CORPORATE BANKING

PRESENTED TO: Prof. K.K.Jindal

PRESENTORS: Arup K.Biswas Aun Ahmed Ashes Pramanik Chinmay Khetan Divesh Arora Himanshu Singh Rajiv Adlakha Rakesh Sharma

CORPORATE BODY
A legal entity (an association,firm,institution) identified by a particular name.It comprises a collection of individuals who (in the view of law) have existence,rights,and duties as individuals.

DEFINITION
Corporate Banking represents Services include access to

the wide range of banking and financial services provided to domestic and international operations of large corporates and local operations of multinationals corporations.

commercial banking products, including working capital facilities such as domestic and international trade operations and funding, channel financing, and overdrafts, as well as domestic and international payments, INR term loans (including external commercial borrowings in foreign currency), letters of guarantee etc.

Characteristics of corporate banking

Transaction banking Multiple banking

Prudential norms

Consortium finance

Characteristics

Syndicated loans Integrated cash management

Wide range of services

CHALLENGES
In todays global Banking arena, Corporate Bankers are facing a string

of unprecedented and sweeping challenges in the areas like Treasury Management, Trade Finance, Risk Management, Compliance Management, Electronic Trading and Derivatives Markets. Compounding this are the mounting complexities from ongoing regulatory changes, decreasing margins and fierce competition.
Clients are serviced by sector based client service teams that combine

relationship managers, product specialists and industry specialists to develop customized financial solutions, ensuring a full understanding and delivery of the company's business and financial needs.

LENDING OPERATIONS
Lending is usually done against appropriate tangible

securities such as deposits, shares, debentures, property, guarantees supported by tangible securities, life policies, goods, gold or other precious metal. A bank may also lend against intangible securities such as unsupported guarantees or assignment of sums due to the borrower by third parties.

CREDIT EVALUATION
a. FINANCIAL ANALYSIS:

Sales, Profitability, Performance, Funds Flow, working Capital Management, liquidity, balance sheet conditions...etc.

b. OPERATING ANALYSIS (OPERATING

RISKS) :

Owners, Management, Company, Industry, Markets.

In summary, the credit proposal (review) must highlight the Financial

Risks and Operating Risks. It should state the magnitude and likelihood of such risks i.e. "What if" scenarios, and how will they be managed? Most global banks maintain their credit evaluating standards in an internal "Instruction Manual" containing the bank's management instructions regarding each and every aspect of the credit extension or review process. It sets the management standard of credit evaluation to eliminate risks and prevent decline in profit margins on credit facilities.

 CREDIT EXPOSURE :-

PRUDENTIAL NORMS

Credit exposure to borrowers belonging to a group may exceed

the exposure norm of 40 percent of the banks capital funds by an additional 10 percent (i.e. up to 50 percent), provided the additional credit exposure is on account of extension of credit to infrastructure projects. Credit exposure to single borrower may exceed the exposure norm of 15 percent of the banks capital funds by an additional 5 percent (I.e. up to 20 percent) provided the additional credit exposure is on account of infrastructure.

CORPORATE ACCOUNTS
Ways in which a company may be formed: 1. By a special Act of the Parliament. 2. By registration under the Indian Companies Act 1956

OPENING THE ACCOUNT

Power to open an account and operate on it may be given by: 1. Its Articles of Association. 2. Resolution of the Board of Directors of the Company. 3. Power of Attorney granted by an authorised person.

THE ACCOUNT RELATIONSHIP MANAGEMENT:

Meaning :Account relationship managers are those who negotiate with
the targeted corporate customers with the terms acceptable to the banks and Account Relationship Management Acceptance Criteria" or the so called "Credit Guidelines." manager/officer.

It should be internally placed and distributed to every credit These guidelines set the minimum acceptance standards, in
simple words, the guidelines are aimed to let the account relationship managers/officers know exactly what they should be selling, to whom, at what price and under which conditions (securities and other terms).

DOCUMENTATION FOR CORPORATE BORROWING

Certificate of incorporation---issued by

Registrar of Companies. Memorandum of Association. Articles of Association. Certificate of commencement of business. Board of Directors---a certificate list of the present directors of the company. Board Resolution.

TRANSACTION BANKING
Banking services to corporations, financial

institutions and non-bank financial institutions globally which includes payments and cash management, trade finance, supply chain and securities services. Solutions are designed to facilitate efficient cash flow management, comprehensive and customized MIS and simplify the workload of the accounts team.

MULTIPLE BANKING
Meaning of Multiple Banking Multiple Banking is a banking arrangement where a borrower avails of finance independently from more than one bank. Thus, there is no contractual relationship between various bankers of such borrower. Also in such arrangement each banker is free to do his own credit assessment and old security, independent of other bankers. RBI Guidelines on Multiple banking :RBI has allowed this type of banking. There are no significant specific guidelines issued by RBI on multiple banking.

Contd
Usefullness :In multiple banking arrangement, a borrower gets freedom to deal with each bank separately and thus can negotiate borrowal terms one to one with each bank.

Difficulty:Borrower also has to spend more time and effort in dealing with multiple banks.

FORMS OF LENDING

CONSORTIUM FINANCE
Under consortium financing, several banks ( or

financial institutions ) finance a single borrower with common appraisal, common documentation, joint supervision and follow up exercises. This finance may be for working capital requirements or fixed assets. Consortium loans are called participation loans in U.S.A. Participation loans mean joint finance by more than one bank to the same party against a common security.

BENEFITS OF CONSORTIUM
It enables the bankers to spread the risk with

other bankers who are members of the consortium. There is an advantage of having collective wisdom of banks in the consortium for appraisal of credit of the borrower. From the angle of profitability , smaller banks that cannot finance huge credit requirements of the big borrowers singly could join the consortium and have the benefit of the borrower.

SYNDICATED LOANS
Syndicated loan is a financing method evolved from bilateral loan. Under the arrangement of syndicated loan, one bank or several banks (as the arrangers) organize other banks to grant loans to the same borrower under one loan agreement (having similar terms and conditions) according to agreed terms. It is an alternative to consortium financing. Syndicated loans have the following features:- Huge amount, long term; fewer restriction on the use of proceeds (compared with government loans and export credit); easier management (compared with loans borrowed separately from different banks); less pressure on banks; diversified risk. As for the borrower, syndicated loans provide large amounts of loans with longer term and easy operation management (only need to contact with the agent bank).

LOAN SYNDICATION PROCESS

Prepare information memorandum borrower arranger

Invite other banks to participate borrower arranger

Prepare draft loan agreement

Arrangers lawyers

Negotiate loan agreement borrower

Arranger other banks

Sign loan agreement

All parties

Mechanics of syndication
Loan syndication is done when a borrower wants to

raise a relatively large amount of money quickly and conveniently. Most loan syndications take the form of a direct lender relationship, in which the leas lender is the agent for the other lenders in the origination and administration of the loan, and the other lending banks are signatories to the loan agreement. A prospective borrower intending to raise resources through this method awards a mandate to a bank commonly known as the lead manager as against the nomenclature of Lead Banker used for the leader of the consortium.

Contd
Eligible Applicants 1.) According to the national industrial policies and economic development plan of the local government, syndicated loans are focused on energy, transportation, hi-tech industries and regional key projects. 2.) Eligible applicants include corporations incorporated within India's territory or other economic organizations approved by the banks (referred to as the borrower) that comply with General Rules on Loans and Interim Regulation on Syndicated Loans.

CORPORATE SERVICES PROVIDED BY INDIAN BANKS I

Cash management services Gold card scheme Working capital finance Project finance

CMS
MEANING: Corporations, the world over is discarding

outdated cash management practices and opting to put in place sophisticated cash management structures to garner the associated economic benefits and due to reasons of expediency. Conversely, banks have taken note of the enormous revenue potential in the fee-based services segment to prop up their sagging bottom lines. While appreciating the initiatives taken by the Administrative Staff College of India in organizing the Workshop. OBJECTIVE OF CASH MANAGEMENT: The fundamental objective of cash management is optimization of liquidity through an improved flow of funds.

Gold Card Scheme

OBJECTIVES OF THE SCHEME:Promotion of export by extending various facilities to exporters having good track record, on better terms.

Working Capital Finance

MEANING:- Working Capital facility is provided to the industry to finance day-to-day production & sales. For production, funds are generally required for purchase of raw materials, stores, fuel, for payment of labor, power charges, for storing finished goods till they are sold out & for financing the sales by way of sundry debtors / receivables. Cash Credit facility is granted to the customers to bridge working capital gap.

PROJECT FINANCE
MEANING: Project finance is the financing of long-term infrastructure and industrial projects based upon a complex financial structure where project debt and equity are used to finance the project.The loans are most commonly non-recourse loans, which are secured by the project itself and paid entirely from its cash flow.

TAKEOUT FINANCING
Take-out financing structure is essentially a

mechanism designed to enable banks to avoid assetliability maturity mismatches that may arise out of extending long tenor loans to infrastructure projects.

TYPES
There are several variants of the Take-out finance

but basically they are either in the nature of unconditional take-out finance or conditional take-out finance though it may involve assuming full credit risk of part of the same The take-out finance products will involve three parties The project company Taking over institution and The lending banks\FI.

SOME NOTES
SBI tops loan syndication chart in Asia Pacific region : The public sector bank has topped the league table for the third consequitive year in the Asia Pacific region beating Chinese and other foreign banks such as Bank of China, ANZ Banking Group & HSBC. In 2009,SBI syndicated rupee and dollar loans amounting to $27.94 billion, in about 67 issues, capturing 12.3% of the loan syndication market.

4th annual corporate banking conference - 2010

The main focus of the meeting was how to remain

profitable in the current,dynamic, corporate banking scenario. Some discussed topics were Excellence in supply chain finance Cash management strategies in volatile environment and Development of new models.

Thank you for your attention.