A REPORT

ON

CREDIT MONITORING ACTIVITES

By
AKSHITA GUPTA
Enrollment No.16BSP0233

AT
KOTAK MAHINDRA BANK LIMITED
Kotak Infiniti, 4th floor,zone-1, infinity park-21, Malad east,
Mumbai-400 097.

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 A REPORT
ON
CREDIT MONITORING ACTIVITIES
BY
AKSHITA GUTA
Enrolment No: 16BSP0233

At
KOTAK MAHINDRA BANK LIMITED

A Report submitted in partial fulfilment of the requirements of

PGPM Program
IBS, Mumbai
List of distribution:
Nikita Vice President Kotak Mahindra
Ramnani
Dr.Anil Faculty Guide IBS, Mumbai
Mahajan

Date of submission: 21st April, 2017

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 ACKNOWLEDGEMENT

A journey is easier when we travel together. Interdependence is certainly more important than
independence. It will always be my pleasures to thank those who have helped me in making
this project a lifetime experience for me.
I would like to express my heartiest gratitude to Kotak Mahindra Bank, for giving me an
opportunity to work with its Department of Credit Monitoring, my Institute and important
persons associated with this project as without their guidance and hard work I would have
never ever got a chance to have real life experience of working with a Private Sector Bank of
such a great repute and learn practically about the Credit monitoring process of Kotak
Mahindra Bank.
I would also like to extend my gratitude to Mrs. Nikita Ramnani (Vice President), for giving
me an opportunity to join her to know and learn various aspects of Retail Assets of the
organization.
It is my privilege to thank Mr. Machhindra Shinde(Senior Manager) whose guidance has made
me learn and understand the finer and complicated aspects of banking, in general and of Credit
Monitoring of Kotak Mahindra Bank, in particular. The help and guidance which he has
extended to me has made me feel as being an integral part of the organization. .

Throughout the time I have gained wonderful guidance and tremendous support from my
internal guide, Mr. Manoj Shinde (Manager), a tireless champion. It has been a great pleasure
to be associated with him and I feel almost lucky to have him as my mentor. I forward my
heartfelt thanks to him.
I would like to thank all the staff members of Kotak Mahindra Bank, for providing me with
necessary information and for their affectionate care, valuable time and their patience for
making this project a worth. I would especially thank Mrs. Minal, Ms. Shakuntala, Mr. Sameer,
Mr. Anil and Mr. Ashim for their constant help.

Thank you
Akshita Gupta

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 TABLE OF CONTENTS:

Serial no Topic Page no

1. Abstract about the report 5

2. Introduction 6-7

3. Main Text 8-10

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 Abstract

The project mainly concerns itself with the study of credit monitoring practices of Kotak
Mahindra bank, with regards to large borrowal accounts with sanctioned credit limit. As the
first step, the project involves in depth analysis of the Working capital and Overdraft facility
given to the respective customers. The monitoring of working capital as well as overdraft
customers with respect to their churn, utilization, performance and various parameter as set by
the bank.

In my Interim Report, the details about the working capital products and also how the
monitoring is been done of the customers before and after sanctioning the facility. The details
about the fund based and non fund based products. How the drawing power is set of the
customers on the basis of their churn. Drawing Limits of various borrowal accounts are
calculated on a monthly basis.

The based basic objective of any follow up is to ensure safety of the advances granted by the
bank. In spite of various changes in the way in which credit products are delivered, the banks
will continue to be concerned about the safety of their funds. Regular monitoring of the
operations in the borrowal account is done to keep a tab on the fluctuations in the account.

How much margin is been kept with the bank as per the facility. Also the insurance of the
collateral security which is hypothecated by the bank. Legal audit reports are studied to
understand the nature of the securities (stocks, equitable mortgages, land, residences etc.)
entrusted with the bank.

As the next step of follow-up, documentation of necessary formats and documents which are to
be issued to the borrower on sanction of a renewal/ enhancement is done to create a charge on
the security.

As post sanction monitoring, stock and book debt audit are done to check adequate availability
of primary security, its nature and quantity.
Apart from the above steps, few activities are concurrent as the project advances, such as the
unit inspection with the bank officials to cross verify the stock statement.
Stock statement is submitted by the borrower as per the sanction letter (mostly every month).

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 Introduction

Kotak Mahindra is one of Indias leading banking and financial services group, offering a wide
range of financial services that encompass every sphere of life.
Kotak Mahindra Bank Ltd. is a one stop for all banking needs. The bank offers personal finance
solutions of every kind from saving accounts to credit cards, distribution of mutual funds to life
insurance products. Kotak Mahindra Bank offers transaction banking, operates lending
verticals, manages IPOs and provides working capital loans. Kotak has one of the largest and
most respected Wealth Management teams in India, providing the widest range of solutions to
high net worth individual, entrepreneurs, business families and employed professionals.

KOTAK MAHINDRA BANK LTD

Consumer Commercial Wholesale Treasury

Bank Bank Bank Bank

Retail More turnover Big turnover Co. Bank Invest

(Individual Product) (Agri- related finance)

Personal Business
Assets Assets

Personal Loan Business Loan/ Loan Against Property(LAP)/ Working capital

Unsecured Loan Unsecured Loan (Not beyond 70-80Lacs)

(eg. Credit card)
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 In a study by Brand Finance Banking 500, published in February 2014 by the Banker magazine
(from The Financial Times Stable), KMBL(KOTAK MAHINDRA BANK LIMITED) was
ranked 245th among the world's top 500 banks with brand valuation of around half a billion
dollars ($481 million) and brand rating of AA+. and merge with ING Vysya bank in 2015.

Adequately managing credit risk in financial institutions (FIs) is critical for the survival and
growth of the FIs. In the case of banks, the issue of credit risk is even of greater concern
because of the higher levels of perceived risks resulting from some of the characteristics of
clients and business conditions that they find themselves in. Banks are in the business of
safeguarding money and other valuables for their clients.
Credit creation is the main income generating activity for the banks. But this activity involves
huge risks to both the lender and the borrower. The risk of a trading partner not fulfilling his or
her obligation as per the contract on due date or anytime thereafter can greatly jeopardize the
smooth functioning of a banks business. On the other hand, a bank with high credit risk has
high bankruptcy risk that puts the depositors in jeopardy. Among the risk that face banks, credit
risk is one of great concern to most bank authorities and banking regulators. This is because
credit risk is that risk that can easily and most likely prompts bank failure.

Vision:

To be the most trusted Global Indian Financial Services brand and the most preferred financial
services employer with focus on creating value.
Value creation rather than size alone will be our business driver.

We will be a world class Indian financial services group. Our technology and best practices will
be benchmarked along international lines while our understanding of customers will be uniquely
Indian. We will be more than a repository of our customers saving. We, the group, will be single
window to every financial service in a customers universe.

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 Main Text

WORKING CAPITAL PRODUCTS:

Fund based Non fund based

Cash Credit / Overdraft Bank Guarantee

Term Loan Letter of Credit
Export finance (INR/FC) VAR limit
Bill discounting
Metal Loan
LCBD
Secured Bill Discounting

The key objective of credit monitoring :

o Ensure proper end-use of money lent

o Track accepted assumptions for credit need
o Ensure compliance with terms of sanction
o Ensure enforceability of security charged
o Forewarn financial indiscipline
o Know impending environment/management change
o Advice needed to re-orient actions well in
o Pre-warn customers business failures
o Review and Monitor Operations in Borrowals A/cs
o Observe Production trends & Business Activities
o Track Cash Generation level for repayment
o Early warning of customers credibility changes
o Close follow-up of creditors & debtors level
o Tracking performance & Irregular a/c status (on- line)

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 Components of credit monitoring are:

o Documentation & Charge registration

o Documentation & Credit Limit Renewal
o Drawing Power Determination
o Insurance
o Stock Statement Analysis
o Unit Inspection
o QIS Analysis
o Tracking of dues/ recovery
o Stock Audit

OBJECTIVE OF THE STUDY:

To study the credit monitoring activities of the bank extending credits to several manufacturing
and trading firms having large borrowal accounts.

To suggest possible measures (if any) to identify early warning signals to prevent slippage of
accounts in NPA category.

LAYOUT OF THE STUDY:

METHODOLOGY
Primary : Collecting data from the customers about their transaction.

Secondary :Collected data from ING vyasa Bank as they already had data about the customers.
Also from the past data of the customers.

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 LIMITATIONS OF THE STUDY
In spite of immense opportunity of learning the various aspects of credit monitoring activities
for large borrowers, there are some inherent limitation in the study which are unavoidable and
can be best explained in the light of the duration and scope of the study. Some of them are:

In depth study of the documentation part and having a thorough exposure in the vast and
complex procedure of sanction follow up require a substantial amount of time which is beyond
the scope of this project.

Confidentiality policy of the Bank makes certain files inaccessible to the study.

There are few more limitations in the study that can be seen from the limitations of the credit
monitoring . Such as:

Window Dressing: the clients, while drawing the financial statements do resort to window
dressing. Thus, the financial statements show a better picture than the actual situation. This is
done to obtain the applied loan.

Projected Data: credit monitoring involves analyzing the projected financial of the company.
Moreover, the analyst also tries to look into the future economic and industrial scenario. But
these are all forecast and forecasts may turn to be wrong.

Personal Bias: in interpretation of the financials of the company, the analyst has to use his own
judgment. Besides, in estimating the industrial and management risk, the analyst has to choose
from the defined value statements. This involves his personal opinion too. Thus there are
possibilities of personal bias.

Risk analysis: Rating models only give the estimated level of risk. The factors in these credit
rating models, based on which the risk is calculated, may change very rapidly making the
whole process futile. These factors are also affected by all foregoing limitations and therefore,
the calculated risk may be incorrect. Some factors may be difficult to judge.

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