working capital financing by pvt bank

Under the guidance of Mr Puneet Handa Mr. Vijay sharma Mr. Ankit Sharma Mrs Mamta mehta

A Report on

WORKING CAPITAL FINANCING OF SM S !" P#T !ANK

A di$$ertation $u%&itted to ING #'$'a !an() Na&de* cho+() ,a-andhar to+ard$ fu-fi--&ent of Su&&er Intern$hip

Su%&itted !' Satyajeet Suman

MBA University Business School

ACKN !"#$%#M#N&

' (ould like to e)*ress my dee* +ratitude to the *eo*le involved in the success,ul com*letion o, an endeavour (hich is al(ays a result o, *eo*le involved e)*licitly therein and it is im*ossi-le (ithout the hel* and +uidance o, the *eo*le around. At the outset. ' (ish to e)*ress my sincere thanks to almi+hty ,or sho(erin+ his -lessin+ on me to develo* this *roject. ' e)*ress my sincere thanks to M/. PUN##& HAN$A. B/ANCH H#A$ ,or +ivin+ *ermission to carry out this study in his esteemed or+ani0ation. ' (ould like to ackno(led+e my sincere thanks to M/. V'1A2 SHA/MA ,or his e)cellent +uidance and su*ervision ,or the com*letion o, this *roject success,ully.

' (ish to e)*ress my sincere re+ards to MS MAM&A SHA/MA 3B SH4. ,or his hel*. valua-le +uidance and kind su*ervision. (hich (as the main stream to accom*lish this study. "ast -ut not the least ' (ish to thank my *arents (ho al(ays -elieved me and have ,aith in me in (hatever ' (ished to do. SA&2A1##& SUMAN MBA.UBS 5

C N&#N&

S.No. 6. 5. ' '' ''' 'V 3a4 3-4 V 7. 8. ' '' ''' 9. ' '' 3a4 3-4 :. ;. <. Content A-out 'N% Vysya Back+round Micro. Small and Medium #nter*rises Business "oan Business Bankin+ at 'N% Vysya SM# lendin+ at 'N% Vysya Code o, Bank=s Commitment to Micro and Small #nter*rises Products ,or SM#s at 'N% Vsysa Credit Mana+ement -jective o, my internshi* Methodolo+y >ollo(ed S&A%# 6? $ra(in+ Po(er S&A%# 5? Monitorin+ S&A%# 7? Credit A**raisal A-stract o, cases done durin+ internshi* $ra(in+ Po(er Calculation Credit A**raisal Case 6? ABC A+ency Case 5? @2A Chemicals /esult B $iscussion Summary /e,erences Pa+e No. 8 C 6D 6: 56 57 57 58 7D 9D 96 95 95 95 98 99 9: 9: :C <; <<

<C 7

AB U& 'N% V2S2A
8

'N% Vysya Bank "td.. is an entity ,ormed (ith the comin+ to+ether o, erst(hile. Vysya Bank "td. a *remier -ank in the 'ndian Private Sector and a +lo-al ,inancial *o(erhouse. 'N% o, $utch ori+in. durin+ ct 5DD5. &he ori+in o, the erst(hile Vysya Bank (as *retty hum-le. 't (as in the year 6C7D that a team o, visionaries came to+ether to ,orm a -ank that (ould e)tend a hel*in+ hand to those (ho (erenEt *rivile+ed enou+h to enjoy -ankin+ services. 'tEs -een a lon+ journey since then and the Bank has +ro(n in si0e and stature to encom*ass every area o, *resentFday -ankin+ activity and has carved a distinct identity o, -ein+ 'ndiaEs Premier Private Sector Bank. 'n 6C<D. the Bank com*leted ,i,ty years o, service to the nation and *ost 6C<9G the Bank made ra*id strides to reach the coveted *osition o, -ein+ the num-er one *rivate sector -ank. 'n 6CCD. the -ank com*leted its $iamond 1u-ilee year. At the $iamond 1u-ilee Cele-rations. the then >inance Minister Pro,. Madhu $andavate. had termed the *er,ormance o, the -ank HStu*endous=. &he ;9th anniversary. the Platinum 1u-ilee o, the -ank (as cele-rated durin+ 5DD9. &he lon+ journey o, seventyF,ive years has had several milestonesI 6C7D 6C8< 6C<9 6C<; 6C<< 6CCD 6CC5 6CC7 6CC: 6CC< Set u* in Ban+alore Scheduled Bank "ar+est Private Sector Bank &he Vysya Bank "easin+ "td. Commenced Pioneered the conce*t o, Co -randin+ o, Credit Cards Promoted Vysya Bank Housin+ >inance "td. $e*osits cross /s.6DDD crores Num-er o, Branches crossed 7DD Si+ns Strate+ic Alliance (ith BB".. Bel+ium. &(o National A(ards -y %em B 1e(ellery #)*ort Promotion Council ,or e)cellent *er,ormance in #)*ort Promotion Cash Mana+ement Services. B commissionin+ o, VSA&. %olden Peacock A(ard F ,or the -est H/ Practices -y 'nstitute o, $irectors. /ated as Best $omestic Bank in 'ndia -y %lo-al >inance 3'nternational >inancial 1ournal F 1une 6CC<4 9

5DDD 5DD6 State Fo, F the Fart $ate Centre at '&P". Ban+alore. /B' clears settin+ u* o, 'N% Vysya "i,e 'nsurance Com*any 'N%FVysya commenced li,e insurance -usiness. &he Bank launched a ran+e o, *roducts B services like the Vys Vya*ar Plus. the ran+e o, loan schemes ,or traders. A&M services. Smartserv. 5DD5 *ersonal assistant service. Save B Secure. an account that *rovides accident hos*itali0ation and insurance cover. Sam-andh. the 'nternational $e-it Card and the miF-Jnk net -ankin+ service. 5DD5 5DD5 5DD7 5DD8 5DD9 5DD: 'N% takes over the Mana+ement o, the Bank ,rom cto-er ;th . 5DD5 /B' clears the . name o, the Bank as 'N% Vysya Bank "td. vide their letter o, 6;.65.D5 'ntroduced customer ,riendly *roducts like ran+e Savin+s. ran+e Current and Protected Home "oans 'ntroduced Protected Home "oans F a housin+ loan *roduct 'ntroduced Solo F My (n Account ,or youth and Customer Service "ine K Phone Bankin+ Service Bank has net(orked all the -ranches to ,acilitate HAAA= transactions i.e. Any(here. Anytime B Anyho( Bankin+ 'n terms o, *ure num-ers. the *er,ormance over the decades can -etter -e a**reciated ,rom the ,ollo(in+ ta-le? /s. in millions 2ear Net(orth 6C8D 6C9D 6C:D 6C;D 6C<D 6CCD 5DDD 5DD6 5DD5 5DD7 5DD8 5DD9 5DD: 5DD; 5DD< 5DDC 5D6D D.DD6 6.8D 6.:D 7.DD 66.9D 6:5.6D 9CDD.DD :95;.DD :<:7.58 ;D:;.CD ;8;7.5D ;DC8.DD 6D6C:.;D 666D6.CD 685:D.DD

69C8D.DD 5557.DD $e*osits D.8DD 9.7D 5D.6D C6.9D 6868.7D <9DC.8D ;858D.DD <6866.6D <D:<D.DD C6<;D.DD 6D8;<D.DD 659:C7.6D 677795.9D 6986<9.;D 5D8C<D.DD 58<CDD.DD 59<:9D.DD Advances D.8DD 7.<D 67.9D :5.<D <67.;D 89<8.<D 7C7<D.DD 876:7.6D 886<D.DD 9:65D.DD :C7:;.7D CD<D9.CD 6D5769.5D 66C;:6.;D 68:9DD.DD 6:;96D.DD 6<9D;D.DD Pro,its D.DD6 D.DC D.67 D.;8 6.67 9D.79 887.6D 7;6.CD :<;.9D <:7.9D 9CD.D6 37<6.<D4 CD.: <<C.D 69:C.DD 6<<<.DD 5855.DD utlets 8 6: 6C 7C 55< 76C 8<6 8<8 8<7 89: 957 97: 9:5 :5: :;; <9; <::L

:

L utlets com*rises o, 8:< -ranches. 67 #Cs. 5< Satellite ,,ices and 79; A&Ms as o, March 76st 5D65. Additionally the -ank also has 'nternet Bankin+. Mo-ile Bankin+ and Customer Service "ine ,or Phone Bankin+ Service. &he ori+in o, 'N% %rou* n the other hand. 'N% +rou* ori+inated in 6CCD ,rom the mer+er -et(een Nationale K Nederlanden NV the lar+est $utch 'nsurance Com*any and NMB Post Bank %roe* NV. Com-inin+ roots and am-itions. the .ly ,ormed com*any called M'nternationale Nederlanden %rou*N. Market circles soon a--reviated the name to 'FNF%. &he com*any ,ollo(ed suit -y chan+in+ the statutory name to M'N% %rou* N.V.N Pro,ile 'N% has +ained reco+nition ,or its inte+rated a**roach o, -ankin+. insurance and asset mana+ement. >urthermore. the com*any di,,erentiates itsel, ,rom other ,inancial service *roviders -y success,ully esta-lishin+ li,e insurance com*anies in countries (ith emer+in+ economies. such as Korea. &ai(an. Hun+ary. Poland. Me)ico and Chile. Another s*ecialisation is 'N% $irect. an 'nternet and direct marketin+ conce*t (ith (hich 'N% is ra*idly (innin+ retail market share in mature markets. >inally. 'N% distin+uishes itsel, internationally as a *rovider o, Hem*loyee -ene,its=. i.e. arran+ements o, non(a+e -ene,its. such as *ension *lans ,or com*anies and their em*loyees. Mission 'N%Os mission is to -e a leadin+. +lo-al. clientF,ocused. innovative and lo(Fcost *rovider o, ,inancial services throu+h the distri-ution channels o, the client=s *re,erence in markets (here 'N% can create value . &he . identity &he immediate -ene,it to the -ank. 'N% Vysya Bank. has -een the *ride o, havin+ -ecome a Mem-er o, the +lo-al ,inancial +iant 'N%. As at the end o, the year $ecem-er 5D6D. 'N%Es total assets e)ceeded /s. <;5CD -illion. (ith a underlyin+ net *ro,it o, /s. 5;596D million. em*loyed around 6D9DDD *eo*le. serves over <9 million customers. across 8D countries. &his +lo-al identity cou*led (ith the -acku* o, a ,inancial *o(er house and the status o, -ein+ the ,irst 'ndian 'nternational Bank. (ould also hel* to enhance *roductivity. *ro,ita-ility. to result in im*roved *er,ormance o, the -ank. ,or the -ene,it o, all the stake holders. ;

BACK%/ UN$
<

Micro. Small and Medium #nter*rises

Micro. small and medium enter*rises 3MSM#4 sector has -een reco+nised as an en+ine o, +ro(th all over the (orld. &he sector is characterised -y lo( investment rePuirement. o*erational ,le)i-ility. location (ise mo-ility. and im*ort su-stitution. 'n 'ndia. the Micro. Small and Medium #nter*rises $evelo*ment 3MSM#$4 Act. 5DD: is the ,irst sin+le com*rehensive le+islation coverin+ all the three se+ments. 'n accordance (ith the Act. these enter*rises are classi,ied in t(o?F 3i4 manu,acturin+ enter*rises en+a+ed in the manu,acture or *roduction o, +oods *ertainin+ to any industry s*eci,ied in the ,irst schedule to the 'ndustries 3$evelo*ment and re+ulation4 Act. 6C96. &hese are de,ined in terms o, investment in *lant and machineryG 3ii4 service enter*rises en+a+ed in *rovidin+ or renderin+ o, services and are de,ined in terms o, investment in ePui*ment. Both cate+ories o, enter*rises have -een ,urther classi,ied into micro. small. medium and lar+e enter*rises -ased on their investment in *lant and machinery 3,or manu,acturin+ enter*rises4 or on ePui*ments 3in case o, enter*rises *rovidin+ or renderin+ services4. &he *resent ceilin+ on investment to -e classi,ied as micro. small or medium enter*rises is as under? Manu,acturin+ Sector #nter*rises Micro #nter*rises Small #nter*rises 'nvestment in *lant B machinery $oes not e)ceed t(enty ,ive lakh ru*ees More than t(enty ,ive lakh ru*ees -ut does not e)ceed ,ive crore ru*ees Medium #nter*rises More than ,ive crore ru*ees -ut does not e)ceed ten crore ru*ees Service Sector #nter*rises 'nvestment in ePui*ments C

Micro #nter*rises Small #nter*rises Medium #nter*rises $oes not e)ceed ten lakh ru*ees More than ten lakh ru*ees -ut does not e)ceed t(o crore ru*ees More than t(o crore ru*ees -ut does not e)ceed ,ive core ru*ees Pro,ile o, 'ndian MSM# Sector S.No. 6 5 7 8 9 Particular Num-er o, micro and small enter*rises #m*loyment Share in %$P Share in manu,acturin+ out*ut Share in e)*orts Value 68D "akhs :DD "akhs <FCQ 89Q 8DQ Small and Medium #nter*rises 3SM#s4 sector in 'ndia is de,initely +ro(in+ at an e)ce*tional rate. Still. there are some im*ortant thin+s that need to -e ,ocused u*on so that -est out o, these enter*rises can -e o-tained. Here is a -rie, analysis o, the 'ndian SM# sector.

Some >i+ures o, 'nterest
R R

&he 'ndian SM# market is (orth S9 -illion. &here are around 68 million SM# units in 'ndia that *roduce more than <.DDD *roducts. 6D

R

Nearly CD *ercent o, the 'ndian industrial units -elon+ to the sector o, small and medium enter*rises. &he SM#s contri-ute 8D *ercent to the overall industrial out*ut o, the country. &he sector accounts ,or a-out 7CQ o, the manu,acturin+ out*ut and around 8DQ o, the total e)*ort o, the country. &he major advanta+e o, the sector is its em*loyment *otential at lo( ca*ital cost.
R R R

As *er availa-le statistics. this sector em*loys an estimated :D million *ersons and the la-our intensity in the MS# sector is estimated to -e almost 8 times hi+her than the lar+e enter*rises.
R R R

't is source o, innovative *roducts. &his sector creates 6.7 million jo-s *er annum. >inally. these enter*rises are estimated to +ro( at the rate o, 5D *ercent *er year ,or u*comin+ years. 'n recent years the MS# sector has consistently re+istered hi+her +ro(th rate com*ared to the overall industrial sector. Main /easons ,or SM# %ro(th
R

>orei+n and local ,und *roviders are takin+ hu+e interest in the small and medium enter*rises o, 'ndia. Bankin+ sector has also sho(n a keen interest in lendin+ credit to these enter*rises. Many recent mer+ers have taken *lace in the sector. &he sector has si+ni,icantly contri-uted to(ards the domestic *roduction as (ell as the e)*ort earnin+s. "o( investment is rePuired to start and maintain these enter*rises. &he sector has contri-uted im*ressively to(ards jo- creation and increase in individual incomes.
R R R R R R R

&echnolo+ical +ro(th is also a ,actor ,or +ro(th o, SM#Es in 'ndia as there are several trade *ortals and -usiness directories availa-le online (ith hu+e data-ase o, -uyers. sellers. manu,acturers (ho are -asically -ack -one o, SM#Es.
R

&he SM#=s are dominant *layers in some o, 'ndia=s major e)*ort sectors namely &e)tiles and %arments. "eather *roducts. S*orts +oods. %ems and je(ellery. Handicra,ts amon+ others. &hey also contri-ute su-stantially in industrial +oods se+ments in sectors such as electrical. en+ineerin+. ru--er and *lastics. 66

**ortunities ,or SM#s in 'N$'A !ith their inherent stren+th and resilience SM#s can (eather adverse situations like +lo-al ,inancial crisis and economic slo(do(n. as they are not de*endent on *u-lic money. Many overseas com*anies are a**roachin+ 'ndian SM# to out source their manu,acturin+ activities. 'n service sector too. many are settin+ u* BP and KP in 'ndia. (hich are a real -oon ,or the 'ndian SM# sector. Unless and until the SM#s ePui* themselves (ith the latest technolo+ies. *rocesses and machinery. they (ill not -e in a *osition to meet the strin+ent Puality standards set out -y the -uyers. #ven i, they are e)*lorin+ . markets. the *roducts and services have to -e suita-ly modi,ied to meet the market rePuirements (ith innovative desi+ns and ,eatures. 't is an e)cellent o**ortunity ,or the 'ndian SM#s to convert the *resent +lo-al melt do(n condition to their advanta+e -y caterin+ to the needs o, the markets. (hich are already reelin+ under the recession. Challen+es Ahead #ven a,ter recordin+ an im*ressive +ro(th in the recent years. the small and medium enter*rises o, 'ndia ,ace many challen+es?
R

'n,rastructure needs to -e develo*ed ,or settin+ u* the SM#s in the rural sector o, the country. &rans*ortation. electricity and communication are the main *arts o, the in,rastructure rePuired.
R R

&echnolo+y need to -e evolved so that Puality *roducts are manu,actured -y the sector. "ack o, in,ormation a-out the in*uts. includin+ ra( material. machinery and skills. is one critical challen+e in ,ront o, the o(ners o, these enter*rises. Hi+h level o, research and develo*ment is rePuired.
R

Administrative ,rame(ork ,or MSM#=s &he %overnment has -een encoura+in+ and su**ortin+ the SM# sector throu+h *olicies ,or in,rastructural su**ort. technolo+y u* +radation. *re,erential access to credit. reservation o, *roducts ,or e)clusive manu,acture in the sector. *re,erential *urchase *olicy. etc. 't has -een o,,erin+ *acka+es o, schemes and incentives throu+h its s*eciali0ed institutions in the ,orm o, assistance in o-tainin+ ,inanceG hel* in marketin+G technical +uidanceG trainin+ and technolo+y u* +radation. etc. 65

%overnment o, 'ndia has set u* a . +overnin+ -ody ,or *romotion and develo*ment o, Micro. Medium and Small Scale #nter*rises via MMSM# $evelo*ment ActN. (hich came into ,orce ,rom 5nd cto-er 5DD:. &he President under Noti,ication dated Cth May 5DD; amended the %overnment o, 'ndia 3Allocation o, Business4 /ules. 6C:6 -y (hich. Ministry o, A+ro and /ural 'ndustries 3Krishi #vam %ramin Udyo+ Mantralaya4 and Ministry o, Small Scale 'ndustries 3"a+hu Udyo+ Mantralaya4 have -een mer+ed into a sin+le Ministry. namely. MMinistry o, Micro. Small and Medium #nter*risesN. &he Ministry o, MMicro. Small and Medium #nter*risesN 3MSM#4 is the administrative Ministry in the %overnment o, 'ndia ,or all matters relatin+ to Micro. Small and Medium #nter*rises. 't desi+ns and im*lements *olicies and *ro+rammes throu+h its ,ield or+ani0ations and attached o,,ices ,or *romotion and +ro(th o, MSM# sector. &he ,,ice o, the $evelo*ment Commissioner 3MSM#4 is an attached o,,ice o, the Ministry o, MSM#. and is the a*e) -ody to advise. coordinate and ,ormulate *olicies and *ro+rammes ,or the develo*ment and *romotion o, the MSM# Sector. &he o,,ice also maintains liaison (ith Central Ministries and other CentralTState %overnment a+enciesTor+ani0ations ,inancial institutions. 'n vie( o, the %overnment o, 'ndia=s am-itious tar+et o, avera+e %$P +ro(th rate o, CQ durin+ the 66th >ive 2ear Plan. SM#=s is *layin+ a vital role in achievin+ this tar+et. 't is im*erative ,or the +overnment to address the major issues *la+uin+ the sector and take ,urther inclusive +ro(th oriented *olicy initiatives to -oost the sector. &his includes measures addressin+ concerns o, credit. ,iscal su**ort. clusterF-ased develo*ment. in,rastructure. technolo+y. and marketin+ amon+ others. As mentioned earlier. SM#=s constitute 8DQ o, 'ndia=s merchandise e)*orts and in order to increase 'ndia=s e)*ort share to the +lo-al trade. SM#=s are e)*ected to enlar+e their sco*e mani,old.

Business "oan

Assets o, -anks consist mainly o, loans to -usinesses and consumers and their lia-ilities com*rise o, various ,orms o, de*osits ,rom consumers. &heir main source o, income is ,rom (hat is called as the interest rate s*read. (hich is the di,,erence -et(een the lendin+ rate 3rate at (hich -anks earn4 and the de*osit rate 3rate at (hich -anks *ay4. Banks +enerally do not lend 6DDQ o, their de*osits. &hey are statutorily rePuired to maintain a certain *ortion o, the de*osits 67

as cash and another *ortion in the ,orm o, liPuid and sa,e assets 3+enerally %overnment securities4. (hich yield a lo(er rate o, return. &hese rePuirements. kno(n as the Cash /eserve /atio 3C// ratio4 and Statutory "iPuidity /atio 3S"/ ratio4 in 'ndia. are sti*ulated -y the /eserve Bank o, 'ndia and -anks need to adhere to them. Bank +ives loan to com*anies to meet their (orkin+ ca*ital rePuirement or as +uarantee. !orkin+ Ca*ital re,ers to that *art o, the ,irm=s ca*ital. (hich is rePuired ,or ,inancin+ short term or current assets such as cash marketa-le securities. de-tors and inventories. >unds thus. invested in current assets kee* revolvin+ ,ast and are constantly converted into cash and this cash ,lo( out a+ain in e)chan+e ,or other current assets. !orkin+ Ca*ital is also kno(n as revolvin+ or circulatin+ ca*ital or shortFterm ca*ital. >AC& /S $#&#/M'N'N% ! /K'N% CAP'&A" U Nature o, the 'ndustry U $emand o, 'ndustry U Cash rePuirements U Nature o, the Business U Production Cycle U Credit control U 'n,lation or Price level chan+es Pro,it *lannin+ and control U Manu,acturin+ time U Volume o, Sales U Attitude to(ards /isk U U &erms o, Purchase and Sales U 'nventory &urnover U Business &urnover U Business Cycle U Current Assets rePuirements U /e*ayment a-ility U Cash reserves U *eration e,,iciency U Chan+e in &echnolo+y U>irm=s ,inance and dividend *olicy S U/C#S > ! /K'N% CAP'&A" Sources o, (orkin+ ca*ital are? U (ned ,und 3#Puity. /eserves. etc.4 U Bank -orro(in+s 3Cash Credit. Packin+ Credit. BT$. "TC4 Sources o, additional (orkin+ ca*ital include the ,ollo(in+? U #)istin+ cash reserves U Pro,its 68

U Paya-les 3credit ,rom su**liers4 U . ePuity or loans ,rom shareholders U Bank overdra,ts or lines o, credit "on+Fterm loans &o hel* com*anies in meetin+ their rePuirements. -anks *rovide ,und -ased and non ,und -ased loans to the com*anies de*endin+ u*on the rePuirement. >und Based NonF,und -ased ,acilities are such ,acilities e)tended -y -anks (hich involve out+o o, ,unds ,rom the -ank (hen the customer avails the ,acilities. R Cash creditT verdra,t ,acility Cash creditToverdra,t is a ,orm o, credit ,acility in (hich a -orro(er is sanctioned a *re F arran+ed limit (ith the ,reedom to -orro( as much money as he rePuires. 'n case o, ,lo( o, credit to the account. he can (ithdra( a,resh su-ject to the limit sanctioned. As such. the limit (orks as a revolvin+ line o, credit. Bank char+es interest on the outstandin+ -alances. An overdra,t allo(s the individual to continue (ithdra(in+ money even i, the account has no ,unds in it. Basically the -ank allo(s *eo*le to -orro( a set amount o, money. As security is al(ays taken ,rom the client a+ainst overdra,t limit. it is a secured limit and thus it is also called Secured verdra,t ,acility 3S $4. Cash Credit 3CC4 is same as verdra,t ,acility. nly di,,erence -et(een cash credit and over dra,t is that in cash credit -oth stock and de-t are considered (hile in overdra,t ,acility only de-t is considered. &hus. client has to send monthly stock statements and list o, de-tors to the -ank ,rom (ith monthly dra(in+ *o(er is calculated. R Bill $iscountin+ Bill discountin+ is a major activity (ith some o, the smaller Banks. 'n case o, discountin+ o, a -ill. a -ank -uys the -ill 3i.e. Bill o, #)chan+e or Promissory Note4 -e,ore it is due and credits the value o, the -ill a,ter discount char+es to 69

the customer=s account. &he transaction is *ractically an advance a+ainst the security o, the -ill and the discount re*resents the interest on the advance ,rom the date o, *urchase o, the -ill until it is due ,or *ayment. nly usance -ills are discounted. Under this *articular ty*e o, lendin+. Bank takes the -ill dra(n -y -orro(er on his3-orro(erEs4 customer and *ay him or her immediately deductin+ some amount as discountTcommission. &he Bank then *resents the Bill to the -orro(erEs customer on the due date o, the Bill and collects the total amount. ', the -ill is delayed. the -orro(er or his customer *ays the Bank a *reF determined interest de*endin+ u*on the terms o, transaction. R &erm "oan &erm "oans are the counter *arts o, >i)ed $e*osits in the Bank. Banks lend money in this mode (hen the re*ayment is sou+ht to -e made in ,i)ed. *reF determined installments. &his ty*e o, loan is normally +iven to the -orro(ers ,or acPuirin+ lon+ term assets i.e. assets (hich (ill -ene,it the -orro(er over a lon+ *eriod 3e)ceedin+ at least one year4. Purchases o, *lant and machinery. constructin+ -uildin+ ,or ,actory. settin+ u* . *rojects ,all in this cate+ory. >inancin+ ,or *urchase o, automo-iles. consumer dura-les. real estate and creation o, in,ra structure also ,alls in this cate+ory. R Pre shi*ment Credit PreFshi*ment Credit is o,,ered to an e)*orter -y (ay o, *ackin+ credit to ena-le him to ,inance *urchaseTim*ort o, ra( materials. *rocessin+ and *ackin+ o, the +oods meant ,or e)*orts. 'm*ort can -e on $A 3Payment a+ainst acce*tance4 or $P 3*ayment a+ainst recei*t o, document4 -asis. $P means documents a+ainst *ayment 3a si+ht *ayment4 . 'n this case the documents are sent to the -uyers -ank (ho holds the documents until *ayment is receieved -y that -ank. nce *ayment is received. the -ank releases the documents to the -uyer. 6:

$A means documents a+ainst acce*tance. &his is N & a -ankerEs acce*tance and it is N & a de,erred *ayment undertakin+ -y the -ank. 'n this case. the documents are sent to the -uyers -ank (ho releases only the dra,t to -e acce*ted -y the -uyer. nce the dra,t is acce*ted (ith a stated maturity date and returned to the -uyers -ank. the -ank (ill release the documents to the -uyer. &he -uyer has the o-li+ation to make *ayment at maturity. -ut i, they do not *ay. the -ank (ill N & make *ayment to the seller. R Post shi*ment Credit PostFshi*ment Credit is o,,ered to an e)*orter to ,inance e)*ort sales receiva-les a,ter the date o, shi*ment o, +oods till the date o, realisation o, e)*ort *roceeds. "ike *re shi*ment. *ayment ,or *ost shi*ment can also -e on $A or $P -asis. NonF>und -ased NonF,und -ased ,acilities are such ,acilities e)tended -y -anks (hich do not involve out+o o, ,unds ,rom the -ank (hen the customer avails the ,acilities -ut may at a later date crystallise into ,inancial lia-ility i, the customer ,ails to honour the commitment made -y availin+ these ,acilities. R "etter o, credit A "etter o, Credit 3"C4 is a letter ,rom a -ank +uaranteein+ that a -uyerEs *ayment to a seller (ill -e received on time and ,or the correct amount. 'n the event that the -uyer is una-le to make *ayment on the *urchase. the -ank (ill -e rePuired to cover the ,ull or remainin+ amount o, the *urchase. "C are o, t(o ty*esF usance and si+ht. &he main di,,erence -et(een the t(o is that in Si+ht "C (here the *urchaser is not *rovided any credit *eriod (hile in Usance "C credit *eriod is *rovided -y the seller to make *ayment ,or the +oods. &hus in Si+ht "C the -ank send the "C ,irst and then the +oods arrive (hose *a*ers remain (ith the -ank till the time the -uyer make *ayment to the -ank and si+ns these *a*ers. n the seller=s side. the "C (ill -e *aya-le only once the +oods are under the *ossession o, -ank and on -uyer=s side +oods can -e received only a,ter the *ayment is done to the -ank. 'n case o, Usance "C. +oods are ,irst dis*atched and then the client is +iven a credit 6;

*eriod in (hich he has to make the *ayment to the seller. ', the client does not make *ayment in the +iven credit *eriod. -ank send the "C to the seller. "C can -e used ,or -uyin+ material ,rom its o(n country or ,rom ,orei+n country. ', the +oods are -ou+ht ,rom its o(n country. in our case ,rom 'ndia. it is called 'nland "etter o, Credit 3'"C4. ', the +oods are -ou+ht ,rom a ,orei+n country i.e. im*orted. it is called >orei+n "etter o, Credit 3>"C4. R Bank %uarantee Bank %uarantee 3B%4 is a +uarantee ,rom a lendin+ institution ensurin+ that the lia-ilities o, a de-tor (ill -e met. 'n other (ords. i, the de-tor ,ails to settle a de-t. the -ank (ill cover it. A -ank +uarantee and a letter o, credit are similar in many (ays -ut theyEre t(o di,,erent thin+s. "etters o, credit ensure that a transaction *roceeds as *lanned. (hile -ank +uarantees reduce the loss i, the transaction doesnEt +o as *lanned. A letter o, credit is an o-li+ation taken on -y a -ank to make a *ayment once certain criteria are met. nce these terms are com*leted and con,irmed. the -ank (ill trans,er the ,unds. &his ensures the *ayment (ill -e made as lon+ as the services are *er,ormed. A -ank +uarantee. like a line o, credit. +uarantees a sum o, money to a -ene,iciary. Unlike a line o, credit. the sum is only *aid i, the o**osin+ *arty does not ,ul,il the sti*ulated o-li+ations under the contract. &his can -e used to essentially insure a -uyer or seller ,rom loss or dama+e due to non *er,ormance -y the other *arty in a contract. R "#> 3"oan #Puivalent >actor4 >or commercial loans. (hen +rantin+ a revolvin+ line o, credit. a -ank usually *rovides a credit limit. A -orro(er o-tains an immediate loan amount and the ,uture availa-ility o, the total loan amount. Accordin+ly. the corres*ondin+ e)*osure ,or the -ank has t(o *arts? the outstandin+ -alance 3NB4 and the current commitment 3N#4. &he outstandin+ -alance re,ers to the amount 6<

dra(n -y the o-li+or. (hile the current commitment includes dra(n and undra(n *ortions that the -ank has *romised to lend to the -orro(er at his or her rePuest. &he *ro-a-ility o, dra(in+ the undra(n *ortion in the ne)t 65 months is de,ined as the loan ePuivalency ,actor 3"#>4 o,, -alance sheet. Since a *ro-a-ility al(ays has values ,rom D to 6. "#> is constrained into a ran+e o, D to 6. R A Buyer=s Credit K /a( Material /a( Material %uarantee 3an im*ort credit +uarantee4 may ,orei+n -orro(er in -e issued as security ,or a loan +ranted to a ,o connection (ith a lon+Fterm contract (ith an 'ndian -uyer concernin+ im*ort o, ra( materials 3,or e)am*le. concentrates ,or the -asic metals industry4. !hile +ivin+ loans -ank does the analysis o, various *arameters to check the risk associated (ith the re*ayment o, loan. ne o, the major *arameter is ,inancial analysis (here key ratios are analysed. 'n +eneral the levels and risk associated (ith these key ratios are? Particulars Current /atio >ormula Current Assets Current "ia-ility & "T&N! &otal utstandin+ "ia-ilities 'nterest Covera+e &otal Net !orth #B'&$A 'nterest B other 6C "o( /isk V6.8D Medium /isk 6.5DF6.8D Hi+h /isk W6.5D W5.DD 5.DDF7.9D W7.9D V7.9D 5.DDF7.9D W5.DD

PA&TSales Q 'nventory 3N o. , days4 $e-tors 3No. o, days4 ,inance char+e 3PA&TSales4L6DD #ndin+ 'nventory Cost o, %oods Sold T 7:9 Avera+e %ross /eceiva-les Annual Net Sales T 7:9 V6D.DD W:D 8.DDF6D.DD :DFCD W8.DD VCD W89 89FCD VCD $e-tF#Puity /atio $SC/ 3 >or &"4 &otal $e-t &otal #Puity #B'&$A 'nterestXCurrent maturities in lon+ term de-t W6.59 V5.DD 6.59F6.;9 6.59F5.DD V6.;9 W6.59

Business Bankin+ at 'N%
Business Bankin+ at 'N% Vyasya. Punja-i Ba+h deals (ith SM#s lendin+. &he SM#s lendin+ has ,ollo(in+ ,our su-*arts? R Sales and marketin+ K #very -ank (ant to have clients (ith +ood *ast record and *ro*er -usiness *lannin+. &hus it is very im*ortant to market the ,acilities availa-le at the -ank and convince +ood clients to take them. %ivin+ ri+ht ,acility to the clients de*endin+ on their rePuirement comes under sales. Pro*er e)ecution o, these t(o ste*s insures lon+ term relationshi* (ith the clients and hel*s to develo* relationshi* (ith . and -etter clients. R Credit A**raisal K nce the overall in,ormation a-out the client is +ot. (e make a *ro*osal -ased on the rePuirement o, the client and *ur*ose ,or (hich he needs de-t. &here are various ty*es o, ,und -ased and non ,und -ased ,acilities availa-le de*endin+ on the rePuirement o, the clients. $e*endin+ on the rePuirement o, the client various *arameters are analysed to kno( the credit (orthiness o, the client. $eviation in the +uidelines setu* -y the 'VB". /B' and other +overnment institution is checked ,or the ,irm and *romoters. >inancial data ,or *ast years and 5D

*rojections ,or ne)t years. -alance sheet and income statement. are analysed to kno( the ,inancial stren+th o, the ,irm. &his is im*ortant as it insures that all the ,acilities (ill -e re*aid on time. A*art ,rom this credit ratin+ is also done -y the -ank to kno( the risk associated (ith the client. R Monitorin+ K A,ter the account has -een created (ith 'VB" and dis-ursement o, loan has -een done. monthly monitorin+ is o, the account is im*ortant to kno( that ,acility diven to the client is *ro*erly utilised. Under monitorin+ (e monthly check the churnin+ in the account. in(ard check returns. out(ard check return. stocks. de-tors. creditors and avera+e utili0ation o, the ,acility +iven. &his hel*s to see (hether the account -earer is doin+ -usiness in accordance (ith the re*orts +iven -y it. A*art ,rom this Puarterly visits are also made to the +odo(ns and ,actories to make sure everythin+ is same as rePuired and re*orted. Bank remains in contact (ith the client=s *romoters to see i, there is any major chan+e in the -usiness structure takin+ *lace (hich could +o a+ainst the *ost dis-ursement conditions and other -ank=s norms. &his *art hel*s to *revent any ,raud or loss to the -ank -ecause o, de,ault. R Collection K Sometimes the clients is una-le to re*ay the loan amount to the -ank due to various reasons. 'n this case. reason ,or de,ault has to -e checked and then le+al *roceedin+s are made accordin+ly to +et the loan amount ,rom the client. &o avoid any major loss in such cases -ank al(ays take *a*ers o, *rimary cover and collaterals -e,ore dis-ursement o, the ,acility is done. ', such situation arises. le+al hel* is rePuired to collect the money ,rom the client. 56

SM# lendin+ at 'N% Vyasya
Code o, BankEs Commitment to Micro and Small #nter*rises
&his is a voluntary Code. (hich sets minimum standards o, -ankin+ *ractices ,or -anks to ,ollo( (hen they are dealin+ (ith Micro and Small #nter*rises 3MS#s 4 as de,ined in the Micro Small and Medium #nter*rises $evelo*ment 3MSM#$4 Act. 5DD:. 't *rovides *rotection to MS#s and e)*lains ho( -anks are e)*ected to deal (ith them ,or their day to Fday o*erations and in times o, ,inancial di,,iculty. &he Code does not re*lace or su*ersede re+ulatory or su*ervisory instructions issued -y the /eserve Bank o, 'ndia 3/B'4 and (e (ill com*ly (ith such instructions Tdirections issued -y the /B' ,rom time to time. &he *rovisions o, the Code may set hi+her standards than (hat is indicated in the re+ulatory or su*ervisory instructions and such hi+her standards (ill *revail. as the Code re*resents -est *ractices a+reed -y 'VB" as their commitment to MSM#s. -jectives o, the Code &he Code has -een develo*ed to a. %ive a *ositive thrust to the MS# sector -y *rovidin+ easy access to e,,icient -ankin+ services. -. Promote +ood and ,air -ankin+ *ractices -y settin+ minimum standards in dealin+ (ith MS#s. 'ncrease trans*arency so that they can have a -etter understandin+ o, (hat they can reasona-ly e)*ect o, the services. d. 'm*rove 'VB" understandin+ o, MS#s -usiness throu+h e,,ective communication. e. #ncoura+e market ,orces. throu+h com*etition. to achieve hi+her o*eratin+ standards. ,. Promote a ,air and cordial relationshi* -et(een MS#s and 'VB" and also ensure timely and Puick res*onse to MS#s= -ankin+ needs. +. >oster con,idence in the -ankin+ system. 55

Products ,or SM#s at 'N% Vyasya
At 'N% Vysya. ,ollo(in+ ty*es o, *roducts are o,,ered under Business Bankin+?

MPo(er /ent

Product $e,inition R R A *roduct that o,,ers immediate liPuidity a+ainst commercial *ro*erty o(ned. Avail o, a loan at com*etitive rates. a+ainst rent receiva-les. Key >eatures RY&he loan is sel, F liPuidatin+ in nature and o,,ers immediate liPuidity to the *ro*erty o(ners. R &he Product envisa+es +rant o, &erm "oans to the "essors o, the *ro*erty -y discountin+Tscrutini0in+ the lease rentals receiva-le ,rom the lessees o, the *ro*erty. &ar+et Customers 'ndividuals Pro*rietary Concerns Partnershi* >irms Pu-lic B Private "imited Com*anies &rusts B /e+istered Bodies like #ducational 'nstitutions. Association o, *ersons etc.. o(nin+ Commercial Pro*erties #li+i-ility Criteria 57

Borro(er Credit 'nvesti+ation /e*ort. $etails like -ack+round o, *romoters. activities o, +rou* com*anies. their ,inancial status. '&T !ealth &a) /eturns. Assets B "ia-ility statements o, individuals B *romoters. >inancial statements o, the "essor ,irmT Com*anyT 'nstitutionT Association o, Persons. B. &enant 3"essee4 !ell kno(n Multinational Com*anies 3MNC4. Pu-lic Sector Undertakin+s 3PSU4. Private Sector Com*anies includin+ their su-sidiaries. Banks. All 'ndia >inancial 'nstitutions. National B 'nternational Airlines. 'nsurance Com*anies. Central %overnment ,,ices. 'n such cases. the ,inancial statements need not -e insisted u*on. ther Com*anies T 'nstitutions T >irms (hich are in e)istence ,or a *eriod o, at least 7 years and are earnin+ Cash Pro,its ,or a minimum *eriod o, 5 years. . com*anies *romoted -y Hi+h Net !orth 'ndividuals. C. Pro*erty Commercial *ro*erties located in Metros and Ur-an areas (ith an unencum-ered. clear and marketa-le title. Pro*erty should -e suita-ly located ,or easy marketa-ility. Value o, the commercial *ro*erty should -e at least 659 to 69D Q o, the "oan Amount. $. "ease A+reement Normally the une)*ired lease *eriod should not -e less than the *eriod o, loan. and terms o, lease a+reement should *rohi-it the "essee ,rom vacatin+ the *remises -e,ore e)*iry o, lease a+reement (ithout *ayin+ rent ,or the ,ull *eriod. discounted at the rate not hi+her than the rate a**lied -y the Bank on the loan. 58

'n case the lease a+reement is ,or a *eriod less than the loan *eriod. and the lessee is not -ound to re. the lease. or he has o*tion to vacate the *remises a,ter +ivin+ notice. it must -e ensured that? F&he lessee has a +reater ,inancial disincentive not to re. the "ease at least ,or the remainin+ *eriod o, the loan. or F&he lessor si+ns an a+reement (ith the Bank. that. in the event the *resent "essee vacates the *ro*erty and the lessor is una-le to ,ind . tenant (ithin a *eriod o, 6 month. the Bank (ill have the ri+ht. -ut (ill -e under no o-li+ation to select a . lessee. &he lessor (ill -e -ound to si+n the a+reement (ith the . lessee.

MPo(er Business "oans &rade

Product $e,inition A scheme ,ormulated s*eci,ically to *rovide credit ,acilities to Small and Medium #nter*rise en+a+ed in &radin+. Small Businesses and Service activities. &he scheme o,,ers Secured verdra,t "imits 3S $4 3>und and NonF,und4 &erm "oans and Com*osite "oans coverin+ -oth !orkin+ Ca*ital as (ell as &erm loan (ith a ma)imum e)*osure o, /s.5DD lakhs *er customer. Key >eatures R %rantin+ o, Secured verdra,t "imits 3S $4 3>und and NonF,und4 &erm "oans and Com*osite "oans coverin+ -oth !orkin+ Ca*ital as (ell as &erm loan (ith a ma)imum e)*osure o, /s.5DD.DD D lakhs *er customer. R Bank %uarantees. "Cs and Solvency Certi,icates can -e issued. &ar+et Customers RY/etail &raders and Small Business. 59

RYPro,essionals includin+ Practicin+ $octors T Advocates T Consultancy Units T &ravel A+enciesTAdvertisin+ and Pu-licity a+encies etc. RY!holesale $istri-utors B $ealers T Stockists. Commission A+ents. RY1e(eler Sho*s. Nursin+ Homes. RYContractors. RY&rans*ort *erators 3only ,or (orkin+ ca*ital4 R ther thrivin+ commercial activities characteri0ed -y major share o, cash transactions. #li+i-le -orro(ers are? R 'ndividuals K Sel, #m*loyed Persons. !omen #ntre*reneurs. A+riF -usinessmen. etc. RYPro*rietorshi* concerns T Partnershi* concerns. RYHU>. "imited Com*anies. RYBorro(ers should necessarily consider 'N% Vysya Bank as their Sole Bankers. #li+i-ility Criteria RYPast track record o, the entre*reneur in the -usiness. RY verall ,inancial standin+ o, the -usiness enter*rise. RYMarket re*utation and inte+rity o, the -orro(er. RYAcce*ta-le level o, trade activity. R R Credit needs ,or stockFinFtrade and credit sales. /isk covera+e -y (ay o, the adePuate securities o,,ered ,or the *ro*osed credit e)*osure.

MPo(er V'$2A"A2A
Product $e,inition 5:

A customi0ed *acka+e ,or ,inancin+ to #ducational 'nstitutions -y ca*itali0in+ on the lendin+ o**ortunities arisin+ out o, the *rivati0ation o, the #ducational Sector. Key >eatures &erm loan ,or construction o, Buildin+s to accommodate classrooms. "a-oratories. Hos*itals 3in case o, Medical Colle+es4. Sta,, rooms. Hostel Accommodation etc. and ,or acPuirin+ the rePuired ePui*ments such as Com*uters. "i-rary -ooks. >urniture. S*orts ePui*mentsT ,acilities etc. &ar+et Customers RY'nstitutions im*artin+ Primary T Secondary #ducation at School level. RYPreFUniversity Colle+es. RYMedical Colle+es 3on selective -asis4 RY#n+ineerin+ Colle+es F as ,ar as *ossi-le are to -e avoided and not to -e encoura+ed e)ce*t in case o, e)istin+ relationshi*s (hich are healthy and (orth *ursuin+. RY'nstitutions o,,erin+ other Pro,essional Courses such as Business Mana+ement. Com*uter Science. RY. institutions F on a very selective -asis (here the *romoters command hi+h inte+rity. res*ect and success,ul track record o, -ein+ associated (ith such ventures earlier. #li+i-ility Criteria RY'nstitution must -e in e)istence ,or at least 9 years and must -e +eneratin+ sur*luses ,or the *ast 7 years. RY&he 'nstitution should have a minimum Student stren+th o, 9DD and minimum &eachin+ Sta,, stren+th o, 59. RYAudited ,inancial statements to -e ,urnished (ithin 7 months ,rom the close o, each accountin+ *eriod. 5;

M Po(er SS'
Product $e,inition A scheme ,ormulated s*eci,ically to *rovide credit ,acilities to Small Scale 'ndustry units en+a+ed in activities like manu,acturin+. *rocessin+ or SSSB#s. includin+ 'n,ormation &echnolo+y and T or So,t(are industry. Key >eatures %rantin+ o, &erm "oan T !orkin+ Ca*italT Non ,unded limits such as Si+ht and Usance "C=s. Bank %uarantees. "#> limits ,or ,or(ard contracts. &ar+et Customers Small Scale 'ndustries. Small Scale Processin+ 'ndustry. SSB# en+a+ed in 'n,ormation &echnolo+y and Tor so,t(are industry. #li+i-ility Criteria RYUnit should have -een in e)istence ,or a minimum *eriod o, t(o years or the *romoter should have -een in the line o, -usiness ,or a minimum *eriod o, 7 years. StartFu* units (ould not -e covered under this scheme. RYBorro(er should have sho(n cash *ro,it at least in the *recedin+ year. RYMinimum $e-t Service Covera+e /atio 3$SC/4 shall -e 6.59 ,or &erm loans durin+ the tenor o, the loan.

MPo(er /'C# M'""S

Product $e,inition R R A scheme ,ormulated s*eci,ically to *rovide credit ,acilities to /ice Millers en+a+ed in *rocessin+ and T or tradin+ o, rice. &he scheme o,,ers &erm "oans. !orkin+ Ca*ital and Non >und -ased "imit 3"Cs B B%s4 5<

Key >eatures %rantin+ o, &erm loan ,or esta-lishment o, /ice Mills and (orkin+ Ca*ital limits vi0. $S'& B Book $e-ts. Bill Purchase T $iscountin+. Produce T Key "oan. "oan a+ainst !H/s and Non >und -ased "imits 3 "Cs B B%s4 (ithout ceilin+ on the e)*osure. &ar+et Customers R R R #)istin+ as (ell as . customers en+a+ed in this line o, activity. #li+i-le -orro(ers are? 'ndividuals. HU>. Sole Pro*rietorshi*. Partnershi*. Associations 'ndividuals. HU>. Sole Pro*rietorshi*. Partnershi*. Associations. #li+i-ility Criteria %ood *ast track record o, the entre*reneur in the -usiness. verall ,inancial standin+ o, the -usiness enter*rise. Market re*utation and inte+rity o, the -orro(er. Acce*ta-le level o, trade activity. Credit needs ,or stockFinFtrade and credit sales. /isk covera+e -y (ay o, the adePuate securities o,,ered ,or the *ro*osed credit e)*osure. 5C

Credit Mana+ement

Credit mana+ement is a *rocess o, mana+in+ credit related activities in -ank. Credit mana+ement involve? R R "oan scrutiny and credit a**raisal $ocumentation and sanction RY$is-ursement RYMonitorin+ the account RY/evie( RY/ecovery

"oan Scrunity and credit a**raisal

&his is the ,irst ste* to -e ,ollo(ed a,ter a client +ives a**lication ,or the a**roval o, oneTmore ,acility ,rom the -ank. >or sanctionin+ *rocess to start. ,irst the credit a**raisal is done ,or (hich the rePuired in,ormation is taken ,rom the client and veri,ied -y -ank. &he *ur*ose o, credit a**raisal can -e? 6. >resh Pro*osal K &he *ro*osal o, the com*any (hich has a**roached the -ank ,or the ,irst time. i.e. (hich does not have any *revious relationshi* (ith the -ank. 5. #nhancement K !hen a com*any is already enjoyin+ one or more o, the >B or N>B ,acilities ,rom the -ank and (ant to increase the limit ,or the same then enhancement *ro*osal is made. 7. Adhov K Sometimes ,or a certain *eriod the +iven limit is not su,,icient ,or the com*any to meet its rePuirements. 'n such case Adhov limit. over and a-ove the avera+e sanction limit. is *rovided to the client. Adhov is *rovided ,or ma)imum CD days. 8. /evie( K ', the client is . or the *er,ormance o, the com*any as *er *rojected is dou-t,ul then a mid revie( date is decided (hile a**rovin+ ,reshTenhancement *ro*osal. 's such cases mostly the client asks ,or more limit as *redicted -y -ank to ,ull,ill its rePuirement. So *ost sanction conditions are *ut to the 7D

*ro*osal. ,or e)am*le com*any has to maintain a turnover o, 65 million and its & "T&N! should not -e more than :. &o monitor (hether these conditions are meet revie( *ro*osals are made -e,ore the end mid revie( month. &he ,acility limit (ill remain same a,ter sanction o, revie( *ro*osal only i, all the conditions are ,ul,illed. 9. /e.al K ', the clients (ant to kee* the ,acility limit same as e)istin+ limit. re.al *ro*osal is made -e,ore the end o, e)istin+ ,acility. Credit A**raisal Memo 3CAM4 is *re*ared ,or the *ur*ose o, credit a**raisal. 'n the CAM -ank com*ile and veri,y the in,ormation a-out the client. &his in,ormation is then analysed to ,ind the risk associated (ith the client and *redict the *ro,ita-ility that -ank can e)*ect a,ter the sanctionin+ o, the concerned *ro*osal. >or makin+ CAM various documents are rePuired to veri,y the in,ormation o, the client. &hese documents are? 6. $uly ,illed *rescri-ed a**lication ,orm. 5. Memorandum B Articles o, AssociationTPartnershi* $eed. 7. Audited Balance Sheets and Pro,it B "oss Accounts alon+ (ith schedules. Auditor=s /e*ortT&a) Audit re*ort ,or last 7 years. 8. $uly si+ned *rovisional ,inancial statements ,or immediate *revious year alon+ (ith schedules etc. ', audited is not availa-le. 9. U*FtoFdate >i+ures o, salesT*urchase. :. $uly si+ned *rojected Balance Sheets and Pro,it B "oss Accounts ,or ne)t yearT,ull tenor in case o, loan. ;. "atest '& returns o, the -orro(erT*artnersTdirectors etc. <. Co*y o, latest sanction letter 3,or the credit ,acilities4 ,rom the e)istin+ -ankerT,inancial institute. C. >orm 766 duly si+ned -y /MTCo*y o, valuation re*ort ,or the *ro*erties o,,ered as collateral security. 6D. $uly ,illed B si+ned latest Net !orth statements o, directorsT*artnersT+uarantors in the -ank=s *rescri-ed ,ormat 3 >orm No 8;CT8<D 4. 66. Call Memo si+ned -y /M. 65. C'B'" re*orts o, *ro*rietorT*artnerTdirectors. 76

67. Statement o, account latest ,or last : months alon+ (ith reasons ,or

lo(erTe)cess credit turnoverTchePue returnin+ etc. TBankin+ SummaryT/e*ayment &rack o, loans. 68. Co*ies o, various re+istration certi,icates i.e. VA&T$'C etc. 69. %/'$ '$ creation *roo, (henever a**lica-le. A,ter a-ove documents are received and veri,ied CAM is made. CAM includes ,ollo(in+ details? '. Borro(er=s Back+round K &his include details a-out line o, activity and end *roduct o, client. -usiness *rocess o, the ,actory. *romoter=s -ack+round. in,ormation a-out *romoter=s share in the com*any and their e)*erience. in,rastructure details o, the com*any i.e. name and address o, ,actoriesTo,,icesT+odo(ns o, the clients and in,ormation a-out the >B and N>B loan ,acilities enjoyed -y the client ,rom di,,erent -anks. ''. Credit Base F 't includes ,uture e)*ansion *lans o, the ,irm. in case there is any major chan+e in -usiness *rocess. $etails re+ardin+ major customers and su**liers o, the com*any. their contri-ution *ercenta+e. their contact *erson (ith contact num-er. $etails a-out contact *erson o, su**liers and customers are rePuired to cross check the details a-out the com*any and their -usiness. '''. /elationshi*TBusiness /ationale K &his includes details a-out relationshi* e)*erience i, the client is already havin+ relationshi* (ith the -ank. Business rationale include the estimates o, the earnin+ that the -ank (ill +et a,ter the *ro*osal is *assed in the ,orm o, *rocessin+ ,ee and +ross interest. 'V. >inancial Analysis o, Client K &his includes the ,inancial summary o, the client ,or current year. audited details o, *revious year and *rojections ,or ne)t year. 'n this ,inancial summary some ratios are also included. they are & "T&N!. inventory turnover. de-tors turnover. creditors turnover and NP mar+in. &his ,inancial summary is used to analyse various *arameters a-out the com*any and reason -ehind any major chan+e in the com*any. &he *arameters that are analysed are turnover. *ro,ita-ility. levera+e and liPuidity o, the com*any. 75

V.

/isk A**raisal F nce the *ro*osal comes (e analyse the *ro,ile o, the com*any to calculate the risk involved in +ivin+ the asked ,acility to it. &he risk a**raisal is done -ased on ,ollo(in+ risks? 6. Business /isk and outlook F 't covers Market $ynamics. Com*etitive Positionin+. Su**ly Chain Mana+ement. &echnolo+ical $evelo*mentT -solescence /isks. $e*endence on Sin+le Su**lier. $e*endence on sin+le Buyer and Products are de*endent on a Sin+le industry. 5. Mana+ement /isk F 't covers Mana+ement ca*a-ilities. $e*endence on ,e( individuals. Presence o, *ro,essionals and succession *lan. 7. Per,ormance /isk F 't covers &echnical kno(Fho(. /a( material sourin+Tavaila-ility. Product delivery ca*a-ilities and Com*etition com*aratives F cost. *roduct ,eatures. 8. Structure /isk F 't covers Product Structure. $ocument structure and Process Structure. 9. 'ndustry Sector Concentration F 't concentrates over e)*osure to a Particular industry -y the Bank. :. Country /isk F 't covers converti-ility. -ansTsanctions on the country. Currency /isk. ;. #nvironment /isk F 't covers the risks arisin+ out o, dealin+ (ith ha0ardous dis*osal o, (asteTe,,luent. ActivitiesT"ocation dealin+ (ith materials. socialTenvironment issues. <. /e+ulatory /isk F 't covers com*liance (ith statutoryT/e+ulatory rePuirements. le+al rePuirement and lendin+ re+ulations. C. 'N% Vysya Bank=s /e*utation /isk F 't covers Moral and #thical issues and SocialT%overnance 'ssues. 6D. S*eci,ic Pur*ose o, Asset Collateral F 't cover the risks arisin+ out o, assets *ut to s*eci,ic usa+e and tailor made assets and the *ro-lems in dis*osal in case o, need. 77

66.

>inancial /isks F 't covers *eratin+ #,,iciency. >inancial Sta-ility and Cash >lo(s. 65. &ransaction /isk F 't covers $ocumentation /isk. CoversTCollateral Valuation /isk and 'nterest /ate /isk. 67. Any other /isk V'. &ake ut K 't covers -oth *rimary and secondary takeouts. 't is the hy*othecation and collateral securities ke*t -y the com*any (ith the -ank (hich can -e taken -y the -ank in case o, de,ault. V''. S! & K 't includes the stren+th. (eakness. o**ortunities and threat o, the com*any. &his is ,ound -y the analysis o, the sector (ith (hich the client is associated. &his hel*s to understand the market *osition o, the client. V'''. Policy $eviation K $eviation ,rom credit *olicy is also checked ,or the clients. &here are three *arameters across (hich deviation is analysed and o-served. &hey are deviation in credit *olicy ,inancial *arameters. deviation in *olicy other *arameters and veri,ication o, de,aulter list. 3a4 $eviation in Credit Policy >inancial Parameters? &he limits ,or the ,inancial *arameters is decided -y 'VB". across (hich deviation is to -e calculated. Under this e)*lanation T justi,ication ,or considerin+ the rePuest des*ite deviation has to -e mentioned alon+ (ith the time ,rame (ithin (hich the deviation has to -e corrected and -rou+ht (ithin the threshold level has to -e mentioned. &he *arameters and its limits are?F Parameter Median &hreshold Actual as o, last D7F@@ Minimum #B'&$ATNet D.D7 6.;9 D.D5 6.9D Sales Minimum 'nterest Covera+e /atio 3#B'&$AT'nterest B 78 /emarks L audited BTs dated 76F

other ,inance char+es4 Minimum Current /atio 3Current "ia-ilities4 Ma)imum 3&otal AssetsTCurrent $e-t #Puity -earin+ 6.69 6.DD 5.DD 7.DD interest $e-tT&N!4 Ma)imum & "T&N! Minimum$SC/ 3#B'&$ATinterest *lus current maturities in lon+ 7.9D 6.8D 8.9D 6.59 term $e-t4 LHere justi,ication ,or considerin+ (ith deviation is +iven. ', the minimum value is a-ove median then it is acce*ted. i, its -et(een median and threshold then also the deviation is considered -ut i, the minimum value is less than threshold then the *arameter ,ails. 3-4 $eviation in ther Credit Policy Parameters? 't includes e)*osure norms in unit and industryTsector. tenor norms ,or e)*osure B ratin+. re+ulatory restrictions. takeover norms. >#MAT>#/A rePuirements and Sec 6C354 o, >irm act. All these are su**osed to -e com*iled (ith the *ro*osal and i, not com*iled then time lines has to mentioned (ithin (hich com*liance (ill -e done. &his is im*ortant as it states various norms to -e ,ollo(ed -y the ,irm across (hich deviations are checked to insure that in ,uture com*any (ould not -e ,acin+ any le+al issues related to these norms. &his in,ormation also hel*s to understand the ,irm -etter and thus i, any chan+e occurs in ,uture the -ank (ould -e in a -etter *osition to e)amine the risk associated (ith it and *ro-lems that -ank could ,ace in ,uture. 3c4 Veri,ication o, $e,aulters "ist? !e also check ,or the *romoters in the de,ault lists and take out their C'B'" to check the credi-ility o, the *romoters. &hese de,aulter lists are /B' $e,aulters list. (il,ul de,aulters list. /B' Caution list. and #C%C and S*ecial A**roval list. '@. Hi+hli+hts o, credit investi+ation done K 't contains the summary o, credit investi+ation re*ort. C'/ includes? F -servations made in the statement o, account o, the client F Personal enPuiries made (ith -anksT,inancial institutions 79

F Market o*inion (ith customer o, the client. creditors o, the clients and inde*endent sources. F $etails a-out visit to ,actoryTo,,ice F 'n,ormation throu+h any other source F Conclusion to credit investi+ation. @. Com*liance (ith statutory rePuirements K 't includes con,irmation that all '&TS&T P>T#S' *ayments have -een made and there are no over dues and that all statutory a**rovals have -een taken ,or conductin+ the -usinessT manu,acturin+ activity. @'. Summary o, conduct o, the account K 't is done in case enhancementTrevie(Tre.al. 't includes very short summary o, Account *er,ormance and covered in detail in Account relationshi* and monitorin+ sheet. Summary o, account *er,ormance include earnin+ o, -ank ,rom this relationshi* and detail a-out utilisation o, (orkin+ ca*ital limit. Utilisation o, (orkin+ ca*ital is ,ound ,rom M'S system o, 'VB". @''. CoverTCollaterals and covenants K 't includes details a-out *rimary cover. collaterals and net (orth o, the +uarantees. &his is done to insure that in case o, de,ault in re*ayment o, ,acility. cover and collaterals *rovided -y the ,irm to the -ank are su,,icient to overcome losses. @'''. /isk ratin+T/iskFre(ardTPro,ita-ility K Bank earns *ro,it ,rom the ,acilities +iven in the ,orm o, the +ross interest and income throu+h commission. 'nterest rate is decided at the time o, a**roval o, ,acilities. &his interest rate varies ,rom client to client de*endin+ on their credit ratin+ and *revious 7:

relationshi* (ith -ank. Base /ate o, the -ank. 'VB/ 3'N% Vysya Base /ate4. is the minimum interest rate that can -e enjoyed -y the customer. &he Commission earned -y the -ank de*end on the ty*e o, *ro*osalT,acility. 'VB" char+es D.9Q on the re.al o, the e)istin+ limit. !hile i, it is a case o, enhancement o, limit or ,resh *ro*osal. 6Q is char+ed on the limit *rovided. Credit /isk /atin+ is an im*ortant *art o, Credit A**raisal as it determines the risk associated (ith the -ank and thus *ro,ita-ility o, the -ank. &o do credit risk ratin+ (e ,irst calculate the credit risk (hich is ,urther divided into three heads K Business /isk. >inancial /isk and Mana+ement /isk. !hile calculatin+ cumulative risk o, the ,irm. (e +ive marks to the ,irm on the -asis o, various *arameters under each head and ,ind risk in res*ective head. nce individual risks are ,ound. (e do (ei+hted summation to ,ind the overall score o, the ,irm -ased on (hich Credit /isk /atin+ is +iven to the ,irm. Credit /isk ratin+ varies ,rom C//6 to C//;. &he *arameters are rated -ased on ,ollo(in+ condition? %ood Satis,actory Parameter Vulnera-le 3;4 UBS 7; #)cellent AdePuate Mar+inal 3:4 Stron+ 354 364 374 384 394

Business /isk Status %ro(th Client=s Position Business 'ndustryT Su**liers Mono*oly in "ocal Market Success,ul track record ,or morethan 59 years Client has si+ni,icant market share %ood track record ,or more than 3V5DQ market share4 6D years 'nsi+ni,icant *layer com*ared tocom*etition Borro(er is a start u* venture Com*etitive "on+ term relationshi* (ith (ellesta-lished su**liers. 'ndustry (ell esta-lished and +ro(in+ very ,ast. i.e. V5DQ annually 'ndustry (ell esta-lished and +ro(in+,ast. i.e. V6DQ annually 'ndustry (ell esta-lished and +ro(in+modest. i.e. V9Q annually "on+ term contract (ith su**liers is in "ocal market leader. !eak com*etition %ood track record ,or more than *lace. 69 years Borro(er is very im*ortant to thesu**liers. $e*endant on oneT t(o lar+e su**liers. Client is one o, the several lar+e *layer %ood track record or more than 9 Mature industry -ut (ith modest +ro(th (ith V6DQ market share years "ess than 9Q market share Acce*ta-le track record ,or more /e+ulatory chan+eT *rice ,luctuations are than 7 years ,rePuent #sta-lished ,or more than 7 'ndustry su-ject to (ide cyclical s(in+sT years. via-ility not yet *rovenT Ha0ardous esta-lished 'ndustry in lon+ term declineTUn,avoura-le Commodity -usiness. Su**lierFBuyerrelationshi* is unim*ortant. Borro(er is unim*ortant to the su**liers. "osin+ market share or ,acin+ cut throatcom*etition UBS 7< Su**lier relationshi* is unsta-le.

>inancial /isk $SC/ PB$'& V59Q PB$'& V 5DQ PB$'& V 69Q PB$'& V No +ro(th -ut very & "T&N! W Current /atio V 6DQ sta-le sales 5.D 6.5D PB$'& V 9Q PB$'& W 9Q Sales (idely & "T&N! W Current /atio V ,luctuatin+ 5.9 6.D Sales sho( & "T&N! V declinin+ trend 5.9 Current /atioW6.D $SC/ V 6.59 PB$'& Ne+ative No sales history & "T&N! V 8.D Current /atioWD.;9 "evera+e "iPuidity Customers PB$'&TSales Sales %ro(th $SC/ V 7.D Annual avera+e & "T&N! W Current /atio V "on+ term relationshi* (ith (ell esta-lished +ro(th V 5DQ D.9 5.D Customers. Annual avera+e & "T&N! W Current /atio V "on+ term contract (ith customers is in *lace. +ro(th V 6DQ 6.D 6.9 Annual avera+e & "T&N! W Current /atio V Borro(er is very im*ortant to the customers. +ro(th V 9Q 6.9 6.77 $e*endant on oneT t(o lar+e customers. $SC/ V 5.9 $SC/ V 5.D $SC/ V 6.9 Commodity -usiness. SellerFCustomerrelationshi* is unim*ortant. Borro(er is unim*ortant to the customers. $SC/ V 6.D 7C $SC/ W 6.D Customer relationshi* is unsta-le.

Mana+ement /isk >amily History Most *rominent and res*ected ,amily (ith lon+ history. 'nte+rity Standin+T UnPuestiona-le inte+rity. Hi+hly res*ecta-le. UnPuestiona-le inte+rant. Hi+hly res*ecta-le. %enerally res*ected ,or inte+rity -ut. not yet tested inters. Hi+hly res*ected closely knit ,amily (ith varied -usiness and cultural !ell re+arded ,amily (ith a lon+ history. Mem-ers o*erate inde*endentaly. !ell esta-lished ,amily. %enerally ,avoura-le re*orts. Prominent mem-er o, community. No adverse re*ort. !ell esta-lished ,amily. No adverse re*orts. No adverse re*orts. >amily history is short. >irst +eneration. No adverse re*orts. Not (ell kno(n in market. No re*orts availa-le. 8D Kno(n ,amily ,euds. . rich (ith *otential connections. 'nte+rity sus*ect -ut no *roo, or evidence availa-le

Standin+ >inancial Com*etence Mana+ement enli+htened. Hi+hly com*etent. enter*risin+ and kno(led+ea-le. A-ove Avera+e com*etence. %ood -usiness sense. -ut *erha*s (eak in ,inanceTadministration. Avera+e com*etence. "acks strate+ic thinkin+. Most com*etent in -usiness community. Hi+hly #normous (ealth. 'nsi+ni,icant de-t. Stron+ liPuidity. >ree assets V 5DDQ +ross lia-ilities. %ood liPuidity. >ree assets V 6DDQ lia-ilities. Satis,actory liPuidity. >ree assets V 9DQ +ross "ia-ilities. >air liPuidity. >ree assets availa-le -ut liPuidity are susce*ti-le. Avera+e com*etence level. >ree assets ne+li+i-le. Still has some ca*acity to -orro(clean. 86 Un*roven com*etence. Poor ,und raisin+ ca*acity in case o, need.

Pro,essional mana+ement. Succession no issue. Successor is already identi,ied and ready to ste*Fin. Stron+ commitment. &his -usiness is the main contri-utor. %ood commitment. &his is one o, the ,e( main &his is one o, the several activities. Commitment isadePuate. "evel o, commitment chan+in+ ,rom year to year. (nerTs have (ell de,ined and *ractical succession *lan. -usinesses. No di,,iculty antici*ant in succession. ne man sho(. His le+al heir may -e a-le to takeover. ne man sho(. But *ro,essional mana+ers (ill ensurecontinuity. 85 Succession may *ose a *ro-lem i, o(ner dies. Succession Mana+ement &his is the only -usiness. Un(averin+ commitment. &his is a minority activity. Commitment is unclear. Mana+ement lacks commitment to this -usiness. Commitment

Zuality 'nternal #)cellent internal control system (ith ,rePuent testin+. All key *osition held -y (ell Puali,ied mem-er o, ,amily. %ood internal controls. Have stood the test o, time. %ood internal control systems. No major la*ses so ,ar. 'nternal controls e)ist -ut lar+ely untested. Hi+hly Puali,ied and motivated em*loyees at all levels. Motivated and loyal em*loyees (ith sound kno(led+e. "oyal and honest em*loyees -ut lacks motivation. Not ,ormal internal controls. (ner=s su*ervisionstron+. Not ,ormal internal controls. (ner=s su*ervisionavera+e. 87 Minor la*ses noticed due to the lack o, internal controls. Controls Motivated em*loyees. -ut Puestiona-le loyalty. #m*loyees are . andTor not e)*erienced. #m*loyees have little com*etence andTor authority. #m*loyee

/ecord /ecord /e*ayment Com*liance *articular +rou*. Unsatis,actory com*liance records. Chronic de,aulter in com*liance. Stron+ commitment to com*liance in letter and s*irit. *ayment. Borro(er al(ays *re*ays amount due. #)cellent track record o, %ood re*ayment record. ccasionally *re*ays. All *ayments are made on time. Com*lies (ith all conditions and covenants. All majorT critical conditions are com*lied (ith. Seeks *rior a**roval (hen conditions cannot -e com*lied Payments are occasionally delayed ,or a ,e( days or e)tensions sou+ht. (ith. A ,e( *ayments delayed u* to 7D days or . relationshi*s. Attitude to com*liance is la) or . relationshi*. >rePuent overdue -ut settled. Mostly settled (ithin 7D days. A,ter +ivin+ score to each *arameter. risk ratin+ is calculated ,or -usiness risk. ,inancial risk and mana+ement risk. 't is an avera+e o, all su- *arameter under a 88 Most *ayments are delayed ,or more than 7D days.

&he ,inal score o, the ,irm is the cumulative summation o, all t(enty *arameters. n the -asis o, this cumulative score overall Credit /isk /atin+ o, the ,irm is done as ,ollo(s? &otal Score 6 5 7 8 9 : ; Credit /isk /atin+ 5D to 5C 7D to 8C 9D to :C ;D to <C CD to 6DC 66D to 65C 67D to 68D /emark #)cellent Stron+ %ood Satis,actory AdePuate Mar+inal Vulnera-le R Credit /isk /atin+ o, a ,irm is al(ays done -ased on the details o, latest availa-le audited Balance Sheet and Pro,it B "oss statements. @'V. Summary o, Assessment K !hile makin+ CAM 3Credit A**raisal Memo4. (e also ,ind the assessment o, "imits and %uarantees. i.e. the amount o, limit ,or di,,erent ,acilities that can -e issued. &hese assessment methods are? 6. &#/M " AN ASS#SSM#N&F Assessment o, term loan includes term loan eli+i-ility. total num-er o, instalments to -e made to re*ay loan and amount o, each instalment. A*art ,rom instalment interest on loan is also considered (hile makin+ assessment. A,ter ,indin+ term loan eli+i-ility $SC/. de-t service covera+e ratio. sensitivity is ,ound. $SC/[ 3Net *ro,it a,ter &a) X 'nterest on &" X $e*reciation4 3'nterest on term loan X &erm loan /e*ayment4 $e-t service covera+e ratio sensitivity is ,ound -y ,ind $SC/ over the loan *eriod (ith *resent *ro,ita-ility. 9Q reduction in total income. 6DQ reduction in total income. 69Q reduction in total income. 9Q increase in C %S and 6DQ increase in C %S. 89

Minimum de-t service ratio 3$SC/4 shall -e 6.59 ,or &erm "oans durin+ the tenor o, the loan. 5. ! /K'N% CAP'&A" ASS#SSM#N&. Methods o, assessment are? Cash >lo( Method. MPB> Method and &urnover Method. &urnover Method U Mainly used ,or small tradin+ com*anies U Not a**ro*riate ,or manu,acturin+ and -i+ tradin+ com*anies UA**lica-le ,or limits u* to : corores. U ri+inally su++ested -y Nayak Committee ,or SS' units. &he method is? Sales &urnover 59Q o, Sales turnover 9Q o, sales turnover *rojected as mar+in Actual N!C e)istin+ as *er last ,inancial statement 3-4 K 3c4 3-4 K 3d4 Ma)imum *ermissi-le -ank ,inance Additional "endin+ to -e -rou+ht in 3a4 3-4 \ [ D.59L3a4 4 3c4 3d4 3e4 3,4 3+4 \ [ minimum o, 3e4 and 3,4 ] 3h4 \ [ 3c4F3d4 ] Cash -ud+et systemT Cash ,lo( method U Mainly used ,or service sector com*anies U Cash out,lo( K Cash in,lo( [ Bank ,inance in ,orm o, !C Ma)imum Permissi-le Bank >inance 3MPB>4 U Also kno(n as &ondon=s method. &ondon Committee /ecommendations. is mainly used -y the -anks ,or assessment o, !C ,inance. Method used is as ,ollo(s? Stocks /eceiva-les ther Current Assets &otal Current Assets "ess? Credit Availa-le on Purchases ther current "ia-ilities &otal Current "ia-ilities e)cludin+ -ank -orro(in+s !orkin+ Ca*ital %a* 59Q o, current assets 3a4 3-4 3c4 3d4 3e4 3,4 3+4 3h4 \[ 3d4 K 3+4 ] 3i4 \[ D.59L3d4 ] 8:

Projected N!C 3h4 F 3i4 3h4 K 3j4 Ma)imum Permissi-le Bank >inance 3j4 3k4 3l4 3m4 \ minimum o, 3k4 and 3l4 ] 7. ASS#SSM#N& > S $F &he method used ,or the assessment o, S $ isF 3i4 3ii4 5DQ D, Projected &urnover 7 &imes o, the Promoter=s Net (ned >unds in the -usiness. \>or com*utation o, Net (ned >unds. eli+i-le Zuasi Ca*ital Com*onent de*loyed in the -usiness on a lon+Fterm -asis can -e included] 3iii4 "o(er o, a-ove itemsF 3i4 or 3ii4 8. ASS#SSM#N& > PC"F &he method used ,or assessment o, *re shi*ment cash limit is? PC" /ePuested #)*ort Sales #stimated /a( materials. stores B s*ares. la-our cost estimates Period rePuired to convert the /a( material to >inished +oods No. o, e)*ort cycles in a year Amount o, materialTla-or rePuired ,or one cycle Mar+in Sti*ulated #li+i-le PC" "imit /ecommended 3a4 3-4 3c4 3d4 3e4 \[ 7:DT3d4 ] 3,4 \[ 3c4T3e4 ] 3+4 3h4 \[ 3,4L36F3+44 ] 3i4 9. ASS#SSM#N& > PS"F &he method used ,or assessment o, *ost shi*ment cash limit is? PS" /ePuested3a4 #)*ort Sales estimated3-4 Usance *eriod e)tended 3includin+ normal &ransit 3c4 *eriod4 No. , Cycles #li+i-le PS" PS" recommended 3d4 \[ 65T3c4] 3e4 \[ 3-4T3d4] 3,4 :. ASS#SSM#N& > 'N"AN$ "#&&#/ > C/#$'& 8;

Annual Purchase o, Client $omestic Purchase in *ercenta+e &otal $omestic Purchase $omestic Cash Purchase $omestic Credit Purchase $omestic credit Purchase on $A -asis $omestic credit Purchase on $P -asis &ransit *eriod ,or 'nland $P "C \months] Usance *eriod ,or 'nland $A "C \months] &otal "ead &ime ,or $AF"C \months] &otal "ead &ime ,or $PF"C \months] '"C rePuirement ,or $PF"C \months] '"C rePuirement ,or $AF"C \months] &otal '"C rePuirement 3a4 3-4 3c4 \[ 3a4L3-4 ] 3d4 3e4 \[ 3c4 K 3d4 ] 3,4 3+4 \[ 3e4 K 3,4 ] 3h4 3i4 3j4 \[ 3h4 X 3i4 ] 3k4 \[ 3h4 ] 3l4 \[ 3,4L3j4 ] 3m4 \[ 3+4L3k4 ] 3n4 \[ 3l4 X 3m4 ] ;. ASS#SSM#N& > > /#'%N "#&&#/ > C/#$'& Annual Purchase o, Client 'm*ort Content in *ercenta+e &otal 'm*ort Avera+e monthly im*ort *urchases 'm*ort duty element in *ercenta+e $uty amountTmonth Net 'm*ort ValueTmonth 'm*orts on $A -asis 'm*orts on $P -asis &ransit *eriod ,or im*orts K months Usance *eriod ,or im*orts K months &ransit *eriod ,or im*orts &otal lead time ,or $AF"C K months &otal "ead time ,or $PF"C K months >"C rePuirement ,or $AF"C >"C rePuirement ,or $PF"C &otal >"C rePuirement >"C Pro*osed 3a4 3-4 3c4 \[ 3a4L3-4 ] 3d4 \[ 3c4T65 ] 3e4 3,4 \[ 3d4L3e4 ] 3+4 \[ 3d4 K 3,4 ] 3h4 3i4 \[ 3+4 K 3h4 ] 3j4 3k4 3l4 3m4 \[ 3j4 X 3k4 ] 3n4 \[ 3j4 X 3l4 ] 3o4 \[ 3h4L3m4 ] 3*4 \[ 3i4L3n4 ] 3P4 \[ 3o4 X 3*4 ] 3r4 <. ASS#SSM#N& > %UA/AN&##S %uarantee rePuirement ,or contractors No. o, contracts to -e -id durin+ the year Q o, contactors that rePuire -id -ond +uarantee

Hit rate 3Q4 Contracts that (ill -e assi+ned durin+ that year Contracts that rePuire -id -ond +uarantees Q amount to -e +uaranteed Bid -ond +uarantee amount rePuired durin+ the year Security de*osit Q to -e ke*t Security de*osit +uarantee rePuirement 3a4 3-4 3c4 3d4 3e4 3,4 3+4 3h4 3i4 \ [ 3a4L3c4 ] \ [ 3a4L3-4 ] \ [ 3e4L3,4 ] \ [ 3d4L3h4 ] 8<

Mo-ili0ation advance +uarantee Q Mo-ili0ation advance +uarantee rePuirement Per,ormance +uarantee Q Per,ormance +uarantee rePuirement /etention money +uarantee Q /etention money +uarantee rePuirement &otal ,inancial +uarantee rePuirement 3j4 3k4 \ [ 3d4L3j4 ] 3l4 3m4 \ [ 3d4L3l4 ] 3n4 3o4 \ [ 3d4L3n4 ] 3*4 \ [ 3+4 X 3i4 X 3k4 X 3o4 ] &otal *er,ormance +uarantee rePuirement3P4 &otal *er,ormance +uarantee rePuirement3r4 &otal %uarantee rePuirement3s4 Assum*tion? All contracts assi+ned durin+ the year rePuire all ty*es o, +uarantees. Note? ', all the contracts do not rePuire all the ty*es o, +uarantees. the individual +uarantee rePuirements have to -e (orked out -ased on only the contracts that rePuire them. @V. ConclusionT/ecommendation K n the -asis o, analysis o, a-ove discussed *arameters. it is decided -y the author o, the re*ort (hether it is -ene,icial ,or the -ank to sanctioned the concerned ,acility limit to the client. A,ter CAM is made. it is *assed to hi+her authorities ,or a**roval.

Sanction B $ocumentation

', sanctionin+ committee ,inds the *ro*osal in ,avour o, -ank and all documents are as *er -ank=s norm. *ro*osal is a**roved. A,ter the a**roval o, the *ro*osal. documentation is done de*endin+ on the ,acility client is a**roved o,.

$is-ursement

A,ter the *ro*osal is a**roved -y the sanctionin+ authority. dis-ursement *rocess started. Be,ore dis-ursement the -ank ,ollo(s some *rocesses to ensure *rotection a+ainst ,uture risks. &hese *rocesses include valuation o, collaterals *rovided. trans,er o, documents o, collaterals ,rom client to -ank. o*enin+ an account o, the client. char+in+ *rocessin+ ,ee. etc. A,ter all the *re dis-ursement documents are si+ned and *rocesses com*leted. dis-ursement o, ,acility is done de*endin+ on the ty*e o, ,acility and conditions stated in the sanctionin+Tdecision letter.

Monitorin+ the account
8C

A,ter dis-ursement o, ,acilities to the client. it is very im*ortant to monitor (hether these ,acilities are *ro*erly utili0ed. >or this credit monitorin+ is done. $etails o-served (hile monitorin+ are? RYBack+round the customerF &his includes name o, the customer 3com*any4. 'ts constitution 3Private limited. "imited. Sole Pro*rietorshi*. 1oint venture com*any and *artnershi*4 . industry to (hich the com*any -elon+ 3 steel. te)tile. manu,acturin+. service. *olymer and tradin+4. the a**lication o, *roducts *roduced -y the com*any. 'n,ormation a-out ,irm=s re+istered o,,ice. +odo(ns and ,actories. major chan+e in -usiness structure. date and year o, esta-lishment and *romoters is also included. R Account Num-erF &his includes the ty*e o, accounts the customer is havin+ (ith the -ank. &his may -e current account or (orkin+ ca*ital demand loan 3short term loan4 or -oth. &his +ives the +lim*se o, the limits -ein+ sanctioned to the customer. R /elationshi* (ith the -ankF &his includes the time ,rom (hich the com*any is (ith 'VB". last sanction o, limits to the customer. &his hel*s to understand the relationshi* customer is sharin+ (ith the -ank. R $etails o, limitsF &his includes the ty*e o, limit customer is availin+ ,rom the -ank. its amount. the return that the -ank +ets ,rom this sanction. i.e. *ricin+ o, the limit and the mar+in on (hich limit is a**roved on. &his also contains the ty*es o, limits availed -y the customer ,rom -anks other than 'VB" and the amount o, these limits. &he limits are considered se*arately under ,und -ased and non ,und -ased limits to -etter understand the need o, the customer. R Collateral $etails K 't includes the ty*e o, collateral client has *rovided. i.e. (hether it is residential. commercial or industrial *lot. &he value o, the land. -uildin+ and *ro*erty as a (hole. &he date on (hich valuation (as done and i, there is insurance o, the *ro*erty then insurance details. (hich includes insurance amount and date till (hich it is valid. 9D

R Stock 'nsurance detailsF &his includes the amount and date o, e)*iry o, stock insurance. i, done. &his taken as stock is amon+ the *rimary covers taken -y the -ank and insurance details tells the amount that is assured to -e received -y the -ank in case dama+e causes to stock. R $e,errals *endin+F &his include details o, the de,errals *endin+ and sanction terms (hich are non com*liance till no(. R >inancial $etailsF &his includes the audited or *rovisional details o, current year and *rojections o, ne)t year. >inancials that are included are Net Sales. Stocks. $e-tors. Creditors and Net (orth o, the com*any. &his in,ormation is used ,rom time to time analyses ,or checkin+ (hether the account transaction are in accordance (ith the monthly in,ormation +iven. &his indicates (hether the +iven ,acility is *ro*erly utili0ed ,or the *ur*ose it is -ein+ +iven. R Monthly analysis o, Account and Stock Statement F till no( (e have monitored those details (hich are more or less common ,or (hole o, the year. No( (e analyse the com*anies= activity and utilisation o, the limits. !e ask the clients availin+ cash credit limit to send monthly stock statements to the -ank o,,ice. &hese details are then matched (ith the transactions made in the account o, the client. Monthly stock statements have details a-out sales. stock. de-tors and creditors ,or that *articular month. &hese details are used to calculate $P. dra(in+ *o(er. o, the client. &his $P is the ma)imum amount that the com*any can de-it once the -ank -alance is 0ero. &hus to check i, the client is not overdra(in+ (e ,ind the churn in the account and the avera+e utili0ation o, the limit -y seein+ the turnover o, the account ,or that *articular month. !e also check ,or check return. -oth in(ard and out(ard. to check the authenticity o, the client=s customer. ', there are more oT(. out(ard. check returns and that too (ith the majority o, same customers re*eatin+ every time. then this means that the customer o, the client is not ca*a-le to do *ayment and thus the relationshi* o, our client and this customer is a matter o, concern. 'n the same (ay i, there are more iT(. in(ard. check return. then commitment o, our client is Puestiona-le as he is tryin+ to do -eyond his ca*acity (hich (ould -e concern ,or -ank. 96

R Unit VisitsF /e+ular visits are made to the client=s o,,iceT,actoryT+odo(n to check i, the thin+s really ha**enin+ are as stated -y the customer. &his also hel*s in understandin+ the -usiness o, the client in a -etter (ay and thus hel*s the -ank to *redict any un(anted situation. At least one unit visit has to done in a Puarter. R Multi*le -ankin+ e)chan+e datesF ', the client is havin+ accountTlimits (ith other -anks also. in,ormation re+ardin+ the same is e)chan+ed -et(een the -anks. At the end o, the year. these monthly in,ormation are used to analyse the account o, the client. collateral related issues and seein+ (hether the *rojected ,i+ures are met. Pro*erty these days is one o, those thin+s (hose *rices chan+es very ra*idly. Because o, this valuation o, the collaterals are done (ithin 5 years. accordin+ to /B' collateral taken should not have valuation more than 9 years and re+ular valuation is necessary in every 9 years. At the end o, the year the monthly in,ormation that (e have collected ,or the clients is chan+ed into avera+e (hich is com*ared (ith the *rojections. ', some deviations are ,ound. these monthly in,ormation hel*s to understand the reason -ehind it and ,urther inPuiry is done (ith the client. $ra(in+ Po(er ? !hile doin+ monitorin+. dra(in+ *o(er ,or the clients. availin+ cash credit ,acility ,rom the -ank. is calculated monthly. $ra(in+ Po(er is the ma)imum *ermissi-le credit limit +iven to client. once his account -alance reaches 0ero. &o take out cash -eyond dra(in+ *o(er limit. client has to take s*ecial *ermission ,rom the -ank. 'n such cases -ank *rovide t(o ty*es o, ,acilities to the client K & $ 3&em*orary ver $ra,t. valid ,or ma)imum o, 69 days4 and Adhoc 3 ver and a-ove the avera+e sanction limit. valid ,or ma)imum o, CD days4. >or calculatin+ monthly dra(in+ *o(er o, the client. stock statements are analysed and checked to see (hether the +iven creditors and de-tors are in accordance (ith the details +iven -y clients to the -ank. &he method used to calculate $P is? 6. !e take monthly in,ormation o, stock. Creditors and de-tors ,rom the client 95

5. !e ,ind the eli+i-le de-tors ,rom the in,ormation +iven. &his is ,ound -y calculatin+ the num-er o, de-tors less than certain days. s*eci,ied -y the -ank durin+ a**roval o, loan. 7. de-t4 8. 9. Similarly (e ,ind value o, *aid stock -y su-tractin+ creditors ,rom total stock. nce *aid stock is ,ound. (e ,ind $P on stock -y the ,ormula? Paid stock ) &hen (e ,ind the $P on $e-t -y the ,ormula? eli+i-le $e-t ) 36F mar+in on 36Fmar+in on stock4 :. ;. &hen (e ,ind total $P rePuired -y addin+ $P on stock and $P on $e-t. &hen (e su-tract this total $P -y the outstandin+ ,acility enjoyed -y the client ,rom other -ank. &his +ives us net $P <. ', the net $P is less than the limit +iven -y us then the Availa-le $P is ePual to net $P. other(ise Availa-le $P is ePual to the credit limit +iven -y 'VB". All these ste*s can -e summari0ed in the ,orm o, ,ollo(in+ ,ormulas? $P on Stock $P on $e-t Net $P [ 3 Stock K Creditors 4 L 3 6 K Mar+in on Stock 4 [ #li+i-le $e-t L 3 6 K Mar+in on $e-t 4 [ $P on Stock X $P on $e-t Availa-le $P [ Net $P K outstandin+ ,acilities

/evie(

&he ,inancial details and -usiness structure o, the client are *eriodically revie(ed to check (hether all *ost dis-ursement conditions are -ein+ ,ul,illed -y the client. 97

/ecovery
Bank +ives loan to earn ,rom the ,acilities it is *rovidin+. !henever a loan is sanctioned. *ricin+ o, ,acility -ein+ *rovidin+ is stated in the sanction letter. Client has to re*ay the loan amount accordin+ to the instructions mentioned in the sanction letter. /e*ayment method di,,ers ,or di,,erent ,acilities. >or e)am*le. ,or term loan re*ayment has to -e done *eriodically till a ,i)ed tenor (hile ,or cash credit ,acility re*ayment is done on demand -asis. ', the customer is una-le to re*ay the amount then the security *rovided -y him is used to recover the loan amount. >or this a *ro*er le+al action is taken and thus a le+al advisor is rePuired. 98

&he o-jective o, this internshi* is to understand the *rocedure o, lendin+ to SM#s at 'N% Vysya -ank. ' did my internshi* at 1alandhar -ranch o, 'N% Vysya. in . 1alandhar. under the +uidance o, Mr. Vijay kumar Sharma and Mr Puneet Handa. &he o-jective o, this internshi* (as to understand SM#s lendin+ at 'N% Vysya -ank. &here are di,,erent schemes ,or SM#s to +et easy ,und -ased loans and non ,und -ased loans at 'N%. Kno(in+ these schemes and understandin+ various ty*es o, risks associated (ith the clients and *ractices ada*ted -y -anks to hed+e these risks is one o, the main aim o, this internshi*. $urin+ my internshi* ' am su**osed to (ork on di,,erent *rojects to understand credit a**raisal and monitorin+ in details and to (ork on it to understand the im*ortance and si+ni,icance o, various issues related to them. &hrou+h these *rojects. ' (anted to +et a real time e)*erience o, *rocedure ,ollo(ed (hile doin+ credit mana+ement. My internshi* includes *rojects on dra(in+ *o(er calculation. monitorin+ and credit a**raisal. &hese *rojects are *rovided to me (ith the aim to o-tain kno(led+e and e)*erience a-out kee*in+ the track o, the accounts o, the clients. to see i, all the conditions are *ro*erly ,ollo(ed -y them. ,indin+ the risk associated (ith the client and ,i+urin+ out the limit that should -e sanctioned to minimi0e *ossi-le losses. 99

-jective o, 'nternshi*

M#&H $ " %2 > "" !#$
9:

!hole o, my internshi* can -e divided into three sta+es. At sta+e one ' (orked on dra(in+ *o(er. &his hel*ed me to understand the si+ni,icance o, dra(in+ *o(er and method o, its calculation. At sta+e t(o ' did *roject on monitorin+. &his sta+e is a very im*ortant *art o, -usiness -ankin+ as throu+h this track o, the client=s account to con,irm *ro*er utilisation o, the limit ,acility +iven to him. Sta+e three o, my internshi* is credit a**raisal. Methodolo+y ,ollo(ed in all these sta+es are descri-ed -elo(? S&A%# 6? $ra(in+ Po(er Clients (ho have availed cash credit ,acilities ,rom the -ank. have to sent their monthly stack statements to the -ank -y the end date allotted to them. #nd date is same ,or each month and -y this date stack statements o, *revious month are su**osed to reach at the -ank. >or e)am*le i, the end date o, a client is ; th. stock statement o, A*ril should reach -ank -y ;th May. $etails ,rom these stock statements are then used to calculate dra(in+ *o(er usin+ the ,ormula. (hich is already descri-ed under the section o, -ack+round. S&A%# 5? Monitorin+ A,ter com*letin+ the *roject on dra(in+ *o(er. ' did monitorin+ o, the clients enjoyin+ various ,acilities ,rom 'VB" and havin+ their accounts in Punja-i Ba+h Branch. 'N% Vysya Bank. 'n this ' (ent throu+h the ,iles o, clients (hich hel*ed me understand the history o, the client. !hile doin+ monitorin+. ' accessed the in,ormation related to the account ,rom the M'S o, 'N%. &he details re+ardin+ monthly sales and stock statement are asked ,rom the clients itsel,. Audit re*orts and u*dated ,inancial statements are used (hile doin+ monitorin+ to understand the current situation the client. Any major issues related to the stock or credit audit is also checked. And i, there is any such issue (ith the client. *resent status o, the issues are stated in the monitorin+ sheet. &his hel*s to kee* track o, such issues. S&A%# 7? Credit A**raisal A,ter Monitorin+. ' (orked on credit a**raisal. >or this credit a**raisal memo. CAM is made. Be,ore makin+ CAM. *ur*ose o, the *ro*osal is decided de*endin+ on the 9;

a**lication o, the client. $e*endin+ on the *ur*ose and the relationshi* o, client (ith the -ank necessary documents are asked ,rom the client. >or the e)istin+ clients. the in,ormation a-out the client is already (ith the -ank. But the documents are veri,ied to kno( i, there is any major issue or major chan+e in -usiness structure o, the client. nce all documents are ,ound as *er -ank=s norm. *ro*osal is made de*endin+ on the rePuirement o, the client. ' started makin+ CAM (ith ,inancial analysis *art. 'n this *art. the -alance sheets and *ro,it B loss account o, used to +et the ,inancial summary o, the client ,or *revious years. current year and ne)t years. &his ,inancial summary is then used to ,ind i, there is any deviation in the ,inancial *olicies set -y 'VB". Pro,ita-ility and earnin+ o, -ank a,ter the sanctionin+ o, *ro*osal is also estimated throu+h this summary. Previous years actual earnin+ is also com*ared (ith the estimated earnin+s durin+ *revious *ro*osal and reason ,or the deviation is analysed. Monthly sales o, current year are taken to make out any major chan+e in the *attern o, yearly sales and to *redict i, the *rojected sales (ould -e achieved. A*art ,rom this any major chan+e. ,or e)am*le +overnment *olicies and re+ulation. in the sector (ith (hich the client is associated is also analysed. ', client is into im*ortin+ or e)*ortin+ then country risk is also estimated. &his includes *olitical and ,inancial sta-ility in that country. nce all these in,ormation are collected and analysed. CAM is *re*ared. ', the *ro*osal is ,ound satis,actory. this CAM is then *assed to sanctionin+ authorities. >or a ,resh *ro*osal. i.e. . client. ,irst the *rimary veri,ication a-out the client is done. &he *rimary veri,ication a-out the ,resh client is done -y searchin+ ,or his (e-site on internet. &hrou+h this *rimary in,ormation. line o, *roducts and industry o, the client is veri,ied. A,ter this. in,ormation a-out the ,irmTclient and its directors is ,ound ,rom the (e-site o, Ministry o, Cor*orate A,,airs. A,ter the *rimary veri,ication o, client and its *romoters are ,ound satis,actory. its su**liers= and customer= in,ormation is also veri,ied throu+h internet. ther sources are also used to ,ind the market *osition o, the client. nce these in,ormation are ,ound as *er the in,ormation +iven -y the client. client is a**roached and asked ,or all the rePuired documents. &hese documents are used ,or secondary veri,ication. &he su**liers and customers o, the client are then contacted to kno( more a-out the clients and also to veri,y their relationshi*s (ith the client. &he ,actories and o,,ices o, the clients are also visited to understand the (orkin+ o, the client. &he *ro*osed collateral is also 9<

visited and its value is estimated to ,ind (hether the collateral is enou+h to cover the risk associated (ith the ,acility asked -y the client. nce every document is as *er -ank=s norms. *ro*osal is *re*ared de*endin+ on the rePuirement o, the client. A,ter this the *rocedure ,ollo(ed ,or makin+ CAM is same ,or the e)istin+ clients and . clients.

ABS&/AC& > CAS#S $ N# $U/'N% 'N&#/NSH'P
9C

Case "imit 3in lakhs4 698.D< 6<7.;5 59Q 67;.;C 8:5.65 6<D $ays 8:6.;< 59Q 78:.78 8<8.67 D 59Q 669.9: 96<.56 CD $ays 8:<.7; 79Q 7D8.88 85D D Stock Creditors Paid Stock Mar+in Q $P onStock &otal Valid u*$e-t to Valid$e-t Mar+in Q $P on $e-t &otal &otal $P Ts Net $P $P Availa-le 6. 7DD 698.D< D.DD 85D 8<8.67 7DD.DD 8<8.67 5. 9DD 858.C6 586.6C 7. F6<.;8 55:.68 FCC.<5: F57D.66 59Q F6;5.9< 555.6C CD $ays 55.6C 59Q F;8.<; 58C.8< CD $ays 58C.8< 59Q 6:C.:6 59;.< CD $ays 6CD.96 79Q 59Q 8DQ 59Q F68.D: 67<5.<C CD $ays 6699.9; 79Q 7DD 559< 5;68 F89: 59Q F785 758C CD $ays 5:6; 59Q 6C:5.;9 6:5D.;9

;96.65 ;7;.D; 657.<7 5C7.88 6<;.66 665.58 67.76 F69C.5; CDD 79D D D D ;5D.;9 7<;.D; 5C7.88 665.58 F69C.5; 7DD.DD ;9.DD 5DD.DD :D.DD D.DD 8. ;9 6D95.;8 6D;6.8< 9. 5DD 59C.<9 77.;6 :. :D 697.:< 597.9D: ;. 8DD 99;.D6 ;<;.65

,ound di,,erent ,rom each other and covers almost all *ossi-le situations.
<. 65DD 9C5:.9; 57D7.:; 7:55.C 59Q 5;6;.6< 7578.98 CD $ays 5:CC.<< 59Q 5D58.C6 8;85.DC 59DD 5585.DC 65DD.DD

$ra(in+ Po(er Calculation? Here ' have *rovided data ,or C cases. (hich i
C. 5DD 6;8.6 8:.7: 65;.;8 59Q 9D8.DD 6:65 CD $ays 6:65 79Q 6D8;.<D 6996.<D 8DD

:D
6696.<D :DD.DD

Credit A**raisal? ' have made the *ro*osal ,or the enhancement o, limit o, t(o ,irms durin+ my internshi*. $ata related to these *ro*osals are +iven -elo(. &he name o, the ,irms is not mentioned to kee* their identities concealed. thou+h most o, the key in,ormations a-out the *roject are ke*t intact. Some other chan+es are also done to kee* the *rivacy o, -ank and client. Case 6? ABC A+ency
Control 'n,ormation A**lication No. Borro(er Name Bankin+ arran+ement "ine o, activity Constitution Su-Fsection ,or PSA &y*e o, #)*osure "imits valid till &radin+ o, 2arn Partnershi* Manu,acturin+ /e.al 7D.D:.5D66 Priority Sector Bankin+ (ith 'VB" since Service #nter*rise #nhancement Micro >resh No 1uneF5D6D Small Ad hoc thers ABC A+ency Sole Asset Classi,ication Standard A**lication date 6DTD9T5D66 /evie( "ast a**roval on 59.D:.6D

Credit /isk /atin+

Particulars 6 5 7 8 9 : ; /emark

3>inancial 'n,ormation *er last
audited accounts as on 76FMarF6D4

'ndustryTBusiness Status Client=s HistoryF %ro(th in &urnover B Pro,ita-ility Com*etitive Position Su**liers Customers "iPuidity "evera+e
'ndustry (ith consistent need -ased demand and adePuate mar+ins Stron+ ,inancial -ackin+ and vinta+e -usiness. %ood turnover lookin+ at 'VB" *ro*osed e)*osure. "ess than 9Q market share $e*end u* one Ft(o lar+e su**liers Borro(er is im*ortant to the customers

AdePuate liPuidity (ith current ratio o, V 5 &he levera+e is satis,actory lookin+ at su-stantial US" o,

:6

^& "T&N!_ Sales %ro(th PB$'&TSales $SC/
,amily mem-ers. 't is less than 6.D Satis,actory +ro(th in turnover durin+ last ,inancial years More than 5DQ in >2 6D !e are not takin+ any &" e)*osure. ho(ever $SC/ is (ell a-ove median. %eneral res*ect ,or inte+rity #thical and traditional -usiness ,amily >ree assets V9DQ o, %ross lia-ilities Sound %ood No di,,iculty to antici*ate the succession Motivated #m*loyee 'nternal Control e)ists All Payments are made on time All Major TCritical conditions are com*lied (ith

'nte+rity >amily Standin+THistory >inancial Standin+ Mana+ement Com*etence Mana+ement Commitment Succession #m*loyee Zuality 'nternal Controls /e*ayment /ecord Com*liance /ecord Business /isk Score >inancial /isk Score Mana+ement /isk Score &otal C// 7.: 6.< 7.7 :D 7
#)*osure to Borro(erT %rou* and C// #)istin+ Borro(er%rou* #)*osure/s. 7DD.DD lacs /s. 7DD.DD C// 7 lacs 7 Pro*osed Borro(er /s. 9DD.DD lacs 7 %rou* /s. 9DD.DD lacs 7

PU/P S# > APP"'CA&' N? :5

Credit ,acilities recommended lakhs
Sl No Nature o, ,acility #)istin+ "imit TS as on 65.D9.5 D66 T $ i, any
By BrT /M By /

'N/ in
Pro*osed limit &ermsF /o'. mar+in. tenor. usance *eriod. commission details. etc4 #)istin+ Pro*osed

6. Cash Credit 7DD.DD 57C.5; 9DD.DD 9DD.DD F / '? 'VB/ X 8.79Q 3i.e.67.59Q*.a.4 3Presently 'VB/ is at <.CQ4 Mar+in? 59Q on stocks and -ook de-ts u*to CD days & &A" 7DD.DD 9DD.DD 9DD.DD >'NANC'A" ANA"2S'S > C"'#N& Particulars Previous 2ear 3audited4 5DD< 64 Sales 54 PB$'& 74 'nterest 84 $e*reciation 94 &a)es :4 PA& ;4 Ca*ital <4 "oans :7 79.D7 Previous 2ear 3audited4 5DDC Previous 2ear 3audited4 5D6D C8.<< 7;.D; 69.97 6.55 D.DD

5D.75 6D6.C5 7:.D: Current 2ear 3*rovisional4 5D66 6.:9;.6C 6;C.99 85.:: 6.D8 85.DD C7.<9 7:D.;9 99.:8 5D65 7.DDD.DD 769.78 :D.DD 6.DD <8.;< 6:C.9: 97D.76 99.:8 Ne)t 2ear 3Projections4

;8.:6 75.D9 67.;; 6.96 D.DD 6:.;< 6DD.<5 <.DD 69.D5 <.;7 D.9; D.DD 9.;6 CD.9; Unsecured 6:.96

C4 "oans ,rom therT ur Banks a4 &erm "oans -4 $TCC 6D4 Current "ia.
D.DD 5;.6C 8.8: 75.6D 5.7< 8;.55 D.DD 5<8.C8 D.DD 9DD.DD

77.C< 85.;; 6.C9 ;.<< 689.:: D.DD 5:.C; D.:5 :6.C6 D.DD 7D7.87 D.DD 97;.DD D.DD 664 Non Current D.DD "ia-ilities 654 >i)ed Assets 674 Assets a4 Stocks -4 $e-tors 7.59 :.:: 6C7.58 9.<9 ;67.69 8.<9 6.66;.9D Current 67;.<D D.DD 6:.8C current 7.<: C5.D8 D.68 698.D< 96<.7: D.78 5;9.DD ;;D.DD D.9D c4 Cash B Bank 6.55 Bal. aTcs 684 Non CA 694 Current /atio 6;4& "T&N! 3(ithout US"4 3(ith US"4 6<4 'n D.DD 8.D: D.9: D.75 D.DD 7.86 D.95 D.86 D

675 7: 55.9 D.DD 7.65 D.C: D.DD 5.79 6.DD D.DD 5.D< 6.65 D.89 88 D.;7 8D D.C5 8D 'nventory D &urnover 6C4 &urnover 5D4 Creditors 7DD :9 7 8 $e-tors 6;5 798 668 C8 &urnover 564 NP mar+in 6:.7 56.85 9.:: 9.:9 &urnover? &urnover the ,irm com*rises *rimarily o, commission income till date as ,irm has sho(n only consi+nment sale till last >2 to avoid sales ta) . 'n >2 5DDC commission income has -een sho(n as actual sales. ,or -etter understandin+ in audited -alance sheet the same is -ein+ re*resented in terms o, commission income . But ,rom current >2 the ,irm *lans to do direct sales and has *rojected a turnover o, a**ro). 7DDD "acs :8

. >urther there is another chan+e in -usiness model ,rom 5DDC as till 5DDC majority o, consi+nment sale (as to +rou* ,irm ABC &e)tiles -ut no( as the t(o ,irms are no( mer+ed. ,irm (ill do direct sale so the sale o, the +rou* (ill increase and dou-le countin+ o, sale (ill not ha**en. 'n the >2 66 ,irm has achieved /s 6:9;.6C lacs (hich is more than 6;9DQ increase over the >2 6D.&he turnover -reak u* o, the ,irm are as ,ollo(s?F Month A*ril May 1une 1uly Au+ Se*t ct Nov $ec 1an >eMar &otal lacs4 6D9.<: 65:.56 678.:6 68C.;8 6;9.6C 558.5: 5DD.97 569.65 5::.;: 5D7.:6 59D.78 7D:.6D 579<.78 Sales &urnover 3'n &he com*any=s *roducts are in hu+e demand (ith almost all the *roduct *re -ooked even -e,ore reachin+ 1alandhar. And as *er customer is not even servicin+ 8D Q o, customer demands and (ith availa-ility o, ,unds he can increase the turnover easily. As the -usiness model (hich he has he has to *ay -oth ,or /M and jo- (ork (ell in advance and +ives +oods on credit. &heir (ill -e no inter +rou* sales in ,uture ,urther the ,irm does not kee* any +rou* concern as de-tor same can -e veri,ied ,rom *revious years de-tor -alances there (as some -alance only in last >2 ,inancials (hich (as only a month end ,i+ure. Pro,ita-ility? Net *ro,it mar+in o, the ,irm (as at 56.85Q in >2DC. (hich decreased to 9.:Q ,or >26D and remained almost constant to 9.9Q in >2 66. &he reason ,or same is that ,or >2 DC the same has -een calculated on commission income and in >2 6D and >2 66 same has -een calculated on actual sales. :9

"evera+e? &N! o, the ,irm com*rises o, *artners ca*ital. reserves. & " o, the ,irm com*rises o, sundry creditors. (orkin+ ca*ital -ank ,inance. unsecured loans ,rom -ank and other shortFterm lia-ilities. & "T&N! o, the ,irm is D.86 ,or >2 DC. (hich has increased to D.89 ,or >2 6D. >urther in the *rovisional ,or >2 66 it (as D.;7 times (hich itsel, is (ith in the norms. No( a,ter havin+ more e)*osure ,rom us. still it is *rojected to -e D.C5 times only. "iPuidity? Current assets o, the ,irm com*rise o, de-tors and inventory B Cash B -ank Balances. and Current "ia-ilities o, the ,irm com*rises o, sundry creditors and (orkin+ ca*ital -ank ,inance. Current ratio o, the ,irm is com,orta-le in all ,inancial year. 'n >2 65 it is *rojected to -e 5.D< times. &urnover in days /a( material is sourced on cash or Av+ credit o, 59F89 days. &he ,irm +ives an Av+ credit o, CDF65D days to its customer and . customers are +iven credit a,ter +ood re,erence check only. there have -een no -ad de-ts in the -usiness. &ill no( the ,irm doesn=t maintain the holdin+ *eriod ,or the inventory. A,ter -ein+ se*aration o, sales ,rom the +rou* concern. no( the ,irm is +oin+ maintain the inventory in the *rojections. &he *ayment terms varies ,rom *arty to *arty ,rom ;FCD days (ith av+ -ein+ 5 months . &he de-tors are hi+her ,or 76.7.5D6D on account o, hi+her sale to one re+ular *arty KP2 "td. /s. 575.59 lakh to this *arty ,irms *rovide a credit o, CD days. ut o, total de-tors o, 96<.5D "akhs de-tors more than CD days is only 8C.<7 "acs that to only ,e( days more than CD days and su-sePuently settled. More o,ten ,irm has de-tor less than CD days. /'SK APP/A'SA" ::

Business /isk and >uture utlook A re*ort entitled MCotton Contamination Survey 5DDCN released -y '&M> 3the 'nternational &e)tile Manu,acturers >ederation4 indicates that the level o, cottons modestly or seriously contaminated as 5DD;4. o, (hich :Q (as seriously contaminated -y some sort o, ,orei+n matter (hile 6:Q (as *erceived -y the s*innin+ mills all around the (orld remained constant at 55Q 3same as to last survey in moderately contaminated. 85Q o, all cottons *rocessed (ere contaminated -y or+anic matter such as leaves. ,eathers. *a*er. leather. etc. and 8Q (as ,rom tar contamination. ther serious contaminants (ere *lastic ,ilm. and strin+s made o, cotton. &his survey sho(s that cotton ori+inated ,rom 'ndia. Pakistan. strin+s made o, jute Hessian. strin+s made o, (oven *lastic. ,a-rics made o, cotton. ,a-rics made o, #+y*t. U0-ekistan and Mali (as ,ound to -e the most contaminated cotton. n the contrary. very clean Cali,ornia4. 'srael. Australia. Bra0il. and the 'vory Coast. &he survey indicates that the *resence o, sticky cotton as *erceived -y the s*innin+ mills dro**ed ,rom 56Q in 5DD; to 6:Q in 5DDC. Ho(ever. this level o, stickiness is still hi+h and remains a major *ro-lem to the s*innin+ industry ra( cottons could -e ,ound in the USA 3&e)as Hi+h Plains. Mem*his. Pima. South #astern and Mana+ement /isk ABC A+ency is *romoted -y Mr. @2. (ho mana+es the -usiness a,,airs o, the as a *artner. He is (ellF e)*erienced -usiness *ersons. mana+es the a,,airs o, the ,irm (ith the hel* o, *ro,essionals *ersons and skilled em*loyees. Per,ormance /isk doin+ (ell in *rintin+ -usiness -ut no( (ith increased *ressure ,rom the e)istin+ customers. ,irm ,eels the need to enhance its *roduction ca*acity in *rintin+ -usiness. >urther the ,irm also *lannin+ to diversi,y into ,lour mill -usiness. in (hich they have su,,icient e)*osure and e)*ertise. &hus lo( *er,ormance is *erceived. &he ,irm ,inancial *osition is satis,actory and meets various ,inancial *arameters. Presently the ,irm is :;

Structure /isk "imits are -ein+ o,,ered to the customer as CC limit. 'ndustry Sector Concentration !ithin norms. Country /isk No country risk is involved in the e)*osure. #nvironmental /isk >irm is in the -usiness o, tradin+ o, yarn. So no environmental risk is there. /e+ulatory /isk &he ,irm com*lies (ith all si+ni,icant statutory and re+ulatory rePuirements and no risk is associated (ith the same. 'N% Vysya Bank=s /e*utation /isk ,riendly and in s*ite o, havin+ hu+e *ro*erty. they are runnin+ -usiness to earn *ro,its as (ell as serve and hel* the ,amilies o, the (orkers (orkin+ in the ,irm. S*eci,ic Pur*ose o, Asset Collateral &he *ro*erty -ein+ o,,ered as residential *ro*erty on (hich *rintin+ *ress is located. &he ,lour mill division is also +oin+ to -e located therein. &he *ro*erty on (hich these units are -ein+ set u* is located in a *rime industrial area and lo( risk is associated (ith dis*osal in case need arises. &here are no risks associated (ith the moral or ethical issues. 'n,act. the mana+ement is em*loyee >inancial /isk &he ,irm=s ,inancial *osition is satis,actory and meets various ,inancial *arameters. Presently the ,irm is doin+ (ell in *rintin+ -usiness -ut no( (ith increased *ressure ,rom the e)istin+ customers. ,irm ,eels the need to enhance its *roduction ca*acity in *rintin+ -usiness. >urther the ,irm also *lannin+ to risk is *erceived. &ransaction /isk $ocumentation risk? All documentation as advised shall -e carried on and no documentation risk is envisa+ed. CoversTCollateral valuation /isk? em*anelled valuer has valued the collateral and it is a-ove the 6DDQ o, :< diversi,y into ,lour mill -usiness. in (hich they have su,,icient e)*osure and e)*ertise. thus lo( ,inancial

the ,acility. &hus no risk is envisa+ed (ith re+ard to the same. 'nterest /ate /isk? &he rate o, interest is a ,loatin+ rate linked (ith 'VB/ and thus shall -e taken care o,. Any ther /isk No other risk envisa+ed. C V#/ T C ""A&#/A"S AN$ C V#NAN&S Collaterals "and Present Pro*osed Buildin+ Machinery F F thers F F &otal /s.99D lakhs /s.99D lakhs Cover Q 6<7.77Q 66DQ /s 99D lakhs /s.99D lakhs N! o, %uarantors F Personal T Cor*orate +uarantees? Promoters ther *ersons Present Pro*osed /s.5DDD.:; lakhs /s.57CC.7D lakhs F F F F Cor*orate T %rou* concerns /s.5DDD.:; lakhs /s.57CC.7D lakhs &otal /'SK /A&'N%T/'SKF/#!A/$TP/ >'&AB'"'&2 /isk /atin+ As on 76.D7.66 Previous ratin+ UBS :C

/isk ratin+ 7 7 /e(ards T Pro,ita-ility %ross 'nterest /evenue *rojected last year Actual K last year /evenue current year Actual K Current year 2&$ U U U U *rojected 7;.DD :D.DD 7.DD 7.9D U U 8D.DD :7.9 7:.DD 7.DD Commission ther char+es 6.9 8D.9 &otal $#V'A&' NS &here is no deviation in the *olicy ,inancial *arameters. Actual as o, Parameters Median &hreshold BTs dated 76.D7.6D Minimum #B'&$A T Net Sales Minimum 'nterest Covera+e /atio 3#B'&$A T 'nterest B other ,inance char+es4 6.;9 6.9D 5.7C A-ove medianF k D.D7 D.D5 D.7C A-ove medianF k /emarks ;D

Minimum Current /atio 3Current Assets T Current "ia-ilities4 Ma)imum $e-t #Puity 3total 'nterest -earin+ de-t T &N!4 Ma)imum & "T&N! Minimum $SC/ 3#B'&$A T interest *lus current maturities in lon+ term de-t4 6.8D 6.59 5.D9 5.DD 7.DD 5.76 6.69 6.DD 7.65 A-ove medianF k A-ove threshold A-ove medianF k A-ove medianF k 7.9D 8.9D D.89 ASS#SSM#N& > "'M'&S MPB> Method 6 Holdin+ "evels Previous year Curren t 2ear Projns ,or year Actual Sales C<.<< 6.:9;.6 7.DDD.DD C Stocks Stock holdin+F days /eceiva-les /eceiva-les holdin+F days ther Assets &otal Current Assets Creditors Creditors Current C;.78 6C7.58 9.:9 holdin+F :9 8D.;6 ;67.69 66.7; 7 ;5.9D 6.66;.9D 59.DD 8 6.66;.9D 59.DD 8 ;5.9D 7.<:

88 C5.D8 798 698.D< 8D 96<.7: 668 5;9.DD 8D ;;D.DD C8 5;9.DD 8D ;;D.DD C8 7.DDD.DD ne)t &aken ,or assessment ;6

days ther "ia-ilities &otal "ia-ilities Current 68.:C 6<.8C 7;.DD 7;.DD Current C.D8 ;.65 65.DD 65.DD /easonin+ ,or the a-ove 5 Monthly Holdin+ "evels -ased on stock statement 3in days4 Stock $e-tors Creditor Sales s Avera+e levels "ast ,i+ures #stimated current year Projected ensuin+ year Acce*ted levels 8D C8 8 7DDD.DD ,or 8D C8 8 7DDD.DD ,or 8D 668 7 6:9;.6C year end 88 798 :9 C<.<< Monthly "inka+es -et(een the monthly avera+es and the year end ,i+ures 7 !orkin+ Ca*ital /ePuirement $etails Stocks /eceiva-les ther current assets &otal Current Assets 3a4 "ess? Credit availa-le on *urchases ther current lia-ilities &otal Current "ia-ilities e)cludin+ Bank Borro(in+s 3-4 !orkin+ Ca*ital %a* 3aF-4FF3c4 8 $ays 8D C8 /s.lakhs 5;9.DD ;;D.DD ;5.9D 6.66;.9D 59.DD

65.DD 7;.DD 6D<D.9D ;5

59Q on Current assets 3d4 Projected N!C 3e4 3C4 F 3d4 3c4 F 3e4 Ma)imum Permissi-le Bank >inance F Minimum o, 3,4 or3 +4 5;C.7< 9<D.9D <D6.DD 9DD.DD 9DD.D C NC"US' N B /#C MM#N$A&' N &he ,irm is doin+ (ell and has +ood relationshi* (ith 'VB". &he *ast records o, the ,irm=s account sho(s *ro*er utili0ation o, the availed ,acility. &hus. enhancement o, limit is recommended.

Case 5? @2A Chemicals
Control 'n,ormation A**lication No. Borro(er Name Bankin+ arran+ement "ine o, activity &rader , 'ndustrial Chemicals B Adhesives Constitution "imited Bankin+ (ith 'VB" since Su-Fsection ,or PSA Manu,acturin+ Small &y*e o, #)*osure /e.al hoc "ast a**roval on "imits valid till 76.D;.5D66 thers 76.D<.5D6D Mid revie( date 3i, any4 No o, Policy 6 %rou* Name NA ;7 None /evie( #nhancement >resh Ad Service #nter*rise Micro 1uneF5DDC Priority Sector No @2A Chemicals "td. Sole Asset Classi,ication Standard A**lication date 57TD9T5D66

deviations

Credit /isk /atin+ Particulars 6 5 7 8 9 : ; /emark
3>inancial 'n,ormation *er last audited accounts as on 76FMarF6D4

'ndustryTBusiness Status Client=s HistoryF%ro(th in
'ndustry (ell esta-lished and +ro(in+ modest Acce*ta-le track record ,or last nine years "ess than 9Q market share Borro(er is very im*ortant to su**lier Su**ly *roducts to many customers Current ratio is 6.86 "evera+e is 6.;9 More than 5DQ PB$'&W9 $SC/ is V5 Hi+hly res*ected in market an e)*erienced *layer (ell esta-lished ,amily no adverse re*ort >ree assets availa-le %ood -usiness sense and +ood -usiness kno(led+e Stron+ commitment Son is already in -usiness ,or a ,e( years no( Motivate em*loyees 'nternal control e)it -ut lar+ely untested

&urnover B Pro,ita-ility Com*etitive Position Su**liers Customers "iPuidity "evera+e ^& "T&N!_ Sales %ro(th PB$'&TSales $SC/ 'nte+rity >amily Standin+THistory >inancial Standin+ Mana+ement Com*etence Mana+ement Commitment Succession #m*loyee Zuality 'nternal Controls /e*ayment /ecord Com*liance /ecord ccassionaly $elayed All critical ;8 conditions com*iled

(ith Business /isk Score >inancial /isk Score Mana+ement /isk Score &otal C// 7.5 7.8 5.C :5 7 #)*osure to Borro(erT %rou* and C// #)istin+ Borro(er #)*osure8DD.DD C//7 %rou* 8DD.DD 7 Pro*osed Borro(er%rou* :DD.DD:DD.DD 77 PU/P S# > APP"'CA&' N? Credit ,acilities recommended 'N/ in lakhs ;9

Sl No Nature o, ,acility #)istin+ "imit TS on as T $ i, any Pro*osed limit &ermsF /o'. mar+in. tenor. usance *eriod. commission details. etc4 357TD9T5 D664 By BrT By /M / #)istin+ Pro*osed 6. Cash Credit 79D.DD 5;7.;; 9DD.DD / '? 'VB/ X 8.59Q 3i.e.66.9D Q*.a.4 3Presently 'VB/ is at <.CQ4 Mar+in? 59Q on stocks and 8DQ on -ook de-ts u*to CD days / '? 'VB/ X 5.D9Q 3i.e.66.9DQ*.a.4 3Presently 'VB/ is at C.89Q4 Mar+in? 59Q on stocks and 8DQ on -ook de-ts u*to CD days 5. >"C 9D.DD 69D.DD Commissi on on? F6.5Q *.a.. Cash Mar+in? 5DQ. &enor?6<D days Commission on?F6.5Q *.a.. Cash Mar+in? 5DQ. &enor? 6<D days & &A" 8DD.DD :DD.D DL

L&he >"C has to -e released u* to /s.6DD."acs and the rest o, /s.9D "acs is to -e released such that the total limit remains /s.:DD"acs. >'NANC'A" ANA"2S'S > C"'#N& ;:

Particulars 'mmediate Previous 2ear Actual 35DD<4 Previous year Audited 35DDC4 Previous year Audited 35D6D4 Ne)t 2ear Prov. 35D664 Ne)t 2ear Projections 35D654 64 Sales 54 PB$'& 74 'nterest 84 $e*reciation 94 &a)es :4 PA& ;4 Ca*ital <4 Unsecured "oans 7.78D.8D 7:.<7 55.88 8.;; 7.97 :.DC :7.:7 577.78 7.666.C9 ;D.95 7D.;: 66.87 6D.:9 6;.:< 5;C.76 668.59 7.C;5.6: ;;.<9 7;.D9 68.;8 C.D6 6;.D9 86:.79 65D.69 8.79:.D< 6D6.78 8C.85 67.C9 66.7C 5:.9< 8:5.C7 65D.69 9.59D.DD 65D.<< :D.DD 68.DD 69.:7 76.59 8C8.6< 65D.69 C4 "oans ,rom therT ur Banks a4 &erm
6.CD 9C.85 68.8: 6:9.77

<.7< 5:5.6C 9.89 5:;.7D 5.;7 9DD.DD

"oans -4 $TCC 6D4 Current "ia-ilities 664 Non Current "ia-ilities 654 >i)ed Assets 674 Current Assets a4 Stocks -4 $e-tors c4 Cash B Bank Bal. 'n current aTcs 684 Non CA 694 Current /atio 6;4& "T&N! :6:.;9 <78.DC C78.67 :C5.8D 6.6D6.98 D.DD C.:8 9.89 5.;7 D.DD 6;.77 <C6.<5 9<.:: 6.D:D.<: 89.78 6.76;.5C 7<.85 6.68;.7: 7<.7; 6.:6;.DD 57:.<C :5;.8: 66.DC 87D.;9 977.7C 9<.<; 7C6.7C <;:.CD 68.6; 796.:< ;87.8D 5D.D7 8;9.DD 6.D<D.DD 57.DD 8.9< 6.89 66<.8; 6.5; 667.89 6.86 C5.7D 6.:: 9C.CD 6.8; 67.7: 7.87 5.99 6.;: 5.8;

;;

3(ithout US"4 3(ith US"4 6<4 'nventory &urnover 6C4 $e-tors &urnover 5D4 Creditors &urnover 564 NP mar+in D.5 D.: D.8 D.:6 D.:D 9; :9 9; 78 8D :C :7 <6 :5 ;9 5.D< 5; 5.68 97 6.;9 7; 6.6C 76 6.;C 79 ;<

Historical B ,uture &urnover? &urnover o, the com*any has sho(n +ood increase ,rom >2D:FD< it increased -y 8CQin D; and 97Q in D< and ,ell -y :.<Q in DC. &he main reason that the turnover declined (as that in 5DD;FD< the *rices as com*ared to DC (ere very volatile and such an environment one has to -e very cautious in inventory level and thus sales tend to -e on a lo(er side. But the com*any is continuously *er,ormin+ (ell as in the >26D it has achieved the audited sales ,i+ure o, /s.7C;5.6:TF lacs. (hich is an increase o, a**ro) 5;.:8Q and in >266 it is sho(in+ a *rojected sales o, /s.879:.D<TF (hich is an increase o, a**ro) C.:;Q. 'n current year (ith +ood domestic demand the com*any e)*ects to achieve a turnover o, /s.959D lacs (hich is an increase o, a**ro) 5D.95 Q. >2D< Sales %ro(thQ 7.78D.8D U >2DC 7.666.C9 F:.<7C >26D 7.C;5.6: 5;.:8569 >266 8.79:.D< C.::95; "ast 65 Months monthly sale details are as ,ollo(s?F Month A*ril May 1une 1uly Au+ust Se*tem-er cto-er Novem-er $ecem-er 5D6DF66 75<.9C 7;6.8; 8<5.86 85;.6: 8D:.<: 7<;.CD 5C:.7: 588.5; 797.5D ;C

1anuary >e-ruary March 5::.8D 7;8.D9 86;.85 879:.D< RY&he com*arison o, *rovisional and audited ,inancial ,or >2 5DDCF6D are? R Particulars Provisional o, >2F6D Sales PB$'& 7C;5.6: <;.:5 7;.<< 57.9< Audited o, >2F6D 7.C;5.6: ;;.<9 7;.D9 6;.D9 No deviation is o-served. Ne+ative deviation due to the increase in +eneral B administrative e)*enses and salaries No deviation o-served. almost same $ecreased due to the increase in +eneral B administrative e)*enses and salaries Ne+ative deviation o, <.C9 due to the decrease in net *ro,it. $ecreased -y 6:.6C lakhs. /emarks 'nterest PA& Ca*ital 859.7D 86:.79 Unsecured "oans Net !orth 67:.78 65D.69 9:6.:8 97:.9D $ecreased due to the decrease in ca*ital and US"s. RY&he com*arison o, *rojected and *rovisional ,inancial ,or >2 5DDCF6D are? Particulars Projected o, >2F66 Provisional o, >2F66 8.79:.D< /emarks Sales 98;7.DD $ecreased due to increase in the ,orei+n +oods. (hich increased the cost o, +oods. A*art ,rom this one o, <D

the major su**lier also sto**ed *roducin+ the material rePuired -y the ,irm (hich ,urther decreased the amount o, ra( material and thus sales. PB$'& 'nterest PA& Ca*ital Unsecured "oans Net !orth 65:.DD 8:.DD 8:.88 8;6.<D 66;.;D 9<C.9 6D6.78 8C.85 5:.9< 8:5.C7 65D.69 9<7.D< $ecreased due to the decrease in sales 'm*roved -y 7.85 lakhs. $ecreased due to the decrease in sales. $ecreased due to the decrease in sales. 'm*roved -y 5.89 lakhs. No deviation o-served. almost same Pro,ita-ility? &he PB$'& mar+in has -een increasin+ continuously e)ce*t ,or >26D due to increase in +eneral e)*enses and interest. &he net *ro,it mar+ins have also sho(n steady increase till no( e)ce*t >26D. &he com*any is *rojectin+ an im*rovement in NP mar+in ,rom D.87 to D.:6 in >266 com*ared to >26D. "evera+e? &N! o, the com*any com*rises o, share ca*ital. reserve and sur*lus and unsecured loans. & " o, the com*any com*rises o, sundry creditors. (orkin+ ca*ital -ank ,inance and shortFterm loan ,rom -anks and ,inancial institutions. &he & "T&N! o, the com*any is at com,orta-le level in all the years. & "T&N! in >2D; to >26D (as at less than 7. 'n >2 66 the same had -een *rojected 6.<C -ut as *er *rovisional the ratio has im*roved to 6.6C -ecause o, re+ular in,usion o, either ca*ital or US" in -usiness in >2 66. %iven is a ta-ular re*resentation o, ca*ital and US" -ein+ maintained -y the com*any over the *eriod o, time? 5DD;FD< 5DD<FDC 5DDCF5D6D Ca*ital Unsecured "oans & " T &N! :7.:7 577.78 5.D< 5;C.76 668.59 5.68 86:.79 65D.69 6.;9 5D6DF66 8:5.C7 65D.69 6.6C ' <6

"iPuidity? Current assets o, the com*any com*rises o, inventory. de-tors and cash B -ank -alance. Current lia-ilities o, the com*any com*rises o, sundry creditors and (orkin+ ca*ital -ank ,inance and other shortFterm lia-ilities. &he current ratio o, the com*any is at com,orta-le level and is around 6.9 or -elo( throu+hout it is 6.86 in >2 DC. &he ratio has ,urther im*roved to the level o, 6.9: in >2 DCF6D. &he com*any maintains an avera+e inventory o, :DFCD days at all time. . >urther. the com*any e)tends a credit o, CD days to its customers. &he com*any *urchases stocks on terms o, CD days credit.

/'SK APP/A'SA"

Business /isk and >uture utlook &he -usiness risk is mainly ,rom com*etitors as there are lots o, *layers in this se+ment. But the advanta+e the @2A has is that is has a vast e)*erience o, almost three decade in this ,ield and have the technical com*etency and +ood relationshi* (ith its customers. >urther it enjoys a +ood re*utation in market (ith *roven track o, *rovidin+ desired Puality and Puantity. Mana+ement /isk Althou+h the main *romoter o, the com*any still associated (ith the -usiness is Mr.ABC -ut ne)t +eneration has already ste**ed in to the -usiness. And have at least 7 years o, e)*erience in the -usiness. Per,ormance /isk &he com*any has rePuisite technical kno(ho(. acPuired over a *eriod o, time. and has the rePuired kno(led+e rePuired to do chemical -usiness. one o, the key success in+redient in the industry. Structure /isk &he customer shall -e o,,ered (ith recommended cash credit. >"C as it does not entail any structural risk 'ndustry Sector Concentration &here is no major e)*osure on the same sector in North 'ndia. Country /isk &he com*any is dealin+ (ith customers in local market in north 'ndia and as such doesn=t entail any country risk. #nvironmental /isk <5

&he com*any is into tradin+ o, chemicals used in manu,acturin+ and as such does not have any environmental risk. /e+ulatory /isk &he com*any com*lies (ith all si+ni,icant statutory and re+ulatory rePuirements and no risk is associated (ith the same. 'N% Vysya Bank=s /e*utation /isk &here are no risks associated (ith the moral or ethical issues. No risk is envisa+ed (ith the lendin+. S*eci,ic Pur*ose o, Asset Collateral !e are takin+ one residential *ro*erty at a *rime location in Area @ and one 'ndustrial *ro*erty used as +odo(n in Area 2. All the *ro*erties are located at *rime locations thus no risk is associated (ith the same. >inancial /isk &he customer has -een into the same -usiness ,or 5C years and has develo*ed his clientele over years and has -een +ettin+ re*eated orders ,rom the same customers. >urther. the -usiness has -een increasin+ year on year and no( the com*any has -uilt a re*utation amon+st its customers. &ransaction /isk $ocumentation risk? All documentation as advised shall -e carried on and no documentation risk is envisa+ed. CoversTCollateral valuation /isk? em*anelled valuer shall value the collateral and thus no risk is envisa+ed (ith re+ard to the same. 'nterest /ate /isk? &he rate o, interest is a ,loatin+ rate linked (ith 'VB/ and thus shall -e taken care o,. Any ther /isk &he -usiness does not entail any other risks. S! & Stren+th? &he stren+th o, com*any is %ood kno(led+e and e)*erience in the ,ield. #sta-lished e)istin+ loyal customer -ase develo*ed (ith relationshi* o, several decades. &he -usiness is very (ell diversi,ied and is not de*endent on one se+ment. <7

!eakness? F &he entry -arriers in -usiness are very lo( and com*any has to -e on its toes all the time. **ortunity? F Presently the com*any is in north 'ndia and can e)*lore the *ossi-ilities in other *arts o, 'ndia (hich is a very hu+e market. &hreat? F Major threat in the se+ment is com*etition as there are many *layers in the se+ment and the retention o, customer is a tou+h ask. But kee*in+ in mind the e)*erience o, the com*any and relationshi* it has (ith customer it has -een a-le to retain its share and +ro( steadily. C V#/ T C ""A&#/A"S AN$ C V#NAN&S Collaterals "and Present Pro*osed 3valuation yet to -e done4 Buildin+ Machinery thers &otal Cover Q /s.9;9.DD "acs /s.9;9.DD "acs 687.;9 Q <<.8:Q N! o, %uarantors F Personal T Cor*orate +uarantees? Promoters ther *ersons Present /s.685;.<8lakhs Nil Nil F Cor*orate T %rou* concerns /s.685;.<8lakhs /s.685;.<8lakhs Pro*osed /s.685;.<8lakhs F &otal /'SK /A&'N%T/'SKF/#!A/$TP/ >'&AB'"'&2 /isk /atin+ As on 76.D7.66 /isk ratin+ 7 Previous ratin+ 7 <8

/e(ards T Pro,ita-ility %ross 'nterest /evenue year Actuals K last year /evenue *rojected current year Actual K Current year 2&$ ther -ene,its includin+ >&P ,rom de*osits &PP Products can -e cross sold to the customer. 8C.85 :D 6.DD D.:D U U 9D.85 :D.:D *rojected last 8:.DD 6.DD Commission ther char+es U 8;.DD &otal $#V'A&' NS #B'&$ATNet Sales is ePual to the &hresh hold limit and thus ,ails. &his is due to the increase in the o*eratin+ e)*enses and hence acce*ta-le. a. $eviations in Credit Policy >inancial Parameters Audited as o, Parameters Median &hreshold BTs dated 76.D7.6D Minimum #B'&$A T Net Sales Minimum 'nterest Covera+e /atio 3#B'&$A T 'nterest B other 6.<< ,inance char+es4 Minimum Current /atio 3Current Assets T Current "ia-ilities4 6.<6 6.9D 5.6D D.D7 D.D5 D.D5 /emarks $ated 76T7T5D6D >ails A-ove medianF K A-ove medianF K 6.DD 6.86 <9

Ma)imum $e-t #Puity 3total 'nterest -earin+ de-t T &N!4 *eratin+ Cash >lo( Minimum $SC/ 3#B'&$A T interest *lus current maturities in lon+ term de-t4 .95 5.DD D.9D A-ove medianF K A-ove medianF K A-ove medianF K Positive ,or atleast 5 years in immediate *ast 7 yrs 6.;9 6.59 6.<9 6.<: &he o*eratin+ cash ,lo( is ne+ative mainly due to hi+her level o, $e-tors due to increased sales and also -ecause o, hi+her stock level. ASS#SSM#N& > >AC'"'&'#S ! /K'N% CAP'&A" ASS#SSM#N& MPB> Method 6 Holdin+ "evels Previous year Actual Sales Stocks Stock holdin+F days /eceiva-les /eceiva-les holdin+F days ther Current Assets &otal Current Assets Creditors Creditors holdin+F days ther Current "ia-ilities &otal Current "ia-ilities /easonin+ ,or the a-ove 5 Monthly Holdin+ "evels -ased on stock statement 3in days4 Stock Avera+e Monthly levels "ast year end ,i+ures 7; <6 9; 7C;5.6: $e-tors Creditors Sales 7.C;5.6: 7C6.7C 7; <;:.CD <6
8C.DD

Current 2ear Projns ,or ne)t year &aken ,or assessment 9.59D.DD 8;9.DD 79 6.D<D.DD ;9
<;.DD

8.79:.D< 796.:<

76 ;87.8D :5
95.5<

9.59D.DD 8;9.DD 79 6.D<D.DD ;9
<;.DD

6.76;.5C
9C<.98 7C6.<5

6.68;.7: 6.:6;.DD
99D.6< 99D.6<

6.:6;.DD 9;
;D.8; ::C.D6

78
77.5< 859.6D

8D
96.7: :D6.98

8D 96.7:
:D6.98

<:

#stimated ,or current year Projected ,or ensuin+ year Acce*ted levels 76 79 79 :5 ;9 ;9 78 8D 8D 879:.D< 959D.DD 959D.DD "inka+es -et(een the monthly avera+es and the year end ,i+ures 7 !orkin+ Ca*ital /ePuirement $etails Stocks /eceiva-les ther current assets &otal Current Assets 3a4 "ess? Credit availa-le on *urchases ther current lia-ilities &otal Current "ia-ilities e)cludin+ Bank Borro(in+s 3-4 !orkin+ Ca*ital %a* 3aF-4FF3c4 59Q on Current Assets 3d4 Projected N!C 3e4 3C4 F 3d4 3c4 F 3e4 Ma)imum Permissi-le Bank >inance F Minimum o, 3,4 or3 +4 8D $ays 79 ;9 /s.lakhs
8;9.DD 6.D<D.DD :5.DD 6.:6;.DD 99D.6< 96.79 :D6.98 6.D69.8: 8D8.59 969.8: :66.56 9DD.DD 9DD.DD

> /#'%N "#&&#/ > C/#$'& K Based n Projections >ormula 6 5 7 8 9 Annual Purchase o, Client 'm*ort Content Q &otal im*orts Avera+e monthly im*ort *urchases 'm*ort duty element Q 364 ) 354 374T65 AmountF/s. "akhs
9D6C.DD

76Q

6.999.<C

65C.:: 9Q <;

: ; < C 6D 66 65 67 68 69 6: 6; 6< $uty amountTmonth Net im*ort valueT month 'm*orts on $A -asis 'm*ort on $P -asis &ransit *eriod ,or im*ortsFmths Usance *eriod ,or im*ortsFmths &ransit *eriod ,or im*orts &otal "ead time ,or $AF"CFmths &otal "ead time ,or $PF"CFmths >"C rePuirement ,or $AF"C >"C rePuirement ,or $PF"C &otal >"C rePuirement Pro*osed "C limits 384 ) 394 384F3:4
:.8< 657.6<

6DDQ 3:4F3;4 F 7D days CD days F 36D4X3664 3C4 3;4)3674 3C4 ) 3684 3694X36:4 65D days F 7:C.98 F /s.7:C.98 lakhs /s.69D "akhs

C NC"US' N B /#C MM#N$A&' N &he ,irm is doin+ +ood and have +ood relationshi* (ith 'VB" ,rom last one year (ith *ro*er utili0ation o, the ,acility. &hus. enhancement o, limit is recommended. UBS <<

/#SU"& B $'SCUSS' N

&his *roject hel*ed me to understand credit mana+ement. My mentors *rovided me enou+h o**ortunities to +et real time e)*eriences o, di,,erent sta+es o, credit mana+ement. ' (orked in detail on monitorin+ and credit a**raisal. ' also learn (hat is dra(in+ *o(er. its si+ni,icance and ho( to decide the dra(in+ *o(er o, the clients. ' (orked e)tensively on Credit A**raisal and Monitorin+. &hese t(o *rojects hel*ed me to understand the si+ni,icance o, monitorin+T,ollo(Fu* and the *rocedure ,ollo(ed to do the same. &hrou+h credit a**raisal ' learned the *rocedure to make and credit a**raisal memo and details a-out the documents rePuired to do the same. &his +ave me the o**ortunity to kno( the +uidelines set u* -y 'N% Vysya ,or makin+ CAM. ' +ot to kno( the veri,ication methods ,or cross checkin+ in,ormation that is +iven -y the client. &hrou+h >inancial Analysis under CAM. ' have done the *ractical im*lementation o, the ,inancial kno(led+e +iven to me at my colle+e. UN'V#/S'&2 BUS'N#SS SCH " . Monitorin+ *roject +ave me the o**ortunity to e)*erience the *o(er o, ,ast movin+ technolo+y throu+h the M'S system o, 'N% Vysya. >rom M'S system authori0ed *ersons can access and ,eed in,ormation related to client=s account. A chan+e made in one -ranch can -e seen at any other -ank. &his hel*s the -ank to save time and *rovide ,ast services to the clients. ' also +ot the o**ortunity to do a unit visit (ith Mr. Vijay sharma at the ,actory o, . client. &his visit (as made -e,ore *re*arin+ credit a**raisal memo ,or the client. &his visit hel*ed me to understand the im*ortance o, unit visits. (hat all thin+s has to enPuired to check the authenticity o, the in,ormation +iven -y client and (hat all documents are rePuired ,or credit a**raisal. <C

SUMMA/2

SM# sector is one o, the ,astest +ro(in+ sector in 'ndia and one o, leadin+ contri-utor to country=s total e)*ort. 't has -een seen as a drivin+ ,actor and an im*ortant element in achievin+ the tar+ets o, the 'ndian economy. Because o, the lo( ca*ital rePuirement and its e)*onentially +ro(in+ s*eed. SM# sector is continuously *rovided (ith various schemes and ,acilities ,rom the -anks. 'N% has a se*arate -ranch ,or the *romotion o, SM#s and o,,ers various schemes to them to achieve their tar+ets. At 'N% ,acilities +iven to SM#s are as *er MCode o, Bank=s commitment to Micro and Small #nter*risesN (ith the o-jective o, encoura+in+ this sector throu+h easy availa-ility o, ,acilities. Bank takes care o, com*laints o, the client -y *rom*tly res*ondin+ to it. &he *ersonal and -usiness in,ormation o, the client is treated as *rivate and con,idential. and is +uided -y *rinci*les and *olicies stated in the code. &he method ,ollo(ed at 'N% ,or lendin+ to SM#s is as *er the norms set u* -y /B' and the a-ove mentioned Code. UBS CD

/#>#/#NC#S
R R

MA-out 'N%N. o,,icial (e-site o, 'N% Vysya Bank. A-out Small and Medium enter*rises. o,,icial (e-site o, Ministry o, Micro. Small and Medium #nter*rises. R Credit A**raisal Method is re,erred ,rom the documents o, 'N% Vysya. Branch. 1alandhar. R $e,inition a-out >und Based and Non >und -ased are taken ,rom? MCode o, Bank=s Commitment to Small and Medium #nter*risesN and (e-site? (((.investo*edia.com R MCode o, Bank=s Commitment to Small and Medium #nter*risesN. o,,icial (e-site o, 'N% Vysya Bank? htt*?TTmsme.+ov.in R $ocument on M"endin+ to SM# SectorN. o,,icial (e-site o, /eserve Bank o, 'ndia. UBS C6