering the changes in the Coan @olicy. D. (onitorin6" R*4i*= and Po#t Sanction :o))o=-up7 !. +he branches are prime centers for monitoring, revie% and post sanction follo%-up of all the loans. +hey %ill be guided and supported by respective :onal offices. ,. For CC accounts, the branches should obtain the *tock and Febtor statement on monthly basis and %orkout F@ for all borro%er accounts and allo% %ithdra%al in the account %ithin F@. '. Ehere the client has been sanctioned sub limit against FF4 %ithin the overall cash credit limit then branch should add the sub limit against FF4 to the F@ to ascertain !"

Industrial Finance In (bhyudaya Co-operative Bank total F@ available to the borro%er. It may be noted that %hen the bank considers sub limit against FF4, the later becomes a @rime *ecurity for Cash Credit. $. Ehile e0ecuting che>ue discounting8 against clearing and allo%ing %ithdra%als in the account, the F@ shall be observed by the branches so that the facilities does not go unsecured. 6. +he branches should restrict cash transactions in the account as much as possible as per various guidelines issued in this regard. #. +he branches should rene% all the CC accounts atleast one month before e0piry of limit. .. Branches should visit all loans and CC accounts atleast once in a >uarter and identify the problem areas if any and keep the record in the file8report to higher authorities. &. If any of the account going bad is observed immediate steps should be taken in consultation %ith the :onal office to rectify the problems in time. ". In case, stock8debtors statements are not submitted, the branches should visit to the borro%er and get the stock8 book debt statements from the borro%er prepared and %ork out F@ accordingly. !-. +he Branches %ill prepare D@( statements as re>uired by the 4.B.I. and advised by Cegal and 4ecovery Fepartment from time to time. !!. (fter disbursement of the +erm Coan, the branches should visit and verify %hether the machinery8e>uipment for %hich the loans are sanctioned are installed and as per the specification given by them %ithin three months from the date of last disbursement and keep a certificate in the file. If there is discrepancy immediate corrective action should be taken. *uch visit report should be available in each file duly signed by the person visited and the In-charge of the Coan Fept. along%ith Branch /anager. ,-

Industrial Finance In (bhyudaya Co-operative Bank !,. +he branches should also closely %atch the gradation of standard accounts and movement of the accounts from one grade to another in the branch and try to have ma0imum higher-grade accounts. !'. +he present system of revie% of borro%er accounts above 4s. 6.-- lacs %ill continue to be done by Honal 9ffice atleast t%ice a year. !$. +he present system of revie% of borro%er accounts above 4s. !--.-- lacs %ill continue to be done =ead 9ffice level by Industrial Finance Fept. on >uarterly basis. !6. (ll the accounts outstanding above 4s. !-.-- Cacs at 4ecovery Fept. shall be revie%ed atleast t%ice a year and a report should be placed before the Board. +he Board shall constitute a KCoan /onitoring CommitteeL consisting of some members of Board and8or all *r. A0ecutives of the bank %ho should meet t%ice a month at the =ead 9ffice, preferably after ,.-- p.m. on alternate *aturdays at the =ead 9ffice and revie% all such problematic accounts both at recovery dept. and branches and initiate necessary corrective action. In addition to total revie% of each account, the committee %ould ensure regular submission of stock and book debt statement, dra%ings %ithin F@ limits, verification of securities by periodical inspection etc.

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Industrial Finance In (bhyudaya Co-operative Bank 0./ Indu#tria) :inanc* D*part5*nt Scrutiny Not* Industrial Finance Fepartment at head office is taken care of by senior manager8 managers. +heir duties in brief in respect of the report and monitoring of loans and advance are as under? (J Fetermination of %orking capital for **I and other manufacturing units One% proposals %ith limits above 4s.,6.-- lacs and rene%al8enhancement above 6-.-- lacs. BJ For all +erm Coans above 4s.!-.-- lacs, projected cash flo% statement should be obtained to ensure generation of ade>uate funds for repaying the loans and interest thereon. In case of ne% term loan in addition to e0isting term loans, average F*C4 to be calculated to confirm satisfactory repayment as per schedule. CJ For loans for purchase of machineries above 4s.!6.-- lacs, Industrial Finance Fepartment %ill verify the genuineness of >uotation, competitive rates and available better alternate machineries at cheaper rate as %ell as better >ualities. FJ +he eligibility +erm Coan for the project8machineries etc. should be calculated as per the margins prescribed by the Bank and proper scrutiny by the Industrial Finance Fepartment independently. AJ 3enuineness of supplies and reasonable rates >uoted by them shall be certified by the Industrial Finance Fepartment. Industrial Finance Fepartment should also check infrastructure facilities like electricity, %ater etc. available %ith the factory, all government dues are paid or not etc. FJ Industrial Finance Fepartment shall al%ays update themselves in respect of various types of supplies of machineries8e>uipments, pricelist through market contacts8internet. 3J +echnical report by 4s.!-.-- lacs. Industrial Finance Fepartment is to be given before

branch8:onal offices recommendations in all term loan accounts %ith limit above

,,

Industrial Finance In (bhyudaya Co-operative Bank =J Industrial Finance Fepartment should also give list of machinery observed during visit. If re>uired, valuation report may be obtained from approval valuer. In case of ne% large proposal 8e0isting large borro%er, the valuer should accompany the :onal office F3/8 Industrial Finance manager during the visit. IJ Industrial Finance Fepartment should mention the current market position, competition to the borro%er and his products. J Industrial Finance Fepartment should given recommendations based on eligibility, technical viability, security, project viability, etc. 1J (t the time of each disbursement of +erm Coan8CC facility above !-.-- lacs, Industrial Finance Fepartment has to visit site of the borro%er for assessment of progress of %ork done along %ith photographs of the site and ho% much amount to be disbursed accordingly. CJ In respect of determination of %orking capital, he %ill study the production process cycle of the industrial unit and decide %orking capital limit based on credit purchases, credit allo%ed on sales, minimum inventory levels, ra% material, %ork in progress, finished goods, etc. /J Industrial Finance /anager should %ork out the %orking capital re>uirement based on the production8processing cycle of the **I and manufacturing units enjoying8applying limit above 4s. 6- lacs. =e should also arrange for photographs of the unit8machineries. DJ /onitor loans and advances above 4s. !.-- crore independently by visit on half yearly basis It%ice in a yearJ and to submit detailed report. 9J (nalytical study of each sector of the industry in respect of the follo%ing? *anction of Industry-%ise ne% loans and advances. /ovement of D@(s and overdue in each industrial sector and the reasons for increasing D@(s8overdue in particular sector. ,'

Industrial Finance In (bhyudaya Co-operative Bank *imilarly, industry-%ise reduction in D@(s and overdue report is prepared and if there is revival of any particular sector8industry, then it should be highlighted. 3eneral report highlighting revival8better prospects in some industrial sectors for the current year so that bank may take necessary steps for deployment of more funds in those sectors.

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Industrial Finance In (bhyudaya Co-operative Bank 0.$ Eona) O22ic* r*port Honal office should comment in respect of the follo%ing as per the guidelines given in (nne0ure-I 1. Capita) Increase? over last year-%hether plough back of profitQ (ddition by introduction of fresh capital by proprietor8 partner-C(Gs certificate- *ource of capital IadditionalJ. =o% they intend to increase it to certain level to make debt e>uity ratio favorable. 4eduction? %hether by main partner-reasons for %ithdra%al-discrete en>uiry to be made. -. R*#*r4*# Ehether increased or decreased %ith details. 0. +n#*cur*d !oan# aJ Cong term loans by family members 8 relatives 8 directors and associates, undertaking from them not to %ithdra% these loans %ithout %ritten permission from the bank. +hese loans %ould be treated as Ruasi Capital and e0cluded from current liabilities. bJ 9ther short term unsecured loans- 4epayable on demand to form current liabilities. /. Oth*r !iabi)iti*# Ehether they include 3overnment dues payable. $. :iC*d A##*t# Ehether Fi0ed (sset are finance through %orking Capital IFiversion of FundsJ. 1. Curr*nt A##*t Command on >uality of assets- stock and book debts upto "- days %ill only >ualify for Dra=in6 Po=*r @DPA. ,. !o##*# 4easons for Cosses O %hether chances of profit making OIs net %orth affected. .. Di4*r#ion o2 :und# Ehether funds transferred to associate accounts for genuine business8 commercial purpose or utili:ation for business of associate (ccount. Ehen these funds %ere bought back, If not, %hether they %ould be bought beck or chances for the same are remote due to siphoning off. C(Gs Certificate of bringing funds back to business to be obtained.

,6

Industrial Finance In (bhyudaya Co-operative Bank

F. P*r2or5anc* o2 th* borro=*r&indi4idua) unit co5par*d to pa#t achi*4*5*nt and pro3*ct*d #a)*#" Gro## Pro2it" N*t Pro2it" Pro2itabi)ity" *tc. *tate about achievement of past year %ith previous year- performance till current year till revie%- %hether they %ould be in a position to achieve projected sales, gross profit, net profit, etc.- ne% %ork orders, ne% products, increase in capacity of output8 product-ne% technology- cost reduction measure, government policies, import substitutes, of another unit, etc. Sa)*# and Purcha#* 2ro5 th* dat* o2 )a#t ba)anc* #h**t ti)) )a#t 5onth. Certified by the borro%er and also their Chartered (ccountant. Ehether current year sales indicate improvement in performance of the unit and tentative sales they %ould achieve by the current year-end. 1%. Ana)y#i# o2 Ba)anc* #h**t and Pro2it and !o## account and int*rpr*tation o2 ratio# Curr*nt Ratio Current (sset Current 4atio N Current Ciabilities +he ratio ,?! sho%s e0cellent li>udity position. +he ratio bet%een !?! to ,?! sho%s satisfactory li>udity position. +he ratio less than !?! sho%s no li>udity at all. For *si units it should be atleast !.''?!.

D*bt E?uity Ratio (ll outside borro%er funds Febt e>uity 4atio N Det Eorth O Intangible (ssets +he foll%ing benchmark denotes good solvency , ? ! ----S /anufacturing units. ,#

Industrial Finance In (bhyudaya Co-operative Bank ' ? ! ----S +rading units. ' ? ! ----S **I units. Cr*dit a4ai)*d on Purcha#*# or Cr*ditor#> Ratio Creditors B '#6 Creditors 4atio N @urchase Cr*dit a))o=*d on #a)*# or D*btor#> Ratio Febtors B '#6 Febtors 4atio N *ales *undry debtors beyond "- days should not be reckoned for calculation of Fra%ing @o%er IF@J. 11. Pay5*nt o2 Statutory Du*# Ehether audit report to Balance sheet and @rofit and Coss account contains information about non-payment of dues like sales ta0, Income +a0, A0cise duty, electricity charges and other statutory dues etc. Branches should make reference to various authorities on >uarterly basis in this matter and ascertain position by visits to take authorities. 1-. +ti)i8ation o2 ca#h cr*dit )i5it# DBD&SBD !i5it# Do. of bills dra%n- (mount during last !, months. Ehether bills are returned8 dishonored. If yes, give details-%hether bills dra%n on such partner are further discountedQ (re payments of these bills received from dra%eeQ +ti)i8ation o2 BG !i5it Do. of B3s issued- (mount of B3s. Fetails of invoked B3s- payment made by borro%er and details of outstanding invoked B3. +ti)i8ation o2 !*tt*r o2 cr*dit !i5it @I5port&In)andA Do. of C8C developed Ipayment made by debiting to forced loan under C8CJ. @ayment made by borro%er-Fetails of outstanding forced loan under C8C. ,.

Industrial Finance In (bhyudaya Co-operative Bank R*pay5*nt o2 *Ci#tin6 T*r5 !oan

10. RBI In#p*ction r*port ob#*r4ation and co5p)ianc* th*r*o2 @i2 app)icab)*A Compliance of deficiencies by client Compliance of deficiencies by Branch8Honal office. 4easons for non-compliance. @rogress8latest position in compliance.

1/. Int*rna) and concurr*nt audit ob#*r4ation and co5p)ianc* th*r*o2 @i2 app)icab)*A Compliance of deficiencies by client Compliance of deficiencies by Branch8Honal office. 4easons for non-compliance. @rogress8latest position in compliance.

1$. Non-co5p)ianc* o2 #anction #tipu)ation# o2 board 4easons for non-compliance by client. Don-compliance by staff8official O reasons for deviations by staff8 officials and %hat action :onal office 8 =ead office initiates in the matter. 11. In#uranc* o2 #toc &5achin*ri*# hypoth*cat*d *tc. Ehether ade>uate insurance is obtainedQ Ehether place of storage of goods is the same incorporated in insurance policy. 1,. Cr*dit Ratin6&Gradation 9n the basis of (udited Balance *heet and @rofit and Coss account as on TTTT Ehat are the reasons for up%ard8 do%n%ard gradationQ Ehat steps the borro%er has promised to take to improve the gradation. 1.. R*con#titution o2 partn*r#hip

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Industrial Finance In (bhyudaya Co-operative Bank Ehether there is a dispute among partners. Ehether the remaining partners are all family members 8 close relatives- %hether main partner has retired8 resigned O %hat %ould be impact on business- %hether our finance is securedQ Ehat is change in capital- %hether retiring partner is %illing to stand as surety at least for ,8' yearsQ Ehether he %ould continue his capital as unsecured loan on long-term basisQ 1F. (ort6a6* o2 I55o4ab)* prop*rti*# Full details like flat8gala etc. Do. in building8 society- area- market value O by IvaluerJ Branch In charge 8 by %hom it is occupied- mortgaged on TTTTTTT. Ehether mortgage change is recorded %ith society builder- to affi08 paste mortgage poster- @resent market value as per 9.C. Do. ##- +he description and area should be based on title Feeds and it should be correctly reported in branch scrutiny note, Branch visit report and :onal office report. -%. Group ECpo#ur* -1. Sp*cia) r*?u*#t o2 th* borro=*r @i2 anyA --. N**d o2 =or in6 capita) T*r5 !oan -0. DSC ratio @2or !oan#A Brief particulars of %eak financial deviations8deficiencies8 irregularities in the proposal. -/. Eona) O22ic* R*co55*ndation# =ith 3u#ti2ication in d*tai)# ustification of each funded and non-funded limits.

,6. In vie% of the above, %e recommend follo%ing credit limits8 %e do not recommend ,"

Industrial Finance In (bhyudaya Co-operative Bank follo%ing credit limits. (mount 4s. !. Cash Credit ,. FBF8 *BF '. Bank 3uarantee $. Cetter of credit 6. IImport8 InlandJ #. +erm Coan .. E.C.+.C. TTTTTTTTTTTTTTTTTTT TTTTTTTTTTTTTTTTTTT TTTTTTTTTTTTTTTTTTT TTTTTTTTTTTTTTT TTTTTTTTTTTTTTT TTTTTTTTTTTTTTTTTTT TTTTTTTTTTTTTTTTTTT TTTTTTTTTTTTTTTTTTT /argin 7 TTTTTTTTTTTTTTT TTTTTTTTTTTTTTT TTTTTTTTTTTTTTT

TTTTTTTTTTTTTTT

Dote? - +he F3/ should not omit any one of the above ! to ,$ points. +here must be specific comment saying that this point is not applicable to borro%er or specific comment be given. 4eport of all :onal office should be identical and there should not be any change as far as the standard format of this report. +he manner of reporting should be strictly in conformity %ith the guidelines given in anne0ure. +hough observations %ill differ from case to case, the method of reporting has to be identical. =ence anne0ure should be strictly adhered to.

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Industrial Finance In (bhyudaya Co-operative Bank 0., Guid*)in*# 2or Cr*dit Ratin6 +he %eight ages for different parameter are given as under *.Do. ! , ' $ 6 Financial @arameters *ecurity @rime and Collateral Conduct of (ccount /anagement Business and 9ther @arameters +otal /arks '# !6 ,& !!! 1%%

AB :inancia) Para5*t*r# For the reference and Clarifications of financial ratios follo%ing clarifications are given Current (sset aJ Current 4atio N Current Ciabilities Current (sset - *tock bJ Ruick 4atio N Current Ciabilities (ll outside borro%er funds cJ Febt e>uity 4atio N Det Eorth O Intangible (ssets dJ Det Eorth N Capital U 4eserves U (ccumulated profit O 4evaluation 4eserves. eJ Capital N Fi0ed Capital U Current capital U Ruasi capital fJ Ruasi Capital N that portion of long term loan taken from Firectors8@artners and their not %ithdra% family members %here undertaking is given that they %ill the same %ithout the consent of the bank.

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Industrial Finance In (bhyudaya Co-operative Bank gJ Fiversion of funds N Coans and advances given to Firectors, their family members, sister concerns and others for any purpose other than for business purpose out of BankGs borro%ers funds. hJ Febt *ervices Coverage ratio IF*C4J Det profit U Fepreciation U @ayment to%ards interest IIncluding CC8+C8BF etc.J F*C4 N Installments U Interest on the loan CC8+C8BF etc. in the year iJ 4etention of @rofit N Det @rofit after +a0 O Fra%ings and dividends !. For Companies? 4etained @rofit N D@(+ O Fra%ings and Fividends ,. For proprietorship 2 @artnership Concerns? 4etained @rofit N Closing Capital O 9pening Capital O I.+. of firms and partners '. 4etention of @rofit I 7J 4etained @rofit Det @(+ Febtors B '#6 jJ Febtors 4atio N *ales Creditors B '#6 kJ Creditors 4atio N @urchase B !--

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Industrial Finance In (bhyudaya Co-operative Bank No. Ratio Standard Ratio :inancia) Para5*t*r# @5aCi5u5 5ar # /%A ! Current 4atio !.'' or above !.!.-!.', !.!--!.!. Cess than !.!, Febt A>uity 4atio Cess than ,.-,.-!-'.-'.-!-$.-$.-!-6.-6.-! or above ' +otal Ciabilities8 +DE Cess than '.-'.-!-$.-$.-!-6.-6.-! or above $ *ales achieved Icompare (bove "-7 &-7-"-7 %ith targets accepted by .-7 - &-7 bank as per projectionsJ Cess than .-7 94 Icompared %ith increase over previous year if no projections given J (bove ,67 (bove !67 upto ,6 7 (bove 67 to !67 Upto 67 Constant or Degative 6 Det @rofit as 7 of sales (bove 67 (bove '7 to 67 Iprojected and actualJ (bove ,7 to '7 Upto ,7 Coss # 4etention of profit I(vg. , .-7-!--7 $-7- #"7 yearsJ ,-7- '"7 Cess than ,-7 . aJF*C4IAvery projected 3reater than ,.-!.6- to !."" year for project financeJ !.,6 to !.$" Cess than !.,6 bJ Fiversion of funds IFor Do Fiversion /inor Fiversion %orking Capital facilitiesJ =uge Fiversion Dote? If both are applicable, avg. /arks be given & +rend in sales Consistently increasing /ore or less stable Fecreasing (ar # $ ' , $ ' , ! $ ' , $ ' , $ ' , ! $ ' , ! $ , ! $ ' ! $ ! $ , ''

Industrial Finance In (bhyudaya Co-operative Bank " Increasing @rofits *table @rofits Fecreasing Cosses S*curity Pri5* and Co))at*ra) @(aCi5u5 (ar #-1$A ! *ecurity @rime Iin relation to /ore than F.@. ust ade>uateNF.@. F@J Upto !-7 Belo% F@ /ore than !-7 Belo% F@ , Collateral Cover I(s per the !--7 and above 6-7- ""7 present market valueJ ,-7 - $"7 Cess than ,-7 Do Collateral Conduct o2 Account @(aCi5u5 (ar #--.A ! *ubmission of monthly @rompt84egular Cate but less than ! month security statements Ilast!, Cate but S ! month to ' months monthsJ Cate but S ' months , +rends in @rofits I(mountJ $ ' ! & # $ . 6 ' ! $ ' ! -

4epayment of Installment +imely- on or before due date I!6 th of $ and ICC8+C8EC+Cetc.J Interest succeeding /onthJ Eithin !6 days from due dateICast ' $ ' , -

'

day of succeeding monthJ (fter last date of succeeding month 9verall 9peration of the A0cellent 3ood (8cIlike regular overdra%ing *atisfactory against clearing, che>ue @oor

returns, etc.J *ales and other business *ales greater than "-7 $ *ales &-7-&"7 ' routed through us *ales .-7 to ." 7 , *ales routed belo% .-7 Dote ? If CF (8c %ith other Bank is permitted , the turnover %ith other banks to be clubbed %ith turnover in our Bank. 4ecoveries of bills Do overdue $ 9verdue regulari:ed %ithin !- days ' purchased8CC Bills8 others8 from due date guarantees Invoked 9verdue regulari:ed %ithin ! month , from due date 9verdue regulari:ed beyond ! month ! from due date 9verdue not regulari:ed Do compliance re>uired $ '$

Industrial Finance In (bhyudaya Co-operative Bank Compliance of (udit and /ajor Items Complied Compilance @ending inspection re>uirement8*tatutory . (uditors observations *ecurity Focumentation Complete and in order $ Focuments incomplete due to valid ' I/ortgage, Doting, @o%er of reason (ttorney etc.J Incomplete or pending , -

(ana6*5*nt @(aCi5u5 (ar #-1%A ! @romoters @rofessionally8+echnically

competent8e0perienced @rofessionally8+echnically competent ' persons employed (bsence of !

@rofessionally8+echnically competent , (ctive /anagement persons *table-no change in past ' years 6 Ie0cept %ithin familyJ *table-but not more than one change ' in last ' years Fre>uent change in recent past Bu#in*## and oth*r para5*t*r# @(aCi5u5 (ar #-11A ! Business parameters Core8 (pproved sectors *ensitive sectors , *atisfactory (ccount (bove 6 <ears ' to 6 years relationship ! to ' years De% or less than ! year ' Ind.8business prospects A0cellent 3ood @oor $ Irregular Firect8 Indirect Do Irregular Firect8 Indirect Ciabilities Ciabilities Irregular Indirect Ciabilities Irregular Firect Ciabilities ! , ! ' , ! $ ' ! , ! -

'6

Industrial Finance In (bhyudaya Co-operative Bank

Dote? !. +he above grades are on liberal terms and %ill be improved upon in future. ,. If any of the item is not applicable, then mark D( and total marks should be calculated on proportionate basis i.e. actual marks given have to be divided by ma0imum total marks applicable multiplied by !--. +he account shall be graded as under 3rade ((( (( ( BB B *ecured loans8 cash credit facilities upto 4s. !-.-- lacs a. @riority *ector (dvances b. Don-@riority *ector (dvances !,.-- 7 p.a. !'.-- 7 p.a. /arks (bove "&! O ".! O &#! O .Upto #-

*ecured Coans8 Cash Credit facilities Iabove 4s. !-.-- lacsJ? +he applicable interest rate %ill depend on the credit rating given to the borro%er8 account as indicated in the table given belo%

Cr*dit Ratin6 Grad* ((( (( ( BB B

Priority S*ctor G Oth*r (anu2acturin6 +nit# H P.a. @C4--.6ARU(C +9 @C4 @C4U -.6@C4 U !.6@C4 U ,.6!!.6!,.-!,.6!'.6!$.6-

Non-Priority S*ctor @ECcu#in6 tho#* Account# =hich ar* not )in *d to cr*dit ratin6A @C4 U -.6@C4 U !.-@C4 U !.6@C4 U ,.-@C4 U '.-!,.6!'.-!'.6!$.-!6.--

Dotes? -

'#

Industrial Finance In (bhyudaya Co-operative Bank a. +he interest rate for CC and +C %ill be the same on the basis of gradation. b. +he ne% clients %ill be charged interest at !,7 p.a. for the first year for both cash credit and Coan Facilities. Dormal gradation %ill be applicable for the account from the second year, based on final year balance sheet and profit and Coss (ccount, etc. c. In case of default, interest %ill be charged !$7 p.a. till the default continues. d. For Fefaulters in builders8developers8contractors category %ith KBL grade rating, the interest chargeable for the period of default %ill be !67 p.a. 0.. Ti5* :ra5* 2or di#po#a) o2 )oan propo#a) +he prospective borro%er approaching the branch should be advised in detail the procedural formalities re>uired to be completed by him at the time of issuing the loan application itself. ( list of documents re>uired along%ith loan application form should be handover to him. Branch should accept all loan8cash credit application and issue receipt of ackno%ledgement immediately. (dvise staff not to issue on-dated receipt. Further no loan file should be returned back to the applicant even though it is not complete in all respects. +he +imeframe for disposal of proposals is as under? !. (fter receipt of application, branch should %rite to the applicant about the re>uirements %ithin ' days of receipt of the application giving him a period of !days for completing the re>uirements. ,. In case of non-receipt of documents %ithin !- days from despatch of the first letter, a further period of !- days be given to complete all the re>uirements. +hus, a total period of ,' days %ill be available to the branch and the applicant. +he last date for compliance by the applicant should be syated specifically in the letters to the applicant instead of mentioning only !- days. '. If the loan could not be sanctioned or rejected by the branch by ,'rd day, file should be for%arded to the :onal office for further action on ,$ th day.+he :onal office %ill e0amine scrutiny notes etc. of the branch and ensure that only genuineand minimum '.

Industrial Finance In (bhyudaya Co-operative Bank re>uiremnts are raised. If found necessary the :onal office %ill advise the concerned branch to delete8%aive some of the re>uirements, provided that in the latterGs vie% such deletion8%aiver may not have material importance from the point of safety and security of the bankGs advance. $. (fter verification of the loan proposal file in respect of the actions initiated by the branch and response of the applicant, :onal office %ill %rite to the borro%er to comply %ith all the remaining re>uiremnts %ithin period of . days. +he :onal office %ill thereafter return the file back to the branch for further compliance %ithin !- days of receipt. 6. (fter receipt of the file from the :onal office, the in-charge of the branch %ill arrange for further follo%-up %ith the applicantand ensure that all re>uirements as advisedby the :onal office are compiled %ith by the applicantat the earliest. =e %ill thereafter recommend sanction or rejection of the proposal and send the loan proposal file to :onal office. +hus, loan proposal fallimg %ithin the delegated po%ers of the branchin-charge. I.e. upto 4s. $.-- lacs as also upto 4s. !-.-- lacs and falling %ithin the po%ers delegated to the :onal Fy. 3eneral /anager %hich have remained pending beyond the prescribed time limit of ,' days from the receipt of application and in respect of %hich the aforesaid procedure has been follo%ed %ill be sanctioned8 rejected by the :onal Fy. 3eneral /anager. #. ( similar procedure as to the timeframe for disposal of loan application, %ill be follo%ed by branches and the Coans and advances Fept. In respect of proposal for amount above 4s. ..-- lacs and upto 4s. !-.-- lacs. .. +he applications8proposals for facilities of higher amounts %ill continue to be approved8 rejected at appropriate higher levels i.e. (ddl. 3eneral /anager8 /anaging Firector as at present. &. *anctioing of Coans and (dvances proposals pending beyond ,' days at branch level %ill be vie%ed as violation of delegated authorities attracting disciplinary action against the in-charge of the branch. ". If it is found by the :onal office that branches are not complying even %ith the rela0ed time schedule as above and there is delay on the part of any branch, the F3/ should %rite to concerned branch-in-charge and seek his e0planation by issuing memo 8 sho%cause.

'&

Industrial Finance In (bhyudaya Co-operative Bank

Benchmark parameter for the purpose of scrutiny8 recommendations and sanction of CC, +C etc. above 4s. !-.-- lacs. :or Cor* and :or #*n#iti4* Cat*6ory :or Bui)d*r# and :or D*4*)op*r#

G*n*ra) S*ctor

Ci4i)

contractor#"iron and #t**) trad*r# *tc.

Current 4atio Ruick 4atio Febt A>uity 4atio +otal Ciabilities8+DE (ct.sales8 proj.sales F*C4 /argin on prime security +otal security Febtors ratio Creditors ratio @rofit sale

!.-,?! '?! /inimum "-7 !.6 or above but not less than !.,6 (s given 6-7 !#-7 '--7 /a0imum "- days *hould be less than Febtors ratio S !-7 S !-7

!.'' !.-$?! 6?!

!.'' !.-'?! $?! $-7 ,--7 S 67

+he e0isting margins as under should continue?I. *tock and Book Febts I9lder than ' months do not >ualify for F@ stock should be paid stocks.J a. b. For *si and /anufacturing and other @riority *ector including retailers and commission (gents. For others $,6

'"

Industrial Finance In (bhyudaya Co-operative Bank II. a.De% machineries and Imported 4econditioned +CJ b.*ecomd =and Indian /achines8 *econd hand imported machines used in India I;aluation 4eport by contract engineer is re>uired giving present valueJ c. Big host moulds d.De% Contract A>uipments III. 3old8 e%ellery ornaments I;. @urchase of real estate a. b. c. *hop8 3ala8 Commercial8 Factory Cand and Building I ConstructionJ I In case of manufacturing project only.J 4enovation8 repairs of shop8 factory ,6 $,6 ,6 ,6 ,6 6/achineries not ,6

used in India I Import documents re>uired for assessing the value for

$-

Industrial Finance In (bhyudaya Co-operative Bank

CHAPTER NO. / ANA!;SIS AND REPRESENTATION O: DATA


PIR CO(PAN; !TD Co#t o2 Pro3*ct and (*an# o2 :inanc*
Co#t o2 Pro3*ct Cand and building development A>uipment and vehicles Furniture and Fitting /uncipal +a0es and deposit R#. !ac# #--.-,6,.6$6.,!&.-F1$.,% (*an# o2 :inanc* @romoterVs Contribution ,67 Coan .67 ,,&."' #&#..& F1$.,%

$!

Industrial Finance In (bhyudaya Co-operative Bank

Pro3*ct*d Pro2it G !o## :or th* y*ar *nd*d


;*ar 1 @ecent Capacity Utlili:ation Inco5* *ales 2 9ther Income !*##7ECp*n#*# /aterial purchases Eages Factiry overheads *elling 2 Fistribution A0penses (dministration A0penses Pro2it B*2or* Int*r*#t G D*priciation and TaC Cess? Interest Fepriciation Pro2it B*2or* TaC Cess? +a0 Pro2it a2t*r TaC Balance For%ard from last year @rofit available for appropriation (ppropriations Fividend +ransfer to reseves +otal (ppropriations Balance carry for%ard ';*ar #;*ar 0 #6 R#. In )ac# ;*ar / ;*ar $ .&-

,.6-.--

6---.-- #---.-- #6--.--

#&--.--

!-$6.-##-.-'-,.6,.6.-'-,.6-

!"--.-- ,,&-.-- ,$.-.-!,--.-- !$$-.-- !6#-.-66-.-- ##-.-- .!6.-6--.-- #--.-- #6-.-66-.-- ##-.-- .!6.--

,6&$.-!#',.-.$&.-#&-.-.$&.--

11$.%% $..'!!".6$ -1../ -.--1../ %.%% -1../

0%%.%% $..'!-!.#' 1$1.%, $6.', 1%$.,$ -1../ 1%0.F1

01%.%% $..'&#..! --$.FF #..&1$..1F $0.10 -11.0-

0F%.%% $..'.$.,, -1../. &-.6$ 1.,.F/ 11F.%1 0%1.FF

/%..%% $..'#'..6 -F1.F$ &".-" -%,.., 1,%.$F 0,../1

-.--.--.--1../

,-..& '-.-6-..& $0.10

$,.,# 6-.-",.,# 11F.%1

#!.$.6.-!'#.$1,%.$F

!!'.6$ .6.-!&&.6$ 1.F.F-

s
$,

Industrial Finance In (bhyudaya Co-operative Bank Ba)anc* #h**t a# on ;*ar 1 Sourc*# o2 :und# *hare capital 4eserves Det @rofit *ecured Coans Tota) App)ication o2 2und# Fi0ed (sset Cess? Fepriciation Det Fi0ed (sset Curr*nt A##*t *undry Febtors *tock Cash iJ !*##7Curr*nt !iabi)iti*# *undry Creditors Bills payable 9ther Current Ciabilities iiJ N*t Curr*nt A##*t @bKi-iiA Tota) @aLbA ,,&.&& -.--!.&$ #&#..& F10..;*ar ,,&.&& '-.-6'.!' 6$".$, .11./0 ;*ar 0 ,,&.&& &-.-!!".-# $!,.-. ./%.%% R#. In )ac# ;*ar / ;*ar $ ,,&.&& !66.-!.-.6" ,.$..! .-F.1F ,,&.&& ,'-.-!&".", !'..'# ,.1.11

aJ

&"...!!".6$ ,,..11

..&.!# !-!.#' 1,1.$0

#.#.6' &#..! $.F..-

6&".&, .$.,, $1$.1%

6!6.##'..6 /$1..$

,,-.-,.6.-!'..610-.$% !##.&$ ,,-.-!!-.-/F1../ 10$.11 F10..-

'6-.-- $',.-- 6,6.-- 6#!.-$&$."- 6"&.!& #$..'" #6..'! ,6-.-- '--.-- '!!.,- '$-.-1%./.F% 100%.1. 1/.0.$F 1$$..01 '--.-- '#-.-- '"-.-- $-&.-$--.-- $&-.-- 6,-.-- 6$$.-,--.-- ,$-.-- ,#-.-- ,.,.-F%%.%% 1%.%.%% 11,%.%% 1--/.%% 1./.F% .11./0 -$%.1. ./%.%% 010.$F .-F.1F 00/.01 ,.1.11

$'

Industrial Finance In (bhyudaya Co-operative Bank

DSCR Ca)cu)ation ;*ar 1 @rofit after ta0 I!J Fepriciation I,J Interest on +erm Coan I'J Ca#h Accrua)# @/A K @1L-L0A +erm Coan Installment I6J Interest on +erm Coan I#J Tota) R*pay5*nt @,AK @$L1A DSCR @/&,A (verage F*C4 D.(. D.(. D.(. D.(. D.(. D.(. N.A. N.A. ;*ar !-6..6 !-!.#' $..'-$/.1. !'..'# $..'1./.11 1.0. ;*ar 0 !6&.!" &#..! $..'-F-.-% !'..'# $..'1./.11 1.$. 1.$F ;*ar / !&.."$ .$.,, $..'0%F./1 !'..'# $..'1./.11 1.1.

4s. In lacs ;*ar $ ,-..&. #'..6 $..'01..F!'..'# $..'1./.11 1.,0

4emark? F*C4 is above !.6. It is acceptable.

$$

Industrial Finance In (bhyudaya Co-operative Bank

Ratio Ca)cu)ation
<ear ! Det @rofit 4atioN I@(+ 8 salesJW!-4eturn on Capital Amployed profit8 employed 4eturn N Det capital on D.(. -.'$ -.'. -.'$ -.', /ore or less stable D.(. <ear , ,.!! <ear ' ,.#$ <ear $ ,.&" <ear 6 '.-# 4emark Increasing

D.(.

-.!,

-.!"

-.,'

-.,#

Increasing

@roprietorsV capital N Det profit8 Icapital U4eservesJ +otal Ciabilities8 +otal Det Eorth Febt A>uity 4atio Febtors 4atio Creditors 4atio

6.,! '.-, ," ,$

$.#6 !..# ,# ,'

'.$" -."# ,# ,'

,.#! -.6," ,'

,.!-.,! ','

Fecreasing Fecreasing Cess than "- days Cess than F+4

$6

Industrial Finance In (bhyudaya Co-operative Bank

<or in6 Capita) E)i6ibi)ity ;*ar 1 a. +nd*r (*thod I Current (sstes Cess? Current Ciabilities Det Current (sstes Cess? ,67 Det current assets E)i6ib)* (PB: ;*ar ;*ar 0

R#. In !ac# ;*ar / ;*ar $

#',.6$"#.&$ 10$.11 ''.", 1%1.,$

!-&$."- !''-.!& !$&'.6" !66&.'! "--.-- !-&-.-- !!.-.-- !,,$.-1./.F% -$%.1. 010.$F 00/.01 $#.,' #,.66 .&.$&'.6& 10..1. 1.,.1/ -0$.1F -$%.,0

b. +nd*r (*thod II Current (sstes Cess? Current Ciabilities Det Current (sstes Cess? ,67 current assets E)i6ib)* (PB:

#',.6$"#.&$ 10$.11 !6&.!' ---./,

!-&$."- !''-.!& !$&'.6" !66&.'! "--.-- !-&-.-- !!.-.-- !,,$.-1./.F% -$%.1. 010.$F 00/.01 ,.!.,' '',.66 '.-."- '&".6& -.1.0-.-.0, -$,.01 -$$.-,

c. +nd*r (*thod III *ales ,-7 of the realisic projeted sales turnover 4emarks?

,.6-.-$$%.%%

6---.-- #---.-- #6--.-- #&--.-1%%%.%% 1-%%.%% 10%%.%% 101%.%%

/ethod II is can not applicable in above e0ample. +he selection of method is depending on the sector.For ne% entity above method is not applicable.

$#

Industrial Finance In (bhyudaya Co-operative Bank

CHAPTER NO. $ :INDINGS AND S+GGESTIONS


$.1 :indin6#7
!. Ehile applying for loan,it %as found that the stetements provided by the customer %as manipulated like they sho%ed the gro%th sales %ithout proper justification, %hich are unreliastic. ,. +here is no uniformity in charging depreciation,and some cases it %as tool use to sho% the better projected figures. '. Ehile selecting sales figure ,there is assumption of demand for their product in market as they have mentioned $. (s per bank policy there is conservative approach to%ards bigger project for granting loan 6. In the analysis of financial statement, it is found that the ratio K 4eturn on capital employedL is not included in the analysis. +his ratio sho%s the overall profitability of the firm.

$.

Industrial Finance In (bhyudaya Co-operative Bank

$.- Su66*#tion#7
!. +he bank should done gradation for ne% proposals also. If the financial statements are not available, the bank can give rating on the basis of other parameters like security prime and collateral, /anagement, business and other parameters etc. +his rating may not be useful for fi0ation of rate of interest. But on the basis of this the bank can keep records of the party and can judge these parameters for the ne0t gradation for any deviation. ,. (s the party is consistently achieving highest grade, it reduces the risk of bankruptcy. +his, in turn, reduces the bad debts of the bank. +he bank should provide some concessions to the party apart from the lo%er rate of interest like some gift vouchers at the end of last installment, some concessions for ne0t loan etc. +his %ill help the bank to increase the value of the bank in the minds of cutomers. +his may act as a marketing tool. '. +here should be strict control on the projected sales figures by considering the factors like future investment projected etc. $. +he depriciation is a non cash e0pense. +herefore, it may use to manipulate the projected figures. +here should be some restrictions for selecting the method of depriciation as %ell as rate of depriciation. 6. +he magin for CC,+C proposals is different for different proposals. +here should be provided some reference for the margin to ensure that the particular margin is taken from policy no.TTTTTTT under the clause no.TTTTTTT. +his %ill help both i.e. top management to ensure that the paricular margin taken by the e0ecutive is correct and junior management %ho actully take from the correct source.

$&

Industrial Finance In (bhyudaya Co-operative Bank

$"

Industrial Finance In (bhyudaya Co-operative Bank

BIB!IOGRAPH;

Financial /anagement (uthors? - @rasanna Chandra

Credit @olicy ,-!--!! (bhyuday Co-op. Bank Ctd. I*cheduled BankJ

6-

Industrial Finance In (bhyudaya Co-operative Bank

ANNEM+RES
IB Cr*dit Ratin67
*. @articulars Do. (ctual /arks =.9. 4emarks by Hone

:inancia) Para5*t*r# @5aCi5u5 5ar # /%A ! Current 4atio , Ruick 4atio ' $ 6 # . & Febt A>uity 4atio
+otal +DE Ciabilities8

*ales achieved Icompare %ith targets accepted by bank as per projectionsJ

Det @rofit as 7 of sales Iprojected and actualJ

4etention of profit I(vg. , yearsJ aJF*C4IAvery proj.


year for financeJ project

bJ Fiversion of Do Fiversion funds IFor /inor Fiversion %orking Capital =uge Fiversion facilitiesJ Dote? If both are applicable, avg. marks be given " +rend in sales Consistently increasing /ore or less stable Fecreasing !- +rends in @rofits Increasing @rofits I(mountJ *table @rofits Fecreasing Cosses S*curity Pri5* and Co))at*ra) @(aCi5u5 (ar #-1$A ! *ecurity @rime in /ore than ade>uate relation to F@ ust ade>uate Inade>uate , Collateral Cover !--7 and above I(s per the present 6-7- ""7 market valueJ ,-7 - $"7 Cess than ,-7 Do Collateral ' Collateral Cover Cash *ecurity8FF8Bonds8Insu policy A>uitable /ortgage of Busi. @remise +ype
A>uitable /ortgage of 4esi. @remise

6!

Industrial Finance In (bhyudaya Co-operative Bank


*econd Charge on fi0ed mortgage of open land etc. Do collaterals assets8

Dote? In case of multiple sec., give proper %eight age as per present /.;. Conduct o2 Account @(aCi5u5 (ar #--,A ! *ub. of monthly @rompt84egular security Cate but not less than ! month statements Ilast!, Cate but greater than ! month monthsJ , 4epayment of +imely %ithin !- days from due date Installment Eithin '- days from due date Interest Beyond '- days from due date ICC8+C8EC+C etc.J 9verall 9peration A0cellent ' of the (8cIlike 3ood regular overdra%ing *atisfactory against clearing, @oor
che>ue returns, etc.J

$ 6

*ales and other business routed through us 4ecoveries of bills purchased8CC Bills8 others8 guarantees

*ales greater than "-7 *ales &-7-&"7 *ales less than &-7 Do overdue
9verdue regulari:ed %ithin !- days from due date 9verdue regulari:ed %ithin ! month from due date 9verdue regulari:ed beyond ! month from due date

9verdue not regulari:ed Compliance of Do compliance re>uired (udit and @rompt %ithin !- days inspection Eithin ! month re>uirements (fter ! month Dot complied since initiated *ecurity Complete and in order
Focumentation I/ortgage, Doting, @o%er of (ttorney etc.J Focuments incomplete due to valid reason

Incomplete or pending

(ana6*5*nt @(aCi5u5 (ar #-.A @rofessionally8+echnically ! @romoters

(ctive /anagement

competent8e0perienced @rofessionally8+echnically competent persons employed (bsence of @rofessionally8+echnically competent persons *table-no change in past ' years Ie0cept %ithin familyJ *table-but not more than one change in last ' years

6,

Industrial Finance In (bhyudaya Co-operative Bank Fre>uent change in recent past Bu#in*## and oth*r para5*t*r# @(aCi5u5 (ar #-1%A ! Business Core8 (pproved sectors parameters *ensitive sectors , *atisfactory !- years and above (ccount # to !- years relationship ! to 6 years De% or less than ! year Ind.8business ' A0cellent prospects for and 3ood effect of e0pected @oor
3ovt. changes policy in

Irregular Firect8 Do Irregular Firect8 Indirect Indirect Ciabilities Ciabilities Irregular Firect8 Indirect Ciabilities

@repared By

(ccountant8(sst. (ccountant

Branch /anager

:or Eona) o22ic* +#*


4eceived on TTTTTTTTTTTTTTTT *.Do. ! , ' $ 6 Financial @arameters *ecurity @rime and Collateral Conduct of (ccount /anagement Business and 9ther @arameters +otal /arks $!6 ,. & !1%% Fy. 3eneral /anager TTTTTTTTTTTTTTTT:one /arks obtained 3rade 4ate of Interest

(ccountant sent to =ead 9ffice onTTTTTTTTTTTTTTTTTTTTT

:or H*ad O22ic* +#*


4eceived on?TTTTTTTTTTTTTTTTT 4emarks ?TTTTTTTTTTTTTTTTTTTT 4ate of Interest fi0ed? TTTTTTTTTT 4eason for deviation if any?

(sst. 3eneral /anager Coans and (dvances

(ddl. 3eneral /anager

/anaging Firector 6'

Industrial Finance In (bhyudaya Co-operative Bank

IIB Eona) R*port /8* Branch

Eona) O22ic* r*port


!. Brief =istory of @roprietor 8 @artner 8 Firector 2 Firms? TTTTTTTTTTTTTTTTTTTTTTT TTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTT TTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTT TTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTT Fetails of (ssociate (ccountsTTTTTT TTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTT TTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTT TTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTT TTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTT @roduct Fealt8 /anufacturedTTTTTT TTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTT TTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTT TTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTT TTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTT Capital TTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTT TTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTT TTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTT TTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTT 4eserves TTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTT TTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTT TTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTT Unsecured Coans TTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTT TTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTT TTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTT 9ther Ciabilities TTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTT TTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTT TTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTT Fi0ed (ssets TTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTT TTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTT TTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTT Current (sset TTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTT TTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTT TTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTT 6$

,.

'.

$.

6.

#.

..

&.

".

Industrial Finance In (bhyudaya Co-operative Bank !-. Cosses TTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTT TTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTT TTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTT !!. Fiversion of Funds TTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTT TTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTT TTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTT !,. @erformance of the borro%er TTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTT TTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTT TTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTT !'. (nalysis of Balance sheet and @rofit and Coss account and interpretation of ratios Current 4atio TTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTT TTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTT TTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTT Febt A>uity 4atio TTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTT TTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTT TTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTT CreditorsG 4atio TTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTT TTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTT TTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTT FebtorsG 4atio TTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTT TTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTT TTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTT !$. Comment on report of Industrial Finance Fepartment TTTTTTTTTTTTTTTTTTTTTTTTT TTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTT TTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTT !6. @ayment of *tatutory Fues TTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTT TTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTT TTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTT !#. Utili:ation of cash credit limits TTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTT TTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTT TTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTT !.. 4BI Inspection report observation and compliance thereof TTTTTTTTTTTTTTTTTTTT TTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTT TTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTT !&. Internal and concurrent audit observation 2 compliance thereof TTTTTTTTTTTTTTTTT TTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTT TTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTT !". Don-compliance of sanction stipulations of board TTTTTTTTTTTTTTTTTTTTTTTTTTTT TTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTT TTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTT 66

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Industrial Finance In (bhyudaya Co-operative Bank

(ssistant (ccountant8 (ccountant Dame Fate

Fy.3eneral /anager Dame Fate

6.

Industrial Finance In (bhyudaya Co-operative Bank

+he banking sector in India is passing through a period of structural change under the combined impact of financial sector reforms, internal competition, changes in regulations, ne% technology, global competitive pressure and fast evolving strategic objectives of banks and their e0isting and potential competitors. Until the last decade, banks %ere regarded largely as institutions rather akin to public utilities. +he market for banking services %ere oligopolies and Centrali:ed %hile the market place %as regulated and banks %ere e0pected to receive assured spreads over their cost of funds. +his phenomenon, %hich %as caricatured as '-#-' banking in the united states, meaning that banks accepted deposits at '7, lent at #7, and %ent home at ' p.m. to play golf, %as the result of the sheltered markets and administrated prices for banking products. A0istence of entry barriers for ne% banks meant that competition %as restricted to e0isting players, %ho often operated as a cartel, even in areas %here the freedom to price their products e0isted. he mar*et place (egan to change for (an*s in India as a result of reforms of the financial sectors initiated in the current decade. On account of polic measures introduce to infuse greater competitive vitalit in the s stem+ the (an*ing has entered in to a competitive phase. Competition has emerged not onl from ,ithin the (an*ing s stem (ut also from non-(an*ing institutions. "o,ering of entr (arriers+ deregulation of interest rates and gro,ing sophistication of customers have made (an*ing far less oligopolistic toda . Introduction of capital ade.uac and other prudential norms+ freedom granted to enter into ne, turf/s and greater overlap of functions (et,een (an*s and non-(an*s have forced (an*s to get out of their co0 little ,orld and thin* of the future of the (an*ing.
Objectives

To meet the credit re.uirements of small (usiness units+ industrial unit+ retail trader+ artisan+ !mall !cale Industr 1!!I2 and tin units
Functions of Commercial Banks

To change cash for (an* deposits and (an* deposits for cash. To transfer (an* deposits (et,een individuals and or companies. To e3change deposits for (ills of e3change+ govt. (onds+ the secured and unsecured promises of trade and industrial units.

6&

Industrial Finance In (bhyudaya Co-operative Bank To under,rite capital issues. The are also allo,ed to invest 45 of their incremental deposit lia(ilities in shares and de(entures in the primar and secondar mar*ets. The lending or advancing of mone securities. either upon securities or ,ithout

The (orro,ing+ raising or ta*ing of mone . The collecting and transmitting of mone and securities. The (u ing and selling of foreign e3change including foreign (an* notes.
Growing Privatization and Commercialization Infrastructure Sector

Toda + )an*s customers are (etter informed+ more sophisticated and discerning. The also have a ,ide choice to choose from various (an*s and non-(an* intermediaries. Their e3pectations are soaring. This is particularl true for (an*s corporate clientele (ut also applies to customers from personal segment. This is changing profile of customer/s call for a shift from product-(ased approach to customers-(ased approach. A (an* aiming at ma3imi0ing customer value must+ of necessit + plan for customi0ed products. A com(ination of mar*eting s*ills and state-of-the-art technolog should ena(le to (an* in ma3imi0ing its profits through customer satisfaction. In the ne3t millennium (an*s ,ill have to (e more and more cautions a(out customer service+ profita(ilit + increased productivit + to *eep face ,ith changing (an*ing scenario. As (an*s in India prepare themselves for the millenium these are the shifts in the paradigm the are li*el to e3perience. The 67st centur ma see the da,n of 8DA#%I'IA' )A'9I'G8. Onl the (an*s could fulfill the demands of mar*ets and changing items ,ould survive and prosper. !mall (usiness units+ retail traders+ artisans+ village industries+ small-scale industrial units and tin units+ professionals and self emplo ed persons etc.+ contri(ute significantl to the gro,th of our econom . The entrepreneur himself manages man of the units. Ver often+ these entrepreneurs complain of procedural dela in sanctions and rene,al of limits. The also find it difficult to cope ,ith the demands for audited (alance sheet and other statements sought ( the (an* from time to time for availing credit facilities. %ith a vie, to providing hassle free financial supports to the a(ove categories of entrepreneurs ,ho have sho,n commitment to run the unit successfull and ,ho are dealing ,ith the (an*s for last t,o ears satisfactoril + ne, and friendl credit product namel small (usiness credit card scheme is designed. :nder the scheme+ cum(ersome procedural aspects relating to revie,s and rene,als+ su(mission of (alance sheet+ stoc* statements and other statements are done ,ith credit deliver made simple and eas . 6"

Industrial Finance In (bhyudaya Co-operative Bank

:suall all persons ,ant mone for personal and commercial purposes. )an*s are the oldest lending institutions in Indian scenario. The are providing all facilities to all citi0ens for their o,n purposes ( their terms. To survive in this modern mar*et ever (an* implements so man ne, innovative ideas+ strategies+ and advanced technologies. ;or that the give each and ever minute detail a(out their institution and pro$ects to Pu(lic. The are providing ample facilities to satisf their customers i.e. 'et )an*ing+ Mo(ile )an*ing+ Door to Door facilit + Instant facilit + Investment facilit + Demat facilit + Credit Card facilit + "oans and Advances+ Account facilit etc. And such (an*s get success to create their o,n image in pu(lic and corporate ,orld. These (an*s al,a s accepts innovative notions in Indian (an*ing scenario li*e Credit Cards+ ATM machines+ #is* Management etc. !o+ as a student (usiness economics I ta*e *een interest in Indian econom and for that (an*s are the main source of development. The crucial role of (an* economists in transforming the (an*ing s stem in India. <conomists have to (e more =mainstreamed> ,ithin the operational structure of commercial (an*s. Apart from the traditional functioning of macroscanning+ the interlin*ages (et,een treasuries+ dealing rooms and trading rooms of (an*s need to (e vie,ed not onl ,ith the da -to-da needs of operational necessit + (ut also ,ith anal tical content and polic foresight. Toda + operational aspects of the functioning of (an*s are attracting intensive research ( professional economists. In particular+ measuring and modeling different *inds of ris*s faced ( (an*s+ the (ehavior of ris*-return relationships associated ,ith different portfolio mi3es and the impact of fluctuations in financial mar*ets on the financial performance of (an*s are areas ,hich lend themselves to anal tical and empirical appraisal ( economists and econometricians. The + in turn+ are discovering the degrees of freedom and room for anal tical maneuver in high fre.uenc information generated ( the da -to-da functioning of (an*s. It is vital that ,e develop an environment ,here these s nergies are nurtured so as to serve the longer-term strategic interests of (an*s. <ven in real time trading and portfolio decisions+ the fundamental anal sis of economists provides an independent assessment of mar*et (ehavior+ reinforcing technical anal sis.
Objectives

? )an*ing is an essential industr . ? It is ,here ,e often ,ind up ,hen ,e are see*ing a pro(lem in financial crisis and mone related .uer . ? )an*ing is one of the most regulated (usinesses in the ,orld. ? )an*s remain important source for career opportunities for people. ? It is vital s stem for developing econom for the nation. ? )an*s can pla a d namic role in deliver and purchase of consumer dura(les. #-

Industrial Finance In (bhyudaya Co-operative Bank


Rational of a Bank Structure

An organi0ation consists of people ,ho carr out differentiated tas*s ,hich are coordinated so as to contri(ute and achieves planned goals. Organi0ations are created mainl for producing goods and services to the societ for ,hich the have to incorporate a formal structure. Indian (an*ing is no, operating in a more competitive setting ,ith the induction of ne, (an*s. )oth Indian and foreign+ ,ho ,ill (e (ringing in ne, ,or* technolog and specialist e3pertise and a variet of ne, financing instruments. )ranch is the primar unit of the (an*>s (usiness+ particularl for serving the ,ea*er sections of the societ . )ranches have to develop close relationship the profess to serve. This leads to opening up or speciali0ed (ranches+ li*e industrial finance+ small scale industries+ and @i-tech agriculture+ overseas and non-resident Indian+ according to mar*et segmentation. This ne, vision entails a ne, chain of command+ a ne, technolog and specific delegation of authorit . This calls for the (ranch manger to concentrate on hisAher st les+ s*ills and su(ordinates+ goals+ to shape the (ranch in the competitive environment to (ecome a profit centre and to render (etter customer service. This implies that the (ranch manager should have ade.uate supporting staff to relieve him from the routine ta(le ,or* to developmental activities. In order to serve the customer it is necessar that one should understand and accept role and relationship ,ith other so as to ma*e sure that none of the supporting staff ,ould (e deemed to (e independent of the (ranch manger. !o the structure of (ranch organi0ation must+ from time to time+ conform to the demands and peculiarities of the localit in ,hich the (ranch is functioning. )efore loo*ing in to the (ranch structure of (an*+ it ,ill (e ,orth,hile e3amining ho, a formal organi0ational structure of a (an* appears.
!e Conce"t of Retail Banking

The retail (an*ing encompasses deposit and assets lin*ed products as ,ell as other financial services offered to individual for personal consumption. Generall + the pure retail (an*ing is conceived to (e the provision of mass (an*ing products and services to private individuals as opposed to ,holesale (an*ing ,hich focuses on corporate clients. Over the ears+ the concept of retail (an*ing has (een e3panded to include in man cases the services provided to small and medium si0ed (usinesses. !ome (an*s in <urope even include their private (an*ing (usiness i.e. services to high net ,orth net ,orth individuals in their retail )an*ing portfolio. The concept of #etail (an*ing is not ne, to (an*s. it is onl no, that it is (eing vie,ed as an attractive mar*et segment+ ,hich offers opportunities for gro,th ,ith profits. The diversified portfolio characteristic of retail (an*ing gives (etter comfort and spreads the essence of retail (an*ing lies in individual customers. Though the term #etail )an*ing and retail lending are often used s non mousl + et the later is lust one side of #etail )an*ing. In retail (an*ing+ all the (an*ing needs of individual customers are ta*en care of in an integrated manner.

#!

Industrial Finance In (bhyudaya Co-operative Bank The advent of ne, deliver channels vi0. ATM+ Interest and Tele(an*ing have revolutionalised the retail (an*ing activities. These channels ena(le )an*s to deliver retail )an*ing products and services in an efficient and cost effective manner. 'o,-ada s the (an*s are under great pressure to attract ne, and retain old customers+ as margins are turning ,afer thin. In these circumstances reducing administrative a transaction cost has (ecome crucial. )an*s are ma*ing special offerings to customers through these channels. #etail (an*ing has (een immensel (enefited ,ith the revolution in IT. and communication technolog . The automation of the )an*ing processes is facilitating e3tension of their reach and rationali0ation of their costs as ,ell. The are the engine for gro,th of retail (an*ing (usiness of )an*s. The net,or*ing of (ranches has e3tended the scope of (an*ing to an ,here and an time 6B C D da s ,ee* (an*ing. It has ena(led customer to (e the customer of a (an* rather then the customers of a particular (ranch onl . Customers can transact retail )an*ing transactions at an of the net,or*ed (ranches ,ithout an e3tra cost. As a matter of fact the #etail )an*ing per se has ta*en off (ecause of the advent of multiple (an*ing channels. These channels have ena(led (an*s to go on a massive customer ac.uisition mode since transaction volumes spread over multiple channels lessen the load on the (ric* and mortar (an* (ranches. Though at present #etail )an*ing appears to (e the (est (et for (an*s to improve their top and (ottom line+ et the future of #etail (an*ing in general+ ma not (e all roses as it appears to (e. There are signs of slo,do,n in customer gro,th in some countries+ ,hich ,ill inevita(l have an impact on #etail )an*ing (usiness gro,th. !econdl the possi(ilit of deterioration in asset .ualit cannot (e ruled out. %ith the (oom in housing loan mar*et+ the sign of overheating has also started surfacing ,ith potential pro(lem for (an*s that have not e3ercised sufficient caution. ;urther the pressure on margins is mounting partl (ecause of fierce competition and partl as a result of falling interest rates environment ,hich has diminished to some e3tent the endo,ment effect of su(stantial deposit (ases from ,hich most retail (an*s have (een deriving (enefits. )ut (an*s+ ,hich have (uilt a significant retail (an*ing portfolio ma fare relativel ,ell in the current fiscal. Those (an*s ,hich have a d namic retail strateg and are ,ell diversified in products+ services and distri(ution channels and have at the same time managed to achieve a good level of cost efficienc are the ones that are most li*el to succeed in the longer term.

#,