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TABLE OF CONTENT
1.INTRODUTION: HISTORY OF PNB PRODUCTS AND SERVICES AWARDS AND DISTINCTIONS PNB OVERSEAS OFFICES 2.PROFILE OF PNB

3. PNB (2009)

4. VISION AND MISSION

5. PORTFOLIO MANAGEMENT

6. CREDIT PORTFOLIO MANAGEMENT METHODS OF CREDIT PORTFOLIO MANAGEMENT

CREDIT PORTFOLIO METHODOLOGY

MODELS OF CREDIT PORTFOLIO MANAGEMENT

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7. CONTENT OF CREDIT PORTFOLIO MANAGEMENT

8. LOANS AND SCHEMS PROVIDED BY PNB

CONCLUSION

REFERENCES & BIBLIOGRAPHY

Executive Summary

In the growing global competition, the productivity of any business concern depends upon the behavioral aspect of consumers. This topic deals with the customers perception towards other Credit Portfolio Management at Jabalpur. This project report contains 5 different chapters. The report begins with the introduction to company, its area of operation, its organization structure, its achievements, etc.

Introduction
Portfolio management Market-to-market transfer of assets asset purchases asset swaps credit derivatives Pr (loss) optimisation of loss distribution credit portfolio loss Line of business product and delivery optimization techniques were initiated by the banking industrys desire to avoid a repeat of its late 80s and early 90s default experience. The heavy credit losses during this period, driven by a poorly controlled rush to build market share at the expense of asset quality and portfolio diversification, threatened the solvency of even well capitalised institutions. The need to better understand portfolio credit risks was reinforced by the publication of the Bank for International Settlements (BIS) capita adequacy guidelines in 1988 These guidelines, whilst specifyin minimum regulatory capita requirements, were inadequate t provide an accurate measure of the risk/reward characteristics of a credit portfolio. Banks therefore started to develop more sophisticated credit risk management techniques that recognized both the credit risk of individual exposures and the degree to which these risks were diversified. Banks leading the development of credit risk management techniques quickly discovered that credit pricing was highly inefficient. Typically pricing within a loan portfolio would be almost flat across the credit risk spectrum, generating huge skews in customer profitability. Initial efforts focused on mitigating these skews by calculating risk adjusted profitability (eg risk adjusted return on [risk-adjusted] capital) by sub-portfolio and then using these measures to create risk adjusted loan pricing tools. Leading banks thus started to rationalize pricing in both loan and bond portfolios, and moving under-performing assets off their balance sheets. Consequently banks that had
5

not developed risk-adjusted performance measures started to suffer from negative selection, often accepting significantly underpriced assets from more sophisticated institutions. In parallel to developing aggregate risk-adjusted performance measures, leading banks were also starting to quantify credit risk at finer levels of detail.

Credit Portfolio Management

Banks leading the development of credit risk management techniques discovered that credit pricing was highly inefficient 1 Credit portfolio management were developed which could differentiate credit risk along multiple dimensions (credit grade, industry, country/region etc) and, for large corporate exposures, on a name-by-name basis. These credit portfolio models have positioned leading institutions to take advantage of the increasing liquidity of the credit markets and to adopt a far more active approach to credit portfolio management than was previously possible. Historically, credit portfolio management had focused on the monitoring of exposure by broad portfolio segment and, if necessary, the imposition of exposure caps. The creation of a stand-alone credit portfolio management function, armed with sophisticated portfolio models and with a controlling mandate over assets held on the balance sheet, now enabled the credit portfolio to be optimized independent of origination activity, Active credit portfolio optimisation has enormous potenorigination Opportunities sales/product teams approval syndication/ sales asset syndication/ disposals. Using only very basic optimization techniques a typical institution might expect to reduce the economic capital consumed by its credit portfolio by 25%30%.
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Credit Risk Measurement Framework Credit risk is conventionally defined using the concepts of expected loss (EL) and unexpected loss (UL) (Because expected losses can be anticipated, they should be regarded as a cost of doing business and not as a financial risk. Obviously credit losses are not constant across the economic cycle, there being substantial volatility (unexpected loss) about the level of expected loss. It is this volatility that credit portfolio models are designed to quantify. Volatility of portfolio losses is driven by two factors concentration and correlation (figure 3). Concentration describes the lumpiness of the credit portfolio (eg why it is more risky to lend 10m to 10 companies than to lend 0.1m to 1,000 companies). Correlation describes the sensitivity of the portfolio to changes in underlying macro-economic factors (eg why it is more risky to lend to very cyclical industries such as property development). In all but the smallest credit portfolios, correlation effects will dominate. When quantifying credit risk, two alternative approaches can be used when valuing the portfolio:

METHODS OF CREDIT PORTFOLIO MANAGEMENT

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Loss-Based MethodUnder this approach an exposure is assumed to be held to maturity. The exposure is therefore either repaid at par or defaults, and thus worth the recovery value of any collateral. Using the approach credit migration has n effect on the book value of the obligation. NPV-based methodUnder this approach, the embedded value o an exposure is assumed to be realizable If the obligation upgrade then it is assumed to be worth more than par, and if it downgrades it I assumed to be worth less than par The value of the obligation can b calculated using either using market credit spreads (where applicable or by marking-to-model using CAPM or similar method. In general, NPV-based method are most applicable to bond portfolios and large corporate portfolio where meaningful markets exist for either the physical assets or credit derivatives. For the vast majority o commercial bank exposures where such markets do not exist a more meaningful risk profile is obtained using a loss-based method. Loss-based calculation have the advantage of requiring less input data (margin and maturity information, for example, is no required) and being simpler t compute. However, many institution are starting to run both method in parallel, particularly for portfolio where securitization is possible The different credit risk profile generated for the same portfolio using loss-based and NPV-base methods are shown later in this article

Credit Portfolio Methodology

Measuring Credit Risk Correlations.
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As discussed previously, to accurately model portfolio credit risk the correlation between exposures must first be measured. This seemingly simple statement conceals the complex string of calculation. Concentration of portfolio correlation of borrower behavior

diversification of credit risk credit risk size of portfolio systematic risk: driven by correlation specific risk: driven by concentration time (years) frequency credit losses. Npv based methodNPV-based methods are most applicable to bond portfolios and large corporate portfolios where meaningful markets exist for either the physical assets or credit derivatives that are actually necessary. Complexity arises as it is extremely difficult to calculate credit risk correlations directly. Indeed, to measure default correlation (as required for loss-based measures) between two companies is impossible, as this would require repeated observations over a given time-period during which each company would either default or survive. Credit risk correlation could then be calculated from the number of times both companies defaulted simultaneously. Clearly such analysis is impossible in practice. Similar difficulties exist when trying to estimate correlation between changes in credit rating or bond spreads. The simplest solution is to use aggregate time series to infer credit risk correlation. Unfortunately this approach is unsuitable except for the most basic of portfolio analysis for two main reasons. Firstly, aggregate time series are usually available only at a very high level, with insufficient data on underlying credit risk rating, industry and geographic distribution of the portfolio. Secondly, using aggregate time series produces unstable results over time. A more attractive solution to calculating
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credit risk correlation is to use a causative default model that takes more observable financial quantities as inputs, and then transforms them into a default probability. The most widely used model for commercial lending portfolios being the Merton default model. Simulation methods. Whilst the risk of small credit portfolios can be calculated analytically, the large number of calculations required mean that for most portfolios it is better to employ a numerical simulation technique. Monte Carlo simulation is the standard method, and can be thought of as a state-of-the-world generator that generates all possible states of the economy and the resulting impact on the value of the credit portfolio. In this way a distribution of all possible portfolio values is built up, from which its credit risk profile can be calculated . Credit Portfolio Models There are a number of currently available credit portfolio models that are distinguished by their correlation structures and choice of risk measure. Portfolio model applications Having discussed the inner workings of credit portfolio models we can now illustrate their uses by examining a number of management applications. Solvency analysisThe most obvious application of a credit portfolio model is to calculate economic capital. This is calculated from the tails of the credit risk distribution by determining the probability that a reduction in portfolio value exceeds a critical value. A loss based example of such an analysis

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is shown in figure 8 where, to achieve a Aa1/AA+ credit rating (equivalent to a 0.02% default probability), economic capital equivalent to 7.8% of total exposure is required. NPV-based 99.98% 99.00% down the aggregate credit risk distribution to show the credit risk of each portfolio element allows risk concentrations and hence diversification opportunities to be identified . For most credit portfolios, simple optimization techniques will substantially reduce economic capital requirements typically reductions of 30% are achievable equivalent to annual savings of 288m (assuming a capital charge of 18%) for a portfolio of 100bn (figure 10). Morten modelThe Merton model assumes that a firm will default if, over a 12- month period, the market value of assets falls below the value of callable liabilities. This enables asset correlation to be transformed into credit risk correlation . In figure 5 the more correlated the movements in the two companies assets the greater the twist in the joint asset value distribution. Hence the greater the probability that the credit quality of the two firms will rise, fall and ultimately default together. Asset correlations have the benefit of being more prices, balance sheet analysis etc) and their correlations have been shown to be stable over time. The Merton model has also been successfully adapted to describe credit risk correlations in financial institution portfolios that contain corporate exposures. The correlation of model inputs themselves are best measured using factor models in the same way that an equity beta is estimated. Factor models usually produce better prospective correlation estimates than direct observation and have the additional benefit, if macro-economic factors are chosen, of
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enabling intuitive stress testing and scenario analysis of the credit portfolio. An example of a macro-economic factor model is shown in. The connection of credit risk to underlying macro economic risk factors has significant implications for credit risk management and the future development of credit markets. Not only could a credit portfolio manager potentially hedge credit risk via equity or macro-economic derivatives, but professional market- makers should ensure that credit, equity and other derivative desks are positioned to take advantage of resulting arbitrage. These developments are likely to be a major driver of liquidity as these markets develop. In figure 6 a positive factor weight indicates that a positive change in that factor produces an increase in asset value, with a corresponding rise in credit quality and reduction in default rate. Conversely, a negative factor weight indicates that a positive change in that factor produces a decrease in asset value, with a corresponding fall in credit quality and increase in default rate. Sensitivity analysis and stress testing. Portfolio models can be use to calculate expected loss rates under different economic scenarios and thus drive dynamic provisioning estimates or loan loss reserving methodologies such as the SBC ACRA reserve. The sensitivity of portfolio credit losses to changes in hour under stress-test scenarios. Base Case: 7.7% Economic capital AA+ (99.98%) solvency standard. CONTENT OF CREDIT PORTFOLIO This paper analyzes the level and cyclicality of bank capital requirement in relation to
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(i) (ii) (iii)

the model methodologies through-the-cycle and point-in-time, four distinct downturn loss rate given default concepts, and US corporate and mortgage loans. The major finding is that less accurate models may lead to a lower bank capital requirement for real estate loans. In other words, the current capital regulations may not support the development of credit portfolio risk measurement models as these would lead to higher capital requirements and hence lower lending volumes. The finding explains why risk measurement techniques in real estate lending may be less developed than in other credit risk instruments. In addition, various policy recommendations for prudential regulators are made.

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COMPANY PROFILE
PROFILE OF PNB With over 56 million satisfied customers and 5002 offices, PNB has continued to retain its leadership position amongst the nationalized banks. The bank enjoys strong fundamentals, large franchise value and good brand image. Besides being ranked as one of India's top service brands, PNB has remained fully committed to its guiding principles of sound and prudent banking. Apart from offering banking products, the bank has also entered the credit card & debit card business; bullion business; life and non-life insurance business; Gold coins & asset management business, etc. Since its humble beginning in 1895 with the distinction of being the first Indian bank to have been started with Indian capital, PNB has achieved significant growth in business which at the end of March 2010 amounted to Rs 435931 crore. Today, with assets of more than Rs 2,96,633 crore, PNB is ranked as the 3rd largest bank in the country (after PNB and ICICI Bank) and has the 2nd largest network of branches (5002 offices including 5 overseas branches) .During the FY 2009-10, with 40.85% share of CASA deposits, the bank achieved a net profit of Rs 3905 crore. Bank has a strong capital base with capital adequacy ratio of 14.16% as on Mar10 as per Basel II with Tier I and Tier II capital ratio at 9.15% and 5.01% respectively. As on March10, the Bank has the Gross and Net NPA ratio of 1.71% and 0.53% respectively. During the FY 2009-10, its ratio of Priority Sector Credit to Adjusted Net Bank Credit at 40.5% & Agriculture Credit to Adjusted Net Bank Credit at 19.7% was also higher than the stipulated requirement
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of

40%

&

18%.

The Bank has maintained its stake holders interest by posting an improved

NIM of 3.57% in Mar10 (3.52% Mar09) and a Return on Assets of 1.44% (1.39% Mar09). The Earning per Share improved to Rs 123.98 (Rs 98.03 Mar09) while the Book value per share improved to Rs 514.77 (Rs 416.74 Mar09) 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 2009-10. The impressive operational and financial performance has been brought about by Banks 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: Rs in Crore Parameters Operating Profit Net Profit Deposit Advance Total Business Mar'08 4006 2049 166457 119502 285959 Mar'09 5744 3091 209760 154703 364463 Mar'10 7326 3905 249330 186601 435931 CAGR(%) 22.29 23.98 14.42 16.01 15.09

PNB has 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)
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since Dec08, thus covering 100% of its business and providing Anytime Anywhere banking facility to all customers including customers of more than 3000 rural & semi urban branches. The bank has also been offering Internet banking services to the customers of CBS branches like booking of tickets, payment of bills of utilities, purchase of airline tickets etc. Towards developing a cost effective alternative channels of delivery, the bank with more than 350 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 in the Indo-Gangetic belt, the Banks mission is Banking for Unbanked. 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. Under Branchless Banking model, the Bank is implementing 40 projects in 16 States. The Bank launched an ambitious Project Namaskar under which 1 lakh touch points will be established in unbanked villages by 2013 to extend the Banks outreach. Under this, 30 Kiosks have been opened covering 119 Villages reaching 1.32 Lakh beneficiaries. Backed by strong domestic performance, the bank is planning to realize its global aspirations. Bank continues its selective foray in international markets with presence in 9 countries, with branches at Kabul and Dubai, Hong Kong & representative offices at Almaty, Dubai, Shanghai and Oslo, a wholly owned subsidiary in UK, a joint venture with Everest Bank Ltd. Nepal and a JV banking subsidiary DRUK PNB Bank Ltd. in Bhutan. Bank is pursuing
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upgradation of its representative offices in China & Norway and is in the process of setting up a representative office in Sydney, Australia and taking controlling stake in JSC Dana Bank in Kazakhastan. Bank has been a recipient of many awards and accolades during the year: Gold trophy of SCOPE Meritorious Award for Excellence in Corporate Governance 2009 by Standing Conference of Public Enterprises As per Financial Express-Ernest & young (FE-EY) Indias Best Banks Survey, PNB is identified as the best bank among the nationalized banks in terms of overall ranking. As per HT-MaRS Survey on Customer Satisfaction, PNB stood NUMBER ONE in Delhi and Chennai in terms of customer satisfaction. As per the Forbes Annual list of 2000 global giants, PNB tops the list of nationalized banks with a global ranking of 695, substantial improvement over last years placement at 946th position. The Economic Times has ranked CEO of PNB as the 32nd Most Powerful CEO of 2010.

YEAR 2009 for Punjab National bank! Another simple measure to watch is net interest margin, which looks at net interest income as a percentage of average earning assets. Track margins over time to get a feel for the trend. PNBs Net Interest margins have been generally stable in the 3.5 to 4 percent range. FY08 Net Interest Margin stands
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at 3.58 percent which is again one of the best records among all banks, next only to HDFC Bank. Punjab National Bank is Indias second-largest public sector lender, with 4668 branches and 2455 ATMs across the country. During the year 2008-09 the number of branches increased by 163 branches. The net profit of the bank was Rs.927 crore for the quarter ended Sept09 as against Rs.707 crore in the corresponding period last year recording a growth of 31.1%. The bank has the lowest prime lending rate (PLR) of 11% among all banks in the country. The Prime lending rate is the rate of interest at which the bank lends to its best customers. Overseas Presence Branches at Kabul and Hong Kong and Representative offices at Almaty, Dubai, Shanghai and Oslo. With the opening of the Representative Office at Oslo, PNB becomes the First Indian bank to have presence in whole Scandinavian belt. In addition the Bank has a subsidiary (PNBIL) in UK. Strong Capital Base A strong capital base is the number one issue to consider before investing in a lender. Punjab National Bank also excels on Capital Adequacy Ratio (CAR) perhaps the only parameter where many Indian banks fall short, much like their global counterparts. While many Indian Banks are struggling to keep their heads above the floor-levels of 9-12%, PNBs CAR is at a very comfortable 14%. Thus there is no need for PNB to seek recapitalization by the government, something that is plaguing many other peers. Net Interest Income (NII):
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All firms can divide the balance sheet into assets and liabilities. For banks the assets are commercial and personal loans, mortgages, construction loans and securities. The liabilities are deposits from customers. The net interest income is then the difference between the revenues on the assets and the cost of servicing the liabilities. The performance on the net interest income front is especially good, taking into account their low PLR. It also enabled PNB to manage margin pressures better. Interest income during quarter ended Sept09 at Rs. 5,407 crore show a growth of 16.3%. Interest income stood at Rs.10,615 crore in the half year ended Sept09 showing year over year growth of 20.8%.

Net Interest Margins (NIM)

Another simple measure to watch is net interest margin, which looks at net interest income as a percentage of average earning assets. Track margins over time to get a feel for the trend. PNBs Net Interest margins have been generally stable in the 3.5 to 4 percent range. FY08 Net Interest Margin stands at 3.58 percent which is again one of the best records among all banks, next only to HDFC Bank.

Return on Equity (RoE) and Return on Assets (RoA)

These metrics are the standards for gauging bank profitability. Punjab National Banks profitability record is commendable. Net Margins have been stable around the 12-13 percent mark. Return on Assets, the indicator of how profitable a company is relative to its total assets is good at around the 1.2 percent mark, probably the best record after HDFC Bank. Return on Equity is at about 19 percent, again comparable to the best in the Industry. And this has been achieved without very high financial leverage (about 15x), which is commendable.
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Strong Revenues

Historically many of the best-performing bank investments have been those that have proven capable of above-average revenue growth. Punjab National Banks FY08 growth has been good. Interest income and total income growth stand at about 26 percent. The balance sheet has also grown strongly with advances growing at about 24% and deposits registering a growth of about 20 percent. This again shows that Punjab National Bank had been aggressive on the loans disbursal front. CASA ratio: CASA ratio is the ratio of the deposits in the form of Current Account & Savings Account to the total deposits. The bank has a good source of low-cost funds in its CASA deposits that amount to nearly 40% of its total portfolio. New Initiative Loans PNB is an outperformer in socially inclusive banking, and has kickstarted several initiatives in sectors like microfinance, self-employment loans, kisan credit cards, rural smart cards, enabling technologies for the handicapped, support for the economically challenged, etc. Summing Up On the technology front, PNB has not only completed implementation of Core Banking Solutions (CBS) throughout its vast network, but has also completed CBS in all its affiliated Regional Rural Banks (RRBs) a sector that is normally shy of technology. With 100% CBS, the largest ATM network among all PSBs, and Internet Banking, Punjab National Bank has implemented truly Anytime Anywhere banking. In fact, it goes even beyond to facets of e20

commerce like booking of tickets, payment of bills etc. With all the above said facts, 2009-10 will be a momentous one for PNB, as it battles some of its core challenges and handles some divestments. VISION AND MISSION VISION "To be a Leading Global Bank with Pan India footprints and become a household brand in the Indo-Gangetic Plains providing entire range of financial products and services under one roof" MISSION "Banking for the unbanked"

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HISTORY OF PNB

History

1895: PNB commenced its operations in Lahore. PNB has the distinction of being the first Indian bank to have been started solely with Indian capital that has survived to the present. (The first entirely Indian bank, the Oudh Commercial Bank, was established in 1881 in Faizabad, but failed in 1958.) PNB's founders included several leaders of the Swadeshi movement such as Dyal Singh Majithia and Lala HarKishen Lal,[2] Lala Lalchand, Shri Kali Prosanna Roy, Shri E.C. Jessawala, Shri Prabhu Dayal, Bakshi Jaishi Ram, and Lala Dholan Dass. Lala Lajpat Rai was actively associated with the management of the Bank in its early years.

1904: PNB established branches in Karachi and Peshawar. 1940: PNB absorbed Bhagwan Dass Bank, a scheduled bank located in Delhi circle.

1947: Partition of India and Pakistan at Independence. PNB lost its premises in Lahore, but continued to operate in Pakistan.

1951: PNB acquired the 39 branches of Bharat Bank (est. 1942); Bharat Bank became Bharat Nidhi Ltd.

1961: PNB acquired Universal Bank of India. 1963: The Government of Burma nationalized PNB's branch in Rangoon (Yangon).

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Punjab National Bank (PNB) is the second largest government-owned commercial bank in India. Having more than 5.8 crore customer, Punjab National Bank has one of the largest branch networks in India. The bank's assets for financial year 2007 were about US$60 billion.

Products and Services

Savings Fund Account - Total Freedom Salary Account, PNB Prudent Sweep, PNB Vidyarthi SF Account, PNB Mitra SF Account Current Account - PNB Vaibhav, PNB Gaurav, PNB Smart Roamer Fixed Deposit Schemes - Spectrum Fixed Deposit Scheme, Anupam Account, Mahabachat Schemes, Multi Benefit Deposit Scheme Credit Schemes - Flexible Housing Loan, Car Finanace, Personal Loan, Credit Cards Social Banking - Mahila Udyam Nidhi Scheme, Krishi Card, PNB Farmers Welfare Trust Corporate Banking - Gold Card scheme for exporters, EXIM finance Business Sector - PNB Karigar credit card, PNB Kushal Udhami, PNB Pragati Udhami, PNB Vikas Udhami Apart from these, the PNB also offers locker facilities, senior citizens schemes, PPF schemes and various E-services.

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Awards and Distinctions

Ranked among top 50 companies by the leading financial daily, Economic Times.

Ranked as 323rd biggest bank in the world by Bankers Almanac (January 2006), London.

Earned 9th place among India's Most Trusted top 50 service brands in Economic Times- A.C Nielson Survey.

Included in the top 1000 banks in the world according to The Banker, London.

Golden Peacock Award for Excellence in Corporate Governance - 2005 by Institute of Directors.

FICCI's Rural Development Award for Excellence in Rural Development 2005

PNB Overseas Offices

PNB has a banking subsidiary in the United Kingdom, as well as branches in Hong Kong and Kabul. It has representative offices in Almaty, Shanghai, and Dubai. The bank was established in 1895 at Lahore. PNB's founders included several leaders of the Swadeshi movement like Dyal Singh Majithia, Lala HarKishen Lal, Lala Lalchand, Kali Prosanna Roy, EC Jessawala, Prabhu Dayal, Bakshi Jaishi Ram, and Lala Dholan Dass. Lala Lajpat Rai was actively associated with the bankss management in its early years.
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EDUCATION LOAN - "VIDYALAKSHYAPURTI" The Scheme aims at providing financial assistance to deserving / meritorious students pursuing higher education in India or abroad. viz., Graduation courses B.A., B.Com., B.Sc., etc., Post-Graduation courses, Masters & Ph.D; Professional courses, Engineering, Medical, Agriculture, Veterinary, Law, Dental, Management, Computer etc., Computer Certificate courses of reputed Institutes accredited to Department of Electronics or institutes affiliated to University; Courses like ICWA, C.A., CFA, etc., courses conducted by IIM, IIT, IISc, XLRI, NIFT, etc., Regular Diploma/Degree courses conducted by Colleges/Universities approved by UGC/Govt./AICTE/AIBMS/ICMR, Regular Degree / Diploma courses like Aeronautical, Pilot training, Shippling etc. approved by DGCA/ etc., Courses offered by National Institutes and other reputed Private Institutes. Students should approach the branch nearest to the place of domicile. Interest is charged monthly on simple basis during the repayment holiday/moratorium period & concession of 1% in rate of interest is allowed provided the same is serviced regularly during study period. Punjab National Bank has tied up with Kotak Mahindra Insurance to provide life insurance cover for Student borrowers.

Eligibility Student eligibility

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Should be an Indian National Secured admission to Professional / Technical courses in India or abroad through Entrance Test / Merit based Selection process.. Expenses considered for Loan Fee payable to College / School / Hostel Examination / Library / Laboratory fee. Purchase of books / equipments / instruments / uniforms. Caution Deposit / Building Fund / Refundable Deposit supported by Institution Bills / Receipts, subject to the condition that the amount does not exceed 10% of the total tuition fee for entire course.. Travel Expenses / Passage money for studies abroad. Purchase of computers - essential for completion of the Course. Boarding and lodging expenses in recognized Boarding Houses / private accommodations Any other expense required to complete the course - like study tours, project work, thesis etc. Quantum of Finance Need based finance, subject to repaying capacity of the parents / students with margin and the following ceilings :For studies in India: Maximum Rs.10.00 lacs. For studies abroad: Maximum Rs.20.00 lacs. Margin

Upto Rs.4.00 lacs: Above Rs.4.00 lacs:

Studies in India Studies Abroad

26

Nil. 5% 15%

Security Upto Rs.4.00 lacs: Above Rs 4.00 lacs and Upto Rs 7.5 lacs: Co-Obligation of Parents. No Security.. Co-Obligation of Parents. 3rd party guarantee acceptable to the Bank. Co-Obligation of Parents. Collateral Above Rs 7.5 lacs: Security of suitable value along with Assignment of future income of the student for payment of installments. The security can be in the form of land / building / Govt. Securities / Public Sector Bonds / Units of UTI, NSC, KVP, LIC Policy, Gold, Shares/ Mutual Funds/ Debentures, Bank Deposit in the name of the student parent / guardian or any other third party with suitable Margin.

The document should be executed by both the student and the parent/guardian. Rate of Interest Repayable up to 3 years Loan up to 400000 Int. 11%-BPLR .50% =10.50% Repayable 3 years and above Loan up to 400000 Int.- BPLR.1% +50% =10.50% Repayment
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Repayment Holiday / Moratorium

Coursee period + 1 year OR 6 months after getting job, whichever is earlier.

The Principl and interest is to be repaid in 5-7 years after commencement of repayment. If the student is not able to complete the course within the scheduled time, extension of time for completion of course may be permitted for a maximum period of 2 years.

Upfront Fee For Study in India - Nil For Study abroad - @ 0.50% with a maximum of Rs. 5000/-(refundable on availment of the loan amount) Documentation Charges Upto Rs. 4 lacs Above Rs.4 lacs Rs.300/- + Service Tax & Education Cess Rs.500/- + Service Tax & Education Cess

Additional Benefits provided to the students by PNB Reimbursement of related expenses such as admission fee, monthly fee, Boarding and lodging expenses in recognized Boarding Houses etc. already incurred by way of loan taken from own sources (to meet the contingency) by the applicant, if claimed within 3 (three) months of such payment and before consideration of the loan by the Bank Second time Education Loan can be sanctioned to the same student borrower for completion of next higher course. Check List

28

While applying for the loan, the borrower is required to furnish the following information/papers: Loan application on Bank's format. Passport size photograph Proof of Address(Permanent) / ID Proof. Proof of Age. Proof of having secured pass marks in last qualifying examination Letter of admission in professional, technical or vocational courses. Prospectus of the course wherein charges like Admission Fee, Examination Fee, Hostel Charges etc. are mentioned. Details of Assets & Liabilities of parents. In case loan amount is above Rs.4.00 lacs Detail of Assets & Liabilities of parents/co-obligants/ guarantors. In case loan is to be collaterally secured by mortgage of IP, Copy of Title Deed, Valuation Certificate and Non Encumbrance Certificate from approved Lawyer of the Bank to be obtained at the cost of the borrower Photocopy of Passport & Visa, in case of study abroad. Any other document/information, depending upon the case and purpose of the loan. (The above CHECKLIST is only illustrative, not exhaustive. For details, please contact our nearest Branch Office).

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LOAN AGAINST MORTGAGE OF IMMOVABLE PROPERTY

Scheme seeks to provide finance against mortgage of immovable property situated in Metro/ Urban/ Semi Urban centres. The scheme is designed to offer instant solutions relating to business needs or for personal needs such as, children's higher education, travel, daughter's marriage, medical emergencies, etc. Loan is, however, not available for speculative purpose. Purpose For personal & business needs Eligibility

Employees of Central/ State Govt/ Schools/ Colleges/ Public Sector Undertakings (PSUs), Reputed Corporates and other intcome tax assesses who are below the age of 60 years

Business Enterprises having a satisfactory track record of

o o

3 years of cash profit; and Net profit in the immediately preceding financial year

Income Criterion For Individuals

Minimum net monthly salary/ net annual income of Rs.10,000/ Rs.1,20,000/- for salaried and for other income tax assesses respectively
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Net annual income should be double that of total EMIs for the year

For Business Enterprises

Minimum net annual income/ profit of Rs.1,20,000/Net income/ profit should be 1.5 times that of total EMIs for the year Amount of loan

Term Loan & Overdraft Minimum Loan:- Rs. 1 Lac Maximum Loan:- Rs.100 Lacs Security Non-encumbered residential house/ flat or Commercial or Industrial property (in the shape of building/ industrial shed) - self occupied or vacant. Rate of interest Loan less then 3 years Base rate 8% + 4.75% spread = 12.75% Loan 3 years and above Base rate 8% + 4.75% spread + .05% T.P = 13.25% Repayment

Loan together with interest is repayable in maximum 84 equal monthly installments or upto the age of 65 years which ever is earlier

Overdraft facility is to be renewed/ reviewed annually

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Upfront Fee (in case of Term Loan) 0.90% of the loan amount (subject to a maximum of Rs.45,000/-) + Service Tax & Education Cess Processing Fee (in case of General Overdraft Limit) Upto Rs. 25,000/- - NIL Above Rs. 25,000/- & upto Rs. 2 Lac - Rs. 270/- + Service Tax & Education Cess Above Rs. 2 Lac - Rs. 225/- per lac or part thereof + Service Tax & Education Cess Documentation Charges Rs.900/- + Service Tax & Education Cess

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'PNB FIN-BASKET' SCHEME 1. OBJECTIVE Offers attractive benefits as part of a Package to those customers who have the capacity and are willing to avail a minimum specified loan amount under at least two or more specified Retail Loan Schemes. 2. SCHEME APPLICABILITY Authorized Branches. 3. ELIGIBILITY Individuals, including joint owners, who are willing to avail a minimum loan of Rs.5.00 lac as a package under at least two specified Retail Loan Schemes at a time. One of which necessarily be for HOUSING and the other may be any one of the following purposes: Car, Personal or Education. At the same time, such individuals/ including joint owners should have adequate capacity to regularly service such loans. 4. PURPOSE Finance will be allowed for: Meeting need based requirement of purchase / construction /addition / repair/alteration/renovation/furnishing of House/Flat. Loans are also available for purchase of land/plot for House Building.
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Loan on pari passu or second charge basis only to confirmed employees of Central/ State Government / Public Sector Undertakings (PSUs) maximum upto Rs. 20 lacs. The quantum of loan be decided taking into account the amount of earlier loan availed and repaying capacity of the borrower. Purchase of New Car. Meeting urgent requirements of personal nature, such as marriage of children, holiday, foreign travel, family function, medical expenses etc. However, loan will not be granted for speculation purposes. Education for Self or Children, including the school education of the child. 5. AMOUNT OF LOAN For Housing: Need Based - Minimum Rs.2 lac. Maximum Rs. 50 lacs For Car : Need Based - Minimum Rs.2 lac. For Personal Needs: Need Based - Minimum Rs.1 lac Maximum Rs. 2 lacs For Education: For Studies in India - Minimum Rs.1 lac Max. Rs.5.00 lac For Studies abroad - Minimum Rs.1 lac Max. Rs.10.00 lac 6. MARGIN 10% except when loan is availed for Personal and or Educational needs in which case it shall be Nil. 7. RATE OF INTEREST Housing 34

For loans repayable in/upto

Rate of Interest @percent p.a.

i) Upto 5 years ii) Above 5 & upto 10 years Car - PTLR presently 11.50% Personal - 13% Education - 50 basis points below PTLR viz.11% 8. REPAYMENT

7.75 8.25

Housing - Maximum 10 years (120 months) in equal Monthly Instalments. For Car and Personal - Maximum 4 years (48 months) in equal Monthly Instalments. For Education - Maximum 7 years (84 months) in equal Monthly Instalments. Obtention of advance cheques (P.D.Cs) signed by the borrowers be ensured towards repayment of equated monthly instalments alongwith letter of deposit. In case of Housing and Education Loans minimum 24 advance cheques be obtained at a time. In case of loan of other purposes cheque for complete repayment period be taken. No moratorium period for repayment will be allowed and repayment to commence immediately. 9. MODE OF DISBURSEMENT

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As per extant guidelines of specific schemes viz. Housing, Car, Personal and Education. However, No charges for issue of Demand Draft /Bankers cheques are to be levied. 10. INSURANCE Comprehensive Insurance Policy to be obtained where loan is allowed for Housing and Car needs. 11. SECURITY: Housing Equitable/ Registered Mortgage of the House/Flat/ Plot Financed. Obtention of pari passu or second charge over the property mortgaged in favour of other Lender in situations where senior authorities consider requests and allow loan only to confirmed employees of Central / State Govts. / Public Sector Undertakings, who have raised funds for construction / acquisition of accommodation from other sources and need supplementary finance, for an amount of loan of maximum upto Rs. 20 lacs, which, however, should be for a minimum of Rs. 2lacs as prescribed above. Car Hypothecation of the Vehicle financed. Equitable mortgage should be for the total amount of loan. 12. GUARANTEE Suitable guarantee acceptable to the Bank may be obtained which may also include guarantee from family members/other relatives.
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13. UPFRONT & DOCUMENTATION CHARGES Flat Upfront charges of Rs.2,500/- & no documentation charge. 14. PREPAYMENT PENALTY In case any of the loan facilities allowed are adjusted within a period of three years, borrower(s) will be required to pay a prepayment Penalty @ 2% on the amount which had not become due for payment. 15. GENERAL The concessional loan facility is available provided the combined availment is Rs. 5 lacs or more. Equitable Mortgage of the Immovable Property against which Housing loan has been allowed will secure the combined loan for two or more purposes. Equitable Mortgage shall not to be released till final adjustment of all the loans.

PROFESSIONAL LOAN SCHEMES PNB extends assistance to self-employed persons, firms and joint ventures of such professional persons engaged in professions such as: Medical practitioners including dentists, chartered accountants, cost

accountants, practicing company secretaries, who are not in regular employment of any employer, accredited journalists or cameramen who are free lancers, i.e.
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not employed by a particular newspaper/magazine, lawyers or solicitors, engineers, architects, surveyors, construction contractors or management consultants or to a person trained in any other art or craft who holds either degree or diploma from any institution established, aided or recognised by Government or to a person who is considered by the bank as technically qualified or skilled in the field in which he is engaged. Loans under this scheme may be granted for the purpose of financing purchase of equipment used by the borrowers, business premises, construction, making alterations or renovation of business premises/nursing homes or for working capital requirements, in their professions. Persons already practicing or new entrants in various professions, having licenses issued under Central or State Legislations; Associations of persons engaged in a single profession provided that each member of such an association is qualified and duly licensed to practice in the profession; and The qualified professionals will be required to produce a certified copy of the license for the record at the bank. Amount of Loan Need based on merits within the overall permissible limits as under: Metro/ Urban 1. Medical practitioners 2. Other professionals Rs 5.00 lac Rs 5.00 lac S.Urban/Rural Area Rs 10.0 lac Rs 5.00 lac

Margin: Nil up to Rs.25000/-. 25% Above Rs. 25000/-.

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Security Hypothecation/Mortgage of the goods purchased/created with the amount of loan till the final adjustment of bank's loan and interest thereon. Collateral security by way of immovable properties or acceptable third party guarantee in case of advances above Rs. 25000/-. Repayment Term Loan Loans up to Rs.50000/- 48 months Loans beyond Rs.50000/- 60 months Working Capital loans are renewable every year. Disbursement Payments will be made direct to the suppliers/ dealers. In case of construction of the premises, the loan may be disbursed in phases after verifying the end use in terms of the plan as also at the spot

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RESEARCH METHODOLOGY
Research methodology is a methodology for collecting all sorts of information & data pertaining to the subject in question. The objective is to examine all the issues involved & conduct situational analysis. The methodology includes the overall research design, sampling procedure & fieldwork done & finally the analysis procedure. The methodology used in the study consistent of sample survey using both primary & secondary data. The primary data has been collected with the help of questionnaire as well as personal observation book, magazine; journals have been referred for secondary data. The questionnaire has been drafted & presented by the researcher himself.

Research Objective The main objective of study this research is to find out the credit portfolio management of Punjab national bank and to maintain a best management to overcome these problems.

Sample Size: Sample of 50 people was taken into study, and their data was collected Sampling Technique: To study the Project, a Simple Random Sampling technique is used. Data Collection: Collection of data is done by Secondary Data & through Questionnaire i.e., Primary data was collected through Questionnaire.

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Data Analysis: After data collection, Im able to analyze customers views, ideas and opinions related to Advance Product and about PNB Advance Product and from this, PNB will come to know the customer requirements. Data Interpretation: Interpretation of data is done by using statistical tools like Pie diagrams, Bar graphs, and also using quantitative techniques (by using these techniques) accurate information is obtained. Classification & tabulation of data: The data thus collected were classified according to the categories, counting sheets & the summary tables were prepared. The resultant tables were one dimensional, two dimensional. Statistical tools used for analysis: Out of the total respondents, the respondents who responded logically were taken into account while going into statistical details & analysis of data. The tools that have been used for analyzing data & inference drawing are mainly statistical tools like percentage, ranking, averages, etc. As per questionnaire and market surveys I have find out different responses from different people. According to their responses I analyze the findings and draw certain remarks.

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LIMITATIONS OF STUDY
However, I shall try my best in collecting the relevant information for my research report, yet there are always some problems faced by the researcher. The prime difficulties, which I faced in collection of information, are discussed below-

Short time period: The time for carrying out the research was
short because of which many facts have left unexplored. Lack of resources: Lack of time and other resources as it was not possible to conduct survey at large level.

Small no. of respondents: Only four Retail companies have

chosen, that is a small number, to represent whole of industry.

Unwillingness of respondents: While collection of the data

many consumers were unwilling to fill the questionnaire. Respondents were having a feeling of wastage of time for them.

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DATA COLLECTION ANALYSIS AND INTERPRETATION

GRAPHICAL REPRESENTATION OF DATA Q1. On which bank you depend for your regular transaction? PNB ICICI HDFC OTHER TOTAL NO. OF PEOPLE 60 % (30) 33 % (16) 5% (2) 2% (1) 50

It has been observed that approximately 60% correspondents are using the service of PNB for their daily transaction, around 33% of people are using ICICI Bank for their transaction and only 5% & 2% of people are using HDFC & other Bank service respectively in Bhubaneswar. It also shows that PNB have the highest market position in Bhubaneswar as per my sample.

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Q2. Are you aware of products & services provided by PNB?

YES

85% (43)

NO Total No. of People

15% (7) 50

From the above data it is clear that most of the customers (around 85%) of Bhubaneswar have the idea about the product & services of PNB, the rest 15% have the idea about the product they are using. In this 15% most of the people are from typical rural area (Farmers). Q3. If yes are you aware of the advance products (Loan segments) of PNB?
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YES NO TOTAL NO. OF PEOPLE

95%(48) 5% (2) 50

It is clear that most of the people have the idea about the advance product of PNB. Almost all the 95% people who have the idea about the advance product are the user of PNB product & service.

Q4. Which bank you prefer for taking loans?

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PNB ICICI HDFC OTHER TOTAL NO. OF PEOPLE

85% (42) 10% (5) 3% (2) 2% (1) 50

According to my sample size 85% of people prefer PNB for loan product, but some people prefer ICICI, HDFC or OTHER Bank for loan because they are working with that bank & it is easier for them to get loan from their bank & it easier for them to pay the interest because it is less as compare to other bank because they are the employee of that bank.

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Q.5 Which loan product of PNB you have used? HOME LOAN EDUCATIONAL LOAN CAR LOAN PERSONAL LOAN OTHER TOTAL NO. OF PEOPLE 47% (23) 20% (10) 15% (8) 10% (5) 8% (4) 50

From the sample size 47 % of people are using the PNB loan product. From the 50 people 47% of people took home loan from PNB. 20% of people took education loan for their children, 15% of people took car loan from PNB. Some of the customer took 2 type of loan from PNB like both car & educational loan and home & car loan. 10% of people took other loan 8%

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Q6. Do you think that the services of PNB is reliable? (a) Yes (b) No

According to the survey the 86% people seems that the services of the PNB is reliabel and the rest of the 14% people seems that not reliable.

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Q7. How long have you been taking services of Punjab National Bank? A)0-1 yrs B) 1-3 yrs C) 3 and Above

According to the survey 55% of respondents will prefer to take the service of Punjab national bank more than 3 years, 1-3 years prefer 30% and the 15% respondents prefer to take the service of Punjab national bank 1year only.

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Q8. Have you taken any loan from Punjab National Bank? A)Yes B) No

According to the survey 75% respondents have taken the loan from the Punjab national bank and the 25% respondents did not take the loan.

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Q9. Do you think that the credit facilities provided by the Punjab National Bank is upto the mark? A)Yes B) No

According to the survey 70% respondents thinks that the credit facility provided by the Punjab national bank upto the mark and the 30% respondents seems not.

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Q10. State general reasons for taking the loan from Punjab National Bank? A)Reliability of Services B) Easy to access the loan C)Less Rate of Interest

According to the survey 60% of respondents prefer to take the loan from the Punjab National Bank for its reliability of services, 30% prefer easy to access and 10% respondents for its less rate of interest.

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FINDINGS AND CONCLUSION

This article has described the underlying theory of credit portfolio management and illustrated their value in making more effective management decisions. With the rapidly growing marketing credit derivatives and portfolio securitizations, the possibility of active credit portfolio management will increase dramatically an result in a fundamental shift in the way banks both originate and hold credit assets. In order to benefit from these new opportunities, banks must ensure that they understand the economic value of their portfolios and how this value can be maximized through efficient credit portfolio management. The underlying macro-economic risk factors can also be examined to determine whether a hedging strategy might be possible. An extension of this application is to use the management for stress-testing to estimate possible changes in portfolio value conditional on extreme macro-economic scenarios. Banks must ensure that they understand the economic value of their portfolios and how this can be maximized through effective management Assessment of capital adequacy under property crash scenario

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SUGGESTION & RECOMMENDATION

Recommendation:

Customer awareness programme is required so that more people should attract towards advance product.

If there are any kind of hidden charges than that must disclose to customer before giving loan to them.

PNB must take some steps so that customers can get their loan in time. Like phone verification by customer care that one customer is got their loan on time or not .It must be before a certain date so necessary steps can be taken. PNB should more concern about physical verification rather than phone verification so it will avoid fraud or cheating.

Advance product selling agents must not give any type of wrong information regarding advance product. For the better service new offers would be require.

PNB customer care should more concern about the fastest settlement of customer problems. Before deducting or charging any monetary charge PNB must consult with customer.

Agents should be trained, well educated & proper trained to convince the people about different advance product. It is the duty of the bank to disclose all the material facts regarding advance product, like interest charged, repayment period, other types of charges, etc.
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 Special scheme should be implemented to encourage both customer and agents. The bank should increase the period for repayment of loan.

PNB should more focus on Retaining existing customers. PNB must focus on Segmentation based on customer knowledge Product offering based on customer demand. PNB must take feedbacks of customers regarding features & services.

Suggestions given by the consumers at the time of survey:

There is more time period for repayment of education loan. ( Namrata Das ) Education loan should be providing to private college also which is not under AICTE or any kind of University. ( Pinaki Bal )

PNB should take steps to solve customer problems immediately. ( Gopinath Mahapatra )

Agents should be trained, well educated & proper trained to convince the people about different advance product. (P.Anish Nath) Loan sanction date should be according to customer convenient. (Joytirmaya Behera) A customer awareness programme should be taking place in rural area.
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REFERENCES & BIBLIOGRAPHY

INTERNET

www.google.com www.pnbindia.com www.yahoo.com www.vikipedia.com

BOOKS

Credit Portfolio Management Author Author: Charles Smithson

Active Credit Portfolio Management Author Micheal Jaiser

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ANNEXURE

Dear Sir/Madam, I am a student of Gyan Ganga Institute of Technology & Science and presently doing a market survey Credit Portfolio Of Punjab National Bank. I request you to kindly fill the questionnaire below and I assure you that the data generated shall be kept confidential.

1. Name of the Respondent a. 2. Address of the Respondent a. .. 3. Name of the Branch a.

4.

Which service do you prefer ? a. ..

5. Which product of PNB you like the most ? a. . 6. How do you find the service provide by PNB? a. Very good
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b. Good c. Satisfactory d. Bad 7. Do you use credit card of PNB? a. Yes b. No 8. If yes, state the service related issues a. . 9. If you want improvement in service of PNB, then what it will be a. ..

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