SUMMER TRAINING PROJECT REPORT

ON
CREDIT APPRAISAL UNDER SME SEGMENT
AT

DENA BANK
REGIONAL OFFICE
(NEW DELHI)

SUBMITED FOR PARTIAL FULFILLMENT OF REQUIREMENT

FOR THE AWARD OF DEGREE

MASTER OF BUSINESS ADMINISTRATION

SESSION 2010-2012

COLLEGE OF BUSINESS STUDIES, AGRA

AFFILIATED TO MAHAMAYA TECHNICAL UNIVERSITY NOIDA (U.P.)

UNDER THE GUIDANCE OF MR. J. D. SINHA (SENIOR MANAGER SME)

Submitted to: Submitted By:

SHEKHAR GUPTA RIDDHIMA SINGH
(HOD) ROLL NO. 1039470040
PREFACE
 The objective of this project is to study the working of DENA BANK for providing

loans & advances, credit transaction and credit appraisal to Small and Medium

Enterprises. SME sector is critical to India’s economy and potentially a key driver of

growth, job creation, innovation and economic prosperity.

After undertaking in the depth of theoretical study such as type of advances, SME

policy of DENA BANK, credit rating, CMA, Working Capital and various financial

under SME’s, It was found that the several industries are growing under banking finance

and SME’s is a one of the fast growing Industries from all the sectors.

As per the 3rd census report, total output of the registered units in the year 2001-02 was

estimated to be Rs. 70,861.73 crores. The SSI sector employed 2,49,32,763 persons

during that period.

Thus SME plays a very significant role in the socio-economic development of the

country.

The project was an attempt to understand and perform the work in credit transaction

and credit appraisal proposal which I have included is just an example of it.

I have worked on many such proposals, which are beyond the scope of this project.

Hence the whole experience of working in such a renowned public sector unit was very

good & made me learn a lot out of it.

ACKNOWLEDGEMENT
 The project Title ‘‘Credit appraisal under SME segment in Dena Bank” has been

conducted by me during 15th June 2011 to 30th July 2011 at Dena Bank, Regional Office,

Delhi. I have completed this project, based on the primary and secondary research under

the guidance of my bank guide Mr. J.D. Sinha, Sr. Manager (SME).

He has helped me to learn about the process of giving loans & advances to SME

sector by giving me a valuable insight into the role played by Banks in SME sector. My

increased spectrum of knowledge in this field is the result of their constant supervision

and direction that have helped me to absorb relevant and high quality information.

Last but not the least, I feel indebted to all those persons and organizations who have

helped me directly or indirectly in the successful completion of this study.

DATED- RIDDHIMA SINGH

DECLARATION
I hereby declare that the project report entitled “Credit Appraisal Under SME’s

Segment at Dena Bank’s” submitted for the Degree Of Master Of Business

Administration, is the record of authentic work carried by me during the period from

15.06.2011 to 30.07.2011 and the project report has not formed the basis for the award of

any degree, diploma, associate ship, fellowship or similar other titles. It has not been

submitted to any other university or institution for the award of any degree or diploma.

(Signature)

RIDDHIMA SINGH

DATE:
 COLLEGE CERTIFICATE

College Of Business Studies, Agra

Affiliated to Mahamaya Technical University

Noida ( Uttar Pradesh)

This is to certify that Miss. RIDDHIMA SINGH is the student of MBA 3 rd Sem. (2010-

12) has completed her summer training and prepared this report on “Credit Appraisal

Under SME segment” at DENA BANK’s Regional Office in New Delhi. Her work is

original and authentic.

Mr. PARAG GAUTAM Mr. SHEKHAR GUPTA

FACULTY GUIDE (HOD)

 Table of Contents

Chapter No.

Page No.

1. Company Profile

2.1 Overview of Dena Bank

2.2 Milestones

2.3 Vision and Mission Statement

2.4 Growth & Development of the Organization

2.5 Area of operation-Regional Office

2.6 Workflow model of R.O.

2. Research Methodology

2.1 Introduction Of Research

2.2 Statement of the research problem

2.3 Objective of the research study

2.4 Research Design & Methodology

2.5 Rationale for the study

2.6 Limitation of the study

3. Introduction & Emergence of SMEs

4. Theoretical Analysis
5. Data Processing & Analysis

6. Case Study

7. Findings and Recommendations

8. Conclusions

9. Bibliography
 Chapter-1

Company Profile-

DENA BANK
 1.1 Overview of Dena Bank

Dena Bank is one of the earliest nationalized banks in India. Since its inception, the

bank has become a renowned name in the field of banking and financial solutions. It is

trusted all over the country by thousands of consumers. By being a customer of Dena

Bank, one can easily enjoy financial stability and also get good returns on the services

and the financial solutions.

Dena Bank was founded on 26th May, 1938 by the family of Devkaran Nanjee under

the name Devkaran Nanjee Banking Company Ltd. It became a Public Ltd. Company in

December 1939 and later the name was changed to Dena Bank Ltd.

In July 1969 Dena Bank Ltd. along with 13 other major banks was nationalized and is

now a Public Sector Bank constituted under the Banking Companies (Acquisition &

Transfer of Undertakings) Act, 1970. Under the provisions of the Banking Regulations
Act 1949, in addition to the business of banking, the Bank can undertake other business

as specified in Section 6 of the Banking Regulations Act, 1949.

Competitors: Top three competitors of Dena Bank.

 Bank of Baroda

 Bank of India

 ICICI Bank Limited

Dena Bank has been the first Bank to introduce:

 Minor Savings Scheme.

 Credit card in rural India known as "DENA KRISHI SAKH PATRA" (DKSP).

 Drive-in ATM counter of Juhu, Mumbai.

 Smart card at selected branches in Mumbai.

 Customer rating system for rating the Bank Services

 1.2 MILESTONES

 One among six Public Sector Banks selected by the World Bank for sanctioning a

loan of Rs.72.3 crores for augmentation of Tier-II Capital under Financial Sector

Developmental project in the year 1995.

 One among the few Banks to receive the World Bank loan for technological up

gradation and training.

 launched a Bond Issue of Rs.92.13 crores in November 1996.

 Maiden Public Issue of Rs.180 Crores in November 1996.

 Introduced Tele banking facility of selected metropolitan centers.

 Dena Bank has been the first bank to introduce-

o Minor Savings Scheme.

o Credit card in rural India known as "DENA KRISHI SAKH PATRA"

(DKSP).

o Drive-in ATM counters of Juhu, Mumbai.

o Smart card at selected branches in Mumbai.

o Customer rating system for rating the Bank Services.

 1.3 VISION & MISSION

Mission and Vision Statement of Dena Bank

Mission Statement-

DENA BANK will provide its

Customers - premier financial services of great value,

Staff - positive work environment and opportunity for growth and achievement,

Shareholders - superior financial returns,

Community - economic growth.

 Vision Statement -

DENA BANK will emerge as the most preferred Bank of customer choice in its area

of operations, by its reputation and performance.

Logo

The logo of Dena Bank represents Lakshmi, the Goddess of wealth, according to

Hindu mythology. It was the desire of the founding fathers of the Bank that the Bank

should be a symbol of prosperity for all its clients, and the logo represents this promise.
The contemporary 'D' in the logo reflects the dynamism, dedication and the drive

towards customer satisfaction.

1.4 Growth and Development of the Organization

To evolve and position the bank as a world class, progressive, cost-effective and

customer friendly institution providing comprehensive financial and related services:

integrating frontiers of technology and serving various segment of society especially the

weaker section of the society: committed to excellence in serving the public and also

excelling in the corporate values. Corporate excellence emanate from good corporate

governance exercised by adopting standard of transparency, accountability,

professionalism, social responsiveness, and ethical business practices with this in view,

the has been making efforts for adopting the best practices. The bank commitment

towards corporate governance is to bestow greater transparency and openness in the

management and to ensure best performance by staff at all the levels to maximize the

operational efficiency. Adopting the corporate governance as a work ethos, the bank is

committed to enhancing the stakeholder’s value.

 1.5 DENA BANK’S BUSINESS STRUCTURE

Personal Banking Services

Core Banking
Deposit Scheme Loan Scheme Solution
Dena Connect Dena
Premium Savings Account
India Remit
» Dena Niwas Housing Value Added
Scheme
Finance Scheme
» Premium Current Services
» Dena Vidya Laxmi
Account Scheme
Educational Loan Dena ATM Services
» Dena Jeevan SB Account
Scheme
» Dena Maha Tax Bachat Dena Bill Pay
» Dena Suvidha
Yojana
» Dena Super Premium
(Personal Loan) Scheme Dena m-Banking
» Dena Auto Finance
Current Account
Scheme Telebanking
» Dena Laxmi Gold
Deposit Scheme
» Dena Consumer Electronic Fund
Durable Loan
» Dena Savifix Deposit
» Dena Trade Finance Transfer
Scheme
» Dena Freedom Deposit
Scheme Inbound
» Dena Mortgage Loan
Scheme
Scheme Remittances
» Dena Samruddhi
Deposit Scheme
» Dena Senior Citizen Direct tax
Pensioners’ Loan
» Dena Fixed Deposit
Scheme collection
Scheme
» Dena Senior Citizen
» Dena Rent Scheme Bank assurance
(Finance
Scheme Indirect Tax
» Dena Recurring Deposit
Scheme Distribution of
» Dena Loan Linked Mutual Funds
Recurring Deposit Scheme
» Dena Minor Savings RTGS / NEFT
Scheme Dena e-Tax Pay
 1.6 AREA OF OPERATION: - REGIONAL OFFICE

I have done my summer training in regional office of Dena Bank. This

regional office operates fifty nine branches.

Name of the branches:

1. Alipore road

2. Asset Rec

3. Chandni Bazar

4. Chattarpur

5. Connaught Circus

6. Daryaganj

7. Dwarka

8. G.B Road

9. Hari Nagar

10. Karol Bagh

11. Laxmi Nagar

12. Loadhi Road

13. Mayapuri
14. Mayur Vihar

15. Nafgargarh

16. Nangloi

17. Navada

18. Nehru Place

19. Okhla

20. Paschim Vihar

21. Papargunj

22. Pitumpura

23. Retail Asset

24. Rajendra Place

25. Rohini

26. Safdargunj

27. Scope complex

28. Service Br.

29. South Extn.

30. Subzi Mandi

31. Wazirpur

32. Ajmer
33. Alanpur

34. Alwar

35. Ambawadi

36. Bharatpur

37. Bhilwara

38. Bikaner

39. Haldio ka Rasta

40. Kishangarh

41. MN Jaipur

42. MI. Rd. Jaipur

43. Mansarovar

44. Jodhpur

45. Kota

46. Pali

47. Parsad

48. Ramgarh

49. Sikar

50. Udaipur

51. Staff Training Centre

52. Noida

53. Currency Chest

54. Sri Ganganagar

55. Bavana

56. Shahdara

57. Hanumangarh

58. Chitrakoot

59. Saket
 1.8 WORKFLOW MODEL

Here is the workflow model of Dena Bank’s regional office-

 Chapter-2

Research

Methodology

2.1 INTRODUCTION
RESEARCH-

Research is the search for and retrieval of existing, discovery or creation of new

information or knowledge for a specific purpose.

METHODOLOGY-

Methodology means body of method used in a particular activity. To proceed

with study in the right direction, it is essential to select an appropriate method.

Selection of method is again a very cautious work and has to be done with proper

understanding.

RESEARCH METHODOLOGY-

Research methodology is a way to systematically solve the research problem.

It may be understood as a science of study how research is done scientifically. In it,

various steps are studied that are used for studying the research problem along with

the logic behind them.

Research methodology, therefore has many dimensions. It has a wider scope.

The purpose of the methodology section is to describe the research procedures.

Therefore research methodology not only includes the research methods but also

considers the logic behind the methods in the context of research study .It helps in

explaining why a particular method or technique is being used and why not others ,so

the research results are capable of being evaluated himself or by others.

2.2 STATEMENT OF THE RESEARCH PROBLEM

The factors beyond Credit Appraisal in financial Institute have widely investigated at the

aggregate level and at the Government level. The main reason is Credit appraisal under

SME’s is new field of research.

Due to the limitations of knowledge about problems and challenges faced by the Credit

Appraisal SME’s and the factors responsible for their sickness are summarized as under:

 Increased competition from cheap imports

 Infrastructural constraints/bottlenecks

 Delayed realization of receivables

 Delayed/inadequate credit

 High cost of funds

 Insistence on collateral/margin

 Complication and cumbersome procedures of banks

 Limited financial resources

 Non availability of adequate promoters’ contribution / equity

 Obsolete technology. Low R & D and technology up gradation effort

 Inadequate managerial competence

 Lack of marketing skills / Poor marketing

 Inadequacy of inputs and skills

 Government policies
 Financial problems

 Low quality image (Low ability perceived)

 Difficulty in dealing with Govt. buying system

The choice of this subject was based on many reasons; there has not been much research

about credit appraisal under SME’s and also, it is a highly actual subject availability of data

and also personal interest that influenced our choice of topic.

2.3 OBJECTIVE OF THE RESEARCH STUDY

The objective of this project report is to study the working of DENA BANK for

providing loans and advances to Small and Medium Enterprises. SME sector is

critical to India’s economy and potentially a key driver of growth, job creation,

innovation and economic prosperity. SMEs contribute about 40% of India’s value

addition manufacturing, almost 50% of India’s total exports and 45% of Industrial

units. They produce different products, ranging from simple items to high-tech

products using sophisticated state-of-art-technology for both domestic and

international market.
 SCOPE OF THE STUDY

• Get an insight of the banking industry.

• Understand the interface of the banks with their clients, customer

service expenses in banks.

• Using the theoretical knowledge in application and understanding

thing practically.

• Serve the organization.

 2.5 Research Design and Methodology

Research Design

Research design is a conceptual structure within which research is conducted the

blueprint for the collection and measurement and analysis of data .

Research design can be categorized as exploratory and conclusive design. Exploratory

seeks to discover new relationships while conclusive research is design to take decisions.

In exploratory the main aim is to come to hypothesis. It means tentative answers to

questions that serve as guide for most research projects. This type of research defines

hypotheses which are then tested by conclusive research .Conclusive research design can

be of two types viz. the case method and the statistical method.

In my case I have opted for conclusive research design by opting case study method.

• In my case I have opted for conclusive research design by opting case study

method.

• This research contains secondary data. A little bit primary source of data

collection is also used to get an insight of case study.

• All analysis and conclusion is derived on the basis of the case study data.
 • To select this case study random sample technique is used.

Sampling technique:

As it is a conclusive research , therefore this research contains secondary data. A little

bit primary source of data collection is also used to get an insight of case study. All

analysis and conclusion is derived on the basis of the case study data. To select this case

study random sample technique is used.

Data collection method:

As far as the study is concerned, sound information base is needed in order to classify the

problem quickly .Basically data is collected from two sources viz. primary source and

secondary source.

Sources of data:

Primary data

It consists of original information collected for specific purpose .Data is collected

through a direct source like survey to obtain the first hand information. Others resources

are written below:

• Discussion with my project guide

• Discussion with other members of the credit department.

Secondary data:

It consists of information that already exists somewhere and has been collected for

specific purpose in the study. The secondary data for this study is collected from various

sources like

• Websites

• Books

• Newspaper

• Financial magazine(weekly , business world, etc)

The reasons for using these sources for collecting data are:

• It provides more reliable results.

• It is easier to tabulate and interpret data gathered in this way.

 2.6 RATIONALE FOR THE STUDY

Offering credit is an operation fraught with risk. Before offering credit to an organization,

its financial health must be analyzed. Credit should be disbursed only after ascertaining

satisfactory financial performance. Based on the financial health of an organization,

banks assign credit ratings. These credit ratings are used to fix the interest rate and

quantum of installment.

This study aims to analyze the credit health of organizations that approach Dena Bank

for foreign exchange credit facilities. After analyzing credit health, the credit rating is

determined. On the basis of credit rating, the interest rate guidelines circular is consulted

to fix a price for the credit facilities i.e. determine the interest rate.
 2.7 LIMITATION OF THE STUDY

Limitations of this Study are as follows:-

 Time:

The short time duration of one & half months is very inadequate.

 Vast topic:

The subject credit appraisal under SME is too vast to study.

 Data gathering:

Gathering of data relating to various products of Dena bank was a little difficult task.

 Scrutinizing of information:

Data mining was a time consuming task. Useful information had to be extracted after

careful scrutinizing from the large data gathered.

 Chapter-

Introduction &

Emergence of

SMEs
 3.1 INTRODUCTION TO SME

YEAR 1950

In the year 1950, SME was defined as a size of Gross Investment in fixed assets

(incl. Plant & machinery, land & building etc.) Not exceeding Rs.5lakhs and strength of

workforce viz. Employment less than 50 workers per day using power or less than 100

workers per day without use of power.

YEAR 1950 TO 2004

Small scale industries (SSI) are those engaged in the manufacture, processing or

preservation of goods and whose investment in plant and machinery (original cost) does

not exceed Rs.1crore. This would include units engaged in mining or quarrying,

servicing and repairing of machinery. In this case of ancillary units, the investment in

plant and machinery (original cost) should not exceed Rs.1crore to be classified under

SSI.
 The investment limit of Rs.1crore for classification as SSI has been enhanced to

Rs.5crore in respect of certain specified items under hosiery, hand tools, drugs

pharmaceuticals and stationary items and sports goods by the Government of India.

YEAR 2006

The Government of India has enacted the Micro, Small and Medium Enterprises

Development (MSMED) Act, 2006 on June 16, 2006 which was notified on October 2,

2006. Consistent with the notification of the Micro, Small and Medium Enterprises

Development (MSMED) Act 2006, the definition of micro, small and medium

enterprises engaged in manufacturing or production and providing or rendering of

services has been modified.

 3.3 MSMED

Introduction:

MICRO:-

Micro (manufacturing) Enterprises

Enterprises engaged in the manufacturing/production or preservation of goods and whose

investment in plant and machinery (original cost excluding land and building and such items

as in 1.1.1) does not exceed Rs. 25 lakh, irrespective of the location of the unit.

Micro (service) Enterprises

Enterprises engaged in the providing/rendering of services and whose investment in

equipment (original cost excluding land and building and furniture, fitting and such items as

in 1.1.2) does not exceed Rs. 10 lakh.

SMALL:-

Small (manufacturing) Enterprises:

Enterprises engaged in the manufacture/production or preservation of goods & whose

investment in plant and machinery (original cost excluding land and building & the items

specified by the Ministry of Small Scale Industries vide its notification No.S.O.1722 (E)

Dated October 5, 2006 as furnished in Annexure I) does not exceed Rs. 5 crores.
Small (service) Enterprises

Enterprises engaged in the providing/rendering of services and whose investment in

equipment (original cost excluding land and building & furniture, fittings and other not

directly related to the service rendered or as may be under the micro, Small and Medium

Enterprises development, (MSMED), Act 2006) does not exceed Rs. 2 crore.

MEDIUM:-

Medium (manufacturing) Enterprises

Enterprises engaged in the manufacture/production or preservation of goods and whose

investment in plant and machinery (original cost excluding land and building and the items

specified by the Ministry of Small Industries vide its notification No.S.O. 1722(E) dated

October 5, 2006) is more than Rs. 5 crore but does not exceed Rs. 10 crore.

Medium (service) Enterprises

Enterprises engaged in the providing/rendering of services and whose investment in

equipment (original cost excluding land and building and furniture, fittings as such items as

in 1.1.2) is more than Rs. 2 crore but does not exceed Rs. 5 crore.

Bank’s lending to medium enterprises will not be included for the purpose of reckoning

under priority sector.

MANUFACTURING SECTOR SERVICE SECTOR

ORIGINAL INVESTMENT IN PLANT & ORIGINAL INVESTMENT IN
MACHINERY EQUIPMENTS
MICRO ENTERPRISES UP TO RS.25.00 LACS UP TO RS. 10.00 LACS.
SMALL ENTERPRISES FROM RS.25.00 LACS TO RS.500.00 FROM RS.10.00 LACS TO
LACS RS.200.00 LACS.
MEDIUM ENTERPRISES FROM RS.500.00 LACS TO FROM RS.200.00 LACS TO
RS.1000.00 LACS RS.500.00 LACS.
TINY UNIT WOULD BE MICRO ENTERPRISES.

SSI WOULD BE SMALL ENTERPRISES.

3.4 NEW NOMENCLATURE & CLASSIFICATION OF MSMED

SMEs have been established in almost all-major sectors
in the Indian industry such as:

1. Agriculture inputs

2. Chemical & Pharmaceuticals

3. Electrical, Electronics

4. Bio-engineering

5. Engineering

6. Food Processing

7. Electro-medical equipment

8. Textiles and Garments

9. Sports goods

10. Plastics products

11. Meat Products

12. Computer software

13. Leather and Leather goods etc.

As a result of globalization and liberalization, coupled with WTO regime, Indian

SMEs have been passing through a transitional period. Those SMEs who have international

business outlook, competitive spirit, strong technological base, and willingness to restructure

themselves they withstand the present challenges and comes out with shining colures by

adding up to contribution to the Indian economy.

 3.5 SWOT ANALYSIS OF SMES IN INDIA

STRENGTHS WEAKNESS

THEY CONTRIBUTE TO NATIONAL ECONOMIC ENCOUNTERS PROBLEMS DUE TO LACK OF FUNDS.

GROWTH . SMES LACK MARKETING SKILLS
THEY GENERATE EMPLOYMENT AND HELP IN SMES ARE NOT FAST IN ADAPTING THE CHANGING

VITALIZING INDIAN BRAND TO THE WORLD TRADE TRENDS

HELPS IN THE REGIONAL DEVELOPMENT NON AVAILABILITY OF TECHNICALLY TRAINED

EXPORT MARKET EXPANSION. HUMAN RESOURCES

TECHNOLOGICAL INNOVATION POOR MANAGEMENT SKILLS

THEY LACK IN TECHNOLOGICAL INFORMATION AND

CONSULTANCY SERVICES

OPPORTUNITIES THREATS

BILATERAL AND MULTILATERAL TRADE DUMPING FROM DEVELOPED COUNTRIES

AGREEMENTS LOT OF DISTRUST BETWEEN SMES AND FINANCIAL
CREDIT SUPPORT IS ENHANCED INSTITUTIONS

THEY GET SUPPORT FOR TECHNOLOGICAL UP- SLOW IMPROVEMENTS IN QUALITY TO MEET THE

GRADATION INTERNATIONAL STANDARDS

COMPREHENSIVE SUPPORT FOR CLUSTER VIRTUAL ABSENCE OF ENTERPRISE EDUCATION

DEVELOPMENT POOR INCENTIVE STRUCTURES FOR ENTREPRENEURS

MARKETING ASSISTANCE AND EXPORT PROMOTION NON-TARIFF BARRIERS FROM DEVELOPED COUNTRIES

SUPPORT

GROWING DOMESTIC AND INTERNATIONAL MARKETS

Chapter-4

Theoretical
Framework
 4.1 DISCUSSIONS ON TRAINING

My Work Profile:-

The summer training was held in the Regional office of Dena Bank. The work profile

at the office was based on the loans and advances given to small and median enterprises

(SME). Hence the whole work was based on the Pre-sanction formalities of credit given to a

particular enterprise. The responsibilities handled at the office were started from reading the

company’s project file (sent by the company to whom the loan is to be sanctioned) and

continued till the loan is sanctioned by the responsible authority according to the limit to be

sanctioned.
4.2 GENERAL INSTRUCTION ON LOANS AND ADVANCES

The loan is sanctioned by keeping in mind the various instructions and conditions:-

1. Efficient management of loans and advances portfolio has assumed greater significance

as it is the largest asset of the bank having direct impact on its profitability. In the wake

of the continued tightening of norms of income recognition, asset classification and

provisioning, increased competition and emergence of new types of risks in the financial

sector, it has become imperative that the credit functions are strengthened. RBI has also

been emphasizing banks to evolve suitable guidelines for effective management and

control of risk credits.

2. With a view to ensure a healthy loan portfolio, our bank has taken various steps to

bring its policies and procedures in line with the changing scenario which also aim at

effective management & dispersal of credit risks, strengthening of pre-sanction appraisals

and post- sanction monitoring systems. Further, bank has been continuously endeavoring

to strengthen the organizational set up by opening Specialized Branches to meet the

credit requirements of specific types of borrowers, imparting intensive credit

management training to staff and deployment of the trained staff at branches/offices

having potential for credit growth. Bank has laid down detailed guidelines to be followed

while considering credit proposals, some of the important ones are listed as under: -
 All loan facilities be considered after obtaining loan applications from the borrower and

compilation of Confidential Report on him and guarantors. The borrowers should have

the desired background, experience to run their business successfully.

 Project for which the finance has been granted should be technically feasible and

economically viable i.e. it should be able to generate enough surplus as to service the

debts within a reasonable period of time.

 Cost of the project and means of financing the same should be properly assessed and tied

up. Both under-financing and over- financing can have an adverse impact on the

successful implementation of the project.

 Borrowers should be financially sound, enjoy good market reputation and must have their

stake in the business i.e. they should possess adequate liquid resources to contribute to

the margin requirement.

 Loan should be sanctioned by the competent sanctioning authority as per the delegating

loaning powers and should be disbursed only after execution of all the required

documents.

 Projects financed must be closely monitored during implementation stage to avoid time

and cost overruns and thereafter till the adjustments of the bank’s loan.

3. Bank extends loan facilities by way of fund based facilities and/or non fund based

facilities. The fund based facilities are usually allowed by way of term loans, cash credit,

bills discounted/purchased, demand loans, overdrafts etc. Further, the bank also provides
 non fund facilities by way of issuance of guarantees, deferred payment guarantees, bills

acceptance facility under various schemes.

4. The foregoing list contains the usual types of facilities undertaken by the bank. In case

loan application is received for any particular facility which is not specifically mentioned

above, the same should be forward to controlling offices for considerations, provided the

same can be transacted within the overall policy of the bank.

5. The usual types of facilities sanctioned by the bank to the borrowers, as also other aspects

like Project appraisal, Post-sanction follow up, Management of NPAs, Documentation,

and Limitation etc. are discussed later. These are the briefly explanations hereunder:

1.0 WORKING CAPITAL FINANCE AND TERM FINANCE:

All advantages are granted basically to provide working capital or for term

finance. Working capital means the funds required for carrying on normal trading and/or

manufacturing activities. Term finance covers funds required for acquiring means of

production such as land and building and plant and machinery. Working capital limits are

granted for short periods of say, one year and have to be renewed at the end of that

period.

Proposal for term finance do not require renewal but only a periodical review. WCDL

is payable on demand on specific date, one year from the date of debit to WCDL account

in lump sum bullet payment.

2.0 PRODUCTION & SALES FINANCE:

 Working capital finance may be for the purpose of production i.e. for acquiring inventory

(or against inventory) or for sales i.e. for financing receivables. Limits such as cash credit,

loans/overdrafts are for production whereas bill limits against hypothecation of book debts

are part of sales finance provided by banks.

3.0 FUND & NON FUND:

Fund limits are those in which the bank’s funds are directly utilized, as for instance, in

the case of limits against stocks or purchasing/discounting of bills. Non-fund limits are those

in which the bank’s funds are not directly involved but where the bank’s funds would be

involved in certain contingencies, as for example, in guarantees and letter of credit limits.

4.0 SECURDED & UNSECURED LOANS:

Advances may be granted against security or without security. Thus, an overdraft limit

may be given against shares or securities or as a clean limits. Similarly, bills limits could be

secured or unsecured and so also packing credit limits. Temporary overdrafts are also clean

advances. Limits which are granted against security, are secured by creating a charge over

the security. This charge could be by way of pledge, hypothecation, mortgage (on immovable

property) or assignment.

5.0 OVERDRAFTS:

All overdraft accounts are treated as current accounts. Normally overdrafts are allowed

against the bank’s own deposits, govt securities, approved share or debentures of companies,

life insurance policies, govt supply bills, cash incentive, duty drawbacks, personal securities

etc.
6.0 TERM LOANS:

Tern loans are sanctioned for acquisition of fixed assets like land, building, plant &

machinery, office equipments, furniture & fixture, etc for purchase of transport vehicles, for

purchase of agriculture equipments, machinery & other movable assets like tractors, pumps

sets, cattle, etc.

The term loan would be a loan, which is not a demand loan and is repayable in terms i.e.

installments irrespective of period or the security cover.

Term loans are normally granted for the period varying from 3 to 7 years and in exceptional

cases beyond 7 yrs.

7.0 CASH CREDIT ADVANCES:

Cash credit account is a drawing account against credit granted by the Bank and is

operated in exactly the same way as a current account on which an overdraft has been

sanctioned. The various types of securities against which CC is allowed are pledge,

hypothecation of goods or produce, pledge of documents of title to goods, mortgage of

immovable property, book debts, trust securities, etc.

In CC accounts borrower is allowed to draw on account within the prescribed limit, and when

required.

8.0 LETTER OF CREDIT:

Letter of credit (LC) is issued by the bank at the request of its customer in favor of third

party informing him that the bank undertakes to accept the bills drawn on its customers up to

the amount stated in the LC subject to fulfillment of the conditions stipulated therein.
Therefore, when bank issues LC, it assumes responsibility to pay its beneficiary on

production of bills drawn in accordance with the terms and conditions of the LC.

Whenever the bills drawn under LC are not paid by the party from its own resources or out of

available DP in the CC account on its due date, the LC is said to have devolved.

9.0 GUARANTEE:

Issuing of guarantees on the behalf of their customers to third parties is one of the

services rendered by commercial banks. Such guarantees are contracts to perform the

promise or discharge the liability of the constituent on whose behalf they are given, in case of

his default or failure to perform the contracts undertaken by him. The party in whose favor

the guarantee is given is called the beneficiary, whereas the issuing bank is called the

guarantor and the third party on whose behalf of guarantee is given is called the principal

debtor. Every guarantee must specify the amount and period of the liability to be undertaken

by the bank.

10.0 DEMAND LOAN:

A Demand loan account is an advance for a fixed amount and no debits to the accounts are

made subsequent to initial advance except for interest, insurance premium and other sundry

charges.

Demand loan would be loan, which is repayable on demand in one shot i.e. bullet repayment.

Normally, demand loans are allowed against the Bank’s own deposits, govt. securities,

approved shares or debentures of companies, life insurance policies, pledge of gold/silver

ornaments, and mortgage of immovable property. A separate account for each demand loan

should be kept in the appropriate demand loan ledger.

 4.6 CREDIT RATING SCHEME

A credit rating scheme has been introduced to encourage the SSI units to get their credit

rating done by the reputed credit rating agencies, with a view to facilitate credit flow to them

and enhancing the comfort-level of lending banks. The scheme, being implemented by the

NSIC, envisages that 75 percent of the cost of the credit rating exercise, with a maximum

limit of Rs.40,000 per SSI unit, would be reimbursed to the SSI units availing of this one-

time facility. Six credit rating agencies namely, CRISIL, ICRA, Dun and Bradstreet, Onicra,

Care and Fitch, which have agreed to credit, rate SSI units through NSIC.

Existing Interest rate for Micro & Small Enterprises:-

Rating Grade Interest Slabs(S.E.) Interest Slabs(M.E.)

AAA High Prime *BPLR BPLR
AA Medium Prime BPLR + 0.25% BPLR + 0.25%
A Low Prime BPLR + 0.50% BPLR + 0.50%
BBB Excellent BPLR + 0.75% BPLR + 0.75%
BB Best BPLR + 1.00% BPLR + 1.00%
B Better BPLR + 1.25% BPLR + 1.50%
C Very Good BPLR + 1.50% BPLR + 2.00%
D Good BPLR + 1.75% BPLR + 2.50%
E Satisfactory BPLR + 2.00% BPLR + 3.00%

TIME PREMIUM – 0.50% [FOR TERM LOAN FOR MORE THAN 36 MONTHS.]
 4.7 CIBIL (CREDIT INFORMATION BUREAU (I) LTD)

In terms of RBI guidelines, all banks have been advised to submit credit information

in respect of their borrowings accounts to cibil, to create a database to be used by the member

banks for extraction of credit information reports (CIR’S) on prospective of submission of

credit information to CIBIL, RBI had advised banks that till such time the appropriate

legislation is passed by the Govt, consents of borrowers are to be obtained.

4.8 CREDIT MONITORING ARRANGEMENT (CMA)

Effective from October 10,1988, RBI replaced the CAS by new scheme known as

Credit Monitoring Arrangement (CMA).

Under the scheme RBI would carry post sanction scrutiny of proposals relating to

sanction of term loans as well as working capital limits beyond stipulated level.

When CMA was introduced banks were required to report to RBI for post sanction scrutiny

all sanctions of working capital limits Beyond Rs. 5 crores and term loan exceeding RS. 2

crores from the banking system.

Since December1992, the stipulated level for post sanction scrutiny by RBI for

working capital facilities (fund based) has been raised to Rs.10 crores and above. Any

sanction of term credit including deferred payment guarantees in which the share of the

banking system is Rs. 5 crores is required to be reported.

 Chapter-

Data

Processing

&
 Analysis

RATIO ANALYSIS

The performance of a unit is judged in the following parameters:-

a) Growth in sales

b) Margin of profit

c) Utilization (i.e. turnover) of assets

d) Financial strength/health

e) Return on investment

Financial ratios in respect of these parameters should be calculated and used as a measure of

evaluation of performance. However, ratio by themselves cannot be good or bad but must be

judged against ratio of previous years or against those of similar units in the same industry or

of an entire industry. Reasons for an upward or downward trend in ratios have to be found

and the ratios interpreted accordingly.

1. Growth in Sales:
Growth in sales is an important indicator of progress of a unit. The growth may be either in

terms of value or in terms of number of unit sold. Thus, although the figures may show an

increase in sales, the increase may be due to an increase in the price per unit.

The ratio for evaluating growth in sales is

Percentage increase = (Current year’s sales-previous year’s sales) *100

Previous year’s sales
This ratios can be calculated in terms of amount or in terms of number of unit sold.

2. Margin of profit:

Every concern would like to make a profit. However, the margin of profit and the quantum

have to be compared over the years. There are four ratios through which this can be done.

a) Gross margin ratio = Gross Profit * 100

Net Sales

b) Operating profit margin ratio = Operating profit * 100

Net Sales

c) PBIT ratio = Profit before interest & tax * 100

Net Sales

d) Net profit margin ratio = Net profit * 100

Net Sales
The higher the ratio, the higher is the operating efficiency of the unit.
3. Utilization of Assets:

The efficiency of a concern is judged from the extent to which it utilizes its assets. If assets

are not fully utilized, it would mean that the money invested in these assets is lying idle and

this is a cost to the firm. The assets could be land and building, plant and machinery or

inventory or debtors; each of these should be utilized in such a way that they contribute the

maximum towards the profits of the firm. For a manufacturing concern, the use of assets is

for achieving sales and hence ratios based on sales and assets are used to evaluate

performance. The following ratios are useful:-

a) Total assets turnover ratio = Gross Sales – Excise duty

Total Tangible Assets

b) Current assets turnover = Gross Sales – Excise duty

Current Assets

c) Fixed assets turnover ratio = Gross Sales – Excise duty

Fixed Assets

Normally, a higher ratio means better utilization of assets. However, too high a ratio

(especially Current Assets Turnover ratio) could mean inadequate investment for that levels

of activity-in other words, over trading.

Another set of ratio is the “number of months” ratios. There are:-

a) Number of months of raw material = Raw material stock

Monthly consumption of raw material
 (where monthly consumption = annual consumption
12

b) Number of months finished goods = Stock of semi-finished goods

Monthly cost of production

c) Number of months finished goods = Stock of finished goods

Monthly cost of sales

d) Number of months debtors = Debtors

Monthly gross sales

(i.e. period of credit allowed by the concern)

Or

Turnover of receivables

The higher the number of months ratio, the greater is the investment needed for a given level

of production and sales. Usually, lower ratios indicate better utilization of current assets.

4. Financial Strength:

There are two aspects of financial strength-liquidity and solvency.

Liquidity is the ability of the firm to pay off current liabilities (normally) by the conversion

of assets into cast through sales.

Current Ratio = Current Assets

Current Liabilities
According to the guidelines given to DENA BANK the ideal level is at 1.33:1 however the

acceptable level is at 1.17:1.

Liquidity can also be measured through,

Net Working Capital = Current assets – Current liabilities

The higher these ratios, the higher the liquidity.

Solvency is the ability of the firm to repay all its borrowings (i.e. current) as well as term

liabilities. This question will of course arise only when the firm will be liquidated and all its

assets disposed off. The solvency is therefore measured thus:

Quick Ratio = total tangible assets

total outside liabilities
Where,
Tangible assets = total assets – intangible assets (like goodwill, patents, preliminary and

formation expenses etc.)

Outside Liabilities = all liabilities except owners’ capital, reserves and surplus/deficit in

Profit and Loss account.

Solvency (which also means tangible assets minus total tangible net worth) can also

be determined by the formula, total tangible assets total outside liabilities.

The higher the proportion of tangible assets to outside liabilities, the better is the solvency.
There are two other measures of solvency, both based on debt/equity ratios. They are:

a. Outside liabilities
Tangible net worth

b. Term liabilities
Tangible net worth
The second measure is used by term lending institutions. The lower these ratios are, the

better is the financial strength of the concern.

In order to judge whether the borrower will able to pay loan installments and interest

periodically, the Debt Service Coverage (D.S.C.) ratio is used. It is calculated thus:

D.S.C. Ratio = Net profit (after tax) and interest on long term debts & depreciation
Installment of long term debt & deferred payments & interest

It is also important for the lender bank to assess the firms debt paying capacity over a period.

Such capacity is derived by calculating ratio like Debt Service Coverage Ratio minimum

acceptable level is 1.50.

Debt Equity Ratio = It is a financial ratio indicating the relative proportion of equity and

debt used to finance a company's assets. This ratio is also known as Risk, Gearing or

Leverage. A high debt equity ratio is not preferable by an investor as the company already

has acquired high amount of funds from market thereby reducing the investor share over the

securities available, increasing the risk.

Interest coverage ratio:-

Interest Coverage Ratio is an indicator as to the number of times the profit covers the

interest liability of the company. This is a risk parameter and an indicator to the extent to

which the interest liability will be serviced on the time. Interest for this purpose would mean

gross interest payable by the borrower and profit would mean the gross profit before interest.

Interest Coverage Ratio = Net profit + depreciation + interest

Gross interest payable

The more the number of times of coverage of interest the better it would be for the financial

strength of the company. Interest coverage should be minimum of 2.25 times.

5. Return On Investment:

Return on any amount invested in a business have to be taken into account when

we talk of profitability. The following are the ratios:

a) Return on total assets = Profit before interest & tax * 100

Total tangible assets

b) Return on net worth = Net Profit * 100

Tangible net worth
Chapter-6

Case Study
 DENA BANK, SME CELL, REGIONAL OFFICE, NEW DELHI

PROPOSAL No:-ABC Date:15/07/2011

Proposal received at Proposal received at RO Complete Proposal received at
Branch HO
Date: 2-2-2011 Date :18.3.11/17.3.11/ Date
15.3.11

FOR APPROVAL
ASST. GEN. MANAGER

1. GIST OF THE PROPOSAL

 Proposal for :
1. Renewal cum Enhancement of Working Capital limit from Rs. 55.00
Lacs to Rs. 65.00 lacs.
2. Renewal of existing Negotiation of Bills under L/C Limit of Rs. 50.00
Lacs. (outside MPBF)
3. Renewal of Forward Cover Limit of Rs. 200.00 Lacs.*

2. PROFILE

Name of borrower XYZ

Address 15B Friends Colony (West),

(Regd. Office) New Delhi-65.
Tel.: 011-41629685, 26933279

RZ-3A/11, Tuglakabad Extension,

Unit Address
New Delhi-19.

Branch: Okhla Region: New Delhi

Established on 01.04.2008 Whether appearing in

Dealing with us
08.04.2008 Standard B List No
since
Yes
Group: Willful Defaulter List No
(XYZGroup)
Manufacturing
Line of Activity and export of Defaulter / CIBIL List No
readymade
Key
Key Person
Person/Promote Sh. Mohit Gupta
r Promoter

Multiple /
Sole EXISTING PROPOSED
Consortium
 Asset
Leader Bank N.A. Standard Standard
Classification
Asset Category
Our share: 100.00% as per CMC N.A. P1
Guidelines
FB - 115.00 D2K Codes & Description
READY MADE GARMENTS
NFB- % 0.00 Activity 6519
(NON-BRANDED)
STL- 0.00 Sector 15 SME
TL- 0.00 Special Category

Priority No

BSR Code: Basel II Code:

Risk Weightage 100% Provisioning: 0.25%

Credit Risk Risk Grade as per ABS Dt“Best”
BB
Rating 31.03.09 BPLR+1.00%

3. NAMES OF DIRECTORS/ PARTNERS / PROPRIETOR & NET WORTH

(Rs. in Lacs)
Sr. Name Net Worth As on Basis
1 Mohit Gupta 35.23 10.03.2011 As mentioned in
Branch Process
Note

Whether Proprietor / Partner/ Director / Guarantor has any No

relationship with any Director or Senior Official (Scale IV &
above) of the Bank. If so give details (Refer to Guidelines)
* CA certificate confirming Net Worth of the Proprietor to be obtained by the Branch before
release of enhanced limit and Branch to ensure that the same is in accordance with Net Worth
as mentioned in the Process Note.

4. Major Shareholders:
S.N Name Status No. of Percentage
Share
N.A.( Proprietorship Firm)
5. EXPOSURE: [Rs in lacs]
Borrower EXPOSURE Existing Proposed Variation(+/-)
Fund Based 105.00 115.00 +10.00
Non Fund Based NIL NIL NIL
Forward Cover* 4.00 4.00 0.00
Total Credit Exposure 109.00 119.00 +10.00
Investments NIL NIL NIL
Other Commitments NIL NIL NIL
Total Exposure 109.00 119.00 +10.00

GROUP EXPOSURE
Fund Based 122.29 128.84 +6.55
Non Fund Based NIL NIL NIL
Forward Cover* 4.00 4.00 0.00
Total Credit Exposure 122.29 128.84 +6.55
Investments NIL NIL NIL
Other Commitments NIL NIL NIL
Total Exposure 122.29 128.84 +6.55

* (Specified 2% of forward cover limit, which is to be reckoned as part of exposure as per

extant guidelines.)
# The Firm has availed Car Loan of Rs. 4.50 lacs and the present outstanding is Rs.3.63
Lacs. The account is classified as Standard. However, being retail exposure, the present
outstanding is not reckoned in the overall exposure.
** Further the borrower is presently enjoying OD limit against FDR and the outstanding as
on date is Rs.6.52 Lacs. The account is classified as Standard. Since the loan is against FDR
the outstanding is not considered as part of overall exposure in the account.
With a view to ease the liquidity position, we propose a stipulation that the borrower should
liquidate the OD facility before release of the enhanced limits.

6 COMPLIANCE TO PRUDENTIAL / INTERNAL EXPOSURE LIMITS:

(Rs in crores)
As per RBI As per Internal Guidelines
guidelines
 For Corporate For Non
Corporate
Individual 476.96 400.00 15.00
Group 1271.80 800.00 60.00
Whether the limits proposed No No No
exceed the prudential exposure
norms (Individual / Group)
In case of exceeding, details of N.A.
permission from the competent
authority

7. BRIEF HISTORY OF SANCTIONS INCLUDING REVIEWS AND ADHOCS

DURING THE PAST TWELVE MONTHS.
Sanctions Dt.
11-07-09 Sanctioned by Dy. Regional Manager(NDR)
02-02-10 Approval for one time use of Negotiation of Bills under
L/C by DGM.

6. PRESENT PROPOSAL:
7.
To permit the following::
I. Status of existing and proposed limits (Rs in lacs)

Facility Existing Outstand DRAW Irregul Proposed Variatio

ing as on ING ar/ n
Limi Margin 10.01.10 Limit Margin (%)
POWE Overdu
t (%)
R e
amount
a) Fund Based
1 PCH cum 55.00 PC- 54.59 55.00 0.00 65.00 PC-10.00% +10.00
FBP 10.00%
2 Neg. of 50.00 23.56 50.00 0.00 50.00 0.00
Bills/LC
Sub-Total (a) 105.0 78.15 105.00 0.00 115.00 +10.00
0
b) Non - Fund
Based
0.00 0.00 0.00 0.00 0.00
Sub-Total (b) 0.00 0.00 0.00 0.00
c) Forward 4.00* 1.38 0.00 4.00 0.00
Cover *
d) Grand Total 109.0 79.53 0.00 119.00 +10.00
(a+b+c) 0
e) Investment 0.00 0.00 0.00 0.00 0.00
Exposure
TOTAL 109.0 79.53 0.00 119.00 +10.00
EXPOSURE 0
*Borrower is enjoying Forward Cover Limit of Rs. 20.0 lacs ( 2% of the limits is reckoned as
part of exposure, as per extant guidelines).

II. SECURITY / DOCUMENATION

a) Prime Security (Rs. in lacs)
Nature Value Basis
Hypothecation of Stocks and Book 81.57 Paid Stocks as per Stock Statement of
Debts Nov.2010

b) Collateral Security (Rs. in lacs)

Nature of Type of Value Basis / Source Whether eligible
Security Charge under CRM
(Basel II Norms)
 Residential Equitable 680.26** Valuation Report by Banks’ No
property Mortgage Panel Advocate Shri K.C.
belonging to Talwar, as on 20.02.09.
Mr. M.C. Gupta As per Legal Opinion-cum-
situated at 15B Non-Encumbrance
Friends Colony Certificate by our
(West), New Panel Advocate, Shri Kalim
Delhi-65, Ur Rehman dated 08-07-09,
comprising of the subject property
418 sq. yards bears clear title and is
having marketable.
construction on
Ground, First
and Second
Floor.
Total Collateral Security (considering Realisable Value of property) is Rs 680.26 lacs

The said property is also mortgaged to the Bank for Mortgage Loan of Rs. 10.85 Lacs
sanctioned to Sh.. Mahesh C. Gupta, Smt. Shashi Khandelwal, Sh. Vikas Gupta, Sh. Mohit
Gupta –O/S as on 10.01.2010 being Rs. 7.95 Lacs and Machinery Term Loan sanctioned to
M/s xyz Apparels Inc-O/S as on 10.01.2010 being Rs. 5.89 Lacs. The conduct of the
aforesaid accounts are satisfactory as reported by the Branch and both the accounts are
classified as Standard.

** Value of Collateral Security (Rs. In Lacs.)

S. No. Particulars Value
1. Market Value of the Property 867.63
2. Realisable Value of the Property 694.10
3. Less: O/s in Mortgage Loan 7.95
4. Less: O/s in Machinery Loan to xyz Apparels 5.89
Total 680.26

i) Percentage coverage of Collateral Security:

 1 Total value of Collateral Security(considering Rs. 680.26 lacs
Realisable value)
2 Of which our share Rs. 680.26 lacs
3 Total limits proposed from our Bank Rs. 128.84 lacs
4 Collateral Coverage 527.99%

ii) Reasons in case of dilution of security coverage: N.A.

c) Date of creation of Charge: 22.07.2009

d) Date of subsequent modification of charge: N.A.
e) Date of vetting of documents by legal officer /Panel Advocate: 29.07.2009

f) Name of Guarantors & their Net Worth (Rs. in lacs)

Name Relationship Net Worth As of Basis

Mahesh Chand Gupta Father of Prop. 867.00 lacs 30.09.09 Annexure CC
Smt. Shashi Mother of Prop. 4.50 lacs 30.09.09 Annexure CC
Khandelwal
Vikas Gupta Brother of Prop. 8.04 lacs 30.09.09 Annexure CC

* Net Worth of the guarantors includes their investment in the subject Company and Group
Companies.
*CA Certificate confirming Net Worth of the Guarantors to be obtained by the Branch before
release of enhanced limit and Branch to ensure the same is in accordance with Net Worth as
mentioned in the Process Note.

III. CREDIT RATING & Pricing:

Pricing Existing Proposed

Credit Rating Score Based on ABS [ March ’08 / Mar ‘08] BBB BB
Applicable interest rate as per Credit Rating BPLR+0.75% BPLR+1.00% at
present
 Interest rate presently Charged and Proposed As per HO/RBI guideline issued
from time to time.
Concession if any Nil
Interest Rate charged by Lead Bank N.A.
Commission on NFB Limits N.A.
Processing Charges 0.25% of the Sanctioned Limit
- Credit Rating Work Sheet furnished as Annexure 1

a) Factors contributing to the up gradation / slippage in credit rating: Change in

the parameters of Risk Rating and lower profitability of the Firm.

b) Justification for proposing lower rate of interest/concession in

charges/process fees: N.A.

IV. Permissions for Deviations, Issue of NOCs etc & Concessions in service charges :
N.A.

9. Ratifications required for actions, exceeding permitted etc. beyond discretionary

powers: N.A.

10. COMPANY PROFILE (in brief)

M/s XYZ Exim is Proprietary concern of Sh. Mohit Gupta started in April 2008 and is
engaged in manufacturing and export of readymade garments. Sh. Mohit Gupta was earlier
working as a Partner in the Partnership Firm M/s xyz Apparels Inc. along with Sh. Vikas
Gupta and were availing credit facilities since 1999. The Partnership Firm was availing
various credit facilities from which a Machinery Term Loan is still operational having a
current outstanding balance of Rs. 5.89 lacs as on 10.01.2010.
Sh. Mohit Gupta, Proprietor, has a decade long experience in the manufacturing and
exports of readymade garments. They had been earlier sanctioned credit limits on 02.02.09
by DRM, New Delhi of Negotiation of Bills under L/C for one time use of Rs. 100.00 lacs.
The conduct of the account has been satisfactory.
The Firm manufactures Hi Fashion garments like ladies tops, blouses, dresses, skirts and
trousers etc. and exports to various customers in France, Germany and USA. The goods are
currently exported to M/s Palais Oriental on D.A. as well as L/C at 90 days sight basis, rest
all the customers are on L/C-DP on sight basis.
1. Palais Oriental- France
2. Ternay Diffusion Carling- France
3. Nolita NYC Inc.- USA

11. INDUSTRY SCENARIO

a. Industry Manufacturing and exports of readymade garments.

Categorisation
b. Demand and supply Due to slowdown in the Global Economy, mainly
situation of the product – in the EU and USA there has been slackness in the
present and projected demand and business. The Govt has by various
(source of information) measures like increase in Duty Drawback Rates and
decrease in rates of interest in pre and post
shipment credits has helped the Garments Exports
sector to maintain its competitive edge. With now
the Global Economy is looking up, it is expected to
further increase & creates fresh demand as India is
one of the main producers of high quality cotton
garments. The raw material consisting of mill made
and a power loom fabric is readily available in
Delhi through various traders. The firm is located in
the one of the hubs of garments manufacturing in
India and hence essential requirements of skilled
labour and other value added services like
embroidery, dyeing and printing etc. are easily
available. The entire requisite infrastructure is also
in place.
c. Major players & their Mr. Mohit Gupta, proprietor has over the years
market share developed products for his own overseas customers,
who send their own designs which are to be
developed by the Firm under various brand names
like ELLYPS, ANJINI, CARLING etc and
therefore the firm would enjoy good clientage. As
the market for this product is good the scope for
increase in sales is immense.
d. Bank’s exposure in Rs. 1757.13 lacs
this industry as of Sep.
2009
e. NPA position as of Rs. 239.07 lacs i.e. 15.74% of the aggregate Bank’s
Sep. 2009 exposure.
f. Cyclical trends Since the firm will be meeting requirements of
manufacturing mainly producing garments made of
cotton based fabrics they have more orders for the
summer month production and sales of it is mainly
from Oct-May. For the winter season the orders are
less than summers and hence there is a slight cyclic
trend in this business.
g. Govt. policies There are specific Govt Policies for boost in this
sector like Duty Drawback, etc to boost this
industry. Presently with the abolishment of quota
system the Govt policies are favourable for exports
as this sector is one of the major sources of Foreign
Exchange earning for the country. The govt has
also reduced the rate of interest on pre and post
shipment credit availed through Banks’ by way of
Interest Subvention.
 h. Whether the product No
is an import substitute, if
so, what is the landed
cost of import and what is
the production cost of the
indigenous manufacture
i. Availability of raw Easily available.
materials, labour,
infrastructural advantages
j. What are internal & The proprietor is well experienced in this line of
external advantages of business. The Firm has installed the latest
the borrower/technology machinery/ infrastructure etc. for execution of
used orders as per the specification of buyers. The Firm
adheres to strict quality control and timely delivery
of shipment/ execution of orders. Since the
proprietor plans to work with the same customers
along with new customers, the firm is assured of
repeated orders from them.
k. What are the The trade is very responsive to price factor as the
weaknesses trade is very competitive from Indian and other
Asian Countries viz. China.
l. What are the relative Now with the revival of the Economy there would
opportunities be fresh & new opportunities for export of
readymade garments.
m. What are the threats Stiff competition

n. Any other Nil

information

12. PRODUCTION CAPACITY :

Production Capacity Existing Proposed

Installed
Utilised
 % Utilisation Firm vide Letter dated 14-12-2009 has informed us
that a lot of production is done in house as well as
from outside on job work basis depending on the
needs of the orders. Hence it is difficult to assess
production and capacity utilisation

13. MARKET CAP : N.A. (not a listed Company)

14. FINANCIAL INDICATORS : (Rs in

lacs)
Audited Audited Estimate Projection
As on 31.03.2008 31.03.2009 31.03.2010 31.03.2011
XYZ
Apparels XYZ Exim XYZ Exim XYZ Exim
i. Capital 22.10 15.62 21.17 26.60
ii. Reserves & Surplus 3.55 5.95 7.40
iii. Intangible Assets 0.00 0.00 0.00 0.00
Tangible Net worth 22.10 19.17 27.12 34.00
Net Working Capital 19.79 17.11 19.80 23.90
Current Ratio 1.29 1.41 1.24 1.29
Net Block 18.16 5.85 19.50 18.36
Net Sales 288.28 312.24 360.00 381.50
- of which exports 262.11 287.61 330.00 350.00
PBDIT 20.35 11.76 17.31 20.14
Gross Profit - PBDT 6.49 4.65 8.31 10.64
Net Profit / Loss – PAT 3.12 3.55 5.95 7.40
Depreciation 3.37 1.10 2.36 3.24
Cash Accruals 6.49 4.65 8.31 10.64
PBDIT/ Gross Sales 0.07 0.04 0.05 0.05
Gross Profit Margin 2.25% 1.49% 2.31% 2.79%
Net Profit Margin 1.08% 1.14% 1.65% 1.94%
TDER (TOL/TNW) 3.14 2.17 3.03 2.40
Interest Coverage Ratio 1.47 1.65 1.92 2.12
Current Assets to Turnover 5.40
Ratio 15.84 6.00 6.36
15. Comments on financial indicators, in brief:

Other Current Assets :

Other Current Assets of Rs 9.38 lacs as of 31.03.09 comprise the following :
 (Rs in lacs)
DBK Receivable IGI 8.31
DBK Receivable JNPT 0.64
E.C.G.C. 0.10
VAT 0.33
---------------
Total 9.38

Total Debt Equity Ratio (TDER):

The TDER of the Company stood at 2.17 as of 31.03.09, which is under the norms
considering Bank’s desirable/benchmark TDER of 4:1 (in case of SSI units). The estimated
and projected TDER for the financial year 2009-10 and 2010-11 is found to be 3.03 and 2.40
which is again under the bank’s desirable/benchmark. The same indicates satisfactory long
term solvency of the Borrower.

Current Ratio :
Current Ratio stood at 1.41 as of 31.03.09. The same is above the minimum
desirable/benchmark level of 1.10 in terms of Bank’s Loan Policy guidelines. The Current
Ratio is estimated at 1.24 as of 31.03.10 and is projected at 1.29 as of 31.03.11, which is
above the benchmark level. The same is indicative of satisfactory liquidity position of the
borrower.

Current Asset to Turnover Ratio:

Current Asset to Turnover Ratio is above the desirable level of 1.75.The same is indicative of
satisfactory turnover of stocks.

I. Positive indicators
Sales:
Th Net Export Sales projected for the next two years is as under

2009-10---------Rs. 360.00 Lacs

 2010-11---------Rs. 381.50 Lacs.

The Firm projects Export sales of Rs. 360.00 Lacs for the year 2009-10 & Rs. 381.50 Lacs
for the FY 2010-11. The Firm has already achieved sales of Rs. 184.01 lacs till 30-11-09
having achievement index 76.67% & have confirmed orders for Rs. 85.87 lacs as on
10.01.2010 to be shipped out by end of January, L/C of which already been received. We
have further been informed that they are in final stages of negotiation for further orders of
approx. Rs. 50.00 lacs. Thus the Firm is optimistic towards achieving the estimated
Turnover.

II. Negative indicators, if any, with reasons

Unsecured Loans:
Borrower has informed that there was an unsecured loan for Rs. 6.32 lacs from Mr. M.C.
Gupta, father of the prop. during the FY 2008-09. Unfortunately due to his ill health the same
had to be liquidated to him during February- March 2009, consequently the total unsecured
loans fell to Rs. 1.29 as on 31.03.2009 as against projections for Rs. 7.50 lacs. At present
unsecured loan stood at Rs. 2.66 lacs and Branch to obtain and keep on record an undertaking
from the borrower that the same would be continued during the currency of Bank finance.

III. Auditor’s remarks and Management replies. Nil as reported by the Branch.

IV. Contingent Liabilities: Nil.

V. Current performance trends: Rs in lakhs

Estimated Net sales turnover for the FY 2009-10 360.00
Achievement till 30.11.2009 184.01
Pro-rata achievement 76.67%

VI. Comment on current performance trends:

 The Firm projects Export sales of Rs. 360.00 Lacs for the year 2009-10 & Rs. 381.50 Lacs
for the FY 2010-11. The Firm has already achieved sales of Rs. 184.01 lacs till 30-11-09
having achievement index 76.67% & have confirmed orders for Rs. 85.87 lacs as on
10.01.2010 to be shipped out by end of January, L/C of which already been received. We
have further been informed that they are in final stages of negotiation for further orders of
approx. Rs. 50.00 lacs. Thus the Firm is optimistic towards achieving the estimated
Turnover.

VII. INTER-FIRM COMPARISON (PEER GROUP)

(In case aggregate limit exceeds Rs.5000 lakhs)
(Rs in lakhs)
Particulars Our borrower Company A Company B Company C
Sales
Net Worth
Net Profit
Borrowing N.A.
D/E Ratio
Current
Ratio

16.A. ASSESSMENT OF WORKING CAPITAL REQUIREMENTS : (Rs in lacs)

Audited Estimated Projected

31.03.09 31.03.10 31.03.11
Net Sales 312.24 360.00 381.50
1 Total Current Assets 58.73 101.90 105.40
Other Current Liabilities (Other than
Bank Borrowing and TL installment
2 payable within one year) 20.71 9.40 8.90
3 Working Capital Gap (WCG) (1 - 2) 38.02 92.50 96.50
Min Stipulated NWC 25% of TCA
4 excluding Export Receivable. 12.50 20.98 21.35
5 Actual/Projected Net WC 17.75 22.50 26.50
6 Item 3 minus 4 25.52 71.52 75.15
7 Item 3 minus 5 20.27 70.00 70.00
8 MPBF (Item 6 or 7 whichever is lower) 20.27 70.00 70.00
9 Excess borrowing 0.00 0.00 0.00
B. INVENTORY AND RECEIVABLE LEVELS: (Rs in lakh)
Inventory Audited Projected Estimated
Valu
Months e Months Value Months Value
31.03.09 31.03.10 31.03.11
Raw Materials 0.00 0.00 0.00 0.00 0.00 0.00
Work in Progress 0.00 0.00 0.00 0.00 0.00 0.00
Finished Goods 0.83 19.71 2.18 60.00 2.09 60.00
Receivables
- Domestic 0.00 0.00 0.00 0.00 0.00 0.00
- Export 0.36 8.72 0.65 18.00 0.69 20.00
Stores & Spares 0.00 0.00 0.00
Creditors 1.43 17.89 0.56 9.00 0.67 8.50

C. TURNOVER METHOD:
(Rs. In lacs.)
S.No. Last Year Estimates Projections
Actual
Year Ending 2008-09 2009-10 2010-11
(i) Projected/Accepted Turnover 312.24 360.00 381.50
(ii) Working Capital Funds @ 25% 78.06 90.00 95.37
of (i)
(iii) Of which Bank Finance @20% 62.45 72.00 76.30
(iv) Min. 5% Borrower’s 15.61 18.00 19.07
Contribution
(v) Actual/Projected NWC 17.11 19.80 23.90

D. COMMENTS ON ASSESSMENT OF WORKING CAPITAL WITH

JUSTIFICATION:
The working capital cycle stood at 1.19 months during FY 2008-09 comprising inventory
holding of 0.83 months and receivables at 0.36 months’ sales. The borrower has now
estimated working capital cycle of 2.83 months during FY 2009-10, comprising inventory
holding of 2.18 months and receivables at 0.65 months.
Nature of business of the borrower is seasonal considering the fact that most of the garment
exports to UK and US for Spring-Summer Season takes place during the period between
November to March.

Receivables :
In Balance Sheet Analysis, receivables have been taken as Rs 8.72 lacs as Rs 102.85 lacs out
of them have been excluded since these bills have been negotiated under FLC and
accordingly FLC outstanding is also excluded from Bank Borrowings. The Firm exports on
L/C-90 days DA/DP basis.

Receivables have been estimated at 0.65 months (Rs 18.00 lacs) and projected at 0.69 months
(Rs 20.00 lacs), as Rs 50.00 lacs have been excluded from Bank Borrowings towards export
bills negotiated under FL/C. The estimated and projected holding of receivables is considered
need based and reasonable to achieve the estimated/projected sales turnover.

Sundry Creditors:
The creditors for goods during FY 2008-09 stood at 1.43 months’ purchases (Rs 17.89 lacs)
which is estimated at 0.56 months’ (Rs 9.00 lacs) during FY 2009-10. The main reason for
low creditors’ level during FY 2009-10 is as under :

The Firm has represented that they had received certain goods during the last week of
March’09 for their suppliers, which were under checking as on the Audited date (31.03.09)
and hence remained unpaid as on that date. The same was paid during 1st week of April out
of available PCH limit. The creditors’ level is projected at 0.67 months (Rs 8.50 lacs) during
FY 2010-11, which is almost in line with the creditors’ holding level during FY 2009-10. In
view of the above, the estimated and projected creditors’ holding period is considered need
based and reasonable.
Based on the accepted level of holding and receivables, the working capital limit works out
to Rs 70.00 lacs under Modified MPBF Method during FY 2009-10 and FY 2010-11.

However, the Drawing Power, as of 31.03.10, based on the accepted holding levels as above,
works out as under:
Particulars Amount (Rs in lacs) Margin Drawing Power
(Rs in lacs)
2009-10 2010-11 2009- 2010-11
10
Stocks 60.00 60.00
10.00%
Less: Sundry Creditors 9.00 8.50
45.90 46.35
Paid Stock 51.00 51.50
Receivable 18.00 20.00 10.00% 16.20 18.00
Total 62.10 64.35
Say Say
62.00 65.00

The D.P. works out to Rs 62.00 lacs during FY 2009-10 and Rs 65.00 lacs during FY 2010-
11. Since only around tow and half months is left before the end of the current financial year,
the limits, based on the accepted projections of FY 2010-11 works out to Rs 65.00 lacs.
Accordingly and in line with the Branch recommendation, we recommend for enhancement
in working capital limits by way of PCH-cum-FBP limit from Rs 55.00 lacs to Rs 65.00 lacs.
However, the operative limit would be capped at Rs. 62.00 lacs during FY 2009-10. The full
limits i.e. upto Rs. 65.00 lacs may be released only during FY 2010-11, subject to availability
of D.P.

Renewal of Negotiation of Bills under L/C Limit :

The borrower is presently enjoying Bills Negotiation (under L/C) limit of Rs 50.00 lacs,
outside the overall MPBF, which it has requested for continuation. The borrower utilizes PC
limits basically for stocking purpose, which is evident from the month-wise position of
stocks is as under :
Date of Stock Statement Total (Rs in lacs)
31.07.08 26.88
31.08.08 57.22
 30.09.08 75.53
31.10.08 93.84
30.11.08 109.12
31.12.08 92.85
31.01.09 102.25
28.02.09 75.60
31.03.09 19.17
30.04.09 90.67
31.05.09 80.25
30.06.09 65.20
31.07.09 51.78
31.08.09 62.40
30.09.09 63.75
31.10.09 66.44
30.11.09 90.25

In view of the above, the borrower is unable to utilize the FBP limit. The borrower requires
separate Bills Negotiation Limit for negotiation of the Bills under L/C, which is outside
overall MPBF.
The overall record has been satisfactory and no bills have been returned unpaid. Accordingly,
Branch has recommended for renewal of the Bills Negotiation under L/C limit of Rs 50.00
lacs and we endorse the Branch recommendation.

17. ASSESSMENT OF TERM LOAN/ DEFERRED PAYMENT GUARANTEE:

N.A.

18. ASSESSMENT OF NON-FUND BASED LIMITS

A. LETTER OF CREDIT (Rs in lakh)

For purchase of raw materials/stocks
Average time taken from date of L/C till the date of shipment (Days)
Average time taken from date of shipment to the date of retirement of
the bill (Days)
(A)
Average rotation of letter of credit in one year (360/A)
(times B)
Projected Purchase
 Level of L/C limit = N.A.
{Projected Purchase/Import during the year}/B
Say
Our share
Whether as per Cash Flow statement there will be adequate cash
accruals to retire the bills under L/C on first presentation/due dates.
Names of the Suppliers/beneficiaries in whose favour L/Cs to be
opened
Whether credit reports on the suppliers obtained from
bankers/outside agencies (especially in case of DA L/Cs)

B. BANK GUARANTEE : N.A.

1. Views/comments on the conduct of the account

A. Comments on utilisation of both fund and Non fund based limits
Whether stock statements are submitted every month. If not Yes, 30.11.2009
submitted regularly mention the date of last stock statement
Whether operations are within sanctioned limits Yes
Whether limits are utilised optimally /satisfactorily Yes
Frequency of inspection of stocks. Date of the last inspection 30.10.2009, by Sr.
and irregularity/adverse features, if any observed and steps Manager.
taken to set right the same. No major/adverse
observations.
Insurance cover - Whether securities adequately insured and Yes
in force All Policies are
obtained directly by
the Branch from
Oriental Insurance
Co. Ltd.
Whether terms and conditions of previous sanction have been Yes
complied with, if not, specify time frame to complete (with
explanation) & permission obtained from competent authority
Whether certificate from Pollution control Board has been Branch has reported
obtained. that the Firm falls in
category F of PC
Band hence
certificate is not
applicable.
Whether the borrower is facing any litigation from banks None
/FIs/creditors/ Govt. Deptt./ Statutory bodies etc., if so, state
in brief.
In case of consortium advance, whether our bank is getting N.A.
proportionate share of business
Additional / temporary limits sanctioned subsequent to the Additional FBNLC
last regular sanction and whether same is liquidated on due limit of Rs. 100.00
date or not lacs sanctioned by
DGM,NDR on
02.02.2009 and
liquidated on time.
Outstanding amount of unhedged Foreign Currency FC
Exposures INR
Rs in Lakhs
Particulars 31.03.2009 31.11.2009
Sales – Actual 312.24 184.01
Purchases 150.46 94.14
Credit Summation 247.72 180.13
Debit Summation 258.09 223.02
Minimum Balance 0.01 14.26
Maximum Balance 57.97 57.98
LC Devolved - N.A. N.A.
Number
A
mount
Guarantee Invoked: N.A. N.A.
Number
A
mount
 Whether sales and purchase figures match with the Satisfactory.
turnover in the account

B. Income value of account (Rs. in Lakh)

Last year Current year
08-09 09-10
Value of account (Deposits)
Process Fee recovered 0.28 0.26
Interest earned 6.67 3.29
Exchange income
Commission earned
Income from Third party products / insurance
Others (Lead Bank Fee, Commitment fee, Penal
Interest, Syndication fee)
Total
Turnover in Foreign Exchange Business 179.00 219.00
Deposits placed (Owner Directors/ partners or
Family Members, Relatives & Friends)
- Current 0.40 0.50
- Savings 1.50 1.50
- Term Deposits 20.00 20.00

a. Adverse features affecting credit decision and action proposed (including non-
compliance to terms and conditions of sanction and present position)
Sr Pending Matters Present position Steps taken / Remarks
No
N.A.

b. MAJOR INSPECTION / AUDIT IRREGULARITIES POINTED OUT IN THE

LAST INSPECTION REPORT
Brief details of irregularities Compliance Status
reported
1 Internal Nil as reported by Branch.
Inspectors
 2 RBI-AFI (i)Credit Rating 2008-09 not Credit Rating carried out as
Inspectors on record. per B/S 31.03.2009.
(ii)Audited Balance Sheet 08- Audited B/S obtained and
09 not on record. kept on record.
3 Statutory Nil as reported by Branch.
Auditors
4 Stock Auditors
5 Credit Auditor

c. Directors’ name figuring in RBI/ Wilful Defaulters’ / CIBIL / SAL – ECGC list and
comments thereon. Impact on taking exposure where names are appearing in the
defaulters list: Nil

d. Position of statutory dues and incentives receivables

Provident Fund, ESI and Superannuation contribution paid upto N.A.
Wages and salaries paid upto 31.10.2009
Sales Tax paid upto N.A.
Service Tax paid upto N.A.
Income Tax Assessment completed upto and for the year ending # N.A.
Advance Tax paid for the year ending 2010
Excise duty paid upto N.A.
Municipal Tax, Octroi etc. N.A.
Incentives from the Government and other agencies N.A.
Disputes not acknowledged as debts N.A.
Contingent Liabilities (Likely to turn into Liabilities) N.A.
Reconciliation of Debtors/ creditors

*Before release of enhanced limit Branch to obtain C.A. certificate and ensure that the
borrower has paid all its’ Statutory Dues upto date.

e. Group dealings/experience & desirability of further exposure: N.A.

f. RISK ASSESSMENT
Risk Risk Factor Risk Mitigation
 Industry/Activity Risk Fluctuations in the Forex The Firm hedges by
market. Forward Contract.

20. COMPLIANCE OF RBI / BANK LOAN POLICY GUIDELINES :

The Proposal is as per RBI/ Bank’s Loan Policy Guidelines.

21. MODIFICATION IN EXISTING TERMS OF SANCTION IF ANY: N.A.

22. VIEWS/RECOMMENDATIONS OF THE CREDIT COMMITTEE:

In terms of HO circular No.DCC/GM-Cr/CAD/1249/08 dated 02.06.08, a meeting of the

Credit Committee was held on 07.01.10 at Regional Office, New Delhi.

The Committee cleared the proposal and suggested as under :

i. As per the estimates in CMA data submitted by the Borrower the D.P. stood at the
level of Rs. 62.10 lacs during FY2009-10 and Rs.64.30 thereafter. Accordingly the
operative limit can be capped at Rs. 62.00 lacs during FY 2009-10. The full limits
i.e. upto Rs. 65.00 lacs may be released during FY 2010-11 subject to the availability
of the Drawing Power.

ii. It is also being observed that at the time of last sanction/renewal Capital was
estimated at the level of Rs. 22.50 lacs for FY 2008-09, whereas as per the Audited
B/S of 31.03.2009 Capital stood at the level of Rs. 19.17 lacs.
Therefore it is being stipulated that the Firm has to introduce fresh Capital or
Unsecured Loan of Rs. 3.00 lacs before release of the enhanced limits.
23. DISCRETIONARY POWER FOR SANCTION AND FOR APPROVAL OF
DEVIATION, IF ANY:
The credit proposal falls within the overall discretionary powers of Asst. Gen. Manager-
NDR.

24. RECOMMENDATION:

 It is an Export Credit Account falling under SME sector.

 Though the Firm was established in April 2008, however the Proprietor, Sh. Mohit
Gupta is associated with the Bank since 1999 by virtue of being a Partner in M/s xyz
Apparels Inc.

 Overall conduct of the a/c is Satisfactory, as reported by the Branch. One Time
Additional FBNLC limit of Rs. 100.00 lacs sanctioned by DGM, NDR on 02.02.2009 and
liquidated on time.

 The family members of the Proprietor are maintaining substantial deposit in the Branch.
(O/s as on Nov. 2009 Current A/c 0.50 lacs, Saving A/c 1.50 lacs, Term Deposits 20.00 lacs).

 Though the borrower has not offered any fresh collateral, however, extension of
Equitable Mortgage over the existing property would result in the coverage of 527.99%,
which is satisfactory.

 Overall financial indicators of the borrower are satisfactory as per Bank’s Policy
Norms.

 Branch has recommended the proposal, as requested by the borrower.

 In view of the foregoing and based on Branch recommendation, we recommend following
subject to the terms and conditions enclosed as per Annexure II

Release of the limits would be as under :

i. The operative limit can be capped at Rs. 62.00 lacs during FY 2009-10. The full limits
i.e. upto Rs. 65.00 lacs may be released during FY 2010-11 subject to the availability of the
Drawing Power.

ii. It is also being observed that at the time of last sanction/renewal Capital was estimated at
the level of Rs. 22.50 lacs for FY 2008-09, whereas as per the Audited B/S of 31.03.2009 Capital
stood at the level of Rs. 19.17 lacs. Therefore it is being stipulated that the Firm has to introduce
fresh Capital or Unsecured Loan of Rs. 3.00 lacs before release of the enhanced limits.

Put up for approval.

Deepika Kansal J.D. Sinha Devi Singh Chhonkar
Officer (SME) Sr. Manager (SME) Chief Manager-Credit
Annexure 1

FOR EXISTING BORROWERS AND NEW BORROWERS FOR EXISTING

UNITS.
FOR FUND BASED LIMITS ABOVE RS.10.00 LACS
CREDIT RATING REPORT
Branch and Region Okhla
Borrower M/s XYZ Exim
Sanctioning Authority Asst. General Manager
Date of Sanction /
Renewal-cum-enhancement
Renewal
Credit Rating as on 26.12.2009
Analysis for Credit Audited Balance Sheet as of 31.03.09
Rating done based on
the Audited /
Unaudited Balance
Sheet and Profit and
Loss A/c of the
borrower for the period
ending

Credit facility enjoyed Outstanding as on

Sanctioned limit
Nature of Arrangement 10.01.2010
(Rs in lacs)
i.
115.00 78.15
Fund Based
ii.
0.00 0.00
Non Fund Based
TOTAL ( i + ii ) 115.00 78.15

Credit Risk
Marks secured Grade Interest Slab
Rating
95%+ AAA High - Prime BPLR
Medium -
90% - 94% AA BPLR + 0.25
Prime
85% - 89% A Low - Prime BPLR + 0.50
80% - 84% BBB Excellent BPLR + 0.75
75% - 79% BB Best BPLR + 1.00
70% - 74% B Better BPLR + 1.25
65% - 69% C Very Good BPLR + 1.50
60% - 64% D Good BPLR + 1.75
55% - 59% E Satisfactory BPLR + 2.00
Non-Performing
Assets
NPA – SS Sub-standard
NPA - D1 Doubtful - 1 Interest to be
NPA - D2 Doubtful - 2 calculated at agreed rates
NPA - D3 Doubtful - 3 but not to be charged
NPA - Loss Loss

Asst. General Manager

SUMMARY SHEET OF CREDIT RATING MODEL FOR EXISTING
BORROWERS AND NEW BORROWERS FOR EXISTING UNITS FOR FUND
BASED LIMITS ABOVE RS.10.00 LACS
Max.score
Parameters / Risk factors to be ratedMaximum
Applicable Score allotted
for existing projects /units score
parameter
External risk /Gov. Policy Risk/
1 5 5 3
Environmental risk

2 Industry / Business / Sector risk 20 20 11

3 Management Risk 15 15 13

Security (Collateral) 5 5 5
4

Income value to the Bank 5 5 3

5
Past Operating performance vis-a-vis
6 projections and financial position40 37 33
represented by ratios/trends

7 Conduct of the Account 10 8 8

TOTAL MARKS 100 95 76

% age of Marks Scored 77.55%

 SUMMARY SHEET OF CREDIT RATING MODEL FOR EXISTING
BORROWERS AND NEW BORROWERS FOR EXISTING UNITS FOR FUND
BASED LIMITS ABOVE RS.10.00 LACS
Max.
Parameters / Risk factors to be rated Maximum score Score
for existing projects /units score Applicable allotted
parameter
External risk /Gov. Policy Risk/
1 5 5 3
Environmental risk
2 Industry / Business / Sector risk
2.1 Intensiveness of Competition 2 2 1
2.2 Presence of substitute etc. 2 2 1
2.3 Barriers to entry for new players 1 1 0
2.4 Business returns 3 3 0
Cyclicality in earnings, subject to
2.5 vagaries of nature technological 2 2 1
obsolescence
2.6 Technology adopted by Borrower 3 3 2
Dependence on a few suppliers for raw
2.7 1 1 1
material
Borrower’s dependence on a few
2.8 1 1 1
customers
Foreign exchange component of total
2.9 1 1 1
business
2.1 Whether borrower dealing in perishable
1 1 1
0 commodity
2.1
Demand/supply gap in the business 3 3 2
1
Total 20 20 11
3 Management Risk
3.1 Ownership pattern 2 2 0
3.2 Past track record of the Management: -
a. Sales 1 1 1
b. Financial Discipline 1 1 1
c. Furnishing Information 1 1 1
3.3 Quality of the management personnel 1 1 1
3.4 Experience of the Management 2 2 2
3.5 Payment record with banks 2 2 2
 3.6 Financial conservatism 1 1 1
3.6 Market standing / credibility 2 2 2
3.7 Support from Group Companies 1 1 1
3.8 Succession risk/plan 1 1 1
Total 15 15 13
4 Security (Collateral) 5 5 5
5 Income value to the Bank 5 5 3
Past Operating performance vis-a-vis
6 projections and financial position
represented by ratios/trends
Achievements of borrower’s projections
6.1 5 5 5
of sales / gross receipts
6.2 Current Ratio 5 5 5
6.3 Trend analysis - variation in Current ratio 1 1 1
6.4 Interest Coverage ratio 5 5 3
6.5 Current Asset to Turnover Ratio 3 3 3
6.6 Debt Equity Ratio 5 5 5
Trend analysis - variation in Debt Equity
6.7 2 2 0
ratio
6.8 Achievement of Profit Projections 3 3 2
Profitability to Net worth (Net Profit/Net
6.9 2 2 2
worth) i.e. Return on Net Worth
6.1 Profitability to sales (Net profit/sales) 2 2 0
Contingent Liabilities of the Borrower
6.1
(Total contingent liabilities to Tangible 2 2 2
1
net worth)
Qualifications in Audit Report of the
6.1
borrower’s Balance Sheet and Profit & 1 1 1
2
Loss A/c.
6.1
Diversion of funds - No diversion 2 2 2
3
6.1
Guarantee to Group Companies 1 1 1
4
6.1
Investment in Group Companies 1 1 1
5
Total 40 40 33
7 Conduct of the Account
7.1 Timely submission of stock and/or Book 1 1 1
 debts statement
Compliance with terms and conditions of
7.2 2 2 2
sanction
7.3 Timely renewal/review of the account 2 2 2
Regularity/irregularity of Term Loan
7.4 1 0 0
A/c.
Regularity / irregularity of the working
7.5 2 2 2
capital facilities
7.6 Submission of FFR-I & FFR-II 1 0 0
7.7 Conduct of the Group Account, if any 1 1 1
10 8 8
TOTAL MARKS 100 98 76
% age of Marks Scored 77.55%

Annexure II
Detailed Terms & Conditions
RO/NDR/SME/24/10 12.01.2010

Borrower’s Name : M/s XYZ Exim

BRANCH : Okhla

Nature of Arrangement : PCH-cum-FBP

Sanctioned Limit : Rs.65.00 lakhs (Rs. Sixty Five lacs only.)

Margin : 10% for PCH

Rate of Interest : As per Ho guidelines

(Subject to change as per RBI Directives or bank's policy from time to time)

TERMS AND CONDITIONS (For PCH)

Security :
a. Hypothecation of stocks of raw materials, semi-finished goods and finished
goods such as fabric, ready-made garments etc, manufactured by the unit for
export purpose etc.
b. The advance under pre-shipment credit to be covered under Whole Turnover
Packing Credit Guarantee of ECGC granted to the Bank as a whole and monthly
premium to be recovered from the borrower wherever applicable and remitted to the
respective Regional/ Branch Office of ECGC.
2. Other Terms and Conditions
a. Lodgment of original irrevocable Letter of Credit/firm contract with the
Branch and our rubber stamp to be affixed on it. L/C should not be restricted to
other bank.
b. The goods to be fully insured against fire, theft, burglary, pilferage,
earthquake, flood, SRCC with Bank clause Place of storage is to be mentioned in
the Insurance Policy. Transit Risk Policy to be obtained if goods are to be
transported to a different centre for shipment.
c. Pre-shipment advance to be liquidated within specified period by negotiation/
purchase/discounting of export bills.
d. The borrower shall submit packing credit hypothecation stock statement every
month so that periodical inspection can be carried out by the bank.
e. Where the goods are given for processing "No Lien Letter" to be obtained from
the processors. Insurance policy including transit risk to cover stocks sent to 3rd
party for processing be obtained.
g. Packing credit for shipment to buyers in the countries placed under Restricted
cover by ECGC to be disbursed only with the prior permission from ECGC.
h. Preshipment advance will be treated as Cash Credit advance if the export does
not take place at all. Penal rate to be charged as per RBI/HO circulars issued from
time to time,
i. Packing credit to be allowed for a period not exceeding 180 days or till such
date shipping documents are tendered in compliance of terms of L/C order,
whichever is earlier. Due date diary to be maintained to monitor timely submission
of documents. Extension beyond 180 days but upto 360 days can be permitted by
concerned General Manager after satisfying about the need for the same. In
exceptional cases extension of shipment beyond 360 days can be permitted after
obtaining approval from ECGC.
j. The advance will be disbursed in phases depending upon cycle of
production/procurement period and delivery schedule. Application to be obtained
from the exporter client stating FOB value of the goods which will be initially
financed. Freight & insurance premium amount would be disbursed at the time of
shipment.
k. Bank’s name plate stating "GOODS HYPOTHECATED TO DENA BANK,
OKHLA BRANCH’ should be prominently displayed where goods are stored.
l. No Packing Credit to be disbursed against the goods received under DA Letter
of Credit.
m. Packing credit advances are to be liquidated only from the proceeds of foreign
bill purchased/discounted/negotiated. Repayment of packing credit advance from
local funds shall attract interest at commercial rate prevailing at the time.
q. In case of failure by the borrower in complying with the terms and conditions
as stipulated above, advance may attract charging of interest at commercial rates.”

Standard terms and conditions for Foreign Bills Purchase/ discounted

(DA/DP) (under L/C / confirmed order)
1. Security :
a. Export Bills with a maximum tenor of 180 days drawn on overseas buyers
accompanied by shipping documents like complete set of Bill of Lading /
Consignee copy of Airway Bill, Invoice, Drafts and other documents evidencing
the shipment of goods manufactured by the unit.
b. The party should obtain a comprehensive policy of ECGC (shipment and
contract). Monthly shipment made under the above policy to be declared to ECGC
every month.
2. Other Terms and Conditions
a. Advances to be covered under whole turnover post shipment guarantee of
ECGC taken by the Bank and monthly premium thereon will be paid by the
concerned branch to respective Regional/Branch office of ECGC. [Premium to be
paid by Branch where Exporter is maintaining the account.]
b. In case of Bills drawn under firm contract/order drawing should be allowed to
the extent of credit limit approved for each buyer by ECGC.
c. In case of bills negotiated under letter of credit, all documents as per terms
of L/C must be submitted at the time of negotiation of bills. Export bills should be
drawn strictly in conformity with LC terms.
d. Branch to ensure that documents tendered are clean. In case of discrepancies
and if the amount received is under reserve, it be held in margin/reserve and may
be released only against the guarantee signed by the firm and the proprietor in his
personal capacity. .
f. ECGC to be informed of the limits sanctioned by the Bank within 30 days of
sanction.
g. Proceeds of the Foreign Bills Purchased/Discounted/negotiated to be credited
to Packing Credit account if any Packing Credit has been disbursed against the
goods exported under such bills.
h. In case export proceeds are not received as per tenor, penal rate of interest as
per HO circular to be charged.
NOTE: while advising the terms of sanction to the borrower please incorporate the
details of penal rates.

Forward Contract Limit – Rs.200 lac

OTHER GENERAL TERMS AND CONDITIONS

1. The prescribed documents to be executed by the Firm and Proprietor, Sh.
Mohit Gupta, in his personal capacity.
2. The advance to be guaranteed by Shri Mahesh Chand Gupta & Smt. Shashi
Khandelwal and Sh. Vikas Gupta.
3.All the assets charged to the Bank to be fully insured against fire, SRCC, fIood,
breakdown of machinery with bank clause.
4. The unit to submit stock statement every month latest by 15th of the next
month.
5. The advance is restricted to manufacturing activities.
6. Interest rates are subject to revision as per RBI/HO guidelines or as decided by
consortium.
7. Branch to ensure that there are no inter-firm transfer of funds except for genuine
sales transactions.
8. Bank will have a right to examine all the times Firm's (borrowers) books of ac-
counts, assets etc. and have the Firms workings and operations examined from
time to time by the officers of the Bank or technical experts and/or management
consultants and/or C.A and fees to be borne by the Firm
9. Bank may charge penal rate of interest over and above the rate applicable under
the following circumstances:-
a. delay in submission of stock statement.
b. delay in submission of renewal papers.
10. Guidelines issued by HO/RO from time to time are to be strictly adhered to.
11. The Borrower be informed of the terms and conditions of sanction and the
confirmation be obtained to the effect thereof in writing.
12. Date of reconsideration - One year after sanction.
13. In case of Credit Limit of Rs. 25 lakhs and above there will be mandatory audit
of annual accounts by Chartered Accounts and the audited accounts of the
borrower should be furnished to the Bank latest by 31st October of each year with
reference to the position as at 31st march of the same year.
14. Process / Upfront Fee @ 0.25% of the sanctioned limit for Working Capital limit to
be charged at applicable rate p.a. plus applicable service tax.
15. Party to pay Supervision Charges @ 0.05% plus Service Tax, subject to maximum
of s 50000/- per quarter.
16. There will be mandatory audit of annual accounts by Chartered Accounts and the
audited accounts of the borrower should be furnished to the Bank latest by 31st October
of each year with reference to the position as at 31st march of the same year.
17. Stock audit may be conducted if bank so desires. The charges for the audit to be
borne by the borrower. Reports will be obtained and examined and necessary action
will be taken as may be decided by the Bank.
18. Plant and Machinery, equipments, furniture and fixtures to be taken as
additional security to cover both the fund based and non-fund based limits.
19. The Borrower to give an undertaking that they are not a defaulter to any Bank /
Financial Institution and has not any relation with any Director of the Bank.
20. Bank reserves the right to modify /alter terms and conditions of sanction and cancel
the limit at any time without assigning the reason
21. The borrower shall undertake that in case of project cost over-run, it shall arrange
funds from its’ own sources to meet the shortfall.
22. Date of reconsideration – one year after sanction. The borrower to submit the
review/renewal papers 2 months before the due date of sanction/approval.
23. The Borrower be informed of the terms and conditions of sanction and the
confirmation be obtained to the effect thereof in writing.
24. Branch to obtain an undertaking from the borrower that it would maintain its’
Capital/ Net Worth as per CMA projections.
25. The documents to be vetted by Advocate on Bank’s Panel (at the borrower’s cost)
to ensure that the documents are as per terms of sanction, valid and enforceable. A
copy of the Vetting Certificate should be kept on Branch record.
26. As per HO circular No.346/42/99 dated 22.11.1999 the following clause should be
incorporated in the sanction letter addressed to the borrower: “ In case you commit
default in repayment of the CC/Loan/Overdraft facilities/additional interest or any
other dues that may arise out of the loan amount /financial assistance, the bank
reserves the right to disclose or publish the names of the directors of the company as
defaulters, in such a manner and through such media as the Bank/RBI in their absolute
discretion may think fit.”

27. As per HO circular No.346/42/99 dated 22.11.1999, 54/1/2004 dt.22/5/2004,

consent letter to be obtained from the borrower for disclosing or publishing their
names in the event of borrower becoming defaulters. The said clause should be
incorporated as last clause of the respective document:

“ I/We hereby agree as pre-condition of the loan/advance( fund based and non-fund
based ) given to me/us by the Bank that in case I/We commit default in the repayment
of loan/advance or in the repayment of interest thereon or any of the agreed installment
of the loan on due dates the Bank and/or RBI will have an unqualified right to disclose
or publish my/our name or the name of the company/firm/unit and it’s
directors/partners/proprietor as defaulter in such manner and through such media as the
bank or RBI in their absolute discretion may think fit.”
28. Declaration about no pending court cases (as per H.O. circular no. 351/02/2003) to
be obtained and kept on Branch records.
29. An undertaking to be obtained from the borrower, that the Directors/Guarantors are
not, in any way, connected with any senior official (Scale-IV and above) of the Bank.
30. Commitment Charges: The utilization of limit should be made within 3 to 6
months of date of communication of sanction to the party for working capital. If
average utilization is less than 75% in case of working capital facilities, commitment
charges will be levied @ 0.50% p.a. at quarterly rests on the sanctioned amount.
31. Further an undertaking is to be obtained from the borrower that it will not effect
any change in neither management nor declare/pay dividend nor encumber any of the
securities charged to the Bank, without the express consent of the Bank.
32. Branch to submit certificate of compliance of terms and conditions, as per
prescribed format, to Regional Office.
33. General Undertaking as per H.O. Circular No. 54/1/2004 dated 22.05.04 to be
submitted by the borrower.

34. Branch Official should visit the site/property offered as collateral and cross-check
its’ Valuation/Title/Marketability etc. through discrete / market enquiries and ensure
that the valuation done by the valuer is justified. Significant divergence observed, if
any, vis-à-vis Reports submitted by Bank’s Approved Valuer and Panel Advocate
should be immediately brought to the notice of the sanctioning authority.

35. All legal expenses/other expenses including incidental charges to be incurred

during the course of operation in the account and for completion of documentation
formalities will be borne by the borrower

36. Declaration to the effect that no court cases are pending against the company, its
directors and the group concerns (as per H.O. circular no. 351/02/2003) to be obtained
and kept on Branch record.

37. Compliance of terms and conditions should be sent to RO in terms of H.O. circular
no.253/41/2002 dated 30.11.2002.

38. The borrower to furnish an undertaking that, where it transpires that the borrower
has given a false declaration, the Bank shall forthwith recall the loan.

39. The Company to submit full details of all the items of Statutory Dues along with
CA Certificate of latest date and Branch to ensure that there are no over dues.

40. Consent clause to be submitted by the borrower & guarantor permitting the Bank
for submission of credit information to Credit Information Bureau (India) Ltd.

41. The Branch to ensure that all the suggestions as suggested by the advocate in Non
Encumbrance Report / Legal Search Report ought to be complied before disbursement.
The Branch Head should personally ensure that if the proposed mortgagor acquired the
title from Government then Non Encumbrance Report / Legal Search Report should be
at least 30 years and if the proposed mortgagor acquired the title from sources other
than the Government then Non Encumbrance Report / Legal Search Report should be
 at least 13 years. The Branch also obtains all the documents (chain of documents) in
Nature of Type of Value Basis / Source Whether
original which are mentioned in the Non Encumbrance Report / Legal Search Report.
Security Charge eligible
42. If the last documents of the mortgaged property is Lease Deed / Perpetualunder
Lease
Deed then the Branch Manager personally go through the Lease Deed / Perpetual
CRM
Lease Deed and before creating mortgage obtain the stipulated permission from the II
(Basel
lessor and if there is any redemption clause (in case of sale of the property theNorms)
lessor
Residential Equitable 680.26** Valuation Report by Banks’ No
have the first right in some percentage of the difference between the premium value
property belonging
and market / saleMortgage Panel Advocate
value) in the Lease Deed / Perpetual Lease Deed,Shrithen
K.C.
valuation of
to Mr.
the M.C. Gupta
property Talwar, as clause.
should be computed according to redemption on 20.02.08.
situated at 15B As per Legal Opinion-cum-
Friends Colony Non-Encumbrance
(West), New Certificate by our
Delhi-65, Panel Advocate, Shri Kalim
comprising of 418 Ur Rehman dated 08-07-08,
sq. yards having the subject property bears
construction on clear title and is marketable.
Ground, First and
Second Floor.
Total Collateral Security (considering Realisable Value of property) is Rs 680.26 lacs

The said property is also mortgaged to the Bank for Mortgage Loan of Rs. 10.85 Lacs
sanctioned to Sh.. Mahesh C. Gupta, Smt. Shashi Khandelwal, Sh. Vikas Gupta, Sh. Mohit
Gupta –O/S as on 10.01.2010 being Rs. 7.95 Lacs and Machinery Term Loan sanctioned to
M/s xyz Apparels Inc-O/S as on 10.01.2010 being Rs. 5.89 Lacs. The conduct of the
aforesaid accounts are satisfactory as reported by the Branch and both the accounts are
classified as Standard.
 SPECIAL CONDITIONS ON CASE TO CASE BASIS
1. Plant and Machinery, equipments, furniture and fixtures to be taken as
additional security to cover both the fund based and non-fund based limits.
2. C.A. certificate confirming Net Worth of the Proprietor and Guarantors to be
obtained by the Branch before release of enhanced limit and Branch to ensure that
the same is in accordance with Net Worth as mentioned in the Process Note.
3. With a view to ease the liquidity position, we propose a stipulation that the
borrower should liquidate the OD facility before release of enhanced limits.
4. The Operative Limit can be capped at Rs. 62.00 lacs during FY 2009-10. The
full limits i.e. upto Rs. 65.00 lacs may be released during FY 2010-11 subject to
the availability of the Drawing Power.
5. It is also being observed that at the time of last sanction/renewal Capital was
estimated at the level of Rs. 22.50 lacs for FY 2008-09, whereas as per the
Audited B/S of 31.03.2009 Capital stood at the level of Rs. 19.17 lacs. Therefore it
is being stipulated that the Firm has to introduce fresh Capital or Unsecured Loan
of Rs.3.00 lacs before release of the enhanced limits.

Deepika Kansal J.D. Sinha Devi Singh Chhokar

Officer (SME) Sr. Manager (SME) Chief Manager
Date: Date: Date:
Annexure 3
FINANCIAL INDICATORS
(Rs in lacs)
Audited Audited Estimates Projection
As on 31.03.2008 31.03.2009 31.03.2010 31.03.2011
XYZ XYZ Exim XYZ Exim XYZ Exim
Apparels
A. CURRENT
LIABILITIES
i. Bank Borrowings 46.01 20.27 70.00 70.00
iii. Term Loan
installments due
within one year. 1.00 0.64 2.70 2.60
iii. Deposits/Unsecured loans
iv. Sundry Creditors 22.36 17.89 9.00 8.50
v. Provision 0.00 0.00 0.00 0.00
vi. Other current liabilities 0.00 2.82 0.40 0.40

Total (A) 69.37 41.62 82.10 81.50

B. TERM LIABILITIES
a) Term Loan 7.51 3.50 10.80 8.20
b) Unsecured Loan 11.99 1.29 2.38 1.06
Other Term Liabilities 0.00 0.00 0.00 0.00
Total Term Liability 19.50 4.79 13.18 9.26

C. NET WORTH
i. Capital 22.10 15.62 21.17 26.60
ii. Reserves & Surplus 3.55 5.95 7.40
Total (I + ii) 22.10 19.17 27.12 34.00

Total (C) 22.10 19.17 27.12 34.00

Revaluation Reserve 0.00 0.00 0.00 0.00
Net worth Excluding
Revaluation Reserve 22.10 19.17 27.12 34.00
D. TOTAL LIABILITIES 110.97 65.58 122.40 124.76
(A+B+C)
E. CURRENT ASSETS
i. Cash & Bank Balance 3.01 19.34 17.30 17.40
ii. Receivables – Domestic
- Export 17.60 8.72 18.00 20.00
iii. Inventory 53.41 19.71 60.00 60.00
iv. Loans & Advances 3.71 1.58 0.00 0.00
v. Other current asset 11.43 9.38 6.60 8.00

Total (E) 89.16 58.73 101.90 105.40

F. NET FIXED ASSETS

(Excluding Revaluation 18.16
Reserve) 5.85 19.50 18.36
G. ADVANCES/
INVESTMENT IN
SUBSIDIARY/ 0.00
ASSOCIATE CONCERNS 0.00 0.00 0.00
H. OTHER NON 3.65
CURRENT ASSETS 1.00 1.00 1.00

I. TOTAL ASSETS 110.97

(E+F+G+H+I) 65.58 122.40 124.76

J. FINANCIAL
PERFORMANCE
i. Gross Sales Domestic 0.00 0.00 0.00
Export 262.11 287.61 330.00 350.00
Duty Drawback 26.17 24.63 30.00 31.50
Less: Excise Duty 0.00 0.00 0.00 0.00
Net Sales 288.28 312.24 360.00 381.50
Growth (%) 8.31% 15.30% 5.97%
ii. Gross Profit 6.49 4.65 8.31 10.64
iii. Depreciation 3.37 1.10 2.36 3.24
iv. Taxation 0.00 0.00 0.00 0.00
v. Net Profit 3.12 3.55 5.95 7.40
vi. Dividend 0.00 0.00 0.00 0.00
- Amount
- Percentage
 vii. Profit retained in
business 3.12 3.55 5.95 7.40
ix. Interest 13.86 7.11 9.00 9.50
x. PBDIT 20.35 11.76 17.31 20.14

K. RATIO ANALYSIS
i. Current Ratio 1.29 1.41 1.24 1.29
ii. Total Debt/Equity 3.14 2.17 3.03 2.40
iii. Gross Profit/Sales 2.25% 1.49% 2.31% 2.79%
iv. Net Profit/Sales 1.08% 1.14% 1.65% 1.94%
v. Debtors/Sales 0.73 0.34 0.60 0.63
vi. Creditors/Purchase 2.36 1.43 0.56 0.67
vii. Interest Coverage
Ratio 1.47 1.65 1.92 2.12
viii. Current Assets to
Turnover Ratio 5.40 15.84 6.00 6.36

Annexure 4

DETAILS OF CONSORTIUM / MULTIPLE BANKING ARRANGEMENTS

(Rs. in lakh)
Particulars % Share EXISTING PROPOSED
FB NFB FB NFB
Our Bank
Other Member Banks
Nil
Total
(Details as per Annexure)

Annexure 5

Limits enjoyed by Associate / Group concerns: (Rs. In lakh)

A. With our bank
Name Branch Details of limits Last sanction
 Ass
TL as et
of Cla
FBWC NFB Date Authority
10.01.1 ssi-
0 fica
tion
Mortgage Loan Okhla 7.95 11.07.0 DRM Stan
of Rs. 10.85 lacs 8 (NDR) dard
sanctioned in
Sep.05 to Sh.
Mahesh C Gupta,
(Borrower) Smt.
Shashi
Khandelwal, Sh.
Vikas Gupta, Sh.
Mohit Gupta (Co
Borrowers)
Machinery Term Okhla 5.89 11.07.0 DRM Stan
Loan Sanctioned 8 (NDR) dard
to M/s xyz
Apparels Inc

(Rs. In lakh)
B. With other bank/FIs/others
Details of limits Outstanding Asset
Bank/FIs
Name Classi-
/Others FBWC TL NFB FBWC TL NFB
fication

Nil

Annexure 6
Profile of the group concerns with brief financial indicators
The Firm is having a sister concern under the name and style of M/s xyz Apparels.
A machinery Term Loan is still operational having current O/s as of 10.01.2010 being Rs.
5.89. The Account is classified as Standard.

Gist of Financial Indicators of M/s Central Agencies

(Rs. In lacs.)
S.No. Particulars As per
Audited B/S
of 31.03.2009
1. Net Sales 144.19
2. Gross Profit 6.41
3. Net Profit 0.93
4. Capital 5.34
5. Net Worth 5.34
6. Net Fixed Assets 15.43

Annexure 7

Details of properties/assets etc. Under collateral security viz. Valuer, valuation date,
encumbrance & marketability status etc.
Nature of Type of Value Basis / Source Whether eligible
Security Charge under CRM
(Basel II Norms)
Residential Equitable 680.26** Valuation Report by Banks’ No
property Mortgage Panel Advocate Shri K.C.
belonging to Mr. Talwar, as on 20.02.08.
M.C. Gupta As per Legal Opinion-cum-
situated at 15B Non-Encumbrance
Friends Colony Certificate by our
(West), New Panel Advocate, Shri Kalim
Delhi-65, Ur Rehman dated 08-07-08,
 comprising of the subject property
418 sq. yards bears clear title and is
having marketable.
construction on
Ground, First
and Second
Floor.
Total Collateral Security (considering Realisable Value of property) is Rs 680.26 lacs

The said property is also mortgaged to the Bank for Mortgage Loan of Rs. 10.85 Lacs sanctioned to
Sh.. Mahesh C. Gupta, Smt. Shashi Khandelwal, Sh. Vikas Gupta, Sh. Mohit Gupta –O/S as on
10.01.2010 being Rs. 7.95 Lacs and Machinery Term Loan sanctioned to M/s xyz Apparels Inc-O/S
as on 10.01.2010 being Rs. 5.89 Lacs. The conduct of the aforesaid accounts are satisfactory as
reported by the Branch and both the accounts are classified as Standard.

Annexure 8
Additional comments, if any along with investments details in associate /sister concerns,
comments on balance sheet, auditors remarks etc. Nil ______________________
 Chapter-7

Findings

After undertaking the in depth theoretical study such as types of advances, SME policy of

DENA BANK, credit rating, CMA, working capital and various financial under SMEs, it was

found that the several Industries are growing through credit/advances granted by banks and

SMEs is a one of the fast growing Industries within all the sectors.

In India, the Micro and Small Enterprises (MSEs) sector plays a pivotal role in the overall

industrial economy of the country. It is estimated that in terms of value, the sector accounts

for about for 39% of the manufacturing output and around 33% of the total export of the

country. Further, in recent years the MSE sector has consistently registered higher growth

rate compared to the overall industrial sector. The major advantages of the sector is its
employment potential at low capital cost. As per available statistics, this sector employs an

estimated 31 million persons spread over 12.8 million enterprises and the labour intensity in

the MSE sector is estimated to be almost 4 times higher than the large enterprises.

As per the 3rd census report, total output of the registered units in the year 2001-02 was

estimated to be Rs. 70,861.73 crores. The SSI sector employed 2,49,32,763 persons during

that period. There were 50606 exporting units accounting for exports to the tune of Rs.

14,199.56 crores.

Thus SME plays a very significant role in the socio-economic development of the

country.

Chapter- 8

Conclusion

The project entitled CREDIT APPRAISAL UNDER SME gives the detailed knowledge

of the whole process of loans and advances which DENA BANK performs. Starting from the

loan application from the borrower and compilation of confidential reports on him and the

guarantor, the process continues till the disbursement of loan and after it the close monitoring

till the adjustment of Bank’s loan.

The project was an attempt to understand and perform the work in credit transaction and

credit appraisal proposal which I have included is just an example of it.

 I have worked on many such proposals, which are beyond the scope of this project.

Hence the whole experience of working in such renowned public sector unit was very good

and made me a learn a lot out of it.

Chapter-9

Bibliography

• Magazines

1. Business week

2. Frontline

3. Business World

• News Papers

1. Business standard

2. Financial Express

3. Economics Times
4. Times of India

• Websites

1. www.denabank.co.in

2. www.google.com

3. www.wikipedia.com

4. www.yahoofinance.com

5. www.indiabankassociation.org.in

6. www.smetoolkit.org

7. www.economicstimes.com

• Circulars, Manuals of Dena Bank.

• Last but not the least, I feel indebted to all persons and organization who have helped me
directly or indirectly in the successful completion of this study.