Union Bank of India
Union Bank of India
Union Bank of India
INTORDUCTION
Insurance Services
Your insurance portfolio should protect what you've earned and preserve your wealth for future
generations. If you need insurance for estate or financial planning or for business or personal
protection, the specialists at UnionBanc Insurance Services can help.
Life Insurance
Life insurance is an essential foundation for building your financial and estate plans. Insurance
professionals at UnionBanc Insurance Services can help you select a policy to protect your
family's current lifestyle, plan for future needs like college tuition and retirement, or protect a
family-owned business.
Policy Reviews
And because insurance costs have decreased in the past several years, there has never been a
better time to analyze your existing policies to ensure that you have the right insurance at the
right price. Ask a UnionBanc Insurance Services specialist about a policy review to learn more.
HISTORY
Union Bank of India (UBI) was registered on 11 November 1919 as a limited company
in Mumbai and was inaugurated by Mahatma Gandhi. At the time of India's Independence in
1947, UNION BANK OF INDIA still only had four branches - three in Mumbai and one
in Saurashtra , all concentrated in key trade centers. After Independence UNION BANK OF
INDIA accelerated its growth and by the time the government nationalized it in 1969, it had
grown to 240 branches in 28 states. Shortly after nationalization, UNION BANK OF INDIA
merged in Belgaum Bank, a private sector bank established in 1930 that had it merged in a bank
in 1964, the Sheri Judea Shankar ling Bank. Then in 1985 UNION BANK OF INDIA merged
in Mira State Bank, which had been established in 1929. In 1999 the Reserve Bank of
India requested that UNION BANK OF INDIA acquire Sikkim Bank in a rescue after extensive
irregularities had been discovered at the non-scheduled bank. Sikkim Bank had eight branches
located in the North-east, which was attractive to UNION BANK OF INDIA.
UNION BANK OF INDIA began its international expansion in 2007 with the opening of
representative offices in Abu Dhabi, United Arab Emirates, and Shanghai, Peoples Republic of
China. The next year, UNION BANK OF INDIA established a branch in Hong Kong, its first
branch outside India. In 2009, UNION BANK OF INDIA opened a representative office in
Sydney, Australia.
MISSION
To Be Premiere Bank,
Responsive To The Needs Of Our Target Market Customers,
Recognized For Consistently Superior Service Quality Innovative Products,
Thereby Delivering Superior Value To Our Shareholders
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, and
NRI Banking
Corporate Banking
Internet Banking
Account Information
Transfer of Funds
Bills
Requests
Mails
Trade
Limits
Currency
U pleads
Customization
Financial enquiries
Non Financial enquiries
investments, apart from death benefits to the loved ones in case of the insureds
unfortunate demise.
Guaranteed Money Back Plan: A savings plan that provides guaranteed payouts
after every 5 years to the insured. Maturity and death benefits are also applicable.
Jeevan Safar Plus:A traditional life insurance plan that guarantees 125% sum
assured apart from additional bonuses accumulated during first 5 years of policy term, as
well as death and maturity benefits.
3.
Wealth Builder: A single premium investment plan, with the option to choose
among 4 funds. Top-up options, death and maturity benefits are available.
Elite Assure Plan:This is a wealth creation plan wherein customers can choose
between 5-5-5 or 7-7-7 option (5/7 years premium collection, next 5/7 years incubation,
and final 5/7 years repayment respectively). Death, maturity, and guaranteed monthly
income benefits applicable.
Dhan Suraksha Plus: A ULIP that allows you the flexibility to choose between 4
different types of funds as specified at the time of policy purchase. Maturity and death
benefits are applicable.
4.
Two choices of funding are available - Wedding Endowment and Career Endowment. In
case of death of insured within policy term, the remaining premium will be waived off and
death benefit will be paid out, without affecting the actual funds meant for the childs
future.
5.
Immediate Annuity Plan: A retirement savings plan that will help you build a
retirement corpus that pays out guaranteed annuity after retirement in flexible frequencies.
6.
Loan Suraksha: This is a decreasing term insurance plan that offers protection to
dependents against any past or future loans taken by the insured. Coverage for joint
borrowers is also available.
Shiksha Suraksha 2: Another decreasing term insurance plan, this plan will
provide protection to the families of educational loan takers against the risk of the
insureds death during the loan repayment tenure.
7.
Group Term Insurance Scheme: This is a one-year group term insurance plan
(renewable) meant to provide cover to groups of people working/operating under a single
umbrella, such as company employees, welfare associations and so on. Death benefits are
applicable, and profit from investments is shared among the insured.
Group Term Insurance Scheme in lieu of EDLI: This is a group term plan that
offers life insurance cover to employees working at a firm and covered by Employees
Provident Fund. Death benefits and higher life cover compared to EDLI plans are
applicable.
Union Bank of India joins hands with insurers to roll out life and accident
insurance policies
Unlike the accidental death cover offered through the Rupay card linked to Pradhan Mantri Jan
Dhan Yojana(PMJDY) bank accounts, where the cover is an in-built feature, customers can
voluntarily opt for these schemes after paying the applicable premium.
Both products offer sum assured of Rs 2 lakh each to accountholders in the age-group of 18-50
years. The annual premium for the life cover amounts to Rs 330, while the accidental death cover
will cost Rs 12 per year. The premium amount will be directly debited from
customers' savings accounts once they opt for it.
The bank also said that over 2.3 lakh accounts opened since August 2014 under the PMJDY had
now become eligible for using overdraft facilities. Out of these, close to 6,700 accountholders
had availed of the facility, according to Union Bank's chairman and managing director Arun
Tiwari. The usage of the overdraft limit amounted to Rs 27 lakh.
COMPANY PROFILE
Union Bank of India (UBI) is one of India's largest state-owned banks (the government owns 55.43% of
its share capital), is listed on the Forbes 2000. 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 is available to
all it score 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
The Union Bank of India was built up in twentieth century and declared open by the Father of the Nation,
Mahatma Gandhi. The bank with its efficient value-added services, sustained growth, consistent
profitability and development of new technologies bank has ensured complete customer delight,
living up to its image of, GOOD PEOPLETO BA NK WITH. Bank is offering credit adds, home
loan, union demit, Kinas ATM, International debit card, online tax payment facility, airway eticketing kiosk, etc., services to its customers through core banking solution.
He Union Bank of India has 2261 branches out which1031 branches are under CBS. All the ATMs are
inter-connected through the Banks ATM Switch, thus facilitating on-line operations in case
of CBS customers. The Bank is a member of Cash Tree consortium and alohas bilateral arrangement
with State Bank of India, enabling the Banks ATM cardholder access to over 20000 ATMs across the
country. UNION BANK OF INDIA Net connects 65 Offices and 984 branches located in
323centers, 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. The Bank is using VSAT network for
connecting branches and ATMs wherever leased line connectivity is not feasible. We have 590
VSATs operational, connecting 194 branches/extension counters and 316 ATMs.
c) Branch sales and services (improving the customer experience in the branch)
d) Centralization of key processes
Bank has brought all its branches under Core banking solutions .Union Bank is the first large
bank to achieve 100% CBS roll out. Bank has taken lead to establish alternate delivery channels
in the form of ATMs, internet banking, phone banking and Mobile Banking. Bank has introduced
many technology based services like RTGS, online NEFT free of cost, on line application for
products and services and online redressed of grievances.
country to focus exclusively on MSME sector with turnaround time of 2 weeks for sanction of
proposals. Bank has launched mobile banking facility U mobile which facilitates limited
transactions and other services through mobile phones.
Mar'12
Mar'11
Mar'10
Mar'09
Mar'08
Liabilities
Share Capital
661.55
635.33
505.12
505.12
505.12
12,437.68
10,555.35
8,302.69
6,549.26
5,118.19
Net Worth
14,633.06
12,764.52
10,423.78
8,740.35
7,347.70
Secured Loans
17,909.49
13,315.97
9,215.31
3,884.90
4,760.49
Unsecured Loans
TOTAL LIABILITIES
Assets
Gross Block
3,720.39
3,598.41
3,396.98
3,220.65
2,937.45
1,388.20
1,319.21
1,101.50
893.35
741.62
Net Block
798.36
705.36
679.51
641.32
471.44
3.61
13.58
9.96
7.86
4.57
Investments.
62,363.56
58,399.14
54,403.53
42,996.96
33,822.63
Inventories
0.00
0.00
0.00
0.00
0.00
Sundry Debtors
0.00
0.00
0.00
0.00
0.00
15,675.14
20,098.44
15,776.69
15,984.93
10,097.84
77,952.40
Current Liabilities
6,799.95
7,442.67
5,483.01
9,647.43
8,106.43
Provisions
0.00
0.00
0.00
0.00
0.00
6,799.95
7,442.67
5,483.01
9,647.43
8,106.43
Misc. Expenses
TOTAL
0.00
(A+B+C+D+E)
ASSETS
0.00
0.00
0.00
0.00
Mar'12
Mar'11
Mar'10
Mar'09
Mar'08
22,383.89
17,684.30
14,667.24
12,901.70
10,123.58
Excise Duty
0.00
0.00
0.00
0.00
0.00
NET SALES
22,383.89
17,684.30
14,667.24
12,901.70
10,123.58
Other Income
0.00
0.00
0.00
0.00
0.00
TOTAL INCOME
23,422.28
18,465.11
15,395.40
13,401.69
10,504.56
Manufacturing Expenses
0.00
0.00
0.00
0.00
0.00
Material Consumed
0.00
0.00
0.00
0.00
0.00
Personal Expenses
2,479.83
2,600.25
1,354.99
1,152.36
845.68
Selling Expenses
67.40
94.08
38.98
132.63
34.49
Administrative Expenses
2,804.57
2,287.70
1,652.65
1,339.02
1,196.21
Expenses Capitalized
0.00
0.00
0.00
0.00
0.00
Provisions Made
975.24
135.25
244.81
217.97
90.94
TOTAL EXPENDITURE
6,327.03
5,117.28
3,291.43
2,841.98
2,167.32
Operating Profit
2,796.71
2,465.86
2,510.35
2,201.88
1,686.24
EBITDA
3,835.10
3,246.66
3,238.51
10,777.68
8,428.18
Depreciation
146.45
155.66
160.14
136.58
101.82
Other Write-offs
0.00
0.00
0.00
0.00
0.00
EBIT
3,688.65
3,091.00
3,078.37
10,641.10
8,326.36
Interest
14,235.39
10,236.42
9,110.27
8,075.81
6,360.95
EBT
2,713.42
2,955.76
2,833.56
2,347.31
1,874.47
Taxes
925.62
873.45
758.00
630.00
487.15
1,787.80
2,082.31
2,075.56
1,717.31
1,387.32
-0.6
-0.3
-0.6
9.24
-0.2
0.78
0.00
0.00
0.00
0.00
Other Adjustments
-0.7
0.00
0.00
0.00
0.00
REPORTED PAT
1,787.14
2,081.95
2,074.92
1,726.55
1,387.03
EXPENDITURE:
KEY ITEMS
Preference Dividend
10.54
5.16
0.00
0.00
0.00
Equity Dividend
440.44
419.47
277.81
252.56
202.05
80.00
79.99
55.00
49.99
40.00
5,505.49
5,243.32
5,051.18
5,051.18
5,051.18
32.46
39.71
41.08
34.18
27.46
Total Business size of Rs. 2, 91,289 crore as on March31, 2010 an increase of 22.9% over
previous year.
Total Deposits of Rs. 1, 70,040 crore, an increase of 22.6%.CASA deposits grew at 29.4%, its
1. As on March31, 2010, Total Business of the bank stood at Rs. 2.91 lakh crore as against Rs. 2.37
lakh crore as on March31, 2009, an increase of 22.9%.The business growth was broad-based
with contribution from retail and corporate customers, both on assets and liabilities side.
2. The Bank posted a total income and net profit of Rs. 15,277 crore and Rs. 2,075crore
respectively for the financial year ended March31, 2010 as against Rs.13372 crore and Rs. 1727
crore respectively in the previous year. The Earning per share (EPS) ratio showed improvement
to Rs. 1.08 as against Rs. 34.18 in the previous year, while cost to income ratio declined to 40.66% as
against 41.81% in the previous year.
Total Capital Adequacy ratio (CAR), calculated in line with Basel II framework, and
stood at12.51%, well above the regulatory bench mark of 9%. Bank s Tier-ICAR was
7.91%
The operating expenses stood at Rs. 2508 crore compared to Rs. 2214 crore, relatively a
CAGR during the financial year 2006- 07 to2009-10 is at 22.3% and 34.9% respectively
Net-worth improved by 25.76% to Rs. 8758 crore from Rs. 6964 crore as reported during
last year. The book value per share increased to Rs. 173.38 from Rs. 137.87.The return on
equity stood at 23.69% and earnings per share increased to Rs. 41.08 from Rs. 34.18
reported during last year. The earnings per share grew at CAGR of 34.9% duringFY07
toFY10.
FINDINGS
Total Capital Adequacy ratio (CAR), stood at 12.51%, well above the regulatory benchmark of
9%.
Profit after tax net profit increased to Rs. 2075 crore compared to Rs. 1727crore achieved
during last year.
The operating expenses registered a lower growth of 13.28% compared to38.98% growth in
previous year. The operating profit of the Bank registered growth of 18.72%.y Net-worth
improved by 25.76%.
The return on equity stood at 23.69% and earnings per share increased to Rs.41.08 from Rs. 34.18.
.Cost to Income ratio has decreased by 115bps to 40.66% as compared to41.81% reported
during last year.
The return on average assets is maintained at a healthy rate of 1.25% as onMarch31, 2010
Chapter 4
6. Report Writing; - The outcome of the project including the analysis, results and key findings
were written in the form of the current report.
7. Survey; - The survey was conducted on companies from each sector, operating in the cluster;
which were randomly selected. The survey was done by a market research agency.
Corporate
Treasury
Banking
a) Retail Banking
Retail banking segment is growing rapidly in the Indian banking industry. Every bank wants to
grow in this particular segment because of the higher margins. UNION BANK OF INDIA is also
showing a strong growth in this business segment. The retail banking business provides financial
products and services to its retail customers. The bank provide housing, retail trade, automobile,
consumer, education and other personal loans and deposit services, such as demand, savings and
fixed deposits, for our customers. In addition, UNION BANK OF INDIA distribute products
such as global debit cards and global credit cards. The bank also provides utility services such as
bill payment. The bank also distributes third-party products, including mutual fund products and
general and life insurance policies. Development of efficient ways of reaching to the customers
and processing transactions is a key element of the banks goal to expand its profitability and to
capitalize on opportunities for organic growth. The bank has sought to strengthen the information
technology through development of its core banking services and other initiatives. UNION
BANK OF INDIA has made progress towards networking, computerizing and interconnecting its
branches, ATMs and other delivery channels. As at September 30, 2006, more than 80% of its
business was through computerized network. In addition, the bank has introduced Internet
banking for customers at its computerized branches.
b) International Banking
The bank had a robust growth in International Banking Business. The foreign exchange turnover,
which was Rs361.02bn in 2004-05, reached the level of Rs408.94bn during the year, registering
a growth of 13.27%.The bank is 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 the Middle East.
The bank has also introduced Internet-based On-line Remittance Product for Non-Resident
Indians (NRIs) in U.K. and U.S.A as well as for exchange houses in the Middle East. The bank is
one of the leading players in the bullion market and offers various financial products related to
bullion at 10 centers in the country.
c) Corporate Banking
The Corporate Banking Segment of the bank offers various loan and fee-based products and
services to large corporate, Small and Medium Enterprises (SMEs) and to the agriculture sector.
In order to give a boost to the SME segment and to agriculture lending, the bank set up SME
cells and adopted cluster-centric approach for agriculture lending in areas with rich potential for
such activity. The bank also experimented with new delivery models for credit, including setting
up low cost rural ATMs. The bank also focused on micro-finance business as a convenient
distribution channel for its rural as well as low income customers.
d) Treasury
Besides the traditional role of liquidity management and maintenance of statutory requirements
like Statutory Liquidity Ratio (SLR) and Cash Reserve Ratio (CRR), treasury operations focused
on judicious investments, derivative transactions for hedging customers financial exposures as
well as its own balance sheet exposures. Bullion trading also played an important role in treasury
operations and products like metal loans and gold forwards were popularized. The bank has a
well laid down treasury policy and risk management systems for undertaking such transactions
Chapter 5
CUSTOMERS SATISFACTION
Customer satisfaction refers to the extent to which customers are happy with the products and
services provided by a business. Customer satisfaction levels can be measured using survey
techniques and questionnaires
DEFINITIONS:
1) Customer satisfaction is equivalent to making sure that product and service performance
meets customer expectations.
2) Customer satisfaction is the perception of the customer that the outcome of a business
transaction is equal to or greater than his/her expectation.
3) Customer satisfaction occurs when acquisition of products and/or services provides a
minimum negative departure from expectations when compared with other acquisitions Gaining
high levels of customer satisfaction is very important to a business because satisfaction
customers are most likely to be loyal and to make report orders and to use a wide range of
Services offered by a business
There are many factors which lead in high levels of customer satisfaction including.
Products and services which is customer focused and hence provide high levels of value
for money. What is clear about customer satisfaction is that customers are most likely to
appreciate the goods and services that they buy if they are made to feel special. This occurs when
they feel that the products and services that they buy have been specially produced for them or
for people like them.
Product quality
Premium Outflow
Return on Investment
Services
Market research
Telephonic interviews
Personal visits
Warranty records
Informal discussions
Satisfaction surveys
Depending upon the customer base and available resources, we can choose a method that is most
effective in measuring the customers perceptions. The purpose of the exercise is to identify
priorities for improvements. We must develop a method or combination of methods that helps to
continually improve service.
Survey forms should be easy to fill out with minimum amount of time and efforts on
customers part. They should be designed to actively encourage the customer to complete the
questions. Yet they must provide accurate data should also be sufficiently reliable for
management decision making. This can be achieved by incorporating objective type questions
where customer has to rate on scale of say 1 to 10. For repeated surveys, you could provide the
rating that was previously accorded by the customer. This works like a reference point for the
customer. Space should always be provided for the customers own opinions this enables them to
state any additional requirements or report any shortcomings that are not covered by the
objective questions.
Normally, we deal various personnel at various levels in the customers organization the buyer,
user, receiving inspector, finance and purchase person etc. surveying a number of respondents for
each customer gives a complete perspective of customer satisfaction. It may be necessary to
device a different questionnaire for each of them.
Respondents must be provided a way to express the importance they attach to various
survey parameters. Respondents should be asked to give a weighting factor, again on a rating
scale of say, 1 to 10, for each requirement. This gives a better indication of relative importance of
each parameter towards overall customer satisfaction and makes it easier for suppliers to
prioritize their action plans by comparing the performance rating (scores) with importance rating
(weighing). `
CONSUMER RESEARCH IN DIFFERENT DISCIPLINES
A considerable body of literature exists on consumption, consumer behavior and
consumer decision making process. Most of the consumer research focused on adopter
categories, habits, attitudes and intentions rather than on actually measuring the satisfaction level
with the service.
Need recognition- realization of the difference between the desired and the current situation
that serves as a trigger for entire process.
constant
consultations
with
our clientele
through
various
Seminars,
Customer Meets, etc. to evaluate improve and widen the range of service to customer. However,
all our customers are requested to keep us informed of their experiences about the various
services rendered by the Bank and feel free to comment on this Code. We intend to bring it out in
many Regional Languages in subsequent years.
Attend to all customers present in the banking hall at the close of business hours. Provide
separate 'Enquiry' or 'May I help you' counter at large branches. Offer nomination facility
to all deposit accounts (i.e. account opened in individual capacity) and all safe deposit
locker hirers (i.e. individual hirers).Display interest rates for various deposit schemes from
time to time.
Pay interest for delayed credit of out station cheques, as advised by Reserve Bank of India
(RBI) from time to time.
Accord immediate credit in respect of outstation and local cheques up to a specified limit
CHAPTER 6
SURVEY REPORT
DATA ANALYSIS & INTERPRETATION
To know customer view about union bank of India, I have done survey of 20 peoples and ask
them certain set of question:
1. When survey respondent were asked, do you have an account in this bank?
BANK ACCOUNT
100
90
80
70
60
50
40
30
5
20
10
0
95
YES
NO
INTERPRETATION
This bar diagram shows how many people are having bank account.
95% of the people are having bank account where as 5% of the people dont have an bank
account
2. When survey respondent were asked, which type of account do you have?
recurring A/c; 5%
INTERPRETATION
This pie diagram show which all bank account people are having.
55% people are having saving account.
10% people are having current account.
5% people are having recurring account.
25% people are having fixed account.
3. When survey respondent were asked, what is the purpose of opening an account in this
bank?
45
40
35
30
25
45
20
35
15
10
15
5
0
security
interest
good relation
INTERPRETATION:
This bar diagram show how people are known about bank account
45% people open an account for security
35% people open an account for interest
15% people open an account for good relation
4. When survey respondent were asked, how did you come to know about the facilities
provided by this bank?
PUBLIC AWARENESS
45
40
35
30
25
20
15
10
5
0
10
NEWS PAPER
30
ADVERTISEMENT
45
AGENT
10
FRIEND
NTERPRETATION:
This bar diagram shows how many people know about bank account.
10% people are aware about news paper.
30% peoples are aware about advertisement.
45% peoples are aware about agent.
10% peoples are aware about friend.
5. When survey respondent were asked, which types of features you like?
FEATURES
60
50
40
30
20
10
0
20
E-BANKING
55
NEW SCHEMES
25
ATM
INTERPRETATION:
This bar diagram shows how many people like the features of this bank.
20% peoples like e-banking.
55% peoples like new schemes.
25% peoples like ATM.
6. When survey respondent were asked, do you think that the private sector is better than
public sector?
WHICH IS BETTER
80
70
60
80
50
40
30
20
20
10
0
YES
NO
INTERPRETATION:
This bar diagram shows how many people says which is better.
80% people say that private sector is better.
20% people say that public sector is better.
7. When survey respondent were asked, which sector do you have prefer?
INTERPRETATION
This bar diagram shows the people are prefer sector.
70 % of people are using public sector bank.
30 % of people are using private sector bank.
8. When survey respondent were asked, do you think the union bank is safe for your
money?
15%
YES
NO
85%
INTERPRETATION
This bar diagram shows how many people say that for safe of money
85% people are says that to safe the money.
15% people are says that not for safe of money.
9. When survey respondent were asked, youre level of satisfaction with union bank?
SATISFACTION
50
45
40
35
30
25
20
15
10
5
0
50
30
20
VERY SATISFIED
NORMAL SATISFIED
INTERPRETATION;
This bar diagram shows the people are preferring sector:
30 % of people are very satisfied
50 % of people are normal satisfied
20 % of people are dissatisfied
DISSATISFIED
10. When survey respondent were asked, If you have an option against union bank you will
go for--
35
30
25
20
15
10
5
0
20
SBI
25
AXIS
20
ICICI
35
OTHERS
INTERPRETATION
This bar diagram shows the how many people are go for other bank.
20 % of people go for state bank of India (SBI)
25 % of people go for AXIS bank
20 % of people go for ICICI bank
35% of people go for other bank
FINDINGS
The time given for the summer internship i.e. 8 weeks was not sufficient enough to study
and understand the retail loans approval process of the Union bank of India.
The banks have their own confidential information and it was very difficult to make the
project and analyze it on the basis of hypothetical information
UNION BANK OF INDIA has this time ranked 5 th among all the Nationalized banks. The
reason for its ranking was the number of NPAs it had. It was found that a number of retail
loans ended up in NPAs. UNION BANK OF INDIA needs to develop a competitive edge
and the managers and the assistants need to keep a tab on the loans given.
Usually the managers would only fulfill their required target and then would forget about
more borrowers. They need to have more borrowers both for small and big loans.
Many times they pass a loan without the proper appraisal, i.e. the client may lack either the
projected and estimated balance sheet or the proper documents. In such cases there should
be a strict protocol followed
CONCLUSION:As discussed in the project above, Credit Appraisal appears to be the back bone of the banking
institution. It is equally important and dangerous, as there is always the chance of default
or some other risk. After dealing with almost every aspect of loans and advances one can
summarize that with a little bit of strict measures and a keen eye and understanding of a
companys balance sheet one can very well save the institute the risk other than the default risk.
Even the default risk can be to a certain limit mitigated, if we before sanctioning the amount
check the profile of the customer. Industry Report, banks own experiences and the ability of the
borrower to run his enterprise professionally are certain things one can check. A very crucial
aspect of credit appraisal is the
Credit rating
Union bank has introduced their own Internal Rating system of all borrowers enjoying/seeking
credit limits above Rs. 2 laces. The rating grades range from CR1 to CR8. Credit ratings up to
CR5 are investment grade. CR6 toCR8 are non-investment grade as per the loan policy of the
bank. Migration in credit rating
Especially downward migration should be discussed in detail and road map to improve the credit
rating has to be drawn up/implemented. A lot of times for some reasons, credit report is not
submitted and the submission of the proposal and its sanctioning is done without it, while
keeping in mind other necessary factors. It is to be seen and made mandatory that the credit
report must accompany the proposal as it gives a very clean and clear picture of the borrowers
credit worthiness. In order to potential NPAs it is significant to have a fair understanding of the
borrowers financial health. Thus, at least last three years balance sheet and Profit and loss
accounts should be obtained, in addition to projections of next 2 years. Now, most of the time
customers to prove their credit worthiness make the estimated balance sheets unrealistic,
such areas should be stressed and it should be checked whether the borrower has the ability to go
as per the projected Balance Sheet.
The important factors which should be given special consideration are trend insoles, both
quantity and quality, it should be positive with the industry trend. Disparities in the sales pattern
should be analyzed properly. Profitability should be critically analyzed; it should be checked
with the existing norms of the balance sheet. The distribution of profits and its impact at the
reserve and surplus along with the tangible net worth should be seen. Increase/decrease in the
term liabilities and its effect on capital employed should be scrutinized too. Increase or
decrease in the investments of the borrower also needs to be looked at, it should be seen that the
investments that the borrower is making should yield some income. The non current assets is
another important aspect, it should be seen and commented upon. The debt equity ratio should be
seen, if the debts are increasing and equity decreasing then such case should be discussed.
Working Capital and its assessment should be done before taking a decision about the borrower.
Credit rating is a very important step in deciding whether to sanction or decline a proposal. All
the stages should be vetted and the necessary action should be taken while making any decision