summer training mba1idbi bank

7/28/2019 Summer Training MBA1idbi Bank

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A

REPORT

ON

"STUDY ON ABILITY OF BANKS TO FULFILL PRESENT

AND FUTURE REQUIREMENTS IN TRADE FINANCE OF

SMALL AND MEDIUM SCALE INDUSTRIES."

PREPARED BY:

STUTI VASAVADA

MBA-1, ALPHA

R.No.3105

As a part of partial fulfillment of MBA course

At N.R. Institute of Business Management

SUBMITTED TO:

Mr. Neeraj Amarnani


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ACKNOWLEDGEMENTS

At the outset, I would like to express my deep gratitude to Mr. Kishore Bhatt for allowing

me to work under his guidance, thereby, giving me an opportunity to gain tremendous

knowledge and skills from his vast experience of 16 years in banking sector.

I am also grateful to Mr. K. Subramanian without whose help, guidance, valuable inputs

and constant monitoring, my learning would have been incomplete. Although I received

regular inputs from Mr. Bhatt, it was Mr. K. Subramanian with whom I interacted on a

day-to-day basis and have spent major tenure of my training and have gained a lot from

his experience.

I am also sincerely thankful to my faculty guides, Mr. Satish Nair and Mr. Neeraj

Amarnani for their guidance and valuable suggestions prior to and during the entire

course of training.

My acknowledgement would be incomplete if I do not extend my sincere thanks to all the

executives & staff of IDBI bank, especially, Mrs. Mini and Mr. Paras Shah for their help

and guidance.

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TABLE OF CONTENTS

Executive Summary. 4

Introduction 5

About The Organization6

About The Project. 9

Cash Management System 16

Survey 20

Survey Of Industry (Questionnaire).. 21

Field Work. 23

Ankleshwar Region:. 23Findings And Recommendations.. 27

Bharuch Region 29Findings And Recommendations.. 32

Baroda Region:. 34Findings And Recommendations.. 37

Conclusion. 39

Learning from the project 40

Bibliography.. 41

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EXECUTIVE SUMMARY

The project was aimed at understanding the various trade finance instruments offered by

banks to the small and medium scale industries. An attempt was also made to getinformation about the present banking services availed by the industries, their further

requirements and the ability of the banks to provide those services.

The survey was undertaken foridbi bank, Baroda branch. Hence, the region surrounding

it i.e. Baroda, Bharuch and Ankleshwar was considered. The outcome of the survey

showed that the banking requirements of the small and medium scale industries are very

limited due to which majority of the industries were not aware of the various services

offered by the banks. This had been observed mainly in the Bharuch and Ankleshwar

region. But it is also a fact that the industries showed great interest in the additional

services provided by banks when they were explained the functions of the services.

The training was a great learning experience resulting in a better understanding of the

banking sector. We found that in spite of so many private sector banks coming in, there

are still a large number of companies who still prefer to carry out their transactions with

the public sector banks. The security aspect is perhaps playing its part in this case.

The findings of the project suggest that idbi bankshould pitch into the SMEs sector as

fast as possible in order to cope up with the competition from other private sector banks

such as ICICI and HDFC who have started penetrating aggressively.

The report, which follows, is an outcome of my sole efforts which is prepared in partial

fulfillment of the MBA course. The facts and figures mentioned in the report are

absolutely true to my knowledge. Reader of this report is hence requested to keep the

information confidential and not use it for any other purpose.

STUTI VASAVADA

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I NTRODUCTION

Banking has been the right hand of any business since a long time. Every time a company

enters into a monetary transaction with a customer, the transaction takes place through abank. May it be payment or collection of money, it is the bank, which makes the payment

and receipt easier through the system of collection and payment by cheque, demand draft,

bill discounting etc. Thus, various banking instruments like those mentioned above have

been a part and parcel of industry operations.

The Banking sector has gained more importance in the recent years. This is perhaps

because of the fact that various industries are coming up on a wide scale and also because

the industries are expanding in different parts of the world as a part of globalization.

Moreover, with the entering of the private sector banks into the traditional banking

sector, survival of the fittest has become the rule. The main advantage of the private

sector banks are that they have large amount of funds and they believe in providing

services by keeping the needs of their customers in mind. Hence, their main aim is to

provide maximum satisfaction to customers by offering different trade finance

instruments at competitive rates to streamline the financial functions of the industries.

Keeping this objective in mind, an attempt has been made with the guidance of idbibank

to study the banking requirements of the small and medium scale industries in terms of

what trade finance services they are presently availing, what are their additional

requirements and what does idbi bankoffer.

Here follows a detailed report on the above-mentioned study. The research was

conducted in three regions:

Baroda

Bharuch

Ankleshwar

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ABOUT THE ORANIZATION

IDBI, the tenth largest development bank in the world has promoted

world-class institutions in India. A few of such institutions built by IDBI

are The National Stock Exchange (NSE), The National Securities

Depository Services Ltd. (NSDL), Stock Holding Corporation of India

(SHCIL) etc. IDBI is a strategic investor in a plethora of institutions,

which have revolutionized the Indian Financial Markets. IDBI promoted

idbi bankto mark the formal foray of the IDBI Group into commercial

Banking. This initiative has blossomed into a major success story. idbi

bank, which began with an equity capital base of Rs.1000 million

(Rs.800 million contributed by IDBI and Rs.200 million by SIDBI),

commenced its first branch at Indore in November 1995. Thereafter in

less than seven years the bank has attained a front ranking position in

the Indian Banking Industry.

idbi banksuccessfully completed its public issue in February 99, which

led to its paid-up capital expanding to Rs.1400 million. The promoters

holding consequent to this public issue stood reduced to 71% with IDBI

holding 57% and SIDBI 14% of the paid up capital of IDBI Bank. This is

in line with the requirement of RBI, which stipulates that eventually the

promoters holding should be brought down to 40%.

The Bank

The birth ofidbi banktook place after RBI issued guidelines for entry of

new private sector banks in January 93. Subsequently, IDBI as

promoters sought permission to establish a commercial bank and

retained KPMG a management consultant of international repute to

prepare the groundwork for establishing a commercial Bank. The

Reserve Bank of India conveyed it's in principle approval to establish

idbi bank on February 11th, 1994. Thereafter the Bank was

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incorporated at Gwalior under Companies Act on 15th of September

1994 with its Registered Office at Indore.

The future

idbi bank looks confidently into the future to face and thrive in the

intense competitive environment that is emerging. The bank has now

gained experience and has in place the strategies required for gaining

a leadership position. With cutting edge relevant technology,

aggressive marketing, innovation, tight control over costs and with its

motivated workforce, the bank is all set to emerge as a model global

corporate citizen in the days ahead.

Promoters

The promoters are Industrial Development Bank of India (IDBI) and

Small Industries Development Bank of India (SIDBI). The Government

of India under an Act of Parliament, the IDBI Act 1964, established IDBI

in 1964. IDBI's role as a catalyst to industrial development has

encompassed a broad spectrum of activities. SIDBI, their second

promoter, was established as a wholly owned subsidiary of IDBI in

1990 when IDBI's portfolio relating to the small industrial sector was

transferred to them.

Government business

The Central Board of Direct Taxes (CBDT) are responsible for

administering various direct taxes through the Commissioners of

Income-tax located in different parts of the country. The

Commissioners of Income-tax are entrusted with the task of collection

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as well as refund of Income tax and Corporation Tax, etc. under the

Income-tax Act, 1961.

The bank has received the mandate from the Central Board of Direct

Taxes to Collect the Direct Taxes through IDBI bank branches.

Information Technology

Modern banking demands banks to be more and more tech-savvy in

order to provide value added services to their clients with cutting edge

technologies.

They serve in various aspects such as:

Software development and implementation - more and more

business processes now rely upon softwares systems

Network maintenance and expansion - to keep the customers

Online

Risk Management

Risk management is a key element of the Bank's business strategy.

Identification, awareness, measurement, monitoring and controlling

risk, efficiently and effectively, in a manner geared towards yielding

sustained economic value, is one of the highest priorities of the Bank.

Mission of the Risk Group is to move the Bank up the value chain by

ensuring sustained quality growth in and off the balance sheet along

with optimizing bottom-line compensation to adequately cover the

various risks embraced by the Bank and provide accretion to its

capital. In the process, Risk Group creates value - tangible and

intangible - for its stakeholders (investors, customers, employees,regulators) - value in the form of a superior balance sheet, adequate

liquidity, healthy return on capital, trust and confidence, knowledge-

backed decision guidance systems, etc.

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Significant means have been invested in adapting the bank's risk

management practices to the rapid development and diversification of

its activities. The Risk Group is actively pursuing its objective of

establishing a high quality of risk measurement and management

system. These are employed not only to satisfy regulatory

requirements, but also to position the Bank ahead of competition in

adopting cutting-edge practices followed internationally in the field of

risk management. By doing so, the Bank improves its ability to detect

early warning signals, allowing it to respond speedily and flexibly to

prevent any adverse variations in the Bank's equity value and

earnings.

The Risk Group believes that risk management is all about wanting to

do business and more so about wanting to remain in business. And in

pursuit of this enterprise-wide objective, it considers every employee

of the Bank a Risk Manager.

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ABOUT THE PROJECT

This project aims at studying various trade finance requirements of the

small and medium scale industries. Through this project an attempt

has been made to get an idea whether the present banking sector is

able to fulfill these requirements or not. Before going to the

technicalities of the project, a brief description of the various trade

finance instruments is given below:

PRODUCT FEATURES:

INLAND BILLS (SIGHT / USANCE) DISCOUNTED

Bill of exchange is an instrument in writing containing an unconditional

order, signed by the maker directing a certain person to pay a certain

sum of money only to or the order of a certain person or to the bearer

of the instrument

INLAND BILLS SENT ON COLLECTION

An inland bill sent outward for collection is a bill of exchange / draftdrawn payable on demand or a certain number of days after sight at

an outstation place and lodged for collection with the bank. The

proceeds of such instruments are credited / remitted to the drawer

after realization of the same.

INLAND BILLS (SIGHT/USANCE) NEGOTIATED UNDER LFTTERS OF

CREDIT

Banks, representing the beneficiary, can associate with the letters of

credit in various capacities such as Advising Bank, Confirming Bank,

bank nominated for effecting settlement under LC, transferring bank or

reimbursing bank.

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FOREIGN CURRENCY BILLS (SIGHT / USANCE) NEGOTIATED UNDER

LETTERS OF CREDIT

UCP defines a documentary letter of credit as any arrangement

whereby a bank (Issuing Bank) acting at the request and in accordance

with the instructions of a customer (applicant) is to make payment to

or to the order of a third party (beneficiary) or is to pay, accept or

negotiate bills of exchange drawn by the beneficiary or authorizes such

payments to be made or such drafts to be paid, accepted or negotiated

by another bank against stipulated documents, provided that the

terms and conditions of the LC are complied with. Banks,

representing the beneficiary, can associate with the letters of credit in

various capacities such as Advising Bank. Confirming Bank, bank

nominated for effecting settlement under LC, transferring bank or

reimbursing bank.

RUPEE EXPORT BILLS (SIGHT / USAGE) NEGOTIATED UNDER LETTERS

OF CREDIT








terms and conditions of the LC are complied with.


credit in various capacities such as Advising Bank, Confirming Bank.

Bank nominated for effecting settlement under LC, transferring bank or

reimbursing bank.

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EXPORT BILLS SENT ON COLLECTION

An export bill sent outward for collection is a bill of exchange / draft

drawn payable on demand or a certain number of days after sight at

an outstation place and lodged for collection with the bank. The

proceeds of such instruments are credited / remitted to the drawer

after realization of the same.

IMPORT LETTERS OF CREDIT




or to the order of a third party (beneficiary) or is to pay. Accept or




terms and conditions of the LC are complied with.

FOREIGN CURRENCY IMPORT BILLS RECEIVED ON COLLECTION

An inward / import collection is a sight / usance instrument which may

be a promissory note or a bill of exchange along with transport

documents (unless in case of clean collection) drawn on an Indian

importer and received for collection by the bank. When an authorized

dealer (AD) receives foreign bills for collection from a correspondent

abroad, the AD acts as an agent for its foreign correspondent bank. AD

should be very careful to ensure that the instructions of the principal

(foreign correspondent bank) are adhered to in all respects. The

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principal should at all stages be kept informed of all developments

relating to the particular bill.

RUPEE IMPORT BILL RECEIVED ON COLLECTION

An inward / import collection is a sight / usance instrument which may

be a promissory note or a bill of exchange drawn on an Indian importer

and received for collection by the bank. When an authorized dealer

(AD) receives foreign bills for collection from a correspondent abroad.

The AD acts as an agent for its foreign correspondent bank. AD should

be very careful to ensure that the instructions of the principal (foreign

correspondent bank) are adhered to in all respects. The principal

should at all stages be kept informed of all developments relating to

the particular bill.

INLAND BILLS RECEIVD ON COLLECTION

An inward inland collection is a sight / usance instrument which may be

a promissory note or a bill of exchange drawn on a buyer (the drawee)

and received for collection by the bank. When the bank receives inland

bills for collection from a correspondent bank / other branches, the

bank acts as an agent for its correspondent bank. Bank should be very

careful to ensure that the instructions of the principal (correspondent

bank) are adhered to in all respects. The principal should at all stages

be kept informed of all developments relating to the Particular bill.

PRE - SHIPMENT CREDIT IN RUPEES

Pre-shipment finance is a working capital finance extended to an

exporter in anticipation of his exporting the underlying goods. Basic

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purpose of extending pre-shipment finance is to enable the eligible

exporters to procure raw materials / process / manufacture /

warehouse / ship the goods meant for exports.

PCL is defined as a loan or advance granted or any other credit

provided by an institution to an exporter for financing purchase of raw

materials, processing and packing of the goods, on the basis of letters

of credit (LC) opened, in favour of the exporter. By an importer of

goods outside India or a confirmed and irrevocable order for the export

of goods from India or any other evidence of an order for export from

India having been placed on the exporters.

PRESHIPMENT CREDIT IN FOREIGN CURRENCY

Pre-shipment finance is a, working capital finance extended to an

exporter in anticipation of his exporting the underlying goods. Basic

purpose of extending pre-shipment finance is to enable the eligible

exporters to procure raw materials / process / manufacture warehouse

1 ship the goods meant for exports.

PCFC is defined as a loan or advance granted or any other credit

provided by an institution to an exporter which is self-liquidating in

nature and accordingly export bill will have to be discounted to

liquidate PCFC for financing purchase of raw materials, processing and

packing of the goods. On tile basis of letters of credit (LC) opened. in

favour of the exporter, by an importer of goods outside India or a

confirmed and irrevocable order for the export of goods from India or

any other evidence of an order for export from India having been

placed on the exporters. PCFC has been permitted by, RBI in order to

help the exporters to avail of exports credit, at internationally

competitive rate.

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BANK GUARANTEES

(Both Inland and Overseas Guarantees)

Bank guarantee is an undertaking given by the bank (the guarantor) at

the request of a third party usually a customer (the principal) or a bank

or other party so requested by the principal (the instructing party) to

another party (the beneficiary) whereby the guarantor undertakes - in

the event of default by the principal in the fulfillment of his obligations

to make the payment to the beneficiary within the limits of a stated

sum of money.

As per the Indian Contract Act, Guarantee is a contract to perform the

promise or discharge the liability of a third person in case of his

default. Guarantee is a collateral contract to answer for the default of

another person and thus is ancillary or subsidiary to another contract.

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BOOKING A FORWARD CONTRACT

Forward contract is a contract for purchase from or sale to a customer

of a foreign currency amount at a specific rate of exchange to he

delivered at a mutually agreed date or during a mutually agreed

period.

ACU BILLS PURCHASED UNDER LETTER OF CREDIT




or to the order of a third party (beneficiary) or is to pay. accept or

negotiate bills of exchange drawn by the beneficiary, or authorizes

such payments to he made or such drafts to be paid, accepted or

negotiated by another bank against stipulated documents, provided

that the terms and conditions of the LC are complied with.

Banks, representing the beneficiary can associate with the letters of

credit in various capacities such as Advising Bank. Confirming Bank,

bank nominated for effecting settlement under L.C. transferring bank

or reimbursing bank.

FOREIGN CURRENCY AND RUPEE BILLS SENT FOR COLLECTION

UNDER LETTERS OF CREDIT







by another bank against stipulated documents provided that the terms

and conditions of the LC are complied with.

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credit in various capacities such as Advising Bank, Confirming Bank.

Bank nominated for effecting settlement under LC. Transferring bank

or reimbursing bank.

INLAND BILLS SENT FOR COLLECTION UNDER LETTRS OF CREDIT


credit in various capacities such as Advising Bank. Confirming Bank.

Bank nominated for effecting settlement under LC, transferring bank or

reimbursing bank.

FOREIGN CURRENCY BILLS, ACU BILLS AND & RUPEE EXPORT BILLS

PURCHASED NOT UNDER LC

This product comprises of two distinct stages.

In the first stage, the bank receives the export documents. The bank

reviews the export documents and the availability of credit limit to the

drawer to purchase the export documents. Once the adequacy of

credit limit is established, the bank purchases the documents from the

drawer and credits the drawer's account with the appropriate amount.

The second stage pertains to forwarding the documents for collection

to the collecting bank abroad. On realization of export bill proceeds the

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transaction is closed forever. If the purchased bill is returned then the

amount is recovered from the drawer.

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CASH MANAGEMENT SYSTEM

Cash management system refers to the ways and means of conserving cash. For this

purpose it is important to understand what float means.

The cash balance shown by a firm on its books is called the book balance whereas the

balance shown in its bank account is called the collected balance. The difference between

the two above-mentioned balances is called float. Again there are two types of floats:

Disbursement float and collection float. Cheques issued by a firm create disbursement

float. On the other hand cheques received by a firm lead to collection float. The net float

is the sum of disbursement float and collection float. It is simply the difference between

the firm's available balance and its book balance. Since, what matters is the available

balance, an attempt is made to maximize net float. This means a firm should strive to

speed up collections and delay disbursements.

SPEEDING UP COLLECTIONS:

The collection time comprises mailing time, cheque processing delay, and the bank's

availability delay. When a company receives payments through cheques that arrive by

mail, all the three components of collection time are relevant. To speed up collection,companies often use lockboxes and concentration banking which are essentially systems

for expeditious decentralized collection.

LOCK BOXES:

Under a lock box system, customers are advised to mail their payments to special post

office boxes called lockboxes, which are attended to by local collecting banks, instead of

sending them to corporate headquarters. The local bank collects the cheques from the

lock box once or more a day, deposits the cheques directly into the local bank account of

the firm, and furnishes details to the firm.

Thus the lock box system cuts down the mailing time, reduces processing time and

shortens the availability delay because the cheques are typically drawn on local banks.

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CONCENTRATION BANKING:

In this system, the company asks its customers in a particular area to send payments to a

local branch office rather than to the corporate headquarters. The cheques received by

local branch office are deposited for collection into a local bank account. With the vast

network of branches set up by banks, regional /local collection centers can be easily

established. Concentration banking can be combined with the lock box arrangement to

ensure that the funds are pooled centrally as quickly as possible.

DELAYING DISBURSEMENTS:

Just as a firm can increase its net float by speeding up collections, it can do so by slowing

down disbursements. A common temptation is to increase the mail time, which generally

provides only short-term benefits. While maximizing disbursement float is a questionable

practice, a firm can still conserve its cash resources by properly controlling its payments.

The following may be done in this respect:

Ensure that payments are made only when they fall due and not early

Centralize disbursements. This helps in consolidating funds at the head office,

scheduling payments more effectively, reducing unproductive cash balances at

regional/local offices, and investing funds more productively.

Arrange with suppliers to set the due dates of their bills to match with company's

receipts. Synchronization of cash outflows with cash inflows helps a company to get

greater mileage from its cash resources.

OPTIONS FOR INVESTING SURPLUS FUNDS

Companies often have surplus funds for short periods of time before they are required for

capital expenditures, loan repayments, or some other purpose. These funds may be

deployed in a variety of ways. At one end of the spectrum is the term deposit (to be made

fro a minimum period of 15 days) in a bank, at the other end of the spectrum is the

investment in equity shares, which can produce highly volatile returns. In between lie

several avenues like units, public sector bonds, treasury bills, inter-corporate deposits,

and bill discounting.

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Following are some options through which firms generally deploy surplus funds.

Term deposits with banks:

Banks accept term deposits for periods ranging from 15 days to 5 years. The interest rate

on term deposits varies currently from 5 percent to8.5 percent per annum. The interest

rate rises sharply as the period of deposit increases from 30 days to 1-year deposit.

Mutual Fund Schemes:

A variety of schemes are offered by mutual funds. Based on the investment policy, the

mutual fund schemes may be broadly classified as follows:

Equity schemes the corpus of an equity scheme is invested substantially (80-95%) in

equity or equity related instruments. The balance may be in debt instruments.

Balanced schemes A balanced scheme, as its name suggests, invests its corpus across

two broad asset classes, i.e. equity and debt in a more or less balanced manner.

Debt schemes A debt scheme invests its corpus primarily in debt instruments. Some debt

schemes may have a small exposure to equities.

For investing short term surpluses perhaps the most popular schemes are debt schemes

because of their low or nil exposure to equities.

Ready forwards:

A commercial bank or some other organization may do a ready forward deal with a

company interested in deploying surplus funds on a short-term basis. Under this

arrangement, the bank sells and repurchases the same securities at prices determined

before hand. Hence, the name ready forward. Ready forwards are permitted only in

certain securities. The company earns a return in the form of a price difference and not in

the form of an interest income.

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Treasury bills:

Treasury bills represent short-term obligations of the government, which have maturities

like 91 days, 182 days and 364 days. They do not carry an explicit interest rate. They are

instead sold at a discount and redeemed at par value. Hence the implicit interest rate is a

function of the size of the discount and the period of maturity.

Commercial paper:

Commercial paper represents short term unsecured promissory notes issued by firms that

are generally considered financially strong. Commercial paper usually has a maturity

period of 90 or 180 days. It is sold at a discount and redeemed at par. Hence the implicit

rate is a function of the size of discount and the period of maturity. Commercial paper is

either directly placed with investors or sold through dealers. Commercial paper does not

presently have a well-developed secondary market in India.

Inter-Corporate Deposits:

A deposit made by one company with another; normally fro a period of up to six months

is referred to as inter-corporate deposit. Such deposits are usually of three types:

Call Deposits In theory, a call deposit is withdrawable by the lender on giving a

days notice. In practice, however, the lender has to wait for at least three days. Three month Deposits More popular in practice, these deposits are taken by

borrowers to tide over a short-term cash inadequacy.

Six month DepositsNormally, lending companies do not extend deposits beyond

this time frame. Such deposits are usually made with first class borrowers.

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SURVEY

PURPOSE:

To study the banking requirements (especially trade finance instruments and

additional services) of the small and medium scale industries.

To know the services availed by the companies from their present banks.

To assess their further requirements from the banks.

To find out the level of satisfaction from their present bank.

METHODOLOGY:

Preparation of questionnaire: After having a healthy discussion with our projectguide Mr. K. subramanian and Mr. Paras Shah we prepared the questionnaire. The

copy of the same is attached on the next page.

Database collection: The industries involved in export and import formed the

database of industries to be surveyed. It is worth mentioning here that though the

industries involved in export and import were considered, many companies were

discovered during the survey which had their export and import license but were

not conducting export or import.

Selection of area: The region for conducting the survey was selected on the basis

of proximity of the idbi bankbranch Baroda. Thus, three regions were selected:

1. GIDC Makarpura

2. GIDC Bharuch

3. GIDC Ankleshwar

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QUESTIONNAIRE FORMAT

1.Name of the Company: ......................................................................................................2.Name of the concern person/designation: .........................................................................

3.Address:..............................................................................................................................

Ph. No. ....................... Fax No. .................... E-mail ID: .........................................

4. Nature of Business: ...........................................................................................................

5.Type of Organization

Flat ( ) Traditional ( )

6.Turnover of Company: ............................

7.Type Of Business

Credit ( ) Non-Credit ( )

8.If on the credit basis, type of credit: ........................................................................

Segmentation

Inland ( ) If Yes LCBD ( ) CBD ( ) Other: ....................

Foreign ( ) If Yes LC ( ) Non LC ( ) Other: ....................

9.Is the company is in Export/Import Business: Yes( ) No ( )

If Yes,

a) Volume of Export/Import

Export: ..........................

Import: ..........................

Currencies:

USD ( ) EUR ( ) GBP ( ) JPY ( ) AUD ( ) CAD ( ) CHF ( )

b) Which of the following Hedging tool Company uses to hedge the risk arising out

Of foreign currency exposure.

Forward Contract ( ) Options ( ) None ( )

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10.Present Banker of Company/Group:

Public Sector Banks ( ) Private Sector Banks ( )

1).................................................... 1)................................................

2).................................................... 2)................................................

3).................................................... 3)................................................

4).................................................... 4)................................................

11.Are you satisfied with the services of your present banker Yes ( ) No ( )

12.What are the additional services you expect from your present banker

1)......................................................

2)......................................................

3)......................................................

4)......................................................

13.Handling Of Finance

Local Level ( ) Mumbai ( ) Other: ..................................

14. Yearly outgo on account of

Direct Taxes: Rs. ........................ Lac. Gujarat Sales Tax: Rs. ........................ Lac.

15. Are you aware of the IDBI Bank Services, which includes:

Current Account & Deposits.Collections & disbursement Solutions:

Outstation Cheque collection.

Dividend/Interest payment Solutions.

Corporate Payroll Account

Bulk Cheque printing. Yes ( ) No ( )

Debt servicing Yes ( ) No ( )

e-banking Solutions:

Online account status Information

Account statements through e-mail. Yes ( ) No ( )

Government Business:

Direct Taxes (CBDT)

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Gujarat State Taxes. Yes ( ) No ( )

FIELD WORK

ANKLESHWAR REGION:Ankleshwar region has a belt of wide variety and varied sizes of industries. For the

market survey purpose we restricted to the survey of industries in which the handling of

finance was done at the local level. In the specified time we could survey 93 industries,

which mainly included those manufacturing chemicals, colour, chemical pulp, machinery

etc. The over all market analysis of Ankleshwar region on the basis of the questionnaire

is given below:

In Ankleshwar majority of the companies

are small and medium scale. Many

companies are having turnover between 1-2

crore. The companies having turnover

above 10 crore are Lupin, Sun Pharma,

Amal Ltd, Elam Pharma etc.

TURNOVER OF THE COMPANIES

68%

14%

51%

1%

2%

10%

1-2Crore

2-4Crore

4-6Crore

6-8Crore

8-10Crore

Above 10

Majority of the firms in Ankleshwar area

are sole proprietor and partnership. Out of

the 93 Companies visited, 81 companies

have a policy of giving credit to their

customers. This is mainly because most of

the firms are quite old and have developed

such relations with their customers.

TYPE OF BUSINESS

81

12

CREDIT

NON-CREDIT

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Majority of the credit is extended to the

customers on the basis of relation. This is

because of the above-mentioned fact. It has

been observed that apart from relation,

priority is also given to 30 days, 60 days

and credit through LC. Co. mfg. heavy

machines and tools take adv. payment

generally; this is to avoid rejection of order

at a later stage and to have enough money

for purchasing inventories.

TYPE OF CREDIT

3.70%

55.56%13.58%

12.35%

2.17%1.23%11.11%

Advance

Relation

30 Days

60 Days

90 Days

120 Days

LC

Majority of the companies in Ankleshwar

are involved in merchant export. This is

because there are many companies

manufacturing similar products, due to

which the companies prefer to sell their

products in bulk through merchant

exporters. The companies involved in export

business are manufacturers of colour

pigments and chemicals.

Type of Business

30.10%

3.24%

49.46%

11.83%5.38%

Only ExportOnly ImportMerchant exportExport-ImportOnly Domestic

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Majority of the companies are having

Public sector banks as their banker. The

reason behind this is they have developed

long-term relations with the banks

and proximity of the banks. The

companies using private sector banks are

generally those companies who have their

head office in Mumbai or any other metro

city.

Present Bank

56%

12%

32%

Only Public

Only Private

Both Sectors

87% of the companies are satisfied withtheir present banker, as it is clear from the

chart. The major reasons behind

dissatisfaction are slow cheque

processing, hidden charges, and no special

preference for regular customer.

SATISFACTION WITH THE PRESENT

BANK

87.00%

13.00%

Satisfied

Dissatisfied

Ankleshwar belt is full of medium and

large-scale companies having their head

office in Mumbai and other cities. For the

purpose of our survey, we have short-

listed the companies, which handle their

finance from local level.

HANDLING OF FINANCE

82.00%

10.00%6.00%

Local Level

Mumbai

Other

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As we can see from the chart there is

almost 50% of the industries, which prefer

the additional services. These additional

facilities mainly include out station

cheque collection, e-banking solution, and

tax payment options. It has been observed

that companies, which do not prefer

additional services, are small scale

involving simple transaction.

PREFERENCE FOR ADDITIONAL

SERVICES

49%51%

Prefer

Do not prefer

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FINDINGS AND RECOMMENDATIONS

As far as Ankleshwar industrial belt is concerned, it is far more prospective than

Bharuch. Initially, the companies were selected on the basis of their export and import

activities but in Ankleshwar, there are a large number of companies who have their head

offices in Mumbai and other metros so it was decided to make a list of those companies

who have their head office at the local level.

Out of the 93 industries visited, majority of the companies are small and medium

scale industries.

In Ankleshwar, the co-operative banks are more popular than the private sector

banks. Though the public sector banks play a vital role, the companies also prefer

the co-operative banks such as Navsarjan co-operative bank, Ankleshwar

udyognagar bank etc. There are a few private sector banks like ICICI and HDFC

bank but they are less popular as compared to the co-operative banks. This is

because the co-operative banks carry out their operations mainly on the basis of

relations as well as provide many services free of charge.

In Ankleshwar, there are varieties of industries such as chemicals, colour

pigments, heavy machines and tools, Engineering, cookware etc. These wide

varieties of industries induce number of banking transactions. The main

advantage of the Ankleshwar area is that there are industries of many kinds;

hence, it is very much possible to pitch into some or the other area of functioning

of a particular industry.

It can be observed from the above charts that majority of the companies are

satisfied with the regular services such as credit limits, current account etc. but

they showed keen interest in getting additional services. It has been observed during the survey that many company owners are not even

aware about these services. Moreover they are very rigid and want to restrict

themselves to the traditional services from the banks.

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So our first step should be to make the companies aware of the various services,

which they can avail from the bank. This can be done by holding meetings with

various company owners and explain them the different services, whether they are

free of cost or involve certain charge. We can also create their interest by

explaining how these services are beneficial to them in saving time and money.

Many company owners are interested in the different schemes of the banks and

they are interested in exploring something new.

In short the scenario is more prospective than Bharuch. This can be proved by the

observation that companies in Ankleshwar are interested in various services like

outstation cheque collection, e-banking solutions and tax payment options.

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BHARUCH REGION

Bharuch has a very limited set of Industries, which have potential for development.

Moreover, there are very few industries, which are developed. In the past, there were a

few industries which had developed but due to the anti pollution movement, many of

them have been closed. Because of this, we could visit only a few companies, which we

found lucrative. The analysis of the same is as follows:

The companies in Bharuch are small scale

i.e. having turnover of 1-2 crore. In

addition to that few companies are having

turnover of 8-10 crore and above 10 crore.

The company having turnover above 10

crore are Blue star and Patson

Transformers.

TURNOVER OF THE COMPANIES

67%5%

5%

0%

14%

9%

1-2Crore

2-4Crore

4-6Crore

6-8Crore

8-10Crore

Above 10

Majority of the firms in Bharuch are sole

proprietorship. It has been observed that

majority of the owners had multiple

businesses so they give credit to excel in all

lines of business.

TYPE OF BUSINESS

20

3

CREDIT

NON-CREDIT

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It is an observed fact that due to

multiplicity of business line, a supplier for

one business is customer of another

business. Because of this, they have to give

credit on the basis of their relations with

the parties.

TYPE OF CREDIT

0

65%

30%

0005%

Advance

Relation

30 Days

60 Days

90 Days

120 Days

LC

Majority of the companies in Bharuch are

involved in domestic business. The main

reason behind this is the majority of

companies are small scale and they are

involved in multiple businesses so they

find enough customers in the local market.

Hence 82.61% companies are doing only

domestic business. Companies involve in

import are manufacturer of transformers,

equipment and chemicals.

TYPE OF BUSINESS

4.34%13.04%

0

82.61%

Only Export

Only Import

Export-Import

Only Domestic

Almost all companies in Bharuch are

satisfied with their present bank. The

reason behind this is that companies are

small scale and require less facility from

the banks. These services they are getting

from their present bank due to their long-

term relation. Apart from that developing

companies requiring additional facilities

avail it from private sector banks.


BANK

91%

9%

Satisfied

Dissatisfied

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Majority of the companies in Bharuch are

availing the services of Public sector banks.

The reason behind this is they have

developed a rapport with the public sector

banks. Moreover over there are very few

private sector banks which have their

branch in Bharuch. So the companies are

reluctant to rely only on private sector

banks hence the composition of both the

sectors is 40%.

PRESENT BANK

52%

8%

40%

Only Public

Only Private

Both Sectors

In Bharuch, 87% of the companies operate

at local level due to their small size. 13% of

the companies have their head office in

Mumbai and other cities.

HANDLING OF FINANCE

87%

9%4%

Local Level

Mumbai

Other

As mentioned earlier, many of the

companies in Bharuch are sick units, some

of them have been shut down and some of

them are involved in the operations which

are very simple and do not require

additional services. The 60% no preference

is due to the indifference on the part of the

company owners.


SERVICES

40%

60%

Prefer

Do not prefer

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During the survey, it has been observed that Bharuch has a very small belt of

industries. Moreover, many small and medium scale units have become sick. We alsocame to know that many units had to be shut down due to the anti pollution

movement few years back.

Companies in Bharuch are not very well developed and the working is done

on small scale and through traditional way. Thus, their requirement of various

services from banks is very less.

Majority of the companies prefer to carry out their transactions with the public

sector banks. The main reasons behind this are (1) their long-term relations

with these banks (2) they find charges of some facilities comparatively less (3)

since the company person goes to the bank everyday, they do not prefer to get

different works done through different banks rather they believe in getting all

work done through single bank.

A major observation is that industrial houses in Bharuch are very resistant to

change to private sector banks because of the feeling of insecurity.

Majority of the companies are satisfied with the present bank because their

work is done on the basis of their relations with the banks, which they claim

are very good hence they get their work done anyhow.

A negligible portion of companies, which is dissatisfied with their present

banks, is found to be those companies, which deal with private banks. This

itself shows that Industrial houses in Bharuch are not comfortable with the

private banks.

It is thus recommended, on the basis of the above facts and findings, to try to

first change the attitude of the industries in Bharuch and then pitch into the

Bharuch industrial zone.

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The attitude is although not very easy to change but it can be changed by

explaining them the services offered by the banks through holding

presentations or meetings with the company officials. Because many of the

company owners are not aware of the various facilities availed by the banks

and how it can save their time and money.

The services can also be offered by aggressively marketing the different

financial services suitable for the companies in Bharuch.

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The companies generally extend credit on

the basis of relation with the clients,

however 20.63% of the companies also

prefer LC. These companies are the

companies involved in major exports and

those dealing with new customers.

TYPE OF CREDIT

13%

36%

11%

10%

8%

2%

20%Advance

Relation

30 Days

60 Days

90 Days

120 DaysLC

Majority of the companies in the Baroda

are involved in domestic business, doing

very less export i.e. once in a year or so.

TYPE OF BUSINESS

46%

3%9%

42%

Only Export

Only Import

Export-Import

Only Domestic

Majority of the companies in Baroda have

put their trust in Public sector banks. These

banks include Makarpura co-operative

bank, Bank of Baroda and State bank of

India. The main reasons behind this fact are

proximity to the companies and long-term

relations with the banks. Another major

reason for this is that many firms carry out

very less transactions with the banks. The

companies using only private sector banks

generally prefer ICICI and ABN Amro

banks. The companies using both the

sectors are the most satisfied ones because

they get their work done through either of

the banks

PRESENT BANK

70%

18%

12%Only Public

Only Private

Both Sectors

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93% of the companies are satisfied with

their present banker. It has been observed

that the companies dissatisfied with the

present bank are those companies, which

are using the services of public sector

banks. The main reason behind

dissatisfaction are slow processing and

stringent credit norms


BANK

93%

7%

Satisfied

Dissatisfied

In Baroda the handling of finance of 88%companies is done at local level because

most of the companies are small scale and

do not have any other unit.10% of the

companies have their head offices in

Mumbai.

HANDLING OF FINANCE

88%

10% 2%

Local Level

Mumbai

Other

As it can be seen from the chart many

companies prefer additional services. They

are specially interested in services like

outstation cheque collection and tax

payment solutions. Some companies dont

prefer additional services because they find

it convenient to personally go to the bank,as the bank is not too far.


SERVICES

47%53%

Prefer

Do not prefer

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In Baroda, out of many industrial areas the Makarpura GIDC was selected for

survey purpose. The companies were selected on the basis of import-export

license they have. Majority of the companies in Makarpura are small and medium

scale. Most of them are in the range of 50lacs to 4 or 5 crore. Few companies like

Jayant oil mills, Bombardier transportation and Almonard ltd., which have turn

over above 50crores.

Majority of the companies in Baroda are involve in the business of manufacturing

Engineering parts, heavy machinery, chemicals etc. generally the companies find

their business at local level so they dont export but there are still companies

depend mainly on export business.

There are many units, which manufacture goods for supplying to the big

companies like ABB, FAG etc. majority companies depend on their relation for

credit business, very few of them are using LC or they use LC when customer is

new.

As there are many public as well as private sector banks in Baroda there is tough

competition among them to grab and sustain its position in the market. The

companies are mainly approaching to the banks, which are in that area like

Makarpura Co-Op. bank, Bank of Baroda and State Bank of India. This is to save

the time and get their transaction done faster.

Many companies have established long term relations with the banks right from

the incorporation of the company. So it is easier for them to get their work done.

In addition to this many companies in spite of having CC limit, do not use it

because mainly their transactions are simple and generally involve cash. The

companies which are taking facilities from private sector banks now days they are

dealing with ICICI and ABN Amro.

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In spite of all these facts there is a bright picture for the bank to approach these

companies. They can provide them various facilities like out station cheque

collection, e-banking solutions and mainly tax payment solutions. Many

companies showed interest in these facilities.

We can approach few companies for LC and bill discounting; these are the

companies, which are suppliers to the big players.

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LEARNING FROM THE PROJECT

This 8 weeks training period has certainly added lot of depth to my shallow

knowledge of the banking sector as well as the working of the small and medium

scale industries. The research work undertaken by me at three different regions gave

me a clear picture of the mentality and attitude of the industry owners in each region.

I became aware of the fact that the attitude of the people to a great extent depends on

the environment they work in. For example, the attitude of the industries in Baroda

was somewhat positive towards our survey whereas the attitude towards the same

survey in Bharuch was totally opposite. Thus, the outcome of the survey can be very

well judged by the attitude of the people working in a particular work environment.

Another major value addition to my knowledge lies in the fact that proper selection of

criteria is a must for any survey to be worthwhile. Keeping this in mind, for our

survey in Ankleshwar we selected the companies, which handled their finance at the

local level because Ankleshwar has a large number of companies whose finance is

handled from head offices in Mumbai and other metros. Similarly, in Baroda,

companies were selected on the basis of companies involved in export and import so

that it is possible for the bank to pitch into the LC segment as quickly as possible.

Finally, this project has given me tremendous level of self-confidence, the spirit to

work in teams and the ability to manage things independently. Moreover, it has

helped me groom myself in to a professional, which is a pre-requisite in this

competitive world.

It is good to learn from experience as long as it is others. The experience of the

highly qualified staff of IDBI has taught me the art of dealing with people and the

organization of the goal to be achieved. All this has certainly been useful to me

during the project and will always be useful in achieving many more endeavors in

future.

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CONCLUSION

idbi bankis a renowned bank all over India and Abroad also. The bank has taken a very

wise step to survey the three areas and study the banking requirements of the companies

and their satisfaction with the present bank.

There are so many private sector banks coming up but very few are able to provide

services that are up to the expectations of the industries. If this will continue, a time will

come when the banking sector will saturate and there would be no scope for further

development.

The findings and recommendations of the survey clearly reveal that there is a need of

proper understanding of the services on the part of the industries in all the three areas.

This effort on the part of idbi bankto keep customers at the centre and understand their

needs will surely prove as a bulls-eye in the progress of the bank as well the banking

sector as a whole.

With proper referencing, monitoring and examination of the weak areas of each zone, the

bank can pitch into the prospective sectors of each region and slowly and gradually

capture the market as a whole. idbi bank already has the policy of providing quality

service and maintain only as many clients as it can manage. If it works on this policy for

these three regions also, it is bound to achieve new heights.

This positive note concludes the report. May this prove to be useful to the bank for

achieving new heights. Wishing all the very best to the bank and its extremely dedicatedstaff.

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BIBLIOGRAPHY

Financial Management, By: Prassanna Chandra

Financial Management, By: I. M. Pandey

Company Database

www.google.com

www.tradeindia.com

www.indiabusinessdirectory.com

www.idbi.com

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summer training mba1idbi bank

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