a study on bank of india’s credit policies

8/8/2019 A study on Bank of Indias CREDIT POLICIES

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A study on Bank of IndiasCREDIT POLICIES and

CREDIT RISKS


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OBJECTIVE OF STUDY

To study the credit polices offered by Bankof India to SMEs.

To study procedures related to Loans.

To study Risk related to credit provided bybanks.

To study the intricacies of corporate

finance identification, analysis, appraisal,sanction, disbursement, follow-up &recovery


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SMEs(Small & Medium

EnterprisesEnterprise Engaged inManufacturing /

Preservation of Goods

Engaged In

Providing/

Rendering of

Services

Micro Enterprise Not to Exceed Rs. 25Lakhs.

Not to Exceed Rs. 10Lakhs.

Small Enterprise More than Rs.25 lakhs

but does not exceed Rs.

5 Crores.

More than Rs.10

lakhs but does not

exceed Rs. 2 Crores.

Medium

Enterprise

More than Rs.5 Crore

Rupees but does not

exceed Rs. 10 Crore.

More than Rs. 2

Crore Rupees but

does not exceed Rs. 5Crore.


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INITAITIVES OF BANK OF

INDIA FOR SMEs Quick decision with least Turnaround Time

through specially constituted SME Cells, and

above all

Better service. Cluster- based Schemes are

also on the list of the Banks initiatives

Provision of timely and adequate credit to the

SMEs Proactively detecting sick and viable units in

time so as to nurse them back to health

through appropriate re-structuring


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LOAN SCHEMES FOR SMES

Star Channel Financing catering to our

manufacturer/trader customers in the SME

sector. Retail Trade

Scheme for Solar Water Heaters.

SME Business Card. Star Laghu Udhyog Suvidha Scheme


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CREDIT APPRAISAL

PROCESS


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PRE-SANCTION PROCESS

PRELIMINARY APPRAISAL

y Application for working capital Finance

y Audited financial for the previous three years

yDetails of existing borrowing arrangements

y Reports from existing Banker on the application

copy


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DOCUMENTS REQUIRED

L-516, Letter of guarantee

L-515(in case Inland guarantee)

Demand Promissory note(In case of Demand

loan)

SCRUITNIZING OF DOCUMENTS

Examine the following:-

Bank lending policy/RBI guidelines

Industry exposure restrictions

Industry related risk factor


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DETAILED APPRAISAL

Working capital Credit Rating

Opinion reports

Review of Proposal Proposal of Sanction


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CREDIT RATING

CREDIT RATING depends upon variousParameters:-

Financial Risk

Management RiskMarket Risk

Compliance

Contingent Risk

Security Value

Capital Market Perception


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Risk rating Parameters Maximum Maximum

applicable scorescore

(B) (C)

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

Financial risks - Static 20

Financial risks - Dynamic 17

Market risks 09

Managerial risks 09

Security Value 06

Capital market perception 04

Contingent risks 05

Compliance 10

Total - 80

Percentage on risk factors =C/B x 100


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AAA-Quality of lending is considered to be high and risk is at its

minimal

AA-Well established borrowers with financial liquidity, strengthand stability

A-This group belongs to the lower end of quality range

B-Borrowers of average liquidity, financial strength and stability

Score obtained Rating to be

assigned

80% & above AAA

65% to 79% AA

50% to 64% A

Below 50% B


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POST-SANCTION PROCESS

FOLLOW UP:-

SUPERVISION:-

MONITORING & CONTROLLING:-


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CREDIT RISK ASSESSMENT

MODEL

Credit Risks

These have been categorized broadly

into:y Financial risks

y Business risks

y Industrial risksManagement Risks


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FINANCIAL RISK

the assessment of financial risk involves

appraisal of the financial strength of the borrowerbased on performance and financial indicators.The overall financial risk is assessed in terms ofstatic ratios, future prospects and risk mitigation

(collateral security/ financial standing). BUSINESS RISK

a. the following are the important parametersassociated with business risk:

y Technology y Consistency in quality

y Consistency in cash flow

Compliance of environmental regulation


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INDUSTRIAL RISKS

a. the following characteristics of an industry which pose

varying degrees of risk are built into the Banks CRA model: y Competition

y Industry outlook

y Regulatory risk

Contemporary issues like WTO etc. MANAGEMENT RISKS

y Integrity (corporate governance)

y Track record

y Managerial competence/commitment y Expertise

y Structure and systems

y Experience in the industry

y y Credibility: ability to meet sales projections


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COMMITTEE ON BANKING

LOAN SYSTEM

TONDON COMMITTEE

NAYAK COMMITTEE

CHORE COMMITTEE


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CONCLUSION

a study on bank of india’s credit policies

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