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Submitted by:SEEMA GUPTA

UIM (UTTARANCHAL INSTITUTE OF MANAGEMENT)

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LIST OF CONTENTS

Preface 1

Executive Summary 2

Acknowledgement 3

Certificate 4

Objectives of the Report 5

Introduction to Banking 6 - 7

Banking system in India 8 - 10

Guide lines of R.B.I. 11 - 12

Chronology of Banks in India 13 - 16

Future of Banking 17

About Standard Chartered Bank 13 - 15

Banking Profile of SCB 16

SCB Structure Over View 17

Operations in IPC 23 - 30

Operation in Internal services 31 - 57

Risk Management System 58 - 64

Credit Risk Management 65 - 66

Introduction to Managing Credit Risk 67- 69

Introduction to Cash flow Analysis 70

Introduction to Ratio analysis 71 - 74

Introduction to Credit Scoring Models 75

Introduction to Financial Services of SCB 76 - 80

Introduction to Small & Medium Enterprises Banking of SCB 81 - 85

Customers of SCB banking 86

Workings on Petroleum Company & It's Analysis 87 - 103

Workings on Metals Company & It's Analysis 109 - 129

Workings on Motors Company & It's Analysis 130 - 159

Conclusion 160 - 162

Bibliography 163

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PREFACE

As a part of MBF program, a student has to peruse a project duly approved by the Director of

the institute. I had privileged of undertaking the project on the study and critical analysis of

the Operation Procedures of consumer banking and Analysis of financial statements and of the

customers of SME banking and measuring the credit risks at Standard Chartered Bank, 10

Parliament Street, New Delhi - 110001 during the period (15th April To 15 June).

It encompasses the entire operation unit in Delhi & consists of three Departments namely:-

ITEM PROCESSING CENTRE

INTERNAL SERVICES

SME BANKING

My project is divided into five Chapters and they are given as under.

1) Chapter one of this study contains, concepts of banking and importance of the subject in

present scenario.

2) Chapter two deals with Introduction of Standard Chartered Bank which consists history as

well as the present scenario of the bank.

3) Chapter three deals with the Banking operations of i tem processing centre of Slandered

Chartered Bank.

4) Chapter four deals with the Banking Operations of internal services of Slandered Chartered

Bank

5) Chapter five deals with Introduction of SME Banking and of Management of credit risk.

6) Chapter six deals with the analysis of Financial Statements and measuring risk

7) Chapter seven deals with the Conclusion and the Bibliography Part.

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EXECUTIVE SUMMARY

I have done my summer internship in Standard Chartered Bank. I have devoted around

one month in Item Processing Centre and Internal Services and around one month in

SME Banking. In the first section of summer training I was in operation department,

thereafter I was moved to SME Banking to learn the processing's of that department.

During my stint , I was exposed to theoretical as well as practical learning.

My project starts with an overview of the banking sector and the profile and

History of STANADRD CHARTERED. It lists the various activit ies handled by IPC. A loss of

any document can cause us lots of problem and hence we have to be very cautious about the

same. The project contains the workflow of the operation unit of standard chartered.

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ACKNOWLEDGEMENT

The summer training project in STANDARD CHARTERED bank was a very wonderful

experience for me. No matter what one achieves in life, he/she is always guided and helped by

someone. I got a good exposure of the industry, both in theoretical as well as practical ground.

This project is a sincere effort to have an in-depth knowledge of various "Banking operations

and credit risk management of SME ".

With profound sense of gratitude and regards I convey my sincere thanks to Mr. ARUN

OBEROI ( Head--IPC) , Mr. Prashant (SME s), Miss Rachna (SMEs ) and all colleagues of

standards chartered bank for not only giving me an opportunity to pursue the project, but also

helping and guiding me through out in this project.

I would like to Express my Sincerest thanks to Prof. J.D.Agarwal And Prof. Aman Agarwal.I

would also like to express my sincerest thanks to Miss. Yamini Agrawal, Prof.Chaterjee, MR.

Pushpendra Raghav, Mr. Deepak Bansal and all the faculty members of IIF for guiding me

with their knowledge and guidance throughout my project work and also very graceful to all

my IIF colleagues for their helpful nature.

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OBJECTIVE OF THE PROJECT

During the course of my project, I had covered the below-mentioned objectives:

1) To Review & Analyze the work process in operation unit in a bank.

2) To understand the importance of the backend operation unit.

3) To review the analysis of Financial Statements of Small & Medium Enterprises to minimize

Credit Risk.

4) To review the significance of process normalization towards saving Processing t ime &

enhancing productivity/ Output.

.

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INTRODUCTION TO BANKING

BANKING SYSTEM

After the nationalization of Banks, increasing adoption of technology, continuous mergers in

the banking, modernizing backroom operation in the banks and competition pave the path of

growth of Indian banking. By the mid-1990, the near monopoly of public sector banks faced

the competition by the more customer-focused private sector entrants. This competition forced

older and nationalized banks to revitalize their operations.

Year 1992 was the golden period of Indian Banking system due to the scam-tainted stock

market. Large proportion of household saving moved into the banking system, which recorded

an annual growth of 20 percent in deposit

But along with the continuous growth and modernization, there are several challenges

confronting the banking sector. The main challenges facing the banking sector is the

deployment of funds in quality assets and the management of revenues and costs. The problem

of NPA (non- performing assets), overall credit recovery system stil l exist . There is a

continuous reforms and modernization is in process. A number of recon mediations of two

Narasimham committees have been implemented.

Foreign Banks are focusing on corporate and on the middle class consumer and providing them

better service. Nationalized Banks are also attempting to get on the path of automation. Strong

Banks will acquire the weaker banks. The numbers of foreign banks operating in India has

increased significantly and their share of total assets has also increased. In the year 2001

estimated foreign bank account for 14.7 percent of the total net profit of commercial banking

sector in India.

In spite tangible progress and the contribution of Narasimham I and Narasimham committee

reports the banking sector in India suffering from systemic and structural problem.

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BANKING SYSTEM IN INDIA

The modern banking system in India started with establishment of the first joint stock bank

The General Bank of India in the year 1786. After this first bank, Bank of Hindustan and

Bengal Bank came to existence. In the mid of 19th century East India Company established

three banks The Bank of Bengal in 1809, The Bank of Bombay in 1840, and bank of Madras in

1843. These banks were independent units and called Presidency banks. These three banks

were amalgamated in 1920 and new bank Imperial Bank of India was established.

After Independence the Imperial Bank of India was nationalized with a new name State Bank

of India by passing State Bank of India act 1955. The Reserve Bank of India as a Central bank

was nationalized in the year 1935 by an act the Reserve bank of India act passed in the

parliament. Several new banks as Punjab National Bank, Bank of Baroda, Canara Bank, Indian

Bank, Bank of India etc were established after independence. On July 19, 1969 14 major banks

were nationalized. Later on more banks were nationalized. At present the numbers of

nationalized banks are 20. Several Foreign banks were allowed to operate as per the guidelines

of RBI. At present the banking system can be classified in following categories:

1. PUBLIC SECTOR BANKS

Reserve Bank of India

State Bank of India and its 7 associate Banks

Nationalized Banks (20 in number)

Regional Rural Banks sponsored by Public sector Banks

2. PRIVATE SECTOR BANKS

Old Generation Private Banks

New Generation Private Banks

Foreign Banks in India

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Scheduled Co-operative Banks

Non Scheduled Banks

3. CO-OPERATIVE SECTOR BANKS

State Co-operative Banks

Central Co-operative Banks

Primary agriculture Credit Societies

Land Development Banks

Urban Co-operative Banks

State Land Development Banks

4. DEVELOPMENT BANKS

Industrial Finance Corporation of India (IFCI)

Industrial Development bank of India (IDBI)

Industrial Credit & Investment corporation of India (ICICI)

Industrial Investment Bank of India (IIBI)

Small Industries Development Bank of India (SIDBI)

National Bank for Agriculture & Rural Development (NABARD)

Export-Import Bank of India

SCICI Ltd

All the types of banks have a centralized control of RBI. All the banks have to follow the guidelines of RBI.

Government used banks to provide credit and loan to weaker sections. This all lead to a serious crisis of

unrecoverable debt. At the end of 1990 banks were saddled with NPA (Non Performing Assets) as bad and

recoverable debts touched to Rs.75, 000 crores.

Foreign Banks in India started to lure customers by good services. These banks were more automated, providing

more faster information, kept flexible working hours and introduced 24 hrs ATM's.

Today Private Indian Banks as well as Nationalized Banks offering better services and attempting to get on to the

path of comprehensive automation.

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Guidelines of RBI

The RBI issued guidelines regarding the formation and functioning of private sector banks in January 1993.

The guidelines are as follows:

The Banks shall be governed by the provisions of The Reserve Bank of India Act 1934, The Banking

Regulations Act 1949, and other relevant statuaries.

Private Sector Banks are required to be registered as Public limited Companies in India.

The shares of banks are required to be listed on Stock Exchanges.

Preference will be given to those banks whose headquarters are proposed to be located in a center which

does not have headquarters of any other bank.

Maximum voting rights of an individual shareholder will be limited to 1% of total voting rights.

The new bank will not be allowed to have as its Director any person who is already a Director in a

banking company.

The bank will be subject to prudential norms in respect of banking operations, accounting policies, and

other policies as laid down by RBI. The bank will be required to adhere` to the following: Minimum

paid-up capital of Rs.1 billion. Promoter's contribution as determined by the RBI capital adequacy of

8% of the risk weighted assets. Single borrower and group borrower exposure limits in force priority

sector lending Export Credit Loan policy within overall policy guidelines laid down by RBI.

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The banks will be free to open Branches anywhere once they satisfy the capital adequacy and prudential

accounting norms.

The banks will not be allowed to have investments in subsidiaries, mutual funds and portfolio

investments in other companies in excess of 20% of the bank's own paid-up capital and reserve.

The banks would be require to use the modern infrastructural facilities in office equipments, computer,

telecommunications etc.

With the recommendations of Narasimham Committee, the Government has now allowed the entry of

Private Banks.

The RBI will grant approvals for entry of private sector banks provide such banks offer competitive,

efficient and low cost financial intermediation services, result in up gradation of technology in the

banking sector, are financially viable and do not resort to unfair means like preemption and

concentration of credit, monopolization of economic power, cross holding with industrial groups etc.

Non Residential Indians are allowed to have primary equity in a new banking company to the extent

of 40%. In the case of a foreign banking company or a finance company acting as a technical

collaboration or a co-promoter, equity participation is restricted to 20%.

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CHRONOLOGY OF BANKS IN INDIA

January 1, 1949 : The Reserve Bank of India is Nationalized and made a Central Bank in India

by an act of Parliament.

September 4, 1951 : The Government of India planned to seek loan from World Bank.

1956 : Life Insurance Companies were Nationalized.

July 3, 1964 : IDBI was set up.

July 6, 1966 :First time the Rupee was devalued by 36.5 percent, one Dollar became Rs.7.50

from Rs.4.75.

July 19,1969 :Fourteen major banks were nationalized by Mrs. Indira Gandhi the then Prime

Minister of India.

1973 :The Foreign Exchange Regulation Act came into existence. (Now Foreign

Exchange Management Act)

January 11, 1978 :Currency notes in denomination of Rs.1000, Rs.5000 and Rs.10, 000 were

withdrawn from circulation.

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November 19, 1986 : Government of India Launched Indira Vikas Patra.

1987 :Government of India introduced 9 % Tax free relief bonds, to mobilize

resources for meeting draught related expenditure.

April 1988 : National Housing Bank was set up with a share capital of Rs.100 crores

subscribed entirely by the R.B.I.

July 1 and 3, 1991 : R.B.I devalued the rupee downward by 17.38 percent.

November, 1991 :M. Narsimham committee on reforming the financial system submitted its

report suggesting phased reduction of SLR to 25 percent in three years and

CRR to 10 percent in four year.

March, 1992 :Dual Exchange rate system was instituted under liberated rate management,

enabling orderly transition from a managed floated regime to a market

determined one.

April, 1992 : RBI introduced Risk-Assets-Ratio for Banks as a Capital adequacy measure.

January 8, 1993 : FERA was amended and subsequently repealed and replaced by Foreign

Exchange Regulation Act 1993.

January, 1993 : Guidelines for setting up private sector banks are issued.

March, 1993 :Process of convertibility is started and Rupee is made convertible on the trade

account.

September, 1993 : New Bank of India was merged into Punjab National Bank.

March, 1994 :UTI Bank became the first private sector bank to start its operation.

June 13, 1994

:RBI issued guidelines on Prudential norms. Banks should achieve minimum

capital adequacy ratio 6 percent on their risk weighted assets and off Balance

Sheet exposures by march31, 1995 and 8 percent by march 1996.

July 15,1994 :Amendment in Banking Companies Act 1970 enabled the Nationalized bank

to tap the capital market. The Nationalized banks are allowed to strengthen

their capital base to contribute to their capital up to 49 percent in the capital

market.

August, 1994 : Full convertibility was taken by making the Rupee convertible on the current

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account.

October, 1994 : Oriental Bank of Commerce became the first Nationalized bank to access the

capital market to raise Rs.387.24 crore capitals.

October 1995 :Banks are allowed to fix their own interest rates on domestic term deposits

with maturity of two years.

July, 1996 :The insurance regulatory authority was set up to privatize the insurance sector.

May 9, 1997 : RBI issued new norms for Non Banking Finance companies to improve their

financial health and viability. The financial companies are required to apply

for registration with RBI by July 8, 1997.

December 7, 1997 :RBI constituted a working group under the Chairmanship of S.H.Khan to

examine the harmonization of role and operations of development of Financial

Institutions and Banks.

April 24, 1998 :The S.H.Khan committee on the harmonization of the role and operations of

development of Financial Institutions and Banks submitted its

recommendation to move towards universal banking.

August 9, 2000 :Banks having a minimum net worth of Rs.500 crore and satisfying other

criteria regarding capital adequacy were allowed to enter insurance business

through a joint venture.

November 10, 2000 :Guidelines to Bank for financing of equities and investment in shares were

issued. Banks were allowed to invest unto 5 percent of its total outstanding

domestic credit in capital market.

January 3, 2001 :Revised guidelines for licensing of new banks in private sector were issued.

These stipulate a minimum initial paid-up capital of Rs.200 crore (to be raised

to Rs.3000 crore within three years o commencement of business) with a

minimum 40 percent as contribution from its promoter.

April 19, 2001 :Banks permitted to formulate Fixed Deposit Schemes specifically for senior

citizen offering higher and fixed rate of interest.

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April 28, 2001 :RBI clarifies approach to universal banking for term lending and reframing

institutions.

FUTURE OF BANKING

India Banking Summit, an international conference examining the future of banking and

financial services in India will bring together leaders in the field of banking, wealth

management, insurance, and IT to discuss growth opportunities in retail, community, rural,

and commercial banking.

The summit will be held in Mumbai from Tuesday 7th December until Wednesday 8th

December 2004 at the Renaissance Mumbai Hotel and Convention Centre.

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The event has been endorsed by Dr. Manmohan Singh, Prime Minister of India, and sponsored

by Intellect Suite by Polaris, SunTec, PSI Data Systems, Carreker Corporation, Red Hat,

Aviva Life Insurance and SDG Software Technologies. It brings together over 150 senior

executives to evaluate the latest developments in banking technology, risk management, retail

and rural financial services, capital markets, and regulation.

Opening this year's event, Chief Executives from ING Vyasa Bank, Bank of Baroda, IDBI

Bank, ICICI Bank, Bank of Maharashtra, Yes Bank, and the Development Bank join the World

Bank and Polaris Software Lab to explore new growth opportunities in retail banking. The

program also features participation from Citigroup, Bank of America, HDFC Bank, Kodak

Investment Banking, Bank of India and the Reserve Bank of India.

ABOUT STANDARD CHARTERED BANK

Standard chartered is the world's leading emerging markets banks headquartered in London.

Its businesses however, have always been overwhelmingly international. This is the summary

of the main events in the history of Standard Chartered and some of the organizations with

which it merged.

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Standard chartered is named after two banks that merged in 1969. They were originally known

as the Standard Bank of Brit ish South Africa and the Chartered Bank of India, Australia and

China. Of the two banks, the Chartered Bank is the older having been founded in 1853

following the grant of a Royal Charter from Queen Victoria. The moving force behind the

Chartered Bank was a Scot, James Wilson, who made his fortune in London making hats.

James Wilson went on to start The Economist, st ill one of the world's pre-eminent

publications. Nine years later, in 1862, the Standard Bank was founded by a group of

businessmen led by another Scot, John Paterson, who had emigrated to the Cape Province of

South Africa and had become a successful merchant. Both banks were keen to capitalize on the

huge expansion of the trade between Europe, Asia and Africa and to reap the handsome profits

to be made from financing that trade. The Chartered Bank opened its first branches in 1858 in

Calcutta and Mumbai. A branch opened in Shanghai in that summer beginning Standard

Chartered unbroken presence in china. The following year the Chartered Bank opened a branch

in Hong Kong and an agency was opened in Singapore. In 1861the Singapore agency was

upgraded to a branch which helped provide finance for the rapidly developing rubber and tin

industry in Malaysia. In 1862 the Chartered Bank was authorized to issue bank notes in

Singapore, a privilege it continued to exercise until the end of the 19 t h century. Over the

following decades both the Standard Bank and Chartered Bank printed bank notes in a variety

of countries including China, South Africa, Zimbabwe, and Malaysia and even during the siege

of Making in the South Africa. Today Standard chartered is stil l one of the three banks which

print Hong Kong's bank notes.

Standard Chartered in the 1990s

Even within this period of apparent retrenchment Standard Chartered expanded its network, re-

opening in Vietnam in 1990, Cambodia and Iran in 1992, Tanzania in 1993 and Myanmar in

1995. With the opening of branches in Macau and Taiwan in 1983 and 1985 plus a

representative office in Laos (1996), Standard Chartered now has an office in every country in

the Asia Pacific Region with the exception of North Korea. In 1998 Standard Chartered

concluded the purchase of a controlling interest in Banco Exterior de Los Andes (Extebandes),

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an Andean Region bank involved primarily in trade finance. With this purchase Standard

Chartered now offers full banking services in Columbia, Peru and Venezuela. In 1999,

Standard Chartered acquired the global finance trade business of Union Bank of Switzerland.

This acquisition makes Standard Chartered one of the leading clearer of dollar payments in the

USA. Standard Chartered also opened a new subsidiary, Standard Chartered Nigeria Limited in

Lagos, acquired 75 percent of the equity of Nakornthon Bank, Thailand; and agreed terms to

acquire 89 percent of the share capital of Metropolitan Bank of the Lebanon.

Standard Chartered Today

Today Standard Chartered is the world's leading emerging market bank employing 30,000

people in over 500 offices in more than 50 countries primarily in countries in the Asia Pacific

Region, South Asia, The Middle East, Africa, United Kingdom, and the Americas. The new

Millennium has brought with it two of the largest Acquisit ion in the history of bank with the

purchase of Grindlays bank from the ANZ Group and the acquisition of the Chase Consumer

Banking operation in Hong Kong in 2000.

These acquisitions demonstrate Standard Chartered firm committed to the emerging markets,

where it has a strong and established presence and where i t sees its future growth. It is one of

the world's most reputed international banks, with a management team comprising 70

nationalities. Standard Chartered is listed on both the London Stock Exchange and the stock

exchange of Hong Kong and is in the top 25 FTSE-

100 companies, by Market Capitalization. It serves both consumer and Wholesale banking

customers. Consumer Banking provides Credit cards, personal loans, mortgages, deposit taking

and wealth management services to individuals and small to medium sized enterprises.

Wholesale banking provides corporate and institutional clients with services in trade finance,

cash management, lending, custody, foreign exchange, debt capital markets, and corporate

finance.

Standard Chartered is well established in growth markets and aims to be the right partner for

its customers. The Bank combines deep local knowledge with global capability. The bank is

trusted across i ts network for its standard of governance and its commitment to making a

difference in the communities in which i t operates.

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BANKING PROFILE OF SCB

SCB has some different types of banking:-

Priority Banking

Personal Banking

Door Step Banking

Retail Services

Additional Services

SCB STRUCTURE OVERVIEW

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Standard Chartered Bank

Internal Services

Central OpsMetro Ops

Service qualitySalesShared Distribut-ion

ServiceBIUService Delivery

Whole Sale BankingConsumer Banking

Item Processing Centre

Account Services

rvicesSafe CustodyDisbursement Unit

Asset OperationLiabilities Operation

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CLEARING

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INTRODUCTION

Clearing is a way adopted by the banking system to enable the exchange of negotiable

instruments like cheques, drafts etc.. . I .e. drawn in any bank in favor of another branch or its

customers and the subsequent settlement of the amounts due between banks on account of such

exchange of these instruments.

In case of Indian banks, 'RESERVE BANKS OF INDIA' is the intermediary between various

banks R.B.I. derives the power of setting up and managing clearing house from section 58(2)

(p) of R.B.I. act . For the above purpose, all banks maintain an account with R.B.I. which is

used for the settlement of inter-bank dues. In case, where R.B.I. does not maintain a clearing

house, a specified local branch of the 'State Bank of India ' or i ts subsidiaries is used for this

purpose.

Clearing can be grouped under two heads:

1) INWARD CLEARING: - Inward clearing is a process wherein each member bank

receives payments.

2) OUTWARD CLEARING: - Outward clearing is a process wherein each member bank of

the clearing house delivers cheques for realization instruments, drawn on the other

banks.

INWARD CLEARING

CLEARING MECHANISM

MICR CLEARING: MICR Clearing concept is basically introduced by R.B.I.

MICR band consists of -

- Serial number of the instruments.

- City drawn cheques.

- Bank code.

- Branch code.

- Transaction code.

- Amount.

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The step by step procedure of clearing :

STEP 1: From R.B.I. clearing house, the inward clearing instruments, the input forms, the

floppy and the reports has been picked up. Similarly from the S.B.I. , the hard copy as well as

the soft copy of the input statement has been picked up.

STEP 2: I .T personnel is handed over that floppy and tapes from the clearing house through

ICSMERGE.

STEP 3: After merging they generate a report of the total number of items and the value,

in the listing of the R.B.I., tall ies with the report. The file is uploaded to the host

for processing and posing of the debits into the customer accounts.

NEXT AT SINGAPORE:-

STEP 4: After uploading at Singapore, the support team runs a program which debits the

customer accounts.

This program has two entries:-

CR - Clearing Settlement.

DR - Inward Clearing computer surpass.

This program pass-

- Debit to customer.

- Credit to ICCS (IPC cost center).

This program simultaneously generates reports for-

- Items that have been posted (90 Q).

- Items that have not been posted (90 V).

-items with hard hold (XS 14)

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The reports downloaded to local "IPC control D-ID".

NEXT AT IPC CENTRE:-

STEP 5: R.B.I. Report will be t icked back against the cheques. If any differences found, it

will captioned in clearing differences.

STEP 6: Three reports generated here:

XS0014 - Late posting (i.e. manual posting transaction).

XS0090V- Rejected items by items sequence numbers.

XS0090Q- Posted items.

STEP 7: Technical verification having checking of six different entries:

- Cheque is postdated/ outdated/ having no date.

- Have signature or not.

- Cheque has crossing stamp of the presenting bank.

- Any unauthorized signature.

- Having payers name.

If any point is missed, that cheque would be considered as rejected i tems.

STEP 8: Signature Verification of those cheques having amount:

> INR 10,000/- will be done.

> INR 50,000/- will be scanned by U.V.Rays.

STEP 9: Total value of Inward Clearing received from the R.B.I. are reported for finance.

STEP 10: Now Inward Balancing takes place like below:

+ Total auto posted items (90Q).

- Total of XS14.

+ Manual posted rejected items (90V).

+ XS14 (Returned un-posted items).

+ CRS (Returned un-posted i tems).

+ GL payments.

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+ CDDTV.

= Total = Total IC as per R.B.I. Schedule.

CLEARANCES OF HIGH VALUE CHEQUES:-

The high-value cheques will be collected from the R.B.I. at the proper given time .The

cheques are in lot and arranged in lots with the l isting attached to i t .Inward clearing of high-

value cheques are completely manual as against HICR Inward-Clearing. Cheques will be add-

listed "presenting bank" lot-wise and verified against the total of the list ing.

Verification of signature is done on CT-Dos. All customer cheques will be posted manually

through transfer withdrawal option in CT-Dos and high-value posted journal is a check to any

wrong posting by the teller.

At the t ime of posting, the details of the cheques have been matched to identify any wrong

position. Then technical verification takes place.

Then high-value limex report has been generated.

The transaction refers to the concerned branch.

Then totaling of the following:-

1. Posted transaction total.

2. Un-posted returned total .

3. Drafts sent to total .

4. Differences if any.

INTER-BANK INWARD CLEARING :

1. Cheques and lists are collected from R.B.I.

2. Verification of the technical error.

3. Signature verification of the Bank officer.

4. Posting of pay-order through CT-Dos.

5. Checking and verification of entries takes place with the R.B.I. Settlement

sheet.

6. Then GL has been generated.

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OUTWARD CLEARING:

This department receives outward clearing cheques and deposit sl ip from the customers from

branches or boxes.

# Two sets of cheques are received here:

- One accepted at the counter.

- One accepted at the cheque collection boxes.

Then cheques are segregated into:-

* Local cheques.

* Outstation cheques.

* Dollar cheque.

* Transfer cheque.

* High amount cheque.

* Discrepancies cheques.

The instruments having high-value > 6 lacs have been reported to senior officials according to

"money laundry guidelines".

In the meanwhile, in the Technical Verification, the NC and BC cheques are segregated.

Clerk reviews the instruments to see if there are any doubtful deposits.

While clearing, clerk checks that:

- Beneficiary details are same as the account number.

- The cheque is not post-dated.

- Any deposit slip having any discrepancy are considered as rejected items and then

finally returned to concerned branch.

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Now the cheques are batched together separately for MICR and payable at par cheques .Then

total of each batch note down. Then all cheques encoded by outward clearing houses. The duly

encode cheques will be checked against the total of various deposit slips.

Then the 'block ticket" at the end of the day are prepared through the machine for the sum of

total of all the batches. Simultaneously MSA OCCS credit voucher will be totaled. Then the

cheques are posted through CT-Dos.

To credit the GL a/c of the bank, the entries that has been passed are

- Dr.-to- OCCS -to- IPC cost centre

- Cr. -to- Respective GL a/c.

Then balancing takes place. Two types of balancing are there:

1) MICR clearing.

2) Non MICR clearing.

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OUTPUT CONTROL

FINANCIALCHECKING• CASH TRANSACTIONS• TRANSFER

TRANSACTIONS• ALL THE VOUCHERS

AND INSTRUCTION ABOVE TELLER LIMITS MUST BE AUTHORISED BY COMPETENT PERSON. (TSM/BM)

NON – FINANCIALTRANSACTIONS• ACCOUNT LAS• AMENDMENTS ON

HOGAN• AMENDMENTS ON CT –

DOS• RESTRAINTS

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CASH TRANSACTIONS

CASH DEPOSITS• TO CUSTOMER

ACCOUNT• TO CREDIT CARD• TO PSGL ACCOUNT

CASH WITHDRAWL• BY CHEQUE• THROUGH CASH

WITHDRAWAL SLIP• AGAINST CREDIT

CARD• AGAINST ID

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CASH DEPOSIT TO CM A/C• Txn Rs. 250000/- and above.• PAN/GIR No to be mentioned

on cash deposits above 50k. If not available Form 60 duly filled up to be annexed.

• If thru ATM – ATM Cash Deposit Envelope with copy of JP enclosed.

• Amounts in words & figures to tally.

• Alterations on the deposit slip to be authenticated.

• Posting into correct account and with correct amount.

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CASH DEPOSIT IN CR. CARD

• All Cash deposits to be checked irrespective of amount.

• Tally Credit Card A/c No with input card no.

• Statement Counterfoil attached

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CASH DEPOSIT TO PSGL

•All Transactions irrespective of amount.•Amount and Account Number to be tallied.

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CASH WITHDRAWAL BY CHEQUE

• Txn Rs. 50000/- and above.• Reperformance of Sig. Verification

for Txn. >= Rs. 50000/- and Txn. =< Rs. 500000/- and for Txn.>= Rs. 500000/- if not done by TSM/BM

• Txn. >= Rs. 500000/- U/V Scan performed.

• Date of Cheque Valid• Bearer Instrument• Alterations authenticated• Rubber Stamp for non – individual

accounts• Cash Receipt Acknowledgement

on reverse of cheque.• Correct A/c No, Amount and

Cheque Number input.

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Cash Withdrawal Slip/Counter Cheque

• Requisition Slip/Letter held

• ID Documents obtained, Customer Identified by branch staff duly signed on the reverse..

• A/c No. on ChequeHand Written/Stamped

• Not Issued to Non –Individual A/c

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Credit Card Advance Slip

• All Transactions irrespective of amount.

• Check the correct amount posted.

• Cash Advance Slip put thru a manual imprinter/POS

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Cash Payment Against ID

•Receipt Acknowledged by ID Holder•Swift/ITT Massage authorised by Payments•ID Documents obtained•Amount as per instruction

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Foreign Currency Transaction USD/GBP/EURO

• FCY Cash Deposit• TC Deposit• FCY Cash Withdrawal• TC Sale• Currency USD, GBP and EURO• PAF (2copies) must be attached to the vouchers• Form A – 4and FEMA declaration must be obtained duly f illed up and signed/stamped• Ensure that FCY leg is posted• Necessary documents – Copy of Passport/CDF/Copy of Visa/Copy of Air Travel

Ticket/Purpose of Travel must be obtained• Form A-2 (2 copies) and documents as above must be separated from the vouchers

and be handed over to the person doing reconciliation of FCY A/cs• Ensure receipt of FCY acknowledged by cm & encashment certif icate issued in case

of FCY TC/Currency purchase.• Any branch can deal in FCY however the FCY account can only be posted in three

Cat A branches – 17 Pst, 10E CP and 10 SMG.• In most of the cases all the branches which receive/sale in FCY post the LCY leg in

their branch and for FCY leg they send massage to 10E CP branch.

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Transfer TransactionsTypes• A/c to A/c Transfer – By

Cheque/ Letter etc.• Salary Transfer• Charges Reversal• DD/PO Issuance• TD Issuance (QAO)/ TD

Breaks

Remember• If A/c to A/c Trf done on Letter

– It must be authorised by the BM.All transactions must be checked

• Reversal of Charges from waiver A/c (PSGL) can only be authorised by BM. All transactions must be checked

• Quick A/c Opening Form must be separated from the vouchers after checking and sent to ACS

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A/c to A/c Transfer by Cheque• Txn >= Rs. 50000/-• Signature Re – Performance for Txn >= Rs. 50000/-

and =< Rs. 500000/-. Above Rs. 500000/- if not authorised by TSM/BM

Check fora) Date of Cheque validb) Alterations authenticatedc) A/c Title matches with beneficiary name on the cheque.d) Rubber Stamp placed on sign. in case of non-individual

A/ce) NDS Stamp duly authorisedf) Cheque no correctly input

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A/c to A/c Trf. by Letter

• Must be authorised by the TSM/BM.• Diary note indicating call back to cm.• Allowed only if there is common A/c holder

between Debit & Credit A/c holder.• No third Party transfers allowed on letter.• All transactions are required to be

checked.

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DD/PO Issuance

• Txns above Rs. 50000/- to be checked.• Alterations authenticated• DD/PO number and a/c no loaded correctly• Receipt acknowledged by cm or authorised

representative• If cm has provided a cheque against issuance of

DD/PO it must be cancelled by debit or crossed for cancellation after checking for stop payments by the TSM.

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Account ClosureDDA• All transactions must be checked.• Sign reperformance for >= Rs.

50000/- & =< 500000/- and for higher amts if not authorised by TSM/BM.

• Cheque Book/ Debit Card taken back and destroyed. (proper remarks given)

• Signatures of all account holders.• If company account Board

Resolution attached. BR must be signed by atleast tw o authorisedrepresentative w ho are not signatory to closure letter.

• Only Karta in HUF and Propr ietor in Proprietorship f irm can s ign the closure instruction not the POA holder.

• No Third party payout be made for proceeds.

CDA• Threshold Rs. 50000/-.• Sign reperformance not required.• Alterations authenticated.• Credit to A/c of same account

holder.• No third party credits allowed.• No cash payments if the

relationship amount (across all CDA accounts) exceeds Rs. 20000/- inclusive of interest accrued. This is IT requirement and must be adhered to strictly.

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Non Financial Transactions

• Issuance of OTC Cheque Book.• Stop Payments.• Placement/removal of Holds/Liens.• Amendments in Debit/ATM Card Status.• Amendments at id/account level.• New Account setup

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Account ClosureDDA• All transactions must be checked.• Sign reperformance for >= Rs.

50000/- & =< 500000/- and for higher amts if not authorised by TSM/BM.

• Cheque Book/ Debit Card taken back and destroyed. (proper remarks given)

• Signatures of all account holders.• If company account Board

Resolution attached. BR must be signed by atleast tw o authorisedrepresentative w ho are not signatory to closure letter.

• Only Karta in HUF and Propr ietor in Proprietorship f irm can s ign the closure instruction not the POA holder.

• No Third party payout be made for proceeds.

CDA• Threshold Rs. 50000/-.• Sign reperformance not required.• Alterations authenticated.• Credit to A/c of same account

holder.• No third party credits allowed.• No cash payments if the

relationship amount (across all CDA accounts) exceeds Rs. 20000/- inclusive of interest accrued. This is IT requirement and must be adhered to strictly.

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OTC Cheque Books Issuance

• Issued only to individual accounts.• Requisition slip/ customer letter obtained.• Must be authorised by TSM/BM.

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Stop Payments

• All transactions to be checked.• Customer Letter.• Signatures Verified.• Date & Time of receipt mentioned on the

instruction.• Cheque No and A/c no correctly loaded.• Charges taken and if waived then duly

authorised.• The gap between receipt and posting time

should be reasonable.

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Other Non Financial Txns• All transactions to be checked.• Customer Instruction/Diary note duly authorised/copy of orders

of regulatory bodies.• If not initiated by cm a sign off by the BM – Specifically in case

of change of ARM code approval by regional head / ARM code owner attached.

• Customer ID docs obtained wherever applicable – as in case of Debit/ATM card activation, removal of Hold 60/20 etc.

• Placement/Removal of Hold 20 must be authorised by BM.• Appropriate Hold placed.• Account Opening Form for LAS.• Details of hold are mentioned on the reverse of hold vouchers.

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Transaction on Dormant A/c & Unclaimed A/c

• ID and Address of the customer to be verified in such cases.• Copies of ID docs of all account holders/authorised signatories taken and

annotated with “Original Seen” by the TSM/MSS/BM.• ID proof not required if the customer is maintaining another transacting (S/B

or C/A) account (s) under the same ID AND the account is being closed where the txn amount involved is less than Rs 500.00.

• In case the ID could not be obtained a diary note authorised by the BM that the ID docs would be obtained in due course must be attached to vouchers.

• Mail to ACS for deferral for obtaining ID docs. Must be attached to the vouchers.

• Hold 60 must be marked in case of deferral.• BM can waive obtaining ID docs. if he/she is satisfied that the customer has

been identified. The same must be clearly annotated on the instruction.• In case of Dormant A/c closure where the ID proof could not be obtained,

payout can be made by PO only and the PO must be sent thru courier/registered post at the address recorded in our system.

Unclaimed accounts• Unclaimed A/c can only be closed and a fresh account is opened after

obtaining KYC docs.• Signatures must be verified by TSM/BM.

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Other Non Financial Txns• All transactions to be checked.• Customer Instruction/Diary note duly authorised/copy of orders

of regulatory bodies.• If not initiated by cm a sign off by the BM – Specifically in case

of change of ARM code approval by regional head / ARM code owner attached.

• Customer ID docs obtained wherever applicable – as in case of Debit/ATM card activation, removal of Hold 60/20 etc.

• Placement/Removal of Hold 20 must be authorised by BM.• Appropriate Hold placed.• Account Opening Form for LAS.• Details of hold are mentioned on the reverse of hold vouchers.

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SUGGESTIONS

Standard Chartered Bank has over the years maintained its services and relationship. It runs over 88 branches all

over the country. It has created a name for itself in the banking sector. As far as my views are concerned,

Standard Chartered as a model has a well-defined banking structure and gives satisfactory business to its clients.

Moreover I have observed some drawbacks in the short span in this department; I strongly believe that if these are

done away with in the Standard Chartered, its family would definitely see a better future. The key areas of

concern are:

- the main problem area of this department is the outdated software package being used across all the branches for

business. It simply reduces the efficiency of this organization. As we know, Cost minimization and profit

maximization is the main and common aim for any organization. The software which is being used here directly

or indirectly hampering the work-efficiency and minimizes profit. It should be replaced by advanced software as

soon as possible. It will double the efficiency of this firm as well as across all branches.

- Use of Dot-Matrix printer should be replaced by "Laser Printer ". It will save "30-45 minutes" of each employee

employed as a clerk here. They use to get their ledger through ink-jet. If Laser-printer will be introduced

here, each day, at least '10 hrs.' can be saved and again it will directly minimize the cost and maximize the

profit.

- Automation of simple jobs:-

Technology Up gradation- Sama Shodhan should be upgraded to enhance the efficiency and support

outstation cheques also, so that it works as a safe-guard for future problems. At present Sama Shodhan

processed only local cheques not outstation cheques. Out-station cheques are processed through CT-Dos.

But there are limitations with this package. It cannot provide further details of the cheques which had

been processed. So any queries occurs, then we have to search the overall records processed cheques

manually to answer and if any cheques are misplaced or damaged intentionally or unintentionally, then

the bank may have to face a bigger problem.

Solution : Shama Shodhan can be advanced by having an option for outstation cheques. It works a safe

guard for coming problems if any and works as a cousin for this bank.

Expenditure Analysis : Absenting is a disease to a flourishing company hence such employees, who fails

to constraints to an organization should be relieved.

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Excess of employees in department : In my view, the no. of employees are more than required, as I

noticed in 2 weeks that each day, 1 or 2 employees remain absent throughout the week but the operation

is going on without any hindrances.

Securitisation of risk : Securitisation of risk should be there which actually lacking here. In clearance

department what I felt is the job of a clerk need much concentration because of a single mistake can

resulted into financial loss may be Lakhs or Crores. But they are actually working in a disturbed

environment they are not able to pay much attention and concentration as required and lastly differences

occurs which takes a long time to solve. So my opinion is, Clerks should be separated by small cabins

then only they can pay much concentration and finally it will helpful for bank as it minimizes the chances

of risk and financial loss and can some time also.

Employees Satisfaction level : As far as my views are concerned, the employees satisfaction is one of the

most important factor and what I found here is that Employees are not working with enthusiasm but

working under pressure of work load. It effects the growth of the firm adversely. So an enthusiastic

environment should provide there so that they simply enjoy their work. It definitely increase their

efficiency to work.

Proper Utilization of Resources : For any firm, Manpower is the biggest resources. Here, manpower is

more than enough but the way, they are doing should be slightly change. Work-distribution and time

management should be modified. Then only the firm will properly utilize its resources and proper

management can only prove economic for this.

In my point of view, the above points of considered favorably will definitely prove as leverages to this

organization and will be 100% helpful in the growth of this firm.

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. I RISK MANAGEMENT SYSTEMRBI Guidelines

1) Introduction

Banks in process of financial intermediation are conforme3ed with various kinds of financial

and non financial risks viz. credit interest rate, foreign exchange rate, liquidity, equity price,

commodity price, legal, regulatory, reputation, operational, etc.. . These risks are highly

interdependent and events one area of risks can have ramification of risks for a range of other

risks categories.

The broad parameters of risks management system should encompass:

Organizational structure

Comprehensive risk management approach

Risk management policies

Guidelines & other parameters

Strong MIS for controll ing , monitoring & controll ing risks

Well laid out procedures , effective control & comprehensive risk reporting framework

Separate risk management framework

Periodical review and evaluation

2) Risk management structure

A major issue in establishing an appropriate risk management organization structure is

choosing between a centralized & decentralized structure. The board should set a risk

limits by assessing the bank’s risk & risk bearing capacity. At organizational level, over

all risk management should be assigned to an independent risk management committee

or executive committee of the top executives that reports to the boards of director.

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3) Credit Risk

The management of credit risk should receive the top management’s attention and the

process should encompass:

Measurement of risk through credit rating

Quantifying the risks through estimating expected loan losses i.e. the amount of loan

losses that bank would experience over a chosen time

Risk pricing on a scientific basis

Controlling the risk through effective Loan Review Mechanism and Portfolio

Management

Instruments of credit risk management

Credit approving authority

Prudential limit

Risk Rating

Risk Pricing

Portfolio Management

Loan Review Mechanism

4) Credit risk & investment banking

Significant magnitude of credit risk, in addition to market risk, is inherent in investment

banking. The proposals for investments should also be subjected to the same degree of credit

risk analysis, as any loan proposals. The proposals should also be subjected to detail appraisal

and rating framework those factors in financial and non-financial parameters of issuers,

sensitivity to external developments, etc.

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5) Credit Risk in Off-balance Sheet Exposure

Banks should evolve adequate framework for managing their exposure in off-balance sheet

products like forex forward contracts, swaps, options, etc as a part of overall credit to

individual customer relationship and subject to the same credit appraisal, l imits and

monitoring procedures. Banks should classify their off-balance sheet into three broad

categories-full risk, medium risk and low risk.

6) Inter-bank Exposure and Country Risk

A suitable framework should be evolved to provide a centralized overview on the aggregate

exposure on other banks. Bank-wise exposure limits could be set on the basis of assessment of

financial performance, operating efficiency, management quality, past experience, etc.

7) Market Risk

Market risk arising from adverse changes in market variables, such as interest rate, foreign

exchange rate, equity price and commodity price has become relatively more important.

Market risk takes the form of

Liquidity Risk

Interest rate Risk

Foreign exchange rate(forex) risk

Commodity Price Risk and

Equity Price Risk

8) Market Risk Management

The Boards should clearly articulate market risk management policies, procedures, prudential

risk limits, review mechanisms and reporting and auditing systems. The policies should

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address the bank’s exposure on a consolidated basis and clearly articulate the risk

measurement systems that capture all material sources risk and assess the effects on the bank.

9) Interest Rate Risk (IRR)

The management of Interest rate Risk should be one of the critical components of market risk

management in banks. Deregulation of interest rates has, however, exposed them to the

adverse impact of interest rate risk. The net Interest Income (NII) or net Interest Margin

(NIM) of banks is dependent on the movement of interest rates.

10) Foreign Exchange (Forex) Risk

Forex risk is the risk that a bank may suffer losses as a result of adverse exchange rate

movements during a period in which it has an open position, either spot or forward, or a

combination of the two, in an individual foreign currency.

Forex risk Management Measures

(a) Set appropriate limits- open posit ions and gaps.

(b) Clear-Cut and well-defined division of responsibility between front, middle, and back

offices.

11) Capital for market Risk

The base Committee on banking supervision (BCBS) had issued comprehensive guidelines to

provide an explicit capital cushion for the prices risk to which banks are exposed, particularly

those arising from their trading activit ies.

12) Operational risk

Managing operational risk is becoming an important feature of sound risk management

practices in modern financial market in the wake of phenomenal increase in the volume of

transactions, high degree of structural changes, and complex support systems.

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13) Risk Aggregation and capital Allocation

Most of internally active banks have developed internal processes and techniques to assess and

evaluate their own capital needs in the light of their risk profiles and business plans. Such

banks take into account both qualitative and quantitative factors to access economic capital.

CREDIT RISK MANAGEMENT

Credit risk management today

Banks are in the business of making loans, and it is credit officer’s responsibility to peruse

that business by making sound credit decisions. This requires more judgments than technical

skills. Reviewing financial statement may yield preliminary findings, but these fail to assess

the numerous variables that must be weighed. The loan officer must understand the

information, not merely crunch the numbers.

Further, unless credit analysis standards are clearly defined, valuable time and efforts are

wasted, not to mention the bottom line consequences of reaching the wrong deci8sion.

If a loan officer determines that the borrowing firms expectations exceeds its repayments

ability, does this mean all possible repayments sources are exhausted? Since the key is to

increase profitabili ty through sound credit judgment, the analyst must always evaluate

repayment judgment; the analyst must always evaluate repayment potential from all alternative

sources.

In turn if the bank is confident of repayment based of additional findings, the appropriate

pricing consideration are issued & monitored. The net effect is future profits of the banks due

to a meticulous credit investigation. Other wise the loan will probably be lost to a better

prepared competitor.

Since lenders are in business of taking risks, why banks are are so concerned about losing

money / briefly stated, a bank can never price an individual loan at a loss even if the

probability of default decreases. For ex., if the bank net interest margin is 4% annually, it will

take 25 years to recoup 100% of the loss, not including related overheads costs.

Thus the core of credit analysis is evaluating the borrower's ability to repay debt.

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Critical risk assumption plays a crit ical role in finalizing lending decision. To calculate risks,

comprehensive information is needed. Further we must understand how much information is

enough. In other words, identifying what is and is not significant is crit ical to reliable credit

judgment.

On way to do this is to assign a risk rating (above average, avg., & below avg.) to all facts.’

Weights of importance will then assigned to details regardless of a positive or a negative

rating.

The important components of this model should be:-

1) Management

2) Management / Administration

3) Bank Relationship

4) Financial Reporting

5) Intention (purpose)

Components of credit risk

i) Personal or consumer risks

ii) Corporate or company risks

iii) Sovereign or country risks

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Managing Credit Risk

This section describes credit analysis for real estate lending, consumer and small business

lending, mid-market commercial and industrial lending, and large commercial and industrial

lending. It also provides insights into the credit risk evaluation process from the perspective

of a credit officer evaluating a loan application.

Risk State Lending

Because of the importance of residential mortgages to banks, savings institutions, credit

unions, and insurance companies, residential mortgage loan applications are among the most

standardized of all credit applications.

Two ratios are very useful in determining a customer’s abili ty to maintain mortgage payments:

the GDS (gross debt service) and the TDS (total debt service) ratios.

Gross debt service ratios are the customer’s total annual accommodations expenses (mortgage,

lease, condominium, management fees, real estate taxes, etc…) divide by annual gross income.

Total Debt ratios is the customer‘s total annual accommodation expenses plus all other debt

service payments divided by annual gross income.

FIs often combine the various factors affecting the abili ty and will ingness to make loan

repayments into a single credit score. A credit-scoring system is a quantit ies model that uses

observed characteristics of the applicant to calculate a “score” representing the applicant’s

probability of default (versus repayment). Credit scoring systems are developed by using

borrower characterist ics (e.g., income, age, loan repayment history) for some past period. The

credit scoring model weights each characteristics to identify a boundary number (score) or

range such that if past loan customer had an overall credit score (derived from the weighted

characterist ics) greater than the boundary number they defaulted on the loan.

If the FI uses a scoring system, the loan officer can give an immediate answer- yes, maybe, or

no- and the reasons for that answer. A maybe occurs in borderline cases or when the loan

officer is uncertain of the classification of certain input information. A credit scoring system

allows an FI to reduce the ambiguity and turnaround time and increases the Transparency of

the credit approval process.

A loan customer list ing the following information on the loan application receives the

following points:

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I. Annual gross income

II. TDS

III. Relations with FI

IV. Major credit cards

V. Age

VI. Residence

VII. Length of Residence

VIII. Job Stabili ty

IX. Credit History

X. Total score

XI. Consumer (Individual) and small business Lending

The techniques used for mortgage loan credit analysis are very similar to those applied to

individual and small business loans. Individual consumer loans are scored like mortgage, often

without the borrower ever meeting the loan officer. Unlike mortgage loan for which the focus

is on the property, however, no mortgage consumer loans focus on the individual ability to

repay. Thus, credit-scoring models for such loans would put more weight on personal

characterist ics such as annual gross income, the TDS score, and so on.

Mid-market Commercial and Industrial Lending

In recent years, mid-market commercial and industrial lending has offered some of the most

profitable opportunities for credit granting Fis. Although definition of mid-market corporate

varies, they typically have sales revenues from $5 million to $ 100 million a year; have a

recognizable corporate structure (unlike many small businesses). But do not have ready access

to deep and liquid capital markets. Credit analysis of a mid-market corporate customer differ

from that of a small business because, while stil l accessing the character of the firms

management, its main focus is on the business itself.

Five C’s of credit :

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To analyze the loan applicant's credit risk, the account officer must understand the customer

character, capacity, collateral, and capital (sometimes referred to as the five Cs of credit).

Measures of capacity and conditions

Measures of character and condition

Measures of conditions

Measures of capital and Collateral .

Cash flow Analysis

FI's require corporate loan applicants to provide cash flow information, which provides the FIs

with relevant information about the applicant's cash receipts and disbursements that are

compared with the principal and interest payments on the loan. Cash receipts include any

transaction that result in an increase in cash assets (i.e., receipt of income, decrease in a non

cash asset, increase in a liabili ty, and increase in an equity account). Cash Disbursements

include any transactions that result in a decrease in cash assets. The cash flow statement

reconciles changes in the cash account over some period according to three cash flow

activit ies: operating, investing, and financial activities. When evaluating the cash flow

statement, FI's ant to see that the loan applicant can pay back the loan with cash flows

produced from the applicants operations.

Ratio Analysis

In addition to cash flow information, an applicant specific level of credit substantiates these

business needs by presenting historical audited financial statements and projections of future

needs. Historical financial statement analysis can be useful in determining whether cash floe

and profit projections are plausible on the basis of history of the applicant and in highlighting

the applicant’s risks.

Financial ratios are useful when performing financial statement analysis on a mid-market

corporate applicant. Although stand-alone accounting ratios are used for determining the size

of the credit facil ity, the analyst may find relative ratio more informative when determining

how the applicants business is changing over time. Hundreds of ratios could be calculated

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from any set of accounting statements. The following are a few that most credit analysts find

useful.

Liquidity ratios

Current ratio = Current assets

Current Liabilities

Quick ratio (acid-test ratio) = Cash + Cash Equivalents + Receivables

Current liabilities

Liquidity provides the defensive cash and near-cash resources for firms to meet claims for payment. Liquidity

ratios express the variability of liquid resources relative to potential claims.

Assets Management ratios

Number of days sales in receivables = Accounts receivables X 365

Credit sales

Number of days in inventory = Inventory X 365

Cost of goods sold

Sales to working Capital = Sales

Working capital

Sales to fixed assets = Sales

Fixed Assets

Sales to total Assets = Sales

Total assets

The asset management ratio gives the account officer clues to how well applicant uses its assets relative to its past

performance and the performance of the industry.

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Debt & Solvency Ratio

Debt asset ratio= Short Term Libilities+Long Term liabilities

Total Assets

Fixed Charge Coverage Ratio=Earning Available To meet Fixed Charges

Fixed Charges

Cash Flow to Debt Ratio= EBIT + Depreciation

Debt

Where EBIT represents Earning before income &tax.

Debt solvency ratio give the account manager an idea of the extent to which the applicant finances its assets with

debt verses equity.

Profitability Ratio

Gross margin = Gross profit

Sales

Operating Profit Margin = Operating Profit

Sales

Return on Assets = EAT

Average Total Assets

Return on Equity = EAT

Total Equity

Dividend Payout = Dividend

EAT

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Where EAT represents earning after tax, or net income.

For all Dividend payout Ratios, the higher the value of the ratio, the higher is the

profitabili ty of the firm.

Cautions with Ratio Analysis

While ratio analysis provides useful information about loan applicant's financial

conditions, it also has the limitations that require care and judgments in i ts use. For

example many firms operate in more than one industry .For these companies it is

difficult to construct a meaningful set of industry averages.

Credit Scoring Models

Credit scoring models use data on observed borrower characteristics either to calculate

profitabili ty of default or to sort borrowers into different default risks classes selecting &

combining different borrowers economic & financials Characterist ics, an FI manager may be

able to:

Numerically Establish which factor is important in explaining default risks

Evaluate the relative degree or importance of these factors

Improve the pricing of default risks

Screen high risk loan applicants

Calculate any reserve needed to me expected future

To employ credit scoring models in this manner, the FI manager must identify objective

economy & financial measures of risks for any particular class of borrower. After data are

identified, a statist ical technique quantifies or scores the default risks probability or

default risk classification.

Financial Services of SCB

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Business Financial address the complete financial needs of Professionals, Professional Firms,

Small & medium enterprises (SME) engaged in services or manufacturing by offerings a range

or multiple product proposition to the target segment. The constitution of the target is:-

Individual comprising of Professional or Business

Proprietorship or HUF

Partnership firm & Private Ltd. Companies

Public Ltd. Companies

BFS facili ties generally structured as multiple products or single products facil ity depending

upon customer requirement. The process of Overdrafts Facility against single products & loans

backed by property of INR 5M or less are decentralized, and has been detailed in Asset

Circular Nos. Assest/SCB/2003/12 and Asset/SCB/2003/15.

Where the credit l ine extends to the customer is for multiple products and / or against multiple

securit ies, the operational activities are centralized at CLC, Chennai for the following

purposes:

o Preparing and documenting the banking Arrangement letter (LOBA) as per the

approved terms of the credit approval. This involves documenting the l imits available

against various credit lines; Extend and type of security required; specifying the

security information; specifying any preconditions.

o Review of documentation received after acceptance of facil ity received from customer

based on the condition set out for the facility.

o Evaluate the eligible operating credit l imits based on valuation of securities and

lodgment of the same.

o Limit set-up in various TP systems

o Revaluation of security periodically and monitoring the exposure levels across various

credit lines.

1 Sourcing

BFS facili ties are relationship based and the sourcing will be done By the

business financial manager )BFM) in each cit ies

The BFM will conduct interview or do a site visit At the customer trading

address/ production site to understand and obtain basic information on the

owner, manager, nature of business. This will be documented in a fast

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The application Cum AOF will be obtained at the time of Customer

requesting the credit facil ity even though the customer may have an

existing current account with SCB. The following Information will be

obtained

Nature of facili ty requested

Limit account

Borrower details

Security holder details

Guarantor details

Relationship with SCB

2 Approvals

Based on the basic information of the customer of the customer obtained through the

interview & the Financials , a detailed limit Application Will be prepared which will

broadly include the following :

Customer Profile: ownership, management , banking relationship, business

operation

Purpose : New application/ renewal/ increase/structure/review/Amount

Pricing/Risk Rating/ Total Credit facili ties

Facilities description: Amount, pricing, risk rating, total credit facilit ies.

Net Worth: Financial Analysis & personal Finance Statements of Guarantor /

Borrower

Operational Sheet : Description & Valuation of security / collateral , terms &

conditions of the facili ty , LTV & any Deviation.

Prior to Submission for Approval , BFM will check the applicants & guarantors

profile from the following database :68

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RBI lists of Willful Defaulters

Search on register of companies( ROC) books for all registered business

Dedup against Hogan & RLS

All Limit application (LA) initiated by BFM will be Supported by Regional Manager

(RM) put approval to Senior Manager , Credit- BFS or to the delegated lending

authority

For proposal outside senior manager's authority, the LA will be Supported

by Business head, BFS and approved by head- Credit CB.

For proposal referred to group credit , will be retained the Original LA & send

a scanned copy of the LA to Officer CLC for preparing the LOBA

3) Acceptance of Letter of Banking Arrangement (LOBA)

Once the approved LA is sent by CLC , the officer CLC refuse the LA approvals

condition & prepares the LOBA giving the following details:

Sanctioned Limit

Products Cap ( inner limits)

Interest rates

Documentation

Security & margin

Pre Condition ( if any)

LOBA is sent to the concerned BFM by e-mail with a copy to manager CLC. A hard

copy is signed by the manager CLC after review of the sanctioned terms & condition.

The BFM will review the sanctioned terms & send to LOBA. The LOBA is delivered to

the customer & on customer acceptance collects the documents including the securing

documents as st ipulated in LOBA

A credit file will be created by the BFM & the documents will be sent to CLC by

courier with an e-mail confirmation sent to officer.

69

DESERTATION

Small & Medium Enterprises Banking

Definit ion of "SME" varies from bank to bank. For Standard Charted Bank, Broadly all

enti ties with turn over of Rs.5.00 - Rs.150.00 Crore come under SME.

SME contributes more than 40% of Industry output of India.

SME enjoys bank Finance of less than 15% of total credit outstanding of banks.

Comprises mainly of small and mid sized Manufactures, Exporters Importers Traders,

distributors, dealers, OEM's, etc.

Quick Overview

SME Characteristics

Closely held owner managed

Not highly capitalized

Significant personal wealth of promoters- property liquid assets

Geographically dispersed

Low financial transparency due to historical tax issue.

COMPETITION

Entrenched Nationalized banks & Aggressive Private Banks

Wide Spread branch network

Relatively liberal credit policies , but lower services level

Economic Environment

Significant growth in industrial and services sectors >10%

SME growth Rate (last 2 yrs) - 10%

Sharp growth in international trade (esp. Exports) > 15%

70

DESERTATION

Stable currency outlook

CUSTOMERS NEEDS

Facilities for regular / one off business needs i.e. working capital expenditure financing Transaction Banking needs viz. Trade, Cash, Treasury services

SME SECTOR IS VITAL TO THE ECONOMY

71

SME

Sector in

India

Accounts

For

95% of all Industrial units

40% of all industrial outputs

45% of Industrial Environment

35% of Exports

Prime Driver of a new Employment

DESERTATION

Customer of SME Banking

CONDITIONS

Turn over <= INR 1000Mn

Min. 3 Years in Business

Profit Making in the Previous

PRODUCTS OFFERED

Following Products are offered to multi-product customers, i.e. customers with annual turn over of > US$1Mn.

FUND BASED

Over Draft

Term Loan

WC Demand Loan (INR / FCY )

Export Credit ( INR / FCY)

Domestic Bill Discounting

OD against Credit Card Receivables

NON FUND NBASED

Letters of Credit

Guarantees

Co acceptance of Bills

LC confirmation

TRANSACTION BKG

Trade Services

Inward / Outward Remittances

Fixed Deposits

ITTS

72

DESERTATION

In January 2005, SME Banking has launched the business installment loans product offered to small

establishments with turn over less than USD 1M.

Criteria followed by SME Banking

Age of should be more than 3 years, in case of professionals, it should be more than 5 years.

Companies with a Turn over criteria of less than 92 crores falls in SMEs

Working Capital Cycle will be = Debtors + Stock turn over - Creditor turnover

They offer their products by keeping collaterals such as RBI bonds, Fixed deposits, property commercials

residential mutual funds, India millennium deposits.

They required 3years audited financials and calculating this MFA report is generated in which different

ratios occur And MPBF( MAXIMUM PERMISSEBLE BANK FINANCE ) is calculated by preparing

one page summary according to which bank finally decides whether to finance the company or not.

They charge 2% of sectionals limit, 10% is earned of cash collaterals or marketable securities.

Term loan can be provided Maximum For 5 Years and minimum for 3 years.

Over draft can be provided for 1 year.

Letter Of credit depends on customer maximum for 180 days.

Inter coverage ratio i.e. PBIT/ Interest should be Greater than 1.5%.

Gearing Ratio i.e. Secured loans / Equity should be less than 3%.

I have got the opportunity to analyze the financial statements And Measure the

credit risks of three companies who had approached standard charted bank for

loans. Those Companies are:-

M/S BAJRANG PETROLEUM

RANJIT METALS

WESTERN INDIAN MOTORS COMPANY

73

DESERTATION

M/S. BAJRANG PETROLEUM

BALANCE SEET AS ON 31 ST MARCH,2001

M/S. BAJRANG PETROLEUMTRADING AND PROFIT & LISS ACCOUNT FOR

74

Liabilities (Amt. In Rs.) Assets (Amt. In Rs.)

CAPITAL ACCOUNT

Balance as per ledger

4,400,238,81 FIXED ASSETS:(As per Annexure-E)

460,568.00

Add:-Net profit during the year

179,310.094,579,548,90

CURRENT ASSETS , LOANS & ADVANCES:-

Closing Stock(As Certified & valued by

Prop.)

2,001,661.00

SECURED LOANS:(As per Annexure-A)

2,005,616,48 Sundry Debtors(As per Annexure-F)

6,003,524.38

UNSECURED LOANS:(As per Annexure-B)

2,455,000,00 Security DepositsSAIL – Bokaro

10,000.00

CURRENT LIABILITIES :

(As per Annexure-C)

1,015,753,00 Loans & Advances(As per Annexure-G)

1,568,553.00

OTHER LIABILITIES:(As per Annexure-D)

258,886,00 CASH & BANK BALANCES:Bank Balance 212,191.00Cash inHand 58,307.00

270,498.00

Total Rs …… 10,314,804,38 10,314,804.38

DESERTATION

THE YEAR ENDED 31 ST MARCH, 2001

Particulars Amount (Rs.) Particulars Amount (Rs.)

To Opening Stock 1,260,568.56 By sales 100,315,040.50To Purchases 97,836,047.00 By Closing Stock 2,001,661.00

To Freight & Cartage 1,933,080.00To Gross Profit C/D 1,287,005.93

Total Rs……… 102,316,701.50 Total Rs……. 102,316,701.50To Salary 246,900.00 By Gross Profit B/D

Misc. Income1,287,005.93

1,048.00To Office Exp. 15,855.51

To Bank Charges 136,700.00To Postage & Telephone

Exp14,176.00

To Audit Fees 5,000.00To Printing & Stationary

Exp.15,771.00

To Accounting Charges 30,000.00To Electricity Expenses 41,597.00

To Repair & Maintenance Exp.

21,898.00

To traveling Exp. 3,678.00Interest 368,593.83

To Advertisements 1,000.00To Business Promotion

Exp.17,034.00

To Insurance Exp. 26,817.00To Fee & Taxes Exp. 1,000.00To staff Welfare Exp. 27,459.00To Conveyance Exp. 63,605.00

To Depreciation 71,659.50To Net Profit Trfd To Prop Capital Account

179,310.09

Total Rs…… 1,288,053.93 Total Rs…….. 1,288,053.93

75

DESERTATION

M/S. BAJRANG PETROLEUMBALANCE SEET AS ON 31 ST MARCH,2002

Liabilities (Amt. In Rs.) Assets (Amt. In Rs.)CAPITAL ACCOUNTBalance as per ledger

2759051.00

FIXED ASSETS:Car a/c as per Ledger

Less: Depreciation during the year

Fax Machine As per ledgerLess: Dep. During the Year

215,500.0043,000.00172,000.0010990.002747.508242.50

Add:-Net profit during the year

15417.812774468.81

CURRENT ASSETS , LOANS & ADVANCES:-

Closing Stock(As Certified & valued by Prop.)

1260568.57

SECURED LOANS:(As per Annexure-A)

-------------- Sundry Debtors

Reliance India Ltd.(Advance)

398,145.00

29.810.00

UNSECURED LOANS:Mrs. Madhu Agrawal

Car Loan From City BankSundry Creditors

55000.0092951.28159313.00

Cash & Bank Balances

Canara BankPunjab National Bank

Cash in Hand

1317494.504900.0018057.00

1340451.50Expenses Payable:

Audit Fee 3,150.00124,334.50

Loans & Advances -------------

OTHER LIABILITIES: ----------------------------------- -----------------

Total Rs ……. 3209 217.57 Total Rs……… 3209,217.57

76

DESERTATION

M/S. BAJRANG PETROLEUM

TRADING AND PROFIT & LOSS ACCOUNT FOR THE YEAR ENDED 31 ST MARCH, 2002

Particulars Amount (Rs.) Particulars Amount (Rs.)

To Opening Stock 60384.00 By sales 16447828.00To Purchases 17032,915.00 By Closing Stock 1260568.57

To Freight & Cartage 410290.00To Gross Profit C/D 204807.57

Total Rs……… 17,708,396.57 Total Rs……. 17708396.57To Salary 46800.00 By Gross Profit B/D

Misc. Income204807.57

To Office Exp.To Bank Charges 14092.00

To Postage & Telephone Exp

3322.00

To Audit Fees 3150.00To Printing & Stationary

Exp.3270.00

To Accounting Charges 9000.00To Electricity Expenses 13598.00

To General expenses 4290.00To traveling Exp. ----------

Interest 26991.99To Advertisements -------------To Legal Expenses 725.00To Insurance Exp. ---------------

To Fee & Taxes Exp. ---------------To staff Welfare Exp. 4924.00To Conveyance Exp. 6980.00

To Depreciation 45747.00To Net Profit Trfd To Prop Capital Account

15417.81

Total Rs…… 204807 Total Rs…….. 204,807.57

77

DESERTATION

Projected Balance Sheet:-

STANDARD CHARTERED BANKPetroleum Company (petroleumc) SCB ISIC Code: 3530 Date Prepared:

6/11/2005Detailed Balance Sheet - Actual and % Page 1

Thousands

Statement Date 3/31/2001 3/31/2002Months Covered 12 12

Analyst Monika Monika Source Currency: INR Target Currency: INR Segment Type: Company Account

CURRENT ASSETS

Cash and Bank Deposits 1,340 41.8 270 2.6Trade Debtors (Gross) 398 12.4 6,003 58.2Stock: Trading 1,260 39.3 2,002 19.4

Other Op Current Assets 30 0.9 1,578 15.3TOTAL CURRENT ASSETS

3,028 94.4 9,853 95.5

FIXED ASSETS

Plant & Machinery 8 0.2 6 0.1Motor Vehicles 172 5.4 455 4.4Gross Fixed Assets 180 5.6 461 4.5

TOTAL FIXED ASSETS 180 5.6 461 4.5TOTAL TANGIBLE ASSETS 3,208 100.0 10,314 100.0

WORKING CAPITAL 2,742 - 6,572 -NET WORKING ASSETS 1,499 - 6,989 -NET CASH ASSETS 1,340 - (1,736) -

CURRENT LIABILITIES

Due to Banks(O/D,T/R etc) - - 2,006 19.4Trade Creditors 159 5.0 1,016 9.9Provisions: Other Current 127 4.0 - -

Other Op. Cur Liabilities - - 259 2.5

78

DESERTATION

TOTAL CURRENT LIABILITIES 286 8.9 3,281 31.8

TERM LIABILITIES

Hire Purchase Loans(1 Year+) 93 2.9 - -Loans from Subs (1 Year+) - - 1,000 9.7Loans from Assoc. Co.(1 Year+) 55 1.7 455 4.4

Loans from Dir/Shareholders (1 Yr+) - - 1,000 9.7TOTAL TERM LIABILITIES 148 4.6 2,455 23.8TOTAL LIABILITIES 434 13.5 5,736 55.6

EQUITY

Share Capital - Ordinary 2,774 86.5 4,578 44.4TOTAL EQUITY 2,774 86.5 4,578 44.4NET WORTH 2,774 86.5 4,578 44.4EFFECTIVE EQUITY 2,774 86.5 4,578 44.4

TOTAL LIABS & NET WORTH 3,208 100.0 10,314 100.0

79

DESERTATION

STANDARD CHARTERED BANK

Petroleum Company (petroleumc) SCB ISIC Code: 3530 Date Prepared: 6/11/2005

Detailed Profit & Loss Statement - Actual and % Page 2Thousands

Statement Date 3/31/2001 3/31/2002Months Covered 12 12

Analyst Monika Monika Source Currency: INR Target Currency: INR

PROFIT & LOSS STATEMENT

Sales (Net of Returns/Duties) 16,448 100.0 100,315 100.0Cost of Sales (16,243) (98.8) (99,028) (98.7)

GROSS PROFIT(LOSS) 205 1.2 1,287 1.3

ADMIN/OTHER OPERATING EXPENSESAuditors Remuneration (3) - (5) -

Depreciation (46) (0.3) (71) (0.1)Other Expenses (62) (0.4) (389) (0.4)Advertising - - (1) -

Wages & Salaries (47) (0.3) (247) (0.2)Employee Benefit (Incl. Pension) Expense (5) - (27) -

Total Admin/Other Operating Expenses (163) (1.0) (740) (0.7)

NET OPERATING PROFIT (LOSS)BEFORE INTEREST & TAXES 42 0.3 547 0.5

Interest Expense (27) (0.2) (368) (0.4)

NET PROFIT (LOSS) AFTER TAX 15 0.1 179 0.2

PROFIT (LOSS) DISTRIBUTIONDistribution to Benefactors/Partners (15) - (179) -PROFIT RETAINED - - - -

80

DESERTATION

STANDARD CHARTERED BANK

Petroleum Company (petroleumc) SCB ISIC Code: 3530 Date Prepared: 6/11/2005

Detailed Cash Flow Page 3Thousands

Statement Date 3/31/2001 3/31/2002Months Covered 12 12

Analyst Monika Monika Sales (Net of Returns/Duties) 100,315

Chg in Trade Debtors (Gross) (5,605)Cash Collected From Sales 94,710

Cost of Sales (99,028)Chg in Stock: Trading (742)Chg in Trade Creditors 857Cash Paid to Suppliers (98,913)

CASH FROM TRADING ACTIVITIES (4,203)

Auditors Remuneration (5)Advertising (1)Wages & Salaries (247)Employee Benefit (Incl. Pension) Expense (27)Cash Paid for Operating Costs (280)

GROSS CASH FROM OPERATIONS (4,483)

Other Expenses (389)Chg in Other Op Current Assets (1,548)Chg in Other Op. Cur Liabilities 259

Chg in Provisions: Other Current (127)Other Income (Expense) & Taxes Paid (1,805)

NET CASH AFTER OPERATIONS (6,288) NET CASH AFTER OPERATIONS (6,288)

Interest Expense (368)Distribution to Benefactors/Partners (179)Cash Paid for Dividends & Interest (547)

CASH AFTER FINANCING COSTS (6,835)

Current Portion Long Term Debt -81

DESERTATION

CASH AFTER DEBT AMORTISATION (6,835)

Chg in Plant & Machinery 2Chg in Motor Vehicles (283)Depreciation (71)Chg in Other Fixed Assets (352)Cash Paid for Plant and Investments (352)

FINANCING SURPLUS (REQS) (7,187)

Chg in Due to Banks (O/D, T/R etc) 2,006Chg in Long Term Debt (93)Chg in Loans from Subs (1 Year+) 1,000Chg in Loans from Assoc. Co. (1 Year+) 400Chg in Loans from Dir/Shareholders (1 Yr+) 1,000Chg in Equity 1,804Total External Financing 6,117

CASH AFTER FINANCING (1,070)

Add:Cash and Bank Deposits 1,340ENDING CASH & EQUIVALENTS 270

82

DESERTATION

STANDARD CHARTERED BANK

Petroleum Company (petroleumc) SCB ISIC Code: 3530 Date Prepared: 6/11/2005

Detailed Ratios Page 4Thousands

Statement Date 3/31/2001 3/31/2002Months Covered 12 12

Analyst Monika Monika

LIQUIDITY RATIOS

Stock Turn Period (Days) 28 7Gross Trade Debtor Collection Period (Days) 9 22Net Trade Debtor Collection Period (Days) 9 22Net Debtor Collection Period (Days) 9 22Trade Creditors Pmt Period (Days) 4 4Net Cash Cycle Period (Days) 34 25

Total ST Debt Coverage (2.65)Cash Coverage

(11.50)DEBT MANAGEMENT RATIOS

Leverage Ratio 0.16 1.25Gearing 0.03 0.44NPBIT: Interest 1.56 1.49Net Cash after Operations: Interest (17.09)Interest on Avg. Financial Debt (%) 29.03 35.06Short Term Debt - 2,006Long Term Debt 93 -

PROFITABILITY RATIOS (%)Net Profit Margin 0.09 0.18Operating Efficiency 0.99 0.74Return on Equity 0.54 3.91Return on Assets (Geared) 0.47 1.74Return on Assets (Un-geared) 1.31 5.30Gross Profit Margin 1.25 1.28NPBIT to Sales 0.26 0.55

NPBT to Sales0.09 0.18

83

DESERTATION

GROWTH RATIOS (%)

Sales Growth 509.89Net Profit Growth 1,093.33Total Asset Growth 221.51Total Liabilities Growth 1,221.66Gross Profit Growth 527.80Sustainable Growth - -

OTHER RATIOS

Current Ratio 10.59 3.00Liquid Ratio 6.18 2.39Sales: Fixed Assets 91.38 217.60Sales: Total Assets 5.13 9.73Effective Tax Rate - -Capital Spending 281Avg. Cap Spending 281Expected Capital Spending 989Avg. Expected Cap Spending 989Def Tax + Tax Payable/Tax Exp (%) N/A N/ADividend Payout Rate 100.00 100.00Average Tax Rate (%) - -Other Cur Assets/Tot Cur Assets (%) 0.99 16.02Other Cur Liabilities/Tot Cur Liabilities (%) - 7.89Other Fixed Assets/Tot Fixed Assets (%) - -Other Term Liabilities/Tot Term Liabilities (%) - -Other Income/Net Income Aft Tax (%) - -Investments/Total Assets (%) - -

Gross Cash Flow less Interest & Dividends (annualized) (4,851)Free Cash Flow (annualized) (2,256)

84

DESERTATION

STANDARD CHARTERED BANK

Petroleum Company (petroleumc) SCB ISIC Code: 3530 Date Prepared: 6/11/2005

Detailed Ratios Page 5Thousands

Statement Date 3/31/2001 3/31/2002Months Covered 12 12

Analyst Monika Monika

CREDIT GRADING DATA

Large CorporateTotal Equity 2,774 4,578Leverage (Total Liabilities to Total Assets) 0.14 0.56Net Profit Margin 0.09 0.18Cash to Total Debt (3.13)Debt to EBITDA 1.06 3.25EBITDA to Interest - New 3.26 1.68Net Cash Ratio - New (1.10)Pre-tax Profitability - New - -Size Factor (Total Equity) - New 2,774 4,578Capital Structure - New 0.86 0.44Liquidity - New 0.66 0.12Debt Service Coverage (%) - New 0.16 0.37Cash Flow Ratio 2 (%) - New (6.13)

Middle MarketGearing Ratio 0.05 0.43Net Profit Margin (%) 0.09 0.18Cash Ratio (%) 468.53 8.23Trading Stock Turn Period 28 7EBITDA to Interest 3.26 1.68Cash Flow Ratio N/A (1.48)Asset Turnover 5.13 9.73Debt Service Coverage (%) 0.16 0.37Sale Growth (%) 509.89Cash Flow Ratio 2 (%) (6.13)

Channel Finance & Supply ChainGearing Ratio 0.05 0.43Stock Turn Period 28 7Net Profit Margin % 0.09 0.18Total Tangible Assets 3,208 10,314Net Worth 2,774 4,578Productivity % 0.29 0.25

85

DESERTATION

STANDARD CHARTERED BANK

Petroleum Company (petroleumc) SCB ISIC Code: 3530 Date Prepared: 6/11/2005

Detailed Ratios Page 6Thousands

Statement Date 3/31/2001 3/31/2002Months Covered 12 12

Analyst Monika Monika FINANCIAL SUMMARY FOR BCA

FRONT SHEET DATA

Total Sales 16,448 100,315Operating Profit 42 547Extraordinary Expenses - -Net Profit after Tax 15 179EBITDA 88 618Net Worth 2,774 4,578Total Debt 93 2,006Gearing 0.03 0.44Debt to EBITDA 1.06 3.25Net Cash After Operations (6,288)CADA (6,835)Contingent Liabilities - -

Total Provision for Employee Benefits (Including Pension) - -

REPAYMENT SOURCE DATA

PROFITABILITY

Total Sales 16,448 100,315Gross Profit 205 1,287Net Profit after Tax 15 179Change in Sales (%) 509.89Gross Profit Margin (%) 1.25 1.28EBITDA to Sales (%) 0.54 0.62NPBT to Sales (%) 0.09 0.18

NET WORKING CASH CYCLE

Stock Turn Period (SDOH) 28 7Trade Debtors Period (DDOH) 9 22Trade Creditors Period (CDOH) 4 4Net Working Cash Cycle Period 34 25

86

DESERTATION

DEBT SERVICE CAPACITY

Net Cash after Operations (6,288)Cash after Financing Costs (6,835)Cash after Debt Amortisation (6,835)Net Cash after Operations/Interest (17.09)Financing Surplus/Deficit (7,187)

LONG TERM ASSET/LIABILITY MANAGEMENTNet Fixed Assets 180 461Long-Term Debt+ Equity 2,867 4,578Sales to Fixed Assets 91.38 217.60Capex to Depreciation Ratio 3.96

DEBT PROTECTIONGearing 0.03 0.44Interest Cover 1.56 1.49Debt to EBITDA 1.06 3.25EBITDA to Interest 3.26 1.68Maturing Debt Obligations S/T - 2,006Maturing Debt Obligations M/T - -

Debt Service Cover Ratio (12.18)Subordinated Debt - -Annual Operating Leases - -Contingent Liabilities - -

CAPITAL PROTECTIONTangible Net Worth 2,774 4,578Revaluation Reserve - -

Total Assets 3,208 10,314Leverage (Total Liabilities to Total Assets) 0.14 0.56Dividend Payout Ratio 100.00 100.00

87

DESERTATION

STANDARD CHARTERED BANK

Petroleum Company (petroleumc) SCB ISIC Code: 3530 Date Prepared: 6/11/2005

Financial Summary Ratios Page 7Thousands

Statement Date 3/31/2001 3/31/2002Months Covered 12 12

Analyst Monika Monika

Source Currency: INR Target Currency: INR Segment Type: Company Account

LIQUIDITY

Cash After Financing Costs (6,835)Cash Coverage (11.50)

PROFITABILITY

Sales (Net of Returns/Duties) 16,448 100,315Gross Profit (Loss) 205 1,287

Net Operating Profit (Loss) Before Interest & Tax 42 547Net Operating Profit (Loss) Before Tax 15 179Profit Retained - -

CAPITAL STRUCTURE

Total Equity 2,774 4,578Net Worth 2,774 4,578Total Debt 93 2,006Gearing 0.03 0.44NPBIT: Interest 1.56 1.49

OTHERS

Sales Growth 509.89Sustainable Growth - -Net Cash Cycle Period 34 25

Total ST Debt Coverage (2.65)Net Op. Profit before Interest& Taxes/Sales (%) 0.26 0.55

ISIC: 3530Nature of Business Mining

88

[DESERTATION]

Analysis of Financial Statements

Bajrang Petroleum Company approached Standard Chartered Bank for a loan of

Rs.2000000/- for 6 years. As the sale of this company is increasing so the company is

in the need of fund.

Analysis:

If we analyze the P&L a/c of the company. The performance of the company is very

impressive as its sale is increased by more than 500%. & Gross profit by more than

600%.

Sales : - Increased by more than 500%

Gross Profit : - Increased by more than 600%

PAT : - Increased by more than 1000%

So we can say that there is a good reputation of the products of the company in the

market and due to which its profit & sale are increasing tremendously.

It all shows the efficiency of the corporation in the market as it has been able to face

the tough competit ion & increased its profit year by year.

There is a drastic increase in the total asset of the company & it has been able to

increases i t from 3 crore to 10 crore. As the company's capital is also increased from

Rs.2759051/- To Rs.4400238/- which helped the company to increase its assets. As the

demand in the market is increasing & reputation of Company is also good, the

company is funding money into the business on the basis of its sale.

Comment on various ratios :

Company's leverage ratio & the gearing are tremendously increased because of the

need of the fund. If we parallel look on the ratio of EBIT & Interest of the Company,

it is more than 1.5 even after taking lots of debt from the outside. It all shows that as

[Type text] Page 105

[DESERTATION]

funds were increased, Production Increased, then Sales Increased, then finally Net

Profit increased.

So if the profit increased with the increase in the interest expenses then the ratio of

EBIT & Interest remained more than one. Company is performing so well in the

market that its sales / total assets ratio is increased from 91% to 217%. It all shows

the utilization of assets in a more efficient way.

If we see the posit ion on the current ratio of the company, the ratio has been decreased

from 10.59 to 3.00 which is favorable to this. 2:1 is considered to be a removable one.

In 2003 ratio 10.59 was very high which shows that lots of funds of a company are

locked into the stocks, debtors etc. This all has an effect on the operations of the firm.

I f we look to the debtors collection period of the corporation. Then it increased from

9 days to 22 days with the tremendous increases in the sale. The reason for this could

be that corporation might have given the more credit facil ity to their in order to

increases the sales of the corporation. As i t is clear from the statements that sale is

increased by more than 500%. The effect of this increase is that stock turn over period

of the company is decreased from 28 days to 7 days which is a good sign of the

company.

The all over impact of this is that cash conversion cycle of the corporation is

decreased from 34 days to 25 days which increases the profitabili ty of the corporation.

Because if this period increases then the corporation's need for external financing will

be increase which will carry some cost.

Cash Conversion Cycle = Inventory turnover days + Debtors turnover days - Creditors

payment period

25 = 7 + 22 - 4

The Gearing Ratio of the company is 0.02% for the financial year 2000-01, 0.80% For 2002-

03 ,Which is less than 3 and the Interest coverage ratio is 1.56 ,1.49, 2.72 for financials years

2000-01, 2001-02, 2002-03 respectively.

If we comment on the other ratios of the company, there is improvement almost most

of the assets. Net profit margin of the company is increased from 0.09 to 0.18 which

increases the sale of the company.

[Type text] Page 106

[DESERTATION]

OVERALL ANALYSIS

If we do the overall analysis of the company then we can say that the demand for the

products in the market is rising year by year due to which the company is also able to

increase its debt. The company is so efficient that i t liberalized i ts credit policy which

increased its debtor's turnover period and also helped to increase its sale to more than

50%.

Management of the company is also very efficient and the company is having the

experience in the same business for more than 5 years. There is also the stabili ty of

the business of the company. So after taking into consideration all these factors we

can say that the bank can sanction the loan of Rs.20 lacks to the firm @ not more than

13%.

If we look towards the EBITD of the company for the last 2 years then we find that

there is an increase of more than 1000% or ten times. If we see the record of the last 3

years, the company is also able to maintain EBITD/interest ratio of more than 1. It

shows that for every Rs.1 interest liabil ity, the company has enough cash to repay.

So after looking on all the sides of the company, we can say that if the company

grows with the same pace or even at a sl ightly lower pace, the company will be able to

pay the interest installments of Rs.2,60,000 [Rs.2,00,000@ 13%] easily because its

EBITD is more than Rs.5 lacs last year.

So the bank can sanction the loan of Rs.20 lacks@ 13%

[Type text] Page 107

[DESERTATION]

RANJIT METALS INDUSTRIESBalance Sheet As At 31 st March 2001

Liabilities AmountRs. P.

Assets AmountRs. P.

Sh. Kamal jain Capital A/C 3956226.21 Fixed Assets(As per annexure ‘F’

attached)

707918.35

Secured Loans

The Federal Bank Ltd 10085752.53 Security 105704.00ICICI Bank Ltd 180270.13 Deposit With DVB 1254.80City Bank Loan 233263.72 Deposit With Excise Dept.

Sales Tex Deposit42481.54

Unsecured Loans(As per annexure ‘A’ enclosed)

1389782.00 Security Deposit - Rent 45000.00

Current Liabilities & Provisions Sundry Creditors

(As per annexure ‘B’ enclosed)

2939488.20

Current Assets, Loans & Adv. Sundry Debtors(As per annexure ‘G’

enclosed)

9633116.03

Stock in Hand 11762925.00Other Creditors

(As per annexure ‘C’ enclosed)4816896.80 Loans & Advances

Loans & Advances352133.15

Expenses Payable(As per annexure ‘D’ enclosed)

92222.00 (As per annexure ‘H’ enclosed)

Interest Accrued on FDRModvat Credit Recoverable

TDS Bank Interest

100998.00769115.108494.00

Other Current Liabilities(As per annexure ‘E’ enclosed)

974058.90 Cash & Bank BalancesCash in hand 5062.24

BankSTDR- The Federal Bank

Ltd

1134659.00

24668860.49 24668860.49

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[DESERTATION]

RANJIT METALS INDUSTRIESTrading and Profit & Loss Account

For the year ended 31-05-2001Particulars Amount

Rs. P.Particulars Amount

Rs. P.To Opening Stock 11670777.00 By Sales 57913272.00

To Purchase 54117622.18 By Closing Stock 11762925.00To Gross Profit C/D 3887797.82

69676197.00 69676197.00To Accountancy Charges 55000.00 By Gross Profit B/D 3887797.82

To Audit Fees 5400.00 By Other Income 197141.29To Bank Charges 150909.05

To Business Promotion 75804.70To Charity & Donation 13130.00

To Commission On Cons. Sale 340542.78To Depreciation A/C 176906.65

To Electricity & Water Expenses 107163.00To Freight & Other Expenses 263912.92

To General Expenses 51029.68To insurance 45942.00To interest 1600345.56

To Legal & Professional Charges 20400.00To Mobile & Telephone Expenses. 144915.32To Office Repair & Maintenance 35775.00

To printing & Stationery 2234.00To Rent 90000.00

To Salary 543000.00To Security Services Charges 11910.00

To Subscription & Memberships 3300.00To traveling Expenses. 115019.19

To Vehicle Repair & Maintenance 42515.02To Net Profit

(Transferred in Prop. Capital A/C)189783.79

4084939.11 4084939.11

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[DESERTATION]

RANJIT METALS INDUSTRIESBalance Sheet As At 31 st March 2002

Liabilities AmountRs. P.

Assets AmountRs. P.

Sh. Kamal jain Capital A/C 3932552.21Less: Drawing 73006.00

Fixed Assets(As per annexure ‘F’

attached)

565408.3

Add: Net Profit for the year 3859546.21191289.26

Secured Loans

The Federal Bank Ltd 8623907.09 4050835.47 Security DepositICICI Bank Ltd 60726.35 Deposit With DVB 105704.00

Deposit With Excise Dept.

Sales Tex Deposit

1254.00

42481.50

Unsecured Loans(As per annexure ‘A’ enclosed)

8684633.44 Security Deposit - Rent

45000.00

Current Liabilities & Provisions Sundry Creditors

(As per annexure ‘B’ enclosed)

1345782.00 Current Assets, Loans & Adv. Sundry

Debtors

12764911.36

10663371.15 Stock in Hand 9503775.00Other Creditors

(As per annexure ‘C’ enclosed)Loans & AdvancesLoans & Advances

979945.25

Other Current Liabilities(As per annexure ‘E’ enclosed)

221615.59

1056322.95

(As per annexure ‘H’ enclosed)

Interest Accrued on FDR

Modvat Credit Recoverable

TDS Bank Interest

194213.00544031.41

10360.00Provision & Expenses Payable(As Per annexure ‘E’ enclosed)

316655.64

Cash & Bank Balances

Cash in hand

214920.28

26339216.24

26339216.24

BankSTDR- The Federal

Bank Ltd

1367212.00

26339216.24

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[DESERTATION]

RANJIT METALS INDUSTRIESTrading and Profit & Loss Account

For the year ended 31-05-2002

Particulars AmountRs. P.

Particulars AmountRs. P.

To Opening Stock 11762925.00 By Sales 67342852.30To Purchase 61286905.80 By Closing Stock 9503775.00

To Gross Profit C/D 3796796.0076846627.30 76846627.30

To Accountancy Charges 79000.00 By Gross Profit B/D 3796796.46To Audit Fees 6600.00 By Other Income 109925.00

To Bank Charges 85826.00To Business Promotion Expenses. 32589.05

329657.38To Commission On Cons. Sale 206700.00

To Conveyance 142510.03To Depreciation 47000.00

To Diwali Expenses. 159139.00To Electricity & Water Expenses 54218.00

To Fees & Taxes 296507.00To Freight & Other Expenses 15795.97

To General Expenses 1082356.67To interest 10000.00

To Legal & Professional Charges 1102.00To Medical Expenses 164816.96

To Mobile & Telephone Expenses. 149.00To News Paper & Periodicals 47050.00

To Office Repair & Maintenance 23181.00To printing & Stationery 90000.00

To Rent 576000.00To Salary 576450.00

To Staff Welfare 20900.00To Vehicle Repair & Maintenance 40524.71

To Traveling Expenses 104966.59To Loss on Con. Sale 30692.84

To Net Profit(Transferred in Prop. Capital A/C)

191289.26 To Legal & Professional Charges

3906721.46 3906721.46

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Projected Balance Sheet:-

STANDARD CHARTERED BANKMETAL COMPANY (METALCOMPA) SCB ISIC Code: 3710 Date

Prepared: 6/11/2005Detailed Balance Sheet - Actual and %

Page 1Thousands

Statement Date 3/31/2003 3/31/2004Months Covered 12 12

Audit Method Unqualif'd Unqualif'dAuditor

Analyst Monika Monika Source Currency: INR Target Currency: INR Segment Type: Consolidated Accounts

CURRENT ASSETS

Cash and Bank Deposits 1,140 4.6 1,582 6.0Trade Debtors (Gross) 9,633 39.1 12,764 48.5Stock: Trading 11,763 47.7 9,504 36.1

Other Op Current Assets 1,230 5.0 1,730 6.6Other Non-Op. Current Assets 194 0.8 194 0.7

TOTAL CURRENT ASSETS 23,960 97.1 25,774 97.9

FIXED ASSETS

Loose Plant/Furniture/Fittings 24 0.1 18 0.1Motor Vehicles 684 2.8 547 2.1Gross Fixed Assets 708 2.9 565 2.1

TOTAL FIXED ASSETS 708 2.9 565 2.1TOTAL TANGIBLE ASSETS 24,668 100.0 26,339 100.0

WORKING CAPITAL 5,051 - 4,893 -NET WORKING ASSETS 16,579 - 11,605 -NET CASH ASSETS (8,946) - (7,042) -

CURRENT LIABILITIESDue to Banks (O/D, T/R etc) 10,086 40.9 8,624 32.7Trade Creditors 4,817 19.5 10,663 40.5

Creditors: Sundry 2,940 11.9 221 0.8Provisions: Other Current 92 0.4 317 1.2

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Other Op. Cur Liabilities 974 3.9 1,056 4.0TOTAL CURRENT LIABILITIES 18,909 76.7 20,881 79.3

TERM LIABILITIES

Hire Purchase Loans (1 Year+) 413 1.7 61 0.2Loans from Assoc. Cos. (1 Year+) 1,390 5.6 1,346 5.1

TOTAL TERM LIABILITIES 1,803 7.3 1,407 5.3TOTAL LIABILITIES 20,712 84.0 22,288 84.6

EQUITY

Share Capital - Ordinary 3,956 16.0 4,051 15.4TOTAL EQUITY 3,956 16.0 4,051 15.4NET WORTH 3,956 16.0 4,051 15.4EFFECTIVE EQUITY 3,956 16.0 4,051 15.4

TOTAL LIABS & NET WORTH 24,668 100.0 26,339 100.0

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[DESERTATION]

STANDARD CHARTERED BANKMETAL COMPANY (METALCOMPA) SCB ISIC Code: 3710 Date Prepared:

6/11/2005Detailed Profit & Loss Statement - Actual and % Page 2

Thousands

Statement Date 3/31/2003 3/31/2004Months Covered 12 12

Audit Method Unqualif'd Unqualif'dAuditor

Analyst Monika Monika Source Currency: INR Target Currency: INR

PROFIT & LOSS STATEMENTSales (Net of Returns/Duties) 57,913 100.0 67,343 100.0Cost of Sales (54,025) (93.3) (63,546) (94.4)

GROSS PROFIT (LOSS)FROM TRADING 3,888 6.7 3,797 5.6

OTHER OPERATING INCOMEOther Operating Income 197 0.3 110 0.2

GROSS PROFIT (LOSS) 4,085 7.1 3,907 5.8

ADMIN/OTHER OPERATING EXPENSESAuditors Remuneration (5) - (7) -

Depreciation (177) (0.3) (143) (0.2)Other Expenses (1,570)(2.7) (1,822)(2.7)Wages & Salaries (543) (0.9) (576) (0.9)

Financial Expenses - - (86) (0.1)Total Admin/Other Operating Expenses (2,295) (4.0) (2,634)(3.9)

NET OPERATING PROFIT (LOSS)BEFORE INTEREST & TAXES 1,790 3.1 1,273 1.9

Interest Expense (1,600)(2.8) (1,082)(1.6)

NET PROFIT (LOSS) AFTER TAX 190 0.3 191 0.3

PROFIT (LOSS) DISTRIBUTIONDistribution to Benefactors/Partners (190) - (191) -PROFIT RETAINED - - - -

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[DESERTATION]

STANDARD CHARTERED BANKMETAL COMPANY (METALCOMPA) SCB ISIC Code: 3710 Date Prepared:

6/11/2005Detailed Cash Flow Page 3

Thousands

Statement Date 3/31/2003 3/31/2004Months Covered 12 12

Analyst Monika Monika Sales (Net of Returns/Duties) 67,343

Chg in Trade Debtors (Gross) (3,131)Cash Collected From Sales 64,212

Cost of Sales (63,546)Chg in Stock: Trading 2,259Chg in Trade Creditors 5,846Cash Paid to Suppliers (55,441)

CASH FROM TRADING ACTIVITIES 8,771

Auditors Remuneration (7)Wages & Salaries (576)Financial Expenses (86)Cash Paid for Operating Costs (669)

GROSS CASH FROM OPERATIONS 8,102

Other Operating Income 110Other Expenses (1,822)Chg in Creditors: Sundry (2,719)Chg in Other Op Current Assets (500)Chg in Other Op. Cur Liabilities 82

Chg in Provisions: Other Current 225Other Income (Expense) & Taxes Paid (4,624)

NET CASH AFTER OPERATIONS 3,478 NET CASH AFTER OPERATIONS 3,478

Interest Expense (1,082)Distribution to Benefactors/Partners (191)Cash Paid for Dividends & Interest (1,273)

CASH AFTER FINANCING COSTS 2,205

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Current Portion Long Term Debt -

CASH AFTER DEBT AMORTISATION 2,205

Chg in Loose Plant/Furniture/Fittings 6Chg in Motor Vehicles 137

Depreciation (143)

FINANCING SURPLUS (REQS) 2,205

Chg in Due to Banks (O/D, T/R etc) (1,462)Chg in Long Term Debt (352)Chg in Loans from Assoc. Co. (1 Year+) (44)Chg in Equity 95Total External Financing (1,763)

CASH AFTER FINANCING 442

Add:Cash and Bank Deposits 1,140ENDING CASH & EQUIVALENTS 1,582

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[DESERTATION]

STANDARD CHARTERED BANK

METAL COMPANY (METALCOMPA) SCB ISIC Code: 3710 Date Prepared: 6/11/2005

Detailed Ratios Page 4Thousands

Statement Date 3/31/2003 3/31/2004Months Covered 12 12

Analyst Monika Monika

LIQUIDITY RATIOS

Stock Turn Period (Days) 79 55Gross Trade Debtor Collection Period (Days) 61 69Net Trade Debtor Collection Period (Days) 61 69Net Debtor Collection Period (Days) 61 69Trade Creditors Pmt Period (Days) 33 61Net Cash Cycle Period (Days) 108 63Total ST Debt Coverage 0.36Cash Coverage 2.73

DEBT MANAGEMENT RATIOSLeverage Ratio 5.24 5.50Gearing 2.65 2.14NPBIT: Interest 1.12 1.18Net Cash after Operations: Interest 3.21Interest on Avg. Financial Debt (%) 15.24 11.28Short Term Debt 10,086 8,624Long Term Debt 413 61

PROFITABILITY RATIOS (%)

Net Profit Margin 0.33 0.28Operating Efficiency 3.96 3.91Return on Equity 4.80 4.71Return on Assets (Geared) 0.77 0.73Return on Assets (Un-geared) 7.26 4.83Gross Profit Margin 6.71 5.64NPBIT to Sales 3.09 1.89NPBT to Sales 0.33 0.28

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GROWTH RATIOS (%)

Sales Growth 16.28Net Profit Growth 0.53Total Asset Growth 6.77Total Liabilities Growth 7.61Gross Profit Growth (2.34)Sustainable Growth - -

OTHER RATIOS

Current Ratio 1.27 1.23Liquid Ratio 0.65 0.78Sales: Fixed Assets 81.80 119.19Sales: Total Assets 2.35 2.56Effective Tax Rate - -

Capital Spending (143)Avg. Capital Spending -Expected Capital Spending 258Avg. Expected Capital Spending 258Def Tax + Tax Payable/Tax Exp (%) N/A N/ADividend Payout Rate 100.00 100.00Average Tax Rate (%) - -Other Cur Assets/Tot Cur Assets (%) 5.94 7.46Other Cur Liabilities/Tot Cur Liabilities (%) 5.15 5.06Other Fixed Assets/Tot Fixed Assets (%) - -Other Term Liabilities/Tot Term Liabilities (%) - -Other Income/Net Income Aft Tax (%) 103.68 57.59Investments/Total Assets (%) - -

Gross Cash Flow less Interest & Dividends (annualized) 7,020Free Cash Flow (annualized) 1,763

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[DESERTATION]

STANDARD CHARTERED BANKMETAL COMPANY (METALCOMPA) SCB ISIC Code: 3710 Date Prepared:

6/11/2005Detailed Ratios Page 5

Thousands

Statement Date 3/31/2003 3/31/2004Months Covered 12 12

Analyst Monika Monika

CREDIT GRADING DATA

Large CorporateTotal Equity 3,956 4,051Leverage (Total Liabilities to Total Assets) 0.84 0.85Net Profit Margin 0.33 0.28Cash to Total Debt 0.40Debt to EBITDA 5.34 6.13EBITDA to Interest - New 1.23 1.31Net Cash Ratio - New 0.16Pre-tax Profitability - New - -Size Factor (Total Equity) - New 3,956 4,051Capital Structure - New 0.16 0.15Liquidity - New 0.03 0.04Debt Service Coverage (%) - New 2.76 1.61Cash Flow Ratio 2 (%) - New 1.63

Middle Market

Gearing Ratio 0.48 0.38Net Profit Margin (%) 0.33 0.28Cash Ratio (%) 6.03 7.58Trading Stock Turn Period 79 55EBITDA to Interest 1.23 1.31Cash Flow Ratio N/A 0.34Asset Turnover 2.35 2.56Debt Service Coverage(%) 2.76 1.61Sale Growth (%) 16.28Cash Flow Ratio 2 (%) 1.63

Channel Finance & Supply ChainGearing Ratio 0.48 0.38Stock Turn Period 79 55Net Profit Margin % 0.33 0.28

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[DESERTATION]

Total Tangible Assets 24,668 26,339Net Worth 3,956 4,051Productivity % 0.94 0.86

STANDARD CHARTERED BANKMETAL COMPANY (METALCOMPA) SCB ISIC Code: 3710 Date Prepared:

6/11/2005Detailed Ratios Page 6

Thousands

Statement Date 3/31/2003 3/31/2004Months Covered 12 12

Analyst Monika Monika FINANCIAL SUMMARY FOR BCA

FRONT SHEET DATA

Total Sales 57,913 67,343Operating Profit 1,790 1,273Extraordinary Expenses - -Net Profit after Tax 190 191EBITDA 1,967 1,416Net Worth 3,956 4,051Total Debt 10,499 8,685Gearing 2.65 2.14Debt to EBITDA 5.34 6.13Net Cash After Operations 3,478CADA 2,205Contingent Liabilities - -

Total Provision for Employee Benefits (Including Pension) - -

REPAYMENT SOURCE DATA

PROFITABILITYTotal Sales 57,913 67,343Gross Profit 4,085 3,907Net Profit after Tax 190 191Change in Sales (%) 16.28Gross Profit Margin (%) 6.71 5.64EBITDA to Sales (%) 3.40 2.10NPBT to Sales (%) 0.33 0.28

NET WORKING CASH CYCLE

Stock Turn Period (SDOH) 79 55Trade Debtors Period (DDOH) 61 69

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[DESERTATION]

Trade Creditors Period (CDOH) 33 61Net Working Cash Cycle Period 108 63

DEBT SERVICE CAPACITY

Net Cash After Operations 3,478Cash After Financing Costs 2,205Cash After Debt Amortisation 2,205Net Cash After Operations/Interest 3.21Financing Surplus/Deficit 2,205

LONG TERM ASSET/LIABILITY MANAGEMENT

Net Fixed Assets 708 565Long-Term Debt+ Equity 4,369 4,112Sales to Fixed Assets 81.80 119.19Capex to Depreciation Ratio (1.00)

DEBT PROTECTION

Gearing 2.65 2.14Interest Cover 1.12 1.18Debt to EBITDA 5.34 6.13EBITDA to Interest 1.23 1.31Maturing Debt Obligations S/T 10,086 8,624Maturing Debt Obligations M/T - -Debt Service Cover Ratio 7.49Subordinated Debt - -Annual Operating Leases - -

Contingent Liabilities - -

CAPITAL PROTECTION

Tangible Net Worth 3,956 4,051Revaluation Reserve - -

Total Assets 24,668 26,339Leverage (Total Liabilities to Total Assets) 0.84 0.85Dividend Payout Ratio 100.00 100.00

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[DESERTATION]

STANDARD CHARTERED BANKMETAL COMPANY (METALCOMPA) SCB ISIC Code: 3710 Date Prepared:

6/11/2005Financial Summary Ratios Page 7

Thousands

Statement Date 3/31/2003 3/31/2004Months Covered 12 12

Analyst Monika Monika Source Currency: INR Target Currency: INR Segment Type: Consolidated Accounts

LIQUIDITY

Cash After Financing Costs 2,205Cash Coverage 2.73

PROFITABILITY

Sales (Net of Returns/Duties) 57,913 67,343Gross Profit (Loss) 4,085 3,907Net Oper Profit (Loss) Before Interest & Tax 1,790 1,273Net Oper Profit (Loss) Before Tax 190 191Profit Retained - -

CAPITAL STRUCTURE

Total Equity 3,956 4,051Net Worth 3,956 4,051Total Debt 10,499 8,685Gearing 2.65 2.14NPBIT: Interest 1.12 1.18

OTHERS

Sales Growth 16.28Sustainable Growth - -Net Cash Cycle Period 108 63Total ST Debt Coverage 0.36

Net Oper Profit before Interest &Taxes/Sales (%) 3.09 1.89

ISIC: 3710

Nature of Business Manufacturing Please see the Financial Summary Text report

on the Consultant tab for more summary information.

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[DESERTATION]

Analysis of Ranjit Metal Industries

Ranjit Metal Industry approached Standard Chartered Bank for a loan of Rs.50 lacks for 7

years.

1) The P&L a/c of the company for the 2 years shows the increase in the sales % but

the gross profit is decreased due to the increase in the cost of the goods sold.

COGS could be increased because of the increase in the prices of the

labour, raw material or any other input i tem in the market. Due to the

competit ive environment the company couldn't increase the selling prices which result in

the reduction on the gross profit.

2) The gross profit of the company is decreased but finally the company is able to

increase the net profit . If we analyze properly then we will find that the company

has saved around Rs.6 lacks from the interest i tem. The company's internal expenses are

decreased by around Rs.6 lacks which means that the company in able to repay a part of i ts

debts.

3) From the analysis of the P&L and balance sheet we can say that the sales of the

company are increased during the year because of the increasing demand of

the metal in the country. The impact of this is directly seen in the balance

sheet as the debtors are increased. Company is also able to increase its

liquidity posit ion.

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[DESERTATION]

COMMENTS ON THE VARIOUS RATIOS

1) The Gearing ratio of the company is increased which is a good indicator that the

company's dependence on the outsider's l iabilit ies has been decreased.

2) Due to the increasing demand in the market and the company's aggressive selling

strategies helped the company a lot to decrease its stock turn period from 79

days to 55 days which is a good indicator of the bright future of the

company. It shows that the company is saving 24 days in order to process the raw

material to finished goods to sale. This factor also plays a very important role in

the increase in the sales.

3) Company is able to increase net profit margin from 0.32% to 0.28% due to the increase in

the cost of goods sold and some increase in the operating expenses.

4) If we analyze some other ratios of the company then we can say that the ratios of the

company are also improved from 2003 to 2004. Like EBITD to interest ratio is

increased from 1.23 to 1.31 which shows that the company's abili ty to pay the interest is

increased.This ratio shows that for the every Re.1 interest company has Re. 1.31 to pay that

interest. Company is also able to increase its tangible assets and net worth also as shown in

the balance sheet of the company.

Company is also able to improve its cash cycle period from 108 days to 63 days, which is

also a good indicator. This helped the company to improve its profits because the longer

the cash conversion cycle, the greater the need for external financing and that

financing has a cost.

Increment of creditor paid period is also a good sign as the company can use this credit

facility in a productive manner.

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[DESERTATION]

OVERALL ANALYSIS

In the overall analysis of the company, on the basis of the weighted score of the company,

56.9(financial score+ non financial score), i t is eligible for the loan.

If the bank allowed the company a loan of Rs.50 lacks @ 13%, then we can analyze that the

company will easily be able to repay the interest of Rs.6, 50,000 per year. Because the

company's EBITD of the last two years is more than Rs.13 lacks. As the company is in the

same business for the last 8 years, industry segment prospects are stable and the management

of the company is also with good talent. In this case we can the increasing graph of the

company in the future. Company is also having a strong competit ive advantage and the

demand for the metal products is increasing in the future.

The Gearing Ratio of the company is 0.3% for the financial year 2000-01, 0.02% For 2002-03 ,Which is

less than 3 and the Interest coverage ratio is 1.07 ,2.86, 5.24 for financials years 2000-01, 2001-02, 2002-

03 respectively.

then we can conclude that overall position of the company is good and we can sanction the

loan to the company.

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[DESERTATION]

Western Indian motors

Balance Sheet As on 31 st March 2001

Liabilities F.C.YAmount (Rs)

Assets F.C.YAmount(rs.)

Partners* capital Account 52,65,000.00 Fixed Assets 89,90,948.48

Partners* Current Account 16,33,864.32 Investments Nil

Secured Loans 16,67,747.87 Current Assets , loans, & AdvancesA. Current Assets

1. InventoriesStock in Trade (As valued & Certified

By the partners)2. Sundry Debtors

3. Cash & Bank Balances1. Cash in Hand(Including Cheques

in hand Rs. 1010681.24)2. Balance with Schedule Banks in

1. In Current a/c2. Fixed Deposits (Including

Accrued interest)B. Loans & Advances

1. Advances recoverable in cash or inKind or for which value to be

Recovered2. Security Deposits

103,69,466.70

61,84,625.02

10,46,044.21

9,39,23.68

9,27,044.00

21,27,911.21

2,71,477.00

Unsecured LoansFrom Relative & Friends

12,05,952.91

Current Liabilities & Provisions(A) Current Liabilities

1. Sundry Creditors(a) For Goods Supplied

(b) For Others2. Advance payments for which

value has still to be given3. Other Liabilities

(B) Provisions

46,81,383.38119,57,240.51

37,38,028.627,07,513.69

Nil

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[DESERTATION]

( Total RS) 308,56,731.00 ( Total RS ) 308,56,731.00

Western Indian Motors Company

Profit And Loss A/C for Year ended on 31 st March 2001

Particulars Amount Particulars Amount

To salaries & wages 2387285.40 By Gross profit Ltd. from

trading Account

5469165.37

Management By work shop service 445669.00

STORES By rent receipt 441600.00

Siemens Deptt. By commission 3412563.00

Work Shop By incentive receipt NIL

Work shop mag.

To Advertisement& Publicity

400839.50

To Bank Charges& commission

56531.15.00

To Bonus 269294.00

To Charity &donation

8700.00

To Claims 13311.25

To Demonstration And Car Expenses

46666.26

To Electricity Charges 405522.00

To contribution to EmployeesFamily pension fund

103967.00

To Contribution to ESI 152341.00

To Contribution to link deposit assurance

9949.00

To Employees Gratuity 69736.00

To General trade expenses 29427.05

To Interest charges 883158.00

To Legal & professional Charges

57506.00

To News paper & periodical 4321.00

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[DESERTATION]

To Office Vehicle & Expenses 52122.00

To Printing & stationary 177453.00

To postage and Telegram 24043.00

To Rent And House tax 37389.00

To Insurance & Subscription & taxes

132532.00

To Railway Freight & Octopi 257485.00

To Staff welfare & expenses 55851.00

To telephone and trunk call 733901.00

To traveling and conveyance 395559.50

To computer accounting charges

18000.00

To computer services charges 49240.00

To depreciation 831985.00

To bad debts 349437.02

To sales promotion expenses 96152.80

To sales campaign expenses 95543.05

To hire purchase charges 10658.00

To sales incentive 40,000.00

To turn over tax 90,000.00

To profit c/d 13,31,597.02

Total 97,68,998.06 Total 97,68,998.06

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[DESERTATION]

Western Indian motors

Balance Sheet As on 31 st March 2002

Liabilities F.C.YAmount (Rs)

Assets F.C.YAmount (Rs.)

Partners* capital Account 52,65,000.00 Fixed Assets 96,84,227.48

Partners* Current Account 13,21,548.18 Investments Nil

Secured Loans 86,62,873.93 Current Assets , loans, & Advances

A. Current Assets1. Inventories

Stock in Trade (As valued & Certified By the partners)

2. Sundry Debtors3. Cash & Bank Balances1. Cash in Hand(Including

Chequesin hand Rs. 1010681.24)

2. Balance with Schedule Banks in

1. In Current a/c2. Fixed Deposits (Including

Accrued interest)B. Loans & Advances

1. Advances recoverable in cash or in

Kind or for which value to beRecovered

2. Security Deposits

1,11,95,544.57

1,78,56,538.63

7,64,287.57

3,96,416.28

21,59,266.00

23,38,313.45

2,65,741.00

Unsecured LoansFrom Relative & Friends

11,14,123.76

Current Liabilities & Provisions

(A) Current Liabilities1. Sundry Creditors

(a) For Goods Supplied(b) For Others

2. Advance payments for which value has still to be

142,44,595.26116,13,336.24

34,95,656.2619,43,200.98

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[DESERTATION]

given3. Other Liabilities

(B) Provisions

Nil

( Total RS) 4,76,60,334.98 ( Total RS ) 4,76,60,334.98

Western Indian motors Company

Profit And Loss A/C for Year ended on 31st March 2002

Particulars Amount(Rs.) Particulars Amount(Rs.)

To salaries & wages By Gross profit Ltd. from

trading Account

44,28,670.00

Management By work shop service 5,23,800.00

STORES By rent receipt 4,41,600.00

Siemens Deptt. By commission 15,17,645.15

Work Shop By incentive receipt 17,70,173.70

Work shop mag. 2570179.90

To Advertisement& Publicity

167245.00

To Bank Charges& commission

72513.00

To Bonus 278035.00

To Charity &Donation

4100.00

To Claims 9945.00

To Demonstration And Car Expenses

48066.00

To Electricity Charges 338316.00

To contribution to EmployeesFamily pension fund

114397.00

To Contribution to ESI 166924.00

To Contribution to link deposit assurance

94695.00

To Employees Gratuity 10951.00

To General trade expenses Nil

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[DESERTATION]

To Interest charges 8379.35

To Legal & professional Charges

91940.00

To News paper & periodical 3,658.00

To Office Vehicle & Expenses 53240.00

To Printing & stationary 131636.00

To postage and Telegram 16976.00

To Rent And House tax 38832.00

To Insurance & Subscription & taxes

127047.00

To Railway Freight & Octopi 154312.00

To Staff welfare & expenses 27185.00

To telephone and trunk call 154312.00

To traveling and conveyance 27185.00

To computer accounting charges

584891.64

To computer services charges 341789.00

To depreciation 18000.00

To bad debts 18230.00

To sales promotion expenses 783227.00

To sales campaign expenses NIL

To hire purchase charges 106050.00

To sales incentive 10798.00

To turn over tax 49,500.00

To profit c/d 16,81,676.14

Total 86,81,409.77 Total 86,81,409.77

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Western Indian motors

Balance Sheet As on 31st March 2003

Liabilities F.C.YAmount (Rs)

Assets F.C.YAmount (Rs.)

Partners* capital Account 53,65,000.00 Fixed Assets 106,84,227.48

Partners* Current Account 13521,548.18 Investments Nil

Secured Loans 78,62,873.93 Current Assets , loans, & AdvancesA. Current Assets

1. InventoriesStock in Trade (As valued &

Certified By the partners)2. Sundry Debtors

3. Cash & Bank Balances1. Cash in Hand(Including Cheques

in hand Rs. 1010681.24)2. Balance with Schedule Banks in

1. In Current a/c2. Fixed Deposits (Including

Accrued interest)B. Loans & Advances

1. Advances recoverable in cash or inKind or for which value to be

Recovered2. Security Deposits

199,95,544.57

1,3,56,538.63

8,64,287.57

5,96,416.28

33,59,266.00

34,38,313.45

346,741.00

Unsecured Loans

From Relative & Friends

10,14,123.76

Current Liabilities & Provisions(A) Current Liabilities

1. Sundry Creditors(a) For Goods Supplied

(b) For Others2. Advance payments for which

value has still to be given3. Other Liabilities

123,44,595.26111,13,336.24

3195,656.2617,43,200.98

Nil

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(B) Provisions

( Total RS) 4,12,65,339.12 ( Total RS ) 4,12,65,339.12

Profit And Loss A/C for Year ended on 31st March 2003

Particulars Amount(Rs.) Particulars Amount(Rs.)

To salaries & wages By Gross profit Ltd. from

trading Account

43,28,670.00

Management By work shop service 432,800.00

STORES By rent receipt 341,600.00

Siemens Deptt. By commission 110,645.15

Work Shop By incentive receipt 1223,173.70

Work shop mag. 2470179.90

To Advertisement& Publicity

117245.00

To Bank Charges& commission

34513.00

To Bonus 258035.00

To Charity &Donation

4400.00

To Claims 10045.00

To Demonstration And Car Expenses

46066.00

To Electricity Charges 367316.00

To contribution to EmployeesFamily pension fund

124397.00

To Contribution to ESI 145924.00

To Contribution to link deposit assurance

96795.00

To Employees Gratuity 11151.00

To General trade expenses Nil

To Interest charges 8339.35

To Legal & professional Charges

92340.00

To News paper & periodical 3,758.00

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To Office Vehicle & Expenses 53233.00

To Printing & stationary 133336.00

To postage and Telegram 16922.00

To Rent And House tax 38552.00

To Insurance & Subscription & taxes

134047.00

To Railway Freight & Octopi 144312.00

To Staff welfare & expenses 33185.00

To telephone and trunk call 133312.00

To traveling and conveyance 24485.00

To computer accounting charges

584891.64

To computer services charges 241789.00

To depreciation 19000.00

To bad debts 12430.00

To sales promotion expenses 789227.00

To sales campaign expenses NIL

To hire purchase charges 104450.00

To sales incentive 10888.00

To turn over tax 50000.00

To profit c/d 1141,676.14

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STANDARD CHARTERED BANKWestern Indian state motors (westernInd) SCB ISIC Code: 7114 Date Prepared:

6/11/2005Detailed Balance Sheet - Actual and % Page 1

Thousands

Statement Date 3/31/2002 3/31/2003 3/31/2004

Months Covered 12 12 12

Analyst Monika Monika Monika Source Currency: INR Target Currency: INR Segment Type: Other

CURRENT ASSETS

Cash and Bank Deposits 5,134 10.0 3,320 7.0 2,912 9.4Trade Debtors (Gross) 14,677 28.5 17,857 37.5 6,185 20.0

Stock: Trading 19,720 38.3 14,196 29.8 10,369 33.6Other Op Current Assets 2,056 4.0 2,604 5.5 2,399 7.8TOTAL CURRENT ASSETS 41,587 80.8 37,977 79.7 21,865 70.9

FIXED ASSETSMotor Vehicles 9,870 19.2 9,684 20.3 8,991 29.1

TOTAL FIXED ASSETS 9,870 19.2 9,684 20.3 8,991 29.1TOTAL TANGIBLE ASSETS 51,457 100.0 47,661 100.0 30,856 100.0

WORKING CAPITAL (1,873) - (1,983) - (886) -NET WORKING ASSETS 20,651 - 17,808 - 11,873 -NET CASH ASSETS (2,965) - (5,343) - 1,245 -

CURRENT LIABILITIES

Due to Banks (O/D,T/R etc) 7,959 15.5 8,663 18.2 1,667 5.4Curr. Mat. Hire Purchase Commit 140 0.3 - - - -

Trade Creditors 13,746 26.7 14,245 29.9 4,681 15.2Creditors: Sundry 13,556 26.3 11,613 24.4 11,957 38.8Other Op. Cur Liabilities 8,059 15.7 5,439 11.4 4,446 14.4TOTAL CURRENT LIABILITIES 43,460 84.5 39,960 83.8 22,751 73.7

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TERM LIABILITIES

Loans from Dir/Shareholders (1 Yr+) 2,100 4.1 1,114 2.3 1,206 3.9

TOTAL TERM LIABILITIES 2,100 4.1 1,114 2.3 1,206 3.9TOTAL LIABILITIES 45,560 88.5 41,074 86.2 23,957 77.6

EQUITY

Share Capital - Ordinary 5,897 11.5 6,587 13.8 6,899 22.4TOTAL EQUITY 5,897 11.5 6,587 13.8 6,899 22.4NET WORTH 5,897 11.5 6,587 13.8 6,899 22.4EFFECTIVE EQUITY 5,897 11.5 6,587 13.8 6,899 22.4

TOTAL LIABS & NET WORTH 51,457 100.0 47,661 100.0 30,856 100.0

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STANDARD CHARTERED BANK

Western Indian state motors (westernInd) SCB ISIC Code: 7114 Date Prepared: 6/11/2005

Detailed Profit & Loss Statement - Actual and % Page 2Thousands

Statement Date 3/31/2002 3/31/2003 3/31/2004

Months Covered 12 12 12

Analyst Monika Monika Monika

Source Currency: INR Target Currency: INR

PROFIT & LOSS STATEMENT

Sales (Net of Returns/Duties) 211,461 100.0 193,862 100.0 100,872 100.0Cost of Sales (205,386) (97.1) (188,393) (97.2) (96,444) (95.6)

GROSS PROFIT (LOSS)FROM TRADING 6,075 2.9 5,469 2.8 4,428 4.4

OTHER OPERATING INCOMECommission Received 2,379 1.1 3,412 1.8 1,518 1.5Rent Received 442 0.2 441 0.2 442 0.4

Other Operating Income 430 0.2 446 0.2 2,294 2.3Total Other Operating Income 3,251 1.5 4,299 2.2 4,254 4.2

GROSS PROFIT (LOSS) 9,326 4.4 9,768 5.0 8,682 8.6

ADMIN/OTHER OPERATING EXPENSESDepreciation (775) (0.4) (832) (0.4) (783) (0.8)Bad Debts Written Off - - (349) (0.2) - -

Wages & Salaries (2,258)(1.1) (2,387)(1.2) (2,570)(2.5)Other SG&A Expense (4,193) (2.0) (3,986) (2.1) (3,143) (3.1)

Total Admin/Other Oper. Expenses (7,226)(3.4) (7,554)(3.9) (6,496)(6.4)

NET OPERATING PROFIT (LOSS)BEFORE INTEREST & TAXES 2,100 1.0 2,214 1.1 2,186 2.2

Interest Expense (1,104)(0.5) (883) (0.5) (504) (0.5)

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NET PROFIT (LOSS) AFTER TAX 996 0.5 1,331 0.7 1,682 1.7

PROFIT (LOSS) DISTRIBUTIONTransfers to/from (+) Rev Reserves (996) - (1,331) - (1,682) -PROFIT RETAINED - - - - - -

STANDARD CHARTERED BANKWestern Indian state motors (westernInd) SCB ISIC Code: 7114 Date Prepared:

6/11/2005Detailed Cash Flow Page 3

Thousands

Statement Date 3/31/2003 3/31/2004

Months Covered 12 12

Analyst Monika Monika

Sales (Net of Returns/Duties) 193,862 100,872Chg in Trade Debtors (Gross) (3,180) 11,672

Cash Collected From Sales 190,682 112,544

Cost of Sales (188,393) (96,444)Chg in Stock: Trading 5,524 3,827

Chg in Trade Creditors 499 (9,564)Cash Paid to Suppliers (182,370) (102,181)

CASH FROM TRADING ACTIVITIES 8,312 10,363

Bad Debts Written Off (349) -Wages & Salaries (2,387) (2,570)

Other SG&A Expense (3,986) (3,143)Cash Paid for Operating Costs (6,722) (5,713)

GROSS CASH FROM OPERATIONS 1,590 4,650

Commission Received 3,412 1,518Rent Received 441 442Other Operating Income 446 2,294Chg in Creditors: Sundry (1,943) 344Chg in Other Op Current Assets (548) 205

Chg in Other Op. Cur Liabilities (2,620) (993)Other Income (Expense) & Taxes Paid (812) 3,810

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NET CASH AFTER OPERATIONS 778 8,460

NET CASH AFTER OPERATIONS 778 8,460

Interest Expense (883) (504)Cash Paid for Dividends & Interest (883) (504)

CASH AFTER FINANCING COSTS (105) 7,956

Curr. Mat. Hire Purchase Commit (140) -Current Portion Long Term Debt (140) -

CASH AFTER DEBT AMORTISATION (245) 7,956

Chg in Motor Vehicles 186 693Depreciation (832) (783)Chg in Other Fixed Assets (646) (90)

Cash Paid for Plant and Investments (646) (90)

FINANCING SURPLUS (REQS) (891) 7,866

Chg in Due to Banks (O/D, T/R etc) 704 (6,996)Chg in Loans from Dir/Shareholders (1 Yr+) (986) 92

Chg in Equity 690 312Admits to Profit & Loss (1,331) (1,682)Total Chg in Capital (641) (1,370)

Total External Financing (923) (8,274)

CASH AFTER FINANCING (1,814) (408)

Add:Cash and Bank Deposits 5,134 3,320

ENDING CASH & EQUIVALENTS 3,320 2,912

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STANDARD CHARTERED BANKWestern Indian state motors (westernInd) SCB ISIC Code: 7114 Date Prepared:

6/11/2005Detailed Ratios Page 4

Thousands

Statement Date 3/31/2002 3/31/2003 3/31/2004

Months Covered 12 12 12

Analyst Monika Monika Monika

LIQUIDITY RATIOS

Stock Turn Period (Days) 35 28 39Gross Trade Debtor Collection Period (Days) 25 34 22Net Trade Debtor Collection Period (Days) 25 34 22Net Debtor Collection Period (Days) 25 34 22Trade Creditors Pmt Period (Days) 24 28 18Net Cash Cycle Period (Days) 36 34 44Total ST Debt Coverage 0.08 3.90Cash Coverage 0.76 16.79

DEBT MANAGEMENT RATIOS

Leverage Ratio 7.73 6.24 3.47Gearing 1.37 1.32 0.24NPBIT: Interest 1.90 2.51 4.34Net Cash after Operations: Interest 0.88 16.79Interest on Avg. Financial Debt (%) 13.63 10.54 9.76Short Term Debt 8,099 8,663 1,667Long Term Debt - - -

PROFITABILITY RATIOS (%)

Net Profit Margin 0.47 0.69 1.67Operating Efficiency 3.42 3.90 6.44Return on Equity 16.89 20.21 24.38Return on Assets (Geared) 1.94 2.79 5.45Return on Assets (Un-geared) 4.08 4.65 7.08Gross Profit Margin 2.87 2.82 4.39NPBIT to Sales 0.99 1.14 2.17NPBT to Sales 0.47 0.69 1.67

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GROWTH RATIOS (%)

Sales Growth (8.32) (47.97)Net Profit Growth 33.63 26.37Total Asset Growth (7.38) (35.26)Total Liabilities Growth (9.85) (41.67)Gross Profit Growth (9.98) (19.03)Sustainable Growth 20.32 25.34 32.23

OTHER RATIOS

Current Ratio 0.96 0.95 0.96Liquid Ratio 0.50 0.60 0.51Sales: Fixed Assets 21.42 20.02 11.22Sales: Total Assets 4.11 4.07 3.27Effective Tax Rate - - -

Capital Spending (186) (693)Avg. Cap Spending - -

Expected Cap Spending 11 (3,862)Avg. Expected Cap Spending 11 (1,926)Def Tax + Tax Payable/Tax Exp (%) N/A N/A N/ADividend Payout Rate - - -Average Tax Rate (%) - - -Other Cur Assets/Tot Cur Assets (%) 4.94 6.86 10.97Other Cur Liabilities/Tot Cur Liabilities (%) 18.54 13.61 19.54Other Fixed Assets/Tot Fixed Assets (%) - - -Other Term Liabilities/Tot Term Liabilities (%) - - -

Other Income/Net Income Aft Tax (%) 326.41 322.99 252.91Investments/Total Assets (%) - - -

Gross Cash Flow less Interest & Dividends (annualized) 707 4,146Free Cash Flow (annualized) 542 2,249

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STANDARD CHARTERED BANKWestern Indian state motors (westernInd) SCB ISIC Code: 7114 Date Prepared:

6/11/2005Detailed Ratios Page 5

Thousands

Statement Date 3/31/2002 3/31/2003 3/31/2004

Months Covered 12 12 12

Analyst Monika Monika Monika

CREDIT GRADING DATA

Large CorporateTotal Equity 5,897 6,587 6,899Leverage (Total Liabilities to Total Assets) 0.89 0.86 0.78Net Profit Margin 0.47 0.69 1.67Cash to Total Debt 0.09 5.07Debt to EBITDA 2.82 2.84 0.56EBITDA to Interest - New 2.60 3.45 5.89Net Cash Ratio - New 0.02 0.35Pre-tax Profitability - New - 0.01 0.02Size Factor (Total Equity) - New 5,897 6,587 6,899Capital Structure - New 0.11 0.14 0.22Liquidity - New 0.22 0.25 1.48Debt Service Coverage (%) - New 0.52 0.46 0.50Cash Flow Ratio 2 (%) - New 0.61 4.46

Middle MarketGearing Ratio 0.20 0.21 0.09Net Profit Margin (%) 0.47 0.69 1.67Cash Ratio (%) 11.81 8.31 12.80Trading Stock Turn Period 35 28 39EBITDA to Interest 2.60 3.45 5.89Cash Flow Ratio N/A 0.02 0.18Asset Turnover 4.11 4.07 3.27Debt Service Coverage (%) 0.52 0.46 0.50Sale Growth (%) (8.32) (47.97)Cash Flow Ratio 2 (%) 0.61 4.46

Channel Finance & Supply ChainGearing Ratio 0.20 0.21 0.09Stock Turn Period 35 28 39

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Net Profit Margin % 0.47 0.69 1.67Total Tangible Assets 51,457 47,661 30,856Net Worth 5,897 6,587 6,899Productivity % 1.07 1.23 2.55

STANDARD CHARTERED BANKWestern Indian state motors (westernInd) SCB ISIC Code: 7114 Date Prepared:

6/11/2005Detailed Ratios Page 6

Thousands

Statement Date 3/31/2002 3/31/2003 3/31/2004Months Covered 12 12 12

Analyst Monika Monika Monika

FINANCIAL SUMMARY FOR BCA

FRONT SHEET DATA

Total Sales 211,461 193,862 100,872Operating Profit 2,100 2,214 2,186Extraordinary Expenses - - -Net Profit after Tax 996 1,331 1,682EBITDA 2,875 3,046 2,969Net Worth 5,897 6,587 6,899Total Debt 8,099 8,663 1,667Gearing 1.37 1.32 0.24Debt to EBITDA 2.82 2.84 0.56Net Cash after Operations 778 8,460CADA (245) 7,956Contingent Liabilities - - -

Total Provision for Employee Benefits (Including Pension) - - -

REPAYMENT SOURCE DATA

PROFITABILITYTotal Sales 211,461 193,862 100,872

Gross Profit 9,326 9,768 8,682Net Profit after Tax 996 1,331 1,682Change in Sales (%) (8.32) (47.97)Gross Profit Margin (%) 2.87 2.82 4.39EBITDA to Sales (%) 1.36 1.57 2.94NPBT to Sales (%) 0.47 0.69 1.67

NET WORKING CASH CYCLE

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Stock Turn Period (SDOH) 35 28 39Trade Debtors Period (DDOH) 25 34 22Trade Creditors Period (CDOH) 24 28 18Net Working Cash Cycle Period 36 34 44

DEBT SERVICE CAPACITY

Net Cash after Operations 778 8,460Cash after Financing Costs (105) 7,956Cash after Debt Amortisation (245) 7,956Net Cash after Operations/Interest 0.88 16.79Financing Surplus/Deficit (891) 7,866

LONG TERM ASSET/LIABILITY MANAGEMENT

Net Fixed Assets 9,870 9,684 8,991Long-Term Debt+ Equity 5,897 6,587 6,899Sales to Fixed Assets 21.42 20.02 11.22Capex to Depreciation Ratio (0.22) (0.89)

DEBT PROTECTION

Gearing 1.37 1.32 0.24Interest Cover 1.90 2.51 4.34Debt to EBITDA 2.82 2.84 0.56EBITDA to Interest 2.60 3.45 5.89Maturing Debt Obligations S/T 8,099 8,663 1,667Maturing Debt Obligations M/T - - -Debt Service Cover Ratio 1.80 9.23Subordinated Debt - - -Annual Operating Leases - - -Contingent Liabilities - - -

CAPITAL PROTECTION

Tangible Net Worth 5,897 6,587 6,899Revaluation Reserve - - -

Total Assets 51,457 47,661 30,856Leverage (Total Liabilities to Total Assets) 0.89 0.86 0.78Dividend Payout Ratio - - -

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STANDARD CHARTERED BANK

Western Indian state motors (westernInd) SCB ISIC Code: 7114 Date Prepared: 6/11/2005

Financial Summary Ratios Page 7Thousands

Statement Date 3/31/2002 3/31/2003 3/31/2004

Months Covered 12 12 12

Analyst Monika Monika Monika

Source Currency: INR Target Currency: INR Segment Type: Other

LIQUIDITY

Cash after Financing Costs (105) 7,956Cash Coverage 0.76 16.79

PROFITABILITY

Sales (Net of Returns/Duties) 211,461 193,862 100,872Gross Profit (Loss) 9,326 9,768 8,682Net Oper Profit (Loss) Before Interest & Tax2,100 2,214 2,186Net Oper Profit (Loss) Before Tax 996 1,331 1,682Profit Retained - - -

CAPITAL STRUCTURE

Total Equity 5,897 6,587 6,899Net Worth 5,897 6,587 6,899Total Debt 8,099 8,663 1,667Gearing 1.37 1.32 0.24NPBIT: Interest 1.90 2.51 4.34

OTHERS

Sales Growth (8.32) (47.97)Sustainable Growth 20.32 25.34 32.23Net Cash Cycle Period 36 34 44Total ST Debt Coverage 0.08 3.90

Net Op. Profit before Interest& Taxes/Sales (%) 0.99 1.14 2.17

ISIC: 7114

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[DESERTATION]

Nature of Business Trading

ANALYSIS

The motor sector of this company is on demand but there is a tough competition in the market. A

number of multi-national companies are coming to India with new technologies and innovative

techniques which makes very difficult for an Indian company to sustain in the market.

A look at the P &L account of the Corporation shows that there is a constant decrease in the

sales of the Company, but even after that the Company is able to maintain its NPAT. If we analyze the

situation closely we find that the NPAT/Sales of the company have kept on increasing year by year

from .5 to .7 to 1.7%. The Company’s gross profit has also increased in the same way from 2.8 to 4.4%.

There is an increase in the management and operation efficiency of the company because the

company is able to decrease the cost of sales which helps the corporation to increase its Gross profit.

The bad-debts of the company are also removed during the year 2004, which shows the strong

collection technique of the company.

But if we analyze the sales part of the company, it is not showing good performance, because if

it keeps on increasing in the same pace, then it will adversely affect the company. So if the company

increases its sales with the induction of the new technologies and adoption of aggressive marketing

strategies, then the prospects of the company could brighten in the future.

Comments of various ratios

If we see the figures of the company's profit in the percentage form, then we can say that

there is a positive trend as the net Profit & the gross profit of company are increasing

year by year.

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[DESERTATION]

Company’s current ratio & the Quick ratio are below 1 which is not good for any

company. Any company can face this situation in getting a short term loan from the

market.

There is high decrease in Debt equity ratio & the Gearing ratio of the company which is a

very good indicator for a company. It shows that the company's dependency on the

outsiders is decreasing progressively & the company is becoming self-dependent.

A glance towards the NPBIT/Interest shows that it has increased from 1.90 -> 2.54 -> 4.34

which is a positive for the company. It shows that for every one rupee of Interest liability,

the company is having Rs.4.34, which means that the company can easily bear the interest

payment .The above ratios directly shows that Company can repay a major portion of its

debt.

When we come on the Cash Conversion cycle of the company, we see that it has

increased, which is not a good sign for the company because the company has to

be dependent on outsider's financing which carries an additional cost .The reason

for this is an increment in the stock-turnover period & the debtor-turnover period.

After analyzing it we can say that due to the lack of proper advertising of the company its

sales is not increasing & on the other side its debtor & stock period is also not increasing.

It shows that lots of money of this company is locked in the form of debts & the stock.

Or we can say that this company is trying to increase its sales by providing the lenient

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[DESERTATION]

(loose) credit policy or facility to its customers. If we see the cash flow statement then

we will find that company has been able to repay a major portion of its due to Bank or

debt which helped the company in reducing its interest expenses.

OVERALL ANALYSIS

If we analyze the whole situation of the company, then we will find that, as due to lots of Competitive

pressure in the market, the sales of the company are decreasing. If company comes with the new

technology, talented employees then the company could rise in the future as it is clear from the annual

report of the company that the % of the Net profit & the Gross Profit of the company is increased.

As the Corporation gearing ratio & the debt to EDITDA is decreasing year by year which shows the sign

of the corporation self dependency. In that case a lender can believe or trust the Corporation for the

security of its interest because corporation liabilities are also decreasing.

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[DESERTATION]

If we se the overall picture & compare the corporation with the industry, then we can say that Corporation

is able to control on its cost department or cost of sales but the main problem with the corporation at this

stage is to face the stringent Competition in the market. As lots of multinational company had entered into

the market, so company need to adopt some innovative & aggressive techniques to face this situation. The

corporation approached the bank for a loan of Rs.1 crore to purchase the new updated machines to enhance

the productivity & production of the innovative products.

If we see the company’s condition & the market condition then we can say that if company will launch its

new products in the market; then it can definitely increase its sale which will directly increase the profit of

the corporation.

If we see the past 3 years record of the corporation in term of EBI TDA/ Interest ,it is near to Rs.22 lakhs

in the 3 years, even after the decrease in the Sales of the corporation. As the Corporation is offering the

collateral of new machines & some personnel property, then we can sanction a part of the requirement of

the corporation. If The bank sanctions Rs.70 lakhs @14 % per annum (PLR + 1.5%) , then we can say that

the corporation will easily be able to repay its interest installment of Rs.9,60,000 as its EBITDA/INT.. is

more than Rs.21 lacks in last 3 years. And if we analyze the credit of the corporation, we see, it has been

able to repay a major portion of its debt without any default. If the same crisis happens in the near future,

the bank can recover its loan with the sale of its machinery & the personal property of the customers. The

value of the property is Rs.30, 00,000 and there are the chances that its value will increase in the future.

The Gearing Ratio of the company is 0.01% for the financial year 2000-01, 0.60% For 2002-03 ,Which is

less than 3 and the Interest coverage ratio is 1.09 ,1.36, 2.32 for financials years 2000-01, 2001-02, 2002-

03 respectively.

So now finally we can say that bank can sanction the loan of Rs.70 lacks with 30 % margin at the rate of

14 % or 1.5% above PLR because there are fewer risks associated with it.

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[DESERTATION]

CONCLUSION

Standard Chartered Bank over the years maintained its services and relationship. It runs over

78 Branches all over the country. It has

SME sector is Vital to the economy . This sectors accounts for 95% of industrial units The

SME sector is vital to the Indian economy. This sector accounts for 95 percent of industrial units, around 40

percent of the industrial output and 35 percent of the country's exports. With liberalization, the sector is

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[DESERTATION]

witnessing a new dawn. SMEs are fast adopting international best practices, focusing on productivity and are at

the leading edge when it comes to innovation and entering new global markets. In addition to sectors like the

auto ancillary, garment exports and pharma, SMEs in emerging sectors such as BPO, ITES, etc are already

making their presence felt in the international vendor markets.

However, SMEs face hurdles in their growth process. To remove these, there are several issues that we need to

tackle. These include revamping the policy framework in the context of the new global paradigm, consolidating

various policy initiatives in a single nodal authority and developing a comprehensive credit guarantee scheme

for small businesses. In this context, the union budget has given importance to stimulating growth in the SME

sector.

While the sector is attractive in terms of its potential, banks have to overcome several challenges in servicing

the SME banking requirement. These are challenges of credit risk evaluation based on inadequate financial

information, high cost of setting up wide distribution architecture, particularly in semi-urban and upcountry

areas and meeting the large volumes of granular transactions.

SMEs, on their end, are seeking efficiency in banking transactions, convenience and reduction in cost of

transactions.

With globalization and increasing competition, the SME customer now requires complex and sophisticated

banking products, and is becoming increasingly demanding in terms of value and service levels. SME exports

are on the rise - SMEs are exporting to retail chains (Walmart, Gap) , auto majors (Ford, GM) and pharma

MNCs (GSK, Avetis, Pfizer). To fund this growth, there are also additional avenues such as the Indonext

platform. This will provide the much-needed capital market window for growth. Besides, the SME Growth

Fund recently announced in the budget, will provide debt-funding support.

We can conclude that the commercial banks are likely to remain the dominate insti tution for

some time. Banks have to gradually rise to provide services in response to market

requirement. Banks can be made more efficient by improving their management system.

Better management requires new lending polices, better loan recovery procedures, more

sophisticated information system, better trained and highly motivated staff and less

government interference. The entry of new private banks, domestic or foreign can stimulate

competit ion.

In spite of competition, commercial banks are to spearhead the financial system in India and

continue to foster accelerated economic development and growth with merit.

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Apart from performing the key function of providing liquidity and payment services to the

real sector and managing bulk of the financial intermediation process, the banking sector has

contributed to the process of economic development by serving as a major source of credit to

all section of the economy, be i t the house hold, industry, government or the weaker section

of the society.

To reach the international standard s of capital adequacy , risk management and accounting

practices the right talent at  appropriate levels of management needs to be inducted laterally

and banks should have the necessary freedom to do so.

There are several impediments including statuary, legal and political in the recovery of bank

loans and advances. Therefore,

restructure of borrower accounts should be left to individual bank decision  subject to full

transparency then only the banks can perform better, as business organization in pursuit of

excellence and sound financial performance.

As I have analyzed three companies in my project report, I came to know there are some

chances of improvement. The bank should properly analyze the customers profile on  some

other grounds also to minimize credit risk. If a loan turns into NPA then it can create a big

trouble for the company.

Standard Chartered Bank over the years maintained its services and relationship. It runs over

78 Branches all over the country. It has created a name for i tself. As far as my views are

concerned

BIBLIOGRAPHY

BOOKS AND NOTES

Process notes of different departments

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[DESERTATION]

Brochures of different SCB Products

Six Sigma for Managers by author GREG BRUF

Study material from the Bank

Reserve bank of India Guidelines Booklet

Presentations from Employees

WEBSITES

www.standardchartered.com

www.default.com

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