current_scenario_of_bank_finance.ppt

CURRENT SCENARIO OF BANK FINANCE.

Presentation byCA.WALTER D’SOUZA.

TYPES OF BANKS

• PUBLIC SECTOR BANKS

• PRIVATE SECTOR BANKS

• FOREIGN BANKS

• RURAL REGIONAL BANKS

• CO-OPERATIVE BANKS

WALTER & ASSOCIATESWALTER & ASSOCIATES

PROGRESS OF COMMERCIAL BANKING AT A GLANCE


1969 2000 2003 2006

No. Of Commercial Banks. 89 297 294 222

No. Of Regional Rural Banks. - (196) (196) (133)

Deposits (Rs./Crores) 4,646 8,51,593 13,11,761 21,09,049

Advances (Rs./Crores) 3,599 4,54,069 7,46,432 15,07,077

Credit Deposit Ratio 77.50 53.30 56.90 71.50

No. of Commercial Banks as on Mar 2007 has further reduced to 183.

CLASSIFICATION OF OUTSTANDING LOANS BASED ON SIZE


Credit Limit No. Of Accounts

Amount Outstanding

(Rs. /Crores)

Up to Rs. 25 Lacs 8,50,52,809

(99.55%)

5,89,483

(38.94%)

Between Rs. 25 Lacs & Rs. 1 Crore

2,70,768

(0.32%)

99,936

(6.60%)

Between Rs. 1 Crore & Rs. 10 Crore

93,335

(0.11%)

2,21,287

(14.62%)

Between Rs. 10 Crore & Rs. 25 Crore

10,944

(0.01%)

1,32,635

(8.76%)

Above Rs. 25 Crore 7,525

(0.01%)

4,70,501

(31.08%)

Total 8,54,35,381 15,13,842

CREDIT OF SCHEDULED COMMERCIAL BANKS ACCORDING TO POPULATION


Population Group

No. Of Accounts. Amount Outstanding

(Rs./Crores)

Rural 2,85,76,751

(33.4%)

1,26,079

(8.3%)

Semi Urban 2,12,82,079

(24.9%)

1,51,445

(10.0%)

Urban 1,27,76,733

(15.0%)

2,45,777

(16.2%)

Metropolitan 2,27,99,818

(26.7%)

9,90,541

(65.4%)

Total 8,54,35,381 15,13,842

BREAK UP OF ADVANCES AS ON 31 MARCH 2006

Banks No. Of Accounts. Amount Outstanding

(Rs./Crores)

SBI & Its Associates. 1,88,79,658

(22.1%)

3,49,943

(23.1%)

Nationalized Banks. 3,17,13,638

(37.1%)

7,25,130

(47.9%)

Foreign Banks. 97,15,237

(11.4%)

99,185

(6.6%)

Regional Rural Banks. 1,33,93,759

(15.7%)

36,644

(2.4%)

Other Commercial Banks. 1,17,33,089

(13.7%)

3,02,940

(20.0%)

Total 8,54,35,381 15,13,842


NON PERFORMING ASSETS OF SCHEDULED COMMERCIAL BANKS


Year Advances

(Rs./Crores)

Npa’s

(Rs./Crores)

Percentage

2001 5,58,679 63,963 11.4%

2002 6,80,869 70,954 10.4%

2003 7,76,508 70,314 9.1%

2004 9,02,026 64,897 7.2%

2005 11,71,210 57,545 4.9%

2006 15,50,449 51,885 3.3%

COMPARITIVE STUDY OF TWO GIANTS

SBI ICICIYears 2004-05 2005-06 2006-07 2004-05 2005-06 2006-07

No. Of Offices 9,185 9,241 NA 515 563 NA

No. Of Employees

2,05,515 1,98,774 NA 18,029 25,479 NA

Deposits 3,67,048 3,80,046 4,35,521 99,819 1,65,083 2,30,510

Advances 2,02,374 2,61,642 3,37,336 91,405 1,46,163 1,95,866

Cost Of Funds 4.90 4.74 NA 3.02 4.01 NA

Net Npa Ratio 2.65 1.87 NA 1.65 0.72 NA

Rs. In Crores


BENCHMARK PRIME LENDING RATE (BPLR)

The BPLR ranges from 12% to 16.5%. Some of the indicative BPLRs are as under:

State Bank of India 12.75% ICICI Bank 15.75%

Punjab National Bank 13.00% HDFC Bank 15.00%

Canara Bank 13.25% Axis Bank 15.00%

Bank of India 13.25% Citi Bank 13.50%

Bank of Baroda 13.25% Standard Chartered 13.00%

Union Bank of India 13.25% Kotak Bank 16.50%


CLASSIFICATION OF INDUSTRY

INVESTMENT IN PLANT & MACHINERY

• MICRO - Up to Rs. 25 Lacs

• SMALL - Between Rs. 25 – 500 Lacs• MEDIUM - Between Rs. 500 -1000 Lacs• LARGE - Above Rs. 1000 Lacs


SOURCES OF FINANCE

A basic principle is that short-term financial needs should be met from short-term sources, medium term financial needs from medium term sources & long term financial needs from long-term sources. Moreover a proper balance between loan funds & own funds has to be maintained.


CLASSIFICATION OF SOURCES OF FINANCE

LONG TERM• Share Capital • Reserves and Surplus including retained earnings• Long Term loans from FI’s and Banks (Rupee and Forex)• Deferred payments• Unsecured loans from promoters and sister concerns• Public deposits• Asset Securitization• Lease financing• Venture Capital Financing• International Financing including GDR, ADR, FCCB etc.


CLASSIFICATION OF SOURCES OF FINANCE.

SHORT TERM• Bank Overdrafts• Trade Credit• Short Term Loans• Bridge loans• Factoring• Bills of Exchange• Hire purchase


CONVENTIONAL PRODUCTS

• Cash-credit/Overdraft

• Bills Discounting

• Bank Guarantees

• Letters Of Credit

• Rupee Term Loan

• Foreign Currency Term Loan

• Hire Purchase/Lease Finance


NON-CONVENTIONAL PRODUCTS

• Bridge Loans/Short Term Loans• Commercial Paper• Factoring• Securitization Of Future Receivable• Invoice Financing• Channel Financing• Cash Management Products• External Commercial Borrowings• FCNRB Loans• Venture Capital Finance• International Finance (ADR,GDR,FCCB)


FACTORING• ASSIGNMENT OF RECEIVABLES

• READY SOURCES OF SHORT TERM FUNDS

• OUTSIDE REGULAR BANK LIMITS

• OFF BALANCE SHEET FINANCING

• DEBT ADMINISTRATION

• CREDIT PROTECTION


SECURITISATION OF FUTURE RECEIVABLES

• DISCOUNTING OF CERTAIN OR NEAR CERTAIN CASH FLOWS

• CREDIT RISKS BACKED BY COLLATERALISATION OF CASH AND RECEIVABLES

• WITH / WITHOUT RECOURSE FINANCING

• BALANCE SHEET MANAGEMENT


INVOICE FINANCING

• FINANCING OF RECEIVABLES

• UNSECURED FINANCE

• MINIMUM DOCUMENTATION

• PAYMENT CONFIRMATION FROM CUSTOMER WITHOUT ANY COMMITMENT ON USANCE PERIOD


CHANNEL FINANCING

• AVAILABLE TO DISTRIBUTORS / DEALERS

• FINANCING OF PURCHASE BILLS

• COMBINED WITH CASH MANAGEMENT SERVICES

• BACKED BY POST DATED CHEQUES OF THE DISTRIBUTOR / DEALERS

• UNSECURED FINANCE HENCE BACKED BY COLLATERALS


CASH MANAGEMENT PRODUCTS• EFFICIENT MANAGEMENT OF FUNDS

• IMMEDIATE CREDIT FOR CHEQUE COLLECTIONS

• AT PAR ISSUE / COLLECTION OF CHEQUES

• NO INTEREST COSTS EXCEPT SERVICE CHARGES

• IMPROVES CASHFLOWS

• IDEAL FOR CORPORATES HAVING MULTI-LOCATIONAL SALES


EXTERNAL COMMERCIAL BORROWINGS• ECB can be raised from International Banks, International Capital

Market, Multilateral financial Institutions, foreign collaborators & equity holders etc.

• ECB upto USD 20 mn should have minimum average maturity of 3 years & above USD 20 mn upto USD 500 mn an average maturity of 5 years.

• All in cost not to exceed 150 basis point over 6 months LIBOR for maturity of 3-5 years and 250 basis points for maturity over 5 years.

• ECB not permitted for real estate, working capital, general corporate purpose, repayment of existing rupee loans etc.

• ECB above USD 500mn & some other categories of borrowers need to use the approval route.


FCNRB – B LOANS

• FOREIGN CURRENCY LOANS IN USD, POUND STERLING, EURO OR JAPANYESE YEN

• REPAYMENT OF LOAN AND INTEREST TO BE MADE IN THE CURRENCY OF THE LOAN

• TO BE CARVED OUT OF WORKING CAPITAL LIMITS

• AVAILABILITY OF FUNDS AT LOWER COSTS


LETTERS OF CREDIT

• INSTRUMENT USED FOR CREDIT ENHANCEMENT OF THE BUYER

• TYPES OF LETTERS OF CREDIT

- SIGHT LCs

- USANCE LCs

- STAND BY LCs

• SAFEGUARDS BUYER’S & SELLER’S POSITION


CRITICAL FINANCIAL PARAMETERS


Parameter Acceptable Level

Current Ratio Above 1.20:1

TOL/TNW (Total Outside Liabilities / Tangible Net Worth)

Not more than 3:1

Debt/ Equity Ratio 1.50:1 to 2:1 sometime 3:1 depends on the nature of the project.

PAT/Net Sales (%) In excess of 5%

Return on capital employed (ROCE) Minimum 15%

Gross Average DSCR Minimum 1.75 to 2.00

THANK YOU


current_scenario_of_bank_finance.ppt

Documents

banks rupee

medium term financial

walter dsouza

lacs medium

cash management servicesbacked

lacs small

lacs large

collateralisation of