Investments & borrowing options

PROJECT REPORTON

INVESTMENT, FUND RAISING OPTIONSANDBANKING PROCEDURES IN A COMPANY

Submitted in partial fulfillment of the requirementsfor the award of the Degree of

Bachelor of Business Administration BBA(B&I) To

Guru Gobind Singh Indraprastha University, Delhi

Guide: Submitted by:Ms. Aarti Dagar Abhishek BehlAssistant Professor 05920501811

BLS INSTITUTE OF TECHNOLOGY MANAGEMENTDelhi- Rohtak Road, NH-10, Jakhoda, Bahadurgarh -124507Batch (2011-2014)CERTIFICATE

I ABHISHEK BEHL, ROLL NO. 05920501811 certify that the Summer Training Report(Paper Code BBA 311) entitledINVESTMENT, FUND RAISING OPTIONS AND BANKING PROCEDURES IN A COMPANY is done by me and it is an authentic work carried out by me at Religare Securities limited (RSL) To the best of my knowledge and belief, the material embodied in this Report has not been submitted earlier for the award of any Degree or Diploma by any University or Institution. Signature of Student

I Certify that the summer training report(paper code BBA 311) entitled INVESTMENT, FUND RAISING OPTIONS AND BANKING PROCEDURES IN A COMPANY done by ABHISHEK BEHL, ROLL NO. 05920501811 has been completed under my guidance and supervision. Signature of Guide Name of the guide:Miss Aarti DagarCountersignedDIRECTOR

ACKNOWLEDGEMENTThis humble endeavor bears the imprint of many persons who are in one or other way helpful in its competition. I express my cordial to all the members of the marketing and finance department for there selfless support and help, they provided me during my project work.Words cannot reflect the co-operation, assistant and encouragement given by them in completion of my project.

Prepared For Submitted By Religare Securities limited (RSL) ABHISHEK BEHL RollNo. 05920501811

CONTENTS

S NoTopicPage No

1Certificate (s) -

2Acknowledgements-

3Chapter-1: Introduction

4Chapter-2: Company Profile

5Chapter-3: Objectives of Study

6Chapter-4: SWOT Analysis

7Chapter-5: Research Methodology

8Chapter-6: Data Interpretation & Analysis

9Chapter-7: Findings and Recommendations

10Chapter-8: Lesson Learnt

11Chapter-9: Conclusion

12Bibliography /References

CHAPTER-1

INTRODUCTION

CHAPTER-1

INTRODUCTION

EXECUTIVE SUMMARY

Religare Securities limited (RSL) is a wholly owned subsidiary of religare enterprises limited (REL), a leading diversified financial services group from India. RSL is one of the market leading securities firms in India serving over 8 lakh clients across both offline and online platforms. Through its extensive footprint extending to over 500 cities, the company offers broking services in equity, currency and commodity (through its subsidiary religare commodities limited) as well as depository participants services.RSL is a member of the NSE, BSE, MCXSX, USE and a depository participant with NSDL and CDSL.

The main objective of the project INVESTMENT, FUND RAISING OPTIONS AND BANKING PROCEDURES IN A COMPANY is to know the investment opportunities with the company for raising funds and expansion in the future, to understand the meaning and types of short term instruments and to have the practical knowledge of the topic.A brief description about the investment is provided in the report. It includes the meaning of investment, types of investment and explains the process of investment in Mutual Fund and Fixed Deposit done by Religare Securities Limited.The project report also includes various methods of raising funds including long term and short term and also explains the process followed by Religare Securities Limited at the time of issuance of Commercial Paper and Debentures.Bank facilities taken by RSL like Bank Guarantee, Overdraft facility also explained in this report and a brief description of RTGS.The objective of the study to see how various transactions take place in the treasury department, to know the investment opportunities with the company for raising funds and expansion in the future, to have practical knowledge of the topic.

Chapter 1: INTRODUCTION

A) COMPANY PROFILE

Religare Enterprises Limited

Our Corporate Structure

Religare Securities Limited

Religare Securities limited (RSL) is a wholly owned subsidiary of religare enterprises limited (REL), a leading diversified financial services group from India. RSL is one of the market leading securities firms in India serving over 8 lakh clients across both offline and online platforms. Through its extensive footprint extending to over 500 cities, the company offers broking services in equity, currency and commodity (through its subsidiary religare commodities limited) as well as depository participants services.RSL is a member of the NSE,BSE,MCXSX,USE and a depository participant with NSDL and CDSL.RSL also offers Tin facilitation and PAN ;facility at select branches a unique service to help an individual with ,PAN, TAN and TDS/TCS returns related requirements. In addition, RSL is an NSDL appointment enrolment agency for UID (unique identification number) and an AMFI- registered mutual fund distributor.

Products Equity Commodity Currency derivatives E-broking International equity Mutual fund E-gold/e-silver IPO Derivatives Depository fixed deposit Tax information network Smart sip

Our Brand IdentityReligare is a Latin word that means ''to bind together''. We chose this name to reflect the integrated nature of our services. Our name is paired with the symbol of a four-leaf clover. Traditionally, it is considered good fortune to find a four-leaf clover as there is only one four-leaf clover for every 10,000 three-leaf clovers found.

Each leaf of the Religare clover has a special meaning. It is a symbol of Hope, Trust, Care and Good Fortune.

The first leaf of the clover represents Hopethe aspirations to succeed. The dream of becoming. Of new possibilities. It is the beginning of every step and the foundation on which a person reaches for the stars.

The second leaf of the clover represents Trustthe ability to place one's own faith in another. To have a relationship as partners in a team. To accomplish a given goal with the balance that brings satisfaction to all, not in the binding, but in the bond that is built.

The third leaf of the clover represents Carethe secret ingredient that is the cement in every relationship. The truth of feeling that underlines sincerity and the triumph of diligence in every aspect. From it springs true warmth of service and the ability to adapt to evolving environments with consideration to all.

The fourth and final leaf of the clover represents Good Fortunesignifying that rare ability to meld opportunity and planning with circumstance to generate those often looked for remunerative moments of success.

Objective of the company To carry on the business of Investment Company and to buy, undertake, lease, invest in, acquire, hold shares, debentures, debentures stocks, bonds, obligation, and the securities of any kind issued, or guaranteed by any company constituted or carrying on business in India or elsewhere. To promote establish and undertake financial ventures of all kinds, and to carry out the said activities either on its own or in alliance with any persons/body/bodies corporate incorporated in India or overseas. To render financial advisory services, investment advisory services and management consultancy services.

Vision- To build Religare as a globally trusted brand in the financial services domain and present it as the Investment Gateway of India. Mission- To provide financial care driven by the core values of diligence & transparency

B) OBJECTIVES OF THE STUDY

To understand the working capital requirement of the company. To upload all the transactions related to Inter Corporate Deposits on Treasury Management System. To know the investment opportunities with the company for raising funds and expansion in the future. To have practical knowledge of the topic. To see how various transactions take place in the treasury department. To allow us to know the financials prospects of the company. To understand the applicability of short term instruments in Religare Group. To understand the meaning and types of short term instruments. To gain practical knowledge and experience through working in the treasury department.

CHAPTER 2TREASURY DEPARTMENTTreasury management means financial management that is related to a future financial balance and cash flows of any corporation. That means that treasury management responsibilities are equal to those of financial management with the exception of inventory and nonfinancial investment management, plus financial and management accounting. By contrast to accounting, the treasury management is concerned with the present and future as expected by the corporation itself and financial markets. Highlevel treasury responsibilities will normally include capital management, risk management and relationship management. Treasury is a staff service function that supports many different areas of the organization. As an internal consultant to the teams in the different functional areas, treasury provides advice in the areas of cost of capital, risk analysis and mitigation, and the effects of the teams' actions on vendors, customers or investors. The specific tasks of a typical treasury function include cash management, financial risk management, and assets and liabilities management.

OBJECTIVES:To Ensure: Money is not kept idle Enough liquidity in all the holding and subsidiary companies. Stable returns Proper planning of investments Fund management To maintain the liquidity of businessIt is the main function of treasury management to maintain the liquidity of business. Without proper liquidity, it is risk for business to operate smoothly by using cash flow and working capital management. Treasury officer make good ratio of liquid assets and liquid liability.

To minimize currency riskIt is the main function of treasury management to minimize the currency risk. For this, treasury managers touch with currency market of world. They analyze the reason of crisis in currency market .Sometimes this crisis will be benefited for them because they have to pay less to other country for getting their service at cheap rates. To provide quick finance to companyIt is also the function of treasury department to supply quick finance to company, when it needs the money. For this, a good network in financial market is required.ROLE OF A TREASURER Basic cash managementI. Management of collection and payments.II. Liquidity monitoring in banking operations.i. Short term treasury forecasts.ii. The management of banking balances on value date and negotiation with the financial organizations. Advanced cash managementi. Management of financial risks.ii. The management of the financing of treasury deficits.iii. Management of the positioning of treasury peaksTreasury management includes management of an enterprises holdings, with the ultimate goal of maximizing the firms liquidity and mitigating its operational, financial and reputational risk. Treasury management includes a firms collections, disbursements, concentration, investment and funding activities. In larger firms, it may also include trading in bonds, currencies, financial derivatives and the associated financial risk management.

CHAPTER 3INVESTMENTS

In finance, the purchase of a financial product or other item of value with an expectation of favorable future returns. In general terms, investment means use money in the hope of making more money. In business, the purchase by a producer of a physical good, such as durable equipment or inventory, in the hope of improving future business.In simple terms, Investment refers to purchase of financial assets. While Investment Goods are those goods, which are used for further production.

Trading Vs. Investing

Many people confuse trading with investing. They are not the same. The biggest difference between them is the length of time you hold onto the assets. An investor is more interested in the long-term appreciation of his assets, counting on that historical rise in market equity.

An investor relies mostly on Fundamental Analysis, which is the analytical method of predicting long-term prospects of a particular asset. Most investors adopt a buy and hold approach to assets, which simply means they buy shares of some company and hold onto them for a long time. This approach can be dangerous, even devastating, in an extremely volatile market such as todays BSE or NSE Indexes Show.

Many investors suffer losses regularly, hoping that in five or ten or fifteen years the market will rebound, and theyll recoup their losses and achieve an overall gain.

What most investors need to remember is this: Investing is not about weathering storms with your beloved company its about making money.

Why should you invest?It can be said that you should invest so that your money grows and shields you against rising inflation. The rate of return on investments should be greater than the rate of inflation, leaving you with a nice surplus over a period of time. Whether your money is invested in stocks, bonds, mutual funds or certificates of deposit (CD), the end result is to create wealth for retirement, marriage, college fees, vacations, better standard of living or to just pass on the money to the next generation or maybe have some fun in your life and do things you had always dreamed of doing with extra cash in your pocket.

When to Invest?By investing into the market right away, you allow your investments more time to grow, whereby the concept of compounding interest swells your income by accumulating your earnings and dividends. Considering the unpredictability of the markets, research and history indicates these three golden rules for all investors:(1) Invest early, (2) Invest regularly(3) Invest for long term and not short term.

Where to invest?There are so many different investment avenues such as stocks, mutual funds, government bonds, post office schemes, bank fixed deposits, commodities, gold, real estate, art etc., that a regular person might be scared of the whole exercise. If your usual investment strategy is to dash off to the local bank and put your money into a fixed deposit (FD), then its time to re-think. Theres nothing wrong with FDs. They are time tested, safe, and in the current interest rate scenario, also attractive. However, if your aim is to create wealth to achieve short-term and long term financial goals (foreign vacation, childrens education and marriage, retirement and so on), FDs lag sadly behind other forms of investment. Although banks may appear to offer attractive interest rates on FDs, the fact is that they often fail to keep up with inflation.How much to invest?There is no statutory amount that an investor needs to invest in order to generate adequate returns from his savings. The amount that you invest will eventually depend on factors such as:(1) Your risk profile(2) Your Time horizon (3) Savings made

Types of investmentFinancial Instruments Equities Equities are a type of security that represents the ownership in a company. Equities are traded (bought and sold) in stock markets. Alternatively, they can be purchased via the Initial Public Offering (IPO) route, i.e. directly from the company. Investing in equities is a good long-term investment option as the returns on equities over a long time horizon are generally higher than most other investment avenues. However, along with the possibility of greater returns comes greater risk.Mutual fundsA mutual fund allows a group of people to pool their money together and have it professionally managed, in keeping with a predetermined investment objective. This investment avenue is popular because of its cost-efficiency, risk-diversification, professional management and sound regulation. You can invest as little as Rs. 1,000 per month in a mutual fund. There are various general and thematic mutual funds to choose from and the risk and return possibilities vary accordingly.BondsBonds are fixed income instruments which are issued for the purpose of raising capital. Both private entities, such as companies, financial institutions, and the central or state government and other government institutions use this instrument as a means of garnering funds. Bonds issued by the Government carry the lowest level of risk but could deliver fair returns.DepositsInvesting in bank or post-office deposits is a very common way of securing surplus funds. These instruments are at the low end of the risk-return spectrum. Cash equivalentsThese are relatively safe and highly liquid investment options. Treasury bills and money market funds are cash equivalents.Non-financial InstrumentsReal estateWith the ever-increasing cost of land, real estate has come up as a profitable investment proposition.GoldThe 'yellow metal' is a preferred investment option, particularly when markets are volatile. Today, beyond physical gold, a number of products which derive their value from the price of gold are available for investment. These include gold futures and gold exchange traded funds.While some investments like PPF, FDs and post office savings deposits are categorized as fixed income securities, others such as equities, MFs and real estate are variable income assets. Fixed income securities offer a fixed return, which largely depends on government policy. For example, PPF fetches a return of 8 per cent per annum, as of now; this has been fixed by the government. In case of variable income securities, the rate of return is market determined. Hence, the returns continuously change with market dynamics.

A brief description about investments in mutual fund and fixed deposits are provided below:-INVESTMENT IN MUTUAL FUND Definitions: A mutual fund brings together a group of people and invests their money in stocks, bonds, and other securities. Mutual fund is a mechanism for pooling the resources by issuing units to the investors and investing funds in securities.A Mutual Fund is a trust that pools the savings of a number of investors who share a common financial goal. The money that collected is then invested by the FUND MANAGER in different types of securities. Mutual fund is a professionally managed firm of collective investments that collects money from many investors and puts it in stocks, bonds, short-term money market instruments/other securities. The fund manager who is also known as portfolio manager, invests and trades the funds underlying securities, realizing capital gains or losses and passing any proceeds to the individual investor

When an investor subscribes for the units of a mutual fund, he becomes part owner of the assets of the fund in the same proportion as his contribution amount put up with the corpus. Mutual Fund investor is also known as a mutual fund shareholder or a unit holder. Any change in the value of the investments made into capital market instruments (such as shares, debentures etc) is reflected in the Net Asset Value (NAV) of the scheme. NET ASSET VALUE (NAV)Net asset value (NAV) represents a funds per share market value. This is the price at which investors buy (bid price) fund shares from a fund company and sell them (redemption price) to a fund company.It is derived by dividing the total value of all the cash and securities in a funds portfolio, less any liabilities, by the number of shares outstanding.NAV is the market value of securities held by the scheme. Since market value ofSecurities changes every day, NAV of a scheme also varies on day to day basis.

NAV= TOTAL ASSETS-TOTAL LIABILITY TOTAL NO OF UNITS

Calculating NAV Calculating mutual fund net asset values is easy. Simply take the current market value of the funds net assets (securities held by the fund minus any liabilities) and divide by the number of shares outstandingSubscription-Depository Mode: Investor who choose depository mode can place order for subscription as currently followed for secondary market activities. The investors should provide their depository account details along with PAN details to the Participants. When investor desires to hold units in Dematerialized form, KYC performed by DP will be considered compliance with applicable requirements specified in this regard in terms of SEBI circular ISD/AML/CIR-1/2008. This is in accordance with SEBI circular no. - SEBI/IMD/CIR/No.11/183204/2009 dated NOV 13, 2009. Participants shall enter the subscription order on exchange platform which will identify each scheme uniquely in terms of Symbols & Series. Subscription order would be created in terms of amount. Once the order is created system will generate a unique confirmation No. for the order. The investor will receive from the Participant a confirmation slip (which will contain unique confirmation number and date and time stamp of order entry) generated from the system. Till the Participant provides allotment details to the investor, the order confirmation slip would be the proof of the transaction. In the case of Demat mode, Demat statement given by depository participant would be deemed to be adequate compliance of the requirement of Statement of Account as specified in SEBI circular number SEBI/IMD/CIR No.11/183204/2009. Exchange will validate these transactions on T day evening with the RTA (Registrar and Transferring agent) as well as the depository and any discrepancy in the transaction details will be informed to the Participant on the same day evening. The Clearing Corporation shall also provide the Participants with funds obligation report end of day for all the valid transactions. The Clearing Corporation of the Exchange shall debit the designated clearing bank account of the Participants for the required funds obligation on T+1 morning. In case of shortage if any, the concerned Participant will be provided an opportunity to identify transactions and provide details of the transactions for which payments have been received and transactions for which payment have not been received. The funds collected from the bank account of the Participant shall be compared with the details provided by the Participant on the payment received status as per above. If the funds collected from the bank account of the Participant covers the details of the payments received as provided by the Participant, the same shall be further processed. Wherever the funds collected from the bank account falls short of the amount indicated in the details provided by the Participant, the details shall be considered defective and shall not be further processed. In such cases, the funds collected, if any, shall be returned to the designated bank account of the Participant. The Exchange / Clearing Corporation shall take appropriate action including penalty on participants who fail to fulfill their funds obligation as required. The Exchange will notify RTA for all such defective transactions and rejections due to non-payment of funds. The RTA will reverse such transactions for respective Participants and transactions for other Participants who have fulfilled their funds obligations will be processed by the RTA. The RTA will intimate the allotment details for the accepted transactions. Allotment information shall be provided to the Participants so that they can provide allotment details to the investor. In the case of Demat transaction, Demat statement given by depository participant shall be considered as fulfilling the requirement of Statement of Account. RTA will also credit the depository account of the investor directly end of day through credit corporate action process.

Important Points for Clients: Depository settlement is available for DP account hold in National Securities Depository Ltd. (NSDL) & Central Depository Services (India) Ltd (CDSL) While entering order for Depository settlement, Participant should ensure that client details should appear in same order as per depository record. Redemption through Depository settlement, client has to ensure that Delivery Instruction slip should be provided to their Depository before the stipulated time. In case of physical settlement, participant should write the unique confirmation number on the application received from the client. The Participant should deposit / courier the completed application form along with the other documents submitted by the investor for each subscription / redemption order with option of Physical settlement to the local / head office of the RTA or AMC(Asset Management Company) In case of physical settlement, if subscription application form has not reached the RTA, the redemption request for such subscription will not be taken by RTA and shall be rejected.

INVESTMENT IN FIXED DEPOSITS

Bank fixed deposits are one of the most common savings scheme open to any investor. Fixed deposits also give a higher rate of interest than a savings bank account. The facilities vary from bank to bank. Some of the facilities offered by banks are overdraft facility on the FD amount. Premature withdrawal before maturity period involves a loss interest.The rate of interest for bank fixed deposits usually varies between 4 and 11 percent, it can be more than 11 depending on the maturity period of the FD and the amount invested. Interest rate also varies between each bank. All banks have facility to pay interest every quarter or on maturity basis. The deposit period can vary from 15, 30 or 45 days to 3, 6 months, 1 year, and 1.5 to 10 years.Benefit of compounding will be received if investor opts for the option of interest to be credited on maturity. The interest payable on fixed deposit can also be transferred to Savings bank or Current account.

PURPOSES Investments Government authorities Issuance of bank guarantee On behalf of client

PROCESS Religare enterprise and its subsidiaries make FD with various banks either for their own purpose or on the request of the clients. Thus the processes that are followed for making the FDs are defined as:Depending upon the below mentioned purposes, request is sent to bank for making the FDs.

Comparison of rates and approvalsCompany requests the bankers to send the current rates of the FDs. Then after receiving rates and company make comparison of rate. It is made by the team on basis of period and amount. Best three rates are sent to the management for approval.

Approval receiving & Request to BankersWhen management decides the rate at which FD needs to be made, it is intimated to the team by the management through mail. Then team request the authorized signatory for their sign. The team after receiving the confirmation and get signed sends the request to the bankers for the issuance of FD.

If FDR submitted in exchangeWe submit FDR, Bank lien letter, member letter for submission of FDR in exchange. Bank lien letter is the letter which is taken from the bank. Member letter is that letter which made by the company and which companys authorized signatory signed.After sending these three documents to exchange, company can confirm from the exchange that have they received these letters.

ShiftingBeside creation of FDs, the team also analyses on daily basis the day to day requirement of exchange and various other requirements of FDs. If exchange margins are comfortable and excess FDRs lying with the exchange, then FDR can be released from exchange and can be placed in overdraft facility. FDRs can be shifted from the segment of NSE to other segment of NSE. E.g. company wants to shift their FD from NSE cash to NSE ----. Shifting can be done by online only. Earlier all shifting were formulated through the medium letter and team sends request to exchange accordingly for shifting of the FDs.

PrematurityPrematurity of FDs are made in situation where there is urgent need of cash. In this case, FD can be matured fully or can be matured partially as per the need of funds. The request for prematurity is also placed with bank as per the desired bank format. MaturityCompany will see the purpose of FDs and accordingly the decision is taken either to mature the FDs or to renew. In case, if it is decided that FD needs to be matured then team ensure that FD is free from all purposes. In maturity, company will take the cash of FD along with interest.

RenewalIf company needs to be renewed then the company requests the banker to send the rates according to the tenure. After receiving the rates the team sends request letter to the bank for renewal. Company can also do that company renewed only principal amount and encashed the interest.

CLIENT FDRWhen any person wants to make FD then he goes to the company and asked for FD because ordinary person cannot register himself in the exchange. He will go to the company and company charges some margin from him because company makes FD in exchange on behalf of him. That margin which company take from client give it in the exchange as exchange demand for margin.

For preparing the Client FDR, the following steps are followed

Request is received from the client for issuance of FD along with the request letter as per the format. Then this FDR issued in the name of Exchange a/c company name. After receiving request company confirms the rates from different banks on the basis of tenure and amount. Then this information sends to the client. Now client confirm the rate and from which bank clients FD to be issued. Team checks the client ledger account and on the basis of accounts company takes decision. If client has not sufficient balance then intimation will be sent to the client. After issuance of FD, team issues letter to the client along with Fixed Deposit Receipt. Client intimates the company on maturity that he wants his FD encashed or renewed.

Below are the screen shots of the internal software used by Religare to record /feed the FD transaction.

CHAPTER 4METHODS OF RAISING FUNDSA company may raise funds for difference purposes depending on the time periods ranging from very short to fairly long duration. The total amount of financial needs of a Company depends on the nature and size of the business. The scope of raising funds depends on the sources from which funds may be available. Companies can raise finance by a number of methods.To raise long term and medium term capital they have the following options:1. Issue of sharesIt is the most important method. The liability of shareholders is limited to the face value of shares and they are also easily transferable. A private Company cannot invite the general public to subscribe for its share capital and its shares are also not freely transferable but for public ltd company there are no such restrictions. There are two types of shares:- Equity sharesThe rate of dividend on these shares depends on the profit available and the discretion of director. Hence there is no fixed burden on the company. Preference sharesDividend is payable on these shares at a fixed rate and is payable only if there are profits. Hence, there is no compulsory burden on the companys finances. Such shares do not give voting rights.

2. Issue of debenturesCompanies generally have powers to borrow and raise loans by issuing debentures. The rate of interest payable on debentures is fixed at the time of issue and is recovered by a charge on the property or assets of the company, which provide the necessary security for payment. The company is liable to pay interest even if there are no profits. Debentures are mostly issued to finance the long term requirements of business and do not carry any voting right.3. Loans from financial institutionLong term and medium term loans can be secured by companies from financial institutions like the industrial finance corporation of India etc. These financial institutions grant loans for the maximum period of 25 years against approved schemes or projects. Loans agreed to be sanctioned must be covered by securities by way of mortgage of the companys property or assignment of stocks, shares, gold etc.

4. Loans from commercial banksMedium term loans can be raised by companies from commercial banks against the security of properties and assets. Loan is the amount borrowed from bank. The nature of borrowing is that the money is disbursed and recovery is made in installments. While lending money by way of loan, credit is given for a definite purpose and for a pre-determined period. Determining upon the purpose and period of loan, each bank has its own procedure for granting loan. However the bank is at liberty to grant to loan requested or refuse it depending upon its own cash position and lending policy.

5. Public depositsCompanies often raise funds by inviting their shareholders, employees and the general public to deposit their savings with the company. The companies act permits such deposits to be received for a period upto 3 years at a time. Public deposits can be raised by companies to meet their medium term as well as short term financial needs.

To finance short term capital companies can use the following methods:-6. Working Capital Demand Loan

WCDL is a loan which is repayable on demand by the bank. In other words, it is repayable at short-notice. The entire amount of demand loan is disbursed at one time and the borrower has to pay interest on it. The borrower can repay the loan either in lump sum (one time) or as agreed with the bank. Demand loans are raised normally for working capital purposes, like purchase of raw materials, making payment of short-term liabilities. It means borrower can demand loan at any point of time when it needs. For example if Religare needs cash then it can demand loan from the bank. Then it can say that we (Religare) need money for 10 days i.e. called WCDL.

7. Cash Credit LimitCash credit is a flexible system of lending for the bank under which the borrower has the option to withdraw the funds as and when required and to the extent of his needs. Under this arrangement the banker specifies a limit of loan for the customer (known as cash credit limit) up to which the customer is allowed to draw. The cash credit limit is based on the borrowers need and as agreed with the bank.Cash credit, is one of the types of bank lending against security by way of pledge or / hypothecation of debtors / receivables. It means bailment of goods as security for payment of debt. Its primary purpose is to put the goods pledged in the possession of the lender. It ensures recovery of loan in case of failure of the borrower to repay the borrowed amount.

8. OD against FDRsIn this case company takes loan as against of fixed deposits. For example:In this case banker sanctioned 85 to 90% of the total FDR.For example :-FDR made at 10% p.a. and banker agreed on OD interest at .50%, so in that case Int. will be charged 10.50% (FDR % + Spread)In bank loan following documents are required: Facility Letter Loan agreement Deed of hypothecation

Facility LetterIt includes terms and conditions agreed between borrower and lender. In this document, rate of interest, tenor are mentioned. In this only brief knowledge is provided for the agreement.

Loan AgreementIt includes detailed knowledge of the contract. They agreed on the following: a. Book debts of RFL b. Charge Creation- 125%, 110% and 130% of loan amount.Rate of interest is of two types: 1. Fixed: e.g. 11% 2. Base Rate + spread charge: e.g. 11% +1%= 12%. In this case 11% is fixed and 1% is spread. It is done when loan is OD against FDRs

Deed of hypothecationIn Hypothecation, goods remain in the possession of the borrower, who binds himself under the agreement to give possession of goods to the banker whenever the banker requires him to do so. So hypothecation is a device to create a charge over the asset under circumstances in which transfer of possession is either inconvenient or impracticable.It is that document in which it is written that we are hypothecating our debtors to the bank. In short we pledge our debtors.Religare bank borrowing is done by Religare Securities Limited (RSL)

9. Overdraft facilityOverdraft financing is provided when businesses make payments from their business current account exceeding the available cash balance. An overdraft facility enables businesses to obtain short term funding, although in theory the amount loaned is repayable on demand by the bank.There are several important factors to consider when assessing the appropriateness of an overdraft as a source of funding for companies: The amount borrowed should not exceed the agreed limit (Facility).The amount of the facility is made available is a matter for negotiation with the bank. Interest is charged on the amount overdrawn-at a rate that is above the bank base rate. The bank may also charge an overdraft facility fee. Overdraft is generally meant to cover short term financing requirements they are not generally meant to provide a permanent source of finance. When company utilize the facility the amount disbursed from the bank is 80-95% of the applied amount, the percentage variation depends on the relationship of the company with the bank. Depending on the size of the overdraft facility, the bank may require the companies to provide some security-for example in case of RELIGARE it pledges the fixed deposits to the bank for the duration it needs the facility or companies can secure the overdraft against tangible fixed assets, or against personal guarantees provided by the directors. A brief description is provided on commercial papers and debentures:-COMMERCIAL PAPERCommercial Paper (CP) is an unsecured money market instrument issued in the form of a promissory note. CP, a private placed instrument was introduced in 1990 with a view to enabling highly rated corporate borrowers to diversify their sources of short-term borrowings and to provide an additional instrument to investors. Subsequently, primary and satellite dealers were also permitted to issue CP to enable them to meet their short-term funding requirements for their operations. It can be raised if you want to fulfill your working capital requirements.Parties involved for the issuance of CP

Issuer: It includes Religare Finvest limited (RFL) and Religare Securities limited (RSL). These are the two subsidiaries who issued the CP. With the simplification in the procedures for CP issuance, issuers would now have more flexibility. Issuers would have to ensure that the guidelines and procedures laid down for CP issuance are strictly adhered to. Issuing and paying agent (IPA): HDFC Bank Ltd. is playing role as IPA for Religare. Company has to submit certain documents to the HDFC for the issuance of the commercial paper. IPA would ensure that issuer has the minimum credit rating as stipulated by the RBI an amount mobilized through issuance of CP is within the quantum indicated by Credit Rating Agency(CRA) for the specified rating.IPA has to verify all the documents submitted by the issuer viz., copy of board resolution, signature of authorized executants when CP is in physical form and issue a certificate that documents are in order.Certified copies of original documents verified by the IPA should be held in the custody of IPA. It should also certify that it has a valid agreement with the issuer (Schedule III).Investor: Investors can be Bank, Financial institutions, Mutual fund companies, Corporate, Insurance companies.Process of commercial PaperThe following steps will illustrate the operational working of issuing the Commercial Paper:Board ResolutionFirst of all, company passed the resolution in the board meeting that the company wants to issue the CP. Then Board of directors set the limit of issuance. Currently Religare Finvest limited has a portfolio for issuance up to 7500 crores. Now company cannot issue more than this limit.Credit Rating AgencyAfter passing of board resolution, company goes for a rating from any of the Credit Rating Agency prevailing in the market. Code of conduct prescribed by the SEBI of CRAs for undertaking rating of capital market instruments applicable to CRAs for rating CP.CRA at the time of rating, clearly indicate the date when the rating is due for review.While the CRAs decide the validity period of credit rating, CRAs have to be closely monitor the rating assigned to issuers vis-a-vis their track record at regular intervals.Religare Finvest Limited has been rated by ICRA with a rating of A1+ & Religare Securities Limited has been rated with CRISL P1+. According to this rating, investors can decide in which CPs they want to invest.IPA CertificatesThe following documents will be sent to the respective Bank, which is acting an IPA w.r.t. to the issuance of Commercial Paper. The letter also includes the CP details such as Amount, Value Date & Maturity Date.Attached Documents common for all CPs: Board Resolution dated xyz (Original) Credit Rating Letter from CRISIL Ltd. dated xyz (Original) Declaration of Company mentioning Share Capital/ Net worth / Rating/ Classification Declaration for eligibility as per RBI guidelines List of Directors as on dated xyz Attached Documents mandatory for individual CPs: Stamped CP certificate Copy of Offer Letter Copy of Deal Confirmation signed by both parties A copy of NSDL intimation giving ISIN allotment number Copy of RBI reporting formatGenerally, the investors will provide Demat account number along with DP ID to the Issuer. In turn the issuer will provide these details to the Issuing & Paying Agent (IPA). After scrutinizing all the enclosed documents, the IPA will send the IPA Certificate to the issuer. Further, the issuer will forward the same to the investor and NSDL to credit the IPAs CP allotment account one day prior to the value day. On the allotment date, the IPA can transfer the securities from its allotment account to the subscribers account.

NSDLNSDL Abbreviates for National Securities depository Limited. It performs various roles like generation of ISIN No, transferring of CP Stocks to IPA Allotment A/c NSDL DP1 DP2 DP3 DP4 (HDFC) (SC) (Deut) (AXIS)There is DP id for each and every IPA and they give id to their client which is known as client id. If one client is registered with two IPA then there is client id will be different with different IPA. For example:HDFCDP Id- 11260023 Client Id- 8600023 (RFL)Here DP Id is of HDFC and Client Id is of Religare Finvest limited. IPA of RELIGARE is HDFC only. IPA has three accounts with NSDL: IPA Allotment A/c IPA Redemption A/c CP Account (Funds)IPA allotment A/cNSDL allot the CP in this IPA Allotment A/c. Then IPA transfers the CP to the Investor account. IPA Redemption A/c The basic purpose of this a/c is to get back the securities from the end investor into the IPA. Funds accountEvery issuer has to maintain a fund account with the IPA so the funds could be transferred to the client by means of IPA. In case of Religare, the Company first transfers the funds in this a/c then IPA after receiving those funds transfer the same to the investor. And in this way CP allotment and CP redemption process goes.ISIN No.It is the international securities identification no. which is activated when CP is raised.If maturity date of CP of same company is same then Identification no. will also same.For example:RSL (X) 11th may 2011 INE945914RFL (Y) 11th may 2011 INE958914Above, CPs raised but of different entity so there ISIN no will be different even if there maturity date is same. RSL raised CPs with same maturity date and RSL also raised CPs with same maturity date. So there ISIN no is different because of different entity.Master Creation FormIt is mandatory for receiving ISIN No. from NSDL. The format for MCF is already being provided by NSDL. After preparation of the same, it will be signed by the two of the authorized signatories and stamp of the company will be pasted on it. Then it will be sent to NSDL for ISIN No.

The form consists of two sections. Section A is common for each Commercial Paper. These details are as follows: Name of the Company Address of the Regd. office including telephone, fax nos. and email addresses Type of entity ( Legal Form) Details of the contact person of the Company Address of the registry operations where the physical securities for Dematerialization are to be delivered by the Depository Participants (DPs)Section B comprises of the details related to security. Thus, it varies for different deals and needs changes every time of the preparation of MCF. These details are as follows. Security Details Security Name, Issue Date, Redemption Date, Face Value per Security (Rs.), Issue Price, Tenure of the security (in days), Total issue size (in Rs. Crores) Credit Rating Symbol Credit Rating Agency IPA Details IPA Demat Account DetailsAfter the preparation of the same, it will be signed by the two of the Authorized Signatories and stamp of the company will be pasted on it. Then it will be sent to NSDL for ISIN.IPA Documents Declaration for eligibility as per RBI guidelines. Offer Letter Deal confirmation Stamp Certificate

IPA Certificate: Allotment of CPIPA will certify that the issuer (the company) has appointed them as the Issuing and Paying Agent (IPA) for the CP under reference. Also, they will confirm on the following:The Board Resolution of the Issuer authorizing the CP has been verified by them in original.The original of duly stamped commercial paper has been retained at their end.The Issuer has complied with the RBI guidelines with reference to the issue of CP.Also, IPA will state that the following details in order to ease the deposition of credits of the CP in the respective account. DP Name DP Id Client Id Client Name Quantity Date of credit ISIN Maturity datePlease note that the certificate will stated valid only if it will be provided by the IPA on its letterhead. Also, the same should reach NSDL latest by 3.00 p.m. on the day prior to the date of credit.Confirmation LetterNSDL will forward the confirmation letter to the issuer and will carry out the required action at its end.Further proceedings will be carried out by NSDL and Registrar.

Procedure at the time of RedemptionThe investor will forward the IPA Certificate for Redemption along with IPA Certificate for allotment unlike in case of NCD. IPA will certify that the issuer (the company) has appointed them as the Issuing and Paying Agent (IPA) for the CP under reference.They will also confirm that all necessary payments have been made to the beneficiaries and will request NSDL to extinguish the balances from the account details mentioned in IPA Certificate for the allotment. The only addition will be the Date of extinguishment instead of date of maturity. It is mandatory that the certificate should reach NSDL latest by 3.00 p.m. on the day prior to the date of extinguishment.STAND-BY FACILITYIn view of CP being a stand alone product, it would not be obligatory in any manner on the part of banks and FIs to provide stand-by facility to the issuers of CP. Banks and FIs would, however, have the flexibility to provide for a CP issue, credit enhancement by way of stand-by assistance/credit backstop facility, etc., based on their commercial judgment and as per terms prescribed by them.PROCEDURE FOR ISSUANCEEvery issuer must appoint an IPA for issuance of CP. The issuer should disclose to the potential investors its financial position as per the standard market practice. After the exchange of deal confirmation between the investor and the issuer, issuing company shall issue physical certificates to the investor and arrange for crediting the CP to the investors account with a depository. Investors shall be given a copy of IPA certificate to the effect that the issuer has a valid agreement with the IPA and documents are in order (Schedule III).

ROLE AND RESPONSIBILTIESThe role and responsibilities of issuer, IPA and CRA(credit rating agency) are set out below:Issuer: With the simplification in the procedures for CP issuance, issuers would now have more flexibility. Issuers would, however, have to ensure that the 4 guidelines and procedures laid down for CP issuance are strictly adhered to.Issuing and Paying Agent (IPA)IPA would ensure that the issuer has the minimum credit rating as stipulated by the RBI and amount mobilized through the issuance of CP is within the quantum indicated by CRA for the specified rating. IPA has to verify all the documents submitted by the issuer viz., copy of board resolution, signatures of authorized executants (when CP in physical form) and issue a certificate that documents are in order. It should also certify that it has a valid agreement with the issuer (Schedule III).Certified copies of original documents verified by the IPA should be held in the custody of IPA.Credit Rating AgencyCode of Conduct prescribed by the SEBI for CRAs for undertaking rating of capital market instruments shall be applicable to them (CRAs) for rating CP.Further, the credit rating agency would henceforth have the discretion to determine the validity period of the rating depending upon its perception about the strength of the issuer. Accordingly, CRA shall at the time of rating, clearly indicate the date when the rating is due for review.

Below are the screen shots of the internal software used by Religare to record /feed the Commercial Paper transactions at the time of issuance.Screen A

Screen B

Screen C

Screen D

DEBENTURESIt is a document or certificate signed by the authorized officers of a company acknowledging money lent and guaranteeing repayment with interest and creating security on the assets of the company for due performance of its obligation. This is a debt instrument and is the commonest method of raising loan capital, as a part of project financing. Debentures may be redeemable as envisaged in the Companies Act or mandatorily convertible wholly into the equity shares of a company as envisaged under FEMA.Non Convertible DebenturesIt is a debt instrument which is issued for a fixed maturity and in which no part of the debenture is convertible into equity. The face value of the debenture is redeemed in one installment (a bullet payment) or in tranches. Usually redemption period range from 3 months to 4 years. Interest is normally paid monthly, quarterly or half yearly. The interest rate that is offered varies from company to company. The interest that is earned by investors on the debentures is taxable. In case of Secured Debenture, the company keeps collateral against the security.PROCEDURESelect ArrangerFirst of all, company will arrange arranger, who deals on the behalf of the company. Arranger arranges the investors. Before that, company comes in a contract with the arranger and decides the tenure, fees payable to arranger. Then arranger starts looking for the investors who are interesting in investing in the company. Arranges tells them the financial position of the company, their credit rating for the debenture units. Then arranger role is complete after arranging the investors and company gets into deal with the investors.

Information MemorandumIn information memorandum, documents will be prepared simultaneously. Any amount raised by issue of debentures secured by the mortgage of any immovable property of the company and that the market value of the immovable property secured is higher than the amount of debentures.Board ResolutionThe power to issue debentures can be exercised on behalf of the company at a meeting of the Board of Directors. First resolution will be in the meeting of Board of Directors. There are some approvals which must be made in the meeting of BOD. The following approvals are required to be obtained by the Company:Approval Level Nature of Approval

Board For issue of debentures

Board Creation of trust

Board Appointment of Debenture Trustees

Board Approval of Trust Deed

Board CertificateApproval of the Form of Debenture Certificate

Letter from Trustees Consent from the Debenture Trustees to act as Trustee

Preparation of Term SheetAfter receiving the deal details from the broker, the company has to prepare the term sheet signifying the deal confirmation. The same will be forwarded to the client through broker. The broker will make sure that the client would accept the deal by duly signing the copy of deal confirmation and forward the same to the company forthe purpose of internal records.The terms of the Debenture issue will be mentioned in the Term Sheet and are explained below:Client Name : Name of the client, to whom the Debenture is issuedDate : The date on which the Term Sheet is preparedDebenture Details : Confirmation on NCD issuance by the issuing companyRating : Rating Symbol, confirmed by ICRA vide its letter dated xyzDebenture Trustee : Name of the Debenture TrusteeFace Value : Par Value of the NCD stated in terms of RupeesCoupon Rate : Interest rate is stated as a percentage of face valueNo. of Debentures : Total number of NCD which are to be issuedAmount : Total amount of the deal, mentioned in RupeesDate of Disbursement : It is the date on which the client will pay the amount to the companyDeemed Date of : It is the date on which the debentures are allotted to the client. AllotmentDate of Maturity : It is the actual date of redemptionDelivery : Physical/DematInterest : It states the periodicity of interest paymentsListing : The Debentures will not be listed on any Stock ExchangeTransferability : The Debentures are transferable only to the following categories of investors Scheduled Banks, Co-Operative banks and any other banking company as defined in Section 5(o) of the Banking Regulation Act, 1948. Financial Institutions/investment institutions/Insurance Companies or any other eligible investors covered under Para 2 (1) (xii) (b) of the Non-Banking Financial Companies Acceptance of Deposits (Reserve Bank Directions 1998-Notification No. DFC 118/DC (SPT)-98 dated January 30, 1998. Companies Mutual FundsThe term sheet will also contain the Current Bank Account Details of the Beneficiary. This will help the client to transfer the amount on date of disbursement. And the most important point without which the TERM SHEET is incomplete is that term sheet cannot be sent to the client unless it is duly signed by the authorized signatory.Credit Rating AgencyIt is an option to measuring credit worthiness of a company or financial position of the company. There are two companies who rate the company:a. CRISILb. ICRA

Below is the sample rating process of CRISIL

Credit rating agency helps investors in knowing the Company position. They give the positive and negative sign. And in grades, agency gives A, B, C, and D.Rating ChartA includes- A, AA, AAAB includes- B, BB, and BBBDebenture TrusteeIn terms of Section 117 B, it has been made mandatory for company making a public issue of debentures to appoint one or more debenture trustees before issuing the prospectus or letter of offer and to obtain their consent which shall be mentioned in the offer document. Trustee ensures that the company does not commit any breach of the provisions of the Trust Deed. Trustee takes reasonable steps as may be necessary to undertake remedy in the breach of any covenant in the Trust Deed. Trustee can convene a meeting of the debenture holders as and when required.These documents are submitted to the exchange for the forward procedure. These documents come under the information memo.Opening and Closing DateNow company decides the opening date and closing date of allotment procedure. In the gap between the opening and closing date, arranger arranges the investors who are interested in investing their money in the company. And company receives the debenture allotment money from the investors. Then at the closing date company allotted the shares to the investors after going through all the KYC documents. KYC documents give the client information. For this allotment process, mostly times company complete their allotment process through the DEMAT account.Closing DateOpening dateCompany verify KYC documentsInvestorsPreparation of Master Creation FormThe next step is to prepare Master Creation Form, which is mandatory to receive ISIN No. from NSDL. ISIN No. is (International Securities Identification Number) is a unique number for each security. The format of MCF is already being provided by NSDL. The form consists of two sections. Section A is common for each and every issuance of NCD. These details are as follows. Name of the Company Address of the Regd. office including telephone, fax nos. and email addresses Type of entity ( Legal Form) Details of the contact person of the CompanySection B comprises of the details related to security. Thus, it varies for different deals and needs changes every time of the preparation of MCF. These details are as follows. Type of Security Total Issue Size Details of Debenture Trustee, if applicable Issue Price per security Face Value per security Issue Date Redemption Date Coupon Rate per annum Periodicity of Interest payments with specified dates, if applicable Put/Call option with specified dates, if applicable Name of the Depository RegistrarAddition to all mentioned above, the same will be pasted with the stamp and duly signed in by the Authorized Signatory i.e. the Company Secretary before sending to NSDL as per guidelines issued by NSDL. Also, the copy of the same will be sent to Depository Registrar.Also, the company would certify that the information published in MCF is correct to the best of their knowledge and they have attached all the enclosures mentioned in the form. They confirm that on redemption of the Security mentioned in the form, they will extinguish the securities from the Investors accountISIN NO. After receiving MCF, NSDL/CDSL will issue ISIN No. specific for the given deal and forward the same to the company within a day or two. It is the debenture unit. This no. is given according to the maturity date of the debenture. Between opening and closing date, company came to know the maturity date of the debenture unit. If there is same maturity date for the same company then there is same ISIN no. for that debenture.Secured DebenturesCompany issues listed and secured debentures. Repayment of all investments and accrued interest is secured by a first ranking floating charge over the whole of the assets and undertaking. This includes the mortgages held and other approved investments.Create SecurityFirst of all company create collateral security for the investors investment. Collateral security means if company will not able to redeem debentures then they can sell the collateral security and investors can get their money. The Debentures are issued pursuant to a Trust Deed which provides for the issue of debt securities comprising debentures. Investors are entitled to the benefit of and have notice of the provisions of the Trust Deed. Details of some of these provisions are set out in this Prospectus.

ChargeCharge is the security when company will not able to pay back their investors money. Then there is charge which investors can get after sell off their collateral security. For example if investors invest 2 crores then there is 1.1times of 2 crores is a charge. It means 22,000,000 of the value of security available against Rs. 2 crores outstanding of investor which they can get after selling the security. But the investors can get only up to his percentage of investment. If there is group of say 10 debenture holders and invest their money, then one will get back their money according to the share they invested.Interest paymentThere are two dates and gap between these two dates called shut period. During shut period, market will be closed for that particular debenture. There will be no buy or sell in the market for that debenture. For exampleFirst date is 10th of May i.e. called record date. And other date is 14th of May i.e. interest payment date. Between these two dates, gap will be called shut period. On the record date, company will record all the debenture holders and their invested amount. During this shut period, company will calculate the interest of those debenture holders who are recorded on the record date and made payment on the interest payment day.Call Option and Put Option:Call Option: Charge Satisfaction ROC No Dues Redemption Request from company to investor Extinguishment of agreement between company and investor

Put Option: Extinguishment of agreement btw company & investor Charge Satisfaction ROC No Dues Redemption Request from investor to companyCompliances It can be monthly, quarterly, or half yearly depending upon the nature of the debenture. Financial performance includes financial analysis, convents, certificate etc. Trustee will look for the financial performance of the debenture.Confirmation LetterNSDL will send Confirmation Letter to the company confirming the allotment. This will include ISIN, Face value per security, Date of Redemption and few other details related to allotment.The securities will be made available for Dematerialization on receipt by NSDL. NSDL will inform all DPs electronically about the availability of securities for Dematerialization. In addition, a monthly bulletin of NSDL 'Nest Update' will also carry this information. Company may consider sending the information to investors through brokers.Further proceedings will be carried out by the Registrar and NSDL.RedemptionNow company will redeem the debentures to the debenture holders and pay back to the investors. The procedure will be: No dues (investor) Redemption Date Record Date Extinguishment of agreement between company and investor Charge Satisfaction ROC

CHAPTER 5NON- FUND BASED BORROWINGS

BANK GUARANTEESA bank guarantee is a written contract given by a bank on the behalf of a customer. By issuing this guarantee, a bank takes responsibility for payment of a sum of money in case, if it is not paid by the customer on whose behalf the guarantee has been issued. In return, a bank gets some commission for issuing the guarantee.Any one can apply for a bank guarantee, if his or her company has obligations towards a third party for which funds need to be blocked in order to guarantee that his or her company fulfill its obligations (for example carrying out certain works, payment of a debt, etc.).In case of any changes or cancellation during the transaction process, a bank guarantee remains valid until the customer dully releases the bank from its liability.In the situations, where a customer fails to pay the money, the bank must pay the amount within three working days. This payment can also be refused by the bank, if the claim is found to be unlawful. A Contract of Guarantee is a contract to perform the promise or discharge of liability of a third person in case of his default. There are three parties to the guarantee. The person who gives the guarantee is called Surety. The person on whose behalf the guarantee is given is called the Principal Debtor. The person in whose favour guarantee is given is called the Creditor or Beneficiary.

LIABILITY OF GUARANTOR The liability of Surety/Guarantor is co-extensive with that of the principal debtor, unless it is otherwise provided in the agreement of guarantee itself. In view of this, guarantees are drafted in such a way that guarantor and the principal debtor are jointly and severally liable in the ordinary course of all times.TYPES OF GUARANTEESBank Guarantees are generally are of two types namely: Financial Guarantees Performance GuaranteesFINANCIAL GUARANTEES A guarantee, which is issued in lieu of monetary consideration, is called financial guarantee. For example: Tender deposit, sales tax payments, retention money etc PERFORMANCE GUARANTEE A guarantee which is issued in respect of performance of a contract or obligation is called performance guarantee. In event of non-performance of obligation in terms of contract, the bank assumes only monetary liability up to a specified amount. GUARANTEES FOR SPECIFIC TRANSACTION A bank guarantee can be issued for covering a single transaction only. E.g. Payment of sales tax.CONTINUING GUARANTEES A guarantee, which extends to a series of transactions, is called a continuing guarantee. If a guarantee is issued in favour of customs authority on account of payment of custom duty by the customer from time to time, up to Rs 4 lacks, the guarantee covers at any time custom duty in arrears by the customers up to 4 lacs, during the period of the guarantee.GUIDELINE TO BE OBSERVED Guarantee should be issued on behalf of the customers only. If a request for issuance of a guarantee is received, study the proposal and be satisfied with the genuineness of the request. Bank should satisfy that the customer would be in a position to reimburse the bank in case BG is invoked. In case of performance guarantee, branch must satisfy that the customer has the necessary experience, capacity and means to perform the obligation under the contract and is not likely to commit any default.DOCUMENTS TO BE OBTAINED FOR ISSUE OF BG Application form from the party duly signed by authorised person. Board resolution in case of limited company. Counter guarantee on a stamp paper. Letter of a lien & set off on a stamp paper. Cash margin duly discharged.

EXECUTION OF BG The guarantee should be executed on the stamped paper of requisite value in compliance with the requirement of the beneficiary. It should be ensured that stamp paper has been issued in the name of the bank or the Beneficiary and the date of purchases of stamp paper is not more than 6 months from the date of issue of guarantee. MARGIN MONEYThe following security can be taken as margin for issued of BG Term deposit receipt preferably issued by same branch. NSE / KVP. Share certificate of a well known company may also be considered Maturity date of above security should be at least up to BG expiry date. 100% margin should be invariably be obtained in respect of BG issued for

Guaranteeing the payment of: Insurance premium. Sales Tax Income Tax MTNL Custom / Excise Duty.BANK GUARANTEE COMMISION BG commission @ pa. Of BG amount should be collected for the entire BG period including claim period in advance at the time of issuing BG.(PL- ) If the original BG is returned duly cancelled before the expiry date and if request is made for refund of commission, the same may be considered on merits of each case only after seeking prior permission of HO.EXPIRED GUUARANTEES Once the guarantee period has expired and no claim has been lodged for payment, the guarantors contingent liability too expires not with standings the position that expired guarantee has not been returned by the beneficiary. This will not alter the legal procedure of the bank even after the amendment of section 28 of the Indian Contract Act. After the expiry of guarantee period, the bank should intimate the beneficiary by a registered AD letter. The letter should mention that guarantee period has expired and the beneficiary is not entitled to invoke the guarantee. If the expired guarantee document is not returned in spite of the notice sent by registered AD, the branch should reverse the relative entries and mark off the liability in the books. INVOKING OF BANK GUARANTEEIf any BG is invoked before the expiry of the validity period: Intimation should be given to the customer immediately. The matter should be reported to HO. Payment should be made immediately as bank has given an irrevocable undertaking to pay.CHAPTER 6 BANKING PROCEDURESRTGS (Real time gross settlement) The acronym 'RTGS' stands for Real Time Gross Settlement, which can be defined as the continuous (real-time) settlement of funds transfers individually on an order by order basis (without netting). 'Real Time' means the processing of instructions at the time they are received rather than at some later time. Gross Settlement' means the settlement of funds transfer instructions occurs individually (on an instruction by instruction basis). Considering that the funds settlement takes place in the books of the Reserve Bank of India, the payments are final and irrevocable. The RTGS system is primarily meant for large value transactions. The minimum amount to be remitted through RTGS is 2 lakh. There is no upper ceiling for RTGS transactions. Under normal circumstances the beneficiary branches are expected to receive the funds in real time as soon as funds are transferred by the remitting bank. The beneficiary bank has to credit the beneficiary's account within two hours of receiving the funds transfer message. The remitting bank receives a message from the Reserve Bank that money has been credited to the receiving bank. Based on this the remitting bank can advise the remitting customer that money has been delivered to the receiving bank.It is expected that the receiving bank will credit the account of the beneficiary instantly. If the money cannot be credited for any reason, the receiving bank would have to return the money to the remitting bank within 2 hours. Once the money is received back by the remitting bank, the original debit entry in the customer's account is reversed.The RTGS service window for customer's transactions is available from 9.00 hours to 16.30 hours on week days and from 9.00 hours to 13.30 hours on Saturdays for settlement at the RBI end. However, the timings that the banks follow may vary depending on the customer timings of the bank branches. Processing Charges / Service Charges for RTGS transactions banks offering funds transfer through RTGS system, a broad framework has been mandated as under: a) Inward transactions Free, no charge to be levied.b) Outward transactions Rs. 2 lakh to Rs. 5 lakh - not exceeding Rs. 30 per transaction.Above Rs. 5 lakh - not exceeding Rs. 55 per transaction.The remitting customer has to furnish the following information to a bank for effecting a RTGS remittance:1. Amount to be remitted 2. Remitting customers account number which is to be debited 3. Name of the beneficiary bank 4. Name of the beneficiary customer 5. Account number of the beneficiary customer 6. Sender to receiver information, if any 7. The IFSC Number of the receiving branch No. All the bank branches in India are not RTGS enabled. As on September 29, 2011, there are more than 78,000 RTGS enabled bank branches. A remitting customer can track the remittance transaction. It would depend on the arrangement between the remitting customer and the remitting bank. Some banks with internet banking facility provide this service. Once the funds are credited to the account of the beneficiary bank, the remitting customer gets a confirmation from his bank either by an E-mail or Sms.In case of non-credit or delay in credit to the beneficiary account contact your bank / branch. If the issue is not resolved satisfactorily, complaint may be lodged to the Customer Service Department of RBI at - The Chief General Manager,Reserve Bank of India,Customer Service Department,1st Floor, Amar Building, Fort,Mumbai 400 001Or send For a funds transfer to go through RTGS, both the sending bank branch and the receiving bank branch would have to be RTGS enabled. The lists are readily available at all RTGS enabled branches. Considering that more than 74,000 branches at more than 20,000 cities/ towns / taluka places are covered under the RTGS system.NEFT is an electronic fund transfer system that operates on a Deferred Net Settlement (DNS) basis which settles transactions in batches. In DNS, the settlement takes place with all transactions received till the particular cut-off time. These transactions are netted (payable and receivables) in NEFT whereas in RTGS the transactions are settled individually. For example, currently, NEFT operates in hourly batches - there are eleven settlements from 9 am to 7 pm on week days and five settlements from 9 am to 1 pm on Saturdays. Any transaction initiated after a designated settlement time would have to wait till the next designated settlement time Contrary to this, in the RTGS transactions are processed continuously throughout the RTGS business hours..

Below are the screen shots of the internal software used by Religare for RTGS.

CHAPTER 7

BIBLIOGRAPHY

WEBSITES

www.investopedia.comwww.rbi.org.inwww.google.co.inwww.religare.comwww.religaresecurities.comwww.careratings.comwww.nseindia.comwww.moneycontrol.comwww.eximguru.com

REPORTS

1. Annual report of Religare Securities Limited

FILES and DOCUMENTS

1. Bank guarantee file of various bank.2. Mutual fund file3. FDR files of various banks4. WCDL file5. Overdraft facility files

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