A Project Report on

Corporate Banking

Submitted to: ICSI 4th Batch of MSOP Jaipur Chapter

Submitted by: Gaurav Chauhan Stud Reg No: 220584981/02/2008

RESEARCH METHODOLOGY
CORPORATE BANKING
STATEMENT OF PROBLEM: To study the emergence and evolution of the corporate banking as an important division of the commercial banking and also to study the credit appraisal models supporting the increased activities of corporate lending by banks. In todays global Banking arena, Corporate Bankers are facing a string of unprecedented and sweeping challenges in the areas like Treasury Management, Trade Finance, Risk Management, Compliance Management, Electronic Trading and Derivatives Markets. Compounding this are the mounting complexities from ongoing regulatory changes, decreasing margins and fierce competition NEED FOR STUDY: Over the period of time, with the tremendous increase in the growth pattern of industrial development, the need for the corporate loans have increased more than ever. So, the increasing trend urges the banks and financial institutions to focus on corporate banking as a separate division. So, the researchers have preferred to study the concept of corporate banking and all the operational aspects attached to it in the entire process.

OBJECTIVE OF THE STUDY: To study the banking industry, as a whole with the help of various analysis including SWOT analysis, PEST analysis and Porters Five Force analysis. To acquire basic knowledge about the corporate lending in India and its relevance with respect to banks.

To analyze the credit risk models of both public bank and private bank and bring out its comparative picture on the basis of various parameters.

To study credit risk management strategies of bank.

RESEARCH DESIGN: A research design is the arrangement of the condition for collection and analysis of data. Actually it is the blueprint of the research project. The research type is descriptive research. The main objective of this design is search primary and secondary data. The research primarily focuses on the secondary sources and first hand information through focus group interviews. DATA COLLECTION: As the research type is descriptive, the method of data collection was informal. SOURCES: The relevant information were collected from both primary and secondary sources like follow up with bank managers web search, newspaper articles TOOLS: Focus group interviews with the managers of banks.

BENEFICIARIES: For the banks: It will give them the in depth review of the various aspects involved in the corporate banking with emphasis on the credit risk management.

For the corporates: The report shows the comparative study of the credit appraisal and sanctioning procedure involved in the credit lending by banks as well as financial institutions. Secondly, they will also get the relevance of the corporate lending by the banks and its various relevant aspects. For the management students: The report studies the entire banking industry from various aspects using different analytical tools. Secondly, it introduces into the world of credit lending and its trend in India. Moreover, it also shows the operational procedures involved in the corporate lending with emphasis on risk modeling and credit risk management.

LIMITATIONS OF THE STUDY: The scope of the report is mainly depends on the information extracted from secondary sources and the information given by the managers of banks. So, lack of the availability of the first hand information may act as a limitation to the project report.

CORPORATE BANKING: AN OVERVIEW

INTRODUCTION:
According to American author and humorist Mark Twain: A banker is a fellow who lends his umbrella when the sun is shining and wants it back the minute it begins to rain. Many troubled businesses seeding credit in recent years might agree with Mr. Twain. Indeed securing the large amounts of credit that many businesses require can be a complicated and challenging task loan requests. Moreover, business loans, often called commercial and industrial loans, rank among the most important assets that commercial banks and their closest competitors hold. Corporate finance is an area of finance dealing with financial decisions business enterprises make and the tools and analysis used to make these decisions. The primary goal of corporate finance is to maximize corporate value
[1]

while managing the firm's financial

risks. Although it is in principle different from managerial finance which studies the financial decisions of all firms, rather than corporations alone, the main concepts in the study of corporate finance are applicable to the financial problems of all kinds of firms. The discipline can be divided into long-term and short-term decisions and techniques. Capital investment decisions are long-term choices about which projects receive investment, whether to finance that investment with equity or debt, and when or whether to pay dividends to shareholders. On the other hand, the short term decisions can be grouped under the heading "Working capital management". This subject deals with the short-term balance of current assets and current liabilities; the focus here is on managing cash, inventories, and short-term borrowing and lending (such as the terms on credit extended to customers). The terms corporate finance and corporate financier are also associated with investment banking. The typical role of an investment bank is to evaluate the company's financial needs and raise the appropriate type of capital that best fits those needs.

STRUCTURE OF CREDIT LENDING (CORPORATE) IN INDIA:

Banks, finance companies, and competing business lenders grant many different types of commercial loans. Among the most widely used forms of business credit are the following: SHORT-TERM BUSINESS LOANS: Self-liquidating inventory loans Working capital loans Interim construction financing Security dealer financing Retailer and equipment financing Asset-based loans (accounts receivable financing, factoring, and inventory financing) Syndicated loans LONG-TERM BUSINESS LOANS: Term loans to support the purchase of equipment, rolling stock, and structures Revolving credit financing Project loans Loans to support acquisitions of others business firms

EMERGENCE OF CORPORATE BANKING IN INDIA

The bank lending has expanded in a number of emerging market economies, especially in Asia and Latin America, in recent years. Bank credit to the private sector, in real terms, was rising at a high rate. Several factors have contributed to the significant rise in bank lending in emerging economies such as strong growth, excess liquidity in banking systems reflecting easier global and domestic monetary conditions, and substantial bank restructuring. The recent surge in bank lending has been associated with important changes on the asset side of banks balance sheet. First, credit to the business sector - historically the most important component of banks assets has been weak, while the share of the household sector has increased sharply in several countries. Second, banks investments in Government securities increased sharply until 2004-05. As a result, commercial banks continue to hold a very large part of their domestic assets in the form of Government securities - a process that seems to have begun in the mid-1990s. There has been a sharp pick up in bank credit in India in recent years. The rate of growth in bank credit which touched a low of 14.4 per cent in 2002-03, accelerated to more than 30.0 per cent in 2004-05, the rate which was maintained in 2005-06. The upturn in the growth rate of bank credit can be attributed to several factors. One, macroeconomic performance of the economy turned robust with GDP growth rates hovering between 7.5 per cent and 8.5 per cent during the last few years. Two, the hardening of sovereign yields from the second half of 2003-04 forced banks to readjust their assets portfolio by shifting from investments to advances. While the share of gross advances in total assets of commercial banks grew from 45.0 per cent to 54.7 per cent that of investments declined from 41.6 per cent to 32.1 per cent in the last few years. However, the credit growth has been broad-based making banks less vulnerable to credit concentration risk. The declining trend of priority sector loans in 2001-02 in the credit book of banks was due to prudential write offs and compromise settlements of a large number of small accounts which was reversed from 2002-03 on the strength of a spurt in the housing loan portfolio of banks. Even though credit to industry and other sectors have also picked up, their share in total loans has declined marginally. Retail loans, which witnessed a

growth of over 40.0 per cent in 2004-05 and again in 2005-06, have been the prime driver of the credit growth in recent years. Retail loans as a percentage of gross advances increased from 22.0 per cent in March 2004 to 25.5 per cent in March 2006. The cyclical uptrend in the economy along with the concomitant recovery in the business climate brings with it improved abilities of the debtors to service loans, thereby greatly improving banks asset quality. Despite the sharp rise in credit growth in recent years, not only the proportional levels of gross non-performing loans (NPLs) have declined, but the absolute levels of gross NPLs declined significantly. Several factors have contributed to the marked improvement in the Indian banks asset quality. One, banks have gradually improved their risk management practices and introduced more vigorous systems and scoring models for identifying credit risks. Two, a favourable macroeconomic environment in recent years has also meant that many entities and units of traditionally problematic industries are now performing better.Three,diversification of credit base with increased focus on retail loans, which generally have low delinquency rates, has also contributed to the more favourable credit risk profile. Four, several institutional measures have been put in place to recover the NPAs. These include Debt Recovery Tribunals (DRTs), Lok Adalats (peoples courts), Asset Reconstruction Companies (ARCs) and corporate debt restructuring mechanism (CDRM). In particular, the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act, 2002 for enforcement of security interest without intervention of the courts has provided more negotiating power to the banks for resolving bad debts.

AN OVERVIEW OF HDFC BANK LTD

HDFC PROFILE The Housing Development Finance Corporation Limited (HDFC) was amongst the first to receive an 'in principle' approval from the Reserve Bank of India (RBI) to set up a bank in the private sector, as part of the RBI's liberalization of the Indian Banking Industry in 1994. The bank was incorporated in August 1994 in the name of 'HDFC Bank Limited', with its registered office in Mumbai, India. HDFC Bank commenced operations as a Scheduled Commercial Bank in January 1995.

HDFC is India's premier housing finance company and enjoys an impeccable track record in India as well as in international markets. Since its inception in 1977, the Corporation has maintained a consistent and healthy growth in its operations to remain the market leader in mortgages. Its outstanding loan portfolio covers well over a million dwelling units. HDFC has developed significant expertise in

retail mortgage loans to different market segments and also has a large corporate client base for its housing related credit facilities.

With its experience in the financial markets,

a strong market

reputation, large shareholder base and unique consumer franchise, HDFC was ideally positioned to promote a bank in the Indian environment.

HDFC Bank began operations in 1995 with a simple mission : to be a World Class Indian Bank. We realized that only a single minded focus on product quality and service excellence would help us get there. Today, we are proud to say that we are well on our way towards that goal.

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TECHNOLOGY USED IN HDFC BANK In the era of globalization each and every sector faced the stiff competition from their rivals. And world also converted into the flat from the globe. After the policy of liberalization and RBI initiatives to take the step for the private sector banks, more and more changes are taking the part into it. And there are create competition between the private sector banks and public sector bank.

Private sector banks are today used the latest technology for the different transaction of day to day banking life. As we know that Information Technology plays the vital role in the each and every industries and gives the optimum return from the limited resources.

Banks are service industries and today IT gives the innovative Technology application to Banking industries. HDFC BANK is the leader in the industries and today IT and HDFC BANK together combined they reached the sky. New technology changed the mind of the customers and changed the queue concept from the history banking transaction. Today there are different channels are available for the banking transactions.

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We can see that the how technology gives the best results in the below diagram. There are drastically changes seen in the use of Internet banking, in a year 2005 (5%) and in the year 2011 (30%). These type of technology gives the freedom to retail customers.

Centralized Processing Units Electronic Processing Straight Through

Derived Economies of Scale Reduced Transaction Cost

Data Warehousing , CRM Innovative Technology Application

Improve cost efficiency, Cross sell Provide new or superior products

HDFC BANK is the very consistent player in the New private sector banks. New private sector banks to withstand the competition from public sector banks came up with innovative products and superior service.

Business Strategy
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HDFC BANK mission is to be

"a World Class Indian Bank",

benchmarking themselves against international standards and best practices in terms of product offerings, technology, service levels, risk management and audit & compliance. The objective is to build sound customer franchises across distinct businesses so as to be a preferred provider of banking services for target retail and wholesale customer segments, and to achieve a healthy growth in profitability, consistent with the Bank's risk appetite. Bank is committed to do this while ensuring the highest levels of ethical standards, professional integrity, corporate governance and regulatory compliance. Continue to develop new product and technology is the main business strategy of the bank. Maintain good relation with the customers is the main and prime objective of the bank.

HDFC BANK business strategy emphasizes the following :

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Increase market share in Indias expanding banking

and

financial services industry by following a disciplined growth strategy focusing on quality and not on quantity and delivering high quality customer service. Leverage our technology platform and open scaleable systems to deliver more products to more customers and to control operating costs. Maintain current high standards for asset quality through disciplined credit risk management. Develop innovative products and services that attract the targeted customers and address inefficiencies in the Indian financial sector. Continue to develop products and services that reduce banks cost of funds. Focus on high earnings growth with low volatility.

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INSIDE HDFC BANK

FIVE S , PART OF KAIZEN WORK PLACE TRANSFORMATION Focus on effective work place organization Believe in Small changes lead to large improvement

Every successful organization have their own strategy to win the race in the competitive market. They use some technique and methodology for smooth running of business. HDFC BANK also aquired the Japanese technique for smooth running of work and effective work place organization.

Five S Part of Kaizen is the technique which is used in the bank For easy and systematic work place and eliminating unnecessary things from the work place.

BENEFIT OF FIVE S
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It can be started immediately. Every one has to participate. Five S is an entirely people driven initiatives. Brings in concept of ownership. All wastage are made visible.

FIVE S Means :S-1 S-2 S-3 S-4 S-5 SORT SYSTEMATIZE SPIC-N-SPAN STANDARDIZE SUSTAIN SEIRI SEITON SEIRO SEIKETSU SHITSUKE

(1) SORT :It focus on eliminating unnecessary items from the work place. It is excellent way to free up valuable floor space. It segregate items as per require and wanted.

Frequently Required

Wanted but not Required

Remove everything from workplace

Junk

Less Frequently Required

Junk

(2) SYSTEMATIZE :-

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Systematize is focus on efficient and effective Storage method. That means it identify, organize and arrange retrieval. It largely focus on good labeling and identification practices. Objective :- A place for everything and everything in its place.

(3) SPIC- n - SPAN :Spic-n-Span focuses on regular clearing and self inspection. It brings in the sense of ownership.

(4) STANDERDIZE :It focus on simplification and standardization. It involve standard rules and policies. It establish checklist to facilitates autonomous maintenance of workplace. It assign responsibility for doing various jobs and decide on Five S frequency.

(5) SUSTAIN:It focuses on defining a new status and standard of organized work place. Sustain means regular training to maintain standards developed under S-4. It brings in self- discipline and commitment towards workplace organization.

Human Resource

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The Banks staffing needs continued to increase during the year particularly in the retail banking businesses in line with the business growth. Total number of employees increased from 14878 as of March31,2006 to 21477 as of March 31, 2007. The Bank continues to focus on training its employees on a continuing basis, both on the job and through training programs conducted by internal and external faculty.

The Bank has consistently believed that broader employee ownership of its shares has a positive impact on its performance and employee motivation. The Banks employee stock option scheme so far covers around 9000 employees.

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Capital Structure
Summary information on the main features of all capital instruments eligible for inclusion under Tier I and Tier II capital : Capital funds are classified into Tier I and Tier II capital under the capital adequacy framework. Tier I capital includes paid-up equity capital, statutory reserves, other disclosed free reserves, capital reserves and innovative perpetual debt instruments (Tier I bonds) eligible for inclusion in Tier I capital that comply with the requirements specified by RBI. Elements of Tier II capital include revaluation reserve, if any, general provision for standard assets, upper Tier II instruments and subordinated debt instruments (lower Tier II bonds) eligible for inclusion in Tier II capital. The Bank has issued debt instruments that form part of Tier I and Tier II capital. The terms and conditions that are applicable for these instruments comply with the stipulated regulatory requirements. The Bank considers the following risks as material risks it is exposed to in the normal course of its business and therefore, factors these while assessing / planning capital :

Market Risk
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Operational Risk Interest Rate Risk in the Banking Book Liquidity Risk Intraday Risk Credit Concentration Risk Business Risk Strategic Risk Compliance Risk Reputation Risk Technology Risk

Credit Risk
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Credit Risk Management Credit risk is defined as the possibility of losses associated with diminution in the credit quality of borrowers or counterparties. In a bank's portfolio, losses stem from outright default due to inability or unwillingness of a customer or counterparty to meet commitments in relation to lending, trading, settlement and other financial transactions. Architecture The Bank has a comprehensive credit risk management architecture. The Board of Directors of the Bank endorses the credit risk strategy and approves the credit risk policies of the Bank. This is done taking into consideration the Bank's risk appetite, derived from perceived risks in the business, balanced by the targeted profitability level for the risks taken up. The Board oversees the credit risk management functions of the Bank. The Risk Policy & Monitoring Committee (RPMC), which is a committee of the Board, guides the development of policies, procedures and systems for managing credit risk, towards implementing the credit risk strategy of the Bank. RPMC ensures that these are adequate and appropriate to changing business conditions, the structure and needs of the Bank and the risk appetite of the Bank. The Bank's Credit & Market Risk Group drives credit risk management centrally in the Bank. It is primarily responsible for implementing the risk strategy approved by the Board, developing procedures and systems for managing risk, carrying out an independent assessment of credit risk, approving individual credit exposures

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and monitoring portfolio composition and quality. Within the Credit & Market Risk group and independent of the credit approval process, there is a framework for review and approval of credit ratings. With regard to the Wholesale Banking business the Bank's risk management functions are centralised. In respect of the Bank's Retail Assets business, while the various functions relating to policy, portfolio management and analytics are centralised, the underwriting function is distributed across various geographies within the country. The risk management function in the Bank is clearly demarcated and independent from the operations and business units of the Bank. The risk management function is not assigned any business targets.

Credit Process
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There are two different credit management models within which the credit process operates - the Retail Credit Model and the Wholesale Credit Model. The Retail Credit Model is geared towards high volume, small transaction size businesses where credit appraisals of fresh exposures are guided by statistical models, and are managed on the basis of aggregate product portfolios. The Wholesale Credit Model on the other hand, is relevant to lower volume, larger transaction size, customised products and relies on a judgemental process for the origination, approval and maintenance of credit exposures. The credit models have two alternatives for managing the credit process - Product Programs and Credit Transactions. In Product Programs, the Bank approves maximum levels of credit exposure to a set of customers with similar characteristics, profiles and / or product needs, under clearly defined standard terms and conditions. This is a cost- effective approach to managing credit where credit risks and expected returns lend themselves to a templated approach or predictable portfolio behavior in terms of yield, delinquency and write-off. Given the high volume environment, automated tracking and reporting mechanisms are important here to identify trends in portfolio behavior early and to initiate timely adjustments. In the case of credit transactions, the risk process focuses on individual customers or borrower relationships. The approval process in such cases is based on detailed analysis and the individual judgement of credit officials, often involving complex products or risks, multiple facilities / structures and types of securities.

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The Bank's Credit Policies & Procedures Manual and Credit Programs, where applicable, form the core to controlling credit risk in various activities and products. These articulate the credit risk strategy of the Bank and thereby the approach for credit origination, approval and maintenance. These policies define the Bank's overall credit granting criteria, including the general terms and conditions. The Policies / Programs generally address such areas as target markets / customer segmentation, qualitative-quantitative assessment parameters, portfolio mix, prudential exposure ceilings, concentration limits, price and non-price terms, structure of limits, approval authorities, exception reporting system, prudential accounting and provisioning norms, etc. They take cognisance of prudent and prevalent banking practices, relevant regulatory requirements, nature and complexity of the Bank's activities, market dynamics etc. Credit concentration risk arises mainly on account of concentration of exposures under various categories including industry, products, geography, underlying collateral nature and single / group borrower exposures. To ensure adequate diversification of risk, concentration ceilings have been set up by the Bank on different risk dimensions, in terms of : Borrower / business group Industry Risk grading The Risk Policy & Monitoring Committee sets concentration ceilings and the Credit and Market Risk Group monitors outstandings for each dimension and ensures that the portfolio profile meets the approved concentration limits. These

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concentration ceilings and outstandings are periodically reported to the Board. The regulatory prudential norms with respect to ceilings on credit exposure to individual borrowers or group of borrowers also ensure that the Bank avoids concentration of exposure. As an integral part of the credit process, the Bank has a fairly sophisticated credit rating model appropriate to each market segment in Wholesale Credit. The models follow principles similar to those of international rating agencies. In Retail Credit, score cards have been introduced in the smaller ticket, higher volume products like credit cards, two wheeler loans and auto loans. For the other retail products which are typically less granular or have higher ticket sizes, loans are underwritten based on the credit policies, which are in turn governed by the respective Board approved product programs. All retail portfolios are monitored regularly at a highly segmented level. Top management monitors overall portfolio quality and high-risk exposures periodically, including the weighted risk grade of the portfolio and industry diversification. Additional to, and independent of, the internal grading system and the RBI norms on asset classification, the Bank has a labeling system, where individual credits are labeled based on the degree of risk perceived in them by the Bank. Remedial strategies are developed once a loan is identified as an adversely labeled credit

SWOT ANALYSIS
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STRENGTH Right strategy for the right products. Superior customer service vs. competitors. Great Brand Image Products have accreditations. High degree satisfaction. of required customer

WEAKNESSES Some gaps in range for certain sectors. Customer training. service staff need

Processes and systems, etc Management cover insufficient. Sectoral growth is constrained by low unemployment levels and competition for staff

Good place to work Lower response time with efficient and effective service. Dedicated workforce aiming at making a long-term career in the field.

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Opportunities

Threats

Profit margins will be good. Could extend broadly. Could seek deals. to overseas

Legislation could impact. Great risk involved Very high competition prevailing in the industry. Vulnerable to reactive attack by major competitors

New specialist applications. better customer

Fast-track career development opportunities on an industrywide basis. An applied research centre to create opportunities for developing techniques to provide added-value services.

Lack of infrastructure in rural areas could constrain investment. High volume/low cost market is intensely competitive.

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AN OVERVIEW OF PUNJAB NATIONAL BANK LTD PNB PROFILE

With over 38 million satisfied customers and 4668 offices, PNB has continued to retain its leadership position among the nationalized banks. The bank enjoys strong fundamentals, large franchise value and good brand image. Besides being ranked as one of India's top service brands, PNB has remained fully committed to its guiding principles of sound and prudent banking. Apart from offering banking products, the bank has also entered the credit card & debit card business; bullion business; life and non-life insurance business; Gold coins & asset management business, etc.

Since its humble beginning in 1895 with the distinction of being the first Indian bank to have been started with Indian capital, PNB has achieved significant growth in business which at the end of March 2009 amounted to Rs 3,64,463 crore. Today, with assets of more than Rs 2, 46,900 crore, PNB is ranked as the 3rd largest bank in the country (after SBI and ICICI Bank) and has the 2nd largest network of branches (4668 including 238 extension counters and 3 overseas offices).During the FY 2008-09, with 39% share of low cost deposits, the bank achieved a net profit of Rs 3,091 crore, maintaining its number ONE position amongst nationalized banks. Bank has a strong capital base with capital adequacy ratio as per Basel II at 14.03% with Tier I and Tier II capital ratio at 8.98% and 5.05% respectively as on March09. As on March09, the Bank has the Gross and Net NPA ratio of only 1.77% and 0.17% respectively. During the FY 2008-09, its ratio of priority sector credit to adjusted net bank credit at 41.53% & agriculture credit to adjusted net bank credit at 19.72% was also higher than the respective national goals of 40% & 18%.

Financial Performance:
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Punjab National Bank continues to maintain its frontline position in the Indian banking industry. In particular, the bank has retained its NUMBER ONE position among the nationalized banks in terms of number of branches, Deposit, Advances, total Business, operating and net profit in the year 2008-09. The impressive operational and financial performance has been brought about by Banks focus on customer based business with thrust on SME, Agriculture, more inclusive approach to banking; better asset liability management; improved margin management, thrust on recovery and increased efficiency in core operations of the Bank. The performance highlights of the bank in terms of business and profit are shown below:

CORPORATE BANKING AT PNB

PNB has introduced a new scheme for property owners having their property situated in Metro/Urban/ Semi Urban/rural centers and who have let out such properties.

Eligibility
Property Owners having their properties situated in metro, urban, semi-urban and rural areas who have leased out such properties to the following: (i) Public Sector Undertakings / Govt. / Semi / State Govt. & reputed corporates, Banks, Financial Institutions, Insurance Companies and Multinational Companies. (ii) Reputed private schools/colleges (approved by/affiliated to State Board/University/ AICTE/ any other govt. body). (iii) Reputed private hospitals/ nursing homes.

Security

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Assignment of lease rentals. Equitable mortgage of the leased property or any other immovable property:

In case of loans having repayment period up to 5 years, the amount of loan should not exceed the value of the property mortgaged.

In case of loans having repayment period beyond 5 years, the amount of loan should not exceed 75% of the value of the property mortgaged.

In case of Company - Personal Guarantee of promoter directors. Rate of interest Repayment Maximum 120 monthly installments or remaining period of lease whichever is less. Processing Fee 0.70% of the loan amount + Service Tax & Education Cess Documentation Charges Rs.270/- up to Rs.2 Lac + Service Tax & Education Cess Rs.450/- over Rs.2 Lac + Service Tax & Education Cess Exim Finance

Services offered to Exporters

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 Pre-shipment finance in foreign currency and Indian rupees Post-shipment finance in foreign currency and Indian rupees Handling export bills on collection basis Outward remittances for purposes as permitted under Exchange Control guidelines Inward remittances including advance payments Quoting of competitive rates for transactions Maintenance of Exchange Earners Foreign Currency (EEFC) accounts Assistance in obtaining credit reports on overseas parties Forfeiting for medium term export receivables

Services offered to Importers

Establishment of Import Letters of Credit covering import into India and handling of bills under Letter of Credit Handling of import bills on collection basis Remittance of advance payment against imports Offering utilization of PCFC ( pre-shipment credit in foreign currency) for imports

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 Credit reports on overseas suppliers

Exchange Earners Foreign Currency (EEFC) Deposits Scheme The Exchange Earners Foreign Currency (EEFC) Deposits Scheme was started by RBI in the year 1992 with the introduction of Liberalised Exchange Rate Management System. Under this scheme, the recipient of inward remittances, exporters and other eligible bodies are allowed to keep a portion of their inward remittances / export proceeds in foreign currency with the banks in India which can later be utilised for permissible purposes. PNB sets up connectivity with the Customs Deptt. for the benefit of exporters/importers: To provide efficient service to our importer/exporter clients, PNB has set up connectivity with the Customs Department to facilitate payment of custom duty and receipt of duty draw back by the importer/exporter clients through the electronic media. Under this system of Electronic Data Interchange (EDI), Custom Authorities process the shipping bills and also effect on line payment of duty draw back for exporters. Further, they undertake processing of Bill of Entry and deposit of custom duty for imports. This is a pilot project in the country successfully implemented at Indira Gandhi International Airport, Custom House branch of PNB. This has now been replicated at PNB's extension counters at Inland Container Depot, Tughlakabad, Delhi and Patpar Ganj, Delhi.

LOANS TO MANUFACTURING INDUSTRIES

To set up SSI units, for purchase of fixed assets and meeting working capital needs. PURPOSE
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For acquisition of fixed assets (plant, machinery, land, building, tools, etc.). For working capital requirements within the ceiling limits of Rs 3 lakh / Rs 5 lakh as the case may be.

ELIGIBILITY FOR FINANCING SSI Technically qualified entrepreneurs and / or those having adequate technical practical experience in a particular field of technology. AMOUNT OF LOAN Maximum Rs 3 lakh in case of individuals and Rs 5 lakh in case of partnership firms or joint stock companies. (In case of ancillary unit or industry with joint financing of SF / Bank higher assistance of Rs 5 lakh for individual and Rs 10 lakh for groups). REPAYMENT 5 to 7 years for term loan including moratorium period. COLLATERAL SECURITY No collateral security for loans up to Rs 5 lakh. For loans in excess of Rs 5 lakh and up to Rs 25 lakh no collateral security required, if the unit is having good track record & financial position. In other cases collateral security or third party guarantee is asked only in cases where primary security is inadequate or for other valid reasons and not as a matter of routine.

LOCATION OF PROJECT Preferably the unit should be set up in an industrial estate where there is provision for suitable accommodation with the requisite facilities such as water, power, transport and communication. Project set up in industrial areas, zones or sites specifically declared as undeveloped by the State Government, concerned agencies / departments will be considered. The required accommodation should, as far as possible, be acquired on rental or hirepurchase basis. This will ensure that the investment in fixed assets is made for purchase of the required machinery and equipment, thereby enabling the entrepreneurs to make the best use of our financial assistance.

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AN OVERVIEW OF ICICI BANK LTD ICICI PROFILE

ICICI Bank is India's second-largest bank with total assets of about Rs. 1 trillion and a network of about 540 branches and offices and over 1,000 ATMs. ICICI Bank offers a wide range of banking products and financial services to corporate and retail customers through a variety of delivery channels and through its specialized subsidiaries and affiliates in the areas of investment banking, life and non-Banking , venture capital, asset management and information technology. ICICI Bank's equity shares are listed in India on stock exchanges at Chennai, Muzaffarnagar, Kolkata and Vadodara, the Stock Exchange, Mumbai and the National Stock Exchange of India Limited and its American Depositary Receipts (ADRs) are listed on the New York Stock Exchange (NYSE).

ICICI Bank was originally promoted in 1994 by ICICI Limited, an Indian financial institution, and was its wholly owned subsidiary. ICICI's shareholding in ICICI Bank was reduced to 46% through a public offering of shares in India in fiscal 1998, an equity offering in the form of ADRs listed on the NYSE in fiscal 2000, ICICI Bank's acquisition of Bank of Madura Limited in an all-stock amalgamation in fiscal 2001, and secondary market sales by ICICI to institutional investors in fiscal 2001 and fiscal 2002. ICICI was formed in 1955 at the initiative of the World Bank, the Government of India and representatives of Indian industry. The principal objective was to create a development financial institution for providing medium-term and long-term project financing to Indian businesses. In the 1990s, ICICI transformed its business from a development financial institution offering only project finance to a diversified financial services group offering a wide variety of products and services, both directly and through a number of subsidiaries and affiliates like ICICI Bank. In 1999, ICICI become the first Indian company and the first bank or financial institution from non-Japan Asia to be listed on the NYSE.

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CORPORATE BANKING AT ICICI BANK

Escrow Account
At ICICI Bank, we extend the trust you have in us by providing you with escrow services for safe custody of assets or for revenue streams. These services are customised to meet your needs. Some of the escrow services offered are in relation to the following: Project financing Debt repayments Sale purchase transactions Mergers and acquisitions Specialised and dedicated services Risk reduction in new relationships Security towards contingencies Mandatory in certain transactions Simplified documentation Customised transaction structure Online tracking of your escrow account

Features

Benefits

Fixed Deposit
Corporates can invest their surplus funds in fixed deposits for a wide range of tenures. The minimum deposit amount is Rs.10, 000. Other features of the account are: Funding through a debit to the operative account/cheque for clearing While interest is compounded quarterly, payment of interest is quarterly, monthly or on maturity Interest payouts can be through credit to your account or through banker's cheque Benefits Wide range of tenures Choice of investment plans
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Partial withdrawal permitted Availability of auto-renewal facility

Structured Finance
In the Structured Finance space, our approach is totally client-centric. We believe that every problem is unique and therefore we endeavour to develop and offer the widest range of solutions tailored to address specific requirements of each client. Services offered are: Structured finance for corporate clients The Structured Finance Group aims to enable its corporate clients access funds through cost efficient structures. The group's strength lies in its experience and expertise in providing tailor-made solutions after understanding the client's requirements. To deliver these customized structures, it leverages on ICICI Bank's global presence, industry expertise, large underwriting capability and comprehensive product suite. Strong capabilities in end-to-end solutions and timely execution have enabled ICICI Bank to become one of the leading arrangers and underwriters of structured finance transactions. The Structured Finance Group provides an array of services to its clients including:

Acquisition finance Asset-backed finance Receivables purchase Subordinated debt Convertibles / Hybrid instruments Non-recourse structures

Investment opportunities in securitized debt instruments We offer a plethora of investment opportunities in securitised debt instruments (SDIs) involving both Pass-Through and Pay-Through structures which:

offer a premium in yield to corporate debt instruments having similar risk profiles are customizable to meet both quantum and tenor requirements of the investors have well-diversified risk profiles

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could be customized (using different levels of credit protection) to meet the specific risk appetites of the investors could be offered as collateral by the investors at a later date for additional leveraging

For clients desirous of growth through the inorganic route, we can structure solutions around sale of specific asset category (yes) as per the clients' needs. Further, we could also structure solutions for clients desirous of getting involved in market making or investing at specific points in time through structuring of appropriate Put Options.

Securitization & structured finance advisory solutions We help structure selling or buying of asset portfolios (in whole or in part) for clients through securitisation or otherwise, thereby effectively limiting their exposures to future risks arising out of such asset pools. We can even offer to buy such identified asset pools from clients if the commercials suit the Bank's risk-return appetite. Being involved in more than 100 securitisation transactions till date, we can provide advice to clients for structuring securitisation transaction efficiently. We have the distinction of structuring and placing some of the largest securitisation transactions in the Indian market including the solitary transaction which exceeded USD 1.00 billion in size.

Dealer financing
Dealers of large corporates can be provided finance which can be either with a limited recourse (on a first loss basis) to the corporate or based on the creditworthiness of the dealer and its relationship with the manufacturer. Bill discounting / Web-based financing with/without recourse, Cash credit / Demand loan facilities, Financing for auto dealers, could be some of the examples in this space.

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Vendor financing
Vendor financing can be structured as a direct line of credit to the vendors specifically to be used for supplies to the company or as a revolving line for discounting bills raised by the vendors on the company. The former can be integrated into the Internet banking model of ICICI Bank and a web-based vendor financing structure can be created. The web-based structure would offer the company the convenience of operating the credit line of the vendors for making payments through the net immediately after accepting goods. Vendor financing programs can be set up for specific vendors recommended by the company. Through the widespread branch network of ICICI Bank, the program can include vendors at multiple locations.

Transporter financing
This is a product designed to finance the truck operators who are dedicated transport service providers to a company. The truck operators are typically small players and hence have limited sources for raising funds. It is likely that the vehicles used by them have been financed at a high cost which they would indirectly be passed on to the company in the form of increased freight rates. A financing facility could be set up for the truck operators with some support from the corporates they serve, which could be used for refinancing their existing vehicles or could be used for expansion of their fleet in line with the company's growth requirements.

Brand financing
Borrowings could be structured against security of specific brand(s) or a sale and lease back of the brand(s). Borrowers could even be financed to fund purchase of a brand. In the first option, the brand would be mortgaged in the name of the lender and only in the event of default of the loan would the brand be transferred to the lender. The lender could alternatively purchase the brand from the borrowing company and lease / license it out to the same entity. After expiry of the lease / license period the brand could either revert to the

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company or be sold to someone else. In the second option, the loan could be given to the company exclusively for purchasing the brand/s which would then be mortgaged in the name of the lender.

Investment monetization
This is a product designed to cater to the requirement of the business groups to streamline the cross-holdings within their own group companies. A Trust could be set up to acquire the intra-group cross holdings from the various companies in the group at current market prices. To fund this, the Trust would issue Pass-through Certificates (PTCs) to the lender. The take-out could be through a put option provided by the identified holding company of the group wherein the lender could sell the PTCs to the put option provider at a predetermined price on a fixed date. The deal could be secured through a pledge of shares.

Project Finance Group

ICICI Bank Project Finance Group (PFG) has developed comprehensive domain expertise and knowledge in the infrastructure & manufacturing sector, having ensured timely financial closure of several big ticket projects. PFG has unmatched capabilities of discovering, creating and structuring project finance transactions.

Technology Finance
The Technology Finance Group (TFG) of ICICI Bank implements various programmes for international agencies such as World Bank and USAID. The programmes currently running are designed to help the industry and institutions undertake collaborative R&D and technology development projects. These programmes focus on the following sectors:

Biotechnology/ Healthcare

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Electrical Electronics & communication Energy Environment Materials Manufacturing/ Control technologies Financial/ Security services

Case study analysis

ICICI RATING MODEL

ICICI Banks corporate banking strategy is based on providing customized financial solutions to clients, tailored to meet their specific requirements. The corporate banking strategy focuses on careful management of credit risk and adequate return on risk capital through risk-based pricing and proactive portfolio management, rapid growth in fee-based services and extensive use of technology to deliver high levels of customer satisfaction in a cost effective manner.

PNB CREDIT RATING MODEL

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Bank has developed online comprehensive risk rating system that serves as a single point indicator of diverse risk factors of counter-party and for taking credit decisions in a consistent manner. The risk rating system is drawn up in a structured manner, incorporating different factors such as borrowers specific characteristics, industry specific characteristics etc. Bank is also undertaking periodic validation exercise of its rating models and also conducting migration and default rate analysis to test robustness of its rating models.

COMPARATIVE ANALYSIS
ICICI model is divided into five parameters viz Promoters/ management, business and market position, financial performance, transaction history and collateral and each parameter is divided in various sub parameters while PNB model is divided in four parameters viz financials, business/industry, management, conduct of account and each parameter is relatively divided in less number of sub parameters compared to ICICI bank Collateral securities are not considered by PNB whereas these parameters are included in ICICI model. PNB bank should consider collateral securities of a company while evaluating and rating company as collateral securities are important to judge companys soundness. Transaction history of a company is considered by ICICI in detail as compared to PNB model. ICICI bank considers various sub parameters under transaction history like cheque bouncing, LC devolvement and utilization of fund based limits that are lacking in PNB bank. ICICI bank focuses on companys relationship with customer in detail as it is important to measure stability of a company and demand of its products and services in market whereas PNB does not consider companys relations with customer.

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 Personal networth of promoters and their flexibility is considered by ICICI bank whereas PNB bank does not consider. ICICI model gives weightage along with score whereas in PNB model only scores are given to each parameter. In ICICI credit rating model separate score and weightage is given to all sub parameters along with parameters In case if total exposure of an individual borrower exceeds maximum exposure according to scorecard special approval is needed as per ICICI model whereas there is no such limit in PNB model

RECOMMENDATIONS TO PNB
PNB bank should consider personal net worth of promoters, promoters financial flexibility and their payment records with other banks, financial institutions, creditors and non financial institutions while rating a company to evaluate efficiency of a company and its repayment abilities. PNB bank should conduct in depth study of a company viz it should consider customers of a company and transaction history in detail to judge its stability in market. As PNB bank ignores weightage of each parameters, scores loses its relevance. Bank should consider weightage for each parameter along with each sub parameter.

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 PNB bank should include maximum exposure limit in its credit rating model to be very specific and clear.

CONCLUSION
During my project I realized that a credit analyst must own multi-disciplinary talents like financial, technical as well as legal know-how about corporate lending and credit rating model for the purpose of lending loan A study of both private bank and public bank enhanced my knowledge and I gained a great learning experience During the study I learnt how the theoretical financial analysis aspects are used in practice during the term loan finance assessment The credit appraisal for term loan finance system has been devised in a systematic way. There are clear guidelines on how the credit analyst or lending officer has to analyze a loan proposal Credit Appraisal Model of both PNB and ICICI bank are based on sound principles of lending Method of lending of both banks is different. Compared to PNB model, ICICI model is complicated as ICICI considers more aspects and in detail compared to PNB. Both banks follow inventory and receivable norms as suggested by RBI.

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