a study on bank of india’s credit policies
TRANSCRIPT
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8/8/2019 A study on Bank of Indias CREDIT POLICIES
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A study on Bank of IndiasCREDIT POLICIES and
CREDIT RISKS
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OBJECTIVE OF STUDY
To study the credit polices offered by Bankof India to SMEs.
To study procedures related to Loans.
To study Risk related to credit provided bybanks.
To study the intricacies of corporate
finance identification, analysis, appraisal,sanction, disbursement, follow-up &recovery
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SMEs(Small & Medium
EnterprisesEnterprise Engaged inManufacturing /
Preservation of Goods
Engaged In
Providing/
Rendering of
Services
Micro Enterprise Not to Exceed Rs. 25Lakhs.
Not to Exceed Rs. 10Lakhs.
Small Enterprise More than Rs.25 lakhs
but does not exceed Rs.
5 Crores.
More than Rs.10
lakhs but does not
exceed Rs. 2 Crores.
Medium
Enterprise
More than Rs.5 Crore
Rupees but does not
exceed Rs. 10 Crore.
More than Rs. 2
Crore Rupees but
does not exceed Rs. 5Crore.
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INITAITIVES OF BANK OF
INDIA FOR SMEs Quick decision with least Turnaround Time
through specially constituted SME Cells, and
above all
Better service. Cluster- based Schemes are
also on the list of the Banks initiatives
Provision of timely and adequate credit to the
SMEs Proactively detecting sick and viable units in
time so as to nurse them back to health
through appropriate re-structuring
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LOAN SCHEMES FOR SMES
Star Channel Financing catering to our
manufacturer/trader customers in the SME
sector. Retail Trade
Scheme for Solar Water Heaters.
SME Business Card. Star Laghu Udhyog Suvidha Scheme
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CREDIT APPRAISAL
PROCESS
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PRE-SANCTION PROCESS
PRELIMINARY APPRAISAL
y Application for working capital Finance
y Audited financial for the previous three years
yDetails of existing borrowing arrangements
y Reports from existing Banker on the application
copy
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DOCUMENTS REQUIRED
L-516, Letter of guarantee
L-515(in case Inland guarantee)
Demand Promissory note(In case of Demand
loan)
SCRUITNIZING OF DOCUMENTS
Examine the following:-
Bank lending policy/RBI guidelines
Industry exposure restrictions
Industry related risk factor
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DETAILED APPRAISAL
Working capital Credit Rating
Opinion reports
Review of Proposal Proposal of Sanction
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CREDIT RATING
CREDIT RATING depends upon variousParameters:-
Financial Risk
Management RiskMarket Risk
Compliance
Contingent Risk
Security Value
Capital Market Perception
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Risk rating Parameters Maximum Maximum
applicable scorescore
(B) (C)
---------------- ----------------- -------------------
Financial risks - Static 20
Financial risks - Dynamic 17
Market risks 09
Managerial risks 09
Security Value 06
Capital market perception 04
Contingent risks 05
Compliance 10
Total - 80
Percentage on risk factors =C/B x 100
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AAA-Quality of lending is considered to be high and risk is at its
minimal
AA-Well established borrowers with financial liquidity, strengthand stability
A-This group belongs to the lower end of quality range
B-Borrowers of average liquidity, financial strength and stability
Score obtained Rating to be
assigned
80% & above AAA
65% to 79% AA
50% to 64% A
Below 50% B
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POST-SANCTION PROCESS
FOLLOW UP:-
SUPERVISION:-
MONITORING & CONTROLLING:-
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CREDIT RISK ASSESSMENT
MODEL
Credit Risks
These have been categorized broadly
into:y Financial risks
y Business risks
y Industrial risksManagement Risks
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FINANCIAL RISK
the assessment of financial risk involves
appraisal of the financial strength of the borrowerbased on performance and financial indicators.The overall financial risk is assessed in terms ofstatic ratios, future prospects and risk mitigation
(collateral security/ financial standing). BUSINESS RISK
a. the following are the important parametersassociated with business risk:
y Technology y Consistency in quality
y Consistency in cash flow
Compliance of environmental regulation
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INDUSTRIAL RISKS
a. the following characteristics of an industry which pose
varying degrees of risk are built into the Banks CRA model: y Competition
y Industry outlook
y Regulatory risk
Contemporary issues like WTO etc. MANAGEMENT RISKS
y Integrity (corporate governance)
y Track record
y Managerial competence/commitment y Expertise
y Structure and systems
y Experience in the industry
y y Credibility: ability to meet sales projections
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COMMITTEE ON BANKING
LOAN SYSTEM
TONDON COMMITTEE
NAYAK COMMITTEE
CHORE COMMITTEE
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CONCLUSION