Final Project

Project financing is an innovative and timely financing technique that has been used on
many high-profile corporate projects, including Euro Disneyland and the Eurotunnel.
Employing a carefully engineered financing mix, it has long been used to fund large-
scale natural resource projects, from pipelines and refineries to electric-generating
facilities and hydro-electric projects. Increasingly, project financing is emerging as the
preferred alternative to conventional methods of financing infrastructure and other large-
scale projects worldwide.
Project Financing discipline includes understanding the rationale for project financing,
how to prepare the financial plan, assess the risks, design the financing mix, and raise
the funds. In addition, one must understand the cogent analyses of why some project
financing plans have succeeded while others have failed. A knowledge-base is required
regarding the design of contractual arrangements to support project financing; issues for
the host government legislative provisions, public/private infrastructure partnerships,
public/private financing structures; credit requirements of lenders, and how to determine
the project's borrowing capacity; how to analyze cash flow projections and use them to
measure expected rates of return; tax and accounting considerations; and analytical
techniques to validate the project's feasibility
Project finance is different from traditional forms of finance because the credit risk
associated with the borrower is not as important as in an ordinary loan transaction; what
are most important is the identification, analysis, allocation and management of every
risk associated with the project.
The purpose of this project is to explain, in a brief and general way, the manner in which
risks are approached by financiers in a project finance transaction. Such risk
minimization lies at the heart of project finance.
In a no recourse or limited recourse project financing, the risks for a financier are great.
Since the loan can only be repaid when the project is operational, if a major part of the
project fails, the financiers are likely to lose a substantial amount of money. The assets
that remain are usually highly specialized and possibly in a remote location. If saleable,
they may have little value outside the project. Therefore, it is not surprising that
financiers, and their advisers, go to substantial efforts to ensure that the risks
associated with the project are reduced or eliminated as far as possible. It is also not
surprising that because of the risks involved, the cost of such finance is generally higher
and it is more time consuming for such finance to be provided.
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Project finance is the financing of long-term infrastructure and industrial projects based
upon a complex financial structure where project debt and equity are used to finance
the project. Usually, a project financing scheme involves a number of equity investors,
known as sponsors, as well as a syndicate of banks which provide loans to the
operation. The loans are most commonly non-recourse loans, which are secured by the
project itself and paid entirely from its cash flow, rather than from the general assets or
creditworthiness of the project sponsors. The financing is typically secured by all of the
project assets, including the revenue-producing contracts. Project lenders are given a
lien on all of these assets, and are able to assume control of a project if the project
company has difficulties complying with the loan terms.
Generally, a special purpose entity is created for each project, thereby shielding other
assets owned by a project sponsor from the detrimental effects of a project failure. As a
special purpose entity, the project company has no assets other than the project.
Capital contribution commitments by the owners of the project company are sometimes
necessary to ensure that the project is financially sound. Project finance is often more
complicated than alternative financing methods. It is most commonly used in the mining,
transportation, telecommunication and public utility industries.
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. A project may
be subject to a number of technical, environmental, economic and political risks,
particularly in developing countries and emerging markets. Financial institutions and
project sponsors may conclude that the risks inherent in project development and
operation are unacceptable (unfinanceable). To cope with these risks, project sponsors
in these industries (such as power plants or railway lines) are generally completed by a
number of specialist companies operating in a contractual network with each other that
allocates risk in a way that allows financing to take place. The various patterns of
implementation are sometimes referred to as "project delivery methods." The financing
of these projects must also be distributed among multiple parties, so as to distribute the
risk associated with the project while simultaneously ensuring profits for each party
involved.

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Because credit policy concerns the company as a whole, it is usually established

officially by top management. Sometimes responsibility for its formulation lies altogether
with top management, but more commonly the chief credit executive and associates
play an active role in its development. The heads of other interested departments may
also be consulted.
Credit policy is probably most effectively implemented when all who are directly affected
have some voice in its development. A credit policy assures that there will be
consistency across departmental functions. It requires the endorsement of top
management, preferably the board of directors.
While credit policy is the cornerstone of credit administration, there is no exclusive
acceptable format.
If a credit policy is to have practical value, it must be related to a specific company,

reflecting the goals that the company has set for receivables management. Every credit
executive is entitled to a written policy statement from the officers of the company²one
that is fully understood and accepted by sales as well as credit people. An effective
credit policy permits and encourages the fullest development of the opportunities in
administering credit. It can be a blueprint for action as well as a training aid for the
development of credit personnel. It provides the latitude to plan departmental operations
within the scope of the company policy, to create effective procedures and techniques
to implement that policy, and to establish adequate controls. It can assure that there is
consistency in the company¶s dealings and interactions with its customers, and it
provides a means of recognizing the importance of the credit function to the company.
In general, there are several key questions that should be answered when developing a
credit policy.
What is the credit department¶s mission? This also can be called a vision or
purpose. It states the overall objective for the credit function.
What are the goals? Goals can be specifically stated, such as a quantifiable
measure, or more generally as an expressed desire to achieve improvement in a
specific area.
What are the roles and specific authorities of the credit department management
and staff? This defines the boundaries of the credit function, often in terms of
interactions with other departments.
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What are the primary criteria for evaluating customer credit? This describes
credit procedures in more detail, listing key aspects of the credit review and
analysis processes.
What are the normal collection procedures? This describes the steps to be taken
in customer collection activities.
What are the company¶s terms of sale? Terms should be spelled out by major
product line, with any qualifications or restrictions included.

When a company is developing a new credit policy or is reviewing an existing one, a

number of factors should be considered. Some of these are internal in nature while
others are external. Depending on the company, they vary in relative importance. All of
them together establish the context within which credit policy must operate. There are
four major focal points.

1.a credit application with each request (sample in manual)
2. Procedures that outline expected turnaround time for making a credit decision on new
accounts
3. Procedures that outline the specific mode for communicating the request for credit
and the credit decision
4. Responsibility for establishing and keeping current credit department files (includes
nature of contents to be included in file)
5.a policy for authorizing and communicating credit limits

1.terms established by industry; clear communication internally and to customers
2. A discount chargeback policy; procedures for follow-up consistently applied and

monitored
3. A late payment service charge policy; procedures for follow-up consistently applied
and monitored
4. A policy for requests for extended term arrangements; necessary approvals clearly
specified
5. A blanket approval policy (Small orders below a specified amount are either cash or
automatically approved)
6.A policy and procedure for consignment sales
7.A policy for export sales and letters of credit
8.A policy for terms for sales to a debtor in possession in Chapter 11 bankruptcies

1. a sign-off policy for responsibility of the control of the account developed by the size
of the account
2. Use of credit-reporting agencies clarified by the requirements for types of reports to
be utilized
3. A policy and procedure that outlines obtaining bank references detailing the type of
information needed
4. A policy and procedure that outlines obtaining trade references with details of
information needed
5. Financial statement requests from customers and procedures for the analysis of
statements with key focal points
6. policies and procedures that govern the use of collateral (include sample
documentation, specify authorized signatures and clarify the safeguarding of documents
held in storage)
7.perfecting liens under Article 9 of the Uniform Commercial Code
8.guarantees (personal and corporate)
9.warehouse receipts
10.letters of credit (details by types of L/C)
11.subordination agreements
12.lien searches
13.pledge of stocks, bonds or certificates of deposit

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1.responsibility and time interval for initial follow up
2.a systematic program for additional follow up
3.use of the computer for monthly statements or automated dunning letters
4.a policy and procedure for holding orders
5.a policy for deductions and open credits
6.a policy for personal visits (written summary report required)
7. A policy for the exchange of credit information related to customer payment
experience
8.a policy for unauthorized shipments
9.a policy and procedure for cash application

1.aging of receivables (Do all items age out?)
2. An over credit limits report
3. a response on open items by category and age (deductions, credits, unearned
discounts, service charges)
4.a highly leveraged transaction report
5.a report for accounts with collection agencies or in litigation
6.a bad debt write-off report
7.travel and expense reports

A. a policy for conversion of an open account to a note (interest bearing?

collateralized?)
B.policies and procedures governing customer counseling
C.A policy for use of collection agencies
C.A policy related to the use of outside attorneys and lawsuits
E. policies and procedures related to customer bankruptcy, bulk sales and assignments
for the benefit of creditors
F.A policy for credit manager participation on creditors¶ committees
G.Authorization for accounts written off to bad debts

1. Recruiting and hiring guidelines

2.educational requirements by position
3.experience requirements by position
4.training and development guidelines

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1. Responsibility for preparation and content

2. Specific items for which policies and procedures need to be developed, including
salaries/incentives, space and equipment, supplies, training and education, travel and
entertainment, and collection and investigation expenses
*

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Credit practices within the industry also bear upon the credit policy of an individual
company. Depending upon the industry, competitive conditions place a high degree of
importance on credit availability.
Where credit is a fundamental factor in competition within the industry, the credit policy
of a company is important for maintaining or improving its competitive position. Even
where credit is not generally a competitive tool, an individual company can use it in this
way if it is willing to do so. In considering credit policy in relation to competitive
conditions within the industry, the credit executive must also evaluate the company¶s
long-range ability to compete. This would include analysis of the company¶s present
position in the industry and its financial strength, as well as a general awareness of
such factors as the strength of its marketing organization and its position in product
development.
Within every industry some companies are leaders and others are followers. The
relative standing of a company in its industry will, in many cases, influence the course of
A

action it sets to meet credit problems. If its position is undisputed, a company may
demand more from its customers. A company that is just getting started, on the other
hand, may find it advantageous to be more lenient in its credit policy. This factor ties in
with the marketing aspects of the company. The role of credit is influenced by a number
of general factors, including tradition, the stability of demand for the industry¶s products,
and the rate of technological change.
The type of customer has a direct limiting influence on the credit policies of all
companies in an industry. Where the buyers¶ line of business is characteristically short
of capital, it is unrealistic for credit policy to be unduly restrictive. A company that
operates on that basis will not maintain its market. If an industry has many well
capitalized customers, the company that takes additional risk must expect additional
return for this added risk. With enough good credit risks available to provide adequate
profits, there must be an added incentive to make sales to fair or marginal risks.
The number of different classes of customers will also have a direct bearing on the
variations in credit terms offered. Credit terms affect the company¶s credit policy in a
number of ways. The market share a company has may affect the types of terms. For
example, if the buyers are in control of the industry, the seller will probably have to offer
longer terms. Also, if a seller is not a major market leader, it will have to match the best
terms, instead of being in firmer control over what terms it offers.
The length of terms offered will also be a function of the product¶s shelf life (for example,
those that can spoil will require shorter terms, so terms are usually net 10 in the food
industry), variations in demand (for example, seasonal products may have differing
terms depending on the time of year), and cost/price of the product (for example, more
expensive items such as jewelry may have longer terms while cheaper products may
have shorter terms).
The type of merchandise affects the credit policy of the seller in a number of ways.
There is a tendency to sell on a more liberal basis if the merchandise has a relatively
high profit margin or there is intense competition for the sale among a large number of
suppliers. Also, terms may be somewhat more liberal if the merchandise can be
repossessed in the same condition as it was sold (rather than if the appearance of the
merchandise were changed by the buyer). Yard goods in the bolt, for example, can be
taken back if they have not been cut by the clothing manufacturer. Once they have been
on the pattern table, however, they lose much of their repossession value. Similarly,
steel fabricated to specification has less reclamation value than that prepared in an
ordinary run.
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The merchandising policy of a company often influences credit policy. For example, a
company may be required to place machinery in the hands of a limited number of
franchised dealers on some basis to enable them to sell a maximum volume during a
relatively short retail buying season. This might involve long terms of sale to coordinate
it with the problems of manufacturing and shipment.
Large extensions of credit may be required in relation to the financial responsibility of

many dealers. Reliance is placed on the character and capacity of the dealer to a far
greater extent than on capital. The essential factors are experience and proven ability in
selling competitively, collecting effectively, and operating profitably.
Markup of the merchandise is important. When profit margins are slim, the credit
department may be more careful in the selection of its accounts. High-markup goods
entice credit executives to approve sales to fair and marginal accounts. On a
percentage basis, they may find it more profitable to check orders and rely on overall
profits to cover relatively large bad-debt losses.
Price range of merchandise similarly influences credit policy. It is generally easier to

establish a uniform liberal policy that applies to all customers when the unit price of
merchandise is relatively low. Even on a wrong decision, the dollar amount of risk is not
great. On a big ticket item, however, credit exposure is greater. A more detailed
analysis is usually conducted before a customer order is approved.
When merchandise can be obtained readily by the supplier, there is no need to restrict
sales to customers unless warranted by financial or credit risks. When a particular item
is scarce, however, credit policy may be influenced to the extent that stricter
requirements are set for customers needing that item. This situation might occur during
shortages of material because of production shutdowns, other restrictions, or in
instances where supplies of materials may be scarce.
When goods have been stored in inventory for some time and an opportunity arises to
dispose of them, credit policy should be sufficiently flexible to approve the transaction.
An extreme example of this is the case of the shoe wholesaler that has stored some
out-of-style shoes for a number of years, then receives an offer for the entire lot. Even if
the customer wanted extra terms or was not a good credit risk, it is doubtful that the
offer would be refused.
The geographical distribution of customers determines credit policy to some degree.

Widely separated markets require particular modifications in credit analysis and in
collection efforts. A highly concentrated selling and buying area, on the other hand,
involves a special type of price competition and service requirements.
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In the case of particular commodities, such as spirits and liquors, government
regulations specify credit policies or procedures which must be followed by the seller.
There, the overall policy must take the regulations into consideration. In a very general
way, expected long-range trends in the economy also influence credit policy.
Economic or business conditions are of much greater significance, however, in

determining how policy is to be applied over a shorter period of time. When times are
prosperous, ability of debtors to pay their bills is somewhat improved; however, there is
a danger that they may tend to overbuy. During slack business periods, debtors tend to
delay payment of their bills and credit requirements may tend to be stricter.
Concurrently, as sales drop, the company is faced with the problem of maintaining
volume in the face of decreasing sales and more demanding selection of credit
customers.

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The actual formulation of credit policy begins with the establishment of objectives. What
does the company want to accomplish during the period of time for which policy is to be
established? If these objectives are to be attained, what should be the role of the credit
department? The next step is a thorough analysis of the context within which the credit
policy must operate over this period of time. This includes those factors which,
according to a realistic appraisal, will act in some way to define what the credit
department will be able to do:
the established company policies

the objectives and policies of the other departments
the primary industry characteristics, such as current credit practices, the role of the
credit in competition, the company¶s position in the industry, and the company¶s
financial resources.
After these steps have been completed, the credit policy can be formulated. Within the
given context, it sets a course of action that is expected to lead to the accomplishment
of the objectives.

This means that it exists but is not officially stated (or written). It has little or no official
expression of approval and may be difficult to perceive and, therefore, be left to
interpretation. It is protected from public view and dissemination is very informal.
The effects of an implied policy may be favorable or unfavorable. Implied policy is often
used when the true policy is unlikely to obtain approval from one or more company
groups.
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This means that it is set forth in writing. It usually has the backing and authentication of
senior management. There are usually fewer misunderstandings as the policy is
available to everyone in the same form. A stated policy indicates a basic honesty and
integrity in intentions. It generates confidence and stability and serves as a good
training.
There are four essential components of credit policy:
Establishing the credit standard. This describes the profile for an acceptable credit
customer, including appropriate details and examples.
Determining credit availability. This describes how the maximum amount of available
credit is computed and managed, including decision criteria for reducing or increasing a
customer¶s availability of credit.
Setting credit terms. This stipulates the exact terms of sale for each class of customer.
Defining collection policy. This provides criteria for regular collections and exception
collection procedures for past due amounts.
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Careful consideration should be given to writing the credit policy. By definition, the
understanding of unwritten policy depends on oral communication or on inference from
the decisions made by senior credit personnel. Once established, a credit policy that is
written has many advantages. It is thought through carefully, with the result that any
vagueness in the unwritten policy becomes apparent and can be modified.
Consideration of a written policy by the executives concerned also helps to reveal
differences in their understanding of what the policy is and areas in which it is
inadequate. A written policy is more useful because it can be a source of stability and
continuity in the operation, not only of the credit department but of the company as a
whole.
Individual credit executives and other administrators tend to vary unconsciously in their
credit thinking as they interpret and react to the conditions and problems with which
they work. Unwritten policy is thus subject to gradual, unnoticed changes while a written
policy lessens the possibility of this kind of variability; it requires that changes in policy
be conscious and intentional. In this way, policy becomes a more effective vehicle for
review of the credit department¶s total situation.
Removing credit policy from dependence on the knowledge and experience of one or a
few individuals tends to ensure consistency regardless of changes in department
personnel. There is a greater probability of consistent decisions under a written policy,
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especially in large and complex credit organizations, where many people are dealing
with the same types of problems and where they may be separated organizationally or
geographically. Customers can be shown a copy of the policy statement, so they can
see that they are not being given unusual or discriminatory treatment.
A clearly stated credit policy is a valuable aid in training credit and sales personnel. The
trainee in the credit department can enhance his or her learning by reviewing the written
statement of policy, which provides orientation to the company¶s point of view on credit
and a frame of reference within which the trainee can proceed. Sales trainees can learn
the credit framework that applies to sales.
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There have been major structural changes in the financial sector since banking sector
reforms were introduced in India in 1992. Since then Banks have been lending
aggressively providing funds towards infrastructure sector. Major policy measures
include phased reductions in statutory pre-emption like cash reserve and statutory
liquidity requirements and deregulation of interest rates on deposits and lending, except
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for a select segment. The diversification of ownership of banking institutions is yet
another feature which has enabled private shareholding in the public sector banks,
through listing on the stock exchanges, arising from dilution of the Government
ownership. Foreign direct investment in the private sector banks is now allowed up to 74
per cent.
The co-existence of the public sector, private sector and the foreign banks has
generated competition in the banking sector leading to a significant improvement in
efficiency and customer service. The share of private and foreign banks in total assets
increased to 31.5 per cent at end-March 2007 from 27.6 per cent at end-March 2006
and less than 10.0 per cent at the inception of reforms.
The nationalized banks have more branches than any other types of banks in India.
Now there are about 33,627 Branches in India, as on March 2005.
Investments of scheduled commercial banks (SCBs) also saw an increase from

Rs 8, 04,199 cr in March 2005 to Rs 8, 43,081 cr in the same month of 2006.
India's retail-banking assets are expected to grow at the rate of 18% a year over
the next four years (2006-2010).
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In India banks are classified in various categories according to different

criteria. The following charts indicate the banking structure:
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c

Retail loan to drive the growth of retail banking in future. Housing loan account for major
chunk of retail loan.

$
' (% The RBI is the supreme monetary and banking authority in the country
and has the responsibility to control the banking system in the country. It keeps
the reserves of all scheduled banks and hence is known as the ³Reserve Bank´.
) &$
State Bank of India and its Associates (8)
Nationalized Banks (19)
Regional Rural Banks Sponsored by Public Sector Banks (196)
c*

* &$
Old Generation Private Banks (22)

Foreign New Generation Private Banks (8)
Banks in India (40)
+
&$
State Co-operative Banks

Central Co-operative Banks
Primary Agricultural Credit Societies
Land Development Banks
State Land Development Banks

, $ Development Banks mostly provide long term finance for
setting up industries. They also provide short-term finance (for export and import
activities)
Industrial Finance Co-operation of India (IFCI)

Industrial Development of India (IDBI)
Industrial Investment Bank of India (IIBI)
Small Industries Development Bank of India (SIDBI)

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Banks play a positive role in economic development of a country as

repositories of community¶s savings and as purveyors of credit. Indian Banking has
aided the economic development during the last fifty years in an effective way. The
banking sector has shown a remarkable responsiveness to the needs of planned
economy. It has brought about a considerable progress in its efforts at deposit
mobilization and has taken a number of measures in the recent past for accelerating the
rate of growth of deposits. As recourse to this, the commercial banks opened branches
in urban, semi-urban and rural areas and have introduced a number of attractive
schemes to foster economic development.
The activities of commercial banking have growth in multi-directional ways

as well as multi-dimensional manner. Banks have been playing a catalytic role in area
development, backward area development, extended assistance to rural development
all along helping agriculture, industry, international trade in a significant manner. In a
way, commercial banks have emerged as key financial agencies for rapid economic
development.
By pooling the savings together, banks can make available funds to

specialized institutions which finance different sectors of the economy, needing capital
for various purposes, risks and durations. By contributing to government securities,
bonds and debentures of term-lending institutions in the fields of agriculture, industries
and now housing, banks are also providing these institutions with an access to the
common pool of savings mobilized by them, to that extent relieving them of the
responsibility of directly approaching the saver. This intermediation role of banks is
particularly important in the early stages of economic development and financial
specification. A country like India, with different regions at different stages of
development, presents an interesting spectrum of the evolving role of banks, in the
matter of inter-mediation and beyond.
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Mobilization of resources forms an integral part of the development process in India. In
this process of mobilization, banks are at a great advantage, chiefly because of their
network of branches in the country. And banks have to place considerable reliance on
the mobilization of deposits from the public to finance development programmes.
Further, deposit mobilization by banks in India acquired greater significance in their new
role in economic development.
Commercial banks provide short-term and medium-term financial assistance. The short-
term credit facilities are granted for working capital requirements. The medium-term
loans are for the acquisition of land, construction of factory premises and purchase of
machinery and equipment. These loans are generally granted for periods ranging from
five to seven years. They also establish letters of credit on behalf of their clients favoring
suppliers of raw materials/machinery (both Indian and foreign) which extend the
banker¶s assurance for payment and thus help their delivery. Certain transaction,
particularly those in contracts of sale of Government Departments, may require
guarantees being issued in lieu of security earnest money deposits for release of
advance money, supply of raw materials for processing, full payment of bills on the
assurance of the performance etc. Commercial banks issue such guarantees also.
$
The Co-operative bank has a history of almost 100 years. The Co-
operative banks are an important constituent of the Indian Financial System, judging by
the role assigned to them, the expectations they are supposed to fulfill, their number,
and the number of offices they operate. The co-operative movement originated in the
West, but the importance that such banks have assumed in India is rarely paralleled
anywhere else in the world. Their role in rural financing continues to be important even
today, and their business in the urban areas also has increased phenomenally in recent
years mainly due to the sharp increase in the number of co-operative banks.
While the co-operative banks in rural areas mainly finance agricultural based
activities including farming, cattle, milk, hatchery, personal finance etc. along with some
small scale industries and self-employment driven activities, the co-operative banks in
urban areas mainly finance various categories of people for self-employment, industries,
small scale units, home finance, consumer finance, personal finance, etc. Some of the

co-operative banks are quite forward looking and have developed sufficient core
competencies to challenge state and private sector banks.
According to NAFCUB the total deposits & landings of Co-operative Banks is much
more than Old Private Sector Banks & also the New Private Sector Banks. This
exponential growth of Co-operative Banks is attributed mainly to their much better local
reach, personal interaction with customers, their ability to catch the nerve of the local
clientele. Though registered under the Co-operative Societies Act of the Respective
States (where formed originally) the banking related activities of the co-operative banks
are also regulated by the Reserve Bank of India. They are governed by the Banking
Regulations Act 1949 and Banking Laws (Co-operative Societies) Act, 1965.
( $
(a) & $ ± within this category there are

three sub categories of banks viz state co-operative banks, District co-operative banks
and Primary Agricultural co-operative societies.
(b) $ ± within the second category
there are land development banks at three levels state level, district level and village
level.

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$

Abhudaya Co-Op Bank Ltd.
(A Scheduled Multi-State Bank)
. & è
Why develop a Vision Statement? It is generally accepted that the clearer the view you
have of where you are going, the more likely the chances you have of getting there.
With the clearly defined vision you can clearly communicate your critical success
factors, motivate and direct your Organization and ultimately move more rapidly in the
pursuit of your competitive advantage.
The Organization with Vision therefore postulate on the future, consider where the
trends of technology, society and economic are going and strive to match the strength
of the organization to the emerging opportunities within that future perspective. The
vision therefore serves as a reference point for making strategic decisions, conveying
benefits to stake holder articulating competitive advantage, and underscoring the driving
principles of the organization.
With the above objective in view, a vision document has been prepared for the
Abhyudaya Co-Op Bank Ltd., covering a period up to 2014, which will culminate in the
celebration of the Bank¶s Golden Jubilee Year, a glorious chapter and coveted
milestone in the bank¶s journey.
From the chairman¶s perspective, µAbhyudaya Bank will emerge as the pioneer and
most trustworthy bank not only in the competitive banking sector but also find for itself
the place of pride throughout the financial system, enabling it to display the highest
standards of professionalism and excellence in all spheres of its working.
'/0+
1964 Established as Co-operative Credit Society.

1965 Converted into a Bank with one Branch at Abhyudaya Nagar
1984 Deposits crossed Rs.50.00 Crores
1985 Inauguration of Bank's own Building, Staff Training College and Auditorium
at Vashi
Permitted the Bank to open and maintain NRI Accounts
1986 Became 3rd Biggest Urban Co-op. Bank in India
1995 Decision to set up "Development Reserve Fund" to undertake special
schemes.
1999 Deposits crossed Rs.1000.00 Crores
2007 $!&
& )11)
& -$

2008 Merger of Shri Krishna Co Operative Bank, Vadodara
Aug 20 Merger of Janata Sahakari Bank, Udupi
Merger of Manekchowk Co-op Bank Ltd,Ahmedabad withour bank
And merger function was held on 10th December 2008 at the hands
Of Shri.P.R.Sompura,Registrar of co-op.Societies, Gujratr State.

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(3%"è 453 5 -
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"%&è -
§ Saving bank account

§ Current account
§ Deposit schemes
§ No frill accounts
§ Any branch banking facility
§ 24*7 ATM facilities
3& "&& -
§ Mobile banking
§ Internet Banking
§ Customer Service
§ NRO/NRE accounts
§ Foreign Exchange Dept

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§ Vehicle loan
§ Loan against security
§ Home loans
§ Mortgage Credit
§ Easy working capital to small retailers
§ Women Entrepreneur.

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§ Telebanking
§ Lockers
§ Franking
§ RTGS
§ Insurance
§ Foreign Exchange Dept.
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Bank continued it¶s all round progress during the year. It can be observed from the
following comparative position:-
(Rs. In cores)
As on 31.03.2008 As on
31.03.2009
Paid up capital and reserves 670.11 717.72
Deposits 2625.50 3174.81
Advances 1616.10 1856.39
Investments / FD¶s 1420.72 1883.20
Working capital 3434.28 4122.15
Gross capital 332.23 446.45
Net profit 40.81 92.36
The deposits of bank have grown by Rs. 549.31 cr. During the year registering a healthy
growth of 20.92% and the advance have grown by Rs. 240.29 cr. registering a growth
rate of 14.87%. As a result of the lesser growth of advances, the banks CD ratio
reduced to 58.47% as on 31.03.2009 as against the CD ratio of 61.55% as on
31.03.2008.

%
The loveable resource of bank has increased during the year because of increase in
loan funds, reserves and additional deposits mobilized during the year. The
investments/FD has also increased from Rs.1420.72 cr. As on 31.03.2008 to
Rs.1883.20 cr. as on 31.03.2009. The investments mainly comprises of central, state
government and trustee securities of Rs.1345.53 cr, fixed deposits with Maharashtra
state co-op bank ltd. And other notified banks of Rs. 475.73 cr. Public sector
undertakings bonds and other investments of Rs. 61.94 cr.

In 2009 bank has earned gross income of Rs. 446.45 cr. As against Rs. 332.23 cr. In
the previous year. The net profit after tax of the bank for the year, after making
provisions as required under the Multi-state co-op societies act and rules amounted to
Rs. 92.36 cr. As against 40.81 cr. In the previous year.
The boards of directors recommend the following appropriations of the net profit:
(Amt in Rs.)
Statutory reserve (25%) 230912380.00
Contingency reserve fund (10%) 92364952.00
Education fund (14%) 92.36495.00
Dividend (15%) 65000000.00
Bonus/ ex-gratia 60800000.00
Investment fluctuation reserve 403060747.00
Lone term finance special reserves fund 25182000.00
Member welfare fund 450000.00
Member benevolent fund 100000.00
Development reserve fund 36542944.59
«««««««««««««««««««««««««««
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15% maximum is permissible as per bye-laws of bank. The dividend is to be distributed
on the basis of pro-rata basis.

! 7: apart from shree Krishna sahakari bank ltd. Vadodara,
which was merged, with bank on 19th June 2008, two more banks were merged during
financial year 2008-2009. The mergers of janatha co-op bank ltd. With effect from 20th
august 2008. And the Manekchowk co. op bank. From 16th October 2008.

Bank has opened three foreign currency accounts in USD, GBP, and EURO with bank
of India, New York, London and Paris branches.

$
After September 2008 up to mid of Jan 2009 there was a sudden change in bond
market due to global turmoil, which started in the form of sub-prime crises. RBI adopted
an increasingly softer monetary stance since October. Repo rate was brought down
from high of 6% during the year to 5%. Reverse repo rate was also brought down from a
high of 6% during the year to 3.5% total 400bps reduction in CRR (i.e. from 9% to
5%)flushed the economy with funds worth Rs. 160000 cr. The step comes in the value
of deteriorating global economic conditions. The India is affected by the global
development and performance across has been weakened.

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The registrar of co-op society for recovery of NPA outstanding devised one time
settlement scheme for the long period. The earlier OTS scheme was valid up
X

t30.09.2008. Subsequently bank has framed new OTS scheme with the cutoff date of
NPA as on 31.03.2005. The scheme was operative up to 31.03.2009. The scheme is
expended up to 28.02.2010 for accepting application and 31.03.2010 for disposal of
proposal. The bank has recovered Rs. 2.79 cr. During April 2008 to march 2009. 108
accounts have been closed during the year and amount recovered in the closed
accounts was Rs. 2.32 cr.

$ 9 )1'1
Looking to the future, bank wish to chalk out a roadmap for resurgence and rejuvenation
of the bank by setting out the targets under various segments of business on year to
year basis up to 31st march, 2014. As a prelude to this, bank seeks to adopt certain
parameters as under:
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Expansion of business.
Branch expansion including through mergers and acquisitions.
Human resource development.
Focus on information technology.
Improvement in customer service.
Creation of special cell.
Strengthening of the internal audit and inspection machine.
Strengthening security arrangements in the bank.

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To play seminal role in brand building.
Contribute substantially to the profitability of the bank
Optimize liquidity costs.
Deal in whole sell and retail markets for debt, derivatives to hedge balance sheet
risks.
To deal in forex markets and undertake foreign exchange transaction.
Access and manage balance sheet risk support activity to ALCO.
Undertake pricing and allocation of resources.
To have a daily and monthly and weekly management of risks and evaluation
systems.
To set up a research/risk management cell to continuously keep abreast of
development and strength market intelligence as to take corrective measures.
To set up dealings with two segments like (a) Money and Debt market, (b)
foreign exchange markets.

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It is customary for the bank to draw up annual performance budget at the beginning of
the year to set a target for business development by indicating goals for deposit
mobilization, expansion of loans and advances, regulation of NPAs and recovery of
NPAs and finally , to achieve optimum profitability.
The board finalizes the credit policy annually based on the review of performance of
previous year, policy objectives and goals adopted for the current year, the regulatory
stipulations, directions and advice issued by the RBI, prevailing market realities an
trends in the banking industry in general. The board has since approved the credit
policy for year formulated by the Loans and Advances department.

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To ensure that accounting policies followed by the bank are in conformity with the
directives/ guidelines of statutory authorities including the institute of Chartered
accountants of India and also in line best international practices.
To develop the comprehensive compliance document, covering key issues like
capital adequacy, liquidity, assets quality, risk management and system control
which should be reviewed periodically.
Submitting various statutory and other returns to RBI and other authorities
promptly an accurately.
To develop comprehensive information system by collecting data to measure,
monitor, and control and report liquidity risk/interest rate risk from ALM angle.
Regularly reconciling inter-branch/inter-bank transactions.
Effectively monitoring and controlling various items of profit and loss.
Preparing corporate plan, allocating annual targets to all branches/departments
and reviewing them periodically.
Preparing banks financial statements, disclosure and various annual and other
expenses.
Exploring and examining proposals for mergers and acquisitions of weak banks
in consultation with all concerned.
To ensure regular and correct compliances with the provisions of income tax as
per income tax act 1961 and tax planning for the bank.
To follow the rules/norms as applicable to accounts department prescribed under
the multistate cooperative societies act, 2002.

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9 > =

Prompt and swift action to effectively seal with such accounts.

Developing management information system in respect of these accounts and
preparing action taken reports thereon, progress of which should be reviewed
from time to time.
Rescheduling the recovery keeping in view the policy guidelines.
Safeguarding securities to serve bank¶s interest.
Resorting to recovery proceedings/due legal process whenever necessary.

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9
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È To assess the financial health of organizations that approaches Abhyudaya co-
operative bank for credit for import export purposes. This would entail
undertaking of the following procedures:
Analysis of past and present financial statements

Analysis of Balance Sheet
Analysis of Cash Flow Statements
Examination of Profitability statements
Examination of projected financial statements
Examination of CMA data
È To assess the suitability of the company for disbursement of credit. This would
involve the following actions:
Use of credit rating charts
Evaluation of management risk
Evaluation of financial risk
Evaluation of market-industry risk
Evaluation of the facility
Evaluation of compliance of sanction terms
Calculation of credit rating
È Determination of interest rate: This would entail the following sequence of

actions.
Collect data regarding financial health evaluation
Noting down of credit rating
Referencing the banks¶ interest rate guidelines circular
Choosing the interest rate from the circular on the basis of financial health
and credit rating
Ñ*

%

The research work for this report was done in two ways:
a) Data from primary source
b) Data from secondary source

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&
Primary source was obtained by interviewing employees and managers of the bank.
& &

Secondary source was obtained through books / periodicals, journals, magazines from
our own library. Bank provided credit policy manual for the purpose of reference. It was
also obtained from web site for which I have spent many hours just surfing the net.

$= <
A $, $, or is a banking institution granted

the exclusive privilege to lend a government its currency. Like a normal commercial
bank, a central bank charges interest on the loans made to borrowers, primarily the
government of whichever country the bank exists for, and to other commercial banks,
typically as a 'lender of last resort'. However, a central bank is distinguished from a
normal commercial bank because it has a monopoly on creating the currency of that
nation, which is loaned to the government in the form of legal tender. It is a bank that
can lend money to other banks in times of need. its primary function is to provide the
nation's money supply, but more active duties include controlling subsidized-
loan interest rates, and acting as a lender of last resort to the banking sector during
times of financial crisis (private banks often being integral to the national financial
system). It may also have supervisory powers, to ensure that banks and other financial
institutions do not behave recklessly or fraudulently.
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The credit policy announced by Reserve Bank of India (RBI) governor Subba Rao may
have hints of a tighter credit regime, but it may not have an impact on the interest rate
structure for home loans, say experts. Experts say that their opinion is based on two
facts. First, the demand for homes and home loans, in turn has gone up in the wake of
the soft rate regime put in place by the finance minister early this year as part of his
anti-recession measures. Second, the Centre has already expressed concerns about
the bankers¶ unwillingness to pass on the benefits of the revival package announced by
the finance minister.
Shobhit Agarwal, joint managing director for capital markets at real estate research and
advisory firm Jones Lang LaSalle Meghraj, tells TOI that the banks will now be a little
more cautious while lending to real estate players, however, interest rates are at their
lowest in recent times, and even a marginal hike due to this tightening in provisioning,
will not affect the overall sector seriously.
³The current credit policy has made only two changes that could conceivably affect the
real estate sector. For one, the statutory liquidity ratio (SLR) has been increased by one
per cent. Secondly, the provisioning for real estate loans has been increased to one per
cent from the earlier 0.4 per cent. The impact on the sector is not significant as we see
it. Rather, it might help, as the Central Bank is trying to curb the formation of an asset
bubble - in other words, trying to control the asset prices for end users,´ Agarwal says.
If well-implemented, this policy will benefit property buyers in the long run, Agarwal
observes, adding that as the projected increase in inflation is in line with India¶s long-
term inflation history, and is automatically factored into the markets and overall market
sentiments, this would not hamper the green shoots of recovery, which are currently
being witnessed after a protracted slowdown period over the previous year.
³The realty sector, especially in the home segment, has already witnessed some price
rise and an interest rate revision, which in any case will be small, may actually help
slowdown the spiraling price rise,´ says a senior banker requesting anonymity. ³As the
home loan interests are between 8.75 per cent to 12 per cent for most banks there is
actually some scope to revise the rates upwards, he feels.
Rohit Gera, vice president of Credai and joint managing director of Gera Developments,
said increasing the lending rate for realty developers would ultimately have an impact
on the end-buyer. That could have avoided even the mild¶ rate rise expected in home
loan rates, he says.
c

³The policy could have spared the affordable home projects as there is no question of
hotting up of this segment as only genuine buyers are buying affordable homes,´ Gera
says. On the commercial side, Gera says, the sales are down thanks to the sluggish
mood globally, and increase in the interest rates for commercial projects will further
dampen the spirit of developers. Navneet Munot, chief investment officer of State Bank
of India Mutual Fund, says the priority for the central bank is shifting to anchoring
inflationary expectations and supporting the growth process. The central bank would
surely keep a vigil on any signs of building of an asset bubble due to excess liquidity.
Source: http://www.indianrealtynews.com

è

The bank has achieved the target of loans and advances of Rs. 2500.00 cr. For the year
2009-2010. The advances increased by more than Rs. 600.00 cr. And the CD ratio has
exceeded 60.00% against 58.47% as on 31.03.2009.
The advances to the educational institutes have grown substantially. The bank has
started giving exposure to this sector to the extent of 25% of the total advances. Bank
has also formed a new policy of exposure to the educational institutes and also has
modified banks policy on real estate exposure. The banks experience regarding the Iron
and Steel industry is not satisfactory during the year. That¶s why bank has decided to
restrict the exposure to this sector and hence bank have to concentrate more on the
other sectors particularly ³Trading´, where bank can earn more interest income.
The bank have also framed the faire practice code for lenders and displayed the same
on the website for information and knowledge of general public.
Recently bank have introduced various new products such as Short term Corporate
Loans (STCL), Medium Term Corporate Loan (MTCL), revolving credit limits (RCL) and
SOD IMP to the builders and developers, so as to monitor the funds utilized by various
types of theses borrowers. Henceforth, sanction of loans under: ³WCTL´ head will be
restricted by bank only to the few borrowable accounts.

§ è9
The broad objectives of Credit Policy are:
To give clarity about various aspects of credit including acceptance,
appraisal, scrutiny, sanction, delegation, documentation and post-
disbursement follow-up.
To give proper direction to the Branches and other functional heads about
the areas in which credit is to be encouraged and to fix maximum credit to
be given under different sectors and purposes.
To manage the credit risk i.e. to identify measure and mitigate the credit
risk.
To encourage/achieve and continue minimum of 40% of total lending
towards Priority Sector Advances and 15% towards Weaker Section.
To maintain the CD Ratio 65% throughout the year and to ensure that the
Total Exposure of the Bank includes the Amount Sanctioned but not
Disbursed, Un-utilized portion of CC and other Working Capital facilities.
To strengthen credit appraisal, improve post sanction follow-up, monitor
credit facilities and to improve quality of credit.
To diversify loan portfolio to different sectors and new areas like export
finance / retail finance etc.
To reduce the gross NPAs of the Bank to a reasonable level during the
year by strengthening appraisal, sanction, post disbursement supervision
and efficient recovery steps.
To maximize profitability and return on capital.

§ è

(
Small Scale Industries & SMEs
Ñ

Housing Loans
Retail Trade & Small Business
Professionals and Self-employed
Surety/SDL/ECS Loans upto Rs. 2.00 Lakh
Food Processing in Small Scale Units
Textiles in Small Scale Units
Educational Institutions
Steel Manufacturers (Small Scale Units)
9 Loans and CC against Govt. Securities and Transferable RBI/Govt.
Bonds.
$ Discounting of Bills under confirmed L/Cs issued by Nationalized
and reputed Private Sector Banks or reputed Co-op. Banks (to
the extent of Rs. 50.00 lakh
Rent Securitization Loan
Educational Loan
Working Capital limits to small retailers up to Rs. 20.00 Lakh
Loans to women entrepreneurs
Credit facilities to minorities like Sikhs, Muslims, Christians,
Zoroastrians and Buddhists communities etc.
7 All other Priority Sector Advances like loans to Artisans and
Craftsmen, Vegetable Vendors, Cart Pullers, Cobblers etc.
Software Industries (Credit facilities only against 100% collateral
securities)
Civil Contractors registered with PWD, CIDCO, MSRTC, MCGM,
NMMC, MIDC and other Govt. organizations.
Auto Ancillaries
Service Industries
Non-conventional Energy/Solar Equipments etc. & Wind Mill
(Advances will be considered only against 100% collateral
securities in addition to Land on which Wind Mill will be setup).
&
Builders and Developers and Real Estate Development including
construction of Shopping Malls and Multiplexes.
Civil Contractors registered with PWD, CIDCO,
MSRTC, MCGM, NMMC, MIDC and other Govt. organizations.
Hotel Industries
Loans to Iron & Steel Traders
Mortgage Loans.

In the above sectors lending to be considered selectively on case-to-
case basis on the inherent strength of the Borrower. It is to be recognized
that some units in these sectors also perform well. Hence, such units will
be financed. Therefore, higher margins and collateral securities are
recommended while considering new loan proposals. They are given under
³Benchmark Financial Parameters for scrutiny, recommendation and
sanction´ subsequently.

%
Loans against shares except to individual upto Rs. 10.00 Lakh
if shares are in demat form.
In case of Group accounts where one of the accounts is a Non-
performing account, then the facilities for other Standard accounts
in the Group Loan be considered only in the Loan Board Meeting.
Sugar factories & Textiles and other activities under Co-op. Sector.
Loans for making TV serials/feature films, movie etc.
Loans to Class-IV employees of Municipal Corporation of Mumbai,
Navi Mumbai, Thane, Bhiwandi, Dombivali, Kalyan, Pune and govt.
depts.. etc.
Loans for purchase of excavators and poclains .

.

Advances to share brokers/Co. against the securities of
shares/tangibles or any other collateral.
Credit facilities for acquisition of/investing in small saving
instruments including Kisan Vikas Patras.
Grant of loans to banned articles including articles
possession/production of which is banned under Wild Life
Protection Act, 1972.
HUFs.
Advances to commodity brokers operating in MCX and NCDEX
exchanges.
Loans for speculative purpose.
ü

NPA accounts of other Banks.
Willful defaulters of other Bank/our Bank and associate
accounts of willful defaulters.
NBFCS.
9 Capital Market.
$ Plantation Firms.
Borrowers who have defrauded our Bank/other Banks.
Guarantors who have defrauded our Bank/other Banks.
Guarantors and Borrowers against whom suit/s are/were filed by
the Bank.
All black listed persons as advised by Government of India/RBI etc.
Borrowers whose line of activity is included in the Negative list by
the Govt. of India/RBI i.e. Defaulter of State/Central Govt. dues.
7 Whenever Bank had entered into O.T.S. settlements under One
Time Settlement scheme or other scheme and has sacrificed its
dues either by way of write-off of principal, interest charged/interest
not charged, the Borrower should not be granted fresh credit
facilities either in his individual capacity or in the name of any other
firm/company.
Loans for purchase of Land except for Industrial/ Manufacturing
Activities where entire project is financed.

.

Any loans other than above four Areas are treated as General Area
advances.

§
%?
S The Borrowers enjoying only cash credit limit above Rs. 10.00 Lakh or
only loan limit above Rs. 25.00 Lakh or if they enjoy both CC & TL, either
of CC or Secured Loan limit being more than Rs. 10.00 Lakh will be
subject to gradation. Thus, the Borrower with cash credit limit of Rs. 5.00
Lakh and Secured Loan of Rs. 11.00 Lakh or vice -versa will be eligible for
credit rating.
!$
Financial Parameters 36
Security Parameters 15
Conduct of Account 28
Management 10
Business and Other Parameters 11
'11
SS The accounts shall be graded as under :
!$
AAA Above 90
AA 81-90
A 71-80
BB 61-70
B Upto 60
The parameters and the marks for Takeover Proposals and Existing established units
are as under:-
Sr. No. !$

1. Financial Parameters 45
2. Security Prime and Collateral 15
3. Conduct of Account 10
4. Management 15
5. Business and Other Parameters 15
( '11
*

The above Credit Rating should be done on the basis of audited
financial statements for past 2 years and perusal of their statement of
accounts for past 2 years in addition to other parameters specified.
§ & Various aspects of scrutiny are as under:-
'@ $ ?

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( %),11$
(A "
Current Ratio = 2.00
Quick Ratio = 1.00
Debt Equity Ratio = Total Long term Liabilities = 4:1
Total Net Worth
è%
Total Liabilities = Long Term Debt + Current Liabilities = 5:1
Total Net Worth Total Net Worth
. Actual Sales = Minimum 90%.
Projected Sales
. Average DSCR = 1.5 or above but not less than 1.25 each year.
. Prime Security ± Should adequately cover the Drawing Power. In case
the Borrower operating account within DP throughout a year, it can be
eligible for full marks.
. Collateral Security ± 25% to 50%.
. Total Security ± 160%
A

B Margin ± As given in the subsequent column under margin.
B Debtors = Maximum 90 days
B Creditors should be less than Debtors.

&
'A
B Debt Equity Ratio = Total Long term Liabilities = 2:1
Total Net Worth
è%
B Margin on Prime Security = 50%
B . Collateral securities = Above 100%.
B. Total Securities = 300%
B. Net Profit Ratio = Profit after Interest + Tax = > 10%
Net Sale
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4 &
( "

Debt Equity Ratio = Total Long term Liabilities = 3:1
Total Net Worth
è%
Margin = 40%
Collateral securities = Minimum 50%.
X

. Total Securities = 200%
. Net Profit Ratio = Profit after Interest + Tax = > 10%
Net Sale

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5è -=&"Bè&3%"(è%" "&( ("
The revised Guidelines on Exposure to Real Estate Sector are as follows:-
@
( % " The Real Estate generally defined as an immovable
asset ± land (earth space and the permanently attached improvements to
it.
% " %" Income producing real estate
(IPRE) refers to a method of providing funding construction of real estate
(such as office buildings to let, retail space, multifamily residential
buildings, industrial or warehouse space and hotels) where the prospects
for repayment and recovery on the exposure depend primarily on cash
flows generated by the asset. The primary source of these cash flows
would generally be lease or rental payments or the sale of the asset.
ü

% "
%" From the above definition that for an
exposure be classified as IPRE/CRE, the essential feature would be that
the ?7 (such
as office buildings to let, retail space, multifamily residential buildings,
industrial or warehouse space and hotels) where the prospects for
repayment and recovery on the exposure depend primarily on cash flow
generated by the asset. (
,18
as also for recovery in the event of
default where such asset is taken as security.
( % " ": The Real Estate exposure is defined as
Bank¶s exposure to essentially fund/non-fund based credit
line/outstanding, recovery of which ultimately relatable to and directly
dependent on and the reliability of Real Estate property.

@ è9
(i) To provide proper and consolidated guidelines to operating units for
extending finance to Real Estate Sector so as to ensure orderly growth of
the portfolio.
(ii) To establish an appropriate credit risk environment and control system in
the Bank to manage credit risk inherent in financing the real estate
business.
(iii) To ensure proper pricing mechanism that the return compensates for the
capital charge and for the risk involved.
(iv) To put in place proper Management information system for the orderly
development of the portfolio.
(v) To ensure compliance with all the directives/guidelines issued by the
Government/Reserve Bank of India and other legal/regulatory
requirements.
(vi) To have Board oversight on Real Estate exposure through a continuous
and structured Reporting system.
@
%"
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"
(i) Residential Mortgages (inclusive of mortgage loans granted for personal
purposes against security of residential properties)
(ii) Commercial Real Estate
(iii) Investment in Mortgage Backed Securities and other Securitized
Exposure- Residential and commercial.
(iv) Exposure relatable to other revenue streams, but are secured by and
dependent of price volatility of Real Estate (e.g. Rent
Securitization/Premises Loans price volatility of real
estate).

"
Fund and Non-Funded exposure on National Housing Bank (NHB) and
Housing Finance Companies (HFCs), Housing Boards, other public
Housing Agencies etc.

%!
All Housing Loans sanctioned for construction/ repair or purchase of houses
for residential accommodation. Housing Loans are segregated under
following broad heads:-
Home Loans up to Rs. 20.00 Lakh forming part of all Priority Sector
Advances.
Other Housing Loans - Maximum Limit is fixed at Rs. 50.00 Lakh.

%"
Funded or Non-funded Advances for construction of and secured by
mortgages on Commercial Real Estates (Office Buildings, Retail Space,
Multi-Purpose Commercial Premises, Multi-Family Residential Buildings,
Multi-tenanted Commercial Premises, Industrial or Warehouse space,
Hotels, Land acquisition, development and construction etc.)
? will broadly be covered under this head.

ü

Other Funded or Non-funded Advances to Builders/Developers of smaller
? %'1111$
Bank shall not sanction advances merely for purchase of plots,
industrial or otherwise except where the plot is purchased for the
project and entire project finance is considered.
.@ è "

RBI has fixed a maximum limit of 15% of the total Deposits of the Bank for the
previous year ending for the purpose of providing Housing Loans and other Block
Capital exposure for CRE. The Bank has further put exposure ceiling of 15% of
Gross Advances for Housing Loans, 25 % for Loans for Educational Institutions
and 10% for Builders within the overall exposure limit of 15% to CRE. Wherever,
the present outstanding has exceeded the above limits, we shall gradually
reduce the outstanding until they reach to the limits fixed above.

.@ .%(.
Whenever outstanding to loans exceeds LTV, branches should either recover the
excess amount or obtain other collateral securities to cover the excess
outstanding above prescribed LTV.
In case of Residential Housing Loans, Bank shall apply the risk weights on the
basis of the LTV Ratio as under:-
(.% & %$

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LTV Ratio = or < 75% Upto Rs. 30.00 Lakh 50%
üÑ

LTV Ratio = or <75% Above Rs. 30.00 Lakh 75%
LTV Ratio > 75% Irrespective of the amount 100%
X]
(i) Bank shall make an endeavor to obtain personal guarantee of Partners,
Trustees and Promoter Directors in case of loans to Partnership Firms,
Trusts and Companies in addition to two outside sureties.
(ii) Wherever third party properties are offered as collateral security,
guarantee of the property owners shall be obtained.
(iii) All Borrowers, Property Owners and Sureties for loans above Rs. 25.00
Lakh shall be Regular Members.
(iv) Sureties for all Loans below Rs. 25.00 Lakh shall be Nominal Members.
B @ %
(i) Interest Rates will be communicated to the Branches from time to time for
different types of Advances against Real Estate Commercial Real Estate
and other Advances.
(ii) Credit Rating (Grading) is compulsory for all loans above Rs. 25.00 Lakh
except for Housing Loans, Premises Loans, Rent Securitization, SOD
against Immovable Properties upto Rs.25.00 Lakh and Mortgage Loans.
In case of other loans except the above, if the Credit Rating is not
completed before 31st December of the year for the reason of not
submitting audited Balance Sheet and Books of Accounts, penal interest
of 1% will be charged from 1st January of subsequent year until the
Grading is completed.
(iii) During the moratorium period, the Borrower has to service the interest on
the outstanding loans regularly on monthly basis.

ü

B @ .
The Bank shall comply with the following criteria/stipulations for empanelling
³Valuers´.
(i) The Bank shall empanel only those Valuers, who are members of the
Institute of Valuers and registered as a Valuer under section 34B of the
Wealth Tax Act.
(ii) In case of professionals like Architects/Engineers who are being
empanelled as Valuers/Engineers, the Bank shall empanel only those
professionals who are members of their respective governing
associations.
(iii) Bank should obtain Valuation Reports from the approved valuer of the
Bank if the value of the property is above Rs. 20.00 Lakh.
(iv) If the value of the property is below Rs. 20.00 Lakh, the Branch Manager
has to give their opinion about the market value of the property.
(v) Bank shall obtain minimum two independent Valuation Reports for
properties valued at Rs. 5.00 crore and above.
(vi) The Valuation Report is valid for the period of 3 years only. Hence,
Branches should obtain fresh Valuation Reports once in every three years
from the empanelled Valuers.
B @
The Documentation should be completed as per the detailed guidelines issued in
Manual of Documentation of our Bank and further instructions issued from time to
time in this regard.
(i) All Housing Loans and other Commercial Real Estate Loans upto Rs.
50.00 Lakh shall be mortgaged by way of Equitable Mortgage.
(ii) All other Commercial Real Estate Loans above Rs. 50.00 Lakh shall be
mortgaged by Regd. Equitable Mortgage except whenever land is a part of
mortgaged property.
(iii) In all other cases, properties shall be mortgaged by way of Regd. Simple
Mortgage.
üü

(iv) In case the project is funded by the Bank, the Builder/Developer
? etc. the name of the Bank as the
financer of the Project and shall also provide No Objection Certificate
(NOC)/permission of the Bank for sale of flats/property if required, to the
intending Purchaser of Units/Flats/Properties.
(v) In case the project is funded by the Bank, the Builder/Developer shall
append the information relating to while
?.
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The following guidelines are framed on Bank¶s exposure to Educational
Institutions:-
±
The Exposure to the Educational Institutions is the financing to the institutions
which are providing education to the students from nursery to post
graduation/research in any/all streams of education.
± è9
(vii) To provide proper and consolidated guidelines to operating units for
extending finance to education sector so as to ensure orderly growth of
the portfolio.
(viii) To establish an appropriate credit risk environment and control system in
the Bank to manage credit risk inherent in financing the educational
institutions.
(ix) To put in place proper Management information system for the orderly
development of the portfolio.
(x) To ensure compliance with all the directives/guidelines issued by the
Government/Reserve Bank of India and other legal/regulatory
requirements.
(xi) To have Board oversight on the exposure to education sector through a
continuous and structured Reporting system.
±

ü

The Bank shall only finance to the educational institutions which are registered
as Trusts under Public Trusts Acts of the respective States and incorporated as
Companies under the Companies Act., 1956. Such institutions should be
recognized/ affiliated to some Board/ Universities/AICTE etc.
No credit facilities shall be granted to any educational institutions which are
constituted as Private Trusts, Partnership firms or Proprietorship firms.
The facilities are generally given to well established Trusts/Companies with
proven track record. The Bank shall restrict the sanctioning of the credit facilities
to newly formed Trusts and Companies.
±
Bank shall make an endeavor to obtain personal guarantee of all
or most of the main Trustees (All Office Bearers) and Directors
(excluding Technical & Govt. nominated Directors) for all credit
facilities sanctioned to Trusts and Companies. In addition, the
Bank may also insist for two outside sureties.
Wherever third party properties are offered as collateral security,

guarantee of the property owners shall be obtained.
Borrowers, Property Owners and Sureties for credit facilities shall

be Regular Members.
± &
The Bank shall obtain securities for the credit facilities sanctioned to the
Educational Institutions. The Trust¶s immovable and movable properties, for
which the credit facilities are sanctioned, shall be mortgaged and/or
hypothecated to the Bank.
The Bank shall also strive for the additional immovable properties belonging to
either of the Trust/Company or personal properties of the Trustees/Directors, as
collateral security.
ü*

± %
(i) Interest Rates will be communicated to the Branches from time to time
for credit facilities to educational institutions.
(ii) Credit Rating (Grading) is compulsory for all loans above Rs. 25.00
Lakh. In case the Credit Rating is not completed before 31st March of the
next year, for the reason of not submitting audited Balance Sheet and
Books of Accounts, the penal interest @ 1% will be charged from 1st
April of subsequent year until the Grading is completed.

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Reserve Bank of India has granted Authorized Dealer Category - I License to
Bank in November 2007. We can now handle all types of foreign exchange
transactions.
As per the guidelines of Reserve Bank of India, 12% of bank finance should be
extended towards exports. Presently, our Export credit is less than 1% of our total
advances. Hence there is an imperative need on the part of all our Branches to market
our export products extensively to our Exporter-customers. Additionally, all the
Branches should make all-out efforts in mobilizing new export oriented accounts to
achieve this 12% target.
Prior to our obtaining AD Category ± I license from RBI, some of our customers
who are having export/import business might have shifted to other banks for better forex
business related services. Few of our existing customers who are in export/import
business also may be routing their forex business through other banks for the same
reason. The Branches should identify all such customers and prevail upon them to pass
on their forex business through our bank as we are now fully equipped to handle all
types of foreign exchange transactions.
An Exporter may need financial assistance for execution of an export order from
the date of receipt of an export order till the date of realization of the export proceeds at
any stage. It is extended as short term working capital finance. The working capital
cycle completes with the realization of the export bill. The Exporters may require the
finance at any stage of this cycle.
üA

Export finance can be granted at two different stages:
1. Pre-shipment finance &
2. Post ±shipment finance
Pre-shipment Finance, also known as " $
is granted to an
Exporter for the purpose of procuring raw materials, processing or manufacturing,
packing, transporting, warehousing of goods meant for exports..

(
i) Packing Credit both in Rupees and in Foreign Currency
ii) Packing Credit in Foreign Currency (PCFC)
iii) Advance against Government incentives covered under ECGC policy.
iv) Advance against receivables- Duty Drawback scheme.
v) Advance against cheques / drafts received as an advance payment for exports.
(

Branch should assess and meet the genuine credit requirements of the Exporters
promptly and in full measure.
While considering the proposal, all the required information should be obtained from
the Exporter to avoid any possible delay in calling for details on a piece meal basis
so that sanction of the limits can be expedited.
Pre-sanction inspection should be carried out as per the information supplied by the
Exporter and due diligence should be done as per KYC norms.
üX

A flexible attitude may be adopted while considering the proposal such as Debt-
Equity ratio, Margin and Security norms etc. But there should be no compromise on
the viability of the proposal and integrity of the borrower.
The Exporter must satisfy the Branch about their capacity to execute the export
order within the stipulated time and their expertise to manage the export business.
Quantum of finance sought for by the Exporter should commensurate with the
expected turnover and the cost of inputs required for execution of the export order.
If the exports will be covered under Letters of Credit, Branch should find out the
standing of the L/C opening bank and its prime status.
Branch should also study the terms of L/C and ensure that the Exporter will be able
to comply with all the terms and conditions of the L/C
Where exports are not covered by L/Cs and will be on the basis of firm contracts,
the Branch may insist for obtaining a satisfactory status report on the overseas
buyer if the value of the shipment exceeds Rs 25.00 Lakh
Branch should also check the profile of the buyer¶s country especially about the
financial and political environment. The information may be obtained from HO or
ECGC.
Dispensation of export credit should be done expeditiously and in a time bound
manner. The RBI requirement is as follows ±
1. New proposal in 45 days.
2. Renewal of limit in 30 days.
3. Ad hoc limit in 15 days.
The pre shipment and post shipment limit should be considered simultaneously and
in total.
Branches should review the export limits annually.

"$

-
a) Who have received confirmed orders for export or Export L/C in their favour.
b) Whose names are not appearing in the Specific Approval List (SAL) of the
ECGC.
c) They should be having Importer Exporter Code (IEC) Number issued by DGFT.
d) They should be holding valid Shipment Policy of ECGC if the sanction so
stipulates.
"$

:
1. It is a need based finance against inventory.
2 In the case of export order, it should contain full details of shipment viz.,
merchandise, quantity, price, period of shipment, mode of shipment, Inco- terms
( FOB/CIF/C& I/C& F), method of payment etc .
3 Wherever Packing Credit is granted for the purpose of procuring the raw
materials, there will not be any prime security at the time of its disbursal. The
Exporter will be holding the amount disbursed as trustee till the raw materials are
purchased. Stock statement should be submitted by the Exporter expeditiously
after the purchase.
4 Each Packing Credit disbursed should be maintained as separate account for the
purpose of monitoring period of sanction and end-use of funds. The aggregate
position will be reflected in the loan ledger.
5. All the guidelines pertaining to finance against inventory should be followed

&
DP Note
Letter of Lien & Set Off
Export Trust Receipt
Deed of Hypothecation
c

Letter of Guarantee
Insurance Policy to cover full value of stock
ECGC cover
Collateral Security as per sanction terms
Other usual documents as stipulated in the Documentation Manual.

1. It is short-term working capital finance.
2. The period for which a Packing Credit advance may be given will depend upon the
circumstances of individual case, such as the time required for procuring,
manufacturing or processing (where necessary) and shipping the relative goods. In
short, the period is depending on the manufacturing cycle of the Exporter. It should
be sufficient to enable the Exporter to ship the goods. A maximum period of 180
days can be considered for this purpose. However, the period of finance may be
extended up to 270 days. As of now, concessional rate of interest can be applied up
to a period of 270 days.
%
1. Interest on export finance is charged on concessional basis as per RBI guidelines.
2. It is charged on slab- wise basis.
3. Rate of interest for a period up to 270 days is 2.5% below the prevailing PLR. If the
shipment takes place beyond the period of 270 days but within 360 days, for the
period beyond 270 days, the applicable rate of interest is PLR.
4. If the shipment does not take place, the advance will attract interest rate ECNOS +
2.0% penal rate. If part shipment has taken place, the excess amount advanced
which is recovered out of local funds will attract the same penal rate.

è&(&4 !"(
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3%
4 &"? &
è3(?"è( ( èèè
3!"(&
Post shipment finance means finance to the Exporter after the goods are
shipped. Essentially it is an advance against the receivables (Bill Finance). Post-
shipment finance can be made available to the Exporters as follows:
1. Purchase /Discount of sight/usance ,as the case may be, Export Bills
2. Negotiation of bills ,both sight as well usance, drawn under export L/Cs
3. Rupee Advance against Bills sent for Collection
4. Advance against Export on Consignment Basis
5. Advance against Un-drawn Balances / Duty Drawback
Although all the above are different methods for providing post ±shipment finance
to the Exporters, the most common are Export Bills Purchased / Discounted and Export
Bills Negotiated.
The bank is required to follow several Exchange Control guidelines some of
which are furnished below:-
1. Exporter should have Import Export Code number allotted by the DGFT
and all the export bills should be submitted along with the prescribed
Declaration (GR/ SDF/ PP/ SOFTEX) form in which the value of the
shipment is declared and duly certified by the customs authority.
Wherever SDF is submitted, the same should be submitted along with the
Shipping Bill .
2. Shipping documents along with appropriate Declaration forms as
mentioned above must be submitted within 21 days from the date of
shipment. If there is any genuine delay, which is beyond the control of the
Ñ

Exporter, we may condone the delay and accept the shipping documents
even after 21 days for the date of shipping.
3. The payment should be received in an approved manner within the
prescribed time limit but within a maximum period of six months from the
date of shipment.

Import Finance is generally made available for the import of capital goods such as
machineries etc as well as procurement of raw materials.
Capital goods are considered under Project Finance for which project appraisal
needs to be done. The project viability both in terms of technical feasibility and
economic viability has to be critically analyzed at the time of sanction of the proposal.
Raw material imports are a part of current assets management. Hence,
assessment can be done on the basis of any one of the following 3 methods:

1. Projected Turnover Method
2. MPBF Method
3. Cash Budget Method
Normally, import finance is considered by the bank by way of sanction Import
Letter of Credit limit. Even though Letter of Credit is a non- fund based facility, while
considering the same, it should be understood that in the event of non-payment of bills
drawn under the LC by the Importer-customer, it will become a funded liability (Forced
Loan). Therefore, while doing the credit appraisal for the sanction of LC limit, all
possible precautions shall be taken which are taken in the case of sanction of any other
credit proposal.
It should be noted that whenever any advance facility is considered involving
import of goods, we should also consider granting of L/C facility. The Sanction for the
L/C facility should permit the Importer to book Forward Sale Contracts also if they desire
to hedge their foreign currency exposure.

%%
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To provide in a professional manner, efficient, courteous, diligent and speedy
services in the matter of retail lending.
Not to discriminate on the basis of religion, caste, sex, descent or any of them.
To be fair and honest in advertisement and marketing of Loan Products.
To provide customers with accurate and timely disclosure of terms, costs, rights
and liabilities as regards loan transactions.
If sought, to provide such assistance or advice to customers in contracting loans.
To attempt in good faith to resolve any disputes or differences with customers by
setting up complaint redressal cells within the organization.
To comply with all the regulatory requirements in good faith.
To spread general awareness about potential risks in contracting loans and
encourage customers to take independent financial advice and not act only on
representations from banks.

ü

'
(a) A prospective customer would be given all the necessary information
adequately explaining the range of loan products available with the Bank to
suit his / her needs.
(b) On exercise of choice, the customer would be given the relevant information
about the loan product of choice.
(c) The Customer would be explained the processes involved till sanction and
disbursement of loan and would be informed of timeframe within which all the
processes will be completed ordinarily at our bank.
(d) The Customer would be informed of the names and phone numbers of
branches and the persons whom he can contact for the purpose of loan to
suit his needs.
(e) The Customer would be informed the procedure involved in servicing and
closure of the loan taken.
) %
(a) Interest Rates for different loan products would be made available through
and in anyone or all of the following media, namely:
(i) In the Bank's Web site.
(ii) Over phone, if Tele Banking services are provided.
(iii) Through prominent display in the Branches and at other delivery points.
(iv) Through other media from time to time.
(b) Customers would be entitled to receive periodic updates on the interest
rates applicable to their accounts.
(c) On demand, Customers can have full details of method of application of
interest.
*% %
(a) The Bank would notify immediately or as soon as possible any revision in the
existing interest rates and make them available to the customers in the media
listed in Para 2.1.

(b) Interest Rate revisions to the existing customers would be intimated within 7
working days from the date of change through notifications in the Bank¶s Website
/ Media/ Notice Board at Branches.

+ ?
The Bank would notify clearly about the default interest/penal interest rates to the
prospective customers.
,

(a) The Bank would notify details of all charges payable by the customers in relation
to their loan account.
(b) The Bank would make available for the benefit of prospective customers all the
details relating to charges generally in respect of their retail products in the media
specified in Para 2.
(c) Any revision in charges would be notified in advance and would also be made
available in the media as listed in Para 2.
0(

(a) The Bank would ordinarily give to the customer, the application forms as soon as
the customer chooses to buy a product of or service of his choice and duly
acknowledge the receipt of such application forms by its Branches or offices.
(b) Immediately after the decision to sanction the loan, the Bank would issue a
sanction letter containing the Terms and Conditions of the sanction, show draft of
the documents that the customer is required to execute and would explain, if
demanded by the customer, the relevant terms and conditions for sanction and
disbursement of loan.
(c) Loan Application forms, Documents or such other papers to be signed by a
customer shall comprehensively contain all the terms and conditions relating to
the product or service of his/her choice.
(d) Reasons for rejection of loan applications would be conveyed to all Borrowers
irrespective of the size of the loan.
(e) Bank shall deliver a copy of the documents executed by the Borrower, if
demanded by the Borrower, at any time, before or after the disbursement of the
credit facilities.
*

*
(a) The Bank would provide regular statement of accounts of their loan accounts,
whenever demanded by the Borrower.
(b) The Bank would notify relevant due dates for application of agreed interest, penal
interest, default interest, and charges if they are not mentioned in the Loan
applications, documents or correspondence.
(c) The Bank would notify in advance any change in accounting practices which
would affect the customer before implementation.
6 &
(a) All personal information of the customer would be confidential and would not be
disclosed to any third party unless agreed to by customer. The term 'Third party'
excludes all Law enforcement agencies, Credit Information Bureau, Reserve
Bank of India, other Banks/ Financial and lending institutions.
(b) Subject to above Para, customer information would be revealed only
under the following circumstances;
If our Bank is compelled by law.

If it is in the Public Interest to reveal the information.
If the interest of the Bank require disclosure.
/
(a) The Bank would sympathetically reckon cases of customer's financial distress.
(b) Customers would be encouraged to inform about their financial distress as soon
as possible.
(c) The Bank would adequately train the operational staff to give patient hearing to
the Customers in financial distress and would try to render such help as may be
possible in their view.
'1 %
(a) The Bank would have in place a Grievance Redressal Cell/ Customer
Care Centre.
(b) The Bank would make available all details, namely;
A

Where a complaint can be made
How a complaint should be made
When to expect a reply
Whom to approach for redressal of grievance etc.,
to the customers individually on demand and through the media.
(c) Response to a complaint whether positive or negative or requiring more time for
redressal would generally be given within a maximum period of four weeks from
the date of receipt of complaint, unless the nature of complaint is such that
requires verification of voluminous facts and figures.

Nature of the business's activities

Financial position
Product durability
Length of production process
Competition and competitors' credit conditions
Country's economic position
Conditions at financial institutions
Discount for early payment
Debtor's type of business and financial position

X

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 

Because credit policy concerns the company as a whole, it is usually established

If a credit policy is to have practical value, it must be related to a specific company,

    

When a company is developing a new credit policy or is reviewing an existing one, a

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1. Recruiting and hiring guidelines

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1. Responsibility for preparation and content

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Large extensions of credit may be required in relation to the financial responsibility of

Price range of merchandise similarly influences credit policy. It is generally easier to

The geographical distribution of customers determines credit policy to some degree.

Economic or business conditions are of much greater significance, however, in

    

 the established company policies

     

 Investments of scheduled commercial banks (SCBs) also saw an increase from

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In India banks are classified in various categories according to different

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 Old Generation Private Banks (22)

 State Co-operative Banks

 Industrial Finance Co-operation of India (IFCI)

Banks play a positive role in economic development of a country as

The activities of commercial banking have growth in multi-directional ways

By pooling the savings together, banks can make available funds to

(  $

(a) &  $ ± within this category there are

1964 Established as Co-operative Credit Society.

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Of Shri.P.R.Sompura,Registrar of co-op.Societies, Gujratr State.

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§ Saving bank account

3& "&& - 

Deposits 2625.50 3174.81

Advances 1616.10 1856.39

Investments / FD¶s 1420.72 1883.20

Working capital 3434.28 4122.15

Gross capital 332.23 446.45

Net profit 40.81 92.36

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 Prompt and swift action to effectively seal with such accounts.

Analysis of past and present financial statements

È Determination of interest rate: This would entail the following sequence of

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the established company policies

Investments of scheduled commercial banks (SCBs) also saw an increase from

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Old Generation Private Banks (22)

State Co-operative Banks

Industrial Finance Co-operation of India (IFCI)

( $

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54

Sr. No. !$

§ & Various aspects of scrutiny are as under:-

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Wherever third party properties are offered as collateral security,

Borrowers, Property Owners and Sureties for credit facilities shall

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