CREDIT APPRAISALThe process of credit appraisal would begin with the selection of the proponent. It would involve appraising the background of the proponent/management, commercial, technical and financial appraisal. Appraisal of credit facilities would comprise two distinct segments:- Appraising the acceptability of the customer.- Assessment of the customer's credit needs.Both the aspects need to be examined simultaneously at the time of the initial entry of a customer to the Bank as also subsequent periodic renewals.The appraisal would be different in respect of:a) personal loans for consumer durables, houses etc ;b) loans to tiny business enterprises ;c) loans to agriculturists ; and,d) Credit facilities to firms, corporates and others for business/trade/ industry.

DEFINING CREDIT APPRAISALCredit appraisal is a holistic exercise which starts from the time a prospective borrower walks into the branch and culminates in credit delivery and monitoring with the objective of ensuring and maintaining the quality of lending and managing credit risk within acceptable limits. Details of it will be given under the title Credit Policy.DIMENSIONS OF CREDIT APPRAISAL:MANAGEMENT APPRAISALA lot of attention has to be paid to this area, for this is one of the long term factors affecting the business of the concern. Does the management have enough experience in the line? What is its track record? What are the antecedents? Introduced to us by whom? These are some of the questions that need to be answered before we can take up any kind of exposure. TECHNICAL APPRAISALWhat is the status of technology used? Has a prototype been developed of the product? What could be the possible economic life period of the present technology? Is the venture technology feasible?Technical appraisal of the project needs to be carried out for industrial activity proposals beyond the cut-off limits prescribed from time to time. Where technical appraisal is carried out by All India Financial Institutions,

PSU Banks/other leading banks having expertise in the area and the same may be accepted for an appraisal purpose, after subjected to vetting by TAC/TAD.Exemptions from fresh techno-economic appraisal shall be available in the following categories:a) Where appraisal has been carried out by all India Financial Institutions and relevant portion of appraisal note made available for vetting of our TAD / TAC.b) Where appraisal has been carried out by leader of WC consortium and the branch / sanctioning authority observing no serious differences with such appraisal.c) In case of AAA /AA rated accounts with other banks, where our bank proposes to join the consortium and /or sanction limits under multiple banking arrangement for the existing activity of the company/firmd) In case of well conducted existing accounts with credit rating of AAA and AA where only additional working capital limits are sought and diversification of the project is not proposede) In case of well conducted existing accounts with credit rating of AAA and AA term loan requirements upto Rs.10 crores, provided expansion is in the same product line and without change in technology 

COMMERCIAL APPRAISALThe business has to be commercially viable for us to proceed further. Is there enough demand in the market? Is the product accepted in the market? How many substitute products are there? What about entry and exit barriers? Is there scope for further growth?The nature of the product, demand for the same, the existing and perceived competition in the segment, ability of the proponents to withstand the same, government policies governing the industry, etc. need to be taken into consideration. The trade practices in respect of the product should be thoroughly understood.

FINANCIAL APPRAISALDoes the promoter has the capacity to raise finance- both own equity and debt? What are the sources of margin? Will the business generate sufficient funds to service the debt and other stakeholders? Is the capital structure optimal?Thorough scrutiny of the financial aspects of the request needs to be carried

out. Apart from ascertaining the need based character of the limits requested for, the financial health of the proponents, ability to absorb unanticipated financial costs need to be looked into. Ascertaining the need based character of the limits would include scrutiny of the cost of the project, means of financing, financial projections etc. need to be within acceptable parameters for that industries/ activities.Where higher limits are considered, detailed analysis of the financial health would be made and the following ratios computed: i) Current ratioii) Total outside liabilities/equity ratioiii) Profit before interest and taxes/interest ratioiv) Profit before tax/Net sales ratiov) Inventory + receivables/Sales ratiovi) DSCR if the borrower enjoys any term loan with any bank/FI even if no TL is being considered by our bank.Assessment of working capital credit requirements hinges normally on the projected sales and other financial figures.All the above ratios would be compiled for the past two/three years including the latest audited balance sheet. As the ratios would vary from industry to industry, services, trade, etc. it is proposed not to stipulate any particular benchmark for the above ratios. Besides the above factors, Bank need to reckon the exist¬ence, if any, of negative factors that may adversely affect the con-tinued well being of a customer.

ECONOMIC APPRAISALWhat is the breakeven level? Will the business post positive net present value through its economic life? What is the level of cost /benefit? What is the Internal Rate of Return (IRR)? Will the cost of funding and operations be well below the IRR?As a prudent Banker the following areas need to be particularly looked into: CHARACTER- Antecedents-introduced by whom- Is it a takeover account? In which case, what does the status report say? - Background Educational Professional Socio –economic, Political- Initiative and Drive. CAPACITY- Experience in the activity – track record – planning, budgeting and review handling –production capacity - capacity utilization- professional capacity to handle men, material, money and minutes – capacities to handle contingencies and crises. CAPITAL

- Extent of stake in business- Ability to raise finance – both owned equity and debt- Ability to inspire and sustain investor confidence- Ability to absorb losses – expected and unexpected- Structuring and budgeting capital.

CONDITION- Condition of economy – growing, stagnant or depressed- Numbers of competitors- Substitutes in the market- Demand vs. Supply- Government policies and regulations- Status of technology- Availability of manpower, material other resources- Pollution control and effluent treatment COLLATERAL- Risk perception and evaluation- Financial parameters• Debt/equity ratio• Asset Cover• Interest Cover• DSCR- Availability, suitability and chargeability of security –MAST principle CASH FLOW- Pattern of cash generation- Liquidity risk- Break-even analysis• DCF Technique• NPV• IRR• PV IndexSTAGES OF CREDIT APPRAISAL

1. Interview with the proponent and obtention of application on Bank’s prescribed format.2. Adherence of KYC norms stipulated by Reserve Bank of India.3. Obtention and verification of documents/financial statements according to type of credit facility/ies required as per Bank’s norms4. Inspection: Pre sanction Inspection is done by Bank’s Officials viz. inspection of borrower’s residence, making inquiries from his area and

collect market reports, inspection of proposed principal and collateral securities. In case of mortgage of property proposed, a search report is obtained from Bank’s approved advocate for last 30 years regarding non-encumbrance of the property, dues on the property, and genuineness of title, peaceful possession and marketability of property. To ensure the market and distress sale value of the property, Valuation report of the property is also needed from Bank’s approved Architect.5. Preparation of credit proposal: The credit proposal contains the complete information about the proponent’s background, appraisal of financial & managerial status, technical and economic viability of the activity and future prospects. Financial analysis is exercised to justify the required financial assistance/ to arrive maximum permissible finance as per Bank’s norms. This Financial analysis is done according to Bank’s/RBI norms for different kind of facility/ies. In specified cases SWOT analysis (strength, weakness, opportunity and threats) is also done for the proponent’s and Bank’s financial safeguard. It is responsibility of the processing officer to mention all the facts relating to proponent, his/their financials, security proposed and all the terms and conditions.6. Sanction of credit proposal: The sanctioning authority goes through the credit proposal and it is his responsibility to ascertain the facts of the proposal. If needed he himself make physical inspection and change/modify the terms and conditions and finally give sanction within stipulated time frame of the scheme.7. A sanction letter is given to the proponent. The sanction letter contains the type and size of facility and margin stipulated with all terms and conditions including rate of interest and charges, Insurance of the proposed security and periodicity of inspections etc. which is duly acknowledged by the proponent/s.8. If the proponent agrees the terms and conditions stipulated by the bank, he/authorized persons have to execute the security documents before the Bank’s authorized officer and finally the account is opened to disburse the facility.9. After disbursement post sanction inspections are carried out by the Bank’s official from time to time (as stipulated per terms of sanction) to ascertain the utilization of funds, for safeguard of the advance and Bank’s interest in the security.

PROCESS OF CREDIT APPRAISALGeneralThe process of credit appraisal would begin with the selection of the proponent. It would involve appraising the background of the proponent/management, commercial, technical and financial appraisal. Appraisal of credit facilities would comprise two distinct segments:- Appraising the acceptability of the customer.- Assessment of the customer's credit needs.Both the aspects need to be examined simultaneously at the time of the initial entry of a customer to the Bank as also subsequent periodic renewals.The appraisal would be different in respect of:a personal loans for consumer durables, houses etc ;b loans to tiny business enterprises ;c loans to agriculturists ; and,d Credit facilities to firms, corporates and others for business/trade/ industry.

Background of the proponent/managementThe identification of the borrower needs to be done properly through scrutiny of his antecedents, experience, competence, integrity, initiative etc. This may be done by obtaining status reports from previous bankers or meaningful assessment of his dealings with bank. In case of corporates, the management structure, the background of the top management, needs to be scrutinised. Bank should be careful if the names of prospective borrowers/promoters appear in the list of defaulters published by RBI/ ECGC etc or in any other list of undesirable customers. 

Wilful defaultersIn case of borrowers/promoters who have been identified as wilful defaulters by banks and advised by RBI, there are certain penal provisions applicable. Credit facilities may not be denied to any constituent merely on the ground that their directors (Nominee of Professional) not connected with the day to day management are appearing on the defaulters list of RBI. However, discrete enquiries may be made about their existing status with the defaulting company. Additionally, it should be ensured that directors of the

borrowing company should not have been disqualified due to provisions of Section 274(g) of Companies Act.

Commercial appraisalThe nature of the product, demand for the same, the existing and perceived competition in the segment, ability of the proponents to withstand the same, government policies governing the industry, etc. need to be taken into consideration. 

Technical appraisalTechnical appraisal of the project needs to be carried out for industrial activity proposals beyond the cut-off limits prescribed from time to time. Such appraisal may be carried out in-house by officers having the technical expertise for the same or by an outside agency as determined by the appropriate authority. Where technical appraisal is carried out by All India Financial Institutions. PSU Banks/other leading banks having expertise in the area and the same may be accepted for an appraisal purposeExemptions from fresh techno-economic appraisal shall be available in the following categories :a Where appraisal has been carried out by all India Financial Institutions and relevant portion of appraisal note made available for vetting of our TAD / TAC.

b Where appraisal has been carried out by leader of WC consortium (in respect of accounts where our Bank is to have only WC exposure) and the branch / sanctioning authority observing no serious differences with such appraisal.

c In case of AAA /AA rated accounts with other banks, where our bank proposes to join the consortium and /or sanction limits under multiple banking arrangement for the existing activity of the company/firmSanctioning authorities may however stipulate, if so desired, techno economic appraisals for any specific reasons in the exempted categories also upon recording such reasons

Financial appraisalThorough scrutiny of the financial aspects of the request needs to be carried out. Apart from ascertaining the need based character of the limits requested for, the financial health of the proponents, ability to absorb unanticipated financial costs need to be looked into. Ascertaining the need

based character of the limits would include scrutiny of the cost of the project, means of financing, financial projections etc. Where higher limits are considered, detailed analysis of the financial health would be made and the following ratios computed: a Current ratiob Total outside liabilities/equity ratioc Profit before interest and taxes/interest ratiod Profit before tax/Net sales ratioe Inventory + receivables/Sales ratiof DSCR if the borrower enjoys any term loan with any bank/FI even if no TL is being considered by our bank.

Appraisal of PSUs and Govt. CorporationsPSUs and Government Corporations are sought after targets for credit off take because of their inherent strength like the skilled managerial and technical manpower pool in their fold, their strategic locations, their knowledge of their field of operation etc. However, it is generally seen that the latest financials are not available since their Balance Sheets need the nod of the Parliament or legislative assembly and are usually delayed by more than a year. In such cases, provisional figures may be accepted in place of Audited Balance Sheet for a period up to two years.

Information to be obtained from the borrowersBank need to obtain all information necessary for a sound credit decision an indicative check list of documents to be obtained is given in the annexure II. At times some of the information required may not be forthcoming immediately from some borrowers due to many factors. In such cases a view may be taken without the said information and comments noted in the proposal.

CREDIT POLICYLending is banking industry’s 'dharma'. In reconfirmation Bank has adopted the policy Mission & Vision statements.Over the years credit priorities of Bank of India have undergone changes to cope with the environmental changes, tap the available opportunities, achieve their commercial objectives, fulfill social obligations and adhere to

mandatory directed lending norms. The policies adopted towards this end have stood the test of time and have been operating at both formal and informal levels.This has resulted in their following below-mentioned credit priorities concurrentlyi) Maintenance of asset quality;ii) Maintaining growth and reasonable risk adjusted returns on credit exposures;iii) Retaining/improving our market share;iv) Thrust on priority sector lending with focus on direct agriculture credit, retail advances SME segment and export credit.With the ushering in an era of liberalization in the economy, new opportunities are available and for a Bank of this size it is important that it realizes its market share through better understanding of these developments. In view of the fast changing needs of customers, the Bank has to have an open ended policy so as to foray into hitherto unfocussed assets.Asset quality priority would dictate a credit culture which is value driven and would have a conservative risk strategy. Market share philosophy will be more volume driven and would have a more aggressive credit risk strategyThe Bank would be concerned with the purpose for which the credit exposure - both fund based and non-fund based is to be utilized. While sanctioning any credit exposure, it should be ensured that the purpose for which the exposure is taken is an approved one. The Bank has over the years, designed and adopted the Best Practices Code which is enshrined in the Manual of Instructions that are amended from time to time. This, in effect, represents the Bank's Philosophy towards effective corporate governance.

COVERAGEThis Policy would govern all credit and credit related exposures, Fund based as well as Non-Fund based. These would include short term, medium term and long term fund based facilities, as also Letters of Credit, Guarantees, Acceptances, etc., exposures in the foreign exchange market and exposures in financial derivatives when these are introduced in the Indian market. It would also be applicable to the Bank’s investments in Commercial Paper. The main features of the Policy would also apply to financial lease facilities, factoring and forfeiting facilities that may be granted by the Bank

CLIENTELE

Bank being one of the largest public sectors Banks is required to service a varied clientele having diverse requirements. This include lending to the poorest of the poor under DRI (differential rate of interest) lending, other priority sector lending, individuals, partnership firms, associates of persons, corporate, trusts, large business houses and groups, undertakings owned by Central/State Governments, etc. In respect of priority sector lending there are laid down parameters. In respect of the others it would be the endeavor with credit rating of ‘AA’ (LC3 to LC4) and above. To ensure that the overall quality of the Bank's credit exposure is good, it is desirable that a major portion of the portfolio is in respect of customers (having exposure of Rs. 1 crore and above) enjoying good health i.e. risk rating not below “A”. This may be reviewed annually.  Emphasis on retail advances such as personal loans, education loans, housing loans, mortgage loans etc. is expected to result not only in better interest spread but is also expected to improve the overall quality of credit.  Small & Medium Enterprises (SME) Sector constitutes the growth engine of the economy. With the Services sector dominating the SME and MNCs outsourcing their various requirements to Indian service providers, there is tremendous scope for SME finance. Accordingly, Bank decided to give increased thrust for lending to SMEs. There is a separate policy for financing SMEs.

MARKETINGIt is proposed that Bank should gradually move over to the system of marketing credit by an exclusive team trained for this purpose. It is proposed to cover the top 50/100 locations (cities, towns, etc.) which account for about 80% of the Bank's business. Further, separate teams may be chosen for marketing corporate products and retail products. The function of marketing team will continue till obtention and provision of adequate data, providing indicative inputs on interest rates, charges, securities, submission of proposals, etc.

Credit Delivery through Bank's branchesThe Bank may adopt a segmented approach to deliver credit through specialized/specially identified branches, in order to develop a focused approach that will develop credit appraisal skills for speedy credit decisions and disposal of credit, as given below:

C & P Branches : These branches will dispense loan against fixed deposits and other paper securities and personal loans. 

Housing & Personal Finance Branches: Housing Finance and Consumer Loans.

SME Branches: SME branches are required to cater to the credit requirements of SME segment in these centres while continuing extending other advances. Agri-Hi-Tech Branches: Hi-Tech Agriculture projects, large volume agriculture businesses.Main Branches in cities/towns: Trade finance, small and medium enterprises – working capital, term loan requirements.Corporate Banking Branches: Large Corporate Branches may be established in various cities to cater to the specific credit requirements of Corporates. Mid Corporate branches may also be established for providing focus on this segment. These branches will cater to the needs of borrowers with total limits (Fund based + Non-Fund Based) of more than Rs.25 crores

CREDIT THRUST Priority Sector Lending• The Bank has traditionally been proactively involved in aggressively

lending to the priority sector to fulfill the social obligations enjoined upon the nationalised sector. Presently the same being as follows : The priority sector target of 40% of net Bank credit. Exposure to agriculture not less than 18% of net Bank credit and direct finance to agriculture should not be less than 13.5% of Net Bank credit. Exposure to weaker section not less than 10% of net Bank credit. Export credit target of 12% of net Bank credit. DRI not less than 1% of the previous year's total advances. Housing loan targets set by RBI from time to time, presently 3% of the incremental deposits of the previous year.• The Bank has in place well laid out policies giving the entire gamut of Priority Sector Lending including thrust areas, strategies to be adopted etc. which are reviewed and revised periodically depending upon the market scenario.• However, to ensure that the lead established by the Bank in this area is maintained and to continuously garner viable business under this head, with minimum additional burden on staff cost, the following areas are identified as thrust areas:- Maintain/achieve targets laid down for financing agriculture under special Agricultural Credit Plan. - Innovative/area based schemes; contract farming schemes may be developed to give thrust to improve agricultural lending.- Bank may involve Micro Finance Institutions and NGOs so as to cover large number of SHGs from weaker sections more particularly women from SC/ST communities, tenant farmers, share croppers, oral lessees etc.,

Lending in addition to Priority Sector• Bank’s credit priorities would be also determined by the market realities, which arei) Currently price driven wherein the corporates have shed their traditional alignment with the bankers merely due to past connections.ii) Changed conditions in money supply resulting in the availability of cheaper credit.iii) Multiple Bank financing in place of consortium lending..

Low Priority/Negative List• New industries not belonging to the following list can be considered for Bank finance. The following industries may not be financed at all : Industries consuming/producing ozone depleting substances like Chlorofluoro Carbon (CFC–11, CFC–12), CFC–113 Carbon Tetrachloride,

Methyl Chloroform, Halons – 1211, 1301, 2402.  Sugar industries in the co-operative sector should not be financed 

CREDIT DELIVERYTypes Of FacilitiesThe types of facilities would comprise of Term Loans, Demand Loans, Overdrafts, Cash Credits, WCDL, Advances against Bills (both DP/DA) with/without L.C., Channel Credit, Invoice Discounting/financing, Discounting of future cash flows/rent receivables and Line of Credit, L/Cs, Guarantees, Acceptance facilities, CPs, Cash Management Services etc.

Modes for delivery of Credit facilitiesThe credit requirements may be dispensed by any one of following modes -A) Sole Banking Arrangements;B) Multiple Banking;C) Consortium Lending; D) Syndication

Sole Banking: Where all the credit needs of a borrowing unit are met by a single Bank. A single bank carries disproportionate risk when it finances huge amount. Smaller banks cannot finance huge sums. It may not have appraising skills. ‘AAA’ & ‘AA’ Borrowers’ accounts can be taken over subject to exposure ceiling A-rated borrowers in the normal course.Multiple Banking: Where the credit needs of different divisions of a borrowing company are met independently by different banks without any formal Agreement/Arrangement amongst them. They are - Credit discipline is in jeopardy, good accounts are snatched away, recovery becomes difficult.There is a ceiling. Consortium Lending: The entire credit needs of a borrowing unit are financed by a group of banks by forming a consortium. It is a concept to promote collective application of banking resources.Syndication: A syndicated credit is an arrangement between two or more lending institutions to provide a credit facility using common loan documentation. Bank will encourage financing under such arrangements. Bank will also act as syndication leader whenever such opportunity is spotted.

With globalisation/liberalisation and infrastructure development, Indian industry requires large sums and syndication is the answer.In syndication, one bank, generally called Lead Manager/Syndicator, arranges a group of banks to form a syndicate and this syndicate provides credit facilities to a borrower, using common loan documentation.

COLLATERAL AND MARGIN NORMSCollateral NormThe Bank would prefer to have its credit exposures backed by tangible security, either primary or collateral, to the full extent of the liability. Wherever such security is not available for any reason, the concerned sanctioning authority would have to satisfy itself on the need for waiving par¬tially or fully such tangible security. In any case, the assets created out of the Bank's credit exposure should, as a general rule, be charged to the Bank by way of first charge on sole/pari passu basis.Bank may consider obtaining collateral security where the primary security is inadequate or for any other valid reasons like weak financials, risky ventures, untested projects/products, and sunrise industries, etc. where primary security has limited market. Whilst considering collateral security, Bank should also explore possibility of obtaining 1st/2nd charge on block assets to cover working capital limits/all other facilities cash and cash like securities like Bank's Term Deposits, government securities, shares, debentures, commercial real estate, residential real estate, etc. Such security of Standby Letter of Credit or guarantees will be acceptable to the bank subject to stipulation that such standby Letters of Credit or guarantees are from Prime Banks. In certain instances of participation in takeover or sale of assets where residual guarantees are remaining while the securities are taken over by the bank, the bank will be required to issue or accept guarantee to/from the Bank in respect of the residual guarantee outstanding. This policy recognises that the collateral securities are a secondary source of repayment of the credit facilities. To this end, a periodical assessment of the condition of the collateral security/(ies) and its/their value shall be undertaken minimum once in say three years and more frequently, if need

be.Margin NormsIn order to ensure continued interest of the borrowers/promoters in the enterprise it is always desirable that appropriate contribution by way of margin is brought in by them. For special schemes like Artisan credit card and Priyadarshini schemes the board approved special margin norms will be applicable.Fund based limits : In case of funded limits, the amount of margin requirements may be decided taking into account the purpose of the advance, size of the limit, the nature of the facility, the experience of the promoters, the risk perception, etc. Generally margin would be in the range of 15% to 50%. Non-fund based limits: In case of non-funded limits we may generally consider a minimum margin of 20%. In case of lending against certain categories of securities, like commodities falling within the purview of Selective Credit Control, directives of RBI, the specific margins prescribed are to be adhered to (presently buffer stocks of sugar and unreleased stocks of sugar with sugar mills representing levy sugar are under Selective Credit Control).

STATUTORY RESTRICTION FOR LOANS AND ADVANCES

1. Statutory Restrictions 

1.1 Advances against bank’s Own Shares: 1.2 Advances to bank’s Directors 1.3 Restrictions on Holding Shares in Companies 1.4 Restrictions on Credit to Companies for Buy-Back of their Securities

2. Regulatory Restrictions 

2.1 Granting loans and advances to relatives of Directors 2.2 Restrictions on Grant of Loans and Advances to Officers and the Relatives of Senior Officers of Banks 2.3 Restrictions on Grant of Financial Assistance to Industries

Producing/Consuming Ozone Depleting Substances (ODS) 2.4 Restrictions on Advances against Sensitive Commodities under Selective Credit Control (SCC)

3.Restrictions on other loans and advances 3.1 Loans and advances against Shares, Debentures and Bonds 3.2 Advances against Money Market Mutual Funds 3.3 Advances against Fixed Deposits Receipts issued by Other Banks 3.4 Advances to Agents/Intermediaries for Deposits Mobilisation 3.5 Loans against Certificate of Deposits (CDs) 3.6 Bank Finance to Non-Bank Financial Companies (NBFCs) 3.7 Bank Finance to Equipment Leasing Companies 3.8 Bank Finance for Purchase/Lease of Existing Assets 3.9 Financing of Infrastructure/Housing Projects 3.10 Issue of Bank Guarantees in favour of financial institutions 3.11 Discounting/rediscounting of bills by banks 3.12 Advances against gold/silver bullion 3.13 Loans and advances to Small Scale Industries 3.14 Loan system for delivery of Bank Credit 3.15 Working Capital Finance to Information Technology and Software Industry

SELECTIVE CREDIT CONTROL1. The banks should not allow the customers dealing in Selective Credit Control commodities any credit facilities which would directly or indirectly defeat the purpose of the directive2. Although advances against security of or by way of purchase of demand documentary bills drawn in connection with the movement of the Selective Credit Control commodities are exempted, the bank should ensure that the bills offered have arisen out of actual movement of goods by verifying the

relative invoices as also the receipts issued by transport operators, etc.3. Priority sector advances are also covered by/under Selective Credit Control directives.4. The banks are free to determine the rate of interest in respect of advances covered under Selective Credit Control directives.5. The banks should refer to the directives on Selective Credit Control measures issued by RBI from time to time.

Restrictions on financing NBFCsThere are certain restrictions on financing NBFCs. These include discounting/rediscounting of bills (except that arising from sale of commercial vehicles), investments made in shares, in sister concerns, etc. and grant of Bridge Loans.Banned ArticlesNo loans are to be sanctioned for the purpose of dealing in/against the security of any banned articles including articles Possession / production of which is banned under Wild Life Protection Act, 1972

FAIR LENDING PRACTICES CODEBank of India being one of the leading PSU Bank has introduced the Code of Fair Banking Practices for domestic branches. This code sets out the standards of fair banking practices which shall be observed by domestic branches in bank’s relations with all borrower-customers. The code is put in place to promote fair banking practices, though this is not a legal document creating rights and obligations for both the Bank and the borrower-customers. This helps, the bank’s existing and prospective borrower customers, in understanding the standard of behaviour which they can expect from our staff at the domestic branches. This code is applicable to all our borrower-customers excepting those who have/propose to have facilities against Bank’s own Term Deposit receipts, shares and securities, Govt. Bonds, NSCs, KVPs, IVPs, Units of UTI, LIC Policies are other such paper securities.Bank of India declares and undertakes:- To provide professional, efficient, courteous, diligent and speedy services in the matter of lending. Not to discriminate on the basis of religion, caste, sex, descent or any of them. To be fair and honest in advertisement and marketing of Loan Products. To provide customers with accurate and timely disclosure of terms, costs, rights and liabilities as regards loan transactions.

To attempt in good faith to resolve any disputes or differences with customers by setting up complaint redressal cells within the organisations. To comply with all the regulatory requirements in good faith. To spread general awareness about potential risks in contracting loans and encourage customers to take independent financial advice and not act only on representation from banks.FAIR PRACTICES

Product InformationA prospective customer would be given all the necessary information about the product needed by the customer.The loan application would be acknowledged outlining the time frame within which the Bank would convey its decision.All the information requirements of the Bank for considering loan applicable would be discussed and shortfalls if any would be communicated to the applicant within a maximum period of 10 days.

Sanctions:-Loan application forms and Draft documents or such other papers shall contain all the terms and conditions relating to the product.

Account Practices:-Bank would provide regular statement of accounts, unless not found necessary by the customers.

Grievance Redressal:-Bank has already put in place a grievance redressal mechanism where customer’s complaints and suggestions are deliberated and acted on. Any aggrieved customer can refer his/her complaint to the Branch concerned and if the complaint remains unresolved he/she may demand for the complaint book which and obtain an acknowledgment immediately.The complaint would be looked into and all endeavours would be made to resolve the same or give a suitable reply within a reasonable period of say 3 weeks.

CREDIT INFORMATION BUREAU (India) LTD.(CIBIL)CIBIL - India's first credit information bureau- is a repository of information, which contains the credit history of commercial and consumer borrowers. CIBIL's equity was held by State Bank of India, Housing Development Finance Corporation Limited, Dun & Bradstreet Information Services India Private Limited and Trans Union International Inc. The shareholding pattern was in

the proportion of 40:40:10:10 respectively.CIBIL is a composite Credit Bureau, which caters to both commercial and consumer segments. The Consumer Credit Bureau covers credit availed by individuals while the Commercial Credit Bureau covers credit availed by non-individuals such as partnership firms, proprietary concerns, private and public limited companies, etc.Banks, Financial Institutions, State Financial Corporations, Non-Banking Financial Companies, Housing Finance Companies and Credit Card Companies are Members of CIBIL.A Credit Information Report (CIR) is a factual record of a borrower's credit payment history compiled from information received from different credit grantors. Its purpose is to help credit grantors make informed lending decisions - quickly and objectively.Encryption is technique used to mask proprietary information in order to prevent it from being accessed by unauthorized individuals. Only authorized individuals who have been provided with the appropriate decoding software can unscramble the information. Thus, encrypted information that our Members provide us with is extremely secure.

RISK PERCEPTION IN LARGE CREDITS

Common sources for Major Credit Problems Concentrations Credit Process Issues Market & Liquidity - Sensitive Credit Exposures

Problems in Credit AdministrationPre-sanction Stage Lack of a proper understanding of customers’ needs. Caution against unbridled takeovers Proposals formats vary  Audited balance sheet – Rs.10 lakhs and above – Balance Sheet is not studied to compare. Valuation of Collaterals

Risk Perception – 3 steps Identify Quantify

Mitigate & Manage

Risk categories Minimum Moderate Average Acceptable Marginally Acceptable Very High Risk Non Acceptable

TypesFinancial Risks – Transaction, Economic & TranslationCustomer RiskMarket Risk Liquidity Risk Counter party (credit risk) Political/country risk – cross border transactions Currency/Exchange Rate Risk Contingency RiskInterest Rate Risk Operational Risk – Legal, Jurisdictional, Litigation & Documentation 

RISK PERCEPTION IN LARGE CREDITSRaw Materials: Prices, Sources, Quality, War 

Finished Goods: Level - Interest Costs Stock Quality Determination Stock Quality Deterioration Stock Quantity Determination Insurance Change in customers, technology.

Technology: Obsolescence, Competing different areas, Demand and Supply.

Financial Risks: Diversion of funds Group companies’ investments

Stock Market/Real Estate Personal consumption Project expansion/Finance

Management Risk:ContinuityAbilityCommitmentFly by night operatorsExpansion into non-core activities – Unrelated diversification.

Market Risk:Mismatch between repricing of asset & liability funding.Liquidity Risk Repricing Risk 

Risk Management StepsA) MIS for monitoring & ControlInternal control Periodic ReportingReporting of violations to Senior ManagementSeparation of monitoring function from operational area Top Management Involvement/ prioritising.

B) Rating ModelFinancial parametersIndustry related parametersManagement related parametersOperations related parameters 

CREDIT RISK ANALYSISAnalysis of the Borrower: Proper analysis of the borrower is necessary as Bank should make proper enquiry about the borrower by physical inspection, market reports and through available other resources. Bank should try to know the antecedents of the borrowers, his financial status and liabilities should be verified. Bank should ensure that the borrower is not a defaulter of any other Bank or Financial institution.

Availability of security: Bank should try to obtain adequate security for safeguard of the proposed advance. Paper security should be preferred as it can easily be liquidated than any other security. Bank should be more cautious in case of mortgage of property. Bank should ensure the title, peaceful possession, marketability, valuation and non-encumbrance over the property. Proper search from the office of Registrar and Revenue department should be made.Collateral free advances: There is a great risk while providing collateral free credit, so Bank should be more cautious in these cases. In these cases Bank should ask for third party guarantee having sufficient worth and should have proper analysis especially regarding future aspects of the project.Government sponsored schemes: More risk is involved in the government sponsored schemes as these schemes are generally exempted from collateral security and third party guarantee. In these cases Bank should have more caution as mentioned in above para.Remedies to recover advances: In case of default/inability of the borrower to pay the dues Bank has the following options to recover the dues:1. Liquidation/set off of paper security by giving proper notice2. Filing Recovery Certificate with District authorities in case of Govt. sponsored advances.3. Enforcement of mortgaged property under SARFAESI Act.4. Filing Suit in Civil Court of Debt Recovery Tribunal5. Taking services of Asset Recovery companies/ Recovery AgentsRegular and proper follow up: Regular and proper follow up is required in case of all advances. In case of advances under Government sponsored schemes and collateral free advances vigorous follow up should be done as these advances are more prone to risk.Competent staff in credit department: The Bank should assign this work to the staff having proper knowledge of Bank’s norms and provision of law. Staff having experience should be preferred. Assistance of local staff can be taken at initial stage.

CREDIT RATINGBased on changing scenario and the need to factor certain vital parameters like Market Risk, Industry Risk, Management Risk, etc. so that important elements of the rating process are given sufficient attention , a new rating model has been evolved. Even though the main purpose of the rating system is to decide on “risk”, credit rating is also used to ‘price the product’ in a scientific and transparent manner. Hence, apart from analyzing the various risks, due weightage has been given to factors such as volume of business, share of ancillary business, length of relationship with the bank , threat of loss of business due to competition , overall image / reputation of the customer/group , etc., to decide the pricing.

CREDIT RISK - MEASUREMENT & MANAGEMENTIn the global context, the concept of risk management in bank lending has become a routine affair though it is still to catch up in the Indian market. Of all the risks banks encounter in their intermediation processes, credit risk poses greater threat to their vulnerability & sustainability.Credit risk arises from the likelihood of borrowers’ inability to meet payment obligations. Credit risk has got two distinct facets:• risk from the macro credit portfolio management perspective; and• risk inherent in the individual loan account.

Determinants of credit risk:The word ‘risk’ is it at corporate level or at branch level refers to the variability of expected return. The variability could be either due to non-fructification of expected cash flows or rejection of the product by the market. Here again, the failure to honour the commitments of repayment could arise from:• economic and business risk• industry risk; and• firm level risk.

• Economic & Business/Industry Risk:Economic risks are more influenced by factors like Government policies - monetary and fiscal measures, investment climate, political happenings,

incentives in the form of tax exemptions, changes in import tariffs, etc.Business/industry risk is also external in nature to the assisted unit. Factors like state of economy, natural calamities, business cycles, industrial recession, excess capacity creation in anticipation of increase in demand, newer and cheaper products replacing the existing one, technology getting obsolete/replaced by cheaper and more effective techniques affect the functioning of the assisted unit, which in turn, inflicts financial damage to the bank• Firm-level Risk: The firm-level risk can be segregated into: Financial risk, Fiduciary risk (off balance sheet items), Default risk

Credit Risk EvaluationEconomic and industry risks being more of a macro level perception influenced by events external to the assisted unit as well as the banks, needs to be managed at the corporate level by undertaking continuous research into various government policies, general economy of the country, industry profile, etc.  At Corporate level:Credit risk at corporate level is bound to vary between 0 and 1. It means if the entire loan portfolio is NPA, the risk is 1. On the contrary if there is no NPA, risk is 0. Possible risk factor index of a bank’s loan portfolio can be worked out as under:Risk Factor Index (RFI) of Loan portfolio at a given time =Cumulative Int. Suspense (k) = cumulative provisions (t) + cumulative write off (t)Outstanding loans (t) + cumulative write off (t)Here as the denominator being the gross outstanding loans, the RFI will always be more than zero but less than 1. This index can aid management in keeping risk element at an acceptable level.

SCORING MODEL

ASPECT RATING RANGE REMARKSIndustry Risk 10-0 ProspectsManagerial Competence 30.0 BOD, Structure, CEOCommercial Aspects 20-0 Growth, DemandTechnical Strength 15-0 Location, TechnologyProfitability 10-0 ROI, ROSGearing 5-0 NW. Outside LiabilitiesLiquidity 5-0 CR, DT, CTGrowth 5-0 Production & Sales

Based on the score obtained, the units are classified into - Low Risk 90-100 Moderate Risk 75- 90 Average Risk 50- 75 High Risk 30- 50 Very High Risk 0- 30

RESEARCH METHODOLGYPROJECT TITLEThe present project undertaken by me bears the title, “Credit Apparaisal of Bank of India”.

STUDY OBJECTIVETo study “Credit Apparaisal Process With Special Reference To Bank of India”.

Research methodology is a way to systematically solve the research problem. It may be understood as a science of studying how research is done scientifically. In this we understand the steps taken for research and the logics behind them.It is necessary for a researcher to design a methodology for a problem. Because there would be different kinds of problems and there would be different methods for solving those problems, so the researcher should know what methods should be used and the logics behind them. When we study research methodology concerning a research problem or study, a number of questions are answered.First the problem was defined, depending upon the problems to be dealt objectives were laid down. To get the answers of each objective, a

questionnaire was formulated which had close ended questions.

RESEARCH DESIGNA research design is the framework or plan for a study which is used as a guide in collecting and analyzing the data collected. It is the blueprint that is followed in completing the study. The basic objective of research cannot be attained without a proper research design. It specifies the methods and procedures for acquiring the information needed to conduct the research effectively. It is the overall operational pattern of the project that stipulates what information needs to be collected, from which sources and by what methods.

Research Type: ExploratoryIt aims at understanding the topic being researched and defining the identified problem, which involves evaluating the existing studies on the related topic, discussing the problem with experts, analyzing the situation etc. This would also involve gathering the detailed knowledge about the customers and the products and services provided by the organization.

SAMPLE DESIGNSampling refers to the method of selecting a sample from a given universe with a view to draw conclusions about that universe. A sample is a representative of the universe selected for study. Sampling design is a definite plan for obtaining a sample from a given population. It refers to the technique or the procedure the researcher would adopt in selecting items for the sample. Sample design is determined before data are collected. There are many sample designs from which a researcher can choose.Types of Sampling DesignThere are basically two types of sampling designs. Those are following:• Probability Sampling: Probability sampling is also known as Random Sampling or Chance Sampling. Under this sampling design every item of the universe has an equal chance of inclusion. It may also be called a Lottery Method in which individual units are picked up from the whole group not deliberately but some mechanical process.• Non-Probability Sampling: Non-probability sampling is not that sampling procedure which does not afford any basis for estimating the probability that each item in the population has of being included in sample. Non-probability is also known as Deliberate Sampling, Purposive Sampling or Judgmental Sampling. In this type of sampling items for researcher selects the sample

deliberately; his choice concerning the items remain supreme. In other words under non probability sampling the organizer of the inquiry purposively choose the particular units of the universe for constituting a sample on the basis that the small mass that they so select out of a huge one will be typical or representative of the whole. The judgment of the organizer of the study plays an important part in this sampling design.• SAMPLING TECHNIQUE:Convenience sampling is used in exploratory research where the researcher is interested in getting an inexpensive approximation of truth. As the name implies, the sample is selected because they are convenient. This non probability method is often used during preliminary research efforts to get a gross estimate of the results, without incurring the cost or time required to select a random sample.Initially, a rough draft was prepared keeping in mind the objective of the research. A pilot study was done in order to know the accuracy of the Questionnaire. The final Questionnaire was arrived only after certain important changes were done. Thus my sampling came out to be judgmental and convenient.

• SAMPLE SIZE: The sample size was restricted to only 200, due to time constraints.

• SAMPLE UNIT:The respondents who were asked to fill out questionnaires are the sampling units. These comprises of people from different regions of Allahabad.

• SAMPLE SELECTION: 

It is done by simple, random and convenience method.

• SAMPLING AREA:The area of the research was Allahabad, India.

• PLAN OF ANALYSIS:Tables were used for the analysis of the collected data. The data is neatly presented with the help of statistical tools such as graphs and pie charts. Percentages and averages have also been used to represent data clearly and effectively. 

DATA COLLECTIONThe two types of data collection method used in my research work are- Primary Data and Secondary Data. Secondary Data: Any data which has been gathered earlier for some other purpose, are secondary data in the hands of the researcher.Sources of Secondary DataAll marketing researchers can tap two sources of data for investigation: internal sources and external sources. Facts and figures are the raw materials with which the researcher works.Internal sources are the company’s own records, registers, documents, etc. Sales record and invoices provide valuable information.Researcher starts with internal data which are inexpensive to collect. The primary or explorative phase of research usually taps the internal sources first.There are numerous sources of secondary data. Each year, the quantity of secondary source material expands at tremendous rate. The sources of secondary data are:• Published surveys of Bank of India;• Books related to topics;• Government publications and reports;• All advertising media, particularly newspapers, magazines, trade journals;• Trade associations and other technical and professional groups; specialised research and foundation organizations;• Specialized market intelligence service, such as advertising agencies, market research firms, stock exchanges, commodity exchanges, banks;• Internal sources, such as customer complaints, and other company records and registers.

Primary Data: Those data, which are collected at first hand either by researcher or by someone else especially for the purpose of the study, are known as primary data.The objective should be precise, attainable and economic so that the findings may be accurate, reliable, valid and useful.Sources of Primary DataThe methods of obtaining primary data are:• The survey technique or approach: This includes mail, personal interview or field survey, telephone survey.• Observation approach

Techniques of Data Collection:Research ToolsWe can obtain data either or through observation or through direct communication with respondents in one form or another through personal interviews. This in other words means there are several methods of collecting primary data. The methods I used in my research are:• Interview Method• Questionnaire Method

Interview MethodThe interview method of the marketing and collecting data involves presentation of oral-verbal stimuli and reply in terms of oral-verbal responses.• Personal Interview: A personal interview is face to face communication with the respondents. The interviewer gets in touch with the respondents, asks the questions, and records the answers obtained. It is the interviewer’s responsibility to record the answers either during the interview or after the interview.• Unstructured Direct Interview: The structured questions provide limited answers. Sometimes they give only two alternatives, i.e., yes or no, and I want to know the reason for the fact and the phenomena. Direct questions in this case rarely elicit useful answers diagnose the problems or find motive behind the responses. To overcome these difficulties I adopted Unstructured and Direct Interview. I inquired to the persons openly about the subject.

Questionnaire MethodQuestionnaire was prepared keeping in mind the data to be collected and suitable instructions for filling up the questionnaire were given. Questionnaire was filled by interview as well as by the respondents themselves.

PRETESTFrom practical point of view a small pretest i.e. trying out the questionnaire and field methods on a small scale had to be done, it helped in deciding upon the effective method of asking question due to pretest questionnaire could make more effective. There were some sampling and non sampling errors in this survey.Sampling Errors: Sometime I usually substituted an invariant number of populations. This obviously lead to some bias since the characteristics possessed by the substituted member was usually different from those possessed by the unit originally in the sample.Non Sampling Errors: Following non sampling errors were there-:1. Response Errors: • Prestige Bias: An appeal to the pride or prestige of person interviewed might introduce some bias called Prestige Bias. Due to this he might have increased his bank details.• Self Interest: In order to safeguard one’s self interest the respondent might have given incorrect information about his or her requirements or desire.2. Non Response Bias: In a door to door survey, some of the respondents were unable to furnish the information on all the questions and refuse to answer certain questions.Advantages of Sampling:1. It takes less time.2. Reduces cost of survey.3. Greater accuracy of result.4. It has greater scope because more detailed information can be obtained from a small group of respondents.Limitations of Sampling:1. It required trained and qualified personnel and sophisticated equipments for its planning execution and analysis.2. If information is required for each and every unit of universe, there is no way but to resort to complete enumeration.

QUESTIONNAIRE

The questionnaire is by far the most common instrument, whether administered in person by phone, or online. Questionnaires are very flexible. The form of each question can influence the response.In my research process I made use of the questionnaire. The questions chosen were simple and to the point, covering the relevant points and also keeping in mind the purpose of the project. It covers all the aspects of the project and contains questions about the borrower’s expectations, the credit structure knowledge, competitor’s knowledge, and view of the borrowers regarding what they are looking for in the equipment in the long run.REASONS FOR CHOOSING THE QUESTIONNAIRE AS THE RESEARCH INTRUMENT1. It gives respondent a clear comprehension of the questions.2. It induces the respondent to want to cooperate and trust that the answers will be treated as confidential.3. Stimulates responses through greater introspection, plumbing of memory, or reference to records.4. It gives instructions on what is wanted and the manner of responding. 

ANALYSIS OF SURVEY

The survey was based on semi-structured questionnaire performed taken into consideration the population as the population of Allahabad.Only the urban part is taken into account.Sample size taken is 200.Sample units consisted of students, women, servicemen, business and professionals.Now let us see the analysis of each and every aspect of the survey taken along with some sort of graphical representation wherever necessary. 

AGE DISTRIBUTION:-The average age of all constituents of the sample is 33.88 years with the lowest being 18 years and the highest being 69 years. There are clusters of ages of which a higher percentage is taken than others. Stress is taken on the age between 40-50 years as this is the average age when people are in maximum need of credit for various purposes. Then an average of 2 people is taken for almost all the age group which is working or workable.

GENDER DISTRIBUTION:-The Survey conducted had gender in the ratio 68:32, 68 being male and 32 females. Males are almost double the females which was necessary as in the area where the survey was conducted males still remain the potent force in financial matters as the percentage of working females is considerably less as compared to metropolitan cities.

OCCUPATION:-The 30%of the population is conducting business. They are the people who are in maximum need of credit facility.18% are students. They opt for credit either for their education or for the purchase of two wheelers. 20% of the sample is professional, either indulged in professions like doctor, advocate etc or they are doing service in any private or government companies. They are the ones who avail the credit facility for their personal requirements.There is nobody sitting idle or rather no one accepts that he/she is idle which is a good thing to know. 11% are housewives.

BANK FACILITY:-97% of the people are using one or more bank’s service thereby meaning

that a large population is aware of various services of the bank. 3% people due to reasons like insufficiently small income donot use the bank.

BANK SECTOR:-53% people use public sector bank meaning that people rely more on public sector bank. There are 36% people who use the private sectot bank facility which clearly show that awareness of private sector bank among people is limited but there are scopes that in the coming times more people will use private sector facility. 11% people are there who use both the banks for their purpose.

PUBLIC SECTOR BANK:-Among the people using public sector bank, 46% people are availing the facilities of SBI. This means that there is more awareness among people for this bank. 37% people use the facilities of Bank of India indicating that the interest of people is relatively higher for this bank. 11% people use Punjab National Bank as their bank of trading which clearly indicates that this bank is not so common among the people. There are 6% people who avail facilities of other banks which includes Allahabad Bank, UTI etc.

PRIVATE SECTOR BANK:-The percentage of people doing transaction with private sector bank is less and among the private sector bank HDFC with 43% customers enjoys the maximum customer attention thereby indicating that it is the most relied bank among the private sector bank. This is followed by ICICI Bank which has 24% people for its service. 21% people are having their accounts in Indusind Bank which shows that it still need greater penetration among people.12% people are using other banks as Axis bank, ING Vyasa and HSBC.

BANK AWARENESS:-Asked about the awareness of bank of India, 89% people replied that they are aware of the existence of bank of India. This indicates that it is a popular and a known bank amongst people. 11% of the people said that they donot know anything in regard to Bank of India which means that it need to emphasis more on its advertisement.

SOURCE:-Asked about the source of knowledge about Bank of India, 45% people said that they have an account in the bank meaning that awareness about the bank is there among a large number of population. 36% people replied that they have seen the branch office which indicates that the office is situated at a place which is visited by people very frequently.8% people say that they have seen the advertisement in newspaper indicating that advertisement campaign of the bank need to be intensified. 11% people have known the bank through different source like colleagues, friends and relatives.

CREDIT FACILITY:-42% people said that they have availed the credit facility of Bank of India in the past. So it can be concluded that faith of people is fairly strong for the Bank. 58% people have not availed the credit facility of the Bank which indicates that the bank needs to intensify its approach of credit distribution to make its credit facility more common among the people.

SOURCE OF INSPIRATION:-Family of the credit facility takers accounts for the maximum percentage of inspiration resulting in 69% people. This shows that credit takers take the

help of their family before taking any credit facility of any bank and it also indicate that Bank of India is famous among the families and it is more or less a general choice of families. 15% say that they have taken the help from their colleagues who were already availing this facility. 16% people said that they have taken help from agents and neighbours which describes the extent of the bank’s fame for its credit distribution.

CREDIT REQUIREMENTS:-88% people have never failed to fulfill the credit requirements asked by the bank. This clearly shows that the bank has set its credit requirements keeping in mind the different sectors of people it will target. 6% people said that they once failed to fulfill the credit criteria meaning that a very small percentage of people find it hard to acquire this facility.5% people failed twice and only 1% people failed many times.

STRINGENT CREDIT TERMS:-32% people believe that the credit terms of Bank of India are stringent indicating that the bank follows strict rules while distributing its credit facility and people have to undergo strict norms to avail any such policy. 60% people believe that the level of stringency is as normal as any other bank

and such policy need to be a little tougher so that the bank would avoid default accounts. Some 8% said that they donot have any idea about the level of strictness being followed by the bank as they take it for the normal procedure through which they believe that they have to undergo.

LENIENT CREDIT TERMS OF OTHER BANKS:-Asked whether other banks have more lenient credit terms, 31% people said yes and they believe that bank of India follows strict norms of distributing the credit facility to its customers while other banks donot put so much check on the customers. 49% people said that they disagree with the statement that other banks follow lenient terms on their customers and baleive that other banks pose a more severe chek on the customers as compared to bank of India. 20% people stood in dailema as to whether the credit terms of other banks are lenient or not.

LEVERAGE ON INTEREST RATE:-88% people said that they have been provided leverage on their interest rate in the past due to their payement of interest amount on time. Some said that they have updated their information each year and they have submitted their financial statements on time due to which they have been given leverage of some percent on their rate. 2% people were their who did not receive any leverage which was due to many reasons as late payment of interst amount, non submission of proper documents.

SATISFIED WITH CREDIT FACILITY:-82% people are happy and are enjoying the credit facility of Bank of India. According to them bank has proved to be a boon in solving their major problems related to day to day life and also the bank has helped most of the businessmen in setting their business. 8% people think that the bank should lower down its credit terms and also it should make its credit terms more lenient.

CREDIT FACILITY IN FUTURE:-When asked whether the people would like to have the credit facility of bank of India in their future, 76% people replied that they always look forward to the bank’s help for their problems and are always willing to avail the credit facility as when needed by them. They thereby represent a lot of loyal customers to the bank. Some 24% people said that they would like to experiment regarding the availment of credit in their future. They believe that they should opt for different bank each time. This lot represents unfaithful customers.

CRITICAL ANALYSIS

1. Almost 97% of people (age above 18 and studying or working) of city Allahabad has a bank account (according to my serve).2. Public sector bank is on top in Allahabad.3. In the public sector bank SBI is on top and covers almost 46% of market share (according to my serve).4. In the private sector bank HDFC Bank is on top, every second person, who has more than two bank accounts, has a bank account in HDFC Bank.5. About 89% people know about Bank of India.6. Bank of India is an established bank and covers 37% of market share.7. Almost 45% people have an account in Bank of India and the bank need to spend more money on advertisements and other promotional activities.8. Only 42% people have availed the credit facility of Bank of India. It needs to improve its credit policy to attract more customers.9. Almost 69% people availaing credit facility has been inspired by the family. So the bank needs to promote its credit policy.10. About 88% of the people have always been in position to fulfill the credit requirements of Bank of India.11. 32% people find the credit terms stringent which could lead to negative mouth of word. Bank should incorporate some leniency in its credit policy.12. 31% people believe that other banks have more linient credit policy. This could lead to diversification of customers.13. As many as 88% people believe that they have been provided leverage in their interest rate on account of timely payment of interest amount.14. 82% people are satisfied with the facilities of Bank of India meaning that it has a good hold on its customers.15. Bank of India has a fairly good reputation among its customers but it needs to strengthen its hold on dissatisfied customers.16. Bank of India in Allahabad holds a reputed position among the public sector banks.

INTERVIEWThe interview method of collecting data involves presentation of oral-verbal stimuli and reply in terms of oral-verbal responses. This method can be used through personal interview and, if possible, through telephone interview.In my research process I made use of Personal Interview. The questions were structured and relating to the purpose of the project. The questions asked were according to the already set form and order. It covers all the aspects of the project and contains questions about the borrower’s background; his/her credit liabilities,compitetor’s knowledge.

REASONS FOR CHOOSING INTERVIEW AS METHOD OF DATA COLLECTION1. More and indepth information can be obtained;2. There is greater flexibility under this method as the opportunity to restructure questions is always there;3. Personal information can as well be obtained easily;4. Language of the interview can be adopted to the ablity or educational level of the person interviewed and as such misinterpretations concerning questions can be avoided.

RESULTS AND FINDINGSThe Credit Apparaisal is a holistic exercise which starts from the time a prospective borrower walks into the branch and culminates in credit delivery and monitoring with the objective of ensuring and maintaining the quality of lending and managing credit risk.

All the efforts have been made to potray a close picture of the approach of credit appraisal. The questionnaire and the interview taken gives a clear indication of a general attitude of individuals towards the credit undertaking and their knowledge regarding the terms and conditions of the Bank before they take onto the credit.

Easy Mode Of Credit Payment:- The study made showed that the Credit payment mechanism of the bank is comparatively easier and that is the reason why a large number of people have been attracted towards the bank for this purpose. Also the Bank has tie-ups with different schools and colleges of Allahabad thus making it possible to have maximum interaction with different people. These tie-ups have proved beneficial to the bank as the people working in those colleges and schools prefer Bank of India over other banks.

Hassel Free Paper Work:- Borrowers generally get confused when they see bundles of papers in a simple credit taking process and this make them avoid the process. Bank has been trying to made the credit payment as easier as possible and for this bank make it easier for the common people to understand their terms which means less of paper work for the borrower. Decreasing the amount of paper work has made the bank one of the most sought after banks of the city. 

Interest Rate As Per Defined Norms of RBI:- RBI has defined certain norms and rate of interest for different types of loans. Various banks donot follow those nomrs and try to negotiate with the borrowers on the interest rates. This makes the borrower infidile towards the bank. Bank of India strictly stic to the norms of RBI and hence there is no negotitation between the borrowers and the bank. This activity gives the bank their loyal customers and feeling of people as being cheated is eliminated.

Strict Evaluation Process:-The Bank takes into consideration strict evalution process of the borrower’s account to ascertain that the account should not turn into an NPA Account (Non Performing Assets Account). The larger the number of NPA accounts, the more is the loss of the Bank. For this purpose the Bank officials take a through study of the financial statements of the borrowers and also the

collateral securities are also thoroughly checked.

Credit Payment Below BPLR:-The Bank makes the credit payment below BPLR (Basic Prime Lending Rate) to some where it finds that the borrower is in urgent need and that he or she has been loyal to the Bank in the past. The basic criteria of the Bank states that the borrower should have to have a good past record and that the borrower should fulfill all the criterias of the credit process. 

RECOMMENDATIONS AND SUGGESTIONSIn spite of all the good factors and rating, still the discrepancies remain either in the part of entire company or on the part of a particular office operating in the state of the country. Similarly Bank of India has some problem in which top management should take corrective measures in order to become more effective and efficient in its operation.1. Bank of India being a commercial bank should take into account its various other services and customers. But the Bank has been stressing on its credit giving process only which makes the Bank irresponsible towards its customers who are using its deposit schemes and current schemes.2. The speed of transaction is slower in Bank of India which makes the bank loose its regural customers. The bank should concentrate more on its regular customers to make a better image in the minds of its customers.3. The biggest loop hole in the bank is its recruitment process of its employees. The Bank has large number of older age employees who are slower in their work speed. This makes the work slower when it comes to services of the employees. The employees are non working lot and usually a lot of pending work is kept. This makes the working of the bank cumbersome.4. The higher officials are generally very irresponsible towards their work and due to this the lower staff is also in the habit of ignoring their work. The higher officials should make sure that all the work should be done on time and they should try to enthusias the lower staff and they should work cordially to make the work load easier for their customers.5. The bank has lost its large number of customers due to stict norms followed by the bank in giving credit to its customers. The reason being borrowers try to scape such stringent terms and conditions. This is the prime reason why the bank frequently looses its customers as they find it appropriate to move to some other bank following comparatively easier

norms. The bank in this case should make its policy a little easier for its customers to make them loyal customers of the Bank. 

BENEFITS OF THE CREDIT STRUCTURE OF BANK OF INDIAUpgradation of industries.Bank lends financial support to the customers for the betterment of their livinghood. Eg: Home Loan, Car Loan.Easy mode of assess of the Credit Structure of the Bank of India.

LIMITATIONS IN STUDYING THE CREDIT APPRAISALLack of time.Datas are collected over a brief period of time.The research is confined to a certain parts of Agra and does not necessarily shows a pattern applicable to all of Country. Thus, the study might not produce absolutely accurate results as it was based on a sample taken from the population.Some respondents were reluctant to divulge personal information which can affect the validity of all responses.In a rapidly changing industry, analysis on one day or in one segment can change very quickly. The environmental changes are vital to be considered in order to assimilate the findings.

CONCLUSIONEvery Bank has its own Credit Structure as per their convinence and the norms proposed by their Head Office. But this certainly does not mean that

the basic layout of the Credit Structure changes from Bank to Bank. There are certain rules and regulations as set by RBI which is exemplary for every Bank to follow. The Bank cannot deviate from the already set norms but certain margins can be added or deducted by Bank as per their requirements.As already mentioned Credit Structure is a very wide term which includes in itself several subparts. The first and foremost part of Credit Structure is Credit Appraisal.Credit Appraisal is a holistic approach which starts from the point a prospective borrower enters the Bank and culminates at its taking credit facility. Lending is prime function of Bank which is already mentioned in the starting pages of the report as ‘Dharma’ of Bank. Investigation of a credit proposal is done from the point of the six C’s viz. Character, Capacity, Condition, Collateral and Cash flow.There are various stages of Credit Appraisal. A brief review of those stages is as follows:1) Interview with proponent.2) Adherence of the KYC Norms.3) Verfication of the documents.4) Presanction inspection.5) Preparation of credit proposal.6) Sanction of credit proposal.7) Giving sanction letter to proponent.

The essential functions of a Bank are:1) To accept deposits from the society.2) To lend or invest same for earning profit.

Tranctions relating to these functions are invariably routed through the accounts maintened by customers who may be individuals, joint account holders, HUF, trusts, executors and administrators, agent, attorney, firms, clubs and associations, Ltd. Companies. While establishing relationship with a customer, a Bank has to ensure that prospective customer1) Is legally capable of entering into a valid contract2) Applied to Bank in proper form

The Bank imposes several restrictions in providing loans to Bank’s own Director and his relatives.

Post liberalisation years have been significant pressure on the Banks in India

with a few Banks repetedly showing signs of distress. One of the primary reasons for this has been lack of effective risk management system in Indian Banks. With the increasingly competitive and volatile banking environment here to stay, a comprehensive and intregated risk management system is now synonymous with survival for Banks. A huge amount of risk is involved in distributing huge credits. Risk is a scientific subject or rather an off-site supervision. The common sources for major Credit Problems are:1) Concentrations2) Credit Process Issuess3) Market and Liquidity

Bank follows three steps of Risk Perception:1) Identify2) Quantify3) Mitigate and ManageEvery Bank is required to have Risk Architecture. Bank of India has Risk Evaluation Committee.

Credit Risk is basically managed through policy guidelines laid down by corporate office from time to time regarding acceptable types of risks, sectors of investments, expected returns etc. and in return, operating units entertaining credit propositions of worth considering nature within these over all broad parameters.

The Fair Practices Code is summerised version of various guidelines already in vogue with improvement wherever necessary in line with directives of RBI in this regard. This would insure that the Bank acts in good faith and without negligence in its dealings with the borrower clients since Bank has adopted the code and purposes to advice borrower customer’s specific time limits and code of conduct.

With the advent of reforms and opening up of economy, competition has intensified and customers have become cost conscious. The banking industry in our country is presently going through intence competition and to improve the earnings all Banks are vying with each other to garner profitable business. With industrial activity still not picking upto the extent of available funds with the banking industry, southward movement of interest rates on treasury securities, Banks are aggressively poaching credit portfolios to other Banks whose Credit Appraisal Systems are good. Migration of accounts from one Bank to another in search of finer interest rates or the Banks

wooing good customers from others offering a freebie has become the order of the day.