Project Reort New Shubham

INTRODUCTION OF PRIVATE SECTOR BANK
The "private-sector banks" are banks where greater parts of stake or equity are held
by the private shareholders and not by government. The private sector banks are split
into two groups, old and new. The old private sector banks existed prior to the
nationalization in 1969 and kept their independence. The new private sector banks are
those that have gained their banking license since the liberalization in the 1990s.
In India private banks are available in plenty and known for offering expeditious
service to their customers. Indian Banking has been dominated by public sector banks
since the 1969 when all major banks were nationalized by the Indian government.
However, since liberalization in government banking policy in the 1990s, old and
new private sector banks have re-emerged. They have grown faster & bigger over the
two decades since liberalization using the latest technology, providing contemporary
innovations and monetary tools and techniques.
In 1994, the Reserve Bank of India opened the door for private banks and handed out
the policy to control the private banks. The policy also included the liberation for
Private Banks in terms of their free and independent operation. The first private bank
is Trust Bank later known as Oriental Bank of Commerce, then other private Banks
like HDFC Bank, International Bank, Kotak Mahindra Bank, SBI Commercial Bank,
Karnataka Bank, Kashmir Bank, ICICI Bank and more came. Private banks in India
achieved a milestone for serving people and showed its great commitment. Private
banks in India have earned great response for its service and also known for bringing
revolution for serving millions of customers. It offers best option for saving and also
offers various schemes with maximum return. It offers its service 24 hours and made
the job of fund transfer easier by offering new banking service. Besides, there are lots
of ATM machines have been set up by such private banks and made the task of
withdrawing liquid money easier. The private banks are accountable for a share of
18.2 percent of the Indian banking industry.
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2
THE IMPORTANCE OF PRIVATE SECTOR BANKS IN
INDIA
The private sector banks play a vital role in the Indian economy. They indirectly
motivate the public sector banks by offering a healthy competition to them. The
following are their importance:
a) Offering high degree of Professional Management:
The private sector banks help in introducing a high degree of professional
management and marketing concept into banking. It helps the public sector banks as
well to develop similar skill and technology.
b) Creates healthy competition:
The private sector banks provide a healthy competition on general efficiency levels in
the banking system.
c) Encourages Foreign Investment:
The private sector banks especially the foreign banks have much influence on the
foreign investment in the country.
d) Helps to access foreign capital markets:
The foreign banks in the private sector help the Indian companies and the government
agencies to meet out their financial requirements from international capital markets.
This service becomes easier for them because of the presence of their head
offices/other branches in important foreign centers. In this way they help a large
extent in the promotion of trade and industry in the country.
e) Helps to develop innovation and achieve expertise:
The private sector banks are always trying to innovate new products avenues (new
schemes, services, etc.) and make the industries to achieve expertise in their
respective fields by offering quality service and guidance.
They introduce new technology in the banking service. Thus, they lead the other
banks in various new fields. For example, introduction of computerized operations,
credit card business, ATM service, etc.
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The Top 10 Best Private Sector Banks in India
1. HDFC Bank
The topmost preferred banking partner is the HDFC Bank or Housing Development
Finance Corporation Limited. Stands on 5thposition in terms of value of the assets. It
is the first private bank in India that received RBI approval to establish a bank. It has
more than 3200 branches all over India and 12000+ ATM’s. At present the bank is
dealing these services: FOREX services, Loans, Insurance, Credit cards, Private
Banking, Premium Banking etc.
2. ICICI Bank
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The 2nd largest private bank of India, established in the year 1994 by CEO Chanda
Kochar. It servers a variety of customers. According to the quantity of assets, ICICI
Bank has been consistently holding the second place for a long time. In 2014, the
bank was awarded with the best bank by Global Business Development. The bank has
current assets value is 99 billion USD and all over India it has 3540 branches and
11200 ATM’s. At present the bank is dealing these services: Privilege Banking, NRI
Accounts, Credit cards, Insurance, Loans, etc
3. Axis Bank
Maintaining its position at number 3 consistently, Axis bank came into being in the
year 1994 as UTI Bank. It is one of the leading private banks in India and deals with
the services such as customer and corporate banking, insurance and finance, credit
cards, mortgage loans, investment banking, wealth management, credit cards etc.
Apart from this, solutions pertaining to NRI Banking, agricultural and rural banking
and commercial banking are also provided.
4. Yes Bank
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Founded in the year 2004, Yes bank was established by Rana Kapoor with its
headquarters in Mumbai. One of the fastest growing private banks in India and has
more than 500 branches in almost 400 cities. In 2013 the bank was awarded with
Golden Peacock Award for its Corporate Social Responsibility. The bank deals with
services such as Commercial Banking, Investment Banking, Corporate and
Institutional Banking, and Branch Banking etc. They are known for their commitment
and dedication towards their clients and customers
5. Kotak Mahindra Bank
Formally known as Kotak Mahindra Finance Limited. It got license to run banking
business in the year 2003. The bank is available in Metro Cities as well as in Tier-2
cities. The products this bank deals in are IPOs, Mutual funds, Tax-free bonds,
portfolio management and services such as NRI Banking, Privileged Banking,
Insurance and Finance, Wholesale Banking etc. Though little expensive but manages
the bank related activities with proper regulation.
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6. IndusInd Bank
The IndusInd bank was established in the year 1994 and the Hinduja group owns the
bank. Ramesh Sobti is the current CEO and Managing Director of this bank. Over a
few years this bank has launched a number of services such as Quick Pay, On the Go
and Swift Pay etc. These are consumer friendly and extremely advanced. The
headquarters of this bank is in Mumbai, Maharashtra. The name of the bank came
from the name of the Indus Valley Civilization and is better known for retail banking.
7. Federal Bank
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This bank was established in the 1947 and was formally known as Travancore
Federal Bank. The founder of this bank is Mr. K P Hormis. The bank has more than
1000 branches all over the country. From its first day of operation the bank is striving
for excellence in customer service. At present the bank is dealing these services:
Insurance and NRI Banking, Corporate Banking, Loans etc. it is one of the preferred
bank for NRI banking.
8. KarurVysya Bank
The bank was established in the year 1916 by M.A. VenkataramaChettiar and Athi
Krishna Chettiar with its headquarters in Karur, TamilNadu. This is also a scheduled
commercial bank in India that is famous for excellent customer service. KarurVysya
Bank has more than 550 branches in 18 states and offer services like mutual funds,
savings account, personal and home loans, and insurance policies.
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9. Bandhan Bank
The bank which is known to provide a great quality banking and financial services is
the Bandhan Bank. It’s headquarter is in Kolkata. Along with IDFC Bandhan is also
the newest private bank in India. Bandhan receives its license from RBI in 2014 and
started its operation in early 2015. The owner and managing director of Bandhan
bank is Mr. Chandra Shekhar Ghosh.
10. J&K Bank
This bank was founded in 1938 with its headquarters in Srinagar. For four decades it
consistently made a record of continuous profit. The banking with J&K Bank is easy
and convenient. The electronic and online transactions are pretty safe.
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List of Private Sector Banks in India and their headquarters /
Tagline:
S. No Private Indian Banks Headquarters Tagline

01 Axis Bank Mumbai Everything is the
same except the name
02 Bandhan Bank Kolkata AapkaBhala, SabkiBhalai
03 Catholic Syrian Bank Ernakulam Support all the way
04 City Union Bank Kumbakonam Trust and Excellence
05 Development Credit Bank Mumbai –
06 Dhanalakshmi Bank Thrissur –
07 Federal Bank Aluva Your Perfect Banking Partner
08 HDFC Bank Mumbai We Understand your World
09 ICICI Bank Mumbai Hum Hai Na
10 IndusInd Bank Mumbai We Make You Feel Richer
11 IDFC Bank Mumbai Banking Hatke
12 Jammu & Kashmir Bank Sri Nagar Serving to Empower
13 Karnataka Bank Mangalore Your family bank across
India
14 Karur Vysya Bank Karur Smart Way to Bank
15 Kotak Mahindra Bank Mumbai Let’s make money simple
16 Lakshmi Vilas Bank Chennai The Changing Face of
Prosperity
17 Nainital Bank Nainital Banking with a personal
touch
18 Ratnakar Bank Mumbai –
19 South Indian Bank Thrissur Experience Next Generation
Banking
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20 Tamilnadu Mercantile Bank Tuticorin –
21 YES Bank Ltd Mumbai Experience our Expertise
Private Sector Bank
Private Sector Banks in India plays a major role in Financial Inclusion. This Article
will give you clear insights into Private Banks, Local Area Banks, Small Banks,
Payment Banks, and Foreign Banks.
A Public Sector bank is one in which, the Government of India holds a majority
stake. It is as good as the government running the bank. Since the public decide on
who runs the government, these banks that are fully/partially owned by the
government are called public sector banks. Public Sector bank means any
Government Sector Bank/Institute that goes public... means that issues it share to
general public. It also has a greater share of government (more than 50%) so that the
main motto of social welfare other than Maximizing Profit remains. Whereas Private
Sector Banks are those Banks where the management is controlled by Private
individuals and Government does not have any say in the management of these banks.
Maximizing profit is the basic motto.
Introduction to Private Sector Banks in India:

The Indian Banking System comprises two major sectors of Banks. i.e. Public and
Private Sector Banks. The former is controlled by the Government and the latter’s
share or equity are held by private shareholders. The Private Sector Banks in India are
divided into two groups. They are Old Private Sector Banks and New Private Sector
Banks.
 Old Private Sector Banks existed prior to the nationalization in 1969 and kept their
independence because they were either too small or specialist to be included in
nationalization.
 The new private sector banks are those that have gained their banking license since
the liberalization in the 1990s.
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The Role of Public Sector Banks
PSBs have been the backbone of Indian financial architecture since nationalization of
State Bank of India in 1955, followed by more banks in 1969 and 1980. Despite
critical global conditions IIMB-WP N0. 530 13 and turbulence in the Indian
economy, PSBs have been successful in meeting their mandate with support from the
Government and the RBI. In recent years, though the credit offtake has been lower
than expected, capital adequacy is appropriate and deposit growth has been following
a steady pace. The general refrain of PSBs is that they operate under constraints, are
not on equal footing with private financial institutions and have to lend to certain
risky segments of the economy as part of priority sector lending, as well as directed
lending, sometimes under political compulsions. However, NPAs in PSBs have been
critical in the past also but staged a recovery. In view of the fact, that NPAs in present
context are explainable in terms of global meltdown or because of beggar-thy-
neighbor behavior of some neighboring countries of India, recovery should not be a
problem, if concerted efforts are made. PSBs account for a substantially large share of
stressed assets in mining, iron and steel, textiles, infrastructure and aviation as
compared to private sector banks (PVBs) because of substantially larger exposure to
these sub-sectors. Illustratively, PSBs account for 17.6 percent of advances to
infrastructure as compared with 8.4 percent of the PVBs, while stressed assets were
30.9 percent compared with 18.2 percent, respectively. Similar are the results when
comparison is extended to other stressed sectors. Thus, when granularly analyzed,
relatively, performance of PSBs is not inferior to that of PVBs. Table 5 report the
incidence of NPAs and stressed assets in PSBs and PVBs respectively. Though the
incidence of NPAs is higher in PSBs, it is important to understand the context behind
such high incidence before any measures can be suggested. Since the first
nationalization of State Bank of India in 1955, followed by more in 1969 and 1980,
PSBs were created to pursue social objectives and focus on banking the unbanked.
Consequently, PSBs have been in the forefront in rural areas and relentlessly pursuing
implementation of welfare schemes of the government in terms of priority sector
lending, and pension and insurance schemes, including those recently announced.
And, PSBs, admirably, despite pursuing social objectives are competing well on
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various financial parameters with PVBs. Therefore, there may be a need, in absence
of level playing field, to evaluate PSBs and PVBs on different scale. Illustratively, to
be fair to the PSBs, the owner and regulator should take cognizance of the fact that in
opening 16.5 crore Jan Dhan accounts within first six months of launching the
scheme, without seeking additional man-power, these PSBs would have deployed all
their resources at the cost of other activities. In contrast, PVBs only opened 68 lakh
Jan Dhan accounts. PSBs have been paying a steady stream of dividends year on year.
The government being the largest shareholder in PSBs, is the biggest beneficiary of
these dividends. This is over and above the corporate taxes and other taxes that all
corporate entities including PSBs have to pay.
Top 10 Public Sector Banks in India:
1) State Bank of India
This is inarguably the king of the Indian banks. Incorporated in 1955, SBI brags of at

least 13,000 branches across India together with at least 190 foreign offices across the
continents. It has its headquarters in Mumbai.
The banks are popular for its technologically advanced products such as the recently
launched SBI in Touch cards that give its users the effective ability to execute
payment by just touching or waving their cards near contactless readers. Other than
banking products, the bank is also known for offering other services and products
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mainly in the fields of capital markets, General Insurance and Life Insurance via its
subsidiaries.
2) Bank of Baroda
The bank is the second biggest banks not only among the public sector banking but in
the entire banking industry. It was incorporated in 1908 and is headquartered in
Vadodara (Previously known as Baroda), in Gujarat.
The bank has widely been spread across the country and beyond, having in the excess
of 5,000 branches across India and about 100 others in at least 25 foreign countries. A
leading institution in the provision of banking and financial services, Bank of
Baroda is a winner of a number of major awards such as the Excellence in Banking
(PSU Sector) Award.
3) Punjab National Bank
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Punjab National Bank is the oldest of the top three public sector banks having been
founded in 1894. The bank has a strong presence in India with at least 6,000 branches
spread across the domestic market with another 5 overseas branches. Its headquarters
is in New Delhi and is currently supported by a workforce of at least 62,000
employees.
Punjab National Bank is yet another award winner, having won the Winner of Golden
Peacock Award among others. The bank returns to the society by performing
Corporate Social Responsibilities such as organizing tree planting sessions, blood
donation camps, and medical camps etc.
4) Central Bank of India
Founded in 1911, the Central Bank of India is one of the oldest and one of the
topmost public sector banks in the country. Its headquarters are in Mumbai with at
least other 4,000 branches having been spread across the country. The bank was
among the first to launch credit cards in the country and is served by a workforce of
at least 40,000 workers. Upon its establishment, the bank became the first commercial
bank in India that was not only wholly owned but also managed by Indians.
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5) IDBI Bank
The IDBI Bank was incorporated in 1964. It has its headquarters in Mumbai and is

served by a workforce of about 18,000 employees. Through time, the IDBI bank has
been able to spread across the country, having about 1,800 branches and 3350 ATMs.
Its operations are driven by a cutting edge in Banking IT platform. Under its belt are
personalized financial and banking solutions to the corporate as well as retail banking
arena through this large network. IDBI already has a formidable name but is still
steadily scaling higher heights.
6) Canara Bank
Incorporated in 1906, the bank has steadily grown into a powerhouse in the country.
Headquartered in Bangalore, the bank runs 8 subsidiaries that operate in different
domains. In total, Canara Bank has at least 5,000 domestic branches in India with 7
other overseas branches. Canara bank doesn’t only sponsor regional rural banks but is
also engaged in the partnership with the United Nations Environment Program
(UNEP) to provide financial assistance for the installation of solar power
technologies in the South Indian homes through the Solar Loan Program initiative.
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7) Bank of India
The Bank of India is a leading public bank that was started in 1906 and has thence be
able to expand across India, having at least 4,800 branches across the country. The
bank was founded by a group of eminent businessmen hence its popularity in serving
the financial and banking needs of businesses. Though started as a private bank, it
becomes publicly owned in July 1969 along with other 13 private banks that were
also nationalized. Today, the Bank of India is standing tall and is among the most
trusted, most popular and most preferred banks across the country.
8) Indian Bank
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Indian Bank came into existence in 1907. Its headquarters are in Chennai, with about
2500 other branches being spread across the country. It also has a branch in Colombo
and in Singapore, and also owns two subsidiaries. With the market capitalization of
11,000 Crore and a profit of 711 Crore in the 2015-2016 financial year, it is one of
the best performing public sector banks in the country.
9) Union Bank of India
This is yet another fast-growing bank within the Indian public bank sector.
Incorporated in 1919, the bank has a market capitalization of about 9,000 Crore and
generates more than 1000 Crore profit every year. Union Bank of India won the 2014
version of the Express Uptime Champion Award.
The bank’s head office is in Mumbai and carries the nation’s heritage as it was
officially inaugurated by India’s father of the nation: Mahatma Gandhi in 1921.
Presently, the bank employs at least 30,000 people across its over 1000 branches and
an additional in excess of 1100 ATMs
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10) Indian Overseas Bank
The bank ranks tenth on the list of the top 10 public sector banks in the country.
Indian Overseas Bank has about 1150 branches in India together with other overseas
branches in countries and cities such as Seoul, Bangkok, Hong Kong, Colombo, and
Singapore. Its main aim is to spread its branches across the world so as to have a
formidable international presence.
Important News Related To Public Sector Banks In India
 Merger of SBI – Five associates of SBI and the BharatiyaMahila Bank merged
with SBI with effect from April 1. With this merger SBI joined the league of top 50
banks globally in terms of assets. The merged entity has a deposit base of more than
Rs 26 lakh crore and advances level of ₹18.50 lakh crore.
 Govt appoints heads of 7 public sector banks – In a major restructuring in the
Public Sector Undertaking banking space, the government appointed heads of various
public sector banks (Vijaya Bank, Bank of India and others) besides carrying out
reigns at Punjab National Bank and Bank of India.
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Current RBI Monetary Policy Rates –
Repo Rate 6.25%
Reverse Repo Rate 6.00%
Bank Rate 6.50%
Marginal Standing Facility

6.50%
Rate
Cash Reserve Ratio 4.00%
Statutory Liquidity Ratio 19.25%
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Following is a list of public sector banks in India along with their
Taglines:
S.N Bank
Headquarters Tagline
o Name
Allahaba A tradition of
1. Kolkata
d Bank trust
Andhra Where India

2. Hyderabad
Bank Banks
India’s
Bank of
3. Vadodara International
Baroda
Bank
Bank of Relationships
4. Mumbai
India beyond Banking
Bank of
One Family One
5. Maharash Pune
Bank
tra
Bhartiya
Empowering
Mahila
Women,
6. Bank Delhi
Empowering
(Merged
India
with SBI)
Canara
7. Bangalore Together we can
Bank
22
Central To you
Central
Since 1911, Build
8. Bank of Mumbai
A Better Life
India
Around Us
A Premier Public
Corporati
9. Mangalore Sector Bank,
on Bank
Prosperity for all
Dena Trusted Family

10. Mumbai
Bank Bank
Indian Your Tech-

11. Chennai
Bank friendly bank
Indian
Good people to
12. Overseas Chennai
grow with
Bank
Banking For All,

IDBI
13. Mumbai Bank Aisa Dost
Bank
Jaisa
Oriental
Where every
Bank of
14. Gurugram individual is
Commerc
committed
e
Punjab
The Name you
15. National New Delhi
can Bank Upon
Bank
23
Punjab &
Where Service Is
16. Sind New Delhi
A Way Of Life
Bank
With you all the

way, Pure
State
Banking Nothing
17. Bank of Mumbai
Else, The
India
Nation’s banks on
us
Syndicate
18. Manipal Faithful. Friendly
Bank
UCO Honors Your

19. Kolkata
Bank Trust
Union
Good people to
20. Bank of Mumbai
bank with
India
PUBLIC
BASIS FOR PRIVATE
SECTOR
COMPARISON SECTOR BANK
BANK
Meaning Public Sector Private Sector

Banks are the Banks refers to
banks whose the banks whose
complete or majority of stake
maximum is held by the
24
PUBLIC
BASIS FOR PRIVATE
SECTOR
COMPARISON SECTOR BANK
BANK
ownership lies individuals and

with the corporations.
government.
No. of banks 27 22
Share in banking 72.9% 19.7%

industry
Customer Base Large Relatively small
Interest rate on High Marginally lower

deposits
Promotion Based on Based on merit

seniority
Growth Low Comparatively

opportunities high
Job security Always present Purely based on

performance.
Pension Yes No
25
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INTRODUCTION
Credit risk management
Credit risk refers to the probability of loss due to a borrower’s failure to make
payments on any type of debt. Credit risk management is the practice of mitigating
losses by understanding the adequacy of a bank’s capital and loan loss reserves at any
given time – a process that has long been a challenge for financial institutions.
The global financial crisis – and the credit crunch that followed – put credit risk
management into the regulatory spotlight. As a result, regulators began to demand
more transparency. They wanted to know that a bank has thorough knowledge of
customers and their associated credit risk. And new Basel III regulations will create
an even bigger regulatory burden for banks.
To comply with the more stringent regulatory requirements and absorb the higher
capital costs for credit risk, many banks are overhauling their approaches to credit
risk. But banks who view this as strictly a compliance exercise are being short-
sighted. Better credit risk management also presents an opportunity to greatly
improve overall performance and secure a competitive advantage.
Meaning Credit risk management
Credit risk is most simply defined as the potential that a bank borrower or
counterparty will fail to meet its obligations in accordance with agreed terms. The
goal of credit risk management is to maximize a bank's risk-adjusted rate of return by
maintaining credit risk exposure within acceptable parameters. Banks need to manage
the credit risk inherent in the entire portfolio as well as the risk in individual credits or
transactions. Banks should also consider the relationships between credit risk and
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other risks. The effective management of credit risk is a critical component of a
comprehensive approach to risk management and essential to the long-term success
of any banking organization.
Objectives of Credit Risk Management
Even if you're not in the banking industry, understanding the objectives of credit risk
management helps you as a consumer. Lenders face credit risk management with
every loan they consider. Banks must create a delicate balance between strict credit
risk policies and customer satisfaction. Conservative credit risk management policies,
fast loan decisions and reasonable loan pricing achieve this balance of protecting loan
portfolios while keeping bank customers satisfied with the institution.
1. Managing Risk
All lenders must reduce their risk of loan loss. Credit risk management is the most
difficult potential loan loss to prevent. Borrowers with consistently poor credit reports
or excellent credit scores allow lenders to make easier approval and rejection
decisions. However, prospective borrowers with a mix of on-time payments and late
payments create credit risk management challenges for lenders.
2. Procedures
Lenders design lending pricing, policies and procedures for employees to achieve
credit-risk objectives. Based on borrower credit scores, procedures advise bank
employees how to process and price loan applications to reduce credit risks. Banks
often instruct lending staff to approve or reject applicants based on their credit scores.
For example, lender procedures may give loan officers permission to approve loans at
higher than market interest rates for borrowers with credit problems that increase loan
risk.
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3. Credit Risk and Customer Satisfaction
Balancing credit risk and superior customer service often requires approving
applications while changing loan terms, such as increasing down payments or interest
rates, to manage risk and increase loan security. Since banks do not want to appear to
be restrictive, increasing interest rates or down payments can achieve credit risk
management objectives, while maintaining customer satisfaction. Balancing credit
risk objectives and customer loan approvals, adjusted for increased risk, can achieve
reasonable risk and customer satisfaction.
4. Fiduciary Responsibility
Lenders have a fiduciary responsibility to stockholders (banks) and members (credit
unions) to make the safest operational, financial and risk decisions at all times.
Conservative credit risk management is critical to exercising appropriate fiduciary
responsibility. Adhering to conservative credit risk policies better protects loan
portfolios and satisfies stockholders, management and customers, while proving to
federal or state regulators that the lender is exercising effective fiduciary
responsibility.
5. Credit Risk Equals Financial Risk

Just as banks must avoid financial risk with their investments and cash security
measures, they must establish credit risk policies that minimize loan losses. Credit
risk can impact both the lending and the financial areas of banks and credit unions.
Loan losses occur at every bank; however, mismanaged credit risk can lead to
excessive loan problems, inevitably damaging the financial condition of financial
institutions. Properly managing credit risk, along with improving the earnings of the
loan portfolio, can prevent excessive financial damage.
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Principles for the Assessment of Banks’ Management of
Credit Risk
A. Establishing an appropriate credit risk environment
Principle 1: The board of directors should have responsibility for approving and
periodically (at least annually) reviewing the credit risk strategy and significant credit
risk policies of the bank. The strategy should reflect the bank’s tolerance for risk and
the level of profitability the bank expects to achieve for incurring various credit risks.
Principle 2: Senior management should have responsibility for implementing the

credit risk strategy approved by the board of directors and for developing policies and
procedures for identifying, measuring, monitoring and controlling credit risk. Such
policies and procedures should address credit risk in all of the bank’s activities and at
both the individual credit and portfolio levels.
Principle 3: Banks should identify and manage credit risk inherent in all products
and activities. Banks should ensure that the risks of products and activities new to
them are subject to adequate risk management procedures and controls before being
introduced or undertaken and approved in advance by the board of directors or its
appropriate committee.
B. Operating under a sound credit granting process
Principle 4: Banks must operate within sound, well-defined credit-granting criteria.

These criteria should include a clear indication of the bank’s target market and a
thorough understanding of the borrower or counterparty, as well as the purpose and
structure of the credit, and its source of repayment.
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Principle 5: Banks should establish overall credit limits at the level of individual
borrowers and counterparties, and groups of connected counterparties that aggregate
in a comparable and meaningful manner different types of exposures, both in the
banking and trading book and on and off the balance sheet.
Principle 6: Banks should have a clearly-established process in place for approving

new credits as well as the amendment, renewal and re-financing of existing credits.
Principle 7: All extensions of credit must be made on an arm’s-length basis. In

particular, credits to related companies and individuals must be authorised on an
exception basis, monitored with particular care and other appropriate steps taken to
control or mitigate the risks of non-arm’s length lending.
C. Maintaining an appropriate credit administration, measurement

and monitoring process
Principle 8: Banks should have in place a system for the ongoing administration of
their various credit risk-bearing portfolios.
Principle 9: Banks must have in place a system for monitoring the condition of
individual credits, including determining the adequacy of provisions and reserves.
Principle 10: Banks are encouraged to develop and utilise an internal risk rating
system in managing credit risk. The rating system should be consistent with the
nature, size and complexity of a bank’s activities.
Principle 11: Banks must have information systems and analytical techniques that
enable management to measure the credit risk inherent in all on- and off-balance
sheet activities. The management information system should provide adequate
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information on the composition of the credit portfolio, including identification of any
concentrations of risk.
Principle 12: Banks must have in place a system for monitoring the overall
composition and quality of the credit portfolio.
Principle 13: Banks should take into consideration potential future changes in
economic conditions when assessing individual credits and their credit portfolios, and
should assess their credit risk exposures under stressful conditions.
D. Ensuring adequate controls over credit risk
Principle 14: Banks must establish a system of independent, ongoing assessment of

the bank’s credit risk management processes and the results of such reviews should
be communicated directly to the board of directors and senior management.
Principle 15: Banks must ensure that the credit-granting function is being properly
managed and that credit exposures are within levels consistent with prudential
standards and internal limits. Banks should establish and enforce internal controls and
other practices to ensure that exceptions to policies, procedures and limits are
reported in a timely manner to the appropriate level of management for action.
Principle 16: Banks must have a system in place for early remedial action on
deteriorating credits, managing problem credits and similar workout situations.
E. The role of supervisors
Principle 17: Supervisors should require that banks have an effective system in place
to identify, measure, monitor and control credit risk as part of an overall approach to
risk management. Supervisors should conduct an independent evaluation of a bank’s
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strategies, policies, procedures and practices related to the granting of credit and the
ongoing management of the portfolio. Supervisors should consider setting prudential
limits to restrict bank exposures to single borrowers or groups of connected
counterparties.
Types of Risk in Banking

A risk is a situation involving exposure to danger. It may be various types. But in
the banking sector, we can specifically classify the risks into eight major types. It is
very important to understand the nuances of risks, for better understanding as well as
for banking exams. Let’s understand these in a simple way. The eight types of risk in
banking are as follows:
1. Credit Risk
2. Market Risk
3. Operational Risk
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4. Liquidity Risk
5. Business Risk
6. Reputational Risk
7. Systematic Risk
8. Moral Hazard
1). Credit Risk
According to the Basel Committee on Banking Supervision (BCBS), a bank is
exposed to Credit Risk when a bank’s borrower or any counterparty fails to meet its
payment obligation, regarding the terms and conditions agreed with the bank while
availing credit. Credit Risk involves both the uncertainty involved in loan repayment
as well as the delay in repayments. All types of banks which forward loans to its
customers face credit risk. Payments bank doesn’t face Credit Risk, as these are not
eligible to forward loans and credit card to its customers.
When a person or entity defaults on its payments for the loan availed, it may be due to
various reasons. It may be due to inadequate income from the business for which loan
was availed or complete failure of the business. But in some cases, Credit Risk may
be due to the wilful default (when a person has sources to repay the loan but not
repaying) by the concerned person or entity on payments.
Whatever be the reason for exposing to the Credit Risk, once a bank faces credit risk
it has to take some remedial actions. One of them is loan provisioning by the banks.
Loan provisioning is a process in which bank set aside some money from the profits
earned, to pay to itself against the loan defaulted or NPA. Loan provisioning is crucial
to keep the capital of bank unaffected.
2). Market Risk

According to the Basel Committee on Banking Supervision (BCBS), the market risk
arises due to movement in market prices of the concerned bank at the stock market.
Market risk is faced by a bank which is listed on stock exchange. The market risk
may be further classified into subcategories as:
a) Interest Rate risk
34
b) Equity risk
c) Foreign Exchange risk
d) Commodity risk
a). Interest Rate risk
It arises due to fluctuations in the interest rate in the economy, may be due to changes
in monetary policy rates etc. In terms of banking language, the management of
interest rate risk is called Asset-Liability Management (ALM).
b). Equity Risk

Equity risk occurs due to change in stock prices of the company in which bank has
some shareholding. When a bank forwards loan to companies it can accept some
shareholding in the company as a collateral. But when the value of shares falls in the
stock market, then equity risk is faced by the bank.
c). Foreign Exchange Risk

It occurs due to a change in the value of assets and liabilities of the bank due to
fluctuations in the exchange rate of currency. Let a bank has taken some loan from
some international organization in dollars, but if the value of rupees falls against the
dollar, then banks need to pay more rupees for the same amount of loan. This is
somewhat we call foreign exchange risk.
d). Commodity Risk

Anything like gold, silver, coal, iron, steel, natural gas, petroleum products, etc are
called commodities. If a bank is holding shares of a company which deals in these
type of commodities, commodity risk is faced by a bank when there is a change in
demand and supply of these commodities. If the demand of commodities falls, prices
will also decrease and ultimately it will affect the bank because the bank is a
shareholder in the concerned company.
3). Operational Risk

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According to the Basel Committee on Banking Supervision (BCBS), an Operational
risk is defined as “the risk of loss resulting from inadequate or failed internal
processes, people and systems or from external events. This includes legal risks but
excludes strategic and reputational risks”.
An operational risk may occur due to various reasons. Some of the most important are
the misuse of power by the authorized person, incompetency of the bank officer to
handle the situation, the failure of information technology systems, hacking of the
bank’s network, some programming error within the banking software, etc.
4). Liquidity Risk

Liquidity is something related to money. When a bank has enough money to carry out
its day to day operations, such as making payment to depositors on demand,
forwarding loan to its customers, then we say it has enough liquidity. But when a
bank doesn’t have enough money for all such operations, then the bank faces liquidity
risk.
To protect the banks against bank run (depositors want their money back but a bank is
unable to repay) in this type of situation, Reserves Bank of India has made some
provision to rescue banks. To protect banks against liquidity risk RBI has prescribed
Cash Reserve Ratio (CRR) and Statutory Liquidity Ratio (SLR) norms on the banks.
RBI also provides credit to banks under Repo (Repurchase option) facility to meet
banks their short-term liabilities.
5). Reputational Risk

When the image of the bank deteriorates in the public, then the bank faces
reputational risk. More the brand value of a bank lesser will be the reputational risk.
The reputation of a bank falls when it is unable to honour its commitments to the
government, regulator or to the public at large. Bad customer service, inappropriate
behaviour of staff, and delay in making decisions are some of the factors which
increases the reputational risk of the bank.
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Like in India, State Bank of India has a bigger brand image in the public, so there is a
lesser reputational risk with the SBI. Negative publicity about the bank also increases
the reputational risk to the bank.
6). Business Risk
Business risk occurs when a bank is dynamic enough to take decisions on its strategy.
If a bank is unable to change its strategy as per the changing competition in
the market, it can lose its market value. Bad Strategy may also lead to merger or
closer of the bank.
7). Systematic Risk
It is an indirect risk faced by banks due to the worst changes in the economic state of
the nation. If the economy of the country effects, it gives some vibrations to the
banking system also. When the entire economy of the country comes to a standstill,
then bank exposes to systematic risk. It happened in 2008 due to financial crises at
that time.
8). Moral Hazard
It refers to the situation when a person or entity has the willingness or tendency to
take high-level risks, even if the concerned person or entity is not capable to bear the
losses (if it occurs, due to the risk taken). In another way, moral hazard may also be
defined as the situation in which some other person or entity is affected by the
decisions taken by any third party.
Moral Hazard can be controlled if a bank has a strong board of directors to take
remedial decisions when required. The regulatory authority of banks (RBI in India)
can also help to control the moral hazard through moral suasion and direct action
(fine or penalties) when required.
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38
Risk Management Process
The process of evaluating and selecting alternative regulatory and non-regulatory
responses to risk.
The selection process necessarily requires the consideration of legal, economic, and
behavioral factors.
Risk management is the decision-making process involving considerations of
political, social, economic and engineering factors with relevant risk assessments
relating to a potential hazard so as to develop, analyze and compare regulatory
options and to select the optimal regulatory response for safety from that hazard.
The risks involved, for example, in project management are different in comparison
to the risks involved finance. This accounts for certain changes in the entire risk
management process. However the ISO has laid down certain steps for the process
and it is almost universally applicable to all kinds of risk. The guidelines can be
applied throughout the life of any organization and a wide range of activities,
including strategies and decisions, operations, processes, functions, projects,
products, services and assets.
7 steps of risk management are;
1. Establish the context,

2. Identification,
3. Assessment,
4. Potential risk treatments,
5. Create the plan,
6. Implementation,
7. Review and evaluation of the plan.
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1. Establish the Context
Establishing the context includes planning the remainder of the process and mapping
out the scope of the exercise, the identity and objectives of stakeholders, the basis
upon which risks will be evaluated and defining a framework for the process, and
agenda for identification and analysis.
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2. Identification
After establishing the context, the next step in the process of managing risk is to
identify potential risks. Risks are about events that, when triggered, will cause
problems.
Hence, risk identification can start with the source of problems, or with the problem
itself.
Risk identification requires knowledge of the organization, the market in which it

operates, the legal, social, economic, political, and climatic environment in which it
does its business, its financial strengths and weaknesses, its vulnerability to
unplanned losses, the manufacturing processes, and the management systems and
business mechanism by which it operates.
Any failure at this stage to identify risk may cause a major loss for the organization.
Risk identification provides the foundation of risk management.
The identification methods are formed by templates or the development of templates
for identifying source, problem or event. The various methods of risk identification
methods are.
2. Assessment
Once risks have been identified, they must then be assessed as to their potential
severity of loss and to the probability of occurrence.
These quantities can be either simple to measure, in the case of the value of a lost
building, or impossible to know for sure in the case of the probability of an unlikely
event occurring.
Therefore;
In the assessment process, it is critical to making the best-educated guesses possible
in order to properly prioritize the implementation of the risk management plan.
The fundamental difficulty in risk assessment is determining the rate of occurrence
since statistical information is not available on all kinds of past incidents.
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Furthermore;
Evaluating the severity of the consequences (Impact) is often quite difficult for
immaterial assets. Asset valuation is another question that needs to be addressed.
Thus, best-educated opinions and available statistics are the primary sources of
information.
Nevertheless, risk assessment should produce such information for the management
of the organization that the primary risks are easy to understand and that the risk
management decisions may be prioritized.
Thus, there have been several theories and attempts to quantify risks.
Numerous different risk formula exists but perhaps the most widely accepted formula
for risk quantification is the rate of occurrence multiplied by the impact of the event.
In business, it is imperative to be it’s to present the findings of risk assessments in
financial terms. Robert Courtney Jr. (IBM. 1970) proposed a formula for presenting
risks in financial terms.
The Courtney formula was accepted as the official risk analysis method of the US
governmental agencies.
The formula proposes calculation of ALE (Annualized Less Expectancy) and
compares the expected loss value to the security control implementation costs (Cost-
Benefit Analysis).
3. Potential Risk Treatments
Once risks have been identified and assessed, all techniques to manage the risk fall
into one or more of these four major categories;
1. Risk Transfer: Risk Transfer means that the expected party transfers whole or
part of the losses consequential o risk exposure to another party for a cost. The
insurance contracts fundamentally involve risk transfers. Apart from the insurance
device, there are certain other techniques by which the risk may be transferred.
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2. Risk Avoidance: Avoid the risk or the circumstances which may lead to losses
in another way, Includes not performing an activity that could carry risk. Avoidance
may seem the answer to all risks, but avoiding risks also means losing out on the
potential gain that accepting (retaining) the risk may have allowed. Not entering a
business to avoid the risk of loss also avoids the possibility of earning the profits.
3. Risk Retention: Risk retention implies that the losses arising due to a risk
exposure shall be retained or assumed by the party or the organization. Risk retention
is generally a deliberate decision for business organizations inherited with the
following characteristics. Self-insurance and Captive insurance are the two methods
of retention.
4. Risk Control: Risk can be controlled either by avoidance or by controlling
losses. Avoidance implies that either a certain loss exposure is not acquired or an
existing one is abandoned. Loss control can be exercised in two ways.
5. Create the Plan
Decide on the combination of methods to be used for each risk. Each risk
management decision should be recorded and approved by the appropriate level of
management.
For example,
A risk (concerning the image of the organization should have top management
decision behind it whereas IT management would have the authority to decide on
computer virus risks.
The risk management plan should propose applicable and effective security controls
for managing the risks.
A good risk management plan should contain a schedule for control implementation
and responsible persons for those actions.
The risk management concept is old but is still net very effectively measured.
Example: An observed high risk of computer viruses could be mitigated by acquiring
and implementing antivirus software.
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6.Implementation
Follow all of the planned methods for mitigating the effect of the risks.Purchase
insurance policies for the risks that have been decided to be transferred to an insurer,
avoid all risks that can be avoided without sacrificing the entity’s goals, reduce
others, and retain the rest.
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7. Review and Evaluation of the Plan
Initial risk management plans will never be perfect.
Practice, experience, and actual loss results will necessitate changes in the plan and
contribute information to allow possible different decisions to be made in dealing
with the risks being faced.Risk analysis results and management plans should be
updated periodically. There are two primary reasons for this;
To evaluate whether the previously selected securitycontrols are still applicable and
effective, and,To evaluate the possible risk level changes in the businessenvironment.
For example, information risks are a good example of the rapidly changing business
environment.
Risk Management Techniques
 Decision Tree
A decision tree is a diagram that branches in different directions. It’s a visual way of
plotting out risk management actions, especially if the options may result in vastly
different solutions and costs.
Each “branch” highlights one possible option, and can then branch off again further if
the path splits again.
You wouldn’t want to do this for every single risk on your log, but where there are
multiple possible routes to address the risk, and the risk impact is significant, it can be
worth using a decision tree to drill down the potential paths before agreeing the next
steps.
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 Expert Interviews
This is simply a fancy way of saying: go and talk to the people who know! This
technique has two main uses:
1. It helps with risk identification. People involved in the project and other subject
matter experts have a good insight into the kinds of things that might cause project
risk.
2. It helps with risk management action planning. Experts may offer you different
ways to address a risk, broadening your options when it comes to deciding what to do
next.
It never hurts to talk to people, and it’s very easy! Set up some calls or meetings and
tap into the wisdom of your experts.
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 Workshops
Workshops are another way of bringing subject matter experts together to help with
risk management. Again, you can use them at the beginning of the project for risk
identification, or for risk management planning as the project progresses.
Workshops give you the chance to dive deeper into some of the possible threats (and
opportunities) on the project. And you can use some of the other techniques like
Ishikawa diagrams at the same time.
A further benefit of work shopping risk like this is that everyone at the meeting has a
common understanding of the project risks. Workshops, and their outputs, can be a
good communication tool.
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 SWOT Analysis
You’re probably aware of this one for other uses, but have you ever used a SWOT
analysis for risk management?
SWOT stands for Strength, Weakness, Opportunity and Threat. See those last two
terms? That’s risk right there.
If a SWOT analysis has already been completed, you can pull the opportunities and
threats direct from that. The SWOT might have been included in the business case,
for example. There’s no need to do the work again; simply lift the information and
put it into your risk management tool.
However, if you haven’t already completed a SWOT for the project, there’s certainly
no harm in doing one, wherever you are in the project lifecycle. It can also be a good
way to double check that your team is still all of the same opinion about the project,
and that you all agree on the strengths of the initiative.
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 Risk Proximity Chart
Risk proximity charts aren’t that common – although the idea of risk proximity is.
Proximity refers to how close to the current date the risk is. For example, the risk of a
supplier failing to deliver the requirement equipment can have a low proximity if the
delivery date is far in the future. If the proposed delivery date is next week, the risk
has a high proximity. Proximity can help you prioritize risks as it tells you which ones
are coming up.
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You’ll often see risk management software with a field for proximity, but it’s often
only categorized as part of a table. You can take that one step further by plotting the
risk on a chart. ‘Today’ is on the left-hand side of the chart and then the x axis
represents the timeline out to the end of the project and beyond.
The y axis shows impact or severity. A risk that is close to ‘Today’ and at the top of
the graph with high severity is definitely one that you need to be looking at urgently.
This visual way of tracking risk proximity is good as it shows the big risks coming on
the horizon and makes it clear how much time you have to do something about them.
 Probability and Impact Matrix
And finally, our old favorite, the probability and impact matrix. You might know this
by a different name, but we’re sure your project teams have come across it before..
This is a very simple tool, but it allows you to track risks over time. You can add
arrows to the chart to show the direction of movement for each risk, noting those that
are increasing in probability and impact. This is a good tool to use for communicating
with senior stakeholders – in your Project Steering Group meetings, for example. Pick
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the top 10 risks, plot them on the matrix and then present the picture. The matrix
makes it easy to see the risks that you should be doing something about – they are the
ones in the top right corner of the grid!
There are other risk management techniques and tools, both built into your enterprise
risk management tools and off-line. The trick is to use a range of risk management
techniques, suited to your organization and the kinds of risk facing your projects. Pick
and choose the ones that will give you the best information about the risk profile on
your projects, programs and portfolios.
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RISK MANAGEMENT FRAMEWORK IN BANKS
Banking Regulation - Legal Framework
The Banking Regulation Act, 1949 (BR Act) provides the legal framework for
regulation and supervision of banks in India. This statute, together with some
provisions in the Reserve Bank of India Act, 1934 specifically empower the Reserve
Bank of India (RBI) to prescribe standards and monitor liquidity, solvency and
soundness of banks, so as to ensure that depositors’ interests are protected at all times.
In addition, Reserve Bank also derives such powers from certain specific statutes viz.
State Bank of India Act, 1955, State Bank of India (Subsidiary Banks) Act, 1959 and
Banking Companies (Acquisition and Transfer of Undertakings) Acts, 1970 & 1980.
Risk Management in Banks - Indian regulatory framework
1. Banks in the process of financial intermediation are confronted with various kinds of
financial and non-financial risks viz., credit, interest rate, foreign exchange rate,
liquidity, equity price, commodity price, legal, regulatory, reputational, operational,
etc. These risks are highly interdependent and events that affect one area of risk can
have ramifications for a range of other risk categories. Reserve Bank of India has
been giving importance on sound risk management infrastructure within banks. RBI
has issued guidelines to banks on all aspects of risk management including risk
management governance, asset liability management, interest rate risk management,
stress testing, asset classification and provisioning norms, exposure norms,
investment operations of 2 banks, specific guidance to banks on credit, market and
operational risk. RBI has been emphasizing the importance of adopting the
international best practices in bank regulation and supervision. Recently, Basel III
norms have been implemented in India from April 2013 in phased manner as agreed
to by the G20 jurisdictions. The current focus of RBI is on implementation of Basel II
advanced approaches for credit, market and operational risk. Implementation of
advanced approaches for credit, market and operational risk capital computation will
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help banks in instituting a robust risk management quantification infrastructure and
also install an effective risk management governance system in banks as well as
ensuring financial stability.
Besides, RBI has been using macro prudential tools to ensure risk in the banking
system is contained and banks’ exposure to sensitive sectors like commercial real
estate, equity exposures, etc. is reduced through use of time varying capital and
provisioning norms. More recently, RBI has been working in implementing the
macro-prudential elements of Basel III framework viz., countercyclical capital buffer,
and systemically important bank framework. It is felt that a sound implementation of
these macro prudential frameworks will help the banking system in reducing the
probability of crisis and its severity in case a crisis occurs.
RBI fully appreciates that risk management framework in a bank cannot be

strengthened independent on general corporate governance framework in the banks
and overall incentive structure in banks. The RBI guidelines on corporate governance
and salary structure within the banks ensure that incentive structure is aligned with
the overall long-term health of the bank.
In a developing economy like India, where banks are dominant providers of credit to
productive sectors of the economy, there is a need to ensure that any signs of
impairment of loan assets are recognized early and banks take appropriate timely
actions. Recently, RBI guidelines on early recognition of deterioration in the quality
of assets and restructuring of loans require banks to monitor their assets diligently and
make early provisions for stress assets if required.
In India banks are required to invest 23% of their net demand and time liabilities in
the form of government securities and other approved securities. The classification of
3 investments is required to be in three categories HTM, AFS and HFT.
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REVIEW OF LITERATURE
 Rima bizri (March 2018) Credit Risk Management in the Banking Sector during
Low-Growth Periods Credit risk management is considered one of the more difficult
activities in the banking industry especially during periods of low growth. It is during
those periods that default risk rises, and a large proportion of the banking industry’s loan
portfolio becomes at risk of default. Consequently, it is the aim of this paper to
investigate how the banking systems in the Middle East manage their asset quality during
periods of low growth. This study examines a sample of Lebanese banks during a 6-year
period of low economic growth to see how the Lebanese banking industry, an advanced
and profitable economic sector, addresses asset quality issues.
 Chinwe.L. Duaka (May.-Jun. 2015)Credit Risk Management in Commercial Banks
Commercial banks are the most important savings, mobilization and financial resource
allocation institutions. Consequently, these roles make them an important phenomenon in
economic growth and development. In performing this role, it must be realized that banks
have the potential, scope and prospects for mobilizing financial resources and allocating
them to productive investments. Therefore, no matter the sources of the generation of
income or the economic policies of the country, commercial banks would be interested in
giving out loans and advances to their numerous Customers bearing in mind, the three
principles guiding their operations which are, profitability, liquidity and solvency.
However, commercial banks decisions to lend out loans are influenced by a lot of factors
such as the prevailing interest rate, the volume of deposits, the level of their domestic and
foreign investment, banks liquidity ratio, prestige and public recognition to mention a
few. Credit creation is the main income generating activity for the banks. But this activity
involves huge risks to both the lender and the borrower. The risk of a trading partner not
fulfilling his or her obligation as per the contract on due date or anytime thereafter can
greatly jeopardize the smooth functioning of a bank’s business. On the other hand, a bank
with high credit risk has high bankruptcy risk that puts the depositors in jeopardy. Among
the risk that face banks, credit risk is one of great concern to most bank authorities and
banking regulators.
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 Swaranjeet Arora (2013) has attempted to identify factors affecting Comparison of
credit risk analysis in Indian banks and compare credit risk analysis Follow-up
practice, empirical studies by Indian public and private sector banks Organized and
examined ideas of employees of different banks Statistical tools This study searches
for events from different angles. It has been found that solvency analysis and
collateral requirements for credit risk analysis are two important factors. Descriptive
and analytical The result, he concluded that Indian banks effectively manage credit
risk. Result also Indicate that there is an important difference between the Indian and
the public audience Bank of the area in analysis of credit risk.
 Banerjee (2011) highlights the introduction of commercial banking in India. I tried to

explore the landscape and other areas of risk management in the banking sector. Also
study Highlighting the costs and management costs of accountants (CMAs) in the
commercial sector In India, banks have contributed to risk management tasks to
increase their effectiveness Development.
 Alansani (2011) Asserting that the performance of the evaluation Important Bank in
the light of banking sector Because financial statements are no longer able to give a
clear picture of how Therefore, the bank considered the success of the bank in getting
the highest return Financial analysis of the main methods for evaluating performance,
because Financial major provides statistics that serve the planning and evaluation
process and Support for sound thinking for monitoring and future creation Given the
risks of banking, the possibility of bankruptcy can increase Financial Crisis. And
evaluate the performance of the bank and study and analyze the bank returns the risks
that the bank wants to check the activity of the port, and Banking bookkeeping
identifies the strengths and weaknesses of the system Shows how effective
management is in recruiting financial resources Hopefully available. As a result of the
study, find many conclusions and suggestions It is most important to rely on
standards to measure and evaluate performance Providing an opportunity to
determine the reasons for the deviation of the bank and how Take action and develop
appropriate policies at a higher and growing level Provide good results for the results
55
of financial statements The performance of the bank, but not enough to represent the
actual performance of the bank .Where the material requires standards to measure
account details.
 Al-Mozahid (2010) indicated in his study that the importance of this study is the
problem of banking is faced by banks, especially with the recent period. Due to the
lack of bank risk Or reduce their impact, this is the reason that there has been a
significant decrease in revenue Therefore, for bankruptcy. Therefore, the effect is
necessary to study banking risks their impact on returns has been selected. CAC
BANK, which is considered a suitable model for banks Yemen to study the problem
of search. It has been selected for the indicator Study of risks and types of returns and
relationships Financial and Statistical Analysis During 2004 to 2008
 Jobreh, Wafa (2008) has set a goal of conducting various types of analysis in his
study. Risks in Jordan Commercial Banks (Credit, Liquidity, Operation and Capital)
Strategies to be followed by this bank to handle these types of Risk, in the end,
impact on Basil 2 (credit, liquidity,) at such risk. Exploitation and risk of capital). The
samples of study include 4 Jordan banks for the period 1995-1995. 2007. Survey
method grouped together and regression methods simultaneously another side was
used to analyze the study data. Results in terms of finance the ratio indicated that
banks have some kind of review and management capability There is a statistical
relationship between risk, and total risk and all types of risk. These studies appear to
have the greatest effect on total risk (liquidity risk and credit risk), and Operating
risks have minimal impact on the total risk relative to other risks.
 Bodla, B.Sc., Verma, Richa (2009) has prepared an article for study Implementation
of the credit risk management framework by commercial banks India the results show
that the approval of the credit risk is approved "Board of Directors" for 94.4% and
62.5% of the public and private sector Sector Bank. The other banks have this right,
however "Credit Policy Committee"
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 Usha, Janakiramani (2008) evaluated the operational risk situation in detail
Management in the Indian banking system under Basel II. The approach used to cover
bank assets and risk capital for operational risk. The calculation is largely compared
to the situation of the banking system in Asia. Africa and the Middle East An
investigation of 22 Indian banks shows Insufficient internal data, difficulties and
modeling when capturing external loss data Complications constitute a major obstacle
to the implementation of operational risk Management framework in banks in Indi
 Das and Ghosh (2007) found that the banks are generally exposed to various risks
such as credit. Market, Market, Operations, Liquidity Risks, etc. Of all types of risks,
credit risk is Most importantly, he emphasized the very existence of the banking
system. Since the credit Risk is about loans and their shortcomings, and loan
transactions represent more than 50% In all banking activities, credit risk should be
closely monitored by the banking sector. Implementation of basal II can increase
concentration on risk. Risk measurement and management at institutional level.
Through the Basel Committee Its various publications provided useful guidance on
the management of various aspects of risk.
 O.B. Satish Kumar (2007) assesses financial situation in his studies Performance of
Indian private banks Private banks play important roles Role in the development of
the Indian economy. After the liberalization of banking sector Major changes have
occurred. Economic reforms have completely changed the banking sector. Sector.
RBI has been able to create new private sector banks in line with the EU The
recommendation of the Narasimhan Committee was the Indian banking sector.
Domination of public banks He summoned this ICICI Bank Employees are those who
generate more profit. Similarly, operating profit Higher for all private banks ICICI
Bank Ltd. And YES BANK LTD. They are those who have a good liquidity position.
 Ajit and Bangar (1998) gave the title "The Role and Performance" in his document
Private sector banks in India (1991-1992 to 1996-1997) presented a table Public
banks issued by private banks during this period 1991-1997, using several indicators:
57
profitability ratio, interest rate differential, capital Adequacy rate and net NPA ratio.
The conclusion is that the Indian private bank Better performance of public banks It is
interesting, however, that they are Indians Despite the small margin of private banks,
the return is high.
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3.1. OBJECTIVE OF THE STUDY
The specific objective of the present research are:
1. To know the different methods available for credit risk and understanding the
procedure used to PNB and ICICI.
2. To gain insights into credit risk management activities of PNB and ICICI.
3. To compare the loans of PNB banks with ICICI bank.
4. To study the credit policy adopted by PNB and ICICI.
5. To analysis the credit recovery management of PNB and ICICI.
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RESEARCH METHODOLOGY
Research process is Systematic investigation of materials and sources to establish

facts and draw new conclusions.
Definition
According to fredker linger, “research is an organized enquiry designed and carried
out to provide information for solving a problems”.
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3.2. RESEARCH DESIGN
A research is the arrangement of condition for the collection and analysis of data in a
manner that aims to combine relevance to the research purpose with economy in
relationship in fact the research is the design is the conceptual structure within which
researched is conducted, it constitutes the blue print of the collection, measurement
and analysis of data. As search the design includes an outline of what the researcher
will does relationship office relationship manager writing the hypothesis and its
operational implication to the analysis of data.
Exploratory Descriptive
Types
Experimental Empirical
Exploratory research :
Investigating the problem or situation providing information to the researcher. The

purpose of the search is to provide details where there is a small amount of
information. He may use various methods such as tests, interviews, group
discussions, experiments or any other strategy to obtain the information.
Descriptive research:
Descriptive research focuses primarily on describing the nature of the demographic section,
without focusing on the "why" when a certain event occurs. Descriptive research deals with
everything that can be counted and studied.
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Experimental research:
Market studies conducted according to the results obtained through a good or use of a
service. The results can be experienced by those who conduct a sample or research
group.
Empirical research:
It is way of gaining knowledge by mean of direct observation or experience.

Empirical evidence can be analyzed quantitatively or qualitatively
SAMPLE DESIGN
A sample design is a plan for obtaining a sample from a given population. It refers to
the techniques or the procedure that the researcher would adopt in selecting items for
the sample. Sample design is determine before the data are collected. Here we select
the banks as sample in our sample design. The selected two banks should be as
representative of the total banks in case of public & private banks.
SAMPLE PLAN
In sample plan which includes followings parts as:
Sampling techniques
Stratified convenient sampling. Research was conducted on clear assumption that the
respondents would give frank & fair answer in a pragmatic way without any bias.
Sampling description
In order to understand the nature & feature of various respondents in study, the
information was collected and analyzed according to their socio-economic
backgrounds like education, occupations, age, gender, place of domicile etc.
62
63
Method of study
Research process is systematic method which includes the primary & secondary
method. Research of credit risk management in PNB & ICICI banks using the both
methods related to study. Methods of the study in to the following parts ;
3.3. DATA COLLECTION
Collection of data is the most important step in every investigation. it is basic for any
analysis and source is chosen depending upon the time, resources and purpose of
investigation. The process of data collection begins after a research problem has been
defined and research design has been chalked out. There are two method of data
collection can be collected from either the primary or secondary sources. In this study
although the data was collected through primary as well as secondary sources.
Primary Data
The researcher has to gather data a fresh for the specific study, under taken by him.
Primary data for the study has been collected with the help of structured
questionnaire. In-depth interviews with brokers, various managers/employees of
banks were conducted. Alongside some reactions from the customers owning these
mutual funds were also obtained. So, I have used primary data as well.
64
Secondary Data
It is the data which is already collected by someone else. Researcher has to analyze
the data and interpret the results. It has always been important for completion of any
report.
 Internet
 Magazines, Archives
 Annual reports of bank
 Newspapers-Economic Times of India, Business Standard, Financial Times.
 General library research sources, Websites, Specialized libraries
The data referred to those which gathered for some other purpose and are already
available in the mutual fund initial records, publication are secondary data.
65
ICICI BANK V/S PNB COMPARISON RESULTS
In data analysis which selects any two banks on the basis of samples from other
banks. In which select PNB from public banks and ICICI from private banks and
which comparison related to credit risk management.
Profitability defined
As the banking is a service industry and the profit motive is not the sole motive of the
banks, yet the sustainability and efficiency can only be judged by the profitability.
The policy makers laid emphasis on profitability as an important benchmark through
which the performance of public sector banks is to be judged in the post reform era.
Profitability in this regards can be measured by the operational efficiency of a
particular bank.
If banks profits are reinvested, this should lead to safer banks & consequently, high
profits could promote financial stability. The monitoring of bank profits is made
difficult by the fact that bank profit components are observed only at low frequencies,
at best quarterly ; detailed public information is available only for large and listed
companies.
PNB
Punjab National Bank (PNB) is the third largest banking entity in the country with
7% share of the total non-food credit disbursals at the end of FY12. Robust growth
and stellar margins has pegged the bank amongst the frontrunners in the PSU
banking space. This has helped it keep its neck above its peers.
ICICI BANK
Despite being the second largest bank in the country after SBI in terms of asset size,
ICICI Bank lost its share of the banking sector's advances from 10.2% in FY07 to 8%
in FY12. At the end of March 2012, the bank had assets of over Rs 4.8 trillion & a
franchise of over 9,000 ATMs & 2,750 branches spread across the country. Retail
66
assets constituted 34% of advances in FY12 as against 65% in FY07. The bank is
focusing on loan origination in the large corporate.
1. Total deposits comparison of ICICI and PNB
(Rs m)
Bank Mar-2018 Mar-2017 Mar-2016
ICICI 5857961 5125873 4510774
PNB 6484390 6296509 5703826
Sources: compiled from secondary structure
Total deposit
7000000
6000000
5000000
4000000
3000000
2000000
1000000
0
icici pnb icici pnb icici pnb
Mar,18 Mar,17 Mar,16
67
Interpretation:
Data reveals that the total deposit comparison of the PNB and ICICI banks. PNB’s
total deposit is 5703826 in2016 and 6296509 in 2017. Whereas ICICI’s total deposit
4510774 in 2016 and 5125873 in 2017. And 2018 total deposit is 6484390 of PNB
and 5857961 of ICICI. From this conclude that total deposit is greater in PNB as
compared to ICICI bank during this period of study.These affect the profitability of PNB
in favorable manner.
68
2. Net NPA’s comparison of ICICI and PNB
(In %)
ICICI 4.8 4.9 3.0
PNB 11.2 7.8 8.6
Sources: compiled from secondary structure.
Net NPA
12.00%
10.00%
8.00%
6.00%
4.00%
2.00%
0.00%
ICICI PNB ICICI PNB ICICI PNB
Interpretation:
The study shows that the total non-performing assets of the PNB and ICICI banks.
PNB’s NPA is 8.6 in 2016, 7.8 in 2017 and 11.2 in 2018. Whereas ICICI’s NPA is
3.0 in 2016, 4.9 in 2017 and 4.8 in 2018. From this we can conclude that total NPA of
ICICI is less than from PNB. These affect the profitability of ICICI in favorable manner.
69
3. Total borrowing comparison of ICICI and PNB
(Rs m)
ICICI 2294018 1882868 2203777
PNB 653297 433360 816737
Total borrowing
2500000
2000000
1500000
1000000
500000
0
Interpretation:
Data reveals that the total borrowings comparison of the PNB and ICICI banks.
PNB’s total borrowings 816737 in2016 and 433360 in 2017. Whereas ICICI’s total
borrowings 2203777 in 2016 and 1882868 in 2017. And 2018 total borrowings is
653297 of PNB and 2294018 of ICICI. From this conclude that interest earned ratio is
greater in ICICI as compared to PNB bank during this period of study. These affect
the profitability of PNB in favorable manner.
4.
70
4. Total investment comparison of ICICI and PNB
(Rs m)
ICICI 3722077 3043733 2860441
PNB 2059102 1915272 1651265
Total investment
4000000
3500000
3000000
2500000
2000000
1500000
1000000
500000
0
Interpretation:
Data reveals that the total investment comparison of the PNB and ICICI banks.
PNB’s total investment 1651265 in2016 and 1915272 in 2017. Whereas ICICI’s total
investment 2860441 in 2016 and 3043733 in 2017. And 2018 total investment is
2059102 of PNB and 3722077 of ICICI. From this conclude that totalinvestment is
greater in ICICI as compared to PNB bank during this period of study. These affect
the profitability of PNB in favorable manner.
71
5. Net profit margin comparison of ICICI and PNB
(In %)
ICICI 12.4 16.7 17.2
PNB -25.9 1.8 -7.6
Net profit margin

20
15
10
0
-5
-10
-15
-20
-25
-30
Interpretation:
Data reveals that the net profit margin of the PNB and ICICI banks. PNB’s net profit
margin -7.6 in2016 and 1.8 in 2017. Whereas ICICI’s net profit margin 17.2in 2016 and
16.7 in 2017. And 2018 net profit margin -25.9 of PNB and 12.4 of ICICI. From this
conclude that interest earned ratio is greater in ICICI as compared to PNB bank
during this period of study. These affect the profitability of ICICI in favorable manner.
6.
72
6. Net fixed assets comparison of ICICI and PNB
(Rs m)
ICICI 94650 93380 87135
PNB 63743 63978 53081
Net fixed assets

100000
90000
80000
70000
60000
50000
40000
30000
20000
10000
0
Interpretation:
The study shows that the net fixed assets comparison of the PNB and ICICI banks.
PNB’s net fixed assets 53081 in2016 and 63978 in 2017. Whereas ICICI’s net fixed
assets 87135 in 2016 and 93380 in 2017. And 2018 net fixed assets is 63743 of PNB
and 94650 of ICICI. From this conclude that net fixed assets are greater in ICICI as
compared to PNB bank during this period of study. These affect the profitability of
ICICI in favorable manner.
73
7. Balance sheet comparison of ICICI and PNB
(Rs cr.)
ICICI 879189.16 771791.45 720695.10
PNB 765830.10 720330.55 667390.45
Balance sheet
900000
800000
700000
600000
500000
400000
300000
200000
100000
0
Interpretation:
The study shows that the balance sheet comparison of the PNB and ICICI banks. PNB’s
balance sheet 667390.45 in2016 and 720330.55 in 2017. Whereas ICICI’s balance sheet
720695.10in 2016 and 771791.45 in 2017. And 2018 balance sheetis 765830.10 of PNB
and 879189.16 of ICICI. From this conclude that balance sheet is greater in ICICI as
compared to PNB bank during this period of study. These affect the profitability of ICICI in
favorable manner.
74
8. Return of assetscomparison of ICICI and PNB
(In %)
ICICI 0.7 1.0 1.1
PNB -1.6 0.`1 -0.5
Return of assets
1.50%
1.00%
0.50%
0.00%
-0.50%
-1.00%
-1.50%
-2.00%
Interpretation:
Data reveals that the return of assets of the PNB and ICICI banks. PNB’s the return of
assets -0.5 in2016 and 0.1 in 2017. Whereas ICICI’s the return of assets 1.1in 2016 and
1.0 in 2017. And 2018 the return of assets -1.6 of PNB and 0.7 of ICICI. From this
conclude that the return of assets is greater in ICICI as compared to PNB bank during
this period of study. These affect the profitability of ICICI in favorable manner.
9.
75
9 Total assets comparison of ICICI and PNB
(Rs m)
ICICI 11242810 9857247 9187562
PNB 7789949 7333109 7127930
Total assets
12000000
10000000
8000000
6000000
4000000
2000000
0
Interpretation:
The study shows that the total assets comparison of the PNB and ICICI banks. PNB’s
total assets 7127930 in2016 and 7333109 in 2017. Whereas ICICI’stotal assets 9187562
in 2016 and 9857247 in 2017. And 2018 total assets is 7789949 of PNB and
11242810 of ICICI. From this conclude that a total asset is greater in ICICI as
compared to PNB bank during this period of study. These affect the profitability of
ICICI in favorable manner.
76
10 Debt-equity ratio comparison of ICICI and PNB
(In %)
ICICI 7.4 6.7 7.1
PNB 16.8 15.5 15.6
Debt-equity ratio
18.00%
16.00%
14.00%
12.00%
10.00%
8.00%
6.00%
4.00%
2.00%
0.00%
Interpretation:
Data reveals that the debt-equity of the PNB and ICICI banks. PNB’s the debt-
equity15.6 in2016 and 15.5 in 2017. Whereas ICICI’s the debt-equity 7.1 in 2016 and 6.7
in 2017. And 2018 the debt-equity 16.8 of PNB and 7.4 of ICICI. From this conclude
that the debt-equity is greater in PNB as compared to ICICI bank during this period of
study. These affect the profitability of PNB in favorable manner.
77
11. Return of equity comparison of ICICI and PNB
(In %)
ICICI 7.0 9.7 10.8
PNB -29.7 2.0 -9.7
Return of equity
15.00%
10.00%
5.00%
0.00%
-5.00%
-10.00%
-15.00%
-20.00%
-25.00%
-30.00%
-35.00%
Interpretation:
Data reveals that the return of equity of the PNB and ICICI banks. PNB’s the return
of equity -9.7 in2016 and 2.0 in 2017. Whereas ICICI’s the return of equity 10.8 in 2016
and 9.7 in 2017. And 2018 the return of equity -29.7 of PNB and 7.0 of ICICI. From
this conclude that the return of equity is greater in ICICI as compared to PNB bank
during this period of study. These affect the profitability of ICICIin favorable manner.
78
12. Net profit comparison of ICICI and PNB
(Rs cr.)
ICICI 6777.42 9801.09 9726.29
PNB -12282.82 1324.80 -3974.40
Net profit
15000
10000
5000
0
-5000
-10000
-15000
Interpretation:
The study shows that the net profit comparison of the PNB and ICICI banks. PNB’s
net profit -3974.40 in2016 and 1324.80 in 2017. Whereas ICICI’s net profit 9726.29 in
2016 and 9801.09 in 2017. And 2018 net profit -12282.82 of PNB and 6777.42 of
ICICI. From this conclude that a net profit is greater in ICICI as compared to PNB
bank during this period of study. These affect the profitability of ICICI in favorable
manner.
79
FINDINGS AND RECOMMENDATIONS
5.1. FINDINGS
1. It was found that private banks are greater in profitability from comparison to
public banks it is just because of high involvement of customers in the private
banks more customers tends to increases the profits in the bank.
2. The concentration risk profits of private banks are found to be higher than that of
public banks it is just because of the security taken by the private banks are less
than the taken by the public banks.
3. In the case of public banks, there is a close link between the level of credit risk and
the diversification of the credit portfolio by the high correlation coefficient. Due to
the lack of credit risk, the concentration risk decreases. However, this relationship is
clearly not clear in the case of a private bank.
4. Credit risk management performance of commercial banks in India is not
satisfactory it is because of the less rate of return given by so many customer
specially farmers.
5. There exists no marked difference between public sector banks and private sector
banks as regards their credit risk management performance.
6. The return of equity is greater in private sector banks (ICICI) as compared to public
sector bank (PNB) bank during this period of study.
7. A Total asset is greater in private sector banks (ICICI) as compared to public sector
bank (PNB) bank during this period of study because of the less concentration of
government in their Public Banks.

80
5.2. RECOMMENDATIONS
1. The Bank should monitor the monitoring and supervision of credit risk. The bank
should ensure that loan officers take follow-up action with borrowers from time to
time to ensure that the loan is used for the purpose intended.
2. The bank should continue to diversify its borrowing activities and allocate more
funds to the manufacturing sector of the economy. Private sector enterprises should
be given priority and should be supported accordingly.
3. The bank should reduce and if possible eliminate political influence in granting of
credit to certain political figures and organizations.
4. The bank should put in place debt collection mechanism including court action as
last resort.
5. The bank should also ensure that there is adequate security from customers in case
they are unable to satisfy their part of the agreement.
6. To improve the operational efficiency, every company should keep a check on
operational expense.
7. Every banks needs to work on their sales. They have to give targets to their
employee in order to increase the sales which is already applicable in private sector
Banks.
8. All the banks should make full utilization of their resources as well as their man
power we all know in public Sector banks employees are not doing their job in well
discipline manner that is the main and basic reason of increasing in private sector
Banks.
81
To study the problems faced by the customer in public as well as
private sector banks and compare between them
For public banks

The main problem faced by the customers in public banks is unfriendly staff towards
them also the services provided to them are not quick enough.
For private banks

The main problem faced by the customers in private banks trust, reliability &
location. Since the private sector banks do not have enough numbers of branches in
this part of the country hence they are facing the problem of including large number
of customers
5.3. Limitations of the study

 It was critical for me gather the financial data of public & private banks for last many
years which I want to include in my report so the better evolution of the performance
of the bank is not possible.
 Since my study is based on the secondary data the partial operations as related to the
credit risk are adopted by the bank are not learned.
 This research study was time bound and due to this only a few aspects of the problem
were taken up for study.
 This research study was limited only too few on banks due to non-availability of data
on public & private banks.
 In today’s day the companies are very sensitive regarding their internal data; this
proved a hindrance to my study.
82
CONCLUSION
A report is not said to be completed unless and until the conclusion is given report. A
conclusion reveals the explanations about what the report has covered and what is the
essence of the study.
The problem statement on which I focused my study is ‘Credit Risk Management in

Public and Private Sector banks’. The Indian banking sector is the important service
sector that helps the people of the India to achieve the socio economy objective. The
Indian banking sector has helped the business and services sector to develop by
providing them credit facilities and other finance related facilities. The Indian
banking system is classified into scheduled and non scheduled banks. The public
sector banks play very important role in developing the nation in terms of providing
good financial services. The public sector banks have also shown good performance
in last few years.
The only problem that the public sector banks are facing today is the problem of
credit risk management. The credit risk means those risk which are classified as bad
credit risk which are not possibly be return back to banks by the borrowers. If the
proper management of the credit risk is not undertaken it would hamper the business
of the banks. The credit risk would destroy the current profit, interest income due to
large provisions of the credit risk, and would affect the smooth functioning of the
recycling of funds.
The RBI has also been trying to take numbers of majors but the ratio of credit risk is
not decreasing of the banks. The banks must find out the measures to reduce the
evolving problem of the credit risk. If the concept of credit risk is taken very lightly it
would be dangerous for Indian banking sector.
83
BIBLIOGRAPHY
BOOKS
A. Goel D.K. Goel Rajesh“ management accounting & finance accounting “

B. Jain P.K. “financial management”
C. Gupta S.P. “ business statistics”
D. Bhalla V.K. “working capital management”
E. Gaur singhsanjay“ Board characteristics and firms performance"
JOURNALS AND MAGAZINES
1. Rima bizri (March 2018) Credit Risk Management in the Banking Sector during Low-
Growth Periods, https://www.researchgate.net/publication/324374113
2. Chinwe .L. Duaka (May.-Jun. 2015)Credit Risk Management in Commercial Banks
http://www.iosrjournals.org/iosr-jef/papers/Vol6-Issue3/Version-3/H06335156.pdf
3. Ajit, D. and Bangar, R.D “The Role and Performance of Private Sector Banks in
India 1991-92 to1996-97”,Political Economy Journal of India7:1 and 2,1998.pp.7 20.
4. Diction O.B. Sathish Kumar, Financial Performance Of Private Sector Banks In

India – An Evaluation, Emerging Markets: Finance e-Journal, December 2007.
5. Das A and Ghosh S (2007) Determinants of credit risk in Indian state owned
banks: Anempirical investigation. Econ Issues 12:27-46.
6. Usha, Janakiramani ,Operational Risk Management In Indian Banks In The
Context Of Basel II: A Survey Of The State Of Preparedness And Challenges In
Developing The Framework, Reserve Bank of India, India, Asia Pacific Journal of
Finance and Banking Research Vol. 2, No. 2, 2008.
84
7. Jawbreh ,Wafaa Jamil , “Risk Management in Commercial Jordan Banks”,
Master Thesis ,Al- Albyt University, 2008.
8. Bodla, B. S.,Verma,Richa,CreditRisk Management Framework at Banks in India,
The ICFAI University journal of bank management :IJBM.,Hyderabad : ICFAI Univ.
Press, Vol. 8.NO.1, 2009, pp. 47-72
9. Al-Mojahid, AmroAhmed ,“The Effects of Banking Risks on Its Revenues (An
Empirical Study on CAC Bank of Yemen)”, Master Thesis ,The Arab Academy for
Banking and Financial Sciences, Faculty Of Banking And Financial Sciences –
Sana’a, Financial Management ,2010.
10. Al-Nasani, Ahmad Yasser “Study of revenue growth in the banking risk”(A case
study on the International Bank of Yemen) Community College- Syoun, Yemen,
2011.
11. Banerjee A (2011) Risk management in banking sector: An overview. Mgmt Acct
46: 679-82.
12. Swaranjeet Arora, Credit Risk Analysis in Indian Commercial Banks-An
Empirical Investigation, Asia-Pacific Finance and Accounting Review,Volume 1,
No. 2, Jan - Mar 2013
85
Websites
a. https://www.sas.com/en_us/insights/risk-management/credit-risk-management.html
b. https://www.equitymaster.com/stock-research/compare/pnb-ICBK/Compare-PNB-ICICI-
BANK
c. https://www.moneycontrol.com/financials/icicibank/balance-sheet/ICI02
d. https://economictimes.indiatimes.com/punjab-national-bank/balancesheet/companyid-
11585.cms
e. https://www.google.com/search?
q=research+process&rlz=1C1CHBD_enIN819IN819&source=lnms&tbm=isch&sa=X&ved=
0ahUK
f. https://www.google.com/search?
q=types+of+research&rlz=1C1CHBD_enIN819IN819&source=lnms&tbm=isch&sa=X&ve
86
ICICI Bank Balance Sheet
Mar 2018 Mar 2017 Mar 2016 Mar 2015 Mar 2014

Particulars
( ).Cr ( ).Cr ( ).Cr ( ).Cr ( ).Cr
SOURCES OF
FUNDS :
Capital 1285.81 1165.11 1163.17 1159.66 1155.04
Reserves 103867.56 98779.71 88565.72 79262.26 72051.71

Total
Equity Share 0.00 0.00 0.00 0.00 0.00

Warrants
Equity 5.57 6.26 6.70 7.44 6.57

Application
Money
Deposits 560975.21 490039.06 448528.09 447495.38 408586.32
Borrowings 182858.62 147556.15 147704.99 86484.70 78086.40
Other 33666.89 37612.55 37887.43 34374.72 36996.27

Liabilities &
Provisions
TOTAL 882659.66 775158.84 723856.10 648784.16 596882.31

LIABILITIES
APPLICATION
OF FUNDS :
Cash & 33102.38 31702.40 27106.09 25652.91 21821.82

Balances with
RBI
Balances with 51067.00 44010.66 32762.65 16651.71 19707.77

Banks &
money at Call
Investments 202994.18 161506.55 160411.80 158129.22 177021.82
Advances 512395.29 464232.08 435263.94 387522.07 338702.65
Fixed Assets 7903.51 7805.21 7576.92 4725.52 4678.14
87
Mar 2018 Mar 2017 Mar 2016 Mar 2015 Mar 2014
Particulars
( ).Cr ( ).Cr ( ).Cr ( ).Cr ( ).Cr
Other Assets 75197.29 65901.94 60734.70 56102.73 34950.11
Miscellaneous 0.00 0.00 0.00 0.00 0.00

Expenditure
not written off
TOTAL 882659.65 775158.84 723856.10 648784.16 596882.31

ASSETS
Contingent 1289244.00 1030993.7 900798.78 851977.61 781430.44

Liability 1
Bills for 28588.36 22623.19 21654.73 16212.97 13534.91

collection
g.
88
Balance Sheet - Punjab National Bank
Rs (in Crores)
M M M M M
a a a a a
r' r' r' r' r'
Particular 1 1 1 1 1
s 8 7 6 5 4
1 1 1 1 1
2 2 2 2 2
M M M M M
o o o o o
nt nt nt nt nt
h h h h h
Liabilities s s s s s
5 4 3 3 3
5 2 9 7 6
2. 5. 2. 0. 2.
Share 1 5 7 9 0
Capital 1 9 2 1 7
3 3 3 3 3
6 7 5 7 4
8 6 0 3 1
3 7 7 2 2
8. 0. 2. 1. 5.
Reserves & 3 8 6 0 0
Surplus 7 6 4 6 7
4 4 3 3 3
1 1 8 9 5
0 8 3 0 8
7 4 1 7 9
4. 6. 0. 9. 5.
3 9 1 5 3
Net Worth 1 8 4 2 2
Secured 6 4 5 4 4
Loan 0 0 9 5 8
8 7 7 6 0
5 6 5 7 3
0. 3. 5. 0. 4.
7 3 2 5 4
89
5 4 4 5 1
6 6 5 5 4
4 2 5 0 5
2 1 3 1 1
2 7 0 3 3
2 0 5 7 9
6. 4. 1. 8. 6.
Unsecured 1 0 1 6 7
Loan 9 2 3 4 5
7 7 6 5 5
4 0 5 8 3
4 4 1 6 5
1 3 1 1 3
5 1 1 2 2
TOTAL 1. 4. 6. 8. 6.
LIABILIT 2 3 5 7 4
IES 5 3 1 1 8
Assets
6 6 5 3 3
3 2 2 5 4
4 7 2 5 1
9. 3. 2. 1. 9.
Gross 3 2 7 4 7
Block 3 5 3 8 4
(-) Acc. . . . . .
Depreciatio 0 0 0 0 0
n 0 0 0 0 0
6 6 2 2 2
3 2 3 1 0
4 7 7 6 1
9. 3. 7. 3. 1.
3 2 9 9 5
Net Block 3 5 5 3 6
Capital . . . . .
Work in 0 0 0 0 0
Progress 0 0 0 0 0
Investment 2 1 1 1 1
s 0 8 5 5 4
90
0 6 7 1 3
3 7 8 2 7
0 2 4 8 8
5. 5. 5. 2. 5.
9 4 8 3 5
8 4 9 6 0
. . . . .
0 0 0 0 0
Inventories 0 0 0 0 0
. . . . .
Sundry 0 0 0 0 0
Debtors 0 0 0 0 0
9 8 7 5 4
5 8 3 5 5
4 3 6 9 2
6 3 2 3 1
2. 1. 3. 4. 8.
Cash and 0 6 0 1 4
Bank 0 5 9 7 5
4 4 4 3 3
6 3 3 9 5
3 9 0 2 7
7 0 6 5 9
1 0 9 6 9
2. 0. 8. 5. 6.
Loans and 7 2 7 5 2
Advances 9 1 4 9 3
5 5 5 4 4
5 2 0 4 0
9 7 4 8 3
1 3 3 4 2
7 3 2 9 1
Total 4. 1. 1. 9. 4.
Current 8 8 8 7 6
Assets 0 6 3 6 8
Current 2 1 1 1 1
Liabilities 1 6 6 7 5
6 0 2 2 0
7 1 7 0 9
8. 6. 3. 4. 3.
91
8 2 9 8 4
6 1 4 9 4
. . . . .
0 0 0 0 0
Provisions 0 0 0 0 0
2 1 1 1 1
1 6 6 7 5
6 0 2 2 0
7 1 7 0 9
Total 8. 6. 3. 4. 3.
Current 8 2 9 8 4
Liabilities 6 1 4 9 4
5 5 4 4 3
3 1 8 3 8
7 1 8 1 8
4 3 0 2 1
9 1 4 9 2
NET 5. 5. 7. 4. 1.
CURREN 9 6 8 8 2
T ASSETS 4 5 9 7 4
. . . . .
Misc. 0 0 0 0 0
Expenses 0 0 0 0 0
7 7 6 5 5
4 0 5 8 3
7 8 1 6 5
8 0 1 1 3
TOTAL 3 6 1 2 2
ASSETS( 5. 4. 6. 8. 6.
A+B+C+D 0 8 5 7 4
+E) 7 6 1 1 8
92

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INTRODUCTION OF PRIVATE SECTOR BANK

5. Kotak Mahindra Bank

10. J&K Bank

S. No Private Indian Banks Headquarters Tagline

Private Sector Bank

Introduction to Private Sector Banks in India:

Top 10 Public Sector Banks in India:

1) State Bank of India

This is inarguably the king of the Indian banks. Incorporated in 1955, SBI brags of at

3) Punjab National Bank

4) Central Bank of India

The IDBI Bank was incorporated in 1964. It has its headquarters in Mumbai and is

9) Union Bank of India

Important News Related To Public Sector Banks In India

Repo Rate 6.25%

Reverse Repo Rate 6.00%

Bank Rate 6.50%

Marginal Standing Facility

Cash Reserve Ratio 4.00%

Statutory Liquidity Ratio 19.25%

Andhra Where India

Dena Trusted Family

Indian Your Tech-

Banking For All,

With you all the

UCO Honors Your

Meaning Public Sector Private Sector

ownership lies individuals and

Share in banking 72.9% 19.7%

Customer Base Large Relatively small

Interest rate on High Marginally lower

Promotion Based on Based on merit

Growth Low Comparatively

Job security Always present Purely based on

Credit risk management

Meaning Credit risk management

Objectives of Credit Risk Management

5. Credit Risk Equals Financial Risk

A. Establishing an appropriate credit risk environment

Principle 2: Senior management should have responsibility for implementing the

B. Operating under a sound credit granting process

Principle 4: Banks must operate within sound, well-defined credit-granting criteria.

Principle 6: Banks should have a clearly-established process in place for approving

Principle 7: All extensions of credit must be made on an arm’s-length basis. In

C. Maintaining an appropriate credit administration, measurement

D. Ensuring adequate controls over credit risk

Principle 14: Banks must establish a system of independent, ongoing assessment of

E. The role of supervisors

Types of Risk in Banking

2). Market Risk

a) Interest Rate risk

b). Equity Risk

c). Foreign Exchange Risk

d). Commodity Risk

3). Operational Risk

4). Liquidity Risk

5). Reputational Risk

6). Business Risk

7). Systematic Risk