Summer Training Project on

ANALYSIS AND APPRAISAL OF CREDIT REQUIREMENTS OF

LARGE BORROWERS AND SME

A training report submitted in partial fulfillment of the requirement for

POST GRADUATE DIPLOMA IN MANAGEMENT
PGDM

SESSION 2009-11

UNDER SUPERVISION OF SUBMITTED BY

MRS.MEENAKSHI SINGH PRIYA SARASWAT
Sr. LECTURER.S.M.S PG/15/067
VARANASI S.M.S. VARANASI
2
 Declaration

I hereby declare that the dissertation report entitled “Appraisal and

Analysis of Credit Requirements of large borrowers and SMEs” is written
and submitted by me under the guidance Mrs.Meenakshi Singh, Faculty,
School of Management Sciences,Varanasi is my original work

This project is not copied from any source or other project submitted for
similar purpose and this particular project would only be used for
academic purpose & Organisation in which training is completed.It would
not be considered for any other commercial reason.

PRIYA SARASWAT
PGDM
PG/15/067

3
 Preface
“No one can undermine the importance of Summer training project as a
part of ongoing process to enrich knowledge and skill and levels of oneself”.

For management career, it is important to develop managerial skills. In

order to achieve positive and concrete results, along with theoretical
concepts, the exposure of real life situation existing in corporate world is
very much needed. To fulfill this need, this practical training is required.

I took training in UNION BANK OF INDIA,VARANASI. It was my

fortune to get training in a very healthy atmosphere. I got ample
opportunity to view the working of bank.

This report is the result of my eight weeks of summer training in UNION

BANK OF INDIA as a part of PGDM. The subject of my report is-
APPRAISAL AND ANALYSIS OF CREDIT REQUIREMENTS OF
LARGE BORROWERS AND SMEs.

In the forthcoming pages, an attempt has been made to present a

comprehensive report covering different aspects of my training.

Priya
Saraswat
PG/15/067

4
 PGDM

ACKNOWLEDGEMENT

This Report is the outcome of the sincere support and guidance of all
the people who directly or indirectly encouraged and helped me to
complete this report successfully.

Firstly, I would like to express my thanks to The Director Prof. P.N.Jha,

the Dean,my mentor Mrs.Meenakshi Singh & all faculty members for their
guidance & undue support.

I also express my profound sense of gratitude to the authorities of

“UNION BANK OF INDIA”, VARANASI, especially to Mr. I.ARSHAD
Senior Manager, for providing me the platform & track for the purpose.

But this could not be possible without the enthusiastic support of my

Summer Training Guide Dr. Meenakshi who helped me during the course
of these investigations.

I am also grateful to my parents without whose constant guidance &

support this survey couldn’t have been carried out.

My summer training has added to my practical knowledge and build up my

confidence. I thank once again all the staff members of Union Bank with
the active support of whom I was able to complete my project report
successfully

Thanks.

Priya Saraswat
PGDM

5
CONTENTS

1. Company Profile
 Introduction
 Location
 Organizational Structure
 Products Markets.
 Competitors
 Strategies
 SWOT Analysis

2. Summer training project

 About the project

6
 EXECUTIVE SUMMARY
Study Topic:
APPRAISAL AND ANALYSIS OF CREDIT REQUIREMENTS
OF LARGE BORROWERS AND SMEs

Objectives: -

1) To assess the procedure of granting loans to borrowers

2) To assess the proposal made for credit facilities

Study instrument:
Official documents & profile of bank.

Scheme of Presentation:
First of all I give the overview of Indian Banking.Then the report presents
a general profile of UNION BANK OF INDIA where the summer training has
been undertaken.

In the third part process of granting credit is covered and analysis is made how
to grant credits to large borrowers and SMEs

7
 BANKING IN INDIA
AN OVERVIEW
Banking in India originated in the first decade of 18th century with The General
Bank of India coming into existence in 1786. This was followed by Bank of
Hindustan. Both these banks are now defunct. The oldest bank in existence in
India is the State Bank of India being established as "The Bank of Bengal" in
Calcutta in June 1806. A couple of decades later, foreign banks like Credit
Lyonnais started their Calcutta operations in the 1850s. At that point of time,
Calcutta was the most active trading port, mainly due to the trade of the British
Empire, and due to which banking activity took roots there and prospered. By
the 1900s, the market expanded with the establishment of banks such as Punjab
National Bank, in 1895 in Lahore and Bank of India in 1906, in Mumbai- both
of which were founded under private ownership. The Reserve Bank of India
formally took on the responsibility of regulating the Indian banking sector from
1935. After India's independence in 1947, the Reserve Bank was nationalized
and given broader powers.

8
Early History:
At the end of late-18th century, there were hardly any banks in India in the
modern sense of the term.Some banks were opened at that time which
functioned as entities to finance industry, including speculative trades in cotton.
With large exposure to speculative ventures, most of the banks opened in India
during that period could not survive and failed. The depositors lost money and
lost interest in keeping deposits with banks. Subsequently, banking in India
remained the exclusive domain of Europeans for next several decades until the
beginning of the 20th century.

(The Bank of Bengal, which later became the State Bank of India.)

9
At the beginning of the 20th century, Indian economy was passing through a
relative period of stability. Around five decades have elapsed since the India's
First war of Independence, and the social, industrial and other infrastructure
have developed. At that time there were very small banks operated by Indians,
and most of them were owned and operated by particular communities. The
banking in India was controlled and dominated by the presidency banks,
namely, the Bank of Bombay, the Bank of Bengal, and the Bank of Madras -
which later on merged to form the Imperial Bank of India, and Imperial Bank of
India, upon India's independence, was renamed the State Bank of India. There
were also some exchange banks, as also a number of Indian joint stock banks.
All these banks operated in different segments of the economy. The presidency
banks were like the central banks and discharged most of the functions of
central banks. They were established under charters from the British East India
Company. The exchange banks, mostly owned by the Europeans, concentrated
on financing of foreign trade. Indian joint stock banks were generally under
capitalized and lacked the experience and maturity to compete with the
presidency banks, and the exchange banks. There was potential for many new
banks as the economy was growing. Lord Curzon had observed then in the
context of Indian banking: "In respect of banking it seems we are behind the
times. We are like some old fashioned sailing ship, divided by solid wooden
bulkheads into separate and cumbersome compartments."

Under these circumstances, many Indians came forward to set up banks, and
many banks were set up at that time, a number of which have survived to the
present such as Bank of India and Corporation Bank, Indian Bank, Bank of
Baroda, and Canara Bank.

10
UNION BANK OF INDIA
(A COMPANY PROFILE)

11
VISION
To become the bank of first choice in our chosen areas by building beneficial
and lasting relationship with customers through a process of continuous
improvement

MISSION
A logical extension of the Vision Statement is the Mission of the Bank,which is
to gain market recognition in the chosen areas & To promote confidence and
commitment among the staff member.

History
Union Bank of India was founded on 11 th November 1919 as a limited company in
Mumbai.In 1921 Bank’s registered office was inaugurated by Mahatma
Gandhi,Father of the Nation. In 1969 Bank
Nationalised along with 10 other leading banks & Shri F.K.F.Nariman became its first
Custodian.Later Bank started expanding to new areas & new activities & around 500
Branches were opened at Nalbari in Assam till 1972.Since that period Bank has gain
very
good reputation and share in market.

12
Union Bank of India (UBI) is one of India's largest state-owned banks (the
government owns 55.43% of its share capital). It has assets of USD 13.45 billion and
all the bank's branches have been networked with its 1135 ATMs. Its online
Telebanking facility are available to all its Core Banking Customers - individual as

well as corporate. It has representative offices in Abu Dhabi, United Arab

Emirates, and Shanghai, Peoples Republic of China, and a branch in

Hong Kong.

Organizational Structure

Union Bank of India has a lean three-tier structure. The delegated powers have
been enhanced. The decentralised power structure has accelerated decision-
making process and thereby Bank quickly responds to changing needs of the
customers and has also been able to adjust with the changing environment.

Bank has nine General Manager Offices at Ahmedabad, Pune, Lucknow, Delhi,

Banglore, Bhopal, Mumbai, Calcutta and Chennai which function as an extended
arm
of corporate office. It also has two Zonal Offices at Bhopal and Pune. Tier 3
comprises
of 54 Regional Offices at various geographical center of the country

13
LOCATION
Union bank of India has its Head office in Mumbai at Nariman point.Bank has a wide
network of its branches all over India. Union Bank Of India is one of the leading
bank of Varanasi.

PRODUCTS

Union Bank of India offers its customers various types of products and services
so that they can make the most of their banking experiences. The wide range of
the services and products consist of:
Personal Banking

 Accounts & Deposits – cumulative deposit scheme, deposit reinvestment

certificate, monthly income scheme, union flexi-deposit, senior citizens
scheme, multi gain savings account, no frills saving account, union super
salary account, union classic current account
 Retail Loans – union cash, union home, union health, union miles, union
education, union top up, EMI calculator, union smile
 Cards - Classic / Silver / Gold, Corporate Credit Cards, Add-On Cards
 Insurance & Investment – mutual fund, union healthcare
 Demat – demat accounts, online share trading
 Payment

14
NRI Banking

 Remittance - Union E-Remit, Nostro Details for Remittance

 Savings & Deposits - NRO Non Resident Ordinary A/c Scheme, NRE
Non Resident External Rupee, RFC, FCNR(B), Union Unfixed, Foreign
Currency Deposit
 Loan & Services – house loans, foreign currency loans, loans against
deposit, immovable property, and shares or debenture
 Payments - Union Bill Pay

Corporate Banking

15
  CMS - Union Speed, Union Centralized Debits/Credits, Union Prompt
 E-Tax - Customs and Direct taxes, DGFT, Central Excise and Service
Tax
 Trade Finance – trade finance for exporters, trade finance for importers,
foreign currency loans, correspondent banking
 Insurance - Non life Insurance – Corporate Agency, Insurance- Corporate
Agency
 Syndication of Loans
 MSME Banking
 Loans & Policies

Internet Banking

 Account Information
 Transfer of Funds
 Bills
 Requests
 Mails
 Trade
 Limits
 Currency
 Uploads
 Customization
 Financial enquiries
 Non Financial enquiries

16
Domestic Operations

Union Bank of India is having a State of the Art treasury, which operates at the
5th floor of the Bank's Central Office building at Nariman Point, Mumbai. In
conformity with the latest treasury management concept, the Bank has fully
integrated its treasury operations and the Treasury in its present form operates
simultaneously in all the financial markets viz,. Money Market, Debt Market,
Capital Market, Foreign Exchange Market & Derivatives Market. The Treasury
is equipped with an upgraded software system, supported by latest information
and communication technologies and manned by a select team of trained,
experienced and dedicated officers. A Mid-office operates within the Treasury,
which gives risk management support in keeping with a well-documented and
updated risk management policy. 

The Treasury also functions as the gateway of transactions for the Real Time
Gross Settlement (RTGS) system and main hub for Society for Worldwide
Inter-bank Financial Telecommunications (SWIFT) to which banks exchange
dealing branches spread across the country are connected. The Treasury has
been discharging a prominent role in messaging and remittance arrangements as
well. “Union Bullet” utilizing the RTGS gateway, was made available as a
convenient user-friendly product for the Bank’s customers. All the CBS
branches of the Bank are RTGS enabled.

Apart from activities pertaining to management of funds and liquidity, the

domestic wing of Treasury also handles financial instruments like:

· Commercial Papers (CP)

· Certificate of Deposits (CD)
· Government Securities

17
· Treasury Bills (TB)
· Bonds and Debentures
· Equities and various other derivatives.

The products and services offered by Treasury cater to the inter-bank market as
well as to the corporate customers of the bank. The Bank offers its customers,
including firms, companies, corporate bodies, institutions, provident funds
trusts, Regional Rural Banks, Urban Cooperative Banks and Non-Banking
Financial Companies opportunities to invest in Government Securities as
allowed by Reserve Bank of India for non-competitive bidding.

   Forex Operations
Union Bank of India, one of the major public sector banks in India having a
correspondent relationship with 345 leading international banks at all major
international centers. The bank has entered into Rupee Drawing Arrangements
(RDA) with 23 International Banks and 13 Exchange Houses in Middle East. The
Bank has also introduced a Internet-based ‘Union e-Remit Product’ for NRIs in
U.K. and U.S.A. as well as for Exchange Houses in Middle East.

The modern state-of-the-art dealing room at its Integrated Treasury Branch at

Mumbai handles exchange business of its clientele. The bank has retained its
primacy as a leading market maker both in spot and forward markets, along with
foreign exchange swap markets.

The forex dealing desk at the Treasury is provided with all modern communication
facilities and is in the process of linking all its authorized branches via Reuters
Automated Dealing (RETAD) System, to provide on-line quotes for foreign
exchange transactions.

18
Through its large network of authorized branches, the bank caters to the foreign
exchange needs of its clientele engaged in export and import trade and the Treasury
provides rates for conversion of all major world currencies like U S Dollar, Sterling
Pounds, Euro, Swiss Francs, Japanese Yen and other exotic currencies. The
services to the customers of the Bank include hedging of foreign currency risks by
providing forward covers and various derivative products.

The Bank is in a position to deliver its products promptly and efficiently to its NRI
customers through select pool of Customers Relationship Managers (CRMs) posted
at strategic locations. The range of products includes remittance facilities and
acceptance of deposits in Indian Rupees (NRE / NRO) as well as in designated
foreign currencies (FCNR). Resident as well as Returning Indians can avail of
benefits like Resident Foreign Currency Accounts (RFC).

Union Bank of India also offers derivative products like Interest Rate Swaps (IRS),
Forward Rate Agreements (FRA) for hedging interest rate risks and for currency
risks, Currency Swaps and Options .

COMPETITORS
Union Bank of india has its various competitors like State Bank of India,Punjab
National Bank,Bank of Baroda,Bank of India,Canara Bank,Oriental Bank,IDBI
Bank,Central Bank of India,Syndicate Bank etc.After a tough competition UBI
clearly scores over its most of the peers on various parameters.

STRATEGIES
Union Bank of India has accepted the challenges and has positioned itself to

19
opportunities that technology has thrown open. The opening up of the
economy together with near total decontrol from the regulatory authorities
has added impetus to our efforts. The transition from traditional banking to
technology banking has already begun and a number of technology projects
are under way and also envisaged for the future. The present and proposed IT
initiatives of the Bank encompasses the following:

All the 2531 branches of the Bank are now under CBS. Leveraging on the
CBS infrastructure Bank has centralized back office operations including
clearing, account opening, statement generations etc. in over 30 centres

Forex operations are fully computerized at all 69 Authorized Dealing

branches. This facilitates submission of various statutory returns minimizing
the chances of default besides ensuring proper monitoring of international
operations.

The Bank has set up a strong ATM network to extend the reach of banking
services to the esteemed customers. Presently over 1200 ATMs spread out
across India both Onsite and Offsite.Internet banking services of the Bank
offers variety of features to make the Banking a pleasure. Some of the
services offered online are single view of all the accounts, balance enquiry,
account statement, transaction history, transfer of funds to self as well as
third party accounts, request for cheque book, request for pay order/ DD etc.

Apart from the regular banking services as above, Internet Banking also
provides other value added services such as online ticketing of air & rail,
online tax payment, online trading of shares, online bill payments, online
Demat information, online LC opening etc.

Bank has also introduced SMS banking services and is providing both Pull
and Push services. Customer are now able to get alerts for all transactions

20
happening in their account.

UBI Net connects all the Offices and branches of bank located in 2500+
centres, facilitating speedier transmission of MIS data (Network Map). The
network also facilitates the implementation of Core Banking Solution, apart
from DEMAT services, Cash Management services, fund transfers,
messaging system, etc.

FINANCIALS OF THE COMPANY

WORKING RESULTS – YEAR ENDED 31st MARCH, 2010

Major Q3 Q4 Growth (Rs in 12M 12M Growth

FY10 FY09 YoY% Crores) FY10 FY09 YoY%
Highlights Q4
FY10
1148 914 912 25.88 Operating 3659 3082 18.72
Profit
594 534 466 27.47 Net Profit 2075 1727 20.15
1.34 1.29 1.25 Return on Avg 1.25 1.27
Assets
0.81 0.58 0.34 Net NPA% 0.81 0.34
39.24 40.23 38.64 Cost to Income 40.66 41.81
Ratio
493 440 560 -11.96 Non Interest 1975 1483 33.18
Income
3.39 2.77 2.69 NIM 2.71 3.24
Union Bank of India today reported its financial performance for the

year ended 31st March 2010. Highlights of the audited results as

compared to the previous period are as under:-

21
􀂾The Bank’s Net profit grew by 20.15% YoY to Rs.2075crs in FY 2010.
Operating profit grew by 18.72% YoY to Rs3659crs in FY 2010. On a
quarterly basis, the Bank’s net profit for Q4 10 increased by 27.47% to Rs
594 crs from Rs 466 crs in the previous year.

􀂾The Bank’s CASA deposit portfolio showed an impressive growth of

29.36% to Rs 53957 Crs. as on 31st March

10 as against Rs.41711 Crs.in the previous year.
􀂾Non-Interest income grew by 33.18% YoY to Rs 1975 crs as against Rs
1483 crs in the previous year. Core fee based income grew by 32.74% to
Rs 896 crs as against Rs 675 crs in the previous year.
􀂾The Bank has been consistently showing Return on Average
Assets(RoAA) at 1.25 or greater in the past 3 years. RoAA for the year ended

31st March’10 was 1.25 as against 1.27 in the previous year. RoAA for Q410
was at 1.34 as against 1.25 in the corresponding period of the previous year.

Financial Highlights
Business Growth
􀀳Domestic Business mix of the Bank has registered growth of 22.33%

(y-o-y) to Rs.287942 Crore as on 31st March’10 from Rs 235376 crore

as on 31st March’09.

􀀳Global Business mix of the Bank registered growth of 22.92% YoY to

Rs 291289 Crore as of 31st March’10.

Key Financials
􀀳The Bank recorded a quarterly Operating profit of Rs.1148 crs for

22
 Q410 as against Rs.912 crs for Q409 registering increase of 25.88%.

􀀳Net Profit increased from Rs. 466 crore to Rs 594 crore registering a
growth of 27.47% QoQ.

􀀳Net Interest Margin (NIM) for quarter ended 31 st March’10 is at

3.39% as against 2.69% in the corresponding period of the previous
year.

􀀳Capital Adequacy as per Basel II stood at 12.51% as of 31st March’10

as against 13.27% in the previous year.

􀀳Net Worth of the Bank posted a rise to Rs. 8758 crs as on 31 st

March’10 from Rs. 6964 crs as of March 09 due to plough back of
profits.

􀀳Return on Average Assets (RoAA) was at 1.25% as on 31st March’10

as against 1.27%. On a quarterly basis, Return on Average Assets has

improved to 1.34% for quarter ended 31st March’10 as against 1.25%

in the corresponding period of the previous year.

Asset Quality:
􀀳The Net NPAs of the Bank marginally increased from 0.34% as

on 31st March’09 to 0.81% as on 31st March’10. Gross NPAs

has also increased to 2.20% from 1.96% in the previous year.

􀀳Gross NPA level increased to Rs.2671 crore as on 31st

23
 March’10 from Rs.1923 crore as on 31st March’09. Net NPAs

increased in absolute terms from Rs.326 crore as on 31st

March’09 to Rs. 965 crore as on 31st March’10

􀀳NPA provision coverage was at 74.02% as on 31st March’10 as

against 87.48% in the previous year.

Other Highlights for Q4-10

􀃎The Bank was awarded the Gold Trophy and a certificate in the
Elite Class for Excellence in Marketing & Brand Communication by
Association of Business Communicators of India (ABCI) in March
2010. The award was given away by the Hon’ble Governor of
Maharastra, Shri K.Sankaranarayan.
􀃎The Bank was awarded the prestigious “Skoch Challenger Award”
2009 for excellence in capacity building through innovative concept
of “Village Knowledge Centre” as part of financial inclusion
initiatives. The award was given away by Dr. C Rangarajan,
Economic advisor to the Prime Minister

􀃎As part of its global expansion initiatives, the Bank opened its 5th
overseas representative office in London, U.K. in April 2010. The
Bank already has 4 representative Offices in Shanghai, Beijing in
PRC, Abu Dhabi in UAE and Sydney, Australia. Besides the Bank
has a full fledged overseas branch in Hong Kong. The Bank is the
process of setting up a Rep Office in Toronto, Canada.

Working Results Overview – Q4 ended 31st March, 2010 Q4 to

24
 Q4 change
March 09 March 10 %
change
Total Income 3849 405 5.33
1.0
4
Interest Income 3289 356 8.27
1.1
1
-on advances 2446 255 4.25
1.1.1
0
-on investments 775 965 24.52
1.1.2
-on others 68 46 -32.35
1.1.3
Non-Interest 560 493 -11.96
1.2
Income
Total Expenses 2937 290 -1.06
2.0
6
Interest 2363 216 -8.38
2.1
Expenses 5
-Deposits 2217 203 -8.43
2.1.1.
0
-Others 146 135 -7.53
2.1.2
Other Expenses 574 741 29.09
2.2
-Establishment 313 424 35.46
2.2.1
-Others 261 317 21.46
2.2.2
Interest Spread 926 139 50.76
3.0
6
Operating Profit 912 114 25.88
4.0
8
Provisions 446 554 24.22
5.0
466 594 27.47
6.0 Net Profit
Working Results Overview
Business:
o The Bank achieved a domestic business–mix of Rs. 287942 cr. as on 31st
March’10, a growth of 22.33%, as against Rs 235376 crs in the previous
year.

25
o Global business-mix reached a level of Rs. 291289 Cr. as on 31 st
March’10.

o The Bank’s domestic deposits as on 31 st March’10 reached a level of Rs.

169670 crs from Rs. 138416 crs as on 31 st March’09, an increase of

22.58%. In sync with its strategic focus, the Bank’s CASA deposits grew

by an impressive 29.36% to 53957 crs as on 31 st March’10 from Rs.

41711 crs in the previous year.

o Gross domestic advances of the Bank reached a level of Rs. 118272crs as

on 31st March’10, registering an increase of 21.98% over 31st March’09.

o MSME advances grew by 40.47% to Rs.22685 crs as on 31 st March’10

from Rs 16149 crs in the previous year. Bank’s Retail advances (Personal
Segment) grew by 33.83% YoY to Rs.13506 crs from Rs.10092 crs in the
previous year. Home Loans grew by 22.56% to Rs 8115 crs from Rs 6621
crs in the previous year. Educational loans portfolio of the Bank grew by

32.48% YoY to Rs.1301 crs as on 31st March’10.

Capital & Net Worth:

o The Bank’s Capital Adequacy Ratio (CRAR) is at 12.51% as on 31 st

March 2010 as per Basel II.

o The Bank’s Net Worth increased by 25.76% and stood at Rs. 8758 crore as

on 31st March 10 as compared to Rs.6964 crore in the previous year.

26
Financial Performance (12 Months):
o The Net Interest Margin (on interest earning assets) of the Bank stood at

2.71% for the year ended 31st March’10 as against 3.24% in the previous
year.

o The Bank’s Net Interest Income increased from Rs.3813 crs to Rs

.4192 crs, a growth of 9.94% YoY.

o The bank’s non-interest fee based income grew by 33.18% to Rs 1975 crs
in FY 10 as against Rs 1483 crs in the previous year. Core fee based
income grew by 32.74% to Rs 896 crs from Rs 675 crs in the previous
year.

o Operating expenses are at Rs.2508 crs in 31 st March’10 as against Rs.2214

crs in the previous year. The ratio of Operating expenses to Average

working funds reduced to 1.52% as of 31 st March’10 as against 1.63% in

the previous year.
Ratio Analysis (Yearly):

o Net Interest Margin (NIM) was at 2.71% for 31st March’10 as against
3.24% in the previous year.

o Return on Average Assets (ROA) was at 1.25% as on 31 st March’10 as

against 1.27% in the previous year.

o Return on Equity is at 23.69% as on 31 st March’10 as against 24.79% in

the previous year.

27
o EPS and Book value showed improvement to Rs. 41.08 and Rs. 173.38 as

on 31st March’10 from Rs.34.18 and Rs. 137.87 respectively in the

previous year.

o Cost to Income Ratio has improved to 40.66% as of 31 st March’10 from

41.81 % in the previous year.

EMPLOYEE PRODUCTIVITY

o Business per Employee increased to Rs.853 lacs as of 31st March’10 from

Rs. 694 lacs as on 31st March’09.

o Net Profit per Employee increased to Rs.7.47 lacs as of 31 st March’10 from

Rs 6.28 lacs as on 31st March’09.

FUTURE PLANS

 The Bank aims for a deposits growth of approx. 22% and advances
growth of 25% for 2010-11.

 Bank targets CASA Ratio of 35% by 31st March 2012.

 Return on Equity to be 25.00% and Return on Average Assets to be

1.25% by 31st March 2011.

28
  Transaction through electronic mode to reach 50% of total

transactions by 31st March 2011.

 Bank will endeavour to reign in Gross NPAs below 2.10% by 31 st

March 2011.

SWOT ANALYSIS
Strengths

• Has been able to maintain healthy asset quality. In Q1 FY09, Gross NPAs
were 2.08%
and Net NPAs were 0.15% with healthy coverage ratio of 93.05%. UBI will
continue to
operate with Gross NPAs of 2.00% with delinquency ratio below 1.00%.
• Very good cost to income ratio of 38% in FY08 as the bank has managed to
bring down
and contain its costs significantly. Has one of the best operating efficiencies
in the banking
sector space.
• Superior ROE (24.67% inFY08) reflect high profitability of
the bank.
• UBI has an excellent technological platform with 100% core banking
solution rollout and
increased use of electronic mode in transactions (12% of the total
transactions). This

29
helps the bank reduce risk, improve efficiency and reduce costs significantly.

Weaknesses

• Higher interest rates are putting pressure on NIM, as the bank is facing
difficulty in passing
on increasing cost of funds to its customers.
• CD ratio has reached 73.1% in FY08. It means the bank has to rely on bulk
deposits to
finance advances growth.
Opportunities
• UBI still has a scope for improving its CASA, which is currently at 34.76%.
The bank has
planned to achieve a CASA target of 40% by 2012.
• Increasing share of fee-based income in operating income represents very
good opportunity
for the bank. The bank is expecting its fee-based income to grow in excess of
a CAGR of
30%.
• Opening of 400 new branches and expansion in the international market by
increasing its
presence in 10 countries with stress on Australia, Canada, Abu Dhabi and
United Kingdom
Threats
• Rising interest rates coupled with slowdown in the economy could result in
higher
delinquencies.
• Increasing money supply and inflationary pressures may prompt RBI to
continue monetary

30
tightening at least in the short-term..

TOPIC OF THE PROJECT

APPRAISAL AND ANALYSIS OF

CREDIT REQUIREMENTS OF
LARGE BORROWERS AND SMEs

31
Introduction
Project financing is an innovative and timely financing technique that has been
used on many high-profile corporate projects, including Euro Disneyland and
the Eurotunnel. Employing a carefully engineered financing mix, it has long
been used to fund large-scale natural resource projects, from pipelines and
refineries to electric-generating facilities and hydro-electric projects.
Increasingly, project financing is emerging as the preferred alternative to
conventional methods of financing infrastructure and other large-scale projects
worldwide.

Project Financing discipline includes understanding the rationale for project

financing, how to prepare the financial plan, assess the risks, design the
financing mix, and raise the funds. In addition, one must understand the cogent
analyses of why some project financing plans have succeeded while others have
failed. A knowledge-base is required regarding the design of contractual
arrangements to support project financing; issues for the host government
legislative provisions, public/private infrastructure partnerships, public/private
financing structures; credit requirements of lenders, and how to determine the
project's borrowing capacity; how to analyze cash flow projections and use
them to measure expected rates of return; tax and accounting considerations;
and analytical techniques to validate the project's feasibility

Project finance is different from traditional forms of finance because the credit
risk associated with the borrower is not as important as in an ordinary loan

32
transaction; what is most important is the identification, analysis, allocation and
management of every risk associated with the project.

The purpose of this project is to explain, in a brief and general way, the manner
in which risks are approached by financiers in a project finance transaction.
Such risk minimization lies at the heart of project finance.

In a no recourse or limited recourse project financing, the risks for a financier

are great. Since the loan can only be repaid when the project is operational, if a
major part of the project fails, the financiers are likely to lose a substantial
amount of money. The assets that remain are usually highly specialized and
possibly in a remote location. If saleable, they may have little value outside the
project. Therefore, it is not surprising that financiers, and their advisers, go to
substantial efforts to ensure that the risks associated with the project are reduced
or eliminated as far as possible. It is also not surprising that because of the risks
involved, the cost of such finance is generally higher and it is more time
consuming for such finance to be provided.

Project finance is the financing of long-term infrastructure and industrial

projects based upon a complex financial structure where project debt and equity
are used to finance the project. Usually, a project financing scheme involves a
number of equity investors, known as sponsors, as well as a syndicate of banks
which provide loans to the operation. The loans are most commonly non-
recourse loans, which are secured by the project itself and paid entirely from its
cash flow, rather than from the general assets or creditworthiness of the project
sponsors. The financing is typically secured by all of the project assets,
including the revenue-producing contracts. Project lenders are given a lien on
all of these assets, and are able to assume control of a project if the project
company has difficulties complying with the loan terms.

33
Generally, a special purpose entity is created for each project, thereby shielding
other assets owned by a project sponsor from the detrimental effects of a project
failure. As a special purpose entity, the project company has no assets other
than the project. Capital contribution commitments by the owners of the project
company are sometimes necessary to ensure that the project is financially
sound. Project finance is often more complicated than alternative financing
methods. It is most commonly used in the mining, transportation,
telecommunication and public utility industries.

Risk identification and allocation is a key component of project finance. A

project may be subject to a number of technical, environmental, economic and
political risks, particularly in developing countries and emerging markets.
Financial institutions and project sponsors may conclude that the risks inherent
in project development and operation are unacceptable.To cope with these risks,
project sponsors in these industries (such as power plants or railway lines) are
generally completed by a number of specialist companies operating in a
contractual network with each other that allocates risk in a way that allows
financing to take place. The various patterns of implementation are sometimes
referred to as "project delivery methods." The financing of these projects must
also be distributed among multiple parties, so as to distribute the risk associated

with the project while simultaneously ensuring profits for each party involved.

34
35
AN OVERVIEW
(Banking Sector)
There have been major structural changes in the financial sector since banking
sector reforms were introduced in India in 1992. Since then Banks have been
lending aggressively providing funds towards infrastructure sector. Major policy
measures include phased reductions in statutory pre-emption like cash reserve
and statutory liquidity requirements and deregulation of interest rates on
deposits and lending, except for a select segment. The diversification of
ownership of banking institutions is yet another feature which has enabled
private shareholding in the public sector banks, through listing on the stock
exchanges, arising from dilution of the Government ownership. Foreign direct
investment in the private sector banks is now allowed up to 74 per cent.

The co-existence of the public sector, private sector and the foreign banks has
generated competition in the banking sector leading to a significant
improvement in efficiency and customer service.

Rationale for the study

Offering credit is an operation fraught with risk. Before offering credit to an

organization, its financial health must be analyzed. Credit should be disbursed
only after ascertaining satisfactory financial performance. Based on the
financial health of an organization, banks assign credit ratings. These credit
ratings are used to fix the interest rate and quantum of installment.

36
This project aims to analyze the credit health of organizations that approach
Union Bank of India for credit facilities. After analyzing credit health, the credit
rating is determined. On the basis of credit rating, the interest rate guidelines
circular is consulted to fix a price for the credit facilities i.e. determine the
interest rate.

Credit disbursement at Union Bank of India

Financial requirements for Project Finance and Working Capital purposes are
taken care of at the Credit Department. Companies that intend to seek credit
facilities approach the bank. Primarily, credit is required for following
purposes:-
1. Working capital finance
2. Term loan for mega projects
3. non fund based Limits Like Letter of Guarantee, Letter of Credit
Companies present audited balance sheets of the current and previous years.
These are used to determine the financial health, turnover trends and rise and
fall of profitability. Then credit rating is done.

The financial health and credit rating are theoretical methods for determining
the right interest rate. However, in practice, banks consider other factors such as
history with client, market reputation and future benefits with clients. Thus, a
difference exists between theory and practice.

Objectives of the project

 To assess the financial health of organizations that approach

Union Bank of India for credit for import export purposes. This
would entail undertaking of the following procedures:

37
  Analysis of past and present financial statements
 Analysis of Balance Sheet
 Analysis of Cash Flow Statements
 Examination of Profitability statements
 Examination of projected financial statements
 Examination of CMA data

 To assess the suitability of the company for disbursement of credit.

This would involve the following actions:
 Use of credit rating charts
 Evaluation of management risk
 Evaluation of financial risk
 Evaluation of market-industry risk
 Evaluation of the facility
 Evaluation of compliance of sanction terms
 Calculation of credit rating

 Determination of interest rate: This would entail the following sequence

of actions.
 Collect data regarding financial health evaluation
 Noting down of credit rating
 Referencing the banks’ interest rate guidelines circular
 Choosing the interest rate from the circular on the basis of financial
health and credit rating

38
Term Loan Assesment

Steps in term loan processing

Submission of Project Report along with the Request Letter .

Carrying out due diligence

Preparing Credit Report

Determining Interest Rate

Preparing and submission of Term Sheet

If not approved if approved

Preparation of proposal

Submission of Proposal to designated authority

If No queries raised If queries raised

Sanction of proposal on
Project Rejected various Solve the queries
Terms & Condition

Communication of Sanction
Terms & Condition

Acknowledgement of Sanction
Terms & Condition

Application to comply with

Sanction Terms & Condition
& execution of Loan

Disbursement

39
CONDUCTING FEASIBILITY STUDY

The success of a feasibility study is based on the careful identification and

assessment of all of the important issues for business success. A detailed Project
Report is submitted by an enterpreneur , prepared by a approved agency or a
consultancy organisation. Such report provides in depth details of the project
requesting finance. It includes the technical aspects, Managerial Aspect, the
Market Condition and Projected performance of the company. It is necessary for
the appraising officer to cross check the information provided in the report for
determining the worthiness of the project.

Project Details:

Definition of the project and alternative scenarios and models.

 List the type and quality of product(s) or service(s) to be marketed.

 Outline the general business model (ie. how the business will make
money).
 Include the technical processes, size, location, kind of inputs

 Specify the time horizon from the time the project is initiated until it is up
and running at capacity.

Relationship to the surrounding geographical area. 

 Identifies economic and social impact on local communities.

 Identifies environmental impact on the surrounding area.   

40
MARKET FEASIBILITY

Industry description.

 Describes the size and scope of the industry, market and/or market
segment(s).
 Estimates the future direction of the industry, market and/or market
segment(s).
 Describes the nature of the industry, market and/or market segment(s)
(stable or going through rapid change and restructuring).
 Identifies the life-cycle of the industry, market and/or market segment(s)
(emerging, mature)

Industry Competitiveness.

 Investigates industry concentration (few large producers or many small

producers).
 Analyzes major competitors.

 Explores barriers/ease of entry of competitors into the market or industry.

 Determines concentration and competitiveness of input suppliers and
product/service buyers.
 Identifies price competitiveness of product/service.

Market Potential.

 Will the product be sold into a commodity or differentiated

product/service market?
 Identifies the demand and usage trends of the market or market segment
in which the proposed product or service will participate.

41
  Examines the potential for emerging, niche or segmented market
opportunities.
 Explores the opportunity and potential for a "branded product".

 Assesses estimated market usage and potential share of the market or

market segement.

Sales Projection.

 Estimates sales or usage. 

 Identifies and assess the accuracy of the underlying assumptions in the
sales projection.
 Projects sales under various assumptions (ie. selling prices, services
provided).

Access to Market Outlets.

 Identifies the potential buyers of the product/service and the associated

marketing costs.

Investigates the product/service distribution system and the costs involved.

ORGANIZATIONAL/MANAGERIAL FEASIBILITY

Business structure.

 Outline alternative business model(s) (how the business will make

money).
 Identify the proposed legal structure of the business.

42
  Identify any potential joint venture partners, alliances or other important
stakeholders.
 Identify availability of skilled and experienced business managers.

 Identify availability of consultants and service providers with the skills

needed to realize the project, including legal, accounting, industry experts,
etc.

 Outline the governance, lines of authority and decision making structure.

Managerial Personnel

Managerial Personnel play a key role in directing the working of the company.
It is important for an organisation to have a pool of efficient personnel who bear
the capacity to bail the company out from crisis situation and work towards
optimum utilisation of organisational resources. Such capacity of the personnel
can be determined by having complete details on following key aspects:
 Market reputation on the promoter / management of the company
 Hands on experience of the management personnel in the industry / Business
managed by qualified personnel
 Ability of the promoters / management to bail out the company in case of
crisis (for example, this could be derived from a strong group company)
 Decision making – Is it concentrated
 Organisation structure / Labour relations
 Is any group company in default / Any Directors on RBI’s negative list /
Borrower’s track-record in honoring financial commitment.
 Length of relationship with the bank

TECHNICAL FEASIBILITY

43
Technology plays an important role in maintaining a competitive position in this
highly competitive market conditions. Investing in the proper technology is the
key to success it irrespective of size of business thus for achieving its projected
performance, it is important for it to have sound technological background.
Such technical competence of the project can be determined by having detailed
study done on following key aspects:

Determining Facility Needs.

 Estimates the size and type of production facilities.

 Investigates the need for related buildings, equipment, rolling-stock

Suitability of Production Technology.

 Investigates and compare technology providers.

 Determines reliability and competitiveness of technology (proven or
unproven, state-of-the-art).
 Identifies limitations or constraints of technology.

Availability and Suitability of Location.

 Access to markets.
 Access to raw materials.

 Access to transportation.
 Access to a qualified labor pool.

 Access to production inputs (electricity, natural gas, water, etc.).

 Investigate emissions potential.

 Analyze environmental impact.

 Identifies regulatory requirements.

44
  Explores economic development incentives.

 Explores community receptiveness to having the business located there.

Raw materials.

 Estimates the amount of raw materials needed.

 Investigates the current and future availability and access to raw
materials.
 Assesses the quality and cost of raw materials and markets of easily

substituted inputs.

Other inputs.

 Investigates the availability of labor including wage rates, skill level, etc.

 Assesses the potential to access and attract qualified management

personnel.

FINANCIAL FEASIBILITY

Estimate the total capital requirements.

 Assesses the capital needs of the business project and how these needs
will be met.

 Estimates capital requirements for facilities, equipment and inventories.

 Determines replacement capital requirements and timing for facilities and

equipment.

 Estimates working capital needs.

45
  Estimates start-up capital needs until revenues are realized at full
capacity.

 Estimates contingency capital needs (construction delays, technology

malfunction, market access delays, etc.

 Estimates other capital needs.

 Estimated equity and credit needs.

 Identifies alternative equity sources and capital availability -- producers,

local investors, angel investors, venture capitalists, etc.
 Identifies and assess alternative credit sources -- banks, government (ie.
direct loans or loan guarantees), grants, local and state economic
development incentives.
 Assesses expected financing needs and alternative sources -- interest
rates, terms, conditions, covenants, liens, etc.
 Establishes debt-to-equity levels.

Budgets expected costs and returns of various alternatives.

 Estimates expected costs and revenue.

 Estimates the profit margin and expected net profit.

 Estimates the sales or usage needed to break-even.

 Estimates the returns under various production, price and sales levels. 
This may involve identifying "best case", "typical", and "worst case"
scenarios or more sophisticated analysis like a Monte Carlo simulation.
 Assesses the reliability of the underlying assumptions of the financial
analysis (prices, production, efficiencies, market access, market
penetration, etc.)

46
  Creates a benchmark against industry averages and/or competitors (cost,
margin, profits, ROI, etc.).
 Identifies limitations or constraints of the economic analysis.

 Determines project expected cash flow during the start-up period.

 Identifies project an expected income statement, balance sheet, etc. when
reaching full operation.

Study Conclusions

The study conclusions contain the information used for deciding whether to
proceed business.  The major categories this section should include are:

 Identify and describe alternative business scenarios and models.

 Compare and contrast the alternatives based on their business viability.

 Compare and contrast the alternatives based on the goals of the producer
group.
 Outline criteria for decision making among alternatives.

Next Step

After the feasibility study has been completed and presented, a carefully study
and analysis the conclusions and underlying assumptions.  Next, it will be
decided which course of action to pursue. 

Potential courses of action include:

 Choosing the most viable business model, for investment

 Identifying additional scenarios for further study.

47
  Deciding that a viable business opportunity is not available and moving
to end the business assessment process.

CREDIT REPORT AND CREDIT RATING

The credit report is an important determinant of an individual's financial

credibility. They are used by lenders to judge a person's creditworthiness. They
also help the person concerned to narrow down on the financial problem areas.
Credit report is a document, which comprises detailed information about the
credit payment history of an applicant. It is mostly used by the lenders to
determine the credit worthiness of an applicant. The business credit reports
provide information on the background of a company. This assists one to take
crucial business related decisions. People can also assess the amount of business
risk associated with a company and then decide whether they would be
comfortable in providing them with credit facilities. The degree of interest that
would be shown by investors in their company can also be gauged from the
business credit reports as they can get an idea of the conception of their
customers regarding themselves. Since these records are updated at regular
intervals of time they enable people to identify the risk levels associated with a
business as well as its future. These reports also allow businesses to get detailed
information about the financial status of business partners and suppliers.

Union Bank of India follows a finely defined Credit Rating Model for assessing
the creditworthiness of the applicant. The credit rating model asses various
aspects of the projects and assigns scores against them thereby determining the
risk level involved with the project.
It is divided in Four Sections:
1. Rating of the Borrower

48
  Financial Risk
 Management Risk
2. Market Condition/ Demand Situation
3. Rating of the Facility
4. Business Consideration
5. Cash Flow related parameters

1) Rating of the Borrower: This part of credit rating model deals with
assessing the financial and managerial ability of the borrower. The financial
ability of the firm is derived by calculating ratios that determine the short term
and long term financial position of the firm
Short term ratios include Current Ratio, determines the liquidity position of the
company over a period of one year. The current ratio is an indication of a firm's
market liquidity and ability to meet creditor's demands. It is excess of current
assets over current liability. If current liabilities exceed current assets (the
current ratio is below 1), then the company may have problems meeting its
short-term obligations. If the current ratio is too high, then the company may
not be efficiently using its current assets.
According to the guidelines given to UBI the ideal level is at 1.33:1 however
the acceptable level is at 1.17:1.
However at times current ratio may not be a true indicator, the current ratio for
road projects is very high but this does not indicate that the company is not
using its assets well but the ratio is high because the activity involves more in
dealing with current assets. Hence it is important for the evaluator to understand
the nature of the industry.
Long term ratio include Debt Equity Ratio is a financial ratio indicating the
relative proportion of equity and debt used to finance a company's assets. This

49
ratio is also known as Risk, Gearing or Leverage. A high debt equity ratio is not
preferable by an investor as the company already has aquired high amount of
funds from market thereby reducing the investor share over the securities
available, increasing the risk.
It is also important for the lender bank to assess the firms debt paying capacity
over a period. Such capacity is derived by calculating ratio like Debt Service
Coverage Ratio minimum acceptable level is 1.50.
It also necessary for the lender to determine the ability of the firm to achieve the
projected growth by evaluating the projected sales with actuals.However such
parameter remains non applicable if the business is new.

Financial risk evaluation is only one of the parameter and not the only
parameter for determining the risk level. It is important to evaluate the
Management Risk also while evaluating the risk relating to borrower.
It is the management of the company that acts as guiding force for the firm. The
key managerial personnel should bear the capacity to bail out the company
crisis situation. In order to remain competitive it is essential to take initiatives.
Such skills are developed over years of experience, thus for better performance
it is required to have a team of well qualified and experienced personnel.

2) Market potential / Demand Situation

A Company does not operate in isolation there are various market forces that
acts in either favourable or unfavourable manner towards its performance. Thus
the rating would not give true picture if does take market or demand situation in
consideration.
The demand supply situation / market Potential plays an important role in
determining the growth level of the company like
i) Level of competition : monopoly , favourable , unfavourable

50
ii) seasonality in demand : affected by short term seasonality, long term
seasonality or may not be affected by seasonality in demand.
iii)Raw Material Availability:
iv)Locational Issues like proximity to market, inputs, infrastructure:
Favourable, neutral, unfavourable.
v)Technology ie, proven Technology- not to be changed in immediate future,
technology undergo change, outdated technology.
vi)Capacity utilisation
3)Rating of the Facility:
The company can start functioning only after completing statutory obligations
laid down by the governing authority. Such statutory obligation involves
obtaining licenses, permits for ensuring smooth operations. Preparation and
Submission of Financial Statements, Stock statements in the standard format
within the given time schedule.

4)Business Consideration:
The length of relationship with the bank enables the lender to assess the
previous performance of the account holder. A good track record acts in the
favour of the applicant,

Thus Credit Rating of the Business takes into consideration various aspects that
directly or indirectly bears an effects the performance of the business.
After evaluating the risk level involved the lender bank decided on lending
Interest Rate.
In UBI they are categorised in 9 segements
1. lowest Risk CR-1
2. Minimal Risk CR-2

51
 3. Moderate Risk CR- 3
4. Satisfactory Risk CR- 4
5. Acceptable Risk CR- 5
6. Watch list CR- 6
7. Risk Prone CR- 7
8. high risk CR- 8
9. Substanadar CR- 9
10. Doubtful CR-10
11. Loss/NPA CR-11
In UBI, a business receiving Credit Rating above level 6 are not considered

good from point of investment and thus are avoided.

DETERMINATION OF INTEREST RATE

The interest rate is determined from the interest rate guidelines circular.
This circular is regularly updated to reflect the bank’s latest credit policies.
The rupee credit is based on BPLR and the foreign exchange loans are
based on LIBOR.

The guidelines define how much interest rate is to be assigned for a

particular credit rating and credit duration. However, credit rating and its
use in determining interest rate is a theoretical concept and the bank may
allow a reduction in interest rate under the following conditions:

52
  Good Client
The organization is a long term client and brings good business to the bank.
The organization’s actions show that it intends to become a long term
customer of the bank
 Banking Consortium
The organization is seeking credit from a consortium of banks. In some
cases like this, the lead bank might decide the interest rate and all the
member banks of the consortium follow this interest rate.

TERM SHEET
Following a favourable feasibility check, credit rating the next step is preparing
term sheet . A Term Sheet is brief document that provides details on aspects
like:
 Account Details
 Financial highlights for immediate previous two audited
years and projection for proceeding year
 Nature of Project
 Cost of Project
 Means of finance
1. Nature of Facility
2. Purpose
3. Tennure of Term Loan
4. Interest rate Reset
5. Margin
6. Interest Rate, Commission

53
  Door to Door Tenor ie.the period within which the entire
amount is to be disbursed.
o Repayment Terms
o Prime Security
o Collateral Security
o Upfront fees i.e. the charges levied by the bank for

processing the documents.

PROPOSAL
An approved term sheet leads to preparation proposal. A proposal is prepared in
standard format, this enables the bank to keep a proper track record and also
facilitates proper comparison. A proposal a full fledged document providing
details on project submitted and requesting finance from bank. A proposal
contains information on following aspects:

* Details of Account: It includes name of the Account Holder, Date of

incorporation, Line of Activity, Internal Credit Rating level, Address of the
Registered Office, Name of Directors, Share Holding Pattern, Asset
Classification, Purpose of the Loan.

* Securities:Lenders often feel more confident about a loan if they are given a
security interest in the assets of a business. Then, if the borrower does not repay
the loan as promised, the lender can take the property the borrower pledged, sell
it and use the proceeds to repay (or partially repay) the borrowed amount.It

54
provides detailed information on nature of securities given in lieu of the
Loan.they are of two types Prime securities, Collateral Securities

Prime Securities: Pari Passu is a term used in banking transactions which means
that the charge to be created is in continuation of an earlier charge which might
be held by the same institution or by an other institution.

Collateral Securities: In lending agreements, collateral is a borrower's asset that

is forfeited to the lender if the borrower is insolvent --- that is, unable to pay
back the principal and interest on the loan. When insolvent, the borrower is said
to default on the loan, in which case the lender becomes the owner of the
collateral. It includes details on

 Nature / Description of collateral security indicating area & location of

property

 Value in Rupees.

 Date of valuation along with name of Valuer

 Insurance Amount & Date of Expiry

Personal guarantee / Corporate Guarantee if any, includes Name of the

guarantor, Value of Guarantee.

* Financial Highlights:
It provides details of important financial elements over a period of years. It
includes
Details on Paid capital, Tangible Net worth, Net working Capital,Current
Assets, Current Liabilities, Net Profit, Net Sales, Reserves and Surplus,
Intangible Assets, Long Term Liabilities, Fixed Assets, Investments, Non
current Assets like guarantees , Cash Accruals, Capital employed.

55
It also includes ratios like Debt Equity Ratio, Current Ratio, Debt Service
Coverage Ratio and so.
The interpretation of the financial data presented provides information on the
performance trend of the company also of the Projections made. Such financial
highlight play an important role in assessing the financial strengths and
weakness of the business.

* Status of the project:

A brief of Project
In this part of proposal a brief about the project is explained, it includes
information on nature, type of project, purpose of the project, commencement
details, the promoters and related details of the project. If it is a on-going project
it also gives details on progress and status of progress

* Evaluation of Industry :
This Section gives brief details on the
1. Scope of the industry
2. Growth level and overall performance of the industry
3. Recent Developments and Trend Evaluation

* Conduct of the Account:

This section provides details on :
Regularity in Submission of—
 Stock Statements / Book Debt Statement
 QPR Statements / Half Yearly Statement
 Financial Statements

56
  CMA Data

* Compliance to Terms of Sanction

It furnishes information on following aspect:
 Completion of Mortgage formalities
 Registration of Charges with RoC
 Whether documents valid and in force
 Compliance of RBI guidelines
 Whether consortium meetings held at prescribed periodic intervals where
the Bank is the leader.

* Exposure details from banking system (existing) (Incl. Our Bank)

The sharing pattern of the banks is mentioned in this section of proposal. It
includes
 Name of the bank
 Percentage of share for the fund based and non Fund based Limits
 Amount in Rs.
Non Fund based credit are in form of guarantees like Letter of Credit (L/c),
Letter of guarantee (L/g)

Letter of Credit
A ‘Letter of credit’ also known as documentary credit is the most commonly
accepted instrument of settling international trade payments. A letter of credit is
an arrangement whereby a bank, acting at the request of a customer, undertakes
to pay a third party by a given date, on documents being presented in
compliance with the conditions laid down.

Letter of Guarantee

57
A letter from a bank stating that a customer owns a particular security and that
the bank will guarantee delivery of the security. A letter of guarantee is used by
an investor who is writing call options when the underlying stock is not in his or
her brokerage account. A Call Option is an agreement that gives an investor the
right (but not the obligation) to buy a stock, bond, commodity, or other

instrument at a specified price within a specific time period.

Financial Guarantee:
A non-cancelable indemnity bond guaranteeing the timely payment of
principal and interest due on securities by the maturity date.  If the issuer
defaults, the insurer will pay a fixed sum of money to holders of the
securities.  Financial guarantees are similar to a Standby Letter of Credit,
but are issued by an insurance company.  A Standby Letter of Credit is a
form of insurance on an underlying agreement or obligation (contract),
insuring all parties to the contract against failure to perform or pay on the
part of one or another party to the contract.  Standbys are issued by banks.

Assessment of Non Fund Based Limit

1. Non Fund Based Limits are normally to be sanctioned for exixting
customer only who already enjoy fund based limits
2. If new borrower full processing as applicable to Fund Based Limits to be
carried.
3. Borrower’s background and experience of meeting commitments to be
examined in details.
4. L/c limit to be considered as per terms of Purchase or contract, lead
period and minimum economical quantity of supply of stocks
5. Non Fund based Limits are to be supported by necessary fund based
limits.

58
 6. While Assessing the L/g Limit contract or agreement which is the base
for L/g, should be examined in details for any ambiguos clauses.
7. Any request for financial Guarantee to be critically examined before
taking decision.

* Details of Sister/ Allied Concerns:

This section provides information about the Sister/ Allied Concerns aspects like
the performance, promoters, share holding pattern, operation exposure and
experience from various banks.

* Terms and Condition:

It is important both for the bank and the applicant to safeguard its interest, this
could be achieved by settling at mutually acceptable terms and condition in
order to ensure that both the parties the lender and borrower perform their part
of obligation thereby not putting other party at loss. All loans are subject to
regulations and conditions. The legal information relating to these regulations
and conditions can be viewed in this section. It is advisable for both the parties
to read this information carefully before approval.

DISBURSEMENT:

After submission of Proposal to Designated/ Sanctioning Authority for

sanctioning the Term Loan. the authorities may raise querries, if any relating to
projects and thereby convey it to the processing officer the processing officer in
turn addresses them to the borrower for necessary step to be taken, such querries

59
are required to be solved to the earliest by the applicant for further processing of
the proposal.
If the authorities are satisfied and have no further querries with respect to
proposal,the Loan gets sanctioned and the disbursement would be released in as
per the terms decided.

FOLLOW-UP:

This is most crucial stage in process of term loan assessment. Since amount of
credit required is usually high, such amounts are disbursed in one installment,
they are paid in installments.This helps the lender bank to understand and assess
the utilisation of funds disbursed by the lender Bank. Such evaluation is done by
obtaining Lender’s Engineer Report, it is report that provides complete details
of the status of the project. It is prepared on monthly basis. It also provides CA
Report, it verifies the Financial details furnished to bank for further

disbursement.This is known as renewal of account.

Analysis of Credit proposals

Cash Credit requirement by M/s Swadeshi Aahar Private Limited of Rs.160 Lacs
for purpose of Food & Agro Based Processing Units Category

M/S Swadeshi Aahar is a private ltd company and was established in 2002.
The total Authorised Capital of the company is Rs.360 lacs & Paid up
capital of the company is Rs.364.10 Lacs The company is engaged in Flour
Milling business and has its Manufacturing Unit at A-4, Industrial Area,
Ramnagar, Chandauli.

60
.Directors of the company are Mr.Vijay Kumar Gupta, Mr.Neekay Lal,
Mrs.Godawari Devi & Mr.Rajendra Prasad Jaiswal All the three promoter
directors are having vast experience in the field of Flour Mill and Food Processing unit..

PROPOSAL FOR: ENHANCEMENT

PURPOSE OF THE NOTE: RENEWAL OF CC(HYP.) LIMIT AT Rs.680.00 LACS & SANCTION OF
TERM LOAN OF Rs.160.00 LACS UNDER FOOD & AGRO BASED PROCESSING UNITS
CATEGORY.

GROUP : No specific Group

BANKING ARRANGEMENT : Multiple LEAD BANK : N.A.
MONTH OF REVIEW : June 2010 OUR SHARE: 95%
ASSET CLASSIFICATION : Standard
INTERNAL CREDIT RATING : CR-4
STATUS OF ACCOUNT Regular Early Alert Special Mention
System Account

1. a) NAME OF THE ACCOUNT : M/s Swadeshi Aahar Pvt. Ltd.

b) BRANCH / ZONE : Varanasi Main / CZ-I

c) DATE OF INCORPORATION : 02.09.2002. Incorporation No.

U15313UP2002PTC 026895, ROC,
Kanpur

2. CONSTITUTION : Private Limited Company

3. LINE OF ACTIVITY : Flour Mill / Atta Chakki

4. ADDRESS -
4.1 Regd. / Admn. Office : 8/20 Telia Nala Raj Ghat Varanasi.

4.2 Unit / Works : A-4, Industrial Area Ramnagar,

Chandauli.

5. NAMES OF PROPRIETOR / :
PARTNERS / DIRECTORS & THEIR
MEANS (Rs. in lacs)
Means as per
CR
Name of the Directors dtd.27.05.2009
1. Mr.Vijay Kumar Gupta 93.94
2. Mr. Neekay Lal 302.50
3. Mrs. Godawari Devi 181.33
Mr. Rajendra PrasadJaiswal (Employee
4. Director) N.A.

61
 Total 577.77

6. BACKGROUND OF PROMOTERS / :
DIRECTORS / PROPRIETOR / PARTNERS

Except the 4th Director, the remaining directors are close relatives and family
members. Mr. Vijay Kumar Gupta, aged about 37 years, has more than 20 years of
experience in food processing industry. His father Mr. Neekay Lal is engaged in food
processing industry since 1970. His mother Smt. Godawari Devi is also looking after the
family business since 1977. Thus all the three promoter directors are having vast
experience in the field of Flour Mill and Food Processing unit.

7. CAPITAL STRUCTURE :

Authorised Capital : Rs.360.00 lacs (3,50,000 shares of Rs.100/-

each)
Issued & Subscribed Capital : Rs.355.10 lacs (2009-10)
Paid Up Capital : Rs.355.10 lacs
Book Value : Rs.142.37 ps. (As on 31.03.2009-Provl.)
Market Value : Not listed.

The company increased share capital from Rs.350.00 lacs to Rs.360.00 lacs and
allotted 14000 shares of Rs.100/- each at a premium of Rs.400/- each during the
current FY. Form 2 and form 5 for increase in share capital & allotment of shares are
filed with ROC. Therefore, the paid capital of the company increased to Rs.355.10 lacs
and share premium is at Rs.56.00 lacs. Branch already submitted a certificate
Dt.21.05.2009 from M/s Divedi Gupta & Co.

7 (a) SHAREHOLDING PATTERN :

Share Holder No of Shares Face Value Holding %

Directors 2,06,830 100/- 58.24%
Others 1,48,270 100/- 41.76%
TOTAL 3,55,100 0

8. IN CASE OF PARTNERSHIP FIRMS : N.A.

INDICATE CAPITAL CONTRIBUTED
BY EACH PARTNER SEPARATELY

9. SECTOR / BSR CODE : SSE / 15301

10. COMMENTS ON LATEST CREDIT / : Our charges for CC limit of Rs.680.00

SEARCH REPORT lacs were registered with ROC as per
search report dt.25.08.2009 of M/s
Dwivedi Gupta & Co, CAs, held by the
Branch.

10 DUE DILIGENCE : Account was taken over in previous year

after due diligence.

11. WHETHER A/C IS TAKEN / TO BE : Account was taken over in September

TAKEN OVER. IF SO NORMS FOR 2008.
TAKE OVER ARE FULFILLED

62
 12. a) DEALING WITH BANK SINCE : August 2008

b) CREDIT FACILITIES SINCE : September 2008

13. TOTAL INDEBTEDNESS :

(Rs. in lacs)
NON-FUND BASED FUND BASED TOTAL
Existing Proposed Existing Proposed Existing Proposed
Our Bank
Working Capital - - 680.00 680.00 680.00 680.00
Term Loan - - - 160.00 - 160.00
- - 680.00 840.00 680.00 840.00
Sub-Total
Other Banks - - - - - -
Fin. Institutions - - 32.08 32.08 32.08 32.08
TOTAL - - 712.08 872.08 712.08 872.08

13.1 Brief Background :

M/s Swadeshi Aahar Private Limited was incorporated in 2002 and registered with the
Registrar of Companies, Kanpur vide certificate of incorporation No. 20-U
15313UP2002PTC 026895. The company is engaged in Flour Milling business and has its
Manufacturing Unit at A-4, Industrial Area, Ramnagar, Chandauli. The plant consists of
roller mill and chakki having capacity of 60,000 TPA and 15,000 TPA respectively.

The company was initially incorporated as a joint venture between Mr. Pawan Kumar
Tulsyan and Mr. Bhola Ram Agrawal. The main promoter Mr. Pawan Kumar Tulsyan and his
family have invested substantially in iron & steel industry during the last 3-4 years. They
have set up iron ore crushing unit, sponge iron plants, induction furnaces and rolling mills
etc. They were implementing major expansion in the said sector as well as related
sectors. They were planning to set up power plant also. All these require substantial
capital investment as well as time and attention. For Mr. Tulsyan it was gradually
becoming difficult to pay due attention to the flour mill and he was also not willing to
spare further funds to meet the need based working capital requirement of the unit. Mr.
Tulsyan initiated disinvestment from Floor Mill Industry about 3 years back in form of total
disinvestment of his entire stake from Kanodia Flour Mill and this recent one in Swadeshi
Aahar Pvt. Ltd. was a further step. The other promoter Mr. Bhola Ram Agrawal, though
inclined to continue in the flourmill industry, was finding it difficult to run the unit
smoothly in absence of adequate support from the main promoter, Mr. Tulsyan. So it was
decided by the then management that ownership and management be changed and the
ownership be transferred to some others, having primary interest in the flour mill/ food
processing industry.

Accordingly offers were invited. Mr. Vijay Kumar Gupta, promoter of M/s Simran Food Pvt
Limited, with capacity of 75000 TPA atta mill, offered to buy entire stake of the old
promoters of the company, which was finally accepted by the old promoters in the board
meeting held on 05.06.2008 and new promoters were appointed on the board.

M/s Simran Food Pvt. Ltd. is an atta mill and adding in the line this one M/s Swadeshi
Aahar Pvt. Ltd. which is a diversified product food (Atta, Maida, Suji, Bran etc.) processing
mill would enable Mr. Gupta to reinforce his business from present level as he is getting in
one hand pre maintained customer base of unit under proposal M/s Swadeshi Aahar Pvt.

63
Ltd. and in another hand, will be in a position to serve additional demand with diversified
range to the existing customers of his exiting unit M/s Simran Food Pvt. Ltd.

14. FINANCIAL INDICATORS :

( Rs. in lacs )
Mar-07 Mar-08 Mar-09 Mar-09 Mar-10 Mar-11
  (Aud) (Aud.) (Est.) (Prov) (Proj) (Proj)
Paid up Capital 341.10 341.10 341.10 341.10 364.10 364.10
Reserves & Surplus 74.61 86.41 116.66 145.89 258.16 365.73
Intangible Assets 2.16 - - 1.37 2.53 1.89
TNW 413.55 427.51 457.76 485.62 619.73 727.94
Term Liabilities 2.00 2.22 72.22 21.08 148.60 103.20
Capital Employed 415.55 429.73 529.98 506.70 768.33 831.14
Net Block 363.88 362.22 345.46 425.31 620.40 586.26
Investments - - - - - -
Non Current Assets 12.11 2.06 2.06 3.56 3.56 3.56
NWC 39.56 65.45 182.46 77.83 144.37 241.32
Current Assets 507.75 392.32 773.77 773.56 1045.26 1213.62
Current Liabilities 468.19 326.87 591.31 695.73 900.89 972.30
Current Ratio 1.08 1.20 1.31 1.11 1.16 1.25
DER (TL/TNW) 0.00 0.01 0.16 0.04 0.24 0.14
DER (TOL/TNW) 1.14 0.77 1.45 1.48 1.69 1.48
Net Sales 2655.07 2182.46 3586.22 2477.79 4340.55 6098.74
Other Income 6.95 12.53 9.00 9.52 10.69 12.04
PBT 8.89 13.28 33.71 16.18 72.77 119.92
PAT 7.79 11.80 30.24 14.47 65.27 107.57
Depreciation 13.48 13.53 16.76 14.29 22.68 34.14
Cash Accruals 21.27 25.33 47.00 28.76 87.95 141.71

(i) Comments on Financial Indicators :

The comments are based on the audited financials as of March 2008 vis-à-vis March 2007:

 Paid up capital is at the same level at Rs.341.10 lacs. As of March 2009 (Provl.) also
it is at the same level.
 Reserves & Surplus include subsidy of Rs.50.00 lacs and balance of profit. As of
March 2009 (Provl.) it also include share application money of Rs.45.00 lacs.
 TNW increased from Rs.413.55 lacs to Rs.427.51 lacs due to additions of profits. It
has further increased to Rs.485.62 lacs due to share application money & P&L
account.
 Term Liability for 2007-08 is unsecured loans from the directors of previous
management. The company has projected to introduce unsecured loans of
Rs.72.22 lacs for March 2009 at the time of previous sanction, but as of March
2009, there are no unsecured loans in the system. As per provisional figures of
March 2009, it is term loan from SIDBI for purchase of generator, excluding
installments repayable within 12 months.
The company informed that they have proposed and raised unsecured loan of
Rs.72.22 lacs during the financial year 2008-09. But, as the unsecured lenders
were demanding high interest rate, which if paid, would have adversely affected

64
 profitability of the company and therefore, the company has decided to raise share
capital for the matching amount. As the unsecured lenders were pressing for
interest, the entire unsecured loans were repaid before the end of FY 2008-09 and
the company raised share capital by Rs.45.00 lacs during the FY ended 31 st March
2009. The company further informed that they have further raised share
application money of Rs.25.00 lacs between the period from 01.04.2009 to 21 st May
2009. The company has submitted CA’s certificate in this regard. As per the
information available on Intranet, the authorised capital is at Rs.360.00 lacs and
the paid up capital is Rs.355.10 lacs as on 23.05.2009. The company further
informed that in order to strengthen the NWC, it is proposing to raise share capital
(including share premium) further by Rs.20.00 las during the current FY 2009-10
before release of enhanced limit.
The company had purchased DG Set by availing loan from SIDBI without obtaining
permission from us. The company informed that due to frequent power cuts in the
area, they have to purchase DG Set urgently. They has availed Term loan from
SIDBI.
 Net block decreased from Rs.363.88 lacs to Rs.362.22 lacs due to depreciation. It
has increased to Rs.425.31 lacs (Provl.) mainly due to purchase of Generator &
additions in Plant & Machinery. Net Block includes CWIP of Rs.146.38 lacs by wayof
factory building, P&M & electric installation. The company informed that CWIP
was incurred in respect of expansion of plant capacity from 45000 TPA to 75000
TPA during the FY 2007-08 and 2008-09. As the installed capacity has increased to
75000 TPA from 01.04.2009, CWIP will be allocated to various heads of fixed assets
during the FY 2009-10.
 Non Current Assets have decreased from Rs.10.06 lacs to Rs.2.06 lacs, due to
classification of receivables > 6 months as Current Assets as the Company has
produced CA Certificate intimating that BDs more than 6 months are Nil. Hence,
under the NCA only item categorised is Security deposit as of March 2009.
 NWC increased from Rs.39.56 lacs to Rs.65.45 lacs. As per provisional B/s as of
March 2009, it has further increased to Rs.77.83 lacs.
 The break up of Current Assets is as under:
(Rs. In lacs)
Mar-07 Mar-08 Mar-09 Mar-09 Mar-10 Mar-11
  (Aud) (Aud.) (Est.) (Prov) (Proj) (Proj)
Cash & Bank Balances 188.94 28.16 8.87 17.47 6.02 32.42
Receivables 143.02 174.39 359.52 380.37 506.63 610.17
Inventory 124.12 133.05 404.63 266.41 524.61 561.03
Loans & Advances 51.67 56.72   109.31 5.00 6.00
Advances payment of Tax - - - - 2.00 2.50
Pre paid insurance /other CA - - 0.75 - 1.00 1.50
Total Current Assets 507.75 392.32 773.77 773.56 1045.26 1213.62

 The break up of Current Liabilities is as under:

(Rs. In lacs)
Total Current Assets 507.75 392.32 773.77 773.56 1045.26 1213.62
Short Term Bank Borrowings 390.99 306.75 560.00 515.95 680.00 680.00
Inst. Payable within 12
months 10.32 - - 11.00 45.40 45.40
Sundry Creditors Trade/exp 65.20 17.88 11.31 142.41 122.99 189.55
Provision for taxation, etc. 1.08 1.48 - 1.67 7.50 12.35
Deposits from others - - - 24.62 - -

65
other CL 0.60 0.76 20.00 0.08 45.00 45.00
Total Current Liabilities 468.19 326.87 591.31 695.73 900.89 972.30

 Current Ratio improved from 1.08:1 to 1.20:1. However, as of March 2009 (Provl.),
it has declined to 1.11:1. If installments of term loan are excluded, CR is at 1.13:1
still below the minimum level. Branch informed that as the company has
continued the expansion of capacity undertaken by the old management and also
availed term loan for purchase of DG Set from SIDBI, the Current Ratio was
affected. However, as the unit is comes under SSE category, minimum CR of
1.10:1 can be considered for manufacturing unit.
 DER(TL/TNW) slightly declined from positive to 0.01:1 and further declined to
0.04:1 as of March 2009, but well within the acceptable level of 2:1.
 TOL / TNW Ratio improved from 1.14:1 to 0.77:1. But, it has declined to 1.48:1 as
of March 2009 (Provl.), but well within the acceptable level of 4:1.
 Net sales declined from Rs.2655.07 lacs to Rs.2182.46 lacs. However, they have
improved to Rs.2477.79 lacs as of March 2009 (Provl.).
 Other income consists of misc. Receipts, interest received, machine rent received
etc., increased from Rs.6.95 lacs to Rs.12.53 lacs. It has declined to Rs.9.52 lacs
as of March 2009 (Provl.).
 PBT increased from Rs.8.89 lacs to Rs.13.28 lacs. It has further increased to
Rs.16.18 lacs as of March 2009 (Provl.)
 PAT also increased from Rs.7.79 lacs to Rs.11.80 lacs and further increased to
Rs.14.47 lacs as of March 2009 (Provl.).
The company informed that increase in estimated / projected net profit is due to
increase in production level and sales, as the fixed overheads do not increase
proportionately with increase in production. Further informed that, as there would
be substantial increase in production quantity and sales, it will result in improved
operating margin and as a result, net profit will grow to the estimated / projected
level.
 Depreciation charges for the years ending March 2007, 2008 and 2009(Provl.) are
Rs.13.48 lacs, Rs.13.53 lacs and Rs.14.29 lacs respectively.
 Cash accruals increased from Rs.21.27 lacs to Rs.25.33 lacs and further increased
to Rs.28.76 lacs as of March 2009 (Provl.).

The overall financial position of the company is satisfactory.

(ii) Audit Notes in Balance Sheet if any, to be : No adverse comments in audited

specified Balance Sheet for March 2008.

(iii) Comments on Financial Indicators on : N.A.

Cash Basis

15. EVALUATION OF MANAGEMENT :

The directors are enjoying good reputation in the market. None of the director is technical
expert but they are having adequate business acumen and relevant industry exposure.
They are already running similar units successfully. The company’s activities will be
managed by the directors viz Mr. Vijay Kumar Gupta and Sri Neekay Lal with the help of
experienced persons. The directors are having business acumen. They are having industrial
background and having capacity to handle business of voluminous turnover. The directors

66
have ability to bail out the company in case of crisis as they are the persons of means with
good financial track record and having other source of income than the subject unit. The
production decision will be taken at Factory itself, by works manager in consultation with
the directors. As such the decision making will be concentrated in the hands of directors.
Being a Pvt. Ltd. company and the directors 1 to 3 are family members, succession
planning is envisaged. The directors have consistently maintained conducive relations
with staff and labour and have never faced any labour problem. None of the
group/associate company is in default with any bank/financial institutions as per
information available on Intranet. The Borrower’s track record in honoring financial
commitments is satisfactory.

16. EVALUATION OF INDUSTRY :

The Flourmill industry caters to one of the basic needs of life. There is ever increasing
demand of food products in India on account of its increasing population. The products of
the flourmill are also used for further processing. Raw material required is available in
plenty. Flour mill industry being food industry is accorded high priority as it involves value
addition to agricultural produce. Secondary food processing units such as bakeries,
confectioneries, traditional food units are also dependent on flour mills. Major consumers
of the products are general households developing with tremendous pace in India. Bran is
consumed by cattle and like Atta its demand is increasing with increase in population

The demand in (I) Eastern Uttar Pradesh, (II) West Bengal, (III) Whole of Bihar and Orissa is
significantly higher than the present production quantity. The demand is likely to further
increase on account of population growth. As such there is a potential demand-supply
gap. Therefore, there are good prospects for flourmills at Varanasi.

Many other flourmills are also operating in the area and engaged in catering the need of
same geographical region. However, the promoters are now well established in this line of
business and have also developed strong customer base across the state as well as above
noted other states. The company is also selling through brokers as is the trend of the
industry. Hence the promoters are confident to secure the required market and to
withstand the market competition.

Flour Mill industry is fragmented and there are small and big flour mills. It is not a
seasonal industry as demand of materials remains round the year and they would not be
any effect on seasonal day.

Since liberalization, there is no license requirement for setting up or capacity expansion of

roller / chakki flourmills. There is no licensing policy for wheat milling and Milling Industry
is open for small scale as well as medium scale industries. The mills can obtain their
wheat supply from any source. Also there are no license requirement or
price/distribution controls on manufacture of wheat products. In view of growing economy
there is a good growth in the packaging industry.

17. EVALUATION OF BUSINESS RISK :

67
The company will not depend upon one or two customers. The group is having good
connection with various customers. It is a fragmented industry and Market share cannot
be ascertained. Wheat is available in open market and can also be purchased directly
from local agriculturists. Wheat Production in the adjoining area is more than enough to
cater the needs of the plant. If need be, it can also be purchased from FCI. Cost of wheat
varies during the year. However, fluctuation in cost is absorbed in selling price of finished
product. Margin of millers generally remain constant. Mainly, the unit is selling through
brokers operating in the market, as is the trend of the industry. Additionally, the
promoters also have established network of dealers and retailers and are also selling
directly to them. The company is using the latest available technology and also upgrading
the machinery year after year.

18 (A) CONDUCT OF THE ACCOUNT :

(i) Regularity in submission of
-Stock Statements / Book Debt : Regular
Statement
-MSOD : Not submitted.
-QPR Statements / Half Yearly : Regular
Statement
-Financial Statements : Regular. Company has submitted
provisional Balance Sheet for March
2009.
-CMA Data : Submitted.

(ii) Name of the Statement / Return No. of Last Stat. / Return

Statements / recd.
Return recd. During
the year
Stock Statement / BD 4 July 2009
MSOD - -
QPR/ Half Yearly Statement 1 July 2009

B. COMMENTS ON OPERATIONS / :
OVERDUES

(1) Turnover in the account is commensurate with the limits:

The turnover in the account for the FY 2008-09 from 23.09.2008, is as follows:
(Rs. in lacs)
Debit Credit Avg. Utilisation Max. Dr. Bal
2600.38 2048.43 466.05 574.87

The sales as per the provisional balance sheet for March 2009 are Rs.2477.79 lacs. The
company had been routing sales turnover since September 2008 only and previous it was
routed through the account with SBI, SME Branch, Varanasi by the old management.
Taking into consideration the value of sundry debtors & previous turnover with SBI, it can
be terms that the turnover in the account is commensurate with sales.

The turnover in the account from April 2009 to August 2009 is as under:
(Rs. in lacs)
Debit Credit Avg. Utilisation Max. Dr. Bal

68
 1623.10 1659.56 547.37 603.03

The sales achieved by the company upto August 2009 are Rs.1797.60 lacs. Taking into
consideration the sundry debtors, the turnover in the account is commensurate with
sales.

(2) The frequent excess are given: No.

(3) Cheques are returned frequently: No.

19. COMPLIANCE TO TERMS OF SANCTION :

a) Completion of Mortgage : Completed.
formalities
b) Registration of Charges with RoC : Registered
c) Whether documents valid and in : Yes.
force
d) Whether all other terms and : Complied with.
conditions complied with
e) Compliance of RBI guidelines : Complied with
f) Whether Consortium meetings : N.A.
held at prescribed periodic
intervals where the Bank is the
leader

g) Compliance on Loan Policy : The activity of the company falls

under Food Processing category and
is in the chosen areas of our Loan
Policy 2008-09.

20 DATES OF INSPECTION DURING THE : 06.01.2009 & 05.04.2009 &

(a) FINANCIAL YEAR 24.06.2009.

20 i) NATURE & VALUE OF :

(b) SECURITY

Prime: CC(H) Hyp. Of stocks, Book Debts not older than 60 days.

Collateral:
Nature / Description of collateral Value Dt. of Insurance Remarks
Security [Rs. in Valuation Amount & Date
lacs] alongwith of Expiry
name of
Valuer
1. EM of 70413sq. ft. of semi-urban/ 317.00 02.08.2008 Bldg: 255.00 Properties are
industrial leased Land with Mr. Atul Rai Upto to inspected by
industrial building in Plot No.A- 07.07.2010 the then Chief
4(A), Mauza- Ram Nagar Manager on
(Industrial Estate), Pargana – 20.08.2008
Ralhupur, Chandauli in the name
of the Company, leased for 90
years (Unexpired period of lease
84 years)
2. Plant & Machinery & Other Fixed 191.57 WDV as on P&M: 200.00 --
Assets 31.03.2008 Exp. 07.07.10
Total 0

69
At the time of enhancement in CC(Hyp.), the company informed that the promoters have
no other property to offer as collateral. The promoters further contended that they have
increased the installed capacity by 30000 tpa without any further borrowing and requested
for considering enhancement on the existing collateral. As per the provisional Balance
Sheet as of March 2009, the value of P&M and Other Fixed Assets is Rs.253.90 lacs, against
Rs.191.57 lacs as of March 2008 (Aud.) (increase Rs.62.33 lacs).

The company has also approached SIDBI for sanction of term loan. SIDBI has sanctioned
the same, but sought pari-passu charge on the entire fixed assets of the company. The
company has requested us to cede pari-passu charge on the fixed assets or to sanction the
term loan with the existing collateral. Branch has recommended for considering the
proposal for enhancement with the existing collaterals taking into consideration the
satisfactory dealings of the party for over 5 years.

The existing collateral coverage is 74.79% (existing exposure is Rs.680.00 lacs) and the
same would come down to 60.54% (proposed exposure Rs.840.00 lacs).

RO Comments: Branch shall immediately ensure renewal insurance of building and also
ensure full coverage of insurance of P&M with Bank clause. Further, Branch to conduct
inspection of the collateral securities and detailed report should be held on record.

ii) PERSONAL GUARANTEE / :

CORPORATE GUARANTEE (Rs. in lacs)
Name of the Guarantor Means as per CR
Dtd. 27.05.2009
Personal Guarantee 1. Mr. Vijay Kumar Gupta 93.94
2. Mr. Neekay Lal 302.50
3. Mrs Godawari Devi 181.33
Total 0

21 a) WHETHER THE NAME OF THE : No, as per the information available

COMPANY / DIRECTORS FIGURE IN on Intranet.
RBI DEFAULTERS’ / CAUTION
LIST / WILFUL DEFAULTERS /
ECGC. IF YES, PLEASE FURNISH
DETAILS.
b) WHETHER DIRECTOR / PARTNER / : No.
PROPRIETOR IS A DIRECTOR IN
OUR / OTHER BANK OR IS
RELATED TO THEM. IF YES -
i) Name of such Director with : N.A.
name of the Bank
ii) Type of Relation : N.A.

c) Any litigation in force against the : No.

firm / company or against the
Partners / Directors. If so,
mention details and present
position

22. AUDIT OBSERVATIONS :

a) Internal : Dt.02.02.2009

70
 Observations Branch Replies
AD-14 not obtained Already held on record
Company seal not affixed Documents executed with common
seal of the company
ROC charge not held. ROC charge created, held on
record.

b) Concurrent : Nil
c) Statutory : Nil
d) RBI Inspection : N.A.

e)
Stock Audit
:
Dt. 16.12.2008 by M/s.GD Gujrati

Observations
Branch Replies

Nil
N.A.

23.
ANY IRREGULAR FEATURE OBSERVED IN THE MONITORING REPORT
:

Date of Report Irregularity Action Taken

04.09.2009 Nil N.A.

24 a) EXPOSURE DETAILS FROM OUR BANK :

(Rs. in lacs)
OUR BANK
Limits Limits D.P. O/s as on Value of Irregu-
Nature of Facility Existing Recom- 08.09.09 Securities larities, if
mended [Our any
share]
-NIL-
A] NON FUND BASED LIMITS
Sub-Total [A] -NIL-

B] FUND BASED LIMITS

CC (Hyp.) 680.00 680.00 680.00 538.32 St: 208.63 Nil
BD:
595.98
(July’09)
Sub-Total [B]

71
 -NIL-
C] TERM LOAN / DPGL LIMITS
Term Loan - 160.00 - - -
Sub-Total [C] -NIL-
GRAND TOTAL [A+B+C] 680.00 840.00 680.00 538.32

Stock insured for Rs.300.00 lacs only (valid upto 04.05.2010) against stock of
Rs.208.63 lacs as per stock statement as of July 2009. Branch to ensure insurance of
stock for full value with bank clause at any point of time.

b) DETAILS OF EXCESSES ALLOWED :

DURING THE YEAR

No. of occasions excesses allowed Maximum Excesses allowed

11 Rs.16.68 lacs

c) OTHER EXPOSURE, IF ANY, : Nil.

INCLUDING INVESTMENTS

d) OTHER LIABILITIES OF DIRECTORS / : The directors have guaranteed in

PARTNERS their individual capacity the limits of
[in their individual capacity] M/s Swadeshi Aahar Pvt. Ltd. & M/s
Simran Food Pvt. Ltd.
(Rs. in lacs)
Name of the Partner Nature of Loan Loan O/s as on Overdue, if
Amount 08.09.09 any
Mrs. Godavari Devi Union Miles 5.75 1.35 Nil
(652/134340)

25 a) EXPOSURE DETAILS FROM BANKING :

SYSTEM (Incl. our Bank)
(Rs. in lacs)
Fund Based Non Fund Based Comments on
Conduct of the
Name of the Bank
Account
% Share Amt. % Share Amt.
Union Bank of India 100% 680.00 - - Satisfactory.
b) CONDUCT OF THE ACCOUNT AND :
EXPOSURE DETAILS FROM FINANCIAL
INSTITUTIONS
(Rs. in lacs)
Fund Based Non Fund Based Comments on Conduct
Name of the Bank of the Account
% Share Amt. % Share Amt.
SIDBI 100% 33.02 - - Satisfactory, as per
Credit report of SIDBI
dtd. 29.06.09.

c) VALUE OF ACCOUNT (During :

Financial Year)
(Rs. in lacs)
i) Advances: 2008-09 Aug.09
- Interest Income 25.85 22.23
- Feebased Income 1.26 1.57

72
 ii) Retail / Consumer / No. of Accounts Amount
Finance[to employees 1 1.91
associates]
iii) Deposits: Amount Tenure
- Own - -
- Third Party - -

d) DETAILS OF THE FOREIGN : Nil.

CURRENCY EXPOSURE, COMMENTS
AND UNHEDGED PORTION, IF ANY

26 a) OPERATIONAL EXPERIENCE WITH :

REGARD TO SISTER / ALLIED
CONCERNS
The details of the accounts and outstanding of Group accounts are as under:
(Rs. in lacs)
Name of the Branch CoA Contingent FBWC Term Loan In- MOR irregu-
Concern (O/s as on 08.09.09) vest- larity, if
ment any
Limit O/s Limit DP O/s Limit O/s
Simran Food Varanasi Std. - - 600.0 600.00 492.2 - - - Aug.09 Nil
Pvt. Ltd. Main 0 5

Branch informed that the renewal of M/s Simran Food Ltd. Was expired on 03.08.2009
and they have already followed up with the company for submission of renewal papers
and the company is submitting shortly.

Key financial indicators of the sister concerns are as under:

Name of the Concern Constitution / Name of Key financials (Rs. In lacs)

promoter(s)
Simran Food Pvt.Ltd. Mr. Neekey Lal Gupta 31.03.07 31.03.08
Mrs. Godavari Devi
Mr.Vijay Kumar Gupta TNW 50.74 56.41
Net Sales 4573.55 5268.25
Profit Before 5.64 8.60
Tax
Net Profit 3.34 5.65
Current Ratio 1.36 1.33
TOL / TNW 7.43 8.04
b) COMMENTS ON OTHER BANK’S : N.A.
CREDIT REPORT ON SISTER
CONCERNS

27. PRUDENTIAL EXPOSURE NORMS : Within the prudential risk exposure

[inclusive of Bank’s exposure in the form of ceiling of the Bank.
investments like shares, debentures, CP, etc.]

28. COMMENTS ON ASSESSMENT OF LIMITS :

a) Projected Level of Sales :

73
The sales realisation of the company from its finished goods is as under:

Maida 55%
Suji 5%
Atta 20%
Bran 20%

During the financial year 2008-09 (Prov.), the company has achieved sales of Rs.2477.79
lacs against previous year's (2007-08) sales of Rs.2182.46 lacs registering a growth of
nearly 13.53%. Now, during the current financial year 2009-10, the company has
estimated sales of Rs.4340.55 lacs, an increase of 75% over the previous year. At the
time of previous enhancement, the company has estimated sales of Rs.3949.83 lacs
estimating an increase of 59%. Branch informed that taking into consideration growth in
net sales achieved during the current FY upto August 2009, the company has revised the
estimates upward for the FY 2009-10. Further, with the proposed enhancement in
installed capacity, the projected sales for 2010-11 are also revised. During the current
financial year upto August 2009, the company has achieved sales of Rs.1797.60 lacs.

The company contended that management of the company changed after 30 th June 2008
and the old management was taking lesser interest in the operations of the company. The
company further informed that they have taken control of the company after first quarter,
which was the peak season for procurement of raw material. Further, due to frequent
power failures, the company installed 750 KVA silent DG set for smooth production. They
further contended that due to change in management and interruption in power supply
had adversely affected the capacity utilisation. The company further informed that in the
current financial year 2009-10, it has operative installed capacity of 75000 TPA against
previous years installed capacity of 45000 TPA and it has conservatively projected capacity
utilisation of 44.40% in 2009-10 and 46% in 2010-11 and sales level, which are achievable
by them.

Regarding lower capacity utilisation, the company informed that the capacity utilisation
was 45% for 2008-09 and if the effect of expansion of capacity ignored, the capacity
utilisation for the FY 2008-09 would be 74%. They further informed that the work for
increase in installed capacity was commenced long back by the old management in order
to strengthen the competitive position of the plant as almost every plant in the
surrounding are is having installed capacity of 75000 tpa and also to take the benefits of
lower fixed overheads and the current management has only completed the remaining
work, in order to ensure that enhanced capacity of the plant becomes available for
production during the FY 2008-09. The company informed that due to increase in working
capital cycle from 62 days (estimated 31.03.2009) to 70 days (estimated 31.03.2010)
resulting in increased working capital requirement.

Now, the company is intended to further expand the capacity from the existing 75000 MT
to 120000 MT in the next FY 2010-11. Taking into consideration the nature of business,
previous trend and company’s, the sales estimated by the company are reasonable and
achievable.

b) Comments on Inventory / Receivable :

The details of actual / projected inventory / receivable levels are as under:

(Rs. in lacs)

74
 Mar.2008 Mar.2009 Mar.2010 Mar.2010
(Act.) (Prov.) (Est.) (Proj.)
Raw Material (Ind.) 38.13 87.47 341.64 379.10
Days’ consumption (6) (11) (25) (20)
Stock-in-process - - - -
Days’ Cost of Production - - - -
Finished Goods 47.88 91.97 140.97 136.93
Days’ Cost of Sales (7) (11) (10) (7)
Receivables 174.39 380.37 506.63 610.17
Days’ consumption (24) (46) (35) (30)
Other Consumable & Spares 47.03 86.97 42.00 45.00
Adv. to suppliers of raw material 54.78 106.31 5.00 6.00
Other Current Assets 28.16 17.46 4.89 45.26
Sundry Creditors 10.30 101.51 122.99 189.55
Days’ Purchase (2) (13) (9) (10)

Raw Material: As per the provisional figure for March 2009, the holding period is 11 days.
The company informed that raw materials level at the end of the financial year is
generally lower due to arrival of new crop. The company informed that the present
management has taken control of the company in June end and they have estimated 25
days on an average for the entire year. In the previous sanction, 25 days holding period
was accepted. The company has estimated / projected 25 / 20 days holding period for
2009-10 & 2010-11 respectively.

Other Consumables & Spares: The company is estimating / projecting other consumables
& spares level at Rs.50.00 lacs against Rs.86.97 lacs as of March 2009 (Provl.) and Rs.47.03
lacs as of March 2008.

Finished Goods: At the time of sanction, 7 days holding period was accepted. Now, the
company is estimating holding level of 10 days against holding level of 11 days for March
2009 (Provl.).

Receivables: In previous sanction in 2008 holding period of 30 days was accepted by us.
The company informed that credit period of 30 to 50 days is allowed and in case they
pressurise for early payments, they have to allow cash discount / early payment discounts
to their customers. As such, cost of early payment will adversely affects profitability of
the company and as such, they have been providing effective credit period of atleast 35
days in order to optimise such early payment discount.

Advance to suppliers of raw material: The company is estimating / projecting Rs.5.00 lacs
under this head. As per the audited financials as of March 2008 it is Rs.54.78 lacs and
provisional figures as of March 2009 it is Rs.106.31 lacs.

Sundry Creditors: Creditors level as on March 2008 is 2 days and as on March 2009 (Provl.)
is 13 days. Holding period of 1 day was accepted in previous sanction. The company
informed that the cost of market credit is higher than that of Bank credit and hence, it
proposes to reduce market credit to improve the operating profit margin. The company is
enjoying concessional interest rate applicable for Food & Agro based industries, which is
less when compared to market credit. The company is estimating / projecting holding
period of 9 & 10 days for 20010 & 2011 respectively.

The inventory / receivable holding levels are reasonable and in view of explanation /
clarifications given by the company, the same may be accepted.

75
 c) Working Capital Assessment :

The working capital assessment of the company under FBF method is as under:
(Rs. In lacs)
2008 2009 2010 2011
(Act.) (Prov.) (Est.) (Proj.)
1. Total Current Assets 392.32 773.56 1045.26 1213.62
2. Less: Current Liabilities (other than Bank 20.12 179.78 220.89 292.30
Borrowings)
3. Working Capital Gap (1-2) 372.20 593.78 824.37 921.32
4. Minimum stipulated Working Capital (25% of WCG) 93.05 148.45 206.09 230.33
5. Net Working Capital 65.45 77.83 144.37 241.32
6. FBF (3-4) 279.15 445.34 618.28 690.99
7. FBF Assessed (3-5) 306.75 515.95 680.00 680.00
8. Net Sales 2182.46 2477.79 4340.55 6098.74
9. NWC to TCA (%) 16.68 10.06 13.81 19.88
10. FBF to TCA (%) 71.15 57.57 59.15 56.94
11. Sundry Creditors to TCA (%) 4.56 18.41 11.77 15.62
12. FBF Assessed 306.75 515.95 680.00 680.00
13. Limit recommended 680.00

The company is at present enjoying FBWC limit of Rs.680.00 lacs and requested for
renewal at the existing level.

The Current Ratio is 1.16:1. If instalments of term loans repayable within 12 months are
excluded, CR is at 1.22:1. Branch informed that as the cash generations are adequate to
service the instalments due next year, taking into consideration the past experience, CR
of 1.22:1 may be considered as reasonable. However, as the unit is comes under SSE
category, minimum CR of 1.10:1 can be considered for manufacturing unit. Branch is
instructed to allow the limit as per the drawing power available as per the latest stock /
BD statement.

d) Term Loan :

The company intends to expand the installed capacity by by 45000 MT ie. from 75000
MT to 120000 MT, with total cost of project of Rs.224.05 lacs as under:
(Rs. in lacs)
Cost of the Project Amt. Means of Finance Amt.
Land & Site Development - Promoters Contribution 25.00
Building & Civil Construction 2.00 Cash Accruals 27.05
Plant & Machinery 215.78 Term Loan from Bank 172.00
Electrical Erection & Installation 1.50
Interest during Construction 4.77
Total 0 224.05
The Debt Equity Ratio for this project is 3.30:1.

Cost of Project:

Land & Site Development: As the land and site were already developed, no amount is
required for the same.

Building & Civil Construction: Branch informed that the company is undertaking civil
works such as making of beds for machinery and other mnior construction in the

76
company and estimated Rs.2.00 lacs as the cost. However, the company has to bear
the total cost from its own margin.

Plant & Machinery: The details of plant & machinery are as under:

Sl Amount
Description Name of Supplier Qty.
No. (Rs. In lacs)
Milling Separator Triple deck
1) W=2000 MM Vashisht Food Pvt. Ltd. 1 2.95
2) Dry Stoner MTSC 120/120 Buhler 1 5.00
Scourer with Aspiration Chanell
3) and motor. Buhler 1 4.50
4) Branfinisher Buhler 2 4.00
5) Automatic Moisture Dampning Unit Buhler 1 17.00
6) Bleeding Damper M.R. Engineers 1 1.21
7) Aspiration Channel M.R. Engineers 2 0.70
8) Branfinisher 45/1100 M.R. Engineers 2 1.30
Impact Detacher Complete with
9) 3.7 K.W Motor M.R. Engineers 6 2.88
10) Pneumatic System M.R. Engineers 32 11.20
11) Spouting M.R. Engineers 1 2.50
Cockly Cylinder (Long & Short
Green Double Deck Machine
12) without Electric Motor. Star Engineering Works 4.60
Roller Mill 1250 x 250 CL Body Mukul Enterprises
13) complete in all respect. -Turkey Make. 5 50.31
14) Plan Shifter 8 Feed 16 Seive Mukul Enterprises 4 12.00
15) Heavy Duty Roller Mill 1250 x 250 Dahela Industries 3 6.30
16) Cleaning Section Fan Flakt 2 1.70
17) H.P. Fan with 30 K.W Flakt 2 2.70
18) Revers Jet Filter -34 Flakt 2 5.30
19) Chkll-ed-5600 with 15 K.W Flakt 1 0.68
20) Revers Jet Filter - 42 Flakt 1 3.11
21) Chill Cast Iron Roll 1250x250 MM Kay Jay 9 9.00
Bearings 22216 K ZKL make
22) complete with JMC make sleve. Kay Jay 24 0.77
23) Vibro Purifier Triple Deck B. Khan 3 6.75
24) Electrical Panel Local 1 12.50
25) Electrical Cable Local 3.00
26) Electrical Erection Local 1.00
27) Erection Material Local 5.00
28) Bolting Cloth O. Market 2.00
29) Bought out items 2.00
30) Elevator and Conveyor 10.00
31) Electrical Motors 6.00
TOTAL : 0
Add CST/VAT, Freight, Insurance, Mechanical Errection and
: Installation Expenses etc. @9% 17.82
TOTAL : 215.78

77
Electrical Erection & Installation: The company has estimated Rs.1.50 lacs under this
head, which is reasonable taking into consideration the size of the project.

Interest during Construction: The company has sought moratorium period of 6 months
upto March 2010 and estimated the amount at Rs.4.77 lacs with interest @ 11.50% p.a.
Means of Finance:

Promoters’ Contribution: The company has proposes to brought Rs.25.00 lacs as

under:

Paid up Capital - Rs.5.00 lacs

Share Premium - Rs.20.00 lacs

Cash Accruals: The company intends to utilise cash accruals of Rs.27.05 lacs. As of
March 2009 (Provl.), cash accruals are at Rs.28.76 lacs.

Term Loan from Bank: The Company is requesting term loan of Rs.172.00 lacs from us
for enhancement of capacity from 75000 MT to 120000 MT. Branch has recommended
for sanction of TL of Rs.160.00 lacs considering margin of 25% on P&M. The margin
requirement is as under:
(Rs. in lacs)
Cost of the Project Amt. Margin (%) Loan
Building & Civil 2.00 100% -
Construction
Plant & Machinery 215.78 26% 160.00
Electrical Erection & 1.50 100% -
Installation
Interest during 4.77 100% -
Construction
Total 0 29% 160.00

Technical feasibility: Branch informed that they have already requested the Technical
Officer for inspection of the unit. However, as the company is in urgent need to issue
Import L/C in favour of seller of machinery, Branch has requested for sanction the loan
pending technical inspection as the company is in urgent need to issue Import L/C for
purchase of some machinery and disbursement will be made only after satisfactory
Technical Inspection report only.
The promoters are already in the business since long time having established
business / track record. The present project is only enhancement of capacity of the
unit from 75000 TPA to 120000 TPA and the promoters are experienced in the line of
activity, the branch request may be acceded to. However, the company has to
undertake to make payment of bills drawn under L/C, in case of non-disbursement of
term loan due to non-satisfactory reporting by Technical Officer.

Financial viability: The profitability estimates of the company after availing of term
loan are as under:
(Rs. In lacs)
Particulars 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15
EST. PROJ PROJ PROJ PROJ PROJ
INSTALLED CAPACITY (MT) 75000 120000 120000 120000 120000 120000
QUANTITY PRODUCED (MT) 36,750 51,000 53,100 55,200 57,300 59,400
CAPACITY UTILIZATION (%) 49.00% 42.50% 44.25% 46.00% 47.75% 49.50%

78
 Particulars 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15
EST. PROJ PROJ PROJ PROJ PROJ
Gross Sales
i.Domestic Sales 4340.55 6098.74 6338.14 6587.83 6837.52 7087.21
ii.Other Sale 2.00 3.00 3.00 3.00 3.00 3.00
Total 4342.55 6101.74 6341.14 6590.83 6840.52 7090.21
Less: Excise duty
Net sales (item 1 - item 2) 4342.55 6101.74 6341.14 6590.83 6840.52 7090.21
Cost of Sales:
Raw Materials - Indigenous 4099.63 5686.50 5920.65 6154.80 6388.95 6623.10
ii Other Spares - Indigenous 2.73 3.78 3.94 4.09 4.25 4.41
iii. Powers & Fuel 90.40 125.46 130.63 135.79 140.96 146.12
iv. Direct Labour (factory wages
& salary) 5.33 7.39 7.69 8.00 8.30 8.61
v. Other Manufacturing Exps 0.91 1.27 1.32 1.37 1.43 1.48
vi. Depreciation 22.68 34.14 34.14 34.14 34.14 34.14
vii. Packing Expenses 4.88 6.77 7.05 7.33 7.60 7.88
viii. Repairs & Maintenance 2.62 3.14 3.77 4.52 5.42 6.51
vii. SUB TOTAL (i to vi) 4229.18 5868.45 6109.19 6350.04 6591.05 6832.25
viii. Add: Opening Stock-in-
process
SUB TOTAL 4229.18 5868.45 6109.19 6350.04 6591.05 6832.25
ix. Ded: Closing stocks-in-
process
x. Cost of Production 4229.18 5868.45 6109.19 6350.04 6591.05 6832.25
xi. Add: Opening Stock of FG 91.97 140.97 136.93 142.55 148.17 153.79
SUB TOTAL 4321.15 6009.42 6246.12 6492.59 6739.22 6986.04
xii. Ded: Closing stock of FG 140.97 136.93 142.55 148.17 153.79 159.42
xiii.SUB TOTAL (Total Cost of
Sales) 4180.18 5872.49 6103.57 6344.42 6585.43 6826.62
Selling, General & Admin Exps 30.93 40.21 44.23 48.65 53.51 58.86
SUB TOTAL (4+5) 4211.11 5912.70 6147.80 6393.07 6638.94 6885.48
Operating Profit before interest
(3-6) 131.44 189.04 193.34 197.76 201.58 204.73
Interest on WC 64.13 58.00 58.00 58.00 58.00 58.00
Interest on TL 2.89 19.52 14.42 9.89 5.93 1.98
Other Interest - - - - - -
Operating Profit (after interest)
(8-9) 64.42 111.52 120.92 129.87 137.65 144.75
i. ADD other non operating
income
a. Interest received 6.99 7.34 7.71 8.10 8.50 8.92
b. Commission earned 1.70 1.70 1.70 1.70 1.70 1.70
c.Other Income
SUB TOTAL (Income) 8.69 9.04 9.41 9.80 10.20 10.62
ii. Deduct other non-operating
expenses
a. Donation - - - - - -
b. Preliminary expenses 0.34 0.64 0.64 0.64 0.61
SUB TOTAL (Expenses) 0.34 0.64 0.64 0.64 0.61 0.00
iii. Net of other non-operating
income/expenses 8.35 8.40 8.77 9.16 9.59 10.62
Profit Before Tax / Loss (item
9+ 10 (iii)) 72.77 119.92 129.69 139.03 147.24 155.37
Provision of taxes ( IT & FBT ) 7.50 12.35 13.36 14.33 15.17 16.00
Provision for DefferedTax
Net Profit 65.27 107.57 116.33 124.70 132.07 139.37

79
 Particulars 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15
EST. PROJ PROJ PROJ PROJ PROJ
Retained Profit (14-15) 65.27 107.57 116.33 124.70 132.07 139.37

Based on the above profitability estimates, the DSCR calculations are worked out as under:
(Rs. in lacs)
  2009-10 2010-11 2011-12 2012-13 2013-14 2014-15
Profit after Tax 65.27 107.57 116.33 124.70 132.07 139.37
Depreciation 22.68 34.14 34.14 34.14 34.14 34.14
Prl. Exp. W/Off 0.34 0.64 0.64 0.64 0.61 0.00
Interest on Term Loan 2.89 19.52 14.42 9.89 5.93 1.98
Total(A) 91.18 161.87 165.53 169.37 172.75 175.49
Repayment of TL 11 45.4 45.4 34.4 34.4 34.4
Interest on TL 2.89 19.52 14.42 9.89 5.93 1.98
Total (B) 13.89 64.92 59.82 44.29 40.33 36.38
DSCR (A/B) 6.56 2.49 2.77 3.82 4.28 4.82
Average DSCR 3.61:1

The average DSCR of 1.82:1 is acceptable.

Assumptions for profitability Estimates:

1. The installed capacity is assumed at 75000 MT for 2009-10 and 120000 MT w.e.f.
for 2010-11 onwards.
2. Capacity utilisation is estimated at 49% for 2009-10, 42.50% for 2010-11, 44.25% for
2011-12, 46% for 2012-13, 47.75% for 2013-14 & 49.50% for 2014-15.
3. Sales are comprising of Maida (55%), Suji (5%), Atta (20%) & Bran (20%).
4. The sale price of Maide is assumed at Rs.13500/- per MT, Suji Rs.13700/- per MT,
Atta Rs.11600/- per MT, Bran Rs.7300/- per MT & Chakki Atta Rs.12700 per MT.
5. Purchase price of wheat at Rs.11150/- per MT was assumed.
6. Labour expenses, packing expenses & other manufacturing expenses are considered
fully variable and is projected to increase with production.
7. Selling, Gen. & Admn. Expenses is projected to increase by 30% for 2009-10 % 2010-
11. In subsequent years it is projected to increase by 10% only.
8. Depreciation calculated on SLM basis.
9. Rate of interest is assumed at BPLR – 1.75% i.e. 10%.
10. Term loan is assumed to be disbursed from September 2009 upto March 2010 and
first instalment fall due in the quarter of Apr-June 10 quarter end.

In view of the foregoing, the project is financially viable.

Sensitivity Analysis: The sensitivity analysis is as under:

Avg. DSCR
Base Case 3.61:1
Scenario-I: 5% decrease in net sales 1.80:1

80
 Scenario-II: 5% increase in capacity utilisation 3.14:1

In all the scenarios, DSCR is above 1.50:1.

Services & Auxiliary Facilities:

Power: The existing power is sufficient for the enhanced limit also. Further, the unit is
also having DG set for uninterrupted production in case of power failure.
As the unit is situated in Ramnagar Industrial Area, all other infrastructure facilities are
available.

Man Power: Being established unit, it has employed labour force for the manufacturing
activity as well as marketing, finance etc..

Raw Material: The basic raw material wheat is available from open market. The company
purhases the wheat from Kanpur Mandi, Gorakhpur Mandi, Raibarely Mandi, Sultanpur,
Faizabad etc. Further, wheat is also available from FCI, which is having godown in
Varanasi.

Present status: The company is undertaking civil work and has placed orders for supply of
machinery. The progress of the project is as per the schedule and it is expected that the
same would be completed as per plan, subject to release of bank finance in time.

Implementation Schedule:

Activity Commencement Completion

Building & Civil work including other July 2009 October 2009
incidental work
Placement for order for machines August 2009 December 2009
and equipment
Arrival at site September 2009 February 2010
Fabrication, Erection and Installation Sept. 2009 March 2010
Commissioning and Trial runs March 2010 March 2010
Commercial Production April 2010

Repayment Schedule:

The loan is to be repaid in 20 quarterly instalments, with moratorium period of 2 quarters,

commencing from June.10 quarter. Interest is to be serviced by the company as and when
debited including moratorium period.

e) Assessment of Non-Fund Based Limits :

The company is importing Automatic Moisture Dumping Unit, Roller Mill and Plan Shifter
etc. from Turkey, Switzerland which are costing Rs.100 lacs (approx.) and requested to
issue Import L/C of Rs.100.00 lacs against the term loan proposed. Branch has
recommended for issue of the same. We concur with the recommendations of the Branch
with the stipulation that Import L/C can be issued with 25% margin as stipulated in term
loan on single transaction basis and term loan minimum to the tune of 75% of L/C issued
shall be earmarked and company has to undertake to pay the excess in term loan which
may be due to downward movement of rupee. Usual commission / charges applicable for
the Import L/C.

81
 f) Consortium Arrangement : N.A.

g) Any other matter :

Branch informed that SIDBI has sanctioned the term loan of Rs.160.00 lacs and the
company is getting subsidy of Rs.15 lacs from SIDBI being the Nodal Bank. However, we
stipulate that the company on its own shall make the efforts for subsidy, if any, receivable
for the term loan, and the Branch will forward the same to the Nodal Bank / Branch with
its recommendations. However, Bank shall not hold any liability / responsibility in case of
non-receipt of subsidy and the company has to pay the term loan in full as per the
repayment schedule. An undertaking to this effect shall be obtained from the company.

29 CREDIT RATING :

The rating of the company as per the provisional financials as of March 2009 in the revised
rating model III for large borrowers with credit limits between Rs.1 crore to Rs.10 crores
and the marks obtained are given as under:

Revised Rating Model for Large Borrowers

With credit limits between Rs.1 Crore to

Rs.10 Crores

(Fund Based and Non Fund Based)

Name of VARANASI MAIN Regio VARANASI

Branch n

Name of M/S. SWADESHI AAHAR PVT. LTD.

Borrower

Credit Facilities

Nature of Limit Amount of

Limit

82
 CASH CREDIT (HYP.) Rs.680.00
LACS
TERM LOAN Rs.160.00
LACS
w/w
IMPORT L/C Rs.100.00
LACS

Rating Assigned : CR-4

Date of Rating : 11.11.2009

Rating assigned based on AUDITED financials as of MARCH 2009

83
 Rating Model - III
Applicable for sanctions between Rs. 1 crore to Rs.10 crores
(Fund Based and Non Fund Based)
INVESTMENT GRADE NON INVESTMENT GRADE
CREDIT RATING AGGREGATE CREDIT RATING AGGREGATE
QUALITY NUMERIC SCORE QUALITY NUMERIC SCORE
Lowest risk CR 1 >90 Risk Prone CR 7 56-60
Minimal risk CR 2 81-90 High Risk CR 8 55 & below
Moderate risk CR 3 76-80 Sub-Standard CR 9 Default – NPA
Satisfactory risk CR 4 71-75 Doubtful CR 10 -
Acceptable risk CR 5 66-70 Loss CR 11 -
Watch List CR 6 61-65

I. RATING OF THE BORROWER

No Parameter/Criterion Parameter/Criterion Scor Marks

. e
A. FINANCIAL RISK [ as per last audited financial statement ] (static)
I DEBT EQUITY RATIO 1.50 and below (0.04) 3 3
[Term Liability 2.00 and below 2
to Tangible Net Worth] 2.50 and below 1
Above 2.50 0

II Ratio of Total Outside Liability 3.00 & below (1.30) 3 3

to Tangible Net Worth Above 3.00-4.00 2
Above 4.00-5.00 1
Above 5.00 0

III. CURRENT RATIO – Liquidity Ratio 1.33 and above 5

Current Assets 1.25 and above 4
Current Liabilities 1.17 and above 3
1.10 and above (1.12) 2 2
1.00 and above 1
Less than One 0

IV Return on Capital Employed 15% and above 4

Net Profit after Taxes 12% and above 3
Capital Employed 10% and above 2
Capital Employed means = 7% and above 1
TNW + Long Term Liabilities Less than 7% (2.74%) 0 0

V NET SALES 100% and above 3

 Actual vis-à-vis > 80% < 100% 2
Projections > 50% < 80% (69%) 1 1
Indicates achievement level Below 50% 0

VI Interest Service Coverage Ratio More than 2.5 3

2.00 to 2.5 (2.38) 2 2
1.99 to 1.50 1
Measures firm’s ability to pay Less than 1.50 0
interest Profit before Interest,
Depreciation, tax
Interest

85
VII Debt Service Coverage Ratio >2 3 N.A.
Measures firm’s ability to pay > 1.50 TO 2.00 2
> 1.10 TO 1.50 1
interest & installment < 1.10 0
Net Profit+Interest on TL + Depriciation
Installment + Interest on TL

VIII Growth in net sales > 20% 3

As compared to previous year > 15% < 20% 2
> 10% < 15% (14%) 1 1
Less than 10% 0

IX. Growth in Net profit In excess of 20% 3

As compared to previous In excess of 15% 2 2
year < 20 % (18%)
In excess of 10% 1
< 15 %
Less than 10% 0
Sub-Total 30 14/27
B. MANAGEMENT RISK
I Hands on experience Very High ( >5 3 3
of the management years)
personnel in the
industry. High (2 to 5 yrs) 2
The
management/proprietor Moderate (< 2 1
’s understanding of the years)
business environment

86
 the borrower operates Absent (0 yrs) 0
in.
(If an experienced
management of well-
managed company /
firm undertakes a new
industry / business
sector, they may be
given the marks for
managerial
competence, as per
rating of the existing
account provided the
industry / business
sector they propose to
start is related to their
existing one.)

II Management Initiatives High 2 2

The initiatives of the Moderate 1

management to stay
ahead of the Low 0
competitors are a clear
indication of
management quality.
The pointers are quality
certification,
collaborations and
marketing alliances,
awards etc.

III Honouring financial Honoured on 3 3

commitments (to our time

87
 bank and other banks & Honoured but 2
Financial Institutions delayed within
and Govt. and other acceptable
creditors). Consider period (say 10
the following to judge to 15 days)
the payment of Honoured but 1
practices: delayed beyond
acceptable
- Payment of period (beyond
interest/instalment 15 days
- Retirement of bills business)
- Govt. dues like sales Not honoured 0
tax/income tax
(whether attachment
orders received from
sales tax/income tax,
etc.
- Return of cheques
- A/c within limits
- Creditors velocity
ratio – in line with
the
projections/acceptab
le level

IV Concentration of Team of 2
Management qualified
professional
Management 1 1
concentrated in
few hands
Business 0
dependent on 1
or 2 individuals

88
V Labour Management in Very Good 2 2
the past.
Cordial 1
In case of the borrower
employing substantial Inadequate 0
labour force the
parameter should be
rated. If there has been
no history of labour
problems – max. score.

VI Affiliate concerns Absent 2 2

performance
Present 0
In case there are
affiliates of the same
management of the
borrower then this
criteria to be applied, as
to whether these
concerns are classified
as NPAs by banks/FIs.

VII Market reputation of the Excellent image 2 2

promoters /
management. (In case No adverse 1
of adverse report on the factors
promoters /directors,
proposal will not be
entertained)

VIII Ability of the promoters Yes 1 1

/ management to bail No 0
out the company in
case of crisis

89
IX Succession planning in Yes 1 1
key business areas No 0

X Balance Sheet Unqualified 2 2

Practices Report for the
Consider those past 3 years
qualifications having Unqualified 1
adverse impact on Net Report for the
Profit & TNW past 2 years
Other cases 0

XI Statutory Compliance Complied with 2 2

Compliance with the Not complied 0
following with
(a) Pollution Board
(b) Environmental
clearance
(c) Sales Tax – Income
Tax No.
(d) Export/Import code
(e) (list only
illustrative)
Sub-Total 22 21/22

C. MARKET - INDUSTRY RISK

I. Market Good 2 2
potential/Demand
situation Neutral 1
Consider the following :

90
 Assessment of the Unfavourable 0
market/demand for the
product being or
proposed to be sold by
the borrower in the area
of operation.
Compare demand /
supply scenario. Say
supply is short of
demand can be
classified as a ‘good’
scenario. If supply
more or less matches
demand, it can be
classified as ‘neutral’
scenario.

II Diversification among High 2 2

different consumer
segments/geographical Moderate 1
spread
Consider the following Low 0
Diversification among
consumers and
geographical spread of
the products sold. Say
whether highly diverse
set of customers or
products or fairly
diverse set of
customers / products

III Competitive Situation Monopoly 3

situation
Every business unit is
exposed to competitive Favourable 2 2
pressures, except in

91
 monopoly. With the Neutral 1
available information,
an approximate Unfavourable 0
assessment of the
competitive situation
should be arrived at
after considering the
following aspects : -

a) Number of
Competitors
b) Presence of big
competitors with
inherent strength
c) Existence of parallel
Markets
d) Competitive
advantages enjoyed
by the borrower such
as cost efficiencies,
superior technology,
brand loyalty, etc.
e) Market share of key
products
f) Impact of WTO
liberalization

IV Inputs/Raw materials High 2 2

availability
Moderate 1

92
 The availability, quality Low 0
of key inputs/raw
materials is having
bearing on the quality
and price of the final
product/services
Consider the following :
a) Continuous
availability of quality
inputs/raw materials
b) Availability of
substitutes for
inputs/raw materials
c) Affordability of
quality inputs/raw
materials

V Locational issues Favourable 2 2

Locational advantage Neutral 1

might provide a

93
 borrower with a Unfavourable 0
competitive advantage
vis-à-vis competitors
like availability of
infrastructure,
favourable government
policies, nearness to
raw materials/markets,
etc.
a) Infrastructure
facilities
b) Proximity to Inputs
c) Proximity to markets
d) Presence in a state
with favourable
policies

VI Technology Superior 2 2
Consider the following
factors : Adequate 1
- Availability of R&D
facilities Low 0
- Proven Technology,
(i.e. not subjected to
changes in the
immediate future)
- Technology likely to
undergo changes
(i.e. Company
capable of surviving
the changes.)
- Outdated technology

VII Manufacturing Good 3

efficiency/capacity
utilisation. Satisfactory 2

94
 Consider the following : Average 1
-
Below Average 0 0
More than 90% - (45.55%)
Good
Between 75% to 90% -
Satisfactory
Between 50% to 75% -
Average
Below 50% -
Below Average

Provided unit is
working above the
break even point,
otherwise score of 0 to
be given

VIII Cyclicality/Seasonality Not affected by 2 2

cyclical
fluctuations
Favourable 1
industry cycle
with long term
prospects
Susceptible to 0
unfavourable
changes in the
markets /
Industry cycle
Sub-total 18 14/18

SUMMARY

95
Borrower Rating

Marks Obtained
A 30 14/27
Financial Aspects
10
B Management aspects 22 21/22
10
C Market/Industry aspects 18 14/18
8
Total 70 49/67
28

II. RATING OF THE FACILITY

A. Compliance of Sanction Terms

I Compliance of All sanction terms 2 2
Sanction terms complied with and
legally enforceable
documentation held
on records
Only 2nd Charge not 1
registered
EM not completed 0

II Submission of Timely Submission 2 2

Stock Submitted within 30 1
Statements/QPR days from due date
Belated Submission 0
beyond 30 days

96
III Submission of Submitted within 5 2 2
Audited Balance months from the
Sheet & Profit & closure of the
Loss A/c & account
Financial Data in Submitted within a 1
CMA forms period of > 5 months
< 8 months from the
closure of the
account
Delay > 8 months 0

IV. Repayment Upto 5 years 2 N.A.

schedule for Term > 5 years 1
Loans only

V. Operations in the - Turnover 3 3

account Commensurate with
sales
- Turnover > 70% to < 2
90%
- Turnover > 60% to < 1
70%
- Turnover < 60% 0

VI. Operations in the Top Class 3

account No occasion of
excess and return of
cheques
Satisfactory 2 2
Rare occasions of
excess and returns
of cheques
Average 1
Occasional excesses
and return of
cheques

97
 Below Average 0
Frequent excess and
return of cheques

VII Commitments Timely payment 4 4

under DPGL/Term Irregular/overdue 3
Loan and upto one month from
payment of due date
interest on cash Irregular/overdue 2
credit/overdraft, beyond one month
etc. upto 2 months
Delayed beyond 2 0
months

VIII Margin given on > 40% Margin 3 N.A.

Term Loan 25% to < 40% 2
20% < 25% 1
< 20% 0
Sub-Total 21 15/16

III RISK MITIGATORS

Availability of Collateral More than 75% to 3

Security and quality of 100% of the total
collaterals. exposure
Note: Between 50% to 75% 2 2
Marks to be allotted of total exposure
only if the formalities (74.56%)
of documentation / Less than 50% of the 1
creations of securities exposure

98
are completed in all No Collateral 0
respects. security
Availability of Guarantee available 2
Guarantee
Promoter - Directors' Guarantee not 0 0
Guarantee / Third Party available
Guarantee
Means of the
Guarantor = Total
Exposure (FB + NFB)
taken
Sub-Total 5 2

IV. Business Considerations

I Length of Having satisfactory 2 2
Relationship relationship with the
Under 'length of Bank for > 5 years
relationship', it is
now clarified that Having satisfactory 1
marks can be relationship with the
allotted if any Bank between 1 – 5
group/ associate years
concern dealing Having satisfactory 0
with the bank is relationship with the
floating a new Bank for < 1 year
venture, the
relationship value
of the group /
associate concern
can be taken into
account.

II Income Value to > 10% 2

the Bank (Interest,
commission, 8% to 10% (9.05%) 1 1
exchange, etc.)

99
 from the account < 8% 0
as percentage to
total fund based
limits
Sub-Total 4 3

SUMMARY

Marks Obtaine
d
I. Rating of the Borrower 70 49/67
II Rating of the facility 21 15/16
III Risk Mitigators 5 2/5
IV Business Aspects 4 3/4
Total 100 69/92
(75%)
Note :
1. The total score under the model is 100. Where one or more parameters
are not applicable, the score obtained under the applicable parameters
should be converted into % terms and appropriate grade / rating is
assigned.

2. Presently, the entire facility rating is treated as 'not applicable' for new
borrower. However, marks may be allotted for proposed margin and
repayment schedule for term loans as margin and repayment schedule
are among other things, main pre-conditions for sanction of the facility.

a) Year Previous Year Current Year

[2007-08(Aud)] [2008-09(Prov)]
Total Score Obtained 77.46% 75%
Grade CR-3 CR-4
b) Marks Obtained
Parameters
Previous Year Current Year
Borrower Rating 48/64 49/67
Facility Rating N.A. 15/16

100
 Risk Mitigators 5/5 2/5
Business aspects 2/2 3/4
Total Marks with Grade 55/71 69/92 (75%)

The account is rated as CR-4 by RMD based on the provisional

financials as of March 09. The account comes under Food & Agro
based Processing Industries category and the applicable rate of
interest for CR-4 rating is BPLR -1.75% for both FBWC & TL.

The company is coming for enhancement of limit for the second

time before submission of audited Balance Sheet. Company
informed Branch that the Balance sheet for 2008-09 is under
finalisation stage and will be submitted shortly and requested for
sanction of loan as they have to issue Import L/C to the sellers of
machinery immediately. Branch has recommended for
consideration of term loan taking into consideration the satisfactory
track record of promoters, operations in this account and the other
Group accounts and genuine request of the company.

30. INDICATE PRODUCTS / : Retail & NID products are

SERVICES PROPOSED TO BE proposed to be marketed to
MARKETED TO CUSTOMER the directors.

31. SUMMARY OF CHANGES IN :

SANCTION TERMS, IF ANY

No. Terms of Sanction Stipulated Now

Earlier Recommended
1. Commission for L/C, LG, N.A. Usual
DPGL
2. Primary Security (give CC: Hyp. Of CC: Hyp. Of
details) stocks, Book stocks, Book
Debts not older Debts not older
than 60 days. than 60 days.
TL: P&M
purchased out
of finance.

Delegated Authority:

101
The proposal falls within the delegated authority of the Dy. General
Manager on account of total individual / group exposure as given
overleaf:

(Rs. in lacs)
Name of the Limit
Branch
Account Exist. Prop.
Simran Food Pvt. Varanasi 600.0 600.0
Ltd. Main 0 0
Swadesh Aahar Varanasi 680.0 840.0
Pvt. Ltd. Main 0 0
Total 0.00 0.00

32. RECOMMENDATIONS :

The activity of the company comes under food processing. Food

processing is one of the thrust areas of the Bank as per our Loan
Policy. The directors are one of our valued clients enjoying
substantial limits with satisfactory operations.

In view of the foregoing, we recommend for enhancement of the

following limit in favour of the company, with the following terms
and conditions:
(Rs. in lacs)
Amount Int./
Margi
Nature of Limit Existin Propose Comm Security
n
g d .
CC (Hyp.) 680.00 680.00 25% BPLR – Hyp. Of stock
1.75% & Book Debts
not older than
60 days.
Term Loan - 160.00 25% -do- Hyp. Of P&M
purchased out
of Bank
finance.
w/w
Import L/C - (100.00) 25% Usual
Total 680.00 840.00

Pre-Disbursement terms & conditions:

102
 1. The company on its own shall make the efforts for subsidy, if
any, receivable for the term loan, and the Branch will forward
the same to the Nodal Bank / Branch with its recommendations.
However, Bank shall not hold any liability / responsibility in
case of non-receipt of subsidy and the company has to pay the
term loan in full as per the repayment schedule. An
undertaking to this effect shall be obtained from the company.
2. Correct and valid set of security documents complete in all
respects and adequately stamped to be held on record for the
enhanced / modified credit facilities.
3. Board resolutions for enhancement of credit facilities from the
Bank and persons authorised to execute the documents on
behalf of the company including affixation of company’s
common seal on the documents should be obtained and held on
record.
4. Branch shall ensure that the EM is created / extended covering
our total exposure as per norms of the bank and the same is
enforceable.
5. In case of limits of Rs.10.00 lacs and above, Branch shall get
the documents vetted by Panel Advocate before release of
limits.
6. Personal guarantee as stipulated shall be obtained for the
enhanced limit/s.
7. Processing charges should be collected as per latest circular.
8. This sanction is valid for a period of 3 months only.
9. Terms and conditions stipulated in process note / sanction
advice, as prescribed in Guide on Documentation / Fair
Practice Code, to be conveyed to borrower/s and guarantor/s
and acknowledged copy thereof should be held on record.
10. Limits to be released after CPA and on approval from competent
authority.
Post-Disbursement terms & conditions:
11.Advance to be allowed strictly as per Drawing Power, worked
out on the basis of “total stocks plus Book-debts plus advance
payments made minus Trade Creditors.”
12.Monthend stock statement and Book-debts statement should
be submitted within 15 days of the succeeding month, else 1%
penal interest to be charged.

103
13.Book debts older than 90 days will not rank for Drawing
Power.
14. Agewise Book Debts statement certified by Chartered Accountant
should be submitted quarterly by the company.
15.Branch shall closely monitor the account as per CO guidelines
and submit relative M-6 / Monthly Credit Monitoring Report on
a regular basis.
16.MSOD / QPR / HPR should be submitted at the end of every
month / quarter / half-year within 7 days, 30 days and 45 days
respectively from the end of month / quarter / half-year.
17.Party should route all the business transactions through the
account with us.
18. Sufficient cushion in the last week of every month to be provided
in the account enabling us to recover periodical interest.
19.Excess over sanctioned limits / Drawing power should not be
allowed.
20. Party to submit all copies of statutory returns like ITR, Wealth/
Trade / Service / Excise / Sales Tax assessment order etc. &
paper submitted to Govt. departments.
21. The company will not invest any amount outside the unit, will
not create charge on assets in favour of others, without the
consent of bank.
22. Bank’s charges should be got registered with ROC for limits
immediately after documentation within 30 days and Search
Report evidencing the registration of charges should be obtained.
23. Branch shall obtain Search report on the company with ROC at
frequent intervals.
24.Inspection of the existing properties at the yearly intervals to
be done as per rules and detailed report should be held on
record.
25.Stocks / machinery / collaterals (prime / collateral) should be
comprehensively insured against all risks, for full value in the
name of Bank Account borrower and the policy should be
obtained and held on record.
26.Bank’s name board should be displayed at a prominent place
of business office / godown.

104
27. Charges applicable for Documentation, inspection, registration /
modification / satisfaction of charges and also for obtaining of
Search Report (in addition to the actual charges) as per latest
Circular on Service Charges to be collected.
28. Penal interest to be charged wherever applicable as per
Annexure II of IC No.8196, dtd. 22.12.2008.
29.Debit Balance Confirmation to be obtained at regular intervals.
30.Copy of VAT return filed with Sales Tax department, if
applicable, should be submitted to Bank on regular basis.
31.Audited financial statements of the company should be
submitted within 15 days of due date. Branch should obtain
fresh credit rating on the audited financials from the RMD as
per IC 8100 dated. 06.09.2008. The borrower should also be
informed that the revised pricing is applicable from the date of
sanction, if there are wide variations in the audited financials
to that of provisional figures.
32. Rate of interest is subject to review again on the basis of credit
rating based on audited financial statements and subject to any
change by Bank / RBI.
33. Bank shall have the right to carry out the inspection of unit /
office / godown, all securities charged to the Bank as well as to
verify books of accounts either through its employees or through
outside agencies. Any cost incurred in this connection shall be
borne by the company.
34.Branch should rectify all the irregularities pointed out by the
Bank auditors / Statutory auditors / concurrent auditors.
35.The bank reserves the right to suitably modify the terms and
conditions whenever considered necessary.
36.The Bank reserves the right to recall any loan / advance upon
the borrower committing any breach or other events,
considered likely to jeopardise the interest of the Bank.
37. Branch should obtain fresh valuation of collateral securities once
in every three years, from a different valuer.
38. Branch should charge commitment charges of 0.5% p.a.
biannually (March & September, on working capital fund based
limits in respect of unutilised portion in excess of 25% of the
sanctioned limit and on the short drawals of the Term loan as per
Draw down schedule.

105
 39.Branch to explore the possibilities of selling SUD Life insurance
policies to the directors / relatives.
40.Branch shall comply with all other stipulations given in the
process note No.ROV:ADV:143:09, dtd.08.06.2009, existing,
Grid observations / stipulations, usual terms and conditions and
other conditions stipulated by the Bank from time to time.
41.Branch should confirm compliance of sanction stipulations
within 10 days of disbursement of limit/s.

CREDIT APPROVAL GRID: -

 The proposal was placed in 46 th meeting of the CAG held on

09.09.2009 and the grid has recommended for sanction of
credit facilities mentioned in the process note.
 A copy of the minutes of 46 th meeting of the CAG dated
09.09.2009 is enclosed for compliance of the branch.

MANAGER (C) CHIEF MANAGER(C)

// Sanctioned / Declined //

Sanctioning Authority

106