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Banking in India:
Structure of the organised banking sector in India. Number of banks are in brackets. Banking in India originated in the last decades of the 18th century. The first banks were The General Bank of India, which started in 1786, and Bank of Hindustan, which started in 1790; both are now defunct. The oldest bank in existence in India is the State Bank of India, which originated in the Bank of Calcutta in June 1806, which almost immediately became the Bank of Bengal. This was one of the three presidency banks, the other two being the Bank of Bombay and the Bank of Madras, all three of which were established under charters from the British East India Company. For many years the Presidency banks acted as quasi-central banks, as did their successors. The three banks merged in 1921 to form the Imperial Bank of India, which, upon India's independence, became the State Bank of India.
Indian merchants in Calcutta established the Union Bank in 1839, but it failed in 1848 as a consequence of the economic crisis of 1848-49. The Allahabad Bank, established in 1865 and still functioning today, is the oldest Joint Stock bank in India.(Joint Stock Bank: A company that issues stock and requires shareholders to be held liable for the company's debt) It was not the first though. That honor belongs to the Bank of Upper India, which was established in 1863, and which survived until 1913, when it failed, with some of its assets and liabilities being transferred to the Alliance Bank of Simla. When the American Civil War stopped the supply of cotton to Lancashire from the Confederate States, promoters opened banks to finance trading in Indian cotton. With large exposure to speculative ventures, most of the banks opened in India during that period failed. The depositors lost money and lost interest in keeping deposits with banks. Subsequently, banking in India remained the exclusive domain of Europeans for next several decades until the beginning of the 20th century. Foreign banks too started to arrive, particularly in Calcutta, in the 1860s. The Comptoire d'Escompte de Paris opened a branch in Calcutta in 1860, and another in Bombay in 1862; branches in Madras and Puducherry, then a French colony, followed. HSBC established itself in Bengal in 1869. Calcutta was the most active trading port in India, mainly due to the trade of the British Empire, and so became a banking center. The first entirely Indian joint stock bank was the Oudh Commercial Bank, established in 1881 in Faizabad. It failed in 1958. The next was the Punjab National Bank, established in Lahore in 1895, which has survived to the present and is now one of the largest banks in India. Around the turn of the 20th Century, the Indian economy was passing through a relative period of stability. Around five decades had elapsed since the Indian Mutiny, and the social, industrial and other infrastructure had improved. Indians had established small banks, most of which served particular ethnic and religious communities. The presidency banks dominated banking in India but there were also some exchange banks and a number of Indian joint stock banks. All these banks operated in different segments of the economy. The exchange banks, mostly owned by Europeans, concentrated on financing foreign trade. Indian joint stock banks were generally under capitalized and lacked the experience and maturity to compete with the presidency and exchange banks. This segmentation let Lord Curzon to observe, "In respect of banking it seems we are behind the times. We are like some old fashioned sailing ship, divided by solid wooden bulkheads into separate and cumbersome compartments." The period between 1906 and 1911, saw the establishment of banks inspired by the Swadeshi movement. The Swadeshi movement inspired local businessmen and political figures to found banks of and for the Indian community. A number of banks established then have survived to the present such as Bank of India, Corporation Bank, Indian Bank, Bank of Baroda, Canara Bank and Central Bank of India. 3|Page
4|Page . was nationalized on January 1. and the Industrial Policy Resolution adopted by the government in 1948 envisaged a mixed economy. Four nationalised banks started in this district and also a leading private sector bank. and it took its toll with banks simply collapsing despite the Indian economy gaining indirect boost due to war-related economic activities. India's independence marked the end of a regime of the Laissez-faire for the Indian banking.The fervour of Swadeshi movement lead to establishing of many private banks in Dakshina Kannada and Udupi district which were unified earlier and known by the name South Canara ( South Kanara ) district. The years of the First World War were turbulent. The Government of India initiated measures to play an active role in the economic life of the nation. India's central banking authority. During the First World War (1914-1918) through the end of the Second World War (1939-1945). Lakhs) 35 109 5 4 25 1 Post-Independence: The partition of India in 1947 adversely impacted the economies of Punjab and West Bengal. This resulted into greater involvement of the state in different segments of the economy including banking and finance. Lakhs) 274 710 56 231 76 209 Paid-up Capital (Rs. 1949 under the terms of the Reserve Bank of India (Transfer to Public Ownership) Act. and two years thereafter until the independence of India were challenging for Indian banking. 1948. paralyzing banking activities for months. The major steps to regulate banking included: • The Reserve Bank of India. Hence undivided Dakshina Kannada district is known as "Cradle of Indian Banking". At least 94 banks in India failed between 1913 and 1918 as indicated in the following table: Years 1913 1914 1915 1916 1917 1918 Number of banks that failed 12 42 11 13 9 7 Authorised capital (Rs.
and inspect the banks in India. control and regulations of Reserve Bank of India. and a debate had ensued about the nationalization of the banking industry. the Banking Regulation Act was enacted which empowered the Reserve Bank of India (RBI) "to regulate. then Prime Minister of India." The meeting received the paper with enthusiasm. the Parliament passed the Banking Companies (Acquisition and Transfer of Undertaking) Bill. Indira Gandhi. 5|Page . it had emerged as a large employer. 1969 Despite the provisions. control. 1969. the Indian banking industry had become an important tool to facilitate the development of the Indian economy. Jayaprakash Narayan. banks in India except the State Bank of India or SBI. her move was swift and sudden. a national leader of India. and it received the presidential approval on 9 August 1969. The Government of India issued an ordinance and nationalised the 14 largest commercial banks with effect from the midnight of July 19. Thereafter. continued to be owned and operated by private persons. At the same time. Nationalisation: Banks Nationalisation in India: July.• • In 1949. and no two banks could have common directors." Within two weeks of the issue of the ordinance. By the 1960s. described the step as a "masterstroke of political sagacity." The Banking Regulation Act also provided that no new bank or branch of an existing bank could be opened without a license from the RBI. 20. expressed the intention of the Government of India in the annual conference of the All India Congress Meeting in a paper entitled "Stray thoughts on Bank Nationalisation.
the Government of India controlled around 91% of the banking business of India. Seven more banks were nationalised with deposits over 200 crores.000%. After the nationalisation of banks in India. • • • • • • • • • • • • • • Central Bank of India Bank of Maharashtra Dena Bank Punjab National Bank Syndicate Bank Canara Bank Indian Bank Indian Overseas Bank Bank of Baroda Union Bank Allahabad Bank United Bank of India UCO Bank Bank of India Condition before nationalization: Befor the steps of nationalisation of Indian banks. The second phase of nationalisation of Indian banks took place in the year 1980. in the year 1993. approximately 80% of the banking segment in India were under Government ownership. the government merged New Bank of India with Punjab National Bank. It took place in July 1955 under the SBI Act of 1955. closer to the average growth rate of the Indian economy. It serves 90 million customers through a network of 9. Later on. the branches of the public sector banks rose to approximately 800% in deposits and advances took a huge jump by 11. The State Bank of India is India's largest commercial bank and is ranked one of the top five banks worldwide. It was the only merger between nationalized banks and resulted in the reduction of the number of nationalised banks from 20 to 19.000 branches and it offers -either directly or through subsidiaries -. Indira Gandhi the then prime minister. only State Bank of India (SBI) was nationalised. It nationalised 14 banks then. The nationalisation of banks in India took place in 1969 by Mrs. 1960. until the 1990s. With the second dose of nationalization. Nationalisation of Seven State Banks of India (formed subsidiary) took place on 19th July. After this.a wide range of banking services. These banks were mostly owned by businessmen and even managed by them. Till this year. The stated reason for the nationalization was to give the government more control of credit delivery.A second dose of nationalization of 6 more commercial banks followed in 1980. the nationalised banks grew at a pace of around 4%. 6|Page .
licensing a small number of private banks. After Nationalisation: This study critically examines the extent to which the banking system in India has been able to achieve the objectives set before it initially by the scheme of 'social control' introduced in early 1968 and subsequently by the nationalisation of 14 major Indian banks. These objectives are: (i) wider territorial and regional spread of the banks' branch network. the then Narasimha Rao government embarked on a policy of liberalization. This paper makes an attempt at analysing the performance of commercial banks during the post-nationalisation period in regard to all of these specific aspects. 1980 : Nationalisation of seven banks with deposits over 200 crores. (ii) prescription of policies and instruments for directing credit in favour of the designated 'priority' areas. 1959 : Nationalisation of SBI subsidiaries. Significant structural changes in the deployment of commercial bank credit requires purposeful action on three planes: (i) rigorous control on the pre-emption of credit by medium and large-scale industries. and (iii) development of a framework of instruments and institutions. Any reorientation of commercial bank lending in favour of 'priority' areas perforce implies a critical questioning of credit absorption by the medium and large-scale industries to which the banks were largely accustomed to lending and which had absorbed two-thirds of bank credit. which 7|Page .• • • • 1955 : Nationalisation of State Bank of India. (ii) larger mobilisation of financial savings through bank deposits. These came to be known as New Generation tech-savvy banks. even though contributing only about one-tenth to the net domestic product or less than 25 per cent to the gross value of output of commodity producing sectors. Liberalisation In the early 1990s. and included Global Trust Bank (the first of such new generation banks to be set up). and (iii) reorientation of credit deployment in favour of small producers and the disadvantaged classes. 1969 : Nationalisation of 14 major banks.
This is the first time an investor has been allowed to hold more than 5% in a private sector bank since the RBI announced norms in 2005 that any stake exceeding 5% in the private sector banks would need to be vetted by them. strong and transparent balance sheets relative to other banks in comparable economies in its region. government banks. The last decade experienced a complete reform in the financial and banking sector. where all Foreign Investors in banks may be given voting rights which could exceed the present cap of 10%.All this led to the retail boom in India. The next stage for the Indian banking has been set up with the proposed relaxation in the norms for Foreign Direct Investment. One may also expect M&As. banking & non-banking organisation and financial instruments was redressed towards development. along with the rapid growth in the economy of India. private banks and foreign banks. takeovers. The Reserve Bank of India is an autonomous body. banking in India is generally fairly mature in terms of supply. Since 1991. In recent years critics have charged that the non-government owned banks are too aggressive in their loan recovery efforts in connection with housing. People not just demanded more from their banks but also received more. In March 2006.Lend at 6%. namely. with minimal pressure from the government. which has seen rapid growth with strong contribution from all the three sectors of banks. Axis Bank(earlier as UTI Bank). With the growth in the Indian economy expected to be strong for quite some time-especially in its services sector-the demand for banking services. The last decade witnessed the maturity of India's financial markets. mortgages and investment services are expected to be strong. till this time. The new wave ushered in a modern outlook and tech-savvy methods of working for traditional banks. and asset sales. The capital and financial market. Currently (2007).at present it has gone up to 74% with some restrictions. There are press reports that the banks' loan recovery efforts have driven defaulting borrowers to suicide. the Reserve Bank of India allowed Warburg Pincus to increase its stake in Kotak Mahindra Bank (a private sector bank) to 10%. The stated policy of the Bank on the Indian Rupee is to manage volatility but without any fixed exchange rate-and this has mostly been true. especially retail banking.Go home at 4) of functioning. The important achievements are in the following fields: • • • • Financial markets Regulators The banking system Non-banking finance companies 8|Page . were used to the 4-6-4 method (Borrow at 4%. revitalized the banking sector in India. every governments of India took major steps in reforming the financial sector of the country. Bankers.later amalgamated with Oriental Bank of Commerce. The new policy shook the Banking sector in India completely. ICICI Bank and HDFC Bank. vehicle and personal loans. In terms of quality of assets and capital adequacy. Indian banks are considered to have clean. product range and reach-even though reach in rural India still remains a challenge for the private sector and foreign banks. This move.
In fact. Some are of Indian origin and some are foreign players. This step has paved a way for few more foreign banks to start business in India. Many even are only catering in cities. Few of them only work in rural sector while others in both rural as well as urban. Each group has their own benefits and limitations in operating in India.• • • • • • The capital market Mutual funds Overall approach to reforms Deregulation of banking system Capital market developments Consolidation imperative Types of Banks in India In India the banking sector is segregated as public or private sector banks. cooperative banks and regional rural banks. Each has their own dedicated target market. Foreign banks has been given a different head followed by upcoming foreign banks in this section. Banking System in India Without a sound and effective banking system in India it cannot have a healthy economy. The banking system of India should not only be hassle free but it should be able to meet new challenges posed by the technology and any other external and internal factors. The most striking is its extensive reach. For the past three decades India's banking system has several outstanding achievements to its credit. Indian banking system has reached even to the remote corners of the country. This is one of the main reason of India's growth process. The RBI has shown certain interest to involve more of foreign banks than the existing one recently. 9|Page . One more section has been taken note of is the upcoming foreign banks in India. The government's regular policy for Indian bank since 1969 has paid rich dividends with the nationalisation of 14 major private banks of India. It is no longer confined to only metropolitans or cosmopolitans in India.In India the banks are being segregated in different groups.
Next came Bank of Hindustan and Bengal Bank. New phase of Indian Banking System with the advent of Indian Financial & Banking Sector Reforms after 1991. an account holder had to wait for hours at the bank counters for getting a draft or for withdrawing his own money. From 1786 till today. Gone are days when the most efficient bank transferred money from one branch to other in two days. Phase II and Phase III. mostly Europeans shareholders. was established in 1786. Bank of Bombay (1840) and Bank of Madras (1843) as independent units and called it Presidency Banks. These three banks were amalgamated in 1920 and Imperial Bank of India was established which started as private shareholders banks. I prefix the scenario as Phase I. though conservative. the journey of Indian Banking System can be segregated into three distinct phases. In 1865 Allahabad Bank was established and first time exclusively by Indians. To make this write-up more explanatory. The East India Company established Bank of Bengal (1809). They are as mentioned below: • • • Early phase from 1786 to 1969 of Indian Banks Nationalisation of Indian Banks and up to 1991 prior to Indian banking sector Reforms. Phase I The General Bank of India was set up in the year 1786.Not long ago. Punjab National 10 | P a g e . Today. The first bank in India. he has a choice. Now it is simple as instant messaging or dial a pizza. Money have become the order of the day.
During those days public has lesser confidence in the banks. This step brought 80% of the banking segment in India under Government ownership. During the first phase the growth was very slow and banks also experienced periodic failures between 1913 and 1948. 1969.000%. Reserve Bank of India was vested with extensive powers for the supervision of banking in India as the Central Banking Authority. Phase II Government took major steps in this Indian Banking Sector Reform after independence. funds were largely given to traders. To streamline the functioning and activities of commercial banks. As an aftermath deposit mobilisation was slow. it nationalised Imperial Bank of India with extensive banking facilities on a large scale specially in rural and semi-urban areas. After the nationalisation of banks. Reserve Bank of India came in 1935. Between 1906 and 1913. mostly small.Banking in the sunshine of Government ownership gave the public implicit faith and immense confidence about the sustainability of these institutions. 1955 : Nationalisation of State Bank of India. 1961 : Insurance cover extended to deposits. and Bank of Mysore were set up. major process of nationalisation was carried out. There were approximately 1100 banks. Seven banks forming subsidiary of State Bank of India was nationalised in 1960 on 19th July. the branches of the public sector bank India rose to approximately 800% in deposits and advances took a huge jump by 11. Indian Bank. 23 of 1965). Canara Bank. Moreover. Indira Gandhi. 1975 : Creation of regional rural banks.Bank Ltd. 1949 which was later changed to Banking Regulation Act 1949 as per amending Act of 1965 (Act No. 1971 : Creation of credit guarantee corporation. 1969 : Nationalisation of 14 major banks. In 1955. Central Bank of India. The following are the steps taken by the Government of India to Regulate Banking Institutions in the Country: • • • • • • • • 1949 : Enactment of Banking Regulation Act. 1959 : Nationalisation of SBI subsidiaries. 11 | P a g e . Bank of Baroda. It was the effort of the then Prime Minister of India. 1980 : Nationalisation of seven banks with deposits over 200 crore. It formed State Bank of india to act as the principal agent of RBI and to handle banking transactions of the Union and State Governments all over the country. Abreast of it the savings bank facility provided by the Postal department was comparatively safer. the Government of India came up with The Banking Companies Act. 14 major commercial banks in the country was nationalised. Second phase of nationalisation Indian Banking Sector Reform was carried out in 1980 with seven more banks. Mrs. Bank of India. was set up in 1894 with headquarters at Lahore.
In 1991. a committee was set up by his name which worked for the liberalisation of banking practices. It is sheltered from any crisis triggered by any external macroeconomics shock as other East Asian Countries suffered. and other institutions. others are called time deposits. This is all due to a flexible exchange rate regime.Phase III This phase has introduced many more products and facilities in the banking sector in its reforms measure. Function of a Bank: a. Savings deposits are those form which withdrawals are not restricted as regards the amount and the period. Phone banking and net banking is introduced. Receipt of deposits: A bank receives deposits from individuals. The entire system became more convenient and swift. The financial system of India has shown a great deal of resilience. Such deposits may be of different types. and banks and their customers have limited foreign exchange exposure. under the chairmanship of M Narasimham. The country is flooded with foreign banks and their ATM stations. Deposits which are withdrawal on demand are called demand or current deposits. the foreign reserves are high. interest paid by banks is different for each kind of deposit – highest for fixed 12 | P a g e . firms. the capital account is not yet fully convertible. Efforts are being put to give a satisfactory service to customers. Deposits constitute the main resources of a bank. Time is given more importance than money. Deposits withdraw able after the expiry of an agreed period are known as fixed deposits.
Purchase and sale of shares and securities iv. circular notes. This lending may take the form of cash credits. Lending of money: banks lend money mainly for industrial and commercial purposes. issue of letters of credit. Agency services : A bank renders various services to consumers. Promissory notes and cheques ii. such as: i. Collection of bills . Collection of dividends. iii. General services: A modern bank performs many services of general nature to the public. Interest charged by banks on such lending varies according to the amount and period involved. conducting economic surveys IV. project reports. bank drafts. Acting as trustee or executor when so nominated v. Making regular payments such as insurance premiums d. premiums etc. safe keeping of valuables in safe deposit vaults III. 13 | P a g e . b. Preparation of feasibility studies. overdrafts. or discounting of bills of exchange. supplying trade information and statistics. etc. interests. social priority-nature of security offered the standing of the borrower.g.deposits and lowest or event nil for current deposits. Banks in some foreign countries also underwrite issue of shares and make loan for long-term purposes. loans and advances. traveler’s cheques. e. etc II. etc. I. c.
the state's role as an economic factor grew substantially. redeemable against the bank's holdings. Within the new system of ownership and investment. Banks played a key role in moving from gold and silver based coinage to paper money.After Globalisation In the late 18th century there was a massive growth in the banking industry. After Technological Advancement 14 | P a g e .
This section is fully dedicated to the Tech Banking. there is a complete freedom to experience. Now its possible. But this time no standing for hours in front of cash counter and no time boundation in withdrawing your own money. accurate and also time saving.Check your account.With the advancement of technology. It became the first Indian bank to open a branch 15 | P a g e . it was tough to belief that banking sector will be at a finger tip. through its vast network in India and overseas India's second largest private sector bank and is now the largest scheduled commercial bank in India Bank which started as private shareholders banks. international and NRI products and services. Fact Files of Banks in India: The first bank in India to be given an ISO Certification The first bank in Northern India to get ISO 9002 certification for their selected branches The first Indian bank to have been started solely with Indian capital The first among the private sector banks in Kerala to become a scheduled bank in 1946 under the RBI Act India's oldest. A mobile hand set with a connection is the only instrument needed to make a gateway to your banking transaction. the latest innovation of technology. mostly Europeans shareholders Canara Bank Punjab and Sind Bank Punjab National Bank South Indian Bank State Bank of India The Federal Bank Limited Imperial Bank of India Bank of India. make payments and what more. ATMs. With all these devises and systems. SMS Banking and Net Banking is only the tip of an ice-berg. Apart from the Mobile Banking. including of SMS Banking. largest and most successful commercial bank. offering the widest possible range of domestic. A decade before. fast. Net Banking and ATMs are the major steps taken by the banks in India towards modernization. The first Indian bank to open a branch outside India in London in 1946 and founded in 1906 in the first to open a branch in continental Europe at Paris in 1974 Mumbai The oldest Public Sector Bank in India having branches all over India and serving the customers for the last 132 years The first Indian commercial bank which was wholly owned and managed by Indians Allahabad Bank Central Bank of India Bank of India was founded in 1906 in Mumbai. transfer your fund. banking sector has become more easy. do anything of everything what has been followed in physical banking since ages. Mobile Banking.
outside India in London in 1946 and the first to open a branch in continental Europe at Paris in 1974. Chapter – 2 16 | P a g e .
after the State Bank of India and the Punjab National Bank and ahead of ICICI Bank. Its total business was Rs.Company Analysis About the company: Bank of Baroda (BoB) (BSE: 532134) is the third largest bank in India. credit cards and asset management. 3. or Rs. BoB has total assets in excess of Rs. 3.657 ATMs. and about 1.583 billion. a network of over 3. 5.452 billion as of June 30.58 lakh crores.409 branches and offices. Mission: 17 | P a g e . It offers a wide range of banking products and financial services to corporate and retail customers through a variety of delivery channels and through its specialized subsidiaries and affiliates in the areas of investment banking. BoB is ranked 763 in Forbes Global 2000 list. It plans to open 400 new branches in the coming year.
princely patronage and state ownership. as many as 87 banks failed in India. and growing itself in turn. Its mission is "to be a top ranking National Bank of International Standards committed to augment stake holders' value through concern. trustworthy financial body. On 20th July 1908.who in ample measure.customers. and with a paid up capital of Rs 10 Lacs started the legend that has now translated into a strong. Bank of Baroda survived the crisis. It is a story that needs to be shared with all those millions of people ." The Ethics : Between 1913 and 1917. History: It all started with a visionary Maharaja's uncanny foresight into the future of trade and enterprising in his country. with his insight into the future. This financial integrity. and deposit of money and will be a powerful factor in the development of art. The founder. care and competence. involving corporate wisdom. industries and commerce of the State and adjoining territories. stakeholders. Starting in 1908 from a small building in Baroda to its new hi-rise and hi-tech Baroda Corporate Centre in Mumbai. Bank of Baroda started its operation in the year 1908 in Baroda though its Corporate Centre is in Mumbai now. It is a story scripted in corporate wisdom and social pride. have contributed to the making of an institution. mainly due to its honest and prudent leadership. it is a saga of vision. under the Companies Act of 1897. transmission. 18 | P a g e . It is a story of ordinary bankers and their extraordinary contribution in the ascent of Bank of Baroda to the formidable heights of corporate glory. Maharaja Sayajirao Gaekwad. business prudence. THE BANK OF BARODA. enterprise. employees & the public at large . Vision: It has been a long and eventful journey of almost a century across 25 countries. It is a story crafted in private capital. It has been a wisely orchestrated growth. care and competence". saw "a bank of this nature will prove a beneficial agency for lending.To be a top ranking National Bank of International Standards committed to augmenting stake holders’ value through concern . financial prudence and corporate governance. social pride and the vision of helping others grow.
retail investors. It ensured that the Bank survived the Great War years. Bank of Baroda Deposit Services: Bank of Baroda has three deposit scheme.caution and an abiding care and concern for the hard earned savings of hard working people. This cardinal philosophy was over years of its existence. The facility makes available funds or credits in the customers account on the same day. Today its equity capital is Rs 294 crores of which one third is held by non-Govt. Capital of Rs 381 crores in December 1996 and became one of the early birds to tap the equity market. the Bank of Baroda continued its triumphant march along the best ethical practices. Even while big names were dragged into the Stock Market scam and the Capital Market scam. Bank of Baroda Key Products and Services: BOBCASHSEARCH: A product by Bank of Baroda to enable electronic transfers/ cash remittances at designated branch through specialised network. They are as follows: • • • Fixed Deposits Current Deposits Savings Deposits Bank of Baroda Loans: Bank of Baroda has the following bouquet of loan solutions for its customers diverse requirements. It ensured survival during the Great Depression. Bank of Baroda's Equity: Bank of Baroda returned the Govt. to become its biggest asset. Investorsa like employees. were to become the central philosophy around which business decisions would be effected. the FIIs and OCBs. • • • • • • • Housing Loan Home Improving Loan Education Loan Car Loan Two Wheeler Loan Consumer Durables Loan Personal Computers Loan 19 | P a g e . Mutual Funds and some insurance companies. bank & financial institutions.
03.93 1 75 035. Business Indicators: Key Business Indicators (Rs.18 31.70 20 | P a g e . Third party products are those product that bank is not directly related with but does business with it. Indian firms/companies.03.• • • • • • • • • • Personal Loan Marriage Loan Festival Loan Advance Against Securities Overdraft Against Property Loan to Pensioners Loan to Defence Pensioners Professional Loan Traders Loan Loan Against Rent Receivables Services: Apart from the different types of Loan Solutions. Invetsments in immovable properties in India. They are as follows: • • • • Remittances (Baroda Money Express) Collection Services ECS (Electronic Clearing Services) Government Business (PPF. Apart from all these common product and services Bank of Baroda also deal with third party products. Bank of Baroda also offers other services to make financial dealings easy and convenient for customers. Deposits. and deposits with. Credit and Debit Cards. mutual funds. DSRGE. shares.38 2 78 316.63 358397. Tax Collections and Savings Bonds) Bank of Baroda NRI/OCB services: The NRIs/OCBs are granted the following facilities by Bank of Baroda • • • Maintenance of Bank accounts in India Investments in securities/shares of.2011 305439.36 71260.2010 2 41 261.48 228676. in Crore) Total Deposits Total Advances Total Investments Total Assets 31. etc.29 61 182. It includes Gold coins.
with a network of 71 offices in 25 countries. The bank also has a 21 | P a g e .02 as per Basel I 14.12 1229 3 058. through various delivery channels. During 2010-11. its subsidiaries and the representative offices. Bank of Baroda has international presence across 5 continents. helped us in overcoming the most adverse business challenges reinforcing our faith in our strong systems. Today. Today. the Bank has over 39 million global customers to serve. We will make active efforts to promote business growth through sales and service excellence by continuously working on our people and processes. we will try to achieve our goals by focusing upon customer needs and preferences and fulfilling them in a cost effective manner by leveraging our strong technology platform.” Making Bank of Baroda the “Most Admired Bank” is a continuous process. its specialized subsidiaries and affiliates in the areas of investment banking.84 as per Basel I 14.74 981 BANK’S CORPORATE GOALS AND STRATEGY: For the year 2011-12.52 as per Basel II 0. Customers of Bank of Baroda: Bank of Baroda offers a wide range of banking products and financial services to 29 million global corporate and retail customers. The Bank’s focus has always remained on the stable and consistent growth with quality. During 2011-12.Net Profit Capital Adequacy Ratio (percentage) Net Non Performing Loans to Net Advances (percentage) Net Interest Margin (percentage) Business Per Employee (Lacs) 4241. It is well understood by us that it is essential to harness the HR capabilities built in the Bank over time and taking forward the Bank’s BPR initiatives.35 3. It represents the dream of the Bank’s founder Maharaja Sayajirao Gaekwad III and a series of legendary leaders who carved out the ethics and philosophy of the Bank that has.68 13. including branches of the bank. The fact that the Bank has been delivering on its promises year after year has won the Bank several recognitions both nationally and internationally.33 12. Responding to the challenges of heightened competition and to improve its position in the market place.36 as per Basel II 0. processes and human resources. the Bank has been continuously focusing on business transformation with several pioneering efforts in the banking sector. credit cards and asset management.34 2. the Bank won various awards for its best business and financial performance in the banking arena. the Bank has selected the motto “Business Growth through Sales and Service Excellence. time and again.
Growing its presence across new geographies and strengthening its equity in existing markets. It offers its products and services with the help of a range of delivery channels and also its associates and subsidiary companies in areas like credit cards. The bank's international operations today contribute around 20% to its global business and well as over 30% to its net profits. Punjab National Bank and State Bank of India.03. in crore) Average 31.2010 38960 3148 9.63 7. in the changing global business scenario. Competitors of BOB: The competitors of the bank are ICICI Bank.03. The bank is exploring out-of-the-box means to identify novel ways to tailor its growing repertoire of products and services to meet segment-specific requirements across geographies.65 5. Bank of Baroda has setup a separate Customer Grievances and Redressal Cell to take care of its customers enquiries.2008 36774 2899 6.03.81 8. Human Resources at Bank of Baroda: Table showing the various details of human resource of BOB: S.joint venture in Zambia with 9 branches.2007 38086 2772 5.26 22 | P a g e .29 11.03.03. orchestration of the offices network and greater attention to compliance with global regulations are aggressively being focused on to help the bank achieve its ambitious goals.2009 36838 2974 8. 1 2 3 4 Particulars (In Percentage) Employees (number) Branches (number) Business per employee (Rs. Bank of Baroda has a big portfolio of banking products and services for individual and institutional clients. investment banking and wealth management. BoB Credit Card Customer Relation: A successful business depends upon long lasting relationship with customers. gearing to leverage the opportunities that the flat world presents and nimbly skirting its threats.2011 40046 3418 12. Automation-led process and cost optimization. queries and complaints. is charting a coherent strategy to not just cope but break path and emerge with the winning edge.57 31.94 31. Bank of Baroda is on the path to establish itself ‘round the clock around the globe’. Bank of Baroda.15 4.No..64 31.94 31.
in lakhs) Business per branch (Rs.85 132. of branches connected with leased lines No.86 1.50 39. of branches in India No.90 89.96 3.5 6 7 8 9 10 11 Business per employee (Rs in crore) Gross Profit per employee (Rs. of branches serving BOBCASHREACH Tele-Banking.2011) Officers Clerks Sub – Staff On Contract Total 15725 15602 7986 3 39313 Bank of Baroda Branches: No.04.43 10.24 116.18 231. in lakhs) Net Profit per employee (Rs.27 2.96 378.44 17. PC-Banking and Any Branch Banking services 2700 2176 450 340 in 53 centres 58 in 53 centres for corporates 291 in following 7 cities • • • • • Chennai Bangalore Hyderabad Pune Mumbai 23 | P a g e . in crore) Gross Profit per branch (Rs.25 1.37 28.59 7.70 75.43 Human Resources (Staff as of 01.01 0.75 61.67 7.37 504.82 12. in crore) Net Profit per branch (Rs.54 11.04 1. of branches operating e-payment product No.45 0.23 0. of computerised branches No.40 261.24 1.34 2. in crore) Earnings per share (Rupees) Book Value per share (Rupees) 6.57 0.14 313.87 0.69 6.05 112.59 156.97 83.
Forex Operations: Bank of Baroda. corporate bodies. At present the 24 | P a g e .• • Ahmedabad SMS and WAP based mobile banking services Inter bank electronic transfer funds (ETF) Delhi 423 branches 206 branches Operations in BOB: BOB basically two types of functions: Domestic Operations. including firms. The Bank is an active participant both in the inter-bank market and the corporates for all the products. for undertaking various types of treasury activities in different financial markets. Regional Rural Banks. one of the major public sector banks in India having a strong global presence with a wide network of 86 overseas offices. institutions. Apart from activities pertaining to management of funds and liquidity. headed by experienced professionals. Urban Cooperative Banks and Non-Banking Financial Companies opportunities to invest in Government Securities as allowed by Reserve Bank of India for non-competitive bidding. Domestic Operations: Bank of Baroda has set up dedicated desks at the SITB. spread over 25 countries. companies. is considered as a market leader in foreign exchange operations in India. including those of subsidiaries. The products and services offered by SITB cater to the inter-bank market as well as to the Corporate customers of the bank. Forex Operations. the domestic treasury also handles financial instruments like: • • • • • • Commercial Papers (CP) Certificate of Deposits (CD) Government Securities Treasury Bills (TB) Bonds and Debentures Equities and various other derivatives. The Bank offers its customers. provident funds trusts.
Since most of its overseas branches are strategically situated at places where sizeable Non-resident Indians are residing. it has sustained the best asset quality standards. The services to the customers of the Bank include hedging of foreign currency risks by providing forward covers and various derivatives product. Euro. to provide on-line quotes for foreign exchange transactions. The modern state-of-the-art dealing room at its Specialised Integrated Treasury Branch (SITB) at Mumbai provides the necessary wherewithal to its 130 designated branches across the length and breadth of the country authorized to handle foreign exchange business of its clientele. Oman. Japanese Yen and other exotic currencies. the bank caters to the foreign exchange needs of its clientele engaged in export and import trade and the SITB provides rates for conversion of all major world currencies like U S Dollar. Hong Kong. Seychelles. Sterling Pounds. Belgium. The forex dealing desk at the SITB is provided with all modern communication facilities and is in the process of linking all its authorized branches via Reuters Automated Dealing System.0% [including the technical writeoffs]. The range of products include remittance facilities and acceptance of deposits in Indian Rupees (NRE / NRO) as well as in designated foreign currencies (FCNR). With its consistently high Provision Coverage Ratio around 85. Bahamas.Bank is having branches / offices in countries like USA. Bank’s incremental slippage ratio at 1. Bank’s strong fundamentals as reflected in its ROAA (Return on Average Assets) at 1. Fiji Islands. Guyana. UAE. Even as it has grown its balance sheet at faster pace than the industry average. The bank has retained its primacy as a leading market maker both in spot and forward markets.48% during 2010-11 have helped it demonstrate its differentiation sustainably. apart from consolidating its overseas operations in those countries where the bank has already made its presence felt. the Bank is in a position to deliver its products promptly and efficiently to its NRI customers. Bank is well covered against any downside economic growth risks in the future. Swiss Francs. robust deposit franchise and high ranking credit culture have enabled it to gain market share consistently during the past three years along with superior profitability and the best asset quality standards.2% averaged over the last six years has been the lowest in the Indian banking system. Finance of BOB: Bank’s strong capital and liquidity position. Kenya. 25 | P a g e . Uganda and Zambia The Bank has completed fifty years of operations in overseas territories and is poised to expand its reach to countries like Tanzania and China.33% and ROE (Return on Equity) at 21. Through its large network of authorized branches. South Africa. Mauritius. along with foreign exchange swap markets. UK. Resident as well as Returning Indians can avail of benefits like Resident Foreign Currency Accounts (RFC).
64% 1. This enabled the Bank to maintain a decent domestic CASA share at 34.44% 1. A consistent growth tempo year after year.2010 6.89% 0. the Bank’s Deposits grew by 25.26% 22.96% 50.8% (y-oy).94% (Operating) profit / AWF Net profit / 0.03.07% 5.7%.34.22% Average Working Funds (AWF) Interest expenses 4.03% 1. While Global Deposits registered a growth of 26.35% / AWF Net Interest 3.87% 2. In domestic operations also.4% during 2010-11.16% 3.3%.48% 4.04% in 2010-11 and in Advances from 3. the CASA growth was maintained at 21.53% to 4.53% 1.48% 26 | P a g e .93% 15.32% 1.2008 31.89% 1.38% 2. profitability and asset quality fronts for the year 2010-11.03.No.91% 2. Key Financial Indicators : S.74% 2.17% Worth 31.80% 0.01% during the same period. Global (Net) Advances expanded by 30.11% Income / AWF Operating 2. whereas advances (net) expanded by 28.57% 2.03.86% 31. In domestic operations.19% 4.63% 7.78% 31.22% 1.2007 Percentage) Interest Income / 7.15% 19.6% (y-o-y).03. Bank’s low-cost deposits (CASA) grew at the healthy pace of 22.4% despite a significant hardening of term deposit rates.56% 43.30% Ratio Gross 1.12% 2.2011 6.42% 1.22% 1.6% (y-o-y) in global operations during 2010-11.47% 39.Moreover.89% 1. The Global Business of the Bank reached the level of Rs 5.2009 7.10% 2.42% 2.90% 2. enabled Bank to increase its market share in Deposits from 3.84% 45.35% 21.04% expenses / AWF Cost Income 51.97% 2 3 4 5 6 7 8 9 10 5.03.87% AWF Non-Interest 1.82% AWF Return on Net 12.70% in 2006-07 to 4.116 crore in 2010-11 with an annual growth of 28.14% 2.05% Margin (NIM) Interest spread / 2. 1 Particulars (In 31. the Bank comfortably achieved all the targets under the Statement of Intent that it had committed to the Government of India on business.15% 1.7%.
52% 9. Gross Profit and Net Profit were Rs 6.32% 82.06% 14.71% 17.69% 23.981.47% 88.56% 12.50% 5.II 0.21% 77.11 12 13 14 15 16 17 18 19 Return on Assets Return on Average Assets Yield on Advances Cost of Deposits Dividend payout Ratio (including Corporate Dividend Tax) Credit -. Net Interest Margin (NIM) as per cent of interest earning assets in global operations was at the level of 3.37% 4.7% over previous year.20% 5.16% 13.30%.78% 81.II Capital Adequacy Ratio (BASEL II) Tier .49% 4.I Tier .99% 4. Net Profit registered a growth of 38.94% 87.05% 8.I Tier .22% 1.Deposit Ratio Credit + Non SLR Investment (excluding Investments in Subsidiaries) -Deposit Ratio Capital Adequacy Ratio (BASEL I) Tier .74% 3. 27 | P a g e • • • • .89% 9.241.36% 9.12% and in domestic operations at 3.75% 0.49% 5.80% 8.29% 11.74% 86.28% 12.84% 8.35% 80.90% 20.77% 90.72% 0. Credit-Deposit Ratio stood at 86.06% - 12.21% 8.55% 4.10% 1.34.88% of the Bank’s Gross Domestic Credit in 2010-11.94% 7.02% 8.91% 7.22% 4.96% 4.77% as against 84.44% 84.77% 24.53% 5.76% 74.80% 8.68 crore respectively.30% 12.09% 14.61 crore and Rs 4.47% last year.90% 1. Retail Credit posted a growth of 33.62% 14.10% 9.79% 5.80% 0.18% 1.72%.59% 0.64% 5.98% 1.63% 5.53% Performance Highlights: • Total Business (Deposit+Advances) increased to Rs 5.8% constituting 18.88% 7.33% 8.116 crore reflecting a growth of 28.56% 17.
52%. • • • Key Financial Ratios: Particulars Return on Average Assets (ROAA) (%) Average Interest Bearing Liabilities (Rs crore) Average Cost of Funds (%) Average Interest Earning Assets (Rs crore) Average Yield (%) Net Interest Margin (%) Cost-Income Ratio (%) Book Value per Share (Rs) EPS (Rs) 2010-11 1. Overall view of Bank of Baroda for the past 5 financial year: The table gives the details of the various details of Bank of Baroda for the year 2005-2006 to 2009-2010.64 crore towards provision for tax.79 7. and of Other Banking Operations was Rs 2750.886.49 crore.70 2.87 504.15.• • Net NPAs to Net Advances stood at 0.098.21 4.76 3.27%.02% and as per Basel II at 14.12 39.96 Segment-Wise Performance: The Segment Results for the year 2010-11 reveal that the contribution of Treasury Operations was Rs 882.74 43. Net Worth improved to Rs 19.44 83.94 4.735.408.18 crore of unallocated expenditure and Rs 1. Business per Employee moved up from Rs 981 lakh to Rs 1.63 crore registering a rise of 43. Book Value improved from Rs 378.37 2009-10 1. 28 | P a g e .51 crore.57 378.16.525.54 7.98 2.229 lakh on year.43 on year.44 to Rs 504.21 2.68 crore after deducting Rs 1.82.750.026.109.89 crore.517. The Bank earned a Profit after Tax (PAT) of Rs 4. that of Retail Banking was Rs 1. that of Corporate/Wholesale Banking was Rs 1.35% this year against 0.43 116.67 2.80. Capital Adequacy Ratio (CAR) as per Basel I stood at 13.61 crore.33 2.241.34% last year.
lakh) Capital and Reserves & surplus Deposits Investments Advances Interest income Other income Interest expended Operating expenses Cost of Funds (CoF) Return on advances adjusted to CoF Wages as % to total expenses Return on Assets CRAR Net NPA ratio 2777 38774 396.4% (y-o-y) forming 34.87 2812 38604 555.05 12880 192397 52446 143251 15092 2758 9968 3576 5. In its Indian operations. The 29 | P a g e . the Bank’s Deposits and Advances increased healthily by 25.00 2.33 3.79 13.80 11.34 0.00 15106 241044 61182 175035 16698 2806 10759 3811 4.38 3.Items 2005-06 2006-07 200708 2845 37260 710.09 14.31 3088 38960 981.94 0.50 16. The Bank’s performance on the business front was much above the banking industry’s average.00 6.03 3.65 0.14 1.73 8650 124916 34944 83621 9004 1382 5427 2544 4.13 7844 93662 35114 59912 7050 1127 3875 2385 4. The Bank’s Global Business touched the mark of Rs 5. of offices No.8% and 28.21 14.4% share of the total Domestic Deposits.34 BUSINESS AND FINANCIAL ACHIEVEMENTS: Consistent with its past track record.05 0.00 2.63 0. lakh) Profit per employee (in Rs.7%.00 8.60 2916 36440 914.41 0.36 0.89 12.94 11044 152034 43870 106701 11813 2051 7902 3034 5.116 crore in 2010-11 posting a growth of 28.34.58 3.80 0.34 1.28 24. respectively.47 2008-09 2009-10 No. the Bank delivered Superior Profitability and Best Asset Quality performance during the year 2010-11 by further gaining market share from both the assets and liabilities sides.25 3. Even in a rising fixed (or term) deposit interest scenario.69 20.3% (y-o-y).51 17. of employees Business per employee (in Rs. the Bank’s Domestic Low-cost or CASA deposits richly grew by 21.00 3.71 17.
9%.68 crore .5% during the year 2010-11. In line with its past record.7% to Rs 4. a good traction of Core Feebased income and a modest growth in Operating Expenses enabled the Bank to achieve such record levels of incomes and profits during the year 2010-11. Despite increased provisions.3% and Advances by 36.36% and Net NPAs to 0.1% to its Core Fee-based Income.8% to Rs 6. the Bank’s Return on Average Assets (ROAA) improved to 1. During the year under review.96 and the Book Value per Share (BVPS) to Rs 504. For the Bank as a whole.52% and the Tier 1 capital ratio to 9.2%). the Bank’s Gross Profit in Overseas operations posted a healthy growth of 23. the Bank’s Cost-Income ratio sharply declined from the previous year’s level of 43. the Government’s shareholding in the Bank increased from 53. With this. Earnings per Share (EPS) to Rs 116. Supported by steady and better than industry average spreads and a good pool of fee-based income. it has sustained the best asset quality standards within the Indian banking universe.43 from Rs 378.5% on the back of surging world trade volumes and a rebound in the activities of Indian corporates abroad.6%.33% from 1. easily surpassing the mandatory requirement of 40. Gross NPAs to 1. the Bank succeeded in restricting its Incremental Delinquency Ratio to 1.40 on the back of significantly improved core performance.375 crore to Rs 91. Total Deposits by 29. Besides. especially on account of the pension liabilities of the employees.37 from Rs 83. As regards the shareholders’ return ratios.6% to the Bank’s Global Business. the Bank received Rs 2.21%. Gross Profits grew impressively by 43.87%. a strong growth in Net Interest Income (at 48.much ahead of the market expectations.57% of its Adjusted Net Bank Credit.Bank’s Priority Sector Credit too recorded a decent growth of 18. within just a year. the Total Business of the Bank’s Overseas branches registered a robust growth of 32.273 crore registering a growth of 33.1% to its Gross Profits and 32.57% to 39. Even as the Bank gained market share in loans.00%.61 crore and Net Profit by 38. the Bank’s Customer Deposits increased by 23.4%.2% during 2010-11 and formed 43. Furthermore. The Bank’s Overseas Business contributed 24. In Overseas operations.461 crore from the Government of India in support of its healthy asset expansion. 17.0% as on 31st March 2011.241.81% to 57.981. improving the Bank’s Capital Adequacy Ratio (Basel II) to 14. The Bank’s Loan Loss Coverage Ratio (including technical write-offs) too stood at the healthy level of 85. reflecting the Bank’s improved earnings profile and prudent control over operating expenses. the Total Assets of the Bank’s International Operations increased from Rs 68. During the year 2010-11.03%.35% during 2010-11.09%. Organizational hierarchy of BOB: 30 | P a g e .99%.
31 | P a g e .
75%. Notwithstanding a good growth tempo. Both deposit and lending rates of commercial banks firmed up quite sharply since August. Aggregate demand indicators too remained healthy as reflected in the rate of real private final consumption expenditure at 58. Rising inflation prompted the RBI to raise its key policy rate eight times during 201011 by 350 bps to 6. 2010 onwards. It is at the Prithvi Building Kempe Gowda Road. 2011. KG. helped in reducing the concerns surrounding widening of the current account deficit. However.02% in March. Yet on the back of strong capex and working capital demand.2% (y-o-y).3% and the rate of real gross fixed capital formation at 32. 2011 and CPIbased inflation for industrial workers too was high at 8. The branch is opposite to the State Bank of Mysore. liquidity conditions stayed tight for most part of the year with some easing during the last quarter. During 2010-11. While the global economic recovery advanced.82%.0% in 2009-10 on the back of a strong rebound in agriculture (6. Moreover. 37. the sectoral deployment of banks’ non-food credit became increasingly broad-based during the year under review. India along with China continued to perform as a new growth pole in the world economy throughout 2010-11. real estate & business services” (9. According to the RBI’s data.Bangalore.9%).75 trillion (or Rs 80 trillion). insurance. the banking industry’s non-food credit expanded healthily by 21.5% growth in exports on year on year basis during 2010-11. The strong growth environment and the improved corporate credit profile eased the asset quality concerns especially for those banks that had maintained well diversified loan-books and modest exposures to sensitive sectors. At end-March. Consistent with the RBI’s monetary policy stance. 32 | P a g e . hotels. the year 2010-11 was a year of great contrasts. inflation remained the major policy concern during 201011.5% from 8. it remained uneven between advanced nations and emerging markets.3%) and “financing. albeit in a step-wise fashion to balance the trade-off between growth and inflation. the size of the Indian economy was estimated at US$ 1.6%) and sustained levels of activity in manufacturing (8.8% (y-o-y). India’s economic growth further improved to 8. Road Branch: It is the branch where I completed my internship.560009. Throughout the year. transport & communications” (10.0%. it stubbornly stayed above the Reserve Bank of India’s (RBI’s) indicative projections.3%) and services like “trade.Environment of BOB: Economic and Banking Environment : From a macroeconomic perspective. Headline inflation based on wholesale prices stood at 9. However. its aggregate deposits grew rather modestly by 15.
4.03.86 0. 11.87 0 1382. Exchange Other Earning(BD 19.77 1.42 0.25 1. 4.96 8207. telegram. 10.36 0.67 0.46 0 153.Road): (Amount in Rs. 4.2011 4150.G. 1.45 8207. printing & advertising Computer expenses Law charges Depreciation Other expenses Interest paid to HO Profit Total Financial ratios Average cost to Deposit Average return on Advances % of commission & exchange to total income % of other expenses to total income % of profit to working funds % of staff expenses to total expenditure other than written off amount % of staff expenses to total income % of staff expenses to total business Amount for Financial Year ending 31. 3. 2.77) Interest earned on HO a/c Loss Total Earning Expenditure Interest paid on deposit Interest paid on borrowing including discount paid Salaries/allowances/PP-staff expenses/cost Overtime Rent. 5. 13.28 34.85 10. 6609.12 1.Financial Performance of the Branch(K.41 137. 2. 3. 8. 9. 6.75 1.74 + Fex86. 2.47 3884. Particulars Earning Interest & Discount Commission. 7.23 2. telephone Stationery.57 9. 7.16 9. telex. 5. taxes. 8.46 2. 6. Lakhs) Sl No. 5. 12.30 0 18. insurance & lighting Postages.10 33 | P a g e .12 1.32 0. 6. 3.
34 | P a g e . Opportunity and Threat(SWOT) Analysis of the branch of Bank of Baroda where the study was conducted: Strength • • • Weakness • • • • • • Opportunities Threats Metro Branch with all the infrastructure including Forex Department. Good scope to canvass corporate clients. Presence of All Major Domestic and Foreign Bank Branches and also Banks with Local head quarters resulting in stiff competition.67% of the deposits reduced from 11. Concentration on bulk Business.15% in 2010. Opportunity and Threats for the concerned place. Baroda Next branch with Focus on customer Service and improved work flow.Strength. Good scope to canvas other products like insurance/gold coin/Mutual Fund and other third party products. Weakness. Big Depositors and Bulk Advances borrower are highly Price sensitive. Strong base of Bulk Business from Government undertakings & Corporates making the Branch one of the Key contributor to the Region’s Performance. Weakness.SWOT Analysis: SWOT analysis is actually a study conducted about a particular company or even an industry to tell about the Strength. SWOT analysis help an organization to know the loop holes present in an organization thus helps to improve and work efficiently and effectively. Share of CASA is decreasing and it constitutes 7. It provides an insight into the company’s ability to perform in this competitive world.
Chapter – 3 Discussion on Training 35 | P a g e .
by which a customer. Home Loans to NRIs / PIOs. Loan Against Future Rent Receivables. Mortgage Loan.Roles and Responsibility: During the course of my internship I studied about the various lending policies of Bank of Baroda. Baroda Career Development Loan. unto a certain limit sanctioned by the bank. Apart from this I also learnt about the various eligibility criteria required to be fulfilled by the customers to get their loans sanctioned. Advance Against Securities. Fixed deposit account and Recurring deposits. purchase of a new car or home appliances. Two . Traders Loan. Loan to Doctors. This is a kind of temporary loan extended by a bank against any personal security or collateral security. Bank of Baroda offers a wide range of retail loans to meet your diverse needs. Saving account. Whether the need is for a new house. Bank of Baroda has a number of lending policies which include: Education Loan Home Loan. Out of these deposits. our unique and need specific loans will enable you to convert your dreams to realities. Personal Loan etc. The various mode by which banks lend money to needy people and firms are given below as follows:• Overdraft: It is an agreement with a bank. generally a current account holder is allowed to withdraw money in excess of his own credit balance. because the depositor can can demand can demand this at anytime without prior intimation. Commercial Banks accept the deposits from people in various form like Current account.Wheeler Loan. the bank cannot utilize the current account money for lending purpose. The eligibility criteria of different types of advances are different depending upon the amount of loans to be sanctioned and also its type. Auto Loan. These money is utilized by the banks to give loans and advances to the public. 36 | P a g e . child's education.
pursuing a graduate or post-graduate degree. Description of the Task handled: My task basically included the details analysis of the various eligibility criteria and the various NPA details of the accounts. specialization Whether you are planning school education (nursery to standard XII) of your child. The interest is payable on the entire loan amount as decided by the bank. shares or debentures or insurance policy or personal security of the borrower. The bank pays the amount of the bill after deducting some amounts of money towards discount. the Bank of Baroda Education Loans. The different criteria by which an account is considered as an NPA account. the bank opens a separate account for the borrower and credits the amount. Higher studies and in certain fields call for additional financial support from time to time. • Cash Credit: In this. can help finance your ambitions and goals. The details of the eligibility criteria for different loans and the calculation showing how a loan is being sanctioned: Baroda Education Loan: Education is the most important investment one makes in life.• Loans: It is an arrangement by which a bank advance loans against any security like jewels. This loan is given for a large amount and for a longer period. 37 | P a g e . • Discounting of Bills: A customer having a bill of exchange can discount it in a bank. When the bill mature. the bank collects the proceeds of the bill from its acceptor. Interest is charged on the amount actually withdrawn by the borrower.
Stage III : IX th to XII th STD. • • • No processing & documentation charges. Stage I : Nursery to V th STD. Student should have secured admission to a recognized school / Highschool / Jr. 2. No Margin. 38 | P a g e . Terms & Conditions Eligibility : • • Should be an Indian national residing in India.Following are the loan options available: • • • • Baroda Vidya Baroda Gyan Baroda Scholar Central Scheme of Interest Subsidy for Education Loans Baroda Vidya: Bank of Baroda presents a one of its kind finance option for parents of students pursuing school education. These loans are available for studies from Nursery to Senior Secondary School. College (including CBSE / ICSE / State Board) for any of the following courses 1. No security required. 3. Stage II : VI th to VIII STD.
Purchase of books / equipments / instruments / uniforms. Penal Interest @ 2% on overdue amount if the loan amount exceeds Rs. Rate of Interest : • • • 1% concession in rate of interest to loans for girl students.lacs.years.Coverage of expenses for : • • • • • • Fee payable to college / school. except in the case of transferable job. First instalment to be due 12 months after first disbursement of each year's loan component. The parents must be residing in the place for a minimum period of -3.00 Lacs Repayment Period : • Loan for each yearly sub limit is repayable in 12 equal monthly instalments. Bank of Baroda extends a helping hand to energize your studies and promote education of the youth. Caution deposit / building fund / refundable deposit supported by instituion bills / receipts. Interest to be serviced as and when applied during moratorium period. Security : • In case the loan is given for purchase of computer the same is to be hypothecated to the bank. Personal Computers / Laptops wherever required. Professional & Other courses in India.Graduation. Baroda Gyan: A loan product specially designed for students pursuing Graduation. Examination / Library / Laboratory Fee. Fee and other charges payable to hostel. • No processing charges. 2/. 39 | P a g e . Maximum Loan Amount : Rs.4. Post .
Architecture. Hotel Management. etc. Agriculture. etc. Evening courses of institutes approved by State/Central/Govt. IIT. The College/Institute must have been approved by the State/Central Govt. Dental. Courses conducted by IIM. Courses Eligible : • • • All Graduation courses.. • • • • • • • • Student Eligiblity : • • Should be Resident Indian. Event Management. Courses offered by National Institutes and other reputed private institutions./UGC/AICTE.A. CFA. CS. NIFT etc. Regular Degree/ Diploma courses like Aeronautical. Engineering. All Post Graduation courses & Doctorate courses. Law. Professional Courses viz. Mass Communication.etc. Courses like C. Computer. Free Debit Card. shipping etc. Homeopathy. Ayurved. IISc. Medical. XLRI. Physiotherapy. conducted by colleges/universities approved by UGC/Govt. Courses offered in India by reputed foreign Universities. of Electronics or institutes affiliated to Universities. 40 | P a g e . Interior Designing. ICWA. Hospital Management./ AICTE/ AIBMS/ ICMR etc. Veterinary./UGC/AICTE/AIBMS/ICMR/ICAR. Computer certificate courses of reputed institutes accredited to Dept. pilot training. Secured admission to either of above courses Coverage of expenses : • Fee payable to college / Institution / University. approved by Director General of Civil Aviation/shipping.• • No Margin on loans upto 4 lacs. Management. Other courses leading to diploma / degree etc. Fashion Technology.
project works. Security : • • Upto Rs.00 lacs :. 4. Above Rs.5 lacs: Collateral in the form of a suitable third party guarantee alognwith assignment of future income.7.NIL Above Rs.00 Lacs. Personal Computers / Laptops wherever required.10.like study tours. etc.00 Lacs and up to Rs.5% • Margin is to be contributed on pro rata basis on year to year basis as and when disbursements are availed. 4. 4. Repayment Holiday / Moratorium Period : • Course period + 1 year or 6 months after getting job. Fee and other charges payable to hostel. Purchase of books / equipments / instruments. Margin : Upto Rs. Any other expenses required to complete the course . Caution deposit / building fund / refundable deposit supported by institution bills / receipts.5 lacs: Tangible collateral security equal to 100% of the loan amount along with assignment of future income • Rate of Interest : 41 | P a g e . Maximum Loan Amount : Rs.00 lacs :. 7. whichever is earlier. Repayment Period : • The loan is repayable in 5-7 years after the above period. thesis.4 lacs : No security Above Rs.• • • • • • Examination / Library / Laboratory Fee.
pilot training.. Penal interest @ 2% p.00 lacs. The loan offering is designed to empower you with the financial capability to realise your dreams. Eligiblity of Courses : Graduate/Post Graduate / Doctorate / Job Oriented Professional / Technical Courses offered by reputed Universities overseas.. Regular Degree/ Diploma courses like Aeronautical. Secured admission to Professional/Technical Courses at foriegn Universities/Institutions. Reach out to the maximum limits. Examination/Library/Laboratory fee..a. on overdue amount. For loans above 4 lacs. Caution deposit/building fund/refundable deposit supported by institution bills/reciepts. shipping etc.• Simple interest to be charged at monthly rests during the repayment holiday / moratorium period. Hyderabad Students which is 2 % less than that for students of other institute.4. Achieve your goals. Student Eligiblity : • • Should be an Indian National. if the loan amount exceeds Rs. 42 | P a g e .. Coverage of expenses (for overseas studies) : • • • • • Admission/Tuition fees to College/University.. interest rate will be 2 % above base rate for ISB. 1% interest concession is provided if interest debited during repayment holiday is serviced. 1% Concession in rate of interest to loans for girl student.. Purchase of books/equipments/instruments. • • • • Baroda Scholar: Bank of Baroda presents financial assistance to students going abroad for Professional / Technical studies. The Institute should be recognized by the competent local aviation / shipping authority and Director General of Civil Aviation/shipping in India. Hostel/Mess charges.
lacs : No security Above Rs.5 lacs: Collateral in the form of a suitable third party guarantee alognwith assignment of future income. on overdue amount if loan exceeds Rs. The loan is repayable in 5-7 years after the above period. whichever is earlier.5 lacs: Tangible collateral security equal to 100% of the loan amount along with assignment of future income • Rate of Interest : • • • • Simple interest during repayment holiday/moratorium period. Any other expense required to complete the course e. Above Rs.00/. 1% Concession in rate of interest to loans for girl student. Margin : 15% Repayment Period : Repayment Holiday/Moratorium Period : • Course period + 1 year or 6 months after getting job. Penal interest @ 2% p.4. 4.lac.7. 20. Purchase of computers if essential for completion of the course.g. if interest debited during the repayment holiday is serviced. study tour. Home Loan Eligibility: 43 | P a g e . Maximum amount of loan : Rs.4/. project work. thesis etc. Security : • • Upto Rs.• • • One way travel expenses/Passage money. Margin is the amount that the customer need to manage from his / her side and show the bank that he / she is capable of doing so.00 Lacs.00 Lacs and up to Rs. 7.a. 1% interest concession.
000/= Salaried More than ` 20. Income Criteria 2.In case of Home loan eligibility three criteria’s are considered for calculation of Home loan eligibility. 2-REPAYING CAPACITY: Total deductions including proposed EMI should be as below : (i) In case of Salaried Persons : 44 | P a g e .000/= and up to ` 1 lac More than ` 1 lac Other than Salaried Persons SOURCE CRITERIA 36 times of monthly gross income 48 times of monthly gross income 54 times of monthly gross income 5 times of average ( last 3 years ) annual income excluding depreciation Wherever income of the family members is clubbed. 1. Income of the Agriculturists who are predominantly dependent on agriculture and not required to file the income tax may be assessed by obtaining income certificate from the local competent revenue authority only. Least of the three is taken for Loan eligibility. The assessment of income so arrived must be properly recorded with justification in the appraisal note. Margin and least of three is taken as Loan eligible amount.INCOME CRITERIA: INCOME Up to ` 20. They are: 1. they should be made co-borrowers.repayment Capacity 3.
42000 45 | P a g e .40.000/Purpose Purchase of Plot ( incl. 50.per month as gross monthly income.and up to ` 12 lacs ` 12 lacs 3-MARGIN: Total Deductions not to exceed ( including proposed EMI ) 40% 50% 60% Total Deductions not to exceed ( including proposed EMI ) 50% 60% 70% For Salaried Persons : Monthly Income Up to ` 20.000/.000/ ` 20.000/ ` 50.Monthly Income (Bracket) Up to ` 20.40.70000*60% = Rs. If a persons is salaried and is earning Rs.000/.000/ ` 2.70000/. registration charges & cost of stamps ) House / Flat already constructed from own resources All other cases including out right purchase of Readymade Houses / flats or construction of houses Purchase of Plot ( incl.000/(ii) In case of Others : Annual Income Up to ` 2.and up to Rs. Repayment Capacity: Rs. Then the three criteria’s calculation is as follows.000/- For Eg. registration charges & cost of stamps ) House / Flat already constructed from own resources All other cases including out right purchase of Readymade Houses / flats or construction of houses Margin 20% 25% 20% 20% 20% 20% Above ` 20.
The housing loan eligibility also indicates how much loan is sanctioned to a particular person. Margin: If the property cost is Rs. Hence EMI for 25 years for per lac for 30 lacs loan is 981 so his eligible amount will be= 33500/981= Rs. Thus .100000 we can take his loan eligibility to be 48 times of Gross Monthly Income i. The least of the three criteria’s will be taken for Loan eligibility. the different types of NPA details and the different criteria to find how an account is considered as a NPA account.1500 Less. Hence he will be given a loan for Rs.e = Rs.33.4000 Total Rs.Insurance paid. Definition of NPA: NPA stands for Non Performing Assets. NPA: Under this section I studied what is NPA .1000 Less-Tax.2000 Less-PPF/PF/VPF/PT& others. NPA is defined as an advance for which interest or repayment of principal or both remain out standing for a period of more than two quarters.70000*48= Rs.e 35-7 =Rs.8500 Balance for EMI Rs. Income Criteria: As his Gross monthly salary is not more than Rs. It shows the exact details of how the calculation takes place in sanctioning of a loan. 7 lacs hence the remaining amount i.Deductions) Less.33500/Hence if his age is 35 then his maximum eligibility will be Retirement age-Current age(60-35) =25 years. the details above shows two different things i.14lacs is the loan amount he is eligible for.e.60 lacs is his loan eligibility. 28 lacs loan eligibility.(Less. the details about the education loan shows the requirement and the details about the housing loan shows how a loan is being sanctioned.35 lacs he has to contribute 20% margin which comes to Rs.other loan EMI’s. The 46 | P a g e .28 lacs as per Margin criteria.34.
47 46.04 158.89 244.04 43. Table showing the various details of NPA accounts for the years 2007-2011: 2011 outstan ding 2010 2009 2008 outstan ding % to total adva nces 0.65 0.10 0.82 1 1.09 58.14 0.74 207.77 216.13 59.10 3909 26 The different criteria to find out what is a NPA account: A non performing asset (NPA) is a: • loan or an advance where interest and/ or installment of principal remain overdue for a period of more than 90 days in respect of a term loan.02 0.01 0. it does not bring substantial income to its owner or is just dormant.14 5.23 3916.66 2.40 81.86 0. if the account remains ‘out of order’ as on date of Balance sheet for reasons as given below: if the outstanding balance remains continuously in excess of the sanctioned limit/drawing power for 90 days OR 47 | P a g e .72 10.01 0.89 Sub standard Doubtful Loss TOTAL NPA TOTAL PWO 1.75 3.17 0.67 49. While it is an "Asset".33 0. • In respect of an Overdraft/Cash Credit (OD/CC).02 1.35 3.02 44.00 16.83 % to Outstan % to Outstan %to total ding total ding total advanc advanc adva es es nces 0.10 8.00 2007 Outs tandi ng 275 4 279 %to total advan ces 1.level of NPA act as an indicator showing the bankers credit risks and efficiency of allocation of resource.01 0.09 0.40 - 2765.00 0.44 0.01 0.84 4.
for Non Infrastructure sector Upto six months from the original Date of Commencement of Commercial Operations (DCCO). ‘Project Loan’ ( any term loan which has been extended for the purpose of setting up of an economic venture) will be classified as NPA: As per record of recovery (i. but there are no credits continuously for 90 days as on the date of Balance Sheet. in respect of a securitization transaction undertaken in terms of RBI 48 | P a g e • • • • • . the installment of principal or interest thereon remains overdue for one crop season for long duration crops (Crops with crop season longer than one year). the installment of principal or interest thereon remains overdue for two crop seasons for short duration crops.e.e. However above periods are subject to extension by restructuring complying guidelines as specified by RBI. • the amount of liquidity facility remains outstanding for more than 90 days. An account where the regular/ adhoc credit limit have not been reviewed/ renewed within 180 days from the due date/ date of adhoc sanction. the bill remains overdue for a period of more than 90 days. In cases where the outstanding balance in the principal operating account is less than the sanctioned limit/drawing power. even if it is regular as per record of recovery. Turnover in the account during the current quarter must be sufficient enough to cover the interest charged during the same quarter. i. 90 days overdue) and/or On account of non achievement of commercial operations for Infrastructure sector within two years from the original Date of Commencement of Commercial Operations (DCCO). An account may also be NPA because of technical reasons say Drawing Power in case of working capital account is determined on the basis of stock statement which is older than 3 months and irregular drawings are permitted in the account for a continuous period of 90 days. in the case of bills purchased and discounted. OR credits are not enough to cover the interest debited during the same period.
the account can be upgraded to standard category immediately. • in respect of derivative transactions. Restructuring / Rehabilitation may be considered in sub-standard advances in case turnaround is possible based on objective assessment / appraisal observing extant guidelines and norms. which has remained NPA for a period less than or equal to 12 months. Sub-standard Assets: With effect from 31 March 2005. 49 | P a g e . These accounts are monitored to ensure the compliance of all terms and conditions specified in the sanction.guidelines on securitization dated February 1. becomes nonperforming when it ceases to generate income for the bank. Doubtful Assets: With effect from March 31. All the recovery measures are relevant in substandard assets also. 2006. Overdue: Any amount due to the bank under any credit facility is ‘overdue’ if it is not paid on the due date fixed by the bank. if an account is classified as NPA due to technical reasons. Standard Assets: Standard assets are those. 2005. a sub-standard asset is one. the overdue receivables representing positive mark-to-market value of a derivative contract. an asset is classified as doubtful if it remained in the substandard category for 12 months. They are normally treated as accounts without any problems. Assets Classification: Broad Guidelines presently in force in respect of delinquency of Loan assets are summarized below: Nonperforming Assets: An asset. the account shall be upgraded on clearance of technical reasons. if these remain unpaid for a period of 90 days from the specified due date for payment. including a leased asset. I even learnt about the different types of assets. which are regular in payment of interest and installments due as per sanction. Similarly. If the entire over dues are recovered by way of cash recovery.
A loan classified as doubtful has all the weaknesses inherent in assets that were classified as sub standard, with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently known facts, conditions and values – highly questionable and improbable. All the recovery measures are relevant for Doubtful Assets also. Branches should however envisage whether it is advisable to restructure/rehabilitate the unit. Looking to promoters’ sincerity, wherewithal, capability to achieve a turnaround, and also based on the objective assessment, branches should decide whether it would be worthwhile to commit additional finance after ascertaining real factors that contributed to sickness of the borrower. If the restructuring/rehabilitation is not possible, recovery action such as Compromise/ OTS settlement / action under SARFAESI Act/ legal action etc. is to be considered. Substandard and Doubtful accounts which are subjected to restructuring/ rescheduling, can be upgraded to standard category only after a period of one year from the due date of first payment of interest or of principal, whichever is earlier, falls due, subject to satisfactory performance.
A loss asset is one where loss has been identified by the bank or internal or external auditors or in the RBI inspection but the amount has not been written off wholly. If the realisable value of the security, as assessed by the bank/ approved valuers/ RBI is less than 10 per cent of the outstanding in the borrowal accounts, the existence of security should be ignored and the asset should be straightaway classified as loss asset. In other words, such an asset is considered uncollectible and of such little value that its continuance as a bankable asset is not warranted although there may be some salvage or recovery value. Since security back up may not be available, the restructuring/rehabilitation, if required, should be considered with utmost care.
Contribution to the Organization:
With the help of my project I could help the organization in the detailed analysis of the various lending policies and its impact on the organization. My project helped me to provide the organization with an overview of how different lending policies differ from each other and why the impact on NPA is different for different policies. I helped them for their work. By doing some of their system related work , I could help them finish their work faster for which I got a letter of appreciation.
50 | P a g e
Chapter – 4 Analysis of Task/Research undertaken
The task undertaken basically compared the various NPA details of the branch. It basically showed the list of the various NPA accounts , the outstanding balance in each case and the amount of loan 51 | P a g e
that was sanctioned. The data mentioned below shows the NPA details of K.G.Road Branch for three financial years.
LIST OF NPAS AS OF 31.3.2011
SL. NO. LIMIT Upto Rs.100000 1 2 3 4 5 6 1 LAC TO 5 LACS 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 RS.5 LACS TO 10 LACS 23 DB3 H/L 1 TOTAL NPA 26 DB2 DB2 LOS DB3 DB2 DB3 DB3 DB1 LOS DB2 DB2 DB3 DB3 SSTD DB3 DB1 H/L H/L CA H/L H/L H/L H/L H/L P/L H/L H/L H/L H/L ODAP H/L H/L 18 DB2 DB3 DB2 DB2 LOS DB3 CC H/L H/L H/L CA H/L 7 85774 45462 62601 69766 56830 70759 391192 134911 115225 161277 157405 233529 280296 152769 192829 148629 393555 132409 321952 403429 101929 377790 461279 3769213 743092 743092 4903497 TYPE CATEGORY AMOUNT
LIST OF NPAs AS OF 31.3.2010
SL. NO. LIMIT TYPE CATEGORY AMOUNT BAL O/S
52 | P a g e
25000 1 2 LOSS LOSS SBTOD SBTOD 712 1608 TYPE CATEGORY AMOUNT BAL O/S 53 | P a g e .2009 SL NO LIMIT Upto Rs.5 LACS TO 10 LACS 24 25 26 1CRORE TO 5 CRORES 27 TOTAL NPA LOS SME 1 27 DB3 SUB DB2 H/L H/L H/L 3 DB1 DB2 DB2 LOS DB1 DB2 DB1 DB3 DB3 DB1 LOS DB2 DB2 DB2 DB3 H/L H/L H/L CA H/L H/L H/L H/L H/L H/L P/L H/L H/L H/L H/L 15 DB2 DB3 SUB LOS DB3 LOS DB3 CC H/L H/L E/L H/L CA H/L 7 DB3 H/L 1 7543 7543 85886 75462 31240 46130 37923 56830 70759 404230 100766 134911 115225 161277 133887 203405 263529 280296 217769 231439 148629 471839 460410 358409 403429 3685220 569477 534444 744021 1847942 0 0 5944935 LIST OF NPAS AS OF 31.Upto Rs.25000 1 25000 TO 1 LAC 2 3 4 5 6 7 8 1 LAC TO 5 LACS 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 RS.3.
3 4 5 6 7 8 25000 TO 1 LAC 9 10 11 12 1 LAC TO 5 LACS 13 14 15 16 17 18 20 21 22 23 24 25 26 RS.5 LACS TO 10 LACS 27 28 29 30 31 32 10 LACS TO 25 LACS 34 1CRORE TO 5 CRORES 35 TOTAL NPA LOSS LOSS LOSS LOSS LOSS DB1 DB3 LOS LOS DB2 DB2 SUB DB1 DB1 LOS SUB DB2 SUB DB2 DB2 DB1 DB1 DB2 SBTOD SBTOD SBTOD SBTOD SBTOD H/L 8 H/L P/L CA H/L 4 H/L H/L H/L H/L CA H/L H/L H/L H/L H/L H/L CC H/L 14 1905 2610 2787 3070 5028 4732 22452 37923 41613 56830 87259 223625 105462 112787 134911 144215 161277 197761 230405 263529 280296 354493 368409 395774 403429 3152748 526379 618750 663551 699099 699822 752021 3959622 1611363 1611363 12647628 12647628 21617438 DB3 DB3 DB3 DB3 DB3 DB2 DB2 H/L H/L H/L H/L H/L H/L 7 H/L 1 SUBSTD SME 1 Table showing the NPA details for 3 financial years on the basis of the amount of loan sanctioned: Rs. UPTO 25000 2011 391192 2010 7543 2009 22452 54 | P a g e .
00 1.25-1.00-25.00 100.25 0. The table showing the total NPA of the various types of loans for 3 years: 55 | P a g e .00 5.00-5. which is more or less constant for the year 2010 and 2011.00-500. There has been a drastic change in the amount of the total NPA from the year 2009 to the year 2010 and a slight change from the year 2010 to the year 2011.100000 – Rs.500000 .00-10. From the diagram we can say that there has been a declining trend in the amount of NPA in all the range of loans except for the range between Rs.25000-100000 100000-500000 500000-1000000 1000000-2500000 10000000-50000000 TOTAL NPA 3769213 743092 4903497 404230 3685220 1847942 0 5944935 223625 3152748 3959622 1611363 12647628 21617438 25000000 20000000 15000000 10000000 5000000 0 2011 2010 2009 Amount in lakhs 0.00 10.00 TOTALNPA The Bar diagram represent the table mentioned above about the various details of NPA.
ODAP is the exception of all as it has NPA amount due only in the year 2011. CA has shown a constant trend throughout the 3 years. There is a drastic change in the total balance outstanding in the year 2010 but a slight increase in the amount for the year 2011 because of the ODAP a/c. The table can be presented with the help of a graph. H/L has been fluctuating over the years with a decrease in 2010 but an increase in the year 2011.The table showing the comparison of different types of loans for three different years. The table above depicts that the Bank has taken considerable steps to reduce it’s NPA balance outstanding. There is a trend of decrease in the amount of NPA over the years except for P/L which shows an increase for 2009 2010 2011 H/L CA CC E/L P/L ODAP SBTOD SME TOTAL 8296596 218107 395774 41613 17720 12647628 21617438 5446183 218107 85886 46130 148629 5944935 7998374 218107 85774 148629 101929 8552813 the year 2010 and a constant there after. The graph is shown below: 56 | P a g e .
NPA Management: 57 | P a g e .
the package is generally finalized in consultation with other lenders. general consistency in approach is expected to be maintained while dealing with the defaulting borrowers.The NPA accounts needs to be managed for the bank to work effectively and efficiently and thus there is a NPA management. • More considerate treatment would be given to the borrower customers who continue to make payments even after being classified as NPA. • Fair treatment and persuasion are the basic principles of recovery mechanism. • Recovery action in each case would depend upon the characteristics of the case specific and prevailing circumstances. GUIDING PRINCIPLES OF RECOVERY POLICY: Bank believes that continuous and day-to-day monitoring is the first step towards ensuring good recovery and in extending timely assistance for any temporary mismatch of the cash flow of the customers in running their day-to-day business. • The basic approach for recovery is practical and non-prejudiced. • Greater focus is laid on preventing an account from becoming NPA rather than applying remedial measures at the post NPA stage. on merits. 58 | P a g e . Cases eligible for coverage under the Corporate Debt Restructuring (CDR) System are intended to be referred to the CDR Cell. In order to strengthen the system of NPA Management at all level the Recovery Policy is designed with a view to keep the level of stressed assets at minimum level leading to healthy credit portfolio. • Since timely rescheduling/restructuring helps in preventing further deterioration of the account. The basic objective of the Recovery Policy is to maximize recovery of dues under the credit portfolio of the Bank through effective credit monitoring for prevention of slippages and to maximize recovery in Non Performing Assets (NPAs) and prudentially written off accounts. • In respect of restructuring proposals. rescheduling / restructuring / rehabilitation of accounts as per RBI guidelines will be resorted to wherever warranted. OBJECTIVE: NPA Management is one of the key barometers observed by the market participants while judging the health of the loan assets of the bank. The details of NPA management is given below. Legal action is considered only as the last resort.
but not found to be in a position to generate adequate surplus to service the debt on a long term basis even after examining the possibility of restructuring. • Bank may consider. Endeavour should be that no account should appear in potential NPA report due to non payment of installment. ‘CDR Mechanism’ etc. assignment/ sale of financial assets to ARCs / Banks / FIs/ NBFCs as an alternate option of Resolution and reduction in NPA / PWO portfolio in cases where protracted litigation are going on and/ or otherwise chances of recovery are poor. To retain the standard asset. including nonviable sick / closed units. for reference purposes only. our ASCROM generated data can be useful tools in tackling potential delinquencies or defaults in Standard accounts. the respective guidelines/ circulars issued from time to time should be referred and complied with. Compromise/OTS option would be considered on merits. branches should promptly take actions and do regular follow up. ‘Rehabilitation of Sick units’. Branches are required to be more alert and proactive in monitoring the advances accounts. However instead of solely depending on potential NPA report generated from ASCROM system for recovering CADU amount the branches should recover the bank dues as soon as these (interest/ Installment) become due. Compromise/ One Time Settlement (OTS) option is explored as an exit route. • While adopting Recovery measures Bank shall follow ‘CODE FOR COLLECTION OF DUES AND REPOSSESSION OF SECURITY’ and Code issued by ‘BANKING CODES AND STANDARDS BOARD OF INDIA’ as approved by Board of Directors (published on website). Intense competition is causing pressure on net interest margins. • In case of units in operation. Therefore. • This Policy covers some of the broad guidelines being monitored by respective functional heads say ‘Credit Monitoring’. Appointment of Recovery/Enforcement Agents shall be in accordance with guidelines issued by Reserve Bank of India from time to time. MONITORING & FOLLOWUP MEASURES: Stricter norms of Income Recognition. For this purpose. Asset Classification.it has become imperative on the Banks to manage NPAs effectively and efficiently to sustain profitability. Therefore. proving difficult and time consuming. • Bank desires to be proactive and be guided by RBI guidelines in complying with the Recovery measures for the asset quality. 59 | P a g e . Provisioning and capital adequacy have made the Banks increasingly sensitive to credit risks.• In the NPA cases where the borrower unit / company may be facing long term problems with structural deficiencies and may not be able to operate on sustained profitable lines. • Enforcing provisions of declaring ‘Wilful Defaulters’ in accordance with RBI guidelines for helping in maintaining credit discipline and creating a recovery climate.
(5) To ascertain current status of DRT/BIFR proceedings. Regional Manager & Zonal Manager in monitoring the NPA/PWO accounts.Early Alert Sysem Reserve Bank of India has issued broad guidelines on preventing slippage to NPAs by recognizing the problems and corrective measures to restructure the accounts after an objective assessment of the viability of the unit and promoter’s intention (and his stake). The purpose of regular monitoring is: (1) To examine whether the account can be upgraded by reschedulement / restructuring / rehabilitation. CONTROL AND MONITORING OF NPA AND PWO ACCOUNTS Monitoring of NPA & PWO Borrowal Accounts: (A) NPA/PWO ACCOUNTS: The Bank has evolved a system of continuous monitoring of large NPA/ PWO borrowal accounts on monthly basis. 60 | P a g e .. INSPECTION OF SECURITIES IN NPA AND PWO ACCOUNTS: All NPA &PWO accounts should be inspected and copy of reports is sent to respective Regional Managers as under: • Rs. Bank has put in place “Early Alert System” that captures early warning signals in respect of accounts showing first signs of weakness by way of analysis of Ascrom Data. Credit Rating and Credit Monitoring etc. One crore & above : Half yearly in June & Dec. Appropriate Credit Monitoring System has been placed at BCC and at Zonal level/ Regional level in order to take care of above. The report shall reflect the endeavors of Branch Manager. (2) To attempt to make appropriate provision because of deterioration in value of security consequent upon ageing process. follow up of which will lead to a healthy credit portfolio as well as ensuring initiation of timely recovery measures. (3) To prevent the assets from becoming loss assets (4) To explore the possibility for an acceptable compromise settlement. The reports shall focus on the current efforts made to recover the dues and the developments in the account.
• Less than one crore -: Yearly in Jan. suitable proposal be submitted to competent 61 | P a g e . the bank not only fails to recover its legitimate dues but also faces the problem of erosion of security. In case access is not allowed to the inspecting officer. The borrower under such circumstances sometimes opens a current account with another bank and routes all sales proceeds through that account. in the routine course. Therefore. Recovery in suit filed/ decreed accounts shall be appropriated first towards legal charges/ Expenses awarded by the Court. APPROPRIATION OF RECOVERIES IN NPA ACCOUNTS: In respect of existing NPAs. Consequently.C. Towards recovery of Expenses Towards unapplied interest. be appropriated completely towards the over-dues. devolvement. wages. Experience shows that substantial amount can be recovered by allowing operations with cut-back arrangement. Branch Managers are allowed to permit operations in such accounts with a cut back arrangements for a period upto 3 months from the date of such cut back arrangement permitted by them and for further period/ restructuring etc. or reduction in drawing power. borrowers’ present activities/ address etc. where suit is not filed. the bank can consider allowing operations. say. ranging from 5 to 10% (or more) of the credits in the account to reduce/wipe-out the excess/over dues/ Interest in the account. CUT BACK ARRANGEMENT: A borrower’s account may have become NPA due to unserviced interest. insurance premium etc. till a Restructure/ revival package is prepared and sanctioned or an acceptable compromise proposal is submitted by the borrower. Any credit coming into the account will. discrete enquiries must be made as regards to present status of securities and possession thereof. branch should also get land records/ Registrar of Companies’ records searched to ensure that no outside interest has been crated thereon. excess allowed to meet statutory dues. and suitable observation be given in the report Such observation be also quoted while noting status of PWO account. up to sanctioned amount or outstanding with a suitable cut-back. Therefore. on merits. In case of any of adverse observations. L. recoveries effected in the account (including recovery under Public Money Recovery Act) from time to time shall be appropriated in the following manner: Towards reduction in Book dues. there after interest due and finally principal amount.
by Regional Managers (including Dy. rehabilitation. RECORD OF UNAPPLIED INTEREST /CHARGES: Branches shall maintain a record of unapplied interest and other charges at contracted rate and update the same at periodical intervals. holding on operation. IN NPA ACCOUNTS: 62 | P a g e . unless specifically agreed by competent authority otherwise. Such accounts with increase in the existing limits and/ or changes/ modifications in terms and conditions of sanction) can be reviewed. sums received through cut back arrangement may be appropriated first towards overdues/ expenses. rescheduled. then towards interest/ unapplied interest and thereafter towards principle. Regional Managers scale V) and above up to their discretionary lending powers. under nursing.(Credit/ Recovery) in ROs) can also review such NPA accounts without increase in existing limits and without changes/modifications in terms and conditions of sanction upto their discretionary lending powers. In such cases. However. LEAD BANK CHARGES/PROCESSING CHARGES etc. pending finalization/sanction of rehabilitation/restructuring proposal) giving details of action already initiated and proposed to be initiated should be submitted to their Regional/ Reporting authority at half yearly intervals who shall note the status of the account and advise steps to be taken for expediting recovery in NPA accounts. Chief Managers. Such status noting review shall be subjected for PSR noting by the next higher authority. provided project/ unit is in operation and such drawings are used to continue in operation.authority. All Regional Managers are authorized to allow operations in the account up to sanctioned limit or the outstanding with suitable cut back arrangement which would eventually lead to reduction in the outstanding in the account. restructured. STATUS REVIEW OF NPA ACCOUNTS: Status notes of all NPA accounts (including BIFR–standard. Executive in Scale IV and Senior Branch Managers (including Senior Manager.
in respect of NPA accounts the following procedure shall be adopted.e./ Recy. If the account is not operated.) in ROs) and above are authorised to sanction Special Temporary Limits (STL) with proper justifications. no lead bank charges need be recovered /claimed. APPOINTMENT OF NOMINEE DIRECTORS: 63 | P a g e . a record of charges shall be maintained and claimed while filing the suit or negotiating a compromise. In case the NPA account is operated and the consortium is subsisting. upto the remaining portion in the DLP. INSURANCE CHARGES. In suit filed accounts. which are not operated. STOCK AUDIT CHARGES. 2. SECURITY CHARGES ETC. within their existing discretionary lending powers i. The expenses incurred shall be debited to the Bank’s Profit and Loss account and record of the same shall be maintained. 1. In respect of NPA accounts where there are no operations in the accounts. the above mentioned charges shall not be debited to the accounts.The policy of the Bank is that all charges as stipulated shall be recovered from all borrowers unless specifically waived/ exempted. ASSET VALUATION CHARGES. the amount shall not be debited to the account. PROCESSING CHARGES – Processing charges need not be recovered for status noting in suit filed accounts. ADDITIONAL FUNDING IN GENUINE CASES: Borrowers having genuine problems due to temporary mismatch in funds flow or sudden requirement of additional funds may be entertained as follows: All senior branch managers (including Sr. Manager (Cr. the charges shall be recovered from the account. In nonsuit filed NPA accounts. the charge shall invariably be recovered. The limit/present outstanding in the account plus the STL shall determine the level of sanctioning authority. For status noting of NPA accounts no processing charges need be recovered. LEAD BANK CHARGES – The charges should be levied till the consortium is officially disbanded or defacto stands dissolved by filing of suit etc. If the account is operated. processing charges shall be recovered for review of accounts. In respect of NPA accounts. However. 3. It shall be satisfied that the temporary mismatch is not because of diversion of short-term funds outside business or for long-term uses. A record of the charges shall be created and claimed while filingthe suit or while negotiating a compromise.
may make recommendations to Corporate Centre for appointment of Nominee directors in respect of borrowing companies which are sought to be rehabilitated by concessions/relief and/or additional exposure under BIFR sanctioned scheme or proposals sanctioned by the Bank outside SICA (where we are the lead bank or sole lender). fair market value should be ascertained or valuation should be done before authorising sale of assets (valuation of the lending FI may be considered for approval if done by an Government/ Wealth tax approved valuer). DISPOSAL OF ASSETS IN NPA/ PWO ACCOUNTS: Many times. 64 | P a g e . Such a Nominee director will not incur any liability for anything done or omitted to be done in good faith in discharge of his duties as Nominee director.The Banking Companies (Acquisition and Transfer of Undertakings) Act 1970 enables the Bank to appoint Nominee directors in borrowing companies.s INSURANCE CLAIM in NPA/ PWO FOR ASSETS CHARGED TO BANK: In a case. valuation of such assets should be conducted by bank’s (or other bank’s/ FI’s Valuer) approved valuer. The sanctioning authorities should ensure that the amount to be deposited in the borrowal accounts consequent upon such authorization of sale of assets should generally not be lower/less than the Net Present Value (NPV) of the realizable value of assets being allowed to be disposed off (Fair Market Value and not the Distress Value) net of the cost of realization in accordance with RBI guidelines. if the relevant risk is covered. Regional Managers through their Zonal Authorities. A Nominee director will hold office as decided by the Bank and can be removed or substituted by the Bank. as per norms. Regional Managers scale IV & above) and above can authorise sale of such assets in accounts. Mumbai. Before authorizing sale of current assets. Chief Managers (including Dy. borrowers approach the bank to allow them to sell the assets charged to the bank and deposit the proceeds in the borrowal accounts with the bank. In respect of movable machinery. executives/ ex executives of the rank of Assistant General Managers and above shall be appointed as Nominee directors of borrowing companies with the approval of Baroda Corporate Centre. There may be instances where a third party may approach the bank to buy the assets charged by the borrower to the bank. a fair value of such assets should be ascertained. In respect of fixed assets. Chairman and Managing Director/Executive Director shall appoint Nominee directors on the Boards of borrowing companies. insurance claim shall be preferred with the insurance company. Generally. In such cases. Another bank or Financial Institution may also approach for sale of assets commonly charged to them and us. where the asset charged to the bank is destroyed or stolen.
This is to obviate the borrower obtaining No Dues Certificate from the Bank after settling the compromise amount and subsequently claiming the insurance amount from the insurance company. which may be higher than the compromise amount. 65 | P a g e .Compromise shall be negotiated for the balance amount (considering receivable claim).
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