05-11-2012, 01:55 PM
Summer internship project New Product Development for Financing SMEs under Regulatory Definition
Financing SMEs under Regulatory.doc (Size: 582 KB / Downloads: 102)
EXECUTIVE SUMMARY
This report is the outcome of six weeks of exhaustive training at the BANK OF BARODA, JAIPUR. The foundation idea for this work rooted in the intent to work on the criteria of assessing a company’s financial position before sanctioning loan.
The foundation idea for this work rooted in the intent to work on the criteria of assessing a company’s financial position before sanctioning loan, as it includes all practical application of financial aspects Analysis of Balance Sheet viz: Financial Ratios, Fund Flow Statement, B/s, P&L A/c, Cash Flow Statement etc. and to gain all practical knowledge in the emerging sectors in SME, this project is undertaken.
For preparing the Project Report, I was given various loan proposals to gather the necessary information. The blend of learning and knowledge acquired during my practical studies at the company is presented in this Project Report. Various Inspections in the various industries were also done which gave exposure related to the industry, checking of security and other documents given by the borrower party.
The rationale behind preparing the Project Report is to study the credit appraisal basics, history and development of SME’s, and to develop a new product in the SME sector which can further boost the market share for Bank of Baroda. The Project Report starts with the introduction & history of bank of Baroda, basic concepts of SME’S, importance of SME’S and also covers the process of loan sanction in the SME Department.
RESEARCH METHODOLOGY:
The study is based on the data collected from primary and secondary sources.
The relevant primary data is collected through discussions with the Relationship managers. In this we have observed the working of SME and also concerned employees who involved me in various activities of the department to get complete information about the SME (Small medium Enterprise)
The source of Secondary data and information was the data collected from the Bank of Baroda (BOB) files, pamphlets, manuals, Business and Economy Magazines
Data so obtained was sorted, tabulated and hence analyzes. I have tried to collect information from all possible sources to give a true scenario of the topic assigned to me.
INTRODUCTION AND HISTORY
Bank of Baroda has been a long and eventful journey of almost a century across 25 countries. Starting in 1908 from a small building in Baroda to its new hi-rise and hi-tech Baroda Corporate Centre in Mumbai is a saga of vision, enterprise, financial prudence and corporate governance.
Bank of Baroda is a public sector bank established on July 20, 1908. It is one of the largest banks in India and known as India’s international bank. A network of over 4002 branches (out of which 3909 branches are in India) and offices, & over 2012 ATMs. It plans to open 400 new branches in the coming year.
Bank of Baroda offers a wide range of banking products and financial services to corporate and retail customers through a variety of delivery channels and through its specialized subsidiaries and affiliates in the area of Whole sale Banking, Agri Banking, Retail Banking, SME Banking, investment banking, credit cards and assets management etc. In its international expansion, Bank of Baroda followed the Indian Diaspora. The Bank of Baroda has seen many ups and downs over a period of 100 years but stood undaunted to surmount all hurdles, coming out with flying colours, uninterrupted profit since inception and reinforcing with its strong fundamentals.
BANK PROFILE
Bank of Baroda (BOB), India’s third largest bank and prominent among the global top 200, has a century’s financial experience backing it. Bank of Baroda offers a wide range of banking products and financial services to more than 70 million global corporate and retail customers, through various delivery channels, its specialized subsidiaries and affiliates in the areas of investment banking, credit cards and asset management. A network of over 4002 branches (out of which 3909 branches are in India) and offices, & over 2012 ATMs. It plans to open 400 new branches in the coming year.
Growing its presence across new geographies and strengthening its equity in existing markets, Bank of Baroda is on the path to establish itself ‘round the clock around the globe’. The bank is exploring out-of-the-box means to identify novel ways to tailor its growing repertoire of products and services to meet segment-specific requirements across geographies. Automation-led process and cost optimization, orchestration of the offices network and greater attention to compliance with global regulations are aggressively being focused on to help the bank achieve its ambitious goals.
BANK POSITION
Notwithstanding the challenging environment Bank of Baroda was able to exploit the opportunities within the given environment and sustain its qualitatively superior performance during the FY 2012. Bank of Baroda posted a very healthy growth of 25.9 % in its global business – way above the banking industries average performance. On the back of healthy growth of 17.2% in its net interest income, the bank recorded net profit growth 18.0% despite adverse pressures on Net Interest Margins (NIMs). Bank of Baroda Return on Average Assets (ROAA) at 1.24%, capital adequacy at 14.67% and Return on Equity at 19.04% again provided an eloquent testimony to the financial soundness of the bank.
Bank of Baroda is at 3rd position in India’s top 5 Public sector banks after State Bank of India and Punjab National Bank. After BOB is IDBI and Bank of India.
SCOPE OF THE PROJECT
This study will cover the analysis of various SME products, its features, its implementation and the performance of them. It will also determine the current funding pattern to the SME Sector, which will further help in understanding the actual and potential growth of SME units. It will also unfold the underlying Challenges which these micro, small and medium units face. Also the constraints faced by banks in lending them.
The rationale behind preparing the Project Report is to study the credit appraisal basics, history and development of SME’s, and to develop a new product in the SME sector which can further boost the market for Bank of Baroda.
The Project Report starts with the introduction & history of bank of Baroda, basic concepts of SME’S, importance of SME’S and also covers the process of loan sanction in the SME Department. At the end with the help of collected data various interpretations are made and accordingly recommendations also and the development of new product for the purpose of fulfilling all the requirements of the SME customers.
RESEARCH METHODOLOGY
In order to achieve the aims and objectives of project, it is very important that researcher should use sound research tools and techniques and know how best to analyze the results.
Primary and secondary data sources will be used to generate this report. Primary data sources are informal discussion with professionals and observation while working in different desks. The secondary data sources are annual reports, manuals, and different publications of Bank of Baroda. To identify the implementation, supervision, monitoring and repayment practice- interview with the existing employees and extensive study of the existing files and keen observation while on the job were done.
CIBIL
CIBIL is India’s first credit information bureau – is a repository of information, which contains the credit history of commercial and consumers borrowers. CIBIL provides this information to its members in the form of credit information reports. Its official website is www.cibil.com. From this site, a CIBIL Information Report is created which is a factual record of a borrowers credit payment history complied from information received from different credit grantors. Its purpose is to help credit grantors make informed lending decisions – quickly and objectively.
A CIBIL report shows history of various accounts of the borrower. All should be standard. And no account should be sub- standard, settled, written-off or overdue.
ECGC:
Ecgc was established in the year 1957 by the Government of India to strengthen the export promotion drive by covering the risk of exporting on credit..
ECGC provides a credit risk insurance covers to exporters against loss in export of goods and services and offers guarantees to banks and financial institutions to enable exporters to obtain better facilities from them. Banks are concerned about the financial strength and the performance of the borrowers. It is necessary that all borrowers are of good credit risk and there should not be any shadow of doubt about the safety of the funds lent.
PRELIMINARY STUDY OF TWO PROPOSALS
Proposal is a request in the form of documents made by the party/ organization/ individual to get the requisite loan from the bank.
In the preliminary study, an officer confirms that the documents are complete as per the Check List or not and whether it fulfills the required norms/ rules and regulations. It also includes the detail study of financial position, economic viability of the activity/project and the validity of documents.
PREPARING A QUERY LETTER
In the case of any problem or query related to the proposal the officer who is studying it prepare a letter to the branch manager or directly to the party to collect the required information, known as query letter.
CONSIDERATION OF THE PROPOSAL
After receiving all the required documents from the party, pre-sanction inspection of the unit is carried out, the proposal is finally analyzed properly and an appraisal note containing the gist of the proposal is submitted to the sanctioning authority for the purpose of further action. If the proposal is sanctioned, it is sent to the branch for disbursement and documentation.