BMT6133 – MANAGEMENT OF BANKS

GROUP PRESENTATION

TOPIC 1: CANARA BANK AND

TOPIC 2: MONETARY POLICY TRANSMISSION MECHANISM

GROUP MEMBERS

• AJAY Raghavendra [20MBA0068]

• ANUSHA [20MBA0126]
 CANARA BANK
OVERVIEW:

 It is Founded as 'Canara Bank Hindu Permanent Fund' in 1906, by late Shri Ammembal Subba Rao Pai,
a philanthropist, this small seed blossomed into a limited company as 'Canara Bank Ltd.' in 1910 and
became Canara Bank in 1969 after nationalization.

 It provides various services to its corporate clients such as Cash Management Services, loans, IPO
monitoring services, etc. NRI Banking– Besides various personal banking products it also offers
remittance services, consultancy services to its NRI Clients. It also offers various products and services
to priority and SME sector.

 The Bank has gone through the various phases of its growth trajectory over hundred years of its
existence. Growth of Canara Bank was phenomenal, especially after nationalization in the year 1969,
attaining the status of a national level player in terms of geographical reach and clientele segments.
Eighties was characterized by business diversification for the Bank. In June 2006, the Bank completed
a century of operation in the Indian banking industry. The eventful journey of the Bank has been
characterized by several memorable milestones. Today, Canara Bank occupies a premier position in the
comity of Indian banks.
PRODUCTS AND SERVICES:

 Canara Bank today holds an unmatched reputation especially in South India. Known for its diverse
product portfolio and excellent services and facilities Canara Bank has achieved several milestones in
the financial sector in India. Personal Banking, Corporate Banking, NRI Banking and Priority & SME
Credit are some of the important functions provided by the bank.

 Savings & Deposits

 Loan Products
 Technology Products
 Mutual Funds
 Insurance Business
 International Services
 Card Services
 Consultancy Services
 Depository Services
 Ancillary Services
 Approved Housing Projects
BASEL III PILLAR 3 DISCLOSURE (ON CONSOLIDATED BASIS) AS
ON 31.12.2020
i) Qualitative Disclosures

 Bank’s policy governs all credit risk related aspects. CRM Policy outlines the principles, standards and approach for credit risk
management at the Bank. It establishes systems, procedures, controls and measures to actively manage the credit risks, optimize
resources and protect the bank against adverse credit situations. The Delegation of Power for approval of credit limits is
approved by Board of Directors

 The Bank’s policies assume moderate risk appetite and healthy balance between risk and return. The primary risk management
goals are to optimize value for shareholders within acceptable parameters and adequately addressing the requirements of
regulatory authorities, depositors and other stakeholders. The guiding principles in risk management of the Bank comprise of
Compliance with regulatory and legal requirements, achieving a balance between risk and return, ensuring independence of risk
functions, and aligning risk management and business objectives. The Credit Risk Management process of the Bank is driven
by a strong organizational culture and sound operating procedures, involving corporate values, attitudes, competencies,
employment of business intelligence tools, internal control culture, effective internal reporting and contingency planning.

ii). QUANTITATIVE DISCLOSURES:

 Amount of the Bank’s Exposures- Gross Advances (Rated & Unrated) in Major Risk Buckets –

 under Standardized Approach, after factoring Risk Mitigants (i.e. Collaterals):

 Particulars Amount (in millions)

iii). Leverage Ratio

 The Basel III leverage ratio is defined as the capital measure (Tier – 1 capital of the risk based capital framework) divided by the
exposure measure, with this ratio expressed as a percentage.
Financial Statement analysis:

STANDALONE: overview
STANDALONE: income statement
STANDALONE: Balance sheets
 
STANDALONE: cash flow
RATIOS:
RATIOS:
RATIOS:
RATIOS:
Non-performing assets:

 Canara bank reported a consolidated net profit of Rs.749.73 crore for October-December quarter.
The state-owned bank had posted a net profit of Rs. 397.65 crore in the year-ago quarter. Contract
bank’s gross NPA’s (non-performing assets) contracted 236 basis points year-on-year to 7.46
percentage of gross advances. Gross Non-performing assets stood T Rs.39,789 Croce. Net Non-
performing assets declined down by 298 basis points to 2.64 percentage and the value remains at
Rs.26,774 crore. If not for the Supreme Court order, directing that accounts not declared as Non-
performing assets till august 31,2020 should not be declared as Non-performing assets till further
orders, the bank’s gross Non-performing assets and net Non-performing assets would have stood at
8.94 percentage and 3.93 percentage. ‘Provision aggregating to Rs.1901 crore (including Covid 19
provision of Rs. 1,038.37 Crore) made opposite and against to the accounts which were stood as on
31.08.2020 but would have been slipped to non-performing assets on 31.12.2020 had the Supreme
Court Dispensation not been reckoned, said by the Canara said. Its provision coverage ratio was at
84.89 percentage at the end of December quarter.
CAPITAN ADEQUACY AND CAPITAL MANAGEMENT:

CAPITAL ADEQUACY:

 Capital Adequacy Ratio: Tier I data was reported at 10.300 % in 2019. This records an
increase from the previous number of 9.770 % for 2018

 Canara Bank has raised up to ₹5,000 crore equity capital through various modes in the
current fiscal year to boost its capital adequacy ratio in view of expansion plans, and by
seeking nod from shareholders for the same in its past AGM.
 In view of certain expansion plans of the bank, the implementation of Basel III norms, and
consequent capital charge, there is a need to increase the capital to further
WORKING CAPITAL MANAGEMENT:

 Working Capital is basically the investment in current assets like raw materials, stores, semi-finished
goods, finished goods, sundry debtors etc.
 It represents the money that is required for purchase / stocking of raw materials, payment of salary,
wages, power charges etc. and also for financing the interval between the supply of goods and the
receipt of payment thereafter.
 Working Capital Finance is extended in different forms basing on the requirement in the form of
Inventory Limits (Pre-Sales), Finance against Receivables (Post-Sales), Non-Fund based limits and
Short Term Lending products.
 Working capital requirements of a unit would be assessed by adopting various methods like
Turnover Method, Maximum Permissible Bank Finance (MPBF) System, Cash Budget System and
Net Owned Funds System, depending on the type of activity.
 The securities for working capital facilities per se would be as per general lending norms of the bank
and also depends on the risk perception of the individual account.
 Rate of interest on working capital finance depends on quantum of loan, nature of activity, purpose
of loan, risk rating, financials etc.
ASSEST LIABILITY MANAGEMENT:

 It is basically a tool for liquidity and interest rate risk management. Bulk of the bank's
profit comes from net interest income and hence the paramount need to measure, control
and manage interest rate exposure. It is no exaggeration to state that many financial
institutions failed miserably by mismanaging the interest rate risk.

 The risk is nothing but a possible loss or damage going to occur. It has to be managed and
cannot be eliminated to earn maximum profits. There are three types of important risks
involved in the banking activity.

 • Credit risk. • Market risk. • Operation risk.

 and long-term horizons. Based on this, they are to assess their vulnerability to adverse
changes, and. therefore, protect them in advance.
FINDINGS

ALM technique is aimed to tackle the market risk. Its objective is to stabilize/ improve the NIL Although
implementation of A.L.M as a risk management tool is done using gap analysis it is essential that banks
strengthen their Management Information System (MIS) and computer processing capabilities for accurate
measurement of interest rate risk in their banking books, which impact, in the short term, their net interest
income (Nil) or net interest margin (NIM) and in the long-term, the economic value of the bank-which
involves up gradation of existing system and application software to attain better and improvised levels
It is also essential that a bank remains alert to the events that affect its operating environment and react
accordingly in order to avoid any undesirable risks. ALM in this context presents a disciplined decision
making framework for banks while at the same time guarding the risk levels

SUGGESTIONS

The Bank should have a strong and regular relationship with both depositors and borrowers and trade-off
relationship with some customers according to their importance to the Bank for liquidity to survive when
crisis increases.
The Bank should have a strong and regular relationship with lenders and large liability holders during the
periods of relative calm, the Bank will be in a better position to secure sources of funds during emergencies.
SUGGESTIONS COND…..

 The Bank should have a strong and regular relationship with both depositors and
borrowers and trade-off relationship with some customers according to their
importance to the Bank for liquidity to survive when crisis increases.

 The Bank should have a strong and regular relationship with lenders and large
liability holders during the periods of relative calm, the Bank will be in a better
position to secure sources of funds during emergencies.
Risk management policy :

 Customer account – Activation and maintenance policy

 Customer’s explore limits.
 Cash segment.
 FNO SEGMENT.
 CDS SEGMENT.
 Maintenance of margins / cash – closure of customer’s positions.
 Internal shortage.
 Dealing errors.
The Transmission of Monetary Policy

 The transmission of monetary policy is about how the reserve bank of India had made changes in cash rate instrument monetary policy flow through
to economic activity and Inflation.
 This process is very big and complex and India’s monetary policy framework has undergone several changes in the recent times. An interim liquidity
adjustment facility was introduced in the year of April 1999 and then transitioned towards a full-fledged LAF through the periodic modifications.
 The liquidity adjustment facility has helped in developing policy interest rate as the main monetary policy instruments, and since November 2004, has
operated using overnight fixed-repos and reserve repos with banks.
 The liquidity adjustment facility is key elements in the RBI operating frameworks and is meant to operate in a deficit liquidity mode, with liquidity
contained around ±1 per of all the banks in India the net demand and time liabilities.
 Banks pledge government securities as collateral, most of which should be over and above the securities they must kept to comply with liquidity
regulations and protocol (the standard liquidity ratio).
 May 6 in the year of 2011 the liquidity adjustment facility was enhanced along several dimensions, a key point of which was the explicit recognition of
the weighted-average overnight call money rate (WACMR) as the operating target of monetary policy.
 Because some banks were pricing loans under their some advertised prime lending rates, the transparency of lending rates became a concern. The
Reserve bank of India instituted a “base rate” system, which became effective in July 2010, with the aim of enhancing transparency in the lending rates
of banks and enabling better assessment of the transmission of monetary policy (RBI 2010). Under this system, a bank’s base rate is the minimum rate
at which it can lend, as loans are priced from the base rate with the addition of borrower-specific charges.
 Banks are free to use their own formula to calculate their base rate, as long as it is calculated in a consistent manner and made available for
supervisory review. Banks are expected to calculate their base rate taking their costs of funds, costs of complying with certain regulation (cash reserve
ratio and standard liquidity ratio), overhead costs, and profits into account. Although banks now price loans from the base rate, they still report prime
lending rates. In practice, the prime lending and base rates move together.