a study on industry loan process of pnb

8/18/2019 A study on industry loan process of PNB

1/63

PROJECT REPORT ON FEASIBILITY OF INDUSTRIALLOAN IN PUNJAB NATIONAL BANK

A Summer Training Project ReportSubmitted in partial fulfillment of the requirement for the

Award of Degree of Master of Business Administration

2014 – 2016

Under the !"d#n$e %&' S!()"tted (*'

PROF' +ONA K,ATRA A+IT +ITTAL

DEPART+ENT OF +ANAE+ENT

+A-ARAJA ARASEN INSTITUTE OF TEC-NOLOY

.A&&"/"#ted t% SIP Un"er"t*3

Se$t%r – 22 R%h"n" De/h" 511006

An ISO 7001'200 Cert"&"ed Int"t!te

AICTE NBA A$$red"ted Int"t!te


2/63

PROJECT REPORT

ON

INDUSTRIAL LOAN

OF PUNJAB NATIONAL BANK

INDE8


3/63

UIDE CERTIFICATE

ACKNO,LEDE+ENT

INTRODUCTION

CO+PANY PROFILE

PRODUCTS

LITERATURE RE9IE,

RESEARC- +ET-OLOY

DATA ANLYSIS

CONCLUSION

REFERENCE


4/63

SELF ATTESTATION

I hereb declare that the dissertation called

!"""""""""""""""""""""""""""# embodies the original wor$ done b me

at """"""""""""""""""""""""""""""""% This wor$ in part or full has not

been submitted to an other uni&ersit


5/63

CERTIFICATE

This is to certif that """"""""""""""""""" semester has completed his

project wor$ on during the ear """"""""""""""%

PR'()*T +,ID)


6/63

ACKNO,LEDE+ENT

I would li$e to than$ all those who helped me through the project of

familiari-ation I would li$e to e.press m sincere appreciation to m guide

"""""""""""""""" for his enlightenment of m $nowledge of feed bac$

and the hotel industr/ &aluable ad&ice and $ind support throughout the

process of dissertation completion

Most importantl/ I would li$e to than$ m parents and sister who were

alwas there to moti&ate me% I would li$e to than$ all the focus group

members for gi&ing their &aluable time and thoughts to m project%

I would li$e to than$ all the customers and emploees of hotel for sharing

their &aluable thoughts which helped me shape this project

ABSTRACT


7/63

0ationali-ation ga&e a great swimpetus and also ga&e a new orientation to

the ban$ing sstem% The importance of the ban$ing sstem as an

intermediar for channeli-ing the sa&ings of communit and its pi&otal role

in the econom made it necessar/ particularl in the conte.t of o&erall

usage of the resources in terms of mone to the industrial sectors% The

e.plosi&e growth econom and the fa&orable demographic profile continue

to dri&e consumption pattern of the people and it automaticall leads to a

mar$et for a wide range of manufactured goods% And there b/ we in&ite the

stepping up of the new industries to satisf the growing needs% Alread we

are in a position where industries are operating at near pea$ capacities and

sustained demand growth will require a rapid build up of production

capacities and infrastructure% But the industrial sectors are facing problems

in getting loans% This paper e.amines the process of sanctioning loans and

finding the criteria of financing the industrial sectors b the ban$ing

sector %The purpose of the present paper is to pro&ide a more comprehensi&estatistical

PREFACE


8/63

Modern organi-ations are highl comple. ad dnamics sstems% The

operate under &er turbulent social economic and political en&ironment%

The are required to reconcile se&eral incompatible goals% *onflicting roles

and di&ergent interest the are also fraught with the use ris$ and

uncertainties/ hence tactful management of such organi-ation to plan to

e.ecute guide/ coordination and control the performance of people to

achie&e predetermined goals% Management has to $eep the organi-ation

&ibrant mo&ing and in equilibrium% It has to achie&e goal which themsel&es

are changing it is therefore a problem highl comple. and tic$lish%

This information will be asset to mar$eting manager in ma$ing effecti&e

decisions% The researches are used to acquire and anal-e information and to

ma$e suggestions to management as to how mar$eting problems should be

sol&ed%

The mar$eting research is the process which lin$s to manufacturer/ dealers

and indi&iduals through information in important part of curriculum of M%B%A% programme is project ta$en b the students to institute under which

he or she is studing/ after completion of third semester of the programme%

The objecti&e of this project is to enable the students to understand the

application of the academics in the real business life% I am full confident

that this project report will be e.tremel useful to the management%

:OOD T-INS IN LIFE BEIN

S+ALL#


9/63

INTRODUCTION OF PUNJAB NATIONAL BANK

P0B was founded in the ear 1234 at 5ahore 6presentl in Pa$istan7 as an

off8shoot of the Swadeshi Mo&ement% Among the inspired founders were

Sardar Daal Singh Majithia/ 5ala 9ar:ishen 5al/ 5ala 5alchand/ Shri :ali

Prosanna Ro/ Shri )%*% (essawala/ Shri Prabhu Daal/ Ba$shi (aishi Ram/

5ala Dholan Dass%

;ith a common missionar -eal the set about establishing a national ban$<

the first one with Indian capital = owned/ managed and operated b the

Indians for the benefit of the Indians% The 5ion of Punjab/ 5ala 5ajpat Rai/

was acti&el associated with the management of the Ban$ in its formati&e

ears%

The Ban$ made stead progress right from its inception% It has shown

resilience to tide o&er man a crisis% It withstood the crisis in ban$ing

industr of 131> and the se&ere depression of the thirties%

It sur&i&ed the most critical period in its histor = the Partlition of

134? = when it was uprooted from its major area of operations% It was the

farsightedness of the management that the registered office of the Ban$ was

shifted from 5ahore to Delhi in (une 134? = e&en before the announcement

of the Partition%

LALA LAJPAT RAI


10/63

;ith the passage of time the Ban$ grew to strength spreading its wings from

one corner of the countr to another% Some smaller ban$s li$e/ The Bhagwan

Dass Ban$ 5imited/ ,ni&ersal Ban$ of India/ The Bharat Ban$ 5imited/ The

Indo8*ommercial Ban$ 5imited/ The 9industan *ommercial Ban$ 5imited

and The 0edungadi Ban$ were brought within its fold%

P0B has the pri&ilege of maintaining accounts of the illustrious national

leaders li$e Mahatma +andhi/ Shri (awahar 5al 0ehru/ Shri 5al Bahadur

Shastri/ Shrimati Indira +andhi besides the account of the famous (alianwala

Bagh *ommittee%

0ationali-ation of the fourteen major ban$s on 13th (ul/ 13@3 was a major

step for the ban$ing industr% P0B was one amongst these% As a result/

ban$ing was gi&en a new direction and thrust%

The ban$s were e.pected to reach people in e&er noo$ and corner/ meet

their needs/ and wor$ for their economic enlistment% Remo&al of po&ert and

regional imbalances were accorded a high priorit%P0B has alwas responded enthusiasticall to the nations needs% It has been

earnestl engaged in the tas$ of national de&elopment% In the process/ the

ban$ has emerged as a major nationali-ed ban$%

Punjab 0ational Ban$ 6herein referred to as P0B7 is one of the leading

ban$s in India and offers a wide &ariet of ban$ing ser&ices/ which include

corporate and personal ban$ing/ industrial finance/ agricultural finance/

financing of trade and international ban$ing% Among the clients of the Ban$

are Indian conglomerates/ medium and small industrial units/ e.porters/ non8

resident Indians and multinational companies% Punjab 0ational Ban$ was

incorporated in the ear 123% Since its humble beginning o&er hundred


11/63

ears ago/ the ban$ has grown in stature to become one of the leading

ban$ing institutions in India% P0B is the second largest PS, ban$ in India

with a dominant presence in north India% :eeping in tune with changing

times and to pro&ide its customers more efficient and speed ser&ice/ the

Ban$ has ta$en major initiati&e in the field of computeri-ation% All the

Branches of the Ban$ ha&e been computeri-ed% The Ban$ has also launched

aggressi&el the concept of CAn Time/ An ;here Ban$ingC through the

introduction of *entrali-ed Ban$ing Solution 6*BS7 and o&er EEE offices

ha&e alread been brought under its ambit%

CO+PANY PROFILE


12/63

Punjab 0ational Ban$ is a state8owned commercial ban$ located in 0ew

Delhi% The Ban$ is one of the Big Four Ban$s of India% The offer ban$ing

products/ and also operate credit card and debit card business/ bullion

business/ life and non8life insurance business/ and gold coins and asset

management business% The are recogni-ed as the Ban$ offering highest

le&els of customer satisfaction in Delhi and *hennai% The Ban$ has the

largest domestic networ$ of 433? offices/ including 4@ e.tension counters

among 0ationali-ed Ban$s% All their branches offer *oreG *entrali-ed

Ban$ing Solution 6*BS7 along with a &ariet of financial products catering

to different mar$et segments% The has international presence in 3 countries/

with a branch at :abul/ branches in 9ong :ong/ representati&e offices at

Almat/ Dubai/ Shanghai and 'slo/ a wholl owned subsidiar in ,: 6with

branches7/ and a joint &enture with )&erest Ban$ 5td/ 0epal% Punjab

0ational Ban$ was incorporated in the ear 123 at 5ahore/ undi&ided India%

The Ban$ has the distinction of being the first Indian ban$ to ha&e beenstarted solel with Indian capital% In the ear 134E/ the Ban$ absorbed

Bhagwan Dass Ban$/ a scheduled ban$ located in Delhi circle% In the ear

131/ the acquired the >3 branches of Bharat Ban$ and in the ear 13@1/

the acquired ,ni&ersal Ban$ of India% Punjab 0ational Ban$ was

nationali-ed in (ul 13@3 along with 1> other ban$s% In the ear 132@/ the

acquired 9industan *ommercial/ which added 9industans 14 branches to

the Ban$s networ$% In the ear 133>/ the acquired 0ew Ban$ of India

which the +'I% During the ear 133@/ the de&eloped a pac$aged for

corporate customers for fast remittance of funds from different up8countr


13/63

branches% In the ear/ the set up a representati&e office in Almat/

:a-a$hstan% In the ear EEE/ the Ban$ has introduced a scheme for

pro&iding finance against mortgage of immo&able propert% In September

EEE/ the commenced their gold business in the form of +old Import

Scheme% In 0o&ember EEE/ the launched an International *o8branded

*redit *ard of Punjab 0ational Ban$ and 9ong$ong H Shanghai Ban$ing

*orporation 69P0B*7 in 0ew Delhi% In March EE/ the Ban$ came out

with their first Initial public offer 6IP'7 for />E/@E/?EE equit shares of Rs

1E each which resulted in the reduction of the go&ernments shareholding in

the Ban$% During the ear EE/ the started their branch in M%+% Road/

Bangalore named as Mid8*orporate Branch 6M*D7 to pro&ide their

corporate clients with a credit limit of Rs >% crore and abo&e% The made

joint &enture with Infoss for the implementation of a *entrali-ed Ban$ing

Solution for them% Also/ the made a tie up with *isco Sstems for

networ$ing >/2?E branches as part of their Rs 1E crore plan% In the ear EE>/ the Ban$ too$ o&er :o-hi$ode8based 0edungadi Ban$ 5td 60B57%

The Ban$ entered into an alliance with 0ew India Assurance for selling their

general insurance products% Also/ the opened a representati&e office in

5ondon% During the ear/ P0B *apital Ser&ice 5td was amalgamated with

the Ban$% In (une EE>/ the Ban$ entered into an Mo, with Principal

Financial Ser&ices Inc 6,SA7 and ijaa Ban$ for joint &enture partnership

in 5ife Insurance/ Pensions and Asset Managements 6MF7 business% Also/

the formed a strategic alliance with Infrastructure 5easing and Financial

Ser&ices 5td 6I5HFS7 for setting up a pri&ate equit fund for in&esting in


14/63

domestic companies% In the ear EE4/ the Ban$ acquired the assets of

9industan Transmission Product 5td% The signed a corporate agenc

agreement with ).port *redit +uarantee *orporation of India 5td 6)*+*7

for mar$eting )*+*s e.port credit insurance products through the networ$

of the ban$s branches% Also/ an Mo, was signed with Intel for the

deploment of &arious IT8related solutions% During the ear/ the Ban$ signed

an Mo, with I*I*I Ban$ for ATM networ$ sharing% The awarded a project

to Tata *onsultanc Ser&ices 6T*S7 for implement human capital

management and paroll solution% The established a branch office in :abul/

Afghanistan% Also/ the opened a representati&e office in Shanghai% The

ban$ established an alliance with )&erest Ban$ in 0epal that permits

migrants to transfer funds easil between India and )&erest Ban$s 1

branches in 0epal% In the ear EE/ the Ban$ un&eiled ATM at )dappal%

Also/ the opened a representati&e office in Dubai% In the ear EE@/ the

Ban$ made a tie up with Master*ard International to launch a signature8 based debit card% Also/ the made a tie up with Indian Airlines for online

boo$ing of air tic$ets% The opened a new branch in ,ttara$hand% In 'ctober

EE?/ the Ban$ entered into Mo, with India Infrastructure Finance

*ompan with an aim to e.tend their cooperation and support to IIF* in

areas of creating a deal flow of infrastructure projects% In (anuar EE2/ the

Ban$ commenced commercial ban$ing operations in 9ong :ong% During the

ear EE28E3/ the Ban$ opened 1@2 branches/ out of which 3E are new

branches and ?2 branches was added through upgradation of ).tension

*ounters% The made collaboration with 5I* for selling insurance policies


15/63

and also made a toe up with 'riental Insurance for selling non8life policies

on a referral basis% In (une EE2/ the entered into an Mo, with I5FS

*luster De&elopment Initiati&e 5td for pro&iding finance for &arious

industrial infrastructure projects in the countr% In September EE2/ the

signed an Mo, with SM* +lobal Securities 5td and 0etworth Stoc$

Bro$ing 5td for pro&iding online trading facilit to *ompans customers%

The offered a unique > in 1 account comprising of Sa&ing/ Demat and

Trading account% In Februar EE3/ the commerciall launched their credit

cards with tpes of consumer credit cards/ namel +old and *lassic% Also/

the entered into an agreement with 'riental Insurance *ompan to mar$et

insurance products/ a practice also $nown as bancassurance% In March EE3/

the Ban$ entered into an understanding with Tata Motors for financing entire

range of passenger cars% Also/ the e.ecuted an agreement with The 5ife

Insurance *orporation of India for banc assurance/ life insurance under the

pro&isions of IRDAs Referral Arrangement% During the ear EE381E/ theBan$ opened 4 domestic branches/ out of which >4? are at new locations

while 1?? branches was added through up gradation of e.isting ).tension

*ounters% The deploed 14EE ATMs ta$ing the the total count of ATMs to

more than >EE 0os% The opened two o&erseas branches 1 in 9ong :ong

and another at DIF* Dubai and started a ( ban$ing subsidiar DR,: P0B

Ban$ 5td in Bhutan% Also/ the opened a representati&e office in 'slo/

0orwa% During the ear/ the Ban$ sold @%J of their sta$e in ,TI Assets

Management *o 5td and ,TI Trustee P&t 5td/ thus bringing down their

sta$e in both these companies to 12%J% The launched *orporate *redit


16/63

*ard with Indi&idual liabilit% Also the launched Merchant Acquiring

Business through installation of Point of Sale 6PoS7 Terminals at Merchant

)stablishments and Internet Pament +atewa b integrating through

Merchant ;ebsite/ with Brand 0ame P0B Bi-% In Ma EE3/ the Ban$

incorporated a subsidiar compan namel P0B In&estment Ser&ices 5td% In

0o&ember EE3/ the entered into an agreement with FIM Ban$ 6Malta7/

Banca IFIS/ Ital and Blend Financial Ser&ices 5td/ Mumbai for setting up a

joint &enture compan for pro&iding factoring/ forfeiting and trade finance

related business% During the ear E1E811/ the Ban$ introduced new set of

products and ser&ices such as P0B ,phaar/ P0B Su&idha and ;orld Tra&el

*ard% In December 1>/ E1E/ the acquired @>%@4J sta$e in (S* Dana Ban$

of :a-a$hstan% In (anuar 1/ E11/ the Ban$s joint &enture India factoring

and Finance Solutions P&t 5td started its commercial operations from Delhi/

Mumbai H *hennai% The total number of branches at the end of March E11

rose to 123% The branch networ$ comprises E4? Rural/ 114 Semi ,rban/1111 ,rban and 2?? Metropolitan branches% During the re&iew period 1E

domestic branches were opened% ;ith 123 branches/ including 2

).tension *ounters/ the Ban$ has the largest networ$ amongst the

nationali-ed ban$s% As part of customer segmentation/ Ban$ has opened

speciali-ed Branches that include @ Micro Finance branches/ 3 SM)

branches/ 11 International Ban$ing Branches/ 1? Asset Reco&er

Management Branches/ 1> Mid *orporate Branches/ 11 5arge *orporate

Branches/ ?> Retail Asset Branches/ 11 Agriculture Finance Branches/ >

high8tech agriculture branches/ 1 *apital Mar$et Ser&ices Branch and 1


17/63

International Ser&ice Branch% Besides/ 41 Bac$ 'ffices/ Special Foreign

).change 'ffices/ 1? Special MI*R *enters/ 41 Ser&ice 6Regional *learing

*entre7 centers/ 4 Financial Inclusion Ser&ice *enters/ > *entrali-ed Draft

Paable *enters/ 1 *entral *learing Ser&ice *entre and 1 Depositor Bac$

'ffice are established to reduce deli&er time and impro&e response time%

The Ban$ recei&ed permission from RBI for setting up a representati&e

office in Sdne/ Australia% Also/ the are in the process of entering into

*anada% The compan is ha&ing an aim to increase the customer base to 1E

million b the ear E1>

INTRODUCTION OF INDUSTRIAL LOAN


18/63

'ne of the major areas of the econom that has recei&ed focus in recent

times is the financial sector% And within the broad domain of the financial

sector/ it is the ban$ing sector that has been the policma$ers% Therefore/ the

ban$ing sector in most emerging economies is passing through the

challenges and India is not e.ception to this rule% ;hen we consider

financial matters/ we thin$ of ban$s as the primar financial entit%

9owe&er/ the continuing wa&e of ban$ mergers and acquisitions has raised

concern about the a&ailabilit of debt capital/ especiall to business firms%

0ow this issue is more hotl debated in Indian ban$ing sector/ where small

firms dominate the business sector% In the light of the importance of financial

intermediation and the difficulties that se&eral countries ha&e encountered in

restructuring their fragile ban$ing sstems/ it would be useful to e.amine the

performance of the ban$ing sector with respect to the procedure of gi&ing

loan in India during the twenties% A loan is a legal contract between thelender and the debtors% The major business of ban$ing compan is to grant

loans and ad&ances to traders as well as commercial and industrial institutes%

The most important use of ban$s mone is lending% There are also some

ris$s in lending% ;hile lending loans the ban$s usuall $eep securities and

assets as a supports so that lending ma be safe and secured%

SCOPE OF T-E STUDY


19/63

The scope of the stud is confined to the Punjab 0ational Ban$ in terms of

customer satisfaction% The stud has been underta$en on the basis of sample

sur&e%

INDUSTRIAL LOAN

In the present changing scenario of ban$ing industr it is the aim of all

financial institutions and ban$s to pro&ide all shorts of financial problems

and needs to its clients% Therefore in the recent de&elopments in the financial

sector we ha&e been witnessing the term lending institutions% The lending

institutions are earlier aiming at pro&iding long term credit requirement for

industr but now the are pro&iding wor$ing capital finance and also inland

as well as foreign letter of credit% Ban$s ha&e also started financing long

term credit needs of the industr% ;ith the ad&ent of financial sector reforms

ushered b go&t% of India and RBI to pro&ide liberali-ed en&ironment in ban$ing industr/ it has become imperati&e to create en&ironment to meet

financial needs of a client/ inland as well o&erseas b one institution onl% In

a nutshell !,ni&ersal Ban$ing# is the need of the hour to sur&i&e% As a step

in this direction some financial institue tionGban$s ha&e introduced the

scheme of pro&iding corporate loan%

T-E LENDIN DECISION


20/63

A ban$Ks credit department will anal-e a borrower and pro&ide a credit

rating used in the lending decision% *reditworthiness of borrowers

determined b 6 *Ks7 is listed below%

1 C-ARACTER Ban$ers should continuall emphasi-e the importance of

the applicantKs credit histor% *haracter is the Prime determinant of a

borrowerKs willingness to repa a loan% It is nothing but the honest and the

integrit of the person requiring loan%

2 CAPACITY It is the firmKs abilit to generate liquidit in the loan

repament process% +enerating the cash flow and changing the capital

structure are the primar source of capital repament%

; CAPITAL This categor refers to the loan applicantKs abilit to create

incomeGcash flow% The !real# net worth of the firm is a good signal for

repament li$elihood%4 COLLATERAL Ban$ lenders alwas run with the ris$ of repament of

the loan b the borrowers% *ollateral pro&ides securit to loans made% As a

part of repament/ accounts recei&able/ equipment/ in&entor/ real estate and

buildings are all potential sources of collateral%


21/63

the factors which influence the appro&al or denial of a business firmKs loan

application%

OBJECTI9ES

1% To $now the criteria for granting ban$ loans to the industrial sectors

% To identif the &ariable that the ban$ emphasi-es before gi&ing loans%

>% To find out the tpe of the business a&ailing the loan most%

4% To find out the tpe of the preferable product to a&ail the loan most%

% To find out which group 6minorit or majorit7 get the loan easil%

@% To access the association in between the go&ernment appro&al of the firm

and sanctioning the loan%

?% To $now the legal structure of the firm helps in getting the loan%

2% Analsis of the relationship of the si-e of the compan/ Financial Sstem/

Business ).perience with the chance of getting loan

Pr%d!$t


22/63

P0B has a wide &ariet of products and ser&ices that meet di&erse

requirements of its &ast customer base% In the light of growing importance of

financial inclusion/ the ban$ has introduced P0B Mitra 8 a no8frills sa&ings

ban$ account that can be opened either b an indi&idual/ or jointl% A number

of deposit and loan schemes are a&ailable to customers such as housing

loans/ car finance/ customer finance/ personal and se&eral tpes of

educational loans% It has an international credit card/ issued in collaboration

with 9ong :ong and Shanghai Ban$ing *orporation% 9P0B* is the issuer

ban$ for the co branded credit card and it underta$es all front8end and bac$8

end operations relating to the co8branded credit card% Punjab 0ational Ban$

has formulated the +old *ard Scheme for its e.porter clients based on the

scheme drawn up b Reser&e Ban$ of India% The scheme ensures eas

a&ailabilit of e.port credit on best terms to credit worth e.porters with a

good trac$ record% The card offered b P0B is $nown as P0B ).po +old

*ard% The ban$ offers 18hour ban$ing ser&ices in ?? branches across India%

RE9IE, OF LITERATURE


23/63

The first part deals with the flow of credit from organi-ed institutions to

&arious sectors li$e manufacturing industr/ pri&ate corporate sector and

&arious other industrial concerns% Studies on the institutional flow of credit

in Delhi are also discussed% The unorgani-ed sector consisting of indigenous

financial agencies is enumerated in the ne.t part% ,nderstanding the

operation of and the potential for housing finance is important/ since in

man de&eloping countries housing polic is about establishing new and

more inno&ati&e finance policies%

The ban$ing sstem in India comprises of the Reser&e Ban$ of India/

*ommercial ban$s and cooperati&e ban$s and credit societies% The

commercial ban$s are the premier institutional structure of the ban$ing

sstem% The principal function of these institutions is to satisf

simultaneousl the portfolio preferences of the borrowers on one side and

the lenders on the other% The mobili-e resources from the sa&ers in the form

of deposits and e.tend credit facilities to borrowers in the form of loans/ad&ances and securities% 5oans and ad&ances pro&ided b these institutions

can be categori-ed into short8term funds and long8term funds% The latter are

ad&anced for purchase of plant and machiner while the former are pro&ided

for purchase of raw materials/ stores/ spare parts and the li$e% 9owe&er

following the traditional British ban$ing practice/ commercial ban$s pro&ide

more short term funds to the in&estors in industr and trade than long term

loans% The pattern of credit disbursement has undergone substantial changes

since 13E%


24/63

*ommercial ban$s e.tended credit to commerce and trade to a larger e.tend

than to manufacturing industr until 132% Since the commencement of the

second fi&e Lear Plan/ which laid emphasis on rapid industriali-ation/ the

pattern of credit flow too$ a new turn in fa&our of medium and large

industr% As a result/ the share of industr/ in public and pri&ate sectors in

total ban$ credit increased from >4%2J to @?%J during the period 134 to

13@2% Since nationali-ation of 14 major commercial ban$s in (ul 13@3/ the

+o&ernment of India assigned new priorities to commercial ban$s with

regard to the flow of credit to hitherto neglected sectors/ called Cpriorit

sectors%C The emphasis thus shifted from industr to the priorit sectors%

Further the suppl of credit was controlled through statutor regulations and

monetar regulations%

'n the other hand the demand for ban$ credit has also undergone substantial

increase% Factors such as/ large growth in the number of industrial units/

di&ersification of e.isting units/ increase in industrial and agricultural production/ increasing needs of short and long8term funds to maintain the

increased le&els of production/ pushed up the demand for ban$ credit%

'bser&ed that the use of funds from ban$s b the pri&ate corporate sector

had e.ceeded its in&entor formation% +upta/ has argued that a small portion

of such finance should ha&e gone to meet fi.ed in&estment% Further/ he

found the growth rate of phsical assets to be more directl and closel

related to securit issues than ban$ credit% 9ence/ he argued that the fast


25/63

growing firms relied hea&il on securit issues than the use of ban$ credit%

Arnbegeo$ar found that the rate of rise in ban$ credit e.ceeded that of

in&entor/ sales and output%

Further he obser&ed Shett* assessed the dimensional changes in credit

deploment during the first fi&e ears of nationali-ation in relation to

changes in output and prices% The rationale for his analsis was the fact that/

in an accepted model of demand for mone/ one common &ariable is the

gross national product or some other &ariant of it in real terms%

*onsequentl/ he hpothesi-ed that credit for an sector or industr o&er a

period has to ha&e some relationship with its performance in real terms/

particularl output% 9e obser&ed a declining trend in the credit e.tended b

ban$s to industries since nationali-ation/ though it was higher than other

sectors% 'n finding that the share of manufacturing sector in ban$ credit is

higher than its share in 0et Domestic Product 60DP7 he concludes that

increase in ban$ credit has occurred far in e.cess of increase in outputduring the ears

In his other paper/ shett4 obser&ed that the share of medium and large

industr in total ban$ credit had declined due to priorit sector lending%

Another obser&ation in line with his earlier finding was that growth in ban$

credit had alwas been disproportionate to growth of their phsical output/

especiall in industries li$e cotton te.tiles% 9is obser&ation particularl for

the ears 13?8?@ and 13?@8?? re&ealed

6a7 Increase in a&erage ban$ credit had been higher than the growth of 0DP

originating in registered manufacturing sector e&en at current prices


26/63

6b7 An appreciable increase in the rate of short8term ban$ credit to

in&entories< and

6c7 Relati&el higher reliance on trade credit% In line with these obser&ations/

he suggested policies to scrutini-e credit claims &igorousl and relate credit

to the genuine production requirements so that funds are not tied up with

these large borrowers%

:%S%R% carried out an econometric e.ercise on the determinants of demand

for ban$ credit of some selected industries for the period between 13?E8?1

and 132482% 9e obser&ed that output of these industries was the most

important factor in determining its demand for ban$ credit whereas/ interest

rate of ban$s and relati&e rate of interest of other sources of borrowing

plaed onl a secondar role% Price of output was also found to ha&e affected

the demand for credit significantl% The relati&e interest rate &ariable was

significant with respect to industries li$e te.tiles/ engineering and total

manufacturing/ while it was not significant for industries li$e sugar andother food products and chemicals%

Di&atia and shan$ar@ in their paper discussed the role of internal and

e.ternal sources of funds and their components in financing capital

formation of the pri&ate corporate sector% The stud was based on the RBI

compan finance studies relating to medium and large public and pri&ate

limited companies and co&ered the period 13@18?@% The also discussed the

trends and patterns of financing for four indi&idual industries/ &i-/ cotton

te.tiles/ jute/ sugar and cement%


27/63

Some interesting findings in his article CFinancial Practices in Indian

*orporate Sector/C based on the RBI compan finance data% 9e underlined

the rising dependence on borrowed capital in relation to the total capital

emploed in the Indian corporate sector% Trade credit was pointed out to be

important sources of capital when the ban$ credit was squee-ed% Ma$ing an

industr8wise analsis/ the author came to the conclusion that the industries

with large profit margins and those with large depreciation and de&elopment

rebate reser&es had a relati&el lower order of o&erall indebtedness and

man of them also had a lower order of ban$ borrowings in relation to

o&erall indebtedness% Industries with high profit margin such as sil$ and

raon te.tiles/ aluminum/ basic industrial chemicals and medicine and

pharmaceutical preparations had lower proportion of borrowed funds as

compared to the a&erage of the medium and large public 5td% companies%

The e.tensi&e stud &iewed that the growth of institutional finance

emerged in India due to structural change for industrial financing sstemwith wide change of socio8political situations in India% 9e attempted to

measure o&erall impact of financial institutions on capital formation in the

organi-ed pri&ate sector as also the locati&e efficienc of financial sstem%

9e obser&ed that during the first planN financial assistance rendered b

special institutions represented onl 4%1 per cent of gross fi.ed in&estment in

pri&ate industr/ which rose to ?%3 per cent in the second plan and further to

12%1J in the third plan period% 9e also found that commercial ban$s

remained the most important single agenc for financing the pri&ate

corporate industr and 5I* was the single largest purchaser of industrial


28/63

securities and the underwriter of new issues of large and established

companies%

RESEARC- +ET-ODOLOY

SA+PLE AND DATA COLLECTION

This sur&e was conducted in the conte.t of ban$ing ser&ices% The data were

collected in face8to face inter&iews of customers coming to ban$s% The stud

pro&ides a representati&e sample of &arious branches of Punjab 0ational

Ban$Ks customers in Delhi onl%

RESEARC- DESIN

The research design is relating to the collection and analsis of data% There is

Oualitati&e and Ouantitati&e Research design%

DATA COLLECTION

In qualitati&e research design/ for the collection of data Depth Inter&iews/Focus groups and Projecti&e techniques ha&e been used% In quantitati&e

research design the data ha&e been collected from primar source through

obser&ations/ e.perimentation and questionnaires%

SA+PLE SI=E'

The samples ha&e been selected on random basis% A sample of 1EE

respondents was be used in the research%

DATA SOURCES'

Both secondar and primar sources of data ha&e been used% The major tpe

of information used is primar data% This is done through primar sur&e%


29/63

The literature re&iew contains a secondar data tpe% The sources include

boo$s/ periodicals websites/ printed literature etc%

TOOLS AND TEC-NI>UES TO BE USED TABLES?

Bar diagram and structures are used in e.planations to bring out the point

more clearl% Tabulation of the primar data was done% 'n the basis of these

tables/ trends came out more &isibl% 'ther statistical techniques those are to

be used are/

@ C-I5S>UARE – it is used to test the independence of the attributes%

@ RANKIN +ET-OD8its basic propert is to arrange a number of

attributes in a particular order%

@ KOL+OORO98 Smirno& test it is used to test the relationship

between the ran$ and the factors%

@ LARE SA+PLE TEST .=5TEST3 it is used to test the equalit of two population proportion%

@ ANO9A 8 it is used to test the significance of difference of the &ariabilit

@ +ULTIPLE RERESSION8 It is used to find out the relation of a

&ariable with a group of &ariables%

COLLECTION OF DATA

The wide &ariet of ban$ regulations along with the e.isting en&ironmental

condition suggests a number of factors that would influence to acceptGreject

commercial ban$ lending decision% Specificall/ the database includes such

information on ban$s who supplied the information about the strateg of


30/63

getting loan from a local commercial ban$ such as P0B/ ,*'/ AQIS/

A0D9RA/ SBI/ 9DF* and their different branches% In order to achie&e the

identified objecti&e pertaining to priorities and preferences and &iews/ a

sample of 1EE ban$ers 6Managers7 ha&e been selected in the cit Mumbai/

Maharashtra from the different branches of P0B/ ,*'/ AQIS/ A0D9RA/

SBI/ 9DF* during December/ E1E%A pre8tested questionnaire was

administered to them/ personal inter&iews with the help of the pre8tested

inter&iew schedule/ designed for this purpose was ta$en% Besides/ personal

obser&ation was done where&er necessaril applicable% A pilot sur&e was

conducted in the cities and the questionnaire was impro&ed in that light% A

structured questionnaire was used as a data collection tool/ and the statistical

judgment sampling was resorted for the purpose of the stud%

DATA ANALYSIS

T#(/e5' St#te)ent h%"n d"&&erent /ee/ %& $!t%)er #t"$t"%n "n

P!n#( N#t"%n#/ B#n

ANALYSIS AND INTERPRETATION

1% Structure wise analsis It is important for the ban$ers to note down the

legal structure of a firm< that is/ whether it is a sole proprietorship/

partnership or corporation%

A one wa A0'A is performed to test whether there is an differences in

the structures while a&ailing the loan%


31/63

NULL -YPOT-ESIS' -0'

There are no differences in the structure of the firm in getting the loan%

A0'A

Table81

Sources of &ariation d%f% Sum of Mean Sum of F*olumn 6tpe of the 2 2@%?3 4>%>3 F11%E?)rror 12 ?> @%E2 5555555

Total 14 55555 5555555 55555555F00< .2 123 ; C#/ F 555555 -0 " ree$ted

INTERPRETATION' There e.ist differences in the structures of the firm

in getting loan

The &%//%"n t#(/e h% the Ger$ent#e %& the reG%ne %(t#"ned

##"nt t% e#$h $#te%r*

TABLE52

Tpe of the structure PercentageSole Proprietorship 14JPartnership EJBig *orporation 2@JINTERPRETATION' 9ence/ it is interpreted that all most all the ban$ers

fa&or to the big corporation while gi&ing the loan%

O,NERS-IP ,ISE ANALYSIS

*onsidering the ownership of this firm/ it is important to note down the

nature of business such as minorit business 6that is/ fift percent or more

minorit owned7 or majorit business% For this purpose/ we ha&e performed

the large sample test 67 in order to $now whether the proportion of minorit

business owner is more important than that of majorit or not%


32/63

0ull hpothesis 9E P E%E

Test statistic

p 8 P G UPO 61G n7V

P Population Proportion of the ban$ers fa&oring to majorit group

n sample si-e 1EE *alculation

*A5 p 8 P G UPO 61G n7V ;here/

P E%E/ O 18 P p Sample proportion of the ban$ers fa&oring to majorit

group 6?> G1EE7 E%?> *A5 E%?> E%EGUE%EW E%E 61G1EE7V 4%@

TAB 1%@4 at J le&el of significance%

As/ *A5 X TAB /9E is rejected and 91 is accepted%

INTERPRETATION'

9ence we can conclude that ban$ emphasi-es the majorit group while

sanctioning the loan%

>% Analsis of the relationship of the si-e of the compan/ Financial Sstem/Business ).perience with the chance of getting loan The chance of getting

the loan is correlated with the si-e of the compan/ Financial Sstem and

Business ).perience% 9ere the basic interest is to find out the weightage of

the independent &ariables 6Si-e of the compan/ Financial Sstem and

Business ).perience7 on the predictor/ the chance of getting the loan b

using the Multiple Regression technique%

5et L be the dependent &ariable the chances of getting 5oan B the

coefficient of determinant 6a constant &alue7 Q1 Si-e of the compan/

Q Financial Sstem/ Q> Business ).perience

L BE Y B1 Q1Y B QY B> Q>


33/63

Step8b8Step Multiple Regression

T#(/e5 ;' +%de/ S!))#r*

Model R R Square Adjusted R Square Std% )rror of the )stimate1 %32? %3?4 %3@2 %@?Ea Predictors 6*onstant7/ Q>/ Q1/ Q

Adjusted R Square &alue tells us that our model accounts for 3@%2J of

&ariance and it signifies the model as good one%

TAB5)84 *'RR)5ATI'0S

L Q1 Q Q>

L 1%EEE %32E %3?? %4Q1 %32E 1%EEE %3@@ %1@Q %3?? %3@@ 1%EEE %41Q> %4 %1@ %41 1%EEEWW *orrelation is significant at E%E1 le&el 68tailed7

This table gi&es details of the correlation between each pair of &ariables%

There is a &er good correlation between the criterion and the predictor

&ariables% The &alues here are acceptable%

Table8 *oefficients,nstandardi-ed

*oefficients

Standardi-ed

*oefficients

t Sig%

B Std% )rror Beta6*onstant7 84%112 11%>12 8%1>1 %E1Q1 E%2E@ %E %>3 >% %EE@Q E%233 %>4 %44> %@E %E1Q> E%2EE> %E?? %E %4?2 %@4E# DeGendent 9#r"#(/e' Y

The Standardi-ed Beta *oefficients gi&e a measure of the contribution of each &ariable to the model% A large &alue indicates that a unit change in this

predictor &ariable has a large effect on the criterion &ariable% The t and Sig

6p7 &alues gi&e a rough indication of the impact of each predictor &ariable

a big absolute t &alue and small p &alue suggests that a predictor &ariables


34/63

ha&ing a large impact on the criterion &ariable% Financial Sstem has the

highest beta &alue 6E%2337/ Si-e of the compan and the Business ).perience

ha&e the &alues of 6E%2337 and 6E%2EE>7%)rror &ariance is e.plained b

constant 611%>127/ followed b Financial Sstem 6E%>47/ Si-e of the

compan 6E%E7/ Business ).perience 6E%E??7% Sample t8test correlates

positi&el for Si-e of the compan 6>%7/ Financial Sstem 6%@E7 and

Business ).perience 6E%4?27 with the chance of a&ailing the loan%

Y 52411 H 00681H 07782 H0200;8;

It is e&ident that the ban$ers are gi&ing more importance on the financial

sstem/ si-e of the firm and less importance on business e.perience while

gi&ing the loan%

4% Analsis of the most important financial sstem of the firm to get the loan

Firms emploing a ear8end compilation accounting method for ta.

purposes can pro&ide little financial information to a prospecti&e lender%

9ere the basic purpose is to find out the tpe of the financial recordfa&orable to get the loan%

T#(/e56

Financial Sstem Percentag ea7 :eep documents which are compiled at the end of the ear for

ta. purposes%

J

b7 Maintain records which can pro&ide information about the

balance sheet along with ta. information at the end of the ear

>J

c7 9a&e a sstem which generates quarterl along with ear8end

financial statements and ta. information

1EJ

d7 ,tili-e a sstem which pro&ides monthl/ quarterl and ear 2J


35/63

end financial statements and the ta. information from the ear

INTERPRETATION'

A majorit i%e% 2J of the ban$ers are in fa&or of the fact that the firm

should utili-e a sstem which pro&ides monthl/ quarterl and ear end

financial statements and the ta. information from the ear%

Analsis of the factors influencing for sanctioning the loan% It is necessar to

assess the important factors influencing to sanction the loan% There are so

man factors/ but we ha&e included the following factors onl% The dataha&e been collected on 8point li$ert tpe scale in all eight attributes% The

statements were measurable on a li$ert scale of 18< where indicates

strongl agree and 1 indicates strongl disagree%

T#(/e ' The !))#r"ed r#n %rder

Features 1 2 ; 4 < Ran$

Sum

Ran$

Ta.es 6 17 20 26 27 >> 4Poor Sales 2 20 21 26 ;1 >@4 ;

Financing and Interest Rates 2 10 12 ;< 41 4E> 2'perating and Production *ost 0 4 20 2; 43 <A&ailabilit and Oualit of 5abor 1< 1< 20 2< 2< >>E 6*ost of Insurance 20 1< 2< 20 20 >E Personal recommendation 1 20 2< 1 20 >E4


36/63

INTERPRETATION'

From the abo&e analsis we conclude that the 'perating and Production

*osts/ Financing and Interest Rates/ Poor Sales are the more influencing

factors for the ban$ers to sanction the loan%

PRODUCT ,ISE ANALYSIS

The tpe of the product such as FM*+/ Petroleum and gasoline products/

Steel product/ and Te.tile product to be produced b the compan is of

prime consideration of getting loan%

The differences among the different products are anal-ed statisticall using

one8wa A0'A%

0ull 9pothesis 9E There is no difference in the products of getting the

loan%

ANO9A T#(/e5Sources of &ariation d%f Sum of Mean Sum of F*olumn 6tpe of 4 21%@? ?%E23 F1)rror 12 ??%12 @%4>44 5555Total 16 555 555555 55555

F00< .4 123 ;26 C#/ F 555555 -0 " ree$ted

InterGret#t"%n' There e"t d"&&eren$e "n the Gr%d!$t %& ett"n the

/%#n Let ! Gr%$eed &!rther t% n% th#t h"$h Gr%d!$t h# the

)#")!) e"ht #e t% et the /%#n

T#(/e57

Tpe of the Product PercentageFM*+ 12JPetroleum and gasoline products JSteel Product 1J


37/63

Te.tile Product 1J'thers 1EJ

InterGret#t"%n' Majorit ban$ers 6J7 fa&ored to Petroleum and gasoline

products while sanctioning loan%

Analsis of ha&ing the go&ernment appro&al In order to access whether the

go&ernment appro&al is important for getting the loan or not we ha&e

performed chi8square test as follows% 0ull hpothesis 9E There is no

significant association between the go&ernment appro&al of the firm and

a&ailing loan Statistical test *hi square test is the most appropriate test for

this purpose%

TEST STATISTIC'

. 6*hi8square7 Z[6'8 )7 G)\ 1@%?@@ Tab% al of . 6E%E7 at > d%f is

%33

As/ . cal X . tab / 9E is rejected and 91 is acceptedInterGret#t"%n' So/ 9E is rejected and 91 is accepted% In other words/ there

is an association between the go&ernment appro&al of the firm and a&ailing

loan

BUSINESS ,ISE ANALYSIS

The nature of a firmKs business/ such as retail/ manufacturing or construction

could influence the probabilit of loan appro&al% The effect could be positi&eor negati&e% The differences among the different products are anal-ed

statisticall using one wa

ANO9A N!// -*G%the"'


38/63

-0' There " n% d"&&eren$e "n the t*Ge %& the (!"ne %& ett"n the /%#n

ANO9A T#(/e510

Sources of &ariation d%f% Sum of squares Mean Sum of squares F*olumn 6tpe of product7 4 21%@? ?%E23 F14%1)rror 12 ??%12 @%4>44 555Total 1< 555555555 555555 5555

F00< .4 123 ;26 C#/ F 555555 -01 " ree$ted

5et us proceed further to $now that which tpe of the business has thema.imum weight age to get the loan%

T#(/e511

Tpe of the Product PercentageRetail EJManufacturing @J*onstruction 1J

InterGret#t"%n' Ma.imum ban$ers 6@J7 fa&ored to manufacturing unit business while sanctioning loan%

+EASURIN CUSTO+ER SATISFACTION IN T-E BANKIN

INDUSTRY

Ban$ing operations are becoming increasingl customer oriented% The

demand for ban$ing supermalls offering one8stop integrated financial

ser&ices is well on the rise% The abilit of ban$s to offer clients access to

se&eral mar$ets for different classes of financial instruments has become a

&aluable competiti&e edge% *on&ergence in the industr to cater to the

changing demographic e.pectations is now more than e&ident% Ban$


39/63

assurance and other forms of cross selling and strategic alliances will soon

alter the business dnamics of ban$s and fuel the process of consolidation

for increased scope of business and re&enue% The thrust on farm sector/

health sector and ser&ices offers se&eral in&estment lin$ages% In short/ the

domestic econom is an increasing pie which offers e.tensi&e economies of

scale that onl large ban$s will be in a position to tap%

;ith the phenomenal increase in the countrs population and the increased

demand for ban$ing ser&ices< speed/ ser&ice qualit and customer

satisfaction are going to be $e differentiators for each ban$s future success%

Thus/ it is imperati&e for ban$s to get useful feedbac$ on their actual

response time and customer ser&ice qualit aspects of retail ban$ing/ which

in turn will help them ta$e positi&e steps to maintain a competiti&e edge%

T-E NEED TO +EASURE CUSTO+ER SATISFACTION

Satisfied customers are central to optimal performance and financial returns%In man places of the world/ business organi-ations ha&e been ele&ating the

role of the customer to that of a $e sta$eholder o&er the past twent ears%

*ustomers are &iewed as a group whose satisfaction with the enterprise must

be incorporated in strategic planning efforts% Forward8loo$ing companies are

finding &alue in directl measuring and trac$ing customer satisfaction as an

important strategic success indicator% )&idence is mounting that placing a

high priorit on customer satisfaction is critical to impro&ed organi-ational

performance in a global mar$et place% ;ith better understanding of

customers perceptions/ companies can determine the actions required to

meet the customers needs% The can identif their own strengths and


40/63

wea$nesses/ where the stand in comparison to their competitors/ chart out

the path of future progress and impro&ement% *ustomer satisfaction

measurement helps to promote an increased focus on customer outcomes

and stimulate impro&ements in the wor$ practices and processes used within

the compan% ;hen buers are powerful/ the health and strength of the

compans relationship with its customers its most critical economic asset

is its best predictor of the future%

ASSETS ON T-E BALANCE S-EET – BASICALLY ASSETS OF

PRODUCTION are good predictors onl when buers are wea$% So it is

no wonder that the relationship between those assets and future income is

becoming more and more tenuous% As buers become empowered/ sellers

ha&e no choice but to adapt% Focusing on competition has its place/ but with

buer power on the rise/ it is more important to pa attention to the

customer% *ustomer satisfaction is quite a comple. issue and there is a lot of

debate and confusion about what e.actl is required and how to go about it%This article is an attempt to re&iew the necessar requirements/ and discuss

the steps that need to be ta$en in order to measure and trac$ customer

satisfaction%

,-AT CONSTITUTES SATISFACTION

T-E +EANIN OF SATISFACTION'

CSatisfiedC has a range of meanings to indi&iduals/ but it generall seems to

be a positi&e assessment of the ser&ices% The word CsatisfiedC itself had a

number of different meanings for respondents/ which can be split into the

broad themes of contentmentGhappiness/ relief/ achie&ing aims and happ

with outcome and the fact that the did not encounter an hassle


41/63

-APPY CONTENT

9app/ prett happ/ quite happ

Pleased

;al$ed out of there feeling good

;al$ out of there chuffed

+rateful the ser&ice has been ':

SER9ICE >UALITY AND CUSTO+ER SATISFACTION

There is a great deal of discussion and disagreement in the literatureabout the distinction between ser&ice qualit and satisfaction% The ser&ice

qualit school &iew satisfaction as an antecedent of ser&ice qualit

satisfaction with a number of indi&idual transactions !deca# into an

o&erall attitude towards ser&ice qualit% The satisfaction school holds the

opposite &iew that assessments of ser&ice qualit lead to an o&erall

attitude towards the ser&ice the call satisfaction and customer retention

customerKs perception of Ser&ice and Oualit of product will determine

the success of the product or ser&ice in the mar$et% If e.perience of the

client from the pre&ious ser&ices/ greatl e.ceeds the e.pectations then

satisfaction will be high/ and &ice &ersa% In the ser&ice qualit literature/

perceptions of the ser&ice deli&er are measured separatel from

customer e.pectations/ and the gap between the two pro&ides a measure

of ser&ice qualit%E8PECTATIONS AND CUSTO+ER SATISFACTION

).pectations ha&e a central role in influencing satisfaction with ser&ices/

and these in turn are determined b a &er wide range of factors lower

e.pectations will result in higher satisfaction ratings for an gi&en le&el


42/63

of ser&ice qualit% This would seen sensible< e%g%/ poor pre&ious

e.perience with the ser&ice or other similar ser&ice is li$el to result in it

being easier to pleasantl surprise customers% 9owe&er/ there are clearl

circumstance where negati&e preconceptions of a ser&ice pro&ider will

lead to lower e.pectations/ but will also ma$e it harder to achie&e high

satisfaction ratings and where positi&e preconception and high

e.pectations ma$e positi&e rating more li$el% The e.pectations theor in

much of the literature/ therefore/ seems to be an o&er simplification% %

BANKIN INDUSTRY' AN O9ER9IE,

For centuries ban$s ha&e plaed an important role in financial sstem of

the countr% The &ital role continues e&en toda although the form of

ban$ing has changed toda with changing need of the econom and

indi&iduals% ;ith e.pansion of trade and commerce/ the concept of

ban$ing gained importance% The ban$ing transcended from indi&iduals to

groups and later to companies% During the Mughal period the indigenous ban$ers plaed a &er important role in lending mone and financing

foreign trade in India% During British rule the agenc houses carried on

the ban$ing business% The Ban$ing sstem in India has three tiers% There

are scheduled commercial ban$s/ the regional rural ban$s< and the

cooperati&e ban$s% The scheduled commercial ban$s constitute those

ban$s which are included in the second schedule of RBI Act/ 13>4% In the

organi-ed segment/ ban$ing sstem occupies an important place in

nationKs econom% It plas a pi&otal role in the economic de&elopment of

a countr and forms the core of the mone mar$et in de&eloped countr%

The commercial ban$s in India comprise of both Public sector as well as


43/63

pri&ate sector ban$s% There are total 2 Public sector and ? pri&ate

sector ban$s functioning in the countr presentl% Ban$s ha&e to deal

with man customers e&erda and render &arious tpes of ser&ices to its

customer% Its a well $nown fact that no business can e.ist without

customers%

PUNJAB NATIONAL BANK

Since its humble beginning in 123 with the distinction of being the first

Indian Ban$ to ha&e been started with Indian capital/ P0B has achie&ed

significant growth in business which at the end of March E11 amounted

to //EE crore% P0B is ran$ed as the nd largest ban$ in the countr

after SBI in terms of branch networ$/ business and man other

parameters% ;ith o&er @E million satisfied customers and more than 1EE

offices including o&erseas branches/ P0B has continued to retain its

leadership position amongst the nationali-ed ban$s% The ban$ enjos

strong fundamentals/ large franchise &alue and good brand image% Apartfrom offering ban$ing products/ the ban$ has also entered the credit card/

debit card< bullion business< life and non8life insurance< +old coins H

asset management business/ etc% P0B has earned man awards and

accolades during the ear in appreciation of e.cellence in ser&ices/

*orporate Social Responsibilit 6*SR7 practices/ transparent go&ernance

structure/ best use of technolog and good human resource management%


44/63

CASE ON SUCCESSFUL S+E FINANCIN

;orldwide/ the wind has been changing in the finance sector in general

and ban$ing8in&estment sector in particular% Such a panorama teaches us

that now/ is the time of cooperation rather than a competition/ now itKs a

time of con&ergence rather than cutting each otherKs nec$ o&er customers

and mar$ets/ now itKs a time of consolidation rather than antagonism%

*uring the fatal disease requires the doses of small pills< impressi&e

thoughts come out from the small brain/ similarl/ India requires prominence of small and medium enterprises for curing its problem of

low economic growth &is8]8&is de&eloped nations% To cure the o&erall

disease of lac$ of appropriate growth of Indian SM)s Small and

Medium )nterprises/ India needs se&eral small pills such as adequate

credit deli&er to SM)s/ better ris$ management/ technological

upgradation of Ban$s esp% Public Sector Ban$s/ attitudinal change in

Ban$ers and so on% Among them/ the major problem of inadequate

financing to SM)s needs an urgent attention% 9a&ing said this/ it is

pertinent to mention that Small Industrial De&elopment Ban$ of India has

achie&ed landmar$ results in the domain of small and medium enterprise


45/63

financing and fulfilling their credit requirements time to time in &arious

forms such as long term project finance/ wor$ing capital finance/ bill

discounting etc% 9owe&er considering the le&el of appetite for credit

facilities of Indian small and medium enterprises/ pri&ate and public

sector ban$s in India need to wor$ out an unique and inno&ati&e model of

financing to this &ital sector 6SM)7 of Indian )conom% In todaKs

changing world/ retail trading/ SM) financing/ rural credit and o&erseas

operations are the major growth dri&ers for Indian ban$ing industr% The

scene has changed since the adoption of financial sector restructuring

programme in 1331% The reform in the financial sector in India along

with the o&erall second generation economic reforms in Indian econom

has transformed the landscape of ban$ing industr and financial

institutions% +DP growth in the 1E ears after reforms a&eraged around @

J% ;ith the introduction of the reforms especiall in financial sector and

successful implementation of them resulted into the mar$ed impro&ementin the financial health of the commercial ban$s measured in terms of

capital adequac/ profitabilit/ asset qualit and pro&isioning for the

doubtful losses%

0ow/ the rules of the game ha&e completel changed% *onsolidation has

become the new mantra for sur&i&al% Due to the growing influence of

globali-ation on the Indian ban$ing industr/ the author is of the opinion

that the financial sector would be opened up for greater international

competition under ;T'% 'pening up of the financial sector from EE/

under ;T'/ would see a number of global ban$s ta$ing large sta$es and

control o&er ban$ing entities in the countr% The are e.pected to bring


46/63

with them capital/ technolog/ and management s$ills which would

increase the competiti&e spirit in the sstem leading to greater efficienc%

+o&ernment policies to allow greater FDI in ban$ing industr and the

mo&e to amend Ban$ing regulations Act to remo&e the e.isting 1E per

cent cap on &oting rights of shareholders are pointer to these

de&elopments% The pressure on ban$s to gear up to meet stringent

prudential capital adequac norms under Basel II and the &arious Free

Trade Agreements 6FTAs7 that India is entering into with other countries/

such as Singapore/ will also impact on globali-ation of Indian ban$ing%

9owe&er/ the flow need not be one wa% Some of the Indian ban$s ma

also emerge as global plaers% As globali-ation opens up opportunities for

Indian corporate entities to e.pand their o&erseas operations/ ban$s in

India wanting to increase their international presence could naturall be

e.pected to follow these corporate entities and other trade flows out of

India% Alongside/ the growing pressure on capital structure of ban$s ise.pected to trigger a phase of consolidation in the ban$ing industr% In

the past mergers were initiated b regulators to protect the interest of

depositors of wea$ ban$s% In recent ears/ there ha&e been a number of

mar$et8led mergers between pri&ate ban$s% This process is e.pected to

gain momentum in the coming ears% A merger between two public sector

ban$s or between a public sector ban$ and a pri&ate ban$ could be the

ne.t logical de&elopment% *onsolidation could also ta$e place through

strategic alliances or partnerships co&ering specific areas of business

such as credit cards/ insurance/ SM)s financing etc% Secondl/ ris$

management has become the $e to success in which adoption of the


47/63

state8of8the8art technolog and latest rating and management s$ills turn

out to be the significant aid for better ris$ management% The abilit to

gauge the ris$s and ta$e appropriate position will be the $e to successful

financing in the emerging Indian ban$ing scenario% Ris$8ta$ers will

sur&i&e/ effecti&e ris$ mangers will prosper and ris$8a&erse are li$el to

perish%

IN T-IS CONTE8T INDIAN BANKS -A9E TO ENSURE

1% Ris$ management has to tric$le down from the corporate office to

branches% The should be made more accountable and responsible

towards their duties% % As audit and super&ision shifts to a ris$8based

approach rather than transaction oriented/ the ris$ awareness le&els of

line functionaries also will ha&e to increase% >% There is a growing need

for ban$s to deal with issues relating to ^reputational ris$ to maintain ahigh degree of public confidence for raising capital and other resources%

In this process/ the technological ad&ancement of Indian ban$s would

create a soothing climate to manage their ris$ in a better wa% In the ears

to come/ technological de&elopments would render flow of information

and data faster/ leading to prompt appraisal and decision8ma$ing% This

would enable ban$s to ma$e credit management more effecti&e/ besides

leading to an appreciable reduction in transaction cost% In order to reduce

in&estment costs in technolog/ ban$s are li$el to resort sharing of

facilities such as ATM networ$s% Ban$s and financial institutions will

join together to share facilities in the areas of pament and settlement/


48/63

bac$8office processing/ data warehousing/ and so on majorl for cost

effecti&eness and secondar motto would be to pro&ide e&erthing under

one head% The ad&ent of new technologies could see the emergence of

new plaers doing financial intermediation% For e.ample/ we could see

utilit ser&ice pro&iders offering/ sa/ bill pament ser&ices or

supermar$ets or retailers doing basic lending operations% So for better

profit margin/ with the help of technological inno&ation/ consolidation

and inno&ation in corporate lending/ the con&entional definition of

ban$ing might undergo changes% *onsidering such de&elopments in the

ban$ing industr of India/ it seems that the ne.t decade will be an era of

consolidation and integration% In such a scenario/ the e.pected integration

of &arious intermediaries in the financial sstem would require a strong

regulator framewor$% It would also require a number of legislati&e

changes to enable the ban$ing sstem to remain contemporar and

competiti&e% There would be an increased need for selfregulation amongIndian ban$s since de&elopment of best international standard practices

could e&ol&e better through this rather than based on mandator

regulator prescriptions% For instance/ to enlist the confidence of the

global in&estors and international mar$et plaers/ the ban$s will ha&e to

initiate adopting the best global practices of financial accounting and

reporting% It is e.pected that ban$s should migrate to global accounting

standards smoothl rather than waiting for the regulator circulars and

guidelines/ although it would mean greater disclosure and tighter norms%

5ast and the most important de&elopment in the Indian ban$ing industr

is its change of focus in corporate lending on account of abo&e mentioned


49/63

changes and challenges% In the sheltered das of corporate lending b

ban$s/ when customers could be freel charged/ ban$s concerned

themsel&es with onl ^re&enue which was equal to cost plus profit% Post8

reforms8 after 1331/ when the cost of ser&ices became nearl equal across

ban$s and cost8control was a $e to higher profits/ the focus of financial

institutions especiall ban$s shifted to ^profit/ which was equal to

re&enue minus cost% This was an alternati&e measure of re&enue stream

which e&er ban$ thought of due to effects of e.ternal en&ironment on

their wor$ings% And in the future/ as domestic and international

competition hots up/ financial institutions including ban$s ma ha&e to

shift their focus to ^cost which will be determined b re&enue minus

profit% In other words/ cost8control in tandem with efficient use of

resources and increase in producti&it will determine the winners and

laggards in the future% The economic theor of _sur&i&al of the fittestK

wor$s e&erwhere it seems through this e.ample% The ra of hope isSmall and Medium )nterprises 6SM)s7

1 which is an emerging/ ine&itable and profitable target mar$et for the

financersK i%e% financial institutions and ban$s% 9owe&er/ that need not

mean ban$s and financial institutions will bac$8up the social ban$ing%

Rather than being seen as directed and philanthropic8li$e financing/ such

lending should ha&e been now more business dri&en% 'n the contrar/ the

authors belie&e that all the sources or mar$et of re&enues ha&e not been

&anished et% The SM)s sector is considered to be an untapped mar$et

for financial institutions in India% ;e just need to combat certain

obstacles% The hurdles which need to be remo&ed are8


50/63

1% Minimi-ation of probabilities of s$ewed returns from SM)s b better

ris$ management

% )radicate inconsistenc in the $nowledge of SM)s business% For

e.ample/ entrepreneurs ma possess more information about the nature

and characteristics of their products and processes than potential

financiers%

>% Absence of managerial and technical e.pertise of intermediaries whose

role is to e&aluate and monitor companies

4% 5ac$ of international infrastructure and e.pertise in SM) financing

S+ES FINANCIN – :T-E RISINM India The onl wa out of the

mire is that the Indian manufacturing sector could be strengthened b the

e.isting rural sstems and ma$ing them self8sufficient% This could ta$e

place onl b helping Small and Medium )nterprises and the rural

artisans 6people with innate s$ills and talents7 in becoming effecti&e and

competiti&e enough to face the future% A number of issues and business practices of global plaers and mar$ets can be obser&ed/ learnt and

adapted for ensuring competiti&eness of Indian SM)s% 5et us ta$e an

anecdote/ which is a part of the school das about the meaning of

domestic and global competition% It is about two friends who while

wal$ing through a dense forest suddenl hear the roar of a bear% 'ne of

them immediatel changes his shoes that he is wearing in/ to the one/ he

uses for running% 9is friend as$ed him !If ou change our shoes/ do

ou thin$ ou can out beat the bearN# The other one replied !The idea is

not to beat the bear/ but ou%# The moral of the stor is that the Indian

SM) sector should be strong enough to out beat the other plaers in the


51/63

econom and not the competition itself% SMA55 and M)DI,M

enterprises 6SM)s7 pla a cataltic role in the de&elopment of an

countr% The are the engines of growth in de&eloping and transition

economies% In India the account for a significant proportion in

manufacturing/ e.ports and emploment/ and are major contributors to

+DP%

*onsidering the growth potential of Indian SM)s/ the +o&ernment of

India has as$ed public sector ban$s to achie&e a minimum E per cent

ear8on8ear growth in the funding of SM)s that will lead to double the

flow of credit to the sector from Rs @?/EEE crore in EE48EE to Rs 1/

>/EEE crore b EE38E1E%

> A small8scale unit is defined as one ha&ing original in&estment in plant

and machiner not e.ceeding Rs 1 crore% ;hile recogni-ing the needs for

larger in&estment in some of the more important segments of small scale

industries 6SSIs7/ the +o&ernment has enhanced this to Rs crore for specified industries% The +o&ernment felt that a separate categor of

medium enterprises 6M)s7 needs to be recognised and/ accordingl/ the

new polic pac$age clearl defined the medium enterprises as those units

ha&ing in&estment in plant and machiner abo&e the small8scale industr

limit and up to Rs 1E crore/ as recommended b the ;or$ing +roup on

Flow of *redit to the SSI sector/ headed b Mr A% S% +angul

The Importance of Small and Medium )nterprises 6SM)s7 in an

econom cannot be o&erloo$ed as the form a major chun$ in the


52/63

economic acti&it of nations% The pla a $e role in industriali-ation of

a de&eloping countr li$e India% The ha&e unique ad&antages due to8

Their si-e

Their comparati&el high labor8capital ratio

0eed a shorter gestation period

Focus on relati&el smaller mar$ets

0eed lower in&estments

)nsure a more equitable distribution of national income Facilitate an effecti&e mobili-ation of resources of capital and

s$ills which might otherwise remain unutili-ed and

Stimulate the growth of industrial entrepreneurship%

INDIAN S+E AT A LANCE In India/ SM) sector accounts for around

3J of the industrial units/ 4EJ of the &alue added in the manufacturing

sector output/ >4J of e.ports and pro&ides direct emploment to E million

persons in around >%@ million registered SM) units% The SM) sector in India

contributes to about ?J of IndiaKs +DP during EE8E>% 0ow/ the question

is/ *an it o&erta$e the in&asion of foreign companies through their

inno&ati&e/ qualit/ affordableGreasonable and readil a&ailable productsN

In de&eloping countries li$e India/ ma$ing the SM)s more competiti&e is

particularl pressing as trade liberali-ation and deregulation increase the

competiti&e pressures and reduce the direct subsidies and protection that

+o&ernments offer to SM)s% If our SM)s are to be competiti&e enough to

withstand and fight bac$ the foreign


53/63

M0* products/ the ha&e to be nurtured% According to Porter/ !the onl

meaningful concept of competiti&eness at the national le&el is Producti&it/

which is the &alue of output produced b a unit of labor or capital%

Producti&it in turn depends on both the qualit and features of products

6which determines the prices that the can command7 and the efficienc with

which the can be produced% Producti&it is the prime determinant of a

nationKs long8run standard of li&ing< it is the root cause of national per capita

income#% Further/ !to find answers/ we must focus not on the econom as a

whole but on specific industries and industr segments% ;e must understand

how and wh commerciall &iable s$ills and technolog are created/ which

can onl be full understood at the le&el of particular industr#% International

trade and foreign in&estment can both impro&e a nationKs producti&it as

well as threaten it% The e.pose the nationKs industries to the test of

international standards of producti&it% An industr will lose out if its

producti&it is not sufficientl higher than its ri&als to offset an ad&antagein the local wage rates% As wage rates in India are sufficientl less to attract

multi8nationals/ the onl wa is to increase the producti&it of local small

industries% This means/ the increase in the producti&it of labor i%e% human

resources/ the producti&it of capital and that of the process/ which in turn

relates to the use of technolog that ields qualit and inno&ati&e products%

According to ).8*ommerce and Industr Minister and President of the

0ational Producti&it *ouncil/ Mr% Arun (aitle at the 4?th meeting of 0P*/

!It has become so competiti&e these das that bul$ of the labor/ for reasons

of higher producti&it/ has now shifted to female labor% If we loo$ at other

Asian economies/ Bangladesh or Srilan$a/ *ambodia or Manmar/ we find


54/63

that in manufacturing/ it is female labor/ which is being encouraged because

the ha&e been found more disciplined and hence with higher Producti&it#%

As e&er coin has two sides/ similarl/ e&en SM) financing has a share in

the o&erall financing%

The following are the issues of SM) financing

The are unable to capture mar$et opportunities/ which require large

production facilities and thus could not achie&e economies of scale/

homogenous standards and regular suppl%

The are e.periencing difficulties in purchase of inputs such as raw

materials/ machiner and equipments/ finance/ consulting ser&ices/

new technolog/ highl s$illed labor etc%

Small si-e hinders the internali-ation of functions such as mar$et

research/ mar$et intelligence/ suppl chain/ technolog inno&ation/

training/ and di&ision of labor that impedes producti&it%

)mphasis to preser&e narrow profit margins ma$es the SM)s mopic

about the inno&ati&e impro&ements to their product and processes and

to capture new mar$ets%

The are unable to compete with big plaers in terms of product

qualit/ range of products/ mar$eting abilities and cost%

And most importantl/ absence of a wide range of Financing and

other ser&ices those are a&ailable to raise mone and sustain the business%

Absence of Infrastructure/ qualit labor/ Business acumen and limited

options G opportunities to widen the business%

Poor IT and :nowledge infrastructure%


55/63

CASE STUDY PUNJAB NATIONAL BANK

About Punjab 0ational Ban$ Punjab 0ational Ban$ 6herein referred to as

P0B7 is one of the leading ban$s in India and offers a wide &ariet of

ban$ing ser&ices/ which include corporate and personal ban$ing/ industrial

finance/ agricultural finance/ financing of trade and international ban$ing%

Among the clients of the Ban$ are Indian conglomerates/ medium and small

industrial units/ e.porters/ non8resident Indians and multinational

companies% Punjab 0ational Ban$ was incorporated in the ear 123% Since

its humble beginning o&er hundred ears ago/ the ban$ has grown in stature

to become one of the leading ban$ing institutions in India% P0B is the

second largest PS, ban$ in India with a dominant presence in north India%

:eeping in tune with changing times and to pro&ide its customers more

efficient and speed ser&ice/ the Ban$ has ta$en major initiati&e in the field

of computeri-ation% All the Branches of the Ban$ ha&e been computeri-ed%


56/63

The Ban$ has also launched aggressi&el the concept of CAn Time/ An

;here Ban$ingC through the introduction of *entrali-ed Ban$ing Solution

6*BS7 and o&er EEE offices ha&e alread been brought under its ambit%

Sstem Prior to the Introduction of FineDocs Document Management

Sstem Punjab 0ational Ban$ 6herein referred to as P0B7 is one of the

leading ban$s in India and offers a wide &ariet of ban$ing ser&ices% Punjab

0ational Ban$ is ser&ing o&er >% crore customers through 4E@ branches

and 44? e.tension counters P0B generates enormous amount of customer8

related documents and reports% For an new ban$ing ser&ices requested b

the customer a new application form is created with all his details% This

application form is the $e document that contains all information regarding

the customer/ for the purpose of customer ser&ice and settlement of legal

disputes% To access an &ital information related to the client/ the compan

had to retrie&e the original hard cop of the application% The regular

procedure included ta$ing out a page from the entire set of documents of original application forms% This page was either photocopied or used and

then $ept bac$ with the original form% This led to papers being misplaced or

left them in a dilapidated state/ due to constant wear and tear% Man a times

the original was missing and at times/ the photocop also got stapled to a

wrong application form%

PROBLE+S FACED BY PUNJAB NATIONAL BANK

Punjab 0ational Ban$ generates a lot of phsical documents for their

e.isting clients% Managing these documents 6Sorting/ Inde.ing and

Filing etc7 was a &er hectic process for them%


57/63

The regular procedure included ta$ing out a page from the entire set

of documents of original application forms and then wor$ing on it%

This leads to papers being misplaced or left them in a dilapidated

state/ due to constant wear and tear%

For searching or locating an document G file was a hassle for the

staff in&ol&ed in this process%

Since paper based filesGdocuments were accessible to each and e&er

person/ the were liable to be tampered/ and resulted sharing of an

internal information with an unauthori-ed person%

Phsical documents were prone to damage with time/ moisture/

rodents etc%

Also there was a problem of disaster reco&er

PYRA+ID?S SOLUTION PYRA+ID IT *onsulting proposed Punjab

0ational Ban$ to automate manual Record G Document $eeping process b

pro&iding its Document Management Solution FineDocs H Scanning

Ser&ices FineScan% After the implementation of the DMS/ the application

form and other related documents got scanned and inde.ed with the user

defined inde.ed &alues% After this whene&er there was a need to refer to the

original document/ a search feature of the DMS helped to retrie&e the

scanned cop of the document to the user% Search in Document ManagementSolution has been carried out on the basis of title/ as well as/ $ewords% ;e

proposed a multi user web based Document Management Solution i%e%

FineDocs that encompass strong searching H distribution modules% All the

documents would be stored in a ser&er and thus this application shall act as a


58/63

central repositor of storage of Data H Documents Document Retrie&al

;hene&er the document is required to be referred b the branch/ the user

logs in to our DMS and where able see the scanned cop of the original

document &er easil% The request for retrie&al of the document is routed to

the *entral FineDocs Database and Image Ser&er client while requesting for

a connection/ specifies a preferred site/ to which it wants to get connected%

For document retrie&al/ the user specifies the Inde. of the document he

wants to retrie&e% ;hene&er a request for document retrie&al is made/ the

Image ser&er chec$s whether the document resides on the clientKs preferred

site% If the document resides on the preferred site then it is fetched from there

else it is fetched from the 9ome site of the repositor

BENEFITS TO PUNJAB NATIONAL

BANK DOCU+ENTS SECURITY FineDocs sstem facilitated role

based access on all the records G documents through a user name and a password%

EASY S-ARIN AND COLLABORATION All documents were stored

in FineDocs with proper access control% This wa authori-ed users were able

to &iew Grefer G share and modif the documents%

AUDIT TRAIL' FineDocs has the functionalit b which each and e&er

operation/ e&ent performed b the user li$e/ user logins into the sstem/

action done etc were recorded with the time/ thus increasing the

accountabilit%

SA9ED COURIER COST FineDocs Sstem pro&ided an option to email

documents both within office and outside cutting down on courier cost% As


59/63

the documents were in non8editable TIFF format/ users were in relief that

the will not be tampered and were as safe as an printed document%

SA9ES DUPLICATION AND P-OTOCOPYIN COST Since

electronic documents could be shared among se&eral users at the same time/

there was no need to photocop the documents for sharing/ thus resulting in

a huge sa&ing on the duplication of documents%

DISASTER +ANAE+ENT FineDocs pro&ided an all8in8one solution

for Punjab 0ational Ban$Ks document protection from disasters li$e 0atural

H accidental calamities etc% There is a full fledged bac$up and restore

facilit pro&ided%

RECO++ENDATIONS AND SUESTIONS

After anal-ing the facts and figures it can be recommended

The lending procedure of the selected public ban$s are improper/ as The ban$s are not ha&ing proper norms for reco&er of loans%

There un