Shaivya Srivastava Final Report

A Final Report On ACHIEVING CUSTOMER DELIGHT THROUGH PRODUCT INNOVATION AND DELIVERY.
By
Shaivya Srivastava 10BSPHH011079
13/05/2011
Kotak Mahindra Bank Pvt. Ltd.
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A Final Report On
ACHIEVING CUSTOMER DELIGHT THROUGH PRODUCT INNOVATION AND DELIVERY.
BY Shaivya Srivastava 10BSPHH011079 A report submitted in Partial fulfilment of The requirements of MBA Program of IBS Hyderabd For Kotak Mahindra Bank Pvt. Ltd
Distribution List: 1. Mr.PVSSR Anjaneyulu (Associate Vice President- TFE)
2. Professor K Siva Reddy
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AUTHORISATION
The project report titled as Achieving Customer Delight Through Product Innovation And Delivery has been authorized by Prof. K Siva Reddy, faculty guide, IBS Hyderabad as a part of the evaluation for Summer Internship Program. The project has been submitted as a partial fulfillment of the requirement of Masters of Business Administration (MBA) Program of ICFAI Business School, Hyderabad.
Submitted By: Shaivya Srivastava (10bsphh011079)
Date: May 13, 2011
Submitted To: Prof. K Siva Reddy IBS Hyderabad & Mr.PVSSR Anjaneyulu Associate Vice President- TFE KMBL, Sumajigudda Branch
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ACKNOWLEDGEMENT
This report has been made possible because of the support and guidance of many people. I am grateful to Mr. Shripad Jadhav (Senior Vice President), Kotak Mahindra bank Limited for providing me the opportunity to be associated with such a reputed organization and giving me complete freedom in going about with the project.
I express sincere thanks to my company guide Mr.PVSSR Anjaneyulu (Associate Vice President- TFE) for his encouragement, support and valuable guidance throughout the project duration. The project was quite unknown to me and required lot of knowledge and guidance. In spite of being fraught with unending engagements in office, he kept motivating me to try best at all times. I am also thankful to Mr. Ramesh Kuchibhotla (State Credit Head) and Mr. T Srinivas (State Marketing Head) for giving me a chance to work on live projects.
I would also like to express my gratitude to the whole TFE team at Kotak Mahindra Bank Limited services for constantly elucidated upon my repetitive queries.
I would like to take this opportunity to thank Prof. K Siva Reddy - Faculty Guide, IBS Hyderabad, for being a very supportive and helpful. His constant motivation and willingness to help at any point of time have been key factors in the successful completion of the report.
At this point of time, I would also like to thank all members at KMBL, friends and my family who provided me valuable insights and have been very supportive and friendly in providing an environment for learning. Lastly, I would like to thank ICFAI Business School, Hyderabad and Kotak Mahindra Bank Limited, Hyderabad for providing me an opportunity to gain hands-on experience by working in a corporate environment.
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TABLE OF CONTENTS
AUTHORISATION ........................................................................................................................ 3 ACKNOWLEDGEMENT........................................................................................................................... 4 EXECUTIVE SUMMARY............................................................................................................................. 7 1. Introduction. ........................................................................................................................ 10 2. Objective of the Project .......................................................................................................................... 11 3. Methodology ....................................................................................................................... 11 4. Limitations......................................................................................................................... 12 5. Indian Banking Sector ............................................................................................................................. 13 5.1 Reserve Bank of India ....................................................................................................................... 15 5.2 Reserve Bank of India on Agri Financing ........................................................................................ 17 6. About Kotak Mahindra Bank of Limited.................................................................................................. 18 History .................................................................................................................................................... 18 Vision ...................................................................................................................................................... 20 7. General process of loan followed by KMBL ............................................................................................ 21 7.1. Credit Policy of KMBL ................................................................................................................... 22 8. Credit Analysis & Appraisal Process in Kotak Mahindra bank Ltd. ......................................................... 23 8.1 Introduction ....................................................................................................................................... 23 The Business of Lending..................................................................................................................... 23 8.2 Credit Specific Parameters in the Appraisal Process ........................................................................ 24 8.2.1 Purpose....................................................................................................................................... 24 8.2.2 Sources of Payment .................................................................................................................... 25 8.2.3 Refinancing ................................................................................................................................ 25 8.2.4 Covenants ................................................................................................................................... 26 8.2.5 Collateral .................................................................................................................................... 27 8.2.6 Know Your Client Norms .......................................................................................................... 28 8.3 Role Played by Credit Appraisal/Analysis........................................................................................ 29 8.5 Credit Rating of the Borrower .......................................................................................................... 32 8.5.1 Credit Rating Symbols of Kotak Mahindra Bank Limited ........................................................ 34 8.6 Risk Control Unit Process Flow........................................................................................................ 35 8.7 APPROVAL & POST DISBURSAL ............................................................................................... 37 Kotak Mahindra Bank Pvt. Ltd. Page 5
9. Market Share of KMBL ............................................................................................................................ 38 10. CUSTOMER RESEARCH .......................................................................................................................... 40 CUSTOMER SATISFACTION RESEARCH SURVEY ....................................................................... 41 10.1 Findings of the Customer Survey.................................................................................................... 43 11. DEALER RESEARCH 51 11.1 Findings of the Dealer Survey. ....................................................................................................... 53 12. Findings. ............................................................................................................... 58 13. Recommendations. ................................................................................................................. 59 14. Conclusion ............................................................................................................ 61 15. References ...................................................................................................................... 62
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EXECUTIVE SUMMARY
I Shaivya Srivastava have done my internship under Kotak Mahindra Bank Limited in their Tractor and Farm Equipment loan department. Customer Satisfaction is critical for growth of banking business. With customers being spoilt for choice with multiple banks striving to attract them to their fold, the way one services the client is the key to acquisition and retention of client. Kotak Mahindra is a comparatively new bank and has grown remarkably in the last decade to be among the top private banks in India. The project was undertaken to evaluate whether the bank was able to achieve customer delight through its services and what extra efforts needs to be undertaken at bank to raise the customer satisfaction level. The project undertaken for study had the primary objective of studying whether Kotak Mahindra Bank was achieving customer delight through product innovation and delivery. Loans are an integral part of a bank and India having its major population in the rural areas requires a lot agricultural financing. Therefore, I decided to make loans in tractor and farm equipment (TFE) sector as the focus of my study. The project emphasizes on analyzing the lending structure of the TFE department and improving it. The loan is generally provided at a cost, referred to as interest on the debt, which provides an incentive for the lender to engage in the loan. In a legal loan, each of these obligations and restrictions is enforced by contract, which can also place the borrower under additional restrictions known as loan covenants. The process followed by the TFE department of Kotak Mahindra Bank Limited is as follows The Purpose/Need of Loan Customer Analysis The amount of loan. Studying the Credit Specific Parameters The various Credit Risk involved in lending to the borrower The Credit Rating of the Borrower Sensitivity Analysis of the Variables to check the borrowers ability to pay back the loan. The Analysis of the documents submitted by the borrower Approval and Post Disbursal Analysis
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I started off by first studying and gaining information about Kotak Mahindra bank Limited and looking at the regular operations conducted in the environment. This helped me in understanding the nature of operations and business of the company. Further, to achieve a better understanding, I studied the details about the various schemes, which bank provides to its tractors and farm equipment borrowers. The various schemes are meant for Dealers and Customers. This was followed by studying the memorandum of process and policies of different departments under TFE. It included the study of the above mentioned points in detail for the better understanding of the flow of the process. Further by involving myself in the current working of the bank, I learned how Field Investigation is done, the Credit Appraisal Method, Risk Control Method and Operations undertaken by the bank. I visited different districts and remote villages to understand the working of the bank. In these visits I personally took cases and understood how field investigation is done. I even revisted the customers for their risk control analysis and interviewed the customer on their satisfaction level with the loan. I also conducted a customer satisfaction survey and a dealer satisfaction surver by collecting primary data using a questionnare as a tool. All of this is gave me a deep insight of the whole process by studying the policies and doing a technical evaluation of it, by calculating IRR and interest rates, assessing the credit risk by working with the credit rating model, inspecting the live customer and seeing their current progress, by involving myself in the meetings with dealers and the customers. This whole process is followed up by the branchs Tractor and Farm Equipment team very effectively and efficiently, which can be seen in their performances and in maintaining 0.28% NPAs till date. With my understanding of the process, I have tried to suggest methods to improve the loan structure of the banks. Some of the suggestions were to increase the man power to efficiently service the dealers and customers and to improve their data management system such that efficient data mining can be done to preempt loan defaults and also give an opportunity to crosssell other banking products. I also suggested them to increase their market share by increasing the incentives given to the dealers and if possible reducing the interest rate or increasing the tenor of the loan so that the monthly burden on the customers can be reduced.
Kotak Mahindra Bank Pvt. Ltd. Page 8
LIST OF FIGURES.
Figure 1: Banking Structure in India ............................................................................................................ 13 Figure 2: Overview of Credit Analysis Process ............................................................................................ 30 Figure 3: Credit Rating Model ..................................................................................................................... 34 Figure 4: Market share of KMBL ................................................................................................................. 38 Figure 5:Customer Satisfaction. .................................................................................................................. 43 Figure 6: Media Consumption Habits ......................................................................................................... 44 Figure 7: Team Rating ................................................................................................................................. 46 Figure 8: Post disbursement satisfaction. ................................................................................................... 47 Figure 9: Satisfaction of turnaround time................................................................................................... 48 Figure 10: Dealer Satisfaction. .................................................................................................................... 53 Figure 11: Awareness of Schemes .............................................................................................................. 54 Figure 12:Awareness of Trade advance ...................................................................................................... 55
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1. Introduction
A strong banking sector is important for a flourishing economy. The failure of banking sector may have adverse effect on the other sectors. Credit has always been the driver for any economy all over the world and not always can these entitys dreams be fulfilled by their internal resources. For this the Banks act as one of the external source for finance and take the responsibility to make money available in the economy and build a strong developing population. Credit provided by banks also helps in restructuring the economic activity around. The word Credit comes from the Latin word Credo meaning I believe. It is a lenders trust in a persons/firms/companys ability or potential ability and the intention to repay. Credit Risk is an important part of banking. A good Credit Risk Management process helps to minimise the Non-Performing Assests(NPAs) of the bank. Default in credit due improper appraisal and management leads to increase in nonperforming assets of the bank giving a bad signal to its shareholder, the industry as well as to its customers thereby decreasing the profitability of the institution. A loan is a type of debt, the borrower receive an amount of money from the lender which he has to pay back in installments with the interest on that debt. Credit Appraisal starts with the submission of loan application by the intended borrower. The process includes various steps such as Intoduction to Borrower, looking at the Credentials, Financials, Project Reports, Credit Rating etc and based on the above factors the company decide whether to advance loan to the borrower or not. Credit granted comes with various types of risks attached to it in form of financial, managerial, societal as well as business related. So the tasks of the bank authorities and executives become more important from the point of assessing the proposal, granting the loan to the point of monitoring the progress till the loan amount is recovered fully. Farmers are the branchs major customer who are fast growing and they also avail lakhs of loan facilities from the bank. TFE department encourage agricultural development generating a lot of employment opportunities and the capital cost per employee is very minimum. So, it is very important on the part of the bank to study their details and assess them carefully before taking any decisions.
Kotak Mahindra Bank Limited is one of the topmost private sector banks in India maintaining a similar portfolio of credit schemes on its services. It provides its services to almost every section of the society, in every corner of the country. With over crore of rupees of business under its services the bank provides me the right platform to understand the managerial activities related to loan processing and monitoring. Tractor and Farm Equipment (TFE) segment constitutes a large share of loan amount sanctioned by the bank. This made the credit appraisal and management of TFE loans as the focus of my study.
3. Objective of the Project

Primary Objective To Study whether Kotak Mahindra Bank is able to achieve customer delight through product innovation and delivery Secondary Objective To understand the existing system of Credit Appraisal process, analyzing it and finding out the shortcomings, if any, to improve the overall profitability. To study and understand the management of Credit Portfolio of Farmers and Dealers of Kotak Mahindra Bank Limited, Hyderabad Branch. To study the Risk Control techniques followed by KMBL. To study the processes and methods used by the bank and support the activities Tractor and Farm Equipment department in general by providing my sincere efforts to contribute to the working and development of the bank..
3. Methodology
Source of Research :Most of the studies will be done through Priamary Research i.e. Survey through questionnaires, meeting customers, meeting dealers etc andSecondary Research i.e. Bank documents, journals, books, internet modules etc. Study Existing Process : Gaining in-depth knowledge of the existing Credit Appraisal process related to the product of TFE under the portfolio of Kotak Mahindra Bank
Limited using the Audited Annual Reports, Bank Documents, Journals, Books, Projects etc. Understand the Process : Understanding the loan process of the bank, the pre-sanction and post sanction managerial activities. This includes all the details about the financials (balance sheets, profit & loss statements, auditors report, directors report etc), the business and managerial risks attached with the account and also the field investigation of the customers. Strategy Development: A strategy will also be devised to reduce the Turn Around Time of the process.
4. Limitations
As a summer trainee, the project will definitely be a profound learning experience. But still due to some factors the following limitations might occur: Language Barrier: Since I am not from Andhra Pradesh and cannot speak Telugu and most of our customers are from rural areas it becomes difficult for me to communicate simple things. Safety: My projects deals mostly with rural customers and being a women it becomes difficult for me to travel to remote areas all alone. Hence every time I have to be accompanied by someone from the office. Vast area of operation: Since the area of operation is vast it becomes difficult to cover it entirely. Difficulty in verification: As the asset moves in the field, verification and inspection becomes difficult. Confidentiality: The study is done under the guidance of Kotak Mahindra Bank Limited and some of the data will be kept confidential. I wont be able to furnish the complete data with the final report. Only the material that my company allows me to share will be there in the report
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5. Indian Banking Sector

Banking in India originated in the last decades of the 18th century. The first bank in India was formed in the year 1786. Since then with the development of the economic conditions and spread of market throughout the country and world over, the banking sector has seen some unimaginary trend in progress and business. The banking system was completely reformed with the formation of RBI by the government as the prime body governing and handling the business of the banks spread all over the region.
Figure 1: Banking Structure in India
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The banking history has seen the developments in an organized and planned way since now. The period of development can be divided into three phases as following: Early phase from 1786 to 1969 of Indian Banks. Nationalization of 14 major commercial Indian Banks and up to 1991 prior to Indian banking sector Reforms. New phase of Indian Banking System with the advent of Indian Financial & Banking Sector Reforms after 1991. Banking industry in India has evolved lately under the impact of the stimulus packages announced by the Government. According to the Annual Policy 2008-09 of the Reserve Bank of India (RBI), the central bank, key monetary aggregates have witnessed some growth in 2009-10. This is reflected in the changing liquidity positions arising from domestic and global financial conditions and the policy initiatives taken by the government. Also, reserve money variations during 2009-10 have largely reflected an increase in currency in circulation and reduction in the cash reserve ratio (CRR) of banks. According to a study by Dun & Bradstreet (an international research body)"India's Top Banks 2008"there has been a significant growth in the banking infrastructure. Taking into account all banks in India, there are overall 56,640 branches or offices, 893,356 employees and 27,088 ATMs. Public sector banks made up a large chunk of the infrastructure, with 87.7 per cent of all offices, 82 per cent of staff and 60.3 per cent of all automated teller machines (ATMs). Currently, India has 88 scheduled commercial banks (SCBs) - 28 public sector banks (that is with the Government of India holding a stake), 29 private banks (these do not have government stake; they may be publicly listed and traded on stock exchanges) and 31 foreign banks. They have a combined network of over 53,000 branches and 17,000 ATMs. According to a report by ICRA Limited, a rating agency, the public sector banks hold over 75 percent of total assets of the banking industry, with the private and foreign banks holding 18.2% and 6.5% respectively.
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5.1 Reserve Bank of India The central bank of the country is the Reserve Bank of India (RBI). It was established in April 1935 with a share capital of Rs. 5 Crores on the basis of their commendations of the Hilton Young Commission. The share capital was divided into shares of Rs. 100 each fully paid which was entirely owned by private shareholders in the beginning. The Government held shares of nominal value of Rs. 2, 20,000. Reserve Bank of India was nationalized in the year 1949. The general superintendence and direction of the Bank is entrusted to Central Board of Directors of20 members, the Governor and four Deputy Governors, one Government official from the Ministry of Finance, ten nominated Directors by the Government to give representation to important elements in the economic life of the country, and four nominated Directors by the Central Government to represent the four local Boards with the headquarters at Mumbai, Kolkata, Chennai and New Delhi. Local Boards consist of five members each Central Government appointed for a term of four years to represent territorial and economic interests and the interests of co-operative and indigenous banks. The Reserve Bank of India Act, 1934 was commenced on April 1, 1935. The Act, 1934 (II of 1934) provides the statutory basis of the functioning of the Bank. The Bank was constituted for the need of following: To regulate the issue of banknotes. To maintain reserves with a view to securing monetary stability. To operate the credit and currency system of the country to its advantage. Functions of Reserve Bank of India.
The Reserve Bank of India Act of 1934 entrust all the important functions of a central bank the Reserve Bank of India. Bank of Issue: The Reserve Bank has the monopoly of note issue in the country. It has the sole right to issue currency notes of various denominations except one rupee note. Banker to Government: The Reserve Bank of India is to act as Government banker, agent and adviser. The Reserve Bank has the obligation to transact Government business, to keep the cash balances as deposits free of interest, to receive and to make payments on
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behalf of the Government and to carry out their exchange remittances and other banking operations. Bankers Bank and Lender of Last Resort: The Reserve Bank of India acts as the bankers' bank. According to the provisions of the Banking companies Act of 1949, every scheduled bank was required to maintain with the Reserve Bank a cash Reserve. Commercial banks can always expect the Reserve Bank of India to come to their help in times of banking crisis the Reserve Bank becomes not only the banker's bank but also the lender of the last resort. Controller of Credit: The Reserve Bank of India is the controller of credit i.e. it has the power to influence the volume of credit created by banks in India. It can do so through changing the Bank rate or through open market operations. Every bank has to get a license from the Reserve Bank of India to do banking business within India. As supreme banking authority in the country, the Reserve Bank of India, has the following powers a) It holds the cash reserves of all the scheduled banks, b) It controls the credit operations of banks through quantitative and qualitative controls, c) It controls the banking system through the system of licensing, inspection and calling for information, d) It acts as the lender of the last resort by providing rediscount facilities to scheduled banks. Custodian of Foreign Reserves: The Reserve Bank of India has the responsibility to maintain the official rate of exchange. Besides maintaining the rate of exchange of the rupee, the Reserve Bank has to act as the custodian of India's reserve of international currencies. Supervisory Functions: The Reserve bank has certain nonmonetary functions of the nature of supervision of banks and promotion of sound banking in India. The Reserve Bank Act, 1934, and the Banking Regulation Act, 1949 have given the RBI wide powers of supervision and control over commercial and co-operative banks, relating to licensing and establishments, branch expansion, liquidity of their assets, management and methods of working, amalgamation, reconstruction, and liquidation. Promotional Functions: The Bank now performs variety of developmental and promotional functions, which, at one time, were regarded as outside the normal scope of central banking. The Reserve Bank was asked to promote banking habit, extend banking
facilities to rural and semi-urban areas, and establish and promote new specialized financing agencies.
5.2 Reserve Bank of India on Agri Financing Agricultural sector play a catalytic role in the development of any country. It is the engines of growth in developing and transition economies. In India, it accounts for a significant proportion of manufacturing, exports and employment, and are major contributors to GDP. However, this sector faces difficulty in accessing adequate finance for their businesses. In the case of India, the government has taken several initiatives both at the national and the international levels to improve the availability of finance. But there are still certain impediments that the agricultural sector faces that are required to be addressed by the government. A changing environment and government policies are forcing banks to lend more to the agricultural sector. Both private and public banks are now involving themselves in a lot of agribased lending activities. Besides financing traditional activities, banks are also involved in training and setting up consultancies, agricultural clinics, the export and marketing of agricultural produce, etc. The Indian banking sector consists of commercial and cooperative banks. The roles of both types of banks are very significant in Indian agriculture. Co-operative banks were considered as the major source of credit flow to agriculture, but with the time, commercial banks too have come forward to extend credit to agriculture.
The Agriculture Sector contribute nearly 14.2% of Indias GDP and according to the Reserve Bank of
India (RBI) guidelines, banks are required to lend 40% of their adjusted net credit to the priority sector, which includes agriculture, small-scale industries and other weaker sections. The government has raised the target for lending to agriculture sector by 27% for FY 11-12 to 475,000 crore and directed banks to step up direct lending and increase credit to small and marginal farmers.
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6. About Kotak Mahindra Bank of Limited

The Kotak Mahindra group is a financial organization established in 1985 in India. It was previously known as the Kotak Mahindra Finance Limited, a non-banking financial company. In February 2003, Kotak Mahindra Finance Ltd, the group's flagship company was given the license to carry on banking business by the Reserve Bank of India (RBI). Kotak Mahindra Finance Ltd. is the first company in the Indian banking history to convert to a bank. Today it has more than 20,000 employees and Rs. 10,000 crore in revenue. The bank is headed by K.M. Gherda as Chairman and Uday Kotak as Executive Vice Chairman & Managing Director. Shankar Acharya is the chairman of board of Directors in the company. The Bank has its registered office at Nariman Bhavan, Nariman Point, Mumbai.
History
The Kotak Mahindra Group was born in 1985 as Kotak Capital Management Finance Limited. This company was promoted by Uday Kotak, Sidney A. A. Pinto and Kotak & Company. The customer based of this group is more than 14 lakh. Industrialists Harish Mahindra and Anand Mahindra took a stake in 1986, and that's when the company changed its name to Kotak Mahindra Finance Limited. It bought stressed assets from a number of banks, at full loan value of Rs 1,000 crore in 2005. In January 2011, the bank reported a 32% rise in net profit to Rs188 crore for the quarter ended December 2010 against Rs. 142 crore the corresponding quarter last year. Kotak Mahindra bank also reached the top 100 most trusted brands of India in The Brand Trust Report published by Trust Research Advisory in 2011.
Year Milestone
1986 Kotak Mahindra Finance Limited starts the activity of Bill Discounting
1987 Kotak Mahindra Finance Limited enters the Lease and Hire Purchase market
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1990 The Auto Finance division is started
1991
The Investment Banking Division is started. Takes over FICOM, one of India's largest financial retail marketing networks
1992 Enters the Funds Syndication sector
1995
Brokerage and Distribution businesses incorporated into a separate company - Securities. Investment Banking division incorporated into a separate company - Kotak Mahindra Capital Company
The Auto Finance Business is hived off into a separate company -Kotak Mahindra Prime Limited (formerly 1996 known as Kotak Mahindra Primus Limited). Kotak Mahindra takes a significant stake in Ford Credit Kotak Mahindra Limited, for financing Ford vehicles. The launch of Matrix Information Services Limited marks the Group's entry into information distribution.
1998 Enters the mutual fund market with the launch of Kotak Mahindra Asset Management Company.
2000 Kotak Mahindra ties up with Old Mutual plc. for the Life Insurance business.
2000
Kotak Securities launches its on-line broking site (now www.kotaksecurities.com). Commencement of private equity activity through setting up of Kotak Mahindra Venture Capital Fund.
2001 Matrix sold to Friday Corporation
2001 Launches Insurance Services
2003 Kotak Mahindra Finance Ltd. converts to a commercial bank - the first Indian company to do so.
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2004 Launches India Growth Fund, a private equity fund.
2005
Kotak Group realigns joint venture in Ford Credit; Buys Kotak Mahindra Prime (formerly known as Kotak Mahindra Primus Limited) and sells Ford credit Mahindra.
2005 Launches a real estate fund
2006 Bought the 25% stake held by Goldman Sachs in Kotak Mahindra Capital Company and Securities
Vision
The global Indian financial services brand- Our customers will enjoy the benefits of dealing with a global Indian brand that best understands their needs and delivers customized pragmatic solutions across multiple platforms. We will be a world class Indian financial services group. Our technology and best practices will be bench marked along international lines while our understanding of customers will be uniquely Indian. We will be more than a repository of our customers savings. We, the Group, will be a single window to every financial service in a customers universe. The most preferred employer in financial services- A culture of empowerment and a spirit of enterprise attracts bright minds with an entrepreneurial streak to join us and stay with us. Working with a homegrown, professionally managed company, which has partnership with international leaders, gives our people a prospective, i.e. universal as well as unique. The most trusted financial services company- We will create an ethos of trust across all our constituents. Adhering to high standards of compliance and corporate governance will be an integral part of building trust. Value creation- Value creation rather than size alone will be our business driver. Three defining qualities of Bank of the future Simplicity Humility Prudence Page 20
7. General process of loan followed by KMBL

The retail agri finance consists of the following steps: Step 1 Dealers: As a first step, when a customer purchases a farm equipment or tractor he/she applies for a loan for the same through a dealer from whom they are buying it. It is the dealer who gives the lead for a loan to the bank except in case of second hand equipment.
Step 2 Field Investigation: After the bank is approached for the loan, the Relationship Manager personally meets the customer and collects the required documents and makes sure that all the documents are there. He does field investigation on the customer and if he is satisfied by the investigation, he forwards the documents to the branch office.
Step 3 Branch: Once the documents are collected they are sent by the RM to the branch. At the branch all the details of the customer are loaded on the system and then the details are sent to the Risk Control Unit.
Step 4 Risk Control Unit: Here the documents are verified by screening and sampling them. Their authenticity is checked and then further sent to Credit Appraisal department.
Step 5 Credit Appraisal: After the documents submitted by the customers are verified by RCU the files are logged with the credit department. Credit is not allowed to accept any files which are not checked by RCU for credit processing. Here the credit department checks the credit worthiness of the customer and his capacity to pay back the loan. After evaluating the customer the credit department approves or rejects the loan.
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Step 6 Operations: After the Credit department has sanctioned the loan, the operations department disburses it. They make sure that the money is received by the concerned person. Usually a cheque is sent to the dealer for the amount or if he holds an account with the bank the loan amount is credited to his account.
7.1. Credit Policy of KMBL The credit policy acts as the guiding pillar for the bank to carry on its day to day operational activities. The main highlights of the credit policy of Kotak Mahindra Bank Limited are: Maintenance of asset quality. Maintaining growth and reasonable risk adjusted returns on credit exposure. Retaining/Improving Kotak Mahindra Bank Limiteds market share. Tradeoff between volume (enhancing profitability) and quality and safety of credit.
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8. Credit Analysis & Appraisal Process in Kotak Mahindra bank Ltd.

8.1 Introduction The word credit comes from the Latin word Credo meaning I believe. It is a lenders trust in a persons/ firms/ or companys ability or potential ability and intention to repay. Customers need loans for their businesses. There are many instances when the applicant is unaware of the banks needs, does not present all the details required or presents it in a manner that causes the Bank to reject the application. The Banker exists to make loans but before he approves the application and permits disbursal, as a responsible professional, he has to be convinced that the borrower has the capacity and the willingness to repay. Nothing thrills him more than a well presented detailed application that addresses all the concerns that he may have. The Business of Lending Borrower requires money now. They need this money essentially from a bank. They are unclear on how to approach the bank and what information they need to furnish. Banks exist in order to lend. They avidly and aggressively seek persons or corporates to whom they can lend money to. However, as the downside of a bad debt is very high, the banker has to be convinced that he is actually not throwing away good money and that he will be repaid in full, and in time. Bank always has to remember that a bad loan is a loss and the return that a banker normally earns on a loan is about 2% to 3% per annum. If a Bank advances a loan of Rs. 1,000,000 to a customer, it could expect a net return/earning of more than Rs. 20,000. If however, the loan becomes uncollectable or defaults, the Bank would need to lend Rs.50, 000,000 at 2% per annum to another customer in order to recoup the loss. This is an enormous amount. In short, considering the cost of a bad loan, it is safer to refuse advancing a loan (from a bankers perspective) than advance one in the hope of earning an income. The downside risk is huge and this is the reason that bankers prefer to lend only to those customers who are growing, profitable, running and well regarded. The norms now imposed by the Reserve Bank of India on banks are becoming increasingly stringent. If no payment is made for one quarter on a loan, the loan has to be deemed/ recognized as a non performing asset (NPA). Interest then cannot be accrued on this advance by the Bank and they are also required to state in the financials, the quantum of NPAs they have at the yearend. Provisions are also made to the amount depending on how good the advance is, the
amount of collateral and the period it has been outstanding. The enormous emphasis placed on NPAs and the scrutiny it is subjected to (quite rightly) is one of the main reasons that bankers are reluctant to lend when there is even a shred of concern on the viability of a project or the creditworthiness of a borrower. The dictum they follow is when in doubt, dont. In conclusion it must always be remembered that the business of banking is lending. The banker takes a risk whenever he approves a loan. His job, as a prudent person, is that he has to ensure that the risk is minimal on any money lent. The borrower, on the other hand, for his enterprise has to satisfy the banker that he is competent and the money borrowed is safe and will be repaid. In this course the borrower will be enlightened on the factors the bankers look at when reviewing a credit proposal - giving the borrower a peep into a bankers mind. These are essentially: The nature of the loan sought. The time within which it will be repaid. The manner it would be repaid in. The security or collateral given for the loan. The economic conditions that might affect the creditworthiness of the borrower. Knowing the sector and the relationship of its performance with the economic cycle. The competence and integrity of management and its intention to repay the loan in the manner agreed. The past record showing that how successful the particular customer has been.
8.2 Credit Specific Parameters in the Appraisal Process 8.2.1 Purpose The crucial question upon which the lending decisions rests is the purpose for which the loan is sought and this is usually the first issue that a Banker ascertains when approached for a loan. Few factors that must be remembered are: a) The nature of the credit facility sought must be consistent with the borrowers activities. b) Must be for a matching need, this means that short term funding should be sought for a short term need.
c) At times a loan may be required for a short period to bridge two events. This is known as a bridge loan. d) Certain customers require facilities seasonally. It is important that a prospective client is honest and open with his banker. If he needs to utilize a loan for a particular purpose, he should tell the banker exactly what the purpose is. He should advise his banker his concerns and his problems. Bankers are there to help and not to hinder. If the banker has a full appreciation of his clients concerns; his strengths and his weaknesses and he is convinced of the persons integrity, if required, the banker will go out of his way to sanction the loan. 8.2.2 Sources of Payment The main concern that a banker has when facilities are extended is on the repayment of the money advanced. Prospective borrowers should be able to demonstrate to their respective bankers with facts and figures of the repayment plan. In ideal circumstances there should be more than one source of repayment so that if there is a delay or a problem, the repayment commitment can still be honored.
a) Primary Source: The primary source of repayment should be directly related to the kind of loan given i.e. for facilities extended for working capital or to finance trade the repayment should be from the proceeds of the goods sold. b) Secondary Source: When customers take loan for a vehicle or equipment it can be resold in the market and the loan can be repaid. 8.2.3 Refinancing Another method of repaying a loan is by refinancing i.e. procuring a second loan out of which the existing loan is repaid such as: a) Taking another loan b) Accepting Fixed Deposits c) Issuing Debentures No banker will issue facilities unless it knows and checks the sources of repayment because he is in the business of lending, and not in the business of giving away.
8.2.4 Covenants Conditions imposed on facilities extended by banks, also known as covenants are imposed by bankers upon a borrower to: Preserve the financial strength of the borrower. Maintain the borrowers ability to refinance itself. Prevent the borrower from selling assets thereby ensuring that assets are not dissipated. Ensure that the borrower does not do something that would be detrimental to the interests of the Bank Covenants, therefore, are from a bankers perspective extremely important in the structuring of a loan. The amount of covenants that can be imposed on a borrower would depend on: Has the borrower borrowed before and what has his repayment history been. The need of the borrower for the loan. The kind of facility required. The nature of the borrowers business and the industry wherein he operates. The borrowers financial health. The risks involved.
Covenants imposed are always negotiable and negotiated. Banks will always attempt to impose very exacting covenants. Some may be too exacting and impractical. Therefore a borrower must, at the time the facilities are being accepted ensure that the covenants are reasonable and realistic and the covenants will not affect the growth or stability of the company. Covenants may be positive or negative. Positive covenants are requirements made on the borrower to do certain acts such as: The borrower must present a monthly statement or as often as required information about his income. The borrower must insure and maintain the assets that have been given as collateral The borrower must comply with all laws and regulations The borrower must pay taxes regularly
Negative covenants while they dont force the borrower to perform certain actions but require him to ensure certain things and restrict him from certain acts such as: Sale of assets
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Limitations on additional loans Purchase of investments and the giving of additional loans Purchase of investments and the giving of advances Mortgaging of assets Maintenance of financial strength
Covenants are, in short, safeguards and are always tailor-made to the requirements of borrowers and lenders based on their respective weaknesses and strengths. Covenants must therefore be viewed as safeguards imposed on a borrower to preserve the borrowers ability to repay the loan. 8.2.5 Collateral Banks seldom extend any facility without collateral and the more liquid, the more realizable and the more tangible; collateral is; the greater the chances are of the facility being granted easily. Collateral is the security given to the bank as a safeguard for the facility/facilities advanced. This is effectively the Banks insurance that should there be as a default at which the bank has something to fall back on to either recover in part or full the amount advanced. The nature of the collateral, the amount and the percentage of the facility advanced that it covers will vary from borrower to borrower and from bank to bank. The collateral sought for an overdraft and working capital facilities is the hypothecation of book debts and stocks. If funds have been advanced to purchase machinery or some other fixed asset, the asset purchased is usually hypothecated/ mortgaged to the Bank. In regard to unfunded facilities such as the issuance of a guarantee or a letter of credit, banks usually ask for cash collateral or margin money. Banks, in case the borrowing company is part of a larger entity (a subsidiary or an associate company or a branch); ask for a guarantee or at worst a letter of comfort from the parent company. In regard to guarantees as collateral, banks ask for the personal guarantees of directors too. Banks will always check whether the collaterals value fluctuates widely as in the case of shares.
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A borrower must always remember collaterals are viewed by bankers as additional comfort and they would never, unless forced to do so, seek to enforce their right as that could affect the viability of the concern. 8.2.6 Know Your Client Norms The banker will do all he can to find out as much as he can about the client. In this no information is too small or too immaterial since they will fit into a larger picture. It has to be always remembered that the project may appear sound, the documentation perfect and the financials impeccable. However, if the intent is to cheat, it could cause severe losses to the Bank. It is because of this crying need of knowing the client that Banks insist on a client being introduced. If a customer Mr. XYZ was approaching ABC Bank for the first time, the Bank would ask for an introduction from an existing client. Additionally the Bank will seek to find out whether the customer had been banking with some other bank. If he had, a reference from that Bank would also be sought. A banker will always attempt to verify facts and try to find out more. This is to establish the credibility of the client. Banks verify facts and information given by: Bank Checkings Trade Checkings Customer Checks On Site Visits Asset Verification Collateral Audit Verification of all the Statements and Documents
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8.3 Role Played by Credit Appraisal/Analysis Credit Analysis supports the work of marketing officers by evaluating customers before lending money to them. The extent of the Credit Analysis is determined by: Size and nature of the enquiry The potential future business with the customer The availability of security to support loans The existing relationship with the customer Obtaining credit and trade references Examining the borrowers financial condition Consulting with legal counsel regarding a particular aspect of the draft loan agreement
By making these checks we are ensuring that the report does not look at customers creditworthiness in a narrowly defined sense. Often it will be necessary for the analyst to place the assessment of the borrowers financial condition within the wider context of the conditions existing in the industry in which it is operating. For Example: Is the customers business flourishing? How much land holdings does he have? How will this affect the long term cash flow of the customer? What are the considerations of general economic conditions and, if appropriate, political conditions in the country where the customer is operating? Credit Analysis includes financial & non-financial factors, and these factors are interrelated such as: The Environment The Industry The competitive position Financial Risks Involved Management Risks Involved Loan Structure and Documentation Issues
All customers operate in an economic and business environment; therefore, when beginning to analyze a customer, it is important to situate the customer in the context.
Figure 2: Overview of Credit Analysis Process Source: Andrew Fight, 2004
We will consider each of these factors in detail, starting with the macroeconomic factors which affect the economy and sectors of the industry and then focus on customer risk and risks that might affect particular loan.
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8.4 Types of Credit Risks Credit along with it brings some risks associated with it. Credit Risk may be defined as the risk of default by the borrower due to inability or unwillingness to repay his debt within the stipulated timeframe and according to the agreed set of conditions. The loan and equity returns are tied to the cash flows and fortunes of the project rather than being dependent on the parent company. Inability to predict the amount of risks associated with a loan and also proper monitoring of the credit granted can lead to huge amount of losses for the bank thereby decreasing the profitability of the institution. Banks therefore maintain a portfolio of credits to be granted to its customers so as to distribute the intensity of risk associated with a single type of product. There are mainly three major types of Credit Risk: Business Risk Management Risk Financial Risk
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8.5 Credit Rating of the Borrower A credit rating assesses the credit worthiness of an individual, corporation, or even acountry. Credit ratings are calculated from financial history and current assets andliabilities.A credit rating tells a lender or investor the probability of the subject being able to payback a loan.A poor credit rating indicates a high risk of defaulting on a loan, and thus leads to highinterest rates. The borrowers are rated through the process of the Credit Rating. This process looks at various details of the borrower i.e. the managerial capabilities, operational efficiencies, past performance, goodwill, the work being undertaken, the projected financials, the economy in general and other factors as well. It is a comprehensive process and is developed in-house by the bank from the past experience gained. Internal Credit Rating System: The Bank uses its own credit rating mechanism for the different enterprises for granting of loan facilities both before and after the disbursement of loan. The bank uses scoring models for rating. This method used by the bank calculates scores on three major risks associated with theenterprise namely Financial Risk, Management Risk and Business/Industry Risk. RBI has given considerable emphasis on having a proper credit risk rating system in place. It is considered as an instrument that helps the bank in Measuring the Credit Risk at the transaction level Pricing the Credit Risk Frequency of inspection
The Credit Rating model followed by Kotak Mahindra Bank Limited in Tractors and Farm Equipment Department in Andhra Pradesh is as followed:
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DIT SCORING MODEL - TRACTOR & FARM EQUIPMENT FINANCING Name of Borrow er A 1. CROPPING DETAILS Distric t 1.5 NO. of c rops / yr Karimnagar,R angareddy Medak,Waran gal,Kadapa,Ku rnool Nizamabad,Na lgonda,Mahab oob 3 4.5 >3 2 4.0 4.0 1.0 3 3.0 3.0 2.0 1 2 1.0 2.0 2.0 agric ultur al land mortgage < 1.00 1.00 2.00 2.00 3.00 > 3.00 0 4.0 0.0 2 4.0 2 3.0 15.50 20% 3.10 3.0 Not dependent 4.0 1.0 progressive 2.0 traditional 4.0 Full 2.0 Partial 1.0 2.0 3.0 farmer profile* 2.0 Dependenc e on Monsoon 1.5 10.0 A BHADRU B C D E Scale Total Sc ore W eight W td. Total Sc ore
COMMERCIAL ORIENTED CLIENT ASPECTS Other Assets Ow ned 2.5 Install ment freque Tractor Truck JCB Others 0 1.0 2.0 4.0 1.0 0.0 nc y Monthl y Quarte rly Hlf y rly 2 4.0 3.0 2.0 1.0 4.0 2.0 Existing Loan repay me nt ETR GTR no loan rec ord 1 3.0 3.0 Proof of c ommerc ial ac tivity (sum of sc ores) 4.0 Contract document2.0 3.0 I.tax return / receipts 1.0 1.0 bank A/c statement .0 2 property papers / utility bills 1.0 0 0.0 7.00 20% 1.40 2.5 10.0
2. PERSONAL DETAILS Family ty pe Joint Family 2.0 No. of 2.0 < 2 yrs 2 to 5 yrs > 5 y rs 2.5 Residenc 1.0 3.0 4.0 rented ow ned 2.5 Assets at 1.0 Other assets 2.0 1.0 1.0 1.0 10.0
1.0 Elec tric ity 2.0 Television /refrigerator Telephone Cell phone
1.0 Cattle (cow/buffalo) 1.0 tw o-w heeler 1.0 Cattle 1.0 (cow/buffalo)
Nuc lear Family 1.0
2.0
10.0
5.0
3.0
2.0
22.00
10%
2.20
3. TECHNICAL FACTORS Borrow er ow ned Y es No 3.0 Loan tenure 3.0 < 3 yrs 1.0 3 -4 y rs 4-5 yrs > 5 yrs 3 9.0 3 4.0 3.0 2.0 1.0 6.0 15% 20% 25% >25% 4 1.0 2.0 3.0 4.0 20.0 35.00 25% 8.75 2.0 Margin Amount 5.0 10.0
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FINANCIAL PARAMETERS: Agri Inc ome / Total Inc ome 3.0 Total net inc om eTotal > 75% 75 % - 50% 50% - 25% < 25% Expen 2.0 < 0.5 3.0 0.5 1.0 2.0 3.0 4.0 < 40000 40000 80000 80000 120000 >120000 1.0 2.0 3.0 4.0 4.0 Total Net Inc ome Total Expenses 3.0 10.0
0.99 4.0 1.00 2.0 1.5 > 1.5
12.0
4.0
6.0
22.00
25%
5.50
GROSS SCORE
21.0
100%
20.95
Category A B C
Cut off Sc ore 25.0 20.0 17.0
To be Rejec ted Below 17
Figure 3: Credit Rating Model
8.5.1 Credit Rating Symbols of Kotak Mahindra Bank Limited High Investment Grades and Scores: A(Cut off Score 25): Highest Safety
Investment Grades: B(Cut off Score 20): Moderate Safety
Speculative Grades: C(Cut off score 17): Inadequate Safety
Score Below 17: To Be Rejected
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8.6 Risk Control Unit Process Flow This note endeavors to lay down the process flow in the Risk Control Unit in TFE. The flow of the file from the time of log in with RCU to the time of reporting the final status to Operations is laid down herewith to understand. PROCESS FLOW FOR DOCUMENT VERIFICATION AND PRE DISBURSEMENT FI: STEP1: CASE LOGIN WITH RCU1. The complete file which is ready for login with all the required documents will be picked up by RCU sampler either from Marketing Coordinator level( before logging the case to credit) or from credit level. This is basically to keep the TAT under control. 2. Simultaneously the file will flow to RCU branch head? RCU executive for checking. STEP2: RCU SCREENING/ SAMPLING1. RCU Sampler will screen all the files logged in for a particular day and sample some of the files/ documents as per the trigger percentages which may change from time to time. 2. RCU branch head/ RCU executive will check the file and based on some triggers will pick up the file for pre disbursement FI. STEP3: FILE STAMPINGStamping will be done on all the files flowing through RCU. STEP4: VERIFICATION1. The Sampled document will be verified at source by RCU Team/ Agency/ Agencies. 2. The files that are picked for pre disbursement FI will be verified by RCU field executives and the report will be submitted to RCU branch head. STEP4: RCU REPORT FLOW1. The RCU report will be sent by RCU Agency/ RCU Executive/ RCU Coordinator to SMH/ SCH/ Local Ops/ Cluster Marketing Head/ Cluster Credit Head.
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2. The RCU report for pre disbursement FI will be sent by RCU executive to RCU branch head. RCU BH will check the report and send the same to SMH/ SCH/ Local Ops/ Cluster Marketing Head/ Cluster Credit Head.
This process will followed and will also be applicable for Post Credit Documents by KMBL.
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8.7 APPROVAL & POST DISBURSAL Approval Once the facilities are approved, the Bank would send a letter of approval subjected to the prospective customer complying with certain stipulations and conditions governing the approval. The letter would also normally detail the collateral which has to be given. The prospective customer would normally sign the offer letter and return it back to the Bank as an acceptance of the terms of the approval. Then he would work with the Bank to get the security documentation complete. Drawdown is usually permitted after all documentation has been perfected. It is then that the prospective customer will, in fact become a customer. Post Disbursal Disbursals take place after the documentation required by the Bank has been executed. The disbursal may be in one or more parts in the case of a term loan or continuous as in the case of overdrafts. Usually there are margins kept by the banker to protect the bank from any deterioration in the value of the collateral. The banker will also periodically visit the factories or go-downs of the borrower to satisfy and check that the stocks do exist. He will also test the quantity and even do a test count of some items. The banker will also, on a day to day basis examine the manner the borrower operates his account.
As far as the banker is concerned post disbursal monitoring is as important as the credit appraisal process because it depends upon this whether he gets repaid or not.
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9. Market Share of KMBL

In a year 40000 loans are generated and the industry is expected to grow at 10%. The main competitors of Kotak Mahindra Bank Limited are 1) 2) 3) 4) 5) Mahindra Finance Service Limited Housing Development Finance Limited Nationalized Banks Larsen And Toubro Other NBFCs
Market Share
MFSL KMBL HDFC 5% 5% 30% Nationalised Banks LNT Other NBFC's
40% 13% 7%
Figure 4: Market share of KMBL
Mahindra Finance Services Limited has the maximum market share i.e. 30% in the industry as they finance their own Mahindra Tractor which have over 60% market share in the industry. They have relaxed the norms and made the process easier as they know that by funding maximum tractors they can increase the sales for the tractors. Doing this is beneficial for both Mahindra and Mahindra Tractors and MFSL. Next in the market is Kotak Mahindra Bank Limited with 13% share in the industry. It has the second highest market share amongst the private financers. Major reason for the bank doing
well is that they have team which is experienced in dealing with rural customer and personally satisfying their needs Under private financer next is HDFC with 7% share in the industry. They in entered the Tractor and Farm Equipment sector last year and are doing very well. One of the major reasons is that they have an intensive branch network in Andhra Pradesh and are more visible to the rural customers. They have an advantage of customers approaching them in these branches. Larsen and Toubro has a 5% share in the industry and the other Non Banking Financial Company have an share of 5% combined which is not very high and are not much of a threat to the KMBL. The combined share of all the Nationalized Banks is 40% under which State Bank of India and State Bank of Hyderabad have maximum share. They are also doing very well in the industry and may be a future threat to the private financers.
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10. CUSTOMER RESEARCH

I am conducting a customer satisfaction survey to find out whether our existing customers are satisfied with our services or not and the reason why they have taken a loan from our bank and not others. This study will help me understand the competitors better and the aspects in our product which needs to be strengthen.
Information Needed
The data that was need for this report was collected through the primary sources and secondary sources.
Data collection from primary sources

Customer feedback is the key ingredient in studying the banking needs of a farmer. Hence consumers are contacted directly by visiting them in their own villages.
Data collection from Secondary sources

The organizations databases and Industry research and studies are being used to gain a better understanding off the market.
Instruments for collecting Data

The instruments used for collecting data are questionnaires.
Population
Rural customers staying in different villages and availing loans for purchase of a tractor.
Sample size
A sample size 10 customers from every district is being taken.
Appendix 1: Research Questionnaire

CUSTOMER SATISFACTION RESEARCH SURVEY
Name: Equipment Purchased: Loan Period:
Age: Loan Amount: Loan Rate: Area:
1) Feedback of the customer and his satisfaction towards our product? Dissatisfied Average Satisfied
2) How did you come to know about KMBL? Through Reference Through dealer Through Newspaper/ Journal Through promotional activities Through Other branches 3) How do you rate team interaction in terms of pre and post disbursement services? Bad Average Good
4) Are you satisfied with post disbursement services? Dissatisfied Average Satisfied
5) Are you satisfied with the Turn Around Time of the bank? Dissatisfied Average Satisfied
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6) While taking the loan why did you choose KMBL?
7) Are there any further requirements for any other loan? Yes No
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10.1 Findings of the Customer Survey
1) Feedback of the customer and his satisfaction towards our product? Dissatisfied Average Satisfied
Satisfied
Average 1% 5%
Dissatisfied
94%
Figure 5:Customer Satisfaction.
Inference- In a world economy that is in constant flux and undergoing turbulence, Kotak Mahindra Bank Ltd has realised that their most precious asset is their customer base. An even more important realization is the need to satisfy the whims and fancies of these customers in order to survive in these increasingly competitive markets. Hence have gone to the length to satisfy their customers in every possible way. It is only3% of the customers who said that they were dissatisfied with the services as they themselves had defaulted with their installments in the past.
2) How did you come to know about KMBL?

Through Reference Through dealer Through Newspaper/ Journal Through promotional activities Through Other branches
90 80 70 60 50 40 30 20 10 0 Through Reference Through dealer Through Newspaper/ Journal Through promotional activities Through Other branches Series1
Figure 6: Media Consumption Habits
Inference- Creating awareness is very important while launching and selling of a product. Especially when one is dealing with rural and less educated customers marketing the product through right channels become very important. In the Tractor and Farm Equipment segment the marketing is done mainly through the dealers. Dealer being the intermediaries play a major role in influencing or educating a customer about the bank loan. Hence we can see 85% of the customers came to know about the loan through the dealers. Word of mouth marketing is another very important way of influencing a buyers choice. In rural sector customer tend to believe their friends and neighbors more than the public advertisements. Therefore we can see that 9% of the customer came to know through references. Being a little less literate the customers do not usually read or are able to read newspapers and journals. Print ads are usually rendered useless for the same reasons in the villages. Hence we see
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only 2% of the customers got influenced by the newspapers and the journals and another 2% with by the promotional activities. As we know that the rural sector doesnt utilize the banking facilities very well there were very few customers who said that got to know about the loan from other branches of the bank.
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3) How do you rate team interaction in terms of pre and post disbursement services? Bad Average
Satisfied
Good
Average 1% 5% Dissatisfied
94%
Figure 7: Team Rating
Inference- Since Kotak Mahindra Bank Ltd believes in maintaining good and long term relationships with the customers it makes sure that all the employees are taught well on how to deal with a customer. The bank makes sure that at no point a customer faces any problem in terms of interacting with the employees. For the TFE department relations are the most important as this is the only cutting edge in this segment. Hence we will see that on surveying 96% customers said that they very highly satisfied with team interaction. In certain cases the loan was availed by the customer only due to his good experience while interacting with the Relationship Manager. Therefore we see that 96% of the customers were highly satisfied and only 4% said that they found the interaction average. There was no one who complained or was dissatisfied with the interaction. It shows how far KMBL goes to keep its customer happy.
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4) Are you satisfied with post disbursement services? Dissatisfied Average Satisfied
Satisfied
Average 1% 5%
Dissatisfied
94%
Figure 8: Post disbursement satisfaction.
Inference- 94% of the customer were in praises with how the bank has treated them after the loan has been disbursed. They even said that the bank was very understanding in terms of there need and delay in installment payments. Most of them said that they enjoyed dealing with the bank. 5% said that the post disbursement services were average and only 1 % said that they were dissatisfied. Most of the customers who said that they were dissatisfied were themselves customers who had defaulted in paying the installments on time as they had asked to repay the loan or submit the vehicle to the bank.
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5) Are you satisfied with the Turn Around Time of the bank? Dissatisfied Average
Satisfied
Satisfied
Average 2% 0% Dissatisfied
98%
Figure 9: Satisfaction of turnaround time.
Inference- Turn Around Time of the bank is one of the cutting edges in this competitive industry. It is how fast and how easily can the bank sanction the loan to its customer. Kotak Mahindra Bank Limited very successfully boasts about a 48hr Turn around Time for its TFE department. It is one of the fasted banks while giving the loans to its customers. 98% of the customer were extremely happy with the time period in which they got the loan from the bank and stated as one of the reasons for availing the loan with the bank. It is only 2% of the customers who said it was average as in their cases due to some unavoidable conditions like verifying the documents in case of doubts. There was no one who was dissatisfied as the loans are usually disbursed with in a stipulated time period or is not disbursed at all.
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6) While taking the loan why did you choose KMBL? Customers when asked gave reasons like Dealer Suggestion- Most of the customer said that they took the loan on the tractor dealers suggestion. It was the dealer who made them aware about the bank and the loan facilities. In the TFE the relations of the bank with the tractor dealer is of utmost importance. If the dealer really likes the bank it will recommend it to the customers. The bank also maintains good relations with the dealer and gives then incentive on very lead they give to the bank. The incentive is usually 1% of the loan amount or Rs3000 whichever is lower. Friends and family references- In the rural sector customer trust their friend, relatives and neighbors more that the advertisements. They will readily buy a product which has been recommended by these people. Hence a lot of customers said it is only because of reference that they took the loan from Kotak Mahindra Bank Limited. Existing loan with another bank- One of the other reasons as told by the customers was that they had existing loans with other banks and were not given a second loan by the same bank. In such cases the customer approached other banks who were ready to give them loans despite an existing loan. Easy procedure- Customer also praised the easy process of the bank and that they didnt have to submit their documents again and again. They also said that they were not bothered by the employees time and again. The loan was sanctioned to them even if certain criterias were not fulfilled like the minimum acres of landholdings etc. Speedy loan process- As the saying goes Time Is Money. Most of the customers took loan from KMBL as the turn around time for loan disbursement is only 48hrs. Since the loan was available faster than the other banks the customer preferred to take it from KMBL.
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7) Are there any further requirements for any other loan? Yes No
Yes No
10%
90%
Inference- 10% of the customers wanted to take another loan for a new tractor. Here especially for this question a different sample was considered. Only customers whose loans were reaching maturity with 6 months were asked this question. 90% were not interested in buying a new tractor or did not have enough income or savings to purchase a new tractor.
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11. DEALER RESEARCH
I am also conducting a dealer satisfaction survey to find out whether our existing dealers are satisfied with our services or not and the reason why they giving leads to our bank and not others. This study will help me understand the competitors better and the aspects in our product which needs to be strengthen. Information Needed The data that was need for this report was collected through the primary sources and secondary sources.
Data collection from primary sources Dealer feedback is also very important in understanding the needs of the farmers. Hence different tractor dealers are contacted directly by their dealerships in different districts.
Data collection from Secondary sources The organizations databases and Industry research and studies are being used to gain a better understanding off the market.
Instruments for collecting Data The instruments used for collecting data are questionnaires.
Population Different tractor dealer in different districts of Andhra Pradesh who are giving leads to the bank for loans.
Sample size A sample size of 5 dealers from every district is being taken. Appendix 2: Research Questionnaire
DEALER SATISFACTION RESEARCH SURVEY Name: Brand: Area:
Satisfaction in terms of services provided by KMBL? Dissatisfied Average Satisfied
Are you aware of the schemes offered by the bank? Yes No
Are you aware of the trade advances and are you satisfied with them?
Yes Yes
No No
What is the reason for you to give leads to KMBL?
What were the incentives offered to you by other banks?
Any Suggestions:-
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11.1 Findings of the Dealer Survey.
1) Satisfaction in terms of services provided by KMBL? Dissatisfied Average Satisfied
Satisfied
Average 1% 4%
Disatified
95%
Figure 10: Dealer Satisfaction.
Inference- In the TFE loan department it is very important to maintain good relations with the dealers as they are the ones who most of the times influence the customer decision. It is usually on the recommendations of the dealer that a customer chooses a particular bank hence it is very important to keep the dealers happy and satisfied. To maintain good relations the managers visit the dealerships very frequently and looks into their grievances if there are any. 95% of the dealers said they were extremely satisfied with banks services and 4 % said they were average. 1% said that they were dissatisfied due to reasons like not enough man power and felt that the incentive given to them should be increase.
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2) Are you aware of the schemes offered by the bank? Yes No

Yes 1% No
99%
Figure 11: Awareness of Schemes
Inference- 99% dealers said that they were aware of all the schemes provided by the bank. They are on a continues process updated on any new schemes by the Relationship Manager present in the local area. They are also sent mails regarding these schemes. It was only 1% who said that they at times did not receive any intimation on the new schemes.
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3) Are you aware of the trade advances and are you satisfied with them?
Yes Yes
No No
Yes 2% No
98%
Figure 12:Awareness of Trade advance
Inference- A trade advance provides short-term finance for daily business transactions. This form of finance may be cheaper than accepting deferred payment terms. The dealers usually avail trade advances to finance their tractor purchases. 98% of the dealer said that they we aware about the trade advance facilities provided by the bank and 2 % did not care as they were not interested in these facilities.
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Yes
No
18%
82%
Inference- Here 82% of the dealers said that they were satisfied with the trade advance facilities provided to them by the bank. 18% said that they were not satisfied with the facilities as Mahindra Finance Securities limited was providing more amount of loan to its Mahindra dealer. Most of the dealer who said that they were not satisfied were Mahindra Tractor dealers.
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4) What is the reason for you to give leads to KMBL? Some of the reasons given by the dealers are Personal Relations with the bank- Most of the leads given by the dealer to the bank has been due to relations with the bank. As I mentioned earlier that in this industry it is the relationship with the dealer which is the cutting edge for every bank. At KMBL the relationship with the dealer is of utmost importance and they have successfully maintained them also. Speedy Process- Since Kotak Mahindra Bank Limited has a very fast loan disbursement procedure that is of 48hrs most of the dealers prefer our bank. They give leads to the bank as they know they will get the amount credited in their accounts with in 2days and their money will not be blocked for long. Availability of Relationship Manager- One of the reasons they gave was that at the time of need for a loan by a customer the Relationship Manager was present at the site. RM on a regular bases frequent the dealerships to see if there are any further leads they can get and try convincing the customers on taking the from KMBL. 5) What were the incentives offered to you by other banks? The incentives provided by the competitive banks were more or less on the same lines. As the competition is tough in this sector most of the banks provide the same facilities and incentives to the dealers and the customers. It is only MFSL which give more amount of trade advances to Mahindra dealers. HDFC being another major competitor has come up with schemes where they give there dealers a foreign trip on every 20 leads generated. This scheme was not able to be very popular as most of the dealers prefer direct incentives like 1% of the total amount being credited to them. 6) Any suggestionsSuggestions given by the dealers were Need For more manpower- Few dealers felt that the manpower in certain areas was less and could be improved. They felt that more number of RMs could help in looking into more number of cases. Interest rate to be lowered- Some of the dealers even mentioned that a lower interest rate would be preferred. Funding should increase- The dealers suggested that funding by the bank in TFE should increase. They felt that the customers need is higher for the funds as compared to the fund provided by the bank.
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12. Findings
Some of the observations made while studying the process: Software used by the Bank The software used to log in the date of the customers and for further processing is actually very good and takes care of the entire information management of the customers of the bank. Revision in appraisal format Kotak Mahindra Bank Limited prepares its policy well before in advance and decides proper criteria for sanction the loan. It can be seen that it receives regular circulars and updates from its head office to continuously improve and fine tune its lending and credit appraisal process and serve the customers in a better way. Time to clear proposals (Turn Around Time) It is generally seen that the turnover time taken to clear proposal is a complex process but the time taken by KMBL is only 48hr which is very good. In certain cases the process takes even lesser time. Non-Performing Assets The NPA of the department is very less which is a very good sign. Last year there were only 20 default cases out of 7000 cases which is 0.28%.
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13. Recommendations
Improve the number of RM mapping the dealer network This being a competitive landscape, it is important that RMs spend as much time as possible with the dealers to take the maximum leads from them. Currently we have 3 RMs to map 16 dealers. This ratio is high and should be brought down to 4:16 by hiring more RMs and having regular interaction with the dealers. Access to data One of the key ingredients of a successful client relationship management is data mining. Company should be able to know its customers, their maturity period etc. System should throw MIS reports regarding status of loan, total loan outstanding, total NPAs, NPA ratio etc. This helps in active management of loan portfolio. Turn Around Time The Turn around Time of the TFE department is adequate and care should be taken to maintain these levels. Online Filing of Documents After studying the entire process I realized that the initial documentation which is done is sent to the department in hard copy. Instead of a hard copy the bank should make use of technology and send the documents through internet or a handheld wireless device. By doing this the process will become faster and cluttered paper work would reduce. Tapping Perspective Customer at Enquiry Level The bank should tap the perspective aggressively at the Enquiry level. As soon as a customer visits any dealership the Relationship Manager should approach the customer and market them the product. It is very important to make customers aware of the product as the bank does not have many branches in the state like HDFC and hence a customer cannot walk into the bank and inquire about the loan.
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Mapping of dealer network in a systematic planned way Relationship Managers should have a clear plan of mapping each dealer on a weekly basis. They should plan systematically on how many dealers they should visit in a week and how many times they should visit them. Market Share improvement With HDFC entering the market last year Kota Mahindra Bank Limited should look into improving its market share which is currently 15%. This can be done through improving the incentives given to the dealers and improving the fundings.
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14. Conclusion
It must always be remembered that the business of banking is lending. The banker takes a risk whenever he approves a loan. His job, as a prudent person, is to ensure that the risk is minimal on any money lent and appraisal process is as efficient and efficient as possible. The borrower, on the other hand, if he wishes to receive the amount he needs for his enterprise has to satisfy the banker that he is competent, the money borrowed is safe and will be repaid The study clearly shows that credit appraisal is a stringent process and requires sincere and thorough knowledge of both theory and practical knowledge of credit officer to successfully appraise the proposal. Credit Appraisal process is extremely important for a bank because the cost of a bad loan is enormous. Credit Appraisal process includes various steps such as the introduction of the borrower, looking at his credentials, financials, project report, rating him etc. and then deciding whether to advance loan. The greater the rating the lower will be the rate of interest charged on the loan. Hence, it is very important for the customer as well to have a strong proposal for applying a loan There are lots of RBI guidelines which appraisers have to meet and the business environment keeps changing and throwing challenges which make this process very difficult. Thus constant adoption to changing environment and flexibility is the key which credit officer should achieve to meet these challenges. NPA, on the other hand, is a double-edged weapon, which affects banks profitability due to interest income not being recognized on NPA accounts and loan loss previously to be created from profit earned. The bank must adopt structured NPAs management policy for elimination or reducing the NPAs in the Bank. In general the trend of NPAs in Kotak Mahindra Bank Limited are decreasing trend, and are very low. The policies adopted to for NPA is very good and should be maintained.
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15. References
Primary Research: Employees of the Kotak Mahindra Bank Ltd Secondary Research: Kotak Mahindra Bank Limited http://www.kotak.com/ http://www.wikipedia.org/ RBI, 2008, Reports on Trends of Indian Banking Sector, [online] India: RBI
http://rbidocs.rbi.org.in/rdocs/Publications/PDFs/88980.pdf I M Pandey, 1980, Financial Management, Vikas Publishing House www.rbi.org.in- Reserve Bank of India Indias Central Bank http://www.investopedia.com/
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Shaivya Srivastava Final Report

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A Final Report On ACHIEVING CUSTOMER DELIGHT THROUGH PRODUCT INNOVATION AND DELIVERY.

Shaivya Srivastava 10BSPHH011079

Kotak Mahindra Bank Pvt. Ltd.

Distribution List: 1. Mr.PVSSR Anjaneyulu (Associate Vice President- TFE)

2. Professor K Siva Reddy

Kotak Mahindra Bank Pvt. Ltd.

Submitted By: Shaivya Srivastava (10bsphh011079)

Date: May 13, 2011

Kotak Mahindra Bank Pvt. Ltd.

Kotak Mahindra Bank Pvt. Ltd.

Kotak Mahindra Bank Pvt. Ltd.

Kotak Mahindra Bank Pvt. Ltd.

Kotak Mahindra Bank Pvt. Ltd.

3. Objective of the Project

Kotak Mahindra Bank Pvt. Ltd.

5. Indian Banking Sector

Figure 1: Banking Structure in India

Kotak Mahindra Bank Pvt. Ltd.

Kotak Mahindra Bank Pvt. Ltd.

Kotak Mahindra Bank Pvt. Ltd.

Kotak Mahindra Bank Pvt. Ltd.

6. About Kotak Mahindra Bank of Limited

Kotak Mahindra Bank Pvt. Ltd.

1990 The Auto Finance division is started

1992 Enters the Funds Syndication sector

2001 Matrix sold to Friday Corporation

2001 Launches Insurance Services

Kotak Mahindra Bank Pvt. Ltd.

2004 Launches India Growth Fund, a private equity fund.

2005 Launches a real estate fund

Kotak Mahindra Bank Pvt. Ltd.

7. General process of loan followed by KMBL

Kotak Mahindra Bank Pvt. Ltd.

Kotak Mahindra Bank Pvt. Ltd.

8. Credit Analysis & Appraisal Process in Kotak Mahindra bank Ltd.

Kotak Mahindra Bank Pvt. Ltd.

Kotak Mahindra Bank Pvt. Ltd.

Kotak Mahindra Bank Pvt. Ltd.

Figure 2: Overview of Credit Analysis Process Source: Andrew Fight, 2004

Kotak Mahindra Bank Pvt. Ltd.

Kotak Mahindra Bank Pvt. Ltd.

Kotak Mahindra Bank Pvt. Ltd.

Nuc lear Family 1.0

Kotak Mahindra Bank Pvt. Ltd.

0.99 4.0 1.00 2.0 1.5 > 1.5

Cut off Sc ore 25.0 20.0 17.0

To be Rejec ted Below 17

Figure 3: Credit Rating Model

Investment Grades: B(Cut off Score 20): Moderate Safety

Speculative Grades: C(Cut off score 17): Inadequate Safety

Score Below 17: To Be Rejected

Kotak Mahindra Bank Pvt. Ltd.

Kotak Mahindra Bank Pvt. Ltd.

Kotak Mahindra Bank Pvt. Ltd.

Kotak Mahindra Bank Pvt. Ltd.

9. Market Share of KMBL

Figure 4: Market share of KMBL

Kotak Mahindra Bank Pvt. Ltd.

10. CUSTOMER RESEARCH

Data collection from primary sources

Data collection from Secondary sources

Instruments for collecting Data

Appendix 1: Research Questionnaire