36917763 project mba finance 2

8/8/2019 36917763 Project MBA Finance 2

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Submitted by:

SEEMA GUPTA

UIM (UTTARANCHAL INSTITUTE OF MANAGEMENT)


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LIST OF CONTENTS

Preface 1

Executive Summary 2

Acknowledgement 3

Certificate 4

Objectives of the Report 5

Introduction to Banking 6 - 7

Banking system in India 8 - 10

Guide lines of R.B.I. 11 - 12

Chronology of Banks in India 13 - 16

Future of Banking 17

About Standard Chartered Bank 13 - 15

Banking Profile of SCB 16

SCB Structure Over View 17

Operations in IPC 23 - 30

Operation in Internal services 31 - 57

Risk Management System 58 - 64Credit Risk Management 65 - 66

Introduction to Managing Credit Risk 67- 69

Introduction to Cash flow Analysis 70

Introduction to Ratio analysis 71 - 74

Introduction to Credit Scoring Models 75

Introduction to Financial Services of SCB 76 - 80

Introduction to Small & Medium Enterprises Banking of SCB 81 - 85

Customers of SCB banking 86

Workings on Petroleum Company & It's Analysis 87 - 103

Workings on Metals Company & It's Analysis 109 - 129Workings on Motors Company & It's Analysis 130 - 159

Conclusion 160 - 162

Bibliography 163

PREFACE

As a part of MBF program, a student has to peruse a project duly approved by the Director o

the institute. I had privileged of undertaking the project on the study and critical analysis of

the Operation Procedures of consumer banking and Analysis of financial statements and of th

customers of SME banking and measuring the credit risks at Standard Chartered Bank, 10

Parliament Street, New Delhi - 110001 during the period (15th April To 15 June).

It encompasses the entire operation unit in Delhi & consists of three Departments namely:-


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ITEM PROCESSING CENTRE

INTERNAL SERVICES

SME BANKING

My project is divided into five Chapters and they are given as under.

1) Chapter one of this study contains, concepts of banking and importance of the subject in

present sc enario.

2) Chapter two deals with Introduction of Standard Chartered Bank which consists history a

well as the present scenario of the bank.

3) Chapter three deals with the Banking operations of item processing centre of Slandered

Chartered Bank.

4) Chapter four deals with the Banking Operations of internal services of Slandered Chartere

Bank

5) Chapter five deals with Introduction of SME Banking and of Management of credit risk.

6) Chapter six deals with the analysis of Financial Statements and measuring risk

7) Chapter seven deals with the Conclusion and the Bibliography Part.


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EXECUTIVE SUMMARY

I have done my summer internship in Standard Chartered Bank. I have devoted around

one month in Item Processing Centre and Internal Services and around one month in

SME Banking. In the first section of summer training I was in operation department,

thereafter I was moved to SME Banking to learn the processing's of that department.

During my stint, I was exposed to theoretical as well as practical learning.

My project starts with an overview of the banking sector and the profile and

History of STANADRD CHARTERED. It lists the various activities handled by IPC. A loss o

any document can cause us lots of problem and hence we have to be very cautious about the

same. The project contains the workflow of the operation unit of standard chartered.


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ACKNOWLEDGEMENT

The summer training project in STANDARD CHARTERED bank was a very wonderful

experience for me. No matter what one achieves in life, he/she is always guided and helped b

someone. I got a good exposure of the industry, both in theoretical as well as practical groun

This project is a sincere effort to have an in-depth knowledge of various "Banking operation

and credit risk management of SME ".

With profound sense of gratitude and regards I convey my sincere thanks to Mr. ARUN

OBEROI ( Head--IPC) , Mr. Prashant (SME s), Miss Rachna (SMEs ) and all colleagues of

standards chartered bank for not only giving me an opportunity to pursue the project, but alshelping and guiding me through out in this project.

I would like to Express my Sincerest thanks to Prof. J.D.Agarwal And Prof. Aman Agarwal.

would also like to express my sincerest thanks to Miss. Yamini Agrawal, Prof.Chaterjee, MR

Pushpendra Raghav, Mr. Deepak Bansal and all the faculty members of IIF for guiding me

with their knowledge and guidance throughout my project work and also very graceful to al

my IIF colleagues for their helpful nature.


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OBJECTIVE OF THE PROJECT

During the course of my project, I had covered the below-mentioned objectives:

1) To Review & Analyze the work process in operation unit in a bank.

2) To understand the importance of the backend operation unit.

3) To review the analysis of Financial Statements of Small & Medium Enterprises to minimiz

Credit Risk.

4) To review the significance of process normalization towards saving Processing time &

enhancing productivity/ Output..

INTRODUCTION TO BANKING


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BANKING SYSTEM

After the nationalization of Banks, increasing adoption of technology, continuous mergers in

the banking, modernizing backroom operation in the banks and competition pave the path of

growth of Indian banking. By the mid-1990, the near monopoly of public sector banks faced

the competition by the more customer-focused private sector entrants. This competition force

older and nationalized banks to revitalize their operations.

Year 1992 was the golden period of Indian Banking system due to the scam-tainted stock

market. Large proportion of household saving moved into the banking system, which recorde

an annual growth of 20 percent in deposit

But along with the continuous growth and modernization, there are several challengesconfronting the banking sector. The main challenges facing the banking sector is the

deployment of funds in quality assets and the management of revenues and costs. The proble

of NPA (non- performing assets), overall credit recovery system still exist. There is a

continuous reforms and modernization is in process. A number of recon mediations of two

Narasimham committees have been implemented.

Foreign Banks are focusing on corporate and on the middle class consumer and providing the

better service. Nationalized Banks are also attempting to get on the path of automation. Stron

Banks will acquire the weaker banks. The numbers of foreign banks operating in India has

increased significantly and their share of total assets has also increased. In the year 2001

estimated foreign bank account for 14.7 percent of the total net profit of commercial bankin

sector in India.

In spite tangible progress and the contribution of Narasimham I and Narasimham committee

reports the banking sector in India suffering from systemic and structural problem.


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BANKING SYSTEM IN INDIA

The modern banking system in India started with establishment of the first joint stock bank

The General Bank of India in the year 1786. After this first bank, Bank of Hindustan and

Bengal Bank came to existence. In the mid of 19th century East India Company established

three banks The Bank of Bengal in 1809, The Bank of Bombay in 1840, and bank of Madras

1843. These banks were independent units and called Presidency banks. These three banks

were amalgamated in 1920 and new bank Imperial Bank of India was established.

After Independence the Imperial Bank of India was nationalized with a new name State Bank

of India by passing State Bank of India act 1955. The Reserve Bank of India as a Central ban

was nationalized in the year 1935 by an act the Reserve bank of India act passed in the

parliament. Several new banks as Punjab National Bank, Bank of Baroda, Canara Bank, India

Bank, Bank of India etc were established after independence. On July 19, 1969 14 major bank

were nationalized. Later on more banks were nationalized. At present the numbers of

nationalized banks are 20. Several Foreign banks were allowed to operate as per the guidelin

of RBI. At present the banking system can be classified in following categories:

1. PUBLIC SECTOR BANKS

Reserve Bank of India

State Bank of India and its 7 associate BanksNationalized Banks (20 in number)

Regional Rural Banks sponsored by Public sector Banks2. PRIVATE SECTOR BANKS

Old Generation Private BanksNew Generation Private Banks

Foreign Banks in IndiaScheduled Co-operative Banks

Non Scheduled Banks

3. CO-OPERATIVE SECTOR BANKS

State Co-operative BanksCentral Co-operative Banks

Primary agriculture Credit SocietiesLand Development BanksUrban Co-operative Banks

State Land Development Banks4. DEVELOPMENT BANKS

Industrial Finance Corporation of India (IFCI)


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Industrial Development bank of India (IDBI)Industrial Credit & Investment corporation of India (ICICI)

Industrial Investment Bank of India (IIBI)Small Industries Development Bank of India (SIDBI)

National Bank for Agriculture & Rural Development (NABARD)Export-Import Bank of India

SCICI Ltd

All the types of banks have a centralized control of RBI. All the banks have to follow the guidelines of RBI.

Government used banks to provide credit and loan to weaker sections. This all lead to a serious crisis of

unrecoverable debt. At the end of 1990 banks were saddled with NPA (Non Performing Assets) as bad and

recoverable debts touched to Rs.75, 000 crores.

Foreign Banks in India started to lure customers by good services. These banks were more automated, providin

more faster information, kept flexible working hours and introduced 24 hrs ATM's.

Today Private Indian Banks as well as Nationalized Banks offering better services and attempting to get on to th

path of comprehensive automation.

Guidelines of RBI

The RBI issued guidelines regarding the formation and functioning of private sector banks in January 1993.The guidelines are as follows:

The Banks shall be governed by the provisions of The Reserve Bank of India Act 1934, The Banking

Regulations Act 1949, and other relevant statuaries.Private Sector Banks are required to be registered as Public limited Companies in India.

The shares of banks are required to be listed on Stock Exchanges.Preference will be given to those banks whose headquarters are proposed to be located in a center which

does not have headquarters of any other bank.


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Maximum voting rights of an individual shareholder will be limited to 1% of total voting rights.The new bank will not be allowed to have as its Director any person who is already a Director in a

banking company.The bank will be subject to prudential norms in respect of banking operations, accounting policies, and

other policies as laid down by RBI. The bank will be required to adhere` to the following: Minimum

paid-up capital of Rs.1 billion. Promoter's contribution as determined by the RBI capital adequacy of 8%

of the risk weighted assets. Single borrower and group borrower exposure limits in force priority sector

lending Export Credit Loan policy within overall policy guidelines laid down by RBI.The banks will be free to open Branches anywhere once they satisfy the capital adequacy and prudential

accounting norms.The banks will not be allowed to have investments in subsidiaries, mutual funds and portfolio

investments in other companies in excess of 20% of the bank's own paid-up capital and reserve.The banks would be require to use the modern infrastructural facilities in office equipments, computer,

telecommunications etc.With the recommendations of Narasimham Committee, the Government has now allowed the entry of

Private Banks.

The RBI will grant approvals for entry of private sector banks provide such banks offer competitive,

efficient and low cost financial intermediation services, result in up gradation of technology in the

banking sector, are financially viable and do not resort to unfair means like preemption and concentration

of credit, monopolization of economic power, cross holding with industrial groups etc.Non Residential Indians are allowed to have primary equity in a new banking company to the extent

of 40%. In the case of a foreign banking company or a finance company acting as a technical

collaboration or a co-promoter, equity participation is restricted to 20%.


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CHRONOLOGY OF BANKS IN INDIA

January 1, 1949 : The Reserve Bank of India is Nationalized and made a Central Bank in India

by an act of Parliament.

September 4, 1951 : The Government of India planned to seek loan from World Bank.1956 : Life Insurance Companies were Nationalized.

July 3, 1964 : IDBI was set up.July 6, 1966 : First time the Rupee was devalued by 36.5 percent, one Dollar became Rs.7.50

from Rs.4.75.July 19,1969 : Fourteen major banks were nationalized by Mrs. Indira Gandhi the then Prime

Minister of India.1973 : The Foreign Exchange Regulation Act came into existence. (Now Foreign

Exchange Management Act)

January 11, 1978 : Currency notes in denomination of Rs.1000, Rs.5000 and Rs.10, 000 werewithdrawn from circulation.

November 19, 1986 : Government of India Launched Indira Vikas Patra.1987 : Government of India introduced 9 % Tax free relief bonds, to mobilize

resources for meeting draught related expenditure.April 1988 : National Housing Bank was set up with a share capital of Rs.100 crores

subscribed entirely by the R.B.I.July 1 and 3, 1991 : R.B.I devalued the rupee downward by 17.38 percent.November, 1991 : M. Narsimham committee on reforming the financial system submitted its


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report suggesting phased reduction of SLR to 25 percent in three years and

CRR to 10 percent in four year.March, 1992 : Dual Exchange rate system was instituted under liberated rate management,

enabling orderly transition from a managed floated regime to a market

determined one.

April, 1992 : RBI introduced Risk-Assets-Ratio for Banks as a Capital adequacy measure.January 8, 1993 : FERA was amended and subsequently repealed and replaced by Foreign

Exchange Regulation Act 1993.January, 1993 : Guidelines for setting up private sector banks are issued.March, 1993 : Process of convertibility is started and Rupee is made convertible on the trade

account.September, 1993 : New Bank of India was merged into Punjab National Bank.

March, 1994 : UTI Bank became the first private sector bank to start its operation.

June 13, 1994

: RBI issued guidelines on Prudential norms. Banks should achieve minimum

capital adequacy ratio 6 percent on their risk weighted assets and off Balance

Sheet exposures by march31, 1995 and 8 percent by march 1996.July 15,1994 : Amendment in Banking Companies Act 1970 enabled the Nationalized bank to

tap the capital market. The Nationalized banks are allowed to strengthen their

capital base to contribute to their capital up to 49 percent in the capital market.August, 1994 : Full convertibility was taken by making the Rupee convertible on the current

account.October, 1994 : Oriental Bank of Commerce became the first Nationalized bank to access the

capital market to raise Rs.387.24 crore capitals.

October 1995 : Banks are allowed to fix their own interest rates on domestic term deposits with

maturity of two years.July, 1996 : The insurance regulatory authority was set up to privatize the insurance sector

May 9, 1997 : RBI issued new norms for Non Banking Finance companies to improve their

financial health and viability. The financial companies are required to apply for

registration with RBI by July 8, 1997.December 7, 1997 : RBI constituted a working group under the Chairmanship of S.H.Khan to

examine the harmonization of role and operations of development of Financial

Institutions and Banks.

April 24, 1998 : The S.H.Khan committee on the harmonization of the role and operations of

development of Financial Institutions and Banks submitted its recommendation

to move towards universal banking.August 9, 2000 : Banks having a minimum net worth of Rs.500 crore and satisfying other

criteria regarding capital adequacy were allowed to enter insurance business

through a joint venture.November 10, 2000 : Guidelines to Bank for financing of equities and investment in shares were


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India Banking Summit, an international conference examining the future of banking and

financial services in India will bring together leaders in the field of banking, wealth

management, insurance, and IT to discuss growth opportunities in retail, community, rural,

and commercial banking.

The summit will be held in Mumbai from Tuesday 7th December until Wednesday 8th

December 2004 at the Renaissance Mumbai Hotel and Convention Centre.

The event has been endorsed by Dr. Manmohan Singh, Prime Minister of India, and sponsore

by Intellect Suite by Polaris, SunTec, PSI Data Systems, Carreker Corporation, Red Hat,

Aviva Life Insurance and SDG Software Technologies. It brings together over 150 senior

executives to evaluate the latest developments in banking technology, risk management, reta

and rural financial services, capital markets, and regulation.

Opening this year's event, Chief Executives from ING Vyasa Bank, Bank of Baroda, IDBI

Bank, ICICI Bank, Bank of Maharashtra, Yes Bank, and the Development Bank join the Worl

Bank and Polaris Software Lab to explore new growth opportunities in retail banking. The

program also features participation from Citigroup, Bank of America, HDFC Bank, Kodak

Investment Banking, Bank of India and the Reserve Bank of India.

ABOUT STANDARD CHARTERED BANK


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Even within this period of apparent retrenchment Standard Chartered expanded its network, r

opening in Vietnam in 1990, Cambodia and Iran in 1992, Tanzania in 1993 and Myanmar in

1995. With the opening of branches in Macau and Taiwan in 1983 and 1985 plus a

representative office in Laos (1996), Standard Chartered now has an office in every country

the Asia Pacific Region with the exception of North Korea. In 1998 Standard Charteredconcluded the purchase of a controlling interest in Banco Exterior de Los Andes (Extebandes

an Andean Region bank involved primarily in trade finance. With this purchase Standard

Chartered now offers full banking services in Columbia, Peru and Venezuela. In 1999,

Standard Chartered acquired the global finance trade business of Union Bank of Switzerland

This acquisition makes Standard Chartered one of the leading clearer of dollar payments in th

USA. Standard Chartered also opened a new subsidiary, Standard Chartered Nigeria Limited

Lagos, acquired 75 percent of the equity of Nakornthon Bank, Thailand; and agreed terms to

acquire 89 percent of the share capital of Metropolitan Bank of the Lebanon.

Standard Chartered Today

Today Standard Chartered is the world's leading emerging market bank employing 30,000

people in over 500 offices in more than 50 countries primarily in countries in the Asia Pacifi

Region, South Asia, The Middle East, Africa, United Kingdom, and the Americas. The new

Millennium has brought with it two of the largest Acquisition in the history of bank with the

purchase of Grindlays bank from the ANZ Group and the acquisition of the Chase Consumer

Banking operation in Hong Kong in 2000.

These acquisitions demonstrate Standard Chartered firm committed to the emerging markets

where it has a strong and established presence and where it sees its future growth. It is one o

the world's most reputed international banks, with a management team comprising 70

nationalities. Standard Chartered is listed on both the London Stock Exchange and the stock

exchange of Hong Kong and is in the top 25 FTSE-

100 companies, by Market Capitalization. It serves both consumer and Wholesale banking

customers. Consumer Banking provides Credit cards, personal loans, mortgages, deposit takin

and wealth management services to individuals and small to medium sized enterprises.

Wholesale banking provides corporate and institutional clients with services in trade finance


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cash management, lending, custody, foreign exchange, debt capital markets, and corporate

finance.

Standard Chartered is well established in growth markets and aims to be the right partner fo

its customers. The Bank combines deep local knowledge with global capability. The bank is

trusted across its network for its standard of governance and its commitment to making adifference in the communities in which it operates.

BANKING PROFILE OF SCB

SCB has some different types of banking:-

Priority Banking

Personal Banking

Door Step Banking

Retail Services

Additional Services


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SCB STRUCTURE OVERVIEW

Standard CharteredBank

Internal

Services

Central OpsMetro Ops

Service qualitySalesSharedDistribut-ion

ServiceBIUService Delivery

Whole Sale BankingConsumer Banking

Item Processing

Centre

Account Services

rvices

Safe CustodyDisbursement Unit

Asset OperationLiabilitiesOperation


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CLEARING

INTRODUCTION

Clearing is a way adopted by the banking system to enable the exchange of negotiable

instruments like cheques, drafts etc... I .e. drawn in any bank in favor of another branch or it

customers and the subsequent settlement of the amounts due between banks on account of suc

exchange of these instruments.

In case of Indian banks, 'RESERVE BANKS OF INDIA' is the intermediary between various

banks R.B.I. derives the power of setting up and managing clearing house from section 58(2

(p) of R.B.I. act. For the above purpose, all banks maintain an account with R.B.I. which is

used for the settlement of inter-bank dues. In case, where R.B.I. does not maintain a clearin

house, a specified local branch of the 'State Bank of India' or its subsidiaries is used for this

purpose.

Clearing can be grouped under two heads:

1) INWARD CLEARING: - Inward clearing is a process wherein each member bank

receives payments.

2) OUTWARD CLEARING: - Outward clearing is a process wherein each member bank

the clearing house delivers cheques for realization instruments, drawn on the other

banks.

INWARD CLEARING

CLEARING MECHANISM

MICR CLEARING: MICR Clearing concept is basically introduced by R.B.I.

MICR band consists of -

- Serial number of the instruments.

- City drawn cheques.

- Bank code.


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- Branch code.

- Transaction code.

- Amount.

The step by step procedure of clearing:

STEP 1: From R.B.I. clearing house, the inward clearing instruments, the input forms, the

floppy and the reports has been picked up. Similarly from the S.B.I. , the hard copy as well a

the soft copy of the input statement has been picked up.

STEP 2: I.T personnel is handed over that floppy and tapes from the clearing house through

ICSMERGE.

STEP 3: After merging they generate a report of the total number of items and the value,

in the listing of the R.B.I., tallies with the report. The file is uploaded to the host

for processing and posing of the debits into the customer accounts.

NEXT AT SINGAP ORE:-

STEP 4: After uploading at Singapore, the support team runs a program which debits the

customer accounts.

This program has two entries:-

CR - Clearing Settlement.

DR - Inward Clearing computer surpass.

This program pass-- Debit to customer.

- Credit to ICCS (IPC cost center).

This program simultaneously generates reports for-

- Items that have been posted (90 Q).


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- Items that have not been posted (90 V).

-items with hard hold (XS 14)

The reports downloaded to local "IPC control D-ID".

NEXT AT IPC CENTRE:-

STEP 5: R.B.I. Report will be ticked back against the cheques. If any differences found, it

will captioned in clearing differences.

STEP 6: Three reports generated here:

XS0014 - Late posting (i.e. manual posting transaction).

XS0090V- Rejected items by items sequence numbers.

XS0090Q- Posted items.

STEP 7: Technical verification having checking of six different entries:

- Cheque is postdated/ outdated/ having no date.

- Have signature or not.

- Cheque has crossing stamp of the presenting bank.

- Any unauthorized signature.

- Having payers name.

If any point is missed, that cheque would be considered as rejected items.

STEP 8: Signature Verification of those cheques having amount:

> INR 10,000/- will be done.

> INR 50,000/- will be scanned by U.V.Rays.

STEP 9: Total value of Inward Clearing received from the R.B.I. are reported for finance.

STEP 10: Now Inward Balancing takes place like below:

+ Total auto posted items (90Q).

- Total of XS14.

+ Manual posted rejected items (90V).


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+ XS14 (Returned un-posted items).

+ CRS (Returned un-posted items).

+ GL payments.

+ CDDTV.

= Total = Total IC as per R.B.I. Schedule.CLEARANCES OF HIGH VALUE CHEQUES:-

The high-value cheques will be collected from the R.B.I. at the proper given time .The

cheques are in lot and arranged in lots with the listing attached to it .Inward clearing of high

value cheques are completely manual as against HICR Inward-Clearing. Cheques will be add

listed "presenting bank" lot-wise and verified against the total of the listing.

Verification of signature is done on CT-Dos. All customer cheques will be posted manually

through transfer withdrawal option in CT-Dos and high-value posted journal is a check to an

wrong posting by the teller.

At the time of posting, the details of the cheques have been matched to identify any wrong

position. Then technical verification takes place.

Then high-value limex report has been generated.

The transaction refers to the concerned branch.

Then totaling of the following:-

1. Posted transaction total.

2. Un-posted returned total.

3. Drafts sent to total.

4. Differences if any.

INTER-BANK INWARD CLEARING :

1. Cheques and lists are collected from R.B.I.

2. Verification of the technical error.

3. Signature verification of the Bank officer.

4. Posting of pay-order through CT-Dos.

5. Checking and verification of entries takes place with the R.B.I. Settlement

sheet.

6. Then GL has been generated.


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OUTWARD CLEARING:

This department receives outward clearing cheques and deposit slip from the customers from

branches or bo xes.

# Two sets of cheques are received here:

- One accepted at the counter.

- One accepted at the cheque collection boxes.

Then cheques are segregated into:-

* Local cheques.

* Outstation cheques.

* Dollar cheque.

* Transfer cheque.

* High amount cheque.

* Discrepancies cheques.

The instruments having high-value > 6 lacs have been reported to senior officials according t

"money laundry guidelines".

In the meanwhile, in the Technical Verification, the NC and BC cheques are segregated.

Clerk reviews the instruments to see if there are any doubtful deposits.

While clearing, clerk checks that:

- Beneficiary details are same as the account number.

- The cheque is not post-dated.


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- Any deposit slip having any discrepancy are considered as rejected items and then

finally returned to concerned branch.

Now the cheques are batched together separately for MICR and payable at par cheques .Then

total of each batch note down. Then all cheques encoded by outward clearing houses. The dul

encode cheques will be checked against the total of various deposit slips.Then the 'block ticket" at the end of the day are prepared through the machine for the sum of

total of all the batches. Simultaneously MSA OCCS credit voucher will be totaled. Then the

cheques are posted through CT-Dos.

To credit the GL a/c of the bank, the entries that has been passed are

- Dr.-to- OCCS -to- IPC cost centre

- Cr. -to- Respective GL a/c.

Then balancing takes place. Two types of balancing are there:

1) MICR clearing.

2) Non MICR clearing.


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O U T P U T C O N T R O L

F IN A N C IA L

C H E C K IN G

C A S H TR A N S A C T IO N S

TR A N S F E RT R A N S A C T I O N S

A L L TH E V O U C H E R SA N D IN S TR U C T IO NA B O V E T E L L E R L IM IT SM U S T B E A U TH O R IS E DB Y C O M P E T E N TP E R S O N . ( TS M /B M )

N O N F IN A N C IA L

T R A N S A C T I O N S

A C C O U N T L A S

A M E N D M E N T S O NH O G A N

A M E N D M E N T S O N C TD O S

R E S TR A IN T S


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R E P O R T S

X C 0 0 8-1

X C 0 0 8-2

C R 0 2 9 0

D R 0 2 9 0

D R 0 1 0

C R 0 1 1

D R 0 2 6

X S 0 0 3 1 B

X S 0 0 0 8 X S 0 0 1 3

C R 0 0 3-T

G L B S C 0 1 9

G L B S C 0 2 0

G L B S C 0 1 0


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C A S H T R A N S A C T IO N S

C A S H D E P O S I T S

T O C U S T O M E RA C C O U N T

T O C R E D I T C A R D

T O P S G L A C C O U N T

C A S H W IT H D R A W L

B Y C H E Q U E

T H R O U G H C A S HW IT H D R A W A L S L IP

A G A I N S T C R E D I TC A R D

A G A I N S T I D


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C A S H D E P O S IT T O C M A /C

T x nR s. 2 5 0 0 0 0 /- a n d a b o v e .

P A N / G I R N o t o b e m e n t i o n e do n c a s h d e p o s i t s a b o v e 5 0 k . If n o t a v a i la b le F o rm 6 0 d u lyfi l l e d u p t o b e a n n e x e d .

If t h r u A T M A T MC a s hD e p o s i t E n ve l o p e w i t h c o p y o f J P e n c l o s e d .

A m o u n t s i n w o rd s & fig u r e s t ot a l l y .

A l t e ra t i o n s o n t h e d e p o s i t s l i pt o b e a u t h e n t ic a t e d .

P o s t in g in t o c o r r e c t a c c o u n ta n d w i t h c o r r e c t a m o u n t .


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C A S H D E P O S IT IN C R . C A R D

A l l C a s h d e p o s its tob e c h e c k e d

ir r e s p e c t iv e o f a m o u n t .

T a l ly C r e d it C a rd A /cN o w ith in p u t c a rd n o .

S ta te m e n t C o u n te r f o i l

a t t a c h e d


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C A SH D E P O S IT T O P S G L

Al l Transa ct ions i rrespe c t ive o f

amount .

Amo unt and Account Nu mber to

be tal lied.


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C A S H W IT H D R A W A L B Y

C H E Q U E T x nR s. 5 0 0 0 0 /- a n d a b o ve . R e p e r fo rm a n c eo f S i g . V e r i fi c a t i o n

fo rT xn. > =R s. 5 0 0 0 0 /- a n dT xn.= =R s. 5 0 0 0 0 0 /- i f n o t d o n e b yT S M / B M

T x n. > =R s. 5 0 0 0 0 0 /- U /V S c a np e r fo rm e d .

D a te o f C h e q u eV a l i d B e a r e r In s t r u m e n t

A l te r a t i o n s a u th e n t i ca t e d

R u b b e r S ta m p fo r n o n i n d i v i d u a la c c o u n t s

C a s h R e ce i p t A c k n o w l ed g e m e n to n r e v e r s e o f c h e q u e.

C o r r e c t A /c N o , Am o u n t a n dC h e q u eN u m b e r i n p u t .


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DESERTATION

C a s h W it h d r a w a l S l ip / C o u n t e r

C h e q u e

R e q u is i t io n S l ip /L e t te r

h e l d

ID D o c u m e n t s o b t a in e d ,C u s t o m e r Id e n t i f ie d b y

b r a n c h s t a f f d u lys ig n e d o n t h e r e v e r s e . .

A /c N o . o nC h e q u e

H a n d W r it t e n /S ta m p e d

N o t Is s u e d t o N o n

In d iv id u a l A /c


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DESERTATION

C r e d i t C a r d A d v a n c e S l i p

A l l T r a n s a c t io n sir r e s p e c t iv e o f

a m o u n t .

C h e c k th e c o r r e c ta m o u n t p o s te d .

C a s h A d v a n c e S l ipp u t th ru a m a n u a l

im p r in te r /P O S


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DESERTATION

C a s h P a y m e n t A g a in s t I D

R e c e ip t A c k n o w le d g e d b y ID H o ld e r

S w if t /IT T M a s s a g ea u t h o r i s e db y P a y m e n ts

ID D o c u m e n ts o b t a in e d

A m o u n t a s p e r i n s tr u c t io n


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DESERTATION

F o r e ig n C u r r e n c y T r a n s a c t io nU S D / G B P / E U R O

F C Y C a s h D e p o s it

T C D e p o s it F C Y C a s h W it h d r aw a l T C S a le C u r r e n cy U S D , G B P a n d E U R O P A F ( 2 c o p ie s ) m u s t b e a t t a c h e d to t h e v o u c h ers

F o r m A 4 a n d F E M A d e c la r a t io n m u s t b e o b ta in e d d u l y f ille d u p a n d s ig n ed / s t a m p e d E n s u r e th a t F C Y le g is p o s t e d N e c e s s a ry d o c u m e n t s C o p y o f P a s s p or t / C D F / C o p y o f V is a / C o p y o f A ir T r a v e l

T ic k e t / P u r p o s e o f T r av e l m u s t b e o b t a in e d F o r m A-2 ( 2 c o p ie s ) a n d d o c u m e n t s a s a b o v e m u s t b e s e p a ra t e d f ro m th e vo u c h e r s

a n d b e h a n d e d ov e r t o t h e p e rs o n d o in g r e c o nc i lia t io n o f F C Y A /c s

E n s u r e r e c e ip t o f F C Y ac k n o w le d g e d by c m & e n c as h m e n t c e r tif ic a te i s s u e d in c as eo f F C Y T C /C u r r e n c y pu rc h a s e . A ny b r a n c h c a n d e a l in F C Y h ow ev e r t h e F C Y ac c o u n t c a n o n ly b e po s t e d in t h r e e

C a t A b r a nc h e s 1 7P s t, 1 0 E C P a n d 1 0 S M G . In m o s t o f t h e c a s e s a ll th e b r an c h e s w h ic h r ec e i v e /s a l e in F C Yp o s t the L C Y le g in

th e i r b r a nc h a n d f o r F C Y le g t h ey s e n d m a s s a g e to 1 0 E C P b r a n c h .


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DESERTATION

T r a n s f e r T r a n s a c t i o n s

T y p e s

A / c t o A /c T r a n s fe r B yC h e q u e/ L e t t e r e t c .

S a la ry T r a n s f e r

C h a rg e s R e v e r s a l

D D / P O Is s u a n c e

T D Is s u a n c e ( Q A O ) / T DB r e a k s

R e m e m b e r

If A / c t o A / cT r fd o n e o n L e t t e r I t m u s t b ea u t h o r i s e db y t h eB M . A l lt ra n s a c t i o n s m u s t b ec h e c k e d

R e v e r s a l o f C h a rg e s fr o mw a i v e r A / c ( P S G L ) c a n o n l yb ea u t h o r i s e db y B M . A l l

t ra n s a c t i o n s m u s t b e c h e c k e d Q u i c k A / c O p e n in g F o r m m u s t

b e s e p a r a t e d f ro m t h ev o u c h e rs a ft e r c h e c k in g a n ds e n t to A C S


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DESERTATION

A / c t o A / c T r a n s f e r b yC h e q u e

T x n> =R s. 5 0 0 0 0 /-

S i g n a tu re R e P e r fo r m a n c e fo r T x n> =R s. 5 0 0 0 0 /-a n d =


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DESERTATION

A / c t o A / cT r f. b y L e t t e r

M u s t b ea u t h o r i s e db y t h e T S M / B M .

D ia r y n o t e i n d i c a t i n g c a l l b a c k t o c m .

A l lo w e d o n ly i f t h e r e i s c o m m o n A / c h o l d e r

b e t w e e n D e b i t & C r e d i t A / c h o ld e r .

N o t h i r d P a r t y t r a n s f e r s a llo w e d o n le t t e r . A l l t r a n s a c t io n s a r e r e q u i r e d t o b e

c h e c k e d .


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DESERTATION

D D / P O Is s u a n c e

T x n sa b o v eR s. 5 0 0 0 0 /- to b e c h e c k e d .

A lt e r a t io n s a u t h e n t ic a te d

D D /P O n u m b e r a n d a /c n o lo a d e d c o r r e c t ly

R e c e ip t a c k n o w l e d g e d b y c m o r a u t h o r i s e dr e p r e s e n t a t i v e

I f c m h a s p r o v id e d ac h e q u ea g a in s t is s u a n c e o f D D /P O i t m u s t b e c a n c e l le d b y d e b i t o r c ro s s e df o r c a n c e l la t io n a f te r c h e c k in g fo r s to p p a y m e n t sb y th e T S M .


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DESERTATION

A c c o u n t C l o s u r eD D A

A ll t r a n s a c t io n s m u s t b e c h e c k e d . S ig nr e p e r f o r m a n c ef o r > =R s.

5 0 0 0 0 /- & = < 5 0 0 0 0 0 /- a n d f o r h ig h e r a m t s i f n o ta u t h o r i s e db yT S M / B M .

C h e q u eB o o k / D e b it C a r d t a k e nb a c k a n d d e s t r o y e d . ( p r o p e r r e m a r k s g iv e n )

S ig n a t u r e s o f a l l a c c o u n t h o ld e r s .

If c o m p a n y a c c o u n t B o a r dR e s o lu t io n a t ta c h e d . B R m u s t b e

s ig n e d b ya t l e a s ttw oa u t h o r i s e dr e p r e s e n t a t iv e w h o a r e n o ts ig n a t o r y t o c lo s u r e l e t t e r .

O n lyK a r t ai n H U F a n d P r o p r ie t o r inP r o p r i e t o r s h i p f ir m c a n s ig n th ec lo s u r e i n s t r u c t io n n o t t h e P O Ah o l d e r .

N o T h ir d p a r ty p a y o u t b e m a d e f o r p r o c e e d s .

C D A

T h re s h o ldR s. 5 0 0 0 0 /-. S i g nr e p e r fo rm a n cen o t r e q u i r e d .

A l te r a ti o n s a u th e n t i c a t e d . C r e d i t to A /c o f s a m e a c c o u n t

h o l d e r .

N o t h i r d p a r ty c r e d i ts a l l o w e d . N o c a s h p a y m e n ts i f th e

r e l a t i o n s h ip a m o u n t ( a c r o s s a l lC D A a c c o u n t s ) e xc e e d sR s.2 0 0 0 0 /- i n c l u s i ve o f i n te r e s t

a c c r u e d . T h is is IT r e q u i r e m e n ta n d m u s t b e a d h e r e d t o s tr ic t l y .


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DESERTATION

N o n F i n a n c i a l T r a n s a c t i o n s

I s s u a n c e o f O T CC h e q u eB o o k .

S t o p P a y m e n t s .

P la c e m e n t / r e m o v a l o f H o l d s / L i e n s .

A m e n d m e n ts i n D e b it / A T M C a r d S t a t u s .

A m e n d m e n t s a t i d /a c c o u n t le v e l .

N e w A c c o u n t s e t u p


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DESERTATION

A c c o u n t C l o s u r eD D A

A ll t r a n s a c t io n s m u s t b e c h e c k e d . S ig nr e p e r f o r m a n c ef o r > =R s.

5 0 0 0 0 /- & = < 5 0 0 0 0 0 /- a n d f o r h ig h e r a m t s i f n o ta u t h o r i s e db yT S M / B M .

C h e q u eB o o k / D e b it C a r d t a k e nb a c k a n d d e s t r o y e d . ( p r o p e r r e m a r k s g iv e n )

S ig n a t u r e s o f a l l a c c o u n t h o ld e r s .

If c o m p a n y a c c o u n t B o a r dR e s o lu t io n a t ta c h e d . B R m u s t b e

s ig n e d b ya t l e a s ttw oa u t h o r i s e dr e p r e s e n t a t iv e w h o a r e n o ts ig n a t o r y t o c lo s u r e l e t t e r .

O n lyK a r t ai n H U F a n d P r o p r ie t o r inP r o p r i e t o r s h i p f ir m c a n s ig n th ec lo s u r e i n s t r u c t io n n o t t h e P O Ah o l d e r .

N o T h ir d p a r ty p a y o u t b e m a d e f o r p r o c e e d s .

C D A

T h re s h o ldR s. 5 0 0 0 0 /-. S i g nr e p e r fo rm a n cen o t r e q u i r e d .

A l te r a ti o n s a u th e n t i c a t e d . C r e d i t to A /c o f s a m e a c c o u n t

h o l d e r .

N o t h i r d p a r ty c r e d i ts a l l o w e d . N o c a s h p a y m e n ts i f th e

r e l a t i o n s h ip a m o u n t ( a c r o s s a l lC D A a c c o u n t s ) e xc e e d sR s.2 0 0 0 0 /- i n c l u s i ve o f i n te r e s t

a c c r u e d . T h is is IT r e q u i r e m e n ta n d m u s t b e a d h e r e d t o s tr ic t l y .


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DESERTATION

O T CC h e q u eB o o k s Is s u a n c e

I s s u e d o n ly t o i n d iv i d u a l a c c o u n t s .

R e q u i s i t i o n s l i p / c u s t o m e r le t t e r o b t a in e d .

M u s t b ea u t h o r i s e db y T S M / B M .


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DESERTATION

S t o p P a y m e n t s

A l l t r a n s a c t io n s to b e c h e c k e d .

C u s to m e r L e t te r .

S ig n a tu re s V e r i f ie d .

D a te & T im e o f re c e ip t m e n t io n e d o n t h ei n s t r u c t i o n .

C h e q u eN o a n d A /c n o c o r re c t ly lo a d e d . C h a rg e s t a k e n a n d i f w a iv e d t h e n d u ly

a u t h o r i s e d.

T h e g a p b e tw e e n r e c e ip t a n d p o s t in g t im es h o u ld b e r e a s o n a b le .


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DESERTATION

O t h e r N o n F i n a n c i a lT x n s

A l l t r a n s a c t i o n s to b e c h e c k e d .

C u s to m e r I n s t r u c t i o n / D i a r y n o t e d u l ya u t h o r i s e d/ c o p y o f o r d e r so f r e g u l a to r y b o d i e s .

I f n o t i n i t i a te d b y c m a s i g n o f f b y th e B M S p e c i fi c a l ly i n c a s eo f c h a n g e o f A R M c o d e a p p r o v a l b y r e g i o n a l h e a d / A R M c o d eo w n e r a t ta c h e d .

C u s to m e r I D d o c s o b ta i n e d w h e r e v e r a p p l i c a b le a s i n c a s e o f D e b i t / A T M c a r d a c t i v a t i o n , r e m o v a l o f H o l d 6 0 / 2 0 e t c .

P l a c e m e n t / R e m o v a l o f H o l d 2 0 m u s t b ea u t h o r i s e db y B M . A p p r o p r i a t e H o l d p l a c e d .

A c c o u n t O p e n i n g F o r m f o r L A S .

D e t a i l s o f h o l d a r e m e n t i o n e d o n t h e re v e r s e o f h o l d v o u c h e r s .


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DESERTATION

T r a n s a c t io n o n D o r m a n t A /c & U n c la im e d A / c

ID a n d A d d r e s s o f th e c u s to m e r to b e v e r i f i e d in s u c h c a s e s .

C o p ie s o f ID d o c s o f a ll a c c o u n t h o l d e rs /a u t h o r i s e ds ig n a t o ri e s ta k e n a n da n n o ta t e d w i th O r i g in a l S e e n b y th e T S M / M S S / B M . ID p r o o f n o t r e q u i re d i f th e c u s t o m e r is m a in t a i n i n g a n o th e r tr an s a c ti n g ( S / B

o r C /A ) a c c o u n t ( s ) u n d e r th e s a m e ID A N D t h e a c c o u n t is b e in gc l o s e dw h e r e th etxna m o u n t i n v o l ve d i s le s s th a nR s5 0 0 . 0 0 .

In c a s e t h e ID c o u ld n o t b e o b ta i ne d a d ia r y n o t ea u t h o r i s e db y th e B M t h a tth e ID d o c s w o u ld b e o b t a in e d i n d u e c o u rs e m u s t b e a t ta c h e d tov o u c h e r s .

M a i l to A C S f o r d e f e r r a l fo r o b t a in in g ID d o cs . M u s t b e a t ta c h e dto th ev o u c h e r s .

H o l d 6 0 m u s t b e m a r k e d in c a s e o f d e f e r ra l . B M c a n w a i ve o b t a i n i n g ID d o cs . i f h e /s h e is s a t is f ie d th a t th ec u s t o m e r h a s

b e e n id e n t i f ie d . T h e s a m e m u s t b e c l e a r ly a n n o ta t e d o n t h e i n s tr u c t i o n . In c a s e o f D o rm a n t A /c c lo s u r e w h e re t h e I D p r o o f c o u ld n o t b e ob t a i n e d ,

p a yo u t c a n b e m a d e b y P O o n l y a n d th e P O m u s t b e s e n t th r uc o u r i e r /r eg is te r e d p o s t a t th e a d d r e s s r e co r d e d i n o u r s ys te m .

U n c la i m e d a c c o u n t s

U n c l a im e d A /c c a n o n l y b e c l o s e d a n d a f r e s h a c c o u n t i s o p e n e d af t e r o b ta i n i n g K Y C d o c s .

S i g n a tu re s m u s t b e ve r i f i e d b y T S M /B M .


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DESERTATION

O t h e r N o n F i n a n c i a lT x n s

A l l t r a n s a c t i o n s t o b e c h e c k e d . C u s to m e r I n s t r u c t i o n / D i a r y n o t e d u l ya u t h o r i s e d/ c o p y o f o r d e r s

o f r e g u l a t o r y b o d i e s .

I f n o t i n i t i a t e d b y c m a s i g n o f f b y t h e B M S p e c i fi c a l l y i n c a s eo f c h a n g e o f A R M c o d e a p p r o v a l b y r e g i o n a l h e a d / A R M c o d eo w n e r a t t a c h e d .

C u s to m e r I D d o c s o b t a i n e d w h e r e v e r a p p li c a b le a s in c a s e o f D e b i t / A T M c a r d a c t i v a t i o n , r e m o v a l o f H o l d 6 0 / 2 0 e t c .

P l a c e m e n t / R e m o v a l o f H o l d 2 0 m u s t b ea u t h o r i s e db y B M .

A p p r o p r i a t e H o l d p l a c e d . A c c o u n t O p e n i n g F o r m f o r L A S .

D e t a i ls o f h o l d a r e m e n t i o n e d o n t h e re v e r s e o f h o l d v o u c h e r s .


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SUGGESTIONS

Standard Chartered Bank has over the years maintained its services and relationship. It runs over 88 branches a

over the country. It has created a name for itself in the banking sector. As far as my views are concerned,

Standard Chartered as a model has a well-defined banking structure and gives satisfactory business to its client

Moreover I have observed some drawbacks in the short span in this department; I strongly believe that if these a

done away with in the Standard Chartered, its family would definitely see a better future. The key areas of

concern are:

- the main problem area of this department is the outdated software package being used across all the branches f

business. It simply reduces the efficiency of this organization. As we know, Cost minimization and profit

maximization is the main and common aim for any organization. The software which is being used here directl

or indirectly hampering the work-efficiency and minimizes profit. It should be replaced by advanced software a

soon as possible. It will double the efficiency of this firm as well as across all branches.

- Use of Dot-Matrix printer should be replaced by "Laser Printer ". It will save "30-45 minutes" of each employ

employed as a clerk here. They use to get their ledger through ink-jet. If Laser-printer will be introduce

here, each day, at least '10 hrs.' can be saved and again it will directly minimize the cost and maximize the

profit.

- Automation of simple jobs:-

Technology Up gradation- Sama Shodhan should be upgraded to enhance the efficiency and supportoutstation cheques also, so that it works as a safe-guard for future problems. At present Sama Shodhan

processed only local cheques not outstation cheques. Out-station cheques are processed through CT-Do

But there are limitations with this package. It cannot provide further details of the cheques which had

been processed. So any queries occurs, then we have to search the overall records processed cheques

manually to answer and if any cheques are misplaced or damaged intentionally or unintentionally, the

the bank may have to face a bigger problem.

Solution : Shama Shodhan can be advanced by having an option for outstation cheques. It works a saf

guard for coming problems if any and works as a cousin for this bank.

Expenditure Analysis : Absenting is a disease to a flourishing company hence such employees, who fa

to constraints to an organization should be relieved.


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DESERTATION

Excess of employees in department : In my view, the no. of employees are more than required, as I

noticed in 2 weeks that each day, 1 or 2 employees remain absent throughout the week but the operatio

is going on without any hindrances.

Securitisation of risk: Securitisation of risk should be there which actually lacking here. In clearancedepartment what I felt is the job of a clerk need much concentration because of a single mistake can

resulted into financial loss may be Lakhs or Crores. But they are actually working in a disturbed

environment they are not able to pay much attention and concentration as required and lastly difference

occurs which takes a long time to solve. So my opinion is, Clerks should be separated by small cabins

then only they can pay much concentration and finally it will helpful for bank as it minimizes the chanc

of risk and financial loss and can some time also.

Employees Satisfaction level: As far as my views are concerned, the employees satisfaction is one of t

most important factor and what I found here is that Employees are not working with enthusiasm but

working under pressure of work load. It effects the growth of the firm adversely. So an enthusiastic

environment should provide there so that they simply enjoy their work. It definitely increase their

efficiency to work.

Proper Utilization of Resources : For any firm, Manpower is the biggest resources. Here, manpower

more than enough but the way, they are doing should be slightly change. Work-distribution and time

management should be modified. Then only the firm will properly utilize its resources and proper

management can only prove economic for this.

In my point of view, the above points of considered favorably will definitely prove as leverages to this

organization and will be 100% helpful in the growth of this firm.


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. I RISK MANAGEMENT SYSTEM

RBI Guidelines

1) Introduction

Banks in process of financial intermediation are conforme3ed with various kinds of financia

and non financial risks viz. credit interest rate, foreign exchange rate, liquidity, equity price

commodity price, legal, regulatory, reputation, operational, etc... These risks are highly

interdependent and events one area of risks can have ramification of risks for a range of othe

risks categories.

The broad parameters of risks management system should encompass:

Organizational structure

Comprehensive risk management approach

Risk management policies

Guidelines & other parameters

Strong MIS for controlling , monitoring & controlling risks

Well laid out procedures , effective control & comprehensive risk reporting framewor

Separate risk management framework

Periodical review and evaluation

2) Risk management structure

A major issue in establishing an appropriate risk management organization structure i

choosing between a centralized & decentralized structure. The board should set a risk

limits by assessing the banks risk & risk bearing capacity. At organizational level, ove

all risk management should be assigned to an independent risk management committee

or executive committee of the top executives that reports to the boards of director.


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DESERTATION

3) Credit Risk

The management of credit risk should receive the top managements attention and the

process should en compass:

Measurement of risk through credit rating Quantifying the risks through estimating expected loan losses i.e. the amount of loan

losses that bank would experience over a chosen time

Risk pricing on a scientific basis

Controlling the risk through effective Loan Review Mechanism and Portfolio

Management

Instruments of credit risk management

Credit approving authority

Prudential limit

Risk Rating

Risk Pricing

Portfolio Management

Loan Review Mechanism

4) Credit risk & investment banking

Significant magnitude of credit risk, in addition to market risk, is inherent in investment

banking. The proposals for investments should also be subjected to the same degree of credi

risk analysis, as any loan proposals. The proposals should also be subjected to detail appraisa

and rating framework those factors in financial and non-financial parameters of issuers,

sensitivity to external developments, etc.


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DESERTATION

5) Credit Risk in Off-balance Sheet Exposure

Banks should evolve adequate framework for managing their exposure in off-balance sheet

products like forex forward contracts, swaps, options, etc as a part of overall credit toindividual customer relationship and subject to the same credit appraisal, limits and

monitoring procedures. Banks should classify their off-balance sheet into three broad

categories-full risk, medium risk and low risk.

6) Inter-bank Exposure and Country Risk

A suitable framework should be evolved to provide a centralized overview on the aggregate

exposure on other banks. Bank-wise exposure limits could be set on the basis of assessment o

financial performance, operating efficiency, management quality, past experience, etc.

7) Market Risk

Market risk arising from adverse changes in market variables, such as interest rate, foreign

exchange rate, equity price and commodity price has become relatively more important.

Market risk takes the form of

Liquidity Risk

Interest rate Risk

Foreign exchange rate(forex) risk

Commodity Price Risk and

Equity Price Risk

8) Market Risk Management

The Boards should clearly articulate market risk management policies, procedures, prudentia

risk limits, review mechanisms and reporting and auditing systems. The policies should


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address the banks exposure on a consolidated basis and clearly articulate the risk

measurement systems that capture all material sources risk and assess the effects on the bank

9) Interest Rate Risk (IRR)

The management of Interest rate Risk should be one of the critical components of market rismanagement in banks. Deregulation of interest rates has, however, exposed them to the

adverse impact of interest rate risk. The net Interest Income (NII) or net Interest Margin

(NIM) of banks is dependent on the movement of interest rates.

10) Foreign Exchange (Forex) Risk

Forex risk is the risk that a bank may suffer losses as a result of adverse exchange rate

movements during a period in which it has an open position, either spot or forward, or a

combination of the two, in an individual foreign currency.

Forex risk Management Measures

(a) Set appropriate limits- open positions and gaps.

(b) Clear-Cut and well-defined division of responsibility between front, middle, and back

offices.

11) Capital for market Risk

The base Committee on banking supervision (BCBS) had issued comprehensive guidelines to

provide an explicit capital cushion for the prices risk to which banks are exposed, particularl

those arising from their trading activities.

12) Operational risk

Managing operational risk is becoming an important feature of sound risk management

practices in modern financial market in the wake of phenomenal increase in the volume of

transactions, high degree of structural changes, and complex support systems.


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13) Risk Aggregation and capital Allocation

Most of internally active banks have developed internal processes and techniques to assess anevaluate their own capital needs in the light of their risk profiles and business plans. Such

banks take into account both qualitative and quantitative factors to access economic capital

CREDIT RISK MANAGEMENT

Credit risk management today

Banks are in the business of making loans, and it is credit officers responsibility to peruse

that business by making sound credit decisions. This requires more judgments than technica

skills. Reviewing financial statement may yield preliminary findings, but these fail to assess

the numerous variables that must be weighed. The loan officer must understand the

information, not merely crunch the numbers.

Further, unless credit analysis standards are clearly defined, valuable time and efforts are

wasted, not to mention the bottom line consequences of reaching the wrong deci8sion.

If a loan officer determines that the borrowing firms expectations exceeds its repayments

ability, does this mean all possible repayments sources are exhausted? Since the key is to

increase profitability through sound credit judgment, the analyst must always evaluate

repayment judgment; the analyst must always evaluate repayment potential from all alternativ

sources.

In turn if the bank is confident of repayment based of additional findings, the appropriate

pricing consideration are issued & monitored. The net effect is future profits of the banks du

to a meticulous credit investigation. Other wise the loan will probably be lost to a better

prepared competitor.

Since lenders are in business of taking risks, why banks are are so concerned about losing

money / briefly stated, a bank can never price an individual loan at a loss even if the

probability of default decreases. For ex., if the bank net interest margin is 4% annually, it wi

take 25 years to recoup 100% of the loss, not including related overheads costs.

Thus the core of credit analysis is evaluating the borrower's ability to repay debt.


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Critical risk assumption plays a critical role in finalizing lending decision. To calculate risks

comprehensive information is needed. Further we must understand how much information is

enough. In other words, identifying what is and is not significant is critical to reliable credi

judgment.

On way to do this is to assign a risk rating (above average, avg., & below avg.) to all facts.Weights of importance will then assigned to details regardless of a positive or a negative

rating.

The important components of this model should be:-

1) Management

2) Management / Administration

3) Bank Relationship

4) Financial Reporting

5) Intention (purpose)

Components of credit risk

i) Personal or consumer risks

ii) Corporate or company risks

iii) Sovereign or country risks


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Managing Credit Risk

This section describes credit analysis for real estate lending, consumer and small businesslending, mid-market commercial and industrial lending, and large commercial and industrial

lending. It also provides insights into the credit risk evaluation process from the perspective

of a credit officer evaluating a loan application.

Risk State Len ding

Because of the importance of residential mortgages to banks, savings institutions, credit

unions, and insurance companies, residential mortgage loan applications are among the mos

standardized of all credit applications.

Two ratios are very useful in determining a customers ability to maintain mortgage payment

the GDS (gross debt service) and the TDS (total debt service) ratios.

Gross debt service ratios are the customers total annual accommodations expenses (mortgag

lease, condominium, management fees, real estate taxes, etc) divide by annual gross incom

Total Debt ratios is the customers total annual accommodation expenses plus all other debt

service payments divided by annual gross income.

FIs often combine the various factors affecting the ability and willingness to make loan

repayments into a single credit score. A credit-scoring system is a quantities model that use

observed characteristics of the applicant to calculate a score representing the applicants

probability of default (versus repayment). Credit scoring systems are developed by using

borrower characteristics (e.g., income, age, loan repayment history) for some past period. Th

credit scoring model weights each characteristics to identify a boundary number (score) or

range such that if past loan customer had an overall credit score (derived from the weighted

characteristics) greater than the boundary number they defaulted on the loan.

If the FI uses a scoring system, the loan officer can give an immediate answer- yes, maybe, o

no- and the reasons for that answer. A maybe occurs in borderline cases or when the loan

officer is uncertain of the classification of certain input information. A credit scoring system

allows an FI to reduce the ambiguity and turnaround time and increases the Transparency of

the credit approval process.

A loan customer listing the following information on the loan application receives the

following points:


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To analyze the loan applicant's credit risk, the account officer must understand the custome

character, capacity, collateral, and capital (sometimes referred to as the five Cs of credit).

Measures of capacity and conditions

Measures of character and condition

Measures of conditions

Measures of capital and Collateral.

Cash flow Analysis

FI's require corporate loan applicants to provide cash flow information, which provides the F

with relevant information about the applicant's cash receipts and disbursements that are

compared with the principal and interest payments on the loan. Cash receipts include any

transaction that result in an increase in cash assets (i.e., receipt of income, decrease in a non

cash asset, increase in a liability, and increase in an equity account). Cash Disbursements

include any transactions that result in a decrease in cash assets. The cash flow statement

reconciles changes in the cash account over some period according to three cash flow

activities: operating, investing, and financial activities. When evaluating the cash flow

statement, FI's ant to see that the loan applicant can pay back the loan with cash flows

produced from the applicants operations.

Ratio Analysis

In addition to cash flow information, an applicant specific level of credit substantiates these

business needs by presenting historical audited financial statements and projections of futur

needs. Historical financial statement analysis can be useful in determining whether cash floand profit projections are plausible on the basis of history of the applicant and in highlightin

the applicants risks.

Financial ratios are useful when performing financial statement analysis on a mid-market

corporate applicant. Although stand-alone accounting ratios are used for determining the siz

of the credit facility, the analyst may find relative ratio more informative when determining

how the applicants business is changing over time. Hundreds of ratios could be calculated


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DESERTATION

from any set of accounting statements. The following are a few that most credit analysts find

useful.

Liquidity ratios

Current ratio = Current assets

Current Liabilities

Quick ratio (acid-test ratio) = Cash + Cash Equivalents + Receivables

Current liabilities

Liquidity provides the defensive cash and near-cash resources for firms to meet claims for payment. Liquidity

ratios express the variability of liquid resources relative to potential claims.

Assets Management ratios

Number of days sales in receivables = Accounts receivables X 365

Credit sales

Number of days in inventory = Inventory X 365

Cost of goods sold

Sales to working Capital = Sales

Working capital

Sales to fixed assets = Sales

Fixed Assets

Sales to total Assets = Sales

Total assets

The asset management ratio gives the account officer clues to how well applicant uses its assets relative to its pa

performance and the performance of the industry.


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Debt & Solvency Ratio

Debt asset ratio= Short Term Libilities+Long Term liabilitiesTotal Assets

Fixed Charge Coverage Ratio=Earning Available To meet Fixed Charges

Fixed Charges

Cash Flow to Debt Ratio= EBIT + Depreciation

Debt

Where EBIT represents Earning before income &tax.

Debt solvency ratio give the account manager an idea of the extent to which the applicant finances its assets wit

debt verses equity.

Profitability Ratio

Gross margin = Gross profit

Sales

Operating Profit Margin = Operating Profit

Sales

Return on Assets = EAT

Average Total Assets

Return on Equity = EAT

Total Equity

Dividend Payout = Dividend

EAT


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Where EAT represents earning after tax, or net income.

For all Dividend payout Ratios, the higher the value of the ratio, the higher is the

profitability of the firm.

Cautions with Ratio Analysis

While ratio analysis provides useful information about loan applicant's financial

conditions, it also has the limitations that require care and judgments in its use. For

example many firms operate in more than one industry .For these companies it is

difficult to construct a meaningful set of industry averages.

Credit Scoring Models

Credit scoring models use data on observed borrower characteristics either to calculate

profitability of default or to sort borrowers into different default risks classes selecting &

combining different borrowers economic & financials Characteristics, an FI manager may be

able to:

Numerically Establish which factor is important in explaining default risks

Evaluate the relative degree or importance of these factors

Improve the pricing of default risks

Screen high risk loan applicants

Calculate any reserve needed to me expected future

To employ credit scoring models in this manner, the FI manager must identify objective

economy & financial measures of risks for any particular class of borrower. After data ar

identified, a statistical technique quantifies or scores the default risks probability or

default risk classification.

Financial Services of SCB


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Business Financial address the complete financial needs of Professionals, Professional Firms

Small & medium enterprises (SME) engaged in services or manufacturing by offerings a rang

or multiple product proposition to the target segment. The constitution of the target is:-

Individual comprising of Professional or Business

Proprietorship or HUF

Partnership firm & Private Ltd. Companies

Public Ltd. Companies

BFS facilities generally structured as multiple products or single products facility depending

upon customer requirement. The process of Overdrafts Facility against single products & loan

backed by property of INR 5M or less are decentralized, and has been detailed in Asset

Circular Nos. Assest/SCB/2003/12 and Asset/SCB/2003/15.

Where the credit line extends to the customer is for multiple products and / or against multip

securities, the operational activities are centralized at CLC, Chennai for the following

purposes:

o Preparing and documenting the banking Arrangement letter (LOBA) as per the

approved terms of the credit approval. This involves documenting the limits availabl

against various credit lines; Extend and type of security required; specifying the

security information; specifying any preconditions.

o Review of documentation received after acceptance of facility received from custome

based on the condition set ou t for the facility.

o Evaluate the eligible operating credit limits based on valuation of securities and

lodgment of the same.

o Limit set-up in various TP systems

o Revaluation of security periodically and monitoring the exposure levels across variou

credit lines.

1 Sourcing

BFS facilities are relationship based and the sourcing will be done By th

business financial manager )BFM) in each cities

The BFM will conduct interview or do a site visit At the customer tradin

address/ production site to understand and obtain basic information on th


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DESERTATION

owner, manager, nature of business. This will be documented in a fast

sheet or basic information report.

The application Cum AOF will be obtained at the time of Customer

requesting the credit facility even though the customer may have an

existing current account with SCB. The following Information will beobtained

Nature of fac ility requested

Limit account

Borrower details

Security holder details

Guarantor details

Relationship with SCB

2 Approvals

Based on the basic information of the customer of the customer obtained through th

interview & the Financials , a detailed limit Application Will be prepared which wi

broadly include the following :

Customer Profile: ownership, management , banking relationship, business

operation

Purpose : New application/ renewal/ increase/structure/review/Amount

Pricing/Risk Rating/ Total Credit facilities

Facilities description: Amount, pricing, risk rating, total credit facilities.

Net Worth: Financial Analysis & personal Finance Statements of Guarantor

Borrower

Operational Sheet : Description & Valuation of security / collateral , terms &

conditions of the facility , LTV & any Deviation.


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Prior to Submission for Approval , BFM will check the applicants & guarantor

profile from the following database :

RBI lists of Willful Defaulters

Search on register of companies( ROC) books for all registered business

Dedup against Hogan & RLS

All Limit application (LA) initiated by BFM will be Supported by Regional Manage

(RM) put approval to Senior Manager , Credit- BFS or to the delegated lending

authority

For proposal outside senior manager's authority, the LA will be Supported

by Business head, BFS and approved by head- Credit CB.

For proposal referred to group credit , will be retained the Original LA & sen

a scanned copy of the LA to Officer CLC for preparing the LOBA

3) Acceptance of Letter of Banking Arrangement (LOBA)

Once the approved LA is sent by CLC , the officer CLC refuse the LA approvals

condition & prepares the LOBA giving the following details:

Sanctioned Limit

Products Cap ( inner limits)

Interest rates

Documentation

Security & margin

Pre Condition ( if any)

LOBA is sent to the concerned BFM by e-mail with a copy to manager CLC. A hard

copy is signed by the manager CLC after review of the sanctioned terms & condition

The BFM will review the sanctioned terms & send to LOBA. The LOBA is delivered t

the customer & on customer acceptance collects the documents including the securin

documents as stipulated in LOBA

A credit file will be created by the BFM & the documents will be sent to CLC by

courier with an e-mail confirmation sent to officer.


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DESERTATION

Small & Medium Enterprises Banking

Definition of "SME" varies from bank to bank. For Standard Charted Bank, Broadly all

entities with turn over of Rs.5.00 - Rs.150.00 Crore come under SME.

SME contributes more than 40% of Industry output of India.

SME enjoys bank Finance of less than 15% of total credit outstanding of banks.

Comprises mainly of small and mid sized Manufactures, Exporters Importers Traders

distributors, dealers, OEM's, etc.

Quick Overview

SME Characteristics

Closely held owner managed

Not highly ca pitalized

Significant personal wealth of promoters- property liquid assets

Geographically dispersed

Low financial transparency due to historical tax issue.

COMPETITION

Entrenched Nationalized banks & Aggressive Private Banks

Wide Spread branch network

Relatively liberal credit policies , but lower services level

Economic Environment


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Significant growth in industrial and services sectors >10%

SME growth Rate (last 2 yrs) - 10%

Sharp growth in international trade (esp. Exports) > 15%

Stable currency outlook

CUSTOMERS NEEDS

Facilities for regular / one off business needs i.e. working capital expenditure financin

Transaction Banking needs viz. Trade, Cash, Treasury services

SME SECTOR IS VITAL TO THE ECONOMY


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Customer of SME Banking

CONDITIONS

Turn over


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PRODUCTS OFFERED

Following Products are offered to multi-product customers, i.e. customers with annual turn over of > US$1Mn

FUND BASED

Over Draft

Term Loan

WC Demand Loan (INR / FCY )

Export Credit ( INR / FCY)

Domestic Bill Discounting

OD against Credit Card Receivables

NON FUND NBASED

Letters of Credit

Guarantees

Co acceptance of Bills

LC confirmation

TRANSACTION BKG

Trade Services

Inward / Outward Remittances

Fixed Deposits

ITTS

In January 2005, SME Banking has launched the business installment loans product offered to small

establishments with turn over less than USD 1M.

Criteria followed by SME Banking

Age of should be more than 3 years, in case of professionals, it should be more than 5 years.

Companies with a Turn over criteria of less than 92 crores falls in SMEs

Working Capital Cycle will be = Debtors + Stock turn over - Creditor turnover

They offer their products by keeping collaterals such as RBI bonds, Fixed deposits, property commercia

residential mutual funds, India millennium deposits.


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DESERTATION

They required 3years audited financials and calculating this MFA report is generated in which differen

ratios occur And MPBF( MAXIMUM PERMISSEBLE BANK FINANCE ) is calculated by preparing

one page summary according to which bank finally decides whether to finance the company or not.

They charge 2% of sectionals limit, 10% is earned of cash collaterals or marketable securities.

Term loan can be provided Maximum For 5 Years and minimum for 3 years.

Over draft can be provided for 1 year.

Letter Of credit depends on customer maximum for 180 days.

Inter coverage ratio i.e. PBIT/ Interest should be Greater than 1.5%.

Gearing Ratio i.e. Secured loans / Equity should be less than 3%.

I have got the opportunity to analyze the financial statements And Measure thcredit risks of three companies who had approached standard charted bank fo

loans. Those Companies are:-

M/S BAJRANG PETROLEUM

RANJIT METALS

WESTERN INDIAN MOTORS COMPANY

M/S. BAJRANG PETROLEUM

BALANCE SEET AS ON 31ST MARCH,2001


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DESERTATION


TRADING AND PROFIT & LISS ACCOUNT FOR

Liabilities (Amt. In Rs.) Assets (Amt. In Rs.)

CAPITAL ACCOUNT

Balance as per ledger

4,400,238,81 FIXED ASSETS:(As per Annexure-E)

460,568.00

Add:-Net profit during the year

179,310.094,579,548,90

CURRENT ASSETS , LOANS& ADVANCES:-

Closing Stock(As Certified & valued by

Prop.)

2,001,661.00

SECURED LOANS:(As per Annexure-A)

2,005,616,48 Sundry Debtors(As per Annexure-F)

6,003,524.38

UNSECURED LOANS:(As per Annexure-B)

2,455,000,00 Security DepositsSAIL Bokaro

10,000.00

CURRENTLIABILITIES :

(As per Annexure-C)

1,015,753,00 Loans & Advances(As per Annexure-G)

1,568,553.00

OTHER LIABILITIES:

(As per Annexure-D)

258,886,00 CASH & BANK BALANCES:

Bank Balance 212,191.00Cash inHand 58,307.00

270,498.00

Total Rs 10,314,804,38 10,314,804.38


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DESERTATION

THE YEAR ENDED 31

ST

MARCH, 2001

Particulars Amount (Rs.) Particulars Amount (Rs.)

To Opening Stock 1,260,568.56 By sales 100,315,040.50

To Purchases 97,836,047.00 By Closing Stock 2,001,661.00

To Freight & Cartage 1,933,080.00

To Gross Profit C/D 1,287,005.93

Total Rs 102,316,701.50 Total Rs. 102,316,701.50

To Salary 246,900.00 By Gross Profit B/DMisc. Income

1,287,005.931,048.00

To Office Exp. 15,855.51

To Bank Charges 136,700.00To Postage & Telephone

Exp14,176.00

To Audit Fees 5,000.00

To Printing & StationaryExp.

15,771.00

To Accounting Charges 30,000.00

To Electricity Expenses 41,597.00

To Repair &Maintenance Exp.

21,898.00

To traveling Exp. 3,678.00

Interest 368,593.83

To Advertisements 1,000.00

To Business PromotionExp.

17,034.00

To Insurance Exp. 26,817.00

To Fee & Taxes Exp. 1,000.00

To staff Welfare Exp. 27,459.00

To Conveyance Exp. 63,605.00

To Depreciation 71,659.50

To Net Profit Trfd To

Prop Capital Account

179,310.09

Total Rs 1,288,053.93 Total Rs.. 1,288,053.93


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DESERTATION


BALANCE SEET AS ON 31ST MARCH,2002

Liabilities (Amt. In Rs.) Assets (Amt. In Rs.)

CAPITAL ACCOUNTBalance as per ledger

2759051.00

FIXED ASSETS:Car a/c as per Ledger

Less: Depreciation during theyear

Fax Machine As per ledgerLess: Dep. During the Year

215,500.0043,000.00172,000.0010990.00

2747.508242.50

Add:-Net profit during the year

15417.812774468.81

CURRENT ASSETS , LOANS& ADVANCES:-

Closing Stock(As Certified & valued by Prop.)

1260568.57

SECURED LOANS:(As per Annexure-A)

-------------- Sundry Debtors

Reliance India Ltd.(Advance)

398,145.00

29.810.00

UNSECURED LOANS:Mrs. Madhu Agrawal

Car Loan From City BankSundry Creditors

55000.0092951.28159313.00

Cash & Bank Balances

Canara BankPunjab National Bank

Cash in Hand

1317494.504900.0018057.00

1340451.50

Expenses Payable:Audit Fee 3,150.00

124,334.50

Loans & Advances -------------

OTHER LIABILITIES: --------------

--------------------- -----------------

Total Rs . 3209 217.57 Total Rs 3209,217.57


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DESERTATION


TRADING AND PROFIT & LOSS ACCOUNT FOR THE YEAR ENDED 31ST MARCH, 2002

Particulars Amount (Rs.) Particulars Amount (Rs.)

To Opening Stock 60384.00 By sales 16447828.00

To Purchases 17032,915.00 By Closing Stock 1260568.57

To Freight & Cartage 410290.00

To Gross Profit C/D 204807.57

Total Rs 17,708,396.57 Total Rs. 17708396.57

To Salary 46800.00 By Gross Profit B/D

Misc. Income

204807.57

To Office Exp.

To Bank Charges 14092.00

To Postage & TelephoneExp

3322.00

To Audit Fees 3150.00

To Printing & StationaryExp.

3270.00

To Accounting Charges 9000.00

To Electricity Expenses 13598.00

To General expenses 4290.00

To traveling Exp. ----------

Interest 26991.99

To Advertisements -------------

To Legal Expenses 725.00

To Insurance Exp. ---------------

To Fee & Taxes Exp. ---------------

To staff Welfare Exp. 4924.00

To Conveyance Exp. 6980.00

To Depreciation 45747.00

To Net Profit Trfd To

Prop Capital Account

15417.81

Total Rs 204807 Total Rs.. 204,807.57


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DESERTATION

Projected Balance Sheet:-

STANDARD CHARTERED BANK

Petroleum Company (petroleumc) SCB ISIC Code: 3530 Date Prepared:6/11/2005

Detailed Balance Sheet - Actual and % Page 1Thousands

Statement Date 3/31/2001 3/31/2002Months Covered 12 12

Analyst Monika MonikaSource Currency: INR Target Currency: INR Segment Type: Company Account

CURRENT ASSETS

Cash and Bank Deposits 1,340 41.8 270 2.6Trade Debtors (Gross) 398 12.4 6,003 58.2Stock: Trading 1,260 39.3 2,002 19.4

Other Op Current Assets 30 0.9 1,578 15.3TOTAL CURRENT ASSETS

3,028 94.4 9,853 95.5

FIXED ASSETS

Plant & Machinery 8 0.2 6 0.1Motor Vehicles 172 5.4 455 4.4Gross Fixed Assets 180 5.6 461 4.5

TOTAL FIXED ASSETS 180 5.6 461 4.5TOTAL TANGIBLE ASSETS 3,208 100.0 10,314 100.0

WORKING CAPITAL 2,742 - 6,572 - NET WORKING ASSETS 1,499 - 6,989 - NET CASH ASSETS 1,340 - (1,736) -

CURRENT LIABILITIES

Due to Banks(O/D,T/R etc) - - 2,006 19.4Trade Creditors 159 5.0 1,016 9.9Provisions: Other Current 127 4.0 - -

Other Op. Cur Liabilities - - 259 2.5TOTAL CURRENT LIABILITIES 286 8.9 3,281 31.8


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DESERTATION

TERM LIABILITIES

Hire Purchase Loans(1 Year+) 93 2.9 - -Loans from Subs (1 Year+) - - 1,000 9.7Loans from Assoc. Co.(1 Year+) 55 1.7 455 4.4

Loans from Dir/Shareholders (1 Yr+) - - 1,000 9.7TOTAL TERM LIABILITIES 148 4.6 2,455 23.8TOTAL LIABILITIES 434 13.5 5,736 55.6

EQUITY

Share Capital - Ordinary 2,774 86.5 4,578 44.4TOTAL EQUITY 2,774 86.5 4,578 44.4NET WORTH 2,774 86.5 4,578 44.4EFFECTIVE EQUITY 2,774 86.5 4,578 44.4

TOTAL LIABS & NET WORTH 3,208 100.0 10,314 100.0


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DESERTATION

STANDARD CHARTERED BANK

Petroleum Company (petroleumc) SCB ISIC Code: 3530 Date Prepared:6/11/2005

Detailed Profit & Loss Statement - Actual and % Page 2Thousands

Statement Date 3/31/2001 3/31/2002Months Covered 12 12

Analyst Monika MonikaSource Currency: INR Target Currency: INR

PROFIT & LOSS STATEMENT

Sales

36917763 project mba finance 2

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