A FINAL PROJECT REPORT ON TO FIND OUT POTENTIAL FOR TRADE FINANCE SERVICE IN PUNJAB Submitted for the partial

completion of the degree of Master of Business Administration AT

Internal guide: Mr. Pankaj Garg

Submitted by: Anurag Aggarwal Roll No: 1172555

DECLARATION

I, Anurag Aggarwal , a Student of MBA 2011-13 Batch, Bhai Gurdas Institute of Engg. & Technology, hereby declare that the project on TO FIND OUT THE POENTIAL FOR TRADE FINANCE SERVICES IN PUNJAB is my original work and that it has not previously formed the basis for the award of any other Degree, Diploma, Fellowship or other similar titles.

Anurag Aggarwal

CERTIFICATE OF APPROVAL

This is to certify that the project work entitled TO FIND OUT THE POENTIAL FOR TRADE FINANCE SERVICE IN PUNJAB is a bonafide work carried out by Mr. Anurag Aggarwal in partial fulfillment for the degree of Master Business Administration from BGIET, Punjab Technical University, Jalandhar. The project report has been approved here with.

Mr. Pankaj Garg Lecturer (BGIET, SANGRUR)

ACKNOWLEDGEMENT

I feel immense pleasure to give the credit of my project work not only to one individual as this work is integrated effort of all those who concerned with it. I want to owe my thanks to all those individuals who guided me to move on the track. This report entitled To find out the potential for trade finance service in punjab is the outcome of my final project report. I would like to appreciate the pain staking effort of Mr. Pankaj Garg Lecturer for educating and guiding me at each and every stage and providing me the information related to my chosen topic. I am equally thankful to the whole team of MBA department of Bhai Gurdas Institute of Engineering and Technology Sangrur extended their full co-operation and assistance. Words are not sufficient to express the greatness for the help, guidance and knowledge dispensed to me by Respected Supervisor, Mr. Pankaj Garg who not only lent her considerable time and energy to the understanding, but also helped me a great deal in making this report see the light of the day. Last but not least, I owe my special regards to my parents and my elders for their blessings and good wishes.

Anurag Aggarwal

TABLE OF CONTENTS
Declaration Certificate of Supervisor (Guide)

Acknowledgement
Chapter-1 1.1 Executive Summary 1.2 Introduction of IDBI Bank 1.3 Bank Value 1.4 Product of Bank Chapter-2 Trade Finance Services Introduction Page No 06-07 08-18 19-19 20-27 Page No 29-33 34-35 36-43 Research Methodology 44-44 44-44 46-48 48-48 49-50 51-51 52-56

2.1 Trade Finance 2.2 Trade development Strategy 2.3 Trade Services Chapter-3 3.1 Objective of the study 3.2 Scope of the Study 3.3Statement of the research methodology 3.4 Research Design 3.5 Selection of Sample Size 3.6 Limitations of the Study Chapter-4 Chapter-5 Finding Conclusion and Suggestions Questionnaire Bibliography
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Data Analysis and interpretation

57-58 59-60 62-61 62-62

TO FIND OUT THE POTENTIAL FOR TRADE FINACNE SERVICES IN PUNJAB

EXECUTIVE SUMMARY
In this project it was found out that IDBI Bank has strong position in the trade finance services. To be precise it is no 1-forex services in Punjab in the private sector & no 2 in all the banks after SBI. Another advantage that IDBI has it that it has the required infrastructure for handling forex transactions locally. The Govt. of India has notified some concessions for the growth of industries in the Punjab. The new industrial units and the existing units on their substantial expansion are entitled to the following fiscal incentives: 100% excise duty exemption for the period of 10 years from the date of the commencement of commercial production.

100% income tax exemption for the period of 5 year and thereafter 30% for companies & 25% for other than companies for a further period of 5 years. All new industries would be eligible for a capital investment in plant & machinery subject to ceiling of Rs. 30 lakh. Because of the above benefits a lot of top rated companies are setting up units in Punjab. Companies like Bhusa ltd. Needle, RTL, Ranbaxy, Quark, PCL. Although none of the private sector banks has opened their branch in Punjab, there are 6 public sector banks to cater to the needs of industry. With the no of increasing in Punjab there is a scope for IDBI bank there. Despite the large no of plants being set up in Punjab, the problem of pollution in the industrial area is increasing. Some reasonable steps should be taken up quickly to prevent the environment form pollution.

IDBI BANK

HISTORY OF IDBI BANK

The Indian Banking industry, which is governed by the Banking Regulation Act of India, 1949 can be broadly classified into two major categories, non-scheduled banks and scheduled banks. Scheduled banks comprise commercial banks and the co-operative banks. In terms of ownership, commercial banks can be further grouped into nationalized banks, the State Bank of India and its group banks, regional rural banks and private sector banks (the old/ new domestic and foreign). These banks have over 67,000 branches spread across the country in every city and villages of all nook and corners of the land. The first phase of financial reforms resulted in the nationalization of 14 major banks in 1969 and resulted in a shift from Class banking to Mass banking. This in turn resulted in a significant growth in the geographical coverage of banks. Every bank had to earmark a minimum percentage of their loan portfolio to sectors identified as priority sectors. The manufacturing sector also grew during the 1970s in protected environs and the banking sector was a critical source. The next wave of reforms saw the nationalization of 6 more commercial banks in 1980. Since then the number of scheduled commercial banks increased four-fold and the number of bank branches increased eight-fold. And that was not the limit of growth. After the second phase of financial sector reforms and liberalization of the sector in the early nineties, the Public Sector Banks (PSB) s found it extremely difficult to compete with the new private sector banks and the foreign banks. The new private sector banks first made their appearance after the guidelines permitting them were issued in January 1993. Eight new private sector banks are presently in operation. These banks due to their late start have access to state-of-the-art technology, which in turn helps them to save on manpower costs. During the year 2000, the State Bank Of India (SBI) and its 7 associates accounted for a 25 percent share in deposits and 28.1 percent share in credit. The 20 nationalized banks accounted for 53.2 percent of the deposits and 47.5 percent of credit during the same period. The share of foreign banks (numbering 42), regional rural banks and other scheduled commercial banks accounted for 5.7 percent, 3.9 percent and 12.2 percent respectively in deposits and 8.41 percent, 3.14 percent and 12.85 percent respectively in credit during the year 2000.about the detail of the current scenario we will go through the trends in modern economy of the country. Current Scenario:
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The industry is currently in a transition phase. On the one hand, the PSBs, which are the mainstay of the Indian Banking system are in the process of shedding their flab in terms of excessive manpower, excessive non Performing Assets (Npas) and excessive governmental equity, while on the other hand the private sector banks are consolidating themselves through mergers and acquisitions. PSBs, which currently account for more than 78 percent of total banking industry assets are saddled with NPAs (a mind-boggling Rs 830 billion in 2000), falling revenues from traditional sources, lack of modern technology and a massive workforce while the new private sector banks are forging ahead and rewriting the traditional banking business model by way of their sheer innovation and service. The PSBs are of course currently working out challenging strategies even as 20 percent of their massive employee strength has dwindled in the wake of the successful Voluntary Retirement Schemes (VRS) schemes. The private players however cannot match the PSBs great reach, great size and access to low cost deposits. Therefore one of the means for them to combat the PSBs has been through the merger and acquisition (M& A) route. Over the last two years, the industry has witnessed several such instances. For instance, HDFC Banks merger with Times Bank Icici Banks acquisition of ITC Classic, Anagram Finance and Bank of Madurai. Centurion Bank, Indusind Bank, Bank of Punjab, Vysya Bank are said to be on the lookout. The UTI bankGlobal Trust Bank merger however opened a pandoras box and brought about the realization that all was not well in the functioning of many of the private sector banks. Private sector Banks have pioneered internet banking, phone banking, anywhere banking, mobile banking, debit cards, Automatic Teller Machines (ATMs) and combined various other services and integrated them into the mainstream banking arena, while the PSBs are still grappling with disgruntled employees in the aftermath of successful VRS schemes. Also, following Indias commitment to the W To agreement in respect of the services sector, foreign banks, including both new and the existing ones, have been permitted to open up to 12 branches a year with effect from 1998-99 as against the earlier stipulation of 8 branches. Tasks of government diluting their equity from 51 percent to 33 percent in November 2000 has also opened up a new opportunity for the takeover of even the PSBs. The FDI rules being more rationalized in Q1FY02 may also pave the way for foreign banks taking the M& A route to acquire willing Indian partners. Meanwhile the economic and corporate sector slowdown has led to an increasing number of banks focusing on the retail segment. Many of them are also entering the new vistas of Insurance. Banks with their phenomenal reach and a regular interface with the retail investor are the best placed to enter into the insurance sector. Banks in India have been allowed to provide fee-based insurance services without risk participation, invest in an insurance company for providing infrastructure and services support and set up of a separate joint-venture insurance company with risk participation.
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Aggregate Performance of the Banking Industry Aggregate deposits of scheduled commercial banks increased at a compounded annual average growth rate (Cagr) of 17.8 percent during 1969-99, while bank credit expanded at a Cagr of 16.3 percent per annum. Banks investments in government and other approved securities recorded a Cagr of 18.8 percent per annum during the same period. In FY01 the economic slowdown resulted in a Gross Domestic Product (GDP) growth of only 6.0 percent as against the previous years 6.4 percent. The WPI Index (a measure of inflation) increased by 7.1 percent as against 3.3 percent in FY00. Similarly, money supply (M3) grew by around 16.2 percent as against 14.6 percent a year ago. The growth in aggregate deposits of the scheduled commercial banks at 15.4 percent in FY01 percent was lower than that of 19.3 percent in the previous year, while the growth in credit by SCBs slowed down to 15.6 percent in FY01 against 23 percent a year ago. The industrial slowdown also affected the earnings of listed banks. The net profits of 20 listed banks dropped by 34.43 percent in the quarter ended March 2001. Net profits grew by 40.75 percent in the first quarter of 2000-2001, but dropped to 4.56 percent in the fourth quarter of 2000-2001. On the Capital Adequacy Ratio (CAR) front while most banks managed to fulfill the norms, it was a feat achieved with its own share of difficulties. The CAR, which at present is 9.0 percent, is likely to be hiked to 12.0 percent by the year 2004 based on the Basle Committee recommendations. Any bank that wishes to grow its assets needs to also shore up its capital at the same time so that its capital as a percentage of the risk-weighted assets is maintained at the stipulated rate. While the IPO route was a much-fancied one in the early 90s, the current scenario doesnt look too attractive for bank majors. Consequently, banks have been forced to explore other avenues to shore up their capital base. While some are wooing foreign partners to add to the capital others are employing the M& A route. Many are also going in for right issues at prices considerably lower than the market prices to woo the investors. Interest Rate Scene The two years, post the East Asian crises in 1997-98 saw a climb in the global interest rates. It was only in the later half of FY01 that the US Fed cut interest rates. India has however remained more or less insulated. The past 2 years in our country was characterized by a mounting intention of the Reserve Bank Of India (RBI) to steadily reduce interest rates resulting in a narrowing differential between global and domestic rates. The RBI has been affecting bank rate and CRR cuts at regular intervals to improve liquidity and reduce rates. The only exception was in July 2000 when the RBI increased the Cash Reserve Ratio (CRR) to stem the fall in the rupee against the dollar. The steady fall in the interest rates resulted in squeezed margins for the banks in general.
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Governmental Policy: After the first phase and second phase of financial reforms, in the 1980s commercial banks began to function in a highly regulated environment, with administered interest rate structure, quantitative restrictions on credit flows, high reserve requirements and reservation of a significant proportion of lendable resources for the priority and the government sectors. The restrictive regulatory norms led to the credit rationing for the private sector and the interest rate controls led to the unproductive use of credit and low levels of investment and growth. The resultant financial repression led to decline in productivity and efficiency and erosion of profitability of the banking sector in general. This was when the need to develop a sound commercial banking system was felt. This was worked out mainly with the help of the recommendations of the Committee on the Financial System (Chairman: Shri M. Narasimham), 1991. The resultant financial sector reforms called for interest rate flexibility for banks, reduction in reserve requirements, and a number of structural measures. Interest rates have thus been steadily deregulated in the past few years with banks being free to fix their Prime Lending Rates(PLRs) and deposit rates for most banking products. Credit market reforms included introduction of new instruments of credit, changes in the credit delivery system and integration of functional roles of diverse players, such as, banks, financial institutions and non-banking financial companies (Nbfcs). Domestic Private Sector Banks were allowed to be set up, PSBs were allowed to access the markets to shore up their Cars. Implications Of Some Recent Policy Measures: The allowing of PSBs to shed manpower and dilution of equity are moves that will lend greater autonomy to the industry. In order to lend more depth to the capital markets the RBI had in November 2000 also changed the capital market exposure norms from 5 percent of banks incremental deposits of the previous year to 5 percent of the banks total domestic credit in the previous year. But this move did not have the desired effect, as in, while most banks kept away almost completely from the capital markets, a few private sector banks went overboard and exceeded limits and indulged in dubious stock market deals. The chances of seeing banks making a comeback to the stock markets are therefore quite unlikely in the near future. The move to increase Foreign Direct Investment FDI limits to 49 percent from 20 percent during the first quarter of this fiscal came as a welcome announcement to foreign players wanting to get a foot hold in the Indian Markets by investing in willing Indian partners who are starved of net worth to meet CAR norms. Ceiling for FII investment in companies was also increased from 24.0 percent to 49.0 percent and have been included within the ambit of FDI investment.

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IDBI bank: all about The economic development of any country depends on the extent to which its financial system efficiently and effectively mobilizes and allocates resources. There are a number of banks and financial institutions that perform this function; one of them is the development bank. Development banks are unique financial institutions that perform the special task of fostering the development of a nation, generally not undertaken by other banks. Development banks are financial agencies that provide medium-and long-term financial assistance and act as catalytic agents in promoting balanced development of the country. They are engaged in promotion and development of industry, agriculture, and other key sectors. They also provide development services that can aid in the accelerated growth of an economy. The objectives of development banks are: To serve as an agent of development in various sectors, viz. industry, agriculture, and international trade: To accelerate the growth of the economy. To allocate resources to high priority areas. To foster rapid industrialization, particularly in the private sector, so as to provide employment opportunities as well as higher production. To develop entrepreneurial skills. To promote the development of rural areas. To finance housing, small scale industries, infrastructure, and social utilities. In addition, they are assigned a special role in: Planning, promoting, and developing industries to fill the gaps in industrial sector. Coordinating the working of institutions engaged in financing, promoting or developing industries, agriculture, or trade, rendering promotional services such as discovering project ideas, undertaking feasibility studies, and providing technical, financial, and managerial assistance for the implementation of projects

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Industrial development bank of India The industrial development bank of India(IDBI) was established in 1964 by parliament as wholly owned subsidiary of reserve bank of India. In 1976, the banks ownership was transferred to the government of India. It was accorded the status of principal financial institution for coordinating the working of institutions at national and state levels engaged in financing, promoting, and developing industries. IDBI has provided assistance to development related projects and contributed to building up substantial capacities in all major industries in India. IDBI has directly or indirectly assisted all companies that are presently reckoned as major corporates in the country. It has played a dominant role in balanced industrial development. IDBI set up the small industries development bank of India (SIDBI) as wholly owned subsidiary to cater to specific the needs of the small-scale sector. IDBI has engineered the development of capital market through helping in setting up of the securities exchange board of India(SEBI), National stock exchange of India limited(NSE), credit analysis and research limited(CARE), stock holding corporation of India limited(SHCIL), investor services of India limited(ISIL), national securities depository limited(NSDL), and clearing corporation of India limited(CCIL) In 1992, IDBI accessed the domestic retail debt market for the first time by issuing innovative bonds known as the deep discount bonds. These new bonds became highly popular with the Indian investor. In 1994, IDBI Act was amended to permit public ownership up to 49 per cent. In July 1995, it raised over Rs 20 billion in its first initial public (IPO) of equity, thereby reducing the government stake to 72.14 per cent. In June 2000, a part of government shareholding was converted to preference capital. This capital was redeemed in March 2001, which led to a reduction in government stake. The government stake currently is 51 per cent. In august 2000, IDBI became the first all India financial institution to obtain ISO 9002: 1994 certification for its treasury operations. It also became the first organization in the Indian financial sector to obtain ISO 9001:2000 certification for its forex services.

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Milestones

July 1964: Set up under an Act of Parliament as a wholly-owned subsidiary of Reserve Bank of India. February 1976: Ownership transferred to Government of India. Designated Principal Financial Institution for co-coordinating the working of institutions at national and State levels engaged in financing, promoting and developing industry. March 1982: International Finance Division of IDBI transferred to Export-Import Bank of India, established as a wholly-owned corporation of Government of India, under an Act of Parliament. April 1990: Set up Small Industries Development Bank of India (SIDBI) under SIDBI Act as a wholly-owned subsidiary to cater to specific needs of small-scale sector. In terms of an amendment to SIDBI Act in September 2000, IDBI divested 51% of its shareholding in SIDBI in favour of banks and other institutions in the first phase. IDBI has subsequently divested 79.13% of its stake in its erstwhile subsidiary to date. January 1992: Accessed domestic retail debt market for the first time with innovative Deep Discount Bonds; registered path-breaking success. December 1993: Set up IDBI Capital Market Services Ltd. as a wholly-owned subsidiary to offer a broad range of financial services, including Bond Trading, Equity Broking, Client Asset Management and Depository Services. IDBI Capital is currently a leading Primary Dealer in the country. September 1994: Set up IDBI Bank Ltd. in association with SIDBI as a private sector commercial bank subsidiary, a sequel to RBI's policy of opening up domestic banking sector to private participation as part of overall financial sector reforms. October 1994: IDBI Act amended to permit public ownership upto 49%. July 1995: Made Initial Public Offer of Equity and raised over Rs.2000 crore, thereby reducing Government stake to 72.14%. March 2000:Entered into a JV agreement with Principal Financial Group, USA for participation in equity and management of IDBI Investment Management Company Ltd., erstwhile a 100% subsidiary. IDBI divested its entire shareholding in its asset management venture in March 2003 as part of overall corporate strategy. March 2000: Set up IDBI Intech Ltd. as a wholly-owned subsidiary to undertake ITrelated activities. June 2000: A part of Government shareholding converted to preference capital, since redeemed in March 2001; Government stake currently 58.47%. August 2000: Became the first All-India Financial Institution to obtain ISO 9002:1994 Certification for its treasury operations. Also became the first organisation in Indian financial sector to obtain ISO 9001:2000 Certification for its forex services. March 2001: Set up IDBI Trusteeship Services Ltd. to provide technology-driven information and professional services to subscribers and issuers of debentures.
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Feburary 2002: Associated with select banks/institutions in setting up Asset Reconstruction Company (India) Limited (ARCIL), which will be involved with the Strategic management of non-performing and stressed assets of Financial Institutions and Banks. September 2003: IDBI acquired the entire shareholding of Tata Finance Limited in Tata Homefinance Ltd, signalling IDBI's foray into the retail finance sector. The housing finance subsidiary has since been renamed 'IDBI Homefinance Limited'. December 2003: On December 16, 2003, the Parliament approved The Industrial Development Bank (Transfer of Undertaking and Repeal Bill) 2002 to repeal IDBI Act 1964. The President's assent for the same was obtained on December 30, 2003. The Repeal Act is aimed at bringing IDBI under the Companies Act for investing it with the requisite operational flexibility to undertake commercial banking business under the Banking Regulation Act 1949 in addition to the business carried on and transacted by it under the IDBI Act, 1964. July 2004: The Industrial Development Bank (Transfer of Undertaking and Repeal) Act 2003 came into force from July 2, 2004. July 2004: The Boards of IDBI and IDBI Bank Ltd. take in-principle decision regarding merger of IDBI Bank Ltd. with proposed Industrial Development Bank of India Ltd. in their respective meetings on July 29, 2004. September 2004: The Trust Deed for Stressed Assets Stabilisation Fund (SASF) executed by its Trustees on September 24, 2004 and the first meeting of the Trustees was held on September 27, 2004. September 2004: The new entity "Industrial Development Bank of India" was incorporated on September 27, 2004 and Certificate of commencement of business was issued by the Registrar of Companies on September 28, 2004. September 2004:Notification issued by Ministry of Finance specifying SASF as a financial institution under Section 2(h)(ii) of Recovery of Debts due to Banks & Financial Institutions Act, 1993. September 2004:Notification issued by Ministry of Finance on September 29, 2004 for issue of non-interest bearing GoI IDBI Special Security, 2024, aggregating Rs.9000 crore, of 20-year tenure. September 2004: Notification for appointed day as October 1, 2004, issued by Ministry of Finance on September 29, 2004. September 2004:RBI issues notification for inclusion of Industrial Development Bank of India Ltd. in Schedule II of RBI Act, 1934 on September 30, 2004. October 2004: Appointed day - October 01, 2004 - Transfer of undertaking of IDBI to IDBI Ltd. IDBI Ltd. commences operations as a banking company. IDBI Act, 1964 stands repealed. January 2005:The Board of Directors of IDBI Ltd., at its meeting held on January 20, 2005, approved the Scheme of Amalgamation, envisaging merging of IDBI Bank Ltd. with IDBI Ltd. Pursuant to the scheme approved by the Boards of both the banks, IDBI Ltd. will issue 100 equity shares for 142 equity shares held by
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shareholders in IDBI Bank Ltd. EGM has been convened on February 23, 2005 for seeking shareholder approval for the scheme.
IDBI Bank Business Chart

IDBI BANK

RETAIL BANKING

DEVELOPMENT BANK.

SAVING ACCOUNT

CURRENT ACCOUNT

INVESTMENT

PERSONAL SAVING

CORPORATE SAVING

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IDBI Bank Organizational Chart

Chairman

President

Vice president Finance

Vice president H. R.

Vice president Marketing

Vice president Operations

Regional Head

Zonal Head

Divisional Sales Manager

Territory In charge

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BANK VALUES
1. Management Team the core strength of the Bank 2. Technology and tech initiatives 3. Strategic retail initiatives corporate Banking and credit 4. Stronger capital adequacy 5. Corporate governance 6. Employee contribution

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VARIOUS PRODUCT OF BANK

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Features of banking in IDBI

Current Account:
A Current Account is a common type of bank account used to store money that is needed on a regular, day-to-day basis. It is a handy way to manage your money in the short-term. It allows you to:

Receive money such as your salary or other types of income Withdraw cash by using your ATM (Automated Teller Machine) or Laser Card or at the bank counter Pay for things using your Laser Card or by writing cheques Transfer money to other accounts Bank using the internet or the telephone Pay bills

ATM Cards & Laser Cards

ATM Cards are used to withdraw cash from your current account You can use your ATM card abroad so long as your card has a Link logo on the back You can use your ATM card at any banks ATM machines As an alternative to using cash Laser Cards (also known as Debit Cards) allow you to pay for items at POS (Point of Sale) terminals in most shops, restaurants, and now even in some taxis! Some retailers will give you the option of receiving cash back, the amount of which is added to the transaction on your laser card

Savings account:

A savings account is a type of bank, building society, credit union or An Post account that is used for accumulating money. Funds saved can be for both short and long-term needs. Short-term needs include things like holidays, weddings and Christmas presents or just for a rainy day. Longer-term needs include things like saving for college or a house.
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There are many different types of savings accounts available. When deciding on a savings account you should consider how much you want to save and what access you want to the money. Generally speaking, savings accounts can be opened with a small sum of money and you can save either regular amounts or lumps sums, and sometimes both. A Savings Account accumulates interest interest rates can be either fixed or variable. The Government charges DIRT (Deposit Interest Retention Tax) on the interest earned on savings. This tax is automatically taken from your account.

Investments

Investment involves purchasing a financial product or other item of value with the expectation that the value of the item will increase over time. Simply put, investment means spending money in the hope of making more money. Investments can offer you a better return on your money in the longer-term compared to savings accounts. However, certain investments may carry a higher level of risk.

What is a Credit Card?

Credit cards are a pay later tool as they let you purchase an item and pay for it some time in the future. VISA and MasterCard are the two main types of Credit Card in Ireland. Credit cards are mainly provided by banks but some retailers and airlines also provide their own credit cards. Remember that you must be 18 years or over to use a Credit Card

How does a Credit Card work?

Credit cards have a credit limit, meaning the amount you can spend on the card this is set by your credit card provider. You have the option of spending the limit in one go or over a period of time. Each month you will receive a credit card statement from your credit card provider. This shows you various information relating to your card including how much you have spent since the last statement, any cash you withdrew using the card, any interest due, the amount you owe and the minimum payment that must be made by a set date. You can settle the amount when your bill falls due or you have the option to pay a minimum amount, but dont forget youll be charged interest on outstanding balances.

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What is Insurance?
Insurance is a form of risk management you pay a set amount called a premium to an insurer and the insurer agrees to cover the costs associated with certain risks that could be financially devastating if they were to happen. There are a number of different types of insurance including:

Car Insurance
By law if you have a car you must, at the very least, have third party insurance. Third party insurance covers any injury or loss suffered by other people as a result of your driving. Comprehensive insurance is an all inclusive type of insurance that covers the cost of repair or replacement if your car is stolen, damaged or destroyed and includes any loss suffered by Third parties.

Home Insurance
Some of the risks your home may be subject to include damage by fire or flooding, burglary or someone injuring themselves on your property. Taking out insurance can cover you for some of these risks.

Travel Insurance
There are many risks associated with travel including damage or delay of luggage, cancelled flights, delayed or missed departure, loss or theft of money or passport and illness or injury. Travel insurance can help compensate you in the eventuality of these things happening.

Health Insurance
Private health insurance helps cover medical or hospital expenses if you get sick, have and accident or need an operation.

Payment Protection insurance

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Payment Protection insurance is designed to cover your repayments on a loan if you suffer from an accident, illness, death or redundancy.

What is a Mortgage?
A mortgage is a special type of loan offered by banks and building societies to enable people to buy property. Its typically a big loan, paid back by the borrower o ver 25 or 30 years, in monthly instalments. Some different types of Mortgages.

Mortgage This is the most common type of mortgage. The monthly repayment consists of the original loan amount (or capital repayment) and the interest payment. At the beginning of the mortgages life, most of the monthly repayment goes towards the interest. Towards the end, more of the monthly payment goes towards the capital repayment. Interest-only mortgage With this type of mortgage the monthly repayment only covers the interest on the mortgage and not the capital. The original loan must be repaid in a lump sum at the end of the mortgage term.

What is online banking?

Online banking refers to carrying out certain banking transactions over the internet. Banking online is very convenient and can save you time and money. All the major banks offer online banking. There are a number of things you can do online such as:

View balances and statements Transfer money Top up your mobile phone Pay bills

Some banks online banking services allow you to:

Apply for certain products, such as credit cards, loans and savings accounts Set up, amend and cancel standing orders Share deal buy and sell shares online

Benefits of online banking Some of the benefits of online banking include:

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Save time and effort by banking from home (or wherever you have access to a pc and the internet) Information about your accounts and transactions is immediately available Can be cost-effective for example transactions charges may be lower and online accounts may offer higher interest rates Cuts down on your paper work

What is a pension and why start one?

Pensions are an investment you contribute to throughout your life, putting money away so youll have money in the bank when you retire. While there are many different types of pensions the principle is the same - to ensure you have a nest egg to live from when you get older. A pension plan is basically a long-term savings plan. People put money away in increments called contributions. Usually people plan for their retirement by starting a pension plan once they start working. People save for a pension so that they can maintain a certain standard of living after they retire.

Different types of pension

State Pension The Government pays a weekly pension to people once they reach the age of 66. Employee pensions Some employers contribute to a pension fund for its employees and employees then have the option to add to this fund. Self-employed pensions People who are self-employed are entitled to put a certain percentage of their profits into a pension plan and in doing so gain some tax benefits. Owner-Director pensions The Government allows owners or directors of companies to pay into a pension fund once the business starts making enough money for it to do so and in doing so gain some tax benefits.

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Internet banking
Internet or online banking describes the use of a bank's secure Web site to view balances and statements, perform transactions and payments, and various other facilities. This can be very useful, especially for banking when a bank is not open or for banking from anywhere Internet access is available. Since the Internet revolution, most retail banking institutions offer access to their own current accounts via online banking.

Telephone banking
Telephone banking is the term applied to specific provision of banking services over the telephone. In many cases such calls are to acall centre or automated service, although some institutions continue to answer such calls in their branches. Often call centre opening times are considerably longer than branches, and some firms provide these services on a 24 hour basis.

Mutual fund
A mutual fund is a type of professionally managed collective investment vehicle that pools money from many investors to purchase securities. While there is no legal definition of the term "mutual fund", it is most commonly applied only to those collective investment vehicles that are regulated and sold to the general public. They are sometimes referred to as "investment companies" or "registered investment companies." Most mutual funds are "openended," meaning investors can buy or sell shares of the fund at any time. Hedge funds are not considered a type of mutual fund. The term mutual fund is less widely used outside of the United States and Canada. For collective investment vehicles outside of the United States, see articles on specific types of funds including open-ended investment companies, SICAVs, unitized insurance funds, unit trusts and Undertakings for Collective Investment in Transferable Securities, which are usually referred to by their acronym UCITS. In the United States, mutual funds must be registered with the Securities and Exchange Commission, overseen by a board of directors (or board of trustees if organized as a trust rather than a corporation or partnership) and managed by a registered investment adviser. Mutual funds are not taxed on their income and profits if they comply with certain requirements under the U.S. Internal Revenue Code.
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Mutual funds have both advantages and disadvantages compared to direct investing in individual securities. They have a long history in the United States. Today they play an important role in household finances, most notably in retirement planning. There are 3 types of U.S. mutual funds: open-end, unit investment trust, and closed-end. The most common type, the open-end fund, must be willing to buy back shares from investors every business day. Exchange-traded funds (or "ETFs" for short) are open-end funds or unit investment trusts that trade on an exchange. Open-end funds are most common, but exchange-traded funds have been gaining in popularity. Mutual funds are generally classified by their principal investments. The four main categories of funds are money market funds, bond or fixed income funds, stock or equity funds and hybrid funds. Funds may also be categorized as index or actively managed. Investors in a mutual fund pay the funds expenses, which reduce the fund's returns/performance. There is controversy about the level of these expenses. A single mutual fund may give investors a choice of different combinations of expenses (which may include sales commissions or loads) by offering several different types of share classes.

FUND TRANSFER
Electronic funds transfer (EFT) is the electronic exchange, transfer of money from one account to another, either within a single financial institution or across multiple institutions, through computer-based systems. The term covers a number of different concepts: Wire transfer via an international banking network Cardholder-initiated transactions, using a payment card such as a credit or debit card. Direct deposit payment initiated by the payer Direct debit payments, sometimes called electronic checks, for which a business debits the consumer's bank accounts for payment for goods or services Electronic bill payment in online banking, which may be delivered by EFT or paper check Transactions involving stored value of electronic money, possibly in a private currency. Electronic Benefit Transfer.
27

TREADE FINANCE

28

Trade finance has been reviewing the global trade market since 1983. The remit of what we cover is somewhat broad, and as the market evolves to meet the requirements of financing global trade, so our content has changed. There are various definitions to be found online as to what trade finance is, and the choice of words used is interesting. It is described both as a science and as an imprecise term covering a number of different activities. As is the nature of these things, both are accurate. In one form it is quite a precise science managing the capital required for international trade to flow. Yet within this science there are a wide range of tools at the financiers disposal, all of which determine how cash, credit, investments and other assets can be utilized for trade. In its simplest form, an exporter requires an importer to prepay for goods shipped. The importer naturally wants to reduce risk by asking the exporter to document that the goods have been shipped. The importers bank assists by providing a letter of credit to the exporter (or the exporters bank) providing for payment upon presentation o f certain documents. Such as a bill of lading. The exporters bank may make a loan to the exporter on the basis of the export contract. Below I have outlined the various ways in which trade is financed by banks beyond the basic financial transaction described above which I would refer to as traditional trade finance. I have divided this extended definition into the sectors which trade finance as a channel for the latest news and analysis for this market strives to cover. Trade services and supply chain Building on what I have termed traditional trade finance, there are a number of ways in which banks can help corporate clients trade (both domestically and cross-border) for a fee. A typical service offering from a bank will include: Letters of credit (LC), import bills for collection, shipping guarantees, import financing, performance bonds, export LC advising, LC safekeeping, LC confirmation, LC checking and negotiation, pre-shipment export finance, export bills for collections, invoice financing, and all the relevant document preparation. Despite this focus on the LC, over the years the term trade finance has been shifting away from this sometimes cumbersome method of conducting business. It is now estimated that over 80% of global trade is conducted on an open account basis.

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Led by large corporates, this form of trade saves costs and time and so has been adopted by smaller corporates as they become more comfortable with their buyer and supplier relationships. Open account transactions can be described as buy now, pay later and are more like regular payments for a continuing flow of goods rather than specific transactions. This is much cheaper for corporates. In response to this development, the organisation SWIFT launched the TSU (trade services utility), a collaborative centralised data matching utility, which allows banks to build products around its core functionality to improve the speed and flow of open account trade. This is helping banks re-intermediate themselves into these trade flows. While volumes of LCs have remained flat in recent years, their value actually increased and they remain an essential part of emerging market trade and trade in countries where exchange controls are in force. This increase in value is also a reflection of the commodity price boom of 2007/08. Factoring & Forfaiting Factoring, or invoice discounting, receivables factoring or debtor financing, is where a company buys a debt or invoice from another company. In this purchase, accounts receivable are discounted in order to allow the buyer to make a profit upon the settlement of the debt. Essentially factoring transfers the ownership of accounts to another party that then chases up the debt. Factoring therefore relieves the first party of a debt for less than the total amount providing them with working capital to continue trading, while the buyer, or factor, chases up the debt for the full amount and profits when it is paid. The factor is required to pay additional fees, typically a small percentage, once the debt has been settled. The factor may also offer a discount to the indebted party. Forfaiting (note the spelling) is the purchase of an exporter's receivables the amount importers owe the exporter at a discount by paying cash. The purchaser of the receivables, or forfaiter, must now be paid by the importer to settle the debt. As the receivables are usually guaranteed by the importer's bank, the forfaiter frees the exporter from the risk of non-payment by the importer. The receivables have then become a
30

form of debt instrument that can be sold on the secondary market as bills of exchange or promissory notes. Structured Commodity Finance Structured commodity finance (SCF) as covered by Trade Finance is split into three main commodity groups: metals & mining, energy, and soft commodities (agricultural crops). It is a financing technique utilised by commodity producers and trading companies conducting business in the emerging markets. SCF provides liquidity management and risk mitigation for the production, purchase and sale of commodities and materials. This is done by isolating assets, which have relatively predictable cash flow attached to them through pricing prediction, from the corporate borrower and using them to mitigate risk and secure credit from a lender. A corporate therefore borrows against a commoditys expected worth. If all proceeds to plan then the lender is reimbursed through the sale of the assets. If not then the lender has recourse to some or all of the assets. Volatility in commodity prices can make SCF a tricky business. Lenders charge interest any funds disbursed as well as fees for arranging the transaction. SCF funding techniques include pre-export finance, countertrade, barter, and inventory finance. These solutions can be applied across part or all of the commodity trade value chain: from producer to distributor to processor, and the physical traders who buy and deliver commodities. As a financing technique based on performance risk, it is particularly well-suited for emerging markets considered as higher risk environments. Export & Agency Finance This part of Trade Finances remit covers the roles of the export credit agencies. The development banks, and the multilateral agencies. Their traditional role is complement lending by commercial banks at interest by guaranteeing payment. These agencies have once again become of vital importance to the trade finance market due to the role that they play in facilitating trade, insuring transactions, promoting exports,
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creating jobs, and increasingly through direct lending. All are important in the current global downturn. ECAs are private or governmental institutions that provide export finance, or credit insurance and guarantees, or both. ECAs can have very different mandates which we will not delve into here (please refer to Trade Finances annual World Official Agency Guide ). As the global economic crisis continues we are seeing a trend towards a liberalisation of these agencies remits. The development banks, sometimes referred to as DFIs (development finance institutions), and the multilaterals similarly have different mandates depending on their ownership or regional remit. Most will have a form of trade facilitation programme that promotes trade through the provision of guarantees. ECAs and multilaterals are becoming a crucial part of the financing of large infrastructure projects around the world as credit from commercial banks remains scarce. And the rest It doesnt stop there, Trade Finance also follows: the trade credit insurance and political risk insurance markets an important part of doing business in developing economies; the syndications market as banks and agencies lend funds to enable the trade finance activities of other institutions; Islamic trade finance through its increasing popularity and expansion beyond its historic markets; and finally Trade Finance follows the changes in global regulations and tracks the law firms and in-house legal teams that contribute to making deals happen. Make sure you stay abreast of the latest news and analysis across the spectrum of global trade with Trade Finance the information source on the trade, supply chain, commodity and export finance markets.

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An introduction to trade finance

International trade, the cross-border exchange of goods and services, is now widely acknowledged as an important engine of growth in most developing and transition economies. The recent ministerial meetings of WTO have further demonstrated the importance of international trade and investment flows, with many developing economies joining hands to vigorously defend their interests in this area. While countries need to actively engage in negotiations with others to create a favorable international environment, each must also ensure that its domestic environment is favorable to trade development. Whether the domestic environment is favorable can ultimately be measured by the economic cost of importing or exporting specific goods and services into or from the domestic market. In most economies, major transaction cost factors would include transportation and financing (including insurance) as well as red tape. Unpredictable and/or uncompetitive transportation, financing or procedurals and documentation costs can all be formidable barriers to trade for SMEs. The Financing of trade and investment has long been identified as one of the most challenging issues faced by new enterprises and SMEs in developing or transition economies. The issue of financing is particularly important, as financing is needed not only during the export process itself, but also for the production of the goods and services to be exported, which may include imports of raw material or intermediate goods. Lack of financing at any time during the production and/or the export process will result in a failed transaction.

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Trade finance and trade development strategy

To understand the significance of trade finance, it is important to view it in the context of an overall trade development strategy whose purpose is to develop and expand sustainable trade flows to support the countrys economic development Trade development strategy Trade relations management International trade relations management involves developing cordial trade relations with other countries to safeguard a countrys trade interests and to ensure market access for its products and services. It also involves responding to restrictions placed on products by importing countries. Trade negotiations may be conducted at three levels, namely bilateral, regional (e.g., ASEAN free trade area, AFTA) and multilateral (i.e., WTO). Trade promotion Trade promotion consists of programmes and activities to promote and develop trade with other countries. It includes measures to help establish and improve a countrys or a firms participation in trade fairs, trade missions and publicity campaigns, as we ll as providing information and advice on overseas market prospects, contacts and access. More generally, it covers the way in which a country assists its exporters to enter markets overseas, to expand their presence in those markets and to make their products competitive. Infrastructure development Infrastructure development is necessary to enable the handling of larger trade volumes and to increase the diversification of traded goods and services. It includes the provision of basic utilities, such as power and water, but also the development of warehousing, transportation, shipping and information technology infrastructures, and the establishment of related administrative bodies and systems. Efficient and effective banking and payment systems are important elements of the trade infrastructure. Trade facilitation
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Trade facilitation, often referred to as the plumbing of international trade, focuses on the efficient implementation of trade rules and regulations.1 In its narrowest sense, trade facilitation may be defined as the systematic rationalization of procedures and documentation for international trade. In its wider sense, however, it covers all the regulatory measures that affect the flow of imports and exports. The main objective of trade facilitation is to minimize the transaction costs and complexity of international trade for businesses, while maintaining efficient and effective levels of government control. Trade facilitation contributes to overall trade development strategy by optimizing the use of the trade infrastructure and complements trade promotion efforts by improving the countrys image as an efficient trading centre. It also enhances the development and management of trade relations by making trade regulations and procedures more transparent and consistent with international conventions and standards. Trade finance Trade finance refers to the financing of imports and exports, one of the major challenges facing businesses that endeavour to compete in global markets. Facilitating access to trade finance requires the development of a trade finance infrastructure, defined in this Handbook as the institutions, laws, regulations and other systems related to the following three activities: (a) (b) (c) Provision of capital to firms that are engaging in international trade transactions; Provision of support services to manage the risk involved in these transactions; Provision of international payment mechanisms.

The absence of an adequate trade finance infrastructure is, in effect, equivalent to a barrier to trade. Therefore, Governments whose economic growth strategy involves trade development may consider supporting the development of an efficient trade finance infrastructure as part of their trade facilitation action plans, i.e., one that is able to provide traders with a variety of trade finance tools and instruments at competitive prices.

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Importance and benefits of trade finance

Trade accounts for about one half of the gross national income of developing countries and financing that trade has become increasingly important to a country's development prospects. Trade finance, provided by commercial banks, export credit agencies, multilateral development banks, suppliers and purchasers, has grown by about 11 per cent annually over the last two decades. Because trade finance eases creditors risk, as it is tied to the traded goods, it may be seen as a way for poor countries to gain broader access to financial markets. However, the primary benefit of improved access to trade finance is to facilitate and expand trade, by providing traders with appropriate instruments to support their trading activities. The benefits of trade finance to traders can be broadly classified into three areas: Reduced capital outlay Trade finance provides companies with the necessary capital and liquidity and helps them to better manage their cash flow, allowing them to expand and grow.

Reduced risks Apart from capital, traders would also need support systems to help them manage risks associated with international trade transactions. The development of a sound and secure trade finance infrastructure will increase the number of options available to traders to reduce or eliminate risks associated with non-payment or payment delays, fluctuation in exchange rates, changes in trade and financial regulations and political unrest, among others. Increased competitiveness Terms of payment are increasingly used as competitive tools during contract negotiation. Buyers would generally favour a contract that provides certainty and attractive credit terms. Traders with access to a wide array of trade finance tools and instruments are better equipped.
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Numerous trade finance methods and instruments exist to support traders throughout the trade cycle. An overview of these methods and instruments is provided in chapter II, while legal issues related to their use are discussed in chapter III. Chapter IV provides additional information on structured commodity and trade financing techniques.

Trade finance infrastructure development

The availability and affordability of the above-mentioned trade finance tools and instruments to domestic traders will depend on the level of development of the trade finance infrastructure, as defined earlier. Two important issues related to trade finance infrastructure development are 1. The development of a favourable macroeconomic and legal environment for trade finance and 2. The development of institutions to support or provide trade finance. Trade finance and the macroeconomic environment Because trade finance tools and instruments are primarily offered by or through financial institutions, the level of development of the trade finance infrastructure is closely linked with that of the overall financial sector. It can therefore be expected that a stable macroeconomic environment will be an important factor in the development of trade finance, along with an open economic policy. Some of the factors that affect the development and availability of trade finance are discussed in chapter V, which includes a methodology that may be used by Governments as a simple way to assess and monitor over time how favourable the macroeconomic and legal environment is for trade finance. This methodology, conceptualized by ITC and pilot-tested in Central Asia and other transition economies in cooperation with ESCAP in 2004, may assist countries in identifying the weaknesses of their trade finance infrastructure and the potential impediments to trade finance development.
37

Institutions for trade finance development

To participate efficiently in international trade, a country needs sound monetary and banking policies, transparent fiscal and financial regimes, and functioning capital and insurance markets. To increase physical capacity, a country also needs a legal and regulatory framework that encourages domestic and foreign investment. But is that enough for the development of trade finance? Should trade finance be left to private sector financial institutions or is there a role for public institutions in actively supporting the provision of trade finance services, particularly to SMEs? Chapter VI proposes a model trade finance institutional structure based on the various models that have developed in some of the fast-growing export-oriented developing countries of the ESCAP region. It contains recommendations taking into account the particularities associated with newly independent States and transition economies.

Payment system development

An international transaction is not complete until payment has been received. Crossborder payment systems form an integral part of the overall banking and financial system and are an essential part of the trade finance infrastructure. A payment system is a set of institutions, laws, regulations and other mechanisms needed for a buyer to make a payment and a seller to receive that payment. An effective payment system should be designed to meet the financial needs of buyers and sellers. For importers and exporters, this means that the payment system must be capable of providing for accurate, secure, efficient and affordable international payments.
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Trade finance and international organizations

A number of international and regional organizations are directly or indirectly involved in trade finance infrastructure development in Asian and Pacific transition economies. At the global level, BIS, IMF, ICC, ITC, UNCTAD, UNCITRAL, and the World Bank are among the most important organizations (this is, however, a non-exhaustive list). At the regional level, ADB, EBRD and ESCAP have all been involved in trade finance infrastructure development. A brief overview of each of these institutions and their role appears below. At the global level (i) Bank for International Settlement BIS is an international organization that fosters cooperation among central banks and other agencies in pursuit of monetary and financial stability. One of the major components of BIS is the Basel Committee on Banking Supervision. The Basel Committee recently issued a revised framework for international convergence of capital measurement and capital standards, commonly known as Basel II. This framework is a revision of the 1988 Basel Accord aimed at further strengthening the soundness and stability of the international banking system. Basel II has implications for trade finance as it stipulates a set of requirements in the area of capital adequacy and credit risk exposure that banks should fulfill. (Website: www.bis.org)

39

(ii) International Chamber of Commerce

ICC plays a very important role in the development of international rules and practices for trade finance. Two of the major contributions of ICC to global trade finance infrastructure development include: ICC Uniform Customs and Practice for Documentary Credits (UCP 500) are the rules that banks apply to finance billions of dollars worth of world trade every year; ICC Incoterms are standard international trade definitions used in most, if not all, contracts that involve cross-border shipments and payments. ICC model contracts also make it easier for small companies that cannot afford an inhouse legal department to engage in international trade. International Monetary Fund IMF was established to promote international monetary cooperation, exchange stability, and orderly exchange arrangements; to foster economic growth and high levels of
employment; and to provide countries with temporary financial assistance to help ease balance of payments adjustments. IMF also provides technical assistance with a view to enhancing the effectiveness of economic policy and financial policy through capacitybuilding and policy design. While the central focus of IMF is on the international monetary and financial system, it works closely with WTO to provide a sound system for global trade and payments. Some trade-related areas in which IMF is involved include current and prospective WTO agreements on financial services and investment, trade debt and finance, and preventing disruptions to trade finance during financial crises. (Website: www.imf.org) International Trade Centre UNCTAD/WTO ITC is the technical cooperation agency of UNCTAD and WTO for operational,
40

enterprise-oriented aspects of trade development. ITC has a dedicated trade finance programme focusing on facilitating access to finance for SMEs that export from developing and transition countries. ITC provides technical assistance aimed at strengthening schemes and mechanisms offered by financial institutions in both the private and public sectors in the fields of export finance, short-term trade credit and trade credit insurance and guarantees. The technical assistance is also aimed at building up the capacity of entrepreneurs and credit officers for dealing with credit and financial risk management. UNCTAD provides information, analysis and technical assistance in a wide range of trade-related areas. The UNCTAD Division on International Trade in Goods and Services and Commodities is active in technical assistance and capacity-building in the area of agricultural and commodity trade finance, while its Division for Services Infrastructure for Development and Trade Efficiency covers e-trade finance issues. Trade Services and Trade Finance Trade Finance products are specialized bank products designed to reduce the risks and uncertainties associated with commercial transactions, thus, facilitating trade. To compete successfully in the ever-expanding international trade arena, which requires the financial ability to minimize the buyer's cost, maximize the seller's offer, and manage the commercial, political and currency risks on both sides. Export Services Selling your products and services in the global market need not be a painstaking process for you anymore. With Commercial Bank handling all of your export related transactions - its no more hassles! With faster credits through our global network of branches and access to collection information through E-mail alerts and a dedicated Trade Toll Free Number - you have greater control over your foreign receivables. Through a dedicated and expert Trade and Forex Advisory desk - we can structure and customise solutions for your specific requirement. a. Export Bill Collection Services By routing your Documentary Collections through Citibank you can now enjoy faster credit of your export credits through our global network of branches in more than 100 countries. With easy access to collection information details - you can now be in complete control of your foreign receivables!

41

b. Export Packing Credit (Pre-Shipment Finance) We provide pre-shipment finance in the form of Export Packing Credit to manage your cash flows for the purpose of procuring raw materials, manufacturing, processing, transporting, warehousing, packing, shipping of goods, etc. You can avail this facility in Indian Rupees (Packing Credit) or in a foreign currency (PCFC - Packing Credit in Foreign Currency). Please walk in to the nearest branch or call your Relationship Manager to know more! c. Export Bills Negotiation (Post-Shipment Finance) We also negotiate your Export Bills Drawn under a Letter of Credit (LC), if the documents submitted comply with the Terms of the LC. This offering is in the form of a loan advanced to you to bridge the working capital need that may arise after shipping of goods to the date of realisation of your export proceeds. And this comes to you at a very competitive rate of finance! d. Export Bill Purchasing and Discounting (Post-Shipment Finance) If your Export Bills are not drawn under a Letter of Credit (LC) - we can advance an amount against sanctioned credit limits immediately after shipment of goods. e. Export LC Advising With an international presence in more than 100 countries and a strong correspondent bank network (more than 6,500 banks globally) we advise LCs for customers and non-customers across the country. Once received these LCs are advised to you without any delay and under committed time frames. Through our expertise we can explain complex LC terms to help you assist in error - free document preparation. f. Export LC Confirmation Services To protect your export receivables against the political climate or credit risk of the buyer's country, we offer LC Confirmation Services. Once confirmed you are assured of payment subject to your submission of non-discrepant documents irrespective of non-payment by LC opening bank. g. Export Document Scrutiny Services A small discrepancy in your export document can lead to refusal of document acceptance or delayed payments resulting in financial losses for you. This can adversely affect your cash flows and profits. With a specialist team of trade exports scrutinising your export documents and a rigorous process of checking you can be assured of not only saving substantially on the discrepancy fee of foreign banks but of any risks that may arise in case the documents get rejected.

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OBJECTIVE OF THE PROJECT

Study of growth of industries in Punjab Potential of trade finance Business in Punjab Scope of the corporation banking Business in Punjab Secondary study of demand of retail banking product among corporate and for opening a branch ATM in Punjab.

SCOP OF THE PROJECT

The project is about the banking sector, which provide the similar facilities. The project covers only the corporate sector in Punjab not the retail customers. So the information about the retails customers is not collected. The project covers only the industrial area of Punjab. Questionnaire was framed on the basis of the requirements of the bank.

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METHODOLOGY OF THE PROJECT

1. 2. 3. 4. 5. 6. 7. 8. Studying the Trade Finance Services of the bank. Secondary data for the industries of Punjab is collected from the industries Dept, Punjab and data available with the bank. Under the guidance of my guide Mr. Pankaj Garg I prepared the questionnaire. Pilot researches on 7-8 companies is done and changes in the questionnaire are done with help of project guide. Survey is done on 102 companies. The data is prepared. Analysis of data is done. Recommendations and conclusions for the bank are drawn.

44

Research Methodology

45

Research Methodology
When you say that are undertaking a research study to find answers to a question, you are implying that the process: 1 is being undertaken within a framework of a set of philosophies (approaches): 2 uses procedures, methods and techniques that have been tested for their validity and reliability; 3 is designed to be unbiased and objective. Philosophies means approaches e.g. qualitative, quantitative and the academic discipline in which you have been trained. Validity means that correct procedures have been applied to find answers to a question. Reliability refers to the quality of a measurement procedure that provides repeatability and accuracy. Unbiased and objective means that you have taken each step in an unbiased manner and drawn each conclusion to the best of your ability and without introduction your own vested interest. Research is a process through which we attempt to achieve systematically and with the support of data the answer to a question, the resolution of a problem, or a greater understanding of a phenomenon. This process, which is frequently called research methodology, has eight distinct characteristics: Research originates with a question or problem. Research requires a clear articulation of a goal. Research follows a specific plan of procedure.
46

 Research usually divides the principal problem into more manageable sub problems. Research is guided by the specific research problem, question, or hypothesis. Research accepts certain critical assumptions. Research requires the collection and interpretation of data in attempting to resolve the problem that initiated the research. Research is, by its nature, cyclical; or more exactly, helical. Descriptive research is used in this project report in order to know about cash management services to clients and determining their level of satisfaction. This is the most popular type of research technique, generally used in survey research design and most useful in describing the characteristics of consumer behavior. The method used was following: Questionnaire method Direct Interaction with the clients.

Research Design: -

Research design is considered as a "blueprint" for research, dealing with at least four problems: which questions to study, which data are relevant, what data to collect, and how to analyze the results. The best design depends on the research question as well as the orientation of the researcher. Every design has its positive and negative sides. In sociology, there are three basic designs, which are considered to generate reliable data; these are crosssectional, longitudinal, and cross-sequential.

There are two kinds of research designs namely; Exploratory Descriptive

47

The project assigned to me to find out the potential for trade finance service in Punjab. Is an exploratory cum descriptive research, exploratory kind of research is done to explore the possible outcomes, and as the project title is itself suggesting that I will be exploring the influence of established priorities for further processing by the bank. Descriptive research design is a scientific method which involves observing and describing the behavior of a subject without influencing it in any way. Situation Analysis: - Conducting a situational analysis means analyzing the company, its market, its competition and the industry in general. The situation analysis is a background investigation. It involves obtaining information about the company and its business environment by means of library, research. Sources of Data :I have collected the information from only Primary sources. The sources are as follows:I. Primary Source: - The questionnaire has been designed and same is asked to the customers in the stores itself. With this mean primary data has been collected. II. Secondary data: - The sources of secondary data were internet, books and newspaper articles. Sampling Design:1. Sampling universe:- All the Person of the IDBI Bank. 2. Type of sampling:- Non- Probability 3. Total sample size:- 50 above members. 4. Sample Area: - Banks. 5. Sample unit: - Office members. 6. Sample collection technique: - Questionnaire method 7. Sample collection Duration:- 45 days.
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8. Sampling procedure:- purposive sampling. 9. Data representation technique:- Pie Chart. 10. Data analysis instrument:- All the data has been analyzed on the basis of percentage basis.

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Limitations

Industries in the industries area of Punjab were given preference as compared to another industries nearby Punjab. Some of company official did not reveal the whole information. Had to rely on verbal information provided by the officials of the subject company. So no proof of authenticity available.

50

Data Analysis And Interpretation

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Analysis of data is a process of inspecting, cleaning, transforming, and modeling data with the goal of highlighting useful information, suggesting conclusions, and supporting decision making. Data analysis has multiple facets and approaches, encompassing diverse techniques under a variety of names, in different business, science, and social science domains.

1.

What is your federal ID number? a. Yes b. No

What is your federal ID number?

No 30% Yes 70%

52

2.

When do file 941 payroll taxes? a. Weekly b. Monthly c. Quarterly d. Yearly

When do file 941 payroll taxes?

weekly monthly quarterly

29% 50% 21%

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4.

Are there any taxes past due? a. Yes b. No

Are there any taxes past due?

No 30%

Yes 70%

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5. Do you have any other loan or lease outstanding? a. Yes b. No

Do you have any other loan or lease outstanding?

No 30% Yes 70%

6. Have you enclosed all of your employee business expenses? a. Yes b. No

Have you enclosed all of your employee business expenses?

No 30% Yes 70%

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Finding
In the companies, which have their head office outside Punjab, majority of the banking decisions are taken in the head office. Corporate are not satisfied with public banks as they have lengthy procedures and complicated documentation.

There is more scope for inland finance as compared to forex. There are less exports units in Punjab because it has not been declared as an export zone and no special incentives have bee offered by the govt. to exports. Private bank like ICICI and HSBC are taping the industry from the Punjab branch only. Plastic industry is set u as an ancillary to other industry especially pharmacy. Company like rambaxy is meeting its requirement of plastic bottles and jars from the local industry only. Packaging industry is also developed because many unit are set up in Punjab just for the packaging and assembling so local industry meets its demand. Many pharmaceutical units are there because of offices of many pharmacy firms in Punjab and there are many good instituted offering degree in chemical engineering thus results in availability of good chemical engineers.

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RECOMMENDATIONS FOR THE BANK

IDBI Bank can take the first mover advantage, as till date there is no private
sector bank in Punjab.

IDBI Bank Punjab has the required infrastructure to handle forex transactions
locally there is saving of time so companies using forex services can be the prospective customers.

There is a potential for retail products in Punjab so proper cost benefit analysis
of retail products is required.

Marketing team can be send to Punjab both for the corporate as well as retail
products.

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CONCLUSION

Many unit have their head office in Punjab thus majority of the banking
decisions are taken in the head office only.

Exports units are less in Punjab because no special benefits are given to the units
exporting and it has not been declared as an exports zone.

In Punjab there is more scope for inland finance as compared to forex business. There is potential for retail products as well. Industry in Punjab meeting the needs of the people as there is growth in Punjab. Banks in Punjab have less power with regards to sanctioning of loans or other
credits. Banks get it sanctioned from their controlling body.

Business environment is very good for the industry in Punjab. A large no of new
units are being set up thus bank has a good potential there.

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Questionnaire
Name: _______________________ Address: _____________________ Phone Number: ________________ Email id: _____________________________ Type of Business: ____________________

1.

What is your federal ID number? c. Yes d. No

How many employees do you have? a. 20-50 b. 50-100

When do file 941 payroll taxes? a. Weekly b. Monthly c. Quarterly d. Yearly

4.

Are there any taxes past due? c. Yes d. No

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6. 7. 8. 9. 10. 11. 12. 13.

If yes, have you filed for it? What is the name and address of your bank? ______________ What is your account number? Have you taken any significantly large business loan? If yes, give the details of the amount and the date of taking the loan Have you leased your business space? If yes, give details of lease and rent amount. ____________ What is the dollar amount of receivables now open? _________ Specify the approximate number of customers you have. __________ Do you have any other loan or lease outstanding? c. Yes d. No

13.

Rate your overall tax clearance experience: a. b. c. d. Excellent Very good Good Not so good

14. Kindly ensure if you have put in all credit statement: a. Yes b. No 15. Have you enclosed all of your employee business expenses? c. Yes d. No

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BIBLIOGRAHY

IDBI:-

www.idbibank.com

www.monetrycontrol.com www.anfi.com Banking history www.mutualfunds.com Mr. Pankaj Garg Questionnaire- www.samplequestionnaire.com Self Notes

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62