Amrapali Institute

Haldwani-263139 (Nainital) Uttarakhand

A PROJECT REPORT ON CREDIT APPRAISAL PROCESS AT ING vysya bank

UNDER THE GUIDANCE OF Mr. MANISH RANGAN Branch Manager (CFD)

SUBMITTED BY ANUPAM VATS MBA (2008-2010)

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Student Declaration

This Project Has Been Undertaken For Partial Full Fillment Of The Requirement For The Award Of Degree Of Master Of Business Administration Of UK.Technical University Dehradun . This Project Was Executed In II Semester Under The Guidance Of Mr. Veer P.Gangwar(Faculty of Management) Further We Declare That This Project Is Our Original Work And Not Submitted For The Award Of Any Another Degree Or Diploma.

( PROJECT GUIDE) Mr. Veer P. Gangwar

Ashish Awasthi MBA (Batch 2008-2009)

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Acknowledgement
Summer training plays an important role in exposing a student to real life situations in an industry, to help him/ her has an insight and an understanding and prepares the student for future challenges. It was a great experience for me to work as a management summer trainee at INDUSIND BANK LTD on the project on Marketing of financial services by Indusind bank ltd. ( CFD ) through which I could learn how to work in a professional atmosphere. It is only though right guidance and genuine effort that any kind of endeavor becomes a success. The completion of this project is an ample proof of the same and hence I would like to express my gratitude to Mr. MANISH RANGAN (Branch Manager, CFD), for his invaluable assistance and constant encouragement as my project guide an how made this whole project a huge learning experience. I also owe my gratitude to Mr. ASHOK SHARMA (Marketing Officer ,CFD), Mr. MOHAN VERMA (CSSE).for their great help and cooperation. I am thankful to all my colleagues at INDUSIND BANK LTD for their help while I was working on my project.

Ashish Awasthi MBA III

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PREFACE
Last few years have witnessed major development, in the Indian financial Markets, with a direct impact on financial services exponential growth in the investor community. Sharp rise in the volume of funds mobilized in the financial markets and increased competition from private sector mutual fund and bank, emergence of mergers and acquisitions as a major aid to corporate restricting are only a few of such developments that have shaped and reshaped the discipline of financial services. As a part of INDUSIND BANK Ltd trainee (project) everyone is required to submit the project report to the company. it is also very necessary to acquire practical knowledge of the field against the theoretical base. Practical study is eminent and plays a vital role for the students for the management because classroom coaching and theoretical study alone are not enough to survive in this highly completive wolfs practical outweighs their student are supposed to learn the various principles of businesses administration conceptually but accuracy and efficiency their implementations is possible only through exposure to practical environment. I have prepared this report after taking training in INDUSIND BANK. This report discussed is of totally important aspect which i have achieved with my primary and secondary objective.

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Table of Contents S. No. Topic

App no of pages ( not to be included in report) 1 2 3 4 5 6 Corporate Internship Objectives Corporate Internship- Abstract Internship Organizations Profile vis--vis its competitors Industry Analysis Financial Statement Analysis Detailed study on the Marketing, Operations and Finance & HR functions OR Details of the specific field based project assigned during the internship Project - Conclusion & Recommendations My Take Away Key learnings Annexure & References

Page Number

7 8 10-23 29-46 47-60

61-75 76 77 78

7 8 9

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Objectives of the Corporate Internship

The purpose of Corporate Internship for a minimum time of 8 weeks is to connect theory and practice, obtain knowledge & awareness of the functioning of various departments of the corporate and its environment which is utmost necessary for the success of the budding managers. The basic objectives of the summer internship programme for the MBA students are: 1. 2. 3. 4. 5. To understand the business and competitive environment of ING Vysya Bank. To analyze and understand the financial position of ING Vysya Bank viz a viz competitors. To study the Business Banking Department of ING Vysya Bank and its practices. To facilitate in testing what I have learnt in the foundation courses in the first year. To get a feel of corporate life and its functioning & understand various interaction styles.

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ABSTRACT
I did my summer internship in ING Vysya bank. It was a business banking department and it was located in Karol Bagh. On the first day I met the branch manager of the bank Mr. Uday Choudhary. He assigned me my mentor who was the relationship manager of the business banking division of ING Vysya Mr. Anshul Dhamija. In the first week he gave me two files of the company which he himself completed. Reading those files I learnt how banks give loans, what are the important documents needed to get the sanction letter. On the second week I was assigned to do cold calling. I was given a data of another private bank. In my whole internship I made 15 customers who gave me time to meet them. And out of those 15 I converted 1 myself with the help of my mentor. The client is Sahib Textiles. They make ladies suits. On a daily routine , my time was divided. From 10 to 1 pm I use to do cold calling. After lunch I used to meet all those people who have approved and would like to meet me. After meeting them I used to come back to my office and had to report to my mentor. The client that I converted was Sahib Textiles. They make ladies suits. They needed a working capital of 4.25 crore. After checking there balanced sheet, profit and loss account statement and there last six month bank account. I gave his case to my mentor, who finally approved his loan. The financials of ING Vysya is in a very healthy stage. All the ratios are showing vast improvements, be it the capital adequacy ratio, the net profit margin. All of the financial ratios has done better than the previous years. There total assets, market cap have also gone up from the previous years. The key learning that I learnt was the fact that I saw the real corporate world. What is the pressure that each employee faces each day. I was working in a professional working environment with professional working people. This was my real learning. Apart from that I worked on real projects, learned how banks gives business loans to there customers. I also learnt how to communicate with different types of clients. Working on the real time project made me learnt how to read a bank statement. This internship also helped me make new friends like Mr. Uday Choudhary and Mr. Anshul Dhamija, who were my boss. I would thank them to give me such a immense opportunity to work with them.

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COMPANY PROFILE
ING Vysya is the joint venture between ING & Vysya ING Group INGs mission is to be a leading, global, client-focused, innovative and low-cost provider of financial services through the distribution channels of the clients preference in markets where ING can create value. ING group originated in 1990, from the merger between Nationale Nederlanden NV (the largest Dutch Insurance Company) and NMB Post Bank Group NV. Combining roots and ambitions, the newly formed company called Internationale Nederlanden Group. Market circles soon abbreviated the name to I-N-G. The company followed suit by changing the statutory name to ING Group N.V.. Since 1991, ING has grown from a Dutch company with some international business to a multinational with Dutch roots. ING Group is a global financial services company of Dutch origin with 150 years of experience, providing a wide array of Banking, insurance and asset management services in over 50 countries. Over 1,20,000 employees work daily to satisfy a broad customer base: individuals, families, small businesses, large corporations, institutions and governments. Based on market capitalization, ING is one of the 20 largest financial institutions worldwide and in the top-10 in Europe. ING is the number one financial services company in the Benelux home market. ING services its retail clients in these markets with a wide range of retail-banking, insurance and asset management. In their wholesale banking activities they operate worldwide, but also with a primary focus on the Benelux countries. In the United States, ING is a top-5 provider of retirement services and life insurance. In Canada, they are the top property and casualty insurer. ING Direct is a leading direct bank with over 11 million customers in nine large countries. In the growth markets of Asia, Central Europe and South America they provide life insurance. ING distinguishes itself internationally as a provider of employee benefits, i.e. arrangements of non-wage benefits, such as pension plans for companies and their employees Another specialization is ING Direct, an Internet and direct marketing concept with which ING is rapidly winning retail.

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Furthermore, the company differentiates itself from other financial service providers by successfully establishing life insurance companies in countries with emerging economies, such as Korea, Taiwan, Hungary, Poland, Mexico and Chile.

Vysya Bank Vysya bank came into existence in the year 1930. When the team of visionaries came together to found a bank that would extend a helping hand to those who weren't privileged enough to enjoy Banking services. Vysya Bank opened its very first branch and started its operations from Bangalore city .With a span of time it gained its strong existence in south India. Its been a long journey since then and the Bank has grown in size and stature to encompass every area of present-day banking activity and has carved a distinct identity of being India's Premier Private Sector Bank. The Bank made rapid strides to reach the coveted position of being the number one private sector Bank.

ING Vysya group in India

In India ING Vysya is into following areas of services: Banking. Life insurance. Mutual fund.

ING Vysya Bank

CORPORATE STATEMENT
ING Vysya Bank will be an entrepreneurial integrated financial services institution where innovation and transformation are the way of life. BANK PROFILE ING Vysya Bank Limited is an entity formed with the coming together of erstwhile, Vysya bank ltd, a premier Bank in the Indian Private Sector and a global financial powerhouse, ING of Dutch origin, during Oct 2002. The immediate benefit to ING Vysya Bank ltd was the pride of having become a member of global financial services giant. Bank has an asset base of 1313 billion euros. It has net profit of 9.24 billion euros. With total business turnover of over Rs.12000 crores.

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It has capital adequacy of 9.8%. Bank has an extensive network with almost 450 branches. And has a network of more than 5000 ATMs. Strong and loyal client base in corporate, trade and retail segment. And more than three million satisfied customers. Is also a part of bankex an index launched by BSE.

Further, the presence of the group in over 50 countries, employing over 1,20,000 people, serving over 85 million customers across the globe, only multiplies the credibility, not only across the country but also across the globe. The pride of this global identity, the back up of a financial power house and the status of being the first Indian International Bank, would also greatly enhance productivity, profitability resulting in improved performance for the Bank to translate into higher returns, to all the stake holders.

ING Vysya Bank deals in following area of Banking Corporate Banking Commercial Banking Treasury management Retail Banking Rural Banking Private Banking

ING Vysya life insurance

The company offers entire range of life insurance plans to meet all the financial needs of an individual- protection, saving and investment. With 50 branches across the country. With sum assured of almost of Rs 800 crore.

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And assets worth Rs 100 crore.

ING Vysya Mutual Fund

It aims to provide practical and secure investment opportunity to retail investors. Operating in 15 cities. And Rs.2800 crores plus fund house.

BUSINESS ACTIVITIES CARRIED OUT BY ING VYSYA

The various products offered by ING Vysya bank are 1) 2) 3) 4) 5) ACCOUNTS AND DEPOSITS Current accounts Saving accounts Term deposits DMAT accounts

CURRENT ACCOUNT The various sub-products in current account which ING Vysya gives are ORANGE CURRENT ACCOUNT: In today's fast-paced world, your business regularly requires you to receive and send funds to various cities in the country. ING Orange Current Account gives you the power of inter-city banking with a single account and access to more than 200 cities. ADVANTAGE CURRENT ACCOUNT: In today's fast-paced world, your business regularly requires you to receive and send funds to various cities in the country. ING Advantage Current Account gives you the power of inter-city banking with a single account and access to more than 300 cities. From personalized cheques that get treated at par with local ones in any city where we have a branch, to Free collection (if instruments are lodged directly) of outstation cheques (payable at branch locations), to free inter-city funds transfers of up to Rs.50 lakhs p.m., our priority services have become the benchmark for banking industry GENERAL CURRENT ACCOUNTS: With ING Vysya general current account you can access your account anytime, anywhere. Withdraw and deposit cash, issue and encash cheques, make balance enquires and ask for mini statements anytime, anywhere. 12 | P a g e

 COMFORT CURRENT ACCOUNT: ING's Comfort Current Account lets you save as much as Rs. 60,000 p.a. for remittance up to Rs. 25 lakhs. This is in addition to a range of other attractive benefits, as well.

SAVING ACCOUNTS
The Savings accounts are primarily meant to inculcate a sense of saving for the future and take care of individuals day to day banking requirements. These accounts are meant to help individual customers protect their money. The Savings Accounts also help individuals to handle their financial transactions through a systematic banking channel. This increases the safety as customers need not carry physical cash with them. The various products in saving accounts are ORANGE SAVING ACCOUNT ADVANTAGE SALARY ACCOUNT FREEDOM ACCOUNT GEERAL SAVING ACCOUNT SOLO SAVING ACCOUNT SARAL SAVING ACCOUNT ING FORMULA SAVING ACCOUNT ASPIRA CORPORATE SALARY SOLUTION.

TERM DEPOSITS The various term deposits are FIXED DEPOSITS: If you believe in the long term investments and wish to earn long term interest on your deposits, than invest in ING fixed deposits. With ING your money will not only be secured but will earn a good interest. CUMULATIVE DEPOSITS: With ING cumulative deposits you can invest small amounts of money that ends up large saving on maturity TAX ADVANTAGE DEPOSITS: TAD is eligible for tax exemption under section 80C of the income tax act 1981. The deposit is in the form of fixed deposit or reinvestment form of 5 year duration. The rate of interest will be according to the 5 year interest rate which will be declared by RBI from time time. AKSHAYA DEPOSITS: your deposit with interest will be reinvested every quarter to earn a higher yield.

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DEMAT ACCOUNT
With practically all trading being conducted electronically, most settlements happen through Demat (Dematerialisation of securities). The ING Demat Account offers you a secure and convenient way to keep track of your shares and investments, how much you've bought and sold over a period of time, without the hassle of handling physical documents that get mutilated or lost in transit.

2) LOANS HOME LOAN HOME EQUITY LOAN NRI LOAN MODEL POLICY

3) NRI SERVICES RUPEE SAVING ACCOUNT RUPEE CURRENT ACCOUNT RUPEE FIXED DEPOSITS ACCOUNTS FOR RETURNING INDIANS FOREIGN CURRENCY DEPOSITS MI REMIT

4) CARDS DEBIT CARDS CREDIT CARDS REMMITANCE CARD REWARD CARD

SMALL AND MEDIUM ENETRPRISES

1. BUSINESS LOANS MPOWER BUSINESS LOAN:

Small business entrepreneurs often encounter problems regarding finance. ING Vysya Bank presents a unique banking loan, specially customized for Small & Medium Business Enterprises. These loans are available for Small Business Entrepreneurs, Retailers, Shop owners, Contractors, Commission Agents and Transport Operators as well as practicing professionals like Doctors, Lawyers, Consultants, Women Entrepreneurs and any others with a credit requirement ranging from Rs. 5 lakhs upto Rs. 50 lakhs. 14 | P a g e

2) BUSINESS LOAN RENT: The Mpower rent allows loans against the security of your receivables. Individuals, propietry concerns, partership firms, public and private limited companies, tructs and registered bodies who will meet the eligibility criteria will be able to secure fast finance . 3) BUSINESS LOANS (SMALL SCALE INDUSTRIES)- CGTSI: ING is one of the member lending banks for CGTSI. ING Ltd offers loans of up to Rs 25 lakhs to SSI units under CGTSI at competitive interest rates without any collateral security and / or third party guarantee. In addition the guarantee fee payable to CGTSI would be debited to the account. CGTSI: credit gurantee fund trust for small scale industries. Minimum Loan Amount: No Minimum Amount Maximum Loan Amount: Rs 25 lacs Eligibility: The SSI units engaged in activities like manufacturing, processing or SSSBEs, including Information Technology and / or Software industry are eligible. 4) MPOWER BUSINESS ACCOUNT: MPower truly empowers you to create the business empire of your dreams. It is a working capital account that enriches small and medium business enterprises by making optimum use of your banking facility, and meeting the day-to-day needs of your business, quite like you would personally do, if you had more time. Thus, you are now free to focus on other business needs, while your MPower Business Account works hard, along with a host of conveniences to give you maximum value and benefits.

WHOLESALE BANKING
Wholesale Banking is a reflection of ING's ability to provide its corporate clients in India a full range of commercial, transactional and electronic banking products. The bank offers a wide array of client-focused corporate banking services, including working capital finance, trade and transactional services, foreign exchange and cash management, to name a few. A well-integrated approach to relationship management and innovative product development helps the bank achieve the above. The offerings take into account a client's risk profile and specific needs. The bank has made significant inroads into the formal banking consortia of a number of Indian companies including multinationals, domestic business houses and prime public sector companies, based on our superior product delivery, industry benchmark service levels and strong customer orientation. 15 | P a g e

The various offerings by the bank in the wholesale banking services are 1) 2) CASH MANAGEMANT SERVICES CORPORATE AND INVESTMENT BANKING:

The 'C&IB' manages Relationships with large Corporate in both the private and public sector. However, the primary focus of the group is to market the bank's products and services to the client base, including Lending Products, Fee Based Products, Treasury Services, Cross Border Products from ING Group, apart from also cross selling the bank's retail Products and Services. The group also crosses sells products of ING Vysya Life Insurance and ING Vysya Mutual Funds. C&IB Group is organized on a regional basis with relationship managers covering: 3) Western Region and Eastern Region out of Mumbai; Southern Region out of Bangalore, Chennai and Hyderabad; and Northern out of Delhi BANKS AND FINANCIAL INSTITUTION GROUPS:

"BFIG" works with renewed focus on the financial intermediaries in the country. BFIG's clientele includes scheduled commercial banks i.e. nationalized, private and foreign banks, some select large co-operative banks and other financial intermediaries including mutual funds, insurance companies and housing finance companies. The group also seeks to build relationship with banks that are not present in the country but the relationship can be leveraged for trade and guarantee business. The major areas of thrust for the group are fund mobilization both onshore as well as offshore, origination of ECB mandates, distribution of debt/loans, cash management services, capital market services, trade finance related transactions, asset buyouts and sell downs, distribution of ING products to Indian banks and cross sell of financial market / asset management / insurance products etc.

4)

EMERGING CORPORATES:

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The "EC" manages relationships with business units engaged in Manufacturing, Processing and Services sector. It also provides Commercial Banking Services with specific focus to Industries, relating to Diamond & Textiles. "EC", also markets the bank's Products, including cross sell of Products and Services to Retail Customers of our Corporate Clients and their Employees. Sales of Cross Border Products of ING Group and other ING entities in India are also marketed. The wide range of products comprehensively meets the business requirements with special focus on Export Credit, regular Working Capital Finance, Term Loans, Non Fund based limits like Letters of Credits, Guarantees and certain structured finance products.

FINANCIAL MARKET
ING Financial Markets, based out of Mumbai is a leading player in the Indian Financial Markets providing one of the widest ranges of products for large corporate, small and medium enterprises as well as individual needs. Supported by state-of-the-art systems and the capabilities of the ING Group, we offer competitive pricing and efficient execution across markets and a comprehensive suite of products. Financial Markets unit is an active market maker on most rupee interest rate and currency products. Within the bank, we play a key role in the Asset Liability Management and ALM strategy. To our corporate and institutional clients, we offer a comprehensive range of products for transactions and risk management needs through the sales desks at Mumbai, Delhi, Bangalore & Chennai. The Financial Markets business is driven by a highly qualified and knowledge driven team that brings together a deep understanding of local and global markets as well as complex financial products. The offering in ING financial are: 1) MARKET MAKING AND TRADING: The Market Making unit provides competitive prices on all major currency and interest rate products to the client facing Financial Market Sales teams as well as to other market participants. The product range includes the Indian Rupee, all major currencies, FX Swaps, Government of India Securities, Corporate Debt and most Rupee Interest Rate benchmarks including the Overnight Index Swaps and MIFOR. ING is one of the largest and most competitive price makers in Indian Rupee. The Trading team is driven by knowledge, focus and discipline and seeks to find value across various permitted assets and instruments for the bank's proprietary account. 2) ASSET LIABILITY MANAGEMENT: The ALM unit of Financial Markets plays a pivotal role in the formulation and implementation of the bank's Asset Liability Management 17 | P a g e

strategy. The ALM team manages the banks statutory and investment portfolios. It is also responsible for managing liquidity and interest rate risk and plays an active role in the management of Transfer Pricing within the bank. 3) FINANCIAL MARKET SALES: Financial Markets Sales team offers solutions to clients for their varied risk management needs. The Sales team is geographically distributed across offices in Delhi, Mumbai, Bangalore and Chennai to keep us closer to our clients. Strong client relationships acquired over the bank's 75 years of service in the Indian markets augment our understanding of customer needs and risk management requirements. Our highly qualified relationship managers offer the most appropriate solutions for these needs drawing on the knowledge and expertise within the ING Group.

The sales team is supported at each location by information systems providing comprehensive and up-to-date market information, tools for analysis and access to research from the ING Group. The sales teams use some of the most advanced pricing systems so as to be able to structure and price across a wide range of products. We also draw from the robust product and pricing capabilities of the ING Group and its various desks across the world to offer the best solutions for our clients. Appropriate market timing and efficient execution is a key to product delivery in Financial Markets. To aid this the Sales team is supported by a niche Structuring desk that, apart from helping in product structuring based on both client needs and market opportunities, helps in efficient execution of mandates.

AGRICULTURE AND RURAL BANKING

1) TERM LOAN: ING have identified rural banking as products and services. The term loans are categorized in these segments. 2) Poultry Dairy Wells Pump sets Tractors Plantation crops Horticulture crops Rural housing Rural godowns Micro finance institutions Swarjogar credit card. SHORT TERM LOAN: short term loan are categorized into following segments

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KISSAN credit card Working capital loan to poultry Gold loans for agriculture Produce loans against warehouse receipts

ORGANISATIONAL STRUCTURE
ING Vysya Bank follows a 3-tier structue

The regional offices are given more powers and jurisdiction so as to enable them to act quickly. Structure of a Bank Branch

From the structure we can see how the functional relationship works in a branch. He structure also explains the reporting authority for each cadre of the employees. It indicates the communication flow in the branch with well-defined accountability on the part of the employees roles.

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COMPERATIVE ANALYSIS OF ING VYSYA BANKS SAVING ACCOUNT WITH OTHER BANKS SAVING ACCOUNT

1) ING VYSYA V/S YES BANK

FEATURES ING VYSYA & YES BANK: NO. OF PRODUCTS Two: orange savings account and freedom account Two: savings account, gold savings account. Average quarterly account balance Rs.5,000 on orange, and nil for freedom Rs.10,000 for savings account and Rs.100000 for gold savings account. Fee for non maintenance of quarterly average balance Rs.600 per quarter Rs.300 for savings account and Rs.600 for gold saving account. Statement of account Quarterly free, and monthly e-statement free (if asked for). Quarterly free for both. ATM usage 4 free for freedom account, unlimited free on cirrus for orange account holders ;un limited from ING Vysya Unlimited free on all the banks in India. Regular debit card Free for first year, then Rs.150 there after. Rs.149 for savings account, free for gold savings account. Gold debit card Rs.799 D.D. Rs.50 for amt up to Rs.10,000;Rs.2.50 per 1000 for amt up to 50,000;Rs 2 per 1000 for amt greater than 50,000 Min Rs.50 then Rs.2.5 per 1000 for savings account and Rs.1.5 per 1000 for gold savings account. Pay order (P.O.) Same as above. 5 free for savings account and 10 free for gold savings account, per year. Branch transaction Free for both the account holders 5 transactions for savings account and 10 transactions for gold savings account are free per year Personalized cheque books Free Balance enquiry Free

2) ING VYSYA V/S ICICI BANK

FEATURES ING VYSYA & ICICI BANK: NO. OF PRODUCTS Two: orange savings account and freedom account Three: category A, B and C. Average quarterly account balance Rs.5,000 on orange, and nil for freedom Rs.5000 for A, Rs.2000 for B, and Rs.1000 for C. Fee for non maintenance of quarterly average balance Rs.600 per quarter Rs.750 per qtr for A & B and Rs.100 per qtr for C.

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Statement of account Quarterly free and monthly e-statement free (if asked for). Free physical statement per qtr otherwise Rs.200 per month for physical form. Free e-statement per month. ATM usage 4 free for freedom account, unlimited free on cirrus for orange account olders ;un limited from ING Vysya Rs.20/month for cash withdrawal & and Rs.60 for same with non partner banks. Regular debit card Free for first year then Rs.150 per annum. Rs.99 per annum for all the products. D.D. Rs.50 for amt up to Rs.10,000;Rs.2.50 per 1000 for amt up to 50,000;Rs 2 per 1000 for amt greater than 50,000 Rs.2 per thousand rupees or part thereof, subject to a minimum of Rs.50 Branch transaction Free for both Rs.2.50/ thousand, subject to min of Rs.30 and max of Rs.10000 Personalized cheque books Free 2 payable at par cheque books of 25 leaves each free in a quarter, Rs.50/- for additional cheque book of 25 leaves. Balance enquiry Free Rs.10 with partner banks & Rs.25 with non partner banks.

3) ING VYSYA V/S HDFC BANK

FEATURES ING VYSYA & HDFC BANK:

NO. OF PRODUCTS Two: orange savings account and freedom account. Three products: regular, savings plus & savings max; each of which are further divided into option 1 and 2.(I have taken comparative product that is option 1 of regular savings acc.) Average quarterly account balance Rs.5,000 on orange, and nil for freedom Rs.5000 Fee for non maintenance of quarterly average balance Rs.600 per quarter Rs.750 per qtr. Statement of account Quarterly free and monthly e-statement free (if asked for). Monthly statements to be Collected from branch. Quarterly statements sent by post. ATM usage 4 free for freedom account, unlimited free on cirrus for orange account holders ;un limited from ING Vysya First 4 withdrawals free of cost from any cirrus network ATM Regular debit card Free for first year then Rs.150 per annum. Rs.100 plus taxes. D.D. Rs.50 for amt up to Rs.10,000;Rs.2.50 per 1000 for amt up to 50,000;Rs 2 per 1000 for amt greater than 50,000 Rs.50 for amt up to 10000, Rs.75 for amt greater than 10000 and up to up 50000, Rs. 2.50 per 1000 or part thereof (Min Rs.150) for amt greater than 50000 Pay order (P.O.) Same as above. 22 | P a g e

Branch transaction Free for both Free 3 free in the qtr & Rs. 60 per additional transaction on non-maintenance of Min balance (cash deposit/withdrawal) Personalized cheque books Balance enquiry Free Free Free Free, Rs.5 per leaf on non maintenance of Min balance.

COMPERATIVE ANALYSIS OF ING VYSYA BANKS CURRENT ACCOUNT WITH OTHER BANKS SAVING ACCOUNT
I) ING VYSYA V/S HDFC BANK
FEATURES ING VYSYA & HDFC BANK Number of products Three: general, advantage and orange Four: plus, trade, premium, and regular. Average quarterly balance Rs.10000 for general CA, Rs.50000 for advantage CA, & Rs.100000 for orange CA Rs.100000 for plus, Rs.40000 for trade, Rs.25000 for premium, & Rs.10000 for regular. Fee for non maintenance of AQB Rs.750 pq for GCA, Rs.1500 pq for ACA, & Rs.4000 pq for OCA. Rs.6000 for plus, Rs.1200 for trade, Rs.900 for premium and Rs.750 for regular. Statement of account Free once in a month (physical or e-mail) Free once in a month Issue of cheque book Rs.2.5 per cheque leaf for GCA and free for others PAP cheque books; 300 leaves free pm for plus, 200 leaves free pm for trade, 100 leaves free pm for premium and Rs.2 per leaf for regular ATM usage Free usage of ING Vysya, Rs.45 on withdrawal from other banks Free usage of HDFC bank ATMs. Issue of international debit card Free for 1st year, Rs.150 there after Free for first year Transfer from one account to other (intercity) Free for all Free for all D.D/P.O. Free as per schedule for GCA, free up to 50 lkhs per month then charges as per schedule for rest, in case of ACA and for OCA free up to 200 lkhs then charges as per schedule on the greater amount. Free up to 50 DDs per month. Above 50 transactions, charges @ Rs. 25/per DD for plus, Free up to 30 DDs per month. Above 30 transactions, charges @ Rs. 25/- per DD for trade; DD Amount Up to Rs. 50,000 charges Rs. 40/- per DD, Above Rs. 50,000 and up to Rs. 100,000- Rs. 25/-, Above Rs. 100,000- Free for premium and DD Amount Up to Rs.50,000 charges Rs.40/- per DD, Above Rs.50,000 and up to Rs.100,000- Rs.25/-, Above Rs.100,000- Free for regular. 23 | P a g e

Charges for PAP cheque payments Rs.0.50/1000 with a min of Rs.5 per payment in case of GCA, free up to cumulative value of 50 lkhs pm then same is followed as in GCA, for OCA free up to a cumulative value of 200 lkhs pm then same is followed as in GCA. Free in the manner as stated above. Balance enquiry Rs.15 for all Rs.25 for all

2) ING VYSYA V/S YES BANK

FEATURES ING VYSYA & YES BANK: Number of products Three: general, advantage and orange Four: CA 25, CA 75, CA 200 and CA 500. Average quarterly balance Rs.10000 for general CA, Rs.50000 for advantage CA, & Rs.100000 for orange CA Rs.25000, Rs.75000, Rs.200000 and Rs.500000 respectively for the above products. Fee for non maintenance of AQB Rs.750 pq for GCA, Rs.1500 pq for ACA, & Rs.4000 pq for OCA. Rs.1000, Rs.1500, Rs.2000, and Rs.4000 respectively for the above products. Statement of account Free once in a month(physical or e-mail) Free once in a month. Issue of cheque book Rs.2.5 per cheque leaf for GCA and free for others Rs.2 per leaf for CA 25 and unlimited free for the rest. ATM usage Free usage of ING Vysya, Rs.45 on withdrawal from other banks Information not available. Issue of international debit card Free for 1st year, Rs.150 there after Information not available. Transfer from one account to other (intercity) Free for all Rs.25 lakhs per month subsequent 0.50 per Rs.1000 for CA 25, Rs.50 lakhs per month subsequent 0.50 per Rs.1000 for CA 75, and unlimited for the rest. D.D/P.O. Free as per schedule for GCA, free up to 50 lkhs per month then charges as per schedule for rest, in case of ACA and for OCA free up to 200 lkhs then charges as per schedule on the greater amount. DD:2 Free Per Month Min-Rs.100 Max-Rs.5000 for CA 25, 5 Free Per Month subsequent Rs.1.75 per rs.1000 or part there of Min- Rs.100 Max-Rs.5000 for CA 75, 5 Free Per Month subsequent Rs.1.50 per rs.1000 or part there of Min- Rs.100 Max-Rs.5000 for CA 200 and free for CA 500. PO: 2 Free Per Month Subsequent 0.75 per Rs.1000. Min- Rs.75 Max- Rs.5000 for CA 25, 5 Free Per Month. Subsequent 0.75 per Rs.1000. Min- Rs.75 Max- Rs.5000 for CA 75 and free for the rest. 24 | P a g e

Charges for PAP cheque payments Rs.0.50/1000 with a min of Rs.5 per payment in case of GCA, free up to cumulative value of 50 lkhs pm then same is followed as in GCA, for OCA free up to a cumulative value of 200 lkhs pm then same is followed as in GCA. Free unlimited Balance enquiry Rs.15 for allInformation not available

BANKING INDUSTRY ANALYSIS

STRUCTURE BANKS IN INDIA: In India banks have separated in different groups. Each group has its own benefits and limitation operating in India. Each has its own dedicated target market. Few of them work in rural sector while others work in both rural and urban. Many of them are catering in cities. Some of them are of Indian origin while others are of foreign origin. The banks in India are:

GROWTH TRENDS The Indian banking market is growing at an astonishing rate, with assets expected to reach US$1 trillion by 2010. An expanding economy, middle class, and technological innovations are all contributing to this growth. The countrys middle class accounts for over 320 million people. In correlation with the growth of the economy, rising income levels, increased standard of living, and affordability of banking products are promising factors for continued expansion. The Indian banking Industry is in the middle of an IT revolution, focusing on the expansion of retail and rural banking. Players are becoming increasingly customer-centric in their A approach, which has resulted in innovative methods of offering new banking products and services. Banks are now realizing the importance of being a big player and are beginning to focus their attention on mergers and acquisitions to take advantage of economies of scale and/or comply with Basel II regulation. Indian banking industry assets are expected to reach US$1 trillion by 2010 and are poised to receive a greater infusion of foreign capital, says Prathima Rajan, analyst in Celent's banking group and author of the report. The banking industry should focus on having a small number of large players that can compete globally rather than having a large number of fragmented players."

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TECHNOLOGY IN BANKING In the six decades of independence banking has evolved in four different phases. During the fourth phase important initiatives were taken with regard to improve the banking system. The entry of foreign banks resulted in a paradigm shift in the way banking was done in India. The arrival of foreign banks and private banks with there superior state of the art technology pushed the Indian banks to adopt latest technology in market, so that they could retain there customer base. Information technology has been used under two different avenues in banking. One is communication and connectivity and other is Business process reengineering. Information technology enables sophisticated product development, better market infrastructure, implementation of reliable techniques for control of risks and help the financial intermediaries reach geographically distant and different market. In India banks as well as other financial entities entered the world of information technology and with Indian financial network(INFINET). INFINET, a wide area satellite network (WAN) using VSAT(very small aperture technology) was jointly set up by Reserve Bank of India and Institute for Development and research for banking in1999. INFINET which was initially comprised only public sector banks was opened for participation by other categories of members. The information technology act 2000 has given legal recognition for creation, transmission, and retention of electronic data to be treated as a valid proof in the court of law. The Reserve Bank of India has assigned priority to the up gradation of technology in the banks. Substantial progress has been made for developing a modern, efficient, integrated and secure payment and settlement system for the financial service sectors. Modernization of clearing and settlement system through MICR based cheque clearing, popularizing electronic clearing services (ECS) and integration of RBI-EFT scheme with funds transfer schemes of bank, introduction of centralized fund management system (CFMS) are significant milestones in this regard. The coverage of electronic clearing services has been significantly effective to encourage non paper based fund and develop a centralized facility for effective payment. The scheme for electronic fund transfer operated by the reserve bank has been augmented and now it is present in 13 cities. The centralized fund management system (CFMS) which would enable banks to obtain account wise and centre wise position of their balances has been implemented in a phased manner from November 2001. Membership of INFINET has been opened to all the banks in addition to those in the public sector banks. At the base of all the interbank message transfers using the INFINET is the structured financial messaging system (SFMS). It would serve as a secure communication carrier with templates for intra and interbank messages in a strict message format that will facilitate straight through messaging. All the interbank messages will be stored and switched to central hub at Hyderabad while the intra bank messages will stored in the bank gateway. Security standards of SFMS will match the international standards.

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Information technology has immense untapped potential in banking. Strengthening the information technology in banks could improve the effectiveness of asset liability of banks. Building up of a related data base would strengthen and enhance the forecasting of liquidity of banks at the branch level. This could enhance the risk management capabilities of banks.

LEGAL/ REGULATORY ISSUES RELATED TO BANKING Banks works under various legal frameworks most important of them are, the Banking regulation act 1949, Basel II norms, RBI act, Negotiable Instruments act.

BANKING REGULATION ACT 1949 The banking regulation act was passed as banking companies act and it came into force in 16/3/49. Subsequently it was changed to Banking regulation act on 1/3/66.

BASEL II NORMS Basel II is the second of the Basel accords which are recommendation on the banking laws and regulations issued by banking committee on banking supervision. The purpose of Basel II norms is to create international standards that banking regulators can use when creating regulations about how much capital does banks needs to put aside to guard against the types of financial and operational risks banks face. Advocates of Basel II believe that such an international system can help protect the international financial system from many types of problem that arise should a bank or a series of banks collapse. In practice Basel II attempts to accomplish this by setting up rigorous risks and capital management requirement designed to ensure that the banks hold capital reserves appropriate to the risks the banks exposes itself to through its investment and lending practices. Generally speaking this rules says that the greater the risk the bank exposes itself, the greater the capital bank requires to safeguard its solvency and overall economic stability.

OBJECTIVES OF BANK REGULATION The objectives of bank regulation, and the emphasis, vary between jurisdiction. The most common objectives are : 1. Prudential -- to reduce the level of risk bank creditors are exposed to (i.e. to Protect depositors) 2. Systemic risk reduction -- to reduce the risk of disruption resulting from Adverse trading conditions for banks causing multiple or major bank failures. 3. Avoid Misuse of Banks -- to reduce the risk of banks being used for criminal laundering the proceeds of crime. 27 | P a g e Purposes, e.g.

4. To protect banking confidentiality 5. Credit allocation -- to direct credit to favored sectors

GENERAL PRINCIPAL OF BANK REEGULATION Banking regulations can vary widely across nations and jurisdictions. This section of the article describes general principles of bank regulation throughout the world.

MINIMUM REQUIREMENT Requirements are imposed on banks in order to promote the objectives of the Regulator. The most important minimum requirement in banking regulation is Minimum capital ratios.

SUPERVISIORY REVIEW Banks are required to be issued with a bank license by the regulator in order to carry on business as a bank, and the regulator supervises licensed banks for compliance with the requirements and responds to breaches of the requirements through obtaining undertakings, giving directions, imposing penalties or revoking the bank's license.

MARKET DISCIPLINE The regulator requires banks to publicly disclose financial and other information, and depositors and other creditors are able to use this information to assess the level of risk and to make investment decisions. As a result of this, the bank is subject to market discipline and the regulator can also use market pricing information as an indicator of the bank's financial health.

BANKING STANDARDS Recognizing that it is necessary, in the public interest, to ensure that banks evolve comprehensive codes and standards for fair treatment of customers of banks It is necessary to have an independent watch dog to ensure that banks deliver services in accordance with such codes and standards; It is necessary to ensure that the institutional mechanism is autonomous, independent and effectively monitors and enforces the compliance of such Codes and Standards. In November 2003, RBI constituted the Committee on Procedures and Performance Audit of Public Services under the Chairmanship of Shri S.S.Tarapore (former Deputy Governor) to address the issues relating to availability of adequate Banking Services to common man. The mandate to the Committee included identification of factors that inhibited the attainment of best 28 | P a g e

customer services and suggesting steps to improve the quality of banking services to individual customers. The Committee felt that in an effort to continuously upgrade the package of services that banks offered to their customers there was a need of benchmarking of such services. After in depth study at the grass root level the Committee concluded that there was an institutional gap for measuring the performance of banks against a bench mark reflecting the best practices (Code and Standards). Therefore, the Committee recommended setting up of the Banking Codes and Standards Board of India broadly on the lines of Banking Codes and Standards Board functioning in U.K. The Banking Codes and Standards Board of India has been registered as a separate society under the Societies Registration Act, 1860. Therefore, it would function as an independent and autonomous body. The Banking Codes and Standards Board of India is not a Department of the RBI. Reserve Bank has agreed to lend it financial support for a limited period. It is an independent banking industry watch dog to ensure that the consumer of banking services get what they are promised by the banks. To ensure that the Board really functions as an autonomous and independent watchdog of the industry, the Reserve Bank also decided to extend financial support to the Board by way of meeting its full expenses for the first five years. This was to enable the Board to reach its economic critical mass that will make it truly independent in its functioning and take a view on any bank without its existence coming under any threat. On its part, RBI would derive supervisory comfort in case of banks which are members of the Board. In substance, the Board has been set up to ensure that common man as a consumer of financial services from the banking Industry is in a no way at a disadvantageous position and really gets what it has been promised.

MARKET ANALYSIS THE PRODUCT MIX: The banks primarily deal in services and therefore, the formulation of product mix is required to be in the face of changing business environmental conditions. The changing psychology, the increasing expectations, the rising income, the changing lifestyles, the increasing domination of foreign banks and the changing needs and requirements of customers at large make it essential that they innovate their service mix and make them of world class. Against this background, we find it significant that the banking organizations minify, magnify combine and modify their service mix. PRODUCT PORTFOLIO: The bank professionals while formulating the product mix need to assign due weight-age to the product portfolio. By the concept product portfolio, emphasis is on including the different types of services/ schemes found at the different stages of the product life cycle. The portfolio denotes a combination or an assortment of different types of products generating more or less in proportion to their demand. The quality of product portfolio determines the magnitude of success. It is excellence of bank professionals that help them in having a sound product portfolio.

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We find the composition of a family sound, if members of all the age groups are given due place. Like this, the composition or blending of a service mix is considered to be sound, if well established and likely to be profitable schemes are included in the mix. The bank professionals are supposed to perform the responsibility of composing the same. An organization with a sound product portfolio gets a conducive environment and successes in increasing the sensitivity of marketing decisions. If the banks rely solely on their established services and schemes, the multidimensional problems would crop up in the long run because when the well established services/schemes would start saturating or generating losses, the commercial viability of banks would of course, be questioned. It is in this context, that we find designing of a sound product portfolio essential to an organisation. We cant deny that the product portfolio of the foreign banks is found sound since they keep their eyes moving. The innovation, diffusion, adoption and elimination processes are taken due care. The public sector commercial banks need to innovate their service and this makes a strong advocacy in favour of analyzing the product portfolio.

THE PRICE MIX

In the formulation of product mix, the pricing decisions occupy a place of outstanding significance. The pricing decisions or the decisions related to interest and fee or commission charged by banks are found instrumental in motivating or influencing the target market. The Reserve Bank of India and the Indian Banking Association are concerned with the regulations. The rate of interest is regulated by the RBI and other charges are controlled by the Indian Banking Association. To be more specific in the Indian setting, we find this component of the marketing mix significant because the banking organizations are also supposed to sub serve the interests of weaker sections and the backward regions. The public sector commercial banks in particular are supposed to play developmental role with societal approach. It is natural that this specific role of the public sector commercial banks complicates the problem of pricing. Pricing policy of a bank is considered important for raising the number of customers vis--vis the accretion of deposits. Of course, there are a number of factors to influence the process but it is also right to mention that the key role in the entire process is played by the Reserve Bank of India. To be more specific when we find a number of domestic and foreign banks working in the Indian economy, the Reserve Bank of India bears the responsibility of making the business environment conductive. The non-banking organizations and foreign banks have been found attracting customers by offering to them a number of incentives. The potential customers or investors frame their investment plans in the face of pricing decisions made by the banking organizations. While formulating the pricing strategies, the banks have also to take the value satisfaction variable into consideration. The value and satisfaction cant be quantified in terms of money since it differs from person to person, keeping in view the level of satisfaction of a particular segment, the banks have to frame their pricing strategies. The policy makers are required to be sure that the services offered by them are providing satisfaction to the customers concerned. The pricing decisions may be to bit liberal, if the potential customers are found

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shifting to the non-banking investments. In this context, it is pertinent that pricing is used as motivational tool. The banking organizations are required to frame two-fold strategies. First, the strategy is concerned with interest and fee charged and second, the strategy is related to the interest paid. Since both the strategies throw a vice-versa impact, it is pertinent that banks attempt to establish a correlation between the two. It is essential that both the buyers as well as the sellers have a feeling of winning as shown in figure. The RBI has to be more liberal so that the public sector commercial banks make decisions in the face of changing business conditions. There is no doubt in it that the commercial banks bear the responsibility of energizing the social marketing, they are also supposed to bear the social costs. It is also right that the foreign banks have been found making the business environment more competitive. These emerging trends necessitate a close look on the pricing problem. The policy makers find it difficult to bring a change since the regulations of the RBI make things more critical. The expenses are not regulated by the RBI and the banking organizations are forced to increase the budgetary provisions. The sources of revenue are regulated which complicates the task of bank professionals. This makes it essential that the Reserve Bank of India, the Government of India and the banking organizations thing over this complicated issue with a new vision.

PROMOTION MIX
In the formulation of marketing mix the bank professionals are also supposed to blend the promotion mix in which different components of promotion such as advertising, publicity, sales promotion, word-of-mouth promotion, personal selling and telemarketing are given due weight age. The different components of promotion help bank professionals in promotion the banking business. Advertising: Like other organizations, the banking organizations also us this component of the promotion mix with the motto of informing, sensing and persuading the customers. While advertising, it is essential that we know about the key decision making areas so that its instrumentality helps bank organization both at micro and macro levels. Finalizing the Budget: This is related to the formulation of a budget for advertisement. The bank professionals, senior executives and even the police planners are found involved in the process. The formulation of a sound budget is essential to remove the financial constraint in the process. The business of a bank determines the scale of advertisement budget. Selecting a Suitable vehicle: There are a number of devices to advertise, such as broadcast media, telecast media and the print media. In the face of budgetary provisions, we need to select a suitable vehicle. The latest developments in the print technology have made print media effective. The messages, appeals can be presented in a very effective way.

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Making Possible creativity: The advertising professionals bear the responsibility of making the appeals, slogans, messages more creative. The banking organizations should seek the cooperation of leading advertising professionals for that very purpose. Instrumentality of branch managers: At micro level, a branch manager bears the responsibility of advertising locally in his / her command area so that the messages, appeals reach to the target customers of the command area. Of course we find a budget for advertisement at the apex level but the business of a particular branch is considerably influenced by the local advertisements. If we talk about the cause-related marketing, it is the instrumentality of a branch manager that makes possible the identification of local events, moments and make advertisements conditionoriented. Public Relations: Almost all the organization need to develop and strengthen the public relations activities to promote their business. We find this component of the promotion mix effective even in the banking organizations. We cant deny that in the banking services, the effectiveness of public relations is found of high magnitude. It is in this context that we find a bit difference in the designing of the mix of promoting the banking services. Of course in the consumer goods manufacturing industries, we find advertisements occupying a place of outstanding significance but when we talk about the service generating organizations in general and the banking organizations in particular, we find public relations and personal selling bearing high degree of importance. It is not meant that the banking organizations are not required to advertise but it is meant that the bank executives unlike the executives of other consumer goods manufacturing organizations focus on public relations and personal. Personal Selling: The personal selling is found instrumental in promoting the banking business. It is just a process of communication in which an individual exercise his/her personal potentials, tact, skill and ability to influence the impulse buying of the customers. Since we get in immediate feed back, the personal selling activities energies the process of communication very effectively. The personal selling in an art of persuasion. It is a highly distinctive form of promoting sale. In personal selling, we find inter-personal or two-way communication that makes the ways for a feed back. There is no doubt in it that the goods or services are found half sold when the outstanding properties are well told. This are of telling and selling is known as personal selling in which an individual based on his/her expertise attempts to transform the prospects into customers. Sales Promotion: It is natural that like other organisations, the banking organizations also think in favour of promotional incentives both to the bankers as well as the customers. The banking organizations make provisions for incentives to the bankers and call this bakers promotion. Like this, the incentives offered to the customers are known as customers promotion. There are a number of tools generally used in the different categories of organizations in the face of the nature of goods and services sold by them. The gift, contests, fairs and shows, discount and commission, entertainment and traveling plans for bankers, additional allowances, low interest financing and retalitary are to mention a few found instrumental in promoting the banking

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business. As and when the banking organizations offer new services and schemes, the tools of sales promotion are required to be innovated. This is with the motto of stimulating the new and old customers. An important thing in the very context is the changing needs and requirements of customers/prospects. The bank professionals bean outstanding task of studying the competitors strategies which would he them in initiating the process of innovation. Here it is important to mention the promotional incentives to the customers would focus on decisions related to the selection of a tool. There are a number of considerations to streamline the process. The bank professionals are supposed to study the market conditions and make necessary suggestions, specially regarding the incentives. It is a blending process and bank professional have to be sure the whatever the provisions, they make are fulfilled on priority basis. More incentives more efficiency or a vice-versa conditions more efficiency, more-incentives motivate bankers substantially.

THE PLACE MIX

This component of the marketing mix is related to the offering of services. The two important decision making areas are making available the promised services to the ultimate users and selecting a suitable place for bank branches. The selection of a suitable place for the establishment of a branch is significant with the viewpoint of making the place accessible and in addition, the safety and security provisions are also found important. The banking organizations are not free to open a branch since the Reserve Bank of India regulates the subject of branch expansion but so far as the management of branch is concerned, the branch managers have option to select a place which is convenient to both the parties, such as the users and the bankers. In the Indian perspective, the protection to the banks assets and safety to the users and bankers need due weight age. The vulnerable area or regions need adequate provisions to make the branch safe. The management of office is also found significant with the viewpoint of making the services attractive. The furnishing, civic amenities and parking facilities cant be overlooked. Another important decision making area is related to the offering of services. This draws our attention on the behavioral profile of bankers. The bankers in general and the front-line-staff in particular bear the responsibility of making available the services-promised to the ultimate users without any distortion often a gap is found generated by front-line-staff that makes an invasion on the image of bank. The bank professionals or a branch manager is required to be sure that whatever the promise have been made regarding the quality of services are not distorted. The RBI and the different public sector commercial banks are required to manage the distribution process intelligently and professionally. Thus, the place mix is found to be an important decision making area which requires due attention, both at macro and micro levels. If the banking organizations sell the promises it is essential that the end users get the same without any distortion.

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THE PEOPLE Sophisticated technologies, no doubt, inject life and strength to our efficiency but the instrumentality of sophisticated technologies start turning sour if the human resources are not managed in a right fashion. Generation of efficiency is substantially influenced by the quality of human resources. It is against this background that a majority of the management experts make a strong advocacy in favour of developing quality people and late, the people management has been include dint he marketing mix of organizations is general and the service generating organizations in particular. Not only the public sector commercial banks but almost all the public sector organization and albeit other government departments, of late, have been facing the problem of quality people resulting into inefficiency, deceleration in the rate of overall productivity and profitability or so. The front-line staff are rough and indecent, the branch mangers are helpless and even the bankers have been found involved in the unfair practices. The public sector commercial banks need to assign on overriding priority to the development of quality people majority of the management of the experts have realized the significance of quality people in the development of an organization and the boardrooms are also found changing their attitudes. The first task before the banking organizations at the apex level is to overhaul the recruitment processes. While fixing criteria for selection, they need to assign due weight age to the ethical values. The education and training facilities are required to be innovated. The process of identification and inculcation need to be managed carefully. The foreign banks and the private sector commercial banks reward for efficiency and at the same time also demotivate the inefficient bankers. This helps them in improving the efficiency of even the inefficient people. The development of human resources makes the ways for the formation of human capital. Incentives, of course, inject efficiency and the organizations offering more incentives succeed in motivating the people. Having better and cost-effective control over operations. Enriching the job content of employees at all level (by reducing the drudgery of mundane operations and increasing the analytical content of their work). Improving the quality of decision-making, a must in the fast changing environment.

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MACRO vs MICRO ECONOMIC ANALYSIS PROBLEMS FACED BY INDIAN ECONOMY

FALL IN SAVINGS RATIO

The savings ratio is the % of income that is saved not spent. A fall in the savings ratio implies that consumer spending is increasing; often this is financed through increased borrowing.

EFFECTS OF FALL IN SAVINGS RATIO

HIGHER LEVEL OF CONSUMPTION

This results in increase in Aggregate Demand. The increase in AD will cause an increase in economic growth and lower unemployment. However, rising Aggregate Demand may cause inflation. Inflation will occur when growth is faster than the long run trend rate. This is now a potential problem in the India. Inflation has recently gone above 12%

BOOM AND BUST

A fall in the savings ratio is usually accompanied by a rise in confidence. It is the rise in confidence which encourages borrowing and consumers to run down savings. Therefore, there is always a danger that a falling savings ratio can be a precursor to a boom and bust situation.

ECONOMY MORE SENSITIVE TO INTEREST RATES

With a fall in the savings ratio interest rate changes will have a bigger effect in reducing spending. This is because levels of borrowing are higher and therefore a rise in interest rates has a significant impact on increasing interest repayments. Also, higher rates will not be increasing incomes from savings as much.

BALANCE OF PAYMENT

With higher levels of consumer spending, there will be an increase in imports. Therefore this will lead to deterioration in the current account. The current account deficit could put downward pressure on the exchange rate in the long term. However, some people argue a fall in the savings ratio is not a problem, but, it is just a reflection of strong economy and booming housing market, which increases scope for equity withdrawal.

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INFLATION

Inflation is posing a serious challenge to the economic growth of India. Since Jan08 onwards, inflation in the country has surged by 8.2% to hit a 13-year high of ~12%. M3 growth in the economy too continued to remain strong at 20% (in July08), well above the RBIs comfort level of 17%. The WPI inflation rate flared up during the period driven by significant increase in the prices of commodities, primary articles and manufactured products, even though very small part of global crude price increase has been passed on to the Indian consumers.

GLOBAL RECESSION

It appears that Europe, Japan and the US are entering into recession. Falling house prices, crisis in the financial system, and lower confidence could lead to a sharp downturn, with the worst still to come. Many argue that Indias growth is not so dependent on growth in the West. However, the Indian stock markets have been hit by the global crisis. Indias growing service sector and manufacturing sector would be adversely impacted by a global downturn.

RISE IN CRUDE PRICES

How global crude prices would behave probably has no easy answers; however we believe that the current challenging and uncertain macro-economic conditions does not lead Indian financials into a state of crisis. But continued rise in crude prices and its resultant impact on inflation, interest rates and government finances has the potential to do so. Hence, crude price remains the key risk to our positive stance on the Indian financials. In the last couple of months oil prices have surged by 45% from US$ 100 to US$ 145 (and now back to US$ 115). India currently imports 70% of its crude requirement, resulting in pressure on government coffers on back of rising crude prices.

DEPRICIATING INR

Surge in crude prices has severely impacted current account deficit of the country. This coupled with the outflow of FII investments has resulted in INR to depreciate sharply against dollar further fueling inflation.

IMPACT OF ECONOMIC PROBLEMS ON INDIAN FINANCIALS The current macro-economic conditions are expected to result in

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SLOWDOWN IN CREDIT GROWTH IMPACT ON MARGINS OF BANKS PREASURE ON CREDIT QUALITY SLOWDOWN IN CREDIT GROWTH

While the rise in interest rates should lead to a moderation in demand for credit, Indian banks too are exercising caution while lending. Credit growth of 18% in FY09E and 17% in FY10E vs. 22% in FY08. Risks and uncertainties in the system have increased given the higher crude and commodity prices and its inflationary impact. This would curtail consumption, which would impact economic growth adversely. Further higher rates will not only impact the profitability of Indian corporate but also impact IRRs of various proposed capex projects. This coupled with elections next year could lead to some postponement of capex plans of corporate, leading to negative impact on demand for credit. Higher rates have particularly impacted retail loan growth. As can be seen in the exhibit below, retail loan growth has slowed down significantly from 26.5% in FY07 to ~13% in FY08. SLR Ratio of the system has started rising since mid FY08 and currently stands at 28.7%. Given the expected negative impact on credit growth.

IMPACT ON MARGINS OF BANKS

During the past 18 months, CRR has increased by 400 bps to 9.0% currently and RBI has also discontinued with interest payment on CRR balances. Every 50 bps hike in CRR generally negatively impacts margins by ~5 bps. Till June08, most of the banks had restrained from hiking lending rates despite significant monetary tightening. However on account of recent measures by RBI, banks have resorted to hiking PLRs in July/August by 50-150 bps to preserve their margins. In fact in an environment, where liquidity is tight, interest rates are at elevated levels and risk premiums have increased, the banks tend to regain the pricing power. This would not only help the banks to adequately price in risks but also help protect their margins. Apart from hiking PLRs, banks are also resorting to reprising (in fact right-pricing) the loans that were sanctioned well below PLRs. Significant portion of fixed rate loans would also get re-priced over the period of 12-18 months.

PRESSURE ON CREDIT QUALITY

Higher lending rates are expected to impact credit quality for the banking system. The extent of the impact on credit quality would also be bank specific given the loan mix (retail vs. corporate), proportion of unsecured lending, credit profile of corporate loan book and industry wise exposure. Indian banks fundamentals are relatively resilient with better risk management systems, dramatically improved asset quality, stronger recovery mechanisms (legal provisions) and with adequate capitalization and provisioning. Even Certain sectors (like real estate, airlines industry) might feel the stress due to the changing macro environment and rise in interest rates. Many companies where crude forms a key raw material component are expected to get hit more severely. Similarly, sectors like real estate and 37 | P a g e

SMEs, which are interest rate sensitive, would face higher delinquencies if interest rates strengthen further by 100-200 bps.

NECESSARY INITIATIVES TAKEN BY RBI & MINISTRY OF FINANCE TO TACKLE ECONOMIC PROBLEMS As most of economists feel that the most horrible problem which India is facing currently is inflation which has crossed 12%. To come out of these problems RBI and ministry of finance and other relevant government and regulatory entities are taking various initiatives which are as follows... RBI MONITORY POLICY

With the introduction of the Five year plans, the need for appropriate adjustment in monetary and fiscal policies to suit the pace and pattern of planned development became imperative. The monitory policy since 1952 emphasized the twin aims of the economic policy of the government: Spread up economic development in the country to raise national income and standard of living, and To control and reduce inflationary pressure in the economy.

This policy of RBI since the First plan period was termed broadly as one of controlled expansion, i.e.; a policy of adequate financing of economic growth and at the same time the time ensuring reasonable price stability. Expansion of currency and credit was essential to meet the increased demand for investment funds in an economy like India which had embarked on rapid economic development. Accordingly, RBI helped the economy to expand via expansion of money and credit and attempted to check in rise in prices by the use of selective controls.

OBJECTIVES OF MONITORY POLICY PRICE STABILITY MONITORY TARGETTING INTEREST RATE POLICY RESTRUCTURING OF MONEY MARKET REGULATION OF FOREIGN EXCHANGE MARKET

WEAPONS OF MONITORY POLICY Central banks generally use the three quantitative measures to control the volume of credit in an economy, namely:

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o o o

Raising bank rates Open market operations and Variable reserve ratio

However, there are various limitations on the effective working of the quantitative measures of credit control adapted by the central banks and, to that extent, monetary measures to control inflation are weakened. In fact, in controlling inflation moderate monetary measures, by themselves, are relatively ineffective. On the other hand, drastic monetary measures are not good for the economic system because they may easily send the economy into a decline. In a developing economy there is always an increasing need for credit. Growth requires credit expansion but to check inflation, there is need to contract credit. In such a encounter, the best course is to resort to credit control, restricting the flow of credit into the unproductive, inflationinfected sectors and speculative activities, and diversifying the flow of credit towards the most desirable needs of productive and growth-inducing sector. It should be noted that the impression that the rate of spending can be controlled rigorously by the contraction of credit or money supply is wrong in the context of modern economic societies. In modern community, tangible, wealth is typically represented by claims in the form of securities, bonds, etc., or near moneys, as they are called. Such near moneys are highly liquid assets, and they are very close to being money. They increase the general liquidity of the economy. In these circumstances, it is not so simple to control the rate of spending or total outlays merely by controlling the quantity of money. Thus, there is no immediate and direct relationship between money supply and the price level, as is normally conceived by the traditional quantity theories. When there is inflation in an economy, monetary restraints can, in conjunction with other measures, play a useful role in controlling inflation.

FISCAL POLICY

Fiscal policy is another type of budgetary policy in relation to taxation, public borrowing, and public expenditure. To curve the effects of inflation and changes in the total expenditure, fiscal measures would have to be implemented which involves an increase in taxation and decrease in government spending. During inflationary periods the government is supposed to counteract an increase in private spending. It can be cleared noted that during a period of full employment inflation, the aggregate demand in relation to the limited supply of goods and services is reduced to the extent that government expenditures are shortened. Along with public expenditure, governments must simultaneously increase taxes that would effectively reduce private expenditure, in an effect to minimise inflationary pressures. It is known that when more taxes are imposed, the size of the disposable income diminishes, also the magnitude of the inflationary gap in regards to the availability of the supply of goods and services. In some instances, tax policy has been directed towards restricting demand without restricting level of production. For example, excise duties or sales tax on various commodities may take away the buying power from the consumer goods market without discouraging the level of production. However, some economists point out that this is not a correct way of combating inflation because it may lead to a regressive status within the economy. 39 | P a g e

As a result, this may lead to a further rise in prices of goods and services, and inflation can spread from one sector of the economy to another and from one type of goods and services to another. Therefore, a reduction in public expenditure, and an increase in taxes produces a cash surplus in the budget. Keynes, however, suggested a programme of compulsory savings, such as deferred pay as an anti-inflationary measure. Deferred pay indicates that the consumer defers a part of his or her wages by buying savings bonds (which, of course, is a sort of public borrowing), which are redeemable after a particular period of time, this is sometimes called forced savings. Additionally, private savings have a strong disinflationary effect on the economy and an increase in these is an important measure for controlling inflation. Government policy should therefore, include devices for increasing savings. A strong savings drive reduces the spendable income of the consumers, without any harmful effects of any kind that are associated with higher taxation. Furthermore, the effects of a large deficit budget, which is mainly responsible for inflation, can be partially offset by covering the deficit through public borrowings. It should be noted that it is only government borrowing from non-bank lenders that has a disinflationary effect. In addition, public debt may be managed in such a way that the supply of money in the country may be controlled. The government should avoid paying back any of its past loans during inflationary periods, in order to prevent an increase in the circulation of money. Anti-inflationary debt management also includes cancellation of public debt held by the central bank out of a budgetary surplus. Fiscal policy by itself may not be very effective in combating inflation; therefore a combination of fiscal and monetary tools can work together in achieving the desired outcome.

DIRECT MEASURES

Direct controls refer to the regulatory measures undertaken to convert an open inflation into a repressed one. Such regulatory measures involve the use of direct control on prices and rationing of scarce goods. The function of price control is a fix a legal ceiling, beyond which prices of particular goods may not increase. When ceiling prices are fixed and enforced, it means prices are not allowed to rise further and so, inflation is suppressed. Under price control, producers cannot raise the price beyond a specified level, even though there may be a pressure of excessive demand forcing it up. In times of the severe scarcity of certain goods, particularly, food grains, government may have to enforce rationing, along with price control. The main function of rationing is to divert consumption from those commodities whose supply needs to be restricted for some special reasons; such as, to make the commodity more available to a larger number of households. Therefore, rationing becomes essential when necessities, such as food grains, are relatively scarce. Rationing has the effect of limiting the variety of quantity of goods available for the good cause of price stability and distributive impartiality. Another control measure that was suggested is the control of wages as it often becomes necessary in order to stop a wage-price spiral. During galloping inflation, it may be necessary to apply a wage-profit freeze. Ceilings on wages and profits keep down disposable income and, 40 | P a g e

therefore the total effective demand for goods and services. On the other hand, restrictions on imports may also help to increase supplies of essential commodities and ease the inflationary pressure. However, this is possible only to a limited extent, depending upon the balance of payments situation. Similarly, exports may also be reduced in an effort to increase the availability of the domestic supply of essential commodities so that inflation is eased. In general, monetary and fiscal controls may be used to repress excess demand but direct controls can be more useful when they are applied to specific scarcity areas. As a result, antiinflationary policies should involve varied programmes and cannot exclusively depend on a particular type of measure only.

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 FINANCIAL ANALYSIS This section will show, how ING Vysya has done financially over the last three years(20052008). We will calculate all the financial ratios including the banking ratios also, to show how ING Vysya fair up against its competitors. To do that I will be using the last three years balance sheet, profit and loss account, and cash flow statement of ING Vysya.

BALANCE SHEET FROM THE YEAR (2005-2008)

Mar '06 12 mths

Mar '07 12 mths

Mar '08 12 mths

Total Share Capital Equity Share Capital Share Application Money Preference Share Capital Reserves Revaluation Reserves Net Worth Deposits Borrowings Total Debt Other Liabilities & Provisions Total Liabilities

90.72 90.72 0.00 0.00 817.41 111.54 1,019.67 13,335.26 1,107.45 14,442.71 1,304.29 16,766.67

90.90 90.90 0.00 0.00 901.60 110.78 1,103.28 15,418.59 843.55 16,262.14 1,920.87 19,286.29

102.47 102.47 0.00 0.00 1,323.67 109.52 1,535.66 20,498.06 1,249.81 21,747.87 2,256.39 25,539.92

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Mar '06 12 mths

Mar '07 12 mths

Mar '08 12 mths

Cash & Balances with RBI Balance with Banks, Money at Call Advances Investments Gross Block Accumulated Depreciation Net Block Capital Work In Progress Other Assets Total Assets Contingent Liabilities Bills for collection Book Value (Rs)

841.65 281.68 10,231.53 4,372.34 676.23 383.02 293.21 112.20 634.06 16,766.67 10,986.42 2,850.13 100.10

945.81 645.89 11,976.17 4,527.81 681.06 394.33 286.73 109.24 794.65 19,286.30 17,462.28 3,033.30 109.18

2,263.53 921.23 14,649.55 6,293.32 706.82 429.31 277.51 121.70 1,013.06 25,539.90 32,959.36 3,096.69 139.17

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PROFIT AND LOSS ACCOUNT FROM 2005-2008

Profit & Loss account of ING Vysya Bank ------------------- in Rs. Cr. ------------------Mar '06 Mar '07 Mar '08 12 mths 12 mths 12 mths

Interest Earned Other Income Total Income

1,222.43 190.31 1,412.74

1,401.38 248.57 1,649.95

1,680.44 418.57 2,099.01

Interest expended Employee Cost Selling and Admin Expenses Depreciation Miscellaneous Expenses Preoperative Exp Capitalised Operating Expenses Provisions & Contingencies Total Expenses

741.25 234.19 161.58 37.20 229.47 0.00 572.17 90.27 1,403.69

859.31 238.48 170.16 37.98 255.10 0.00 576.51 125.21 1,561.03

1,182.05 302.39 140.70 38.93 279.99 0.00 645.49 116.52 1,944.06

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Mar '06 12 mths Net Profit for the Year Extraordinary Items Profit brought forward Total Preference Dividend Equity Dividend Corporate Dividend Tax 9.06 0.00 -34.60 -25.54 0.00 0.00 0.00

Mar '07 12 mths 88.91 0.00 1.29 90.20 0.00 5.91 1.00

Mar '08 12 mths 154.95 0.00 18.44 173.39 0.00 15.37 2.61

Earning Per Share (Rs) Equity Dividend (%) Book Value (Rs)

1.00 0.00 100.10

9.78 6.50 109.18

15.12 15.00 139.17

Transfer to Statutory Reserves Transfer to Other Reserves Proposed Dividend/Transfer to Govt Balance c/f to Balance Sheet Total

-26.84 0.00 0.00 1.29 -25.55

64.85 0.01 6.91 18.44 90.21

53.85 0.00 17.98 103.53 175.36

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CASH FLOW STATEMENT

Cash Flow of ING Vysya Bank

------------------- in Rs. Cr. ------------------Mar '06 Mar '07 Mar '08 12 mths 12 mths 12 mths 21.52 -202.67 127.63 308.12 251.46 1426.23

Net Profit Before Tax Net Cash From Operating Activities Net Cash (used in)/from Investing Activities Net Cash (used in)/from Financing Activities Net (decrease)/increase In Cash and Cash Equivalents Opening Cash & Cash Equivalents Closing Cash & Cash Equivalents

-74.90

-17.62

-35.55

286.41

177.87

202.38

8.84 1114.50 1123.33

468.37 1123.33 1591.70

1593.06 1591.70 3184.76

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RATIO ANALYSIS LIQUIDITY RATIOS

Liquidity ratios measures the ability of the firm to meet its current obligations (liabilities). The most common ratios that indicate the extent of liquidity or lack of it are 1) 2) CURRENT RATIOS QUICK RATIOS

3) CASH RATIOS

CURRENT RATIOS Current ratio is calculated by dividing current asset by current liabilities. Current ratio = current assets / Current liabilities. For ING VYSYA the current ratios for last three years are. 2005-06 CURRENT RATIOS 1.66 2006-07 2.02 2007-08 2.42

As a conventional rule current ratios of 2: 1 is considered satisfactory. Looking at the current ratios of ING Vysya we can see that in the year 2005-06 the current ratio was 1.66, which is well below the standard. This shows that in 2005-06 the bank was not in the position to pay it current obligations. But in the years 2006-07 and 2007-08 the current ratio of the bank has been improving. This shows that the bank has higher safety now, because there are more current assets than current liabilities. NET WORKING CAPITAL RATIOS Net working capital is the difference between current assets and current liabilities. It is considered that the bank having larger NWC has the greater ability to meet its current obligations. Net working capital ratios = NWC / Net assets 2005-06 NWC ratio 48 | P a g e 1.03 2006-07 1.11 2007-08 1.19

From the table above we can see that the net working capital ratio of the bank has been increasing, which shows that the bank is much more secured now, as it can pay its current liabilities.

PROFITABILITY RATIOS
Profitability ratios are used to asses a business ability to generate earnings as compared to expenses over a period over a time. The various profitability ratios that we will use are 1) Return on net worth 2) Interest spread 3) Earning per share 4) Net profit margin

NET PROFIT MARGIN

Net profit divided by net revenues, often expressed as a percentage. This number is an indication of how effective a company is at cost control. The higher the net profit margin is, the more effective the company is at converting revenue into actual profit. The net profit margin is a good way of comparing companies in the same industry, since such companies are generally subject to similar business conditions. However, the net profit margins are also a good way to to compare companies in different industries in order to gauge which industries are relatively more profitable. The profit margin is mostly used for internal comparison. It is difficult to accurately compare the net profit ratio for different entities. Individual businesses' operating and financing arrangements vary so much that different entities are bound to have different levels of expenditure, so that comparison of one with another can have little meaning. A low profit margin indicates a low margin of safety: higher risk that a decline in sales will erase profits and result in a net loss

NET PROFIT MARGIN

2005-06 .87

2006-07 6.7

2007-08 7.8

As can be seen that from the data, in 2005-06 the bet profit margin of ING Vysya was just 8.7% but in 2006-07 and 2007-08( 67% and 78%) the NPM has constantly been increasing. This shows that the bank is converting its revenues into profit. This shows that the bank is safe and there is lower risk.

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RETURN ON NET WORTH/RETURN ON EQUITY

Return on net worth is used as a measure of a financial institutions profitability. It reveals how much profit a company generates with the money a equity shareholders have invested. It is also called return on equity. ROE/RONW = net income 100 Shareholders equity

RONW

2005-06 1.11%

2006-07 9.36%

2007-08 11%

As can be seen from the table the return on net worth or return on equity was very less in 200506(1.11%), but after that in the year 2006-07 the banks ROE/RONW started increasing. This means that for each rupee invested by the shareholders 9.36% was returned in the form of earning. In 2007-08 the banks RONW increased to 11%.

INTEREST SPREAD Interest spread is the difference between the average lending rate and the average borrowing rate for a bank or other financial institution. It is: interest income interest earning assets) - (interest expense interest bearing liabilities This is very similar to interest margin. If a bank's lending was exactly equal to its borrowings (i.e. deposits plus other borrowing) the two numbers would be identical. In reality, bank also has its shareholder's funds available to lend, but at the same time its lending is constrained by reserve requirements. Changes in the spread are an indicator of profitability as the spread is where a bank makes its money 2005-06 4.51 2006-07 4.23 2007-08 5.24

INTEREST SPREAD

We can see in the table that the interest margin has been swinging. In 2006-07 the interest margin came down from the previous year which means the bank didnt made money as compared to last year. But in 2007-08 the interest margin went to 5.24. this is an indicator of profitability and proves that the bank is making money.

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BALANCE SHEET RATIOS

In banking the two most important ratios that are looked very closely are 1) Capital adequacy ratio 2) Return on assets 3) Loan/advances funds%

CAPITAL ADEQUACY RATIO

CAR is a ratio of banks capital to its risk. National regulators tracks banks CAR to ensure that it can absorb reasonable amount of loss and are complying with the banking statutory capital requirements. Capital adequacy ratio is the ratio which determines the capacity of the bank in terms of meeting the time liabilities and other risk such as credit risk, operational risk, etc. In the simplest formulation, a bank's capital is the "cushion" for potential losses, which protect the bank's depositors or other lenders. Banking regulators in most countries define and monitor CAR to protect depositors, thereby maintaining confidence in the banking system The percent threshold (9% in this case, a common requirement for regulators conforming to the Basel Accords) is set by the national banking regulator. 9% is for the existing banks. 2005-06 9.32 2006-07 10.12 2007-08 11.31

CAPITAL ADEQUACY RATIO

From the table it can be seen that ING Vysya has always had the minimum requirement capital adequacy ratio. So in that point it can be concluded that the bank has always been safe.

RETURN ON ASSETS
An indicator of how profitable a bank is relative to its total assets. ROA gives an idea as to how efficient management is at using its assets to generate earnings. Calculated by dividing a company's annual earnings by its total assets, ROA is displayed as a percentage. Sometimes this is referred to as "return on investment". The formula for return on assets is: 2005-06 .05% 2006-07 .13% 2007-08 .52%

Return on assets

As can be seen from the table that the return on assets has been increasing as the years have gone by. The ratio is significantly low as compared to other private banks, but it is catching up on it.

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LOAN / ADVANCES FUNDS

Loans/advances constitute a major chunk of a banks assets. These also yield returns by way of interest income which contributes the largest percentage of banks profits. Lending of funds to traders, business, enterprises constitutes the main business of banking. Banks are financial intermediaries and lend the funds of depositors who themselves do not want to lend in the business directly.

Loan / advances funds%

2005-06 73.12

2006-07 78.1

2007-08 81.3

It can be seen from the table above that ING Vysyas loan/ advances funds I % terms have been increasing. This is a good data. Because the main profit of loans and advances is to earn profit by way of interest spread. The more the lending percentage will be the more will be profit;

DEBT COVERAGE RATIOS

Also known as the Debt Service Coverage Ratio (DSCR), the debt coverage ratio measures your ability to pay the property's monthly mortgage payments from the cash generated from renting the property. Bankers and lenders use this ratio as a guide to help them understand whether the property will generate enough cash to pay rental expenses and whether you will have enough left over to pay them back on the money you borrowed. The DCR is calculated by dividing the property's annual net operating income (NOI) by a property's annual debt service. Annual debt service is annual total of your mortgage payments (i.e. the principal and accrued interest, but not your escrow payments). The various debt coverage ratios are 1) Credit deposit ratio 2) Investment deposit ratio 3) Cash deposit ratio

CREDIT DEPOSIT RATIO

It is the proportion of loan-assets created by banks from the deposits received. The higher the ratio, the higher the loan-assets created from deposits. Some experts contend that a high creditdeposit ratio could lead to a rise in interest rates. Consider Bank X which has deposits worth Rs. 100 crores and a credit-deposit ratio of 60 per cent. That means Bank X has used deposits worth Rs. 60 crores to create loan-assets. Only Rs. 40 crores is available for other investments. Now, the Indian government is the largest borrower in the domestic credit market. The government borrows by issuing securities (G-secs) through auctions held by the RBI. Banks, thus, lend to the government by investing in these G-secs. And Bank X has only Rs. 40 crores to invest in G-secs. If more banks like X have lesser money to invest in G-secs, what will the government do? After all, it needs to raise money to meet its expenditure. The government has two options. One, it can 52 | P a g e

raise yields to make investment by banks in G-secs attractive. Or two, force the RBI to take the securities into its books. Both the options have a tendency to push up interest rates in the economy. Yields on G-secs serve as a benchmark for interest rates on other debt instruments. A rise in the former, thus, pushes up interest rates on the latter. But why should interest rates rise if RBI takes G-secs into its books? Because, by doing so, the RBI releases fresh money into the system. If the money so released is large, ``too much money will chase too few goods'' in the economy resulting in higher inflation levels. This would prompt investors to demand higher returns on debt instruments. In other words, higher interest rates. 2005-06 69.18 2006-07 73.21 2007-08 70.12

DEBT COVERAGE RATIO

It can be seen from the table that the debt coverage ratio of ING Vysya has been moving up and down. A high debt coverage ratio means higher interest rate for the bank. So it can bee see that in 2007-08 the debt coverage ratio has been less than 2006-07, but still it is on the higher side.

CASH DEPOSIT RATIO

Historically, and in banking theory, the cash-deposit ratio is a measure of the liquidity of banks' assets. Cash consists of cash in the vaults of banks, and balances with the Reserve Bank of India. The regulatory authorities of central banks would like to fix minimal cash ratios and to vary it according to macro policy requirements. In India, there is a minimal requirement of 3 per cent for the cash-deposit ratio. Banks like to keep the cash ratio higher than the minimum for various understandable reasons. In theory, cash does not earn banks any interest but when the RBI moves up the ratio, it often tends to pay some interest on the excess cash maintained with it. This is with a view not to hurt the earnings of banks too much in the context of regulatory requirement. 2005-06 5.82 2006-07 6.94 2007-08 9.12

CASH DEPOSIT RATIO

As it can be seen from the data, the cash deposit ratio of ING Vysya has been at satisfactory level. And it has contantantly been increasing.

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COMPARISION WITH KOTAK MAHINDRA

Bank Name Last price ING Vysya 211 Kotak Mahindra 668 Market cap 2165.11 23158.70 Net int. income 2239.45 3065.14 Net profit 188.8 276 Total assets 31858.34 28711.78

RATIO ANALYSIS OF KOTAK MAHINDRA

PROFITABILITY RATIOS Profitability ratios are used to asses a business ability to generate earnings as compared to expenses over a period over a time. The various profitability ratios that we will use are 1) Return on net worth 2) Interest spread 3) Net profit margin

NET PROFIT MARGIN

NET PROFIT MARGIN

2005-06 17.12

2006-07 15.65

2007-08 15.12

As can be seen from the table net profit margin of Kotak Mahindra has been decreasing, the reason can be that they are not able to convert revenue into net profit. Thats the reason the net profit is going down and the net profit margin is showing low.

RETURN ON NET WORTH/RETURN ON EQUITY

ROE/RONW = net income

100

Shareholders equity 2005-06 14.2 2006-07 11.18 2007-08 8.7

RONW

As can be seen from the table, the return of net worth is going down which suggests that the net income generated by the bank is very low as compared to the equity invested.

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INTEREST SPREAD
INTEREST SPREAD 2005-06 4.55 2006-07 5.06 2007-08 6.3

This shows that the interest margin of kotak Mahindra is going up for consecutive years. The reason can be that the bank is earning a good margin in the interest rate. That is the difference between the average lending rate and the borrowing rate. This also shows that the bank is making money.

BALANCE SHEET RATIOS

In banking the two most important ratios that are looked very closely are 1) Capital adequacy ratio 2) Return on assets 3) Loan/advances funds%

CAPITAL ADEQUACY RATIO

2005-06 CAPITAL ADEQUACY RATIO 11.23 2006-07 13.12 2007-08 18.31

The capital adequacy ratio of kotak has been constantly increasing. The average CAR which national banking regulator has set is 8%. This shows that kotak is less risqu.

LOAN / ADVANCES FUNDS

Loan / advances funds% 2005-06 95.34 2006-07 90 2007-08 86.3

The advances% has been decreasing for kotak. This means that the company is not able to earn profit by the way of interest spread.

RETURN ON ASSETS
The formula for return on assets is 2005-06 3.6 2006-07 3.4 2007-08 4.5

Return on assets

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As can be seen from the table that the return on assets has been increasing as the years have gone by. The ratio is significantly low as compared to other private banks, but it is catching up on it.

DEBT COVERAGE RATIOS CREDIT DEPOSIT RATIO

DEBT COVERAGE RATIO 2005-06 98.43 2006-07 94.23 2007-08 96

The credit deposit ratio of kotak mahindra is too much as compared to other banks. A higher credit deposit means higher interest rate. The average for all banks is around 66%.

CASH DEPOSIT RATIO

2005-06 2006-07 2007-08 CASH DEPOSIT RATIO 6 6.5 8.68 `` As it can be seen from the data, the cash deposit ratio of ING Vysya has been at satisfactory level. And it has constantly been increasing.

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PROJECT CREDIT APPRAISAL PROCESS

1) 2) 3) 4) 5) Login of the credit file. To watch out that weather the case is doable or not. Preparation of the note. Appraisal by the risk department. Sanction letter.

STEP FIRST: LOGIN OF THE CREDIT FILE

In this very first step, the marketing team of the bank gets the cases on the basis of their references and the data in their hand .After that the marketing will handle over the case to the credit department along with the necessary documents for further process of the case. Following is the list of necessary documents required to log in a case Duly filled application form. Audited financials of last three years. Provisional financials of last year (if audited is not available) Bank statement of last six months(through which bank A/c the firm does the maximum banking) ITR (Income Tax Return) of Promoter/ Property owner. Vintage proof. Sanction letter of prevailing limit (if any). CIBIL FORM Once all the documents are completed for log in .The case is shown in MIS as a log in by credit department.

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STEP TWO: DECISION OF GO-NO-GO CRITERIA BY THE CREDIT DEPARTMENT

Once all the login documents are completed the process of checking of do ability (GO/NO GO) is done. In this very step the dedupe checkup is to be done. In this dedupe checkup we do a check out weather there is any overdue or default on the borrower side or not. Once the dedupe checkup is clear the credit team prepare the finspred (software for analyzing the financials) for the case with the help of the audited financials .And also check out the track record in the bank statement of client .We can check the track record with the help of the following things. Counts of credit transactions Total amount of credit transactions (%of the ratio to turnover) Counts of debit transactions Total amount of debit transactions (%to the ratio of expenditure) Number of INWARD cheque returns Number of OUTWARD cheque returns Timely payment of EMIs and Interest.

After preparing the finspread on the basis of certain ratios and track record of bank statement the credit team decides that the case is doable or not. Following are the some of the main parts or ratios on which the bank gives more emphases while to judge that the case is doable or not. LEVERAGE of the company must have the leverage of 6 according to the bank norms (i.e. TOL/TNW total outstanding liability, tangible net worth) CURRENT RATIO of the company MPBF (Maximum Permissible Bank Finance) DSCR (debt security coverage ratio) in case of term loan Profitability ratio (like gross profit margin, EBIDTA rate, PAT margin)

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THIRD STEP: NOTE PREPARATION

Once the case is to be approved as doable a set query is send to the marketing team for further movement of case or we can say for the preparation of note In the note the credit team summarizes up all the details of the borrower. NOTE WRITING INCLUDES THE FOLLOWING Business background Process of business. comment on financial statement of the company Future plan of the company and comments on the projection. Bank statement analysis Promoters background Market reference of the client Industry scenario Detailed terms & condition of the sanction including:

Type of limit to be sanctioned (fund based CC / OD/ TL/ PC/ WCDL etc & non fund based LC/BG/For ex limit etc.) Amount of Limit to be sanctions Rate of interest (for fund based facility) and rate of commission (for non fund based facility) and processing fee Detail of security (primary and collateral) Detail of Personal guarantee. Other terms & conditions as required.

And other information specific to case to case. Once the note is prepared the case is sent to the centralized risk management department (CRMD).the risk department is totally independent from credit department the credit department sent the prepared note to risk department to examine the proposal.

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STEP FOUR: APPRAISAL BY THE RISK DEPARTMENT

In this step the risk department scrutinizes the whole proposal and they bring out the observations, and send a list of query to the credit department. As and when credit department will get a list of query raised by the risk department they replies on the same with help of the marketing department start working on them to solve out the quires along with the help of marketing department. After solving all the observation the case s uploaded for sanction to the appropriate authority as per the delegation of power by the bank.

STEP FIVE: SANCTION

After the uploading of the case, the case is presenting by the credit department along with marking department to the appropriate author for the sanction of the case. During the presentation of the case various observation are raised by the appropriate sanction author and on the basic of discussion, the authority decide to approve / reject or withdrawn for modification. If case is withdrawn for modification for the adding of some information or document. The credit department along with mark modifies the proposal as required by authority and again uploads the same and discuss with the authority to get it approved or rejected. Once the case got sanctioned minutes are generated. On the basis of minutes the CAL (Credit Agreement Letter) are prepared and issued to customer.

METHODOLOGY USED The credit appraisal process at ING Vysya bank

The credit appraisal process at ING Vysya bank is considered very thorough and conservative the bank undertakes the above steps to complete the credit appraisal process. 1. Meet the client: The bank has appointed various Relationship managers( RM) and executives who find the clients with credit requirements for their business, if the RM are satisfied with the client and its expectation with the bank the case goes to the regional office for a complete check and evaluation. 2. Take KYC Documents& Application form: The RM after the first course of interaction with the client asks for the various document required to appraise the project. KYC documents as mentioned in the policy guidelines are Know your customer(KYC) the customer can be best known with his financials and other vintage proofs mentioned in the requirement list. 61 | P a g e

3. Initial Dedupe Check: This is better known as initial de-duplication checks in this the bank checks the credit reporting of the client whether he holds any over-dues etc. The bank also checks the client in RBI defaulter list. 4. Check the Banking: The first thing the bank checks is the banking of the existing limit account if any, the bank tries to check the existing performance of client with the other banks, and in case more number of inward returns due to in-sufficiency of funds. Then this is also a deviation and if there is over utilization of the limit on all the days then this calls for accountability by the client. 5. Audited financial test: The bank under takes a complete check of financials as mentioned in the requirements, these audited financials are put in finspread software of the bank and then projections are made on the basis of financials and then various profitability ratios are analyzed and the financial soundness of the company is analyzed. The financial viability of the company is checked on various parameter as mentioned. 6. Deviation check: The bank after checking the financial soundness of the company goes for the verification of the deviation check of policy compliance, if any in case of major deviations the case is presented in front of the zonal credit committee, their decision stands the final verdict on the approval f the case. 7. Internal Verification: The bank through its various sources makes a complete thorough investigation of the handling of business of the clients, this enables the bank to make sure that the client is not forging with the financials of the company. 8. Approval by ZCC: If the credit limit is below Rs5oo lakhs then the approval is sought by Zonal head of the business banking and if the amount exceeds the above stated amount then the case is first discussed by ZCC and is then presented on ECC(electronic credit committee) depending upon the policy compliance failed by the client. 9. Decision on disbursal of loan: When the case is presented to risk department it analyses the variety of risk involved in the sanctioning of loan if it crosses the parameters then the possibility of disbursal of loan declines then the ZCC makes its final approval on the limits required by the client and the limit deserved by the client, the bank makes it final way to the approval of the loans. 10. Discussion between client &Bank on approval: The banks proposes its terms and conditions to the client and the amount of loan that is approved to the client at what rate of interest and what proportion of collateral is kept by the bank, when the client agrees on all these terms then only the case reaches the sanctioning stage.

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CONCLUSIONS

The credit appraisal process carried out at ING is sound and bank has good parameters to appraise the project. The credit department thoroughly analyses the credit requirement of the company and the capacity to service the debt. The bank has conservative norms to appraise the project the bank at the max. Allows a 20% hike in projections. The credit appraisal passes through various stages and evaluations before it is appraised.

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RECOMMENDATIONS

Process should be made faster. All the documents required to appraise the project should be asked at the time of application only rather than later by the bank The bank must bring more transparency in appraisal of the project there should be explanation for a appraisal of the project that was sanctioned by higher authority. The bank must not rely on software or information provided by the client the bank should dig in for other sources in order to draw a real picture for the company. At the time of projections due to lack of documents, the projections are done Without any basis like depreciation in the audited years is not accumulated depreciation

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MY TAKE AWAY- KEY LEARNINGS

Through this project of mine I got exposure of working in professional environment which in itself was a great experience. I also felt that there is vast difference between academic theory and its practical applicability. I found that summer training project provides a lot of learning opportunities. I gained a lot of knowledge about the practical aspect of fieldwork. I also got familiarized with the credit appraisal process for SMEs. My exposure to the outer world through my training had given me a chance to relate my theoretical knowledge with its practical applicability. I have become more confident and I have also improved on my sense of appreciation.

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ANNEXURE & REFERENCES LINKS

www.worldbank.org.in www.ingvysyabank.com www.rbi.org.in www.mospi.nic.in www.moneycontrol.com www.indiainfoline.com www.bankinginfo.com

BOOKS
Financial Management- Theory & Practice by Prasana Chandra, Tata McGRAW HILL. (7th Edition) Marketing Management-by Philip Kotler, Pearson Education Ltd. (13th Edition)

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