PNB

Credit Appraisal & Risk Analysis

A

Project Study Report

On Training Undertaken at

PUNJAB NATIONAL BANK, JAIPUR

Titled

CREDIT APPRAISAL AND RISK ANALYSIS

Submitted in partial fulfillment for the

Award of degree of

Bachelor of Business Administration

University of Rajasthan

2012-2013

Submitted To: Submitted By:

Aarti Chopra Tarun Bagra (BBA Sem-IV)

Lecturer Bhavan’s College of Communication & Management, Jaipur (Raj.)

1


INDEX

SR.

No.

Particulars Page

No.1 Preface 3

2 Acknowledgement 4

3 Introduction to industry 5

4 Introduction to the organization 15

5 Research methodology 23

6 Study of title 27

7 Data interpretation and analysis 46

8 Swot Analysis 53

9 Findings and conclusion 55

10 Recommendations by RBI 57

11 Bibliography 60

2


PREFACE

Classroom teaching helps the student by making conceptual base clear, but on the job training

is the practical way, which helps the students to get the practical knowledge of the concept.

Normally the students are not aware of actual requirement in the practical field keeping in view

this fact, a system of summer training is has been established to make the students aware of

actual difficulties that come in the way of practical field, which is not taught in classroom

teaching so, the students are given practical training in the course of their education.

Training at Punjab National Bank, has given me a great experience. I was required to

prepare a training report on the topic “Credit Appraisal & Risk Analysis” The managers of

Retail & Credit department helped me a lot to prepare this report. I have tried my best to

prepare this report during the very short training period.

3


ACKNOWLEDGEMENT

I would like to thank Punjab National Bank, JAIPUR for providing me an opportunity to work on

my summer project. I would like to thank Mr. B.S Saxena (Manager) and Mr. S.L Meena

(Manager) for providing me continuous guidance & support and for his valuable inputs during

the course of my project. The staff at Punjab National Bank was very co-operative and helped

me a lot by providing required information as and when I needed it.

I am thankful to my Faculty Guide Mrs. Aarti Chopra for her continuous support and

guidance. And finally I would like to thank the entire faculty at Bhavans College of

Communications & Management, JAIPUR for equipping me to carry out this study.

4


CHAPTER-1

INTRODUCTION

TO

INDUSTRY

Bank may be defined as a financial institution which is engaged in the business of keeping

money for savings and checking accounts or for exchange or for issuing loans and credit etc. A

5


set of services intended for private customers and characterized by a higher quality than the

services offered to retail customers.

Based on the notion of tailor-made services, it aims to offer advice on investment, inheritance

plans and provide active support for general transactions and the resolution of asset-related

problems.

The essential function of a bank is to provide services related to the storing of deposits and the

extending of credit.Basic function may include Credit collection, Issuer of banking notes,

Depositor of money and lending loans.

Now a days banking is not in its traditional way , with the advancement of technology its

focusing on more comfort of customer providing services such as:

online banking

investment banking

electronic banking

internet banking

pc banking /mobile banking

e-banking

The importance of banking sector is immense in the progress and prosperity of any State or

country.

A Brief History

Banking in India originated in the last decades of the 18th century. The oldest bank in

existence in India is the State Bank of India, a government-owned bank that traces its origins

back to June 1806 and that is the largest commercial bank in the country. Central banking is

the responsibility of the Reserve Bank of India, which in 1935 formally took over these

responsibilities from the then Imperial Bank of India, relegating it to commercial banking

functions. After India's independence in 1947, the Reserve Bank was nationalized and given

6

http://en.wikipedia.org/wiki/Reserve_Bank_of_India

http://en.wikipedia.org/wiki/State_Bank_of_India

http://www.google.co.in/search?hl=en&oi=definer&q=define:e-banking&defl=en

http://www.google.co.in/search?hl=en&oi=definer&q=define:pc+banking&defl=en

http://www.google.co.in/search?hl=en&oi=definer&q=define:internet+banking&defl=en

http://www.google.co.in/search?hl=en&oi=definer&q=define:electronic+banking&defl=en

http://www.google.co.in/search?hl=en&oi=definer&q=define:investment+banking&defl=en

http://www.google.co.in/search?hl=en&oi=definer&q=define:online+banking&defl=en


broader powers. In 1969 the government nationalized the 14 largest commercial banks; the

government nationalized the six next largest in 1980.

Currently, India has 88 scheduled commercial banks (SCBs) - 27 public sector banks (that is

with the Government of India holding a stake), 31 private banks (these do not have

government stake; they may be publicly listed and traded on stock exchanges) and 38 foreign

banks. They have a combined network of over 53,000 branches and 17,000 ATMs. According

to a report by ICRA Limited, a rating agency, the public sector banks hold over 75 percent of

total assets of the banking industry, with the private and foreign banks holding 18.2% and

6.5% respectively

Origin of the Industry

Banking in India originated in the last decades of the 18th century. The first banks were The

General Bank of India, which started in 1786, and the Bank of Hindustan, both of which are

now defunct. The oldest bank in existence in India is the State Bank of India, which originated

in the Bank of Calcutta in June 1806, which almost immediately became the Bank of Bengal.

This was one of the three presidency banks, the other two being the Bank of Bombay and the

Bank of Madras, all three of which were established under charters from the British East India

Company. For many years the Presidency banks acted as quasi-central banks, as did their

successors. The three banks merged in 1925 to form the Imperial Bank of India, which, upon

India's independence, became the State Bank of India.

Indian merchants in Calcutta established the Union Bank in 1839, but it failed in 1848 as a

consequence of the economic crisis of 1848-49. The Allahabad Bank, established in 1865 and

still functioning today, is the oldest Joint Stock bank in India. It was not the first though. That

honor belongs to the Bank of Upper India, which was established in 1863, and which survived

until 1913, when it failed, with some of its assets and liabilities being transferred to the Alliance

Bank of Simla.

When the American Civil War stopped the supply of cotton to Lancashire from the Confederate

States, promoters opened banks to finance trading in Indian cotton. With large exposure to

speculative ventures, most of the banks opened in India during that period failed. The

7

http://en.wikipedia.org/wiki/Confederate_States

http://en.wikipedia.org/wiki/Confederate_States

http://en.wikipedia.org/wiki/Lancashire

http://en.wikipedia.org/wiki/American_Civil_War

http://en.wikipedia.org/wiki/Alliance_Bank_of_Simla

http://en.wikipedia.org/wiki/Alliance_Bank_of_Simla

http://en.wikipedia.org/wiki/Allahabad_Bank

http://en.wikipedia.org/wiki/Imperial_Bank_of_India

http://en.wikipedia.org/wiki/Bank_of_Madras

http://en.wikipedia.org/wiki/Bank_of_Bombay

http://en.wikipedia.org/wiki/Bank_of_Bengal

http://en.wikipedia.org/wiki/Automated_teller_machine

http://en.wikipedia.org/wiki/Government_of_India


depositors lost money and lost interest in keeping deposits with banks. Subsequently, banking

in India remained the exclusive domain of Europeans for next several decades until the

beginning of the 20th century.

Foreign banks too started to arrive, particularly in Calcutta, in the 1860s. The Comptoire

d'Escompte de Paris opened a branch in Calcutta in 1860, and another in Bombay in 1862;

branches in Madras and Pondichery, then a French colony, followed. HSBC established itself

in Bengal in 1869. Calcutta was the most active trading port in India, mainly due to the trade of

the British Empire, and so became a banking center.

The first entirely Indian joint stock bank was the Oudh Commercial Bank, established in 1881

in Faizabad. It failed in 1958. The next was the Punjab National Bank, established in Lahore in

1895, which has survived to the present and is now one of the largest banks in India.

Around the turn of the 20th Century, the Indian economy was passing through a relative period

of stability. Around five decades had elapsed since the Indian Mutiny, and the social, industrial

and other infrastructure had improved. Indians had established small banks, most of which

served particular ethnic and religious communities.

The presidency banks dominated banking in India but there were also some exchange banks

and a number of Indian joint stock banks. All these banks operated in different segments of the

economy. The exchange banks, mostly owned by Europeans, concentrated on financing

foreign trade. Indian joint stock banks were generally under capitalized and lacked the

experience and maturity to compete with the presidency and exchange banks. This

segmentation let Lord Curzon to observe, "In respect of banking it seems we are behind the

times. We are like some old fashioned sailing ship, divided by solid wooden bulkheads into

separate and cumbersome compartments."

The period between 1906 and 1911, saw the establishment of banks inspired by the Swadeshi

movement. The Swadeshi movement inspired local businessmen and political figures to found

banks of and for the Indian community. A number of banks established then have survived to

the present such as Bank of India, Corporation Bank, Indian Bank, Bank of Baroda, Canara

Bank and Central Bank of India.

8

http://en.wikipedia.org/wiki/Central_Bank_of_India

http://en.wikipedia.org/wiki/Canara_Bank

http://en.wikipedia.org/wiki/Canara_Bank

http://en.wikipedia.org/wiki/Bank_of_Baroda

http://en.wikipedia.org/wiki/Indian_Bank

http://en.wikipedia.org/wiki/Corporation_Bank

http://en.wikipedia.org/wiki/Bank_of_India

http://en.wikipedia.org/wiki/Swadeshi

http://en.wikipedia.org/wiki/Joint_stock_company

http://en.wikipedia.org/wiki/Indian_rebellion_of_1857

http://en.wikipedia.org/wiki/Lahore

http://en.wikipedia.org/wiki/Punjab_National_Bank

http://en.wikipedia.org/wiki/Faizabad

http://en.wikipedia.org/wiki/British_Raj

http://en.wikipedia.org/wiki/Bengal

http://en.wikipedia.org/wiki/HSBC

http://en.wikipedia.org/wiki/Pondichery

http://en.wikipedia.org/wiki/Chennai

http://en.wikipedia.org/wiki/Mumbai

http://en.wikipedia.org/w/index.php?title=Comptoire_d'Escompte_de_Paris&action=edit&redlink=1

http://en.wikipedia.org/w/index.php?title=Comptoire_d'Escompte_de_Paris&action=edit&redlink=1

http://en.wikipedia.org/wiki/Kolkata


The fervor of Swadeshi movement lead to establishing of many private banks in Dakshina

Kannada and Udupi district which were unified earlier and known by the name South Canara (

South Kanara ) district. Four nationalised banks started in this district and also a leading

private sector bank. Hence undivided Dakshina Kannada district is known as "Cradle of Indian

Banking".

Nationalization of Banks

By the 1960s, the Indian banking industry has become an important tool to facilitate the

development of the Indian economy. At the same time, it has emerged as a large employer,

and a debate has ensued about the possibility to nationalise the banking industry. Indira

Gandhi, the-then Prime Minister of India expressed the intention of the GOI in the annual

conference of the All India Congress Meeting in a paper entitled "Stray thoughts on Bank

Nationalisation." The paper was received with positive enthusiasm. Thereafter, her move was

swift and sudden, and the GOI issued an ordinance and nationalised the 14 largest

commercial banks with effect from the midnight of July 19, 1969. Jayaprakash Narayan, a

national leader of India, described the step as a "masterstroke of political sagacity." Within two

weeks of the issue of the ordinance, the Parliament passed the Banking Companies

(Acquisition and Transfer of Undertaking) Bill, and it received the presidential approval on 9

August, 1969.

A second dose of nationalization of 6 more commercial banks followed in 1980. The stated

reason for the nationalization was to give the government more control of credit delivery. With

the second dose of nationalization, the GOI controlled around 91% of the banking business of

India. Later on, in the year 1993, the government merged New Bank of India with Punjab

National Bank. It was the only merger between nationalized banks and resulted in the

reduction of the number of nationalised banks from 20 to 19. After this, until the 1990s, the

nationalised banks grew at a pace of around 4%, closer to the average growth rate of the

Indian economy.

The nationalized banks were credited by some, including Home minister P. Chidambaram, to

have helped the Indian economy withstand the global financial crisis of 2007- 009

9

http://en.wikipedia.org/wiki/Udupi_district

http://en.wikipedia.org/wiki/Dakshina_Kannada

http://en.wikipedia.org/wiki/Dakshina_Kannada


Growth and Present Status of Banks

In the early 1990s, the then Narsimha Rao government embarked on a policy of liberalization,

licensing a small number of private banks. These came to be known as New Generation tech-

savvy banks, and included Global Trust Bank (the first of such new generation banks to be set

up), which later amalgamated with Oriental Bank of Commerce, Axis Bank(earlier as UTI

Bank), ICICI Bank and HDFC Bank. This move, along with the rapid growth in the economy of

India, revitalized the banking sector in India, which has seen rapid growth with strong

contribution from all the three sectors of banks, namely, government banks, private banks and

foreign banks.

The next stage for the Indian banking has been setup with the proposed relaxation in the

norms for Foreign Direct Investment, where all Foreign Investors in banks may be given voting

rights which could exceed the present cap of 10%,at present it has gone up to 49% with some

restrictions.

The new policy shook the Banking sector in India completely. Bankers, till this time, were used

to the 4-6-4 method (Borrow at 4%;Lend at 6%;Go home at 4) of functioning. The new wave

ushered in a modern outlook and tech-savvy methods of working for traditional banks.All this

led to the retail boom in India. People not just demanded more from their banks but also

received more.

Currently (2010), banking in India is generally fairly mature in terms of supply, product range

and reach-even though reach in rural India still remains a challenge for the private sector and

foreign banks. In terms of quality of assets and capital adequacy, Indian banks are considered

to have clean, strong and transparent balance sheets relative to other banks in comparable

economies in its region. The Reserve Bank of India is an autonomous body, with minimal

pressure from the government. The stated policy of the Bank on the Indian Rupee is to

manage volatility but without any fixed exchange rate-and this has mostly been true.

With the growth in the Indian economy expected to be strong for quite some time-especially in

its services sector-the demand for banking services, especially retail banking, mortgages and

10


investment services are expected to be strong. One may also expect M&As, takeovers, and

asset sales.

In recent years critics have charged that the non-government owned banks are too aggressive

in their loan recovery efforts in connection with housing, vehicle and personal loans. There are

press reports that the banks' loan recovery efforts have driven defaulting borrowers to suicide.

Future of Banking Sector and Initiated Reforms

Financial sector reforms were initiated as part of overall economic reforms in the country and

wide ranging reforms covering industry, trade, taxation, external sector, banking and financial

markets have been carried out since mid 1991. A decade of economic and financial sector

reforms has strengthened the fundamentals of the Indian economy and transformed the

operating environment for banks and financial institutions in the country. The sustained and

gradual pace of reforms has helped avoid any crisis and has actually fuelled growth. As

pointed out in the RBI Annual Report 2001-02, GDP growth in the 10 years after reforms i.e.

1992-93 to 2001-02 averaged 6.0% against 5.8% recorded during 1980-81 to 1989-90 in the

pre-reform period. The most significant achievement of the financial sector reforms has been

the marked improvement in the financial health of commercial banks in terms of capital

adequacy, profitability and asset quality as also greater attention to risk management. Further,

deregulation has opened up new opportunities for banks to increase revenues by diversifying

into investment banking, insurance, credit cards, depository services, mortgage financing,

securitisation, etc. At the same time, liberalisation has brought greater competition among

banks,both domestic and foreign, as well as competition from mutual funds, NBFCs, post

office, etc. Post-WTO, competition will only get intensified, as large global players emerge on

the scene. Increasing competition is squeezing profitability and forcing banks to work efficiently

on shrinking spreads. A positive fallout of competition is the greater choice available to

consumers,and the increased level of sophistication and technology in banks. As banks

benchmark themselves against global standards, there has been a marked increase in

disclosures and transparency in bank balance sheets as also greater focus on corporate

governance.

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Major Reforms In Banking Sector

Some of the major reform initiatives in the last decade that have changed the face of the Indian

banking and financial sector are:

• Interest rate deregulation. Interest rates on deposits and lending have been deregulated

with banks enjoying greater freedom to determine their rates.

• Adoption of prudential norms in terms of capital adequacy, asset classification, income

recognition, provisioning, exposure limits, investment fluctuation reserve, etc.

• Reduction in pre-exemptions – lowering of reserve requirements (SLR and CRR), thus

releasing more lendable resources which banks can deploy profitably. Government equity

in banks has been reduced and strong banks have been allowed to access the capital

market for raising additional capital.• Banks now enjoy greater operational freedom in terms

of opening and swapping of branches, and banks with a good track record of profitability

have greater flexibility in recruitment.

• New private sector banks have been set up and foreign banks permitted to expand their

operations in India including through subsidiaries. Banks have also been allowed to set up

Offshore Banking Units in Special Economic Zones.

• New areas have been opened up for bank financing: insurance, credit cards,

infrastructure financing, leasing, gold banking, besides of course investment banking, asset

management, factoring, etc.

• New instruments have been introduced for greater flexibility and better risk management:

e.g. interest rate swaps, forward rate agreements, cross currency forward contracts,

forward cover to hedge inflows under foreign direct investment, liquidity adjustment facility

for meeting day-to-day liquidity mismatch.

12


• Several new institutions have been set up including the National Securities Depositories

Ltd., Central Depositories Services Ltd., Clearing Corporation of India Ltd., Credit

Information Bureau India Ltd.

• Limits for investment in overseas markets by banks, mutualfunds and corporates have

been liberalised. The overseas investment limit for corporates has been raised to 100% of

net worth and the ceiling of $100 million on prepayment of external commercial borrowings

has been removed. MFs and corporates can now undertake FRAs with banks. Indians

allowed to maintain resident foreign currency (domestic) accounts. Full convertibility for

deposit schemes of NRIs introduced.

• Universal Banking has been introduced. With banks permitted to diversify into long-term

finance and DFIs into working capital, guidelines have been put in place for the evolution of

universal banks in an orderly fashion.

• Technology infrastructure for the payments and settlement system in the country has

been strengthened with electronic funds transfer, Centralised Funds Management

System,Structured Financial Messaging Solution, Negotiated Dealing System and move

towards Real Time Gross Settlement.

• Adoption of global standards. Prudential norms for capital adequacy, asset classification,

income recognition and provisioning are now close to global standards. RBI has introduced

Risk Based Supervision of banks (against the traditional transaction based approach). Best

international practices in accounting systems, corporate governance,payment and

settlement systems, etc. are being adopted.

• Credit delivery mechanism has been reinforced to increase the flow of credit to priority

sectors through focus on micro credit and Self Help Groups. The definition of priority sector

has been widened to include food processing and cold storage, software upto Rs 1 crore,

housing above Rs 10 lakh,selected lending through NBFCs, etc.

13


• RBI guidelines have been issued for putting in place risk management systems in banks.

Risk Management

Committees in banks address credit risk, market risk and operational risk. Banks have

specialised committees to measure and monitor various risks and have been upgrading

their risk management skills and systems.

• The limit for foreign direct investment in private banks has been increased from 49% to

74% and the 10% cap on voting rights has been removed. In addition, the limit for foreign

institutional investment in private banks is 49%.

• Wide ranging reforms have been carried out in the area of capital markets. Fresh

investment in CPs, CDs are allowed only in dematerialised form. SEBI has reduced the

settlement cycle from T+3 to T+2 from April 1, 2003 i.e. settlement of stock deals will be

completed in two trading days after the trade is executed, taking the Indian stock trading

system ahead of some of the developed equity markets. Stock exchanges will set up trade

guarantee funds. Retail trading in Government securities has been introduced on NSE and

BSE from January 16, 2003. A Serious Frauds Office is proposed to be set up. Fungibility

of ADRs and GDRs allowed.

14


CHAPTER 2

INTRODUCTION

TOTHE ORGANIZATION

15


Punjab National Bank

Logo

Parent Company Government of India

Category Banking services

Sector Banking and finance

Tagline/ Slogan The name you can bank upon

USPPunjab National Bank is one of the Big Four banks of India

STP

Segment Urban and rural banking

Target Group International Banking

Positioning Complete Banking solutions

The Vision of the Bank is “To be a Leading Global Bank with Pan India footprints and become

a household brand in the Indo-Gangetic Plains providing entire range of financial products and

services under one roof”.

The Mission of the Bank “Banking for Unbanked”, itself says about the very reason of

existence of this esteem organization. Punjab National Bank has always worked for the

common people of the bank. The bank has started with the concept of “Swadeshi Bank”.

Punjab under the British especially after annexation in 1849 witnessed a period of rapid

development giving rise to a new educated class fired with a desire for freedom from the yoke

of slavery. Amongst the cherished desires of this new class was also an overriding ambition to

start a Swadeshi Bank with Indian Capital and management representing all sections of the

Indian community. The idea was first mooted by Rai Mool Raj of Arya Samaj who, as reported

by Lal Lajpat Rai, had long cherished the idea that Indians should have a national bank of their 16


own. He felt keenly "the fact that the Indian capital was being used to run English banks and

companies, the profits accruing from which went entirely to the Britishers whilst Indians had to

contend themselves with a small interest on their own capital".

At the instance of Rai Mool Raj, Lala Lajpat Rai sent round a circular to selected friends

insisting on an Indian Joint Stock Bank as the first special step in constructive Swadeshi. Lala

Harkrishan Lal who had returned from England with ideas regarding commerce and industry,

was eager to give them practical shape.

On May 23, 1894, the efforts materialized. The founding board was drawn from different parts

of India professing different faiths and a varied back-ground with, however, the common

objective of providing country with a truly national bank which would further the economic

interest of the country.

The Bank opened for business on 12 April, 1895. The first Board of 7 Directors comprised of

Sardar Dayal Singh Majithia, who was also the founder of Dayal Singh College and the

Tribune; Lala Lalchand one of the founders of DAV College and President of its Management

Society; Kali Prosanna Roy, eminent Bengali pleader who was also the Chairman of the

Reception committee of the Indian National Congress at its Lahore session in 1900; Lala

Harkishan Lal who became widely known as the first industrialist of Punjab; EC Jessawala, a

well known Parsi merchant and partner of Jamshedji & Co. of Lahore; Lala Prabhu Dayal, a

leading Rais, merchant and philanthropist of Multan; Bakshi Jaishi Ram, an eminent Civil

Lawyer of Lahore; and Lala Dholan Dass, a great banker, merchant and Rais of Amritsar. Thus

a Bengali, Parsi, a Sikh and a few Hindus joined hands in a purely national and cosmopolitan

spirit to found this Bank which opened its doors to the public on 12th of April 1895. They went

about it with a Missionary Zeal. Sh. Dayal Singh Majithia was the first Chairman, Lala

Harkishan Lal, the first secretary to the Board and Shri Bulaki Ram Shastri Barrister at Lahore,

was appointed Manager.

A Maiden Dividend of 4% was declared after only 7 months of operation. Lala Lajpat Rai was

the first to open an account with the bank which was housed in the building opposite the Arya

17


Samaj Mandir in Anarkali in Lahore. His younger brother joined the Bank as a Manager.

Authorised total capital of the Bank was Rs. 2 lakhs, the working capital was Rs. 20000. It had

total staff strength of nine and the total monthly salary amounted to Rs. 320.

The first branch outside Lahore was opened in Rawalpindi in 1900. The Bank made slow, but

steady progress in the first decade of its existence. Lala Lajpat Rai joined the Board of

Directors soon after. in 1913, the banking industry in India was hit by a severe crisis following

the failure of the Peoples Bank of India founded by Lala Harkishan Lal. As many as 78 banks

failed during this crisis. Punjab National Bank survived. Mr. JH Maynard, the then Financial

Commissioner, Punjab, remarked...."Your Bank survived...no doubt due to good

management". It spoke volumes for the measure of confidence reposed by the public in the

Bank's management.

The years 1926 to 1936 were turbulent and loss ridden ones for the banking industry the world

over. The 1929 Wall Street crash plunged the world into a severe economic crisis.

It was during this period that the Jalianwala Bagh Committee account was opened in the Bank,

which in the decade that followed, was operated by Mahatma Gandhi and Pandit Jawaharlal

Nehru. The five years from 1941 to 1946 were ones of unprecedented growth. From a modest

base of 71, the number of branches increased to 278. Deposits grew from Rs. 10 crores to Rs.

62 crores. On March 31, 1947, the Bank officials decided to leave Lahore and transfer the

registered office of the Bank to Delhi and permission for transfer was obtained from the Lahore

High Court on June 20, 1947.

PNB was then housed in the precincts of Sreeniwas in the salubrious Civil Lines, Delhi. Many

a staff member fell victim to the widespread riots in the discharge of their duties. The

conditions deteriorated further. The Bank was forced to close 92 offices in West Pakistan

constituting 33 percent of the total number and having 40% of the total deposits. The Bank,

however, continued to maintain a few caretaker branches.

18


The Bank then embarked on its task of rehabilitating the displaced account holders. The

migrants from Pakistan were repaid their deposits based upon whatever evidence they could

produce. Such gestures cemented their trusts in the bank and PNB became a symbol of Trust

and a name you can bank upon. Surplus staff posed a big problem. Fast expansion became a

priority. The policy paid rich dividends by opening up an era of phenomenal growth.

In 1951, the Bank took over the assets and liabilities of Bharat Bank Ltd. and became the

second largest bank in the private sector. In 1962, it amalgamated the Indo-Commercial Bank

with it. From its dwindled deposits of Rs. 43 crores in 1949 it rose to cross the Rs. 355 crores

mark by the July 1969. Its number of offices had increased to 569 and advances from Rs. 19

crores in 1949 to Rs. 243 crores by July 1969 when it was nationalised.

Since inception in 1895, PNB has always been a "People's bank" serving millions of people

throughout the country and also had the proud distinction of serving great national leaders like

Sarvshri Jawahar Lal Nehru, Gobind Ballabh Pant, Lal Bahadur Shastri, Rafi Ahmed Kidwai,

Smt. Indira Gandhi etc. amongst other who banked with us.

Punjab National Bank is one of the Banks which has earned a name of trust among its

customers all over the country. As the name of the bank says it has started in the Punjab, but

today this esteem organization is having presence in every corner of the country with highest

number of branches among Nationalised Banks. Today Punjab National Bank is the biggest

nationalized bank as per the “Business Mix”, “Net Profit” and on many other parameters.

With over 60 million satisfied customers and more than 5100 offices including 5 overseas

branches, PNB has continued to retain its leadership position amongst the nationalized banks.

The bank enjoys strong fundamentals, large franchise value and good brand image. Besides

being ranked as one of India's top service brands, PNB has remained fully committed to its

guiding principles of sound and prudent banking. Apart from offering banking products, the

bank has also entered the credit card, debit card; bullion business; life and non-life insurance;

Gold coins & asset management business, etc. PNB has earned many awards and accolades

during the year in appreciation of excellence in services, Corporate Social Responsibility

19


(CSR) practices, transparent governance structure, best use of technology and good human

resource management.

Since its humble beginning in 1895 with the distinction of being the first Swadeshi Bank to

have been started with Indian capital, PNB has achieved significant growth in business which

at the end of March 2011 amounted to Rs 5,55,005 crore. PNB is ranked as the 2nd largest

bank in the country after SBI in terms of branch network, business and many other

parameters. During the FY 2010-11, with 39.16% share of CASA to domestic deposits, the

Bank achieved a net profit of Rs 4433 crore. Bank has a strong capital base with capital

adequacy ratio of 12.42% as on Mar’11 as per Basel II with Tier I and Tier II capital ratio at

8.44% and 3.98% respectively. As on March’11, the Bank has the Gross and Net NPA ratio of

1.79% and 0.85% respectively. During the FY 2010-11, its ratio of Priority Sector Credit to

Adjusted Net Bank Credit at 40.67% & Agriculture Credit to Adjusted Net Bank Credit at

19.30% was also higher than the stipulated requirement of 40% & 18% respectively.

The Bank has been able to maintain its stakeholders’ interest by posting an improved NIM of

3.96% in Mar’11 (3.57% Mar’10). The Earning per Share improved to Rs 140.60 (Rs 123.86

Mar’10) while the Book value per share improved to Rs 661.20 (Rs 514.77 Mar’10). Punjab

National Bank continues to maintain its frontline position in the Indian banking industry. In

particular, the bank has retained its NUMBER ONE position among the nationalized banks in

terms of number of branches, Deposit, Advances, total Business, Assets, Operating and Net

profit in the year 2010-11. The impressive operational and financial performance has been

brought about by Bank’s focus on customer based business with thrust on CASA deposits,

Retail, SME & Agri Advances and with more inclusive approach to banking; better asset

liability management; improved margin management, thrust on recovery and increased

efficiency in core operations of the Bank. The performance highlights of the bank in terms of

business and profit are shown below:

Rs. In Crore

Parameters Mar'09 Mar'10 Mar'11 CAGR (%)

Operating Profit 5690 7326 9056 26.16

Net Profit 3091 3905 4433 19.76

20


Deposit 209760 249330 312899 22.14

Advance 154703 186601 242107 25.10

Total Business 364463 435931 555005 23.40

Bank always looked at technology as a key facilitator to provide better customer service and

ensured that its ‘IT strategy’ follows the ‘Business strategy’ so as to arrive at “Best Fit”. The

Bank has made rapid strides in this direction. All branches of the Bank are under Core Banking

Solution (CBS) since Dec’08, thus covering 100% of its business and providing ‘Anytime

Anywhere’ banking facility to all customers including customers of more than 3200 rural & semi

urban branches. The Bank has also been offering Internet banking services to its customers

which also enables on line booking of rail tickets, payment of utilities bills, purchase of airline

tickets, etc. Towards developing a cost effective alternative channels of delivery, the Bank with

5050 ATMs has the largest ATM network amongst Nationalized Banks.

With the help of advanced technology, the Bank has been a frontrunner in the industry so far

as the initiatives for Financial Inclusion is concerned. With its policy of inclusive growth, the

Bank’s mission is “Banking for Unbanked”. The Bank has launched a drive for biometric smart

card based technology enabled Financial Inclusion with the help of Business

Correspondents/Business Facilitators (BC/BF) so as to reach out to the last mile customer.

The Bank has started several innovative initiatives for marginal groups like rickshaw pullers,

vegetable vendors, dairy farmers, construction workers, etc. Bank has launched a welfare

scheme of adoption of village viz., “PNB VIKAS”. Under the scheme, Bank has selected 117

villages (60 in lead districts and 57 in non lead district) in different circles for all-round

improvement in the living standards of the villagers. Besides, Bank has formed “PNB

PRERNA”, an association of the wives of the Bank’s senior management. The association

through its voluntary initiatives has undertaken activities like distribution of food to the poor and

needy, provision of computers, books, stationary items to poor girl students at various

orphanages and schools etc.

Backed by strong domestic performance, the Bank is planning to realize its global aspirations.

Bank has opened one branch each at Kabul and Dubai, two branches at Hong Kong and an

21


Off Shore Banking Unit at Mumbai. In addition to the above, Bank has Representative offices

at Almaty, Dubai, Shanghai and Oslo, a wholly owned subsidiary in UK with 7 branches and a

subsidiary each in Kazakhstan & Bhutan, and joint venture with Everest Bank Ltd. Nepal.

During the year, Bank acquired majority equity stake of 63.64% in Dana Bank of Kazakhstan.

22


CHAPTER-3

RESEARCH

METHODOLOGY

Research Methodology refers to the method the researchers use in performing research

operations. In other words, all those methods, which are used by the researcher during the

course of studying his research problem, are termed as Research Methods.

RESEARCH DESIGN

23


A research project conducted scientifically has a specific frame work of research from problem

identification to presentation of research report. This framework of conducting research is

known as Research Design.

DESCRIPTIVE RESEARCH DESIGN

Descriptive research includes surveys and facts finding enquiry’s of different finds. The major

purpose of descriptive research is description of the state of affairs as it exists at present. The

main characteristics of this method are that the researcher has no control over the variable. He

can only report what has happened or what is happening. Most are post facts research

projects are used for descriptive studies in which the researcher seeks to measure such items

as for example frequency of shopping, preference of people or similar data. Ex post facts

studies also include attempt by researchers to discover causes even way when they cannot

control the variables. The method of research utilized in descriptive research is survey method

of all kinds, including comparative and correctional methods.

The study is about customer satisfaction regarding services in PNB. It is being made because

Customer satisfaction is the key to the profitability of the banking. It implies the retention of

customers for the long term, which is cheaper than altercating new customers. In current

scenario bank becoming larger the closure of branches and the advent of internet banking, the

question arises whether the customers are satisfied or not.

DATA COLLECTION

PRIMARY DATA with the help of self structured, questionnaire was collected to the address

the research objectives and keeping in tune with the research design.

SECONDARY DATA consisted from “Journals, Magazines, and Books & Websites.”

SAMPLING TECHNIQUE

24


Sampling is necessary because it is almost impossible to examine the entire parent population

or universe. Various factors such as time available, cost, purpose of study etc. make it

necessary for the researchers to choose a sample. It should neither be too small nor too big.

SAMPLE SIZE

40 Customers.

MODE OF DATA COLLECTION

Questionnaire

Objectives of study

To study the various services offered by PNB

To measure behavior of staff is satisfactory towards customers.

To check out staff co-operation towards customers.

To measure manager co-operation towards customers.

DESCRIPTION OF EXPERIENCES

Uneducated customers were not abling to fill their Forms properly

Due to the lack of the employees’ ledger were not in good condition.

Recording of the data was incomplete and due to which they were not able to clarify the dues.

But due to the computer the job of the employees is simpler.

Now they have to pass simple entries and all records is maintained easily without any

confusion.

There job is much simpler than before now they can make changes, add, modify at

the same time in a easy manner that is an achievement for bank

I learnt many things in the bank but the most interesting thing I like there is the

Environment of the bank the employees help each other rather they the job of other

or not but they help each other.

Conflicts arise between them because of the lack of the customers they add wrong

information in their cheques or vouchers that cannot be passed.

25


I learnt many things I have good and bad experiences both over their before I I was

not aware of anything in the bank now I know many things.

I can say that while working over their no employee leaves its work pending for net

day because if they let it pending than they can not end their day and by hook or

crook they have to finish it.

26


CHAPTER-4

STUDY

OF

TITLE

GENERAL INSTRUCTIONS

INTRODUCTORY

1. Efficient management of Loans and Advances portfolio has assumed greater significance as

it is the largest asset of the Bank having direct impact on its profitability. In the wake of

27


continued tightening of norms of income recognition, asset classification and provisioning,

increased competition and emergence of new types of risks in the financial sector, it has

become imperative that the credit functions are strengthened. RBI has also been emphasising

banks to evolve suitable guidelines for effective management and control of credit risks.

2. With a view to ensuring a healthy loan portfolio, our bank has taken various steps to bring its

policies and procedures in line with changing scenario which also aim at effective management

& dispersal of credit risks, strengthening of pre-sanction appraisal and post-sanction

monitoring systems. Further, bank has been continuously endeavoring to strengthen the

organizational set-up by opening Specialized Branches to meet the credit requirements of

specific types of borrowers, imparting intensive credit management training to staff and

deployment of the trained staff at branches/offices having potential for credit growth. Bank has

laid down detailed guidelines to be followed while considering credit proposals, some of the

important ones are listed as under:

i) All loan facilities be considered after obtaining loan application(s) from the borrower(s) and

compilation of Confidential Report(s) on him/them and the guarantor(s). The borrowers should

have the desired background, experience/expertise to run their business successfully.

ii) Project for which the finance is granted should be technically feasible and

economically/commercially viable i.e. it should be able to generate enough surplus so as to

service the debts within a reasonable period of time.

iii) Cost of the project and means of financing the same should be properly assessed and tied

up. Both, under-financing and over- financing can have an adverse impact on the successful

implementation of the project.

iv) Borrowers should be financially sound, enjoy good market reputation and must have their

stake in the business i.e. they should possess adequate liquid resources to contribute to the

margin requirements.

28


v) Loans should be sanctioned by the competent sanctioning authority as per the delegated

loaning powers and should be disbursed only after execution of all the required documents.

vi) Projects financed must be closely monitored during implementation stage to avoid time and

cost overruns and thereafter till the adjustment of the bank's loan.

3. Bank extends Loan facilities by way of fund-based facilities and/or non-fund based facilities.

The fund-based facilities are usually allowed by way of term loans, cash credit, bills

discounted/purchased, demand loans, overdrafts, etc. Further, the bank also provides non

fund-based facilities by way of issuance of inland and foreign letters of credit, issuance of

guarantees, deferred payment guarantees, bills acceptance facility under SIDBI Bills

Rediscounting Scheme etc.

4. The foregoing list contains the usual types of facilities undertaken by the bank. In case loan

application is received for any particular facility which is not specifically mentioned above, the

same should be forwarded to controlling office(s) for consideration, provided the same can be

transacted within the overall policy of the bank.

5. The usual types of facilities sanctioned by the Bank to the borrowers, as also other aspects

like Project appraisal, Post sanction follow up, Management of NPAs, Documentation,

Limitation etc. are discussed in succeeding chapters. These are briefly explained here under:

LOANS AND ADVANCES

OVERDRAFT:

29


All overdraft accounts are treated as current accounts. Normally, overdrafts are allowed

against the Bank's own deposits, government securities, approved shares and/or debentures

of companies, life insurance policies, government supply bills, cash incentive and duty

drawbacks, personal security etc.

Overdraft accounts should be kept in the ordinary current account head at branches.

Temporary clean overdrafts in current accounts should be maintained in the ordinary current

account ledgers.

TERM LOANS:

Term loans are sanctioned for acquisition of fixed assets like land, building, plant/machinery,

office equipment, furniture-fixture, etc., for purchase of transport vehicles & other vehicles, for

purchase of agricultural equipment, machinery & other movable assets e.g. tractors, pump

sets, cattle etc. under various schemes of agricultural advances introduced from time to time,

for purchase of house, consumer durables, etc. under Special Schemes introduced from time

to time.

The Term loan would be a loan, which is not a demand loan and is repayable in terms i.e. in

installments irrespective of period or the security cover.

Term Loans are normally granted for periods varying from 3 to 7 years and in exceptional

cases beyond 7 years. Term loans for Infrastructure Projects can be allowed even with longer

repayment period. The exact period for which a particular loan is sanctioned depends on the

circumstances of the case.

30


DEMAND LOANS

A demand loan account is an advance for a fixed amount and no debits to the account are

made subsequent to the initial advance except for interest, insurance premia and other sundry

charges. As an amount credited to a demand loan account has the effect of permanently

reducing the original advance, any further drawings permitted in the account will not be

secured by the demand promissory note taken to cover the original loan. A fresh loan account

must, therefore, be opened for every new advance granted and a new demand promissory

note taken as security.

Demand Loan would be a loan, which is repayable on demand in one shot i.e. bullet

repayment.

Normally, Demand Loans are allowed against the Bank's own deposits, government securities,

approved shares and/or debentures of companies, life insurance policies, pledge of gold/silver

ornaments etc. A separate account for each demand loan should be kept in the appropriate

demand loan ledger.

CASH CREDIT ADVANCES:

Cash Credit account is a drawing account against credit granted by the Bank and is operated

in exactly the same way as a current account on which an overdraft has been sanctioned. The

various types of securities against which cash credits are allowed are pledge/ hypothecation of

goods or produce, pledge of documents of title to goods, book debts, trust securities, etc. In

cash credit accounts the borrower is allowed to draw on account within the prescribed limit, as

and when required.

BILL FINANCE:

Advances against Inland Bills are sanctioned in the form of limits for purchase of bills (ODD)

or discount of bills (BD) or bills sent for collection (ABC), to borrowers for their genuine trade

transactions. Bills are either payable on demand or after usance period. Demand Bills which

are payable on demand or at sight, are purchased from the parties who are sanctioned ODD

limits and Usance Bills which are payable on maturity after a certain period of time as per

terms of contract are discounted for parties who are sanctioned BD limits.

31


While discounting/purchasing/negotiating usance bills under LCs or otherwise, it is to be

ensured that the bills so discounted/ purchased/negotiated have arisen out of the actual

movement of goods. Further, branches should not extend bills limits to non-constituent

borrower and/or non-constituent member of a consortium/multiple banking arrangement.

PACKING CREDIT:

Packing credit is an advance given to an exporter who holds a Code Number assigned to him

by the Directorate General of Foreign Trade (DGFT), for financing the purchase, processing,

manufacturing or packing of goods prior to shipment, on the basis of letter of credit opened in

his favour or in favour of some other person, by an overseas buyer or a confirmed and

irrevocable order for the export of goods from India or any other evidence of an order for

export from India having been placed on the exporter or some other person, unless lodgement

of export orders or Letter of Credit with the bank has been waived.

Packing credit advances are generally allowed separately for each Letter of Credit/Firm Order

to comply with the guidelines issued by HO Divisions/RBI.

INLAND LETTERS OF CREDIT:

Letter of credit (LC) is issued by the Bank at the request of its customer in favour of a third

party informing him that the Bank undertakes to accept the bills drawn on its customer up to

the amount stated in the LC subject to fulfillment of the conditions stipulated therein. Therefore,

when Bank issues LC, it assumes responsibility to pay its beneficiary on production of bills

drawn in accordance with the terms and conditions of the LC.

While assessing the non-fund based limits, branches should ensure that projections and cash

flows submitted by the borrowers are realistic and in line with the past trend.

Whenever the bills drawn under LC are not paid by the party from its own resources or out of

available DP in the CC account on its due date, the LC is said to have devolved. In order to

ensure continuance of bank charge on Block Assets/Other Assets for such amount of default,

Incumbents are advised to make its payment by debit of LC Due Date Default Account.

32


In case two consecutive bills, drawn under LCs opened previously were not retired by the party

from its own resources or out of available DP in the CC account, further opening of Letter of

Credit must not be allowed by the Incumbents without clearance from their next higher

authorities.

GUARANTEES:

Guarantee is a contract to perform the promise, or discharge the liability of a third person in

case of his default. In the ordinary course of business, Bank often issues guarantees on behalf

of its customers in favour of third parties. When Bank issues such a guarantee, it assumes a

responsibility to pay the beneficiary,in the event of default made by the customer.

33


RETAIL LOAN SCHEME OF PNB

SCHEME FOR ADVANCE AGAINST GOLD/ SILVER JEWELLERY/

ORNAMENTS

1. Purposes and eligibility

Advance is available for productive purposes such as agricultural/allied and other

activities as well as for non-productive purposes (meeting medical, educational,

marriage expenses and other unforeseen expenses etc.).

2. Eligibility

Individuals & Business Enterprises

3. Quantum of loan

Productive purposes - Need based, without ceiling.

Non-productive purposes - Max. amount of Loan - Rs.2.00 lacs.

4. Security

Gold/silver jewellery and ornaments.

5. Nature of facility

Loan may be given by way of Demand Loan / Overdraft.

6. Margin

GOLD-5%

SILVER - 15%

7. Upfront fee

Upfront Fee: 0.70% + service tax & education cess.

8. Documentation charges:

Up to Rs. 2 lakh Rs. 270/- + service tax & education cess; and

Over Rs. 2 lakh Rs.450/- + service tax & education cess.

10. Repayment

Demand Loan - Maximum 12 months.

Overdraft - Renewed annually

34


CAR FINANCE

Available for purchase of New Car/ Van/ Jeep/ Multi Utility Vehicle (MUV)/ Sports Utility

Vehicle (SUV) or for old vehicles that are not older than 3 years (Depriciation @ 15%

p.a. on current invoice / showroom invoice). Finance will be provided for purchase of

vehicle of indigenous/ foreign makes

Eligibility

Individuals as well as Business Concerns (Corporate or non-corporate).

Minimum net monthly salary / pension / income – 20000/-. Income of spouse /Parent

can be added.

Amount of Loan

For Individuals / Proprietorship Concerns: 25 times of the monthly net salary OR Rs.25

lacs (for one or more vehicles), whichever is lower. Income of parent(s) / spouse can be

taken into account for determining loan amount. In such cases, the parent(s)/ spouse

shall stand as additional guarantor.

For Business Concerns (Corporate or non-corporate): No ceiling on loan amount (for

one or more vehicles).

Margin

For New Vehicles: 15%

For Old Vehicles: 30%

Under Tie-up Arrangement : 10%

Security

The vehicle purchased with the amount of loan is to be hypothecated to the Bank. It will

be registered in the name of the borrower jointly with the Bank.

Guarantee / Collateral Security

i)Third party guarantee / collateral security is waived in following cases:

35


Permanent Employees of Central Govt. /State Govt. /PSUs/ MNCs/ Listed Companies

at NSE/ BSE whose Shares are actively traded and quoted above par.

For other than salaried class borrowers where ex – showroom cost of the car is

exceeding Rs.6 lakh.

ii)However the Guarantee of Parent(s) / Spouse will be taken in case their income

has been considered for determining loan amount

Repayment

For New Vehicle: The loan amount together with interest is to be repaid maximum in 84

Equated Monthly Installments (EMIs).

For Old Vehicle: The loan amount together with interest is to be repaid maximum in 60

Equated Monthly Instalments (EMIs)

Upfront Fee & Documentation Charges

@ 1% of the loan amount, with a maximum of Rs.6,000/- (exclusive of service tax &

education cess)

Disbursement

The intending borrower will be required to settle the transaction for purchase of vehicle

needed by him/her with the seller and will be required to deposit the difference of the

cost of the vehicle to amount of loan, and thereafter, the advance will be allowed to

him/her from the bank by paying the entire price of the vehicle to the seller directly on

behalf of the borrower.

36


EDUCATION LOAN - VIDYALAKSHYAPURTI

Studies in India

1. Graduation courses – B.A., B.Com., B.Sc., etc.,

2. Post-Graduation courses, Masters & Ph.D;

3. Professional courses, Engineering, Medical, Agriculture, Veterinary, Law, Dental, Management, Computer etc.,

4. Computer Certificate courses of reputed Institutes accredited to Department of Electronics or institutes affiliated to University;

5. Courses like ICWA, C.A., CFA, etc.,

6 Courses conducted by IIM, IIT, IISc, XLRI, NIFT, etc.,

7 Regular Diploma/Degree courses conducted by Colleges/Universities approved by UGC/Govt./AICTE/AIBMS/ICMR,

8. Regular Degree / Diploma courses like Aeronautical, Pilot training, Shippling etc. approved by Director General of Civil Aviation/ Shippinge, if the course is persued in India. In case the course is pursued abroad, the Institue should be recognised by the competent local (abroad) Aviation/Shipping authority.

9. Advance Diploma in Banking Technology offered by PNBIIT, Lucknow.

10. Courses offered in India by reputed foreign universities.

11. Other courses leading to Diploma/Degree etc. conducted by colleges/universities approved by UGC/Govt./AITCE/AIBMS/ICMR etc.

12. Courses offered by National Institutes and other reputed Private Institutes.

13. Diploma courses, Diploma Leading to Degree Courses local as well as abroad and courses offered by recognised universitis of repute through distance learning etc.

Studies Abroad:

1.Graduation- for job oriented professional/technical courses offered by reputed

universities abroad.

37


2. Post Graduation cources- MCA, MBA, MS, etc. offered by reputed universities abroad.

3. Courses conducted by CIMA- London, CPA in USA etc.

Students should approach the branch nearest to the place of residence of their parents.

Interest is charged monthly on simple basis during the repayment holiday/moratorium

period & concession of 1% in rate of interest is allowed provided the same is serviced

regularly during study period.

Punjab National Bank has tied up with Kotak Mahindra Insurance to provide life insurance

cover for Student borrowers.

Eligibility:

Student eligibility

1. Should be an Indian National.

2. Secured admission to Professional / Technical Courses in India or abroad

through Entrance Test / Merit based Selection process.

Expenses considered for Loan

1. Fee payable to College / School / Hostel

2. Examination / Library / Laboratory fee.

3. Purchase of books / equipments / instruments / uniforms.

4. Caution Deposit / Building Fund / Refundable Deposit supported by

Institution Bills / Receipts, subject to the condition that the amount does not

exceed 10% of the total tution fee for entire course.

5. Travel Expenses / Passage money for studies abroad.

6. Purchase of computers - essential for completion of the Course.

7. Insurance premium for student borrower

8.Boarding and lodging expenses in recognised Boarding Houses / private

accomondations

9.Any other expense required to complete the course - like study tours,

project work, thesis etc.

Quantum of Finance

38


Need based finance, subject to repaying capacity of the parents / students

with margin and the following ceilings :-

For studies in India: Maximum Rs.10.00 lacs.

For studies abroad: Maximum Rs.20.00 lacs.

Margin

Upto Rs.4.00

lacs

Nil.

Above Rs.4.00

lacs

Studies in India 5%

Studies Abroad 15%

Security

Upto Rs.4.00 lacs: Co-Obligation of Parents. No Security

Above Rs 4.00 lacs and Upto Rs 7.5 lacs: Co-Obligation of Parents together with

collateral security in the form of suitable

3rd party guarantee acceptable to the

Bank

Above Rs 7.5 lacs: Co-Obligation of Parents. Collateral

Security of suitable value along with

Assignment of future income of the

student for payment of installments

The security can be in the form of land / building / Govt. Securities / Public

Sector Bonds / Units of UTI, NSC, KVP, LIC Policy, Gold, Shares/ Mutual

Funds/ Debentures, Bank Deposit in the name of the student parent /

guardian or any other third party with suitable Margin.

The document should be executed by both the student and the

parent/guardian.

Repayment

Repayment Holiday / Course period + 1 year OR 6 months

39


Moratorium after getting job, whichever is earlier.

The Principle and interest is to be repaid in 5-7 years after commencement

of repayment. If the student is not able to complete the course within the

scheduled time, extension of time for completion of course may be

permitted for a maximum period of 2 years.

Upfront Fee

For Study in India - Nil

For Study abroad - @ 0.50% with a maximum of Rs. 5000/-(refundable

on availment of the loan amount)

Documentation Charges

Upto Rs. 4 lacs Rs.270/- + Service Tax & Education Cess

Above Rs.4 lacs Rs.450/- + Service Tax & Education Cess

Additional Benefits provided to the students by PNB

A rebate of 0.50% in rate of interest permitted to women

beneficiaries for loans up to Rs. 10 lac for studies in India and

Rs 20 lac for studies abroad for existing as well as new girl

student borrowers wef. 08.03.2009.

1% interest concession may be provided for loanees if the

interest is serviced during the study period/moratorium period.

Second time Education Loan can be sanctioned to the same

student borrower for completion of next higher course.

Check List

While applying for the loan, the borrower is required to furnish

the following information/papers:

Loan application on Bank's format.

Passport size photograph

40


Proof of Address(Permanent) / ID Proof.

Proof of Age.

Proof of having secured pass marks in last qualifying examination.

Letter of admission in professional, technical or vocational courses.

Prospectus of the course wherein charges like Admission Fee, Examination

Fee, Hostel Charges etc. are mentioned.

Details of Assets & Liabilities of parents.

In case loan amount is above Rs.4.00 lacs :

Detail of Assets & Liabilities of parents/co-obligates/ guarantors.

In case loan is to be collaterally secured by mortgage of IP, Copy of Title

Deed, Valuation Certificate and Non Encumbrance Certificate from

approved Lawyer of the Bank to be obtained at the cost of the borrower.

Photocopy of Passport & Visa, in case of study abroad.

Any other document/information, depending upon the case and purpose of

the loan.

41


REGULAR HOUSING FINANCE SCHEME FOR PUBLIC

PNB reaches out to you with fast, friendly and most convenient home loans under Normal

and Flexible variants (Details also available seperately) having highlighting features :

1. Highlights

Option to choose between Floating and Fixed interest rates.

Longest Repayment period of 25 years

For Term loan component of flexible variant 0.25% lower interest rate than under

normal variant under all tenors of repayment

Flexible repayment option

No hidden charges

Quick and Fast processing

2. Purpose

1. Construction or purchase of new/old house/ flat/ plot (Finance for purchase of plot is

allowed only under Normal Scheme).

2. Purchase of house/ flat on First Power of Attorney basis from the original allottee.

3. Carrying out repairs/ renovations/ additions/ alterations/ furnishing.

4. After 3 years loan for personal needs allowed only under Flexible variant.

5. Borrowers are entitled for 20% increase in the original total limit sanctioned after a lapse

of five years under Flexible variant.

3. Eligibility

1. Under Normal variant Individuals & Joint owners (age group of 18-65 years) having

regular source of income. Income of spouse/children can also be added.

2. Under Flexible variant: Customers who are below the age of 50 years and existing

Housing loan borrowers who have availed loan under our Housing Loan scheme for

public.

4. Loan Amount

1. For construction/purchase of house/flat:- Need based.

42


2. Cost of car parking upto the maximum extent of 5% of the cost of flat/house can be

considered in the cost of the project.

3. For carrying out repairs/ renovations/ additions/ alterations: - Maximum of Rs. 20 lacs.

4. For furnishing of house – Maximum Rs. 2 Lacs

5. For purchase of Land/ Plot - Maximum Rs. 20 Lacs.

5. Disbursement

1. Under Normal variant – in the shape of a Term Loan

2. For purchase of Built-up house/ flat - In lump sum (Down Payment) .

3. For construction of house/ under construction flat - The loan amount will be

4. disbursed in stages as per progress of construction/ demand by selling agency

5. Under Flexible variant – 80% in the shape of Term Loan and 20% as overdraft.

6. Overdraft limit can be enhanced maximum upto 50% of the total loan amount sanctioned

originally and first such enhancement is allowed after three years

7. Extent of enhancement in overdraft limit will be equal to reduction in term loan

amount. These enhancement in overdraft limit are for personal needs and allowed

through esperate overdraft account.

6. Margin

Construction/ purchase/ repairs/ renovations/ additions/ alterations – 25%

Land/ Plot – 40%

7. Fee/Charges

For loans upto Rs. 300 lacs = 0.50% of the loan amount max. of Rs. 20,000/- + taxes

For loans above Rs. 300 lacs =0.90% of the loan amount + taxes

Documentation charges of Rs. 1350/- + taxes

8. Repayment

For Term Loan component under Normal or Flexible variant

For construction/purchase of house/flat - Maximum of 25 years or borrowers attaining age of

65 years whichever is earlier (can be extended upto the age of 70 years under banks

discretion) to be repaid in equated monthly installments inclusive of maximum moratorium period

43


of 18 months.

For carrying out repairs/ renovations/ additions/ alterations - Maximum of 10 years inclusive

of maximum moratorium period of Six months.

For Overdraft component of Flexible variant : Repayment shall be as under

For borrower below 55 years : Servicing of interest as and when charged i.e. on monthly

basis.

For 55 years and above: On monthly reducing drawing power maximum up to the age of 65

years.

9. Moratorium/ Repayment Holiday

Moratorium or Repayment holiday where loan is allowed for construction - till completion of

construction or 18 months (6 months in case of repair/ renovation/ addition/ alteration) from the

date of disbursement of first installment of the loan, whichever is earlier.

10. Pre- Payment Charges

Nil- where the loans is prepaid by the borrower from his/her own sources

Nil- where the borrower shifts to other bank within 30 days from the date of upward revision in

the rate of interest to be charged in his/her account or change in other terms of sanction.

2 % - where the account is taken over by some other Bank/ Financial institutions.

44


45


CHAPTER-5

Data Interpretation

and

analysis

46


47


DATA ANALYSIS and INTERPRETATION

TABLE

HOW IS BEHAVIOUR OF STAFF?

48

OCCUPATION GOOD SATISFA-

CTORY

VERY

GOOD

UNATIS

FACTORY

TOTAL %AGE

SERVICE 6 4 1 2 13 32.5

STUDENT 4 2 1 1 8 20.0

RETIRED 2 0 2 0 4 10.0

BUSINESS 4 2 3 2 11 27.5

HOUSE HOLD 2 1 0 1 4 10.0

TOTAL 18 9 7 6 40 100


GOOD

SATISFACTORY

VERY GOOD

UNSATISFACTORY

TABLE

DO YOU FIND OUT STAFF CO-OPERATVE/COURTEOUS?

49

OCCUPATION YES NO TOTAL %AGE

SERVICE 5 8 13 32.5

STUDENT 3 5 8 20.0

RETIRED 2 2 4 10.0

BUSINESS 8 3 11 27.5

HOUSE HOLD 2 2 4 10.0

TOTAL 20 20 40 100


yes

no

TABLE

IS MANAGER & STAFF RECEPTIVE TO YOUR PROBLEMS?

50


yes

no

TABLE

HOW MUCH TIME IS TAKEN IN OPENING OF AN ACCOUNT?

51

OCCUPATION YES NO TOTAL %AGE

SERVICE 9 4 13 32.5

STUDENT 3 5 8 20.0

RETIRED 3 1 4 10.0

BUSINESS 6 5 11 27.5

HOUSE HOLD 3 1 4 10.0

TOTAL 24 16 40 100


15 minutes

30 minutes

1 hour

2 hours/more

TABLE

DO YOU WANY TO AVAIL OUR CREDIT FACILITIES?

52

OCCUPATION 15

MINUTES

30

MINUTES

1

HOUR

2 HOURS/

MORE

TOTAL %AGE

SERVICE 6 5 2 0 13 32.5

STUDENT 2 4 2 0 8 20.0

RETIRED 2 2 0 0 4 10.0

BUSINESS 5 3 2 1 11 27.5

HOUSE HOLD 3 1 0 0 4 10.0

TOTAL 18 15 6 1 40 100


personal loan

consumer loan

others

housing loan

car loan

53

OCCUPATI

ON

PERSON

AL LOAN

CONSUM

ER LOAN

OTHER

S

HOUSIN

G LOAN

CAR

LOA

N

TOTA

L

%AG

E

SERVICE 1 1 6 2 3 13 32.5

STUDENT 1 4 1 1 1 8 20.0

RETIRED 4 0 0 0 0 4 10.0

BUSINESS 2 5 0 2 2 11 27.5

HOUSEHOL

D

2 0 0 2 0 4 10.0

TOTAL 10 10 7 7 6 40 100


CHAPTER-5

SWOT

ANALYSIS

54


55

SWOT Analysis

Strength

1. Diversified operations with 5100 branches2. Strong I.T support with “best fit” approach

3. Schemes for small and medium scale businesses4. It is the second largest state-owned commercial bank in India with about 5000

branches across 764 cities

5. Its 56,000+ workforce serves over 37 million customers

Weakness

1. Less penetration in the urban areas

2. Inadequate advertising and branding as compared to other banks3. Legal issues regarding employees caused a bad name of PNB

Opportunity

1. Small scale business banking across India2. Expansion in other countries for international banking

3. Installation of more ATM’s and better customers services

Threats

1. Economic crisis and economic fluctuations2. Highly competitive environment

3. Stringent Banking Norms by the RBI and the Govts


CHAPTER-6

FINDINGS

AND

CONCLUSION

56


FINDINGS & CONCLUSION

PNB is having a distribution network of more than 4000 branches. This is the

main strength of the PNB, which cannot be the strength of any other bank.

PNB is the oldest bank from 1895, so it has a strong band image in the market

built over the time & a huge stockpile of the customers under its arms.

The age group of employees is mostly towards at higher side, which is

adversely affecting the productivity, as they do not have any enthusiasm left.

PNB as not much computer savy and works more manually, which restricts its

scope of business.

The process of certain activities of the bank is very much lengthy, as a result of

which now a day’s people prefer to go towards private banks.

The working environment of the bank is not so much healthy and clean as

result of which customers even hesitate to enter the bank.

Conclusions

Bank requires good sitting arrangements for the old generation so that they can

get their work done easily and in a manner and get fully satisfied.

Promotions to the employees should be given and their salary must be

increased.

Maximum tax benefit is availed from home loan and minimum from car loan.

Maximum number of borrowers were get influenced by dealer/agent and

minimum by relative. So bank requires introducing new advertisement for loan

schemes.

Bank requires to make better arrangements in sitting and standing in the

branch.

Bank has to maintain its working environment as result of which customers not

even hesitate to enter the bank

57


.

CHAPTER-7

RECOMMENDATIONS

58


GENERAL SAFEGUARDS SUGGESTED BY RBI

RBI has suggested that the following broad safeguards/corrective measures may be

observed while allowing advances:

i) Branches should open letters of credit and purchase/ discount/negotiate bills under

LCs only in respect of genuine, commercial and trade transactions of their borrower

constituents who have been sanctioned regular credit facilities. Branches should not

extend the fund based (including bills financing) or non-fund based facilities like

opening of LCs, providing guarantees and acceptances to non-constituent borrowers

or/and non-constituent Member of a Consortium/Multiple Banking Arrangement.

ii) All proposals for advances, without exception, should emanate from the branches

and sanctions should be made only after proper appraisal.

iii) No excess limit beyond the delegated powers should be sanctioned unless it is

absolutely essential. Normally, necessity for large and adhoc amounts cannot arise

overnight. If it happens, it indicates either unrealistic projections in the credit proposals

59


or improper assessments of credit requirements.

iv) Adhoc amounts/excesses wherever sanctioned should be promptly reported to

higher authorities without waiting for regularisation of advances, explaining the

circumstances leading to the urgent need for funds. Controlling authorities should

monitor the regularisation effectively.

v) Sanctions within discretionary powers should also be promptly reported to the

controlling authorities in the stipulated manner (Bank has prescribed reporting through

Monthly Limits Sanctioned Statement).

vi) In case of non-reporting (either of the regular or adhoc sanction), the controlling

authorities should obtain the prescribed returns/ statements and scrutinise the same

diligently and take prompt follow up action. Observations/discrepancies, if any, should

be conveyed to the sanctioning official for corrective action.

vii) Caution should be exercised against attempts by main borrowers to float fictitious

companies in order to facilitate sanction of large limits ostensibly within the

discretionary power of the sanctioning authority obviating need to put up the proposal

to higher authorities for sanction.

viii) In case of oral/telephonic sanctions, proper record of the same should be

maintained by the sanctioning as well as the disbursing authority, explaining therein

the circumstances under which such sanctions had to be conveyed/obtained.

Written confirmation of the competent sanctioning authority must invariably be

obtained by the disbursing authority in such cases as also in sanctions beyond

discretionary powers.

ix) The discretionary powers of the officials who have a tendency to exceed their

powers frequently, should be reviewed by the Controlling Authorities.

Bank's guidelines provide that wherever it is felt that the delegated powers are not

60


being exercised judiciously or in Bank's interest, the same may be withdrawn.

x) Controlling Authorities should make frequent visits to branches and submit reports

of such visits, with special focus on all loan accounts

BIBLIOGRAPHY

Books

MacMillan “Principles and practices of banking”, Tata Mc Graw hill

publishing company ltd, 2nd revised addition

News Papers

The Economic Times

Business Standard

Magazines

Business Outlook

61


Business World

WEBLIOGRAPHY

http:/www.pnbindia.in

http:/www.wikipedia.com

www.google.com

www.infibeam.com

62

http://www.google.com/

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