Index

Chapter 1 Rationale for the study

Chapter 2 Objective of the study
Title of the project
Objective of the study
Scope of the study
Chapter 3 Profile of the company
Chapter 4 Theoretical Perceptive
Chapter 5 Research Methodology
Research Design
Data collection methods sources
Sampling plan !hich should include sampling unit"
sampling si#e and sampling methods via $uestionnaire
methods" intervie! methods" observations etc
Chapter 6 Data analysis and interpretations using various charts and
graphs
Chapter 7 %indings
Chapter 8 &imitations if any
Chapter 9 'xpected contribution from the study


RATIONALE FOR THE STUDY

(redit ris) is defined as the possibility of losses associated !ith diminution in the credit
of $uality of borro!ers or counter parties* In a ban)s portfolio" losses stem from outright

default due to inability or un!illingness of a customer or counter party to meet
commitments in relation to lending" trading" settlement and other financial transactions*
+s credit ris) is one of the challenging tas)s to ban)s I have selected this topic for
my study in order to )no! the various types of ris) and the types of strategies the ban)s
use to mitigate the ris)*
+s part of its vision of using technology to provide affordable ban)ing services to
the vast rural population of India" (anara ban) has extend the performance and cost
benefits of enterprises &inux to its customers* ,ith a moderni#ed branch infrastructure"
(anara ban) hopes to serve customers in a timely and efficient manner" reinforcing its
image of being a customer savvy ban)
About the Canara Bank:
%ounded in -./0" (anara 1an) is one of the premier ban)s in India" !ith a net
!or) of 2345 branches across the country* The ban) !as the first t!o launch net!or)ed
+TMs in India and obtain and ISO certification* (anara ban) has also achieved the

distinction of being the country6s highest net profit earner among nationali#ed ban)s for
the year march 2//4*
The ban) has already carved a niche in providing IT7based services such as
net!or)ed +TMs" any!here ban)ing" Teleban)ing" Remote access Terminals" Internet
and Mobile ban)ing" Debit cards" etc* (anara ban) a vision to help improve the economic
condition of the common people of India by inculcating the habit of savings in rural areas
+s part of its vision of using technology to provide affordable ban)ing services to
the vast rural population of India" (anara ban) has extend the performance and cost
benefits of enterprises &inux to its customers* ,ith a moderni#ed branch infrastructure"
(anara ban) hopes to serve customers in a timely and efficient manner" reinforcing its
image of being a customer savvy ban)

Title of the project
Objective of the study
Scope of the study
Title of the Project
~Credit risk Management at Canara Bank

Objective of the Study:
-* To )no! the methods to be implemented in ban)s*
2* To )no! the various methods used by ban) to mitigate credit ris)*
8* To )no! the various types of credit ris) in ban)*
9* To )no! the executing methods used in managing credit ris)*
Scope of the Study:
:eographical Scope ; The geographical scope of the study is limited to the boundary of
,hitefield Mas)i city by :overnment of <arnata)a*
Theoretical Scope 7 The theoretical scope of the study is limited to analy#ing the
dynamics of corporate salary accounts from the customer6s perspective in 1ranch Mas)i


COMPANY PROFILE
%ounded in -./0" (anara 1an) is one of the premier ban)s in India" !ith a net
!or) of 2345 branches across the country* The ban) !as the first t!o launch net!or)ed
+TMs in India and obtain and ISO certification* (anara ban) has also achieved the
distinction of being the country6s highest net profit earner among nationali#ed ban)s for
the year march 2//4*
The ban) has already carved a niche in providing IT7based services such as
net!or)ed +TMs" any!here ban)ing" Teleban)ing" Remote access Terminals" Internet
and Mobile ban)ing" Debit cards" etc* (anara ban) a vision to help improve the economic
condition of the common people of India by inculcating the habit of savings in rural
areas*
+s part of its vision of using technology to provide affordable ban)ing services to
the vast rural population of India" (anara ban) has extend the performance and cost
benefits of enterprises &inux to its customers* ,ith a moderni#ed branch infrastructure"
(anara ban) hopes to serve customers in a timely and efficient manner" reinforcing its
image of being a customer savvy ban)
Genesis
%ounded as =(anara 1an) >indu Permanent %und= in -./0" by late" Mr*
+mmembal Subba Rao Pai" a philanthropist" this small seed blossomed into a limited
company as =(anara 1an) &td*= in -.-/ and became (anara 1an) in -.0. after
nationali#ation*
==+ good ban) is not only the financial heart of the community" but also one !ith
an* obligation of helping in every possible manner to improve the economic conditions of
the common people?

Canara Bank Founding Principles
-* To remove Superstition and ignorance*
2* To spread education among all to sub 7serve the first principle*
8* To inculcate the habit of thrift and savings*
9* To transform the financial institution not only as the financial heart of the
community but the social heart as !ell*
3* To assist the needy*
0* To !or) !ith sense of service and dedication*
4* To develop a concern for fello! human being and sensitivity to the surroundings
!ith a vie! to ma)e changesremove hardships and sufferings*
Sound founding principles" enlightened leadership" uni$ue !or) culture and
remar)able adaptability to changing ban)ing environment have enabled (anara 1an)
to be a frontline ban)ing institution of global standards*
+s (anara ban) founded in -./0" (anara 1an) is one of the premier ban)s in India"
!ith a net!or) of 2345 branches across the country* The ban) !as the first to launch
net!or)ed +TMs in India and obtain an ISO (ertification* (anara 1an) has also achieved
the distinction of being the country=s highest net profit earner among nationali#ed ban)s
for the year March 2//4*
The ban) has already carved a niche in providing IT 7based services such as
@et!or)ed +TMs" +ny!here 1an)ing" Tele7ban)ing" Remote +ccess Tensional" Internet
A Mobile 1an)ing" Debit (ards" etc* (anara 1an) has a vision to help improve the
economic condition of the common people of India by inculcating the habit of savings in
rural areas*

Challenges
(anara =1an) achieved -//B computeri#ation very early in the course of its
operational history* It deployed a number of ban) automation tools such as a customi#ed
Total 1ranch +utomation CT1+D pac)age called Integrated 1ranch 1an)ing Soft!are
C-51SD" !hich !as developed by its subsidiary" (an 1an) (omputer Services &td*
C((S&D* I11S !as deployed on @ovell @et,are at close to -9// medium si#ed branches
across the country*
(anara 1an) follo!s a detailed tendering process for ne! hard!are purchases" in
!hich contracts are a!arded on the basis of bids* +fter nearly a decade of deploying
I11S" the ban) had purchased different types of hard!are from multiple vendors* +s a
result" standardi#ation on @ovell @et,are became difficult" and supporting the legacy
I11S application became a challenging tas)*
Moreover" I11S !as developed using Micro focus (O1O& and designed to run
in a -0 bit DOS environment* ,ith poor support for the T(PIP protocol stac)" the
@et,are servers running I11S could not be integrated into the corporate net!or) easily*
'ssentially" the @et,are servers functioned as branch file servers" !ithout any
data connectivity* Regular maintenance of different versions of I11S across -9//
branches !as a painsta)ing effort in the absence of net!or) support* Patching"
troubleshooting and version upgrades had to be conducted onsite* 1ranches in rural and
remote areas !ere particularly difficult to access and re$uired support personnel to travel
fre$uently* +lso" the availability of certified hard!are on @et,are !as limited" !hich
made adding ne! machines difficult*
+s (anara 1an)=s customer base expanded" its ban)ing services began to scale"
creating an immediate need for Internet 1an)ing" +ny!here 1an)ing Cban)ing from any
(an 1an) branch across the countryD and an expanded +TM net!or)* @ovell @et,are=s
closed legacy environment did not allo! room to accommodate these ne! technologies*
(anara 1an) had to purchase additional machines running Microsoft ,indo!s to

interface !ith these ne! technologies" !hich !as extremely inefficient from a hard!are
utili#ation standpoint* @e! hard!are and Microsoft ,indo!s licenses strained budgets
and made ne! technology projects difficult to scale and sustain*
,hen additional branches !ere added to the ban)=s net!or)" procuring ne!
servers that !ere certified to run on @et,are !as difficult" as I>Es had ceased to provide
support for older versions of the as* Micro %ocus had also ceased support for the (O1O&
version on !hich the I11S pac)age had been developed* + combination of all these
factors made migration attractive*
Migrating the -9// odd legacy @et,are servers posed another challengeF (anara
1an) !anted to s!itch platforms but not hard!are* Deploying the latest as available"
!ithout going into a hard!are refresh cycle that !ould cost millions of rupees !as a
challenging tas)* The ban) had amassed about a do#en different types of machines after a
decade of deploying I11S* This heterogeneous mix of hard!are that spanned across
more than-"/// server -/"///destopsmadethe project very complex* (anara 1an) began
to loo) for a platform that could deliver the latest innovation along !ith complete hard!are
freedom*
Future plan
Moving from the legacy @et,are platform to Red >at 'nterprise &inux has
opened up significant opportunities for (anara 1an)* ,ith net!or)ing support no!
available" (anara 1an) is planning to deploy Red >at @et!or) Satellite to send updates
for both I11S as !ell as the operating system to all distributed machines across the
country* 'nterprise &inux has also made Remote Management and health monitoring of
remote servers possible*
,ith the tremendous benefit6s provided by 'nterprise &inux" (anara 1an) plans
to move its +ny!here 1an)ing and Internet 1an)ing Ii steners to the 'nterprise &inux
platform* 'nterprise &inux has provided (anara 1an) !ith the freedom and choice to
develop a scalable gro!th plan" !hich !as not possible under @et,are=s closed legacy

environment*
The po!er of &inux is not restricted by hard!are limitations" as it can run on
different )inds of architectures* (anara 1an) has managed to save crores of rupees in
ne! hard!are ac$uisition costs" by using a light!eight customi#ed &inux distribution on
its existing hard!are
The Bank Today
(anara 1an) is one of the premier ban)s in the country" accredited !ith umpteen
distinctions* The present stature of the 1an) is due to its strong fundamentals and $uality
customer orientations* Profit ma)ing since inception" the 1an) today ep itomi#es a
perfect blend of commercial and social ban)ing*
%or the year March 2//4" the 1an) cloc)ed the highest net profit C RS*---/ croreD
among nationali#ed ban)s" !ith significant improvement in capital ade$uacy ratio
C-8*3/BD and asset $uality Cnet @P+ ratio of /*.9BD*
The 1an) has already carved a niche in providing IT 7based services* ,ith -//B
computeri#ation of the branches" the ban) provides a !ide array of services" such as"
@et!or)ed +TMs" +ny!here 1an)ing" Teleban)ing" Remote +ccess Terminal also
Internet A Mobile 1an)ing" Debit (ard etc* The 1an) !as the first among ban)s to
launch net!or)ed +TMs and obtain ISO (ertification*
(ommercial consideration has" no !ay" diluted the 1an)=s role in national
priorities* (anara 1an) is in fact the first ban) to be conferred %I((l a!ard for
contribution to rural development*

CANARA BANK SERVICES
Anywhere Banking:

+ny!here 1an)ing is a technology7based" customer7friendly service designed to
provide greater convenience to our customers* ,ith +ny!here 1an)ing facility"once
customer has an account !ith any of the select branches" (ustomer can operate it
%rom any other designated branch across 53 cities*
FACILITIES:
Individuals I joint account holders Coperated severallyD maintaining (urrent I 35 I OD
+ccountsF
I* ,ithdra!al of cash
2* Remittance of cash
8* Transfer of funds
9* 1alance en$uiry
3* Issue of mini statement
0* Depositing local che$ues for collection
4* Purchase of Demand draft
Firmsl Companies I Other Bodies maintaining Current I OD I OCC Accounts:
-* Transfer of funds bet!een accountsG from one +ny!here 1an)ing branch to
another any!here ban)ing branch*
2* Depositing of local chec)s for collection and crediting to the respective account
at any +ny!here 1an)ing branch*
ELIGIBILITY:
+ccount holders should have maintained a minimum average balance of
Rs*3"OOO 7 in S1 account and Rs*I /"/// 7 In (urrent account in the last six
months
FEATURES:
-* (ash !ithdra!al up to Rs*3/" OOO 7 per occasion
2* Transactions permitted on production of identity card issued exclusively for

ANYWHERE BANKING FACILITY
8* %acilities of both intra7city and inter7city transactions*
9* >OM' (&'+RI@: 7 on line debit of chec)s dra!n on our o!n + ,1 branches
!ithin the city clearing #one*
Tele services
+ccess information about your account right from your home" office or from
any!here over telephone" a round the cloc) teller ans!ering the en$uiries from any!here
presenting voice information at any time
You can make the following enquiries/requests over telephone:
1alance in the account including clear balance* &ast five transactions in the
account*
Re$uest for chec) boo)* Re$uest for pass sheet*
(hange in pass !ord* %ax on demand*
Note: The facility is pass!ord protected to ensure secrecy* +s) your 1ranch Manager
for details and enroll today itself the service =is absolutely lice of cost
Personal Banking:
Deposits
Savings 1an) +ccount
(urrent +ccount
Term Deposits
7 %ixed Deposits
7 <amadhenu Deposits
7 Recurring Deposits

7 (an flexi Deposits
Loans & Advances
Retail Loan Products
7 >ome Improvement &oan
; (an cash
7 (an mobile
7 (an budget
7 Teachers &oan
Card Services
Insurance
NRI
7 @R' C@on Resident 'xternal Rupee +ccountD
7 @RO C@on Resident Ordinary +ccountD
7 %(@R C%oreign (urrency @on Resident +ccounts 71an)sD 7 R%( Deposits
Loans & Advances
7 >ousing &oan
7 >ome Improvement
7 (an carry C(onsumer DurablesD
7 (an cash CSharesD
7 (an mobileCvehicleD

General Facilities
7Safe (ustody Services
7Safe Deposits &oc)er
7@omination facility
Other Services%acilities
7@ R I 1ranches
7@ R I Services
7Remittance %acility
7%acilities %or Returning Indians
Rural %inancing
7+griculture A Rural (redit
7<isan (redit
7&oans for setting up +gri (linic
7Minor Irrigation &oans
7%arm Machinery &oans
7%arm Development &oans
7Eehicle &oan for +griculturists
7&oans for Plantation (rops

VIDYASAGAR (EDUCATIONAL LOAN)
7 >ousing &oan
7 &oans to SSIs
7 (harter for SSIs
7 Other Priority Sector &oans
7 :overnment Sponsored Schemes
7 &ead 1an) +ctivities
7 +gricultural (onsultancy Services
Social Banking
7 Rural Development Schemes
7 (1HRDT Institutes
7 ,omen Development
7 Social 1an)ing
7 (ommunity (oncerns 7 RIDS'TIs
International Banking Services
(anara 1an) entered fore arena in -.38 !ith the opening of its first %oreign
'xchange Department in Mumbai
Today (anara 1an) the 9th largest 1an) in India catering to the cross border trade
A remittances and financing of foreign trade*

,e finance exports at pre7shipment stage as !ell as post shipment stage" !hich
can be availed either in foreign currency or Indian Rupee s*
In addition !e facilitate for fainting* That is" discounting of deferred export
receivables on =!ithout recourse basis= from an overseas forfeiting agency*
The 1an) has been the pioneer in financing of &( based International Trade
transactions in India*
The 1an) not only finance at customers option in foreign currency at pre
7shipment and post7 shipment stages at &I1 OR related rates but also finance the import
leg in foreign currency !here imported inputs are re$uired for exp/l-s*
The 1an) has the expertise in handling project exports of goods and services*
The 1an) has an excellent !orld!ide correspondent relationship and have the
capability to handle any export" import" remittance and related transactions any!here in
the !orld and in any currency*
@on fund based transactions li)e adding confirmations to &(" issuing in!ard and
out!ard 1id bonds A guarantees" establishing &(s for import into India" arranging
buyer=s credit at attractive terms etc* are our forte* (anara 1an) has a branch in &ondon
and holly o!ned subside in >ong <ong* ,e have a joint venture !ith S1I at Mosco!
under the name (ommercial 1an) of India &&(* ,e have recently opened a
Representative Office at Shanghai" People Republic of china* They are engaged in Trade
finance and have expertise on the Indian mar)et scenario* The 1an) also manages 2
'xchange houses in the :ulf and arrangement !ith 2/ 'xchange >ouses and -5 1an)s
for dra!ing on DD6s from :ulf (ountries on our select branches thought out India*
The 1an) has 3 fore dealing rooms located in Mumbai" @e! Delhi" (alcutta"
(hennai and 1angalore in India* ,e provide a !hole range of services and products li)e

purchases and sale of 4 !orld currencies for!ard boo)ing and other fore hedging
instrument li)e currency s!aps*
SUBSIDIARIES OF CANARA BANK & CAN FIN HOMES LIMITED:
(an %in >omes &imited !as established on 2.*-/*-.54 as a Sponsored 'ntity of
the 1angle some of the premier financial institutions such as >D%(" ITI and @>1 are
the co7promoters of the (ompany*
(anara 1an) holds 2.*8/B of e$uity in the (ompany*
Sri < Een)ataramayya" :eneral Manager of the 1an) IS Managing Director of the
(ompany*
+part from the Managing Director" the 1oard of Directors is complied of top
'xecutives of the 1an)" institutional nominees of >D%(" ITI and @>1 and also
professionals in the field of accountsfinance1an)ing*
The Registered Office of the (ompany is at @o* 2." Sir M @ <rishna Rao Par)
Road" 1asavanagudi" 1angalore 30/ //9*
The (ompany has 41 branches and 3 Representative Office spread across the country*
Activities:
The prime objective and activity of the (ompany is to provide Ion g term finance
to individuals for construction or purchase of residential housesflats and to
(ompanies or (orporations or Societies or +ssociations for the purpose of
construction or purchase of residential houses flats

Over the years" the company has added ne! products to their range and value
addition is done to the existing products to )eep updated !ith the changing
mar)et scenario and the competition" !hich is getting tougher !ith each passing
day* Personal loans to the existing borro!ers" loans for purchase of sites"
insurance cover for loaners" etc*" are some examples of innovationvalue addition*
1an)=s good!ill" the innate strength of the (ompany approach and an unflinching
business acumen have al!ays )ept the business on an envious platform ma)ing
good profits and paying rich dividends and their pragmatic ever since inspection*
The (ompany also too) a major step in diversification by launching three @on7
housing %inance Products namely Premises &oan for practicing professionals
CEentureD" Mortgages &oans C@et !orthD and &oan against rent receivables C@on7
cashD
CANARA BANK FACTORS LIMITED:
Post Sale funds crunch is proving a handicap for many industries and business in
the smooth cycling of capital* (anara 1an) %actors &imited C(%&D !as established in
-/*/3*-..- to mitigate this problem of the industry and business and ensure a smooth
flo! of capital in the entire cycle*
This (ompany is promoted by our 1an) along !ith +ndhra 1an) and SID1J* The
Registered office is at @o* -4" Seshadri Road" 1angalore 30 / //.*
The (ompany is no! being headed by Sri : R Seshadri as Managing Director a
senior executive in the cadre of Deputy :eneral Manager deputed from the 1an)*
The 1oard of the (ompany consists of (hairman A Managing Director"
'xecutive Director and a :eneral Manager of the 1an)" apart from the Managing
Director* SID1I and +ndhra 1an) have appointed their nominees* There are 8 non7
official Directors from the profession of auditaccounts 1an)ing%inance*

>as a net!or) of 5 branches in southern and !e stem part of the courtly and
proposes to add some more during the next financial year*
Activity:
Factoring Services.
KK To cater to the needs of the clientele" (ompany has al!ays on the loo) out for
innovative and competitive products* Introduction LDf variants of fact ling such as
International %actoring'xport %actoring and Sub 7variants such as Invoice Discounting
bac)ed by &(s>undisffripartite +greement=s are examples of their consistent 'ndeavour
to designredesign their products*
CRISIL has given the following RATING to the Company:
?P>? 7 indicating highest safety for short term debt program allover (ommercial
Papers ?%++M? 7 indicating higher safety for Public Deposits
?++? 7 indicating higher safety for non7convertible debentures
>as developed a !ell designed ?Management Information System? CMISD
Prudential norms prescribed by R1I are strictly complied !ith*
>as developed in house ?Internal Ris) 'valuation System? CIR'SD
>as attained @il @et @P+ position for 9 consecutive years 2// 27/8" 2//87/9" 2//9 7/3
and 2//37/0
The (ompany is accredited !ith an ISO (ertificate 7?DI@ '@ ISO .//-F2///? by TIE
('RT (ertification body of :ermany*
Operations are fully computeri#ed from Day one*

CANBANK VENTURE CAPITAL FUND LIMITED:
In our economic environment" assistance for establishment of ne! ventures in the
field of industry is not easily forthcoming* To assist the ne! ventures" our 1an) had
formed a Eenture (apital %und in the year -.5.* The %und is managed by (anara ban)
Eenture (apital %und &td" a !holly o!ned Subsidiary of (anara 1an)*
This is the only (ompany of its )ind sponsored by a Public Sector 1an) in the
country* Sri 1 Sudha)ar Shetty" +sst :eneral Manager of the 1an) is heading the
(ompany as Managing Director*
+part from the Managing Director" the (ompany=s 1oard of Directors consists of
our (hairman A Managing Director" 'xecutive Director and a :eneral Manager of the
1angle There are t!o non7official Directors" each dra!n from the field of industry and
%inance* The Registered Office is at @o* -9" @aveen (omplex" 9th %loor" M : Road"
1angalore 30///-*
Activity:
Trustee and Manager of (anara ban) Eenture (apital %und
CANBANK COMPUTER SERVICES LIMITED:
,ith fast increasing impetus Nn information technology and extensive use of
computers in more and more spheres" the 1an) found good opportunity for establishment
of a (ompany !hich can develop soft!are6s and provide consultancy services to
computer users* This thought of the 1an) culminated in the establishment of ((S& on
-8*/5 *-..9* The (ompany is co7promoted by 2 other Public Sector 1an)s and 8 Private
Sector 1an)s* (anara 1an) is holding 02*.4B of the e$uity of the (ompany*
The Registered Office is situated at @o* -9" @aveen (omplex" 4 the %loor" M :

Road" 1angalore 30/ //-* 1 Sivaraman" Deputy :eneral Manager of the 1an) is heading
the (ompany as Managing Director of the (ompany*
+part from the Managing Director" the 1oard of Directors consists of our
(hairman A Managing Director and 'xecutive Director* There is one Director each from
1an) of 1aroda" &a)shmi Eilas 1an)" I@: Eysya 1an) &imited and Eijay 1an) on the
1oard
Activities:
((S& designs and develops soft!are for ban)s" financial institutions and
:overnment Departments" !ith its extensive in7house infra7structure and proven
technical expertise* +ll its products and Projects are !ell documented and user 7friendly"
!ith on7line help" data encryption and audit features*
CCSL offers services in the following areas:
-* Soft!are development
2* 1usiness Process Outsourcing
8* Training
9* Data !arehousing Solution
3* ,eb based solution
0* Information Systems +udit
4* (onsultancy Service
GILT SUCURITIES TRADING CORPORATION LIMITED
K This is the latest of the Subsidiaries of (anara 1an) so far* 'stablished
on/0*/0*-..0 and co7promoted by (orporation 1an) and 1an) of 1aroda" is a
Primary Dealer Subsidiary accredited by R1I* (ompany is a !holly O!ned
Subsidiary of (anara 1an) since September 2//9*

The Registered Office is at -7-" <alahari heritage" Mani)in ,ada 1uilding" -24"
M : Road" %oi T" Mumbai 9// /28*
Presently" the (ompany is under the ste!ardship of Sri D : <amath as Managing
Director !ho is a Deputy :eneral Manager of the 1an) on second mint to the
(ompany*
The 1oard of the (ompany consists of our (hairmanA Man aging Director"
'xecutive Director" 2 :eneral Managers of the 1an) and 2 (hartered +ccountants
and a former 1an)er*
Activity:
Primary Dealer accredited by R1I for dealing III :overnment of India Dated
Securities and Treasury 1ills*
Strengthening Infrastructure in the :overnment Securities C: SecD Mar)et so as to
ma)e it vibrant" li$uid and broad based*
Development of Inder!riting and Mar)et Ma)ing capabilities*
Improving Secondary Mar)et Trading System*
,ith the mentioned objectives" :ST(& participates actively both III Security and Money
Mar)et*
Reserve 1an) of India" being the Regulator of Primary Dealers" sets certain goals
in tons of 1idding (ommitments and Success Ratio in the Primary auction of :
Sec and T 1ills" to be accomplished by them !hich form the basis for rene!al of
PD=s license* :ST(& has the distinction of achieving these benchmar)s
consistently since inception* Inder!riting of : Sec in the auction is yet another
obligation cast on PDs*
1ond yields being the function of interest rate" the (ompany=s asset portfolio is
subject to mar)et vagaries caused by factors li)e inflation" li$uidity" government
borro!ing programmed" coupon" maturities of papers issued and also event base
ris)s* In order to manage and mitigate these ris)s the (ompany has !ell defined

and board approved investment policy so also Ris) Management Policy*
+s typical of a trader" the (ompany is encasing price volatility to earn profits*
Day7to7day operations are largely supported by (all and Repo 1orro! !ings*
Thus efficient funds management holds )ey to improving profitability*
The (ompany is also into retailing : Sec to individual investors P% staffs
(haritable Institutions through 29 designated branches of the parent" (anara
1an)* +nd also has put in place arrangements for retailing through Stoc)
'xchanges*
CANBANK INVESTMENT MANAGEMENT SERVICES LIMITED
1an) had established its Mutual %und arm ?(anara ban) Mutual %und? on
-.*-2*-.54 for foraying into the (apital Mar)et* (M% is an independent Trust
governed by a 1oard of Trustees"
,hen the R1I issued directives to form +sset Management (ompanies to manage
the assets of Mutual %unds and such other Trusts" (anara ban) Investment Management
Services &imited !as established by the 1an) on /2*/8*-..8 as a ,holly O!ned
Subsidiary of the 1an)"
Sri @ R Rarnanujam" Deputy :eneral Manager of the 1an) is at the helm of the
(ompany as Managing Director* T!o :eneral Managers of the 1an) is also on the
1oard* There are four non7official Directors on the 1oard dra!n from various fields
connected to finance"
CANBANK FINANCIAL SERVICES LIMITED:
This is the first Subsidiary emerging from the stable of (anara 1an)* 'stablished on
/-*/0*-.54 as a ,holly O!ned Subsidiary of the 1an)" cantina !as very $uic) to carve a
niche for itself in the Merchant 1an)ing arena as a premier institution providing a host of
financial services under one roof.

Registered Office of the (ompany is housed at @o* -9" @aveen (omplex" 0 th %loor" M :
Road" 1angalore 30/ //-* Sri M* S* Prabhu" Divisional Manager of the 1an) is
heading the (ompany 'xecutive Director* +part from the 'xecutive Director" the 1oard
of Director consist of t!o :eneral Managers of the 1an) and a (hartered +ccountant
!ho is GG non 7official @ominee as (hairman*
Activities:
+ctivities of (antina !ere curtailed post security scam of -..2* (antina is
presently attending to matters li)e collection of lease rentals and reali#ations of
investments*
DETAILS OF SECTIONS/DIVISIONS/DEPARTMENTS COMINC UNDER
EACH FUNCTIONAL WIN G OF HEAD OFFICE
PERSON N EL WING:
I* Personnel Management Section**
2* Industrial Relations Section*
8* >uman Resources and Organisation Development Section*
9* >ead Office Staff +dministration Section*
3* >ouse Maga#ine and &ibrary Section*
0* Official &anguage Section*
4* Staff Training (ollege
5* Recruitment (ell*
.* S(ST (ell*

CORPORATE CREDIT WING
-* :eneral (redit Sanctions7I Section*
2* :eneral (redit Sanctions7II Section
8* 'xport Import (redit and Development Section*
9* Project %inance Department
3* Technology Ip gradation %und Scheme (ell*
RISK MANAGEMENT WING'
-* (redit Policy Section*
2* Industrial +dvisory Division*
8* Operational Ris) Management :roup*
9* (redit Statistics Section*
3* (redit Revie! +nd Monitoring Section*
0* Integrated Mid Office*
PRIORITY CREDIT WING
-* Priority (redit Section*
2* +gricultural (onsultancy Services*
8* Small Scale Industries Division*

9* Regional Rural 1an)s Division*
3* Rural Development Section* 0* Social 1an)ing (ell*

PLANNING AND DEVELOPMENT WING
-* Development Section*
2* 'conomic Research Section*
8* Management Information and Planning Section*
9* (ustomer Service Section*
3* Publicity and Public Relations Section*
0* (orporate Merchant 1an)ing Division*
4* Mar)eting" Research A Product Development Section*
5* (orporate (ash Management Services*
RECOVERY WING
-* Recoveries Section*
2* @P + Management Section*
8* &egal Section*
9* Sic) Industries and Rehabilitation Section*

FINANCIAL AND GENERAL ADMINISTRATION WING:
a) General Administration Department -
-* %urniture and 1ills Section*
2* Premises" Policy and +dministration Section*
8* Technical (ell*
9* Records and Tappal Section*
3* Premises and 'state Section*
0 Printing Section*
4 Stationery Section*
5 (entral Security (ell*
. 'state Policy and (ontrol Section*
b) Accounts and Taxation Department -
-* 1alance Sheet and (entral +ccounts Section*
2* Staff Provident %und*
8* Staff ,elfare %und*
9* Pension %und*
3* :overnment +ccounts Section*
0* 'xecutor" Trustee and Taxation Section*
4* I1+ Reconciliation Section*
5* DD Reconciliation Section*
.* +TM and Debit (ard Reconciliation Section*
TREASURY AND INTERNATIONAL OPERATIONS WING'
-* Treasury and Investment Division*
2* Overseas 1an)ing Division*

RETAIL BANKING AND SUBSIDIARIES WING'
a) Can card Division
b) Retail Banking Division
-* Retail 1an)ing Division*
2* 1an) assurance Section*
8* (ross Selling of Mutual %und Products Section*
c) Subsidiaries Division
-* Subsidiaries Section*
Names of Subsidiaries and Associates
aD (anban) Mutual %und &imited*
bD (anban) %actors &imited*
cD (anfm >omes &imited*
dD (anban) Investment Management Services &imited*
eD (anban) (omputer Services &imited*
fD (anban) Eenture (apital %und &imited*
gD :ilt Securities Trading (orporation &imited*
hD (anban) %inancial Services &imited*
INSPECTION WING.
-* Planning Section*
2* %ollo! Ip Section*
8* Revie! and Reporting Section*

9* Information Systems +udit Section*
3* Eigilance Department*
0* Staff +dministration Section*
4* Organisation and Methods Section*
DEPARTMENT OF INFORMATION TECHNOLOGY- WING'
-* Planning 'stablishment A Training :roup*
2* +dministrative Soft!are :roup*
8* Service Inits Soft!are :roup*
9* 1ranch Soft!are :roup*
3* Delivery (hannel A (ommunication :roup*
0* Procurement :roup*
4* Payment System :roup*
5* @e! Projects :roup*
.* (ore 1an)ing :roup*
INDUSTRIAL PROFILE
Overview:
The enhanced role of the ban)ing sector in the Indian economy" the increasing
levels of deregulation along !ith the increasing level of the competition have
facilitated globali#ation of the Indian ban)ing system and placed numerous
demands on ban)s* Operating in this demanding environment has exposed ban)s
to various challenges* The last decade has !itnessed major changes in the
financial sector7ne! ban)s" ne! financial institutions" ne! instruments" ne!
!indo!s and ne! opportunities7 and" along !ith all this" ne! challenges* ,hile
deregulation has opened up ne! vistas for ban)s to augment revenues" it has
entailed greater competition and conse$uently greater ris)s* Demands for ne!

products" particularly derivatives" has re$uired ban)s to diversify their product
mix and also effect rapid changes in their processes and operations in order to
remain competitive in the globali#e environment*
The benefits of globali#ation have been !ell documented and are being
increasingly recogni#ed* :lobali#ation of domestic ban)s has also been facilitated
by tremendous advancement in information and communication technology*
:lobali#ation has thro!n up lot of opportunities but accompanied by concomitant
ris)* There is a gro!ing reali#ation that the ability of countries to conduct
business across national borders and the ability to cope !ith the possible
do!nside ris)s !ould depend" inter ; alia" on the soundness of the financial
system and the strength of the individual participants* +doptaion of appropriate
prudential" regulatory" supervisory" and technological frame!or) on par !ith
international best practices enables strengthening of the domestic ban)ing system"
!hich !ould help in fortifying it against the ris)s that might arise out of
globali#ation in India
!e had strengthened the ban)ing sector to face the pressures that may arise out of
globali#ation by adopting the ban)ing sector reforms in a calibrated Mann
follo!ed the t!in governing principles of non7disruptive progress and
consultative process*
&egal prescriptions for o!nership and governance of ban)s in ban)ing regulation
+ct" -.9. have been supplemented regulatory prescriptions issued by R1I from
time to time*

Outsourcing risk:
1an)s are increasingly using outsourcing for achieving strategic aims lading to either
ratio nationali#ation of operational costs are taping specialist expertise !hich is not
available internally* OOutsourcing6 may be defined as a ban)s use of a third party"
including an affiliated entity !ithin a corporate group" to perform activities on a
continuing base that !ould normally be underta)en by the ban) itself* Typically
outsourced financial services include applications processing Cloan organi#ation" credit
cardD" document processing" investment management" mar)eting and research"
supervision of loans data processing and ban) office related activities etc*
Application of advanced technology:
Technology is a )ey driver in the ban)ing industry" !hich creates ne! business modules
and process" and also revolutioni#es distribution channels* 1an)s !hich have made in
ade$uate investment in technology have conse$uently faced and erosion of there mar)et
shares* The beneficiaries are those ban)s !hich have invested in technology* +doption of
technology also enhanced the $uality of ris) management systems in ban)s* Recogni#ing
the benefits of moderni#ing their technology infrastructure ban)s is ta)ing the right
initiatives* ,hile doing so" ban)s have four options to choose fromF they can build a ne!
system those selves" or buy best of he modules" or buy a comprehensive solution" or
outsource* In this context ban)s need to clearly define their core competencies to be sure
that they are investing in the areas that !ill distinguish them from other mar)et players"
and give them a competitive advantage*
The global challenges !hich ban)s face or not confined only to the global ban)s" these
aspects are also highly relevant for ban)s !hich are part of a globali#ed ban)ing system*
%urther" over coming these challenges by the other ban)s is excepted to not only stand
them in good stead during difficult times but also augurs !ell for the ban)ing system to
!hich they belong and !ill also e$uip them to launch themselves as a global ban)*


CREDIT RISK MANAGEMENT IN BANKS

The financial sector especially the ban)ing industry III most emerging economies
including India is passing through a process of change* +s the financial activity has
become a major economic activity in most economies" any disruption or imbalance in its
infrastructure !ill have significant impact on the entire economy* 1y developing a sound
financial system" the ban)ing industry can bring stability !ithin the financial mar)ets*
Deregulation in the financial sector had !idened the products range in the
developed mar)ets* Some of the ne! products introduced are &1Os" structured
transaction" credit cards" housing finance" derivatives and various off balance sheet items*
Thus ne! vistas have created multiple sources for ban)s to generate higher profits than
the traditional financial intermediation* Simultaneously they have opened ne! areas of
ris) also* Many un)no!n issues that are intricately related to ne! products have exposed
ban)s to various ris)s across the globe and India is no exception*
During the past decade" the Indian ban)ing industry continued to respond to the
emerging challenges of competition" ris)s and uncertainties* Ris)s originate in the forms
of customer default" funding a gap or adverse movements of mar)ets*
Measuring and $uantifying ris)s is neither easy nor intuitive* Our regulators have
made some sincere attempts to bring prudential and supervisory norms conforming !ith
international ban) practices !ith an intention to strengthen the stability of the ban)ing
system*

Banks in general face the following ris)F
&i$uidity %oreign 'xchange
(redit Mar)et
Interstate Operational
The industry has undergone drastic changes in the last three decades* >ori#ontal
expansion of the financial mar)ets" deregulation across the globe in financial mar)ets and
stiff competition have led the ban)s to multiply their activities* Increased activities in the
industry have exposed the ban)s to more uncertainties and more ris)s*
RISK MANAGEMENT IN BANKS IS BROADLY DIVIDED INTO SIX
SECTIONS:
%unds Management is a major activity of the ban)s* &i$uidity management is an
integral part of funds management* 1an)s mobili#e the deposits and deploy funds in
advances and investments* 1an)s also float funds through various subsidiary services
extended to their clients*
There !ill be al!ays a time gap bet!een the availability of resources and their
deployment* >ence ban)s !ill often s!ing bet!een excess li$uidity and li$uidity crunch
in their funds position* &i$uidity management essentially deals !ith efficient handling of
inflo!s and outflo!s of funds* Section 7I discusses the li$uidity management in ban)s in
India and across the globe*
(ash Management is a subset of the entire funds management* The lead time is
reduced in collection of che$ues and other instruments by the ban)s" if they introduce
efficient cashmanagement services* %rom the ban)=s point of vie! it increases the fee
based income* (ash management services are one innovative product introduced by the
ban)s in the recent times* Section7II discusses the cash management techni$ues adopted

by ban)s and corporate clients*
(redit ris) is as old as money* ,hen the default rate increases in the portfolio of
the ban)P it may lead to its total collapse* To circumvent the credit ris)" the system tries to
design innovative products* Section7III discusses the credit ris) management in ban)s*
The 1asle committee defines the operational ris) as ?the ris) of direct or indirect
loss resulting from inade$uate or failed internal processes" people and systems or from
external events?* This definition excludes operationalF ris) but includes legal ris)* Such
operational ris)s can be broadly classified into four categories as information technology
ris)" human resource ris)" loss to assets ris) and =relationship ris)* Quantification of
operational ris) is a major challenge to the *ris) management group of the ban)F Section 7
IE attempts to elucidate fe! issues involved in the operational ris) management*
One of the core activities of the regulators is proper of the system* The 1asle
committee had set certain guidelines for the ban) s* The Reserve 1an) of India had set up
an advisory committee under the chain Ilship of M S Eerma and the committee had
submitted its report in May 2//-* The committee recommended corporate governance"
internal controls" ris) management" loan accounting transparency and disclosures"
financial conglomerates and cross border ban)ing supervision* The supervisor should
provide a safety net to the financial system* Section 7E discusses the important issues of
any ris) management techni$ue*
Section7EI consists of t!o case studies* It briefly discusses the ris) management
Techni$ue=s to be adopted by ban)s* Derivatives are the hedging instruments !hich help
minimi#e the ris)s* 1ut a 8// year old investment ban) collapsed because of its exposure
to derivatives* The 1arings= collapse is a classic example of failure of supervision and
incidence of human sours ris)*
In the global scenario" the increased credit ris) arises due to t!o reasons* 1an)s

have been forced to lend to ris)ier clients because !ell7rated corporates have moved
a!ay from ban)s as they have access to lo! cost funds through disinter mediation* The
other reason is the lur)ing fear of global recession* Recession in the economy could lead
to lo! industrial output !hich may lead to defaults by the industry under recession
culminating into credit ris)* >ence" the mar)ets are in search of ne! credit ris)
management models* (redit derivatives !hich !ere a ne! innovation in the mar)et stood
the real test in -..4 during the +sian financial crisis* Several 'uropean and IS ban)s
!hich !ere exposed to high ris) areas in <orea" Philippines and Thailand !ere able to
save themselves from losses as they could hedge themselves !ith credit derivatives* The
papers ?(redit Ris) Management 7 Models and Hudgments? and ?Ise of (redit Derivati
ves? discuss the critical operational issues in managing credit ris) through credit
derivatives*
In the recent times" !e have !itnessed runs on the ban)s 7 mainly the Irban
(ooperative 1an)s li)e Madhavpura (oop 1an) in :ujaratMumbai" (harminar 1an)" a
scheduled ban) in >yderabad and many others*
,hen the ban)s give the signals of distress" the depositors panic and run for their
money* +s per the existing rules" Deposit Insurance and (redit :uarantee (orporation of
India CDI(:(D guarantees the depositors= money up to one la)h rupees subject to certain
conditions* Till no!" the ban)s used to pay the insurance premium for the deposits they
hold to get insurance coverage from DI(:(* @o! the committee set up by the R1I under
the (hairmanship of H (aptor suggested that the ris) premium is to be paid !hich Is
sensitive to the probability of the ban) in $uestion going ban)rupt* The paper ?,hat
Ma)es 1an)s %ragile tries to compute the volatility of ban)s= assets and deposit insurance
premium !ith an illustrate on and presents a vie! point of fixing higher deposit insurance
premium if reserve re$uirements are to be phased out*

Credit Risk Management at Canara 1an)
Introduction
(redit ris) is defined as the possibility of losses associated !ith diminution in the
credit $uality of borro!ers or counter parties* In a ban)=s portfolio" losses stem from
outright default due to inability or un!illingness of a customer or counter party to meet
commitments in relation to lending" trading" settlement and other financial transactions*
+lternatively" losses result from reduction in portfolio value arising from actual or
perceived deterioration in credit $uality* (redit ris) emanates from a ban)=s dealings !ith
an individual" corporate" ban)" financial institution or a so vereign*
(redit ris) ta)es in the follo!ing formsF
-* In the case of direct lendingF principaland or interest amount not be repaidG
2* In the case of guarantees or letters of creditF funds not forthcoming from the
constituents upon crystalli#ation / f the liability*
8* In the case of treasury operationsF the payment or series of payments due from the
counter parties under the respective contracts may not be forthcoming or ceasesG
9* In the case of securities trading businessesF funds securities settlement may not be
effected*

Credit Risk Management
In this bac)drop" it is imperative that (anara ban) has credit ris) management system"
!hich is sensitive and responsive to these factors* The effective management of credit
ris) is a critical component of comprehensive ris) management and ie essential for the
long7term success of (anara ban)ing organisation* (redit ris) managemnt encompasses
identification" measurement" monitoring and control of the credit ris) sources* The 1an)
has put in place a unified ris) management architecture to attain global best practices for
effective implementation of ris) management initiatives in consistence !ith the 1asle II
frame!or) and R1I guidelines* The 1oard of Directors drives the Ris) Management
initiatives in the 1an)* The Ris) Management (ommittee of the 1oard is operational*
Top 'xecutive (ommittees for (redit Ris)" Operational Ris) and Mar)et Ris)
Management oversee and monitor the respective ris) management processes and
procedures* +sset &iability (ommittee C+&(OD meets periodically for effective and pro7
active +&M in the 1an)*
+n exclusive Ris) Management ,ing at the >ead Office is functioning as a nodal centre
for overall implementation of various ris) management initiatives across the 1an)*
Integrated Mid Office of both domestic and %orex Treasury are functioning under the
Ris) Management ,ing for effective and independent supervision and monitoring of
Mar)et Ris) in investment and forex functions* Ris) Management Sections are
functioning at all the 89 (ircle Offices of the 1an) as an extended arm of the Ris)
Management ,ing at the (orporate Office*

The 1an) has put in place various ris) management policies" !hich include policy for
management of (redit Ris)" Mar)et Ris)" Operational Ris)" +sset &iability" &i$uidity
Ris)" (ountry Ris)" (ounterparty 1an) Ris)" (orporate :overnance" Disclosures"
(ollateral Management" Stress Testing" (ompliance %unctions" Disaster Recovery and
1usiness (ontinuity Planning" 1usiness &ines" Outsourcing" :roup Ris)" &egal Ris) etc*
The 1an) has also framed ris) management policies for its overseas branches* These
policies are being revie!ed and fine tuned annually*

Building Blocks of Credit Risk Management at (anara Bank'
In a ban)" an effective credit ris) management frame!or) !ould "=omprise of the
follo!ing distinct building bloc)sF
Policy and Strategy
Organi#ational Structure
Operations Systems
Policy and Strategy
The 1oard of Directors shall be responsible for approving and periodic a II y
revie!ing the credit ris) strategy and significant credit ris) policies*
Credit Risk Policy
-* 1an) has credit ris) policy document approved by the 1oard* The document include
ris) identification" ris) measurement" ris) grading aggregation techni$ues" reporting
and ris) controlE mitigation techni$ues" documentation" legal issues and management
of problem loans*
2* (redit ris) policies defined target mar)ets" ris) acceptance criteria" credit approval
authority" credit originationJ maintenance procedures and guidelines for portfolio
management*
8* The credit ris) policies approved by the 1oard communicated to branchescontrolling
offices* +ll dealing officials should clearly understand the barne=s approach for credit
sanction and are held accountable for complying !ith established policies and
procedures*
9* Senior management of a (anara ban) shall be responsible for implementing the credit
ris) policy approved by the 1oard*

Credit Risk Strategy
-* 'ach branch of (anara ban) should develop" !ith the approval of its 1oard" its o!n
credit ris) strategy or plan that establishes the objectives guiding the (anara ban)=s
credit7granting 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 ris) 7re!ard trade7off for its activities*
2* The strategy !ould" therefore" include a statement of the (anara ban)=s !illingness to
grant loans bas ed on the type of economic activity" geographical location" currency"
mar)et" maturity and anticipated profitability* This !ould necessarily translate into
the identification of target mar)ets and business sectors" preferred levels of
diversification and concentration" the cost of capital in granting credit and the cost of
bad debts*
(redit ris) Management (ommittee C(RM(R
'ach (anara ban) may" depending on the si#e of the organi#ation or loanJ Investment
boo)" constitute a high level (redit Ris) Management (ommittee C(RM(D* The
(ommittee should be headed by the (hairman and should comprise of heads of
(redit Department" Treasury" (redit Ris) Management Department C(RMDD and the
(hief 'conomist*
The functions of the (redit Ris) Management (ommittee should be as underF
-* Responsible for the implementation of the credit ris) policy strategy approved by the
1oard*
2* Monitor credit ris) on a (anara ban) !ide basis and ensure compliance !ith limits approved
by the 1oard*
8* Recommend to the 1oard" for its approval" clear policies on standards for presentation of
credit proposals" financial covenants" rating standards and benchmar)s"
9* Decide delegation of credit approving po!ers" prudential limits on large credit exposures"

standards for loan collateral" portfolio management" loan revie! mechanism" ris)
concentrations" ris) monitoring and evaluation" pricing of loans" provisioning"
regulatorylegal compliance" etc*
(oncurrently" (anara ban) set up (redit Ris) Management Department C(RIEIDD"
independent of the (redit +dministration Department*
The CRMD does the followings:
-* Measure" control and manage credit ris) on a (anara ban) 7!ide basis !ithin the
limits set by the 1oard (RM(
2* 'nforce compliance !ith the ris) parameters and prudential limits set by t.he
1oardJ (RM(*
8* &ay do!n ris)assesment system develop loan investment portfolio* identify
problems" correct deficiencies and underta)e loan revie!audit* &arge (anara
ban)s could consider separate set up for loan revie!audit*
9* +ccountable for protecting the $uality of the entire loanJ investment portfolio*
The Department underta)es portfolio evaluations and ma)es comprehensive
studies on the environment to test the resilience of the loan portfolio
Operations 1
st
Systems
(anara ban)s have an appropriate credit administration" credit ris) measurement
and monitoring processes*
The credit administration process typically involved the following
-* Relationship management phase i*e* business development*
2* Transaction management phase covers ris) assessment" loan pricing" structuring the facilities"
internal approvals" documentation" loan administration" on going monitoring and ris)
measurement*
8* Portfolio management phase entails monitoring of the portfolio at a macro level and the
management of problem loans*

9* On the basis of the broad management frame!or) stated above" the (anara ban)s has
follo!ing credit ris) measurement and monitoring proceduresF
3* (anara ban)s established proactive credit ris) management practices li)e annual half yearly
industry studies and individual obligor revie!s Crecently establishedD periodic credit calls that
are documented" periodic visits of plant and business site" and at least $uarterly management
revie!s of troubled exposures!ea) credits
Canara bank has system of checks and balances in place for extension of
credit viz.:
-* Separation of credit ris) management from credit sanction
2* Multiple credit approvers ma)ing financial sanction subject to approvals at various
stages vi#* credit ratings" ris) approvals" credit approval grid" etc*
8* +n independent audit and ris) revie! function*
9* The level of authority re$uired to approve credit !ill increase as amounts and
transaction ris)s increase and as ris) ratings !orsen*
3* 'very obligor and facility must be assigned a ris) rating*
0* Mechanism to price facilities depending on the ris) grading of the customer" and to
attribute accurately the associated ris) !eightings to the facilities*
4* 1an)s ensure that there are consistent standards for the origination" documentation
and maintenance for extensions of credit
5* 1an)s has a consistent approach to!ards early problem recognition" the classification
of problem exposures" and remedial action*
.* 1an)s maintain a diversified portfolio of ris) assetsG have a system to conduct regular
analysis of the portfolio and to ensure ongoing control of ris) concentrations*
-/* (redit ris) limits include" obligor limits and concentration limits by industry or
geography* The 1oards should authori#e efficient and effective credit approval
processes for operating !ithin the approval emits*
--* 1an) has systems and procedures for monitoring financial performance of customers
and for controlling outstanding !ithin limits*

-2* + conservative policy for provisioning in respect of non 7performing advances adopted*
Credit Risk Rating CRR]
(anara ban) concern !ith follo!ing ris) !hile rating themF
-* %inancial ris)
2* Industry ris)
8* 1usiness ris)
9* Mar)et ris)
Treatment of Credit risk at bank.
The unsecured portion of @P+ accounts net of specific provisions is also to be
subject to ris) !eighting mechanismG unsecured portion means the @P + amount obtained
after deducting the eligible and guarantee amounts*
The risk weights for NPA accounts are as follows:
Other than residential mortgage loans
,hen specific provisions are P 2/B of @P+ ris) !eights amount -3/B
,hen specific provisions are at least 2/B of @P+ ris) !eight is -//B
,hen specific provisions are at least 3/B of @P+ ris) !eight amounts to 3/B
%ully (overed by Plant and Machinery and &and and 1uilding
,hen specific provision reaches at least -3B of @P+ ris) !eight amount -//B
Residential Mortgage loans
:enerally ris) !eight applicable is -//B

If specific provisions are at least 2/B of @P+ ris) !eights amount to 43B
An Illustration
(redit Ris) assessment at branch level CTraffic Island 1ranchD
Major Segments Scores Scores assessed &evel of Ris)
I
allotted
C-D +ssessment area7
I
(redit
I &o! K (redit7 :ro!th -/ /3
Trend
K (redit7 Quality 2/ /5 I &o!
K @on7%und based
I Medium
exposure /3 /8
N +de$uacy of
portfolio /3 /2 &o!
Total 9/ -5 &o!
Branch Authorities (Authority to sanction loans to Corporate)
1ranch OfficeF
1raches allo!ed transaction loan from I to 43 lac)s for respective sectors*
Regional OfficeF
If loan amount is more than 43 lac)s then that proposal goes to regional office" Regional
office has authority to sanction from 43 lac)s to 8 crores for industries*
(ircle OfficeF
(ircle office has authority of sanctioning loan from 8 crores and above*

Factors considered for sanction loans:
-D Individual (apacity*
2D Securities
8D +dditional securities
9D Prompt repayment of &/2*
3D Deposits in 1an)s
Individual Capacity:
1an) considers individual capacity hD repayment of loan !ith term or agreed term
!ith ban) and also considers his transaction !ith ban) if any*
Securities:
1an) considers securities of borro!ers !hile lending money to him* 'xF Shares
cel-ificate" Insurance policies
Additional Securities:
1an)s consider or accept additional securities li)e land" home and other securities
!hile sanctioning ne! loan to customers !hen customers has existing loan in ban)*
Prompt repayment of Loan:
'xisting transaction or previous transact ion consider !hile grant ne! loan to
customers (lients* >is prompt repayment of loan consider for ne! loans*
Bank Deposits
1an) deposits !ith ban) or any other ban)s consider as security for loans*

Existing Credit Risk Management at Canara Bank
%ollo! up clients(ustomers*
Recovery systems*
Revie! of loan*
+dditional securities
Providing additional loans to ma)e repayment of existing loans*
&oan Revie! Mechanism*
&o! and >igh credit ris) ratings*
&o! interest rate for high credit rating companies
>igh interest rate for lo! credit rating companies
Singlegroup borro!er limits
+uthorities to branches K +uthorities to (ommittees*
Following Up customers/Clients:
1an) remind borro!ers to repay loan and interest according to term and condition
!hich he has agreed !hile ta)ing loan from ban)s" and also ensure that ifhe fails to pay
the loan!hat is next step of ban)s*
Recovery Systems:
1an) directly collect dues from customers They have separate department" !hich loo)
Safter all matters related to recovery of loan*
Review of loan:
If the amount not recovered !ithin specified term mentioned as per the policy of ban)"

ban) goes for revie! of loan if re$uired*
Additional Securities:
+dditional securities !ill be ta)en from the customer in t!o situationsF
-D If existing loan extended by the ban)*
2D ,hen additional loan is given to the customer in addition to existing loan*
Low and High credit risk ratings.
Interest rate is depend on credit !orthy nests of the company" if the credit !orthy
@ess of the company is high he !ill be charged lo! interest" opposite is the case for lo!
credit !orthiness
%ollo!ing Securities as eligible for treatment as (redit ris) mitigatesF
-D 1an) Deposits
2D :old He!ellery C 1enchmar)ed to ..*.. purityD
8D State :ovt securities
9D (entral :ovt securities
3D @ational Saving (ertificates" Ei)as Patras and <isan Ei)as Patras
0D &ife Insurance Policies
4D '$uities C Including convertible bondsD
5D Mutual fund securities
.D &and and 1uilding
-/D Plant and Machinery

Guarantors Types
K State :overnment
K (entral :overnment
K Public Sector 'ntities
K 1an)s
K Primary Dealers (orporate
Substitution approach
In this approach ris) !eight of the guarantor replace the lis) !eight of the
borro!er provided it result in application of a lo!er ris) !eight" thus only guarantee
issued by entities !ith a lo!er ris) !eight provides credit ris) mitigation effect in the
form of lo!er capital charges*
Proportional Cover
This method is ta)en note of is that the ris) mitigation effect !ill be available to
the extent of protection provided b :uarantor and the remaining unprotected portion
carry the ris) !eight applicable to borro!er*
Thus in order to avail capital relief it is necessary that the follo!ing details on guarantors
are capturedF
@ame of the :uarantor
'xtent of :uarantee cover available
(ustomer type of the guarantor

Techni$ues for Measuring (redit Ris)
In the measurement of credit ris)" models may be classified along three different
dimensionsF
-* The techni$ues employed"
2* The domain of applications in the credit process and
8* The products to !hich they are applied*
Techniques:
The follo!ing are the more commonly used techni$uesF
-* Econometric Techniques such as linear and multiple discriminate analysis"
Multiple regression" logic analysis and probability of default" etc
2* Neural networks are computer-based systems that use the same data employed in
the econometric techni$ues but arrive at the decision model using alternative
implementations of a trial and error method*
8 Itemization models are mathematical programming techniques that discover the
optimum !eights for borro!er and loan attributes that minimi#e lender error and
maximi#e profits*
8* Rule-based or expert are characteri#ed by a set of decision rules" a )no!ledge base
consisting of data such as industry financial ratios" and a structured in$uiry process to
be used by the analyst in obtaining the data on a particular borro!er*
9* Hybrid Systems In these systems simulation are driven in part by a direct causal
relationship" the parameters of !hich are determined through estimation techni$ues*

Domain of application:
These models are used in a variety of domainsF
Credit approval
Models are used on a stand alone basis or in conjunction !ith a judgemental
override system for approving credit in the consumer lending business* The use of such
models has expanded to include small business lending* They are generally not used in
approving large corporate loans" but they may be one of the inputs to a decision*
Credit rating determination:
Quantitative models are used in deriving =shado! 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 !ithin an institution to challenge the rating assigned by the traditional
credit analysis process*
(redit ris) models may be used to suggest the ris) premier that should be charged
in vie! of the probability of loss and the si#e of the loss given default* Ising a mar) 7to7
mar)et model" an institution may evaluate the costs and benefits of holding a financial
asset* Inexpected losses implied by a credit model may be used to set the capital charge
in pricing*
Instruments of Credit Risk Management
(redit Ris) Management encompasses a host of management techni$ues" !hich
help the ban)s in mitigating the adverse impacts of credit ris)*
1. Credit Approving Authority
'ach ban) should have a carefully formulated scheme of delegation of po!ers*
The ban)s should also evolve multi7tier credit approving system !here the loan proposals

are approved by an =+pproval :rid= or a =(ommittee=* The credit facilities above a
specified limit may be approved by the =:rid= or =(ommittee=" comprising at least 8 or 9
officers and invariably one officer should represent the (RMD" !ho has no volume and
profit targets* 1an)s can also consider credit approving committees at various operating
levels i*e* large branches C!here considered necessaryD" Regional Offices" Tonal Offices"
>ead Offices" etc* 1an)s could consider delegating po!ers for sanction of higher limits
to the =+pproval :rid= or the =(ommittee= for better rated $uality customers* The spirit of
the credit approving system may be that no credit proposals should be approved or
recommended to higher authorities" if majority members of the =+pproval :rid= or
=(ommittee= do not agree on the credit!orthiness of the borro!er* In case of
disagreement" the specific vie!s of the dissenting members should be recorded*
The ban)s should also evolve suitable frame!or) for reporting and evaluating the
$uality of credit decisions ta)en by various functional groups* The $uality of credit
decisions should be evaluated !ithin a reasonable time" say 8 7 0 months" through a !ell7
defined &oan Revie! Mechanism*
2. Prudential Limits
In order to limit the magnitude of credit ris)" prudential limits should be laid
do!n on various aspects of creditF
aD Stipulate benchmar) currentdebt e$uity and profitability ratios" debt service coverage
ratio or other ratios" !ith flexibility for deviations* The conditions subject to !hich
deviations are permitted and the authority therefore should also be clearly spelt out
in the &oan PolicyG
bD Singlegroup borro!er limits" !hich may be lo!er than the limits prescribed by
Reserve 1an) to provide a filtering mechanismG
dD 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 !hen a pm-icular sector or industry faces slo!do!n
or other sectorindustry specific problems* The exposure limits to sensitive sectors"
such as" advances against e$uity shares" real estate" etc*" !hich are subject to a high
degree of asset price volatility and to specific industries" !hich are subject to
fre$uent business cycles" may necessarily be restricted* Similarly" high7ris)
industries" as perceived by the ban)" should also be placed under lo!er portfolio
limit* +ny excess exposure should be fully bac)ed by ade$uate collaterals or
strategic considerations*
eD 1an)s may consider maturity profile of the loan boo)" )eeping in vie! the mar)et
ris)s inherent in the balance sheet" ris) evaluation capability" li$uidity" etc*
3 Risk Rating
1an)s should have a comprehensive ris) scoring rating system that serves as a
single point indicator of diverse ris) factors of counterparty and for ta)ing credit
decisions in a consistent manner* To facilitate this" a substantial degree of standardi#ation
is re$uired in ratings across borro!ers* The ris) rating system should be designed to
reveal the overall ris) of lending" critical input for setting pricing and non 7price terms of
loans as also present meaningful information for revie! and management of loan
portfolio* The ris) rating" in short" should reflect the underlying credit ris) of the loan
boo)* The rating exercise should also facilitate the credit granting authorities some
comfort in its )no!ledge of loan $uality at any moment of time*
4 Risk Pricing
Ris)7return pricing is a fundamental tenet of ris) management* In a ris) 7return
setting" borro!ers !ith !ea) financial position and hence placed in high credit ris)
category should be priced high*
1an)s should evolve scientific systems to price the credit ris)" !hich should have
a bearing on the expected probability of default* The pricing of loans normally should be

lin)ed to ris) rating or credit $uality* The probability of default could be derived from the
past behavior of the loan portfolio" !hich is the function of loan loss provision*
1an)s should build historical database on the portfolio $uality and provisioning
charge off to e$uip themselves to price the ris)* 1ut value of collateral" mar)et forces"
perceived value of accounts" future business potential" portfolioindustry exposure and
strategic reasons may also play important role in pricing* %lexibility should also be made
for revising the price Cris) premierD due to changes in rating value of collaterals over
time* &arge si#ed ban)s across the !orld have already put in place Ris) +djusted Return
on (apital CR+RO(D frame!or) for pricing of loans" !hich calls for data on portfolio
behavior
+nd allocation of capital commensurate !ith credit ris) inherent in loan
proposals* Inder R+RO( frame!or)" lender begins by charging an interest mar) 7up to
cover the expected loss 7 expected default rate of the rating category of the borro!er* The
lender then allocates enough capital to the prospective loan to cover some amount of
unexpected loss7 variability of default rates* :enerally" international ban)s allocate
enough capital so that the expected loan loss reserve or provision plus allocated capital
cover ..B of the loan loss outcomes*
Portfolio Management
The existing frame!or) of trac)ing the @on Performing &oans around the balance
sheet date does not signal the $uality of the entire &oan 1oo)* 1an)s should evolve
proper systems for identification of credit !ea)nesses !ell in advance* Most of
international ban)s have adopted various portfolio management techni$ues for gauging
asset $uality* The (RMD" set up at >ead Office should be assigned the responsibility of
periodic monitoring of the portfolio*
The portfolio $uality could be evaluated by trac)ing the migration Cup!ard or
do!n!ardD of borro!ers from one rating scale to another* This process !ould be
meaningful only if the borro!er7!ise ratings are updated at $uarterly half7yearly

intervals* Data on movements !ithin grading categories provide a useful insight into the
nature and composition of loan boo)*
The ban)s could also consider the follo!ing measures to maintain the portfolio
-D 'valuate the rating7vie! distribution of borro!ers In vanous industry" business
segments"
2D 'xposure to one industrysector should be evaluated on the basis of overall rating
distribution of borro!ers in the sectorgroup* In this context" ban)s should !eigh the
pros and cons of speciali#ation and concentration by industry group* In cases !here
port folio exposure to a single industry is badly performing" the ban)s may increase
the $uality standards for that specific industryG
6. Loan Review Mechanism (LRM)
&RM is an effective tool for constantly evaluating the $uality of loan boo) and to
bring about $ualitative improvements in credit administration* 1an)s should" therefore"
put in place proper &oan Revie! Mechanism for large value accounts !ith
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 $uality" etc* The complexity and scope of &RM normally vary based
on ban)s= si#e" type of operations and management practices* It may be independent of
the ( RMD or even separate Department in large ban)s*
The main objectives of LRM could be:
To identify promptly loans !hich develop credit !ea)nesses and initiate timely
corrective actionG
To evaluate portfolio $uality anN isolate potential problem areasG
To provide information for determining ade$uacy of loan loss provisionG

To assess the ade$uacy of and adherence to" loan policies and procedures" and to
monitor (ompliance !ith relevant la!s and regulations*
To provide top management !ith information on credit administration"
including credit Sanction process" ris) evaluation and post7sanction follo!7up*
+ccurate and timely credit grading is one of the basic components of an effective
&RM* (redit grading involves assessment of credit $uality" identification of problem
loans" and assignment of ris) ratings* + proper (redit :rading System should support
evaluating the p/l-folio $uality and establishing loan loss provisions* :iven the
importance and subjective nature of credit rating" the credit ratings a!arded by (redit
+dministration Department should be subjected to revie! by &oan Re vie! Officers !ho
are independent of loan administration*
The Ris) Management :roup of the 1asle (ommittee on 1an)ing Supervision has
released a consultative paper on Principles for the Management of (redit Ris)* The Paper
deals !ith various aspects relating to credit ris) management* The Paper is enclosed for
information of ban)s*
6. Qualification and Independence
The &oan Revie! Officers should have sound )no!ledge in credit appraisal"
lending practices and loan policies of the ban) they should also be !ell versed in the
relevant la!sregulations that affect lending activities* The independence of &oan Revie!
Officers should be ensured and the findings of the revie!s should also be reported
directly to the 1oard or (ommittee of the 1oard*
7. Frequency and Scope of Reviews
The &oan Revie!s are designed to provide feedbac) on effectiveness of credit
sanction and to identify incipient deterioration in portfolio $uality* Revie!s of high value
loans should be underta)en usually !ithin three months of sanction rene!al or more
fre$uently !hen factors indicate a potential for deterioration in the credit $uality* The

scope of the revie! should cover all loans above a cut 7off limit* In addition" ban)s
should also target other accounts that present elevated ris) characteristics* +t least 8/7
9/B of the portfolio should be subjected to &RM in a year to provide reasonable
assurance that all the major credit ris)s embedded in the balance sheet have been trac)ed*
Depth of Reviews
The loan revie!s should focus onF
+pproval processG
+ccuracy and timeliness of credit ratings assigned by loan officersG
+dherence to internal policies and procedures" and applicable la!s regulationsG
(ompliance !ith loan conventsG
Post7sanction follo!7upG
Sufficiency of loan documentationG
Portfolio $ualityG and
Recommendations for improving portfolio $uality
The findings of Revie!s should be discussed !ith line Managers and the corrective
actions should be elicited for all deficiencies* Deficiencies that remain unresolved should
be reported to top management*
The Ris) Management :roup of the 1asle (ommittee on 1an)ing Supervision has
released a consultative paper on Principles for the Management of (redit Ris)* The Paper
deals !ith various aspects relating to credit ris) management* The Paper is enclosed for
information of ban)s*
Early warning:
(redit models are used to flag potential problems in the portfolio to facilitate early
corrective action*

Common credit language:
(redit models may be used to select assets from a pool to construct a portfolio acceptable
to investors at the time of asset securiti#ation or to achieve the minimum credit $uality
needed to obtain the desired credit rating* Inder!riters may use such models for due
diligence on the portfolio Csuch as a collaterali#ed pool of commercial loansD*
Collection strategies:
(redit models may be used in deciding on the best collection or !or)out strategy
to pursue* If" for example" a credit model indicates that a borro!er is experiencing short 7
term li$uidity problems rather than a decline in credit fundamentals" then an appropriate
!or)out may be devised*
Credit Risk Models: Approaches
The literature on $uantitative ris) modeling has t!o different approaches to credit
ris) measurement* The first approach is the development of statistical models through
analysis of historical data* This approach !as fre$uently used in the last t!o decades* The
second type of modelling approach tries to capture distribution of the firm=s asset 7value
over a period of time*
The statistical approach tries to rate the firms on a discrete or continuous scale*
The linear model introduced by +ltman C-.04D" also )no!n as the T 7score Model"
separates defaulting firms from non7defaulting ones on the basis of carat in financial
ratios* +ltman" >art!ell" and Pec) C-..3"-..0D have modified the original T 7score
model to develop a model specific to emerging mar)ets* This model is )no!n as the
'merging Mar)et Scoring C'MSD 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 fre$uency
C'D%D model* It calculates the asset value of a film from the mar)et value of its e$uity
using an option pricing based approach that recogni#es e$uity 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 hori#on* The default ris) is the probability of the estimated asset value falling belo!
a prespecified default point* This model is based conceptually on Merton=s C-.49D
contingent hassoc) and has been !or)ing very !ell for estimating default ris) in a li$uid
mar)et*
(losely related to credit ris) models are portfolio ris) models* In the last three
years" important advances have been made in modeling credit ris) in lending portfolios*
The ne! models are designed to $uantify credit ris) on a portfolio basis" and thus are
applied at the time of diversification as !ell as portfolio based pricing* These models
estimate the loss distribution associated !ith the P/l-folio and identify the ris)y
components by assessing the ris) contribution of each member in the portfolio*
1an)s may adopt any model depending on their si#e" complexity" ris) bearing capacity
and ris) appetite" etc* >o!ever" the credit ris) models follo!ed by ban)s should" at the
least" achieve the follo!ingF
-* Result in differentiating the degree of credit ris) in different credit exposures of a
ban)* The system could provide for transaction 7based or borro!er7based rating or
both* It is recommended that all exposures are to be rated* Restricting ris)
measurement to only large si#ed exposures may fail to capture the p/l-folio ris)
in entirety for variety of reasons* %or instance" a large si#ed exposure for a short
time may be less ris)y than a small si#ed exposure for a long time*
2* Identify concentration in the portfolios
8* Identify problem credits before they become @P+s
9* Identify ade$uacy inade$uacy of loan provisions
3* >elp in pricing of credit
0* Recogni#e variations in macro7economic factors and a possible impact under
alternative scenarios
4* Determine the impact on profitability of transactions and relationship*


DATA COLLECTION METHOD
Primary data: Primary data collected through the interaction !ith chief manager" senior
manager and ban) staff*
Secondary Data: Secondary data collected from ban) circulars" ban) guidelines boo)
and internet*
1rief %indings
(urrent system of credit ris) management
(anara 1an) has a system of chec)s and balance in place of extension of credit*
The aspect covered under the present system is multiple credit approvals" independt audit
and ris) revie! and ris) rating system for various categories of system and corresponding
pricing mechanism* The ban) maintains a diversified portfolio of ris) assets" and ensures
on going control of ris) considerations *+ll credit exposures above RS 3 (rores are
assigned ris) !aiting assigned by domestic credit rating agencies recogni#ed by R1I
The credit ris) management system at the branch level has been maped out in detail
-* Internal rating based CIR1D approach the standardi#ed approach adopted so far"
provides incentives to ban)s improving their credit ris) management techni$ues*
2* 1an)s may have discretion and flexibility in defining the exposure classes" such as
corporate" project finance" etc*
8* Inless suitable modified" the adoption of the ne! +ccord in its present format
!ould result in significant increase in the capital charge for ban)s*


OUTLOOK FOR 2010-11
The International Monetary %und CIM%D" in its World Economic Outlook" +pril 2/-/
raised its forecast for !orld economic gro!th in 2/-/ to 9*2B as against a /*0B
contraction in 2//.* >o!ever" IM% forecasted that advanced economies !ould not exit

the global recession until the middle of 2/-/ and emerging economies" !hich are
increasingly driven by domestic gro!th factors" !ill continue to drive global recovery*
%inancial year 2/-/7-- started on a positive note for Indian economy !ith major macro
economic parameters performing !ell* Industrial gro!th and exports have been sho!ing
steady increase and the continued strong gro!th in manufacturing indicates the resilience
of domestic demand* + strong saving and investment rate" favourable capital mar)et
conditions and improved capital flo!s and positive business outloo) !ill also help the
economy to!ards a faster revival* :oing for!ard" the strong domestic demand and
sustained increase in per capita income !ill ensure faster economic gro!th* Thrust on
inclusive gro!th and focus on the rural economy !ould propel the gro!th engine of the
economy further*
Indian economy !ill remain one of the fastest gro!ing economies in the !orld in vie! of
the expected recovery in agricultural production" industrial output" demand for higher
exports and the revival of global economy* The R1I in its Annual Monetary Policy
Statement for 2010-11 placed real :DP gro!th for 2/-/7-- at 5B" !ith an up!ard bias*
The R1I envisages containing money supply CM8D at around -4B in consonance !ith the
outloo) on gro!th and inflation* ,hile aggregate deposits of S(1s are projected to gro!
at -5B" adjusted non7food credit is li)ely to record a gro!th of 2/B during 2/-/7--" as
indicated by the R1I* The annual policy also endeavors to contain inflation at a benign
level of 3*3B" !ith a medium term goal of 8B*
FINANCE PERFORMANCE
Dividend of 100% for 2009-10

(anara 1an) crossed three major milestones during 2//.7-/* %irst" its total business
crossed the Rs*9///// crore mar)s" signifying a gro!th of 29*8B* Second" @et profit
crossed Rs*8/// crore to reach Rs*8/2- crore" up by Rs*93*5B* Third" the 1an)6s branch
net!or) crossed the 8/// mar) to reach 8/90" !ith an addition of 8-9 branches during
the year
%or (anara 1an)" 2//.7-/ !as a year of rec)oning and crossing of milestones* It !as a
year of robust performance on the business front coupled !ith unprecedented gains in
profits and profitability* (ontinued buoyancy in core business operations and costs
containment helped the 1an) to sustain and enhance the top line earnings !hile
maintaining a stronger bottom line*
@et profit reached an all time high of Rs*
8/2- crore" signifying a strong 93*5B
gro!th y7o7y and substantially higher than
Rs* 2/42 crore recorded during the
preceding year* Operating profit recorded
a 24*4B gro!th to reach a level of Rs*
3/0- crore*
Return on average assets CRo++D for the year stood at -*8/B" !ell above the
international benchmar) of -B* (ost to Income ratio declined by 255 basis points to
9/*48B* Profit per employee" moved up to Rs*4*80 la)h compared to Rs*9*.4 la)h in the
previous financial year*

Enhancing Shareholder ValueF In
conformity !ith its commitment to enhance
value for shareholders" the 1an) sho!ed
steady improvement in 'arnings Per Share
C'PSD and 1oo) Ealue* ,hile 1oo) Ealue
increased to Rs*8/3*58 as at March 2/-/ as
compared to Rs*299*54 for the previous
financial" 'PS rose to Rs*48*0. for the year ended March 2/-/ compared to Rs*3/*33 a
year ago* + dividend of -//B" amounting to Rs*9-/ crore" !as recommended by the
1oard of Directors of the 1an) for 2//.7-/*
<ey %inancial Ratios CBD March*2//. March*2/-/
(ost of %unds 6.32 5.65
Uield on %unds 8.72 8.10
(ost of Deposits 6.87 6.12
Uield on +dvances 10.79 9.81
Uield on Investments 7.94 7.52
Spread as a B to +,%V 2.40 2.45
@et Interest Margin C@IMD 2.78 2.80
Operating 'xpenses to +,% 1.56 1.50
Return on +vg* +ssets CRo++D 1.06 1.30
Return on +vg* @et !orth 22.61 26.76
1usiness per 'mployee CRs* in (roreD 7.80 9.83
Profit per 'mployee CRs* in &ac)D 4.97 7.36
1oo) Ealue CRs*D 244.87 305.83
'arnings per Share CRs*D 50.55 73.69
+,% 7 +verage ,or)ing %unds

Income and Expenditure Analysis
The 1an)6s interest income recorded a
y7o7y gro!th of .*3B to
reach Rs*-5432 crore
compared to Rs*-4--.
crore recorded during the
previous financial* @on7interest income increased to Rs* 2535 crore"
recording a robust gro!th of 28*4B*
(oncerted focus on mobili#ation of lo! cost deposits and strong resistance to high cost
preferential rate deposits helped the 1an) to reduce the cost of deposits to 0*-2B from
March 2//. level of 0*54B* Uield on advances decreased by .5 basis points to .*5-B as
against -/*4.B in March 2//. due to lo!
interest rates* Interest spread increased to
2*93B from 2*9-B as at March 2//.*
,hile interest expenditure marginally
increased to Rs*-8/4- crore" the 1an)
reasonably contained its rise in non7interest
expenditure at -8*3B* @otably" the net
interest income of the 1an) registered a
good 2/*9-B gro!th to reach Rs* 305- crore and @et Interest Margin C@IMD improved to
2*5/B compared to 2*45B as at March 2//.*
Business Volumes Cross Rs.4 lack Crore

Capital and Reserves
@et !orth of the 1an)" as at March 2/-/" stood at Rs*-2.9. crore compared to Rs*-//9/
crore as at March 2//.* ,ith the paid7up capital at Rs*9-/ crore" reserves and surplus
increased to Rs*-9202 crore* To augment the capital resources" the 1an) raised Rs* 0//
crore through the Innovative Perpetual Tier I 1onds during the year*
(Amt. in Rs.
Crore)
+s at March
2/-/" (apital to Ris) ,eighted +ssets Ratio C(R+RD of the 1an) under 1asle II stood at
-8*98B" !ell above the .B regulatory benchmar)* Significantly" the 1an) has attained a
Tier I capital ratio of 5*39B* The medium term objective of the 1an) is to maintain the
(R+R ratio above -2B* ,ith the still undiluted 48*-4B :overnment of India
shareholding" the 1an) has large headroom available under both Tier I and Tier II options
to raise capital and support business gro!th momentum*
BUSINESS GROWTH
(omposition of (apital March 2//.
1asle II
March 2/-/
1asle II
Risk Weighted Assets -23--- 150623
Tier I Capital -//28 12870
CRAR ()(Tier I) 5*/- 8.54
Tier II Capital 4028 7362
CRAR ()(Tier II) 0*/. 4.89
Total Capital -4090 20232
CRAR () -9*-/ 13.43

Deposits
Total Deposits of the 1an)
registered a gro!th of 23*0B
to reach Rs* 2"89"03- crore as
at March 2/-/* In accordance
!ith the strategic focus" the
1an)=s core deposits recorded
a gro!th of 82*8B" supported
by -.*8B gro!th in savings
deposits*
Inrelenting focus on augmenting of lo! cost resources yielded good results* The 1an)6s
mega savings ban) deposit campaign CSavings ItsavD resulted in an addition of Rs*5/09
crore in savings deposits during %U-/ as against Rs*0399 crore in %U/.* The share of
(+S+ Ccurrent and savings ban) depositsD deposits in domestic deposits stood at 2.*53B*
,ith a (+S+ per branch at Rs* 22*9 crore" the 1an) 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*83 million deposit
accounts" ta)ing the total tally under
deposit accounts to 82*53 million*
Advances (net)
The 1an)=s advances CnetD !itnessed a
robust 22*3B gro!th in 2//.7-/ to reach Rs* -"0."883 crore* In $uantum terms" credit
increased by over Rs*8-/// crore* The 1an) stepped up credit to all productive segments
of the economy li)e agriculture and Micro" Small and Medium 'nterprises CMSM'D"

exposure to corporate and infrastructure segments* The number of borro!al accounts" as
at March 2/-/" rose to 9*9. million*
Total 1usiness of the 1an) gre!
by 29*8B to reach
Rs* 9"/8".50 crore as
at March 2/-/ as
against Rs* 8"23"--2
crore during the
preceding year*
Productivity" as
measured by business per employee" increased to Rs*.*58 crore from Rs*4*5/
crore a year ago" continuing to be one of the best among the peers* ,ith
several enterprise7!ide initiatives and measures" the 1an) added 2*39 million
clientele during the year*
Retail &ending Operations

Retail lending operations of the 1an) regained the gro!th momentum during the year*
,hile disbursals under the retail lending stood at Rs* 5038 crore" the outstanding
advances rose to Rs* 28./2 crore" accounting for about -3B of the domestic credit*
(Amt. in Rs. Crore)
The 1an) too) several measures during the year to expand retail credit" including special
pac)ages for housing and auto loans* Inder (anara Mobile loan" the 1an) sanctioned
29"/// accounts" amounting to Rs* 5/8 crore* To facilitate speedy disposal of proposals
and credit flo!" a total of 23 (entrali#ed Processing Inits C(PID Retail +ssets >ubs
CR+>D for housing and personal loans !ere functioning at major centres across the
country*
1usiness performance of overseas branches as on 8-*/8*2/-/
Retail &ending March 2//. March 2/-/ :ro!th CBD
Retail Lending -.4.5 28./2 2/*4
Housing (Direct) 45.0 -/--0 25*-
Retail Trade 993- 3858 2/*.
Other Personal (Including
Education Loan)
493- 59/8 -2*5
Overseas Branch Deposits Advances Gross
Profit
Net Profit
&ondon C:1P MnD ..2*0. 44-*/5 5*55 /*8
>ong <ong CISD MnD 0-*53 808*23 3*3/ 2*95
Shanghai In first year of operation

The 1an) has already obtained approval from the R1I to open -/ branchesoffices in
ohannes!ur"# $rankfurt# Muscat# Manama# %$&-%atar# 'e( )ork# Sao Paulo# *ar-er-
Salam# +okyo and Shar,ah# out of the 2/ international financial centres identified for
global expansion in the medium term*
The 1an)=s international operations are supported by a !ide net!or) of 8.3
correspondent ban)s" spread across 5/ countries* The 1an) has rupee dra!ing
arrangements !ith 22 exchange houses and -5 ban)s in the Middle 'ast for channelising
the remittances of expatriates* The 1an) has been managing t!o exchange houses vi#*" +l
Ra#ou)i International 'xchange (ompany" Dubai and 'astern 'xchange 'st*" Qatar"
under secondment and management agreement respectively* The 1an)" during the year"
expanded its arrangement under =Remit Money=" a !eb based product by extending to -4
'xchange (ompanies1an)s and 9 branches abroad*
FINANCIAL SOUNDNEES
CAPITAL
The 1an)=s paid7up capital stood at Rs9-/ crore !ith -*/5 lac) shareholders*
(apital to Ris) ,eighted +ssets Ratio !or)ed out to - 8*3/B vis7W7vis the .B
benchmar)*
During %U/4" the 1an) raised lo!erupper Tier II capital !orth Rs* -.43 crore
from the domestic mar)et and ISX23/ million overseas by !ay of a medium term note
programmed*
The 1an)=s (apital Roadmap duly factors in the li)ely scenario in advances

movement and expected regulatory changes* The overarching objective has been to
maintain (R+R above -2B so as to support the buoyancy in credit deployment*
RESERVES AND OWNED FUNDS
Reserves increased to Rs*..99 crore" additional accrual during the year being
Rs*8222 crore* O!ned funds stood at Rs*5--- crore as compared to Rs*4-82 crore at the
end of the previous year*
PROFITS AND PROFITABILITY
:ross profit for the year 2//07/4 stood at Rs*2.-2 crore" !hile net profit !as of
the order of Rs* -92- crore*
Return on +verage +ssets CRo++D" !or)ed out to /*.5B" despite a 23B gro!th in total
assets* @et Interest Income !as up -2*98Bto Rs*9/24 crore*
SHAREHOLDERS'VALUE
+ dividend of 4/B" amounting to Rs*254 crore" is proposed by the 1oard of
Directors of the 1an)" as against 00B CRs*24/*0/ croreD paid last year" subject to the
approval of shareholders* 1an)=s performance under earnings is reflected in a consistent
uptrend in 1oo) Ealue and 'arnings Per Share* ,hile boo) value increased to
Rs*-.4* 58 as at March 2//4 compared to Rs* -4- *-. recorded for last financial"
'arnings per Share further rose from Rs*82*40 to Rs*89*03 for the year ended March 2//4
NATIONAL PRIORITIES

Priority Sector Advances
+s one of the leading players in the domestic ban)ing industry" the 1an) continues to
accord importance to varied goals under national priorities* The remar)able performance
during 2//.7-/ has further reinforced the 1an)6s commitment to the large and gro!ing
productive segments of the economy" including agriculture" small enterprises" education"
micro7credit" !ea)er sections" S(STs and minorities*
The 1an) has achieved stipulated mandatory targets under Total Priority" Total
+griculture and ,ea)er Sections +dvances !ith comfortable margin*
Priority Sector Advances of the 1an) as at March 2/-/ increased by Rs*-/394 crore to
reach Rs*3.8-/ crore" recording a y7o7y gro!th of 2-*0B covering 85 la)h borro!ers*
Priority Sector +dvances formed 98*.2B of the 1an)6s +djusted @et 1an) (redit
C+@1(D" !ell above the 9/B stipulated norm*
(Amt. in Rs. Crore)
,ith a focus on credit delivery to agriculture" the 1an)6s advances under agriculture
rose by Rs* 9./4crore to reach Rs* 23/3- crore" covering 2. la)h farmers* +griculture
credit as a proportion of +@1( rose to -5*33B" surpassing the mandatory targeted level
of -5B* +dvances to agriculture CdirectD reached a level of Rs* -./0. crore" !ith a 28B
y7o7y gro!th and accounting for -9*-2B of +@1(*

Priority Sector
Advances
As on 31st March Growth
2009 2010 Amount Percentage
Agriculture 2/-99 23/3- 9./4 29*80
Micro & Small
Enterprises
-08-0 29-5/ 4509 95*2/
Total Priority Sector 95408 3.8-/ -/394 2-*08

Inder Kisan Credit Card Scheme" the 1an) issued 8*/2 la)h cards during the year !ith
credit coverage of Rs*2982 crore* +s at March 2/-/" the cumulative number of <isan
(redit (ards reached 8/ la)hs" involving credit coverage of Rs*-93/4 crore*
Over the years" the 1an)
has supported la)hs of
promising students to
pursue higher education in
India and abroad* In
doing so" the 1an) has built
up a si#able education loan
portfolio and has been
sustaining the premier
position among
nationali#ed ban)s in India* The 1an)=s advances under Education Loan Scheme
recorded a gro!th of 23*.B to reach Rs*25.0 crore* The ban) has financed more than
-*4- la)h students as at March 2/-/* The 1an) also extended financial assistance to other
priority sectors" such as" retail traders" housing and micro credit*
During the year" the 1an) actively participated in various :overnment Sponsored
Schemes" such as" PMRU" S:SU" SHSRU" S&RS and DRI* +s at 8-
st
March 2/-/" the
outstanding advances under these schemes aggregated to Rs*330 crore" involving -*9/
la)h beneficiaries*
Performance under Various Government Sponsored Schemes
@ame of the Scheme @o* of +ccounts +mt* in Rs* (rore
PMRU 0-.5/ 2.3*5-
S:SU -0/4- 3/*--
SHSRU 88489 -35*95
S&RS --09 2*3/

DRI 24-55 9.*3/
Total -9/-84 330*9/
In support of the underprivileged sections of the society" the 1an)6s advances to
S(ST beneficiaries reached Rs*8./3 crore as at March 2/-/* +dvances to S(ST
reached a level of 0*35B of total priority sector advances and total accounts under
S(ST advances !ere -4B of total priority sector accounts*
+dvances to !ea)er sections aggregated to Rs*-908- crore" !ith 23 la)h borro!ers*
+dvances to !ea)er sections formed -/*58B of +@1( against the norm of -/B*
+s at March 2/-/" advances by the 1an) to minority communities aggregated to Rs*
.895 crore and crossed the stipulated target of -3B of total priority by reaching
-3*40B*
During the year" the 1an) has formed 995./ Self7>elp :roups CS>:sD" ta)ing the
cumulative number of S>:s formed to 8*2/ la)hs as at March 2/-/* ,ith 3/"4/- S>:s
credit lin)ed during the year" the cumulative tally under credit lin)ing reached 2*43 la)hs
since inception*
The total exposure of the 1an) under S>: finance rose to Rs* .20 crore" spreading over
.4"9.5 S>:s*
+dvances to Micro Small and
Medium 'nterprises CMSM'sD
reached Rs*8-/49 crore" !ith a y7o7y
gro!th of over 8/B" far above the
mandatory y7o7y gro!th of 2/B*
The 1an) has covered 84"0/5
accounts !ith an exposure of over
Rs* .95 crore as at March 2/-/
under (redit :uarantee for Micro and Small 'nterprises C(:MS'D*

(onsidering the importance of MSM' sector in the national economy" the 1an) has
developed specific loan products to meet the diverse re$uirements of entrepreneurs in this
particular segment* (luster based lending is adopted to cater to the units in industrial
clusters* +rea cluster specific loan products have been introduced to meet specific
re$uirements*
To enable the MSM' sector to face the challenges of economic slo!do!n" the 1an)
acted s!iftly and rolled out a Special Pac)age to provide relief to MSM's during
December 2//5* The special pac)age continued during the year 2//.7-/ also* The
comprehensive pac)age includes" among other facilities" additionaladhoc !or)ing
capital" extended tenability for receivables" concession in interest and debt restructuring*
MSM' (are (enters !ere established across the country to resolve the grievances of
MSM's*
During the year" the 1an) has launched ?SM' SI&+1>?" a ne! business model for
speedy credit delivery to MSM' Sector* The SM' Sulabhs are independent centrali#ed
loan processing centres aimed at fast processing$uic) delivery of credit to MSM's* They
are e$uipped !ith speciali#ed mar)eting" credit appraisal and monitoring teams* -3 SM'
Sulabhs have been established at +gra" +hmedabad" 1angalore" (handigarh" (hennai"
(oimbatore" Delhi" >ubli" >yderabad" <ol)ata" &uc)no!" Madurai" Mumbai" Pune and
Trivandrum* The 1an) has embar)ed upon reaching out to large section of MSM's at
major centres in the country through this model* The contributions of the Sulabhs in the
gro!th of MSM' credit of the 1an) during 2//.7-/ has been substantial resulting in
1an) achieving the MSM' targets for the year*
Rural Development
The 1an)" through its (anara 1an) (entenary Rural Development Trust" has established
exclusive training institutes to promote entrepreneurship development among rural youth

and encourage them ta)ing up self7employment activities* During the year" . ne! training
institutes !ere opened at +ligarh and 'tah districts in Ittar Pradesh" Shei)hpura district
in 1ihar" (alicut and Pala))ad districts in <erala" @ilgiris" 'rode" Theni and Dindigul in
Tamil @adu enhancing the number of such training institutes to 20* These institutes have
so far trained .9.83 unemployed youth" comprising 0/B !omen !ith an impressive
settlement rate of 4/B* The Trust is also supporting the activities of Society for
'ducational and 'conomic Development CS''DD" a voluntary organi#ation based in
Sriperambadur" Tamil @adu" !or)ing for the !elfare of the socially marginali#ed
children*
The 1an) has co7sponsored 28 Rural Development and Self 'mployment Training
Institutes CRIDS'TIsD engaged in training of rural youth for ta)ing up self7employment
programmes* 28 RIDS'TIs have trained more than 2"85"/// unemployed youth" !ith a
settlement rate of 4/B*
The 1an) is also co7sponsoring Deshpande7RIDS'TI at >aliyal in <arnata)a and
+ndhra Pradesh 1an)ers Institute of Rural Development C+P1IR'DD at >yderabad in
+ndhra Pradesh* These t!o institutes are also engaged in promoting entrepreneurship
development among rural unemployed youth*
The ne! campus for (anara 1an) Institute for +rtisans" <arai)udi !as inaugurated by
>on=ble Inion >ome Minister" Shri P (hidambaram" during the year*

(anara 1an)=s Rural (linic Service Scheme provides basic health care services in
remote areas lac)ing basic medical infrastructure facilities* Inder the Scheme" the 1an)
encourages doctors to set up clinics in identified rural areas* +s at March 2/-/" the total
number of such clinics rose to 3-5* The 1an) under =Halayoga=" a scheme to provide safe
drin)ing !ater" has so far implemented 83 projects in its lead districts*
Exanded !an "ndia !resence

The 1an) donated a hi7tech" custom built" solar po!ered =Mobile Sales Ean= to assist
!omen entrepreneurs" S>:s and artisans to mar)et their products*
Visits by Parliamentary Committees
The third Sub7(ommittee of Parliamentary (ommittee on Official &anguages had
inspected our <hajuraho" :ha#iabad" Raipur 1ranches and (O Mysore and lauded the
efforts put in by the 1an) in the field of Official &anguage implementation*
Branch Network
The year !as significant for the 1an) in expanding domestic operations across the
country* 1efitting its -/9
th
year of existence" the 1an) on its %ounder6s Day i*e*" -.
th
@ovember" 2//." opened -/9 branches across the country" inaugurated by >on6ble
%inance Minister Shri Pranab Mu)herjee* The 1an) opened 8-9 branches during the year"
ta)ing the total tally under the branch net!or) to 8/90 branches*
Composition of domestic branch network
Category
No. of Branches
31.03.2009 31.03.2010
Metropolitan 02. 424
Urban 049 499
Semi-urban 0.- 4.8
Rural 483 44.
Total Branches 242. 8/98

The 1an) has --5 speciali#ed branches catering to the specific financial needs of
different clientele categories*

Categories of Specialized Branches 31.03.2010
-* SM's 84
2* Overseas -4
8* +gri7%inance -/
9* Micro %inance 1ranches .
3* Savings 4
0* @RIs 4
4* +sset Recovery Management 4
5* Prime (orporate 4
.* Industrial %inance 3
-/* Stoc) 'xchange 8
--* (apital Mar)et 8
-2* Mahila 1an)ing 8
-8* (onsumer %inance -
-9* >ousing %inance -
-3* 1ranch for Physically (hallenged -
TOTAL 118

GOALS FOR 2007-08
1an) targets a global business level of Rs*2" ./" /// crore for 2//47/5" !ith a
gro!th rate of over 2/B" comprising Rs* I"4/"/// crore under deposits and
Rs*I"2/"/// crore under advances* +dvances gro!th !ill be significantly driven
by agriculture" SM'" infrastructure and other productive segments" including
services sector*
To!ards faster implementation of (ore 1an)ing Solution C(1SD" the 1an) targets
to cover all the branches under (1S by March 2//5*
The 1an) has ta)en up a major brand building exercise and comprehensive
revie! of its business strategies covering products" processes" people and its
organi#ation structure*
In pursuit of the 1an)=s global aspirations" 2- prominent centers have been

identified by the 1an) for expanding its global reach* ,ith the preliminary moves
under!ay" the 1an)=s Representative Office at Shanghai is being converted into a
full fledged branch*
+fter creation of HEs in Insurance and +sset Management" the 1an) is exploring
similar options in other financial services*
The 1an) is geared up to comply !ith the revised guidelines issued under priority
sector lending*
Inder >R" +ssessment Development (entre concept !ill be implemented to map
training competence and upgrade manpo!er s)ill* Plans are under!ay to
introduce =Internship= programmed to assist students pursuing professional course*
Y

Analysis of the financial statement
%inancial statements and reports are the tools !hich provide information of the
firms financial affairs* This information is re$uired for financial analysis A decision
ma)ing* It assesses the financial status of organi#ation !hich is prepared !ith help of
accounting principle*
%inancial statement has mainly as follo!F
1alance sheet
Profit A loss account
%inancial statement is prepared on basis of generally accepted accounting
principle* These are
a* 1usiness entity principle
b* :oing concern principle
c* Monetary principle
d* >istorical principle
e* Reali#ations principle
f* +ccrual concept
Basic conventions under which financial statements prepared isF
consistency
conservativeness
disclosure
+naly#ing of financial statements helps to )no! the financial health of the
borro!er" !hich provides the detail of the liabilities and the assets of the applicant* It also
helps to study the trends in the financial matters of the company* It helps to valuate the
assets of the applicant company* It assists in decision ma)ing process relating to the
future activities*

Profit and Loss accountF7
MeaningF7 profit and loss account is one of the essential document !hich sho!s the
summary of revenues" expenses and net income of the firm during the particular financial
period*
Functions of the Profit and Loss account:-
It gives a concise summary of the firm6s revenue and expenses during the
particular period*
It measures the firm6s profitability*
It represents the activity of the firm*
Ratio Analysis:-
Ratios are classified into four parts li)eF7
-* &i$uidity ratios
2* +ctivity ratios
8* leverage ratios
9* profitability ratios

anara 1an) 1alance Sheet

Mar '06 Mar '07 Mar '08 Mar '09 Mar '10
12 mths 12 mths 12 mths 12 mths 12 mths
Capita an! "iabiities:
Total Share Capital 410.00 410.00 410.00 410.00 410.00
Equity Share Capital 410.00 410.00 410.00 410.00 410.00
Share Application Money 0.00 0.00 0.00 0.00 0.00
Preference Share Capital 0.00 0.00 0.00 0.00 0.00
Reserves 660!.!6 ""01.11 "!!#.6$ %6&%.61 1&1&%.11
Revaluation Reserves 11$.$! &&4&.!" &&04.!6 &16!.16 &1$&.6!
#et $orth 7%1&2'2( 10%&)&'98 10%)00'(9 12%207'77 1(%671'79
'eposits 116!0$.&$ 14&$!1.4# 1#40"&.4& 1!6!%&.#1 &$46#1.44
(orro)in*s &#.!& 1#"4.$# &#1".&$ "0#6.61 !440.#6
*ota +ebt 116%829'0) 1(&%9))'80 1)6%)89'6) 19&%9(9'12 2(&%092'00
+ther ,ia-ilities . Provisions !!60.#" 116#1.&# 1$4$!.## 1$4!!.%1 6%"".$0
*ota "iabiities 1&2%821'86 16)%961'0& 180%)28'69 219%6()'80 26(%7(1'09
Assets
Cash . (alances )ith R(/ "%14.00 %0%#.1% 1$$64."% 100$6."% 1#"1%.46
(alance )ith (an0s Money at Call 4%0%.#6 "&"!."4 4#1$.&# 66&&.%% $%$$."#
A!van,es 79%(2)'70 98%)0)'69 107%2&8'0( 1&8%219'(0 169%&&('6&
-nvestments &6%97('18 ()%22)')( (9%811')7 )7%776'90 69%676'9)
1ross (loc0 1"1!.60 40#6.$% 4&#4.$$ 4440.0" 44!0.$"
Accu2ulate3 'epreciation 10$0.1$ 11%#.04 1$$".46 1#10.61 16&0.%%
#et Bo,k 688'(7 2%861'&) 2%916'87 2%929'(6 2%8)9'&8
Capital 4or0 /n Pro*ress 0.00 0.00 0.00 0.00 0.00
+ther Assets &%0%.%# &%%4.#$ &6!4.1" 4060.&6 $&16.%&
*ota Assets 1&2%821'86 16)%961'0( 180%)28'69 219%6()'80 26(%7(1'09
Contin*ent ,ia-ilities 4"06&.$" #&1#0."# %#"10.!" 1$6!#1.$% 1106&".0&
(ills for collection 1&&60.%$ 1#660.41 &#&%%.6$ &#"#"."$ &1&06.4"
(oo0 5alue 6Rs7 1"1.1% 1%".!$ &0&.$$ &44.!" $0#.!$
Profit & Loss account of Canara Bank


-n,ome
/nterest Earne3 !"11.#1 11$64.#6 14&00."4 1"11%.0# 1!"#1.%6
+ther /nco2e 1$"".#1 1#11.!0 &$0!.$1 &4&".10 $000.!&
*ota -n,ome 10%089'02 12%876'&6 16%)09'0) 19%)(6'1) 21%7)2'78
./pen!iture
/nterest e8pen3e3 #1$0.01 "$$"."$ 1066&.%4 1&401.&# 1$0"1.4$
E2ployee Cost 1#1#.$0 160%.&% 1661.&! 1!"".1# &1%$."0
Sellin* an3 A32in E8penses 1061.4& %#"."" 14%1.0% 1#40.&" &164.6#
'epreciation 14#.0$ 14!.1! 16%.%" 1"$.64 1##.1$
Miscellaneous E8penses !%4.0# 140&.#! %#!."6 14!1.4& 1146.44
Preoperative E8p Capitalise3 0.00 0.00 0.00 0.00 0.00
+peratin* E8penses &%!&.$& $0&$.&6 $666.$0 $%6#.&4 4%0$."%
Provisions . Contin*encies 6$$.4! 10%4.#6 614.!0 110".&4 "#6.1$
*ota ./penses 8%7()'81 11%())')) 1(%9(('0( 17%(7&'7& 18%7&1'&)
Mar '06 Mar '07 Mar '08 Mar '09 Mar '10
#et 0ro1it 1or the 2ear 1%&(&'22 1%(20'81 1%)6)'01 2%072'(2 &%021'(&
E8traor3ionary /te2s 0.00 0.00 0.00 0.00 0.00
Profit -rou*ht for)ar3 0.00 0.00 0.00 0.00 0.00
*ota 1%&(&'22 1%(20'81 1%)6)'01 2%072'(2 &%021'(&
Preference 'ivi3en3 0.00 0.00 0.00 0.00 0.00
Equity 'ivi3en3 &"0.60 &!".00 $&!.00 $&!.00 410.00
Corporate 'ivi3en3 Ta8 $!.00 4!."! #6.00 ##."# "0.00
0er share !ata 3annuaise!4
.arnin5 0er 6hare 37s4 &2'76 &('6) &8'17 )0')) 7&'69
Equity 'ivi3en3 697 66.00 "0.00 !0.00 !0.00 100.00
(oo0 5alue 6Rs7 1"1.1% 1%".!$ &0&.$$ &44.!" $0#.!$
Appropriations
Transfer to Statutory Reserves :!6".1& $6&.&1 !0&.00 1#0!.64 16"6.$#
Transfer to +ther Reserves 1%01."4 "&&.!& $"%.01 1!0.0$ !6#.0!
Propose3 'ivi3en3;Transfer to 1ovt $0!.60 $$#."! $!4.00 $!$."# 4!0.00
(alance c;f to (alance Sheet 0.00 0.00 0.00 0.00 0.00
*ota 1%&(&'22 1%(20'81 1%)6)'01 2%072'(2 &%021'(&



Findings
-* The proposed standardi#ed 1asel2 to approach does not fits the needs of smaller
ban)ing organi#ation engaged primarily traditional ban)ing*
2* The current nor proposed capital frame!or)s yet address !hat is perhaps the most
critical ris) factor for the smaller ban)s 7 geographic and sect oral concentrations
of credit ris)*
8* Internal ratting based approach provides positive incentives to ban)s in improving
their credit ris) management techni$ues*
9* 1an)s may have discretion and flexibility in defining the exposure classes that
!hich corporate" project finance" etc*
3* Inless suitably modified the adoption of the ne! accord in its present format
!ould result in significant increase in the capital charge for ban)*
0* +dditional cost of capital !ill increase to the ban) and ban) may go for capital
mar)et to raise the found*
4* 1an) as !ell documented schemes delegation po!ers for credit sanction*



LIMITATIONS
-* The study restricted to only one branch*
2* The time constraint !as a limiting factor" as more time re$uired carrying / ut study
on other aspects of the topic*
8* Due to secrecy it is difficult obtain actual facts and figures of advances of branches*


suggestion
-* The ban) !ill no! have to adopt the credit ris) assessment system !hich is an
international standard specified for the ban)ing system*
2* Due to increased sensitivity to!ards ris) under the ne! norms" the ris) !ill come
do!n significantly* This !ill lead to an increase in the regulatory capitali#ation levels"
!hich !ill increase the cost of capital" !hich may be passed on to the customers*
8 The ban)s !ill have to exercise due care in maintaining the portfolio of ris) assets
in order not to increase unduly the re$uired regulatory capitali#ation level* This may in
turn in duce conservatism in the ban) in ta)ing of ris)y portfolio of advances" a danger
they have to guard against* It !ill indeed be a delicate balancing tas)*


(onclusion
The variability of return around the expected average is thus a $uantitative
description of ris) *Moreover" this measure of ris) is simply a proxy for ris)
because other measures cud be used*
The total variance is the rate of return on a stoc) around the expected average that
includes both systematic and unsystematic ris)*

BIBLIOGRAPHY
Refer 1y
- 1an) circulars*
2 Internal maga#ines*
8 !!!*mis*org*
9 !!!*canban)india*com*
3 !!!*rbi*org*in*