Summer Internship 3 Nd 4 Weekly Report

7/31/2019 Summer Internship 3 Nd 4 Weekly Report

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Summer Internship Report

TERM LOAN & WORKING

CAPITAL FINANCE

(state bank of Patiala)

Submitted to:

Ms. Meenakshi Malhotra

(faculty guide)

Submitted by:

Mehak Mehta

A1802011304


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A Term Loan is an advance which is granted usually against the security of the

borrowers Fixed Assets for a fixed term of not less than 3 years, is intended

normally for financing acquisition of Fixed Assets, with a repayment schedule

normally not exceeding 8 years.

An element of risk is inherent in any type of loan because of the uncertainty of the

repayment. Risk involved in Term Loans is greater.

RBI treats only loans granted for periods exceeding 3 years as Term Loans.

Although the SBI Act provides for grant of Term Loan for any period, the Bank

usually restricts the repayment period of Term Loans for Commercial projects upto 7

to 10 years .As a Term Loan is granted for a fixed term, it is not payable ondemand.In exceptional cases like infrastructure project where project life is much higher, the

Bank considers grant of Term Loans with repayment periods even for more than 10

years.

PRE SANCTION CREDIT PROCESS

KEY ELEMENTS OF KYC( know your customers)

Customer Acceptance

Customer Identification

Monitoring of Transactions

Risk Management

KYC norms applicable for all Customers, including Borrowers

KYC Critical, especially for new customers.

KYC norms applicable for LC bill discounting too

INDIVIDUALS (exemptions credit summation upto Rs 1 lakh p.a.incircular, applicable for Proprietorship firms too)


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(a) Proof of identity

(i) Passport. (ii) Voter ID card (iii) PAN Card

(iv) Govt./ Defence ID card

(v) ID cards of reputed employers

(vi) Driving License

B) Proof of current address (any of the following)

(i) Credit Card Statement (ii) Salary slip

(iii) Income/Wealth Tax Assessment Order

(iv) Electricity Bill (v) Telephone Bill

(vi) Bank account statement

(vii) Letter from reputed employer

(viii) Letter from any recognized public authority

ADDITIONAL DOCUMENTS

Copy of latest Income Tax return

Nature of Business Activity/Profession

Partnership Firms: KYC NORMS :

Partnership deed

Partnership letter

Introduction from a person known to the bank

Registration Certificate (in case of Registered firm)

Any officially valid document identifying the partners

And the persons having Power Of Attorney and their

addresses

Telephone bill in the name of firms/partners.

COMPANIES : KYC NORMS


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Memorandum and Articles of Association

Certificate of Incorporation,

Certificate of commencement of business

( wherever applicable)

A copy of the resolution of the Board of

Directors for opening of the account and

Identification of those who have authority to

operate the account

KYC GUIDELINES

CUSTOMER ACCEPTANCE

Branches should not open accounts of persons whose identity can not be

verified by them. Greater care to be exercised in respect of the following:

Thorough checking of antecedents to avoid opening of accounts in fictitious/

benami name

CLOSURE OF ACCOUNTS

(in event of non compliance of KYC)

Where a branch is unable to apply appropriate KYC measures,

the branch may consider closing the account .

CUSTOMER PROFILE

For the purpose of exercising control on individual transactions in

accounts, Customer Profile of individual account holders should

be compiled in the account opening forms, covering the following

information:-

(i) Occupation

( ii) Source of funds

(iii) Monthly Income

(iv) Annual turnover

(v) Date of Birth
http://kyc/customer%20acceptance.dochttp://kyc/closure%20of%20accounts.dochttp://kyc/closure%20of%20accounts.dochttp://kyc/customer%20acceptance.doc


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(vi) Educational qualification

(vii) Details of existing credit facilities, if any

(viii) Assets (approximate value).

RISK CATEGORIZATION

All accounts (both liabilities and assets) to have a risk categorization

The categorization has to be Low Medium and High Risk.

Asset accounts risk categorization{High risk are NPAs and accounts (other than PSUs etc)with

limit > Rs 10 crores}

MONITORING OF TRANSACTIONS

It is important to recognize that the KYC process does not start and end with

opening of accounts

Cash withdrawals and deposits for Rs.10.00 lakhs and above in deposit, cash

credit and overdraft accounts to be recorded in a separate register andreported to controlling office every month.

Integrally connected to each other which have taken place within a month

and the aggregate value of such transactions exceeds Rupees Ten Lakh

VARIOUS FACTORS WHICH BANK LOOKS BEFORE

PROVIDING LOAN TO COMPANY /INDUSTRY

Industry Risks : Industry Rating, Industry Scenario & Outlook,Technology Upgradation ,availability of inputs, product obsolescence,

etc.

Business Risks: operating efficiency, competition faced from theunits engaged in similar products, demand and supply position, cost of

labour, cost of raw material and other inputs like water and electricity,

pricing of product, surplus available, marketing, etc.
http://kyc/str%20table.dochttp://kyc/integrated%20explanation.dochttp://kyc/integrated%20explanation.dochttp://kyc/str%20table.dochttp://kyc/str%20table.doc


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Financial Risks: Financial strength/standing of the promoters, reliability, pastfinancial performance, reliability of operational data and financial ratios. Qualifying

remarks of auditors /inspectors.

Following are the aspects, which need to be scrutinised and

analysed while appraising:

A) MARKET (DEMAND & POTENTIAL) The market demand and potential is to be examined for each product item and

its variants/substitutes

Critical analysis is required regarding size of the market for the product(s) both

local and export

Competition from imported goods, Government Import Policy and Import duty

structure also need to be evaluated.

B) TECHNICAL ASPECTS

Location and Site

Plant & Machinery, Plant Capacity and Manufacturing Process

C) FINANCIAL ASPECTS

Cost of Project & Means of Financing :

The major cost components of any project are land and

building including transfer, registration and development

charges as also plant and machinery, equipment for auxiliary

services, including transportation, insurance, duty, clearing,

loading and unloading charges etc.

Besides Banks loan, the project cost is normally financed by

bringing capital by the promoters and shareholders in the

form of equity, debentures, unsecured long term loans and

deposits raised from friends and relatives which are not

repayable till repayment of Bank's loan. Resources are raised

for financing project by raising term loans from

Institutions/Banks which are repayable over a period of time,

deferred term credits secured from suppliers of machinerywhich are repayable in instalments over a period of time


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Profitability Statement

The profitability statement which is also known as `Income and Expenditure

Statement' is prepared after considering the net sales figure and details of

direct costs/expenses relating to raw material, wages, power, fuel,

consumable stores/spares and other manufacturing expenses to arrive at a

figure of gross profit. Thereafter, all other expenses like salaries, office

expenses, packing, selling/distribution, interest, depreciation and any other

overhead expenses and taxes are taken into account to arrive at the figure of

net profit

Break-Even Analysis

Analysis of break-even point of a business enterprise would help in knowing the level

of output and sales at which the business enterprise just breaks even i.e. there is

neither profit nor loss.

Break-even point = Total Fixed Cost .

(Volume or Units) (Sales price_Variable Cost per unit)

Break-even point = Total Fixed Cost x Sales .

(Sales in rupees) (Sales) - (Variable Costs)

Balance Sheet Projections

The financial appraisal also includes study of projected balance sheet which gives

the position of assets and liabilities of a unit at a particular future date.

Financial Ratios

i) Debt-Equity Ratio = Debt (Term Liabilities) .

Equity (Share capital, free reserves, premium on

share)


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*Large Projects

Power - independent power producing plants

(Thermal, Hydro, Gas based)

Iron & Steel

Infrastructure (excl. power) and capital intensive

projects not specified otherwise

Real Estate

Mid/small projects

2.33:1

2.25:1

2.00:1

1.75:1

2:1

Net Profit (After Taxes) + Annual

interest on long term debt +

Debt-Service Coverage = Depreciation /.

Ratio Annual interest on long term debt +

Amount of instalments of principal

payable during the year

The ratio of 1.5 to 2 is considered reasonable. A very high ratio may indicate the

need for lower moratorium period/repayment of loan in a shorter schedule

Current Ratio = Current Assets .

Current Liabilities

Higher the ratio greater the short term liquidity.

Profit-Sales Ratio = Operating Profit *

______________________

Sales


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(Before Taxes and excluding Income from other Sources)

This ratio gives the margin available after meeting cost of manufacturing. It provides

a yardstick to measure the efficiency of production and margin on sales price i.e. the

pricing structure.

Internal Rate of Return (IRR)

IRR is that rate of discount which makes the discounted value of the net cash flow

from a project just equal to the amount which has to be invested to obtain that net

cash flow.

CASE STUDY :

THIS IS THE PROPOSAL WHICH I READ THIS WEEK

1.a) Name of the Borrower and

Constitution

M/s Anant Swaroop Narinder Kumar

(PROPRIETORSHIP CONCERN)

b) Address of Regd. Office Kalsia Road,Saharanpur

c) Works/Factory Kalsia Road,Saharanpur

d) Date of incorporation/

establishment

1995

e) Dealing with SOBP since 1998

f) Business Activity (Product)/

Installed Capacity

Rice Milling & export with capacity of I MT per

hour(Rice Sheller)

2. Branch Office/CO SME Saharanpur

Muzaffaranagar

3.a) Directors/Partners/Proprietors

(Name, Address, Phone No.,

e0.00mail

ID of main Directors/Key persons)

Shri Mukesh Kumar Jain(Prop.

b) Whether any of them, in RBIs

Caution advices/ECGC Caution

list/Wilful defaulters' list. If yes,

the reasons for considering the

proposal.

NO

c) If any of them, related to Directors/

Sr. Officers of PNB

NO

d) Management Change since last

sanction, if any

No change it is a proprietorship concern

e) Whether Memorandum of NA


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Association permits the Activity &

Powers for borrowings

f) Shareholding Pattern NA

g) Whether the profile of theborrower, its

Director/Partners/Promoters and

its Group Cos./Associate Firms

has been verified through CIBIL

database/other credit information

bureaus

If No please give reasons.

If Yes please give details.

Yes

NA

(No Adverse Report)

Credit Appraisal Format for limits upto Rs.2 crore (for SME upto Rs.5 crore)

Date of proposal 21.5.2012

Whether fresh/renewal/ enhancement/

In0.00principle

Renewal

Asset Classification as on 31.03.2012 Standard

Credit Risk Rating based on ABS ..

(Previous and current with scores and reasons

for degradation, if any)

Last PMS Score, if applicable

Customer ID No. 651373536

Activity Code

Whether sensitive sector Real estate/Capitalmarket

Applicable risk weight

No

Date of last sanction & Sanctioning Authority 10.03.2011

Chief

Manager


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Financial Position of the borrower

31.03.2009 31.03.2010 31.03.2011 31.03.2012 31.03.2013 31.03.2014

AUDITED AUDITED AUDITED PROVISIONAL PROJECTED PROJECTED

GROSS SALES 148.48 273.67 276.04 304.07 350.00 400.00

DOMESTIC 148.48 273.67 276.04 304.07 350.00 400.00

EXPORT

NET SALES 148.48 273.67 276.04 304.07 350.00 400.00

OTHER INCOME 0.00 0.00 0.00 0.00 0.00 0.00

OPERATING PROFIT 3.88 4.08 3.69 2.05 4.48 5.31

PBT 3.88 4.08 3.69 2.05 4.48 5.31

PAT3.88 4.08 3.69

2.054.48 5.31

DEPRECIATION 0.80 0.69 0.87 0.96 0.87 0.72

CASH PROFIT 4.68 4.77 4.56 3.01 5.35 6.03

PBIDTA 14.70 19.27 20.22 19.54 24.57 25.88


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PAID UP CAPITAL 5.22 7.50 11.25 11.02 15.35 18.50

RESERVE AND

SURPLUS 0.00 0.00 0.00 0.00 0.00 0.00

MISC EXP. 0.00 0.00 0.00 0.00 0.00 0.00

ACC LOSSES 0.00 0.00 0.00 0.00 0.00 0.00

DEFFERED TAX 0.00 0.00 0.00 0.00 0.00 0.00

ASSETS/LIABILITIES 0.00 0.00 0.00 0.00 0.00 0.00

NET WORTH 5.22 7.50 11.25 11.02 15.35 18.50

TOTAL

BORROWINGS 131.41 155.11 133.44 173.03 196.10 201.35

SECURED 78.52 97.59 87.09 109.33 120.00 120.00

52.89 57.52 46.35 63.70 76.10 81.35


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UNSECURED

TOTAL ASSETS 177.11 241.96 223.34 232.64 227.04 240.51

NET FIXED ASSETS 45.06 44.37 46.77 45.81 44.90 44.18

CURRENT RATIO 1.12 1.12 1.07 1.18 1.34 1.40

DEBT EQUITY RATIO 10.30 7.67 4.12 5.78 4.96 4.40

LONG TERM

SOURCES 58.98 65.02 57.60 74.72 91.45 99.85

LONG TERM USES 45.06 44.37 46.77 45.81 44.90 44.18

SURPLUS 13.92 20.65 10.83 28.91 46.55 55.67

SHORT TERM

SOURCES 118.14 176.94 165.74 157.92 135.59 140.66

SHORT TERM USES 132.05 197.59 176.57 186.83 182.14 196.33

DEIFICIT -13.92 -20.65 -10.83 -28.91 -46.55 -55.67


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This data was provided by bank. LAST 3 YEARS AUDITED BALANCE SHEET

WAS PROVIDED BY BANK. AND COMING 2 YRS PROJECTED BALANCE

SHEET 2013 -2014 WAS PROVIDED BY COMPANY TO BANK.

Comments on Financial Indicators

Sales

During F.Y. 2011-12 the firm has achieved turnover of Rs 304.06 lacs. The demand

of the product is increasing in the market and keeping in view the past trend and

future projections, the estimated sale of Rs 350.00 lacs for the F Y 2012-013 seems

to be realistic and very much achievable..

Profitability

The firm has been running continuously in profits. However during last two years,

the net profit of the firm has declined .This is due to increase in interest burden.

However the net profit is likely to improve during the current year with the increase in

turnover of the firm.

Debt equity ratio

Companys debt equity ratio in 2012 has been increased to 5.78 from 4.12 in

2011.this indicates company has less short term liquidity. The company has taken

more loans and borrowings.

Current ratio

companys cuurent ratio in 2012 is 1.18 which indicates company is highly liquid. It

can meets it short term payment capacity easily.

The companys paid up capital has descreased this yr to 11.02 from 11.25 .however

this is likely to improve during the current year to 15.35

CONDITIONS AND NORMS BY BANK BEFORE PROVIDING LOAN TO

COMPANY:

1) The firm to submit detailed stock statements along with a list of creditors

within 10 days on the close of each month, which should be checked on

monthly basis by Branch Official. Book Debts be got verified from the CA once

in a quarter.

2) No DP to be allowed against :


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a) Unpaid, obsolete, depleted, defective stocks and stocks older than 12

months,

though the same shall remain hypothecated to bank.

b) Book Debts in the name of allied/associate concern.

3) The stock to be properly stored and proper records to be maintained, which

should be checked by branch officials at the time of checking of inventory

invariably.

4) Netting of debtors/creditors shall be permitted as per bank norms.

5) The company to submit age wise details (within and beyond the cover

period) of

Book debts in the monthly stock statement as under :

Book Debts upto 90 days

Book Debts 910.00180 days

Book Debts more than 181 days The company shall deal with our bank, shall not

open current account/s with any other

bank without prior permission and shall route all sale transactions through

accounts.

6) Company to display name board inside/outside of the factory/godown/office etc.

Common seal of the company shall be affixed on the documents to be executed interms of the provisions of the Memorandum and Articles of Association of the

company.

7) The account will be collaterally secured by following :

i) Hypothecation/ Mortgage of Block Assets Immovable Properties

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Summer Internship 3 Nd 4 Weekly Report

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