A

Summer internship Project report on CREDIT RISK MANAGEMENT AT PUNJAB NATIONAL BANK Submitted to the

Gahlot Institute Of Management Studies And Research

University of Mumbai
In partial fulfilment of the Requirement for the degree of

Master of Management Studies By SHAIKH AHMED MOHD Batch ( 2011-12)

Date : 28/07/2011 Dear sir,

This is to certify that Mr. Shaikh Ahmed Mohammed has completed his training For 2 Months at our office and worked for his project on credit risk management from 02nd May 2011 to 30th June 2011. We wish him all the best for his future.

Authorised signatory

PNB Bank Ltd.

DECLARATION

I hereby declare that project titled Credit risk Management at Punjab national bank is an original piece of research work carried out by me under the guidance and supervision of Mr.Suhas Khamkar The information has been collected from genuine & authentic sources. The work has been submitted in partial fulfillment of the requirement of MMS to our college.

Place: Date:

Signature: Name of the students:

I accept the sole responsibility for any possible errors of omission and would be extremely grateful to the readers of this project report if they bring such mistakes to my notice. I would thank to God for their blessing and my parents also for their valuable suggestion and support in my project report. However.N. inspiration and motivation. I would like to express my sincere gratitude to all the faculty members who have taught me in my entire MBA curriculum and our Director B. SHAIKH AHMED MOHD 4 . Last but not the least. I would also like to thank our friends and those who have helped us during this project directly or indirectly.LAHIRI who has always been a source of guidance. I hereby express my deep sense of gratitude to all the personalities involved directly and indirectly in my project work.PUNJAB NATIONAL BANK ACKNOWLEDGEMENT “Perseverance inspiration and motivation have always played a key role in success of any venture”.

Objective of the study………………… Data collection Method………………. Credit Risk Management at PNB………. 6. a. 14.. Punjab National Bank Services………… Deposit Schemes………………………. Corporate Mission……………………. 9. 15. 26 28 29 30 34 39 41 47 52 58 a.. Company Profile…………………. 10. Executive Summary…………………. 7. Credit Risk Management in Banks…….. 5 8 16 23 24 4...PUNJAB NATIONAL BANK TABLE OF CONTENTS Sr.No.. 1.... Awards…………………………………. PNB Bank founding principles………... 5. Low & High Credit Risk Ratings……….. Particulars Board of directors…………………….. 3.. 11... 13. Secondary data Page no. 8. 12. Industrial Profile……………………….. 2. Introduction 5 . Primary data b... Loans…………………………………….

18.PUNJAB NATIONAL BANK 16. 17.. 61 64 67 68 69 6 . 20. Recommendations………………………. Findings…………………………………. Bibliography……………………………. 19. Risk Managements……………………… Analysis of Financial Statements………..

PUNJAB NATIONAL BANK Board of Directors 7 .

Usha Ananthasubramanian Executive Director Directors Smt. Rakesh Sethi Executive Director Smt. K. Chairman of Indian Banks Association Shri. Tribhuwan Nath Chaturvedi Share Holder Director 8 . of India Nominee Director Shri.Kamath Chairman & Managing Director and Dy.R. Vinod Kumar Mishra Part-time non-official Director Shri. Jasbir Singh Reserve Bank of India Nominee Director Shri. Ravneet Kaur Govt.PUNJAB NATIONAL BANK Shri.

the profits accruing from which went entirely to the Britishers whilst Indians had to contend themselves with a small interest on their own capital". Amongst the cherished desires of this new class was also an overriding ambition to start a Swadeshi Bank with Indian Capital and management representing all sections of the Indian community. Lala Harkrishan Lal who had returned from England with ideas regarding commerce and industry. the efforts materialized. The founding board was drawn from different parts of India professing different 9 . He felt keenly "the fact that the Indian capital was being used to run English banks and companies. On May 23. The idea was first mooted by Rai Mool Raj of Arya Samaj who. as reported by Lal Lajpat Rai.PUNJAB NATIONAL BANK Executive Summary Topic: Credit risk Management at Punjab national bank About the Punjab national bank: Origin Punjab under the British especially after annexation in 1849 witnessed a period of rapid development giving rise to a new educated class fired with a desire for freedom from the yoke of slavery. 1894. had long cherished the idea that Indians should have a national bank of their own. was eager to give them practical shape. Lala Lajpat Rai sent round a circular to selected friends insisting on an Indian Joint Stock Bank as the first special step in constructive Swadeshi. At the instance of Rai Mool Raj.

A Maiden Dividend of 4% was declared after only 7 months of operation. Parsi. eminent Bengali pleader who was also the Chairman of the Reception committee of the Indian National Congress at its Lahore session in 1900. merchant and philanthropist of Multan. Lala Lalchand one of the founders of DAV College and President of its Management Society. It had total staff strength of nine and the total monthly salary amounted to Rs. an eminent Civil Lawyer of Lahore. who was also the founder of Dayal Singh College and the Tribune. His younger brother joined the Bank as a Manager. the working capital was Rs. Sh. a well known Parsi merchant and partner of Jamshedji & Co. a great banker. and Lala Dholan Dass. 320. Lala Lajpat Rai was the first to open an account with the bank which was housed in the building opposite the Arya Samaj Mandir in Anarkali in Lahore. however. a Sikh and a few Hindus joined hands in a purely national and cosmopolitan spirit to found this Bank which opened its doors to the public on 12th of April 1895. a leading Rais. Bakshi Jaishi Ram. the first secretary to the Board and Shri Bulaki Ram Shastri Barrister at Lahore. Authorised total capital of the Bank was Rs. 1895. EC Jessawala. merchant and Rais of Amritsar. the common objective of providing country with a truly national bank which would further the economic interest of the country. Thus a Bengali. of Lahore. Kali Prosanna Roy. They went about it with a Missionary Zeal. Dayal Singh Majithia was the first Chairman. The first Board of 7 Directors comprised of Sardar Dayal Singh Majithia. was appointed Manager. 20000. 10 . Lala Harkishan Lal who became widely known as the first industrialist of Punjab. The Bank opened for business on 12 April. Lala Prabhu Dayal. 2 lakhs.PUNJAB NATIONAL BANK faiths and a varied back-ground with. Lala Harkishan Lal.

JH Maynard. The five years from 1941 to 1946 were ones of unprecedented growth. Many a staff member fell victim to the widespread riots in the discharge of their duties."Your Bank survived. the number of branches increased to 278. It was during this period that the Jalianwala Bagh Committee account was opened in the Bank. but steady progress in the first decade of its existence. The Bank. It spoke volumes for the measure of confidence reposed by the public in the Bank's management. Punjab. Punjab National Bank survived. 11 . 10 crores to Rs.. 62 crores.no doubt due to good management". the Bank officials decided to leave Lahore and transfer the registered office of the Bank to Delhi and permission for transfer was obtained from the Lahore High Court on June 20. Mr. On March 31.. From a modest base of 71. continued to maintain a few caretaker branches.PUNJAB NATIONAL BANK The first branch outside Lahore was opened in Rawalpindi in 1900. The 1929 Wall Street crash plunged the world into a severe economic crisis. however. Lala Lajpat Rai joined the Board of Directors soon after. in 1913. The Bank made slow. which in the decade that followed. 1947.. was operated by Mahatma Gandhi and Pandit Jawaharlal Nehru. Deposits grew from Rs. the then Financial Commissioner. PNB was then housed in the precincts of Sreeniwas in the salubrious Civil Lines. The conditions deteriorated further.. Delhi. The years 1926 to 1936 were turbulent and loss ridden ones for the banking industry the world over. the banking industry in India was hit by a severe crisis following the failure of the Peoples Bank of India founded by Lala Harkishan Lal. As many as 78 banks failed during this crisis. remarked. 1947.. The Bank was forced to close 92 offices in West Pakistan constituting 33 percent of the total number and having 40% of the total deposits.

the Bank took over the assets and liabilities of Bharat Bank Ltd. Lal Bahadur Shastri. Rafi Ahmed Kidwai. Such gestures cemented their trusts in the bank and PNB became a symbol of Trust and a name you can bank upon. Fast expansion became a priority. 243 crores by July 1969 when it was nationalised. From its dwindled deposits of Rs. Surplus staff posed a big problem. Gobind Ballabh Pant. 355 crores mark by the July 1969.PUNJAB NATIONAL BANK The Bank then embarked on its task of rehabilitating the displaced account holders. 12 . Indira Gandhi etc. In 1951. The migrants from Pakistan were repaid their deposits based upon whatever evidence they could produce. Smt. 43 crores in 1949 it rose to cross the Rs. amongst other who banked with us. 19 crores in 1949 to Rs. In 1962. it amalgamated the Indo-Commercial Bank with it. Its number of offices had increased to 569 and advances from Rs. and became the second largest bank in the private sector. The policy paid rich dividends by opening up an era of phenomenal growth. Since inception in 1895. PNB has always been a "People's bank" serving millions of people throughout the country and also had the proud distinction of serving great national leaders like Sarvshri Jawahar Lal Nehru.

he took keen interest in industrial and financial matter also. Having passed the final examination in Law from Punjab University. after having plunged themselves into the political struggle. Lala Lajpat Rai was one of such leaders. Lala Lajpat Rai had benefit of education in the practical rationalism of western science combined with the religious purity and moral elevation of Eastern literature that put on him the hallmark of true culture. he belonged to the Agarwal Baniya caste and it was perhaps because of this.PUNJAB NATIONAL BANK Punjab Keshari Lala Lajpat Rai (Saluting the spirit of our founding father) (1865-1928) The Life and Times of Lala Lajpat Rai There are few leaders of the pre-independence era who. 1865 at a small village. Endowed with a rich legacy of moral and intellectual background. His father was a teacher of Persian and Urdu in a government school. in addition to taking part in social and political life of the country. when he was barely 18 years old. Born on 28th January. he started his practice in1883. Dhudike in the Ferozepur district of Punjab. continued to take an active interest in social. While sympathizing with and aiding every movement made for progress. Lala Lajpat Rai identified himself very closely with 13 . cultural and educational work.

He along with Gokhale carried on the political campaign in various parts of England and brought home to the mind of the British. He organized the Arya Samaj there and put it on proper lines. he transferred his practice to the wider field at Lahore. the Indian National Congress Committee having recognized in him an austere.A. He took part in the foundation of the D. It was in 1888 that he joined the Indian National Congress when it met at Allahabad under the presidency of Mr. He met the expenses of his trip from his own pocket. College at Lahore. sincere and selfless devoted worker selected him as one of its delegates to place before the British. The movement of “Swadeshi” was in the offing and he put his heart and soul into it. He preached the message of Swadeshi to the people of Punjab and made it very popular. in which he found ample scope for the exercise of his patriotism. Having qualified as a pleader. In 1892. Lalaji and Politics Lala Lajpat Rai always felt drawn towards politics.PUNJAB NATIONAL BANK Arya Samaj. G. cause of the half starving and half dying people of India. Lala Lajpat Rai started practice at Hissar and soon became a leading lawyer of the district. was in Lala Lajpat Rai’s view an important factor in national development. adding facts and figures in supporting their contention. After his return from England.V.Education. This naturally enraged the bureaucracy and he came to be regarded as a revolutionary by the Britishers and the AngloIndian press. the evils of an unsympathetic and bureaucratic government under which India was labouring and pleaded in eloquent language. Lala Lajpat Rai created an impression on the English Populace. he was busy devising and organizing ways and means for political advancement and industrial emancipation of the country. In 1905. both secular and religious. He was openly dubbed as a Revolutionary and an instigator of the armed forces. 14 . the political grievances of the Indian people. philanthropy and religious zeal. Yule.

and the Urdu Akhbar-e-Am and Paisa Akhbar. Lala Lajpat Rai sent a circular to selected friends insisting on an Indian joint stock Bank as the first step in constructive Swadeshi and the response was satisfactory After filing and registering the memorandum and Articles of Association on 19 May.In 1925. the bank was incorporated under Act VI of the 1882 Indian Companies Act. Lala Lajpat Rai and PNB Lalaji was keenly concerned with the fact that though Indian capital was being used to run English Banks and companies. 15 . 1894. At the instance of Rai Mul Raj. the profits went entirely to the British. It was he. He took active part in the deliberations of the debates of the Assembly. the founders met at the Lahore residence of Sh. 1894. The prospectus of the bank was published in the Tribune. Dyal Singh Majithia. while Indians had to contend themselves with a small interest on their capital. the first Chairman of PNB. he joined the Swaraj Party and became its deputy leader. 1928 that he received lathi blows on his chest which ultimately brought about his death on the 17th November. 1928. who moved the resolution for the Boycott of the Simon Commission in the Assembly.PUNJAB NATIONAL BANK The Jalianwala Bagh tragedy and the Government's denial to censure the conduct of its officers made him a complete non cooperator. On 23rd May. He lost his faith in the British and threw himself whole heartedly into the non-cooperation movement. and resolved to go ahead with the scheme. He echoed this sentiment in one of his writing while concurring with Rai Mul Raj of Arya Samaj who had long cherished the idea that Indians should have a National Bank of their own. It was while leading the boycott procession at Lahore on the 30th October.

PUNJAB NATIONAL BANK They decided to hire a house in the famous Anarkali Bazar of Lahore opposite the post office and near well known stores of Rama Brothers. The essence of the Bank’s culture was clear at this first meeting itself. the control of the Bank was to lie with the large. dispersed shareholders. a purely professional approach that was as uncommon then as it is today. The fourteen original shareholders and seven directors took only a modest number of shares. the Bank opened for business. a day before the great Punjab festival of Baishakhi.On 12th April 1895. 16 .

Since its humble beginning in 1895 with the distinction of being the first Swadeshi Bank to have been started with Indian capital. PNB has earned many awards and accolades during the year in appreciation of excellence in services. debit card.PUNJAB NATIONAL BANK Company Profile With over 60 million satisfied customers and more than 5100 offices including 5 overseas branches. transparent governance structure. Besides being ranked as one of India's top service brands. During the FY 2010-11. PNB has achieved significant growth in business which at the end of March 2011 amounted to Rs 5. etc. Corporate Social Responsibility (CSR) practices. the bank has also entered the credit card. life and non-life insurance.55. business and many other parameters. Gold coins & asset management business. The bank enjoys strong fundamentals. large franchise value and good brand image. PNB has remained fully committed to its guiding principles of sound and prudent banking. PNB has continued to retain its leadership position amongst the nationalized banks. bullion business.005 crore. best use of technology and good human resource management. with 39.16% share of CASA to domestic 17 . Apart from offering banking products. PNB is ranked as the 2nd largest bank in the country after SBI in terms of branch network.

PUNJAB NATIONAL BANK

deposits, the Bank achieved a net profit of Rs 4433 crore. Bank has a strong capital base with capital adequacy ratio of 12.42% as on Mar’11 as per Basel II with Tier I and Tier II capital ratio at 8.44% and 3.98% respectively. As on March’11, the Bank has the Gross and Net NPA ratio of 1.79% and 0.85% respectively. During the FY 2010-11, its ratio of Priority Sector Credit to Adjusted Net Bank Credit at 40.67% & Agriculture Credit to Adjusted Net Bank Credit at 19.30% was also higher than the stipulated requirement of 40% & 18% respectively. The Bank has been able to maintain its stakeholders’ interest by posting an improved NIM of 3.96% in Mar’11 (3.57% Mar’10). The Earning per Share improved to Rs 140.60 (Rs 123.86 Mar’10) while the Book value per share improved to Rs 661.20 (Rs 514.77 Mar’10). Punjab National Bank continues to maintain its frontline position in the Indian banking industry. In particular, the bank has retained its NUMBER ONE position among the nationalized banks in terms of number of branches, Deposit, Advances, total Business, Assets, Operating and Net profit in the year 2010-11. The impressive operational and financial performance has been brought about by Bank’s focus on customer based business with thrust on CASA deposits, Retail, SME & Agri Advances and with more inclusive approach to banking; better asset liability management; improved margin management, thrust on recovery and increased efficiency in core operations of the Bank. The performance highlights of the bank in terms of business and profit are shown below:

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PUNJAB NATIONAL BANK

Rs. In Crore Parameters OperatingProfit NetProfit Deposit Advance TotalBusiness Mar'09 5690 3091 209760 154703 364463 Mar'10 7326 3905 249330 186601 435931 Mar'11 9056 4433 312899 242107 555005 CAGR(%) 26.16 19.76 22.14 25.10 23.40

Bank always looked at technology as a key facilitator to provide better customer service and ensured that its ‘IT strategy’ follows the ‘Business strategy’ so as to arrive at “Best Fit”. The Bank has made rapid strides in this direction. All branches of the Bank are under Core Banking Solution (CBS) since Dec’08, thus covering 100% of its business and providing ‘Anytime Anywhere’ banking facility to all customers including customers of more than 3200 rural & semi urban branches. The Bank has also been offering Internet banking services to its customers which also enables on line booking of rail tickets, payment of utilities bills, purchase of airline tickets, etc. Towards developing a cost effective alternative channels of delivery, the Bank with 5050 ATMs has the largest ATM network amongst Nationalized Banks.

With the help of advanced technology, the Bank has been a frontrunner in the industry so far as the initiatives for Financial Inclusion is concerned. With its policy of inclusive growth,the Bank’s mission is “Banking for Unbanked”.

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PUNJAB NATIONAL BANK

The Bank has launched a drive for biometric smart card based technology enabled Financial Inclusion with the help of Business Correspondents/Business Facilitators (BC/BF) so as to reach out to the last mile customer. The Bank has started several innovative initiatives for marginal groups like rickshaw pullers, vegetable vendors, dairy farmers, construction workers, etc. Bank has launched a welfare scheme of adoption of village viz., “PNB VIKAS”. Under the scheme, Bank has selected 117 villages (60 in lead districts and 57 in non lead district) in different circles for all-round improvement in the living standards of the villagers. Besides, Bank has formed “PNB PRERNA”, an association of the wives of the Bank’s senior management. The association through its voluntary initiatives has undertaken activities like distribution of food to the poor and needy, provision of computers, books, stationary items to poor girl students at various orphanages and schools etc. Backed by strong domestic performance, the Bank is planning to realize its global aspirations. Bank has opened one branch each at Kabul and Dubai, two branches at Hong Kong and an Off Shore Banking Unit at Mumbai. In addition to the above, Bank has Representative offices at Almaty, Dubai, Shanghai and Oslo, a wholly owned subsidiary in UK with 7 branches and a subsidiary each in Kazakhstan & Bhutan, and joint venture with Everest Bank Ltd. Nepal. During the year, Bank acquired majority equity stake of 63.64% in Dana Bank of Kazakhstan.

Fired by the spirit of nationalism and founded on the idea that Indians should have a national bank of their own, Punjab National Bank Ltd was the result of the efforts of far-sighted visionaries and patriots, among
20

Mr. Nationalisation came in 1969 which unleashed a new chapter in the long history of the Bank. Indian Companies Act. A pioneer throughout. the Bank distinguished itself by appointing auditors in 1895 long before it was mandatory. provident fund and voluntary outside audit well before they formed keystones of good management. the Bank commenced operations on April 12. Prophetically. Babu Kali Prasono Roy. Lala Harkishan Lal and Sardar Dyal Singh Majithia. established profit sharing bonus. introduced the "teller" system in 1944 (another first ).the Bank withstood various financial crises including the trauma in the form of partition of India when the Bank had to close 92 offices (33%) in west Pakistan which constituted 40% of its deposits and 15 of its staff fell victims to the frenzy. the Bank registered impressive performance and grew from strength to strength. Incorporated under the Act VI of 1882. The registered office was shifted to Delhi and the Bank honoured all the deposit claims of the refugees even on the basis of whatever little evidence they could produce. PNB expanded its presence rapidly in unbanked areas. 1895 from Lahore. with an authorised total capital of Rs 2 lac and working capital of Rs 20. the Bank chose "Stability" as its telegraphic address.PUNJAB NATIONAL BANK whom were persons like Lala Lajpat Rai. E C Jessawala.000. Keeping with the economic ideology of catalyzing development and amelioration of poverty by funding various self-employment schemes. Subsequently. as the future course of events were to prove . The Bank donned the role of a facilitator in providing the vital input of credit and consistently exceeded the national goals in 21 .

in the relatively underrepresented Kerala region. The bank's growth has been aided by take-over/merger of 7 private sector banks during different periods in its history. and in 2002. In order to meet future capital requirements on account of implementation of Basel II norms.PUNJAB NATIONAL BANK respect of priority sector lending. PNB has established itself firmly as one of the premier banking institutions in the country with a long tradition of sound and prudent banking. PNB’s management team has been quite successful in managing the mergers and ensuring the integration process in a smooth and effective manner. the erstwhile Nedungadi Bank Ltd (e-NBL). reducing the shareholding of Govt of India to 57. particularly. This was the seventh merger in PNB’s history of more than 115 years. The first ever and the only merger of a nationalized bank with PNB was in 1993. the Bank sponsored Regional Rural Banks (RRBs). 22 . By late 1980s when the first whiff of liberalization came about.. the Bank came out with Follow-on Public Offer (FPO) through the book building process. in March 2005. viz. It may be added that no other bank in the nationalized bank group has a track-record of so many mergers. the Bank initiated strategic moves towards diversification. This has improved the franchise value of the Bank. With its large presence throughout the country and with a view to strengthening the rural credit delivery system. 20% of government ownership was disinvested through a very successful IPO to the public. In 2003. New Bank of India.8%. a Kerala based private bank was amalgamated with Punjab National Bank.

both to the retail customer and corporate business. The bank has a strong franchise value and provides a host of financial products and services. The Bank supports various societies.e. weaker sections of society. During 2008-09. AIDS. 23 . women in shelter homes. underprivileged. mentally retarded children. besides donations to Hospitals. tuberculosis. Donations are also extended for purchase of water coolers. ambulances and building infrastructure facilities at hospitals/schools. the Bank achieved the landmark of becoming the largest Nationalized Bank to bring ALL BRANCHES/EXTENSION COUNTERS into Core Banking Solution (CBS). The Bank also contributes for fighting diseases like diabetes. Schools etc. next only to SBI. The Bank also continues to discharge its social obligations and addresses environmental concerns with added vigour. spastics. charitable institutions and NGO /organisations working for the benefit of downtrodden. which include free medical camps. keeping with its objective of transforming itself into a techno-savvy Bank.PUNJAB NATIONAL BANK Punjab National Bank with more than 5000 domestic offices including Extension Counters has the largest network amongst the nationalized banks i. etc. handicapped. leprosy etc. orphans. distribute artificial limbs. It has continued to fulfill its social responsibilities and made significant progress in adoption of technology. tree plantation and blood donation camps. combined with its technological capabilities provides the Bank competitive advantages. The strong franchise enjoyed by the Bank.

To know the executing methods used in managing credit risk. 2. To know the various methods used by bank to mitigate credit risk. In a banks portfolio. To know the methods to be implemented in banks. settlement and other financial transactions. 4. As credit risk is one of the challenging tasks to banks I have selected this topic for my study in order to know the various types of risk and the types of strategies the banks use to mitigate the risk. OBJECTIVES OF THE STUDY: 1. 24 . losses stem from outright default due to inability or unwillingness of a customer or counter party to meet commitments in relation to lending. trading. To know the various types of credit risk in bank. 3.PUNJAB NATIONAL BANK About the topic Credit risk is defined as the possibility of losses associated with diminution in the credit of quality of borrowers or counter parties.

PUNJAB NATIONAL BANK DATA COLLECTION METHOD Primary data: Primary data collected through the interaction with chief manager. and ensures on going control of risk considerations . Brief Findings Current system of credit risk management Punjab national bank has a system of checks and balance in place of extension of credit. independt audit and risk review and risk rating system for various categories of system and corresponding pricing mechanism. The aspect covered under the present system is multiple credit approvals. bank guidelines book and internet. senior manager and bank staff.All credit exposures above RS 5 Crores are assigned risk waiting assigned by domestic credit rating agencies recognized by RBI The credit risk management system at the branch level has been maped out in detail 25 . Secondary Data: Secondary data collected from bank circulars. The bank maintains a diversified portfolio of risk assets.

as more time required carrying out study on other aspects of the topic.The study restricted to only one branch. Unless suitable modified. 26 . provides incentives to banks improving their credit risk management techniques. LIMITATIONS 1. the adoption of the new Accord in its present format would result in significant increase in the capital charge for banks. The time constraint was a limiting factor.Due to secrecy it is difficult obtain actual facts and figures of advances of branches. 2. such as corporate. etc. project finance. Internal rating based (IRB) approach the standardized approach adopted so far. Banks may have discretion and flexibility in defining the exposure classes. 3. 2. 3.PUNJAB NATIONAL BANK 1.

While deregulation has opened up new vistas for banks to augment revenues. new challenges. regulatory. new instruments. the increasing levels of deregulation along with the increasing level of the competition have facilitated globalization of the Indian banking system and placed numerous demands on banks. along with all this. The benefits of globalization have been well documented and are being increasingly recognized. The last decade has witnessed major changes in the financial sector-new banks. There is a growing realization that the ability of countries to conduct business across national borders and the ability to cope with the possible downside risks would depend.PUNJAB NATIONAL BANK INDUSTRIAL PROFILE Overview: The enhanced role of the banking sector in the Indian economy. Globalization has thrown up lot of opportunities but accompanied by concomitant risk. particularly derivatives. on the soundness of the financial system and the strength of the individual participants.and. new windows and new opportunities. inter – alia. supervisory. it has entailed greater competition and consequently greater risks. has required banks to diversify their product mix and also effect rapid changes in their processes and operations in order to remain competitive in the globalize environment. new financial institutions. Globalization of domestic banks has also been facilitated by tremendous advancement in information and communication technology. and technological framework on par with international best practices enables strengthening of the domestic 27 . Demands for new products. Operating in this demanding environment has exposed banks to various challenges. Adoptaion of appropriate prudential.

PUNJAB NATIONAL BANK banking system. banks have four options to choose from: they can build a new system those selves. While doing so. and also revolutionizes distribution channels. Banks which have made in adequate investment in technology have consequently faced and erosion of there market shares. Adoption of technology also enhanced the quality of risk management systems in banks. or buy best of he modules. Legal prescriptions for ownership and governance of banks in banking regulation Act. Application of advanced technology: Technology is a key driver in the banking industry. The global challenges which banks face or not confined only to the global banks. The beneficiaries are those banks which have invested in technology. In this context banks need to clearly define their core competencies to be sure that they are investing in the areas that will distinguish them from other market players. which would help in fortifying it against the risks that might arise out of globalization in India we had strengthened the banking sector to face the pressures that may arise out of globalization by adopting the banking sector reforms in a calibrated Mann followed the twin governing principles of nondisruptive progress and consultative process 1. which creates new business modules and process. 1949 have been supplemented regulatory prescriptions issued by RBI from time to time. and give them a competitive advantage. These aspects are also highly relevant for banks which are part of a globalized banking system. Further. over coming 28 . or buy a comprehensive solution. Recognizing the benefits of modernizing their technology infrastructure banks is taking the right initiatives. or outsource.

3. 29 . 4.PUNJAB NATIONAL BANK these challenges by the other banks is excepted to not only stand them in good stead during difficult times but also augurs well for the banking The Mission Our mission is to groom professionals of tomorrow by • Imparting high quality education in Management and Information Technology • Developing intellectual capabilities through a challenging Curriculum • Providing training and development services • Fostering research • Extending consultancy services to the industry • Disseminating information through the publication of books. To assist the needy. journals and magazines. To transform the financial institution not only as the financial heart of the community but the social heart as well. To spread education among all to sub -serve the first principle. Punjab national bank Founding Principles 1. To inculcate the habit of thrift and savings. To remove Superstition and ignorance. 5. society and ethics. environment. The Vision To be an Institute of Academic Excellence known for total commitment to superiority in management and IT education and research with a holistic concern for quality of life. 2.

PUNJAB NATIONAL BANK 6. 7. To work with sense of service and dedication. 30 . To develop a concern for fellow human being and sensitivity to the surroundings with a view to make changes/remove hardships and sufferings.

Sh.R. Kamath. Governor.V.Chakraborthy and Dr. M. Subir Gokarn.Union Minister for Heavy Industries. Tanksale and Shri Rakesh Challenger Award 2011 on Sethi. K. PNB receiving RBI Rajbhasha Awards from Dr. Kamath. PNB Awarded SKOCH M. D.PUNJAB NATIONAL BANK Awards Awards & Achievements of Punjab National Bank in Recent Times Shri K. Other PNB Awarded Rajbhasha dignitaries present on the dias are Awards RBI Dy. Governors Dr. M. at a function held at New Delhi.V.PNB. Tanksale. Sh. Tanksale. PNB 31 . PNB adjudged Best Managed CMD. Bank by SCOPE Praful Patel. A Sai Prathap. Chairman & Managing Director. ED. Sh. Minister of State & Sh.R.V. Chairman of the Prime Minister's Economic Advisory Council. Punjab National Bank declared winner of "SKOCH Challenger Award on Financial Inclusion". RBI.PNB. PNB receiving award Financial Inclusion from Dr. C Rangarajan. K.C.Subbarao. EDs. ED. PNB Awarded Best Technology Punjab National Bank declared winner of "Best Technology Bank Bank 2010 2010". Won Second Prize under the category of "Best Wind Power Wind Power India 2011 Awards Project Financier" 2011 by World Institute of Sustainable Energy. Hon’ble President of India Smt. Seen in picture are Sh. Pratibha Devisingh Patil giving SCOPE Best Managed Bank Gold Trophy Award to Sh.

C. K. S. IDRBT. Sh. Outlook Money Award for the year 2010 for "Best Home Loan Provider" Outlook Money Award for the year 2010 for "Best Education Loan Provider" 2nd prize of Indira Gandhi Rajbhasha Shield by Dept. PNB receiving Niryat Bandhu Award from Hon’ble Sh.Kamath. 2008-09. MoS (Independent Charge) and Sh. GM and Sh. Governor. PNB declared winner of the Golden Peacock Awards for Training.R. Secretary. Kapoor. Sushma Bali. Subbarao. GOI 32 . Seen in the picture is Sh. Sh. K Sankaranarayanan. Smt.Kamath.P. Dinesh Rai. PNB receiving 'excellent performance in lending under PMEGP scheme' award from Sh. CMD. at Hyderabad from Shri D. GM. PNB is receiving the Best Bank Award Outlook Money Award 2010 Outlook Money Award 2010 and Sh. Dr. Executive Director. Governor.N. Bhagwati Ex-Chief Justice of India. CGM. Director. Ajay Misra. Mr. A. of Indian Official for promoting Hindi for the year Language. J. Dinsha Patel. GM. Dy. Governor of Maharashtra and Sh. PNB receiving award from Hon’ble ExPresident of India Sh.J Abdul Kalam at the Banking Technology Conference held at Mumbai. Minister of State for Commerce and Industry. GM. CMD. Mr. P. K. IDRBT and Mr. Chakrabarty. DGM.P. RBI . Samba Murthy. RBI.R. Nagesh Pydah. S Ganesh Kumar.Dubey. PNB receiving award from Hon'ble Sh. Ministry of Home Affairs. Jyotiraditya Scindia. PNB are also seen in the photograph. PNB.K.PUNJAB NATIONAL BANK PNB AWARDED GOLDEN PEACOCK AWARD FOR TRAINING PRESS RELEASE PNB AWARDED NIRYAT BANDHU BRONZE TROPHY PRESS RELEASE Hindi PRESS RELEASE English PNB Received Excellent Performance in Lending Under PMEGP Scheme award SME PRESS RELEASE Hindi MSME PRESS RELEASE K. Small & Medium Enterprises. Ajay Misra. Ministry of Micro.

Propagating KVI Programmes in Small & Medium Enterprises. Regional Round Award WinnersIndia Indore Golden Peacock Award for By Institute of Directors for 2009. CENTRAL ZONE of India(Prime Minister Employment 33 . Best Employer Brand Award By Employer Branding Institute. Ministry of Micro. including Financial Inclusion. Govt. Excellence in Corporate Governance By Dainik Bhaskar in association India Pride Awards for excellence in with Daily News and Analysis for PSU 2009. Uttar Pradesh Best use of Technology for Financial By IDRBT. National Award for Excellence in By Khadi & Village Industry Lending for Institutional Finance for Commission. Ministry of Micro. Govt. Governance in 2009 5th Social and Corporate Governance Award Under the Category of "Best By Bombay Stock Exchange for Corporate Social Responsibility 2010 Practice" Skoch Awards 2010 for By Skoch for 2010 "Computerisation of RRBs" Global HR Excellance Award 2010 for the outstanding Contribution to World HRD Congress the cause of Education Asia Best Employer Brand Award" By World HRD Congress for 2010 for Excellence in Training Award for Brand Excellance" under By CMO Asia for 2010 Banking & Financial Services "CSR Excellence Award 2010" By ASSOCHAM For Livelihood Linkage of the milk Skoch Challenge Award 2010 producers in Bulandshahr District. Inclusion for 2009-10. Lending for Institutional Finance in Small & Medium Enterprises. Propagating KVI Programmes in of India. Dun & Bradstreet Award for “Priority Sector Lending By Dun & Bradstreet for 2009. (Interest Subsidy Eligibility NATIONAL LEVEL Certificate Scheme) for 2009. By Khadi & Village Industry National Award for Excellence in Commission.PUNJAB NATIONAL BANK Gold trophy of SCOPE Meritorious By Standing Conference of Public Award for Excellence in Corporate Enterprises.

Govt. By Khadi & Village Industry National Award for Excellence in Commission. Lending for Institutional Finance in Small & Medium Enterprises. Propagating KVI Programmes in of India(Interest Subsidy Eligibility CENTRAL ZONE Certificate Scheme) for 2009. Propagating KVI Programmes in of India(Interest Subsidy Eligibility NORTH ZONE Certificate Scheme) for 2009. PUNJAB NATIONAL BANK SERVICES 34 . Govt.PUNJAB NATIONAL BANK Generation Programme) for 2009. By Khadi & Village Industry National Award for Excellence in Commission. Ministry of Micro. Lending for Institutional Finance in Small & Medium Enterprises. Ministry of Micro.

once customer has an account with any of the select branches. Balance enquiry 5. Purchase of Demand draft Firmsl Companies I Other Bodies maintaining Current I OD I OCC Accounts: 1. Transfer of funds 4.PUNJAB NATIONAL BANK Anywhere Banking: Anywhere Banking is a technology-based. Remittance of cash 3. With Anywhere Banking facility. FACILITIES: Individuals I joint account holders (operated severally) maintaining Current I 58 I OD Accounts: I. Issue of mini statement 6. Withdrawal of cash 2. Depositing of local cheques for collection and crediting to the respective account at any Anywhere Banking branch. 2. customer-friendly service designed to provide greater convenience to our customers. Depositing local cheques for collection 7. Transfer of funds between accounts. from one Anywhere Banking branch to another anywhere banking branch. FEATURES: 35 . Customer can operate it From any other designated branch across 85 cities.

Cash withdrawal upto Rs. Last five transactions in the account. 4. Note: The facility is password protected to ensure secrecy.PUNJAB NATIONAL BANK 1. OOO/ .per occasion 2. • Change in pass word. Facilities of both intra-city and inter-city transactions. You can make the following enquiries/requests over telephone: • Balance in the account including clear balance. • Request for cheque book. Request for pass sheet.on line debit of cheques drawn on our own A WB branches within the city / clearing zone. office or from anywhere over telephone. Tele services Access information about your account right from your home. Ask your Branch Manager for details and enroll today itself the service 'is absolutely lice of cost Personal Banking: Deposits 36 . HOME CLEARING .50. A round the clock teller answering the enquiries from anywhere presenting voice information at any time. Transactions permitted on production of ident ity card issued exclusively for ANYWHERE BANKING facility 3. Fax on demand.

All CBS branches are inter-connected with each other. These services are: To make enquiries about the balance. He becomes the Bank’s Customer.PUNJAB NATIONAL BANK • Savings Bank Account • Current Account SERVICES • CBS (Core Banking Services) ATM Service | Safe Deposit | Service Charges CBS ( Core Banking Solution) Core Banking Solution (CBS) is networking of branches. 37 . regardless of where he maintains his account. debit or credit entries in the account. and avail banking services from any branch of the Bank on CBS network. Therefore. Thus CBS is a step towards enhancing customer convenience through anywhere and anytime Banking. which • • • • • enables Customers to operate their accounts. Customers of CBS branches can avail various banking facilities from any other CBS branch located any where in the world. The customer is no more the customer of a Branch.

• To obtain Demand Drafts or Banker’s Cheques from any branch on CBS – amount shall be online debited to his account. Navi Mumbai & Pune. • To deposit cheques / cash into account of some other person who has account in a CBS branch. • ATM (Automated Teller Machine) Service:The Bank's 17 ATM of 14 branches of the Bank are connected to Central ATM Switch at Data Center and Customers are able to do all the transactions through any of the Branches of the Bank in Thane. To deposit cash into the account. • To get statement of account • To transfer funds from his account to some other account – his own or of third party. By using ATM Customer can 38 . • • To deposit a cheque for credit into his account.PUNJAB NATIONAL BANK • To obtain cash payment out of his account by tendering a cheque. provided both accounts are in CBS branches.

PUNJAB NATIONAL BANK transfter their fund from one Branch account to Other Branch account by ATM Link Process.10% of the amount9 Locker Rent Rs 300/Applicable as per Size of locker 12Cheque purchase commissionRs 3 per Thousand 13Safe CustodyRs 50 per Month14LCMaximum Int. • • Safe Deposit Locker Keep your valuables safe with Punjab national bank Senior Citizen 0.000/.16Pay Order / D D CancellationRs 30/- 39 .Rs 0.25% of the amount Upto Rs 50.75% Additional Interest to Senior Citizen Service Charges • • • Outward ClearingRs 60/Upto Rs 1 lac – Rs 120/Above Rs 1 lac .20% of the amount Maximum Rs 3000/. Rate on Loan plus 2% more15Solvency CertificateUp to Rs 2 lac – Rs 400/Above Rs 2 lacs – 0.– No charges Above Rs 50000 to Rs 1 lac .Rs 0.

PUNJAB NATIONAL BANK DEPOSIT SCHEMES Fixed Deposit Recurring Deposit Reinvestment Deposit Monthly / Quarterly Interest Scheme 40 .

75% Interest (On all Fixed Deposits above 1 year) • Recurring depositInterest Rate 1 year & below 18months7.00%1 year & below 18months7.00%For senior citizen additional 0.75% Interest • Reinvestment DepositInterest Rate 1 year & below 18months7.75%18months & below 2 years 8.00%For senior citizen additional 0.50%2 years upto 3 years8.50%46 to 90 days5.75%18months & below 2 years 8.25%Above 3 years8.75% Interest • Montly / Quarterly Interest Deposit LOANS • Housing Loans | 41 .00%181days to below 1 year7.75%18months & below 2 years 8.25%Above 3 years 8.PUNJAB NATIONAL BANK Fixed Deposit Interest Rate 15 to 45 days4.00%For senior citizen additional 0.25%Above 3 year 8.50%2 years upto 3 years8.50%2 years upto 3 years8.50%91 to 180 days6.

upto Rs 25 lakhs for 5 years.50% p.00%11. above Rs 25 lakhs for 5 years:@ 11.:@ 11. upto Rs 25 lakhs for 5yr-15yr.:@ 11. per Rs.a.Rate of Interest:Upto Rs 2 lakh @ 13.00% p.50%11.a.a.50% p. 1 LakhRate of Interest10.PUNJAB NATIONAL BANK • • Vehicle Loan | Article Loan | Term Loan For Business | Builders & Contractors Housing Loans Purpose:Purchase flat or Construction of HouseRate of interest:@ 10.50%5 years2149 2174 2199 10 years-1378140615 years-11371168 Vehicle Loan NEW VEHICLE (Commercial Use)Rate of Interest:@ 12. above Rs 25 lakhs for 5yr-15yr.a.Eligibility:Individual. I.Security :Mortgage of Flat Purchased / House constructed Repayment:Maximum Upto 15 years. Above Rs 2 lakh @ 15.00% p.a.Security:Vehicle & Salary/Income. M. Loan Amount :80% of Invoice Value + Registration Charges + InsuranceOLD VEHICLEIn case of Old Vehicle upto 5 years:50% of Agreement value or valuation whichever is less.00% p.Repayment :Maximum 5 years*Conditions Apply TERM LOAN FOR BUSINESS 42 .00% p.E.75 % p.a.a.

00% Eligibility:Individual / Firm / Partnership Firm / Company etcLoan Amount:As per requirementMargin :30%*Repayment :Maximum 7 years.00% Eligibility:Individual / Firm / Partnership Firm / Company etcLoan Amount:As per requirementMargin :30%**Conditions Apply TERM LOAN FOR BUILDERS & CONTRACTORS Purpose:Business Expansion Purchasing Machinery Raw Material Setting New ProjectRate of InterestLOAN AMOUNT INTERESTAny Amount15.00%ABOVE Rs 3 crore 12. Upto Rs 50 Lacs13. Article Loan 43 .PUNJAB NATIONAL BANK Purpose:Business Expansion Purchasing Machinery Raw Material Setting New ProjectRate of InterestLOAN AMOUNT INTERESTMEDIUM TERM BUSINESS & SMALL SCALE IND.50%ABOVE Rs 50 Lacs upto 3 crores13.

Electronic / Consumable Appliances etc.Repayment :Max. 10 Lacs for studies in India.aLoan Amount:Upto Rs. 'Whole Life' Insurance Policy on the life of the student. Education loan • To brighten the future of bright & committed students by extending financial assistance to pursue higher professional / technical courses studies in India & Abroad through Educational Universities / Institutes / Organisations of good reputation & recognition. Rate of Interest :Upto Rs.Security :Article / Furniture / Immovable PropertyRepayment:Upto 5 years. 120 months.Margin:30% *.a.a. 10 Lacs @ 10% p.PUNJAB NATIONAL BANK Purpose:Purchase of Furniture & Fixtures. ” Purpose:Higher Education. for the amount of loan. 20 Lacs @11% p.Eligibility:IndividualLoan Amount:Maximum upto Rs.Rate of Interest:@14% p. Above Rs. including moratorium period Professional Loan 44 . 5 lacs. 20 Lacs for studies in Abroad. Security:Collateral security owned by Parents or Guarantor. 10 Lacs & Upto Rs. Upto Rs.

50%ABOVE Rs 10 Lacs To Upto Rs 50 Lacs12.PUNJAB NATIONAL BANK • Criteria:Doctor Advocate Architect CA & EngineerRate of Interest LOAN AMOUNT INTEREST UPTO Rs 10 Lacs12.50% Eligibility:Individual / Firm / Partnership Firm / Company etcLoan Amount:As per requirementMargin :30%**Conditions Apply General Facilities -Safe Custody Services -Safe Deposits Locker -Nomination facility Other Services/Facilities 45 .00%ABOVE Rs 50 Lacs12.

46 . Central Security Cell. Printing Section. 3. Research & Product Development Section. Customer Service Section. 2. Corporate Cash Management Services. Economic Research Section. Management Information and Planning Section. Corporate Merchant Banking Division. 3. Policy and Administration Section. Publicity and Public Relations Section. Premises. Premises and Estate Section. 5. Development Section. Estate Policy and Control Section. 6. 4. Technical Cell. Records and Tappal Section. 5. FINANCIAL AND GENERAL ADMINISTRATION WING: a) General Administration Department 1. 6 7 8 9 Furniture and Bills Section. 2. 8. Marketing.PUNJAB NATIONAL BANK PLANNING AND DEVELOPMENT WING 1. Stationery Section. 4. 7.

3. Core Banking Group. ATM and Debit Card Reconciliation Section. Procurement Group. Executor. Payment System Group. 9.PUNJAB NATIONAL BANK b) Accounts and Taxation Department 1. Delivery Channel & Communication Group. 7. 6. Planning Establishment & Training Group. Balance Sheet and Central Accounts Section. New Projects Group. Trustee and Taxation Section. 4. Staff Welfare Fund. 8.WING' 1. 7. 5. DD Reconciliation Section. Service Units Software Group. Administrative Software Group. 9. Government Accounts Section. 4. Branch Software Group. DEPARTMENT OF INFORMATION TECHNOLOGY. Pension Fund. 8. 3. 47 . 5. 2. 2. Staff Provident Fund. 6.

credit cards. Some of the new products introduced are LBOs. housing finance. any disruption or imbalance in its infrastructure will have significant impact on the entire economy. Deregulation in the financial sector had widened the products range in the developed markets. 48 .PUNJAB NATIONAL BANK Credit Risk Management in Banks An Overview The financial sector especially the banking industry III most emerging economiesincluding India is passing through a process of change. As the financial activity has become a major economic activity in most economies. By developing a sound financial system. derivatives and various off balance sheet items. Thus new vistas have created multiple sources for banks to generate higher profits than the traditional financial intermediation. Simultaneously they have opened new areas of risk also. the banking industry can bring stability within the financial markets. structured transaction. Many unknown issues that are intricately related to new products have exposed banks to various risks across the globe and India is no exception.

funding a gap or adverse movements of markets.PUNJAB NATIONAL BANK During the past decade. risks and uncertainties. the Indian banking industry continued to respond to the emerging challenges of competition. Banks in general face the following risk: • • • Liquidity Foreign E xchange C redit M arket Intrestrate Operational The industry has undergone drastic changes in the last three decades. Horizontal expansion of the financial markets. deregulation across the globe in financial markets and stiff competition have led the banks to multiply their activities. Increased activities in the industry have exposed the banks to more uncertainties and more risks. 49 . Our regulators have made some sincere attempts to bring prudential and supervisory norms conforming with international bank practices with an intention to strengthen the stability of the banking system. Risks originate in the forms of customer default. Measuring and quantifying risks is neither easy nor intuitive.

The lead time is reduced in collection of cheques and other instruments by the banks. When the default rate increases in 50 . There will be always a time gap between the availability of resources and their deployment. From the bank's point of view it increases the fee based income. Liquidity management essentially deals with efficient handling of inflows and outflows of funds. Section-II discusses the cash management techniques adopted by banks and corporate clients. if they introduce efficient cash management services. Liquidity management is an integral part of funds management. Banks mobilize the deposits and deploy funds in advances and investments. Banks also float funds through various subsidiary services extended to their clients. Section -I discusses the liquidity management in banks in India and across the globe. Cash Management is a subset of the entire funds management. Hence banks will often swing between excess liquidity and liquidity crunch in their funds position. Cash management services are one innovative product introduced by the banks in the recent times.PUNJAB NATIONAL BANK Risk Management in Banks is broadly divided into six sections: Funds Management is a major activity of the banks. Credit risk is as old as money.

The Baslc committee defines the operational risk as "the risk of direct or indirect loss resulting from inadequate or failed internal processes. human resource risk.PUNJAB NATIONAL BANK the portfolio of the bank< it may lead to its total collapse. This defination excludes operational: risk but includes legal risk.risk management group of the bank: Section IV attempts to elucidate few issues involved in the operational risk management. Section-III discusses the credit risk management in banks. Quantification of operational risk is a major challenge to the . Such operational risks can be broadly classified into four categories as information technology risk.'relationship risk. people and systems or from external events". To circumvent the c re d it risk. the system tries to design innovative products. 51 . loss to assets risk and .

loan accounting transparency and disclosures. The Basle committee had set certain guidelines for the bank s. The Reserve Bank of India had set up an advisory committee under the chainn:Ulship of M S Verma and the committee had submitted its report in May 2001. financial conglomerates and cross border banking supervision.PUNJAB NATIONAL BANK One of the core activities of the regulators is proper of the system. The supervisor should provide a safety net to the financial system. internal controls. Section -V discusses the important issues of any risk management technique. risk management. The committee recommended corporate governance. 52 .

In the case of treasury operations: the payment or series of payments due from the counter parties under the respective contracts may not be forthcoming or ceases. Credit risk emanates from a bank's dealings with an individual. 4. In the case of securities trading businesses: funds/ securities settlement may not be effected. 53 . In the case of direct lending: principal/and or interest amount not be repaid. In a bank's portfolio. In the case of guarantees or letters of credit: funds not forthcoming from the constituents upon crystallization 0 f the liability. corporate. trading. Alternatively. losses stem from outright default due to inability or unwillingness of a customer or counter party to meet commitments in relation to lending. 2. financial institution or a so vereign. 3. bank.PUNJAB NATIONAL BANK Credit Risk Management at Punjab national bank Introduction Credit risk is defined as the possibility of losses associated with diminution in the credit quality of borrowers or counter parties. losses result from reduction in portfolio value arising from actual or perceived deterioration in credit quality. settlement and other financial transactions. Credit risk takes in the following forms: 1.

it is imperative that Punjab national bank has credit risk management system. measurement. 54 . Credit risk managemnt encompasses identification. which is sensitive and responsive to these factors. monitoring and control of the credit risk sources.PUNJAB NATIONAL BANK Credit Risk Management In this backdrop. The effective management of credit risk is a critical component of comprehensive risk management and ie essential for the long-term success of Punjab national banking organisation.

The Boards should authorize efficient and effective credit approval processes for operating within the approvall imits.: Separation of credit risk management from credit sanction Multiple credit approvers making financial sanction subject to approvals at various stages viz. Banks ensure that there are consistent standards for the origination. The 5. credit ratings. and remedial action. 9. risk approvals. 7. 2. have a system to conduct regular analysis of the portfolio and to ensure ongoing control of risk concentrations. 6. Banks maintain a diversified portfolio of risk assets.PUNJAB NATIONAL BANK Punjab national bank has system of checks and balances in place for extension of 1. 55 . documentation and maintenance for extensions of credit 8. credit viz. obligor limits and concentration limits by industry or geography. Banks has a consistent approach towards early problem recognition. and to attribute accurately the associated risk weightings to the facilities. the classification of problem exposures. 3. Credit risk limits include. etc. Every obligor and facility must be assigned a risk rating. 4. credit approval grid. level of authority required to approve credit will increase as amounts and transaction risks increase and as risk ratings worsen. Mechanism to price facilities depending on the risk grading of the customer. 10. An independent audit and risk review function.

Banks should have a clear. Bank has an experience. 12. Treatment of Credit risk at bank. Factors considered for sanction loans: 1) 2) 3) 4) 5) Individual Capacity. unsecured portion means the NPA amount obtained after deducting the eligible and guarantee amounts. judgment and commitment to technical development. well-documented scheme of delegation of powers for credit sanction.PUNJAB NATIONAL BANK 11. Securities Additional securities Prompt repayment of L02. A conservative policy for provisioning in respect of non -performing advances adopted adopted. 56 . The unsecured portion of NPA accounts net of specific provisions is also to be subject to risk weighting mechanism. Bank has systems and procedures for monitoring financial performance of customers and for controlling outstanding within limits. Deposits in Banks Individual Capacity: Bank considers individual capacity h) repayment of loan with term or agreed term with bank and also considers his transaction with bank if any. 13. 14.

Additional securities Providing additional loans to make repayment of existing loans. Existing Credit Risk Management at Punjab national bank • • • • Follow up clients/Customers. Bank Deposits Bank deposits with bank or any other banks consider as security for loans. Review of loan. Recovery systems. Prompt repayment of Loan: Existing transaction or previous transact ion consider while grant new loan to customers/ Clients.PUNJAB NATIONAL BANK Securities: Bank considers securities of borrowers while lending money to him. Loan Review Mechanism. home and other securities while sanctioning new loan to customers when customers has existing loan in bank. Insurance policies Additional Securities: Banks consider or accept additional securities like land. His prompt repayment of loan consider for new loans. 57 • • . Ex: Shares cel1ificate.

Recovery Systems: Bank directly collect dues from customers.PUNJAB NATIONAL BANK • • • • • Low and High credit risk ratings. They have separate department. Additional Securities: Additional securities will be taken from the customer in two situations: 1) If existing loan extended by the bank. Review of loan: If the amount not recovered within specified term mentioned as per the policy of bank. and also ensure that ifhe fails to pay the loanwhat is next step of banks. 2) When additional loan is given to the customer in addition to existing loan. Low interest rate for high credit rating companies High interest rate for low credit rating companies Single/group borrower limits Authorities to branches • Authorities to Committees. 58 . bank goes for review of loan if required. Following Up customers/Clients: Bank remind borrowers to repay loan and interest according to term and condition which he has agreed while taking loan from banks. which look \after all matters related to recovery of loan.

if the credit worthy ness of the company is high he will be charged low interest.99 purity) 3) State Govt securities 4) Central Govt securities 5) National Saving Certificates 6) Life Insurance Policies 7) Equities ( Including convertible bonds) 8) Mutual fund securities 9) Land and Building 10) Plant and Machinery 59 . opposite is the case for low credit worthiness Following Securities as eligible for treatment as Credit risk mitigates: 1) Bank Deposits 2) Gold Jewellery ( Benchmarked to 99. Interest rate is depend on credit worthyness of the company.PUNJAB NATIONAL BANK Low and High credit risk ratings.

The techniques employed. The domain of applications in the credit process and 3. logic analysis and probability of default. 2.PUNJAB NATIONAL BANK Guarantors Types • State Government • Central Government • Public Sector Entities • Banks • Primary Dealers Corporate Techniques for Measuring Credit Risk In the measurement of credit risk. Multiple regression. models may be classified along three different dimensions: 1. Neural networks are computer-based systems that use the same data employed in the econometric techniques but arrive at the 60 . Econometric Techniques such as linear and multiple discriminate analysis. etc. Techniques: The following are the more commonly used techniques: 1. 2. The products to which they are applied.

• Compliance with loan convents. • Adherence to internal policies and procedures. • Accuracy and timeliness of credit ratings assigned by loan officers. for example. and • Recommendations for improving portfolio quality Collection strategies: Credit models may be used in deciding on the best collection or workout strategy to pursue. If. 61 . • Sufficiency of loan documentation. • Portfolio quality. a credit model indicates that a borrower is experiencing short term liquidity problems rather than a decline in credit fundamentals.PUNJAB NATIONAL BANK decision model using alternative implementations of a trial and error Depth of Reviews The loan reviews should focus on: • Approval process. and applicable • laws / regulations. then an appropriate workout may be devised. • Post-sanction follow-up.

have so far trained I . Top Executive Risk Committees. taking the total of such 62 . RUDSETls. has promoted 14 self-employment training institutes. numbering 20 across India.87lakh unemployed youth. with an impressive settlement rate of72%. are in place to effectively address all issues related to the management and mitigation of various business/control risks. under Punjab national bank Centenary Rural Development Trust. a voluntary organization workingforthe welfare of socially marginalized children. The Bank. headed by the Chairman & Managing Director. The Bank's 'Rural Clinic Services' scheme has assisted doctors in opening 21 additional clinics during 2006-07. These institutes have so far trained 56520 rural youth. The Bank's Board has been driving the policy initiatives and putting appropriate strategies in place for effectively managing the Credit. Market and Operational risks.PUNJAB NATIONAL BANK RISK MANAGEMENT The Bank has initiated implementation of parallel run of new capital adequacy framework under Basel II during the year and is fully geared for a smooth switchover within the RBI prescribed time schedule. CORPORATE SOCIAL RESPONSIBILITIES) RURAL DEVELOPMENT Rural Development and Self-Employment Training Institutes (RUDSETls) co-sponsored by the Bank have been engaged in providing training to rural youths to pursue various self-employment activities. with a settlement rate of 67%. The Trust is also extending support to Society for the Educational and Economic Development (SEED).

. As a responsible corporate social citizen. the Bank has donated hi-tech and solar powered 'Mobile Sales Van' to assist women entrepreneurs. covering 10000 customers was conducted by consultant of repute to 63 . a scheme for facilitating availability of safe drinking water in rural areas. customer survey from a sample of 25 branches each in five metros. Under 'Jalayoga'.PUNJAB NATIONAL BANK clinics to 493 across India. under the Rural Service Volunteer Scheme. the Bank has completed 35 projects so far. during the year. benefiting over 2 lakh families since its inception in 1985. During the year. Kolkata and Hyderabad. Delhi. has assisted 500 villages. Bangalore. Chennai. In a noteworthy initiative. the Bank has implemented 'Six Sigma' project for enhancing the knowledge base of its frontline staff on products and services. the Bank. introduced several new measures towards further improving customer centricity and service quality to match the competitive market conditions and customer expectations. viz. Keeping track of services quality at branches has been a hallmark of the Bank's unprecedented customer orientation. Tapping the spirit of voluntarism among its employees. SHGs and artisans in their entrepreneurial ventures. CUSTOMER ORIENTATION The Bank.

64 . Continued focus on quality drive enhanced the number of ISO 900I Certified Branches and Administrative Offices to 805 and 14 respectively as at March 2007.PUNJAB NATIONAL BANK further improve the level of customer service. apart from moves to decentralize operational activities. Close on the heels of achieving the one lakh mark in training/re-skilling during its centenary year. The Bank also adopted a fast track promotion policy and implemented cash incentive scheme for high performers.09. to spearhead strategic changes in the fast changing banking environment. Further. the Bank has brought out a booklet on "Code of Commitment to Customers" to create awareness among the customers as well as staff about the Uniform Fair Practice Code used as benchmark standard by all banks in India. 2006-07 featured the tally moving up further to 1. as a member of Banking Codes and Standards Board of India (BCSBI). the Bank effected a major organizational restructuring exercise for grater business focus and expeditious decision making. set up by RBI. Punjab national bank is also the only Bank in the country to have formed 'Club 2020' a group. HUMAN RESOURCES DEVELOPMENT Knowledge enrichment for employees continued to be a top priority for the Bank during FY07. comprising young talent. During the year.661 covering diverse functional areas. financial analysis and risk management. Focus on specialized expertise led to recruitment of 541 officers through campus and direct recruitment in diverse areas like marketing.

This information is required for financial analysis & decision making. It assesses the financial status of organization which is prepared with help of accounting principle. 65 .profit and loss account is one of the essential document which shows the summary of revenues.PUNJAB NATIONAL BANK Analysis of the financial statement Financial statements and reports are the tools which provides information of the firms financial affairs.  It represents the activity of the firm. expenses and net income of the firm during the particular financial period. Functions of the Profit and Loss account: It gives a concise summary of the firm’s revenue and expenses during the particular period.  It measures the firm’s profitability. Financial statement has mainly as follow:  Balance sheet  Profit & loss account Profit and Loss account:Meaning:.

It helps in decision making. profitability ratios Limitations of the analysis: There are no standard formula fixed to judge the performance. Activity ratios 3. 66 .PUNJAB NATIONAL BANK Ratio Analysis:Ratios are classified into four parts like:1. These are prepared with help of accounting principle. Liquidity ratios 2. leverage ratios 4. it has some limitation for Credit officer has to consider the financial statements and reports which produce information of the firm’s financial affairs.  due to price fluctuation it may distort the result  there are chances of making window dressing in the financial statements of the firm.  Forming of the ratio should be made with care. Since management problems are so complex that they cannot be reduced to a formula.

profit and loss account 3. activity ratio 3. balance sheet 2. liquidity ratio 2. profitability ratio 67 . funds flow and cash flow statements These financial statements will help the credit officer to calculate the following to ratios to make the credit rating 1.PUNJAB NATIONAL BANK The main financial statements are 1. leverage ratio 4.

4. Unless suitably modified the adoption of the new accord in its present format would result in significant increase in the capital charge for bank. Bank as well documented schemes delegation powers for credit sanction. The proposed standardized Basel2 to approach does not fits the needs of smaller banking organization engaged primarily traditional banking. Additional cost of capital will increase to the bank and bank may go for capital market to raise the found. 2. 5.PUNJAB NATIONAL BANK Findings 1. Internal ratting based approach provides positive incentives to banks in improving their credit risk management techniques. 7. etc. 68 . - 3. Banks may have discretion and flexibility in defining the exposure classes that which corporate. project finance. The current nor proposed capital frameworks yet address what is perhaps the most critical risk factor for the smaller banks geographic and sectoral concentrations of credit risk. 6.

the risk will come down significantly. 2.PUNJAB NATIONAL BANK Recommendations 1. This will lead to an increase in the regulatory capitalization levels. a danger they have to guard against. This may in turn in duce conservatism in the bank in taking of risky portfolio of advances. which may be passed on to the customers. 69 . Due to increased sensitivity towards risk under the new norms. The bank will now have to adopt the credit risk assessment system which is an international standard specified for the banking system. which will increase the cost of capital. The banks will have to exercise due care in maintaining the portfolio of risk assets in order not to increase unduly the required regulatory capitalization level. 3. It will indeed be a delicate balancing task.

org. 3 4 70 .PUNJAB NATIONAL BANK BIBLIOGRAPHY 1 Bank circulars.punjabnationalbankindia. 5 www. 2 Internal magazines. www.in.com.org.mis. www.rbi.

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