Summer Internships 2010

MBA 2009-11
PROJECT REPORT
ON
“CREDIT MANAGEMENT”
In addition to
(Comparative Analysis of credit recovery mechanism of
Private Sector & Public Sector Banks in Haryana)
Undertaken at

PUNJAB NATIONAL BANK

Circle Office
Near Meera Ghati Chowk
Karnal (Haryana)

Prepared By:
 (MANOJ SINGLA)
(MO923)

Company Guide
Faculty Guide
Mr. Sunil Kumar Singla                         Prof. Amit 
Gupta
(Senior Manager Credit Section)                        (Prof.
Finance)
DECLERATION

I hereby declare that this project titled “CREDIT MANAGEMENT

(Comparative Analysis of efficiency of credit recovery

mechanism of Public Sector vs. Private Sector Banks in
Haryana)” submitted by me to
R.P. Educational trust group of institution and Punjab national bank
(circle office), karnal in partial fulfillment of requirements of MBA
programme is a bonafide work carried out by me under the guidance
of Prof. Amit Gupta (mentor) this has not been submitted earlier to
any other University
Or Institution for the award of any degree diploma/ certificate or
published any time before.

(Signature)

MANOJ
SINGLA
 ACKNOWLEDGMENT

This project has been prepared as a part of an

internship required during the completion of MBA
program.
I was involved with PUNJAB NATIONAL BANK
(CIRCLE OFFICE), karnal, for 2 months, and I come
across a lot of people who put in their time and
effort towards acclimatizing me to the workings of
their of organization .I express
My thanks to my company guide Mr.   SUNIL   KUMAR  
SINGLA(senior Manager  credit section  ), Mr. Khurana
(Credit manager) who motivated me in all my
efforts.
I would like to thank Mr. Amit Gupta (Mentor) for
supporting me during this project and providing me
an opportunity to learn outside the class room. It
was truly wonderful learning Experience.
Last but not the least, I express my gratitude to the
entire staff of PUNJAB NATIONAL BANK.
These past 2 months were of utmost importance as
they added value towards my path of Knowledge. I
would like to end this acknowledgement by thanking
the customers and people at large with whom I have
interacted during the course of my training.

(Signature)
MANOJ
SINGLA
 TABLE OF CONTENT

EARLY HISTORY OF BANKS

○ Banking industry in India
○ Vision of Banks in India
○ Success Path for Banker
○ Challenges facing by Banking industry in India
○ Future challenges of Banks in India
○ Industry Segmentation
○ Major Key Players
COMPANY DESCRIPTION
○ History of bank
○ Vision
○ Mission
○ Domestic network
➢ SWOT ANALYSIS
➢ MARKET POSITION OF PNB
➢ 2010 ACHIEVEMENTS BY PUNJAB NATIONAL BANK
TOPIC DESCRIPTION

CREDIT MANAGEMENT

○ Introduction, functions and its effectiveness

○ Types of Borrowers
○ Partnership firms
○ Preparation of credit proposal
 ○ Guidelines for preparing credit proposal
○ Documentation and creation of security
○ Disbursement, monitoring, renewal /review (types of
guarantee)

➢ CREDIT PRODUCTS PROVIDED BY PUNJAB NATIONAL BANK

➢ CREDIT RECOVERY MEANING AND ITS PROCEDURE

RESEARCH WORK
○ Meaning and objective of research
○ Types of research
○ Importance and uses of research
○ Data collection method

SURVEY
○ Statistical analysis
○ Charts and the interpretation of data
○ Findings
○ Recommendations
○ Conclusion

ANNEXURE
○ Questionnaires
○ Report on customer services
○ Bibliography
 EXECUTIVE SUMMARY
This report has been completed in fulfilment of my
management program, MASTER IN BUSINESS
ADMINISTRATION (MBA) in the PUNJAB NATIONAL
BANK.

Objectives

➢ The main objective of this project is to get the practical knowledge of

credit
Management in the organization.
➢ To know about different credit recovery methods adopted by banks.
➢ To know which sector banks are more efficient in recovering its money.
➢ To get a good insight of banking industry.
➢ To know the significance of credit management.
➢ To get the practical experience of industry environment

The scope of the project undertaken was:

➢ Study of credit management in banks.
➢ Study various methods of credit recovery.
➢ Analysis of the findings and observations of the study.
 ➢ Recommendations based on observations
➢ Study of difference in credit recovery pattern of
public and Private sector banks.

Early History of Banks

Currently, India has 96 scheduled commercial banks(SCBs) - 27 public sector
banks (that is with the Government of India holding a stake), 31 private banks
(these do not have government stake; they may be publicly listed and traded on
stock exchanges) and 38 foreign banks. They have a combined network of over
53,000 branches and 49,000 ATMs. According to a report by ICRA (Investment
Information and Credit Rating Agency of India Limited) a rating agency, the
public sector banks hold over 75 percent of total assets of the banking industry,
with the private and foreign banks holding 18.2% and 6.5% respectively.
Banking in India originated in the last decades of the 18th century. The first
banks were The General Bank of India which started in 1786, and the Bank of
Hindustan, both of which are now defunct. The oldest bank in existence in India
is the State Bank of India, which originated in the Bank of Calcutta in June 1806,
which almost immediately became the Bank of Bengal. This was one of the three
presidency banks, the other two being the Bank of Bombay and the Bank of
Madras, all three of which were established under charters from the British East
India Company. For many years the Presidency banks acted as quasi-central
banks, as did their successors. The three banks merged in 1921 to form the
Imperial Bank of India, which, upon India's independence, became the State
Bank of India.
Indian merchants in Calcutta established the Union Bank in 1839, but it failed in
1848 as a consequence of the economic crisis of 1848-49. The Allahabad Bank,
established in 1865 and still functioning today, is the oldest Joint Stock bank in
India.(Joint Stock Bank: A company that issues stock and requires shareholders
to be held liable for the company's debt) It was not the first though. That honor
belongs to the Bank of Upper India, which was established in 1863, and which
survived until 1913, when it failed, with some of its assets and liabilities being
transferred to the Alliance Bank of Simla.
When the American Civil War stopped the supply of cotton to Lancashire from
the Confederate States, promoters opened banks to finance trading in Indian
cotton. With large exposure to speculative ventures, most of the banks opened in
India during that period failed. The depositors lost money and lost interest in
keeping deposits with banks. Subsequently, banking in India remained the
exclusive domain of Europeans for next several decades until the beginning of
the 20th century.
Foreign banks too started to arrive, particularly in Calcutta, in the 1860s. The
Comptoire d'Escompte de Paris opened a branch in Calcutta in 1860, and another
in Bombay in 1862; branches in Madras and Pondicherry, then a French colony,
followed. HSBC established itself in Bengal in 1869. Calcutta was the most
active trading port in India, mainly due to the trade of the British Empire, and so
became a banking center.
The Bank of Bengal, which later merged with the Bank of Bombay and the
Bank of Madras to form the Imperial Bank of India in 1921.
The first entirely Indian joint stock bank was the Oudh Commercial Bank, established in
1881 in Faizabad. It failed in 1958. The next was the Punjab National
Bank, established in Lahore in 1895, which has survived to the
present and is now one of the largest banks in India.
Around the turn of the 20th Century, the Indian economy was passing through a relative
period of stability. Around five decades had elapsed since the Indian Mutiny, and the
social, industrial and other infrastructure had improved. Indians had established small
banks, most of which served particular ethnic and religious communities.

Banking industry in India

The Banking Industry was once a simple and reliable business that took
deposits from investors at a lower interest rate and loaned it out to
borrowers at a higher rate.
The Banking Industry was once a simple and reliable business that took
deposits from investors at a lower interest rate and loaned it out to
borrowers at a higher rate.
However deregulation and technology led to a revolution in the Banking
Industry that saw it transformed. Banks have become global industrial
powerhouses that have created ever more complex products that use risk
and securitization in models that only PhD students can understand.
Through technology development.
Banking services have become available 24 hours a day, 365 days a week,
through ATMs, at online banking, and in electronically enabled exchanges
where everything from stocks to currency futures contracts can be traded.
The Banking Industry at its core provides access to credit. In the lenders
case, this includes access to their own savings and investments, and interest
payments on those amounts. In the case of borrowers, it includes access to
loans for the creditworthy, at a competitive interest rate.
Banking services include transactional services, such as verification of
account details, account balance details and the transfer of funds, as well
as advisory services that help individuals and institutions to properly plan
and manage their finances. Online banking channels have become key in
the last 10 years.
The collapse of the Banking Industry in the Financial Crisis, however,
means that some of the more extreme risk-taking and complex
securitization activities that banks increasingly engaged in since 2000 will
be limited and carefully watched, to ensure that there is not another banking
system meltdown in the future.

Vision of Banks in India

The banking scenario in India has already gained all the momentum, with
the domestic and international banks gathering pace. The focus of all banks
in India has shifted their approach to 'cost', determined by revenue minus
profit. This means that all the resources should be used efficiently to better
the productivity and ensure a win-win situation. To survive in the long run,
it is essential to focus on cost saving. Previously, banks focused on the
'revenue' model which is equal to cost plus profit. Post the banking reforms,
banks shifted their approach to the 'profit' model, which meant that banks
aimed at higher profit maximization.

Success Path for Banker

One of the biggest problems facing senior managers of banks today is attracting
customers and attaining growth, often in an environment where products and prices
among competitors are close substitutes. Traditional bases for differentiation, such as
product features or cost, are becoming less tangible. So the management’s are forced to
look for new ways to appear attractive to its target market and simultaneously retain the
existing one. From the annual survey conduct by FICCI, we found that they rank their
business strategies that have helped them in increased customer acquisition and retention
(On a scale of 1 to 8 with 8 being the most important marketing strategy). The results of
the Mode score being accorded by the Public, Private& Foreign banks are presented
below:

Technology has moved from being just a business enabler to being a business driver. Be
it customer service, reducing operational costs, achieving profitability, developing risk
management systems, we turn to technology for providing necessary solution.
Technological up gradation was clearly identified as one of the most successful strategy
in Customer Acquisition and Retention followed by Expansion of ATM Network,
Advertisements and additional sales force.
Customer Retention and Customer Satisfaction are inexorably interred - linked. While
consumers may be happy to make payments and interact with their bank through
convenient – and cheaper – banking channels, they still expect high standards of service.
A consistent service reflects the bank’s brand and image across all channels. 93.75 per
cent of respondent banks informed that superior service pre and post banking has been
one of the essential factors rated high by their customers. 75 per cent of respondent
banks felt that Personal touch in the dealings has helped them in winning customers.

Challenges facing by Banking industry in

India
The banking industry in India is undergoing a major transformation due to changes in
economic conditions and continuous deregulation. These multiple changes happening
one after other has a ripple effect on a bank Refer fig. trying to graduate from
completely regulated sellers market to completed deregulated customers market.
Future challenges of Banks in India
The Indian banks are hopeful of becoming a global brand as they are the
major source of financial sector revenue and profit growth. The financial
services penetration in India continues to be healthy, thus the banking
industry is also not far behind. As a result of this, the profit for the Indian
banking industry will surely surge ahead. The profit pool of the Indian
banking industry is probable to augment from US$ 4.8 billion in 2005 to
US$ 20 billion in 2010 and further to US$ 40 billion by 2015. This growth
and expansion pace would be driven by the chunk of middle class
population. The increase in the number of private banks, the domestic credit
market of India is estimated to grow from US$ 0.4 trillion in 2004 to US$
23 trillion by 2050. Third largest banking hub of the globe by 2040 - is that
vision too far away?
Industry Segmentation
Nationalized /Public sector banks
➢ Dominate the banking system in India.
➢ Nationalization of banks in India took place in 1969 by Mrs. Indira
Gandhi.
Private Banks
➢ Made banking more efficient and customer friendly.
➢ Jolted public sector banks out of complacency and forced them to
become more competitive.
Foreign banks
➢ Have brought latest technology and latest banking practices in India.
➢ Have helped made Indian banking system more competitive and
efficient.

Major Key Players

COMPANY DESCRIPTION
Punjab National Bank (PNB) (BSE: 532461), is a
state-owned financial services company located in New
Delhi, India. It was registered on May 19, 1894 under
the Indian Companies Act with its office in Anarkali
Bazaar Lahore. Today, the Bank is the second largest
government-owned commercial bank in India with about 5000 branches across 764
cities. It serves over 37 million customers. The bank has been ranked 248th biggest bank
in the world by the Bankers Almanac, London. The bank's total assets for financial year
2007 were about US$60 billion. PNB has a banking subsidiary in the UK, as well as
branches in Hong Kong, Dubai and Kabul, and representative offices in Amati, Dubai,
Oslo, and Shanghai.

Punjab National Bank is one of the Big Four Banks of India,

along with ICICI Bank, State Bank of India and Canara
Bank.
History of BANK
• 1895: PNB commenced its operations in Lahore. PNB has the distinction of
being the first Indian bank to have been started solely with Indian capital that has
survived to the present. (The first entirely Indian bank, the Oudh Commercial
Bank, was established in 1881 in Faizabad, but failed in 1958.) PNB's founders
included several leaders of the Swadeshi movement such as Dyal Singh Majithia
and Lala HarKishen Lal, Lala Lalchand, Shri Kali Prosanna Roy, Shri E.C.
Jessawala, Shri Prabhu Dayal, Bakshi Jaishi Ram,
and Lala Dholan Dass. Lala Lajpat Rai was actively
associated with the management of the Bank in its
early years.
• 1904: PNB established branches in Karachi and
Peshawar.
• 1940: PNB absorbed Bhagwan Dass Bank, a
scheduled bank located in Delhi circle.
• 1947: Partition of India and Pakistan at Independence. PNB lost its premises in
Lahore, but continued to operate in Pakistan.
• 1951: PNB acquired the 39 branches of Bharat Bank (est. 1942); Bharat Bank
became Bharat Nidhi Ltd.
• 1961: PNB acquired Universal Bank of India.
• 1963: The Government of Burma nationalized PNB's branch in Rangoon
(Yangon).
• September 1965: After the Indo-Pak war the government of Pakistan seized all
the offices in Pakistan of Indian banks, including PNB's head office, which may
have moved to Karachi. PNB also had one or more branches in East Pakistan
(Bangladesh).
• 1960s: PNB amalgamated Indo Commercial Bank (est. 1933) in a rescue.
• 1969: The Government of India (GOI) nationalized PNB and 13 other major
commercial banks, on July 19, 1969.
• 1976 or 1978: PNB opened a branch in London.
• 1986 The Reserve Bank of India required PNB to transfer its London branch to
State Bank of India after the branch was involved in a fraud scandal.
• 1986: PNB acquired Hindustan Commercial Bank (est. 1943) in a rescue. The
acquisition added Hindustan's 142 branches to PNB's network.
• 1993: PNB acquired New Bank of India, which the GOI had nationalized in
1980.
• 1998: PNB set up a representative office in Almaty, Kazakhstan.
• 2003: PNB took over Nedungadi Bank, the oldest private sector bank in Kerala.
At the time of the merger with PNB, Nedungadi Bank's shares had zero value,
with the result that its shareholders received no payment for their shares.
PNB also opened a representative office in London.
• 2004: PNB established a branch in Kabul, Afghanistan.
PNB also opened a representative office in Shanghai.
PNB established an alliance with Everest Bank in Nepal that permits migrants to
transfer funds easily between India and Everest Bank's 12 branches in Nepal.
• 2005: PNB opened a representative office in Dubai.
• 2007: PNB established PNBIL - Punjab National Bank (International) - in the
UK, with two offices, one in London, and one in South Hall. Since then it has
opened a third branch in Leicester, and is planning a fourth in Birmingham.
• 2008: PNB opened a branch in Hong Kong.
• 2009: PNB opened a representative office in Oslo, Norway, and a second branch
in Hong Kong, this in Kowloon.
• 2010: PNB received permission to upgrade its representative office in the Dubai
International Financial Centre to a branch.
 PNB India’s
Leading Nationalised
Bank
166 Scheduled Commercial Bank in Indian Banking
System.

Ranked second strongest bank in Asia pacific by

“The Asian banker” (Singapore)
Sh.K.R.Kamath (Chairmen and
Managing Director)

Vision
“To be a Leading Global Bank with Pan India
footprints and become a household brand in the
Indo-Gangetic Plains providing entire range of
financial products and services under one roof"

Mission

"Banking for the unbanked"

The performance highlights of the
bank in terms of business and profit
are shown below:
axd s
Quarterly Net Interest Margin On Daily Average
Basis.

Domestic network
SWOT
ANALYSIS
SWOT stands for Strength,
Weakness, Opportunities and Threats.
Strengths and Weakness are the
internal factors of the company where
as Opportunities and Threats are
external factors. SWOT Analysis is the tool for auditing an organization and
its environment. It is the first stage as planning. It can be used in conjunction
with other tools as audit and analysis.

Strengths
➢ Well known brand and long history
➢ Capture small retail sector
➢ Knowledge of Indian market
➢ Having sound market share
Weakness
➢ Lack of unified global identity
➢ Not able to position itself correctly
Opportunities Threats
➢ Growing Indian banking sector ➢ From various competitors
➢ People are becoming more service ○ Foreign banks
○ Private banks
oriented in global market
➢ Future market trends
PUNJAB NATIONAL BANK is listed
in BSE (Bombay Stock Exchange).
This figure shows the market trend of
Punjab National Bank in last six
months.
2010 Achievements by
Punjab National Bank
 CREDIT MANAGEMENT
Credit Scenario in India
Against the backdrop of generally strong economic
fundamentals, the credit growth has been impressive. The credit
products have become more sophisticated with the increasing
maturity of banks and growth of financial institutions. In order to
decrease the borrowing cost and hedge interest rate risk the
companies in India are increasingly using products Credit Linked
Note, Credit Default Swaps, CBOs etc.

Function of the Credit Department

 Credit is a core banking function that enables attainment of the
fundamental objective of assets transformation between its
clients. The function is executed by way of extending fund
based and non-fund based credit facilities to different clients.

 The Credit department endeavors to extend different products in

the above two categories to the corporate clients in the country.
The department aims to maximize the interest spread earned on
funds available with the Bank while keeping the risk on the
credit portfolio at acceptable levels.
  The department is the major contributor to the top line as well
as bottom line of PUNJAB NATIONAL BANK. The department has
been at the forefront of launching innovative corporate credit
products.

 The key strengths of the department are superior appraisal

skills, understanding of risk, in-depth understanding of industry
and relationship with leading Indian corporate, especially in the
mid corporate segment.

Effective credit management

The effective management of credit involves choosing its
best mix and use with respect to loan maturity terms,
interest rates, and payment size and frequency. In other
words, it shows the insight of knowing when to borrow, how
much to borrow, and from where to borrow. As a result,
you’re able to meet your required loan obligations without
great stress or strain, and you have an overall debt
repayment strategy.
The ability to handle credit is, of course, influenced by many
factors, such as your current and future income, your current
and future expenses, the prevailing interest rate that you’ll
have to pay on borrowed funds, the payment terms of your
loans, and your financial discipline.
Being able to handle larger debt payments means that, if
needed, you can safely borrow more money. Although every
individual or family situation is unique, many financial
 advisors suggest a basic rule-of-thumb to determine your
overall debt position. Compute the percentage of your take-
home pay, also known as your disposable income, that’s
required to service your debts

TOUGH CHALLENGES IN CREDIT MANAGEMENT

In their quest to more-effectively manage their

corporate credit process, most banks face some tough hurdles.
Even under ideal circumstances, the corporate credit
management process presents challenges for most banks. Many
banks face challenges with information technology (IT) systems
that often hinder rather than help them. At many banks, the IT
systems used by analysts, underwriters, loan officers, and
portfolio and relationship managers are often a mishmash of
outdated customized legacy systems that make the loan
management process convoluted and more difficult to navigate.

What part of a bank’s credit goes to

which type of loans?
 BORROWERS
Credit limits are considered to various types of borrowers.
Depending on the constitution of the borrower certain
formalities are required to be completed, and precautions
need to be taken while dealing with them.

A limited company may be private or public, incorporated

under the Companies Act, 1956.It come into legal existence
after the Registrar of Companies issues a Certificate of
Incorporation. The following basic documents should be
obtained for considering requests for advances to limited
companies:
 Certificate of Incorporation

○ Certificate of Commencement of Business

○ Memorandum and Articles of Association
○ Balance Sheets and Profit & Loss Statements
○ Board Resolution

Restrictions on the Borrowings by a Company

The Memorandum of Association of the limited
company should be scrutinized to ascertain that the purpose and
the amount of advance facility sought are authorized by the
Memorandum of Association. It must be ascertained whether there
is any restriction on the borrowing by the company.
Restrictions on Borrowing Powers of Directors
The board of directors of a public limited company
cannot borrow in excess of the paid-up capital and free reserves of
the company without the consent of the company in a general
meeting.

Restriction on Banking Arrangements

with Other Banks
In the case of limited company borrowers, an
undertaking should be obtained from them to the effect that they
will not open any current account or approach any other bank for
facilities without obtaining prior clearance in writing from the Bank.
It should also be ensured that the company close their existing
accounts, if any, with other banks, unless satisfactory explanation is
offered for continuing the accounts
 PARTNERSHIP FIRMS
A partnership firm is governed by the Indian Partnership
Act, 1932.
Original Partnership Deed should be verified to ensure that the
provisions in the deed do not conflict with the terms of the
account. A copy of the deed should be obtained. Important
provisions/ stipulations affecting the operations of the bank
account should be noted for ready reference
In every partnership account, the Partnership Letter completed
and signed by all the partners in their personal capacity and on
behalf of the firm should be obtained.
In case of Retirement or Admission of a
Partner
Normally, the operations in the existing account should be put
on hold to keep the retiring partner’s estate liable for the debts
due to the Bank. The credit facility for the reconstituted firm
should be got reviewed as soon as possible.
In case of death of a Partner
The operations in the existing account should be stopped /
freezed to protect the Bank’s right against the estate of the
deceased.

INDIVIDUAL BORROWERS
 Single Borrower
 An account in the name of an individual is operated upon
by the account holder him/herself.
 An individual borrower may authorize another person to
operate the account under a Power of Attorney.

Joint Borrowers
 In case of more than one borrower, all must be made jointly and
severally liable for borrowings.
 Authority to any of the joint debtor to operate on a deposit account
does not automatically extend to borrowing without the concurrence
of all account holders.

PROPRIETARY CONCERNS

Proprietorship is in the name of a firm or a business owned

by an individual who is its proprietor
A declaration from the sole proprietor of the concern,
whether functioning under his/her own name or a trade
name, should be obtained in the personal capacity to the
effect that no person other than the proprietor has any
 interest in the business as proprietor or otherwise and that
the proprietor as the sole proprietor is and will continue to
be personally liable for all the dealings and obligations in
the name of business.

HINDU UNDIVIDED FAMILIES (HUF)

A Joint Hindu Family consists of all persons lineally descended
from a common ancestor and includes their wives.
The documents should be executed by the Karta and also by all
major co-partners or by the Karta, provided a letter of authority
signed by all the major co-partners empowering the Karta to sign
the documents on their behalf is furnished. An undertaking letter
stating, that the advance is required for the ordinary purpose of
the family business and all of them jointly and severally bind
their interest in the Undivided Hindu Family and also those of
their respective issues should be obtained.

CREDIT APPLICATION FORM AND INITIAL

SCRUTINY

Issuing Credit Application Form

Appropriate Credit Application Form of the Bank may be
provided to the prospective customer, if:
• The request is found to be prima facie in order and
generally conforming to the credit policy and plan/s
of the Bank / branch and basic principles of lending.
 • The customer is agreeable to the Bank’s terms and
conditions normally prescribed for such facilities.

Receipt
Receipt of Credit Application Form
Credit Application Form submitted by the customer should be
checked to ensure that:
 All the applicable items are properly filled-in, with
appropriate remarks made against inapplicable items.
 It is signed by the borrowers and guarantors, wherever
applicable.
 All the relevant details and necessary enclosures like
statements, reports, certificates, balance sheets,
assessment orders, forms etc., are enclosed.

Initial Scrutiny
A quick scrutiny of the Credit Application Form submitted by
the customer may be carried out by reviewing the papers and
financial particulars submitted by them. The observations
contained in the note on discussions / interview with the
customer may also refer to.

Pre Sanction Inspection and Credit

Reports
 Pre-sanction inspection should be conducted and credit
reports collected for considering all the credit requests,
except the following:
• Advances against the Bank’s Term Deposit
Receipts.
Advances against Shares, LIC Policies, National Savings
Certificates, and other Government securities where the
branch has directly registered its charge with the issuing
authority and necessary proof to this effect is maintained
on the branch record.

PREPARATION OF CREDIT PROPOSAL

Credit Application and other particulars submitted by the
customer, credit reports and reports / notes of pre-sanction
inspection of the account carried out by the Bank officials would
form the basic

• Inputs for preparing the Credit Proposal. It is necessary that

the person preparing the Credit Proposal is thoroughly
acquainted with the basic principles of lending and the up-
to-date guidelines, policies and procedures of the Bank and
the guidelines / directives of the Reserve Bank of India and
other regulatory authorities on the subject.
• Credit Proposal should normally be prepared by the branch
staff. In cases involving large limits and complex projects or
in case of other exigencies, Credit Proposals can be
 prepared by or with the assistance of the officials at
Zonal/Central Office.
• The Bank has not standardized the Credit Proposal Format
for processing credit requests of Corporate Banking
customers as each credit proposition has its own
peculiarities. Depending on requirements of each case, the
proposal should be prepared covering all relevant areas.

GUIDELINES FOR PREPARING CREDIT PROPOSAL

The guidelines for preparing credit proposal based on
the frame-work mentioned above are given below.

Proposal Number
Number the proposals serially from the beginning of each
financial year. The Alfa Code of the Branch (short form of the
branch name), financial year and serial number of the proposal
would form the proposal number.
Branch
State the name of the branch to which the advance
pertains.
Name of the Company
Mention full and correct title of the advance account.
Date of Incorporation
Mention the date of incorporation of the company. This can
be ascertained from the Certificate of Incorporation issued
by the Registrar of Companies. In case of non-corporate
bodies, the date / year of establishment may be given
Line of Activity
Give brief description of the nature of business / activities
carried out by the borrower for which the facilities are
proposed. In case of manufacturing / industrial concerns,
give brief description of major processes / products.
Registered Office
Give full and correct address of the Registered Office of the borrower
company.
Corporate Office

Give full and correct address where the Administrative Office of the
Company is situated.
Board of Directors
Give the list of Directors of the Company indicating against
each name the type of office he/she holds, such as Chairman,
Vice Chairman, Managing Director, Whole Time Director,
Nominee of ____ (FI) etc.
Indebtedness to Punjab National Bank
Give the extent of present and proposed fund based
and non-fund based limits from our Bank.
Banker’s Reference and Rating by Credit Agency
Give highlights of the Bankers’ Reports obtained recently on the
conduct of the accounts of the company and the other
companies of the group.

• In case the company has obtained credit rating

from any Rating Agency, give the latest rating (and its
 brief description) along with the name of the Credit Rating
Agency, nature of instrument/s for which rating is
obtained, date of awarding the rating and its validity.

Credit Risk Rating and Asset Classification

Work out and indicate the Credit Rating as per the Credit
Risk Rating system of the Bank. Also confirm that the asset
classification continues to be ‘Standard’. In case of new
accounts, credit rating allocated by the leader of
consortium / other financing banks and also confirmation
that it continues as ‘Standard’ account may be given.
Brief Background of the Company
Give brief history background of the company. Also give brief
description of major business / activities. In case of
manufacturing / industrial enterprises, give brief description of
the major processes and products. Give comments about the
reputation of the company, quality and conduct of business,
soundness of operations etc.

Major Competitors and Market Share

• Give brief particulars about the major
competitors and market share of the company as well
as main competitors. The information may be
obtained from published data, where available and/or
market enquiries.

• Give price advantage, tariffs, marketing network,

trends and prospects, main customers of the company
vis-à-vis the competitors.
Performance and Financial Indicators
In case of existing companies, figures pertaining to four years
i.e. last two years actual based on audited accounts, estimates
for the current year and projections for the next year are
normally given... The major items of figures for which
information is to be furnished are given below given are as
under:
Key Financial Indicators
a) Net Sales
b) Other Income
c) Operating Profit after Interest
d) Net Profit before Tax
e) Net Profit after Tax
f) Paid-up Capital
g) Tangible Net-worth
Ratios
a) Profitability Ratios
b) Turn over Ratios
c) Liquidity Ratios
d) Leverage Ratios

Assessment of Limits
Term Loans
The request for the Term Loan limits should
generally be accompanied by the detailed project report
prepared by the Borrower. The bank official should appraise
the project from different angles with the objective of
justifying the investment. The main components of appraisal
of a project are given below in graphic form for ready
reference:
The important Ratios that need to be considered for appraising
the project are described below:

➢ Service Coverage Ratio (DSCR)

○ Debit Service Coverage Ratio (DSCR) ratio provides the
measure of the ability of the project to service the
repayment of its entire long term debt. It also serves as
a guide to determine the period for repayment
○ The ratio is valuable as it indicates the margin of safety
which exists for the Bank. A good DSCR should be two
or more. When it is less than two, greater care needs to
be exercised.
Internal Rate of Return
Internal Rate of Return (IRR) is generally worked
out by a process of trial and error. First cash flows are
discounted at cut off rate and if NPV is negative at this rate, the
project is rejected since IRR is less than the cut-off rate.
Secondly if NPV is positive at the cut-off rate, cash flow is
discounted at higher and higher rates, till such time NPV
becomes zero.
Break Even Point (BEP)
Break Even Point indicates the volume of sales
which the unit must achieve in order to cover its total costs. If
the unit can sell more than the break even volume, it earns
profit.

Sensitivity Analysis
Sensitivity analysis indicates the degree of cushion
available in the profitability of the project to withstand
changes with assumed conditions
Format for Critical Project Information

 Assessment of Term Loan Requirement

1. Vocational Advantage
2. Cost of Project
3. Means of Finance
4. Schedule of Implementation
5. Project Requirements
6. Schedule of Implementation
7. Loan Eligibility
8. Margin
9. Status of Government Clearance
10. Financial Highlights
11. Refinance

➢ Working Capital Assessment

➢ Risk Perception / Analysis

 Some of the suggested risk
parameters that may be commented
upon in arriving at the risk perception
are given below. All the parameters may
not be applicable to each Credit
Proposal. Also the degree of importance
of each parameter may vary across the
accounts and time.
○ Political.
○ Regulatory
○ Finance

DOCUMENTATION AND
CREATION OF SECURITY
Security documents establish the precise relationship
between the Bank and the borrower and form the main basis for
the Bank’s legal recourse in court of Law in case the borrower
fails to repay the advance.
 While obtaining the documents, it should be borne in mind
that, if the Bank is faced with a situation of remedying any
defects or irregularities in the security documents at
the time of filing a suit, it would be difficult to get the co-
operation from the borrower and guarantor/s, if need be,
and the Bank’s action against them might be affected.
  Proper drafting/format of the documents and their correct
stamping and execution are the three essential
requirements of proper documentation.
 Instruments / documents, other than bills of exchange and
promissory notes, executed out of India may be stamped
within three months after being first received in India.
 In case of instruments chargeable according to the State
Stamp Act, the stamps should pertain to the concerned
State.
Stamp duty should be paid to the Stamp Office of the
State where the documents are executed. The stamp paper
should normally be in the name of the Bank or the customer.
The Stamp Law provides that any adhesive stamp affixed on an
instrument should be cancelled in such a way that it cannot be
used again. Such cancellation is done either at the time when
the stamps are affixed or at the time of execution.
All security documents obtained from the borrowers should be
held in cloth-lined / plastic Security Dockets only.

Separate dockets should preferably be maintained for each

facility of the borrower. The following information should appear
on the outer cover:

a. Name of the Account

b. Account No.
c. Type of Facility
d. Limit
e. Date of Sanction
 Now the CREATION OF SECURITY which includes
the third party guarantee. Guarantee is stipulated as a security
to reinforce the safety of the Bank’s funds. When guarantee is
stipulated as one of the securities in an advance account.
Parties to the contract of guarantee are:

• Applicant: The principal debtor – the party at whose

request the guarantee is being executed.
• Beneficiary: The party to whom the guarantee is being
given and who can enforce it in case of default.
• Guarantor: The party who undertakes to discharge the
obligations of the applicant in case of his/her defaults.

Thus, a guarantee is a collateral contract

consequential to a main contract between the applicant
and the beneficiary. As a means of such safeguard, the
bank seeks from the borrower the guarantee of another
person for the prompt repayment of debt in case the
borrower fails to repay.
➢ In the event of death of a single guarantor or of one of the
joint and several guarantors, steps should be taken
immediately to obtain a new guarantor in place of the
deceased.
➢ Since a decision to substitute a fresh guarantee or to waive
the guarantee of the deceased as mentioned above would
take some time, steps should be taken to preserve the
liability of the estate of the deceased guarantor to the Bank
under the guarantee.
 DISBURSEMENT,
MONITORING, RENEWAL /
REVIEW

DISBURSEMENT

Disbursement of any advance (credit facility) should be

effected only after:

I) sanction of facility by the appropriate authority.

ii) Proper execution of security documents by borrower /

guarantor and their checking and verification.

iii) Compliance of all terms of sanction including creation and

registration of charge over securities, where applicable.

iv) Completion of account opening formalities, where

applicable.

Disbursement should be made as per the guidelines in

this regard and subject to stipulations, if any, made in the
sanction.

RENEWAL / REVIEW
 Its Purpose is to all credit facilities, other than ad-hoc
guarantees / letters of credit, are required to be renewed
annually. The correct terminology is Review in case of Term Loans
and Renewal in case of other facilities repayable on Demand.
The “Annual Renewal/Review” exercise gives the Bank an
opportunity mainly to assess:
I. The performance of the borrower’s business activity.
II. How well and effectively the borrowed funds were utilized.
III. The borrower’s position with regard to plough back of profits.
IV. Whether the limits are appropriate.
GUARANTEES

Issuing guarantees on behalf of customers is a major non-

fund based business of banks. A guarantee is a contract to
perform the promise or discharge the liability of a third person in
case of his/her default. It constitutes a contingent liability which
arises in the event of default by the customer.
There are three parties to a bank
guarantee:
i. The Applicant customer - on whose behalf the
guarantee is given, also known as Principal Debtor.
ii. The Beneficiary - to whom the guarantee is given.
iii. The Issuing Bank - who gives the guarantee, also called
as the surety
Types of Guarantees

Bank Guarantees are broadly of two types:

 Deferred Payment Guarantees

- A Deferred Payment Guarantee is a contract or

undertaking by the bank to the supplier that the price of
machinery or goods supplied by them on deferred payment terms
will be paid in agreed instalments with stipulated interest on the
respective due dates, in case of default in payment thereof by the
buyer.
- A deferred payment guarantee is akin to a term loan, and as
far as the buyer is concerned, it serves the same purpose as that
of a term loan.
- A company which desires to acquire plant and machinery can
buy them by making full payment at the time of delivery itself,
either from its own source, or by availing of a suitable term loan
from a bank/financial institution

In case of a term loan, the bank makes the payment either

to the buyer or directly to the seller and the buyer (borrower)
repays his obligations in stipulated instalments to the bank.
In the case of a deferred payment guarantee, the bank
merely executes a guarantee on behalf of the buyer to the seller’s
bank, who on the strength thereof discounts the seller’s bills
drawn on the buyer.

ii) Ordinary Guarantees

Ordinary Guarantees are of two types - Financial Guarantees and
Performance Guarantees.
Financial Guarantees

It is a contract of guarantee, whereby the bank becomes the

surety for the applicant who is the principal debtor and assumes
all the liability of a surety under the Indian Contract Act. If the
applicant fails to repay the underlying debt, the bank as surety is
called upon to repay the unpaid portion of the debt.

Performance Guarantees

It is a contract of indemnity, whereby the bank undertakes to

indemnify the beneficiary to the extent of loss or damage suffered
by the beneficiary as a result of non-performance or defective
performance by the applicant during the warranty period.
Although these guarantees are for performance of a contract or
obligation, in case of default, the liability of the bank is to
reimburse the loss or damage not exceeding the bank guarantee
amount.

Text and Authentication of Guarantee

A bank should normally be issued in the form Standardized by the
Bank. If a guarantee is required to be issued in a different format
due to insistence of beneficiary, it should be ensured that the
guarantee is:
• For a definite period.
• For a definite object and enforceable on happening of a
definite event.
• For a specific amount.
• Without any clause providing for automatic renewal on its
expiry.
 Other guidelines and precautions to be taken while issuing
guarantees are as follows:

a. In order to prevent unaccounted issue of guarantees, as

well as fake guarantees, as suggested by IBA, bank
guarantees should be issued in serially numbered
security forms.

b. The body of the guarantee, as per the requirements of

the beneficiary /applicant, should be typed in
continuation sheets.

c. The guarantee should be adequately stamped.

d. The guarantee should be signed by at least two

authorized signatories of the bank.
SOLVENCY CERTIFICATES

Banks are occasionally required to issue Solvency

Certificates for the contractors / businessmen / companies.
Solvency Certificates should be issued only to the customers
having borrowing limits with the same bank or to those having
satisfactorily conducted accounts for a minimum period of six
months.
The amount of Solvency / Capacity Certificate should be
decided after satisfying about the customer’s means and capacity.
The following aspects need to be taken into consideration for
deciding the Solvency of the customer:
✔ Volume of Business.
✔ Means and standing of the Customer (Net worth should be

verified from audited Balance Sheet and Profit & Loss

Account, Statement
Of Assets & Liabilities, Income Tax, Wealth Tax, Sales Tax,
Returns etc.)
✔ Operations in the account.
✔ Track record/past performance in respect of
work/contracts/business undertaken.
✔ Market report
Credit Products
Provided By
Punjab National
Bank

➢ Housing loan
➢ Car finance
➢ Two wheeler finance
➢ Personal loan
➢ Professional loan
➢ Education loan
➢ Loan against mortgage of property
➢ PNB Fin-Basket scheme
➢ Personal loan scheme for pensioners
➢ Reverse mortgage scheme
➢ Other credit scheme

HOUSING LOAN
Regular Housing Finance Scheme for Public
• PNB reaches out to you with fast, friendly and most convenient home loans for:
Construction or purchase of house/ flat.
• Purchase of house/ flat on First Power of Attorney basis from the original allot tee.
Carrying out repairs/ renovations/ additions/ alterations to existing house/ flat.
• Special Feature- To cover the loan outstanding, life Insurance cover is also available on
payment of one time premium which can also be financed by the bank.

Car finance

Available for purchase of New Car/ Van/ Jeep/ Multi Utility

Vehicle (MUV)/ Sports Utility Vehicle (SUV) or for old vehicles
that are not older than 3 years.
Finance will be provided for purchase of vehicle of indigenous/
foreign makes

Personal loan
To meet all type of personal needs. Term loan/overdraft minimum amount of
loan will be Rs. 50,000 /- and maximum amount of loan Rs. 4, 00,000/- or 20
times monthly net salary whichever is less, depending upon the repaying
capacity.
And suitable guarantee is acceptable to the bank.

Professional loan scheme

PNB extends assistance to self-employed persons, firms and joint ventures of

such professional persons engaged in professions such as:
Medical practitioners including dentists, chartered accountants, cost
accountants, practicing company secretaries, who are not in regular
employment of any employer, accredited journalists or cameramen who are
free lancers, i.e. not employed by a particular newspaper/magazine, lawyers
or solicitors, engineers, architects, surveyors, construction contractors or
management consultants or to a person trained in any other art or craft who
holds either degree or diploma from any institution established, aided or
recognized by Government or to a person who is considered by the bank as
technically qualified or skilled in the field in which he is engaged. Loans
under this scheme may be granted for the purpose of financing purchase of
equipment used by the borrowers, business premises, construction, making
alterations or renovation of business premises/nursing homes or for working
capital requirements, in their professions.

Education loan scheme

The scheme aims at providing financial support to
deserving/meritorious students for pursuing education in India
and abroad at APPROVED universities. The scheme takes care
of increasing costs of admission, books, instruments,
lodging/boarding etc.

Two different schemes under this category which provided by

bank are...

A. "VIDYALAKSHYAPURTI"
B. Sarvottam shiksha
Loan against mortgage of property
Scheme seeks to provide finance against mortgage of immovable property situated in
Metro/ Urban/ Semi Urban centres. The scheme is designed to offer instant solutions
relating to business needs or for personal needs such as, children's higher education,
travel, daughter's marriage, medical emergencies, etc. Loan is, however, not available
for speculative purpose.
The purpose is for personal and business needs.

Pnb Fin-Basket scheme

Offers attractive benefits as part of a Package to those customers who have the
capacity and are willing to avail a minimum specified loan amount under at least two
or more specified Retail Loan Schemes.
This scheme is only for authorized branches.

Personal Loan Scheme for Pensioners

All types of pensioners who are drawing their pension through our branches are
eligible. This includes pensioners and Ex-employees of our Bank. PNB’s pre 1986
retirees who are getting ex-gratia are also eligible.

Further, pensioners whose pension is being received by the Bank through Department
of Pension Disbursing Office (DPDOs) may also be allowed loan under the Scheme.
And the purpose is to meet personal needs including medical expenses.
The loan amount is maximum Rs.1, 50,000/- (Rupees one lace only) or amount
equivalent to 18 months' net pension, whichever is lower.
For Pensioners above the age of 75 years, the maximum amount of loan would be
Rs.70, 000/-

Reverse Mortgage Loan - "PNB Baghban" for

Senior Citizens
PNB is the first Public Sector Bank to come out with a Reverse Mortgage concept
based product for senior citizen titled "PNB Baghban". The product addresses one of
the very important requirements of the society in the fast changing culture of Indian
society.
The objective of this loan is to address the financial needs of senior citizens owning
self occupied property (house), for leading a decent life.
The qualifying amount of loan will depend on the realisable value of residential
property, after maintaining margin of 20%. The maximum qualifying amount of loan,
along with interest, shall be restricted to Rs.100 lack.

Other Credit Schemes

To meet your credit requirements, PNB is there with many attractive
schemes to choose from
○ Scheme for advances to Road Transport Operators for purchase of
Truck, Buses and advances to owner-drivers of Taxi, Car, Scooter,
Diesel Jeep, Station Wagons or Tempos etc.
○ Scheme for advance to self-employed persons engaged in small
business.
○ Advance against Bank's own Deposits.
○ Loans to individuals against Shares / Debentures / Bonds.
○ Advances against Govt. securities, postal securities, IVPs, KVPs,
Jewellery, FDRs of PNB Subsidiaries, Units of UTI & other Mutual
Funds, Pensioner's Benefit Scheme etc.
Credit
recovery

It is the primary responsibility of the branch to monitor advance

accounts, ensure that they are conducted as per the terms of
sanction and the interest and instalments, wherever applicable
are recovered promptly.

It is likely that despite follow up by the branch, some accounts

become irregular/overdue. The branch should devise appropriate
strategies and take necessary steps in consultation with the
controlling authorities wherever required, for
regularizing/effecting recovery in these accounts.
The general guidelines and procedural steps decided by
the Bank to be followed by the branches are given in the
following paragraphs.

Recovery Process
 The recovery of loan is a continuous and seamless process,
which should start from the disbursement of a loan
 rather than on noticing certain undesirable
features/developments. The branches should thus monitor
the accounts on an ongoing basis immediately after
disbursement a watch for any incipient problem in the
account.
 In all accounts, instalment reminders should be sent
10 days before due date and interest advices as soon as
applied.

The actual recoveries should be closely monitored. Diary

notes should be regularly maintained for obtaining Revival
Letters. It should be ensured these are obtained well in
advance.
 If conduct of the account is unsatisfactory, desirability
of initiating legal action should be examined during the
validity period of security documents. History sheet of each
account for follow-up made and important events that have
taken place in the account should be kept in the account
folder.
 Normally, an account which has the potential of becoming
a major problem in near or distant future would show
some symptoms quite early on. Some of these symptoms
are quite common and easily discernible.
 On detection of the symptoms, the pros and cons of
retaining the account with the Bank should be examined in
a dispassionate manner, in consultation with Zone/Central
 Office. In appropriate cases, attempts should be made to
persuade the client to shift to some other bank. This should
be done with utmost skill, tact and patience.
 The next stage of action should be when the account is
being persistently irregular and likely to be categorized
as a NPA. However, prior to that a thorough scrutiny of
the account should be carried out and any pending
formality in the area of documentation insurance, charge
registration etc. should be undertaken, in complete
cooperation with the client.

 If our exposure to an account is a part of a consortium

arrangement, branches must maintain formal and
informal contacts with the consortium leader and other
major participants in the arrangement.

 The next step would be enforcement of securities.

This would be two – pronged – securities which could be
sold without mediation of Court e.g. sale of assets like
shares pledged to the Bank. For the securities which can be
sold through the intervention of court, legal action should
be initiated fast.
 Once recovery process starts in any account, Branches
should immediately stop making any fresh
commitments to the concerned borrowing unit as also to
any other units of the same management. Further dealings
with the unit/Group should be determined on the basis of
advice of Zonal/Central Office.
 Research Work
Research

Comparative Analysis of credit recovery

mechanism of Public Sector vs. Private Sector
Banks in Haryana.

Objectives of the study:

➢ To learn about credit recovery mechanism of public and

private sector banks.
➢ To do the comparative analysis of public and private sector
banks credit recovery pattern.
➢ To know the effort and level of efficiency of public and
private sector banks in credit recovery mechanism.

Research Methodology
 Research methodology is a way to
systematically solve the research problems. It may be
understood as a science of studying how research is done
scientifically. We study the various steps that are generally
adopted by a researcher in studying his research problem along
with the logic behind them.

It is necessary for the researcher to know not only need to know

how to develop certain indices or tests, how to calculate the
mean, the mode, the median, standard deviation and chi –
square, how to apply the particular research techniques, are
relevant and which are not and what would they mean and
indicate and why?
Researchers also need to understand the assumptions
underlying various techniques and they need to know the criteria
by which they can decide that certain techniques and
procedures will be applicable to certain problems and
others will not.

What type of research design was used?

➢ Exploratory Research Design

Why was this type of design used?

 Exploratory research is a type of research conducted
because a problem has not been clearly defined. Exploratory
research helps determine the best research design, data
collection method and selection of subjects. Given its
fundamental nature, exploratory research often concludes that a
perceived problem does not actually exist.
Exploratory research often relies on secondary
research such as reviewing available literature and/or data, or
qualitative approaches such as informal discussions with
consumers, employees, management or competitors, and more
formal approaches through in-depth interviews, focus groups,
projective methods, case studies or pilot studies. The Internet
allows for research methods that are more interactive in nature:
E.g., RSS feeds efficiently supply researchers with up-to-date
information; major search engine search results may be sent by
email to researchers by services such as Google Alerts;
comprehensive search results are tracked over lengthy periods
of time by services such as Google Trends; and Web sites may be
created to attract worldwide feedback on any subject.
The results of exploratory research are not usually useful for
decision-making by themselves, but they can provide significant
insight into a given situation. Although the results of qualitative
research can give some indication as to the "why", "how" and
"when" something occurs, it cannot tell us "how often" or "how
many."Exploratory research is not typically generalizable to the
population at large.

What data collection methods were used?

✔ Primary Data
 ✔ Secondary Data
✔ Survey

Primary Data Collection Methods:

In primary data collection, you collect the data
yourself using methods such as interviews and questionnaires.
The key point here is that the data you collect is unique to you
and your research and, until you publish, no one else has access
to it. There are many methods of collecting primary data and the
main methods include:

 Questionnaires
 Interviews
Secondary Data Collection Methods:
All methods of data collection can supply
quantitative data (numbers, statistics or financial) or qualitative
data (usually words or text). Quantitative data may often be
presented in tabular or graphical form. Secondary data is data
that has already been collected by someone else for a different
purpose to yours.

Survey:
Surveys are used to collect quantitative information about items
in a population. Surveys of human populations and institutions
are common in political polling and government, health, social
science and marketing research. A survey may focus on opinions
or factual information depending on its purpose, and many
surveys involve administering questions to individuals. When the
questions are administered by a researcher, the survey is called
a structured interview or a researcher-administered survey.
When the questions are administered by the respondent, the
survey is referred to as a questionnaire or a self-administered
survey.

What Data Collection Devices were

used?
In primary data:

 Questionnaire
 Close ended
 Personal Interview
 observation
In Secondary Data:

 Search Engines
 Wikipedia & Encyclopedia
 Annual company report
 Government statistics
 STATISTICAL ANALYSIS
In this segment I am showing my findings in the form of
tables. All the data which I got from the banks I have shown here
with the help of tables ,pie chart , bar graph etc .Here I have shown
questionnaire of 4 major banks and did not shown small banks data
but results has been shown keeping in the mind data as a whole.

Questionnaires
➢ Sample Size - 4 major banks*
➢ Area - Credit Recovery
➢ Type of Data - Primary data, Secondary data
➢ Industry - Banking
➢ Respondent - Bank Employees

Four major players have been selected for

the purpose
Public Sector Bank

Punjab national bank (PNB)

Oriental bank of commerce (OBC)

Private Sector Bank

Axis Bank Ltd

Industrial Credit Investment Corporation of

India Bank (ICICI)
 Survey
QUES. 1 Does your Corporate Credit Policy
entails a Credit Recovery Policy/
Mechanism
ANS. Yes
No
Sectors/Answer Public Sector Banks Private sector banks
PNB OBC ICICI AXIS
Yes/ No YES NO YES YES

INTERPRETATION OF DATA
This pie chart show more than 50% of private banks has
credit recovery mechanism while in public sector banks very
few banks have credit recovery mechanism.
Ques.2 Does your institution have a separate
credit recovery department that handles
collection of credits in default?

ANS. YES
NO
Sectors/Answer Public Sector Banks Private sector banks
PNB OBC ICICI AXIS
Yes/ No YES NO YES No

INTERPRETATION
This pie chart represents that approx both sector have
different department for credit recovery but in case of AXIS
BANK they have a credit recovery cell not proper separate
department so in private sector banks we find few banks
having separate department instead they have cells like
SCRC(stressed Assets Recovery Cell). So, public sector
banks have more seriousness towards their credit recovery.
 ➢ In case of YES
• No. of employees in the credit recovery/ credit
department?

○ 05-15;
○ 15-30;
○ More than 30
Sectors/Answer Public Sector Banks Private sector banks
PNB OBC ICICI AXIS
No. of employees 5-15 15-30 5-15 5-15

Interpretation

This figure shows that public sector banks which has more
than employees in credit department in comparison to
private sector banks so this shows a public bank efforts in
credit recovery. In private sector they have very few
employees regarding this purpose. So in diagram
approximately 15-20% banks have more than 15
employees. So, this shows positive attitude of public sector
banks towards credit recovery.
 • Any standardized procedures for
handling credit recovery?

Yes
No

Sectors/Answer Public Sector Banks Private sector banks

PNB OBC ICICI AXIS
Yes/ No Yes Yes Yes Yes

INTERPRATION
This diagram shows that majority of private sector banks
and public sector banks. Both have their own standardize
procedures for credit recovery. But the way of credit
recovery by public sector is give maximum satisfaction to
their customers in comparison to private sector.

Ques.3 Do you hire any agency for

credit recovery?
Yes
No
Sectors/Answer Public Sector Banks Private sector banks
PNB OBC ICICI AXIS
Yes/No Yes Yes Yes NO

INTERPRATION
This diagram shows 80% of public sector banks hire outside
agency for credit recovery while few private banks hire
outside agency for recovery that’s why the level of NPAs are
high in case of private sector banks.

Ques.5 How many reminders your institutions

give before any legal proceeding?

○ 1-5
○ 5-10
○ 10-15
○ 15-20
○ More than 20
Sectors/Answer Public Sector Banks Private sector banks
 PNB OBC ICICI AXIS
No. of reminders 5-10 5-10 15-25 15-20

INTERPRETATION
In this figure we can see that the number of reminder is send by
the private sector bank and few reminders are sends by public
sector bank. Because they believe in face to face interaction
rather than knocking at the door by reminders again and again.
Public sector sends reminder by making the gap of proper time
period. Not after passing little bit if time.

Ques.6 Overall average recovery rate:

○ 20%
○ 20-40%
○ 40-60%
○ 60-80%
○ More than 80%

Sectors/Answer Public Sector Banks Private sector banks

PNB OBC ICICI AXIS
Overall average More than 60-80% More than 40-60%
recovery rate 80% 80%
INTERPRETATION

This chart is self explanatory that how much private sector

banks and public sector banks able to recover. We can see
here that public sector banks able to recover more than
80% approx while private sector banks recover even less
than or equal to 80% of its credit recovery cases. This shows
difference of level of efficiency in credit recovery.

Ques.7 The average duration for

recovery:

○ 1-15 days
○ 15-30days
○ 1-3 months
○ 3-6 months
○ More than 6 months

Sectors/Answer Public Sector Banks Private sector banks

PNB OBC ICICI AXIS
Overall average 1-15 1-15 1-15 15-30
duration for
recovery(Days)

INTERPRETATION
This diagram shows that how quickly public sector banks
able to recover their money in comparison to private sector
banks. Public sector banks recover their money in easy
instalments under the rules and regulations which specified
by the RBI. In some cases private sector banks not have
proper way for making their recovery of money.
Ques.8 The average costs incurred in trying to
collect the loans (e.g., costs of litigation, costs
for external lawyers, valuation reports, auction or
execution costs, experts.)

○ 1-5000
○ 5000-10000
○ 10000-15000
○ 15000-20000
○ More than 20000

Sectors/Answer Public Sector Banks Private sector banks

PNB OBC ICICI AXIS
Average cost 5000-10000 1-5000 10000- 5000-10000
incurred 15000

INTERPRETATION
This shows that average cost incurred by private sector
banks is higher which shows a negative sign.

Public sector has less cost incurred reason can be their

fewer requirements in credit recovery because of their good
employees and recovery procedure. Public sector banks
have many optimal options for recover their amount like
tagging, full amount settlement etc. This makes less
NPA’S in comparison to private sector banks.

Ques.9 Compromise policy:

Yes
No
Sectors/Answer Public Sector Banks Private sector banks
PNB OBC ICICI AXIS
Yes/No Yes Yes Yes Yes
INTERPRETATION

This figure shows that public as well as private sector banks

both have facility of compromise policy. This gives the
smoothness to the NPA’S customer as well as banks. When
a customer is not in position of this service makes
compromise between the customer and the bank for
settlement of his account.

 Additional Recommendations.
Ques.10 what additional changes or
recommendations would you propose to
improve and strengthen the area of creditor
rights and recovery for banks, or to reduce the
risk faced by lenders?

In both above case we find that public sector

banks are comparatively lenient in their credit recovery
process so mostly they have compromise policy moreover ,
government keep on coming with different schemes like one
time settlement schemes , tagging etc While private sector
banks use this policy in very few cases.

Moreover, private sector banks keep on coming with new

ways of credit recovery like incentives to employees for
their recovery etc. public sector
banks are also coming with the
customer beneficiary schemes under
the supervisions of Government of
India.

Findings
In the end we can say that public sector efficiency is high as
compared to private sector banks which gives maximum
satisfaction and services to their customers. Public sector
banks are government bank so that public can easily trust
on them. Which can be seen from above questions, table
and charts private sector is providing more services in
comparison to public sector bank but they are also losing
their faith from the customer side because of more extra
expenses, Private Taxes, more interest charged by them and
less or not specified returns.

While private sector need to have little control on its cost

incurred in credit recovery process and should try to earn
public faith with providing good services and investment
products.
Recommendations
✔ Number of Branches should be increased covering a
wider area in various states.
✔ A wide publicity to be given about the organization and
its products through various means of communications
to keep growth moments.
✔ More number of training and educational
programmers’ should be included in Banks schedule.
✔ Developing a learning culture through continuous
learning process.

CONCLUSION
My experience with Punjab National Bank is outstanding. While
working in Punjab National Bank I found that this bank has developed
manifold by their long experience due to facilities and services
provided to their customer and this growth rate can be keep it up if
they start to go in semi-urban areas. In last couple of years they have
opened new many branches and they should open many more. The
working staffs are very co-operative in nature and due to that the
bank will also get good benefit. Punjab National Bank has provided
their customer Net-banking facilities and due to that transactions are
done fast. Charges at Punjab National Bank is on lower side when we
compare it with other Banks.
 Annexure
QUESIONNAIRES

Credit Recovery Questionnaire

 Does your Corporate Credit Policy entail a Credit
Recovery Policy/ Mechanism

✔ Yes
○ NO
 Does your institution have a separate credit
recovery department that handles collection of
credits in default?
If yes, describe the following:
✔ YES

• No. of employees in this department

✔ 05-15;
○ 15-30;
○ More than 30

• Any standardized procedures for handling credit recovery

✔ Yes
○ No

 If no whether Credit Department itself is handling recovery

○ Yes
○ No
✔ NA

 Do you hire any agency for credit recovery?

 ✔ Yes
○ No

 How many reminders your institutions give

before any legal proceeding?
○ 1-5
✔ 5-10
○ 10-15
○ 15-20
○ More than 20

 Overall average recovery rate :

○ 20%
○ 20-40%
○ 40-60%
○ 60-80%
✔ More than 80%

 The average duration for recovery :

✔ 1-15 days
○ 15-30days
○ 1-3 months
 ○ 3-6 months
○ More than 6 months

 The average costs incurred in trying to collect the

loans (e.g., costs of litigation, costs for external
lawyers, valuation reports, auction or execution costs,
experts.)

○ 1-5000
✔ 5000-10000
○ 10000-15000
○ 15000-20000
○ More than 20000

 Compromise policy:

✔ Yes
○ No

 Additional Recommendations.

✔ What additional changes or recommendations would you

propose to improve and strengthen the area of creditor
rights and recovery for banks, or to reduce the risk faced by
lenders?
Ans.
✔ Time to time new government policy
✔ Auction by government of NPA,s
✔ Schemes for agriculture loans
Source: Mr. Khurana (Credit
Manager)
 Credit Recovery Questionnaire
 Does your Corporate Credit Policy entail a Credit
Recovery Policy/ Mechanism
○ Yes
✔ No

 Does your institution have a separate credit

recovery department that handles collection of
credits in default?
If yes, describe the following:
NO
• No. of employees in this department
○ 05-15;
○ 15-30;
○ More than 30

• Any standardized procedures for handling credit recovery

 ✔ Yes
○ No

 If no whether Credit Department itself is handling recovery

✔ Yes
○ No

 Do you hire any agency for credit recovery?

✔ Yes
○ No

 How many reminders your institutions give

before any legal proceeding?
○ 1-5
✔ 5-10
○ 10-15
○ 15-20
○ More than 20

 Overall average recovery rate :

○ 20%
○ 20-40%
○ 40-60%
 ✔ 60-80%
○ More than 80%

 The average duration for recovery :

✔ 1-15 days
○ 15-30days
○ 1-3 months
○ 3-6 months
○ More than 6 months

 The average costs incurred in trying to collect the

loans (e.g., costs of litigation, costs for external
lawyers, valuation reports, auction or execution costs,
experts.)

✔ 1-5000
○ 5000-10000
○ 10000-15000
○ 15000-20000
○ More than 20000

 Compromise policy:

✔ Yes
○ No
 Additional Recommendations.

✔ What additional changes or recommendations would you

propose to improve and strengthen the area of creditor
rights and recovery for banks, or to reduce the risk faced by
lenders?

Ans: Hiring outside agency

 Credit Recovery Questionnaire
 Does your Corporate Credit Policy entail a Credit
Recovery Policy/ Mechanism
✔ Yes
○ No

 Does your institution have a separate credit

recovery department that handles collection of
credits in default?
If yes, describe the following:

YES
• No. of employees in this department
✔ 05-15;
 ○ 15-30;
○ More than 30

• Any standardized procedures for handling credit recovery

✔ Yes
○ No

 If no whether Credit Department itself is handling recovery

○ Yes
○ No
✔ NA

 Do you hire any agency for credit recovery?

✔ Yes
○ No

 How many reminders your institutions give

before any legal proceeding?
○ 1-5
○ 5-10
○ 10-15
○ 15-20
✔ More than 20

 Overall average recovery rate :

 ○ 20%
○ 20-40%
○ 40-60%
○ 60-80%
✔ More than 80%

 The average duration for recovery :

✔ 1-15 days
○ 15-30days
○ 1-3 months
○ 3-6 months
○ More than 6 months

 The average costs incurred in trying to collect the

loans (e.g., costs of litigation, costs for external
lawyers, valuation reports, auction or execution costs,
experts.)

○ 1-5000
○ 5000-10000
✔ 10000-15000
○ 15000-20000
○ More than 20000

 Compromise policy:

✔ Yes
○ No
 Additional Recommendations.

✔ What additional changes or recommendations would you

propose to improve and strengthen the area of creditor
rights and recovery for banks, or to reduce the risk faced by
lenders?

✔ Incentive based recovery

✔ More efficient agency hire
✔ More professional employees hire
✔ More strictness in giving loans

Source: Piyush Singh (Credit

Recovery Manager)
 Credit Recovery Questionnaire
 Does your Corporate Credit Policy entail a Credit
Recovery Policy/ Mechanism
✔ Yes
○ No

 Does your institution have a separate credit

recovery department that handles collection of
credits in default?
If yes, describe the following:

• No. of employees in this department

✔ 05-15;
○ 15-30;
○ More than 30

• Any standardized procedures for handling credit recovery

✔ Yes
○ No

 If no whether Credit Department itself is handling recovery

 ○ Yes
○ No
✔ NA

 Do you hire any agency for credit recovery?

○ Yes
✔ No

 How many reminders your institutions give

before any legal proceeding?
○ 1-5
○ 5-10
○ 10-15
✔ 15-20
○ More than 20

 Overall average recovery rate :

○ 20%
○ 20-40%
✔ 40-60%
○ 60-80%
○ More than 80%

 The average duration for recovery :

 ○ 1-15 days
✔ 15-30days
○ 1-3 months
○ 3-6 months
○ More than 6 months

 The average costs incurred in trying to collect the

loans (e.g., costs of litigation, costs for external
lawyers, valuation reports, auction or execution costs,
experts.)

○ 1-5000
✔ 5000-10000
○ 10000-15000
○ 15000-20000
○ More than 20000

 Compromise policy:

✔ Yes
○ No

 Additional Recommendations.

✔ What additional changes or recommendations would you

propose to improve and strengthen the area of creditor
rights and recovery for banks, or to reduce the risk faced by
lenders?

Ans: Increase revenue authority role in recovery

✔ Faster judicial process for settlement of cases
✔ More efficiency in operation
 REPORT
ON
CUSTOMER SERVICES
AT
PUNJAB NATIONAL BANK,
(G.T.ROAD BRANCH, KARNAL)

Customer services
“The work done with the purpose of
providing service to the desired people
for the fulfilment of their work with the
motto of earning profit from that service
which they provide”

Customer services under the

enquiry counter
Mr. R.K. JAIN (Astt. Gen.
Manger) of Punjab national bank
gave me the opportunity to work
under the supervision of Mr. S.C.
KWATRA and Mrs. ARVINDER
KAUR.
Punjab National Bank is very
enthusiastically providing the service to their customer. They the
value of customers’ needs .They know the importance of
customers time so they provide expedite work with extra add on
customize services with due diligence.
At the enquiry counter, they handle customer grievances with
due care. There are many functions at the enquiry counter like
new account opening, customer handling with giving right
information and solving their problems in the right way at the
right time with best of their knowledge. The employees under
this section are well trained and are having up to date
knowledge of the bank policies. They all are fully dedicated to
their jobs & do their work very efficiently.
The customers who visit the bank for their specific work, they
first come to the enquiry counter. They are well treated & get
proper response from the employees. The employees provide the
customer solutions in the best suitable way.

Bibliography
Websites
www.thebanker.com
 www.asianbanker.com
www.icicibank.com
www.axisbank.com
www.pnbindia.in
http://en.wikipedia.org/wiki/Punjab_National_Bank
http://www.scribd.com/doc/20687931/PNB-Project-on-an-
evaluation-of-credit-flow-by-pnb
www.pdffound.com
http://company-profile.reportlinker.com/o0293333/Punjab-National-
Bank.html
http://www.rbi.org.in/scripts/BS_CircularIndexDisplay.aspx?
Id=2494
www.strategy-business.com

Annual reports & presentations

➢ Annual report 2010 by PNB

➢ Final presentation by PNB
➢ Analyst presentation by PNB