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DESERTATION

Submitted by:
SEEMA GUPTA
UIM (UTTARANCHAL INSTITUTE OF MANAGEMENT)

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LIST OF CONTENTS
Preface 1
Executive Summary 2
Acknowledgement 3
Certificate 4
Objectives of the Report 5
Introduction to Banking 6-7
Banking system in India 8 - 10
Guide lines of R.B.I. 11 - 12
Chronology of Banks in India 13 - 16
Future of Banking 17
About Standard Chartered Bank 13 - 15
Banking Profile of SCB 16
SCB Structure Over View 17
Operations in IPC 23 - 30
Operation in Internal services 31 - 57
Risk Management System 58 - 64
Credit Risk Management 65 - 66
Introduction to Managing Credit Risk 67- 69
Introduction to Cash flow Analysis 70
Introduction to Ratio analysis 71 - 74
Introduction to Credit Scoring Models 75
Introduction to Financial Services of SCB 76 - 80
Introduction to Small & Medium Enterprises Banking of SCB 81 - 85
Customers of SCB banking 86
Workings on Petroleum Company & It's Analysis 87 - 103
Workings on Metals Company & It's Analysis 109 - 129
Workings on Motors Company & It's Analysis 130 - 159
Conclusion 160 - 162
Bibliography 163

PREFACE

As a part of MBF program, a student has to peruse a project duly approved by the Director of
the institute. I had privileged of undertaking the project on the study and critical analysis of
the Operation Procedures of consumer banking and Analysis of financial statements and of the
customers of SME banking and measuring the credit risks at Standard Chartered Bank, 10
Parliament Street, New Delhi - 110001 during the period (15th April To 15 June).
It encompasses the entire operation unit in Delhi & consists of three Departments namely:-

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 ITEM PROCESSING CENTRE


 INTERNAL SERVICES
 SME BANKING
My project is divided into five Chapters and they are given as under.
1) Chapter one of this study contains, concepts of banking and importance of the subject in
present scenario.
2) Chapter two deals with Introduction of Standard Chartered Bank which consists history as
well as the present scenario of the bank.
3) Chapter three deals with the Banking operations of item processing centre of Slandered
Chartered Bank.
4) Chapter four deals with the Banking Operations of internal services of Slandered Chartered
Bank
5) Chapter five deals with Introduction of SME Banking and of Management of credit risk.
6) Chapter six deals with the analysis of Financial Statements and measuring risk
7) Chapter seven deals with the Conclusion and the Bibliography Part.

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EXECUTIVE SUMMARY

I have done my summer internship in Standard Chartered Bank. I have devoted around
one month in Item Processing Centre and Internal Services and around one month in
SME Banking. In the first section of summer training I was in operation department,
thereafter I was moved to SME Banking to learn the processing's of that department.
During my stint, I was exposed to theoretical as well as practical learning.
My project starts with an overview of the banking sector and the profile and
History of STANADRD CHARTERED. It lists the various activities handled by IPC. A loss of
any document can cause us lots of problem and hence we have to be very cautious about the
same. The project contains the workflow of the operation unit of standard chartered.

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ACKNOWLEDGEMENT

The summer training project in STANDARD CHARTERED bank was a very wonderful
experience for me. No matter what one achieves in life, he/she is always guided and helped by
someone. I got a good exposure of the industry, both in theoretical as well as practical ground.
This project is a sincere effort to have an in-depth knowledge of various "Banking operations
and credit risk management of SME ".
With profound sense of gratitude and regards I convey my sincere thanks to Mr. ARUN
OBEROI ( Head--IPC) , Mr. Prashant (SME s), Miss Rachna (SMEs ) and all colleagues of
standards chartered bank for not only giving me an opportunity to pursue the project, but also
helping and guiding me through out in this project.
I would like to Express my Sincerest thanks to Prof. J.D.Agarwal And Prof. Aman Agarwal.I
would also like to express my sincerest thanks to Miss. Yamini Agrawal, Prof.Chaterjee, MR.
Pushpendra Raghav, Mr. Deepak Bansal and all the faculty members of IIF for guiding me
with their knowledge and guidance throughout my project work and also very graceful to all
my IIF colleagues for their helpful nature.

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OBJECTIVE OF THE PROJECT

During the course of my project, I had covered the below-mentioned objectives:

1) To Review & Analyze the work process in operation unit in a bank.

2) To understand the importance of the backend operation unit.

3) To review the analysis of Financial Statements of Small & Medium Enterprises to minimize
Credit Risk.

4) To review the significance of process normalization towards saving Processing time &
enhancing productivity/ Output.
.

INTRODUCTION TO BANKING
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BANKING SYSTEM
After the nationalization of Banks, increasing adoption of technology, continuous mergers in
the banking, modernizing backroom operation in the banks and competition pave the path of
growth of Indian banking. By the mid-1990, the near monopoly of public sector banks faced
the competition by the more customer-focused private sector entrants. This competition forced
older and nationalized banks to revitalize their operations.
Year 1992 was the golden period of Indian Banking system due to the scam-tainted stock
market. Large proportion of household saving moved into the banking system, which recorded
an annual growth of 20 percent in deposit
But along with the continuous growth and modernization, there are several challenges
confronting the banking sector. The main challenges facing the banking sector is the
deployment of funds in quality assets and the management of revenues and costs. The problem
of NPA (non- performing assets), overall credit recovery system still exist. There is a
continuous reforms and modernization is in process. A number of recon mediations of two
Narasimham committees have been implemented.
Foreign Banks are focusing on corporate and on the middle class consumer and providing them
better service. Nationalized Banks are also attempting to get on the path of automation. Strong
Banks will acquire the weaker banks. The numbers of foreign banks operating in India has
increased significantly and their share of total assets has also increased. In the year 2001
estimated foreign bank account for 14.7 percent of the total net profit of commercial banking
sector in India.
In spite tangible progress and the contribution of Narasimham I and Narasimham committee
reports the banking sector in India suffering from systemic and structural problem.

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BANKING SYSTEM IN INDIA

The modern banking system in India started with establishment of the first joint stock bank
The General Bank of India in the year 1786. After this first bank, Bank of Hindustan and
Bengal Bank came to existence. In the mid of 19th century East India Company established
three banks The Bank of Bengal in 1809, The Bank of Bombay in 1840, and bank of Madras in
1843. These banks were independent units and called Presidency banks. These three banks
were amalgamated in 1920 and new bank Imperial Bank of India was established.
After Independence the Imperial Bank of India was nationalized with a new name State Bank
of India by passing State Bank of India act 1955. The Reserve Bank of India as a Central bank
was nationalized in the year 1935 by an act the Reserve bank of India act passed in the
parliament. Several new banks as Punjab National Bank, Bank of Baroda, Canara Bank, Indian
Bank, Bank of India etc were established after independence. On July 19, 1969 14 major banks
were nationalized. Later on more banks were nationalized. At present the numbers of
nationalized banks are 20. Several Foreign banks were allowed to operate as per the guidelines
of RBI. At present the banking system can be classified in following categories:

1. PUBLIC SECTOR BANKS


Reserve Bank of India
State Bank of India and its 7 associate Banks
Nationalized Banks (20 in number)
Regional Rural Banks sponsored by Public sector Banks
2. PRIVATE SECTOR BANKS
Old Generation Private Banks
New Generation Private Banks
Foreign Banks in India
Scheduled Co-operative Banks
Non Scheduled Banks

3. CO-OPERATIVE SECTOR BANKS


State Co-operative Banks
Central Co-operative Banks
Primary agriculture Credit Societies
Land Development Banks
Urban Co-operative Banks
State Land Development Banks
4. DEVELOPMENT BANKS
Industrial Finance Corporation of India (IFCI)
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Industrial Development bank of India (IDBI)


Industrial Credit & Investment corporation of India (ICICI)
Industrial Investment Bank of India (IIBI)
Small Industries Development Bank of India (SIDBI)
National Bank for Agriculture & Rural Development (NABARD)
Export-Import Bank of India
SCICI Ltd

All the types of banks have a centralized control of RBI. All the banks have to follow the guidelines of RBI.
Government used banks to provide credit and loan to weaker sections. This all lead to a serious crisis of
unrecoverable debt. At the end of 1990 banks were saddled with NPA (Non Performing Assets) as bad and
recoverable debts touched to Rs.75, 000 crores.
Foreign Banks in India started to lure customers by good services. These banks were more automated, providing
more faster information, kept flexible working hours and introduced 24 hrs ATM's.
Today Private Indian Banks as well as Nationalized Banks offering better services and attempting to get on to the
path of comprehensive automation.

Guidelines of RBI

The RBI issued guidelines regarding the formation and functioning of private sector banks in January 1993.
The guidelines are as follows:

The Banks shall be governed by the provisions of The Reserve Bank of India Act 1934, The Banking
Regulations Act 1949, and other relevant statuaries.
Private Sector Banks are required to be registered as Public limited Companies in India.
The shares of banks are required to be listed on Stock Exchanges.
Preference will be given to those banks whose headquarters are proposed to be located in a center which
does not have headquarters of any other bank.
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Maximum voting rights of an individual shareholder will be limited to 1% of total voting rights.
The new bank will not be allowed to have as its Director any person who is already a Director in a
banking company.
The bank will be subject to prudential norms in respect of banking operations, accounting policies, and
other policies as laid down by RBI. The bank will be required to adhere` to the following: Minimum
paid-up capital of Rs.1 billion. Promoter's contribution as determined by the RBI capital adequacy of 8%
of the risk weighted assets. Single borrower and group borrower exposure limits in force priority sector
lending Export Credit Loan policy within overall policy guidelines laid down by RBI.
The banks will be free to open Branches anywhere once they satisfy the capital adequacy and prudential
accounting norms.
The banks will not be allowed to have investments in subsidiaries, mutual funds and portfolio
investments in other companies in excess of 20% of the bank's own paid-up capital and reserve.
The banks would be require to use the modern infrastructural facilities in office equipments, computer,
telecommunications etc.
With the recommendations of Narasimham Committee, the Government has now allowed the entry of
Private Banks.

The RBI will grant approvals for entry of private sector banks provide such banks offer competitive,
efficient and low cost financial intermediation services, result in up gradation of technology in the
banking sector, are financially viable and do not resort to unfair means like preemption and concentration
of credit, monopolization of economic power, cross holding with industrial groups etc.
Non Residential Indians are allowed to have primary equity in a new banking company to the extent

of 40%. In the case of a foreign banking company or a finance company acting as a technical
collaboration or a co-promoter, equity participation is restricted to 20%.

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CHRONOLOGY OF BANKS IN INDIA

January 1, 1949 : The Reserve Bank of India is Nationalized and made a Central Bank in India
by an act of Parliament.
September 4, 1951 : The Government of India planned to seek loan from World Bank.
1956 : Life Insurance Companies were Nationalized.
July 3, 1964 : IDBI was set up.
July 6, 1966 : First time the Rupee was devalued by 36.5 percent, one Dollar became Rs.7.50
from Rs.4.75.
July 19,1969 : Fourteen major banks were nationalized by Mrs. Indira Gandhi the then Prime
Minister of India.
1973 : The Foreign Exchange Regulation Act came into existence. (Now Foreign
Exchange Management Act)
January 11, 1978 : Currency notes in denomination of Rs.1000, Rs.5000 and Rs.10, 000 were
withdrawn from circulation.
November 19, 1986 : Government of India Launched Indira Vikas Patra.
1987 : Government of India introduced 9 % Tax free relief bonds, to mobilize
resources for meeting draught related expenditure.
April 1988 : National Housing Bank was set up with a share capital of Rs.100 crores
subscribed entirely by the R.B.I.
July 1 and 3, 1991 : R.B.I devalued the rupee downward by 17.38 percent.
November, 1991 : M. Narsimham committee on reforming the financial system submitted its
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report suggesting phased reduction of SLR to 25 percent in three years and


CRR to 10 percent in four year.
March, 1992 : Dual Exchange rate system was instituted under liberated rate management,
enabling orderly transition from a managed floated regime to a market
determined one.
April, 1992 : RBI introduced Risk-Assets-Ratio for Banks as a Capital adequacy measure.
January 8, 1993 : FERA was amended and subsequently repealed and replaced by Foreign
Exchange Regulation Act 1993.
January, 1993 : Guidelines for setting up private sector banks are issued.
March, 1993 : Process of convertibility is started and Rupee is made convertible on the trade
account.
September, 1993 : New Bank of India was merged into Punjab National Bank.
March, 1994 : UTI Bank became the first private sector bank to start its operation.
: RBI issued guidelines on Prudential norms. Banks should achieve minimum
June 13, 1994 capital adequacy ratio 6 percent on their risk weighted assets and off Balance
Sheet exposures by march31, 1995 and 8 percent by march 1996.
July 15,1994 : Amendment in Banking Companies Act 1970 enabled the Nationalized bank to
tap the capital market. The Nationalized banks are allowed to strengthen their
capital base to contribute to their capital up to 49 percent in the capital market.
August, 1994 : Full convertibility was taken by making the Rupee convertible on the current
account.
October, 1994 : Oriental Bank of Commerce became the first Nationalized bank to access the
capital market to raise Rs.387.24 crore capitals.
October 1995 : Banks are allowed to fix their own interest rates on domestic term deposits with
maturity of two years.
July, 1996 : The insurance regulatory authority was set up to privatize the insurance sector.
May 9, 1997 : RBI issued new norms for Non Banking Finance companies to improve their
financial health and viability. The financial companies are required to apply for
registration with RBI by July 8, 1997.
December 7, 1997 : RBI constituted a working group under the Chairmanship of S.H.Khan to
examine the harmonization of role and operations of development of Financial
Institutions and Banks.
April 24, 1998 : The S.H.Khan committee on the harmonization of the role and operations of
development of Financial Institutions and Banks submitted its recommendation
to move towards universal banking.
August 9, 2000 : Banks having a minimum net worth of Rs.500 crore and satisfying other
criteria regarding capital adequacy were allowed to enter insurance business
through a joint venture.
November 10, 2000 : Guidelines to Bank for financing of equities and investment in shares were

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issued. Banks were allowed to invest unto 5 percent of its total outstanding
domestic credit in capital market.
January 3, 2001 : Revised guidelines for licensing of new banks in private sector were issued.
These stipulate a minimum initial paid-up capital of Rs.200 crore (to be raised
to Rs.3000 crore within three years o commencement of business) with a
minimum 40 percent as contribution from its promoter.
April 19, 2001 : Banks permitted to formulate Fixed Deposit Schemes specifically for senior
citizen offering higher and fixed rate of interest.
April 28, 2001 : RBI clarifies approach to universal banking for term lending and reframing
institutions.

FUTURE OF BANKING

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India Banking Summit, an international conference examining the future of banking and
financial services in India will bring together leaders in the field of banking, wealth
management, insurance, and IT to discuss growth opportunities in retail, community, rural,
and commercial banking.

The summit will be held in Mumbai from Tuesday 7th December until Wednesday 8th
December 2004 at the Renaissance Mumbai Hotel and Convention Centre.

The event has been endorsed by Dr. Manmohan Singh, Prime Minister of India, and sponsored
by Intellect Suite by Polaris, SunTec, PSI Data Systems, Carreker Corporation, Red Hat,
Aviva Life Insurance and SDG Software Technologies. It brings together over 150 senior
executives to evaluate the latest developments in banking technology, risk management, retail
and rural financial services, capital markets, and regulation.

Opening this year's event, Chief Executives from ING Vyasa Bank, Bank of Baroda, IDBI
Bank, ICICI Bank, Bank of Maharashtra, Yes Bank, and the Development Bank join the World
Bank and Polaris Software Lab to explore new growth opportunities in retail banking. The
program also features participation from Citigroup, Bank of America, HDFC Bank, Kodak
Investment Banking, Bank of India and the Reserve Bank of India.

ABOUT STANDARD CHARTERED BANK


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Standard chartered is the world's leading emerging markets banks headquartered in London.
Its businesses however, have always been overwhelmingly international. This is the summary
of the main events in the history of Standard Chartered and some of the organizations with
which it merged.

The early years

Standard chartered is named after two banks that merged in 1969. They were originally known
as the Standard Bank of British South Africa and the Chartered Bank of India, Australia and
China. Of the two banks, the Chartered Bank is the older having been founded in 1853
following the grant of a Royal Charter from Queen Victoria. The moving force behind the
Chartered Bank was a Scot, James Wilson, who made his fortune in London making hats.
James Wilson went on to start The Economist, still one of the world's pre-eminent
publications. Nine years later, in 1862, the Standard Bank was founded by a group of
businessmen led by another Scot, John Paterson, who had emigrated to the Cape Province of
South Africa and had become a successful merchant. Both banks were keen to capitalize on the
huge expansion of the trade between Europe, Asia and Africa and to reap the handsome profits
to be made from financing that trade. The Chartered Bank opened its first branches in 1858 in
Calcutta and Mumbai. A branch opened in Shanghai in that summer beginning Standard
Chartered unbroken presence in china. The following year the Chartered Bank opened a branch
in Hong Kong and an agency was opened in Singapore. In 1861the Singapore agency was
upgraded to a branch which helped provide finance for the rapidly developing rubber and tin
industry in Malaysia. In 1862 the Chartered Bank was authorized to issue bank notes in
Singapore, a privilege it continued to exercise until the end of the 19 t h century. Over the
following decades both the Standard Bank and Chartered Bank printed bank notes in a variety
of countries including China, South Africa, Zimbabwe, and Malaysia and even during the siege
of Making in the South Africa. Today Standard chartered is still one of the three banks which
print Hong Kong's bank notes.

Standard Chartered in the 1990s

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Even within this period of apparent retrenchment Standard Chartered expanded its network, re-
opening in Vietnam in 1990, Cambodia and Iran in 1992, Tanzania in 1993 and Myanmar in
1995. With the opening of branches in Macau and Taiwan in 1983 and 1985 plus a
representative office in Laos (1996), Standard Chartered now has an office in every country in
the Asia Pacific Region with the exception of North Korea. In 1998 Standard Chartered
concluded the purchase of a controlling interest in Banco Exterior de Los Andes (Extebandes),
an Andean Region bank involved primarily in trade finance. With this purchase Standard
Chartered now offers full banking services in Columbia, Peru and Venezuela. In 1999,
Standard Chartered acquired the global finance trade business of Union Bank of Switzerland.
This acquisition makes Standard Chartered one of the leading clearer of dollar payments in the
USA. Standard Chartered also opened a new subsidiary, Standard Chartered Nigeria Limited in
Lagos, acquired 75 percent of the equity of Nakornthon Bank, Thailand; and agreed terms to
acquire 89 percent of the share capital of Metropolitan Bank of the Lebanon.

Standard Chartered Today

Today Standard Chartered is the world's leading emerging market bank employing 30,000
people in over 500 offices in more than 50 countries primarily in countries in the Asia Pacific
Region, South Asia, The Middle East, Africa, United Kingdom, and the Americas. The new
Millennium has brought with it two of the largest Acquisition in the history of bank with the
purchase of Grindlays bank from the ANZ Group and the acquisition of the Chase Consumer
Banking operation in Hong Kong in 2000.
These acquisitions demonstrate Standard Chartered firm committed to the emerging markets,
where it has a strong and established presence and where it sees its future growth. It is one of
the world's most reputed international banks, with a management team comprising 70
nationalities. Standard Chartered is listed on both the London Stock Exchange and the stock
exchange of Hong Kong and is in the top 25 FTSE-

100 companies, by Market Capitalization. It serves both consumer and Wholesale banking
customers. Consumer Banking provides Credit cards, personal loans, mortgages, deposit taking
and wealth management services to individuals and small to medium sized enterprises.
Wholesale banking provides corporate and institutional clients with services in trade finance,

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cash management, lending, custody, foreign exchange, debt capital markets, and corporate
finance.
Standard Chartered is well established in growth markets and aims to be the right partner for
its customers. The Bank combines deep local knowledge with global capability. The bank is
trusted across its network for its standard of governance and its commitment to making a
difference in the communities in which it operates.

BANKING PROFILE OF SCB

SCB has some different types of banking:-

Priority Banking
Personal Banking
Door Step Banking
Retail Services
Additional Services

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SCB STRUCTURE OVERVIEW

Standard Chartered
Bank

Consumer Banking Whole Sale Banking

Service Delivery BIU Service Shared Sales Service quality


Distribut
-ion

Metro Ops Central Ops


Account Services

Internal Item Processing


Services Centre

Liabilitiesrvices Asset Operation


Operation

Disbursement Unit Safe Custody

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CLEARING

INTRODUCTION

Clearing is a way adopted by the banking system to enable the exchange of negotiable
instruments like cheques, drafts etc... I.e. drawn in any bank in favor of another branch or its
customers and the subsequent settlement of the amounts due between banks on account of such
exchange of these instruments.
In case of Indian banks, 'RESERVE BANKS OF INDIA' is the intermediary between various
banks R.B.I. derives the power of setting up and managing clearing house from section 58(2)
(p) of R.B.I. act. For the above purpose, all banks maintain an account with R.B.I. which is
used for the settlement of inter-bank dues. In case, where R.B.I. does not maintain a clearing
house, a specified local branch of the 'State Bank of India' or its subsidiaries is used for this
purpose.
Clearing can be grouped under two heads:

1) INWARD CLEARING: - Inward clearing is a process wherein each member bank


receives payments.

2) OUTWARD CLEARING: - Outward clearing is a process wherein each member bank of


the clearing house delivers cheques for realization instruments, drawn on the other
banks.

INWARD CLEARING

CLEARING MECHANISM

MICR CLEARING: MICR Clearing concept is basically introduced by R.B.I.


MICR band consists of -
- Serial number of the instruments.
- City drawn cheques.
- Bank code.

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- Branch code.
- Transaction code.
- Amount.

The step by step procedure of clearing :

STEP 1: From R.B.I. clearing house, the inward clearing instruments, the input forms, the
floppy and the reports has been picked up. Similarly from the S.B.I. , the hard copy as well as
the soft copy of the input statement has been picked up.

STEP 2: I.T personnel is handed over that floppy and tapes from the clearing house through
ICSMERGE.

STEP 3: After merging they generate a report of the total number of items and the value,
in the listing of the R.B.I., tallies with the report. The file is uploaded to the host
for processing and posing of the debits into the customer accounts.

NEXT AT SINGAPORE:-

STEP 4: After uploading at Singapore, the support team runs a program which debits the
customer accounts.

This program has two entries:-


 CR - Clearing Settlement.
 DR - Inward Clearing computer surpass.

This program pass-


- Debit to customer.
- Credit to ICCS (IPC cost center).

This program simultaneously generates reports for-

- Items that have been posted (90 Q).

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- Items that have not been posted (90 V).


-items with hard hold (XS 14)

The reports downloaded to local "IPC control D-ID".

NEXT AT IPC CENTRE:-

STEP 5: R.B.I. Report will be ticked back against the cheques. If any differences found, it
will captioned in clearing differences.

STEP 6: Three reports generated here:


 XS0014 - Late posting (i.e. manual posting transaction).
 XS0090V- Rejected items by items sequence numbers.
 XS0090Q- Posted items.
STEP 7: Technical verification having checking of six different entries:
- Cheque is postdated/ outdated/ having no date.
- Have signature or not.
- Cheque has crossing stamp of the presenting bank.
- Any unauthorized signature.
- Having payers name.
If any point is missed, that cheque would be considered as rejected items.
STEP 8: Signature Verification of those cheques having amount:
> INR 10,000/- will be done.

> INR 50,000/- will be scanned by U.V.Rays.

STEP 9: Total value of Inward Clearing received from the R.B.I. are reported for finance.

STEP 10: Now Inward Balancing takes place like below:

+ Total auto posted items (90Q).


- Total of XS14.
+ Manual posted rejected items (90V).
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+ XS14 (Returned un-posted items).


+ CRS (Returned un-posted items).
+ GL payments.
+ CDDTV.
= Total = Total IC as per R.B.I. Schedule.
CLEARANCES OF HIGH VALUE CHEQUES:-

The high-value cheques will be collected from the R.B.I. at the proper given time .The
cheques are in lot and arranged in lots with the listing attached to it .Inward clearing of high-
value cheques are completely manual as against HICR Inward-Clearing. Cheques will be add-
listed "presenting bank" lot-wise and verified against the total of the listing.
Verification of signature is done on CT-Dos. All customer cheques will be posted manually
through transfer withdrawal option in CT-Dos and high-value posted journal is a check to any
wrong posting by the teller.

At the time of posting, the details of the cheques have been matched to identify any wrong
position. Then technical verification takes place.
Then high-value limex report has been generated.
The transaction refers to the concerned branch.
Then totaling of the following:-
1. Posted transaction total.
2. Un-posted returned total.
3. Drafts sent to total.
4. Differences if any.

INTER-BANK INWARD CLEARING :


1. Cheques and lists are collected from R.B.I.
2. Verification of the technical error.
3. Signature verification of the Bank officer.
4. Posting of pay-order through CT-Dos.
5. Checking and verification of entries takes place with the R.B.I. Settlement
sheet.
6. Then GL has been generated.

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OUTWARD CLEARING:

This department receives outward clearing cheques and deposit slip from the customers from
branches or boxes.

# Two sets of cheques are received here:

- One accepted at the counter.


- One accepted at the cheque collection boxes.

Then cheques are segregated into:-

* Local cheques.
* Outstation cheques.
* Dollar cheque.
* Transfer cheque.
* High amount cheque.
* Discrepancies cheques.

The instruments having high-value > 6 lacs have been reported to senior officials according to
"money laundry guidelines".
In the meanwhile, in the Technical Verification, the NC and BC cheques are segregated.
Clerk reviews the instruments to see if there are any doubtful deposits.
While clearing, clerk checks that:

- Beneficiary details are same as the account number.


- The cheque is not post-dated.

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- Any deposit slip having any discrepancy are considered as rejected items and then
finally returned to concerned branch.
Now the cheques are batched together separately for MICR and payable at par cheques .Then
total of each batch note down. Then all cheques encoded by outward clearing houses. The duly
encode cheques will be checked against the total of various deposit slips.
Then the 'block ticket" at the end of the day are prepared through the machine for the sum of
total of all the batches. Simultaneously MSA OCCS credit voucher will be totaled. Then the
cheques are posted through CT-Dos.
To credit the GL a/c of the bank, the entries that has been passed are
- Dr.-to- OCCS -to- IPC cost centre
- Cr. -to- Respective GL a/c.

Then balancing takes place. Two types of balancing are there:

1) MICR clearing.
2) Non MICR clearing.

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O UT PUT CO NT RO L
F IN A N C IA L N O N– F I N A N C IA L
C H E C K IN G T R A N S A C T IO N S
• C A S H TR A N S A C T IO •N SA C C O U N T L A S
• TR A N S F E R • A M E N D M E N TS O N
TR A N S A C T IO N S HOGA N
• A L L T H E V O U C H E R S• A M E N D M E N T S O –N C T
A N D IN S T R U C T IO N D O S
A B O V E TE L L E R L IM IT • SR E S T R A IN T S
M U S T B E A U TH O R IS E D
B Y C O M P E TE N T
P E R S O N . ( T S M /B M )

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REPO RTS
• X C 0 0-18
• X C 0 0-28
• CR 02 90
• DR 02 90
• DR 01 0
• CR 01 1
• DR 02 6
• XS 0 03 1B
• XS 0 00 8
• XS 0 01 3
• C R 0 0-T3
• G LB S C 01 9
• G LB S C 02 0
• G LB S C 01 0

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C A S H T R A N S A C T IO N S
C A S H D E P O S ICT ASS H W IT H D R A W L
• T O C U S T O M E R• B Y C H E Q U E
ACCO UNT • THR O UG H C ASH
• T O C R E D I T C A R WD IT H D R A W A L S L IP
• T O P S G L A C C O• UA NG TA I N S T C R E D I T
C AR D
• A G A INS T ID

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DESERTATION

C A S H D E P O S IT T O C M A /C
• T x nR s. 2 5 0 0 -0a0 n/ d a b o v e .
• P A N /G IR N o to b e m e n tio n e d
o n c a s h d e p o s it s a b o v e 5 0 k . If
n o t a v a ila b le F o rm 6 0 d u ly
fille d u p t o b e a n n e x e d .
• If t h ru A –TAM T MC a s h
D e p o s it E n ve l o p e w it h c o p y o f
J P e n c lo s e d .
• A m o u n t s in w o rd s & fig u r e s t o
t a lly .
• A lt e ra t io n s o n t h e d e p o s it s lip
t o b e a u t h e n t ic a t e d .
• P o s t in g in t o c o rr e c t a c c o u n t
a n d w it h c o rr e c t a m o u n t .

30
DESERTATION

C A S H D E P O S IT IN C R . C A R D
• A ll C a s h d e p o s its to
b e c h e c ke d
irre s p e c tiv e o f
a m o u n t.
• T a lly C re d it C a rd A /c
N o w ith in p u t c a rd n o .
• S ta te m e n t C o u n te rf o il
a tta c h e d

31
DESERTATION

C AS H D E P O S IT T O P S G L

•A ll Tra ns a c tio ns irre s pe c tiv e o f


a mo u nt.
•A m o u nt a n d Ac c o u nt N u m be r to
be ta llie d.

32
DESERTATION

C A S H W IT H D R A W A L B Y
CHEQUE
• T xnR s. 5 0 0 0- a0 n/ d a b o ve .
• R e p e r fo rm ao nf Sc ei g . V e r i fi c a tio n
fo rT xn. > =R s. 5 0 0 0- a0 n/ dT xn.
= <R s. 5 0 0 0 -0a0n/ d foT rxn.> =
R s. 5 0 0 0 -0i 0f n/ o t d o n e b y
T S M /B M
• T xn. > =R s. 5 0 0 0 -0U0 /V / S can
p e r fo rm e d .
• D a te Co fh e q uV ea l i d
• B e a r e r In s tr u m e n t
• A l te r a ti o n s a u th e n ti ca te d
• R u b b e r S ta m p –foi nr dn ivio nd u a l
a c c o u n ts
• C a s h R e ce i p t A c k n o w l e d g e m e n t
o n r e ve r s ceh oe qf u. e
• C o r r e c t A /c N o , A m o u n t a n d
C h e q uNeu m b e r i n p u t.

33
DESERTATION

C a s h W it h d r a w a l S lip /C o u n t e r
C heque
• R e q u is itio n S lip /L e tte r
h e ld
• ID D o c u m e n ts o b ta in e d ,
C u s to m e r Id e n tif ie d b y
b r a n c h s ta ff d u ly
s ig n e d o n th e r e v e r s e ..
• A /c N o . Co hn e q u e
H a n d W r itte n /S ta m p e d
• N o t Is s u e d to– N o n
In d iv id u a l A /c

34
DESERTATION

C r e d i t C a r d A d v a n c e S l ip
• A ll T ra n s a c tio n s
irre s p e c tiv e o f
a m o u n t.
• C h e c k th e c o r re c t
a m o u n t p o s te d .
• C a s h A d v a n c e S lip
p u t th ru a m a n u a l
im p rin te r/P O S

35
DESERTATION

C a s h P a y m e n t A g a in s t I D
•R e c e ip t A c k n o w le d g e d b y ID H o ld e r
•S w ift/IT T M a sas ua th
g eo r is be yd P a y m e n ts
•ID D o c u m e n ts o b ta in e d
•A m o u n t a s p e r in s tr u c tio n

36
DESERTATION

F o re ig n C u rre n c y T ra n s a c tio n
U S D /G B P /E U R O
• F C Y C a s h D e p o s it
• T C D e p o s it
• F C Y C a s h W ith d r aw a l
• T C S a le
• C u rre n cy U S D, G B P a n d E U R O
• P A F ( 2 c o p ie s ) m u s t b e a tta c h ed to th e v o u c h ers
• F o r m –A4 a n d F E M A d e c la r a tio n m u s t b e o b ta in e d ddu/slytaf ille m pde du p a n d s ig n e
• E n s u r e th a t F C Y le g is p o s te d
• N e c e s s a ry d o c u– mC oe pn yts of P a s s p or t/C D F / C o p y o f V is a /C o py of A ir T r a v e l
T ic k e t/ P u r p o s e of T r av e l m u s t b e o b ta in e d
• F o r m -2A ( 2 c o p ie s ) a n d d o c u m e n ts a s a b o v e m u s t boeu cs he ers p ar a te d f ro m th e v
a n d b e h a n d e d ov e r to th e pe rs o n d o in g r ec c so nc ilia tio n o f F C Y A /
• E n s u r e r e c e ip t of F C Y ac k n ow le d g e d by c m &e ise ns cu as e d h inm ec nast ce er tif ic a t
o f F C Y T C /C u r r e n c y pu rc h a s e .
• A ny b r a n c h c a n d e a l in F C Y h ow ev e r th e F C Yosac te cd ouin ntht cr ee
a n o n ly b e p
C a t A b r a nc– 1h 7ePss, t 1 0 E C P a n d 1 0 S M G .
• In m o s t o f th e c as e s a ll th e b r a n c h e s w h ic ph or se tc the
e iv eL/sCaYle leing FinC Y
th e ir b r a nc h a n d f o r F C Y le g th e y s e n d m a s s a g e to 1 0 E C P b r a n c h .

37
DESERTATION

T r a n s f e r T r a n s a c t io n s
T yp e s R emember
• A / c t o A / c T ra– nB syf e r • If A / c t o TArf/dco n e o n L e t t e r
C h e q /u Le e t t e r e t c . – It m u s t abuet h o risbey d t h e
• S a la ry T r a n s f e r B M . At ra
ll n s a c t io n s m u s t b e
• C h a rg e s R e v e rs a l checked
• D D / P O Is s u a n c e • R e v e rs a l o f C h a rg e s fr o m
w a i v e r A / c (P S G L ) c a n o n ly
• T D Is s u a n c e (Q A O )/ T D b ea u t h o risbey d B M . A ll
B re a k s t ra n s a c t io n s m u s t b e c h e c k e d
• Q u ic k A / c O p e n in g F o rm m u s t
b e s e p a ra t e d f ro m t h e
v o u c h e rs a ft e r c h e c k in g a n d
s e n t to A C S

38
DESERTATION

A /c to A /c T r a n Cs fe
h er qbuye
• T x n> =R s. 5 0 0 0- 0 /
• S i g n a tu re– PR e r fo rm a n cTex nfo> =r R s. 5 0 0 0- 0 /
a n d =R<s. 5 0 0 0 -.0 0A/ b o vRes. 5 0 0 0 -0i 0f /n o t
a u t h o ri sbeyd T S M /B M
C h e c k fo r
a ) D a teCohf e q uv ea li d
b ) A lte ra ti o n s a u t h e n ti c a te d
c ) A /c T i t le m a tc h e s w i t h b e n e fi c i ca hrye qn .ua em e o n t h e
d ) R u b b e r S ta m p p la c e d o n s i g n-i .n di ni vci ad su ea l o f n o n
A /c
e ) N D S S ta m ap udt uh ol yri s e d
f)C h e q uneo c o r re c t l y i n p u t

39
DESERTATION

A / c t o AT /r.cf b y L e tt e r
• M u s t ab eu t h o r isb ey dt h e T S M / B M .
• D ia r y n o t e in d ic a t in g c a ll b a c k t o c m .
• A llo w e d o n ly if t h e r e is c o m m o n A / c h o ld e r
b e t w e e n D e b it & C r e d it A / c h o ld e r .
• N o t h ir d P a r t y t r a n s f e r s a llo w e d o n le t t e r .
• A ll t r a n s a c t io n s a r e r e q u ir e d t o b e
che cke d.

40
DESERTATION

D D / P O Is s u a n c e
• T x n as b o vRe s. 5 0 0 0- to
0 / be c hec ked .
• A lte r a tio n s a u th e n tic a te d
• D D /P O n u m b e r a n d a /c n o lo a d e d c o r r e c tly
• R e c e ip t a c k n o w le d g eadu bthyo crism e od r
re p r e s e n ta tiv e
• If c m h a s p r o vcidh e qd uaaeg a in s t is s u a n c e o f
D D /P O it m u s t b e c a n c e lle d b y d e b it o r c ro s s e d
f o r c a n c e lla tio n a f te r c h e c k in g fo r s to p p a y m e n ts
b y th e T S M .

41
DESERTATION

A c c o u n t C lo s u r e
DD A CD A
• A ll tr a n s a c t io n s m u s t b e c h• e cT kh er de .s h Ro s.ld 5 0 0 0-. 0 /
• S ig nr e p e r f o r m af onrc >eR= s. • S ig rne p e r fo rm an no ce t re q u ire d .
5 0 0 0- 0&/ = < 5 0 0-0a 0n0d/ f o r
h ig h e r a m t s aifu tnhoot r isbey d • A l te r a ti o n s a u th e n ti ca te d .
TS M/B M. • C r e d i t to A /c o f s a m e a c c o u n t
• C h e q uB eo o k / D e b it C a r d ta k e nh o l d e r .
b a c k a n d d e s tr o y e d . ( p r o p •e r N o th ir d p a r ty c r e d i ts a l l o w e d .
r e m a r k s g iv e n ) • N o c a s h p a ym e n ts i f th e
• S ig n a t u r e s o f a l l a c c o u n t h o ldr eel rasti. o n s h ip a m o u n t ( a c r o s s a l l
• If c o m p a n y a c c o u n t B o a r d C D A a c c o u n ts ) eRxcs. e e d s
R e s o lu t io n a t ta c h e d . B R m u s2 t0 b0e0- 0i n/ c l u s i ve o f i n te r e s t
s ig n e d abt yle a tws t oa u th o r is e d a c c r u e d . T h is is IT r e q u i r e m e n t
r e p r e s e n ta t iv e w h o a r e n o t a n d m u s t b e a d h e r e d to s tr ic tly.
s ig n a t o r y t o c lo s u r e l e tte r .
• O n lyK a r tian H U F a n d P r o p r ie t o r in
P r o p r i e t o r s h i p f ir m c a n s ig n th e
c lo s u r e i n s t r u c tio n n o t th e P O A
h o ld e r.
• N o T h ir d p a r ty p a y o u t b e m a d e f o r
proc ee ds .

42
DESERTATION

N o n F in a n c ia l T ra n s a c tio n s
• I s s u a n c e o fCOh Te Cq Bu eo o k .
• S to p P a y m e n ts .
• P la c e m e n t / r e m o v a l o f H o ld s / L ie n s .
• A m e n d m e n t s in D e b it / A T M C a r d S t a t u s .
• A m e n d m e n t s a t id / a c c o u n t le v e l.
• N e w A c c o u n t s e tu p

43
DESERTATION

A c c o u n t C lo s u r e
DD A CD A
• A ll tr a n s a c t io n s m u s t b e c h• e cT kh er de .s h Ro s.ld 5 0 0 0-. 0 /
• S ig nr e p e r f o r m af onrc >eR= s. • S ig rne p e r fo rm an no ce t re q u ire d .
5 0 0 0- 0&/ = < 5 0 0-0a 0n0d/ f o r
h ig h e r a m t s aifu tnhoot r isbey d • A l te r a ti o n s a u th e n ti ca te d .
TS M/B M. • C r e d i t to A /c o f s a m e a c c o u n t
• C h e q uB eo o k / D e b it C a r d ta k e nh o l d e r .
b a c k a n d d e s tr o y e d . ( p r o p •e r N o th ir d p a r ty c r e d i ts a l l o w e d .
r e m a r k s g iv e n ) • N o c a s h p a ym e n ts i f th e
• S ig n a t u r e s o f a l l a c c o u n t h o ldr eel rasti. o n s h ip a m o u n t ( a c r o s s a l l
• If c o m p a n y a c c o u n t B o a r d C D A a c c o u n ts ) eRxcs. e e d s
R e s o lu t io n a t ta c h e d . B R m u s2 t0 b0e0- 0i n/ c l u s i ve o f i n te r e s t
s ig n e d abt yle a tws t oa u th o r is e d a c c r u e d . T h is is IT r e q u i r e m e n t
r e p r e s e n ta t iv e w h o a r e n o t a n d m u s t b e a d h e r e d to s tr ic tly.
s ig n a t o r y t o c lo s u r e l e tte r .
• O n lyK a r tian H U F a n d P r o p r ie t o r in
P r o p r i e t o r s h i p f ir m c a n s ig n th e
c lo s u r e i n s t r u c tio n n o t th e P O A
h o ld e r.
• N o T h ir d p a r ty p a y o u t b e m a d e f o r
proc ee ds .

44
DESERTATION

O T CC h e q uBeo o k s Is s u a n c e
• Is s u e d o n ly t o in d iv id u a l a c c o u n t s .
• R e q u is itio n s lip / c u s t o m e r le t te r o b ta in e d .
• M u s t ba eu t h o r isbeyd T S M / B M .

45
DESERTATION

S to p P a y m e n t s
• A ll tr a n s a c tio n s to b e c h e c k e d .
• C u s to m e r L e tte r .
• S ig n a tu re s V e rif ie d .
• D a te & T im e o f re c e ip t m e n tio n e d o n th e
in s tru c tio n .
• C h e q uN eo a n d A /c n o c o r r e c tly lo a d e d .
• C h a r g e s ta k e n a n d if w a iv e d th e n d u ly
a u th o r is. e d
• T h e g a p b e tw e e n r e c e ip t a n d p o s tin g tim e
s h o u ld b e r e a s o n a b le .

46
DESERTATION

O th e r N o n F inTaxnncsia l
• A l l t r a n s a c ti o n s to b e c h e c k e d .
• C u s to m e r I n s tr u c ti o n / D i aa ruy thn o rtei /se
c dodup lyy o f o r d e r s
o f r e g u l a to r y b o d i e s .
• I f n o t i n i ti a te d b y c m a si g n – oS ffp eb cy i fth i c ea l Bl yMi n c a s e
o f c h a n g e o f A R M c o d e a p p ro v a l b y re g io n a l he a d / A R M c o d e
o w n e r a tta c h e d .
• C u s to m e r I D d o c s o b ta i n e d w h e–rae sv ei nr ac ap speli coaf b le
D e b i t/ A T M c a r d a c ti v a t i o n , r e m o v a l o f H o l d 6 0 / 2 0 e tc .
• P l a c e m e n t/ R e m o v a l o f H o al du th 2 0o mr i sebu ysdtBbMe .
• A p p r o p r i a te H o l d p l a c e d .
• A c c o u n t O p e n i n g F o r m fo r L A S .
• D e ta i l s o f h o l d a r e m e n ti o n e d o n th e re v e r s e o f h o l d v o u c h e r s .

47
DESERTATION

T r a n s a c tio n o n D o r m a n t A /c & U n c la im e d A /c

• ID a n d A d d r e s s o f th e c u s to m e r to b e ve r i fi e d in s u c h c a s e s .
• C o p ie s o f ID d o c s o f a ll a c ca ou uthn ot hrisos eligdden rs
a to/ rie s ta k e n a n d
a n n o ta te d w i th “ O r i g in a l S e e n ” b y th e T S M / M S S /B M .
• ID p r o o f n o t r e q u i re d if th e c u s to m e r is m na sina tac tiinn ign g( Sa/B n o th e r tra
o r C /A ) a c c o u n t ( s ) u n d e r th e s a m e ID A N Dc l oths e da c c o u n t is b e in g
w h e r e th txnea m o u n t in vo lve d i s Rless5s0 0th.0a 0n .
• In c a s e th e ID c o u ld n o t b e o b ta ian ue th d oa r disbiaeydryth ne oBteM th a t
th e ID d o c s w o u ld b e o b ta in e d i n d u e c o u rs vo e mu cuhset rsb e. a tta c h e d to
• M a i l to A C S fo r d e fe r ra l fo r o b ta in in g ID d otocs th. Me u s t b e a tta c h e d
vo u c h e r s .
• H o l d 6 0 m u s t b e m a r k e d in c a s e o f d e fe r r a l.
• B M c a n w a i ve o b ta i n in g ID d o cs . i f h e /s h ce u iss tos ma tis e rfieh ad sth a t th e
b e e n id e n tifie d . T h e s a m e m u s t b e c le a r l y ua cn tio n onta. te d o n th e in s tr
• In c a s e o f D o rm a n t A /c c lo s u r e w h e r e th e ID b tapinr oe od f, c o u l d n o t b e o
p a yo u t c a n b e m a d e b y P O o n ly a n d th e P O m u s t b e s e n t th ru
c o u r ie r /r e g is te re d p o s t a t th e a d d r e s s r e co r d e d i n o u r s ys te m .
U n c la im e d a c c o u n t s
• U n c l a im e d A /c c a n o n ly b e c l o s e d a n d a fr e sfteh ra c c o u n t i s o p e n e d a
o b ta in i n g K Y C d o cs .
• S ig n a tu re s m u s t b e ve r ifie d b y T S M /B M .

48
DESERTATION

O th e r N o n F inTaxnn cs i a l
• A l l tr a n s a c ti o n s to b e c h e c k e d .
• C u s to m e r I n s tr u c ti o n / D i a ruythnoorti/esceoddpu yl y o f o r d e r s
o f r e g u l a to r y b o d i e s .
• I f n o t i n i ti a te d b y c m a s i g n– So ffp ebcyi fit ch ae l lBy Mi n c a se
o f c h a n g e o f A R M c o d e a p p ro v a l b y re g io n a l he a d / A R M c o d e
o w n e r a tta c h e d .
• C u s to m e r I D d o c s o b ta i n e d w h e– ar es v ienr ca apspeli co af b le
D e b i t / A T M c a r d a c ti v a ti o n , r e m o v a l o f H o l d 6 0 / 2 0 e tc .
• P l a c e m e n t/ R e m o v a l o f H oal du t2h 0o rmi sbueysdtB bMe.
• A p p r o p r i a te H o l d p l a c e d .
• A c c o u n t O p e n i n g F o r m fo r L A S .
• D e t a i l s o f h o l d a r e m e n ti o n e d o n th e re v e r s e o f h o l d v o u c h e r s .

49
DESERTATION

SUGGESTIONS

Standard Chartered Bank has over the years maintained its services and relationship. It runs over 88 branches all
over the country. It has created a name for itself in the banking sector. As far as my views are concerned,
Standard Chartered as a model has a well-defined banking structure and gives satisfactory business to its clients.
Moreover I have observed some drawbacks in the short span in this department; I strongly believe that if these are
done away with in the Standard Chartered, its family would definitely see a better future. The key areas of
concern are:
- the main problem area of this department is the outdated software package being used across all the branches for
business. It simply reduces the efficiency of this organization. As we know, Cost minimization and profit
maximization is the main and common aim for any organization. The software which is being used here directly
or indirectly hampering the work-efficiency and minimizes profit. It should be replaced by advanced software as
soon as possible. It will double the efficiency of this firm as well as across all branches.
- Use of Dot-Matrix printer should be replaced by "Laser Printer ". It will save "30-45 minutes" of each employee
employed as a clerk here. They use to get their ledger through ink-jet. If Laser-printer will be introduced
here, each day, at least '10 hrs.' can be saved and again it will directly minimize the cost and maximize the
profit.
- Automation of simple jobs:-
 Technology Up gradation- Sama Shodhan should be upgraded to enhance the efficiency and support
outstation cheques also, so that it works as a safe-guard for future problems. At present Sama Shodhan
processed only local cheques not outstation cheques. Out-station cheques are processed through CT-Dos.
But there are limitations with this package. It cannot provide further details of the cheques which had
been processed. So any queries occurs, then we have to search the overall records processed cheques
manually to answer and if any cheques are misplaced or damaged intentionally or unintentionally, then
the bank may have to face a bigger problem.

 Solution : Shama Shodhan can be advanced by having an option for outstation cheques. It works a safe
guard for coming problems if any and works as a cousin for this bank.

 Expenditure Analysis : Absenting is a disease to a flourishing company hence such employees, who fails
to constraints to an organization should be relieved.

50
DESERTATION

 Excess of employees in department : In my view, the no. of employees are more than required, as I
noticed in 2 weeks that each day, 1 or 2 employees remain absent throughout the week but the operation
is going on without any hindrances.

 Securitisation of risk : Securitisation of risk should be there which actually lacking here. In clearance
department what I felt is the job of a clerk need much concentration because of a single mistake can
resulted into financial loss may be Lakhs or Crores. But they are actually working in a disturbed
environment they are not able to pay much attention and concentration as required and lastly differences
occurs which takes a long time to solve. So my opinion is, Clerks should be separated by small cabins
then only they can pay much concentration and finally it will helpful for bank as it minimizes the chances
of risk and financial loss and can some time also.

 Employees Satisfaction level : As far as my views are concerned, the employees satisfaction is one of the
most important factor and what I found here is that Employees are not working with enthusiasm but
working under pressure of work load. It effects the growth of the firm adversely. So an enthusiastic
environment should provide there so that they simply enjoy their work. It definitely increase their
efficiency to work.

 Proper Utilization of Resources : For any firm, Manpower is the biggest resources. Here, manpower is
more than enough but the way, they are doing should be slightly change. Work-distribution and time
management should be modified. Then only the firm will properly utilize its resources and proper
management can only prove economic for this.
In my point of view, the above points of considered favorably will definitely prove as leverages to this
organization and will be 100% helpful in the growth of this firm.

51
DESERTATION

52
DESERTATION

. I RISK MANAGEMENT SYSTEM


RBI Guidelines

1) Introduction

Banks in process of financial intermediation are conforme3ed with various kinds of financial
and non financial risks viz. credit interest rate, foreign exchange rate, liquidity, equity price,
commodity price, legal, regulatory, reputation, operational, etc... These risks are highly
interdependent and events one area of risks can have ramification of risks for a range of other
risks categories.
The broad parameters of risks management system should encompass:
• Organizational structure
• Comprehensive risk management approach
• Risk management policies
• Guidelines & other parameters
• Strong MIS for controlling , monitoring & controlling risks
• Well laid out procedures , effective control & comprehensive risk reporting framework
• Separate risk management framework
• Periodical review and evaluation

2) Risk management structure

• A major issue in establishing an appropriate risk management organization structure is


choosing between a centralized & decentralized structure. The board should set a risk
limits by assessing the bank’s risk & risk bearing capacity. At organizational level, over
all risk management should be assigned to an independent risk management committee
or executive committee of the top executives that reports to the boards of director.

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3) Credit Risk

The management of credit risk should receive the top management’s attention and the
process should encompass:
• Measurement of risk through credit rating
• Quantifying the risks through estimating expected loan losses i.e. the amount of loan
losses that bank would experience over a chosen time
• Risk pricing on a scientific basis
• Controlling the risk through effective Loan Review Mechanism and Portfolio
Management

Instruments of credit risk management

• Credit approving authority


• Prudential limit
• Risk Rating
• Risk Pricing
• Portfolio Management
• Loan Review Mechanism

4) Credit risk & investment banking

Significant magnitude of credit risk, in addition to market risk, is inherent in investment


banking. The proposals for investments should also be subjected to the same degree of credit
risk analysis, as any loan proposals. The proposals should also be subjected to detail appraisal
and rating framework those factors in financial and non-financial parameters of issuers,
sensitivity to external developments, etc.

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5) Credit Risk in Off-balance Sheet Exposure

Banks should evolve adequate framework for managing their exposure in off-balance sheet
products like forex forward contracts, swaps, options, etc as a part of overall credit to
individual customer relationship and subject to the same credit appraisal, limits and
monitoring procedures. Banks should classify their off-balance sheet into three broad
categories-full risk, medium risk and low risk.

6) Inter-bank Exposure and Country Risk


A suitable framework should be evolved to provide a centralized overview on the aggregate
exposure on other banks. Bank-wise exposure limits could be set on the basis of assessment of
financial performance, operating efficiency, management quality, past experience, etc.

7) Market Risk

Market risk arising from adverse changes in market variables, such as interest rate, foreign
exchange rate, equity price and commodity price has become relatively more important.
Market risk takes the form of

• Liquidity Risk
• Interest rate Risk
• Foreign exchange rate(forex) risk
• Commodity Price Risk and
• Equity Price Risk

8) Market Risk Management

The Boards should clearly articulate market risk management policies, procedures, prudential
risk limits, review mechanisms and reporting and auditing systems. The policies should

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DESERTATION

address the bank’s exposure on a consolidated basis and clearly articulate the risk
measurement systems that capture all material sources risk and assess the effects on the bank.
9) Interest Rate Risk (IRR)

The management of Interest rate Risk should be one of the critical components of market risk
management in banks. Deregulation of interest rates has, however, exposed them to the
adverse impact of interest rate risk. The net Interest Income (NII) or net Interest Margin
(NIM) of banks is dependent on the movement of interest rates.

10) Foreign Exchange (Forex) Risk

Forex risk is the risk that a bank may suffer losses as a result of adverse exchange rate
movements during a period in which it has an open position, either spot or forward, or a
combination of the two, in an individual foreign currency.
Forex risk Management Measures

(a) Set appropriate limits- open positions and gaps.


(b) Clear-Cut and well-defined division of responsibility between front, middle, and back
offices.

11) Capital for market Risk

The base Committee on banking supervision (BCBS) had issued comprehensive guidelines to
provide an explicit capital cushion for the prices risk to which banks are exposed, particularly
those arising from their trading activities.

12) Operational risk

Managing operational risk is becoming an important feature of sound risk management


practices in modern financial market in the wake of phenomenal increase in the volume of
transactions, high degree of structural changes, and complex support systems.

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DESERTATION

13) Risk Aggregation and capital Allocation

Most of internally active banks have developed internal processes and techniques to assess and
evaluate their own capital needs in the light of their risk profiles and business plans. Such
banks take into account both qualitative and quantitative factors to access economic capital.

CREDIT RISK MANAGEMENT

Credit risk management today

Banks are in the business of making loans, and it is credit officer’s responsibility to peruse
that business by making sound credit decisions. This requires more judgments than technical
skills. Reviewing financial statement may yield preliminary findings, but these fail to assess
the numerous variables that must be weighed. The loan officer must understand the
information, not merely crunch the numbers.
Further, unless credit analysis standards are clearly defined, valuable time and efforts are
wasted, not to mention the bottom line consequences of reaching the wrong deci8sion.
If a loan officer determines that the borrowing firms expectations exceeds its repayments
ability, does this mean all possible repayments sources are exhausted? Since the key is to
increase profitability through sound credit judgment, the analyst must always evaluate
repayment judgment; the analyst must always evaluate repayment potential from all alternative
sources.
In turn if the bank is confident of repayment based of additional findings, the appropriate
pricing consideration are issued & monitored. The net effect is future profits of the banks due
to a meticulous credit investigation. Other wise the loan will probably be lost to a better
prepared competitor.
Since lenders are in business of taking risks, why banks are are so concerned about losing
money / briefly stated, a bank can never price an individual loan at a loss even if the
probability of default decreases. For ex., if the bank net interest margin is 4% annually, it will
take 25 years to recoup 100% of the loss, not including related overheads costs.
Thus the core of credit analysis is evaluating the borrower's ability to repay debt.

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Critical risk assumption plays a critical role in finalizing lending decision. To calculate risks,
comprehensive information is needed. Further we must understand how much information is
enough. In other words, identifying what is and is not significant is critical to reliable credit
judgment.
On way to do this is to assign a risk rating (above average, avg., & below avg.) to all facts.’
Weights of importance will then assigned to details regardless of a positive or a negative
rating.

The important components of this model should be:-

1) Management
2) Management / Administration
3) Bank Relationship
4) Financial Reporting
5) Intention (purpose)

Components of credit risk

i) Personal or consumer risks


ii) Corporate or company risks
iii) Sovereign or country risks

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Managing Credit Risk

This section describes credit analysis for real estate lending, consumer and small business
lending, mid-market commercial and industrial lending, and large commercial and industrial
lending. It also provides insights into the credit risk evaluation process from the perspective
of a credit officer evaluating a loan application.
Risk State Lending
Because of the importance of residential mortgages to banks, savings institutions, credit
unions, and insurance companies, residential mortgage loan applications are among the most
standardized of all credit applications.
Two ratios are very useful in determining a customer’s ability to maintain mortgage payments:
the GDS (gross debt service) and the TDS (total debt service) ratios.
Gross debt service ratios are the customer’s total annual accommodations expenses (mortgage,
lease, condominium, management fees, real estate taxes, etc…) divide by annual gross income.
Total Debt ratios is the customer‘s total annual accommodation expenses plus all other debt
service payments divided by annual gross income.
FIs often combine the various factors affecting the ability and willingness to make loan
repayments into a single credit score. A credit-scoring system is a quantities model that uses
observed characteristics of the applicant to calculate a “score” representing the applicant’s
probability of default (versus repayment). Credit scoring systems are developed by using
borrower characteristics (e.g., income, age, loan repayment history) for some past period. The
credit scoring model weights each characteristics to identify a boundary number (score) or
range such that if past loan customer had an overall credit score (derived from the weighted
characteristics) greater than the boundary number they defaulted on the loan.
If the FI uses a scoring system, the loan officer can give an immediate answer- yes, maybe, or
no- and the reasons for that answer. A maybe occurs in borderline cases or when the loan
officer is uncertain of the classification of certain input information. A credit scoring system
allows an FI to reduce the ambiguity and turnaround time and increases the Transparency of
the credit approval process.
A loan customer listing the following information on the loan application receives the
following points:

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DESERTATION

I. Annual gross income


II. TDS
III. Relations with FI
IV. Major credit cards
V. Age
VI. Residence
VII. Length of Residence
VIII. Job Stability
IX. Credit History
X. Total score
XI. Consumer (Individual) and small business Lending

The techniques used for mortgage loan credit analysis are very similar to those applied to
individual and small business loans. Individual consumer loans are scored like mortgage, often
without the borrower ever meeting the loan officer. Unlike mortgage loan for which the focus
is on the property, however, no mortgage consumer loans focus on the individual ability to
repay. Thus, credit-scoring models for such loans would put more weight on personal
characteristics such as annual gross income, the TDS score, and so on.

Mid-market Commercial and Industrial Lending


In recent years, mid-market commercial and industrial lending has offered some of the most
profitable opportunities for credit granting Fis. Although definition of mid-market corporate
varies, they typically have sales revenues from $5 million to $ 100 million a year; have a
recognizable corporate structure (unlike many small businesses). But do not have ready access
to deep and liquid capital markets. Credit analysis of a mid-market corporate customer differ
from that of a small business because, while still accessing the character of the firms
management, its main focus is on the business itself.

Five C’s of credit:

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DESERTATION

To analyze the loan applicant's credit risk, the account officer must understand the customer
character, capacity, collateral, and capital (sometimes referred to as the five Cs of credit).

 Measures of capacity and conditions


 Measures of character and condition
 Measures of conditions
 Measures of capital and Collateral.

Cash flow Analysis

FI's require corporate loan applicants to provide cash flow information, which provides the FIs
with relevant information about the applicant's cash receipts and disbursements that are
compared with the principal and interest payments on the loan. Cash receipts include any
transaction that result in an increase in cash assets (i.e., receipt of income, decrease in a non
cash asset, increase in a liability, and increase in an equity account). Cash Disbursements
include any transactions that result in a decrease in cash assets. The cash flow statement
reconciles changes in the cash account over some period according to three cash flow
activities: operating, investing, and financial activities. When evaluating the cash flow
statement, FI's ant to see that the loan applicant can pay back the loan with cash flows
produced from the applicants operations.

Ratio Analysis

In addition to cash flow information, an applicant specific level of credit substantiates these
business needs by presenting historical audited financial statements and projections of future
needs. Historical financial statement analysis can be useful in determining whether cash floe
and profit projections are plausible on the basis of history of the applicant and in highlighting
the applicant’s risks.
Financial ratios are useful when performing financial statement analysis on a mid-market
corporate applicant. Although stand-alone accounting ratios are used for determining the size
of the credit facility, the analyst may find relative ratio more informative when determining
how the applicants business is changing over time. Hundreds of ratios could be calculated
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DESERTATION

from any set of accounting statements. The following are a few that most credit analysts find
useful.
Liquidity ratios
Current ratio = Current assets
Current Liabilities

Quick ratio (acid-test ratio) = Cash + Cash Equivalents + Receivables


Current liabilities
Liquidity provides the defensive cash and near-cash resources for firms to meet claims for payment. Liquidity
ratios express the variability of liquid resources relative to potential claims.

Assets Management ratios

Number of days sales in receivables = Accounts receivables X 365


Credit sales

Number of days in inventory = Inventory X 365


Cost of goods sold

Sales to working Capital = Sales


Working capital

Sales to fixed assets = Sales


Fixed Assets

Sales to total Assets = Sales


Total assets

The asset management ratio gives the account officer clues to how well applicant uses its assets relative to its past
performance and the performance of the industry.

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Debt & Solvency Ratio

Debt asset ratio= Short Term Libilities+Long Term liabilities


Total Assets

Fixed Charge Coverage Ratio=Earning Available To meet Fixed Charges


Fixed Charges

Cash Flow to Debt Ratio= EBIT + Depreciation


Debt

Where EBIT represents Earning before income &tax.


Debt solvency ratio give the account manager an idea of the extent to which the applicant finances its assets with
debt verses equity.

Profitability Ratio

Gross margin = Gross profit


Sales

Operating Profit Margin = Operating Profit


Sales

Return on Assets = EAT


Average Total Assets
Return on Equity = EAT
Total Equity

Dividend Payout = Dividend


EAT

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DESERTATION

Where EAT represents earning after tax, or net income.


For all Dividend payout Ratios, the higher the value of the ratio, the higher is the
profitability of the firm.

Cautions with Ratio Analysis

While ratio analysis provides useful information about loan applicant's financial
conditions, it also has the limitations that require care and judgments in its use. For
example many firms operate in more than one industry .For these companies it is
difficult to construct a meaningful set of industry averages.
Credit Scoring Models

Credit scoring models use data on observed borrower characteristics either to calculate
profitability of default or to sort borrowers into different default risks classes selecting &
combining different borrowers economic & financials Characteristics, an FI manager may be
able to:

• Numerically Establish which factor is important in explaining default risks


• Evaluate the relative degree or importance of these factors
• Improve the pricing of default risks
• Screen high risk loan applicants
• Calculate any reserve needed to me expected future

To employ credit scoring models in this manner, the FI manager must identify objective
economy & financial measures of risks for any particular class of borrower. After data are
identified, a statistical technique quantifies or scores the default risks probability or
default risk classification.

Financial Services of SCB

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DESERTATION

Business Financial address the complete financial needs of Professionals, Professional Firms,
Small & medium enterprises (SME) engaged in services or manufacturing by offerings a range
or multiple product proposition to the target segment. The constitution of the target is:-
• Individual comprising of Professional or Business
• Proprietorship or HUF
• Partnership firm & Private Ltd. Companies
• Public Ltd. Companies
BFS facilities generally structured as multiple products or single products facility depending
upon customer requirement. The process of Overdrafts Facility against single products & loans
backed by property of INR 5M or less are decentralized, and has been detailed in Asset
Circular Nos. Assest/SCB/2003/12 and Asset/SCB/2003/15.
Where the credit line extends to the customer is for multiple products and / or against multiple
securities, the operational activities are centralized at CLC, Chennai for the following
purposes:
o Preparing and documenting the banking Arrangement letter (LOBA) as per the
approved terms of the credit approval. This involves documenting the limits available
against various credit lines; Extend and type of security required; specifying the
security information; specifying any preconditions.
o Review of documentation received after acceptance of facility received from customer
based on the condition set out for the facility.
o Evaluate the eligible operating credit limits based on valuation of securities and
lodgment of the same.
o Limit set-up in various TP systems
o Revaluation of security periodically and monitoring the exposure levels across various
credit lines.

1 Sourcing
 BFS facilities are relationship based and the sourcing will be done By the
business financial manager )BFM) in each cities
 The BFM will conduct interview or do a site visit At the customer trading
address/ production site to understand and obtain basic information on the

65
DESERTATION

owner, manager, nature of business. This will be documented in a fast


sheet or basic information report.
 The application Cum AOF will be obtained at the time of Customer
requesting the credit facility even though the customer may have an
existing current account with SCB. The following Information will be
obtained
 Nature of facility requested
 Limit account
 Borrower details
 Security holder details
 Guarantor details
 Relationship with SCB

2 Approvals

• Based on the basic information of the customer of the customer obtained through the
interview & the Financials , a detailed limit Application Will be prepared which will
broadly include the following :
 Customer Profile: ownership, management , banking relationship, business
operation

 Purpose : New application/ renewal/ increase/structure/review/Amount


Pricing/Risk Rating/ Total Credit facilities

 Facilities description: Amount, pricing, risk rating, total credit facilities.

 Net Worth: Financial Analysis & personal Finance Statements of Guarantor /


Borrower

 Operational Sheet : Description & Valuation of security / collateral , terms &


conditions of the facility , LTV & any Deviation.
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DESERTATION

Prior to Submission for Approval , BFM will check the applicants & guarantors
profile from the following database :
 RBI lists of Willful Defaulters
 Search on register of companies( ROC) books for all registered business
 Dedup against Hogan & RLS
• All Limit application (LA) initiated by BFM will be Supported by Regional Manager
(RM) put approval to Senior Manager , Credit- BFS or to the delegated lending
authority
 For proposal outside senior manager's authority, the LA will be Supported
by Business head, BFS and approved by head- Credit CB.
 For proposal referred to group credit , will be retained the Original LA & send
a scanned copy of the LA to Officer CLC for preparing the LOBA

3) Acceptance of Letter of Banking Arrangement (LOBA)

• Once the approved LA is sent by CLC , the officer CLC refuse the LA approvals
condition & prepares the LOBA giving the following details:
 Sanctioned Limit
 Products Cap ( inner limits)
 Interest rates
 Documentation
 Security & margin
 Pre Condition ( if any)
• LOBA is sent to the concerned BFM by e-mail with a copy to manager CLC. A hard
copy is signed by the manager CLC after review of the sanctioned terms & condition.
• The BFM will review the sanctioned terms & send to LOBA. The LOBA is delivered to
the customer & on customer acceptance collects the documents including the securing
documents as stipulated in LOBA
• A credit file will be created by the BFM & the documents will be sent to CLC by
courier with an e-mail confirmation sent to officer.

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Small & Medium Enterprises Banking

Definition of "SME" varies from bank to bank. For Standard Charted Bank, Broadly all
entities with turn over of Rs.5.00 - Rs.150.00 Crore come under SME.
• SME contributes more than 40% of Industry output of India.
• SME enjoys bank Finance of less than 15% of total credit outstanding of banks.
• Comprises mainly of small and mid sized Manufactures, Exporters Importers Traders,
distributors, dealers, OEM's, etc.

Quick Overview

SME Characteristics

• Closely held owner managed


• Not highly capitalized
• Significant personal wealth of promoters- property liquid assets
• Geographically dispersed
• Low financial transparency due to historical tax issue.

COMPETITION

• Entrenched Nationalized banks & Aggressive Private Banks


• Wide Spread branch network
• Relatively liberal credit policies , but lower services level

Economic Environment
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DESERTATION

• Significant growth in industrial and services sectors >10%


• SME growth Rate (last 2 yrs) - 10%
• Sharp growth in international trade (esp. Exports) > 15%
• Stable currency outlook

CUSTOMERS NEEDS

• Facilities for regular / one off business needs i.e. working capital expenditure financing
• Transaction Banking needs viz. Trade, Cash, Treasury services

SME SECTOR IS VITAL TO THE ECONOMY

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DESERTATION

95% of all Industrial units


SME

40% of all industrial outputs


Sector in

45% of Industrial Environment


India

Accounts 35% of Exports

For Prime Driver of a new Employment

Customer of SME Banking

CONDITIONS

• Turn over <= INR 1000Mn


• Min. 3 Years in Business
• Profit Making in the Previous
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DESERTATION

PRODUCTS OFFERED

Following Products are offered to multi-product customers, i.e. customers with annual turn over of > US$1Mn.
• FUND BASED
 Over Draft
 Term Loan
 WC Demand Loan (INR / FCY )
 Export Credit ( INR / FCY)
 Domestic Bill Discounting
 OD against Credit Card Receivables
• NON FUND NBASED
 Letters of Credit
 Guarantees
 Co acceptance of Bills
 LC confirmation
• TRANSACTION BKG
 Trade Services
 Inward / Outward Remittances
 Fixed Deposits
 ITTS
In January 2005, SME Banking has launched the business installment loans product offered to small
establishments with turn over less than USD 1M.

Criteria followed by SME Banking

• Age of should be more than 3 years, in case of professionals, it should be more than 5 years.
• Companies with a Turn over criteria of less than 92 crores falls in SMEs
• Working Capital Cycle will be = Debtors + Stock turn over - Creditor turnover
• They offer their products by keeping collaterals such as RBI bonds, Fixed deposits, property commercials
residential mutual funds, India millennium deposits.

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DESERTATION

• They required 3years audited financials and calculating this MFA report is generated in which different
ratios occur And MPBF( MAXIMUM PERMISSEBLE BANK FINANCE ) is calculated by preparing
one page summary according to which bank finally decides whether to finance the company or not.
• They charge 2% of sectionals limit, 10% is earned of cash collaterals or marketable securities.
• Term loan can be provided Maximum For 5 Years and minimum for 3 years.
• Over draft can be provided for 1 year.
• Letter Of credit depends on customer maximum for 180 days.
• Inter coverage ratio i.e. PBIT/ Interest should be Greater than 1.5%.
• Gearing Ratio i.e. Secured loans / Equity should be less than 3%.

I have got the opportunity to analyze the financial statements And Measure the
credit risks of three companies who had approached standard charted bank for
loans. Those Companies are:-

 M/S BAJRANG PETROLEUM

 RANJIT METALS

 WESTERN INDIAN MOTORS COMPANY

M/S. BAJRANG PETROLEUM

BALANCE SEET AS ON 31ST MARCH,2001

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DESERTATION

Liabilities (Amt. In Rs.) Assets (Amt. In Rs.)

CAPITAL ACCOUNT 4,400,238,81 FIXED ASSETS: 460,568.00


(As per Annexure-E)
Balance as per ledger

Add:- 179,310.09 CURRENT ASSETS , LOANS 2,001,661.00


Net profit during the year 4,579,548,90 & ADVANCES:-
Closing Stock
(As Certified & valued by
Prop.)

SECURED LOANS: 2,005,616,48 Sundry Debtors 6,003,524.38


(As per Annexure-A) (As per Annexure-F)

UNSECURED LOANS: 2,455,000,00 Security Deposits 10,000.00


(As per Annexure-B) SAIL – Bokaro

CURRENT 1,015,753,00 Loans & Advances 1,568,553.00


LIABILITIES : (As per Annexure-G)
(As per Annexure-C)

OTHER LIABILITIES: 258,886,00 CASH & BANK BALANCES: 270,498.00


(As per Annexure-D) Bank Balance 212,191.00
Cash inHand 58,307.00

Total Rs …… 10,314,804,38 10,314,804.38

M/S. BAJRANG PETROLEUM


TRADING AND PROFIT & LISS ACCOUNT FOR

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DESERTATION

THE YEAR ENDED 31ST MARCH, 2001

Particulars Amount (Rs.) Particulars Amount (Rs.)


To Opening Stock 1,260,568.56 By sales 100,315,040.50
To Purchases 97,836,047.00 By Closing Stock 2,001,661.00
To Freight & Cartage 1,933,080.00
To Gross Profit C/D 1,287,005.93
Total Rs……… 102,316,701.50 Total Rs……. 102,316,701.50
To Salary 246,900.00 By Gross Profit B/D 1,287,005.93
Misc. Income 1,048.00
To Office Exp. 15,855.51
To Bank Charges 136,700.00
To Postage & Telephone 14,176.00
Exp
To Audit Fees 5,000.00
To Printing & Stationary 15,771.00
Exp.
To Accounting Charges 30,000.00
To Electricity Expenses 41,597.00
To Repair & 21,898.00
Maintenance Exp.
To traveling Exp. 3,678.00
Interest 368,593.83
To Advertisements 1,000.00
To Business Promotion 17,034.00
Exp.
To Insurance Exp. 26,817.00
To Fee & Taxes Exp. 1,000.00
To staff Welfare Exp. 27,459.00
To Conveyance Exp. 63,605.00
To Depreciation 71,659.50
To Net Profit Trfd To 179,310.09
Prop Capital Account
Total Rs…… 1,288,053.93 Total Rs…….. 1,288,053.93

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DESERTATION

M/S. BAJRANG PETROLEUM


BALANCE SEET AS ON 31ST MARCH,2002

Liabilities (Amt. In Rs.) Assets (Amt. In Rs.)


CAPITAL ACCOUNT FIXED ASSETS:
Balance as per ledger Car a/c as per Ledger 215,500.00
Less: Depreciation during the 43,000.00
2759051.00 year 172,000.00
10990.00
Fax Machine As per ledger 2747.50
Less: Dep. During the Year 8242.50
Add:- 15417.81 CURRENT ASSETS , LOANS
Net profit during the year 2774468.81 & ADVANCES:-
Closing Stock 1260568.57
(As Certified & valued by Prop.)
SECURED LOANS: -------------- Sundry Debtors 398,145.00
(As per Annexure-A)
Reliance India Ltd.(Advance) 29.810.00

UNSECURED LOANS: Cash & Bank Balances


Mrs. Madhu Agrawal 55000.00
Car Loan From City Bank 92951.28 Canara Bank 1317494.50
Sundry Creditors 159313.00 Punjab National Bank 4900.00
Cash in Hand 18057.00
1340451.50
Expenses Payable: Loans & Advances -------------
Audit Fee 3,150.00
124,334.50

OTHER LIABILITIES: --------------


--------------------- -----------------

Total Rs ……. 3209 217.57 Total Rs……… 3209,217.57

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DESERTATION

M/S. BAJRANG PETROLEUM

TRADING AND PROFIT & LOSS ACCOUNT FOR THE YEAR ENDED 31ST MARCH, 2002

Particulars Amount (Rs.) Particulars Amount (Rs.)


To Opening Stock 60384.00 By sales 16447828.00
To Purchases 17032,915.00 By Closing Stock 1260568.57
To Freight & Cartage 410290.00
To Gross Profit C/D 204807.57
Total Rs……… 17,708,396.57 Total Rs……. 17708396.57
To Salary 46800.00 By Gross Profit B/D 204807.57
Misc. Income
To Office Exp.
To Bank Charges 14092.00
To Postage & Telephone 3322.00
Exp
To Audit Fees 3150.00
To Printing & Stationary 3270.00
Exp.
To Accounting Charges 9000.00
To Electricity Expenses 13598.00
To General expenses 4290.00
To traveling Exp. ----------
Interest 26991.99
To Advertisements -------------
To Legal Expenses 725.00
To Insurance Exp. ---------------
To Fee & Taxes Exp. ---------------
To staff Welfare Exp. 4924.00
To Conveyance Exp. 6980.00
To Depreciation 45747.00
To Net Profit Trfd To 15417.81
Prop Capital Account
Total Rs…… 204807 Total Rs…….. 204,807.57

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DESERTATION

Projected Balance Sheet:-

STANDARD CHARTERED BANK


Petroleum Company (petroleumc) SCB ISIC Code: 3530 Date Prepared:
6/11/2005
Detailed Balance Sheet - Actual and % Page 1
Thousands

Statement Date 3/31/2001 3/31/2002


Months Covered 12 12
Analyst Monika Monika
Source Currency: INR Target Currency: INR Segment Type: Company Account

CURRENT ASSETS

Cash and Bank Deposits 1,340 41.8 270 2.6


Trade Debtors (Gross) 398 12.4 6,003 58.2
Stock: Trading 1,260 39.3 2,002 19.4
Other Op Current Assets 30 0.9 1,578 15.3
TOTAL CURRENT ASSETS
3,028 94.4 9,853 95.5

FIXED ASSETS

Plant & Machinery 8 0.2 6 0.1


Motor Vehicles 172 5.4 455 4.4
Gross Fixed Assets 180 5.6 461 4.5
TOTAL FIXED ASSETS 180 5.6 461 4.5
TOTAL TANGIBLE ASSETS 3,208 100.0 10,314 100.0
WORKING CAPITAL 2,742 - 6,572 -
NET WORKING ASSETS 1,499 - 6,989 -
NET CASH ASSETS 1,340 - (1,736) -

CURRENT LIABILITIES

Due to Banks(O/D,T/R etc) - - 2,006 19.4


Trade Creditors 159 5.0 1,016 9.9
Provisions: Other Current 127 4.0 - -
Other Op. Cur Liabilities - - 259 2.5
TOTAL CURRENT LIABILITIES 286 8.9 3,281 31.8

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DESERTATION

TERM LIABILITIES

Hire Purchase Loans(1 Year+) 93 2.9 - -


Loans from Subs (1 Year+) - - 1,000 9.7
Loans from Assoc. Co.(1 Year+) 55 1.7 455 4.4
Loans from Dir/Shareholders (1 Yr+) - - 1,000 9.7
TOTAL TERM LIABILITIES 148 4.6 2,455 23.8
TOTAL LIABILITIES 434 13.5 5,736 55.6

EQUITY

Share Capital - Ordinary 2,774 86.5 4,578 44.4


TOTAL EQUITY 2,774 86.5 4,578 44.4
NET WORTH 2,774 86.5 4,578 44.4
EFFECTIVE EQUITY 2,774 86.5 4,578 44.4
TOTAL LIABS & NET WORTH 3,208 100.0 10,314 100.0

78
DESERTATION

STANDARD CHARTERED BANK

Petroleum Company (petroleumc) SCB ISIC Code: 3530 Date Prepared:


6/11/2005
Detailed Profit & Loss Statement - Actual and % Page 2
Thousands

Statement Date 3/31/2001 3/31/2002


Months Covered 12 12
Analyst Monika Monika
Source Currency: INR Target Currency: INR

PROFIT & LOSS STATEMENT

Sales (Net of Returns/Duties) 16,448 100.0 100,315 100.0


Cost of Sales (16,243) (98.8) (99,028) (98.7)

GROSS PROFIT(LOSS) 205 1.2 1,287 1.3

ADMIN/OTHER OPERATING EXPENSES


Auditors Remuneration (3) - (5) -
Depreciation (46) (0.3) (71) (0.1)
Other Expenses (62) (0.4) (389) (0.4)
Advertising - - (1) -
Wages & Salaries (47) (0.3) (247) (0.2)
Employee Benefit (Incl. Pension) Expense (5) - (27) -
Total Admin/Other Operating Expenses (163) (1.0) (740) (0.7)

NET OPERATING PROFIT (LOSS)


BEFORE INTEREST & TAXES 42 0.3 547 0.5

Interest Expense (27) (0.2) (368) (0.4)

NET PROFIT (LOSS) AFTER TAX 15 0.1 179 0.2

PROFIT (LOSS) DISTRIBUTION


Distribution to Benefactors/Partners (15) - (179) -
PROFIT RETAINED - - - -

79
DESERTATION

STANDARD CHARTERED BANK

Petroleum Company (petroleumc) SCB ISIC Code: 3530 Date Prepared:


6/11/2005
Detailed Cash Flow Page 3
Thousands

Statement Date 3/31/2001 3/31/2002


Months Covered 12 12
Analyst Monika Monika
Sales (Net of Returns/Duties) 100,315
Chg in Trade Debtors (Gross) (5,605)
Cash Collected From Sales 94,710

Cost of Sales (99,028)


Chg in Stock: Trading (742)
Chg in Trade Creditors 857
Cash Paid to Suppliers (98,913)

CASH FROM TRADING ACTIVITIES (4,203)

Auditors Remuneration (5)


Advertising (1)
Wages & Salaries (247)
Employee Benefit (Incl. Pension) Expense (27)
Cash Paid for Operating Costs (280)

GROSS CASH FROM OPERATIONS (4,483)

Other Expenses (389)


Chg in Other Op Current Assets (1,548)
Chg in Other Op. Cur Liabilities 259
Chg in Provisions: Other Current (127)
Other Income (Expense) & Taxes Paid (1,805)

NET CASH AFTER OPERATIONS (6,288)


NET CASH AFTER OPERATIONS (6,288)

Interest Expense (368)


Distribution to Benefactors/Partners (179)
Cash Paid for Dividends & Interest (547)

CASH AFTER FINANCING COSTS (6,835)

Current Portion Long Term Debt -


80
DESERTATION

CASH AFTER DEBT AMORTISATION (6,835)

Chg in Plant & Machinery 2


Chg in Motor Vehicles (283)
Depreciation (71)
Chg in Other Fixed Assets (352)
Cash Paid for Plant and Investments (352)

FINANCING SURPLUS (REQS) (7,187)

Chg in Due to Banks (O/D, T/R etc) 2,006


Chg in Long Term Debt (93)
Chg in Loans from Subs (1 Year+) 1,000
Chg in Loans from Assoc. Co. (1 Year+) 400
Chg in Loans from Dir/Shareholders (1 Yr+) 1,000
Chg in Equity 1,804
Total External Financing 6,117

CASH AFTER FINANCING (1,070)

Add:
Cash and Bank Deposits 1,340
ENDING CASH & EQUIVALENTS 270

81
DESERTATION

STANDARD CHARTERED BANK

Petroleum Company (petroleumc) SCB ISIC Code: 3530 Date Prepared:


6/11/2005
Detailed Ratios Page 4
Thousands

Statement Date 3/31/2001 3/31/2002


Months Covered 12 12
Analyst Monika Monika

LIQUIDITY RATIOS

Stock Turn Period (Days) 28 7


Gross Trade Debtor Collection Period (Days) 9 22
Net Trade Debtor Collection Period (Days) 9 22
Net Debtor Collection Period (Days) 9 22
Trade Creditors Pmt Period (Days) 4 4
Net Cash Cycle Period (Days) 34 25
Total ST Debt Coverage (2.65)
Cash Coverage
(11.50)
DEBT MANAGEMENT RATIOS

Leverage Ratio 0.16 1.25


Gearing 0.03 0.44
NPBIT: Interest 1.56 1.49
Net Cash after Operations: Interest (17.09)
Interest on Avg. Financial Debt (%) 29.03 35.06
Short Term Debt - 2,006
Long Term Debt 93 -
PROFITABILITY RATIOS (%)
Net Profit Margin 0.09 0.18
Operating Efficiency 0.99 0.74
Return on Equity 0.54 3.91
Return on Assets (Geared) 0.47 1.74
Return on Assets (Un-geared) 1.31 5.30
Gross Profit Margin 1.25 1.28
NPBIT to Sales 0.26 0.55
NPBT to Sales
0.09 0.18

82
DESERTATION

GROWTH RATIOS (%)

Sales Growth 509.89


Net Profit Growth 1,093.33
Total Asset Growth 221.51
Total Liabilities Growth 1,221.66
Gross Profit Growth 527.80
Sustainable Growth - -

OTHER RATIOS

Current Ratio 10.59 3.00


Liquid Ratio 6.18 2.39
Sales: Fixed Assets 91.38 217.60
Sales: Total Assets 5.13 9.73
Effective Tax Rate - -
Capital Spending 281
Avg. Cap Spending 281
Expected Capital Spending 989
Avg. Expected Cap Spending 989
Def Tax + Tax Payable/Tax Exp (%) N/A N/A
Dividend Payout Rate 100.00 100.00
Average Tax Rate (%) - -
Other Cur Assets/Tot Cur Assets (%) 0.99 16.02
Other Cur Liabilities/Tot Cur Liabilities (%) - 7.89
Other Fixed Assets/Tot Fixed Assets (%) - -
Other Term Liabilities/Tot Term Liabilities (%) - -
Other Income/Net Income Aft Tax (%) - -
Investments/Total Assets (%) - -
Gross Cash Flow less Interest & Dividends (annualized) (4,851)
Free Cash Flow (annualized) (2,256)

83
DESERTATION

STANDARD CHARTERED BANK

Petroleum Company (petroleumc) SCB ISIC Code: 3530 Date Prepared:


6/11/2005
Detailed Ratios Page 5
Thousands

Statement Date 3/31/2001 3/31/2002


Months Covered 12 12
Analyst Monika Monika

CREDIT GRADING DATA

Large Corporate
Total Equity 2,774 4,578
Leverage (Total Liabilities to Total Assets) 0.14 0.56
Net Profit Margin 0.09 0.18
Cash to Total Debt (3.13)
Debt to EBITDA 1.06 3.25
EBITDA to Interest - New 3.26 1.68
Net Cash Ratio - New (1.10)
Pre-tax Profitability - New - -
Size Factor (Total Equity) - New 2,774 4,578
Capital Structure - New 0.86 0.44
Liquidity - New 0.66 0.12
Debt Service Coverage (%) - New 0.16 0.37
Cash Flow Ratio 2 (%) - New (6.13)

Middle Market
Gearing Ratio 0.05 0.43
Net Profit Margin (%) 0.09 0.18
Cash Ratio (%) 468.53 8.23
Trading Stock Turn Period 28 7
EBITDA to Interest 3.26 1.68
Cash Flow Ratio N/A (1.48)
Asset Turnover 5.13 9.73
Debt Service Coverage (%) 0.16 0.37
Sale Growth (%) 509.89
Cash Flow Ratio 2 (%) (6.13)

Channel Finance & Supply Chain


Gearing Ratio 0.05 0.43
Stock Turn Period 28 7
Net Profit Margin % 0.09 0.18
Total Tangible Assets 3,208 10,314
Net Worth 2,774 4,578
Productivity % 0.29 0.25
84
DESERTATION

STANDARD CHARTERED BANK

Petroleum Company (petroleumc) SCB ISIC Code: 3530 Date Prepared:


6/11/2005
Detailed Ratios Page 6
Thousands

Statement Date 3/31/2001 3/31/2002


Months Covered 12 12
Analyst Monika Monika
FINANCIAL SUMMARY FOR BCA

FRONT SHEET DATA

Total Sales 16,448 100,315


Operating Profit 42 547
Extraordinary Expenses - -
Net Profit after Tax 15 179
EBITDA 88 618
Net Worth 2,774 4,578
Total Debt 93 2,006
Gearing 0.03 0.44
Debt to EBITDA 1.06 3.25
Net Cash After Operations (6,288)
CADA (6,835)
Contingent Liabilities - -
Total Provision for Employee Benefits (Including Pension) - -

REPAYMENT SOURCE DATA

PROFITABILITY

Total Sales 16,448 100,315


Gross Profit 205 1,287
Net Profit after Tax 15 179
Change in Sales (%) 509.89
Gross Profit Margin (%) 1.25 1.28
EBITDA to Sales (%) 0.54 0.62
NPBT to Sales (%) 0.09 0.18

NET WORKING CASH CYCLE

Stock Turn Period (SDOH) 28 7


Trade Debtors Period (DDOH) 9 22
Trade Creditors Period (CDOH) 4 4
Net Working Cash Cycle Period 34 25
85
DESERTATION

DEBT SERVICE CAPACITY

Net Cash after Operations (6,288)


Cash after Financing Costs (6,835)
Cash after Debt Amortisation (6,835)
Net Cash after Operations/Interest (17.09)
Financing Surplus/Deficit (7,187)

LONG TERM ASSET/LIABILITY MANAGEMENT


Net Fixed Assets 180 461
Long-Term Debt+ Equity 2,867 4,578
Sales to Fixed Assets 91.38 217.60
Capex to Depreciation Ratio 3.96

DEBT PROTECTION
Gearing 0.03 0.44
Interest Cover 1.56 1.49
Debt to EBITDA 1.06 3.25
EBITDA to Interest 3.26 1.68
Maturing Debt Obligations S/T - 2,006
Maturing Debt Obligations M/T - -
Debt Service Cover Ratio (12.18)
Subordinated Debt - -
Annual Operating Leases - -
Contingent Liabilities - -

CAPITAL PROTECTION
Tangible Net Worth 2,774 4,578
Revaluation Reserve - -
Total Assets 3,208 10,314
Leverage (Total Liabilities to Total Assets) 0.14 0.56
Dividend Payout Ratio 100.00 100.00

86
DESERTATION

STANDARD CHARTERED BANK

Petroleum Company (petroleumc) SCB ISIC Code: 3530 Date Prepared:


6/11/2005
Financial Summary Ratios Page 7
Thousands

Statement Date 3/31/2001 3/31/2002


Months Covered 12 12
Analyst Monika Monika

Source Currency: INR Target Currency: INR Segment Type: Company Account

LIQUIDITY

Cash After Financing Costs (6,835)


Cash Coverage (11.50)

PROFITABILITY

Sales (Net of Returns/Duties) 16,448 100,315


Gross Profit (Loss) 205 1,287
Net Operating Profit (Loss) Before Interest & Tax 42 547
Net Operating Profit (Loss) Before Tax 15 179
Profit Retained - -

CAPITAL STRUCTURE

Total Equity 2,774 4,578


Net Worth 2,774 4,578
Total Debt 93 2,006
Gearing 0.03 0.44
NPBIT: Interest 1.56 1.49

OTHERS

Sales Growth 509.89


Sustainable Growth - -
Net Cash Cycle Period 34 25
Total ST Debt Coverage (2.65)
Net Op. Profit before Interest& Taxes/Sales (%) 0.26 0.55

ISIC: 3530
Nature of Business Mining

87
[DESERTATION]

Analysis of Financial Statements

Bajrang Petroleum Company approached Standard Chartered Bank for a loan of


Rs.2000000/- for 6 years. As the sale of this company is increasing so the company is
in the need of fund.

Analysis:

If we analyze the P&L a/c of the company. The performance of the company is very
impressive as its sale is increased by more than 500%. & Gross profit by more than
600%.

Sales : - Increased by more than 500%


Gross Profit : - Increased by more than 600%
PAT : - Increased by more than 1000%

So we can say that there is a good reputation of the products of the company in the
market and due to which its profit & sale are increasing tremendously.
It all shows the efficiency of the corporation in the market as it has been able to face
the tough competition & increased its profit year by year.
There is a drastic increase in the total asset of the company & it has been able to
increases it from 3 crore to 10 crore. As the company's capital is also increased from
Rs.2759051/- To Rs.4400238/- which helped the company to increase its assets. As the
demand in the market is increasing & reputation of Company is also good, the
company is funding money into the business on the basis of its sale.

Comment on various ratios :

Company's leverage ratio & the gearing are tremendously increased because of the
need of the fund. If we parallel look on the ratio of EBIT & Interest of the Company,
it is more than 1.5 even after taking lots of debt from the outside. It all shows that as

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[DESERTATION]

funds were increased, Production Increased, then Sales Increased, then finally Net
Profit increased.
So if the profit increased with the increase in the interest expenses then the ratio of
EBIT & Interest remained more than one. Company is performing so well in the
market that its sales / total assets ratio is increased from 91% to 217%. It all shows
the utilization of assets in a more efficient way.
If we see the position on the current ratio of the company, the ratio has been decreased
from 10.59 to 3.00 which is favorable to this. 2:1 is considered to be a removable one.
In 2003 ratio 10.59 was very high which shows that lots of funds of a company are
locked into the stocks, debtors etc. This all has an effect on the operations of the firm.
I f we look to the debtors collection period of the corporation. Then it increased from
9 days to 22 days with the tremendous increases in the sale. The reason for this could
be that corporation might have given the more credit facility to their in order to
increases the sales of the corporation. As it is clear from the statements that sale is
increased by more than 500%. The effect of this increase is that stock turn over period
of the company is decreased from 28 days to 7 days which is a good sign of the
company.
The all over impact of this is that cash conversion cycle of the corporation is
decreased from 34 days to 25 days which increases the profitability of the corporation.
Because if this period increases then the corporation's need for external financing will
be increase which will carry some cost.

Cash Conversion Cycle = Inventory turnover days + Debtors turnover days - Creditors
payment period
25 = 7 + 22 - 4

The Gearing Ratio of the company is 0.02% for the financial year 2000-01, 0.80% For 2002-03

,Which is less than 3 and the Interest coverage ratio is 1.56 ,1.49, 2.72 for financials years 2000-

01, 2001-02, 2002-03 respectively.

If we comment on the other ratios of the company, there is improvement almost most
of the assets. Net profit margin of the company is increased from 0.09 to 0.18 which
increases the sale of the company.

[Type text] Page 106


[DESERTATION]

OVERALL ANALYSIS

If we do the overall analysis of the company then we can say that the demand for the
products in the market is rising year by year due to which the company is also able to
increase its debt. The company is so efficient that it liberalized its credit policy which
increased its debtor's turnover period and also helped to increase its sale to more than
50%.
Management of the company is also very efficient and the company is having the
experience in the same business for more than 5 years. There is also the stability of
the business of the company. So after taking into consideration all these factors we
can say that the bank can sanction the loan of Rs.20 lacks to the firm @ not more than
13%.

If we look towards the EBITD of the company for the last 2 years then we find that
there is an increase of more than 1000% or ten times. If we see the record of the last 3
years, the company is also able to maintain EBITD/interest ratio of more than 1. It
shows that for every Rs.1 interest liability, the company has enough cash to repay.
So after looking on all the sides of the company, we can say that if the company
grows with the same pace or even at a slightly lower pace, the company will be able to
pay the interest installments of Rs.2,60,000 [Rs.2,00,000@ 13%] easily because its
EBITD is more than Rs.5 lacs last year.
So the bank can sanction the loan of Rs.20 lacks@ 13%

RANJIT METALS INDUSTRIES


[Type text] Page 107
[DESERTATION]

Balance Sheet As At 31st March 2001


Liabilities Amount Assets Amount
Rs. P. Rs. P.
Sh. Kamal jain Capital A/C 3956226.21 Fixed Assets 707918.35
(As per annexure ‘F’
attached)
Secured Loans

The Federal Bank Ltd 10085752.53 Security 105704.00


ICICI Bank Ltd 180270.13 Deposit With DVB 1254.80
City Bank Loan 233263.72 Deposit With Excise Dept. 42481.54
Sales Tex Deposit

Unsecured Loans 1389782.00 Security Deposit - Rent 45000.00


(As per annexure ‘A’ enclosed)
Current Liabilities & Provisions Current Assets, Loans & 9633116.03
Sundry Creditors Adv. Sundry Debtors
(As per annexure ‘B’ enclosed) (As per annexure ‘G’
enclosed)
2939488.20
Stock in Hand 11762925.00
Other Creditors 4816896.80 Loans & Advances 352133.15
(As per annexure ‘C’ enclosed) Loans & Advances
Expenses Payable 92222.00 (As per annexure ‘H’
(As per annexure ‘D’ enclosed) enclosed)
Interest Accrued on FDR 100998.00
Modvat Credit 769115.10
Recoverable 8494.00
TDS Bank Interest
Other Current Liabilities 974058.90 Cash & Bank Balances
(As per annexure ‘E’ enclosed) Cash in hand 5062.24
Bank 1134659.00
STDR- The Federal Bank
Ltd
24668860.49 24668860.49

RANJIT METALS INDUSTRIES

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[DESERTATION]

Trading and Profit & Loss Account


For the year ended 31-05-2001
Particulars Amount Particulars Amount
Rs. P. Rs. P.
To Opening Stock 11670777.00 By Sales 57913272.00
To Purchase 54117622.18 By Closing Stock 11762925.00
To Gross Profit C/D 3887797.82
69676197.00 69676197.00
To Accountancy Charges 55000.00 By Gross Profit B/D 3887797.82
To Audit Fees 5400.00 By Other Income 197141.29
To Bank Charges 150909.05
To Business Promotion 75804.70
To Charity & Donation 13130.00
To Commission On Cons. Sale 340542.78
To Depreciation A/C 176906.65
To Electricity & Water Expenses 107163.00
To Freight & Other Expenses 263912.92
To General Expenses 51029.68
To insurance 45942.00
To interest 1600345.56
To Legal & Professional Charges 20400.00
To Mobile & Telephone Expenses. 144915.32
To Office Repair & Maintenance 35775.00
To printing & Stationery 2234.00
To Rent 90000.00
To Salary 543000.00
To Security Services Charges 11910.00
To Subscription & Memberships 3300.00
To traveling Expenses. 115019.19
To Vehicle Repair & Maintenance 42515.02
To Net Profit 189783.79
(Transferred in Prop. Capital A/C)
4084939.11 4084939.11

RANJIT METALS INDUSTRIES


Balance Sheet As At 31st March 2002

[Type text] Page 109


[DESERTATION]

Liabilities Amount Assets Amount


Rs. P. Rs. P.
Sh. Kamal jain Capital A/C 3932552.21 Fixed Assets 565408.3
Less: Drawing 73006.00 (As per annexure ‘F’
attached)
Add: Net Profit for the year 3859546.21
191289.26
Secured Loans

The Federal Bank Ltd 8623907.09 4050835.47 Security Deposit


ICICI Bank Ltd 60726.35 Deposit With DVB 105704.00

Deposit With Excise 1254.00


Dept.
Sales Tex Deposit 42481.50

Unsecured Loans 8684633.44 Security Deposit - 45000.00


(As per annexure ‘A’ enclosed) Rent
Current Liabilities & Provisions Sundry 1345782.00 Current Assets, 12764911.36
Creditors Loans & Adv. Sundry
(As per annexure ‘B’ enclosed) Debtors

10663371.15 Stock in Hand 9503775.00


Other Creditors Loans & Advances 979945.25
(As per annexure ‘C’ enclosed) Loans & Advances
Other Current Liabilities (As per annexure ‘H’ 194213.00
(As per annexure ‘E’ enclosed) enclosed) 544031.41
221615.59 Interest Accrued on
FDR
Modvat Credit
Recoverable
1056322.95 TDS Bank Interest 10360.00
Provision & Expenses Payable Cash & Bank 214920.28
(As Per annexure ‘E’ enclosed) Balances
316655.64 Cash in hand
26339216.24 Bank 1367212.00
STDR- The Federal
26339216.24 Bank Ltd 26339216.24

RANJIT METALS INDUSTRIES


Trading and Profit & Loss Account
For the year ended 31-05-2002

[Type text] Page 110


[DESERTATION]

Particulars Amount Particulars Amount


Rs. P. Rs. P.
To Opening Stock 11762925.00 By Sales 67342852.30
To Purchase 61286905.80 By Closing Stock 9503775.00
To Gross Profit C/D 3796796.00
76846627.30 76846627.30
To Accountancy Charges 79000.00 By Gross Profit B/D 3796796.46
To Audit Fees 6600.00 By Other Income 109925.00
To Bank Charges 85826.00
To Business Promotion Expenses. 32589.05
329657.38
To Commission On Cons. Sale 206700.00
To Conveyance 142510.03
To Depreciation 47000.00
To Diwali Expenses. 159139.00
To Electricity & Water Expenses 54218.00
To Fees & Taxes 296507.00
To Freight & Other Expenses 15795.97
To General Expenses 1082356.67
To interest 10000.00
To Legal & Professional Charges 1102.00
To Medical Expenses 164816.96
To Mobile & Telephone Expenses. 149.00
To News Paper & Periodicals 47050.00
To Office Repair & Maintenance 23181.00
To printing & Stationery 90000.00
To Rent 576000.00
To Salary 576450.00
To Staff Welfare 20900.00
To Vehicle Repair & Maintenance 40524.71
To Traveling Expenses 104966.59
To Loss on Con. Sale 30692.84
To Net Profit 191289.26 To Legal & Professional
(Transferred in Prop. Capital A/C) Charges
3906721.46 3906721.46

Projected Balance Sheet:-

STANDARD CHARTERED BANK


METAL COMPANY (METALCOMPA) SCB ISIC Code: 3710 Date

[Type text] Page 111


[DESERTATION]

Prepared: 6/11/2005
Detailed Balance Sheet - Actual and %
Page 1
Thousands

Statement Date 3/31/2003 3/31/2004


Months Covered 12 12
Audit Method Unqualif'd Unqualif'd
Auditor
Analyst Monika Monika
Source Currency: INR Target Currency: INR Segment Type: Consolidated Accounts

CURRENT ASSETS

Cash and Bank Deposits 1,140 4.6 1,582 6.0


Trade Debtors (Gross) 9,633 39.1 12,764 48.5
Stock: Trading 11,763 47.7 9,504 36.1
Other Op Current Assets 1,230 5.0 1,730 6.6
Other Non-Op. Current Assets 194 0.8 194 0.7
TOTAL CURRENT ASSETS 23,960 97.1 25,774 97.9

FIXED ASSETS

Loose Plant/Furniture/Fittings 24 0.1 18 0.1


Motor Vehicles 684 2.8 547 2.1
Gross Fixed Assets 708 2.9 565 2.1
TOTAL FIXED ASSETS 708 2.9 565 2.1
TOTAL TANGIBLE ASSETS 24,668 100.0 26,339 100.0

WORKING CAPITAL 5,051 - 4,893 -


NET WORKING ASSETS 16,579 - 11,605 -
NET CASH ASSETS (8,946) - (7,042) -

CURRENT LIABILITIES
Due to Banks (O/D, T/R etc) 10,086 40.9 8,624 32.7
Trade Creditors 4,817 19.5 10,663 40.5
Creditors: Sundry 2,940 11.9 221 0.8
Provisions: Other Current 92 0.4 317 1.2
Other Op. Cur Liabilities 974 3.9 1,056 4.0
TOTAL CURRENT LIABILITIES 18,909 76.7 20,881 79.3

TERM LIABILITIES

Hire Purchase Loans (1 Year+) 413 1.7 61 0.2


Loans from Assoc. Cos. (1 Year+) 1,390 5.6 1,346 5.1
TOTAL TERM LIABILITIES 1,803 7.3 1,407 5.3
TOTAL LIABILITIES 20,712 84.0 22,288 84.6

EQUITY

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[DESERTATION]

Share Capital - Ordinary 3,956 16.0 4,051 15.4


TOTAL EQUITY 3,956 16.0 4,051 15.4
NET WORTH 3,956 16.0 4,051 15.4
EFFECTIVE EQUITY 3,956 16.0 4,051 15.4
TOTAL LIABS & NET WORTH 24,668 100.0 26,339 100.0

[Type text] Page 113


[DESERTATION]

STANDARD CHARTERED BANK


METAL COMPANY (METALCOMPA) SCB ISIC Code: 3710 Date Prepared:
6/11/2005
Detailed Profit & Loss Statement - Actual and % Page 2
Thousands

Statement Date 3/31/2003 3/31/2004


Months Covered 12 12
Audit Method Unqualif'd Unqualif'd
Auditor
Analyst Monika Monika
Source Currency: INR Target Currency: INR

PROFIT & LOSS STATEMENT


Sales (Net of Returns/Duties) 57,913 100.0 67,343 100.0
Cost of Sales (54,025) (93.3) (63,546) (94.4)

GROSS PROFIT (LOSS)


FROM TRADING 3,888 6.7 3,797 5.6

OTHER OPERATING INCOME


Other Operating Income 197 0.3 110 0.2

GROSS PROFIT (LOSS) 4,085 7.1 3,907 5.8

ADMIN/OTHER OPERATING EXPENSES


Auditors Remuneration (5) - (7) -
Depreciation (177) (0.3) (143) (0.2)
Other Expenses (1,570)(2.7) (1,822)(2.7)
Wages & Salaries (543) (0.9) (576) (0.9)
Financial Expenses - - (86) (0.1)
Total Admin/Other Operating Expenses (2,295) (4.0) (2,634)(3.9)

NET OPERATING PROFIT (LOSS)


BEFORE INTEREST & TAXES 1,790 3.1 1,273 1.9

Interest Expense (1,600)(2.8) (1,082)(1.6)

NET PROFIT (LOSS) AFTER TAX 190 0.3 191 0.3

PROFIT (LOSS) DISTRIBUTION


Distribution to Benefactors/Partners (190) - (191) -
PROFIT RETAINED - - - -

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[DESERTATION]

STANDARD CHARTERED BANK


METAL COMPANY (METALCOMPA) SCB ISIC Code: 3710 Date Prepared:
6/11/2005
Detailed Cash Flow Page 3
Thousands

Statement Date 3/31/2003 3/31/2004


Months Covered 12 12
Analyst Monika Monika
Sales (Net of Returns/Duties) 67,343
Chg in Trade Debtors (Gross) (3,131)
Cash Collected From Sales 64,212

Cost of Sales (63,546)


Chg in Stock: Trading 2,259
Chg in Trade Creditors 5,846
Cash Paid to Suppliers (55,441)

CASH FROM TRADING ACTIVITIES 8,771

Auditors Remuneration (7)


Wages & Salaries (576)
Financial Expenses (86)
Cash Paid for Operating Costs (669)

GROSS CASH FROM OPERATIONS 8,102

Other Operating Income 110


Other Expenses (1,822)
Chg in Creditors: Sundry (2,719)
Chg in Other Op Current Assets (500)
Chg in Other Op. Cur Liabilities 82
Chg in Provisions: Other Current 225
Other Income (Expense) & Taxes Paid (4,624)

NET CASH AFTER OPERATIONS 3,478


NET CASH AFTER OPERATIONS 3,478

Interest Expense (1,082)


Distribution to Benefactors/Partners (191)
Cash Paid for Dividends & Interest (1,273)

CASH AFTER FINANCING COSTS 2,205

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[DESERTATION]

Current Portion Long Term Debt -

CASH AFTER DEBT AMORTISATION 2,205

Chg in Loose Plant/Furniture/Fittings 6


Chg in Motor Vehicles 137
Depreciation (143)

FINANCING SURPLUS (REQS) 2,205

Chg in Due to Banks (O/D, T/R etc) (1,462)


Chg in Long Term Debt (352)
Chg in Loans from Assoc. Co. (1 Year+) (44)
Chg in Equity 95
Total External Financing (1,763)

CASH AFTER FINANCING 442

Add:
Cash and Bank Deposits 1,140
ENDING CASH & EQUIVALENTS 1,582

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[DESERTATION]

STANDARD
CHARTERED BANK
METAL COMPANY (METALCOMPA) SCB ISIC Code: 3710 Date
Prepared: 6/11/2005
Detailed Ratios Page 4
Thousands

Statement Date 3/31/2003 3/31/2004


Months Covered 12 12
Analyst Monika Monika

LIQUIDITY RATIOS

Stock Turn Period (Days) 79 55


Gross Trade Debtor Collection Period (Days) 61 69
Net Trade Debtor Collection Period (Days) 61 69
Net Debtor Collection Period (Days) 61 69
Trade Creditors Pmt Period (Days) 33 61
Net Cash Cycle Period (Days) 108 63
Total ST Debt Coverage 0.36
Cash Coverage 2.73

DEBT MANAGEMENT RATIOS


Leverage Ratio 5.24 5.50
Gearing 2.65 2.14
NPBIT: Interest 1.12 1.18
Net Cash after Operations: Interest 3.21
Interest on Avg. Financial Debt (%) 15.24 11.28
Short Term Debt 10,086 8,624
Long Term Debt 413 61

PROFITABILITY RATIOS (%)

Net Profit Margin 0.33 0.28


Operating Efficiency 3.96 3.91
Return on Equity 4.80 4.71
Return on Assets (Geared) 0.77 0.73
Return on Assets (Un-geared) 7.26 4.83
Gross Profit Margin 6.71 5.64
NPBIT to Sales 3.09 1.89
NPBT to Sales 0.33 0.28

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[DESERTATION]

GROWTH RATIOS (%)

Sales Growth 16.28


Net Profit Growth 0.53
Total Asset Growth 6.77
Total Liabilities Growth 7.61
Gross Profit Growth (2.34)
Sustainable Growth - -

OTHER RATIOS

Current Ratio 1.27 1.23


Liquid Ratio 0.65 0.78
Sales: Fixed Assets 81.80 119.19
Sales: Total Assets 2.35 2.56
Effective Tax Rate - -
Capital Spending (143)
Avg. Capital Spending -
Expected Capital Spending 258
Avg. Expected Capital Spending 258
Def Tax + Tax Payable/Tax Exp (%) N/A N/A
Dividend Payout Rate 100.00 100.00
Average Tax Rate (%) - -
Other Cur Assets/Tot Cur Assets (%) 5.94 7.46
Other Cur Liabilities/Tot Cur Liabilities (%) 5.15 5.06
Other Fixed Assets/Tot Fixed Assets (%) - -
Other Term Liabilities/Tot Term Liabilities (%) - -
Other Income/Net Income Aft Tax (%) 103.68 57.59
Investments/Total Assets (%) - -
Gross Cash Flow less Interest & Dividends (annualized) 7,020
Free Cash Flow (annualized) 1,763

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[DESERTATION]

STANDARD CHARTERED BANK


METAL COMPANY (METALCOMPA) SCB ISIC Code: 3710 Date Prepared:
6/11/2005
Detailed Ratios Page 5
Thousands

Statement Date 3/31/2003 3/31/2004


Months Covered 12 12
Analyst Monika Monika

CREDIT GRADING DATA

Large Corporate
Total Equity 3,956 4,051
Leverage (Total Liabilities to Total Assets) 0.84 0.85
Net Profit Margin 0.33 0.28
Cash to Total Debt 0.40
Debt to EBITDA 5.34 6.13
EBITDA to Interest - New 1.23 1.31
Net Cash Ratio - New 0.16
Pre-tax Profitability - New - -
Size Factor (Total Equity) - New 3,956 4,051
Capital Structure - New 0.16 0.15
Liquidity - New 0.03 0.04
Debt Service Coverage (%) - New 2.76 1.61
Cash Flow Ratio 2 (%) - New 1.63

Middle Market

Gearing Ratio 0.48 0.38


Net Profit Margin (%) 0.33 0.28
Cash Ratio (%) 6.03 7.58
Trading Stock Turn Period 79 55
EBITDA to Interest 1.23 1.31
Cash Flow Ratio N/A 0.34
Asset Turnover 2.35 2.56
Debt Service Coverage(%) 2.76 1.61
Sale Growth (%) 16.28
Cash Flow Ratio 2 (%) 1.63

Channel Finance & Supply Chain


Gearing Ratio 0.48 0.38
Stock Turn Period 79 55
Net Profit Margin % 0.33 0.28

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[DESERTATION]

Total Tangible Assets 24,668 26,339


Net Worth 3,956 4,051
Productivity % 0.94 0.86

STANDARD CHARTERED BANK


METAL COMPANY (METALCOMPA) SCB ISIC Code: 3710 Date Prepared:
6/11/2005
Detailed Ratios Page 6
Thousands

Statement Date 3/31/2003 3/31/2004


Months Covered 12 12
Analyst Monika Monika
FINANCIAL SUMMARY FOR BCA

FRONT SHEET DATA

Total Sales 57,913 67,343


Operating Profit 1,790 1,273
Extraordinary Expenses - -
Net Profit after Tax 190 191
EBITDA 1,967 1,416
Net Worth 3,956 4,051
Total Debt 10,499 8,685
Gearing 2.65 2.14
Debt to EBITDA 5.34 6.13
Net Cash After Operations 3,478
CADA 2,205
Contingent Liabilities - -
Total Provision for Employee Benefits (Including Pension) - -

REPAYMENT SOURCE DATA

PROFITABILITY
Total Sales 57,913 67,343
Gross Profit 4,085 3,907
Net Profit after Tax 190 191
Change in Sales (%) 16.28
Gross Profit Margin (%) 6.71 5.64
EBITDA to Sales (%) 3.40 2.10
NPBT to Sales (%) 0.33 0.28

NET WORKING CASH CYCLE

Stock Turn Period (SDOH) 79 55


Trade Debtors Period (DDOH) 61 69

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[DESERTATION]

Trade Creditors Period (CDOH) 33 61


Net Working Cash Cycle Period 108 63

DEBT SERVICE CAPACITY

Net Cash After Operations 3,478


Cash After Financing Costs 2,205
Cash After Debt Amortisation 2,205
Net Cash After Operations/Interest 3.21
Financing Surplus/Deficit 2,205

LONG TERM ASSET/LIABILITY MANAGEMENT

Net Fixed Assets 708 565


Long-Term Debt+ Equity 4,369 4,112
Sales to Fixed Assets 81.80 119.19
Capex to Depreciation Ratio (1.00)

DEBT PROTECTION

Gearing 2.65 2.14


Interest Cover 1.12 1.18
Debt to EBITDA 5.34 6.13
EBITDA to Interest 1.23 1.31
Maturing Debt Obligations S/T 10,086 8,624
Maturing Debt Obligations M/T - -
Debt Service Cover Ratio 7.49
Subordinated Debt - -
Annual Operating Leases - -

Contingent Liabilities - -

CAPITAL PROTECTION

Tangible Net Worth 3,956 4,051


Revaluation Reserve - -
Total Assets 24,668 26,339
Leverage (Total Liabilities to Total Assets) 0.84 0.85
Dividend Payout Ratio 100.00 100.00

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[DESERTATION]

STANDARD CHARTERED BANK


METAL COMPANY (METALCOMPA) SCB ISIC Code: 3710 Date Prepared:
6/11/2005
Financial Summary Ratios Page 7
Thousands

Statement Date 3/31/2003 3/31/2004


Months Covered 1212
Analyst Monika Monika
Source Currency: INR Target Currency: INR Segment Type: Consolidated Accounts

LIQUIDITY

Cash After Financing Costs 2,205


Cash Coverage 2.73

PROFITABILITY

Sales (Net of Returns/Duties) 57,913 67,343


Gross Profit (Loss) 4,085 3,907
Net Oper Profit (Loss) Before Interest & Tax 1,790 1,273
Net Oper Profit (Loss) Before Tax 190 191
Profit Retained - -

CAPITAL STRUCTURE

Total Equity 3,956 4,051


Net Worth 3,956 4,051
Total Debt 10,499 8,685
Gearing 2.65 2.14
NPBIT: Interest 1.12 1.18

OTHERS

Sales Growth 16.28


Sustainable Growth - -
Net Cash Cycle Period 108 63
Total ST Debt Coverage 0.36
Net Oper Profit before Interest &Taxes/Sales (%) 3.09 1.89

ISIC: 3710

Nature of Business Manufacturing


Please see the Financial Summary Text report
on the Consultant tab for more summary information.

[Type text] Page 127


[DESERTATION]

Analysis of Ranjit Metal Industries

Ranjit Metal Industry approached Standard Chartered Bank for a loan of Rs.50 lacks for 7
years.

1) The P&L a/c of the company for the 2 years shows the increase in the sales % but
the gross profit is decreased due to the increase in the cost of the goods sold.
COGS could be increased because of the increase in the prices of the
labour, raw material or any other input item in the market. Due to the
competitive environment the company couldn't increase the selling prices which result in
the reduction on the gross profit.

2) The gross profit of the company is decreased but finally the company is able to
increase the net profit. If we analyze properly then we will find that the company
has saved around Rs.6 lacks from the interest item. The company's internal expenses are
decreased by around Rs.6 lacks which means that the company in able to repay a part of its
debts.

3) From the analysis of the P&L and balance sheet we can say that the sales of the
company are increased during the year because of the increasing demand of
the metal in the country. The impact of this is directly seen in the balance
sheet as the debtors are increased. Company is also able to increase its
liquidity position.

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[DESERTATION]

COMMENTS ON THE VARIOUS RATIOS

1) The Gearing ratio of the company is increased which is a good indicator that the
company's dependence on the outsider's liabilities has been decreased.

2) Due to the increasing demand in the market and the company's aggressive selling
strategies helped the company a lot to decrease its stock turn period from 79
days to 55 days which is a good indicator of the bright future of the
company. It shows that the company is saving 24 days in order to process the raw
material to finished goods to sale. This factor also plays a very important role in
the increase in the sales.

3) Company is able to increase net profit margin from 0.32% to 0.28% due to the increase in
the cost of goods sold and some increase in the operating expenses.

4) If we analyze some other ratios of the company then we can say that the ratios of the
company are also improved from 2003 to 2004. Like EBITD to interest ratio is
increased from 1.23 to 1.31 which shows that the company's ability to pay the interest is
increased.This ratio shows that for the every Re.1 interest company has Re. 1.31 to pay that
interest. Company is also able to increase its tangible assets and net worth also as shown in
the balance sheet of the company.
Company is also able to improve its cash cycle period from 108 days to 63 days, which is
also a good indicator. This helped the company to improve its profits because the longer
the cash conversion cycle, the greater the need for external financing and that
financing has a cost.

Increment of creditor paid period is also a good sign as the company can use this credit
facility in a productive manner.

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[DESERTATION]

OVERALL ANALYSIS

In the overall analysis of the company, on the basis of the weighted score of the company,
56.9(financial score+ non financial score), it is eligible for the loan.
If the bank allowed the company a loan of Rs.50 lacks @ 13%, then we can analyze that the
company will easily be able to repay the interest of Rs.6, 50,000 per year. Because the
company's EBITD of the last two years is more than Rs.13 lacks. As the company is in the
same business for the last 8 years, industry segment prospects are stable and the management
of the company is also with good talent. In this case we can the increasing graph of the
company in the future. Company is also having a strong competitive advantage and the
demand for the metal products is increasing in the future.
The Gearing Ratio of the company is 0.3% for the financial year 2000-01, 0.02% For 2002-03 ,Which is

less than 3 and the Interest coverage ratio is 1.07 ,2.86, 5.24 for financials years 2000-01, 2001-02,

2002-03 respectively.

then we can conclude that overall position of the company is good and we can sanction the
loan to the company.

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[DESERTATION]

Western Indian motors


Balance Sheet As on 31st March 2001

Liabilities F.C.Y Assets F.C.Y


Amount (Rs) Amount(rs.)

Partners* capital Account 52,65,000.00 Fixed Assets 89,90,948.48

Partners* Current Account 16,33,864.32 Investments Nil

Secured Loans 16,67,747.87 Current Assets , loans, & Advances


A. Current Assets 103,69,466.7
1. Inventories 0
Stock in Trade (As valued & Certified
By the partners)
2. Sundry Debtors 61,84,625.02
3. Cash & Bank Balances
1. Cash in Hand(Including Cheques
in hand Rs. 1010681.24) 10,46,044.21
2. Balance with Schedule Banks in
1. In Current a/c 9,39,23.68
2. Fixed Deposits (Including
Accrued interest) 9,27,044.00
B. Loans & Advances
1. Advances recoverable in cash or in
Kind or for which value to be 21,27,911.21
Recovered
2. Security Deposits 2,71,477.00
12,05,952.91
Unsecured Loans
From Relative & Friends

Current Liabilities & Provisions


(A) Current Liabilities
1. Sundry Creditors 46,81,383.38
(a) For Goods Supplied 119,57,240.5
(b) For Others 1
2. Advance payments for which
value has still to be given 37,38,028.62
3. Other Liabilities 7,07,513.69

Nil
(B) Provisions

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[DESERTATION]

( Total RS) 308,56,731.0 ( Total RS ) 308,56,731.0


0 0

Western Indian Motors Company


Profit And Loss A/C for Year ended on 31st March 2001

Particulars Amount Particulars Amount

To salaries & wages 2387285.40 By Gross profit Ltd. from 5469165.37


trading Account
Management By work shop service 445669.00
STORES By rent receipt 441600.00
Siemens Deptt. By commission 3412563.00
Work Shop By incentive receipt NIL
Work shop mag.
To Advertisement 400839.50
& Publicity
To Bank Charges 56531.15.00
& commission
To Bonus 269294.00
To Charity & 8700.00
donation
To Claims 13311.25
To Demonstration And Car 46666.26
Expenses
To Electricity Charges 405522.00
To contribution to Employees 103967.00
Family pension fund
To Contribution to ESI 152341.00
To Contribution to link deposit 9949.00
assurance
To Employees Gratuity 69736.00
To General trade expenses 29427.05
To Interest charges 883158.00
To Legal & professional 57506.00
Charges
To News paper & periodical 4321.00
To Office Vehicle & Expenses 52122.00
To Printing & stationary 177453.00
To postage and Telegram 24043.00
To Rent And House tax 37389.00
To Insurance & Subscription & 132532.00
taxes
To Railway Freight & Octopi 257485.00
To Staff welfare & expenses 55851.00

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[DESERTATION]

To telephone and trunk call 733901.00


To traveling and conveyance 395559.50
To computer accounting 18000.00
charges
To computer services charges 49240.00
To depreciation 831985.00
To bad debts 349437.02
To sales promotion expenses 96152.80
To sales campaign expenses 95543.05
To hire purchase charges 10658.00
To sales incentive 40,000.00
To turn over tax 90,000.00
To profit c/d 13,31,597.02
Total 97,68,998.06 Total 97,68,998.06

Western Indian motors


Balance Sheet As on 31st March 2002

Liabilities F.C.Y Assets F.C.Y


Amount (Rs) Amount (Rs.)

Partners* capital Account 52,65,000.00 Fixed Assets 96,84,227.48

Partners* Current Account 13,21,548.18 Investments Nil

Secured Loans 86,62,873.93 Current Assets , loans, &


Advances 1,11,95,544.57

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[DESERTATION]

A. Current Assets
1. Inventories
Stock in Trade (As valued & 1,78,56,538.63
Certified By the partners)
2. Sundry Debtors
3. Cash & Bank Balances 7,64,287.57
1. Cash in Hand(Including
Cheques 3,96,416.28
in hand Rs. 1010681.24)
2. Balance with Schedule Banks 21,59,266.00
in
1. In Current a/c
2. Fixed Deposits (Including 23,38,313.45
Accrued interest)
B. Loans & Advances 2,65,741.00
1. Advances recoverable in cash
or in
Kind or for which value to be
Recovered
2. Security Deposits
11,14,123.76
Unsecured Loans
From Relative & Friends

Current Liabilities &


Provisions
(A) Current Liabilities 142,44,595.26
1. Sundry Creditors 116,13,336.24
(a) For Goods Supplied
(b) For Others 34,95,656.26
2. Advance payments for 19,43,200.98
which value has still to be
given Nil
3. Other Liabilities

(B) Provisions

( Total RS) 4,76,60,334.98 ( Total RS ) 4,76,60,334.98

Western Indian motors Company


Profit And Loss A/C for Year ended on 31st March 2002

Particulars Amount(Rs.) Particulars Amount(Rs.)


To salaries & wages By Gross profit Ltd. from 44,28,670.00

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[DESERTATION]

trading Account
Management By work shop service 5,23,800.00
STORES By rent receipt 4,41,600.00
Siemens Deptt. By commission 15,17,645.15
Work Shop By incentive receipt 17,70,173.70
Work shop mag. 2570179.90
To Advertisement 167245.00
& Publicity
To Bank Charges 72513.00
& commission
To Bonus 278035.00
To Charity & 4100.00
Donation
To Claims 9945.00
To Demonstration And Car 48066.00
Expenses
To Electricity Charges 338316.00
To contribution to Employees 114397.00
Family pension fund
To Contribution to ESI 166924.00
To Contribution to link deposit 94695.00
assurance
To Employees Gratuity 10951.00
To General trade expenses Nil
To Interest charges 8379.35
To Legal & professional 91940.00
Charges
To News paper & periodical 3,658.00
To Office Vehicle & Expenses 53240.00
To Printing & stationary 131636.00
To postage and Telegram 16976.00
To Rent And House tax 38832.00
To Insurance & Subscription & 127047.00
taxes
To Railway Freight & Octopi 154312.00
To Staff welfare & expenses 27185.00
To telephone and trunk call 154312.00
To traveling and conveyance 27185.00
To computer accounting 584891.64
charges
To computer services charges 341789.00
To depreciation 18000.00
To bad debts 18230.00
To sales promotion expenses 783227.00
To sales campaign expenses NIL
To hire purchase charges 106050.00
To sales incentive 10798.00
To turn over tax 49,500.00
[Type text] Page 135
[DESERTATION]

To profit c/d 16,81,676.14


Total 86,81,409.77 Total 86,81,409.77

Western Indian motors


Balance Sheet As on 31st March 2003

Liabilities F.C.Y Assets F.C.Y


Amount (Rs) Amount (Rs.)

Partners* capital Account 53,65,000.00 Fixed Assets 106,84,227.48

Partners* Current Account 13521,548.18 Investments Nil

Secured Loans 78,62,873.93 Current Assets , loans, & Advances


A. Current Assets 199,95,544.57
1. Inventories
Stock in Trade (As valued &
Certified By the partners) 1,3,56,538.63
2. Sundry Debtors
3. Cash & Bank Balances
1. Cash in Hand(Including Cheques 8,64,287.57
in hand Rs. 1010681.24)
2. Balance with Schedule Banks in 5,96,416.28
1. In Current a/c
2. Fixed Deposits (Including 33,59,266.00
Accrued interest)
B. Loans & Advances
1. Advances recoverable in cash or in 34,38,313.45
Kind or for which value to be
Recovered 346,741.00
2. Security Deposits

[Type text] Page 136


[DESERTATION]

Unsecured Loans 10,14,123.76

From Relative & Friends

Current Liabilities & Provisions


(A) Current Liabilities
1. Sundry Creditors 123,44,595.26
(a) For Goods Supplied 111,13,336.24
(b) For Others
2. Advance payments for which 3195,656.26
value has still to be given 17,43,200.98
3. Other Liabilities
Nil
(B) Provisions

( Total RS) 4,12,65,339.1 ( Total RS ) 4,12,65,339.12


2

Profit And Loss A/C for Year ended on 31st March 2003

Particulars Amount(Rs.) Particulars Amount(Rs.)


To salaries & wages By Gross profit Ltd. from 43,28,670.00
trading Account
Management By work shop service 432,800.00
STORES By rent receipt 341,600.00
Siemens Deptt. By commission 110,645.15
Work Shop By incentive receipt 1223,173.70
Work shop mag. 2470179.90
To Advertisement 117245.00
& Publicity
To Bank Charges 34513.00
& commission
To Bonus 258035.00
To Charity & 4400.00
Donation
To Claims 10045.00
To Demonstration And Car 46066.00
Expenses
To Electricity Charges 367316.00
To contribution to Employees 124397.00
Family pension fund
To Contribution to ESI 145924.00
To Contribution to link deposit 96795.00
assurance

[Type text] Page 137


[DESERTATION]

To Employees Gratuity 11151.00


To General trade expenses Nil
To Interest charges 8339.35
To Legal & professional 92340.00
Charges
To News paper & periodical 3,758.00
To Office Vehicle & Expenses 53233.00
To Printing & stationary 133336.00
To postage and Telegram 16922.00
To Rent And House tax 38552.00
To Insurance & Subscription & 134047.00
taxes
To Railway Freight & Octopi 144312.00
To Staff welfare & expenses 33185.00
To telephone and trunk call 133312.00
To traveling and conveyance 24485.00
To computer accounting 584891.64
charges
To computer services charges 241789.00
To depreciation 19000.00
To bad debts 12430.00
To sales promotion expenses 789227.00
To sales campaign expenses NIL
To hire purchase charges 104450.00
To sales incentive 10888.00
To turn over tax 50000.00
To profit c/d 1141,676.14

[Type text] Page 138


[DESERTATION]

STANDARD CHARTERED BANK


Western Indian state motors (westernInd) SCB ISIC Code: 7114 Date Prepared:
6/11/2005
Detailed Balance Sheet - Actual and % Page 1
Thousands

Statement Date 3/31/2002 3/31/2003 3/31/2004

Months Covered 12 12 12

Analyst Monika Monika Monika


Source Currency: INR Target Currency: INR Segment Type: Other

CURRENT ASSETS

Cash and Bank Deposits 5,134 10.0 3,320 7.0 2,912 9.4
Trade Debtors (Gross) 14,677 28.5 17,857 37.5 6,185 20.0
Stock: Trading 19,720 38.3 14,196 29.8 10,369 33.6
Other Op Current Assets 2,056 4.0 2,604 5.5 2,399 7.8
TOTAL CURRENT ASSETS 41,587 80.8 37,977 79.7 21,865 70.9

FIXED ASSETS
Motor Vehicles 9,870 19.2 9,684 20.3 8,991 29.1
TOTAL FIXED ASSETS 9,870 19.2 9,684 20.3 8,991 29.1
TOTAL TANGIBLE ASSETS 51,457 100.0 47,661 100.0 30,856 100.0

WORKING CAPITAL (1,873) - (1,983) - (886) -


NET WORKING ASSETS 20,651 - 17,808 - 11,873 -
NET CASH ASSETS (2,965) - (5,343) - 1,245 -

CURRENT LIABILITIES

Due to Banks (O/D,T/R etc) 7,959 15.5 8,663 18.2 1,667 5.4
Curr. Mat. Hire Purchase Commit 140 0.3 - - - -
Trade Creditors 13,746 26.7 14,245 29.9 4,681 15.2
Creditors: Sundry 13,556 26.3 11,613 24.4 11,957 38.8
Other Op. Cur Liabilities 8,059 15.7 5,439 11.4 4,446 14.4
TOTAL CURRENT LIABILITIES 43,460 84.5 39,960 83.8 22,751 73.7

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[DESERTATION]

TERM LIABILITIES

Loans from Dir/Shareholders (1 Yr+) 2,100 4.1 1,114 2.3 1,206


3.9
TOTAL TERM LIABILITIES 2,100 4.1 1,114 2.3 1,206 3.9
TOTAL LIABILITIES 45,560 88.5 41,074 86.2 23,957 77.6

EQUITY

Share Capital - Ordinary 5,897 11.5 6,587 13.8 6,899 22.4


TOTAL EQUITY 5,897 11.5 6,587 13.8 6,899 22.4
NET WORTH 5,897 11.5 6,587 13.8 6,899 22.4
EFFECTIVE EQUITY 5,897 11.5 6,587 13.8 6,899 22.4
TOTAL LIABS & NET WORTH 51,457 100.0 47,661 100.0 30,856 100.0

[Type text] Page 140


[DESERTATION]

STANDARD CHARTERED BANK

Western Indian state motors (westernInd) SCB ISIC Code: 7114 Date Prepared:
6/11/2005

Detailed Profit & Loss Statement - Actual and % Page 2


Thousands

Statement Date 3/31/2002 3/31/2003 3/31/2004

Months Covered 12 12 12

Analyst Monika Monika Monika

Source Currency: INR Target Currency: INR

PROFIT & LOSS STATEMENT

Sales (Net of Returns/Duties) 211,461 100.0 193,862 100.0 100,872 100.0


Cost of Sales (205,386) (97.1) (188,393) (97.2) (96,444) (95.6)

GROSS PROFIT (LOSS)


FROM TRADING 6,075 2.9 5,469 2.8 4,428 4.4

OTHER OPERATING INCOME


Commission Received 2,379 1.1 3,412 1.8 1,518 1.5
Rent Received 442 0.2 441 0.2 442 0.4
Other Operating Income 430 0.2 446 0.2 2,294 2.3
Total Other Operating Income 3,251 1.5 4,299 2.2 4,254 4.2

GROSS PROFIT (LOSS) 9,326 4.4 9,768 5.0 8,682 8.6

ADMIN/OTHER OPERATING EXPENSES


Depreciation (775) (0.4) (832) (0.4) (783) (0.8)
Bad Debts Written Off - - (349) (0.2) - -
Wages & Salaries (2,258)(1.1) (2,387)(1.2) (2,570)(2.5)
Other SG&A Expense (4,193) (2.0) (3,986) (2.1) (3,143) (3.1)
Total Admin/Other Oper. Expenses (7,226)(3.4) (7,554)(3.9) (6,496)(6.4)

NET OPERATING PROFIT (LOSS)


BEFORE INTEREST & TAXES 2,100 1.0 2,214 1.1 2,186 2.2

Interest Expense (1,104)(0.5) (883) (0.5) (504) (0.5)

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[DESERTATION]

NET PROFIT (LOSS) AFTER TAX 996 0.5 1,331 0.7 1,682 1.7

PROFIT (LOSS) DISTRIBUTION


Transfers to/from (+) Rev Reserves (996) - (1,331) - (1,682) -
PROFIT RETAINED - - - - - -

STANDARD CHARTERED BANK


Western Indian state motors (westernInd) SCB ISIC Code: 7114 Date Prepared:
6/11/2005
Detailed Cash Flow Page 3
Thousands

Statement Date 3/31/2003 3/31/2004

Months Covered 12 12

Analyst Monika Monika

Sales (Net of Returns/Duties) 193,862 100,872


Chg in Trade Debtors (Gross) (3,180) 11,672
Cash Collected From Sales 190,682 112,544

Cost of Sales (188,393) (96,444)


Chg in Stock: Trading 5,524 3,827
Chg in Trade Creditors 499 (9,564)
Cash Paid to Suppliers (182,370) (102,181)

CASH FROM TRADING ACTIVITIES 8,312 10,363

Bad Debts Written Off (349) -


Wages & Salaries (2,387) (2,570)
Other SG&A Expense (3,986) (3,143)
Cash Paid for Operating Costs (6,722) (5,713)

GROSS CASH FROM OPERATIONS 1,590 4,650

Commission Received 3,412 1,518


Rent Received 441 442
Other Operating Income 446 2,294
Chg in Creditors: Sundry (1,943) 344
Chg in Other Op Current Assets (548) 205
Chg in Other Op. Cur Liabilities (2,620) (993)
Other Income (Expense) & Taxes Paid (812) 3,810

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[DESERTATION]

NET CASH AFTER OPERATIONS 778 8,460

NET CASH AFTER OPERATIONS 778 8,460

Interest Expense (883) (504)


Cash Paid for Dividends & Interest (883) (504)

CASH AFTER FINANCING COSTS (105) 7,956

Curr. Mat. Hire Purchase Commit (140) -


Current Portion Long Term Debt (140) -

CASH AFTER DEBT AMORTISATION (245) 7,956

Chg in Motor Vehicles 186 693


Depreciation (832) (783)
Chg in Other Fixed Assets (646) (90)
Cash Paid for Plant and Investments (646) (90)

FINANCING SURPLUS (REQS) (891) 7,866

Chg in Due to Banks (O/D, T/R etc) 704 (6,996)


Chg in Loans from Dir/Shareholders (1 Yr+) (986) 92
Chg in Equity 690 312
Admits to Profit & Loss (1,331) (1,682)
Total Chg in Capital (641) (1,370)
Total External Financing (923) (8,274)

CASH AFTER FINANCING (1,814) (408)

Add:
Cash and Bank Deposits 5,134 3,320
ENDING CASH & EQUIVALENTS 3,320 2,912

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[DESERTATION]

STANDARD CHARTERED BANK


Western Indian state motors (westernInd) SCB ISIC Code: 7114 Date Prepared:
6/11/2005
Detailed Ratios Page 4
Thousands

Statement Date 3/31/2002 3/31/2003 3/31/2004

Months Covered 12 12 12

Analyst Monika Monika Monika

LIQUIDITY RATIOS

Stock Turn Period (Days) 35 28 39


Gross Trade Debtor Collection Period (Days) 25 34 22
Net Trade Debtor Collection Period (Days) 25 34 22
Net Debtor Collection Period (Days) 25 34 22
Trade Creditors Pmt Period (Days) 24 28 18
Net Cash Cycle Period (Days) 36 34 44
Total ST Debt Coverage 0.08 3.90
Cash Coverage 0.76 16.79

DEBT MANAGEMENT RATIOS

Leverage Ratio 7.73 6.24 3.47


Gearing 1.37 1.32 0.24
NPBIT: Interest 1.90 2.51 4.34
Net Cash after Operations: Interest 0.88 16.79
Interest on Avg. Financial Debt (%) 13.63 10.54 9.76
Short Term Debt 8,099 8,663 1,667
Long Term Debt - - -

PROFITABILITY RATIOS (%)

Net Profit Margin 0.47 0.69 1.67


Operating Efficiency 3.42 3.90 6.44
Return on Equity 16.89 20.21 24.38
Return on Assets (Geared) 1.94 2.79 5.45
Return on Assets (Un-geared) 4.08 4.65 7.08
Gross Profit Margin 2.87 2.82 4.39
NPBIT to Sales 0.99 1.14 2.17
NPBT to Sales 0.47 0.69 1.67

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[DESERTATION]

GROWTH RATIOS (%)

Sales Growth (8.32) (47.97)


Net Profit Growth 33.63 26.37
Total Asset Growth (7.38) (35.26)
Total Liabilities Growth (9.85) (41.67)
Gross Profit Growth (9.98) (19.03)
Sustainable Growth 20.32 25.34 32.23

OTHER RATIOS

Current Ratio 0.96 0.95 0.96


Liquid Ratio 0.50 0.60 0.51
Sales: Fixed Assets 21.42 20.02 11.22
Sales: Total Assets 4.11 4.07 3.27
Effective Tax Rate - - -
Capital Spending (186) (693)
Avg. Cap Spending - -
Expected Cap Spending 11 (3,862)
Avg. Expected Cap Spending 11 (1,926)
Def Tax + Tax Payable/Tax Exp (%) N/A N/A N/A
Dividend Payout Rate - - -
Average Tax Rate (%) - - -
Other Cur Assets/Tot Cur Assets (%) 4.94 6.86 10.97
Other Cur Liabilities/Tot Cur Liabilities (%) 18.54 13.61 19.54
Other Fixed Assets/Tot Fixed Assets (%) - - -
Other Term Liabilities/Tot Term Liabilities (%) - - -

Other Income/Net Income Aft Tax (%) 326.41 322.99 252.91


Investments/Total Assets (%) - - -
Gross Cash Flow less Interest & Dividends (annualized) 707 4,146
Free Cash Flow (annualized) 542 2,249

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[DESERTATION]

STANDARD CHARTERED BANK


Western Indian state motors (westernInd) SCB ISIC Code: 7114 Date Prepared:
6/11/2005
Detailed Ratios Page 5
Thousands

Statement Date 3/31/2002 3/31/2003 3/31/2004

Months Covered 12 12 12

Analyst Monika Monika Monika

CREDIT GRADING DATA

Large Corporate
Total Equity 5,897 6,587 6,899
Leverage (Total Liabilities to Total Assets) 0.89 0.86 0.78
Net Profit Margin 0.47 0.69 1.67
Cash to Total Debt 0.09 5.07
Debt to EBITDA 2.82 2.84 0.56
EBITDA to Interest - New 2.60 3.45 5.89
Net Cash Ratio - New 0.02 0.35
Pre-tax Profitability - New - 0.01 0.02
Size Factor (Total Equity) - New 5,897 6,587 6,899
Capital Structure - New 0.11 0.14 0.22
Liquidity - New 0.22 0.25 1.48
Debt Service Coverage (%) - New 0.52 0.46 0.50
Cash Flow Ratio 2 (%) - New 0.61 4.46

Middle Market
Gearing Ratio 0.20 0.21 0.09
Net Profit Margin (%) 0.47 0.69 1.67
Cash Ratio (%) 11.81 8.31 12.80
Trading Stock Turn Period 35 28 39
EBITDA to Interest 2.60 3.45 5.89
Cash Flow Ratio N/A 0.02 0.18
Asset Turnover 4.11 4.07 3.27
Debt Service Coverage (%) 0.52 0.46 0.50
Sale Growth (%) (8.32) (47.97)
Cash Flow Ratio 2 (%) 0.61 4.46

Channel Finance & Supply Chain


Gearing Ratio 0.20 0.21 0.09
Stock Turn Period 35 28 39

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[DESERTATION]

Net Profit Margin % 0.47 0.69 1.67


Total Tangible Assets 51,457 47,661 30,856
Net Worth 5,897 6,587 6,899
Productivity % 1.07 1.23 2.55

STANDARD CHARTERED BANK


Western Indian state motors (westernInd) SCB ISIC Code: 7114 Date Prepared:
6/11/2005
Detailed Ratios Page 6
Thousands

Statement Date 3/31/2002 3/31/2003 3/31/2004


Months Covered 12 12 12
Analyst Monika Monika Monika

FINANCIAL SUMMARY FOR BCA

FRONT SHEET DATA

Total Sales 211,461 193,862 100,872


Operating Profit 2,100 2,214 2,186
Extraordinary Expenses - - -
Net Profit after Tax 996 1,331 1,682
EBITDA 2,875 3,046 2,969
Net Worth 5,897 6,587 6,899
Total Debt 8,099 8,663 1,667
Gearing 1.37 1.32 0.24
Debt to EBITDA 2.82 2.84 0.56
Net Cash after Operations 778 8,460
CADA (245) 7,956
Contingent Liabilities - - -
Total Provision for Employee Benefits (Including Pension) - - -

REPAYMENT SOURCE DATA

PROFITABILITY
Total Sales 211,461 193,862 100,872
Gross Profit 9,326 9,768 8,682
Net Profit after Tax 996 1,331 1,682
Change in Sales (%) (8.32) (47.97)
Gross Profit Margin (%) 2.87 2.82 4.39
EBITDA to Sales (%) 1.36 1.57 2.94
NPBT to Sales (%) 0.47 0.69 1.67

NET WORKING CASH CYCLE

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[DESERTATION]

Stock Turn Period (SDOH) 35 28 39


Trade Debtors Period (DDOH) 25 34 22
Trade Creditors Period (CDOH) 24 28 18
Net Working Cash Cycle Period 36 34 44

DEBT SERVICE CAPACITY

Net Cash after Operations 778 8,460


Cash after Financing Costs (105) 7,956
Cash after Debt Amortisation (245) 7,956
Net Cash after Operations/Interest 0.88 16.79
Financing Surplus/Deficit (891) 7,866

LONG TERM ASSET/LIABILITY MANAGEMENT

Net Fixed Assets 9,870 9,684 8,991


Long-Term Debt+ Equity 5,897 6,587 6,899
Sales to Fixed Assets 21.42 20.02 11.22
Capex to Depreciation Ratio (0.22) (0.89)

DEBT PROTECTION

Gearing 1.37 1.32 0.24


Interest Cover 1.90 2.51 4.34
Debt to EBITDA 2.82 2.84 0.56
EBITDA to Interest 2.60 3.45 5.89
Maturing Debt Obligations S/T 8,099 8,663 1,667
Maturing Debt Obligations M/T - - -
Debt Service Cover Ratio 1.80 9.23
Subordinated Debt - - -
Annual Operating Leases - - -
Contingent Liabilities - - -

CAPITAL PROTECTION

Tangible Net Worth 5,897 6,587 6,899


Revaluation Reserve - - -
Total Assets 51,457 47,661 30,856
Leverage (Total Liabilities to Total Assets) 0.89 0.86 0.78
Dividend Payout Ratio - - -

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[DESERTATION]

STANDARD CHARTERED BANK

Western Indian state motors (westernInd) SCB ISIC Code: 7114 Date Prepared:
6/11/2005
Financial Summary Ratios Page 7
Thousands

Statement Date 3/31/2002 3/31/2003 3/31/2004

Months Covered 12 12 12

Analyst Monika Monika Monika

Source Currency: INR Target Currency: INR Segment Type: Other

LIQUIDITY

Cash after Financing Costs (105) 7,956


Cash Coverage 0.76 16.79

PROFITABILITY

Sales (Net of Returns/Duties) 211,461 193,862 100,872


Gross Profit (Loss) 9,326 9,768 8,682
Net Oper Profit (Loss) Before Interest & Tax 2,100 2,214 2,186
Net Oper Profit (Loss) Before Tax 996 1,331 1,682
Profit Retained - - -

CAPITAL STRUCTURE

Total Equity 5,897 6,587 6,899


Net Worth 5,897 6,587 6,899
Total Debt 8,099 8,663 1,667
Gearing 1.37 1.32 0.24
NPBIT: Interest 1.90 2.51 4.34

OTHERS

Sales Growth (8.32) (47.97)


Sustainable Growth 20.32 25.34 32.23
Net Cash Cycle Period 36 34 44
Total ST Debt Coverage 0.08 3.90
Net Op. Profit before Interest& Taxes/Sales (%) 0.99 1.14 2.17

ISIC: 7114
Nature of Business Trading
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[DESERTATION]

ANALYSIS

The motor sector of this company is on demand but there is a tough competition in the market. A

number of multi-national companies are coming to India with new technologies and innovative

techniques which makes very difficult for an Indian company to sustain in the market.

A look at the P &L account of the Corporation shows that there is a constant decrease in the

sales of the Company, but even after that the Company is able to maintain its NPAT. If we analyze the

situation closely we find that the NPAT/Sales of the company have kept on increasing year by year

from .5 to .7 to 1.7%. The Company’s gross profit has also increased in the same way from 2.8 to 4.4%.

There is an increase in the management and operation efficiency of the company because the

company is able to decrease the cost of sales which helps the corporation to increase its Gross profit.

The bad-debts of the company are also removed during the year 2004, which shows the strong

collection technique of the company.

But if we analyze the sales part of the company, it is not showing good performance, because if

it keeps on increasing in the same pace, then it will adversely affect the company. So if the company

increases its sales with the induction of the new technologies and adoption of aggressive marketing

strategies, then the prospects of the company could brighten in the future.

Comments of various ratios

 If we see the figures of the company's profit in the percentage form, then we can say that

there is a positive trend as the net Profit & the gross profit of company are increasing year by year.

 Company’s current ratio & the Quick ratio are below 1 which is not good for any

company. Any company can face this situation in getting a short term loan from the market.

 There is high decrease in Debt equity ratio & the Gearing ratio of the company which is a

very good indicator for a company. It shows that the company's dependency on the outsiders is decreasing

progressively & the company is becoming self-dependent.

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[DESERTATION]

A glance towards the NPBIT/Interest shows that it has increased from 1.90 -> 2.54 -> 4.34

which is a positive for the company. It shows that for every one rupee of Interest liability,

the company is having Rs.4.34, which means that the company can easily bear the interest

payment .The above ratios directly shows that Company can repay a major portion of its

debt.

 When we come on the Cash Conversion cycle of the company, we see that it has

increased, which is not a good sign for the company because the company has to be dependent on

outsider's financing which carries an additional cost .The reason for this is an increment in the stock-

turnover period & the debtor-turnover period.

After analyzing it we can say that due to the lack of proper advertising of the company its

sales is not increasing & on the other side its debtor & stock period is also not increasing.

It shows that lots of money of this company is locked in the form of debts & the stock.

Or we can say that this company is trying to increase its sales by providing the lenient

(loose) credit policy or facility to its customers. If we see the cash flow statement then

we will find that company has been able to repay a major portion of its due to Bank or

debt which helped the company in reducing its interest expenses.

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[DESERTATION]

OVERALL ANALYSIS

If we analyze the whole situation of the company, then we will find that, as due to lots of Competitive

pressure in the market, the sales of the company are decreasing. If company comes with the new

technology, talented employees then the company could rise in the future as it is clear from the annual

report of the company that the % of the Net profit & the Gross Profit of the company is increased.

As the Corporation gearing ratio & the debt to EDITDA is decreasing year by year which shows the sign

of the corporation self dependency. In that case a lender can believe or trust the Corporation for the

security of its interest because corporation liabilities are also decreasing.

If we se the overall picture & compare the corporation with the industry, then we can say that Corporation

is able to control on its cost department or cost of sales but the main problem with the corporation at this

stage is to face the stringent Competition in the market. As lots of multinational company had entered into

the market, so company need to adopt some innovative & aggressive techniques to face this situation. The

corporation approached the bank for a loan of Rs.1 crore to purchase the new updated machines to enhance

the productivity & production of the innovative products.

If we see the company’s condition & the market condition then we can say that if company will launch its

new products in the market; then it can definitely increase its sale which will directly increase the profit of

the corporation.

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[DESERTATION]

If we see the past 3 years record of the corporation in term of EBI TDA/ Interest ,it is near to Rs.22 lakhs

in the 3 years, even after the decrease in the Sales of the corporation. As the Corporation is offering the

collateral of new machines & some personnel property, then we can sanction a part of the requirement of

the corporation. If The bank sanctions Rs.70 lakhs @14 % per annum (PLR + 1.5%) , then we can say that

the corporation will easily be able to repay its interest installment of Rs.9,60,000 as its EBITDA/INT.. is

more than Rs.21 lacks in last 3 years. And if we analyze the credit of the corporation, we see, it has been

able to repay a major portion of its debt without any default. If the same crisis happens in the near future,

the bank can recover its loan with the sale of its machinery & the personal property of the customers. The

value of the property is Rs.30, 00,000 and there are the chances that its value will increase in the future.
The Gearing Ratio of the company is 0.01% for the financial year 2000-01, 0.60% For 2002-03 ,Which is

less than 3 and the Interest coverage ratio is 1.09 ,1.36, 2.32 for financials years 2000-01, 2001-02, 2002-

03 respectively.

So now finally we can say that bank can sanction the loan of Rs.70 lacks with 30 % margin at the rate of

14 % or 1.5% above PLR because there are fewer risks associated with it.

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[DESERTATION]

CONCLUSION
Standard Chartered Bank over the years maintained its services and relationship. It runs over
78 Branches all over the country. It has
SME sector is Vital to the economy . This sectors accounts for 95% of industrial units The
SME sector is vital to the Indian economy. This sector accounts for 95 percent of industrial units, around 40
percent of the industrial output and 35 percent of the country's exports. With liberalization, the sector is
witnessing a new dawn. SMEs are fast adopting international best practices, focusing on productivity and are at
the leading edge when it comes to innovation and entering new global markets. In addition to sectors like the
auto ancillary, garment exports and pharma, SMEs in emerging sectors such as BPO, ITES, etc are already
making their presence felt in the international vendor markets.
However, SMEs face hurdles in their growth process. To remove these, there are several issues that we need to
tackle. These include revamping the policy framework in the context of the new global paradigm, consolidating
various policy initiatives in a single nodal authority and developing a comprehensive credit guarantee scheme
for small businesses. In this context, the union budget has given importance to stimulating growth in the SME
sector.
While the sector is attractive in terms of its potential, banks have to overcome several challenges in servicing
the SME banking requirement. These are challenges of credit risk evaluation based on inadequate financial
information, high cost of setting up wide distribution architecture, particularly in semi-urban and upcountry
areas and meeting the large volumes of granular transactions.

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[DESERTATION]

SMEs, on their end, are seeking efficiency in banking transactions, convenience and reduction in cost of
transactions.
With globalization and increasing competition, the SME customer now requires complex and sophisticated
banking products, and is becoming increasingly demanding in terms of value and service levels. SME exports
are on the rise - SMEs are exporting to retail chains (Walmart, Gap) , auto majors (Ford, GM) and pharma
MNCs (GSK, Avetis, Pfizer). To fund this growth, there are also additional avenues such as the Indonext
platform. This will provide the much-needed capital market window for growth. Besides, the SME Growth
Fund recently announced in the budget, will provide debt-funding support.

We can conclude that the commercial banks are likely to remain the dominate institution for
some time. Banks have to gradually rise to provide services in response to market
requirement. Banks can be made more efficient by improving their management system.
Better management requires new lending polices, better loan recovery procedures, more
sophisticated information system, better trained and highly motivated staff and less
government interference. The entry of new private banks, domestic or foreign can stimulate
competition.
In spite of competition, commercial banks are to spearhead the financial system in India and
continue to foster accelerated economic development and growth with merit.
Apart from performing the key function of providing liquidity and payment services to the
real sector and managing bulk of the financial intermediation process, the banking sector has
contributed to the process of economic development by serving as a major source of credit to
all section of the economy, be it the house hold, industry, government or the weaker section
of the society.
To reach the international standard s of capital adequacy , risk management and accounting
practices the right talent at appropriate levels of management needs to be inducted laterally
and banks should have the necessary freedom to do so.
There are several impediments including statuary, legal and political in the recovery of bank
loans and advances. Therefore,

restructure of borrower accounts should be left to individual bank decision subject to full
transparency then only the banks can perform better, as business organization in pursuit of
excellence and sound financial performance.
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[DESERTATION]

As I have analyzed three companies in my project report, I came to know there are some
chances of improvement. The bank should properly analyze the customers profile on some
other grounds also to minimize credit risk. If a loan turns into NPA then it can create a big
trouble for the company.
Standard Chartered Bank over the years maintained its services and relationship. It runs over
78 Branches all over the country. It has created a name for itself. As far as my views are
concerned

BIBLIOGRAPHY
BOOKS AND NOTES

 Process notes of different departments

 Brochures of different SCB Products

 Six Sigma for Managers by author GREG BRUF

 Study material from the Bank

 Reserve bank of India Guidelines Booklet

 Presentations from Employees

WEBSITES

 www.standardchartered.com

 www.default.com

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