A Study on Credit Investigation & Analysis With Special Reference To Shriram Transport Finance Company Ltd

Objectives of the Study

General Objective To study the Credit Investigation and Analysis Policy of Shriram Transport Finance corporation

Specific Objectives
To check the Viability of Funding projects To Study in deep the various terms, conditions and terminologies used in commercial vehicle Finance. To Prevent the recurring of NPAs (Non Performing Assets) of the Company To clear the Ideas Regarding the Extent of Loan to be sanctioned as it depends on various Parameters which are taken into consideration while evaluating a finance Proposal through Investigation and analysis.

Research Methodology
PROBLEM STATEMENT

To study the credit Investigation and Analysis process at STFC

SOURCES OF DATA COLLECTION Primary Sources

Meetings and discussion with the loan processor of the company

Secondary Sources Loan Policy and Internal Circulars of the bank Research papers, power point presentations and PDF files Case studies and Financial Statements provided by STFC Library research

RESEARCH METHOD ADOPTED Analytical research is adopted as this kind of research is used to zero in on the root cause of the problem and derive conclusions from it, case study analysis which is a part of analytical research is done

RESEARCH DESIGN Analytical In Nature LIMITATIONS OF THE STUDY:

As credit analysis process is one of the crucial areas for any Institution, some of the

Technicalities are not revealed.

Credit analysis system includes various types of detail studies for different areas of analysis, but due to time constraint, our analysis was of limited areas only.

Case Study Analysis

Proposal for term loan by Meeras international limited: Circle: Tamil Nadu Branch: Chennai

Company: Meeras International Limited

Term Loan :

a)
b)

Proposal: Term Loan of Rs.295.00 lacs under the Transport Plus Scheme .
Project / Purpose: To purchase 59 new Mahindra DI2WD -

c)

Appraised by: In house examined by the Branch and found to be economically viable

Cost of Project & Means of finance

Cost
MAHINDRA DI-2WD Insurance RTO Tax WC Margin Total 363.44 328.63 15.34 19.47

Means
Equity : 68.44

Debt: Total

295.00 363.44

Brief of Contract:

Duration of contract = 3 Years

Proposed Credit Requirement: Fund Based = Rs.295 lacks

Deviations in Loan Policy/ Scheme

Parameters

Indicative Min/Max level as per Scheme

Company's level as on 31/03/2011

Liquidity TOL/TNW Average gross DSCR (TL) Promoters contribution (under

Min. 1.33 Max. 3.00 Min. 2.00 Min. 10 %

1.42 12.80* 2.002 18.86%

tie-up)

Tools Used Break Even Analysis Debt Service Coverage Ratio Liquidity Ratios Total Net-worth Ratio Promoters Contribution (Own Fund)

Evaluation of the Study

The promoters contribution to the project is 18.86% (68.44 Lacks) which is above the margin requirement The current ratio is 1.42 that is satisfactory TOL/TNW(Total Net Worth) should be max. 3 which is 12.80 here, as the co. has done multiple banking arrangement it has o/s loans with other banks also but the co. is regularly making the payment of loans of principal amount along with the interest so the loan is given. Shriram also checks commercial viability of the company & found that the DSCR for term loan is 2.02 which is considered satisfactory

Despite that Shriram has also done B.E. analysis & found that the B.E. sales was 47.10% of net sales for this current year
The overall projected performance & financial of the unit are considered satisfactory

Findings
The Gross Non Performing Assets of the Company are Less than 2 % . Shriram Transport Finance Company Limited is one of the most trusted financial institutions in NBFC, with 50000 satisfied customers. The interest rate is lower than other banks and non-financial institution like ICICI, cholamandalm , Sundaram etc. The staff is well-qualified and versed with the loan system as per the policy of the company. From the information customers are satisfied with STFCL, 35% customers are old customers. The main competitor of STFCL is Cholamandal. The recovery rate of the loans is 90%.

SUGGESTIONS

The company should enter into personal vehicle finance where it has no presence

The company should try to reduce the rate of interest to attract more customers
The company should try to make the procedure more easy than the existing procedure The company should try reducing the documentation required for loan. Appoint required staff for attending the customers complaints. Company should appoint customer relationship manager for better customer relations.