Summer Internship On MSME Sector at Dena Bank

On
ROLE OF RETAIL & MSME ADVANCE IN BANKS

Conducted at
DENA BANK
Zonal Office and Bangla Bazar Lucknow Branch
SUBMITED FOR PARTIAL FULFILMENT OF REQUIREMENT FOR THE
AWARD OF DEGREE
MASTER OF BUSINESS ADMINISTRATION

SESSION 2013-2015
DEPARTMENT OF BUSINESS ADMINISTRATION
UNIVERSITY OF LUCKNOW
Under the guidance of Mr. Kaustubh Dwivedi (Senior Manager, Credit &Risk and Chief Mentor)
and
Mr. M K Madhukar Branch Manager, Bangla Bazar Branch, Lucknow
PREFACE
The objective of this project is to study the working of DENA BANK for providing
loans & advances, credit transaction and credit appraisal to Retail and MSME sector. MSME
sector is critical to Indias economy and potentially a key driver if growth, job orientation,
innovation and economic prosperity.
After undertaking in the depth theoretical study such as type of advances, MSME Policy
of DENA BANK, credit rating, CMA and various financial under MSMEs. It was found that
several industries are growing under banking finance and MSMEs is one of the fast growing
industries from all the sectors. According to the Fourth Census of MSME in 2006-07 in India,
the number of MSMEs was estimated at 36.17 (only 1.56 million registered-source MSME
annual report 2012-13, Government of India) million employing about 80.52 million persons.
By the year 2011-12 the estimated numbers of MSME units were 44.77 million with
employment of 101.26 million persons. Out of these MSMEs, 31.79 percent are engaged in
manufacturing and 68.21 per cent in service enterprises. This sector contributes to about 44 per
cent of the total manufacturing output and accounts for over 40 per cent of the total exports of
the country and forms the second largest source of employment next only to agriculture.
The project was an attempt to understand and perform the work in credit transaction
and credit appraisal proposal which I have included is just an example of it. I have worked on
many such proposals, which are beyond the scope of this project. Hence the whole experience
of working in such a renowned public sector unit was very good and made me learn a lot out
of it.
Department of Business Administration, University of Lucknow
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ACKNOWLEDGEMENT
The project ROLE OF RETAIL & MSME ADVANCE IN BANKS has been
conducted by me during 1st June, 2014 to 31st July, 2014 at Dena Bank, Zonal Office
Lucknow and Dena Bank Bangla Bazar Branch, Lucknow. I have completed this project,
based on the primary and secondary reseach under the guidance of my bank guide
Mr.Kaustubh Dwivedi (Senior Manager, Credit & Risk and Chief Mentor).
He has helped me to learn about the process of giving loans and advances to MSME
sector by giving me a valuable insight into the role played by Banks in MSME sector. My
increased spectrum of knowledge in this field is the result of his constant supervision and
direction that have helped me to absorb relevant and high quality information.
I would also like to thank Mr M P Madhukar Branch Manager Dena Bank Bangla
Bazar Lucknow Branch for giving me detailed information about Retail advances given by
Dena Bank.
My heartiest gratitude extended to my faculty guide Dr.Ajai Prakash, Professor

Department of Business Administration, University of Lucknow who has helped me in every
aspect of my work. The greatest credit goes to the blessings bestowed upon me by Almighty
God without whose yearning; I could not have even moved a step forward and to my parents
who are always a constant source of inspiration in all my endeavors.
KRISHNA PRASAD
MBA (2013-2015)
DEPARTMENT OF BUSINESS ADMINISTRATION
UNIVERSITY OF LUCKNOW
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DECLARATION
I hereby declare that the project report entitled ROLE OF RETAIL & MSME
ADVANCE IN BANKS submitted for the Degree of Master of Business Administration, is
the record of authentic work carried by me during the period from 1st June, 2014 to 31st July,
2014 and the project report has not formed the basis for the award of any degree, diploma,
associateship, fellowship or similar other titles. It has not been submitted in any other
University or Institute for the award of any degree or diploma.
KRISHNA PRASAD
DATE: 31st July, 2014
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Table of Contents
Banking Industry in India ................................................................................................ 6
COMPANY PROFILE DENA BANK .......................................................................... 12
Milestones ............................................................................................................................................................ 12
Dena Bank has been the first Bank to introduce: .............................................................................................. 13
International Operations: First Foot Print in Overseas..................................................................................... 13
SWOT Analysis of Dena Bank ............................................................................................................................ 15
PESTEL ANALYSIS ........................................................................................................................................... 16
Competitive forces Model: Porters Five Forces Model-Industry Analysis ....................................................... 18
OBJECTIVE OF RETAIL LENDING POLICY ............................................................. 25

My Work Profile............................................................................................................. 26
GENERAL INSTRUCTION ON LOANS AND ADVANCES .......................................... 26
RETAIL LOAN PRODUCTS ......................................................................................... 28
Dena Niwas Housing Finance Scheme ...................................................................................................... 32
Dena Vidya Laxmi Educational Loan Scheme .......................................................................................... 33
Dena Suvidha (Personal Loan) Scheme .................................................................................................... 34
Research Methodology ................................................................................................... 36

Pre-Sanctioned Loan...................................................................................................... 37
MSME Advances............................................................................................................ 39
Recommendations for Banks .......................................................................................... 43
Conclusion ..................................................................................................................... 45
References ..................................................................................................................... 62
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Banking Industry in India

Banking in India in the modern sense originated in the last decades of the 18th century.
The first banks were Bank of Hindustan (1770-1829) and The General Bank of India,
established 1786 and since defunct. The largest bank, and the oldest still in existence, 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. The three banks merged in 1921 to form
the Imperial Bank of India, which, upon India's independence, became the State Bank of India
in 1955. For many years the presidency banks acted as quasi-central banks, as did their
successors, until the Reserve Bank of India was established in 1935.
In 1969 the Indian government nationalized all the major banks that it did not already
own and these have remained under government ownership. They are run under a structure
known as 'profit-making public sector undertaking' (PSU) and are allowed to compete and
operate as commercial banks. The Indian banking sector is made up of four types of banks, as
well as the PSUs and the state banks; they have been joined since 1990s by new private
commercial banks and a number of foreign banks.
Banking in India was generally fairly mature in terms of supply, product range and
reach-even though reach in rural India and to the poor still remains a challenge. The
government has developed initiatives to address this through the State bank of India expanding
its branch network and through the National Bank for Agriculture and Rural Development with
things like microfinance.
Today, banks have diversified their activities and are getting into new products and
services that include opportunities in credit cards, consumer finance, wealth management, life
and general insurance, investment banking, mutual funds, pension fund regulation, stock
broking services, custodian services, private equity, etc. Further, most of the leading Indian
banks are going global, setting up offices in foreign countries, by themselves or through their
subsidiaries.
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Adoption of banking technology

The IT revolution has had a great impact on the Indian banking system. The use of
computers has led to the introduction of online banking in India. The use of computers in the
banking sector in India has increased many fold after the economic liberalization of 1991 as
the country's banking sector has been exposed to the world's market. Indian banks were finding
it difficult to compete with the international banks in terms of customer service, without the
use of information technology.
The RBI set up a number of committees to define and co-ordinate banking technology. These
have included:
In 1984 was formed the Committee on Mechanization in the Banking Industry (1984) whose
chairman was Dr. C Rangarajan, Deputy Governor, Reserve Bank of India. The major
recommendations of this committee were introducing MICR technology in all the banks in the
metropolises in India. This provided for the use of standardized cheque forms and encoders.
In 1988, the RBI set up the Committee on Computerization in Banks (1988) headed by Dr. C
Rangarajan. It emphasized that settlement operation must be computerized in the clearing
houses of RBI in Bhubaneshwar, Guwahati, Jaipur, Patna and Thiruvananthapuram. It further
stated that there should be National Clearing of inter-city cheques at Kolkata, Mumbai, Delhi,
Chennai and MICR should be made Operational. It also focused on computerization of
branches and increasing connectivity among branches through computers. It also suggested
modalities for implementing on-line banking. The committee submitted its reports in 1989 and
computerization began from 1993 with the settlement between IBA and bank employees'
associations.
In 1994, the Committee on Technology Issues relating to Payment systems, Cheque Clearing
and Securities Settlement in the Banking Industry (1994) was set up under Chairman W S
Saraf. It emphasized Electronic Funds Transfer (EFT) system, with the BANKNET
communications network as its carrier. It also said that MICR clearing should be set up in all
branches of all those banks with more than 100 branches.
In 1995, the Committee for proposing Legislation on Electronic Funds Transfer and other
Electronic Payments (1995) again emphasized EFT system. Total numbers of ATMs installed
in India by various banks as on end June 2012 is 99,218. The New Private Sector Banks in
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India are having the largest numbers of ATMs, which is followed by off-site ATMs belonging
to SBI and its subsidiaries and then by Nationalized banks and foreign banks.
EMPLOYMENT SCENARIO IN THE BANKING SECTOR
As reported in the Economic Times, the countrys leading public sector bank, State Bank of
India has plans to recruit 25,000 employees in the year 2009. Besides, its life insurance venture,
SBI Life, has plans to hire 13,000 agents and 200 sales managers. Also, Punjab National Bank,
the country's second largest public sector lender, and Union Bank of India have plans of hiring
5,000 people each. The financial year 2008-09 has already shown the banking sector to be
among the largest job providers in the country with over 50,000 vacancies being notified and
filled up in the public sector banks alone.
MAJOR RECRUITERS OF BANKING INDUSTRY
Public Sector Banks are the major recruiters of candidates aspiring for bank jobs. These banks
are:
The State Bank of India Group (Total: 8 Banks) namely SBI (State Bank of India),
State Bank of Indore, SBBJ (...Bikaner & Jaipur), SBH (...Hyderabad), SBM
(...Mysore), SBP (...Patiala), SBS (...Saurashtra), and SBT.
Nationalized Banks (Total: 19 Banks) namely Allahabad Bank, Andhra Bank, Bank
of Baroda, Bank of India, Bank of Maharashtra, Canara Bank, Central Bank of India,
Corporation Bank, Dena Bank, Indian Bank, Indian Overseas Bank, Oriental Bank of
Commerce, Punjab & Sind Bank, Punjab National Bank, Syndicate Bank, UCO Bank,
United Bank of India, Union Bank of India and Vijaya Bank.
Private Sector Banks (Total: 27 Banks). The major recruiters in the private sector
include the ICICI Bank, HDFC Bank, Axis Bank, Federal Bank, Centurion Bank of
Punjab, Indusind Bank, Kotak Mahindra Bank, Yes Bank, ING Vysya Bank, Bank of
Rajasthan, Karur Vysya Bank, Karnataka Bank, Jammu & Kashmir Bank, South Indian
Bank, Bharat Overseas Bank, etc. These banks conduct their own exams, but normally
follow patterns similar to those of the exams of the public sector banks.
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Co-operative Banks: All major National and State Co-operative Banks and Scheduled
Urban Co-operative Banks conduct their own exams to recruit staff. Their recruitment
exams, too, are generally similar to the exams of the public sector banks.
COMPETITION IN BANKING INDUSTRY
The liberalized policies of RBI and Govt. of India relating to Indian Banking have set the stage
for a competitive banking. In the past competitive advantages have been determined by size,
branch, distribution capability, artificial barriers to entry etc., which helped old players in
maintaining a prominent position in the industry despite their inefficiencies. The direction of
the new policy is to establish a level playing field. The creation of term money market, changes
in credit delivery mechanism, flexibility in credit assessment process, diversification of sources
of money etc. will change the factors that determine the survival, growth and profitability in
the Indian Banking.
The areas in which the competition in the industry is either prevalent or is likely to emerge:
Price based competition
Product based competition
Quality of service based competition
Market segment based competition
Technology based competition
Skill based competition
Location based competition
Early entry strategy based competition
CHARACTERISTICS OF COMPETITION
Large no. of users and providers of banking services and none of them able to influence
the price, demand or supply in a significant manner. Free flow of information about
industry, its products, range of services, pricing etc. In other words, a situation of near
perfect competition.
Competition is demand driven now rather than supply driver which used to be there till
few years ago. There has to be innovations, differentiation and value addition.
Competition will be based more on skills or core competencies than on products.
Competition will have to be based on long term strategies and not short term goals.
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Competition is not only internal i.e. with the banking system but it is intra-financial
system.
The factors on which competitive advantages will be determined are:

Strategic focus: Majority of banks will have to develop mix of products and business based on
relative strengths and competence rather than historical reasons. Every product may it be
deposit or credit or retail lending or corporate banking, must pay for itself in terms of return on
investment rather than exist to promote or subsidize other business.
Adaptability: Size alone is not sufficient and adaptability to new products, processes,
technology, markets and customer needs will be more crucial.
Cost competitiveness: Competitive pressure would lead to declining margins. Lower cost
operators will have obvious advantage. Lean and wean organizations are the likely winners.
Productivity: Cost efficiency would be supported by the ability to work smartly and capability
to handle volumes and changing processes efficiently will be very crucial.
Technology: Adopting, assimilating and implementing appropriate technology will
significantly influence competitive strengths. Technology affects cost, productivity and people.
The necessity and utility of the branch networks will have to be seen in the context of power
and reach of technology.
People: The quality of people will often support an organization in an environment where
differentiation based on product, pricing and delivery methods will be negligible.
Risk management: The ability to grow and expand would depend on quality of risk. which
will determine access to funds as well as the freedom to price products competitively.
Attitudinal changes: Perhaps the more important than all the other factors is the requirement
of flexible mind-set to understand, appreciate and anticipate the changes in the market place.
A large part of the banking industry has for long been conditioned to think in a directed manner
in an environment where innovation was virtually prohibited.
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COMPETITIVE STRENGTHS OF BANKS

PSBs: Bank network, market coverage, product differentiation, technology absorption,
knowledge of local environment, expertise in niche segment (weakness are poor HRD policies,
delayed decision making, poor risk management systems)
Old Private Banks: Knowledge of local environment, personalized service, speedy decisions,
reasonable branch network, technology absorption (weakness - poor risk management systems,
poor product innovations)
i.
Foreign and new private Banks: Automation and technology, product innovation,
strong risk management system, speedy decision making, personalized service,
progressive HRD policies, expertise in niche market (weakness - branch network
and poor coverage).
******
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COMPANY PROFILE DENA BANK
Dena Bank was founded on 26th May, 1938 by the family of Devkaran Nanjee under
the name Devkaran Nanjee Banking Company Ltd
It became a Public Ltd. Company in December 1939 and later the name was changed
to Dena Bank Ltd.
In July 1969 Dena Bank Ltd. along with 13 other major banks was nationalized and is
now a Public Sector Bank constituted under the Banking Companies (Acquisition & Transfer
of Undertakings) Act, 1970. Under the provisions of the Banking Regulations Act 1949, in
addition to the business of banking, the Bank can undertake other business as specified in
Section 6 of the Banking Regulations Act, 1949.
Milestones
One among six Public Sector Banks selected by the World Bank for sanctioning a loan
of Rs.72.3 crores for augmentation of Tier-II Capital under Financial Sector
Developmental project in the year 1995.
One among the few Banks to receive the World Bank loan for technological up
gradation and training.
Launched a Bond Issue of Rs.92.13 crores in November 1996.
Maiden Public Issue of Rs.180 Crores in November 1996.
Introduced Tele banking facility of selected metropolitan centers.
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Dena Bank has been the first Bank to introduce:
Minor Savings Scheme.

Credit card in rural India known as "DENA KRISHI SAKH PATRA" (DKSP).
Drive-in ATM counter of Juhu, Mumbai.
Smart card at selected branches in Mumbai.
Customer rating system for rating the Bank Services.
VISION & MISSION

Mission Statement
DENA BANK will provide its Customers -premier financial services of great value, Staff Positive work environment and opportunity for growth and achievem
e n t Shareholders -superior financial returns and Community- economic growth.
Vision Statement
DENA BANK will emerge as the most preferred Bank of customer choice in its
area of operations, by its reputation and performance.
Logo
T h e l o g o o f Dena Bank represents Lakshmi, the Goddess of wealth, according to

Hindu mythology. It was the desire of the founding fathers of the Bank that the
Bank should be a symbol of prosperity for all its clients, and the logo represents this
promise.
International Operations: First Foot Print in Overseas
Bank has opened Representative office in London on Dec 24, 2013.
Business Growth:
Bank is targeting a growth of 20% in business during FY 2014-15.
Bank targets to:
Open 150-200 new branches during FY 2014-15.
Establish specialized NRI branch.
Strengthening of Retail Processing Hubs
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Strengthening of SME Processing Centres.

IT Initiatives:
As per Ministry directives, Bank has provided on site ATMs in most of the Branches.
Opening of 200 E-Lobbies across the country.
Cash Management Services.
Issue of RuPay Platinum Debit Card.
Bank will continue its participation in SIBOS-International Technology Exhibition.
Credit Monitoring: Bank has initiated close monitoring of borrowable accounts to prevent
slippages. At present, Bank is monitoring all accounts above 10 cr. on daily basis.
Other Details:
To cater to needs of new branches being opened and provided personalized customer
service, Bank has placed indent with IBPS for recruiting of 586 POs,217 Specialist
Officer and 834 Clerks for FY 2014-15.
Bank has covered 2,958 villages under financial inclusion till March 2014 as against
target of 2,768 villages.
Bank has procured 2,000 Micro ATMs for providing to Business correspondents
engaged in Rural Areas. This device will facilitate intra-bank, inter-bank, RuPay Card
and Aadhaar Enabled Payment System transactions.
******
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SWOT Analysis of Dena Bank

SWOT Analysis
Strength
1. Rural banking expertise

2. Government schemes implementation
3. Innovative schemes for different groups like drive in ATMs
4. Emphasis on customer satisfaction through modules like customer
ratings
5. Introduced Minor Savings Scheme.
6. Credit card in rural India known as "DENA KRISHI SAKH
PATRA" (DKSP)
7. Drive-in ATM counters and Smart cards in Mumbai
8. Customer rating system for rating the Bank Services
Weakness
1. Less penetration as compared to other banks

2. Limited advertising in comparison with leading banks
3. Less emphasis on IT support
4. Customer service is low as compared to other banks.
Opportunity
1. International banking
2. Favorable Government schemes
3.Doing aggressive marketing in order to improve brand value
4. Rural and social banking.
5. Agriculture based consultancy.
Threats
1. Economic crisis and fluctuating economic scenarios

2. Highly competitive environment with foreign banks
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PESTEL ANALYSIS
The micro-environment:
This environment influences the bank directly. It includes suppliers that deal directly or
indirectly, consumers and customers, and other local stakeholders. Micro tends to suggest
small, but this can be misleading. In this context, micro describes the relationship between
firms and the driving forces that control this relationship. It is a more local relationship, and
the firm may exercise a degree of influence. These are internal factors close to the company
that have a direct impact on the organizations strategy. These factors include customers,
employees, suppliers, shareholders, competitors.
1. Customers
Organizations survive on the basis of meeting the needs, wants and providing benefits
for their customers. Failure to do so will result in a failed business strategy.
2. Employees
employing the correct staff and keeping these staff motivated is an essential part of
the strategic planning process of an organization. Training and development plays an
essential role particular in service sector marketing in-order to gain a competitive
edge. This is clearly apparent in the airline industry.
3. Suppliers
Increase in raw material prices will have a knock on effect on the marketing mix
strategy of an organization. Prices may be forced up as a result. Closer supplier
relationship is one way of ensuring competitive and quality products for an
organization.
4. Shareholders
As organization require greater inward investment for growth they face increasing
pressure to move from private ownership to public. However this movement
unleashes the forces of shareholder pressure on the strategy of organizations.
Satisfying shareholder needs may result in a change in tactics employed by an
organization.
5. Competitors
High- There is public sector banks, private sector and foreign banks along with nonbanking finance companies competing in similar business segments. Plus the RBI is
all set to issue new banking licenses soon.
The macro-environment
Macro environment factors are uncontrollable external forces that affect how a business
operates. They are largely out of the control of the business, and often require changes in
operating, management, production, and marketing. Analysts often categorize them using the
acronyms PESTEL stands for political, economic, social, and technological, environmental
and legal concerns
1. Political factors
o Monetary policy
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2.
3.
4.
5.
6.
o Regulatory framework
o Budget and budget measures
o Changes in interest rates
Economic factors
o More savings
o More capital formation
o Increase in production of goods and services
o Banking channels
Social factors
o Increase in population
o Changes in lifestyle
o Easy way of lending money
o Exploring banking facilities in rural areas
Technological factors
o Internet banking
o IT services and mobile banking
o Credit cards
o Improvement in efficiency
Environmental factors
o Natural disasters can disrupt production and supply operations, or even
destroy bank assets. Programs such as environmental risk assessment can help
companies prepare to handle many of the most likely short-term crises. In the
long view, however, businesses may have an interest in ensuring that their
supply chains are not destroyed by unsustainable practices.
Legal factors
o Legal factors can limit or change how a bank operates. For example, they may
have to hire additional supervisory staff or purchase safety equipment after a
new health and safety law is passed.
********
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Competitive forces Model: Porters Five Forces Model-Industry Analysis
Potential Entrants is high as

development financial
institutions as well as private
and Foreign Banks have
entered in a big way.
Organizing power
of the supplier is
high. With the new
financial
instruments they
are asking higher
return on the
investments
Ralry among existing

firms has increased
with liberalization.
New products and
improved customer
services is the focus.
Bargaining power
of buyers is high
as corporate can
raise funds easily
due to high
Competition.
The threat of substitute product

is very high like credit unions
and investment houses. There are
other substitutes as well banks
like mutual funds, stocks,
government securities,
debentures, gold, real estate etc.
1. Rivalry among existing firms

With the process of liberalization, competition among the existing banks has increased.
Each bank is coming up with new products to attract the customers and tailor made Loans are
provided. The quality of services provided by banks has improved drastically.
2. Potential Entrants
Previously the Development Financial Institutions mainly provided project finance and
development activities. But they now entered into retail banking which has resulted into
stiff competition among the exiting players.
3. Threats from Substitutes

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Competition from the non-banking financial sector is increasing rapidly. The threat of
substitute product is very high like credit unions and in investment houses. There are other
substitutes as well banks like mutual funds, stocks, government securities, debentures,
gold, real estate etc.
4. Bargaining Power of Buyers
Corporate can raise their funds through primary market or by issue of GDRs, FCCBs. As
a result they have a higher bargaining power. Even in the case of personal finance, the
buyers have a high bargaining power. This is mainly because of competition.
5. Bargaining Power of Suppliers
With the advent of new financial instruments providing a higher rate of returns to the
investors, the investments in deposits is not growing in a phased manner. The suppliers
demand a higher return for the investments.
6. Overall Analysis
The key issue is how banks can leverage their strengths to have a better future. Since the
availability of funds is more and deployment of funds is less, banks should evolve new
products and services to the customers. There should be a rational thinking in sanctioning
Loans, which will bring down the NPAs. As there is an expected revival in the Indian economy
Banks have a major role to play.
*******
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SECTORIAL DETAILS
1.) MSME SECTOR
Introduction
Micro, Small & Medium Enterprises are the growth engines of the Indian economy due to their
ability to create jobs, foster entrepreneurship and to provide depth to the industrial base of the
economy. MSMEs are contributing to the process of economic growth, employment generation
and helping in more equitable distribution of national income. The major advantage of the
sector is its employment potential at low capital cost. MSMEs are second only to agriculture
in the field of employment. Thus MSME plays a very significant role in the socio-economic
development of the country. With the opening up of the Indian economy due to globalization
and liberalization, this vital sector of the economy is facing a lot of challenges and competition
from the domestic as well as multinational corporations.
Problems & Challenges
The problems and challenges faced by the SMEs and the factors responsible for their sickness
are summarized as under:
1. Increased competition from cheap imports
2. Infrastructural constraints/bottlenecks
3. Delayed realization of receivables
4. Delayed/inadequate credit
5. High cost of funds
6. Insistence on collateral / margin
7. Complicated and cumbersome procedures of banks
8. Limited financial resources
9. Non availability of adequate promoters contribution / equity
10. Obsolete technology. Low R & D and technology up gradation effort
11. Inadequate managerial competence
12. Lack of marketing skills / Poor marketing
13. Inadequacy of inputs and skills
14. Government policies
15. Financial problems
16. Low quality image (Low ability perceived)
17. Difficulty in dealing with Got buying system
Problems Identified by Banks
1. High sickness / NPA level
2. Lack of entrepreneurship
3. Infrastructural constraints
4. Competition/ lack of marketing skills
5. Lack of credit information.
6. Obsolete technology/ inertia to technological up gradation
7. Multiple agencies overseeing the development of MSME sector
8. Inadequate reach of banks
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MSMED Act 2006

In line with the announcements in the policy package Govt of India brought in a special act
called THE MICRO, SMALL AND MEDIUM ENTERPRISES DEVELOPMENT ACT,
2006 which was passed on 16th June, 2006 to provide for facilitating the promotion and
development and enhancing the competitiveness of Micro, Small and Medium Enterprises and
for matters connected there with or incidental there to. The Act has come in force w.e.f. 2nd
October, 2006.
With the passing of MSMED Act-2006 there has been clarity as per the definition of Micro
Small and Medium Enterprises. Under the provision of the Act steps are also being taken to
support MSME sector with a view to increasing their competitiveness and also to provide legal
protection. With this development in the year 2006 the growth in MSME sector shall be
accelerated visibly in the ensuing period.
Classification of Micro, Small & Medium Enterprises is as follows:
Manufacturing Sector
Service Sector
Original Investment in Plant Original

Investment
& Machinery
Equipment
in
Micro Enterprises
Up to Rs. 25 lacs
Up to Rs. 10 lacs
Small Enterprises
More than Rs. 25 lacs but not More than Rs. 10 lacs but not
exceeding Rs. 500 lacs
Medium Enterprises More than Rs. 500 lacs but not More than Rs. 200 lacs but not
Small Enterprises
Small (manufacturing) Enterprises:Enterprise engaged in the manufacture/production or preservation of goods and whose
investment in plant and machinery (original cost excluding land and building and the items
specified by the Ministry of Small Scale Industries vide its notification No. S.O. 1722(E) dated
October 5, 2006) does not exceed Rs. 5 crore
Small (service) Enterprises:Enterprise engaged in the providing/rendering of services and whose investment in equipment
(original cost excluding land and building and furniture, fittings and other not directly related
to the service rendered or as may be under the Micro, Small and Medium Enterprises
Development, (MSMED), Act 2006) does not exceed Rs.2 crore.
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Micro Enterprises
Micro (manufacturing) Enterprises:Enterprise engaged in the manufacture/production or preservation of goods and whose
investment in plant and machinery (original cost excluding land and building and such items
as per MSMED Act 2006) does not exceed Rs. 25 lakh, irrespective of the location of the unit.
Micro (service) Enterprises:Enterprise engaged in the providing/rendering of services and whose investment in equipment
(original cost excluding land and building and furniture, fittings and such items as per MSMED
Act 2006) does not exceed Rs. 10 lakh.
Medium Enterprises
Medium (manufacturing) Enterprises:Enterprise engaged in the manufacture/production or preservation of goods and whose
investment in plant and machinery (original cost excluding land and building and the items
specified by the Ministry of Small Scale Industries vide its notification No. S.O. 1722(E) dated
October 5, 2006) is more than Rs. 5 crore but does not exceed Rs. 10 crore.
Medium (service) Enterprises: Enterprise engaged in the providing/rendering of services and
whose investment in equipment (original cost excluding land and building and furniture,
fittings and such items as per MSMED 2006) is more than Rs. 2 crore but does not exceed Rs.
5 crore.
RETAIL BANKING SECTOR

Retail banking is banking service that is geared primarily toward individual customers Retail
banking is usually made available by commercial banks as well as smaller community banks.
Unlike wholesale banking, retail banking focuses on consumer markets. Retail banking entities
provide a wide range of personal banking services including offering savings and checking
accounts, bill paying services as well as debit and credit cards. Though retail banking,
consumers may also obtain mortgages and personal loans. Although retail banking is, for the
most part, mass market driven, many retail banking products may also extend to small and
medium sized enterprises.
Retail banking deals with lending money to individual consumers
Retail banking consists of both the deposits side which from the liabilities of the bank, and the
loan side which are the assets of any bank.
-22-
Retail banking is, however, quite broad in nature - it refers to the dealing of commercial banks
with individual customers, both on liabilities and assets sides of the balance sheet. Fixed,
current / savings accounts on the liabilities side; and mortgages, loans (e.g., personal, housing,
auto, and educational) on the assets side, are the more important of the products offered by
banks. Related ancillary services include credit cards, or depository services. Todays retail
banking sector is characterized by three basic characteristics:
1.
multiple products (deposits, credit cards, insurance, investments and securities);
2.
multiple channels of distribution (call center, branch, Internet and kiosk); and
3.
Multiple customer groups (consumer, small business, and corporate).
The Retail Banking schemes of the bank are as under:

1. Dena Niwas Housing Finance Scheme.
2. Dena Rent Scheme.
3. Dena Mortgage Loan Scheme.
4. Dena Vidya Laxmi Educational Loan Scheme
5. Dena Trade Finance Scheme.
6. Dena Suvidha Personal Loan Scheme.
7. Dena Auto Finance Scheme.
8. Dena Senior Citizens (Pensioners') Loan Scheme.
9. Dena Consumer Durables Loan Scheme
10. Dena Doctor+ Scheme.
11. Dena Gold Loan Scheme (for individuals other than farmers).
-23-
Total
Dena Consumer Durables Loan Scheme

Dena Doctor+Scheme
Dena Gold Loan Scheme
0%
9% 0%
11%
7%
1%
0%
Dena Mortgage Loan Scheme

Dena Niwas Housing Finanace Scheme
9%
Dena Rent Scheme
Dena Senior Citizens (Pensioner's) Loan
Scheme
63%
Dena Suvidha Personal Loan Scheme

Dena Trade Finance Scheme
Dena Vidya Laxmi Educational Loan Scheme
RETAIL LOAN POLICY AT DENA BANK

The retail lending policy is sub policy of the main loans and advances policy of the bank. The
Retail lending policy is the guideline that covers the required rules and regulations for
advancing loans under the various retail schemes of the bank.
In the back drop of the changing economic scenario, the focus of lending is increasingly getting
shifted from industrial/commercial advances to a diversified portfolio of advance to retail,
MSME and the core traditional sector i.e. Agriculture. Retail banking is one of the principal
growth engines for the banks in India and retail advances have been widely accepted as the
driver of the credit acceleration.
Due to globalization, foreign banks and new generation private banks have entered the market
and have brought with them several technologically driven innovative products. In order to
face the competition effectively, public sector banks are also becoming more technology savvy
and customer oriented. Thus, non-traditional competition, market consolidation, new
technology, and advent of Internet are changing the landscape of the retail banking industry.
Now customers are easily switching banks whenever they find better services and products and
are difficult to retain. Banks therefore, are finding ways & means to cross-sell various retail
products to existing customers and keep their base intact.
-24-
OBJECTIVE OF RETAIL LENDING POLICY
1. To strengthen the credit delivery system for retail lending.

2. To build up and maintain a well-diversified, healthy and high yielding retail portfolio.
3. To set up an effective Risk Management System to address key issues like risk
identification, risk measurement, risk monitoring and risk mitigation.
4. To provide for adequate delegation of discretionary powers at all levels.
*********
-25-
My Work Profile
The summer internship was held in the Zonal Office and Bangla Bazaar Branch of Dena
Bank. The internship was based on the loans and advances given to MSME Sector. Hence the
entire process was based on the Pre-Sanction formalities of credit given to particular enterprise.
The responsibilities handled at the office were started from reading the companys project file
(sent by the company to whom the loan is to be sanctioned) and continued till the loan is
sanctioned by the competent authority according to the limit to be sanctioned.
GENERAL INSTRUCTION ON LOANS AND ADVANCES
The assessment process of sanctioning any loan/advances is based on following

conditions:
1. Efficient management of loans and advances portfolio has assumed greater significance
as it is the largest asset of the bank having direct impact on its profitability. In the wave
of the continued tightening of norms of increase recognition, asset clarification and
provisioning increased competition and emergence of new types of risks in the financial
sector, it has become imperative that the credit functions are strengthened. RBI has also
been emphasizing banks to evolve suitable guidelines for effective management and
control of risk credits.
2. With a view to ensure a healthy loan portfolio, our bank has taken various steps to bring
its policies and procedures in line with the changing scenario which also aim at effective
management and dispersal of credit risks, strengthening of pre-sanction appraisals and
post-sanction monitoring systems. Bank has laid down detailed guidelines to be
followed while considering credit proposals, some of the important ones are listed as
under: All loan facilities be considered after obtaining loan applications from the
borrower and completion of Confidential Report on him and guarantors. The
borrowers should have the desired background, experience to run their business
successfully.
Project for which the finance has been granted should be technically feasible
and economically viable i.e. it should be able to generate enough surplus as to
service the debts within a reasonable period of time.
Cost of the project and means of financing the same should be properly assessed
and tied-up. Both under-financing and over-financing can have an adverse
impact on the successful implementation of the project.
Borrowers should be financially sound, enjoy good market reputation and must
have their stake in the business i.e. they should possess adequate liquid
resources in contribute in the margin requirement.
Loan should be sanctioned by the competent sanctioning only after execution
of all the required documents.
Project financed must be closely monitored during implementation stage to
avoid time and cost overruns and thereafter till the adjustments of the banks
loan.
-26-
WORKING CAPITAL FINANCE AND TERM FINANCE

All advantages are granted basically in provide working capital or for term finance.
Working capital means the funds required for carrying on normal trading under
manufacturing activities. Term finance covers funds required for acquiring means of
procedure such as land and building and plant and machinery. Working capital limits
are granted for sheet periods of say, one year and have to be renewed at the end of that
period.
PRODUCTION & SALES FINANCE
Working capital finance may be for the purpose of production i.e. for acquiring
inventory (or against inventory) or for sales i.e. for financing receivables. Limits such
as cash credit, loans/overdrafts are for production whereas bill limits against
hypothecation of books debts are part of sales finance provided by banks.
CASH CREDIT ADVANCES
Cash credit account is a drawing account against credit granted by the Bank and is
operated in exactly the same way as a current account on which an overdraft has been
sanctioned. The various types of securities against which CC is allowed are pledge,
hypothecation of goods or produce, pledge of documents of title to goods, mortgage of
immovable property, book debts, trust securities, etc.
In CC accounts borrower is allowed to drawn on account within the prescribed limit,
and when required.
GURANTEE
Issuing of guarantees on the behalf of their customers to third parties is one of the
services rendered by commercial banks. Such guarantees are contracts to perform the
promise or discharge the liability of the constituent on whose behalf they are given, in
case of his default or failure to perform the contracts undertaken by him. The party in
whose favor the guarantee is given is called the beneficiary, whereas the issuing bank
is called the guarantor and the third party on whose behalf of guarantee is given is called
the principal debtor. Every guarantee must specify the amount and period of the liability
to be undertaken by the bank.
CREDIT RATING SCHEME
A credit rating scheme has been introduced to encourage MSME units to get their credit
rating done by reputed credit rating agencies, with a view to facilitate credit flow to
them and enhancing the comfort level of lending banks. The scheme, bring
implemented by the NSIC, envisages that 75 percent of the cost of the credit rating
exercise, with a maximum limit of Rs 40000 per MEME unit, would be reimbursed to
the MSME units availing of this onetime facility. Six credit rating agencies namely,
CRISIL, ICRA, Don and Broadstreet, Onicra, Car and Finch, which have agreed to
credit, rate MSME units through NSIC.
-27-
RETAIL LOAN PRODUCTS
RETAIL BANKING DEPARTMENT

Revised interest rates on various retail lending schemes w.e.f. 25.7.2013
Dena Niwas Housing Finance :
Floating Rate of Interest (linked to Base Rate)
Limit up to Rs.75 lakhs
Limit above Rs.75 lakhs
10.25%
10.50%
*Fixed Rate of Interest (To be reset at the end of every 3 Yrs)

Limit up to Rs. 25.00 Lacs
Repayable up to 5 years
11.25% (fixed)
Repayable above 5 years & up to 10 years
Repayable above 10 years
Limit > Rs.25 lakhs & Up to Rs.30 lakhs :
Repayable in > 5 years & up to 10 years
Repayable in > 10 years
11.25% (fixed)
Limit > Rs.30 lakhs :

Repayable above 5 years & up to 10 years
Repayable above 10 years
11.75% (fixed)
* Note: The fixed rate of interest is to be reset after every 3 years. At the time of
reset it should be fixed by the same spread over the Base Rate applicable on the
date of reset as was applicable at the time of sanction.
OTHER RETAIL LENDING SCHEMES:
S. N.
Scheme
Revised Rates
1 Dena Suvidha
13% (fixed) in case of tie-up under Corporate Salary

Scheme.
14.00% (fixed) in all other cases.
-28-
2 Dena Consumer Durables

Finance
3 Dena Senior Citizen

Pensioners
4 Dena Auto Finance
Two Wheelers
13% (fixed) in case of tie-up under Corporate Salary

Scheme.
14% (fixed) in all other cases.
14.55%
Repayable up to 3 yrs : 13.30%

Repayable > 3 yrs
: 13.80%
Repayable up to 1 yr. : 11% (fixed)
Four Wheelers
In >1 yr. & up to 3 yrs : 11.50%(fixed)
Old
Vehicles
years)
(Max.
In > 3 yrs & up to 5 yrs : 12% (fixed)

3 Repayable up to 1 yr. : 12% (fixed)
In >1 yr. & up to 3 yrs : 12.50%(fixed)
-29-
5 Dena Vidya Laxmi Education Loan:

Rate of Interest
A)
Up to Rs. 4.00 lakhs:

11.80% p.a.
Repayable > 3 yrs.
11.80% p.a.
Above Rs.4.00 lakhs

11.80% p.a.
Repayable
11.80% p.a.
> 3 yrs.
In case of following institutions, Rate of Interest, Margin & Security will

be as per point No. B
For studies in India :
a. Engineering :- IITs, NITs, BITS, IISc Bangalore, MIT-Madras
b. Management :- IIMs, ISB-Hyderabad, XLRI-Jamshedpur, NMIMS Mumbai,
JBIMS
Mumbai
c. Medical Science :- CMC-Vellore, AIIMS-New Delhi, PGIMER-Chandigarh,
Armed
Forces Medical Sciences, Dr.Ram Manohar Lohia Hospital-New Delhi,
VMM
College & Safdarganj Hospital
d. Others: - IIFT-New Delhi, NID-Ahmedabad, Delhi School of Economics.
For studies abroad :- Universities of Cambridge-UK; University of OxfordUK;
Imperial College London-UK; UCL-UK; University of Edinburgh-UK;
University of
Toronto-Canada; McGill University-Canada; Harvard University-USA; MITUSA;
Yale University-USA; University of Chicago; Upenn-USA; Columbia
University;
Stanford University; Caltech-USA; (USA- Princeton University; University
of
Michigan; Cornell University; Johns Hopkins University; Duke University;
UCB; Northwestern University) ETH Zurich-Switzerland; HKU-Hong Kong;
University of Tokyo-Japan.
-30-
B)
ROI :- For studies in India & Abroad
Base Rate i.e. 10.25% at present,

irrespective of repayment period
& including concessions
available, if any
Margin
Nil - irrespective of loan amount
Security :- For studies in India -
No collateral security is to be
obtained irrespective of loan
amount.
For studies Abroad
As per scheme guidelines.

For other conditions, contact nearest Dena Bank Branch.
6
Dena Trade Finance :

Dena Trade under MSE
Limit above Rs.5.00 crores
Dena Rent
Up to limit of Rs.5.00 crores as per MSE rate of

interest
CCHyp.
: 13.25%
TL repayable in 3 yrs : 13.00% TL
repayable in > 3 yrs : 13.50%
Repayable up to 3 years : 13.25%
Repayable in > 3 yrs
Dena Mortgage
Loan
Term
Repayable up to 3 years : 13.50%
Repayable in > 3 years : 14.00%
14.50%
Overdraft facility
9
10
Dena Doctor +
CC Hyp.
TL Repayable up to 3
years
TL Repayable in > 3 yrs
Dena Gold Loan
: 13.50%
13.05%
13.05%
13.05%
Up to Rs.3 lacs) -
12% (fixed)
> Rs.3 lacs & up to Rs.100 lacs : 13.55%

(floating)
********************
-31-
Dena Niwas Housing Finance Scheme
A Loan for different needs

Dena Niwas Home Loan is provided for purchasing a plot, construct a house, buy a ready built
house or buy one under construction. The loan even helps you build an extension to your
existing house or purchase a house that is up to 50 years old provided the remaining life of the
house is more than 25 years. Besides you can take this loan for repairs and up gradation, which
includes the cost of fixtures, POP works, retiling, fittings etc.
It even gives you the option to shift an existing home loan with any other Bank or Financial
Institution.
Eligibility:
Major individual, resident or non-resident, having a regular source of income.

Your age on the maturity of the loan is less than retirement age if you are a salaried
employee & below 65 years, if you have a business.
The total deductions do not exceed 60% of your gross income, including the loan
installment of the proposed loan.
Spouses/Co-applicants income can be clubbed for enhanced eligibility.
Loan Amount
Up to Rs.200 lakhs for the purchase/construction of a house.
Up to Rs.10 lakhs for renovation/up gradation.
Margin
Loans up to Rs.20 lakhs - 10% of cost of house property (excluding stamp duty,
registration charges, etc.)
Loans above Rs.20 lakh & up to Rs. 75 lakhs - 20% of cost of the house property
(excluding stamp duty, registration charges, etc.)
Loans above Rs.75 lakhs - 25% of cost of the house property (excluding stamp duty,
registration charges, etc.)
Rate of Interest
Please Check out the Interest Rates Attached above

Interest Charged on Daily Reducing Balance
No Prepayment Charges
Loan Limit of Rs 200 Lacs.

Purchase of House up to 50 years old allowed
Floating Rate Linked to Base Rate
-32-
Repayment
Up to 25 years-for the purchase of a new flat/house/construction/extension.

Up to 10 years- for repairs, renovation and up gradation.
Security
Simple equitable mortgage of the house/flat/apartment on which the loan is availed.
Process Fees:
0.50% of sanctioned limit.
Dena Vidya Laxmi Educational Loan Scheme

Dena Bank also considers education loan for Vocational Education and Training
Education Loan - Government interest subsidy scheme for Economically Weaker Sections
(EWS)
Coverage:
EWS with upper parental income of Rs.4.50 lakhs per annum.

For recognized Technical / Professional Courses in India after Class XII as approved
by Ministry of Human Resources Department, Government of India.
Certification of income by designated authority in the prescribed format.
Applicable from academic year 2009-10.
Interest Subsidy during moratorium period (Course period + 6 months / 1 year).
The Topper for your childrens Higher Education

Ensure a bright future for your children. Provide them with the best of higher education in India
or abroad. Avail Dena Vidya Laxmi Educational Loan.
Eligibility:
You are an Indian national and have secured admission to a professional or technical
course in an Indian or Foreign university.
Simply walk in with the mark-sheet of the qualifying exam and proof of admission.
Course Eligibility
Study in India:
Graduation courses, Post-Graduation courses, Masters & PhD, Professional courses.
Study Abroad:
Graduation: For job oriented professional / technical courses offered by reputed universities
-33-
Post-Graduation: MCA, MBA, MS etc.

Courses conducted by CIMA-London, CPA in USA etc.
Loan Amount
Up to Rs.10 lakhs for studies in India.

Up to- Rs. 20 lakhs for studies abroad.
Loan takes care of:
Fee payable to colleges/ schools/ hostels

Examination/ Library/ Laboratory fees.
Purchase of books, equipment, instruments and uniforms.
Passage fare for travel abroad.
Purchase of computers needed to complete the course.
Any other expense to complete the course like study tours, project work, thesis etc.
Margin
Up to Rs. 4 lakhs- NIL for study in India and abroad.

Above Rs. 4 lakhs- 5% for study in India and 15% for study abroad.
Rate of Interest
Please check out the Interest Rates Table
1% interest concession if interest is serviced as and when due during the moratorium period
when repayment holiday is specified.
SIMPLE INTEREST CHARGED DURING MORATORIUM PERIOD.
Process Fees
Rs.1000/- for studies abroad which is refundable on availing the limit.
Repayment
For loans up to Rs.7.50 lakhs : Up to 10 years
For loans above Rs.7.50 lakhs: Up to 15 years
Dena Suvidha (Personal Loan) Scheme
Dena Suvidha is the ideal way to fulfil personal needs of your family. Be it to finance a
marriage or family function. To travel or celebrates a festival. For medical treatment or
educational purposes. Or simply a vacation. Even an unforeseen event. Dena Suvidha
(Personal) Loan is always there for all your needs.
-34-
Eligibility:
You are a permanent employee between 24 to 55 years having worked for at least 2
years in a Govt. or PSU/ reputed organization.
You have a gross monthly income of at least Rs. 15,000/-. Income of any other
earning member (co-applicants) can be clubbed for enhanced eligibility.
You can have a salary disbursement arrangement with us or provide an undertaking
form your employer.
Loan Amount
Minimum- Rs. 15,000/ Upton- Rs. 1 lakh or 9 times the net monthly income whichever is less.
Margin
NIL
Rate of Interest
Please check out the Interest Rates Table Attached.
INTEREST CHARGED ON DAILY REDUCING BALANCE
NO PREPAYMENT CHARGES
Process Fees
1% of loan amount
Repayment
Upton 36 EMIs
Mode of disbursement
By credit to your Savings Bank account.
-35-
Research Methodology
The methodology being used involves two basic sources of information primary sources and
secondary source.
Primary sources of Information
Meetings and discussion with the Chief Manager and the Senior Manager of both
Credit and Credit Risk Management Department
Meetings with the customers at Retail Branch
Secondary sources of Information
Loan Policy and Internal Circulars of the bank

Research papers, power point presentations and PDF files prepared by the bank and
its bank officials
Referring to information provided by CIBIL, Income Tax Return, Registrar of
Companies (Ministry of Corporate Affairs), and Auditor reports.
Research Design - Analytical in nature

Expected Contribution Of The Study:
This study will help in understanding the credit appraisal system in banks & to reduce various
risk parameters, which are broadly categorized into financial risk, business risk, industrial risk
& management risk associated in providing any loans or advances or project finance.
Limitation of the Study:
Limitations of this Study are as follows: Time:
The short time duration of one & half months is inadequate.
Vast topic:
The subject credit appraisal under SME is too vast to study.
Scrutinizing of information:
Data mining was a time consuming task. Useful information had to be extracted after careful
scrutinizing from the large data gathered.
-36-
Pre-Sanctioned Loan
For a house-hunter, the second biggest hurdle after zeroing in on the dream home is obtaining
a home loan. How would you like it if you have the loan in your pocket even before you
approach the developer to negotiate? Banks and housing finance companies offer pre-approved
home loans even before the borrower decides on the property. While this sounds inviting, there
may be some not-so-exciting features that you should be aware of.
The working: The procedure for a preapproved loan is not very different from a regular home
loan application-you need to submit the documents along with the processing fee.
These will include (depending on whether the applicant is a salaried individual, self-employed
professional or an entrepreneur) identity and residence proofs, the latest salary slip, Form 16,
past six months' bank statement, past three years' income-tax returns (self and business) as well
as profit/loss statements and balance sheet, certificate and proof of business existence and so
on. However, a desirable income level is not the only criterion. Your repayment capacity, too,
is a critical parameter.
"We take into account the borrower's income-to obligation ratio. Hypothetically, if the
applicant's income is `1 lakh, his total repayment should not be more than `55,000-60,000,"
explains Kamlesh Rao, executive vice-president, retail assets, Kotak Mahindra Bank. Even
after your loan is sanctioned, the disbursal will take place only after you identify a property
that passes the lenders due diligence test.
"There is no typical period within which the loan seeker is required to avail of the disbursement.
However, we keep the file open for six months and if the applicant does not act within this
period, we send reminders to the individual," informs an HDFC spokesperson. The validity
period varies with each bank. For instance, the State Bank of India, which has been publicizing
this facility of late, requires the borrower to identify the property within 60 days for the sanction
to be valid. In case of Kotak Bank, the validity could range from 1-3 months. "We generally
prefer a period of one month," says Rao.
-37-
However, if there is a change in the interest rate, you will be charged the one prevailing at the
time of taking the loan. While the interest rate may change, the spread over the bank's base rate
will not be altered, unless a significant period of time has elapsed.
Benefits for the borrowers: Buying a property typically involves a mountain of paperwork-with
the builder and, later, with the lender. Availing of a pre-approved loan would mean that one
part of it is taken care of.
"The borrower's creditworthiness is established already and this helps in negotiating on rates
with the builders. Secondly, your total transaction turnaround time comes down," explains Rao.
Also, banks advise home-seekers on properties that meet their criteria. Besides, lenders have
tie-ups with builders for various projects. "In the event of the borrower (with a pre-approved
home loan) finding it difficult to take a decision, the bank may direct him to the right kind of
project. Thus, if both the loan as well as the project is pre-approved, the processing will be
much shorter," he adds.
Tread cautiously: However, bear in mind that it is not always a win-win situation. You would
lose the processing fee if you defer your purchase or decide to shift to another lender. "The
processing fee is not refundable. In case of HDFC, it is 0.5% of the loan amount or `10,000,
whichever is lower," says the HDFC spokesperson. "We retain 0.25% of the loan amount or
`5,000," says Rao.
Therefore, you need to factor in the uncertainty of the actual disbursement while signing up for
such loans. Even if you do take the decision within the prescribed cut-off date, the disbursal
may be stalled if the bank does not find the property suitable. "I don't see much value in such
schemes, unless you are unsure of the amount of loan that you may be eligible for," says Harsh
Roongta, CEO of Apnapaisa.com.
"The processing fee may have to be forgone in such cases. If no processing fee is levied, you
can consider it." In short, though these schemes score high on utility, they may not be suited
for all. You could consider these schemes if you are comfortable with the prevailing rate of
interest, the amount required for down payment is in place and you have already narrowed
down your search to a particular locality, the size as well as the kind of apartment and the
developer. If you are starting from scratch, it would be probably safer to finalise the property
before proceeding with the loan-related paperwork.
-38-
MSME Advances
Advances to Micro, Small & Medium Enterprises (MSME):
Bank has well defined policy for lending to Micro, Small & Medium Enterprises
(MSMEs) with built-in concessions and incentives. The operative part of the MSME
policy for the year 2013-14 is as under:
The Bank shall continue to lay emphasis on financing Micro, Small & Medium
Enterprises and our existing MSME credit portfolio shall be enlarged with special focus
on lending to Micro Enterprises.
Following recommendations of High Level Task Force constituted by Honble Prime

Minister on Micro, Small & Medium Enterprises (MSME) Sector will be implemented:
Achievement of 20% year on year growth in credit to Micro and Small
Enterprises.
The share of Micro Enterprises in Micro & Small Enterprises lending be
increased to 60% by accelerating lending to Micro Enterprises.
10% annual growth in number of accounts of advances to Micro Enterprises.
The Reserve Bank of India guidelines on financing to MSMEs shall continue to be

followed and be incorporated in various schemes for financing MSMEs. These
guidelines on timely sanctioning of MSME applications, margin, rate of interest,
collateral security, etc shall continue to be adhered to.
The Bank envisages MSEs credit growth through financial inclusion by way of
collateral free and without third party guarantee lending by leveraging CGTMSE. As
per RBI mandatory guidelines, loans upto Rs.10 lakh to Micro and Small Enterprises,
which are eligible for coverage under Credit Guarantee Scheme of CGTMSE, are to be
considered on merits without accepting any collateral security / third party guarantee
and all such cases must be got covered under guarantee scheme of CGTMSE. Further,
as per Banks guidelines, MSE proposals up to Rs.100 lakh, which are eligible under
Credit Guarantee Scheme of CGTMSE, are to be sanctioned by the competent authority
without taking any collateral security/third party guarantee.
Disposal of Loan Applications within the prescribed time limit is to be ensured as

under:
Upto Rs. 2 lakh 2 Weeks

Above Rs.2 lakh & upto Rs.50 lakh 4 weeks
Above Rs.50 lakh & upto Rs.100 lakh 5-6 weeks
Above Rs.100 lakh & upto Rs.100 crore 6-7 weeks
Above Rs.100 crore 8-9 weeks
-39-
The Bank has approved Credit Rating agencies like SMERA, CRISIL, ICRA, ONICRA
and BRICKWORK for rating of the MSME units and is extending interest concession
of 0.50% for first two rating grades and 0.25% to third rating grade only. However, it
is to be ensured that at a time only one concession will be admissible to the borrowers
having good rating of SMERA/CRISIL/ICRA/ONICRA/BRICKWORK.
In case of MSEs (to new as well as to existing cases) where implementation of project
is in progress, liberal moratorium on term loan and working capital shall be extended
by including interest also, during first 6-12 months of operation on case to case basis
by the sanctioning authorities. As such, interest debited during this period be treated as
long term funding of project and instalments after moratorium period shall be fixed
accordingly.
Special concession to Women owned enterprises have been extended in margin

requirement and interest rates, irrespective to the amount of loan.
District-wise project profiles With a view to obviate the need for TEV studies for
each project, common industrial activities prevailing in a district are being identified at
Lead Districts of the Bank for preparation of standard project reports for loans up to
Rs. 1 crore. Wherever, these Standard Project Profiles have been approved by the
DLRC in the Lead Districts of the Bank, the Techno Economic Viability Study is not
required. Similarly project profiles approved by DLRCs in other districts, where we
are not lead bank, shall be adopted for financing and TEV reports will not be required.
The Bank is financing Artisans, Craftsmen, Village & Cottage Industries and Industries
falling under KVIC schemes like PMEGP (Prime Minister Employment Generation
Programme), Interest Subsidy Eligibility Certificate cases etc. These loans are to be
classified under advances to Micro Enterprises without any investment ceiling. The
small non farm sector units in rural areas, minorities, SC/ST and other special groups
are being financed in terms of GOI/RBI policy and shall continue to be given attention.
Sufficient Loaning Powers have been vested to ensure faster disposal of MSMEs loan
applications:
(i)
(ii)
Branch Managers have been vested with higher powers to directly

dispose of proposals at branch level for financing Micro Enterprises
(manufacturing/service) covered under CGTSME scheme as
follows:
Scale II Managers vested with the powers of Scale-III
Managers.
Scale III Managers vested with 125% of their vested
loaning powers.
Incumbents of all the specialized MSME branches may consider
takeover proposals to the extent of 50% of their regular loaning
powers in case of MSME advances without obtaining prior approval
from the next higher authority.
At present there is a system of online filing of loan applications by MSEs on Banks

website. The Bank is providing 20% concession in processing/upfront fee, in case such
applications received online.
-40-
Simplified Loan Application (PNB - 1166) for credit requirement up to Rs. 50 Lakh for
Micro & Small Enterprises (Manufacturing & Service sector) has been made available
along with the check list of documents. Loans Applications above Rs. 50 lakh are also
available along with check list.
Banks guidelines provide for extending Cash Credit facilities against combined level
of stocks and book debts. The sundry creditors are netted against the sundry debtors
and surplus receivables, if any, are considered for calculation of DP after providing for
adequate margin. Similarly, surplus sundry Creditors will be reduced from the value of
stock.
The Bank is providing Working Capital through simplified turn over method (Nayak
Committee) i.e. providing 20% of the turn over as bank finance with 5% promoters
contributions to MSEs units (Manufacturing and Service) for credit requirement up to
Rs. 500 lakh. However in case of Retail Trade this limit is restricted up to Rs. 200 lakh.
The Quarterly Monitoring System (QMS) forms have been simplified and Current ratio
norms relaxed to 1.25:1.
The Bank has adopted Cluster based lending approach for MSME sector. Under Cluster
based approach, Bank has adopted 55 MSME clusters and more are to be adopted in
the years to come. Emphasis will be made for customisation of cluster specific schemes
for boosting MSME advances. To promote cluster based lending approach, Bank will
provide financial support to MSMEs, situated in these clusters by way of mapping of
one of its specialised MSME branches with these clusters. In case of no MSME
specialised branch is available at the center, endeavor will be made to covert one of its
branches as MSME specialised branch at such centers where we are lead bank.
The Bank has 59 specialized MSME branches & 465 MSME focus branches to support
finance to MSME units. These branches shall be developed as centres of excellence in
MSME financing. These branches shall primarily focus for credit growth through
MSME advances especially advances to Micro Enterprises.
The Bank has adopted the Code of Banks commitment to Micro and Small Enterprises
of Banking Code and Standards Board of India (BCSBI).
For identifying sick units in MSE sector, Bank has adopted following revised definition
of MSEs sick units:
A Micro or Small Enterprise (as defined in the MSMED Act 2006) will be said to have
become Sick, if
Any of the borrowable account of the enterprise remains NPA for three months or
more
OR
There is erosion in the net worth due to accumulated losses to the extent of 50% of
its net worth during the previous accounting year.
-41-
The Bank has implemented RBI guidelines of Debt Restructuring Mechanism for
MSMEs, to ensure timely and transparent mechanism for restructuring of debts of
potentially viable units.
Bank has also set up Rehabilitation-cum-Care Centers at Circle Offices to guide the
MSME units on the matters relating to their financial needs and the facilities available
from the Banks/Govt./RBI.
For objective decision making, Credit Scoring Models for loans up to Rs. 50 lakh have
been launched and made applicable at all branches. These Credit Scoring Models have
been placed on the server of the bank and available on Finacle with link as PNB Score
SME and PNB Score. These models i.e. PNB Score SME or PNB Score, as applicable,
are being used for scoring of eligible MSME accounts.
To track delinquency in the scored accounts, score card IDs are necessarily being fed
in MIS (V) details of accounts opened in CBS.
The Bank is providing application tracking system to its MSME borrowers. All MSME
applications received with required documents, are being entered in Credit Proposal
Tracking System (CPTS) which automatically generate an acknowledgement
comprising of unique application serial number, user ID and password for tracking the
application.
To promote advances to Micro Enterprises, there is an incentive scheme for branches

for financing to Micro Enterprises. Top three branches at All India level and one top
performing branch from each circle are recommended under the scheme.
MSME campaigns are being conducted every month in the cluster of 6 to 8 branches in
every circle and report of the same is being sent to RBI on quarterly basis. The progress
of these campaigns is also being updated on Banks website on quarterly basis.
With an effort to promote Food and Agro processing sector, a special rate of interest is
being provided by the Bank, with the objective of integration of food processing units
with farm sector as well as domestic and international market.
-42-
Recommendations for Banks

TIMELY AND ADEQUATE FINANCE
1. The Loan Application form should be redesigned having the complete list of
documents for sanction, Legal documentation and Disbursement separately
2. A pre-numbered computerized receipt should be issued to the company with
date and time with Login and Password for tracking the status of the proposal.
3. The company should be given a Login and Password to track its loan application
online to know what is the status of the application and at which desk it is
parked? It will also be clear to the company if it is pending due to the nonsubmission of reply by the company.
4. A comprehensive check list for the balance documents should be issued to the
company within next 7 days.
5. Possibility of in-house Legal and Valuation should be explored, as the
outsourcing takes lot of time.
6. At the time of sanction/ Rejection, a Travel Sheet of the Flow of the application
as per Annexure I should invariably be a part of Sanction / Rejection Letter.
7. Reason of Rejection should also be conveyed to the company.
CREDIT RATING
1. There should be different credit rating scale for MSMEs and Large Corporate
under Basel II.
2. The threshold limit for external credit rating should be increased from the
present Rs. 5 crore to Rs. 25 crore. IBA should approach RBI with data mapping
internal rating with external ratings for limits / exposure below Rs. 25 crore
PARTICIPATION OF INDUSTRIAL ASSOCIATIONS
1. A representative of MSME Associations should be a member of Regional/
Zonal MSME Review Committee of all the banks. This committee should hold
meeting every month at all the Regional/ Zonal offices of all the banks to review
the progress of MSME loan proposals.
2. New channels of Credit Delivery like Industry Associations / Banking
Correspondents may be developed. SIDBI has taken initiative in capacity
building of select industry associations in different clusters. We recommend
that the model adopted by SIDBI may be replicated with suitable modification
if so required, by other banks/FIs for capacity building of Industry Association.
SME BRANCHES
1. The SME branches should be headed by some senior executive preferably Asstt
General Manager of the bank.
-43-
RE- APPRAISAL
1. It has been the practice at the banks that the proposals recommended by
branches headed by AGM/ DGM are re-appraised by a junior officer at the
Regional/ Zonal office. Further the proposals recommended by the Regional
Managers/ Zonal Managers with the rank of DGM/ GMs are re-appraised by the
lower ranked officer at the Head office of the bank. Different queries are thus
raised at different levels. We recommend that at the higher office which may be
Regional office/ Zonal office/ Head office, the queries should be raised only by
an officer above or atleast of the same rank officer, who has recommended the
proposal from Branch / Regional/ Zonal level.
CENTRAL GRIEVANCES CELL
1. Central Grievances cell should be formed especially for credit proposals of
MSME sector, in line with Banking OMBUDSMAN Scheme.
CONSORTIUM ARRANGEMENT
1. It has been observed in many cases that the Lead Bank appraise and assess the total
requirement of the company, still the other member banks do not sanction their
required share to the company on time. There is thus no use of the Consortium
funding. It should be mandatory for all the Consortium members to sanction the
facilities assessed by the Lead Bank within a period of one month of the assessment.
REHABILITATION & EXIT POLICY
1. As there is a Board for Industrial & Financial Reconstruction (BIFR) for large
public and private sectors owning industrial undertakings, similarly a separate
Board could be constituted for MSMEs so that their restructuring process could be
hastened. The Board would act as the nodal agency which will be authorised to
examine and declare the MSME unit as sick unit on a reference by the MSME unit
like BIFR. Rehabilitation proposal can then be finalised in consultation with banks
and the borrowers.
2. SIDBI has formulated Scheme for Management / Restructuring of Stressed Assets,
Rehabilitation and model OTS Scheme for MSME and has also circulated the same
with banks. An independent view on the scheme formulated by SIDBI may be taken
up; thereafter the same scheme may be put up by banks to their board for their
consideration.
3. The NPA norms for MSEs should be changed from 90 days to 120 days to enable
units to help company take steps to revive the company.
INTERACTION WITH CHIEF EXECUTIVES OF BANK
1. Most of the time the Chief Executives i.e. CMDs/ EDs of the banks are busy in their
internal meetings/ meetings with the large corporates. It is very difficult for SME
clients to fix up appointments with them. There should be at-least one day during a
-44-
month as a public day for MSME sector, where the CMDs/ EDs should be available
for meeting with MSME clients without any prior appointment.
Conclusion
The principal aim of a banks credit analysis is to determine the ability and willingness of a
borrower to repay a requested loan in accordance with the terms of the loan contract.
The project gives the detailed knowledge of the whole process of loans and advances which
DENA BANK performs in MSME department. Starting from the loan application from the
borrower and compilation of confidential reports on him and the guarantor, the process
continues till the disbursement of loan and after it the close monitoring till the adjustment of
Banks loan. I have realized during my project that a credit analyst must own multi-disciplinary
talents like financial, technical as well as legal know-how.
The project was an attempt to understand and perform the work in Credit appraisal proposal
which I have included is just an example of it. I have worked on many such proposals, attaching
all those is beyond the scope of this project.
The whole experience of working in such renowned public sector unit was very good and made
me learn a lot out of it.
-45-
CASE STUDY
1.) MSME PROPOSAL - CRISTAL ENTERPRISES LTD

For Approval,
CAC(Credit Approval Committee)
Proposal for
1) Renewal of CCH limits at Rs 35 lacs of M/s CRISTAL Enterprises Ltd. (Excess
borrowings of Rs 45.00 lacs converted into WCTL with moratorium period of eight
months).
2) Review of Term loan at o/s level of Rs 30.16 lacs as on 01.08.2013.
(In line with circular no 185/15/2013/14 dated 17/09/2013 referring Moratorium on
repayment of loan and interest for a period of one year in respect of all kinds of loans that are
outstanding in the account in state of Uttarakhand.)
Branch : Rudrapur
Zone : Lucknow
Dena Vivran ID
119823
2.
PROFILE
Name of the Borrower
M/s CRISTAL Enterprises/
Registered
Office
Address : Flat No 305 EBRO-J Om Nagar Uttarakhand
Address with e-mail and
Phone No.
Address
of
Plot No 54 Sector 7 IIE Pant Nagar District U S Nagar Uttarakhand
Unit/Works/Factory
Zone: Lucknow
Branch: Rudrapur
Established on
13.11.2010
Whether appearing in
Dealing with us since
22.02.2012
Standard B List as of Sep 2013
Date of Last Sanction & Authority

Group:
Line of Activity
Key Person/Promoter
NA
Yes**
May 2012 by ZO-CAC

Willful Defaulter List as of March13 No,
Auto mobile & Defaulter / CIBIL List

No
Auto Parts
Smt Geet Devi, Smt Poornima Singh & Madhvee
Key Person
Panwar ( All partners in the firm )
-46-
Promoter
Smt Geet Devi,Smt, Poorrnima Singh & Madhvee Panwar ( All

partners in the firm )
** Due to non renewal of limits.
Multiple / Consortium NA
EXISTING
Leader Bank
PROPOSE
D
Asset Classification
Our share:
100%
FB - %
100%
Asset Category as per STD

CMC Guidelines
D2K Codes & Description
Standard
NFB- %
Activity
7899
Any other vehicle

component
STL-
Sector
MNF
MSME
Special Category
99
Others
TL-
27.20 lacs
Priority
Yes
BSR Code:
250755
Basel II Code:
Risk Weightage
100%
Provisioning:
Risk Grade as per estimated

Balance
Sheet
Dated B Better
31.03.2013**
Credit Risk Rating
0.25%
** Rating has been carried in the moth of September 2013, hence acceptable in old rating module.
3. NAMES OF DIRECTORS/ PARTNERS / PROPRIETOR & NET WORTH (Rs. in lakh)

Sr.
Name
Status
Net Worth
As on
Basis
Partner
33.93
30.06.2013
Annexure CC dated
30.06.13
Mrs Geet Devi

2
Mrs Poornima Singh
Partner
80.73
30.06.2013
Annexure CC dated
30.06.13
Mrs Madhvee Panwar
Partner
60.15
30.06.2013
Annexure CC dated
30.06.13
Whether Proprietor / Partner/ Director / Guarantor has any No

relationship with any Director or Senior Official (Scale IV & above)
of the Bank. If so give details (Refer to Guidelines)
-47-
4. Major Shareholders: NA
Sr.
Name
Status
Percentage holding
Geet Devi
Partner
33.33%
Poornima Singh
Partner
33.33%
Madhvee Panwar
Partner
33.33%
5 EXPOSURE:
[Rs in Lacs ]
Borrower EXPOSURE
Fund Based
Non Fund Based
Existing
138.43
NA
Proposed
110.16
Variation(+/-)
-28.27
NA
NA
Forward Cover
NA
NA
NA
Total Credit Exposure

Investments
138.43
110.16
-28.27
NA
NA
NA
Other Commitments
NA
NA
NA
Total Exposure
138.43
110.16
-28.27
NA
NA
NA
GROUP EXPOSURE
NA
NA
NA
Fund Based
Non Fund Based
138.43
110.16
-28.27
NA
NA
NA
Forward Cover
NA
NA
NA
Total Credit Exposure

Investments
138.43
110.16
-28.27
NA
NA
NA
Other Commitments
NA
NA
NA
Total Exposure
138.43
110.16
-28.27
6 COMPLIANCE TO PRUDENTIAL / INTERNAL EXPOSURE LIMITS (Rs in Cr.)
As per RBI guidelines

Individual
742.41
Group
1979.76
Whether the limits proposed exceed the prudential exposure No
norms (Individual / Group)
In case of exceeding, details of permission from the competent Not Applicable
authority
-48-
7. BRIEF HISTORY OF SANCTIONS INCLUDING REVIEWS AND ADHOCS DURING THE

PAST TWELVE MONTHS.
Sanctions Dt.
Proposal was last sanctioned on 17.05.2012 by ZO-CAC
8. PRESENT PROPOSAL:
To permit the following:
I.
Status of existing and proposed limits
Facility
Existing
Outstandi
ng as on
28.12.2013
(Rs in Lacs )
Irregular/
Overdue
amount
Proposed
Variation
Limit
Margin (%)
Limit
Margin
(%)
25%
a)
1
Fund Based
CC( Hypo)
80.00
25%
35.00
WCTL
45.00
+45.00
Term Loan
58.43
30.16
-28.27
Total
Non
Fund
Based
Total
Forward cover
Grand
Total
(a+b+c)
138.46
Nil
Nil
b)
c)
d)
)
138.43
0.00
138.43
-45.00
NIL
107.20
Nil
-28.27
NIL
109.43
0.00
138.00
-28.27
0.00
0.00
110.16
-28.57
Nil
Investment
Exposure
TOTAL EXPOSURE
II. SECURITY / DOCUMENATION

a) Prime security
Nature
Existing
- Hypo of Stock & Book
Debts
2-Hypo. Of Plant &
Machinery and other fixed
assets
Proposed
- Hypo of Stock & Book
Debts
2-Hypo. Of Plant &
Machinery and other fixed
assets
B- Colletreal security
Nature of Security
(Rs. in lacs)
Value
Basis
76.70
Based on ABS 31.03.13
135.14
Based on ABS 31.03.13
88.00
Based on CA certified CMA

data as of 31.03.2014
Based on CA certified CMA
data as of 31.03.2014
121.63
Type of Value
Charge
(Rs in lacs)
Basis / Source
Whether
eligible
under
CRM
(Basel II
Norms)
-49-
Exiting :
EM of Industrial property located at Plot No
54 ( Khasara no 411,412,414) Sector 7
Pantnagar Dist U S Nagar
Proposed
EM of Industrial property located at Plot No
54 ( Khasara no 411,412,414) Sector 7
Pantnagar Dist U S Nagar
EM
Rs 98.58
Lacs
Valuation Report Dated

19.03.2012 of M/s Hi Tech
Consultants our banks penal
valuar.
No,
EM
Rs 98.58
Lacs
Valuation Report Dated

19.03.2012 of M/s Hi Tech
Consultants our banks penal
valuar.
No,
Details of properties/assets etc. under collateral security viz. valuer, valuation date, encumbrance &
marketability status etc. are as per Annexure 7
i)
Percentage coverage of collateral security:
1
Total value of Fixed Assets
Rs. 98.58 lacs
2
Of which our share
Rs. 98.58 lacs
3
Total limits proposed from our Bank
Rs 110.16
4
Collateral coverage
89.45%
As per original sanction TL was sanctioned at 58.00 lacs, however the firm has availed TL of
Rs 36.00 lacs only, which is further reduced to Rs 30.16 lacs (due to repayment of TL). Hence
the collateral coverage has been increased to 89.45% as against the original coverage of 71.43%.
ii)
Reasons in case of dilution of security coverage: NA
c) Date of creation of Charge: 26.06.2012.

Date of Creation of Charge: 26.06.2012
I. d) Date of subsequent modification of charge: N.A.
e) Date of vetting of documents by legal officer /Panel Advocate Renewal of Limit so branch
to ensure that it is already done.
f) Name of Guarantors & their net worth
Name
Relationship
Net Worth
(Rs. in Lacs )
As of
Basis
Pravin Kumar Panwar
Guarantor
Rs 93.73
30.06.2013
Annexure
CC
dated 30.06.13
Haldi Lal
Guarantor
Rs 39.86
30.06.2013
Annexure
CC
dated 30.06.13
Note: Net worth of the guarantors include their investment in the subject Firmand group
companies.
(Declaration from borrower to be obtained and kept on record, that no commission or remuneration is
paid to them for providing guarantee.)
III. CREDIT RATING & Pricing:

Pricing
Existing
Credit Rating Score Based on B-Better
Projected BS [ March 13]
Proposed
B-Better
-50-
Applicable interest rate as per Base Rate + 2.55 % = 13.25 %

Credit Rating
1) CC= BR +2.55 i. e 13.25%
2) Term Loan =BR+2.55+TP i.e 13.75
Interest rate presently Charged
and Proposed
1) CCH-BR +2.65
2) TL-BR+2.65+TP
Concession if any
NA
NA
1) CCH= BR +2.65
2) TLn =BR+2.65+TP
Interest Rate charged by Lead NA

Bank
N/A
Commission on NFB Limits
NA
NA
Processing Charges
As per HO Guidelines
As per HO Guidelines
Credit Rating Work Sheet furnished as Annexure 1
a) Factors contributing to the up gradation / slippage in credit rating: Not Applicable

Justification for proposing lower rate of interest/concession in charges/process fees:NA
IV. Permissions for Deviations, Issue of NOCs etc & Concessions in service charges: NA
9. Ratifications required for actions, exceeding permitted etc. beyond discretionary powers:
NIL
VI. Terms and conditions as specified as per annexure
10. Company PROFILE (in brief)

(DETAILS OF MANAGEMENT, PRODUCTS MANUFACTURED,
INDUSTRIES & COMPANYS MAJOR CUSTOMERS)
USER
M/s CRISTAL Enterprises is a partnership firm established on 13.11.2010 through partnership

deed dated.13/11/2010. The firm is having three partners all are women & family members of
business class family. As per partnership deed each partner is having 1/3 share. One of the
Guarantor Mr. Pravin Kumar Panwar is husband of partner Mrs Poornima Singh and running
a factory in the name and style of M/s Om Industries, the line of activity is same. As explained
by Mr. Parvin Kumar, M/s Om Industries is having ample orders in hand.
The firm is engaged in manufacturing of Sheet Metal & Auto Parts Components. There is
good demand for sheet metal & Auto parts components as number of automobile companies
are shifting their base to Uttarakhand. The partners in the firm are spouses of Promoters of
another Firm Om Industries, who have rich experience in this field.
-51-
11. INDUSTRY SCENARIO

a. Industry Categorization
b. Demand and supply situation of the
product present and projected
(source of information)
c.
d.
e.
f.
g.
h.
i.
1.
2.
3.
4.
5.
Metal Components
There is good demand for these components in the
industry, as number of Automobile companies are
shifting there base to Uttarakhand. But due to
calamity there are some fluctuation in the Demand
and supply.
Major players & their market share There are also a number of Big & Small players in
the market and the exact data about market share of
the players is not available. Firm is trying to
penetrate the market with its experience and skill
with good quality of the products.
Banks exposure in this industry
A/c 436
Amt Rs 5.00 Cr as of 31.03.2013
NPA position
A/c 133
Amt 1.16 Cr as of 31.03.2013
Cyclical trends
NA
Govt. policies
This Industry is very important for the economy for
employment generation and export point of view.
The Government of India has taken number of
Initiatives to boost the growth of the industry. These
initiatives include tax concession, announcement of
Policy for technology up- gradation, Export
Promotion, capital goods scheme etc as the unit falls
under the MSME sector, which is a thrust area of the
Bank.
Whether the product is an import No,
substitute, if so, what is the landed
cost of import and what is the
production cost of the indigenous
manufacture.
Availability of raw materials, The raw material required and the skilled labour is
labour, infrastructural advantages. easily available within the local area.
What are internal & external The unit is being promoted by persons who have
advantages
of
the significant experience in this field.
borrower/technology used.
What are the weaknesses
None
What are the relative opportunities The firm should diversify in other field also and also
try to explore New markets
What are the threats
Cheap goods from China, however Govt Support is
available to the industry
Any other information
Nil
12. PRODUCTION CAPACITY
Production Capacity
Installed
Utilised
% Utilisation
Existing
400
200
50%
Proposed
700
600
86%
-52-
13. MARKET CAP :
NA-
a) Face value of shares

b) Market value as on
c ) High & low ( 12 months )
NA
14. FINANCIAL INDICATORS
[Rs in lacs]
Audited
Audited
Estimated
projected
As on
31.03.12
31.03.13
31.03.14
31.03.15
i. Capital
34.17
45.89
62.57
75.65
ii. Reserves & Surplus
0.00
8.98
18.08
22.49
iii. Intangible Assets
0.00
Tangible Net worth
34.17
54.87
80.65
98.14
Net Working Capital
2.36
(56.81)
24.52
28.60
Current Ratio
Net Block
2.28
79.65
0.44
149.72
1.42
135.14
1.43
121.63
Net Sales
10.62
93.58
175.00
210.00
- of which exports
0.00
Gross Profit PBDT
4.52
0.00
0.00
0.00
0.00
0.00
0.00
23.21
33.10
36.00
Net Profit / Loss PAT
4.17
8.98
18.08
22.49
Depreciation
0.35
14.23
15.02
13.51
Cash Accruals
4.52
23.21
33.10
36.00
Gross Profit Margin
42.56%
24.80%
18.91%
17.14%
Net Profit Margin
39.27%
9.60%
10.33%
10.71%
TDER (TOL/TNW)
Interest Coverage Ratio
Current Assets to Turnover Ratio
0.23
-
2.56
3.85
7.71
1.70
3.21
2.29
1.31
3.40
2.28
2.39
15. Comments on financial indicators, in brief:

-53-
Tangible Net worth:

TNW of the firm has been increased from Rs 34.17 lacs as on 31.03.12 to Rs 54.87 lacs as on
31.03.13. The same has further estimated at Rs 80.65 lacs as on 31.03.14. The Tangible Net
Worth of the firmis showing an Increasing Trend due to plough back of profits every year.
Net sales:
Net sales of the firm has been increased from Rs 10.62 lacs to Rs 93.52 lacs as on 31.03.2013.
The firm has informed that due to first year of full operations i.e 2012-13 and the firm could
not achieve its target, however the sales has increased significantly in compare to last years
sales of Rs 10.62 lacs .For the financial year 2013-14, it has been estimated at Rs 175.00 lacs
and the firm has also achieved sales of Rs 85.03 lacs till November 2013. The firm is confident
to achieve the target of Rs 175.00 lacs as on 31.03.14.
Current Ratio:
The current ratio of the firm has been declined from 2.28:1 to 0.44:1 as on 31.03.13.However
same has been improved to 1.42:1 as on 31.03.14.
Debt Equity Ratio:

TDER of the firm has been declined from 0.23:1 to 2.56:1 as on 31.03.13 due to increase in
bank borrowings of Rs 80.00 lacs. However the same is well within policy guidelines. Further
the same has been improved to 1.70:1 as on 31.03.14 due to reduction in term liabilities and
also infusion of fresh capital.
All the projected ratios are within the indicative level as per our Loan Policy.
The sales of the firm are increasing on Y-o-Y basis and the firm is confident of getting good
orders from local industries.
All other ratios of the firm are within our banks policy/guidelines.
(Detailed Financial Indicators provided in Annexure - 3)
Quarterly results:
The firm has achieved a turnover of 85.03 lacs as on 30.11.2013 against the estimates of Rs
175.03 lacs. The pro-rata achievement is 72.88% however the firm is confident to achieve the
same.
I. Auditors remarks and Management replies. (Points to cover Internal controls,
Adherence to Statutory provisions, Accounting Standards)
a.
Contingent Liabilities: ---NA--II. Current performance trends:

Estimated sales/Income turnover for the year As on
Achievement till
Rs in Lacs
Nov -13
85.03
-54-
Pro-rata achievement
INTER-FIRM COMPARISON (PEER GROUP) NA
(In case aggregate limit exceeds Rs.5000 lakhs)
72.88%
16. ASSESSMENT OF WORKING CAPITAL REQUIREMENTS:

The firm has achieved a turnover of Rs. 93.58 lacs as on 31.03.2013 and has estimated the same
at Rs 175.00 lacs as of 31.03.14.
31.03.13
31.03.14
31.03.15
31.03.16
93.58
175.00
210.00
250.00
Net Sales
Total Current Assets
82.49
95.76
101.76
115.76
Current Liabilities (Other than Bank

Borrowing for Working Capital )
22.97
32.16
41.24
41.24
Working Capital Gap
59.52
63.60
60.52
74.52
Minimum stipulated (Margin) -
12.37
14.36
15.26
17.36
Actual / Projected NWC
24.52
28.60
25.52
39.52
Item 3 Minus item 4
47.15
49.24
45.26
57.16
Item 4 Minus item 5
35.00
35.00
35.00
35.00
Maximum Permissible Bank Finance
35.00
35.00
35.00
35.00
Limit proposed
35.00
35.00
35.00
C: COMMENTS
JUSTIFICATION:
ON
ASSESSMENT
OF
WORKING
CAPITAL
WITH
The firm has achieved a turnover of Rs.93.58 lacs during the year 2012-13.Due to delay in
installation of machineries the company could not achieve its projected sales. During the
financial year 2013-14 the Uttrakhand also faces natural calamity and the firm has estimates
its sales target in line with current trend of the state. Due to reasons mention thereof the MPBF
works out at Rs 35.00 lacs hence the excess borrowing of Rs 45.00 lacs has been converted in
WCTL of Rs 45.00 lacs to be repaid in 44 months, inclusive of moratorium period of 8 months.
The first installment will due in the month of August 2014.Inteset to be served during
moratorium period.
Holding Levels:
Inventory
AUDITED
AUDITED
AUDITED
AUDITED
Month
s
Month
s
Month
s
Month
s
Valu
e
Valu
e
Value
Value
-55-
31.03.12
31.03.13
31.03.14
31.03.15
Raw Materials
55.00
1.54
60.00
3.00
130.0
0
1.49
21.70
1.60
28.00
1.44
30.00
1.72
38.00
Stores & Spares
Creditors
0.60
20.00
0.46
18.00
0.46
20.00
0.39
20.00
(including WIP, FG ) 1.65
2.79
140.0
0
Receivables
- Domestic
The company is involved in manufacturing of Auto-parts components. The entire process right
from purchase of raw materials to finished goods takes 1.65 months to 1.54 months, however
during 2013-14, due to natural calamity in the state of Uttrakhand the entire process consumes
extra time compare to usual time. However keeping in view of the receivables and creditors
levels the same seems justified.
17. ASSESSMENT OF TERM LOAN/ DEFERRED PAYMENT GUARANTEE:

Project in brief: M/s CRISTAL Enterprises is a partnership firm established on 13.11.2010
through partnership deed dated.13/11/2010. The firm is having three partners all are women &
family members and hailing from a good business class family. As per partnership deed each
partner is having 1/3 share. One of the Guarantor Mr. Pravin Kumar Panwar is husband of
partner Mrs Poornima Singh and running a factory in the name and style of M/s Om Industries,
the line of activity is same. As explained by Mr. Parvin Kumar, M/s Om Industries is having
ample orders in hand.
The firm is engaged in manufacturing of Sheet Metal & Auto Parts Components. There is
good demand for sheet metal & Auto parts components as number of automobile companies
are shifting their base to Uttarakhand. The partners in the firm are spouses of Promoters of
another Firm Om Industries, who have rich experience in this field.
a. Project Visit:
i) Date of Visit: 08.11.2013
ii) Authority: Branch Manager
iii) Observation: The unit is visited by the Branch Manager Rudrapur Branch .It has been found
that the unit is in working condition and all the machines installed were in working
condition .Branch has verified the asset created out of the bank finance in good condition
.Copy of the same is enclosed as per annexure
b.
Project appraised by: In House appraisal
c.
Location: Plot No 54 Sector 7 IIE Pant-Nagar Distt U S Nagar Uttarakhand.
d.
Cost of the project and Means of finance : Review of Term loan
Repayment Schedule:
-56-
For Existing Term Loan:

Particulars
Limit
Repayment Period
Moratorium Period
Interest
Existing
Rs 36.00 lacs (Disbursed)
78 monthly installments of
Rs 46154
6 months from the date of
1st Disbursement **
Proposed
30.16 lacs (o/s as on 01.08.13
58 monthly installments of
Rs 52015.00
12
months
moratorium
period from August 2013 to
July 2014
Interest to be served as and when debited
** Limit disbursed in July 2013
Note : It is informed by the branch that borrower has made advance payment of some
installments . In case of advance payment of installments the same can be adjusted with the
due date of installments after the completion of moratorium period.
For Fresh WCTL Term Loan:
Particulars
Limit
Repayment Period
Moratorium Period
Interest
Existing
Nil
Proposed
45.00 lacs (o/s as on 01.08.13
Nil
36 monthly installments of Rs
125000.00
Nil
8 months moratorium period
from January2014 to August
2014
Interest to be served as and when debited
(In line with circular no 185/15/2013/14 dated 17/09/2013 referring Moratorium on repayment
of loan and interest for a period of one year in respect of all kinds of loans that are outstanding
in the account in state of Uttarakhand.)
18.
ASSESSMENT OF NON-FUND BASED LIMITS: Not Applicable
A.
LETTER OF CREDIT -Nil
B.
BANK GUARANTEE -Nil
19. Views/comments on the conduct of the account

A.
Comments on utilization of both fund and Non fund based limits.
Whether stock statements are submitted every month. If not Yes,
submitted regularly mention the date of last stock statement
Whether operations are within sanctioned limits
Yes,
-57-
CCH is utilized but TL**

loan is not fully disbursed.
Whether limits are utilized optimally /satisfactorily

**Justification: Required machinery has been installed and firm
has started commercial production hence no further disbursement
made.
Frequency of inspection of stocks. Date of the last inspection and Inspection Done by BM
irregularity/adverse features, if any observed and steps taken to set right Rudrapur.
the same.
Insurance cover - Whether securities adequately insured and in force
Branch should ensure

proper (Insurance) risk
cover for the stock, goods
and P&M before release
of limit.
Insurance cover : Amount and In force upto : (date)
Whether terms and conditions of previous sanction have been complied Yes,
with, if not, specify time frame to complete (with explanation) &
permission obtained from competent authority
Whether certificate from Pollution control Board has been obtained.
Branch should ensure

pollution certificate.
Whether the borrower is facing any litigation from banks /FIs/creditors/

Govt. Deptt./ Statutory bodies etc., if so, state in brief.
No,
In case of consortium advance, whether our bank is getting proportionate No,

share of business
Additional / temporary limits sanctioned subsequent to the last regular
sanction and whether same is liquidated on due date or not
NA,
Outstanding amount of unhedged Foreign Currency Exposures
NA,
(Rs in Lacs)
Particulars
Last year 31.03.2013
Current year upto 30.11.13
Sales/Receipt Actual
Purchases
Credit Summation
Debit Summation
Minimum Balance
Maximum Balance
LC Devolved Guarantee Invoked:
93.58
64.21
103.62
182.08
7.44
79.72
NA
NA
126.17
90.29
33.37
28.57
71.67
79.61
NA
NA
Whether sales and purchase figures match with the turnover in

the account
-58-
B.
Income value of account
(Rs. in Lakh)
Last year
Current year
Value of account (Deposits)

Process Fee recovered
0.72
0.75
Interest earned
5.53
2.45
Exchange income
NA
NA
Commission earned
NA
NA
Income from Third party products / insurance
NA
NA
Term Loan
1.85
1.42
Total
8.10
4.62
Turnover in Foreign Exchange Business
NA
NA
- Current
Closed on 22.02.2013
- Savings
Sb a/c 118910025646 Rs0.18 lacs Cr
- Term Deposits
3 a/c Rs1.17 lacs
c. Adverse features affecting credit decision and action proposed (including noncompliance to terms and conditions of sanction and present position)
Sr No
Pending Matters
Present position
Steps taken / Remarks
NIL
d. MAJOR INSPECTION / AUDIT IRREGULARITIES POINTED OUT IN THE
LAST INSPECTION REPORT
Brief details of irregularities Compliance Status
reported
1
Internal Inspectors
2
RBI-AFI Inspectors
3
Statutory Auditors
NA
4
Stock Auditors
5
Credit Auditor
e.
Directors name figuring in RBI/ Willful Defaulters / CIBIL / SAL ECGC list and
comments thereon. Impact on taking exposure where names are appearing in the defaulters list:
Partners name are not appeared in RBI Willful defaulter list.
(f) Position of statutory dues and incentives receivables (for limit of Rs.50.00 lac and above)
-59-
Provident Fund, ESI and Superannuation contribution paid upto

Wages and salaries paid upto
Sales Tax paid upto
Service Tax paid upto
Branch should
obtain
CA
certificate for all
the dues should
be paid before
release of the
limit.
Income Tax Assessment completed upto and for the year ending #
Advance Tax paid for the year ending
Excise duty paid upto
Municipal Tax, Octroi etc.
Incentives from the Government and other agencies
Disputes not acknowledged as debts
Contingent Liabilities (Likely to turn into Liabilities)
NA
Reconciliation of Debtors/ creditors
CA certificate to be obtained and kept on record for the above.

# wherever borrowers encounter tax disputes, searches, raids by tax authorities, details along
with proceedings and present status should be reported.
f. Group dealings/experience & desirability of further exposure: Firm has expressed its
view on further finance in coming future.
g. RISK ASSESSMENT
Industry /Activity risks: The Metal industry is affected by Government policies any
adverse change in the policy will adversely affect to this sector.
Risk mitigating factors: The Government is trying to encourage this sector and the unit is a
SME unit, the govt. policy is very favorable for the SME unit.
Borrower/ Business risk: There are so many big players in the market and stiff
competition among the suppliers / manufacturing unit.
Risk mitigating factors: The Promoters of the Group have significant experience in
this field & having good network with the Automobiles companies. Borrower is
mainly dealing with a dedicated group of buyers.
Security risk:
Risk mitigating factors: The borrower has offered us collateral security to the extent of
71.44% of the exposure.
Other risk. ---Nil-- Risk mitigating factors:
20. COMPLIANCE OF RBI / BANK LOAN POLICY GUIDELINES :Complied with

-60-
21.
MODIFICATION IN EXISTING TERMS OF SANCTION IF ANY:--NA
22.
VIEWS/RECOMMENDATIONS OF THE CREDIT COMMITTEE:
23.
DISCRETIONARY POWER FOR SANCTION AND FOR APPROVAL OF

DEVIATION, IF ANY: ZO-CAC
24.
BRANCH RECOMMENDATION
Branch has recommended for approval of CCH limits at Rs 35.00 lacs and Excess
borrowings of Rs 45.00 lacs to be converted as WCTL to be repaid in 36 months (excluding
Moratorium period of 12 months .Branch has also recommended for extension of
moratorium period by 12 months for existing TL of Rs 29.43 lacs at outstanding level of
30.16 lacs. The same has been proposed in line with HO circular no 185/15/2013/14 dated
17/09/2013 referring Moratorium on repayment of loan and interest for a period of one year
in respect of all kinds of loans that are outstanding in the account in state of Uttarakhand.
Recommendation:In view of the above and as recommended by branch we recommend for approval of
following
I.
II.
Renewal of CCH limits at Rs 35 lacs of M/s GPM Enterprises Ltd. (Excess

borrowings of Rs 45.00 lacs converted into WCTL with moratorium period of
eight months).
Review of Term loan at o/s level of Rs 30.16 lacs as on 01.08.2013.
(In line with circular no 185/15/2013/14 dated 17/09/2013 referring Moratorium on

repayment of loan and interest for a period of one year in respect of all kinds of loans that
are outstanding in the account in state of Uttarakhand.)
All terms and conditions of the original sanction remain unchanged except terms of
repayment for existing term loan and WCTL as specified in the process note.
-61-
References
1.
Mckinsey & Company. India Banking 2010 - Towards a High-performing Sector
2.
Ben McClure. Working Capital Works. Investopedia. From

http://www.investopedia.com/articles/fundamental/03/061803.asp
3.
Richard Loth. The Working Capital Position. Investopedia. From

http://www.investopedia.com/articles/basics/06/workingcapital.asp
4.
M.Y.Khan & P.K.Jain, Financial Management, Seventh Edition
Bank Journals (For internal circulation only)

Loan Policy and MSME Policy (2013-14)
Book of Instructions on Loans, March 2005
Loans & Advances Circulars on
BPLR
Project Finance
Industry Rating
Loaning Powers and Guidelines for exercising such powers
RBI Circulars and Guidelines
-62-

Summer Internship On MSME Sector at Dena Bank

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On

ROLE OF RETAIL & MSME ADVANCE IN BANKS

MASTER OF BUSINESS ADMINISTRATION

Department of Business Administration, University of Lucknow

My heartiest gratitude extended to my faculty guide Dr.Ajai Prakash, Professor

Department of Business Administration, University of Lucknow

Department of Business Administration, University of Lucknow

OBJECTIVE OF RETAIL LENDING POLICY ............................................................. 25

Dena Niwas Housing Finance Scheme ...................................................................................................... 32

Dena Vidya Laxmi Educational Loan Scheme .......................................................................................... 33

Dena Suvidha (Personal Loan) Scheme .................................................................................................... 34

Research Methodology ................................................................................................... 36

Department of Business Administration, University of Lucknow

Banking Industry in India

Department of Business Administration, University of Lucknow

Adoption of banking technology

Department of Business Administration, University of Lucknow

Department of Business Administration, University of Lucknow

Competition will be based more on skills or core competencies than on products.

Department of Business Administration, University of Lucknow

The factors on which competitive advantages will be determined are:

Department of Business Administration, University of Lucknow

COMPETITIVE STRENGTHS OF BANKS

Department of Business Administration, University of Lucknow

COMPANY PROFILE DENA BANK

Department of Business Administration, University of Lucknow

Dena Bank has been the first Bank to introduce:

Minor Savings Scheme.

VISION & MISSION

T h e l o g o o f Dena Bank represents Lakshmi, the Goddess of wealth, according to

Strengthening of SME Processing Centres.

Department of Business Administration, University of Lucknow

SWOT Analysis of Dena Bank

1. Rural banking expertise

1. Less penetration as compared to other banks

1. Economic crisis and fluctuating economic scenarios

Department of Business Administration, University of Lucknow

Department of Business Administration, University of Lucknow

Competitive forces Model: Porters Five Forces Model-Industry Analysis

Potential Entrants is high as

Ralry among existing

The threat of substitute product

1. Rivalry among existing firms

3. Threats from Substitutes

Department of Business Administration, University of Lucknow

Department of Business Administration, University of Lucknow

MSMED Act 2006

Original Investment in Plant Original

Department of Business Administration, University of Lucknow

RETAIL BANKING SECTOR

Department of Business Administration, University of Lucknow

multiple products (deposits, credit cards, insurance, investments and securities);

Multiple customer groups (consumer, small business, and corporate).

The Retail Banking schemes of the bank are as under:

Department of Business Administration, University of Lucknow

Dena Consumer Durables Loan Scheme

Dena Mortgage Loan Scheme

Dena Suvidha Personal Loan Scheme

RETAIL LOAN POLICY AT DENA BANK

Department of Business Administration, University of Lucknow

OBJECTIVE OF RETAIL LENDING POLICY

1. To strengthen the credit delivery system for retail lending.

Department of Business Administration, University of Lucknow