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Shivanappa
HET’s IMS, Hubli
Credit risk is defined as the possibility of losses associated with diminution in the credit
of quality of borrowers or counter parties. In a banks portfolio, losses stem from outright
default due to inability or unwillingness of a customer or counter party to meet
commitments in relation to lending, trading, settlement and other financial transactions.
As credit risk is one of the challenging tasks to banks I have selected this topic for
my study in order to know the various types of risk and the types of strategies the banks
use to mitigate the risk.
Geographical Scope – The geographical scope of the study is limited to the boundary of
Whitefield Maski city by Government of Karnataka.
Theoretical Scope - The theoretical scope of the study is limited to analyzing the
dynamics of corporate salary accounts from the customer’s perspective in Branch Maski
Founded in 1906, Canara Bank is one of the premier banks in India, with a net
work of 2578 branches across the country. The bank was the first two launch networked
ATMs in India and obtain and ISO certification. Canara bank has also achieved the
distinction of being the country’s highest net profit earner among nationalized banks for
the year march 2007.
The bank has already carved a niche in providing IT-based services such as
networked ATMs, anywhere banking, Telebanking, Remote access Terminals, Internet
and Mobile banking, Debit cards, etc. Canara bank a vision to help improve the economic
condition of the common people of India by inculcating the habit of savings in rural
areas.
As part of its vision of using technology to provide affordable banking services to
the vast rural population of India, Canara bank has extend the performance and cost
benefits of enterprises Linux to its customers. With a modernized branch infrastructure,
Canara bank hopes to serve customers in a timely and efficient manner, reinforcing its
image of being a customer savvy bank
Genesis
''A good bank is not only the financial heart of the community, but also one with
an. obligation of helping in every possible manner to improve the economic conditions of
the common people"
As Canara bank founded in 1906, Canara Bank is one of the premier banks in India,
with a network of 2578 branches across the country. The bank was the first to launch
networked ATMs in India and obtain an ISO Certification. Canara Bank has also
achieved the distinction of being the country's highest net profit earner among
nationalized banks for the year March 2007.
The bank has already carved a niche in providing IT -based services such as
Networked ATMs, Anywhere Banking, Tele-banking, Remote Access Tensional, Internet
& Mobile Banking, Debit Cards, etc. Canara Bank has a vision to help improve the
economic condition of the common people of India by inculcating the habit of savings in
rural areas.
Canara 'Bank achieved 100% computerization very early in the course of its
operational history. It deployed a number of bank automation tools such as a customized
Total Branch Automation (TBA) package called Integrated Branch Banking Software
(18BS), which was developed by its subsidiary, Can Bank Computer Services Ltd.
(CCSL). IBBS was deployed on Novell NetWare at close to 1400 medium sized branches
across the country.
Canara Bank follows a detailed tendering process for new hardware purchases, in
which contracts are awarded on the basis of bids. After nearly a decade of deploying
IBBS, the bank had purchased different types of hardware from multiple vendors. As a
result, standardization on Novell NetWare became difficult, and supporting the legacy
IBBS application became a challenging task.
Moreover, IBBS was developed using Micro focus COBOL and designed to run
in a 16 bit DOS environment. With poor support for the TCP/IP protocol stack, the
NetWare servers running IBBS could not be integrated into the corporate network easily.
Essentially, the NetWare servers functioned as branch file servers, without any
data connectivity. Regular maintenance of different versions of IBBS across 1400
branches was a painstaking effort in the absence of network support. Patching,
troubleshooting and version upgrades had to be conducted onsite. Branches in rural and
remote areas were particularly difficult to access and required support personnel to travel
frequently. Also, the availability of certified hardware on NetWare was limited, which
made adding new machines difficult.
As Canara Bank's customer base expanded, its banking services began to scale,
creating an immediate need for Internet Banking, Anywhere Banking (banking from any
Can Bank branch across the country) and an expanded ATM network. Novell NetWare's
closed legacy environment did not allow room to accommodate these new technologies.
Canara Bank had to purchase additional machines running Microsoft Windows to
When additional branches were added to the bank's network, procuring new
servers that were certified to run on NetWare was difficult, as IHVs had ceased to
provide support for older versions of the as. Micro Focus had also ceased support for the
COBOL version on which the IBBS package had been developed. A combination of all
these factors made migration attractive.
Migrating the 1400 odd legacy NetWare servers posed another challenge: Canara
Bank wanted to switch platforms but not hardware. Deploying the latest as available,
without going into a hardware refresh cycle that would cost millions of rupees was a
challenging task. The bank had amassed about a dozen different types of machines after a
decade of deploying IBBS. This heterogeneous mix of hardware that spanned across
more than1,000 server 10,000destopsmadethe project very complex. Canara Bank began
to look for a platform that could deliver the latest innovation along with complete hardware
freedom.
Future plan
Moving from the legacy NetWare platform to Red Hat Enterprise Linux has
opened up significant opportunities for Canara Bank. With networking support now
available, Canara Bank is planning to deploy Red Hat Network Satellite to send updates
for both IBBS as well as the operating system to all distributed machines across the
country. Enterprise Linux has also made Remote Management and health monitoring of
remote servers possible.
With the tremendous benefit’s provided by Enterprise Linux, Canara Bank plans
to move its Anywhere Banking and Internet Banking Ii steners to the Enterprise Linux
platform. Enterprise Linux has provided Canara Bank with the freedom and choice to
develop a scalable growth plan, which was not possible under NetWare's closed legacy
environment.
HET’s INSTITUTE OF MANAGEMENT STUDIES HUBLI Page 12
The power of Linux is not restricted by hardware limitations, as it can run on
different kinds of architectures. Canara Bank has managed to save crores of rupees in
new hardware acquisition costs, by using a lightweight customized Linux distribution on
its existing hardware
Canara Bank is one of the premier banks in the country, accredited with umpteen
distinctions. The present stature of the Bank is due to its strong fundamentals and quality
customer orientations. Profit making since inception, the Bank today ep itomizes a
perfect blend of commercial and social banking.
For the year March 2007, the Bank clocked the highest net profit ( RS.1110 crore)
among nationalized banks, with significant improvement in capital adequacy ratio
(13.50%) and asset quality (net NPA ratio of 0.94%).
The Bank has already carved a niche in providing IT -based services. With 100%
computerization of the branches, the bank provides a wide array of services, such as,
Networked ATMs, Anywhere Banking, Telebanking, Remote Access Terminal also
Internet & Mobile Banking, Debit Card etc. The Bank was the first among banks to
launch networked ATMs and obtain ISO Certification.
Anywhere Banking:
Anywhere Banking is a technology-based, customer-friendly service designed to
provide greater convenience to our customers. With Anywhere Banking facility,once
customer has an account with any of the select branches, Customer can operate it
From any other designated branch across 85 cities.
FACILITIES:
Individuals I joint account holders (operated severally) maintaining Current I 58 I OD
Accounts:
I. Withdrawal of cash
2. Remittance of cash
3. Transfer of funds
4. Balance enquiry
5. Issue of mini statement
6. Depositing local cheques for collection
7. Purchase of Demand draft
ELIGIBILITY:
Account holders should have maintained a minimum average balance of
Rs.5,OOO / - in SB account and Rs.I 0,000/ - In Current account in the last six
months
FEATURES:
HET’s INSTITUTE OF MANAGEMENT STUDIES HUBLI Page 14
1. Cash withdrawal up to Rs.50, OOO/ - per occasion
2. Transactions permitted on production of identity card issued exclusively for
• Balance in the account including clear balance. Last five transactions in the
account.
• Request for check book. Request for pass sheet.
• Change in pass word. Fax on demand.
Note: The facility is password protected to ensure secrecy. Ask your Branch Manager
for details and enroll today itself the service 'is absolutely lice of cost
Personal Banking:
Deposits
• Savings Bank Account
• Current Account
- Fixed Deposits
- Kamadhenu Deposits
- Recurring Deposits
- Can flexi Deposits
Card Services
Insurance
NRI
- NRE (Non Resident External Rupee Account)
- NRO (Non Resident Ordinary Account)
- FCNR (Foreign Currency Non Resident Accounts -Banks) - RFC Deposits
-Nomination facility
Other Services/Facilities
-N R I Branches
-N R I Services
-Remittance Facility
Rural Financing
-Kisan Credit
- Housing Loan
- Loans to SSIs
Social Banking
- CBJRDT Institutes
- Women Development
- Social Banking
Canara Bank entered fore arena in 1953 with the opening of its first Foreign
Exchange Department in Mumbai
Today Canara Bank the 4th largest Bank in India catering to the cross border trade
& remittances and financing of foreign trade.
The Bank has been the pioneer in financing of LC based International Trade
transactions in India.
The Bank not only finance at customers option in foreign currency at pre
-shipment and post- shipment stages at LIB OR related rates but also finance the import
leg in foreign currency where imported inputs are required for exp0l1s.
The Bank has the expertise in handling project exports of goods and services.
The Bank has an excellent worldwide correspondent relationship and have the
capability to handle any export, import, remittance and related transactions anywhere in
the world and in any currency.
Non fund based transactions like adding confirmations to LC, issuing inward and
outward Bid bonds & guarantees, establishing LCs for import into India, arranging
buyer's credit at attractive terms etc. are our forte. Canara Bank has a branch in London
and holly owned subside in Hong Kong. We have a joint venture with SBI at Moscow
under the name Commercial Bank of India LLC. We have recently opened a
Representative Office at Shanghai, People Republic of china. They are engaged in Trade
finance and have expertise on the Indian market scenario. The Bank also manages 2
Exchange houses in the Gulf and arrangement with 20 Exchange Houses and 18 Banks
for drawing on DD’s from Gulf Countries on our select branches thought out India.
The Bank has 5 fore dealing rooms located in Mumbai, New Delhi, Calcutta,
Chennai and Bangalore in India. We provide a whole range of services and products like
purchases and sale of 7 world currencies forward booking and other fore hedging
instrument like currency swaps.
Apart from the Managing Director, the Board of Directors is complied of top
Executives of the Bank, institutional nominees of HDFC, UTI and NHB and also
professionals in the field of accounts/finance/Banking.
The Registered Office of the Company is at No. 29, Sir M N Krishna Rao Park
Road, Basavanagudi, Bangalore 560 004.
The Company has 41 branches and 5 Representative Office spread across the country.
Activities:
• The prime objective and activity of the Company is to provide Ion g term finance
to individuals for construction or purchase of residential houses/flats and to
Companies or Corporations or Societies or Associations for the purpose of
construction or purchase of residential houses flats
• Over the years, the company has added new products to their range and value
addition is done to the existing products to keep updated with the changing
market scenario and the competition, which is getting tougher with each passing
HET’s INSTITUTE OF MANAGEMENT STUDIES HUBLI Page 20
day. Personal loans to the existing borrowers, loans for purchase of sites,
insurance cover for loaners, etc., are some examples of innovation/value addition.
• Bank's goodwill, the innate strength of the Company approach and an unflinching
business acumen have always kept the business on an envious platform making good
profits and paying rich dividends and their pragmatic ever since inspection.
• The Company also took a major step in diversification by launching three Non-
housing Finance Products namely Premises Loan for practicing professionals (Venture),
Mortgages Loans (Net worth) and Loan against rent receivables (Noncash)
Post Sale funds crunch is proving a handicap for many industries and business in
the smooth cycling of capital. Canara Bank Factors Limited (CFL) was established in
10.05.1991 to mitigate this problem of the industry and business and ensure a smooth
flow of capital in the entire cycle.
This Company is promoted by our Bank along with Andhra Bank and SIDB!. The
Registered office is at No. 17, Seshadri Road, Bangalore 56 0 009.
Has a network of 8 branches in southern and we stem part of the courtly and
proposes to add some more during the next financial year.
Activity:
•• To cater to the needs of the clientele, Company has always on the look out for
innovative and competitive products. Introduction {)f variants of fact ling such as
International Factoring/Export Factoring and Sub -variants such as Invoice Discounting
backed by LCs/Hundisffripartite Agreement's are examples of their consistent Endeavour
to design/redesign their products.
"PH" - indicating highest safety for short term debt program allover Commercial
Papers "FAA+" - indicating higher safety for Public Deposits
Has attained Nil Net NPA position for 4 consecutive years 200 2-03, 2003-04, 2004 -05
and 2005-06
The Company is accredited with an ISO Certificate -"DIN EN ISO 9001:2000" by TUV
CERT Certification body of Germany.
This is the only Company of its kind sponsored by a Public Sector Bank in the
country. Sri B Sudhakar Shetty, Asst General Manager of the Bank is heading the
Company as Managing Director.
Apart from the Managing Director, the Company's Board of Directors consists of
our Chairman & Managing Director, Executive Director and a General Manager of the
Bangle There are two non-official Directors, each drawn from the field of industry and
Finance. The Registered Office is at No. 14, Naveen Complex, 4th Floor, M G Road,
Bangalore 560001.
Activity:
The Registered Office is situated at No. 14, Naveen Complex, 7 the Floor, M G
Road, Bangalore 560 001. B Sivaraman, Deputy General Manager of the Bank is heading
the Company as Managing Director of the Company.
Activities:
CCSL designs and develops software for banks, financial institutions and
Government Departments, with its extensive in-house infra-structure and proven
technical expertise. All its products and Projects are well documented and user -friendly,
with on-line help, data encryption and audit features.
1. Software development
2. Business Process Outsourcing
3. Training
4. Data warehousing Solution
5. Web based solution
6. Information Systems Audit
7. Consultancy Service
GILT SUCURITIES TRADING CORPORATION LIMITED
• The Registered Office is at 1-1, Kalahari heritage, Manikin Wada Building, 127,
M G Road, Foi T, Mumbai 400 023.
• Presently, the Company is under the stewardship of Sri D G Kamath as Managing
Director who is a Deputy General Manager of the Bank on second mint to the
Company.
HET’s INSTITUTE OF MANAGEMENT STUDIES HUBLI Page 24
• The Board of the Company consists of our Chairman& Man aging Director,
Executive Director, 2 General Managers of the Bank and 2 Chartered Accountants
and a former Banker.
Activity:
• Primary Dealer accredited by RBI for dealing III Government of India Dated
Securities and Treasury Bills.
• Strengthening Infrastructure in the Government Securities (G Sec) Market so as to
make it vibrant, liquid and broad based.
• Development of Underwriting and Market Making capabilities.
• Improving Secondary Market Trading System.
With the mentioned objectives, GSTCL participates actively both III Security and Money
Market.
• Reserve Bank of India, being the Regulator of Primary Dealers, sets certain goals
in tons of Bidding Commitments and Success Ratio in the Primary auction of G
Sec and T Bills, to be accomplished by them which form the basis for renewal of
PD's license. GSTCL has the distinction of achieving these benchmarks
consistently since inception. Underwriting of G Sec in the auction is yet another
obligation cast on PDs.
• Bond yields being the function of interest rate, the Company's asset portfolio is
subject to market vagaries caused by factors like inflation, liquidity, government
borrowing programmed, coupon, maturities of papers issued and also event base
risks. In order to manage and mitigate these risks the Company has well defined
and board approved investment policy so also Risk Management Policy.
• As typical of a trader, the Company is encasing price volatility to earn profits.
Day-to-day operations are largely supported by Call and Repo Borrow wings.
Thus efficient funds management holds key to improving profitability.
• The Company is also into retailing G Sec to individual investors PF staffs/
Charitable Institutions through 24 designated branches of the parent, Canara
• Bank had established its Mutual Fund arm "Canara bank Mutual Fund" on
19.12.1987 for foraying into the Capital Market. CMF is an independent Trust
governed by a Board of Trustees,
When the RBI issued directives to form Asset Management Companies to manage
the assets of Mutual Funds and such other Trusts, Canara bank Investment Management
Services Limited was established by the Bank on 02.03.1993 as a Wholly Owned
Subsidiary of the Bank,
Sri N R Rarnanujam, Deputy General Manager of the Bank is at the helm of the
Company as Managing Director. Two General Managers of the Bank is also on the
Board. There are four non-official Directors on the Board drawn from various fields
connected to finance,
This is the first Subsidiary emerging from the stable of Canara Bank. Established on
01.06.1987 as a Wholly Owned Subsidiary of the Bank, cantina was very quick to carve a
niche for itself in the Merchant Banking arena as a premier institution providing a host of
financial services under one roof.
Registered Office of the Company is housed at No. 14, Naveen Complex, 6 th Floor, M G
Road, Bangalore 560 001. Sri M. S. Prabhu, Divisional Manager of the Bank is
heading the Company Executive Director. Apart from the Executive Director, the Board
of Director consist of two General Managers of the Bank and a Chartered Accountant
who is ;; non -official Nominee as Chairman.
Activities:
PERSON N EL WING:
8. Recruitment Cell.
9. SC/ST Cell.
1. Development Section.
RECOVERY WING
1. Recoveries Section.
2. NP A Management Section.
3. Legal Section.
c) Subsidiaries Division
1. Subsidiaries Section.
INSPECTION WING.
1. Planning Section.
2. Follow Up Section.
3. Review and Reporting Section.
4. Information Systems Audit Section.
INDUSTRIAL PROFILE
Overview:
The enhanced role of the banking sector in the Indian economy, the increasing
levels of deregulation along with the increasing level of the competition have
facilitated globalization of the Indian banking system and placed numerous
demands on banks. Operating in this demanding environment has exposed banks
to various challenges. The last decade has witnessed major changes in the
financial sector-new banks, new financial institutions, new instruments, new
windows and new opportunities- and, along with all this, new challenges. While
deregulation has opened up new vistas for banks to augment revenues, it has
entailed greater competition and consequently greater risks. Demands for new
products, particularly derivatives, has required banks to diversify their product
The financial sector especially the banking industry III most emerging economies
including India is passing through a process of change. As the financial activity has
become a major economic activity in most economies, any disruption or imbalance in its
infrastructure will have significant impact on the entire economy. By developing a sound
financial system, the banking industry can bring stability within the financial markets.
Deregulation in the financial sector had widened the products range in the
developed markets. Some of the new products introduced are LBOs, structured
transaction, credit cards, housing finance, derivatives and various off balance sheet items.
Thus new vistas have created multiple sources for banks to generate higher profits than
the traditional financial intermediation. Simultaneously they have opened new areas of
risk also. Many unknown issues that are intricately related to new products have exposed
banks to various risks across the globe and India is no exception.
During the past decade, the Indian banking industry continued to respond to the
emerging challenges of competition, risks and uncertainties. Risks originate in the forms
of customer default, funding a gap or adverse movements of markets.
Measuring and quantifying risks is neither easy nor intuitive. Our regulators have
made some sincere attempts to bring prudential and supervisory norms conforming with
international bank practices with an intention to strengthen the stability of the banking
system.
The industry has undergone drastic changes in the last three decades. Horizontal
expansion of the financial markets, deregulation across the globe in financial markets and
stiff competition have led the banks to multiply their activities. Increased activities in the
industry have exposed the banks to more uncertainties and more risks.
There will be always a time gap between the availability of resources and their
deployment. Hence banks will often swing between excess liquidity and liquidity crunch
in their funds position. Liquidity management essentially deals with efficient handling of
inflows and outflows of funds. Section -I discusses the liquidity management in banks in
India and across the globe.
Cash Management is a subset of the entire funds management. The lead time is
reduced in collection of cheques and other instruments by the banks, if they introduce
efficient cashmanagement services. From the bank's point of view it increases the fee
based income. Cash management services are one innovative product introduced by the
banks in the recent times. Section-II discusses the cash management techniques adopted
by banks and corporate clients.
Credit risk is as old as money. When the default rate increases in the portfolio of
The Basle committee defines the operational risk as "the risk of direct or indirect
loss resulting from inadequate or failed internal processes, people and systems or from
external events". This definition excludes operational: risk but includes legal risk. Such
operational risks can be broadly classified into four categories as information technology
risk, human resource risk, loss to assets risk and 'relationship risk. Quantification of
operational risk is a major challenge to the .risk management group of the bank: Section -
IV attempts to elucidate few issues involved in the operational risk management.
One of the core activities of the regulators is proper of the system. The Basle
committee had set certain guidelines for the bank s. The Reserve Bank of India had set up
an advisory committee under the chain Ulship of M S Verma and the committee had
submitted its report in May 2001. The committee recommended corporate governance,
internal controls, risk management, loan accounting transparency and disclosures,
financial conglomerates and cross border banking supervision. The supervisor should
provide a safety net to the financial system. Section -V discusses the important issues of
any risk management technique.
Section-VI consists of two case studies. It briefly discusses the risk management
Technique's to be adopted by banks. Derivatives are the hedging instruments which help
minimize the risks. But a 300 year old investment bank collapsed because of its exposure
to derivatives. The Barings' collapse is a classic example of failure of supervision and
incidence of human sours risk.
In the global scenario, the increased credit risk arises due to two reasons. Banks
have been forced to lend to riskier clients because well-rated corporates have moved
away from banks as they have access to low cost funds through disinter mediation. The
other reason is the lurking fear of global recession. Recession in the economy could lead
to low industrial output which may lead to defaults by the industry under recession
culminating into credit risk. Hence, the markets are in search of new credit risk
In the recent times, we have witnessed runs on the banks - mainly the Urban
Cooperative Banks like Madhavpura Coop Bank in Gujarat/Mumbai, Charminar Bank, a
scheduled bank in Hyderabad and many others.
When the banks give the signals of distress, the depositors panic and run for their
money. As per the existing rules, Deposit Insurance and Credit Guarantee Corporation of
India (DICGC) guarantees the depositors' money up to one lakh rupees subject to certain
conditions. Till now, the banks used to pay the insurance premium for the deposits they
hold to get insurance coverage from DICGC. Now the committee set up by the RBI under
the Chairmanship of J Captor suggested that the risk premium is to be paid which Is
sensitive to the probability of the bank in question going bankrupt. The paper "What
Makes Banks Fragile tries to compute the volatility of banks' assets and deposit insurance
premium with an illustrate on and presents a view point of fixing higher deposit insurance
premium if reserve requirements are to be phased out.
Introduction
Credit risk is defined as the possibility of losses associated with diminution in the
credit quality of borrowers or counter parties. In a bank's portfolio, losses stem from
outright default due to inability or unwillingness of a customer or counter party to meet
commitments in relation to lending, trading, settlement and other financial transactions.
Alternatively, losses result from reduction in portfolio value arising from actual or
perceived deterioration in credit quality. Credit risk emanates from a bank's dealings with
an individual, corporate, bank, financial institution or a so vereign.
In this backdrop, it is imperative that Canara bank has credit risk management system,
which is sensitive and responsive to these factors. The effective management of credit
risk is a critical component of comprehensive risk management and ie essential for the
long-term success of Canara banking organisation. Credit risk managemnt encompasses
identification, measurement, monitoring and control of the credit risk sources. The Bank
has put in place a unified risk management architecture to attain global best practices for
effective implementation of risk management initiatives in consistence with the Basle II
framework and RBI guidelines. The Board of Directors drives the Risk Management
initiatives in the Bank. The Risk Management Committee of the Board is operational.
Top Executive Committees for Credit Risk, Operational Risk and Market Risk
Management oversee and monitor the respective risk management processes and
procedures. Asset Liability Committee (ALCO) meets periodically for effective and pro-
active ALM in the Bank.
An exclusive Risk Management Wing at the Head Office is functioning as a nodal centre
for overall implementation of various risk management initiatives across the Bank.
Integrated Mid Office of both domestic and Forex Treasury are functioning under the
Risk Management Wing for effective and independent supervision and monitoring of
Market Risk in investment and forex functions. Risk Management Sections are
functioning at all the 34 Circle Offices of the Bank as an extended arm of the Risk
Management Wing at the Corporate Office.
The Bank has put in place various risk management policies, which include policy for
management of Credit Risk, Market Risk, Operational Risk, Asset Liability, Liquidity
Risk, Country Risk, Counterparty Bank Risk, Corporate Governance, Disclosures,
Collateral Management, Stress Testing, Compliance Functions, Disaster Recovery and
Business Continuity Planning, Business Lines, Outsourcing, Group Risk, Legal Risk etc.
The Bank has also framed risk management policies for its overseas branches. These
policies are being reviewed and fine tuned annually.
1. Bank has credit risk policy document approved by the Board. The document include
risk identification, risk measurement, risk grading/ aggregation techniques, reporting
and risk controlV mitigation techniques, documentation, legal issues and management
of problem loans.
2. Credit risk policies defined target markets, risk acceptance criteria, credit approval
authority, credit origination! maintenance procedures and guidelines for portfolio
management.
4. Senior management of a Canara bank shall be responsible for implementing the credit
risk policy approved by the Board.
1. Each branch of Canara bank should develop, with the approval of its Board, its own
credit risk strategy or plan that establishes the objectives guiding the Canara bank's
credit-granting activities and adopt necessary policies/ procedures for conducting
such activities. This strategy should spell out clearly the organisation's credit appetite
and the acceptable level of risk -reward trade-off for its activities.
2. The strategy would, therefore, include a statement of the Canara bank's willingness to
grant loans bas ed on the type of economic activity, geographical location, currency,
market, maturity and anticipated profitability. This would necessarily translate into
the identification of target markets and business sectors, preferred levels of
diversification and concentration, the cost of capital in granting credit and the cost of
bad debts.
Each Canara bank may, depending on the size of the organization or loan!
Investment book, constitute a high level Credit Risk Management Committee
(CRMC). The Committee should be headed by the Chairman and should comprise of
heads of Credit Department, Treasury, Credit Risk Management Department
(CRMD) and the Chief Economist.
1. Responsible for the implementation of the credit risk policy/ strategy approved by the
Board.
2. Monitor credit risk on a Canara bank wide basis and ensure compliance with limits approved
by the Board.
3. Recommend to the Board, for its approval, clear policies on standards for presentation of
credit proposals, financial covenants, rating standards and benchmarks,
4. Decide delegation of credit approving powers, prudential limits on large credit exposures,
standards for loan collateral, portfolio management, loan review mechanism, risk
1. Measure, control and manage credit risk on a Canara bank -wide basis within the
limits set by the Board/ CRMC
2. Enforce compliance with the risk parameters and prudential limits set by t.he
Board! CRMC.
3. Lay down riskassesment system develop loan/ investment portfolio. identify
problems, correct deficiencies and undertake loan review/audit. Large Canara
banks could consider separate set up for loan review/audit.
4. Accountable for protecting the quality of the entire loan! investment portfolio.
Canara bank has system of checks and balances in place for extension of
credit viz.:
11. Bank has systems and procedures for monitoring financial performance of customers
and for controlling outstanding within limits.
12. A conservative policy for provisioning in respect of non -performing advances adopted.
1. Financial risk
2. Industry risk
3. Business risk
4. Market risk
When specific provisions are < 20% of NPA risk weights amount 150%
When specific provisions are at least 20% of NPA risk weight is 100%
When specific provisions are at least 50% of NPA risk weight amounts to 50%
When specific provision reaches at least 15% of NPA risk weight amount 100%
If specific provisions are at least 20% of NPA risk weights amount to 75%
Branch Office:
Regional Office:
If loan amount is more than 75 lacks then that proposal goes to regional office, Regional
office has authority to sanction from 75 lacks to 3 crores for industries.
Circle Office:
Circle office has authority of sanctioning loan from 3 crores and above.
Individual Capacity:
Bank considers individual capacity h) repayment of loan with term or agreed term
with bank and also considers his transaction with bank if any.
Securities:
Bank considers securities of borrowers while lending money to him. Ex: Shares
cel1ificate, Insurance policies
Additional Securities:
Banks consider or accept additional securities like land, home and other securities
while sanctioning new loan to customers when customers has existing loan in bank.
Existing transaction or previous transact ion consider while grant new loan to
customers/ Clients. His prompt repayment of loan consider for new loans.
Bank Deposits
Bank deposits with bank or any other banks consider as security for loans.
Following Up customers/Clients:
Bank remind borrowers to repay loan and interest according to term and condition
which he has agreed while taking loan from banks, and also ensure that ifhe fails to pay
the loanwhat is next step of banks.
Recovery Systems:
Bank directly collect dues from customers They have separate department, which look
Review of loan:
If the amount not recovered within specified term mentioned as per the policy of bank,
bank goes for review of loan if required.
Additional Securities:
Interest rate is depend on credit worthy nests of the company, if the credit worthy
Ness of the company is high he will be charged low interest, opposite is the case for low
credit worthiness
1) Bank Deposits
2) Gold Jewellery ( Benchmarked to 99.99 purity)
3) State Govt securities
4) Central Govt securities
5) National Saving Certificates, Vikas Patras and Kisan Vikas Patras
6) Life Insurance Policies
7) Equities ( Including convertible bonds)
8) Mutual fund securities
9) Land and Building
10) Plant and Machinery
• State Government
• Central Government
• Public Sector Entities
• Banks
• Primary Dealers Corporate
Substitution approach
In this approach risk weight of the guarantor replace the lisk weight of the
borrower provided it result in application of a lower risk weight, thus only guarantee
issued by entities with a lower risk weight provides credit risk mitigation effect in the
form of lower capital charges.
Proportional Cover
This method is taken note of is that the risk mitigation effect will be available to
the extent of protection provided b Guarantor and the remaining unprotected portion
carry the risk weight applicable to borrower.
Thus in order to avail capital relief it is necessary that the following details on guarantors
are captured:
Techniques:
2. Neural networks are computer-based systems that use the same data employed in
the econometric techniques but arrive at the decision model using alternative
implementations of a trial and error method.
Credit approval
Quantitative models are used in deriving 'shadow bond rating' for unrated
securities and commercial loans. These ratings in turn influence portfolio limits and other
lending limits used by the institution. In some instances, the credit rating predicted by the
model is used within an institution to challenge the rating assigned by the traditional
credit analysis process.
Credit risk models may be used to suggest the risk premier that should be charged
in view of the probability of loss and the size of the loss given default. Using a mark -to-
market model, an institution may evaluate the costs and benefits of holding a financial
asset. Unexpected losses implied by a credit model may be used to set the capital charge
in pricing.
The banks should also evolve suitable framework for reporting and evaluating the
quality of credit decisions taken by various functional groups. The quality of credit
decisions should be evaluated within a reasonable time, say 3 - 6 months, through a well-
defined Loan Review Mechanism.
2. Prudential Limits
In order to limit the magnitude of credit risk, prudential limits should be laid
down on various aspects of credit:
a) Stipulate benchmark current/debt equity and profitability ratios, debt service coverage
ratio or other ratios, with flexibility for deviations. The conditions subject to which
deviations are permitted and the authority therefore should also be clearly spelt out
in the Loan Policy;
b) Single/group borrower limits, which may be lower than the limits prescribed by
Reserve Bank to provide a filtering mechanism;
d) maximum exposure limits to industry, sector, etc. should be set up. There must also
be systems in place to evaluate the exposures at reasonable intervals and the limits
should be adjusted especially when a pm1icular sector or industry faces slowdown
e) Banks may consider maturity profile of the loan book, keeping in view the market
risks inherent in the balance sheet, risk evaluation capability, liquidity, etc.
3 Risk Rating
Banks should have a comprehensive risk scoring / rating system that serves as a
single point indicator of diverse risk factors of counterparty and for taking credit
decisions in a consistent manner. To facilitate this, a substantial degree of standardization
is required in ratings across borrowers. The risk rating system should be designed to
reveal the overall risk of lending, critical input for setting pricing and non -price terms of
loans as also present meaningful information for review and management of loan
portfolio. The risk rating, in short, should reflect the underlying credit risk of the loan
book. The rating exercise should also facilitate the credit granting authorities some
comfort in its knowledge of loan quality at any moment of time.
4 Risk Pricing
Banks should evolve scientific systems to price the credit risk, which should have
a bearing on the expected probability of default. The pricing of loans normally should be
linked to risk rating or credit quality. The probability of default could be derived from the
past behavior of the loan portfolio, which is the function of loan loss provision.
Portfolio Management
The existing framework of tracking the Non Performing Loans around the balance
sheet date does not signal the quality of the entire Loan Book. Banks should evolve
proper systems for identification of credit weaknesses well in advance. Most of
international banks have adopted various portfolio management techniques for gauging
asset quality. The CRMD, set up at Head Office should be assigned the responsibility of
periodic monitoring of the portfolio.
The banks could also consider the following measures to maintain the portfolio
HET’s INSTITUTE OF MANAGEMENT STUDIES HUBLI Page 57
1) Evaluate the rating-view distribution of borrowers In vanous industry, business
segments,
LRM is an effective tool for constantly evaluating the quality of loan book and to
bring about qualitative improvements in credit administration. Banks should, therefore,
put in place proper Loan Review Mechanism for large value accounts with
responsibilities assigned in various areas such as, evaluating the effectiveness of loan
administration, maintaining the integrity of credit grading process, assessing the loan loss
provision, portfolio quality, etc. The complexity and scope of LRM normally vary based
on banks' size, type of operations and management practices. It may be independent of
the C RMD or even separate Department in large banks.
• To identify promptly loans which develop credit weaknesses and initiate timely
corrective action;
• To evaluate portfolio quality an~ isolate potential problem areas;
• To provide information for determining adequacy of loan loss provision;
• To assess the adequacy of and adherence to, loan policies and procedures, and
to monitor Compliance with relevant laws and regulations.
• To provide top management with information on credit administration,
including credit Sanction process, risk evaluation and post-sanction follow-up.
The Risk Management Group of the Basle Committee on Banking Supervision has
released a consultative paper on Principles for the Management of Credit Risk. The Paper
deals with various aspects relating to credit risk management. The Paper is enclosed for
information of banks.
The Loan Review Officers should have sound knowledge in credit appraisal,
lending practices and loan policies of the bank they should also be well versed in the
relevant laws/regulations that affect lending activities. The independence of Loan Review
Officers should be ensured and the findings of the reviews should also be reported
directly to the Board or Committee of the Board.
• Approval process;
• Accuracy and timeliness of credit ratings assigned by loan officers;
• Adherence to internal policies and procedures, and applicable laws / regulations;
• Compliance with loan convents;
• Post-sanction follow-up;
• Sufficiency of loan documentation;
• Portfolio quality; and
• Recommendations for improving portfolio quality
The findings of Reviews should be discussed with line Managers and the corrective
actions should be elicited for all deficiencies. Deficiencies that remain unresolved should
be reported to top management.
The Risk Management Group of the Basle Committee on Banking Supervision has
released a consultative paper on Principles for the Management of Credit Risk. The Paper
deals with various aspects relating to credit risk management. The Paper is enclosed for
information of banks.
Early warning:
Credit models are used to flag potential problems in the portfolio to facilitate early
corrective action.
Credit models may be used to select assets from a pool to construct a portfolio acceptable
to investors at the time of asset securitization or to achieve the minimum credit quality
needed to obtain the desired credit rating. Underwriters may use such models for due
diligence on the portfolio (such as a collateralized pool of commercial loans).
Credit models may be used in deciding on the best collection or workout strategy
to pursue. If, for example, a credit model indicates that a borrower is experiencing short -
term liquidity problems rather than a decline in credit fundamentals, then an appropriate
workout may be devised.
The literature on quantitative risk modeling has two different approaches to credit
risk measurement. The first approach is the development of statistical models through
analysis of historical data. This approach was frequently used in the last two decades. The
second type of modelling approach tries to capture distribution of the firm's asset -value
over a period of time.
The statistical approach tries to rate the firms on a discrete or continuous scale.
The linear model introduced by Altman (1967), also known as the Z -score Model,
separates defaulting firms from non-defaulting ones on the basis of carat in financial
ratios. Altman, Hartwell, and Peck (1995,1996) have modified the original Z -score
model to develop a model specific to emerging markets. This model is known as the
Emerging Market Scoring (EMS) model.
The second type of modeling approach tries to capture distribution of the financial
asset value over a period of time. This model is based on the expected default frequency
(EDF) model. It calculates the asset value of a film from the market value of its equity
using an option pricing based approach that recognizes equity as a call option on the
underlying asset of the firm. It tries to estimate the asset value path of the firm over a
time horizon. The default risk is the probability of the estimated asset value falling below
a prespecified default point. This model is based conceptually on Merton's (1974)
contingent hassock and has been working very well for estimating default risk in a liquid
market.
Banks may adopt any model depending on their size, complexity, risk bearing capacity
and risk appetite, etc. However, the credit risk models followed by banks should, at the
least, achieve the following:
1. Internal rating based (IRB) approach the standardized approach adopted so far,
provides incentives to banks improving their credit risk management techniques.
2. Banks may have discretion and flexibility in defining the exposure classes, such as
corporate, project finance, etc.
3. Unless suitable modified, the adoption of the new Accord in its present format
would result in significant increase in the capital charge for banks.
The International Monetary Fund (IMF), in its World Economic Outlook, April 2010
raised its forecast for world economic growth in 2010 to 4.2% as against a 0.6%
contraction in 2009. However, IMF forecasted that advanced economies would not exit
the global recession until the middle of 2010 and emerging economies, which are
increasingly driven by domestic growth factors, will continue to drive global recovery.
Financial year 2010-11 started on a positive note for Indian economy with major macro
economic parameters performing well. Industrial growth and exports have been showing
steady increase and the continued strong growth in manufacturing indicates the resilience
of domestic demand. A strong saving and investment rate, favourable capital market
conditions and improved capital flows and positive business outlook will also help the
economy towards a faster revival. Going forward, the strong domestic demand and
sustained increase in per capita income will ensure faster economic growth. Thrust on
inclusive growth and focus on the rural economy would propel the growth engine of the
economy further.
Indian economy will remain one of the fastest growing economies in the world in view of
the expected recovery in agricultural production, industrial output, demand for higher
exports and the revival of global economy. The RBI in its Annual Monetary Policy
Statement for 2010-11 placed real GDP growth for 2010-11 at 8%, with an upward bias.
The RBI envisages containing money supply (M3) at around 17% in consonance with the
outlook on growth and inflation. While aggregate deposits of SCBs are projected to grow
at 18%, adjusted non-food credit is likely to record a growth of 20% during 2010-11, as
indicated by the RBI. The annual policy also endeavors to contain inflation at a benign
level of 5.5%, with a medium term goal of 3%.
Canara Bank crossed three major milestones during 2009-10. First, its total business
crossed the Rs.400000 crore marks, signifying a growth of 24.3%. Second, Net profit
crossed Rs.3000 crore to reach Rs.3021 crore, up by Rs.45.8%. Third, the Bank’s branch
network crossed the 3000 mark to reach 3046, with an addition of 314 branches during
the year
For Canara Bank, 2009-10 was a year of reckoning and crossing of milestones. It was a
year of robust performance on the business front coupled with unprecedented gains in
profits and profitability. Continued buoyancy in core business operations and costs
containment helped the Bank to sustain and enhance the top line earnings while
maintaining a stronger bottom line.
Opera
Net profit reached an all time high of Rs.
3021 crore, signifying a strong 45.8%
growth y-o-y and substantially higher than
Rs. 2072 crore recorded during the
preceding year. Operating profit recorded
a 27.7% growth to reach a level of Rs.
5061 crore.
Return on average assets (RoAA) for the year stood at 1.30%, well above the
international benchmark of 1%. Cost to Income ratio declined by 288 basis points to
40.73%. Profit per employee, moved up to Rs.7.36 lakh compared to Rs.4.97 lakh in the
5100
previous financial year.
4100
Dividend of 100% for 2009-10
Non-Interest
crore recorded during the
previous financial. Non-interest income increased to Rs. 2858 crore,
recording a robust growth of 23.7%.
Income
Concerted focus on mobilization of low cost deposits and strong resistance to high cost
preferential rate deposits helped the Bank to reduce the cost of deposits to 6.12% from
13%
March 2009 level of 6.87%. Yield on advances decreased by 98 basis points to 9.81% as
against 10.79% in March 2009 due to low
interest rates. Interest spread increased to
2.45% from 2.41% as at March 2009.
Expend
2.80% compared to 2.78% as at March 2009.
Investment
21% 8%
HET’s INSTITUTE OF MANAGEMENT STUDIES HUBLI Page 69
Capital and Reserves
Net worth of the Bank, as at March 2010, stood at Rs.12949 crore compared to Rs.10040
crore as at March 2009. With the paid-up capital at Rs.410 crore, reserves and surplus
increased to Rs.14262 crore. To augment the capital resources, the Bank raised Rs. 600
crore through the Innovative Perpetual Tier I Bonds during the year.
(Amt. in Rs.
Crore)
Basle II Basle II
Risk Weighted Assets 125111 150623
Tier I Capital 10023 12870
CRAR (%)(Tier I) 8.01 8.54
Tier II Capital 7623 7362
CRAR (%)(Tier II) 6.09 4.89
Total Capital 17646 20232
CRAR (%) 14.10 13.43
As at March 2010, Capital to Risk Weighted Assets Ratio (CRAR) of the Bank under
Basle II stood at 13.43%, well above the 9% regulatory benchmark. Significantly, the
Bank has attained a Tier I capital ratio of 8.54%. The medium term objective of the Bank
BUSINESS GROWTH
Deposits
Total Deposits of the Bank
registered a growth of 25.6%
to reach Rs. 2,34,651 crore as
at March 2010. In accordance
with the strategic focus, the
Bank's core deposits recorded
a growth of 32.3%, supported
by 19.3% growth in savings
deposits.
Unrelenting focus on augmenting of low cost resources yielded good results. The Bank’s
mega savings bank deposit campaign (Savings Utsav) resulted in an addition of Rs.8064
crore in savings deposits during FY10 as against Rs.6544 crore in FY09. The share of
CASA (current and savings bank deposits) deposits in domestic deposits stood at 29.85%.
With a CASA per branch at Rs. 22.4 crore, the Bank continues to be one of the best
among the peers. Pursuing a strategy of broad basing deposit clientele, all the branches
together added nearly 2.35 million deposit CA
260000
accounts, taking the total tally under
deposit accounts to 32.85 million.
210000
Advances (net)
The Bank's advances (net) witnessed a robust 22.5% growth in 2009-10 to reach Rs.
1,69,335 crore. In quantum terms, credit increased by over Rs.31000 crore. The Bank
stepped up credit to all productive segments of the economy like agriculture and Micro,
Small and Medium Enterprises (MSME), exposure to corporate and infrastructure
segments. The number of borrowal accounts, as at March 2010, rose to 4.49 million.
CAGR for
measured by business per employee, increased to Rs.9.83 crore from Rs.7.80
crore a year ago, continuing to be one of the best among the peers. With
several enterprise-wide initiatives and measures, the Bank added 2.54 million
450000
clientele during the year.
400000
HET’s INSTITUTE OF MANAGEMENT STUDIES HUBLI Page 72
Retail Lending Operations
Com
momentum during the year. While
disbursals under the retail lending
stood at Rs. 8653 crore, the
outstanding advances rose to Rs.
23902 crore, accounting for about
15% of the domestic credit.
O
Retail Trade 4451 5383 20.9
Other Personal (Including 7451 8403 12.8
Education Loan)
Per
3
HET’s INSTITUTE OF MANAGEMENT STUDIES HUBLI Page 73
The Bank took several measures during the year to expand retail credit, including special
packages for housing and auto loans. Under Canara Mobile loan, the Bank sanctioned
24,000 accounts, amounting to Rs. 803 crore. To facilitate speedy disposal of proposals
and credit flow, a total of 25 Centralized Processing Units (CPU)/ Retail Assets Hubs
(RAH) for housing and personal loans were functioning at major centres across the
country.
The Bank has already obtained approval from the RBI to open 10 branches/offices in
Johannesburg, Frankfurt, Muscat, Manama, QFC-Qatar, New York, Sao Paulo, Dar-er-
Salam, Tokyo and Sharjah, out of the 20 international financial centres identified for
global expansion in the medium term.
CAPITAL
The Bank's paid-up capital stood at Rs410 crore with 1.08 lack shareholders.
Capital to Risk Weighted Assets Ratio worked out to 1 3.50% vis-à-vis the 9%
benchmark.
During FY07, the Bank raised lower/upper Tier II capital worth Rs. 1975 crore
from the domestic market and US$250 million overseas by way of a medium term note
programmed.
The Bank's Capital Roadmap duly factors in the likely scenario in advances
movement and expected regulatory changes. The overarching objective has been to
maintain CRAR above 12% so as to support the buoyancy in credit deployment.
Reserves increased to Rs.9944 crore, additional accrual during the year being
Rs.3222 crore. Owned funds stood at Rs.8111 crore as compared to Rs.7132 crore at the
end of the previous year.
Gross profit for the year 2006-07 stood at Rs.2912 crore, while net profit was of
the order of Rs. 1421 crore.
SHAREHOLDERS'VALUE
Rs.197. 83 as at March 2007 compared to Rs. 171 .19 recorded for last financial,
Earnings per Share further rose from Rs.32.76 to Rs.34.65 for the year ended March 2007
NATIONAL PRIORITIES
Priority Sector Advances
As one of the leading players in the domestic banking industry, the Bank continues to
accord importance to varied goals under national priorities. The remarkable performance
during 2009-10 has further reinforced the Bank’s commitment to the large and growing
productive segments of the economy, including agriculture, small enterprises, education,
micro-credit, weaker sections, SC/STs and minorities.
The Bank has achieved stipulated mandatory targets under Total Priority, Total
Agriculture and Weaker Sections Advances with comfortable margin.
Priority Sector Advances of the Bank as at March 2010 increased by Rs.10547 crore to
reach Rs.59310 crore, recording a y-o-y growth of 21.6% covering 38 lakh borrowers.
Priority Sector Advances formed 43.92% of the Bank’s Adjusted Net Bank Credit
(ANBC), well above the 40% stipulated norm.
With a focus on credit delivery to agriculture, the Bank’s advances under agriculture
rose by Rs. 4907crore to reach Rs. 25051 crore, covering 29 lakh farmers. Agriculture
credit as a proportion of ANBC rose to 18.55%, surpassing the mandatory targeted level
of 18%. Advances to agriculture (direct) reached a level of Rs. 19069 crore, with a 23%
y-o-y growth and accounting for 14.12% of ANBC.
Under Kisan Credit Card Scheme, the Bank issued 3.02 lakh cards during the year with
credit coverage of Rs.2432 crore. As at March 2010, the cumulative number of Kisan
Credit Cards reached 30 lakhs, involving credit coverage of Rs.14507 crore.
3500
Educat
position among
nationalized banks in India. The Bank's advances under Education Loan Scheme
recorded a growth of 25.9% to reach Rs.2896 crore. The bank has financed more than
No. of S
1.71 lakh students as at March 2010. The Bank also extended financial assistance to other
priority sectors, such as, retail traders, housing and micro credit.
HET’s INSTITUTE OF MANAGEMENT STUDIES HUBLI Page 77
3000
During the year, the Bank actively participated in various Government Sponsored
Schemes, such as, PMRY, SGSY, SJSRY, SLRS and DRI. As at 31st March 2010, the
outstanding advances under these schemes aggregated to Rs.556 crore, involving 1.40
lakh beneficiaries.
During the year, the Bank has formed 44890 Self-Help Groups (SHGs), taking the
cumulative number of SHGs formed to 3.20 lakhs as at March 2010. With 50,701 SHGs
credit linked during the year, the cumulative tally under credit linking reached 2.75 lakhs
since inception.
The total exposure of the Bank under SHG finance rose to Rs. 926 crore, spreading over
97,498 SHGs.
Micro
reached Rs.31074 crore, with a y-o-y
growth of over 30%, far above the
mandatory y-o-y growth of 20%.
Considering the importance of MSME sector in the national economy, the Bank has
developed specific loan products to meet the diverse requirements of entrepreneurs in this
particular segment. Cluster based lending is adopted to cater to the units in industrial
clusters. Area/ cluster specific loan products have been introduced to meet specific
requirements.
35000
To enable the MSME sector to face the challenges of economic slowdown, the Bank
acted swiftly and rolled out a Special Package to provide relief to MSMEs during
December 2008. The special package continued during the year 2009-10 also. The
comprehensive package includes, among other facilities, additional/adhoc working
capital, extended tenability for receivables, concession in interest and debt restructuring.
30000
MSME Care Centers were established across the country to resolve the grievances of
MSMEs.
During the year, the Bank has launched "SME SULABH", a new business model for
speedy credit delivery to MSME Sector. The SME Sulabhs are independent centralized
loan processing centres aimed at fast processing/quick delivery of credit to MSMEs.
1860
25000
They are equipped with specialized marketing, credit appraisal and monitoring teams. 15
SME Sulabhs have been established at Agra, Ahmedabad, Bangalore, Chandigarh,
Rural Development
The Bank, through its Canara Bank Centenary Rural Development Trust, has established
exclusive training institutes to promote entrepreneurship development among rural youth
and encourage them taking up self-employment activities. During the year, 9 new training
institutes were opened at Aligarh and Etah districts in Uttar Pradesh, Sheikhpura district
in Bihar, Calicut and Palakkad districts in Kerala, Nilgiris, Erode, Theni and Dindigul in
Tamil Nadu enhancing the number of such training institutes to 26. These institutes have
so far trained 94935 unemployed youth, comprising 60% women with an impressive
settlement rate of 70%. The Trust is also supporting the activities of Society for
Educational and Economic Development (SEED), a voluntary organization based in
Sriperambadur, Tamil Nadu, working for the welfare of the socially marginalized
children.
The Bank has co-sponsored 23 Rural Development and Self Employment Training
Institutes (RUDSETIs) engaged in training of rural youth for taking up self-employment
programmes. 23 RUDSETIs have trained more than 2,38,000 unemployed youth, with a
settlement rate of 70%.
Canara Bank's Rural Clinic Service Scheme provides basic health care services in
remote areas lacking basic medical infrastructure facilities. Under the Scheme, the Bank
encourages doctors to set up clinics in identified rural areas. As at March 2010, the total
number of such clinics rose to 518. The Bank under 'Jalayoga', a scheme to provide safe
drinking water, has so far implemented 35 projects in its lead districts.
The Bank donated a hi-tech, custom built, solar powered 'Mobile Sales Van' to assist
women entrepreneurs, SHGs and artisans to market their products.
The year was significant for the Bank in expanding domestic operations across the
country. Befitting its 104th year of existence, the Bank on its Founder’s Day i.e., 19th
November, 2009, opened 104 branches across the country, inaugurated by Hon’ble
Finance Minister Shri Pranab Mukherjee. The Bank opened 314 branches during the year,
taking the total tally under the branch network to 3046 branches.
Composition of domestic branch network
No. of Branches
31.03.200 31.03.2010
Category 9
Metropolitan 629 727
Urban 674 744
Semi-urban 691 793
Rural 735 779
Total Branches 2729 3043
• Bank targets a global business level of Rs.2, 90, 000 crore for 2007-08, with a
growth rate of over 20%, comprising Rs. I,70,000 crore under deposits and
Rs.I,20,000 crore under advances. Advances growth will be significantly driven
by agriculture, SME, infrastructure and other productive segments, including
services sector.
• Towards faster implementation of Core Banking Solution (CBS), the Bank targets
to cover all the branches under CBS by March 2008.
• The Bank has taken up a major brand building exercise and comprehensive
review of its business strategies covering products, processes, people and its
organization structure.
• In pursuit of the Bank's global aspirations, 21 prominent centers have been
identified by the Bank for expanding its global reach. With the preliminary moves
underway, the Bank's Representative Office at Shanghai is being converted into a
full fledged branch.
• After creation of JVs in Insurance and Asset Management, the Bank is exploring
similar options in other financial services.
• The Bank is geared up to comply with the revised guidelines issued under priority
sector lending.
• Under HR, Assessment Development Centre concept will be implemented to map
training competence and upgrade manpower skill. Plans are underway to
introduce 'Internship' programmed to assist students pursuing professional course.
Financial statements and reports are the tools which provide information of the
firms financial affairs. This information is required for financial analysis & decision
making. It assesses the financial status of organization which is prepared with help of
accounting principle.
Financial statement has mainly as follow:
Balance sheet
Profit & loss account
It gives a concise summary of the firm’s revenue and expenses during the
particular period.
It measures the firm’s profitability.
It represents the activity of the firm.
Ratio Analysis:-
Ratios are classified into four parts like:-
1. Liquidity ratios
2. Activity ratios
3. leverage ratios
4. profitability ratios
Mar '06 Mar '07 Mar '08 Mar '09 Mar '10
12 mths 12 mths 12 mths 12 mths 12 mths
Capital and Liabilities:
Assets
Cash & Balances with RBI 7,914.00 9,095.19 13,364.79 10,036.79 15,719.46
Balance with Banks, Money at Call 4,909.56 7,278.74 4,513.25 6,622.99 3,933.75
Advances 79,425.70 98,505.69 107,238.04 138,219.40 169,334.63
Investments 36,974.18 45,225.54 49,811.57 57,776.90 69,676.95
Gross Block 1,718.60 4,056.39 4,254.33 4,440.07 4,480.37
Accumulated Depreciation 1,030.13 1,195.04 1,337.46 1,510.61 1,620.99
Net Block 688.47 2,861.35 2,916.87 2,929.46 2,859.38
Capital Work In Progress 0.00 0.00 0.00 0.00 0.00
Other Assets 2,909.95 2,994.53 2,684.17 4,060.26 3,216.92
Total Assets 132,821.86 165,961.04 180,528.69 219,645.80 264,741.09
Income
Interest Earned 8,711.51 11,364.56 14,200.74 17,119.05 18,751.96
Other Income 1,377.51 1,511.80 2,308.31 2,427.10 3,000.82
Total Income 10,089.02 12,876.36 16,509.05 19,546.15 21,752.78
Expenditure
Interest expended 5,130.01 7,337.73 10,662.94 12,401.25 13,071.43
Employee Cost 1,515.30 1,609.29 1,661.28 1,877.15 2,193.70
Selling and Admin Expenses 1,061.42 957.77 1,491.09 1,540.27 2,164.65
Depreciation 145.03 148.18 169.97 173.64 155.13
Miscellaneous Expenses 894.05 1,402.58 958.76 1,481.42 1,146.44
Preoperative Exp Capitalised 0.00 0.00 0.00 0.00 0.00
Operating Expenses 2,982.32 3,023.26 3,666.30 3,965.24 4,903.79
Provisions & Contingencies 633.48 1,094.56 614.80 1,107.24 756.13
Total Expenses 8,745.81 11,455.55 14,944.04 17,473.73 18,731.35
Mar '06 Mar '07 Mar '08 Mar '09 Mar '10
Net Profit for the Year 1,343.22 1,420.81 1,565.01 2,072.42 3,021.43
Extraordionary Items 0.00 0.00 0.00 0.00 0.00
Profit brought forward 0.00 0.00 0.00 0.00 0.00
Total 1,343.22 1,420.81 1,565.01 2,072.42 3,021.43
Preference Dividend 0.00 0.00 0.00 0.00 0.00
Equity Dividend 270.60 287.00 328.00 328.00 410.00
Corporate Dividend Tax 38.00 48.78 56.00 55.75 70.00
Per share data (annualised)
Earning Per Share (Rs) 32.76 34.65 38.17 50.55 73.69
Equity Dividend (%) 66.00 70.00 80.00 80.00 100.00
Book Value (Rs) 171.19 197.83 202.33 244.87 305.83
Appropriations
Transfer to Statutory Reserves -867.12 362.21 802.00 1,508.64 1,676.35
Transfer to Other Reserves 1,901.74 722.82 379.01 180.03 865.08
Proposed Dividend/Transfer to Govt 308.60 335.78 384.00 383.75 480.00
Balance c/f to Balance Sheet 0.00 0.00 0.00 0.00 0.00
Total 1,343.22 1,420.81 1,565.01 2,072.42 3,021.43
suggestion
3 The banks will have to exercise due care in maintaining the portfolio of risk assets
in order not to increase unduly the required regulatory capitalization level. This may in
turn in duce conservatism in the bank in taking of risky portfolio of advances, a danger
they have to guard against. It will indeed be a delicate balancing task.