Indus School of Business Management Isbm: Axis Bank LTD., Pune Main Branch

INDUS SCHOOL OF BUSINESS
MANAGEMENT
Approved by AICTE, Ministry of HRD, Govt. of India
ISBM
“SYNOPSIS- APPRAISAL & DISBURSEMENT PROCEDURE OF

CONSUMER LENDING BUSINESS @ AXIS BANK’’
AXIS BANK LTD., PUNE MAIN BRANCH

A PROJECT REPORT SUBMITTED AS A PART OF THE POST-GRADUATION DIPLOMA
IN MANAGEMENT (PGDM) PROGRAM
BY
Nitin Kumar
Regd. No. 2011/ISBM/PGDM/007
Majors: Finance Minors: Marketing
Batch- 2011-13
UNDER THE GUIDANCE OF:

Mr. Vikas Bhagwat Mr. Sandeep Patil
VP & Branch Head Deputy Manager- ARM
Pune Main Branch Pune Main Branch
MOB: +91-8806900371 & TEL: 020-66295136
MOB: +91-9923960374
Sandeep2.Patil@axisbank.com
AXIS BANK Ltd., Pune September 30, 2012
Company Certificate
2 INDUS SCHOOL OF BUSINESS MANAGEMENT (ISBM)- 2011/ISBM/PGDM/007

Project Details
Title of the Project : SYNOPSIS- APPRAISAL & DISBURSEMENT
PROCEDURE OF CONSUMER LENDING
BUSINESS @ AXIS BANK
Area of the Project : Axis Bank Ltd.,

Pune Main Branch,
Sterling Plaza,
1262/B, J M Road Deccan Gymkhana,
Pune - 411004
Organizational Details
Name of the organization : Axis Bank Ltd.
Telephone Number : 020-66295139
VP & Branch Head : Mr. Vikas Bhagwat
Head of the Operation Department

Name : Mrs. Aditi Shrivastava
Designation : Senior Manager & Operation Head
Telephone Number : 1800-103-5577
Mobile Number : +91-8806900372
Email Address : Aditi.Shrivastava@axisbank.com

ACKNOWLEGDEMENT
I would like to express a deep sense of gratitude to Axis Bank Ltd., Pune
Main Branch for extending me the opportunity for a company project
study and providing all the necessary resources and expertise for its
successful completion.
To begin with, I am very grateful to my Project Mentor, Mr. Vikas
Bhagwat (Vice-President & Branch Head) & Mr. Sandeep Patil (Deputy
Manager-ARM) whose constant mentoring, encouragement, cooperation,
guideline and teaching helped me to complete this project successfully.
They made me work professionally and think in terms of a manager all the
time by exposing me to different cases in the field. The credit also goes to
Mrs. Aditi Shrivastava (Senior Manager & Operation Head) and her
entire team of Retail Banking as well as Sales & Securities Executives who
gave me excellent guidance and support. It was a great learning
experience to have worked with them.
Their continuous support and cooperation along with their valuable in
hand experience about Retail Banking and Retail Assets provided me with
the conceptual understanding and practical approach needed to work
efficiently for this project.
Last, but not the least, I would take the opportunity to thank Mr. Sumit
Gupta (Asst. Manager) who has arranged such a golden opportunity for
me to work with such a dynamic organization for eight week (1st June-31st
July, 2012) and also for his intellectual stimulation and moral support
throughout my project.
Again, I sincerely thank all of them.
Nitin Kumar

Executive Summary
The tile of the project is “Synopsis- Appraisal & Disbursement Procedure of Consumer
Lending Business @ Axis Bank‟‟.
The Axis Bank is engaged in all Banking services. The project is carried out in the Retail
Banking Division of the Bank. The study was conducted to identify the lending system &
Appraisal Technique used by Axis Bank ltd. For this, a detailed study of different Retail Loan
Products as well as a part of working capital financing has been taken into consideration.
In this Project Report, I have taken a Case Study to understand the appraisal technique of
Working Capital Financing. In that I have selected a Small Enterprise which is a borrower to the
Bank and analyzed its Financial Statements to get familiar with the appraisal system of Working
Capital Financing followed by the Bank. Then, I approached to customer with the Questionnaire
to know how much they are aware about the different Retail Loan Products of Axis Bank, which
Bank offered to them. Customer perceptions also place an important role in loan product lending
and its interest rates. To find out that I met 100 customer of Axis Bank to find out their level of
product awareness and product demand and also why they mostly offer Axis Bank for loan
products. The Data collected was then analyzed with the help of statistical tools. The finding and
suggestions of my study was then forwarded to the concerned person.
OBJECTIVES OF THE STUDY

Project study which is conducted by me for the last two months is not only a formality for the
fulfillment of the two year full time Post Graduate Diploma in Business Management. But being
a management student I tried my best to extract best of the information from the department. The
objectives have been classified by me in this project form personal to professional, but here I am
not disclosing my personal objectives which have been achieved by me while doing the project.
Only professional objectives which are being covered by me in this project are as follow:-
 To study the fundamental of the Retail loans lending & working Capital lending.
 To study the policies, practices & procedures in credit appraisal of Retail loans of Axis
Bank Ltd.
 To know the appraisal Techniques.
 To know about NPA‟s and Write-off concepts.
 Carryout customer survey to find out the demanded Retail loan product and to give
suggestion to Bank to increase awareness about its Retail loan products.
 To study procedure adopted in evaluating credit proposal of working capital by using

case analysis.
SCOPE OF THE STUDY

The study involves the policies, practices & procedures in the appraisal process of Axis Bank till
and after disbursement with regards to Retail Banking.
The study seeks to collect the information from the existing customer about their Retail loan
product awareness which is offered by Bank to them and satisfaction level of the service which is
provided by the Bank. The scope is limited to the customer of Pune Branch.
SOURCES OF PRIMARY AND SECONDARY DATA

For the purpose of project, Data is very much required which works as a food for process which
will ultimately give output in the form of information. So before mentioning the sources of data
for the project I would like to mention that what type of data I have collected for the purpose of
project and what it is exactly.
a. Primary Data:
Primary data is basically the live data which I have collected from field while talking to
customers and I show them list of question for which I require their responses. A main source for
the primary data for the project was my face-to-face conversation with the customers which
walks in branch & my medium of interaction was questionnaires. Sometimes it was filled by me
on the basis of discussion with the walk-in customers.
b. Secondary Data:
Secondary data is for the base of the project which has been collected from internet, intranet of
Axis Bank, magazines, books and newspaper.
NEED OF THE STUDY

a. Credit- The Life Line of the Business
Of all the elements that go into a business, credit is perhaps the most crucial. The best of the
plans can come to naught if adequate finance is not available at the right time. Entrepreneurs
need credit support not only for running the enterprise & operational requirements but also for
diversification, modernization/ up gradation of facilities, capacity, expansion etc. Banking and
financial system should ensure the supply of timely and adequate amount of credit to the
entrepreneurs in order to develop the economy.

b. Development in Banking Systems

Given the robust growth in the economy, Banks can expect to see rapid increase in
disbursements; this challenges the credit appraisal systems followed by Banks. Adoption of
global best practices under these circumstances will be timely and credit positive.
The Indian Banking system has seen structural improvement during the last few years, including
improved solvency, better risk management systems and greater access to capital. However, the
greater complexities of the corporate and consumer lending business, as well as the growing
competition among Indian Banks, reinforces the need for stronger risk assessment systems. A
well-developed and implemented credit appraisal system will results in:
 Growth in the volume of credit disbursement.
 Reduce in the non-performing assets of the Bank and improves the quality of asset
portfolio.
 Improves the bottom line of the Banks,
 Ensures timely and adequate supply of credit to the industry.
Hence, this study is carried out to understand the lending procedure of different loans and to
know how much customers are aware about the different Retail loan product and demanded
product of Retail loan.
LIMITATIONS OF THE STUDY

 This study is mostly limited to Retail loans divisions and partly to Working capital
financing.
 The information related to credit appraisal system which is very confidential thus policies
are taken to the extent only.
 Bank is not interested in providing crucial information about their borrowers as it is
secretive part and hence name of the Customer kept secretive.
 This study is limited to advanced lend by Axis Bank Ltd., J.M. Road Branch.
 This Project Report contains policies of- Personal Loan, Auto Loan (Car Loan), Home
Loan, Loan against Property & Loan against Shares.
 Since, Axis Bank offers high Rate of Interest on Educational loan and chances of NPA
are also high. Thus, this project does not contain Educational Loan Policies & Procedure.

As, I didn‟t have its information about it from the Bank and Bank is also not interested in
providing Educational loan to its customer.
 Commercial Vehicle and Construction Equipment financing are very new concept for
Bank and introduced during my training period. They are also not part of this study.
 In Depth Analyses could not be carried out because shorter time duration.
 Questionnaire has a set of 11 questions.
 Accuracy of the study of respondents is limited due to the possible bias of the
respondents.

LIST OF FIGURES
Fig. No. TITLE OF THE FIGURES Pg. No.
1.1 Banking System in India 20

1.2 Performance of Public, Private And Foreign Banks 21
1.3 Net Income And CAGR Of Public And Private Banks 22
1.4 ROA & CAR of Public And Private Banks 23
1.5 Organizational Structure of Axis Bank Ltd. 25
1.6 Retail Liabilities of Axis Bank Ltd. 36
1.7 Retail Assets of Axis Bank Ltd. 37
1.8 Shares of Retail Loans of Axis Bank Ltd. 37
1.9 Classification of Loans/ Advances 39
1.10 Classification of Home Loan Under Hl Policy 53
1.11 Working Capital Cycle 86
1.12 Credit Appraisal Process of Working Capital 92
1.13 Customer Offering/ Preferring Various Retail Loan Products 106
1.14 Customer Will Avail Loan 107
1.15 Service Rating of Axis Bank by Customers 108

TABLE OF CONTENTS
Pg. No.
Company Certificate 2
Project Details 3
Acknowledgement 4
Executive Summary 5-8
List of Figures 9
CHAPTER – I
1.1 Review of Related Literature 12
CHAPTER – II
2.1 Banking Sectors in India 17
2.2 Axis Bank Ltd. 24
2.3 An Overview on Retail Banking & Corporate Credit of Axis 35
CHAPTER – III
3.1 Loans/ Bank Lending 39
3.2 Lending Objectives & Principles 42
CHAPTER – IV
4.1 Personal Loan 44
4.2 Auto Loans (Car Loans) 49
4.3 Housing Loans (Power Home) 53
4.4 Loan against Property 60
4.5 Loan Against Demat Shares 63

Chapter – V
5.1 Role & Functions of Retail Assets Center (RAC) 65
5.2 Procedure of Retail loans Lending 69
5.3 Tools & Techniques Used in Retail Loan Appraisals 78
5.4 Priority Sector Advances 80
5.5 Non-Performing Assets (NPA) 82
CHAPTER – VI
6.1 Working Capital 85
6.2 Methods of Assessment of Working Capital Needs 89
6.3 Appraisal of Credit Proposal of Working Capital 92
6.4 Credit Appraisal Tools for Working Capital 95
6.5 Case Study Analysis
A. Case Study 1 98
B. Case Study 2 101
CHAPTER – VII
7.1 Customer Survey Analysis 106
7.2 Conclusion 110
7.3 Recommendation 112
7.4 Bibliography 113
ANNEXURES
Annexure I - Customer Surveyed Form 114
Annexure II - Tier wise Citi‟s for Home Loan 116
Annexure III - Guidelines on formats to be used for legal & Technical Report 117
Annexure IV - Know Your Customer (KYC) Form 121
Annexure V - Standards for Financial Norms 124

CHAPTER- I
1.1 REVIEW OF RELATED LITERATURE
The purpose of this study was to find out the Policies, Practices & Procedures in credit appraisal
of Axis Bank Ltd., Pune. This chapter presents the review of related research of the components
credit appraisal.
Banks manage a wide range of Assets, Liabilities and Equity Capital that support their
Operations & Activities. Proper risk management is therefore a vital and integral part of effective
Bank Operation. Widely cited risks include Credit Risk, Interest Risk, Liquidity Risk and
Operation Risk. All these risks are derived from Banks‟ most fundamental and traditional roles
in lending and borrowing. Among those risks, Credit Risk, which is associated with the potential
variability of the stream of cash flows from an asset, is one of the most crucial ones, as it often
appointed as the cause of the Bank failure. To perfect its Credit Risk Assessment, Monitoring
and Management, Bank uses a variety of methods and tools. In the past 20 years, Banks have
been adopting and improving Automatic Credit Scoring system between 1 to 10 so as to evaluate
certain types of loans more objectively, accurately and efficiently. Recently, the industry has
started implementing Credit Rating as a mechanism to better manage its Credit Risk and to
improve its overall portfolio performance.
Credit Risk Rating is a summary indicator of risk for Banks‟ individual credit exposures and is
generally assigned at the time of each underwriting or credit approval and reassessed during the
credit review process. It functions as the barometer for the Banks to measure their credit risk
exposure to each individual customer, either in isolation or as part of their loan portfolio. The
Rating allows Banks to measure the relevant default probabilities at different rating levels more
accurately. It helps Banks to reduce their risk exposure and to improve their profitability by
reducing the number of potential default loans as well as minimizing the cost associated with
Bad Debt Recovery.
Although the major objective of Credit Rating is to determine the ability and willingness of a
borrower to pay at the agreed terms, the rating does a bit more than just classifying the borrowers
into- “Pass” to “fail” categories.

The most important benefits for Banks in using the rating system to assess their loans include:
- Identify and decline potential risky applicants;
- Reduce losses due to defaults;
- Increase liquidity;
- Maximize the profit;
- Improve monitoring process;
- Reduce monitoring cost;
- Minimize Administrative costs with Debt collection;
- Help Banks to achieve their objectives;
- Allow allocation of resources where they are more productive; &
- Avoid loan concentration.
RBI suggest that in designing a Credit Rating System, a Bank should consider numerous factors,
including cost, efficiency of information gathering, consistency of rating produced, staff
incentives, nature of a Bank‟s business, and uses to be made of the internal ratings. They notice
that the proportion used to distinguish among risker pass credits trend to differ with the business
mix of a Bank. A rating system with more rating categories is better than a system with just a
few categories.
Finer distinctions of risk, especially among riskier assets, can enhance a Bank‟s ability to analyze
its portfolio risk exposure. However, an Internal Rating System with larger number of grades is
costly to operate because of the extra work required to distinguish finer degrees of risk.
When assigning a loan applicant to a particular grade, Banks should analyze three different
categories of variables- Qualitative, Quantitative & Legal. The Quantitative analysis
concentrates mainly on Financial Analysis and is often based on firm‟s financial reports. The
four main quantities factors used in the assessment model include Net Income, Total Operating
Income, Total Equity Capital and Total Asset Values. These factors allow the Bank to calculate a
variety of ratios including Return on Assets (ROA), Return on Equity (ROE) and Assets
Utilization (AU), etc. Once computed, these ratios would be compared with the internal Credit
Risk Rating system in the Banking Sector Industry Standards.
As for Qualitative Analysis, the principal concern will be the quality of a Borrower‟s
Management. A thorough review of a firm‟s competitiveness within its industry as well as the
expected growth of the industry is needed. Finally, legal analysis refers to the capacity to borrow.

This means that a Bank must make sure that a customer requesting a loan has the authority and
legal standing to sign a binding agreement. For instance, a Bank needs to check whether the
representatives from an Organization/ Individual asking for a loan has the power to sign the
Credit Agreement binding the organization and whether it gets the first claim on the collateral. In
case it is an individual asking for a loan, a Bank needs to know if he can be held legally liable for
the loan he is requesting.
The Rating Process almost always involves the exercise of human judgment because factors to
be considered in assigning a rating and the weights given to each factor can differ significantly
among the borrowers. Because of the high cost involved, in general, Banks produce Credit
Ratings for business and institutional loans only.
Credit Appraisal in the Market

Credit Appraisal is a technique by which a Banker or for that matter any financial agency
including financial institutions(FIs) estimate the soundness of a credit proposal or a project
appraisal from the point of view of Technical and Financial liability or feasibility.
Credit Appraisal
The decision to Sanction or Reject the proposal has to base on a careful analysis of various facts
and data presented by the borrower concerning him and the proposal as assessed by the
Relationship Manager. Such an objective and in-depth study of the information and data should
convince the Sanctioning Authority that the money lent to the borrower for the desired purpose
will be safe and it will be repaid with interest over the desired period, if assumption and terms
and conditions on which it is sanctioned, are fulfilled. Such an in-depth study is called Pre-
Sanction Credit Appraisal. It helps the approver to sanction the proposal.
Credit appraisal for an organization focuses on:
a. Borrower/ management appraisal.
b. Technical appraisal of the project.
c. Market appraisal determining the viability of the project.
d. Financial Appraisal determining the viability of the cash flows to meet the loan
repayment requirements.

Modern Approaches
The Modern Approaches for Credit Appraisal are statistical in nature. These approaches are more
objective as they are based on some statistical mode. One of the commonly used approaches is
Credit Scoring.
Traditionally Banks were using the Credit Scoring methods of analyzing the financial statement
of the applicants by which the Bank was able to evaluate the applicant‟s capacity to pay back the
loan. Though the applicant may be financially sound to pay, it was very difficult to identify
whether He/ She has the „willingness‟ to pay the loan.
When the demand for the consumer credits in Retail market is fast increasing, Bank must have a
system by which they are able to process the credit applicants professionally and at the same
time to identify the potential default risk of the borrower.
Most of Banks presently use Credit-Scoring model to evaluate the loan applications they receive
from consumers. Credit card providers, Mortgage lenders and other loan providers develop their
own internal Credit-Scoring models on Retail lending and use these models to evaluate their
applicants. With the introduction of Credit Scoring model in the Banks, often the customer can
phone in with a loan request and within the shortest possible time, Bank can convey their
decision calling back the customer.
Usually the Credit Scoring System are based on discriminant models or related techniques in
which variables are used jointly to establish a numerical score or ranking for each credit
applicant. If the applicant scare exceeds the prescribed and defined cutoff level, the loan
application is likely to be approved for Credit. If Credit Scoring is below the cutoff level, Credit
is likely to be denied.
Credit evaluation in using a Credit Scoring model

Basic concept of using such scoring models by the Banks are to identify the financial, economic
and motivation factors that separate Good loans from Bad loans by observing large group of
customers who had borrowers in the past. The same factors may hold in future also with certain
percentage of deviation. The underline assumptions may go wrong if abruptly there is change in
the economic and other enforcing factors. Because of this reason, Credit Scoring System are
frequently updated with the current events and revised with the identified current sensitive
predictors.

Working capital Assessment

Working capital refers to the funds invested in current assets, i.e. investment in stock, sundry
debtors, cash and other current assets. Business concerns will have some current liabilities like
trade creditors, bills payable, etc., which could be partially financing the amount, required for
current assets. Hence, the difference between the Current Assets and Current Liabilities is the
Working Capital Gap, which is to be financed by Bank Advances. Commercial Banks have been
lending Short-Term Advances to finance the working capital gap.
Working Capital Assessment is the process by which a Banker ascertains the Maximum
Permissible Bank Finance (MPBF) for working capital that can be provided to any customer who
requests a working capital that can be provided to any customer who requests a working capital
advances as per the prescribed norms and recommendation.
Retail Credit
Retail Credit is what is granted to consumer for the purchase of goods or services‟; Retail House
is “a brokerage firm that caters to individual customers rather than large institutions”; Retail
Investors are “small individual investors who commit capital for their personal account rather
than on behalf of another company.”
Corporate Credit
A contractual agreement in which a corporation receives something of value now and agrees to
repay the lender at some later date. This is almost identical to personal credit except it is a
business entity, instead of an actual person, that receives corporate credit from vendors.
Business Credit
The credit business fellow (CBF) is a professional designation for a business-to-business credit
manager. The CBF designation and structure is trademarked by the National Association of
Credit Manager. The CBF designation illustrates that achievers are knowledgeable about and
have contributed to the field of business credit by first having earned the CBA designation as
well as having completed additional course work.

CHAPTER- II
2.1 INTRODUCTION TO BANKING SECTORS IN INDIA
HISTORY OF BANKING IN INDIA

Without a sound and effective Banking system in India it cannot have a healthy economy. The
Banking system of India should not only be hassle free but it should be able to meet new
challenges posed by the technology and any other external and internal factors.
For the past three decades India‟s Banking system has several outstanding achievements to its
credit. The most striking is its extensive reach. It is no longer confined to only metropolitans or
cosmopolitans in India. In fact, Indian Banking system has reached even to the remote corners of
the country. This is one of the main reasons for India‟s growth. The government‟s regular policy
for Indian Bank since 1969 has paid rich dividends with the Nationalization of 14 major private
Banks of India.
The first Bank in India, though conservative, was established in 1786. From 1786 till today, the
journey of Indian Banking System can be segregated into three distinct phases. They are as
mentioned below:
 Early phase from 1786 to 1969 of Indian Banks.
 Nationalization of Indian Banks and up to 1991 prior to Indian.
 Banking sector Reforms.
 New phase of Indian Banking System with the advent of Indian.
 Financial & Banking Sector Reforms after 1991.
Phase I
The General Bank of India was set up in the year 1786. Next came Bank of Hindustan and
Bengal Bank. The East India Company established Bank of Bengal (1809), Bank of Bombay
(1840) and Bank of Madras (1843) as independent units and called it Presidency Banks. These
three Banks were amalgamated in 1920 and Imperial Bank of India was established which started
as private shareholders Banks, mostly European shareholders.
In 1865 Allahabad Bank was established and first time exclusively by Indians, Punjab National
Bank Ltd. was set up in 1894 with headquarters at Lahore. Between 1906 and1913, Bank of
India, Central Bank of India, Bank of Baroda, Canara Bank, Indian Bank, and Bank of Mysore
were set up. Reserve Bank of India came in 1935.

During the first phase the growth was very slow and Banks also experienced periodic failures
between 1913 and 1948. There were approximately 1100 Banks, mostly small. To streamline the
functioning and activities of Banks, mostly small. To streamline the functioning and activities of
commercial Banks, the Government of India came up with The Banking Companies Act, 1949
which was later changed to Banking Regulation Act 1949 as per amending Act of 1965 (Act
No. 23 of 1965). Reserve Bank of India was vested with extensive powers for the supervision
of Banking in India as the Central Banking System.
During those day‟s public has lesser confidence in the Banks. As an aftermath deposit
mobilization was slow. Abreast of it the savings Bank facility provided by the Postal department
was comparatively safer. Moreover, funds were largely given to traders.
Phase II
Government took major steps in this Indian Banking Sector Reform after independence. In 1955,
it nationalized Imperial Bank of India with extensive Banking facilities on a large scale
especially in rural and semi-urban areas. It formed State Bank of India to act as the principal
agent of RBI and to handle Banking transactions of the Union and state government all over the
country.
Seven Banks forming subsidiary of State Bank of India was nationalized in 1960 on 19th July
1969, major process of nationalization was carried out. It was the effort of the then Prime
Minister of India, Mrs. Indira Gandhi. 14 major commercial Banks in the country were
nationalized. Second phase of nationalization Indian Banking Sector Reform was carried out in
1980 with seven more Banks. This step brought 80% of the Banking segment in India under
Government ownership.
The following are the steps taken by the Government of India to Regulate Banking
Institutions in the Country:
1. 1949: Enactment of Banking Regulation Act.
2. 1955: Nationalization of State Bank of India.
3. 1959: Nationalization of SBI subsidiaries.
4. 1961: Insurance cover extended to deposits.
5. 1969: Nationalization of 14 major Banks.

6. 1971: Creation of credit guarantee corporation.

7. 1975: Creation of regional rural Banks.
8. 1980: Nationalization of seven Banks with deposits over 200 crores.
After the nationalization of Banks, the branches of the public sector Bank India rose to
approximately 800% in deposits and advances took a huge jump by 11000%. Banking in the
sunshine of Government ownership gave the public implicit faith and immense confidence about
the sustainability of these institutions.
Phase III
This phase has introduced many more products and facilities in the Banking sector in its reforms
measure. In 1991, under the chairmanship of M Narasimham, a committee was set up by his
name, which worked for the Liberalization of Banking Practices.
The country is flooded with foreign Banks and their ATM stations. Efforts are being put to give a
satisfactory service to customers. Phone-Banking & Net-Banking is introduced. The entire
system became more convenient and swift. The financial system of India has shown a great deal
of resilience. It is sheltered from any crisis triggered by any external macroeconomics shock as
other East Asian Countries suffered. This is all due to a flexible exchange rate regime, the
foreign reserves are high, the capital account is not yet fully convertible, and Banks and their
customers have limited foreign exchange exposure.
Classification of Banks:
The Indian Banking industry, which is governed by the Banking Regulation Act of India, 1949
can be broadly classified into two major categories; Non-scheduled Banks and Scheduled Banks.
Scheduled Banks comprise Commercial Banks and the Co-operative Banks. In terms of
ownership, Commercial Banks can be further grouped into Nationalized Banks, the State Bank
of India and its group Banks, Regional Rural Banks and Private Sector Banks (the old / new
domestic and foreign). These Banks have over 67,000 branches spread across the country. The
Indian Banking Industry is a mix of the Public Sector, Private Sector & Foreign Banks. The
Private Sector Banks are again spilt into Old Banks and New Banks.

Reserve Bank of India (Controlling Authority)
Development Financial institutions Banks
IFCI IDBI ICICI NABARD NHB IRBI EXIM Bank SIDBI
Commercial Regional Rural Land Development Co-operative

Banks Banks Banks Banks
Public Sector Banks Private Sector Banks
SBI Groups (8) Nationalized Banks (19) Indian Banks (32) Foreign Bank (45)
AXIS BANK LTD

Fig. 1.1: BANKING SYSTEM IN INDIA
An overview of Recent Trend in Banking Industry in India (2011-12)

RBI has taken a few important steps to make the Indian Banking industry more robust and
healthy. This includes de-regulation of savings rate, guidelines for new Banking licenses and
implementation of Base Norm III. Since March 2002, Bankex (Index tracking the
performance of leading Banking sector stocks) has grown at a compounded annual rate of
about 31%. After a very successful decade, a new era seems to have started for the Indian
Banking Industry. According to a Mckinsey report, the Indian Banking sector is heading towards
being a high-performing sector.
According to an IBA-FICCI-BCG report titled „Being five stars in productivity – road map
for excellence in Indian Banking‟, India‟s Gross Domestic Product (GDP) growth will make
the Indian Banking Industry the third largest in the world by 2025. According to the report, the
Domestic Banking Industry is set for an exponential growth in coming years with its assets size
poised to touch USD 28,500 billion by the turn of the 2025 from the current asset size of USD
1,350 billion (2010)”. So, before going in its future, let‟s have a glance at its historical
performance.

Fig. 1.2: PERFORMANCE OF PUBLIC, PRIVATE AND FOREIGN BANKS
In the last 5 years, Foreign & Private-Sector Banks have earned significantly higher return on
total assets as compared to their public peers. If we look at its trend, Foreign Banks show an
overall decreasing trend, Private Banks an increasing trend and Public Banks have been more or
less stagnant. The net NPA of public sector Bank was also significantly higher than that of
private and foreign Banks at the end of FY11, which indicates the asset quality of public Banks
is comparatively poor. The Capital Adequacy Ratio (CAR) was also very high for Private and
Foreign Bank as compared to Public Banks.
In conclusion, we could say that the current position of ROA, Net NPA and CAR of different
kinds of players in the industry indicates that going ahead; Public Banks will have to face
relatively more problems as compared to Private and Foreign Banks.
After looking at industry performance, let‟s see how the different players in the Banking Industry
have performed in the last five years.

Fig. 1.3: NET INCOME AND CAGR OF PUBLIC AND PRIVATE BANKS
The table above indicates that overall the top Private Banks have grown faster than that of Public
Banks. Axis Bank, one of the New Private Sector Bank, has shown the highest growth in all
parameters i.e. net interest income, deposits, advances, total assets and book value. Among
Public Sector Banks, Bank of Baroda has been the outperformer in the last five years.

Fig 1.4: ROA & CAR OF PUBLIC AND PRIVATE BANKS
Kotak Mahindra Bank has reported the highest 5-year average net interest margin and currently,
it also has the highest CAR whereas HDFC Bank has the highest CASA, the lowest net NPA to
net advances ratio and the highest five-year-average ROA. On the other hand, India‟s largest
Bank, SBI reported the lowest five-year-average ROA. Currently, it has the highest net NPA to
Net Advances Ratio and the lowest CAR.
Looking at all of the above, it is expected that Private Banks are better placed to garner growth in
the Indian Banking Industry.

2.2 INTRODUCTION TO AXIS BANK LTD.
Type Public
BSE: 532215
Traded as LSE: AXBC
NSE: AXISBANK
Industry Banking, financial Services
Founded 1994
Headquarters Mumbai, Maharashtra, India
Adarsh Kishore (Chairman)
Key People
Shikha Sharma (MD & CEO)
Credit Cards, Consumer Banking, Corporate
Banking, Finance & Insurance, Mortgage Loans,
Products
Private Banking, Private Equity, Wealth
Management.
Revenue Rs. 198.26 billion (US $3.96 billion)
Net worth as on 31-03-2012 Rs. 21,781 crores
Total assets Rs. Rs. 2,85,628 Crores
Net Loans/ Advances Rs. 1,71,146 Crores
Market Capitalization as on 31-03-2012 Rs. 47,361 crores
Employees 21,640
Branches & Extension Counters 1,622
Foreign Office 7
ATMs 9,924
Savings Banks Accounts 119 lacs
Website http://www.axisBank.com/

Axis Bank Ltd

BSE: 532215|NSE: AXISBANK| ISIN: INE238A01026
Market Cap: [Rs. Cr.] 42,242|Face Value: [Rs.] 10
Industry: Banks- Private Sector
Company Profile
AXIS Bank Ltd. is one of the fastest growing Banks in private sector. The Bank operates in four
segments, namely- Treasury, Retail Banking, Corporate/ Wholesale Banking and Other
Banking Business.
The treasury operations include investments in sovereign and corporate debt, equity and mutual
funds, trading operations, derivative trading and foreign exchange operations on the account, and
for customers and central funding.
Retail Banking includes lending to individuals/ small businesses subject to the orientation,
product and granularity criterion. It also includes liability products, card services, Internet
Banking, automated teller machines (ATM) services, depository, financial advisory services, and
Non-Resident Indian (NRI) services.
The Corporate/ Wholesale Banking segment includes corporate relationships not included
under Retail Banking, corporate advisory services, placements and syndication, management of
publics issue, project appraisals, capital market related services, and cash management services.
The Bank's registered office is located at Ahmedabad and their Central Office is located at
Mumbai. The Bank has a very wide network of more than 1622 branches (including 56 Service
Branches/ CPCs as on June 30, 2012). The Bank has a network of over 9,924 ATMs providing
24 Hours a day Banking convenience to their customers. This is one of the largest ATM
networks in the country.
The Bank has five wholly-owned subsidiaries namely Axis Securities and Sales Ltd, Axis
Private Equity Ltd, Axis Trustee Services Ltd, Axis Asset Management Company Ltd and
Axis Mutual Fund Trustee Ltd.
Axis Bank was incorporated in the year 1993 with the name UTI Bank Ltd. The Bank was the
first Private Banks to have begun operations after the Government of India allowed New Private
Banks to be established. The Bank was promoted jointly by the Administrator of the Specified
Undertaking of the Unit Trust of India (UTI - I), Life Insurance Corporation of India (LIC) and
General Insurance Corporation of India (GIC) and other four PSU insurance companies, i.e.
National Insurance Company Ltd, The New India Assurance Company Ltd, The Oriental
Insurance Company Ltd and United India Insurance Company Ltd. In the year 2001, the Bank
along with Global Trust Bank (GTB) had a merger proposal to create the largest private sector
Bank, but due to media's issues both the Banks withdraw the merger proposal.
In the year 2003, the Bank was given the authorized to handle Government transactions such as
collection of Government taxes, to handle the expenditure related payments of Central
Government Ministries and Departments and pension payments on behalf of Civil and Non-civil
Ministries such as Defense, posts, telecom and railways. In December 2003, the Bank launched
their merchant acquiring business. In the year 2005, the Bank raised $239.3 million through
Global Depositary Receipts. They won the award 'Outstanding Achievement Award' for the
year 2005 from Indian Banks Association for IT Infrastructure, delivery capabilities and
innovative solutions.
In December 2005, the Bank set up Axis Securities and Sales Ltd (originally incorporated as
UBL Sales Ltd) to market credit cards and Retail asset products. In October 2006, they set up
Axis Private Equity Ltd., primarily to carry on the activities of managing equity investments
and provide venture capital support to businesses. In the year of 2007, the Bank again raised
$218.67 million through Global Depository Receipts. They opened 153 new branches during the
year, which includes 43 extension counters that have been upgraded to branches and 8 Service
branches/ CPCs. They also opened new overseas offices at Singapore, Dubai and Hong Kong
and a representative office in Shanghai. During the year 2007-08, the Bank opened 143 new
branches, taking the number of branches to 651 which included 33 extension counters that have
been upgraded to branches. Also, they expanded overseas with the opening of a branch at the
Dubai International Finance Centre.
The Bank changed their name from UTI Bank Ltd to Axis Bank Ltd with effect from July 30,
2007 to avoid confusion with other unrelated entities with similar name. During the year 2008-
09, the Bank opened 176 new branches that include 12 extension counters that have been
upgraded to branches taking the total number of branches and ECs to 835. During the year, they
opened 831 ATMs, thereby taking the ATM network of the Bank from 2,764 to 3,595. Also, they
opened a Representative Office in Dubai. In May 2008, the Bank established Axis Trustee
Services Company Ltd as a wholly owned subsidiary company, which is engaged in trusteeship
activities. In December 2008, they launched their new investment advisory service exclusively
for High Net-Worth clients. In January 2009, the Bank set up Axis Asset Management
Company Ltd to carry on the activities of managing a mutual fund business. Also, they
incorporated Axis Mutual Fund Trustee Ltd to act as the trustee for the mutual fund business.
During the year 2009-10, the Bank opened 200 branches taking the total number of branches
Extension Counters (ECs) to 1,035. In March 2009-2010, they opened their 1000th branch at
Bandra West, Mumbai. In September 2009, Axis Bank launched the private Banking business in
the domestic market, christened 'Privee' to cater to highly affluent individuals and families
offering them unique investment opportunities. During the year, the Capital Markets SBU was
restructured with the debt capital market business (hitherto a part of the capital markets) carved
into a separate vertical. As a result, the Bank's Capital Markets SBU comprises Equity Capital
Markets (ECM) business, mergers and acquisitions and private equity syndication.
In February 24, 2010, the Bank launched the 'AXIS CALL & PAY on atom', a unique mobile
payments solution using Axis Bank debit cards. Axis Bank is the first Bank in the country to
provide a secure debit card-based payment service over IVR. During the year 2010-11, 407 new
branches were added to the Bank's network taking the total number of branches and extension
counters (ECs) to 1,390. Of these, 564 branches/ ECs are in semi-urban and rural areas and 826
branches/ECs are in metropolitan and urban areas. The Bank is present in all states and Union
Territories (except Lakshadweep) covering 921 centers. The ATM network of the Bank
increased from 4,293 to 6,270 and over 10000 ATMs (as on 31st March, 2012) providing 24 hrs.
A day banking convenience to its customers. During the year, the Bank also opened a
Representative Office in Abu Dhabi. This was in addition to the existing branches at Singapore,
Hong Kong and DIFC (Dubai International Financial Centre) and representative offices at
Shanghai and Dubai. In March 7, 2011, the Bank incorporated a new subsidiary namely Axis
U.K. Ltd. as a private limited company registered in the United Kingdom (UK) with the main
purpose of filing an application with Financial Services Authority (FSA), UK for a Banking
license in the UK and for the creation of necessary infrastructure for the subsidiary to commence
Banking business in the UK. The Bank as on 31st March, 2012 is capitalized to the extent of Rs.
413.20 crores with the public holding (other than promoters and GDRs) at 54.08%. The Bank has
strengths in both Retail and Corporate Banking and is committed to adopting the best industry
practices internationally in order to achieve excellence.

Promoters
Axis Bank ltd. has been promoted by the largest and best Financial Institution of the country,
UTI. The Bank was set up with a capital of Rs. 115 crores, with UTI contributing Rs. 100 crores,
LIC- Rs. 7.5 crores and GIC and its four subsidiaries contributing Rs. 1.5 crores each.
SUUTI- Shareholding 23.53%

Erstwhile UTI was set up as a body corporate under UTI Act, 1963, with a view to encourage
saving and investment. In December 2002, bifurcation of UTI into two entities, UTI-I and UTI-
II with effect from 1st Feb 2003. UTI-I has been transferred and vested in the Administrator of
the Specified Undertaking of the Unit Trust of India (SUUTI), who manages assured return
schemes along with 6.75%, US-64 Bonds, 6.60% ARS Bonds with a Unit Capital of over Rs.
14167.59 Crores.
SHAREHOLDING PATTERN
The Shareholding Pattern page of Axis Bank Ltd. presents the Promoter's holding, FII's holding,
DII's Holding, and Share-Holding by general public etc.
Holder’s Name No. of Shares % Share Holding
Indian Promoters 154443470 37.38%
Foreign Institutions 136116421 32.94%
GDR/ ADR 35295613 8.54%
Financial Institutions 35950766 8.71%
General Public 23925185 5.79%
N Banks Mutual Funds 19370979 4.69%
Private Corporate Bodies 5290207 1.28%
Others 1729986 0.42%
Foreign NRI 995957 0.24%
Foreign Others 55368 0.01%
BOARD OF DIRECTORS
The Bank has 11 members on the Board. Shri Adarsh Kishore is the Chairman and Smt.
Shikha Sharma Managing director & CEO of the Bank. The members of the Board are:
NAME DESIGNATION
Shri Adarsh Kishore Chairman
Smt. Shikha Sharma Managing Director & CEO
Shri K.N. Prithviraj Director
Shri V.R. Kaundinya Director
Shri Prasad Menon Director
Shri Rabindranath Bhattacharyya Director

Smt. Rama Bijapurkar Director

Prof. Samir K Barua Director
Shri S.B. Mathur Director
Shri A.K. Dasgupta Director
Shri Som Mittal Director
Vision, Mission & Core Values
VISION 2015:
To be the preferred financial solutions provider excelling in customer delivery through insight,
empowered employees and smart use of technology.
MISSION:
 Customer service and product innovation tuned to diverse needs of individual and
corporate clientele.
 Continuous technology up gradation while maintaining human values.
 Progressive globalization & achieving International standards.
CORE VALUES:
 Customer Satisfaction through : -
o Providing quality service effectively and efficiently;
o “Smile, it enhances your face value” a service quality stressed on;
o Periodic customer service audits;
o Maximization of stakeholder value.
 Ethics
 Transparency
 Teamwork
 Ownership
BUSINESS DIVISIONS
 Treasury management
Treasury is responsible for the maintenance of the statutory requirements such as the
Cash Reserve Ratio (CRR), Statutory Liquidity Ratio (SLR) and the investment of such
funds. It also manages the assets and liabilities of the Bank. Primary dealing activities can
be classified into:-

 Money market operations

 Foreign exchange operations
 Derivatives
 Merchant Banking and Capital Markets

Axis Bank is a registered Merchant Banker. The services offered are:
 Private placement/ syndication
 Issue management
 Debenture trustees
 Depository services
 Project advisory service, capital market services, advisory on Merger &
Acquisition.
 Retail financial services

All branches have a dedicated financial advisory desk, wherein the mutual fund schemes
are marketed. The objective is to provide customers with a larger portfolio of investment
avenues thereby enhancing customer relationship. Other products handled by the
department include sale of Gold Coins as well as marketing of Depository services.
 Corporate and Institutional Banking

 Cash management Services
 Business Current Accounts
 Correspondent Banking
 Government Business
 Retail Banking
Retail Banking is one of the key departments in the Bank. It has the largest variety in its
portfolio which consists of Retail asset and Retail liability products. Retail banking by
definition implies Banking services which are offered to individual customers as opposed
to corporate banking which is meant for companies.

 International Banking
Major functions include:
 Handling regulatory issues which include compliance with regulations of
various authorities such as RBI regulations, FEMA etc.
 Keeping a track of the business volumes being generated by the branches and
controlling the margins
 Maintaining relationship with correspondent Banks outside India.
 Loan & Advances

The function involves extending fund and non-fund based credit facilities to different
clients in the country, the department aims to maximize the interest spread earned on
funds available with the Bank while keeping the risk on the credit portfolio at acceptable
limits. The department also tries to maximize fee-based income from both fund based and
non-fund based activities.
Product and Services:

Products and Services on offered by AXIS Bank are:
1. Accounts:
a. Easy Access Accounts
b. Prime Savings Account
c. Salary Account
d. Women‟s Saving Account
e. Senior Privilege Account
f. Defense Salary Account
g. Trust & NGO Savings Account
h. Azzadi –No frills
i. RFC (D) Account
j. Pension savings Account
2. Deposits:
a. Fixed Deposits
b. Recurring Deposits
c. Encash 24
d. Tax Saver Fixed Deposits
3. Loans:
a. Home Loan
b. Personal Loan
c. Loan Against Property
d. Loan Against Shares & Securities
e. Auto Loans
f. Educational Loans
g. Consumer Loan
4. Investments:
a. Online Trading
b. Mutual Funds
c. Fixed Income
d. Depository Services
e. E Depository services
5. Insurance:
a. Health Insurance
b. Family Health
c. Health Guard
d. Hospital Cash
Awards
Awards & recognition received by the Bank during the Year 2011:
 „Best Risk Master‟ award - (private sector category) - 'FIBAC 2011 Banking Awards'
 „Most Productive Private Sector Bank‟ Award - 'FIBAC 2011 Banking Awards'
 Ranked 3rd Strongest Bank in Asia Pacific region by Asian Banker
 The CLSA survey on personal Banking trends validated again that Axis is the preferred
Bank amongst Retail consumers.
 Best Bond house India - 2011 by Finance Asia.

Awards & recognition received by the Bank during the Year 2010:
 Euro money – Best Debt House in India
 Asia money – Best Domestic Debt House in India
 Finance Asia – Best Bond House in India
 FE Best Banks Award – Best New Private Sector Bank, Rank 2
 Forbes Fab 50 – The Best of Asia-Pacific‟s Biggest Listed Companies- second year in a
row
 The Asset Triple A Country Awards 2010:
o Best Domestic Bank, India
o Best Domestic Bond House, India.
 Business Today Best Bank Awards - Overall Winner & Consistent Performer -(Large
Banks Category)
 Business World Best Bank Award- Fastest Growing Large Bank
 Ranked No. 1 in "overall experience with Bank staff" and "overall branch facilities" by
The Hindustan Times-MARS Survey Report dated, 29th March, 2010.
ORGANIZATIONAL STRUCTURE
HEAD
OFFICE
CIRCLE OFFICE
BRANCH OFFICE
Fig. 1.5: ORGANIZATIONAL STRUCTURE OF AXIS BANK LTD.

SMALL & MEDIUM ENTERPRISES GROUP (SMEG)

Small & Medium Enterprises Group (SMEG) caters to the SME segment and offers banking
solutions to sole proprietorship, partnership firms and companies. Their extensive trade related
expertise, widespread local network and global alliances enable us to provide value-added
services. SMEs trust us for information, assistances, advice and customized Banking solutions.
Purpose
To provide Bank credit to SME at concessional Rate of Interest towards working capital and
term loan for acquiring any fixed assets for business development purpose.
Coverage
All Small & Medium Enterprises as per the extent definition of Govt. of India.
Definition: a) the term “Small Enterprises” means that of a small scale industrial unit in which
investment in plant and machinery does not exceed Rs. 1 Crores except in respect of certain
specified items under Hosiery hand tools, drugs and pharmaceuticals, stationery item and sports
goods where this investment limit has been enhanced to Rs. 5 Crores. b) The term “Medium
Enterprises” means that of units with investment in plant & machinery in excess of SSL limit and
up to Rs. 10 Crores.
** Note: A comprehensive legislation which would enable the paradigm shift from Small Scale
Industry to Small & Medium Enterprises is under consideration of Parliament.
Eligibility
All SME units run by Individual, Proprietary concerns, Partnership Firm, Limited Companies.
Product & Services include:

 Business Loans
- Vender/ Dealer Finance
- Working Capital Finance
- Cash Credit
- Credit Card securitization
- Merchant Account

 Forex
- Fx Remittance
- Derivatives
 Trade
- Letter of Credit
- Export Bill Negotiation
- Escrow Account
2.3 AN OVERVIEW ON RETAIL BANKING & CORPORATE CREDIT

RETAIL BANKING AT AXIS BANK
The Bank aims to increase its share in India‟s expanding financial services sector by
continuing to strengthen its Retail franchise. Retail Banking continued to be one of the key
drivers of the Bank‟s growth strategy and it encompasses a wide range of products
delivered to customers through multiple channels. The Bank offers a complete suite of
products across deposits, loans, investment solutions, payments and cards to help customers
achieve their financial objectives. The Bank has maintained its focus on product
differentiation as well as a high level of customer-service to enable it to build its Retail
business.
The Bank has pursued an effective customer segmentation strategy over the years to develop
the Retail liabilities business and increase its Retail deposit base, Particularly Savings Bank
and Current Account deposits. The Savings Bank deposits of the Bank grew to 51,668
crores as on 31st March 2012, against 40,850 crores last year, registering a strong
growth of 26%, with the number of savings Bank accounts growing to 119.35 lac on the
31st March 2012, registering a growth of 27% over the previous year. In the back drop of
deregulation of interest rates on Savings Bank deposits by Reserve Bank of India (RBI), the
growth is significant. Over a five-year period, Savings Bank deposits have grown at a
Compounded Annual Growth Rate (CAGR) of 34%. On a daily average basis, Savings
Bank deposits grew by 20% to `43,442 crores.

RETAIL LIABILITIES
SB Deposits (in Crores)
60,000
50,000
40,000
30,000
20,000
10,000
0
2007-08 2008-09 2009-10 2010-11 2011-12
RETAIL LIABILITIES 19,982 25,822 33,862 40,850 51,668
Fig. 1.6: RETAIL LIABILITIES OF AXIS BANK LTD.
With an objective to widen the Retail deposit base, the Bank continued to focus on Retail term
deposit which grew 43% to 47,866 crores as on 31st March 2012. As a result, the percentage
share of Retail term deposits to total term deposits has increased to 37% on 31st March 2012 from
30% last year. The share of aggregate Retail deposits, comprising savings Bank and Retail term
deposits in total deposits has increased to 45%.
The Bank has also focused on increasing its share of Retail loans in total loans. The Retail assets
portfolio of the Bank has increased to `37,570 crores as on 31st March 2012 from `27,759 crores last
year, thereby registering a growth of 35%. Retail assets constituted 22% of the Bank‟s total loan
portfolio as on 31st March 2012, against 19% at the end of last year. The growth areas identified
by the Bank were in the areas of residential mortgages and passenger car loans. Of the total Retail
loans portfolio, 88.47% is in the form of secured loans (residential mortgages and auto loans).
The Bank has continued to develop its risk management capabilities in Retail business, both from a
credit and operations risk standpoint. The credit risk on the Retail loans portfolio continued to
improve through the year and the gross NPA ratio for Retail assets improved to 0.85% as on 31st
March 2012 from 1.49% last year. The branch channel was effectively utilized for growing the Retail
assets business, with loan and card products being offered to existing clientele. Unsecured lending
business products are also being offered with appropriately conservative risk management guardrails.

RETAIL ASSETS
40000
Retail assets (in crores)
35000
30000
25000
20000
15000
10000
5000
0
2007-08 2008-09 2009-10 2010-11 2011-12
RETAIL ASSETS 13592 16,052 20,821 27,759 37,570
Fig. 1.7: RETAIL ASSETS OF AXIS BANK LTD.
SHARES OF RETAIL LOANS

AUTO LOANS
13%
NON-SCHEMATIC
LOANS
4% CARDS
2%
PERSONAL LOANS
6%
HOME LOANS
75%
Fig. 1.8: SHARES OF RETAIL LOANS OF AXIS BANK LTD.

CORPORATE CREDIT AT AXIS BANK

Capital expenditure, particularly in Greenfield projects remained subdued through the year in view
of the prevalent macro-economic environment, with brownfield and smaller ticket projects and
working capital loans driving demand for credit from corporate customers. However, existing
sanctions continued to witness disbursements, as the projects financed by Banks drew down on
committed sanctions. In October 2010, the Bank has launched the Axis Infra Index (AII) with the
primary objective of conveying a sense of investment conditions in the infrastructure sector. The
Index, as a composite measure of investor confidence, comprises four components: flow of equity
and debt funds into infrastructure sectors, project completion and commencement of operations,
output related to infrastructure segments and regulatory and policy developments relevant for the
sector. It is designed to capture the evolving fundamentals of the sector and is updated and
disseminated on a quarterly basis.
The mid-corporate group continues to be an important business segment of the Bank with total
advances of Rs. 17,365 crores as on 31st March 2012, registering a growth of 10% over last year.
The focus continues to be on targeting opportunities in industries with lower coverage but having
positive outlook across geographies without compromising on quality. The Bank caters to the ever
increasing financial requirements of this segment by offering both off-the-shelf and complex,
transactional solutions. Existing client relationships are maintained through active cross-selling of
products and services in corporate and Retail Banking space.
The corporate credit portfolio of the Bank comprising advances to large and mid-corporates
(including infrastructure) grew by 20% to `91,053 crores from `75,922 crores last year. This
includes advances at overseas branches amounting to `24,890 crores (equivalent to USD 4.89
billion) comprising mainly the portfolio of Indian corporates and their subsidiaries, as also trade
finance. The relationship model introduced last year has shown good results and has helped the
Bank to improve its share of wallet due to a marked improvement in cross-selling a wide range of
products to the Bank‟s corporate customers. The Bank‟s focus on fee-based business, foreign
exchange business and loan syndication paid rich dividends as well. The Bank continually monitors
portfolio diversification through tracking of industry, group and company specific exposure limits.
The entire portfolio is rated on the basis of a Credit Rating Tool, which facilitates appropriate credit
selection.

CHAPTER- III
3.1 AN INTRODUCTION TO LOANS
A loan is a type of debt. Like all debt instruments, a loan entails the redistribution of financial
assets over time, between the lender and the borrower.
In a loan, the borrower initially receives or borrows an amount of money, called the principal,
from the lender, and is obligated to pay back or repay an equal amount of money to the lender at
a later time. Typically, the money is paid back in regular installments, or partial repayments; in
an annuity, each installment is the same amount.
Acting as a provider of loans is one of the principal tasks for financial institutions. For other
institutions, issuing of debt contracts such as bonds is a typical source of funding.
A key function of the Bank is deploying funds for income- yielding assets. A major part of
Bank‟s assets are the loans and advances portfolio and investments in approved securities. Loans
& advances refer to long-term and short- term credit facilities to various types of borrowers and
non-fund base facilities like Bank Guarantees, Letter of Credit, Letter of Solvency, etc. bills
facilities represent structured commitments which are negotiable claims having a market by way
of negotiable instruments. Thus, Banks extend credit facilities by way of fund-based long-term
and short-term loans and advances as also by way of non-fund facilities.
Fig. 1.9: CLASSIFICATION OF LOANS/ ADVANCES

Axis Bank provides credit in various forms. These are broadly classified into two categories-
Fund based and Non-Fund Based. Fund based refers to the type of credit where cash is directly
involved i.e. where Bank provides money to the seeker in anticipating of getting it back. Where
as in a Non-Fund Based, Bank doesn‟t pay cash directly but gives assurance or takes guarantee
on behalf of its customer to pay if they fail to do so.
In case on Fund Based there are different categories of loans which are discussed as follows:-
I. RETAIL LOANS
Retail loan is the practice of loaning money to individuals rather than institutions. Retail
lending is done by Banks credit union and savings and loan associates. The institutions
make loans for cars purchases, home purchases, medical care, home repairs, vacations
and other consumer uses. Retail lending has taken a prominent role in lending activities
of Banks, as the availability of credit and the number of products offered for Retail
lending have grown. The amounts loaned through Retail lending are usually smaller than
those loaned to businesses. Retail lending may take the form of installment loans, which
must be paid off little by little over the courses of years, or non-installment loans, which
are paid off in net lump sum.
II. TERM LOANS

A Bank loan to a company with a fixed maturity and often featuring amortization of
principal. If this loan is in the form of a line of credit, the funds are drawn down shortly
after the agreement is signed. Otherwise, the borrower usually uses the funds from the
loan soon after they become available. Bank term loans are very common kind of
lending.
Term loans are the basic vanilla commercial loans. They typically carry fixed interest
rates and monthly or quarterly repayment schedules and include a set maturity date.
Bankers tend to classify term loans into two categories:
 Intermediate-term loans, running less than three years and repaid in monthly
installments.
 Long-term loans, mostly between three to ten years and some run for as long as
20 years. They are collateralized by a business‟s assets and typically require
quarterly or monthly payment derived from profit or cash flow.

III. CASH CREDIT/ OVER DRAFT/ WORKING CAPITAL

Cash credit is a short-term cash loan to a company. A Bank provides this type of funding,
but only after the required security is given to secure the loan. Once a security for
repayment has been given, the business that receives the loan can continuously draw from
the Bank up to a certain specified amount. The Bank provides certain amount to the
company for its day to day working keeping certain margin in hand.
IV. DISCOUNTING OF BILLS

Under the purchases or discounting of bills, a borrower can obtain credit from the Bank
against bills. The Bank purchases or discounts the borrower‟s bills. The amount provided
under this agreement is covered within the overall cash credit or overdraft limit.
V. EXPORT FINANCE
This type of a credit facility is provided to exporters who export their goods to different
places; it is divided into two parts- pre-shipment finance and post-shipment finance.
 Pre Shipment Finance is issued by a financial institution when the seller wants
the payment of the goods before shipment.
 Post Shipment Finance is a kind of loan provided by financial institutions to an
exporter or seller against a shipment that has already been made. This type of
export finance is granted from the date of extending the credit after shipment of
the goods to the realization date of the exporter proceeds. Exporters don‟t wait for
the importer to deposit the funds.
In case on NON Fund Based there are different categories of loans which are discussed as
follows:-
I. LETTER OF CREDIT
Suppliers particularly the foreign suppliers, insists that his buyer should ensure that his
Bank will make the payment if fails to honor its obligations. This is ensured through a
letter of credit arrangement. A Bank opens a L/C in favor of a customer to facilitate his
purchase of goods. If the customer does not pay to the supplier within the credit period,
the Bank makes the payment under the L/C arrangement.

II. BANK GUARANTEE

A Bank guarantee limit or one time guarantee facility is extended by Bank on behalf of
their customers in favor of third parties who will be the beneficiary of the guarantees.
When a Bank guarantee is given, no credit is extended and Bank does not part with any
funds. There will be only guarantee by a Bank to the beneficiary to make payment in the
event of the customer on whose behalf guarantee is given, makes a default in his
commitment. Until then, Bank is not required to part with any money to the beneficiary.
3.2 LENDING OBJECTIVES & PRINCIPLES

OBJECTIVES OF LENDING
The basic objectives of lending are to grant credit facilities to the entities:
i. For a defined purpose.
ii. To deploy the Bank‟s resources in a profitable manner and to achieve the statutory and
regulatory norms.
BASIC PRINCIPLES
To achieve these objectives, the Bank has to follow a prudent policy and conduct the business on
the basis of sound principles of lending namely, Safety, liquidity & profitability. These aspects
are further elaborated below:
i. Safety
Safety of the funds lent has to be ensured with respect to Borrower. The borrower should
have the means, ability and willingness to repay the advance along with interest as per the
term of finance. These depend on factors like tangible assets, income generating potential,
operational efficiency and integrity of the borrower. It is therefore imperative to make a
thorough investigation into the means, character, antecedents, respectability and capacity of
the borrower before allowing them any credit facilities and by keeping a close watch on their
dealing and on the operations in their accounts during the period of advances. Character-
indicating the borrower‟s honesty, integrity, business ethics, regulatory, dependability,
reputation and promptness to keep promise.
ii. Profitability
Notwithstanding the socio-economic objectives of lending the fact remains that Banks are
profit making institutions. They have to be run on commercial considerations to meet the

expectations of the shareholders and ensure their healthy growth. The Bank should, therefore,
have a proper mix of credit portfolio which would earn sufficient income to enable it is to
defray the cost of funds, meet establishment and other expenses, provide for contingencies
and risky assets, build reserves and pay dividend to the shareholders.
iii. Liquidity
As the funds lent mostly belong to the depositors and as the Bank should always be in a
position to meet the demands of the depositors, it is essential that the loans and advances are
recoverable in full on demand or within a reasonable period. It is, therefore, necessary to
ensure that the funds lent are backed by security that is easily marketable and realizable
matching of the assets and liabilities is very critical from this point of view.
iv. Security
Though repayment in the ordinary course must come out of the surplus from business of the
borrower, the security aspect cannot be neglected. Security serves as a cushion or comfort to
fall back upon in the event on the borrower‟s failure or default in the repayment of advances.
The assets purchased out of the credit facilities are obviously the first to be taken. It is a
safeguard against disposal alienation of such securities.

CHAPTER- IV
4.1 PERSONAL LOAN
Personal Loan is the Loan provided for individual customers for their personal needs. Axis Bank
finances only for approved reasons like educational purpose, medical expenses, for improvement
the current business etc. and does not finance for unapproved reasons like for investment in
shares, mining business and for the purpose of venture capital.
Axis Bank has segmented the customers into following Categories:
i. Salaried individual normal
ii. Salaried individual Professional
iii. Salaried Doctors
iv. Salaried Employed Doctors
v. Self Employed Professional
Bank has defined different policy parameters like, eligibility Criteria, Location, Documentation,
Interest Rates & charges.
Eligibility Criteria
a) Salaried Employees
Salaried Doctors, CAs, employees of select MNCs, Public and Private limited companies,
Government sector employees including Public Sector Undertakings and Central and Local
bodies:
 Minimum age of applicant: 21 years
 Maximum age of applicant at loan maturity: 58 years
 Minimum Net Monthly Income: Rs 15,000
 Maximum loan available: Rs. 15 lacs
 Cumulative experience of 2 yrs.‟ or more.
b) Self-employed Professionals
Self-employed professionals include self-employed Doctors (MBBS and higher degree)
having majority of their income from practice, Architects, Chartered Accountants &
Company Secretary.
 Minimum age of applicant: 24 years to 65 years at the time of loan maturity
 Minimum Annual Net Profit: Rs 2 lac per annum

 Maximum loan available: Rs 20 lacs for Self Employed doctors

 Special scheme for Self Employed doctors.
c) Self-Employed normal (Individual and Sole Proprietorship)

 Self-employed for the last 3 years
 Minimum Annual Net Income: Rs 1 lac per annum
 Minimum Loan amount: Rs. 10 Lakhs
 Maximum loan available: Rs 10 lakhs
Axis Banks are currently offering personal loans only at the given locations and the eligibility
would be based on the Tier location:-
Tier 1 :- Bangalore, Chennai, Delhi, Mumbai, Hyderabad, Gurgaon, Noida, Ghaziabad,
Faridabad.
Tier 2 :- Pune, Ahmedabad, Kolkata.
Tier 3 :- Coimbatore, Kochi, Jaipur, Lucknow, Patna, Jamshedpur, Vadodara, Trivandrum,
Vishakhapatnam, Bhubaneswar, Trichy, Surat, Nasik, Aurangabad, Goa,
Guwahati, Nagpur, Chandigarh.
Tier 4 :- Bhopal, Calicut, Jodhpur, Mysore, Pondicherry, Raipur, Rajkot, Durgapur,
Dehradun, Hubli, Jalandhar, Kolhapur, Ludhiana, Madurai, Mangalore, Patiala,
Siliguri , Ranchi, Tirunelveli, Udaipur, Vijayawada, Indore, Ajmer, Allahabad,
Bhatinda, Belgaum, Bhavnagar, Bhilwara, Jamnagar, Kanpur, Kota, Salem,
Ujjain, Warangal, Mishanga.
Net Income
PARAMETERS SEGMENT ALL CUSTOMERS

Tier 1 Rs. 15,000
Tier 2,3 & 4 Rs. 12,000
Net Income
Police Rs. 10,000
Defence Rs. 10,000
Net Salary refers to the amount as reflected in the pay slip.
1. Salary by cheque can be included if the amount on the cheque tallies with the pay slip of the
customer.
2. Customers who receive salary by cash will not be eligible under this program.

Minimum & Maximum Loan Amount
TIER MIN LOAN MAX LOAN

Tier 1 Rs. 1,00,000 Rs. 15,00,000
Tier 2 Rs. 1,00,000 Rs. 10,00,000
Tier 3 Rs. 50,000 Rs. 5,00,000
Tier 4 Rs. 50,000 Rs. 3,00,000
Defense Segment- Commissioned Officers Rs. 50,000 Rs. 10,00,000
Defense Segment- JCO/ NCO Rs. 50,000 Rs. 5,00,000
Police Rs. 50,000 Rs. 4,00,000
Fixed Obligation Income Ratio (FOIR)
SEGMENT INCOME FOIR

<25 K 50%
Salaried 25 K < 40 K 60%
>= 40 K 70%
Police NA 50%
Defense NA 50%
Definition of FOIR - (All Existing EMI + EMI of proposed Personal Loan) / (Net Appraised Monthly Income
prior to deduction of obligations)
Documents Required:
Pan Card/Passport/Election Card/Photo Identity issued by Government, Defense

Services, Public Sector undertaking/Driving License/Photo Credit
Identity Proof
Card/Employees ID Card, Letter/card issued by UIDAI containing the details of
name, photograph, address and Aadhaar number.
Latest salary slips showing all deductions or Form 16 along with current dated
Income Proof
salary certificate or ITR (last 2 years).
Bank Account Statement/ Latest Electricity Bill/ Latest Telephone Bill/ Latest
Credit Card Bill/ Employers letter certifying current mailing address/Passport
Residence Proof (Valid) - provided the passport address is present address mentioned in
application form / Existing Registered House Lease/ Government I-card with
photo and address/ Ration Card/ Latest Property Tax / Water Tax bill.
Signature Verification Valid Passport /Pan Card/ Processing Fee Cheque/ Banker's Verification Letter
Latest bill of landline or mobile or WLL stating name of borrower or address of
Proof of telephone
borrower.
Guarantor Optional

Interest Rates & Charges

Category Rack Rate
SUP CAT A 15.00%
CAT A 16.00%
CAT B 17.00%
CAT C 20.00%
CAT D 24.00%
Rate of Interest 15.00% to 24% AXIS BANK STAFF 13.50%
CX >50K NET 17.00%
CX 50K NET 18.50%
SALARIED DOCTORS 14.50%
SELF- EMPLOYED PROFESSIONALS 14.50%
SELF EMPLOYED 18.00%
DEFENCE 16.75%
Loan Processing Charges 1.50% to 2.00% + Service Tax as applicable
Cheque Bounce Charges Rs. 500 per Cheque bounces + service tax as applicable
Cheque/ Instrument Swap
Rs. 500 per instance + service tax as applicable
charges
Foreclosure Charges Nil
Default Interest Rate @24.00% per annum i.e. 2% per month on the overdue installment
Duplicate Statement Issuance

Charges
Duplicate Amortization
Schedule Issuance Charges
Issuance Charges for Photocopy
of Loan Agreement/ Documents
*(Subject to change as per Bank’s discretion from time to time)
Repayment
12 to 60 months in equated monthly installments from the date of disbursement by the way of
post-dated cheques in case were check-off facility is not available otherwise, the monthly
installment will be received from the employer under check-off facility.

Other facilities provided by Axis Bank to Personal Loan customers

Apart from the above income based loans Bank has also framed other variants of the schemes
known as Surrogate schemes to compete in the competitive market.
 Top-up Loans were existing customers are provided loans upon the prevailing loans.
 Balance transfer- this facility is made available for those who want to retire any higher
cost of debt.
 Loans are made available against repayment track records of any existing auto, personal
or home loans.
 Loans are made available against proof of Life Insurance policy or Premium receipts.
 Prompt payment discount- it is a scheme offered by the Bank to the customers who are
prompt in paying their monthly EMI‟s accurately on each month‟s specified date, such
customer get 2% cash back offer on their interest rate.
 Credit card program: the scheme is only applicable to gold credit card holder only.
Charge holders will also be eligible under this scheme provided the customer can produce
document showing the charge limit.
 Express Loans: in order to spread the Banks net wider the Bank target customers under
this scheme who are not eligible under the above income based program, the loan amount
is disbursed at a shorter period.

4.2 AUTO LOANS (CAR LOANS)

Now a day‟s car has become a part of life. Many Banks offer the car loans with attractive
schemes, because the risk involved in other loans. In car loan both customer and Banker will
carry the minimum risk.
At Axis Bank a car loan is given to the customers for the purchase of new car only, the procedure
involved in car loan is also simple with low Interest rate. There is no need of giving a separate
security for the car loan; the only security needed is hypothecation of the car. Axis Bank‟s Power
Drive finances a major part of the cost of new car; loan value is calculated as per the on road
price. LTV (Loan to Value) of upto 90% of the Ex-showroom price on selected models is
provided. Special car loan scheme is for Axis Bank salary account-holders. Loans offered from
Rs. 1 lakh and tenure is from 1 year to 7 years.
Axis Bank offers Car Loans at attractive interest rates to both salaried and self-employed
individuals who meet the Axis Banks age and income eligibility criteria.
a) Salaried Individuals
 Minimum age of applicant: 21 years
 Maximum age of applicant at loan maturity: 58 or 60 years
 Loan amount: Minimum Rs. 100,000
 Income Norms: Minimum Net Annual Salary of Rs. 1.5 Lac p.a. for selected models
and Rs. 2.5 Lac p.a. for others.
 Income eligibility: As per latest salary slip or Form 16
 Employment: Minimum 2 yrs. of continuous employment
 Documents required: Proof of Identity, proof of income & address proof
b) Self-employed Individuals/ Proprietary concerns

 Minimum age of applicant : 21 years
 Maximum age of applicant at loan maturity : 65 years
 Tenure: Minimum 1 yr. & Maximum 7 yrs.
 Income: Minimum Net Annual Business income of Rs. 1.5 Lac p.a. for A & B CAT
cars and Rs. 2.0 Lac p.a. for others.
 Income eligibility - As per latest ITR and computation of income
 Employment: Minimum 2 yrs. in same line of business.
SCHEME FOR PRIORITY CUSTOMERS

Eligibility:- All Priority customers, with a vintage of 12 months & A minimum Average
Quarterly Balance as below:
 For Cat A and Cat B cars the account must have an AQB of Rs. 1 Lac for last 4
completed quarters.
 For Cat C cars the account must have an AQB of Rs. 2.5 Lac for last 4 completed
quarters.
 For Cat D cars the account must have an AQB of Rs. 5 Lac for last 4 completed quarters.
 Maximum loan amount restricted to 3 times the AQB in the last 4 quarters.
SCHEME FOR SALARY CUSTOMERS

All customers having their Salary A/c with Axis Bank since the past 3 months and working with
the following organization are eligible for this product:
Eligibility
 Public limited & Private Limited Companies;
 MNCs;
 Permanent employees of State / Central Government;
 Permanent employees of Public Sector Undertakings; &
 Permanent employees of reputed schools / colleges.
Car Loan Eligibility Calculator

Axis Bank has made it easy for customers to quickly check out their Car Loan eligibility. Axis
Bank Car Loan eligibility calculator helps the customers to find out whether they can avail have
auto finance.
DOCUMENTATION
Pre-approval Documents for:-
Salaried & Self- Employed Firms/ Company/ Partnership firms
 Age proof  Photograph
 ID proof  PAN Card & Company PAN
 Application form  Residence Address Proof
 Photograph  Office Proof/ shop Act License
 Residence proof  Last 2 yrs. ITR with computation Income &
 Income proof Audited Report
 Bank statement  6 Month Bank Statement
 Signature verification proof  Signature verification Proof

 Pro-forma invoice  Memorandum of Association (MOA)

 Article of Association (AOA)
Note: - If any loan is reflecting in Banking than Bank need TRACK record or 12 Month Bank statement
Post Sanction/ Pre Disbursement Documentation

 Loan agreement duly signed along with RTO set
 Post Dated Cheques (PDCs)/ ECS form/ Standing Instruction (SI) request
 Margin money receipt
 Copy of Final Invoice.
 Copy of Insurance Policy.
 Copy of RC book.
Car Categories, Interest Rates & Other Charges
Rates of Interest Processing Fee

12.50%- 15.00% Rs. 3,500- Rs. 5,500
CAR CATEGORIES WITH RATE OF INTERESTS & PROCESSING FEES

For 36 For 60 PF
Category Car Names
months months INR.
Maruti 800, Omni, Versa, Tavera, Bolero, Scorpio, Sumo-
CAT A/ MUV 12.25% 12.25% 3,500 Victa & Grande, Safari, Eeco, Ford Figo, Volkswagen Polo
Nissan Micra, Swift, Ritz, Liva, Chevrolet Beat, Brio.
Chevrolet, Spark, Chevrolet U-VA, Palio, Grande Punto,
CAT B 12.40% 12.40% 4,000 Santro, i10 ,Getz ,Zen ,Alto ,Wagon R ,A-Star, Indica,
Indigo, Chevrolet Aveo, Logan.
i20, Fabia, Volkswagen, Vento, Linea, Fiesta, SRV, Jazz,
Accent, Verna, Esteem, Baleno, Swift Dzire, SX4, Marina,
CAT C 12.00% 12.00% 4,500
Innova, Tata Aria, Fusion, Xylo, Ikon, Chevrolet Optra,
Manza, Itios, City, NISSAN SUNNY.
Fiat 500, Elantra, Cedia, Lancer, Petra, Chevrolet Cruze,
Civic, Octavia, Laura, Corolla Altis, Volkswagen Jetta,
CAT C+ 12.00% 12.00% 5,000
Combi, Endeavour, Captiva, Sonata, Vitara, Pajero,
Outlander, Teana ,X-Trail, Santa FE, Tuscon, Skoda Yeti.
CR-V, Volkswagen Beetle, Accord, Land Rover-Freelander,
Land Rover-Discovery, Land Rover-Range Rover,
Montero, Land Cruiser Prado, Fortuner, Toyota Prius,
CAT D 11.25% 11.25% 5,500
Volkswagen Passat, Audi, BMW, Jaguar, Mercedes Benz,
Porsche, Land Cruiser 200 Series, Volkswagen Touareg,
Superb, Camry.

LTV would be as follows:
Loan Tenor less than 36 Loan Tenor more than 36

Category of Car
months months and upto 60 months
Category A 75% 70%
Category B 75% 70%
Category C 60% 55%
Note: - Loan to value (LTV) should be computed on On-Road Price (Inclusive of insurance and
registration)
Other Charges:-
Sr. No. Type Charges

1 Cheque Bounce/ instrument Return Charges Rs. 500/ Instance
2 Cheque/ Instrument Swap Charges Rs. 500/ Instance
3 Duplicate Statement issuance Charges Rs. 500/ Instance
4 Duplicate Repayment Schedule issuance Charges Rs. 500/ Instance
5 Duplicate No Dues Certificate/ NOC Rs. 500/ Instance
6 Late Repayment penalty 2% per month
7 Loan Cancellation/ Re-Booking Rs. 1,000/ Instance
8 Foreclosure charges within 6 months 10% of outstanding loan amt.
9 Foreclosure charges after 6 months and above 5% of outstanding loan amt.
10 Stamp Duty At Actuals
11 Issuance of Credit Report Rs. 50/ Instance
 Hypothecation of the vehicle

Security  RC in joint name of the borrower and Bank
 Bill of the vehicle will also be in the joint name.
Spouse if employed or suitable 3rd party guarantee or collateral security in shape of IP/
Guarantee liquid security equal to 100% of loan amount CH and above can waive the guarantee/
collateral security.
Insurance Comprehensive insurance with Bank clause and policy to remain with the Bank.
Car loan finance to business concern for personal use of executives shall be outside the
Other purview of corporate Banking and may be sanctioned by officials under vested power
Provision even in case where existing facilities have been sanctioned by higher authorities in term
of RBI Cir. No. 51 dt. 15/09/09.
Delegation of Powers
Designation Limit (Rs.)
a) Credit Manager- Auto Loans 10 Lakhs
b) RAC Head/ SRAC Head/ Branch Head 10 Lakhs
c) VP- Auto Loans & Above Full

4.3 HOUSING LOANS (POWER HOME)
HOME LOAN
Vanilla Home Loan Improvement/ Plot Loan Takeover of Loan Top Up Loan
Extension/
Renovation Loan
Purchase of
Purchase of new Home Loan Takeover + Top
PLOT/
House/ Flat Plot Loan Up/ Internal
Purchase of
Resale of House/ Improvement/ Top up
Plot &
Flat/ Construction Renovation Loan
Construction
Income Program Income Program Income Program Income Program Income Program
For SALARIED For SALARIED For SALARIED For SALARIED For SALARIED
for SENP for SENP for SENP for SENP for SENP
for SEP- GPR for SEP- GPR for SEP- GPR for SEP- GPR for SEP- GPR
Income Program Income Program Income Program Income Program

for NRI for NRI for NRI for NRI
Banking Surrogate Surrogate

Takeover
Program
Step Down for
-SAL/ SEP/ SENP
SAL/ SEP/ SENP
Fig. 1.10: CLASSIFICATION OF HOME LOAN UNDER HL POLICY

Details of Schemes and Variants:

Surrogate Loan-
Product Vanilla GPR Step Down NRI Plot Loan
Banking
Step down is
Home Loan
Repayment
scheme
Home Loan Loan norms
Standard where the Home loan
under Gross for
Power EMI reduces program with the
Professional Home loan Purchasing
Home loan after a income assessed
Receipt schemes for of
Schemes offering- certain through Banking
Program for Non residential
and Variants Purchase of period with income papers
self Resident plot to
House/ Flat, the lower are surrogated
Employed Indians construct
Construction income for through Banking
professional house
of House one of the habit
only thereon
borrower
retiring
before loan
Maturity
1. Purchase of a new house/ flat

2. Purchase of old house/ flat
3. Purchase of plot
4. Purchase of a plot of land & construction of a house
5. Construction of a house on plot of land already owned
6. Extend/ Renovate/ Repair of a house or flat already owned by self
7. Balance Transfer (Takeover)
8. Top Up Loan for existing customers/ linked with Balance Transfer
9. Home Loan/ Residential Plot Purchase for NRI Customers
Loan variants & Tenure:

HOME LOAN PLOT LOAN
Purchase of
House/ Flat- Extension/
Purchase of
Old & New Renovation/ Purchase of
Purpose Plot + BT Top Up
& Repair/ Plot
Construction
Construction Improvement
of House

BT + Top Up –
SALARIED- Resident SALARIED- 25 Resident
25 Yr. Yr. Same as BT for
Indian- 20 Indian- 15 Internal Top Up
Tenure of Year for all Year for all As Per
SEP/ SENP- SEP/ SENP- – same as
Loan profiles profiles Purpose
20 Yr. 20 Yr. outstanding
NRI- 15 Yr. NRI- 10 Yr. Home Loan
NRI- 15 Yr. NRI- 15 Yr. Tenor
Features & Benefits

Axis Bank offers affordable and flexible housing loans that can turn the customer dream of
owning a home into reality. Axis Bank housing loans are designed for today‟s home-hunter. Our
easy home loans are rich in features and offer a number of benefits.
 Attractive housing finance rates
 Flexible rates
 Balance transfer facility
 Doorstep service
 Nil prepayment charges
 Quick & transparent processing
Home Loan Eligibility Criteria

A) Salaried Individuals
 Individual in permanent service in the government or reputed companies.
 Applicant should be above 24 years of age at the time of loan commencement and
upto the age of 60 or superannuation, whichever is earlier at the time of loan
maturity.
 Maximum Tenure of loan: 25 Yrs.
B) Professionals
 Professionals (i.e., doctors, engineers, dentists, architects, CA, Cost Accountants,
Company Secretary, and Management Consultants only) can apply.
maturity.

C) Self-Employed Individuals
 Any individual filing income tax returns can apply.
maturity.
Max & Min Loan Amount for Tier of Cities

HOME LOAN
Tier AMOUNT
Tier I Min Rs. 5 lac- Max Rs. 500 lac
Tier II Min Rs. 3 lac- Max Rs. 300 lac
Tier III Min Rs. 2 lac- Max Rs. 150 lac
PLOT LOAN
Tier I Min Rs. 5 lac- Max Rs. 200 lac
Tier II Min Rs. 3 lac- Max Rs. 100 lac
Tier III Min Rs. 2 lac- Max Rs. 50 lac

Locations where the property is situated is applicable
Tier of Cities are enclosed in the Annexure.
Margin
Sr. No Loan Amount (Rs.) Margin
1 For Housing Loan upto Rs. 20 Lacs 15%
2 For Housing Loan above Rs. 20 Lacs 20%
3 Improvement or renovation loans 25%
Documentation
The following documents are required along with loan application:
Purpose Salaried Others

Voter’s Id card or driving license or PAN card
or photo credit card or employees ID card or Voter's ID card or driving license
Proof of identity
defense or police or government department or PAN card or photo credit card
ID card
IT returns for the last 2 years and
Latest Salary slip showing all deductions or
Proof of income computation of income for the
Form 16 along with recent salary certificate
last 2 years certified by a CA

Bank account statement or latest electricity Bank account statement or latest

bill or latest mobile or telephone bill or latest electricity bill or latest mobile or
credit card statement or latest LIC policy or telephone bill or latest credit
insurance premium receipt or employers card statement or latest LIC
Proof of Residence
letter certifying the current mailing address policy or insurance premium
or latest NSC or other similar instruments receipt or latest NSC or other
indicating the address or existing house lease similar instruments indicating
agreement the address.
Bank Statement Last 6 months Last 6 months
Guarantor form Optional Optional
Interest Rates & Charges

Base Rate + Mark Effective Rate of
Sr. No Type Loan Amount (Rs.)
Up Interest
Less than Rs. 25 Lakhs Base Rate + 0.75% 10.75% p.a.
Loans greater than Rs. 25 Base Rate + 1.00% 11.00% p.a.
Lakhs- Rs. 75 Lakhs
1 Floating Rate
Loans greater than Rs. 75 Lakhs Base Rate + 1.25% 11.25% p.a.
Top Up – All Loans,
Base Rate + 2.75% 12.00% p.a.
Renovations
2 Fixed Rate 11.75% p.a.
*Base Rate – 10.00%
Processing Fee
 Processing fee equivalent to 0.5% + S.T. of the loan amount/ Rs. 10,000 + S.T whichever
is least is applicable. The login fees of Rs. 5000 are non-refundable. (Taxes are
applicable)
 Stamp duty on EM charges, if applicable to be paid by the customer separately.
Prepayment & other Charges

Sr. No. Type Charges
1 Cheque Bounce/ instrument Return Charges Rs. 500/ Instance
2 Cheque/ Instrument Swap Charges Rs. 500/ Instance
3 Duplicate Statement issuance Charges Rs. 250/ Instance
4 Duplicate Amortization Schedule issuance Charges Rs. 250/ Instance
5 Duplicate Interest Certificate Issuance Charge Rs. 250/ Instance
6 Issuance charges for Photocopy of title documents Rs. 250/ Instance
7 Charges on Customer initiated request for copies of Document Rs. 250/ Instance
8 Prepayment Charges including part prepayment for floating rate loan NIL
9 Prepayment Charges including part prepayment for fixed rate loan 2% of o\s Principal
Switching Cost:
Switching from the floating rate scheme to the fixed rate scheme and vice versa is permissible. If
a fixed rate customer wants to reschedule loan to the present fixed interest rate applicable to the
new customer, the same is also permissible. The existing customer can also switch over to the
new rate of interest applicable for the new customer. For all the above changes, a nominal
switching fee is applicable.
Repayment
 Repayment period for Home Loans shall not exceed 25 years.
 Repayment period of pre-allotment bookings of housing loans shall not exceed 1½ year.
 Repayment period of improvement or renovation or extension of existing property shall
not exceed 10 years.
 Income eligibility: As per latest salary slip or Form 16.
 Employment: Minimum 2 yrs. of continuous employment.
Loan to Value (LTV)

Home Loans
Greater than Rs. 20 lakhs Less than Rs. 20 lakhs
80% of market value, subject to 85% of the documented cost or
Salaried Customers
85% of the documented cost. market values whichever is lower.
85% of the documented cost 85% of the lower of documented
Self-Employed (SEP/ SENP) subject to the 80% of market cost or Market value.
value.
Plot loan: 75% Max or 80% for direct allotment from development authority.
LTV Norm
Documented Cost Market Value
Agreement Value + Stamp Duty +
Registration charge + Amenities
up to 50% of agreement value + Market Value of the property
State electricity & water charges + given by the empanelled valuator
car parking + society formation & + Stamp Duty + Registration
development charges + Club charges + service tax + VAT (as
Direct Purchase from Builder
House, provided documented applicable) + Life Insurance
proof is obtained + service tax + Premium + Property Insurance
VAT (as applicable) + Life Premium + Home Protector
Insurance Premium + Property Insurance premium.
Insurance Premium + Home
Protector Insurance premium.
Agreement Value + Stamp Duty +

Market Value of the property
Registration charge + Amenities
given by the empanelled valuator
up to 50% of agreement value
+ Life Insurance Premium +
Resale + Life Insurance Premium + Property Insurance Premium +
Property Insurance Premium + Home Protector Insurance
Home Protector Insurance premium.
premium.
Only Market Value to be considered for LTV calculation + Life Insurance
Balance Transfer
Premium + Home Protector Insurance premium.
1. Amenities agreement is an unregistered agreement executed
to cover the Amenities cost/ Improvement work/ furniture &
fixture expenses incurred by the borrower.
2. Amenities agreement can be executed between the following
parties:
 Borrower & Seller
 Borrower & the Builder/ Developer
Treatment of Amenities  Borrower & the third party (can be firms/ Companies/
individuals)
 Furniture & Fixture agreement between borrower &
third parties (e.g. Contractor/ Vendor etc.)
3. Amenities agreement executed with relatives will not be
accepted.
4. Amenities value considered at 50% of the agreement value at
documented cost of the property.

4.4 LOAN AGAINST PROPERTY

Features
 Attractive interest rates
 Balance Transfer facility available with additional finance
 Doorstep service
 Loan against property - Residential
 Loan against property - Commercial
 Loan for purchase of commercial property
 Take-over of existing loan with additional refinance (Balance Transfer)
 Lease Rental Discounting (LRD)
Interest Rates
Loan Against Property Base Rate Mark up Effective Rate of Interest
LAP Residential 10.00% 3.00% 13.00%
LAP Commercial 10.00% 3.00% 13.00%
3rd Party LAP - Residential 10.00% 4.00% 14.00%
3rd Party LAP - Commercial 10.00% 4.00% 14.00%
Gross Receipts - Residential 10.00% 3.25% 13.25%
Gross Receipts - Commercial 10.00% 3.25% 13.25%
LAP Surrogate Scheme 10.00% 4.00% 14.00%
Lease Rental Discounting (for rated lessee) 10.00% 2.75% 12.75%
Lease Rental Discounting (for un-rated lessee) 10.00% 3.25% 13.25%
Overdraft Against Property (Residential) 10.00% 4.00% 14.00%
Overdraft Against Property (Commercial) 10.00% 4.00% 14.00%
Reverse Mortgage Loan 10.00% 1.75% 11.75%
 Any individual who is in permanent service in government or
a reputed company.
Salaried Individuals  The applicant in all the cases should be above 24 years of age
at the time of loan commencement and up to the age of
superannuation.
 Professionals (ie, doctors, engineers, dentists, architects,
chartered accountants, cost accountants, company secretary,
and management consultants only) can apply.
Professionals
 The applicant should be above 24 years of age at the time of
loan commencement and up to 65 years or less at the time of
loan maturity.
 Any individual filing Income Tax returns can apply.
Self-employed Individuals  The applicant in all the cases should be above 24 years of age
at the time of loan commencement and up to 65 years or less

at the time of loan maturity.

All resident individuals can apply. The lessee must however be a
company as defined under the Companies Act, 1956. Funding will be
Lease Rental Discounting (LRD) done only against ready commercial property. The same will be
restricted to 85% of the net present value of the future rentals or 50%
of the value of property, whichever is lower.
Documentation
Purpose Documents
Voter's ID card or driving license or PAN card or employees ID card or government
Proof of identity
department ID card
Latest salary slip showing all deductions or Form 16 along with recent salary
Proof of income
certificate / IT returns of last 2 years
Proof of Bank account statement or latest electricity bill or latest mobile or telephone bill or
residence latest LIC policy or insurance premium receipt or existing house lease agreement
Bank statement
Last 6 months
or Pass Book
Guarantor form Optional
Lease Agreement Copy of lease agreement required for all lease rental discounting cases
Limits of Asset Power

Minimum- Rs. 2 lakhs
Maximum- Rs. 500 lakhs (based on Product/ Variant categorization)
Margin
20 – 30% in case of purchase of commercial property
40 – 55% in case of purchase of residential/ commercial property
Schedule of Charges
Dropline Overdraft
Asset Power (Loan Against Property / Loan Against Rent
Scheme
Against Property) Commercial OD against Receivables
Property
Loan Processing 1% + Service tax as 1% + Service tax as 1% + Service tax as
Charges applicable applicable applicable
2% will be charged if 2% will be charged if
the amount exceeds the amount exceeds
2% will be charged on
25% of the principle 25% of the principle
Prepayment Charges the limit set for the
outstanding during a outstanding during a
specific year.
quarter, otherwise No quarter, otherwise No
penalty. penalty.
No Due Certificate NA NA NA
Solvency Certificate NA NA NA
Charges for Late Penal interest @24% Penal interest @24% Penal interest @24%

Payment of EMI per annum i.e. @ 2% per annum i.e. @ 2% per annum i.e. @ 2%
per month on the per month on the per month on the
overdue installment/s overdue installment/s overdue installment/s
Stamp Duty & other As per applicable laws As per applicable laws As per applicable laws
statutory charges of the state of the state of the state
Cheque Bounce
Rs 500/- per instance Rs 500/- per instance Rs 500/- per instance
Charges
Cheque swapping Rs. 500/- plus service Rs. 500/- plus service Rs. 500/- plus service
charges tax as applicable tax as applicable tax as applicable
Duplicate statement
Rs. 250/- per instance Rs. 250/- per instance Rs. 250/- per instance
issuance charges
Issuance charges for
Rs 250/- per document Rs 250/- per document Rs 250/- per document
photocopy of title
set set set
deeds
Credit Report Issuance
Rs. 50/- Rs. 50/- Rs. 50/-
Charges
Terms & Conditions

Facility is granted for 12 months. This is reviewed and renewed at annual
Facility Tenure
rests.
Penalty for early closure Nil
 Bank reserves the right to reject any application / renewal without
assigning reasons thereof. It shall be the sole right of the Bank to
consider the proposal on case to case basis after taking into
consideration, the credentials/credit worthiness of each of the
customers
 No loan under this scheme is granted for investment in capital
market instrument or for speculation purpose
Other Conditions
 The overdraft facility shall be disbursed / renewed only after all the
required documentation and pledge creation formalities are
complete.
 The margin requirement will be reviewed regularly. In event of any
volatile fluctuations in the prices of the units, the client shall make
good the shortfall, if any, within four days, failing which the security
will be enforced.
 The applicant will undertake to inform the Bank as and when there
is a change in address or employment

4.5 LOAN AGAINST DEMAT SHARES
Loan against shares is provided only to meet customer‟s personal needs. The following are the
feature & benefits of Loan against Share:
 Facility only to individuals
 Overdraft facility against single and combination of scrip‟s in dematerialized form from
the list of approved scrip.
 Facility will be renewed/ reviewed after 12 months from the date of sanction.
 Interest charge on actual amount utilized- no EMI or post-dated cheque required.
 Shares can be pledged from any Depository Participant across the country.
 Only resident Indians are eligible to apply.
 Applicant should be above 21 years of age at the time of application.
Documentation
Purpose Documents
Voter's ID card or driving license or PAN card or employees ID card or government
Proof of identity
department ID card
Latest salary slip showing all deductions or Form 16 along with recent salary
Proof of income
certificate / IT returns of last 2 years
Proof of Bank account statement or latest electricity bill or latest mobile or telephone bill or
residence latest LIC policy or insurance premium receipt or existing house lease agreement
Bank statement
Last 6 months
or Pass Book
Holding
Latest statement of holding
Statement
Guarantor form Optional. (Mandatory in case of jointly held DEMAT holding)
Pledge form Mandatory for creation of pledge
Limit on Loan against Shares

Minimum- Rs. 1 lakh
Maximum- Rs. 20 lakhs
Margin
50% in case of multiple scrip*
60% in case of single scrip

*The contribution of single scrip should not exceed 65% of the total portfolio value at any point
of time during the tenure of the account. Loan is sanctioned as per applicable internal policy of
the Bank.
Interest Rates:
Sr. No Loan Amount (Rs.) Rate of Interest (p.a.)
1 Sanction Limit upto Rs. 20.00 lakhs 12.50%
Other Charges:
Sr. No Type Charges
1 Cheque Book Issuance Charges Rs. 100/- plus Service tax as applicable
Repayment Instruction/Instrument Return Rs. 500/- plus service tax as applicable per
2
charges instance
3 Swap Charges Rs. 150/- plus service tax as applicable
Terms & Conditions

Facility is granted for 12 months. This is reviewed and renewed at annual
Facility Tenure
rests.
Pledge of adequate value of shares in dematerialized form from the
Security
approved scrip list.
This is based on the permissible drawing power against the dematerialized
shares available for being pledged. Further drawing will be released only
upon pledge of adequate value of dematerialized shares with prescribed
Limit Available
margin and confirmation of marking of pledge on NSDL / CDSL screen
Processing fee equivalent to 1% of the loan amount (applied for) will be
collected along with the application form (taxes as applicable).
Penalty for early closure Nil
 Bank reserves the right to reject any application / renewal without
assigning reasons thereof.
 No loan under this scheme is granted for investment in capital
market instrument.
 The overdraft facility shall be disbursed / renewed only after all the
required documentation and pledge creation formalities are
Other Conditions complete.
 The margin requirement will be reviewed regularly. In event of any
volatile fluctuations in the prices of the scrips, the client shall make
good the shortfall, if any, within four days, failing which the security
will be enforced.
 The applicant will undertake to inform the Bank as and when there
is a change in address or employment.

CHAPTER- V
5.1 ROLE & FUNCTIONS OF RETAIL ASSETS CENTER (RAC)
At Axis Bank, RAC is the organization consists of the following departments with individual
function aspects:
1. Sales dept.
2. Credit dept.
3. Operations dept.
4. Collections dept.
1. Sales Dept.
Sales is one of the most important functionary unit as it includes the initial ground work for
generating the business, Sales dept. includes the sales executives who are responsible for
sourcing the business to the Axis Bank, Axis Bank also has its own internal sales channel called
as Axis Sales & Securities which is wholly owned subsidiary of Axis Bank, Sales & Securities
are solely responsible for sourcing nearly 50% of the business to the Bank. Sales & Securities
has been operating with its own manpower where in the organization structure involves team
leaders, business executives who have their own Top management to whom the administrator
functions are to be reported and the business proceedings are reported to Axis Bank Ltd. RAC.
The business at Axis Bank Ltd. Is also sourced by the other outsourced agencies like Dolphin
Financial solutions, Money center & USA associates were in the DMA‟s (Direct Marketing
Associates) and DST‟s (Direct Sales Team) are responsible for getting the business to the Bank.
The outsourced agencies are opening with the help of their own manpower, which consists of
team leaders and sales executives.
Axis Bank has been outsourcing the business to different agencies to face the competition in the
market and most importantly to gain a major share in the market.
The outsourcing concept has been a profitable source for the Axis Bank.

2. Credit Dept.
Once the business is sourced to the Bank by the sales executives (DMA‟s & DST‟s), the
processing of file is done by the credit Dept. where a detailed study of the case file is made.
In case where the customer profile meets the required eligibility criteria the case is accepted for
further processing if not rejected.
The case is then initiated for field investigation, some of the private players/ Banks like ICICI
and HDFC have separate departments to check the fraud they are called as Risk Control Unit
(RCU) or Fraud Control Unit (FCU) this department concentrates on the fraudulent acts if any,
the sales executives check the frauds if any in documentation.
At Axis Bank the field investigation has been outsourced to Kalyan consultancy who are
responsible to carry out residence verification of the customers, IT Returns verifications, salary
slip verification & Bank statement verification and office verification has been has been
outsourced to aim agencies who are responsible for conducting office verification, tele-
verification and references verification. These agencies will be providing remarks about the case
investigated and also bring to the notice of the Bank in case any fraud detected, they are
responsible for verifying the details such as Nature of Business, yearly income, and Nature of
business, about its existence, locality, and verification is done by personal interaction and also
from customer and suppliers.
Then the CIBIL report of the customer is accessed to check the customer credibility, CIBIL is a
repository of information which contain the credit history of commercial and consumer
borrowers. With a view to provide an institutional mechanism for sharing of information which
contain the credit history of commercial & consumer borrowers. With a view to provide an
institutional mechanism for sharing of information on borrowers of Banks and financial
institutions, the Credit Information Bureau (India) Ltd. (CIBIL) was set up in August 2000. The
Bureau provides a framework for collecting, processing & sharing credit information on
borrowers of credit institutions.
At Axis Bank the customer‟s credibility is accessed with the help of CIBIL.
Documents collected for processing purpose in case of Self Employed Normal are ID proof,
Address proof, own house proof, Business proof, IT papers and Bank Statements; and for
Salaried Individuals are ID proof, Address Proof & Salary slip.

Sanction Letter
The Credit Dept. is responsible for a through file checking wherein they have to check the
document in detail and verify whether the documents provided match with the detail given. The
customer profile is studied in detail in respect to his/her‟s Income Statement, Bank statement,
Business proof and in any case any discrepancies found the same is brought to the notice of the
sales executives who inhume solve the discrepancies and again file is presented.
After a detailed check a Credit Score card sheet is prepared. The credit score card sheet has been
systematically formulated by Axis Bank considering the various Parameters like age, educational
qualifications, number of dependents of the customer, Income Information, total number of years
of employment, any other loans have been with the customer, etc., and the points are allocated
against various parameters were the cutoff score must be 60% and more.
The CAM (Credit Approved Memo) is prepared which includes the loan detail regarding the loan
amount, monthly EMI, processing fees amount, repayment mode and repayment period etc. and
sent to Approval Authority for approval of loan and once the case is approved, Sanction letter is
handed over to the sales executives.
In the meantime, backend team of credit has to generate the application ID of the individual
customer. Account (App IP) is authorized for opening the loan a/c and for disbursement after the
case is approved.
Sales executives are responsible to present the sanction letter to the customers which includes the
details such as loan amount monthly EMI, number of installments, processing fees etc. and loan
agreement paper duly signed by the customer after going through the terms and conditions as
framed by Axis Bank and agreeing for the same by the customer.
3. Operations Dept.
Complete file along with the daily signed agreement and the EMI PDC‟s of the customer is
handed over to the operation dept. by sales team.Further these documents are processed for the
disbursement stage.
Operation dept. takes care of all the activities, which are involved post disbursement like,
disbursement, customer services, pre-closure of loans, and presentation of the EMI PDC‟s.
Updated the same in the software (EMIs cleared in the clearing house and also the returned
instruments).

Axis Bank RAC makes use of Software‟s like Finacle, which is used to maintain the accounts
and transactions and “Nischint”, is a software with the help of which customer loan account
number is created, both the software‟s are developed by Infosys for which Bank is liable to pay
the maintenance Fees.
4. Collections Dept.
The duty of the collections dept. starts after the loan amount is disbursed, collection dept. is
responsible for collecting the disbursed loan amount in case of any default customer, and even
the collections work at Axis Bank has been outsourced to some private agencies.
A detailed function of a collection dept. is briefed out in the head of “Effectiveness of Collection
Dept.”
Effectiveness of Collection Department

The collection department is one of the most important departments among all other department
in the Bank. The duty of the collection department starts after the loan amount is disbursed;
collection dept. is responsible for collection the disbursed loan amount in case of any default
customer.
The due date for EMI payment has been fixed on 5th and 20th of every month for which the
operations department has to present the EMI PDC‟s to the Bank. The Bank has the systemized
techniques of sending the SMS alerts to the customer Mobile phones intimating their due date
and amount of their EMI.
The Collection Department is involved in giving regular follow-up & reminders for repayment of
loan for which the present PDC‟s got bounced back.
Collection Department has outsourced some agencies called as “Collection Agencies” for the
collections and recovery of the Due amount. These agencies are authorized to recover the EMI
dues and penal charge if any. In case of Auto Loans, Loan against Property, Loan Against Shares
& Securities, Home Loans, etc. these are also authorized to seize the vehicle of those accounts,
which are due for more than 3 EMIs; Seizing practice is done by the legal methods.

5.2 PROCEDURE OF LENDING

Step 01: Application Form
Step 02: Personal Discussion
Step 03: Bank‟s Field Investigation
Step 04: Credit Appraisal by the Bank and loan sanctions
Step 05: Submission of legal documents & legal check
Step 06: Technical/ Valuation Check
Step 07: Valuation
Step 08: Offer Letter
Step 09: Registration of Property Documents
Step 10: Signing of agreements and submitting Post- dated Cheques
Step 11: Disbursement
Step 01: Application Form

Filling up the application form is the first step. The look of an application from may differ from
product to product, but nearly 90 percent of the information they need is similar. Most of this is
basically your personal and professional information, details of the customer financial assets and
liabilities.
Documents to be submitted:
While submitting the application form, every Bank asks for several documents. And Axis Banks
these days provide doorstep services, so that the customers don‟t have to spend time visiting their
office to submit the documents. However, Bank still insists to the customer to visit the office at
least once.
a. Proof of Income:
This will need to be backed up by proof such as copies of last three years Income Tax
returns (along with copies of Computation of Income/ Annual accounts, if any), Form 16/
Form 16A, last three month salary slips, copies of last 6 months statements of Bank
accounts in which the salary/ Business income details are reflected, etc. other documents
that needed to with the application form include age proof, address proof and
identification proof. Customers may also be asked to give their employment details.
b. Age Proof:

Copy of school leaving certificate/ Driving License/ Passport/ Ration Card/ PAN card/
Election Commission‟s card/ etc. are accepted as age proof.
c. Identification Proof:
Same as above, but with Photograph. Sometimes, the same document if it contains a
photograph, the current residential address and the correct age can be the proof for all 3
things.
d. Employment details:
If Company, where the prospect is working is not well-known, then a short summary
about the nature of the company, its business lines, its main customers, its competitors,
number of offices, number of employees, turnover, profit, etc. may be needed. Usually,
the company profile that is available on
e. Financial check:
All the income-related documents one submits like past Profit & Loss Account with the
balance sheet and Expected/ forecasted cash flow statement with Profit & Loss and B/s
which serves a specific purpose. The lending institution uses them to study the
customer‟s financial status.
The Bank statements submitted are scrutinized for:

Level of activity in the case of self-employed persons, this gives a very good clue about the
extent of business activities.
Average Bank balance a cursory glance at the average Bank balances maintained in a savings
Bank account speaks volumes about the spending/ saving habits of any individual.
Cheque returns a small charge debited by the Bank in the statement indicates that a cheques
issued by the customer was returned by the Bank. Many such cheque returns can have a negative
impact in the process of loan sanction.
Cheque Bounce, if cheques deposited by customer are returned by the issuer‟s Bank, they will
be visible in the Bank statement and again, Banks have specific norms as to how many such
returns are acceptable in a period of one year.
Regular periodic payments to other finance companies/ Banks etc. indicating an existing
liability and you will need to provide full details to the lender.
Customer‟s investment also comes under the scanner. This will helps the Bank to estimate the
ability to pay the down payment as well as the customer savings habit.

Processing Fees
Along with the application on form and the credit documents, Bank asks for processing fee. This
fee is usually around 1.50% to 2.00% + service tax of the total loan amount. The agent dealing
with the customer earns a commission from the Bank, which to some extent is also affected by
the amount of fees paid by the customer.
Axis Bank has a transparent fees structure, whereas other Banks may have zero upfront fee
loans, but the advantage may be neglected as their other charges such as legal charges and stamp
duty are normally higher.
This fee is collected to maintain the loan account, and includes word like sending Income Tax
Certificate every year, maintaining post-dated cheques, etc.
Step 02: Personal Discussion

After formally and successfully completing the application process, one has to wait till the Bank
evaluates the document submitted. The wait normally lasts only a day or two or sometimes even
less. Bank insists on meeting the applicant after receiving the application form, and before the
loan sanction. This is to gather more details that may not be mentioned in the application form
and to reassure them of the applicant‟s repayment capacity.
Step 03: Field Investigation

Many of people apply for loans every day. And Bank is eager to complete its targets, every loan
is a risk. So, it is only natural that it confirms or validates the detail that a customer provides. The
Bank check all information including existing residential address, place of employment/
business, employer credentials, residence and work telephone numbers. Representatives are sent
to workplace or residence to verify the details.
Even the references provided in the application form are checked out. While this may sound
irritating and an invasion of customer privacy, Bank is forced to undertake the validation before
the sanctions once credentials are validated, it helps establish trust between the two.
Step 04: Credit Appraisal and loan sanctions

This is the make-or-break stage. If the Bank is not convinced about the credentials, the
application may get rejected. If it is satisfied, sanctions the loan. The Bank establishes the
applicant‟s repayment capacity based on his/ her income, age, qualifications, experience,
employer, nature of business (if self-employed), etc., and based on these, works out the

maximum loan eligibility, and the final loan amount is communicated. The Bank than issues a
sanction letter. This letter may either be an unconditional letter, or may have certain terms and
conditions mentioned, which have to fulfill before the loan disbursal.
Step 05: Submission of Legal Documents (Applicable for Property Loans)

Now, the focus of the Bank activities shifts from the applicant to the property he/ she intend to
buy or want to mortgage. Once the property is selected, one needs to hand over the entire set of
original documents pertaining to the property to the Bank so that it can keep them as security for
the loan amount given. These normally include:
The title of documents of seller, which prove the seller\‟s title including the change of title
documents if he is not the first owner. NOCs from the legal owners such as cooperative housing
societies, statutory development authorities, the lessor of the land in case of leasehold land, etc.
NOCs are not required where the property is situated on freehold land and the entire land is
being transferred along with the structure. These documents remain in the Bank‟s custody until
the loan is fully repaid.
Legal Check: AXIS Bank conducts a legal check on the documents to validate their authenticity.
Even the draft sale documents that the applicant will be entering into with his/ her seller will be
scrutinized by the lawyer in their panel (outsourced). The lawyer‟s report either gives a go-ahead
if documents are clear, or it may ask for a further set of documents. In the latter case, the
customer is expected to hand over additional documents to the Bank for the clear title.
Step 06: Technical/ Valuation Check

Bank is extremely careful about the property they plan to finance. They send an expert to visit
the premises the customer to purchase or invest. This expert could either be a Bank employee or
he could belong to a firm of architects/ civil engineers.
Site Visit:
The site visit to applicant is conducted to verify the following:
In case of Under Construction Property

 Stage of construction is the same as that mentioned in the payment notice given to
applicant by the builder.
 Quality of construction

 Satisfactory progress of work

 Layout of flats and area of property is within permissions granted by the governing
authority.
 The builder has the requisite certificates to start construction at the sites.
 Valuation of the property in relation to other deals in the surrounding areas.
In Case of ready/ resale:

 External/ Internal maintenance of the property.
 The age of the building.
 Will the building last the loan tenure? This has a direct bearing on the loan eligibility,
since the loan tenure will be restricted to the maximum age of the property as decided by
the Bank‟s engineer and this will impact on applicant loan eligibility.
 Quality of construction.
 Surrounding area (development).
 Whether the builder has received the requisite certificates for handing over possession of
the flat.
 There is no existing lien or mortgage on the property.
 Valuation of the property in relation to other deals in the surrounding areas.
These inspections are carried out to protect consumer interests in terms of construction quality,
adherences to local laws, approved building plans, etc. a technical inspection also lets the Bank
understand the progress of construction so as to release the staggered disbursement.
Step 07: Valuation

Since housing loans are cheaper than other loans, there have been cases where individuals have
shown purchase of properties from related entities at inflated prices to obtain cheap loans. Since
the risk associated with diversion of funds is higher than if the loan was used for genuine
purposes, Banks carry out an independent valuation to find out whether the transaction is in line
with the existing market price of the area.
Valuation has become the key parameter in determining the loan amount that can be sanctioned
by the Bank. The valuation process is quite subjective and depends on the quality and ability of
the person sent by the Bank for valuation.

Valuation of real estate as a profession is still in its infancy in India and is still non-standardized.
In many cases, the valuer determines the value of the property at the amount that is lower than
the documented cost of the property and this would result in the loan amount being lower, since
the Bank funds a certain percentage of the cost or valuation of the property, whichever is lower.
Step 08: Offer Letter

Once the loan is sanctioned, the Bank sends an offer letter mentioning the following details:
 Loan Amount
 Rate of Interest
 Whether fixed or variable rate of interest linked to a reference rate
 Tenure of the loan
 Mode of Repayment
 If the loan is under special scheme, then the details of the scheme
 General term and conditions of the loan
 Special condition, if any
Acceptance Copy:
If the applicant agrees with what is mentioned in the offer letter from the Bank, he/she will have
to sign a duplicate letter of the same for the Bank‟s records. Earlier, Bank used to charge
administrative fees along with the offer letter. However, with rising competition, this fee has
virtually disappeared from the loan market.
Step 09: Registration of Property Documents

After the legal and technical/ valuation check, the draft documents as cleared by the lawyer need
to be finalized and signed and the stamping and registration of the documents need to be done.
Also, if any NOC‟s are pending than these need to be obtained in the format approved by the
Bank‟s lawyer.
Step 10: Signing of agreements and submitting Post- dated Cheques

All borrower need to sign the loan agreement and need to submit post-dated cheques as per
agreed mode of repayment. The original documents have to be handed over to the Bank if loan is
taken over that.

This document is also called a memorandum of entry and attracts significant stamp duty
depending on the amount of the loan. The stamp duty payable on such memorandum is
recoverable from the applicant as per the agreement signed by the parties involved.
Step 11: Disbursement

After the Bank has ensured that the documents are legally and technically clear and all the
necessary loan agreement have been executed, finally, it is payment time! The applicant will now
actually receive the cheque and along with a document that he/ she has paid his/ her personal
contribution towards that property, auto, cars, etc. since Bank normally finance only up to 85-90
per cent as per their regulation.
In case the applicant is expecting money from other sources to funds his/ her contribution, he/
she need to provide sufficient evidence for the same. It is only after submitting this proof that the
Bank will release part-disbursement of the loan.
The cheque or draft is in the name of the reseller, builder, society or the development authority.
It is only in exceptional circumstances, i.e., if the applicant provides document to support that he/
she has made an excess payment then only the cheque will be handed over to the applicant
directly by the Bank.
Disbursement in Stages:
Usually, loans are disbursed on the basis of stages in case of construction of the property/
Commercial vehicle/ Construction Equipment/ Working capital. In case of under-construction
properties, the payment is made in parts, also known as part-disbursement. Each option would
have different disbursement processes.
a. Part Disbursement:
When a loan is partly disbursed, the Bank does not start EMI immediately, since it is calculated
on the total loan amount at a particular rate of interest and for a given tenure. Moreover, it
normally does not start breaking up the installments into its principal and interest components
until the entire loan amount is disbursed.
To overcome this difficulty, Bank charges simple interest on the partly disbursed amount. For
instance, if Bank have sanctioned loan of Rs. 10 lakh, but the property is under construction and
Bank has disbursed only Rs. 4 lakh, than SI is charged on the disbursed amount. This process

continues until the final disbursement takes place. The simple interest paid is called Pre-EMI
interest or PEMI.
At this stage, Banks may take only around three to six post-dated cheques on account of PEMI.
b. Full and final disbursement:

If it is a ready-possession, the Bank disburses the entire loan amount in favor of either the
reseller or the builder.
Payment Receipt:
Once the Bank hands over the pay order to the borrower, he/ she is expected to hand it over to
the seller and should get a receipt from them for the payment and hand it back to the Bank, as it
will become part of the borrower‟s mortgage documentation.
Share Certificates:
In case it is part of the seller, the customer will need to get the transfer of title on his/ her name
and records the transfer of ownership in their books.
This normally happens at the first AGM/ EGM after the sale transaction. The transferred share
certificate also happens to be a part of the mortgage documentation and has, therefore, to be
handed over to the Bank after the transfer takes place.
Repayment
The loan is generally repaid by equated monthly installments, using post-dated cheques. Bank
usually asks for 12, 24 or 36 PDCs, after which customer need to repeat the process until the
entire loan have been repaid.
In case the installments are to be deducted against the borrower‟s salary / income, him/ her need
to submit a letter accepting the arrangement and directly remitting the amount to the Bank every
month.
Axis Bank allows giving Standing Instructions to the Bank to deduct money each month
crediting the borrower‟s loan account. One can deposit the EMI every month at the Bank‟s
office.
Prepayment
The borrower can prepay a loan either in part or in full at any given point of time. It can also be
prepaid, when it is only partly disbursed.

Loan Pre-closure/ Satisfaction

The customer also has an option of completely repaying the loan at any time. Of course, Bank
has its conditions for pre-closure. Also, the loan will get completely paid off on the expiry of the
tenure of the loan if one has paid all installments on time.
After one has completely repaid the entire loan, he/ she must ensure that the entire sets of
original documents are taken back. One should ask the Bank for No-Objection Certificate (NOC)
saying the account has been cleared. As an option, the Bank may issue a consent letter stating
that the property is now free from mortgage.
If the borrower has guarantors, the Bank will issue a separate letter for each of the guarantors
stating that their liability has come to an end.

5.3 TOOLS & TECHNIQUES USED IN RETAIL LOAN APPRAISALS
1. Credit Scorecard Sheet

The credit scorecard sheet has been systematically formulated by Axis Bank; it is a
format where points are allocated against various parameters such as age of the customer,
qualification, No. of dependents of the customer, income information, total no. of years
of employment etc. and a cutoff score of 60% and more is mandatory, after preparing the
credit score sheet the customer eligibility can be accessed, the low profile cases can be
filtered and only the eligible cases are approved for further processing. Axis Bank has
been using the credit score card sheet which is a powerful technique used in the appraisal
system.
2. CIBIL Rating
With a view to provide an institutional mechanism for sharing of information on
Borrowers of Banks and financial institutions, the Credit Information Bureau (India) ltd.
(CIBIL) was set up in August 2000. The Bureau provides a framework for collecting,
processing and sharing credit information on borrowers of credit institutions. CIBIL is a
repository of information, which contains the credit history of commercial & consumer
borrowers.
At Axis Bank the customer credibility is accessed with the help of CIBIL, which is useful
to get the credit information of the customer, and is considered as one of the major
technique of appraisal system.
3. Field Investigation
Field Investigation is also one of the important practical tools of appraisal system where
in the field investigation at Axis Bank Retail Asset Center, Pune has been outsourced to
Consultancy and Agencies who are responsible to carry out residence verification of the
customer, IT Returns verification, salary slip, and Bank statement verification of the
customers, office verification has also been outsourced who also conducted tele-
verification and verification of references, and the concerned agencies also provide
remarks about the case investigated and brings to the notice of the Bank in case of any
fraud detected in the Documents and in other forms.

A thorough Investigation of the customer profile by outsourced agencies in each and

every aspect is a techniques adopted by Axis Bank RAC as an effective appraisal method.
4. Credit Alerts
This technique is normally used for high ticket size funding wherein the Credit manager
will take the alerts of the specific case with the Bank network and his own network built.
Credit alert is checked about the customer background, cross verification is done by his
clients/ Creditors or debtors or Alert is taken from his Banker or Charted Accountants
etc.
Also Credit dept. takes the feedback about the high value case from the collection Dept.

5.4 PRIORITY SECTOR ADVANCES

RBI‟s revised guidelines on lending to priority sector, loans up to Rs. 20 lakh to individuals for
purchase/ construction of dwelling unit per family, (excluding loans granted by Banks to their
own employees) and loans given for repairs to the damaged dwelling units of families up to Rs. 1
lakh in rural and semi-urban areas and up to Rs. 2 lakh in urban and metropolitan areas as
priority sector advances (loans).
Priority sector guidelines mandate Banks to lend to those sectors that impact large sections of the
population, the weaker sections and the sectors, which are employment-intensive such as
agriculture and tiny and small enterprises. Domestic commercial Banks are required to lend 40%
of their Adjusted Net Bank Credit (ANBC) and Foreign Banks are required to lend 32% of their
Adjusted Net Bank Credit (ANBC) to the priority sector activities identified by RBI. Notably the
revised guidelines take into account the latest definition of small & micro enterprises as per
Micro, Small & Medium Enterprises Development Act, 2006. Other features of the revised
guidelines are:
 Educational loans granted to individuals for educational purposes up to Rs. 10 lakh for
studies in India and Rs. 20 lakh for studies abroad qualify as priority sector advances.
 Advances to small manufacturing enterprises (investment in plant and machinery not
exceeding Rs. 5 Crores) and micro manufacturing enterprises (investment in plant and
machinery not exceeding to Rs. 25 lakhs) also qualify as priority sector advances.
 Loans granted for construction, additions, alterations, repairs, etc. granted as under would
be categorized as housing loans: Direct housing loans to individuals by Banks up to Rs.
10 lakh for construction of houses in urban and metropolitan areas will be eligible for
inclusion under Priority Sector. Further, Banks with the approval of their Boards may
also extend direct housing loans up to Rs. 10 lakh in the rural and semi urban areas and
cost be considered as part of Priority Sector Advances.
 Loans granted by Banks upto Rs. 1 lakh in rural and semi urban areas and Rs. 2 lakh in
urban areas for repair, additions and alterations etc. to individual borrowers would be
reckoned as Priority Sector Advances.
 At Axis Bank, in case of housing loans the loan amount of below Rs. 10 lakhs is treated
as priority sector advances, in personal loan the loan amount which is below Rs. 1 lakh
which is generally provided for smaller business units like provision stores, and other

petty cash business and even larger loan amount to other SSI units, majority of which are
into the forgoing, iron casting business etc. are treated as priority sector advances.
Apart from the above, Bank is also lending crores of amounts to agricultural sector, which comes
under the preview of Priority Sector Lending.

5.5 NON-PERFORMING ASSETS (NPA)

Definition:
An asset is classified as non-performing asset (NPA‟s) if any dues in the form of principal and
interest are not paid by the borrower for a period of 180 days.
Any asset that is not effectively producing income is generally referred as Non-Performing
Asset. An example, an overdue loan would be considered as Non-performing Asset.
One of the most important and major roles played by Banking sector is that of lending business.
It generally encouraged because it has the effect of funds being transferred from the system to
productive purposes, which also results into economic growth. As there are pros and cons of
everything, the same is with lending business that carries credit risk, which arises from the
failure of borrower to fulfill its contractual obligation either during the course of a transaction or
on a future obligation.
However with effect from March 2004, default status would be given to a borrower if dues are
not paid for 90 days. If any advances or credit facility granted by Bank to a borrower becomes
Non-Performing, then the Bank will have to treat all the advances/ credit facilities granted to that
borrower as non-performing without having any regard to the fact that there may still exist
certain advances/ credit facilities having performing status.
Banks play a very important role in the economic development of every nation. They have
control over a large part of the supply of money in circulation. Banks are the main stimulus of
the economic progress of a country. In general there are several challenges confronting of Banks.
The main challenge confronting the Bank is the disbursement of funds in quality assets (loans &
advances), the main challenge facing the Banks is the disbursement of funds in quality assets
(Loans & Advances) or otherwise it leads to Non-Performing Assets.
An asset which ceases to generate income of the Bank is called Non-Performing Asset. The past
due amount remaining uncovered for the two quarter consequently the amount would be
classified as NPA for the whole year. It includes borrowers‟ defaults or delays in interest on
principal repayment.
NPA is a double-edged weapon, which affects Bank profitability due to interest income not
being recognized on NPA accounts and loan loss previously to be created from profit earned.
NPA doesn‟t earn any income, it adversely affects the capital adequacy ratio, and the adequacy
ratio reveals the health condition of the Bank. The capital adequacy ratio is defined as the ratio
between a Bank‟s total capital and its risk-weighted assets.
GENERAL REASONS FOR ASSETS BECOMING NPA‟s

A multiplicity of factor is responsible forever increasing size of NPA‟s in Banks. A few
prominent reasons for assets becoming NPA‟s are as under:
 Poor credit appraisal system
 Lack of proper monitoring
 Reckless advances to achieve the budgetary targets.
 There is no or lack of corporate culture in the Bank. In adequate legal provisions on
foreclosure & Bankruptcy.
 Change in economic policies/ environment.
 No transparent accounting policies and poor auditing practices.
 Directed lending to certain sector.
Write offs:
Write offs is also one of the common management techniques of NPA‟s. The assets are treated as
loss assets, when the Bank writes off the balances. The ultimate aim of the write offs is to
cleaning the Balance sheet.
Generally Banks writes off these NPA‟s once they are 180 days old after the approval of
competent authority. After writing off these NPA‟s, they are removed from the Books of Records
of the Bank, thereby maintaining the standard of their balance sheet.
Even after the Writing Off the cases, Banks used to collect the due amount, which is treated as
the Recovery.
Impact of NPA‟s on internal factors:

An NPA‟s affect the internal position of the Bank. The following are the impact of internal
factors.
1) NPA increase Total Expenditures:
The overall expenses of the Bank continued to rise for a number of reasons. The
Provision for doubtful accounts, that caused the dramatic increases in total expenses. The
size of provision for doubtful accounts varies from year to year because of the differences
in the levels of the risk anticipated.

2) NPA‟s reduces the earning Capacity:

The NPA affects earning capacity of the Bank. In general various causes reduce the
profitability performance of the Bank. The provision for doubtful debts is one among the
most important cause for reducing the profitability of the Bank.
3) NPA‟s reduces the ROA:

NPA reduces the earning capacity of the assets, return on assets also get affected.
4) NPA‟s do not earn any income they adversely affect Capital Adequacy Ratio.
Impact on external factors:

a. Regulatory and credit agencies are also not happy with the level of NPA.
b. Indifferent attitude developed in the mind of the Bank customers.
c. Image of the Bank in the minds of the general public will go down.
NPA‟s at Axis Bank

Axis Bank has been successfully maintaining relatively a lower size of NPA‟s which is mainly
because of adoption and implementation of effective credit appraisal tools and also the Bank
makes a thorough study at the financial profile/ cash flows of the customer before selling any
loan products.
The EMI payment which is due for more than 3 months or 90 days past due (DPD) results into
Non Performing Asset. In case where the repayment due exceeds 6 months the case is considered
for write-off, write-off is a concept where the balances of the customer are written off completely
from the Balance Sheet.
The Housing Loan and Loans against Property portfolio till date has no any record of NPA‟s and
so the written-off situation doesn‟t arise in case of Housing Loan Portfolio as of now.
As in personal loan portfolio in 30 days past due as against the Banks target of 3.5% the
percentage has been nominal of 1.75% which shows an healthy signs of the branch and in case of
90 days past due the NPA‟s percentage accounts to only 0.25% which is extremely good in term
of quality of the portfolio of Personal loan being absolutely non-secured.
And in case of Auto Loan, since the Bank has hypothecation this product, the NPA does not
come into picture during my project tenure.

CHAPTER- VI
After having seen, the steps involved in the processing of a Retail loan, let‟s us understand the
main issues involved in the issuance of loan to meet the Working Capital Requirement.
6.1 Working Capital

For running an industry or a Concern, two type of capital are required viz., fixed capital and
working capital. Fixed capital is utilized for acquiring the fixed assets such as land, building,
plant & machinery, etc., and to meet capital expenditure connected with the setting to keep the
wheels moving up of the industry or Concern. But by themselves, these fixed assets would not
produce/ earn anything. They have to be run/ worked for production. This requires enough liquid
sources, viz., working capital.
Working capital represents the money that is required for purchase/ stocking of raw materials,
payment of salary, wages, power charges, etc., and also for financing the gap between supply of
goods and the receipt of payment thereafter.
In other words, Working Capital Finance is the fund required to meet the cost involved during
the working capital cycle or operating cycle.
Operating Cycle or Working Capital Cycle

Working capital cycle of a manufacturing activity starts with the acquisition of the raw material/
stores & spares and ends with realization of cash for finished goods. The cycle is long in some
cases and short in other cases depending upon the nature of business. In manufacturing units,
Working Capital Cycle comprises of purchase of Raw materials either in cash/ credit basis,
converting raw materials into stock in process and then into finished goods and transformation of
finished goods into book debts/ cash.
In respect of trading concerns, operating cycle represents the period involved from the time the
goods and services are procured and the same are sold and realized. The working capital cycle is
illustrated as follows:

Fig. 1.11: WORKING CAPITAL CYCLE
The total Working Capital requirements for Industrial Units will depend upon the holding period
of assets and the operation of the cycle. During the cycle, funds are blocked in various stages of
current assets, viz., cash itself, inventory (consisting of raw materials, stock in progress, finished
goods) and receivables. These require finance. Finance involves costs. Quicker the cycle more is
the turnover normally and longer the cycle, the less is the turnover. Stagnation in any area effects
turnover and profitability.
Management of Working Capital

Management of working capital involves management of current assets, current liabilities and
Net working Capital.
A. Current Assets
Current assets are convertible assets, liquid assets or floating assets. They change their form
every now and then and ultimately are converted into cash. They indicate short-term deployment
of funds and from Gross Working Capital.
Current Assets mainly consist of:
1. Cash and Bank Balance

2. Stock in trade consisting of raw materials, stock-in-progress, finished goods, stores,

packing materials.
3. Book Debts: including bills purchased & discounting (only upto 180 days)
4. Investments (Short term)
5. Cash margin from non-fund based limit (letter of credit/ Bank Guarantee) may be treated
as a part of current assets,
6. Other loans and advances, etc.
The following items should not be treated as Current Assets and the same may be classified as
Non-Current Assets.
1. Investment/ loans to subsidiaries/ associates (non-trade investments)
2. Other investment (not marketable)
3. Overdue book debts (generally those more than six months old)
4. Deferred Receivables (maturity exceeding one year)
5. Other- fixed deposits with Government Departments, loans to directors/ employees/
partners, advances (machinery suppliers), machinery stores, tools, etc.
6. Cash margin held for deferred payment guarantee.
B. Current Liabilities
Current liabilities are short term liabilities which are repayable within a year. They are normally
raised for meeting the working capital needs and to acquire current assets. They are main sources
of finance for working capital and are normally identified with the operating cycle of the
business.
Current Liabilities normally consist of:
1. Bank Borrowings for working capital.
2. Other short term borrowings like unsecured loans, inter corporate deposits, etc.
3. Sundry creditors (for goods, expenses and other including advances payment against
orders.)
4. Term loan/ Debentures/ Deferred Payments and Lease Rental installments repayable
within a period of one year.
5. Statutory Liabilities (due within one year)
6. Other current liabilities & provisions (accrued expenses of wage, interest, unclaimed
dividend & provision for taxation, etc.)
C. Working Capital Gap

This represents excess of current assets over current liabilities excluding Bank borrowings. A
part of the Current Assets are financed by Current Liabilities (other than Bank borrowings). The
remaining portion of current assets which requires financing is called as working capital gap.
Bank does not grant advances to the full extent of working capital gap. It is always desirable rule
that the borrower has to finance a part of working capital gap out of either capital or long term
sources which reflects his continued commitment to the business that is necessary for the
survival of the unit.
D. Net Working Capital

This represents excess of current assets over current liabilities (including Bank finance). It
indicates the margin or long term sources provided by the borrower for financing a part of the
current assets. For successful operation of a business, Current Assets should be more than the
Current Liabilities.
E. Current Ratio
The ratio of current assets to current liabilities is known as Current Ratio. It indicates the
liquidity position whereby the capacity of unit to pay the creditors & short-term liabilities is
determined. It is generally expected that the customer should meet about 25% of its Working
Capital requirements or Current assets from long term sources. Thus, normally, the current ratio
should be minimum 1.33.

6.2 METHODS OF ASSESMENT OF WORKING CAPITAL NEEDS

Consistent with the policy of liberalization, in April 1997, RBI withdrew the prescription in
regard to assessment of working capital needs, based on MPBF, enunciated by Tandon
Committee. Thus Banks are given greater operational freedom for dispensation of credit. Banks
are also free to evolve their own method of assessing working capital requirements of the
borrowers within the prudential guidelines and exposure norms already prescribed. However the
Bank continue to adhere to various guidelines under Credit Monitoring Arrangement (CMA) for
sanction of credit proposals and classification of current assets and liabilities as they still hold
good and valid.
Assessment of the working capital requirements of a borrower shall generally be made under any
one of the following methods:
1) Turnover Method (P.R. Nayak committee Recommendation)
2) Maximum Permissible Bank Finance (MPBF) system (Tandon/ Chore Committee
recommendation)
3) Cash Budget System
1. Turnover Method
Turnover method also known as the simplified turnover method is based on the
recommendations given by Nayak Committee. Under this method, the working capital
requirement is 25% of average projected turnover, out of which the party has to contribute 5% of
average projected turnover as margin and remaining 20% will be financed by Bank. The
minimum margin of 5% shall be by way of promoter‟s contribution towards margin money.
However, if the available NWC in the system exceeds stipulated 5% minimum margin, the same
shall be reckoned for assessing the extent of Bank finance and limits will be determined
accordingly. This method is used for financing of loan within the limit of 2 crores for trading and
service concerns or others and 5 crores for a manufacturing concern. Under this method Current
ratio would be 1.25.
2. Maximum Permissible Bank Finance Method (MPBF)

This method is based on the recommendations given by Tondon committee. As per the
recommendations of Tandon Committee, the corporate should be discouraged from accumulating
too much of stocks of current assets and should move towards very lean inventories and
receivable levels. The committee even suggested the maximum levels of Raw Material, Stock-in-
process and Finished Goods which a corporate operating in an industry should be allowed to
accumulate. These levels were termed as inventory and receivable norms. Depending on the size
of credit required, the funding of these current assets (working capital needs) of the corporate
could be met by one of the following methods:
 First method of lending: Banks can work out the working capital gap, i.e. total current
assets less current liabilities other than Bank borrowings (called Maximum Permissible
Bank Finance or MPBF) and finance a maximum of 75 per cent of the gap; the balance to
come out of long-term funds, i.e., owned funds and term borrowings. This approach was
considered suitable only for very small borrowers i.e. where the requirements of credit
were less than Rs.10 lakhs.
 Second Method of Lending: Under this method, it was thought that the borrower should
provide for a minimum of 25% of total current assets out of long-term funds i.e., owned
funds plus term borrowings. A certain level of credit for purchases and other current
liabilities will be available to fund the buildup of current assets and the Bank will provide
the balance (MPBF). Consequently, total current liabilities inclusive of Bank borrowings
could not exceed 75% of current assets. RBI stipulated that the working capital needs of
all borrowers enjoying fund based credit facilities of more than Rs. 10 lacs should be
appraised (calculated) under this method.
 Third Method of Lending: Under this method, the borrower's contribution from long
term funds will be to the extent of the entire CORE CURRENT ASSETS, which has been
defined by the Study Group as representing the absolute minimum level of raw materials,
process stock, finished goods and stores which are in the pipeline to ensure continuity of
production and a minimum of 25% of the balance current assets should be financed out of
the long term funds plus term borrowings.
(This method was not accepted for implementation and hence is of only academic
interest).
Under MBPF method for assessment of borrowers working capital needs, the projections
submitted by borrowers are relevant. The first step in assessing the quantum of WC finance is to
find out whether the projections given by the borrower are reasonable. Once the borrower‟s

overall projections for the following year have been accepted then the actual requirement of the
WC and Bank finance can be worked out as:
 The actual requirement of WC can be arrived on the basis of position of current assets
and other current liabilities
 The Bank is to partly meet to difference between current assets and other current
liabilities
 If the available NWC is more than the minimum stipulated WC under the second method
of lending, the available NWC is to be taken into account for arriving at the permissible
level of Bank finance i.e. permissible Bank finance will be reduced accordingly.
3. Cash Budget System

In case of tea, sugar, film industries and service sector requirement of finance may be at the peak
during certain months while the same proceeds may be realized throughout the year to repay the
outstanding in the account. Therefore, credit limits are fixed on the basis of projected monthly
cash budgets to be received before beginning of the season.

6.3 APPRAISAL OF CREDIT PROPOSAL OF WORKING CAPITAL
Submission of Project Report along Carrying out Due Diligence on the

with the Request Letter Client
Determining of Interest Rate and Feasible

Preparing Credit Report / Feasibility
Preparation of Proposal Report and Risk Rating
Not feasible
Submission of Proposal to designated Submission of Proposal to designated

Authority (Circle office) Authority
Queries
Re-verification and analysis of the Meeting with the client to clarify the
Proposal queries
No Queries
Vetting of Credit Risk Rating Report Approval of request made by the client
like Reduction of Interest Rates etc
Acknowledgement of Sanction Terms Sanction of Proposal on various Terms

& Condition by the client & Conditions
Application to comply with Sanction Disbursement of Sanctioned Amount

T&C. Execution of Loan Documents from the branch office
SME
Procedures at Branch Office Procedures at Circle Office Level
Level
Figure 1.12: CREDIT APPRAISAL PROCESS OF WORKING CAPITAL

The clients are targeted based on clear norms, which seek to filter the undesirables at the entry
level. The credit exposure is taken after subjecting the proposal to various factors such as
financial risk, industry risk, management risk, etc. Periodical review is conducted to ascertain the
conduct of the accounts. The details of credit appraisal for working capital are as follows.
Procedure:
 Proposal under credit facilities are received by the advance department directly from the
customers.
 These proposals are put forward to the credit officer and senior manager who will
analyses the proposal.
 Then they will submit a report in the form of office note to the chief manager.
 For advance up to Rs. 1 Crore, the chief manager will sanction the loan. And for
advances above that the regional officer will sanction the loan.
Thus, after going through the office note and on the basis of pros and cons in the proposal the
chief manager/ Regional officer will take decision on sanctioning the loan. The underlying theme
for sanction of proposal is a conservative approach.
Analysis by Credit Official

The credit official on receiving a request makes a detailed credit analysis. The appraisal
fundamentally focuses on the aspect of short term and long term liquidity and profitability. After
a detailed analysis, an office note is prepared by the credit official along with the
recommendations of the Chief Manager and submitted to the regional office for consideration.
The Note generally encompasses the following:

1. The nature and constitution of the borrower, profile of the proprietors/ partners/
promoters/ Directors/ Management and pattern of shareholding.
2. Credit report cum opinion sheet, containing the details about the credit worthiness of the
borrower and opinions, collected from various sources.
3. Banks past experience with the borrower (for existing customers) or the experience of
borrower past Bankers (for new customers). This will include annual turnover (Sum of
credit entries in account), number of cheques returned, detail about repayment of existing
and old loans etc.

4. Banks present exposure to the company/ group and borrowers present request.
5. Purpose for which the loan is required.
6. Details about sister concerns, their credit worthiness, relation with the borrower etc.
7. Compliance with Central Government, State Government and other competent authorities
and socio-economic feasibility of the project.
8. Nature of the industry, new developments in the industry and cycle of the industry.
9. Market feasibility analysis of the borrower, existing business relationship, existing
current and future demand, etc.
10. Technical feasibility of the project, location of the factory and environmental and
pollution clearance, etc.
11. Analysis of managerial competence by studying the educational qualification, experience,
knowledge and capacity of the management and its work force.
12. The appraisal of the financial figures, qualifications in the auditor‟s report, accounting
practices, and director‟s report.
13. Analysis of financial statement by using various tools such as ratio analysis, cash flow
analysis and fund flow analysis. Analysis of income generating capability.
14. Details about prime and collateral security. This include details about creation of EMI,
availability of insurance, legal opinion of the property, encumbrance certificate of the
property, engineers valuation for the asset, managers desktop valuation and field visit
details, etc.
15. Details about the guarantor, their net worth, credibility, etc.
16. Terms and conditions to be fulfilled for sanctioning the loan.
Beyond these, Axis Bank also does credit checks on the borrower to actually determine a
borrower‟s ability to pay and willingness to pay.
Standards for financial norms:

The next step is to check the key ratios of the business of the borrowers, such as, Current ratio,
Debt equity ratio, TOL/ TNW, Interest Coverage ratio, Security Coverage ratio, etc. the standard
financial norms for considering credit proposal are given below in Annexure V.

6.4 CREDIT APPRAISAL TOOLS FOR WORKING CAPITAL

The following methods and techniques are used to analyze the proposals:
a. Background Information:
It Consist of client company‟s business activities, product profile, awards and
certification, mission, etc.
b. Industry Analysis:
It details with the status of the industry, its growth rate, drawbacks, and other technical
factors.
c. Market Analysis:
This analysis is made of determine the market position, level of competition, profitability
position, threat in the market, etc.
d. Financial indicators:
Key financial indicators which are used by the Bank to determine the financial soundness
of the clients are found out and they are analyzed for the selected cases. Those indicators
are as follows:
(1) Tangible Net Worth (TNW):
The owner‟s interest or proprietor‟s stake is called Tangible Net worth (TNW).
Tangible net worth is the excess of total amount of assets (excluding miscellaneous
expense) over total amount of outside liability. It is given by-
TNW= Share Capital + Reserves & Surplus – Fictitious Assets
(2) Debt Equity Ratio (DER):

The Debt Equity Ratio (DER) is one of the two basic financial ratios which a Banker
will always look into, the other ratio being Current Ratio. Debt Equity Ratio is
calculated to measure the relative claims of outsiders and owners against the firm‟s
assets. This ratio is also called as TOL/ TNW ratio. This ratio indicates the
relationship between the external equities or the outsider‟s fund and the internal
equities or the shareholders fund.
Debt Equity Ratio= Outsider‟s Funds/ Shareholder‟s Funds
= Total Outside Liability/ Tangible Net Worth

(3) Current Ratio:

The ratio of Current Assets to Current liability is called Current Ratio. In order to
measure the short-term liquidity or solvency of a concern, comparison of current
assets and current liability is inevitable. Current ratio indicates the ability of a concern
to meet its current obligations as and when they are dues for the payment.
Current Ratio= Current Assets/ Current Liability.
(4) Net Working Capital (NWC):

Net Working Capital refers to the difference between Current Assets and Current
Liabilities. Net working Capital can be positive or negative. A positive Net Working
Capital will arise when Current Assets exceeds Current Liabilities. A Negative Net
Working Capital occurs when Current Liabilities are in excess of Current Assets.
Net Working Capital (NWC) = Current Assets (CA) – Current Liabilities (CL)
(5) Sales:
It is the readily available and most important financial indicator to judge whether the
business will survive or not. Here sales refer to net sales.
Sales= Gross Sales – (Sales Return + Sales Tax + Excise Duty)
(6) Depreciation:
Depreciation is a provision made in the Profit & Loss A/c. to replace the assets when
they are due for replacement. It is non-cash expenditure. Amount of depreciation is
readily available in the Profit & Loss A/c.
(7) Profit After Tax:

All firms exist to earn profit. Proprietors will invest more in the business if only it
provides goods return to them. Hence, Profit is the single most judging factor to
determine the viability of the business.
PAT = Net Profit after Interest & Depreciation – Provision for Tax.
(8) Cash Generation:

Business should generate sufficient cash flows to satisfy its day-today cash needs.
When it is unable to meet its daily cash needs it will leads to a situation of cash

crunch. Cash flow during the year is determined by adding depreciation (which is
non-cash expenditure) and PAT.
Cash Generation = PAT + Depreciation.
(9) PAT/ Sales:

This ratio is designed to focus attention on the net profit margin arising from business
operations. This ratio is expressed as a percentage. This ratio is of primary
importance since profits accrue on sales. This ratio indicates the profitability of
business for each Rs. 100 of sales.
PAT/ Sales = (Profit after interest, Depreciation and Tax/ Net Sales) * 100
These above mentioned risks are measured on a scale of 1-6 points, 6 being the highest score and
results in 10 grades as under:
DEGREE OF SAFETY
WITH REGARDS TO
GRADE COMMENTS
SERVICING DEBT
OBLIGATIONS
Grade I The fundamentally strong debt servicing capacity of such companies is
Very High
(AAA) most unlikely to be adversely affected by changes in circumstances.
Adverse business conditions are unlikely to affect debt servicing
Grade II
High capacity. Such companies differ in safety from those in Grade only
(AA+)
marginally.
Grade III Changes in circumstances are more likely to affect debt servicing
Adequate
(AA) capacity than for higher grades.
Grade IV Debt servicing capacity could weaken in view of charging
Average
(A) circumstances
While such companies are less susceptible to default than those in
Grade V
Below Average lower grades, uncertainties faced by them could adversely affect debt
(BBB)
servicing capacity.
Grade VI Uncertainty faced by issuer could lead to inadequate capacity to make
Inadequate
(BB+) timely debt repayments.
Grade VII Uncertainty faced by issuer could is highly vulnerable to adverse
Low
(BB) changes in circumstances.
Grade VIII Adverse business or economic conditions are likely to lead to lack of
High Risk
(B) ability or willingness to service debt obligations.
Grade IX Timely payment of debt would continue only if favorable
Substantial Risk
(CC) circumstances continue.
Grade X Debt servicing capacity in default and returns from this may be
Default
(C ) realized only on reorganization or liquidation.
6.5 CASE STUDY ANALYSIS

A. CASE STUDY 1
One proposal was selected, in order to apply credit appraisal and working capital assessment
procedures to the company.
Methods of Data Collection

Secondary Data:
The data which is collected from the already existing files, journals, published financial
statements and documents are called as secondary data. The secondary data which are collected
has been taken from the loan application forms, annual reports of the borrowers and other
documents and handouts given by the borrower.
Tools of Analysis
The following methods and techniques have been used to analyze the cases:
1. Background Information
It consists of client company‟s business activities, product profile, awards &
certifications, mission, etc.
2. Industry Analysis
It deals with the status of the industry, its growth rate, drawbacks, and other technical
factors.
3. Market Analysis
This analysis is made to determine the market position, level of competition, profitability
position, threats in the market, etc.
4. Financial Analysis
Key financial indicators which are used by the Bank to determine the financial soundness
of the clients are found out and they are analyzed for the selected cases.

Financial Performance of XYZ Pvt. (Ltd)

5 YEARS PERFORMANCE AT A XYZ – FINANCIAL (RS. In Lakh)
Projected Projected
2011-10 2010-09 2009-08
2013 2012
INCOME STATEMENT
Sales 3001.94 2806.09 2681.48 2236.95 2440.04
Other Income 664.87 642.39 461.47 195.21 172.43
TOTAL INCOME 3666.81 3448.48 3142.95 2432.16 2612.47
Earnings Before Tax
2346.01 1972.51 1957.42 1445.70 1305.48
& Depreciation
Depreciation 516.30 499.78 259.85 260.93 271.26
Interest 66.09 69.01 3.92 3.77 5.77
Profit 1763.62 1403.72 1693.65 1181.00 1028.43
Prior Period
-9.06 9.36 2.67 17.53 -3.24
Adjustment (Net)
Extraordinary Item 2.12 0.00 -8.48 0.00 0.00
Profit Before Tax. 1756.68 1413.08 1687.83 1198.53 1025.19
Provision for Tax 541.68 269.57 539.43 379.33 299.27
Net Profit/ (Loss) PAT 1215.00 1143.51 1148.40 819.20 725.92
Dividend 335.54 234.88 234.88 226.49 172.89
Dividend Tax 46.70 30.09 30.09 - 17.64
BALANCE SHEET
Equity Capital 1677.71 1677.71 1677.71 1677.71 1677.71
Reserves & Surplus 6001.47 5168.85 4290.46 3407.18 3292.35
Tangible Net Worth 7673.05 6824.25 5947.55 5061.98 4959.51
Loans Outstanding 1229.69 1295.70 1386.78 1266.31 1292.85
Net Fixed Assets 4269.06 4542.63 4129.79 2585.15 2610.62
Investments 2590.77 2590.77 595.00 498.00 595.00
Net Current Assets 2617.16 1549.24 2407.99 1793.49 1507.25
Capital Employed 9476.99 8682.64 7132.78 4876.64 4712.87
RATIOS
Operating Margin
56.00 47.40 55.79 55.90 46.44
(OPM) (%)
Return on Capital
12.82 13.17 16.10 16.80 15.40
Employed (ROCE) (%)
Return on Net-worth
15.83 16.76 19.30 16.18 14.64
(RONW) (%)
Debt Equity (%) 16.03 18.99 23.32 25.02 25.66
Current Ratio 3.89 2.43 3.47 3.21 2.27
Quick Ratio 3.50 2.15 3.11 2.72 1.86
VALUE ADDED PER
1348250 1253704 1156768 952534 849201
EMPLOYEES (in Rs.)
BOOK VALUE PER
45.74 4.068 35.45 30.17 29.56
SHARE (in Rs.)
Dividend (%) 20.00 14.00 14.00 13.50 10.00

Total Operating Income

The Operating Income of the Company has Increase for Every Year. It indicates that the
company has huge sales in the Every Year. This income shows that the part of the sale is card
sales.
Debt Equity Ratio

The Debt Equity ratio is neutral. This Ratio is Fluctuate for every year.
Current Ratio
The current Ratio is an indication of a firm‟s market liquidity and ability to meet short-term debt
obligations.
The organization current ratio is not between the margin levels it has fluctuating for every year.
It indicates the organization is not properly utilizing the current assets. In Projected year it may
utilize for business purpose.
Findings of the Case

 Sales and Profit after Tax are showing Rapid Growth.
 Debt Equity ratio is not favorable level of risk is very high at a DER of 23.32. it may
decrease in Future.
 Current Ratio is not satisfactory Position. The organization is not utilizing the current
assets.
 “-C” score is below the discriminating level and it is very low. The card sales are margin
level.
Recommendation
In view of the above analysis, it is recommended that credit could be provided to the borrower.
But, the Bank should take a higher level of risk. Borrower request for renewing the Demand loan
for Rs. 20 lakh as (or) 30 lakh for fresh Term loan has been sanctioned. Borrower should be
continuously monitored and steps should be taken to improve their financial position.

B. CASE STUDY 2
Details of case study
Name of the
Suchi Enterprises (New Relationship)
Applicant
Work Office 72-76, MUNHWA, INDUSTRIAL ESTATE, PUNE, MAHARASTRA
Address
Residence
72-76, MUNHWA, INDUSTRIAL ESTATE, PUNE, MAHARASTRA
Address
Contact Details
Proprietorship Firm
31.01.1992
(GST Registration No.
Proprietor: Mr. Rajendra
Date of 24691601368)
Constitution Vallavhbhai. Patel
Establishment (SSI Registration No.
240191100480, dated 07.06.2007)
PAN: ACSPP2512N
Nature of
Manufacturer of HB (Half hard bend) & MS (Mild stone) wires
Business
Brief Background
M/s Suchi Wires is a proprietorship firm established in year 1992. Mr. Rajendra Vallabhbhai
Patel is a proprietor of the firm.
Firm is mainly engaged in the business of manufacturing of iron wires, cutting & stretching it
into different sizes according to customers‟ requirements.
The proprietor was working with administrative department of school in his initial career before
20 years. Proprietor then started trading in wires with friends at small level, on seeing the
business potential, he decided to establish the business in the name of Suchi Wires.
The proprietor is Commerce Graduate & aged about 51 years. He started business in year 1992
and having experience of around 17 years in the same line of business.
Mrs. Niyati Patel (sister of the proprietor) manages administrative work related to the business.
Mr. Kalpesh Patel (Brother-in-law of the proprietor) looks after the technical support. The
proprietor looks after the finance & overall management.

There are 16 workers in the firm, working in 2 shifts a day.

Applicant purchases wires of different diameters & then processes it through different machines
to stretch them and prepare wires of particular diameter & size, as per the
requirements/specifications of the clients.
To prepare the wires according to customer‟s requirement, work processes like wire drawing,
cutting, bending etc. are performed. Iron wires are used in making grill of fridge back, table fan
cover, stapler pins, u-pins, etc.
 Major Suppliers of the applicant are:
o National Small Industries Corporation Ltd. (Pune)
o Shanti Fintrade Ltd. (Raipur)
o Roundwell Steel Corporation (Ahmedabad)
o Shree Vinayak Steels (Billimora)
 Major Buyers of the applicant are:

o Gandhi Special Tubes Ltd. (Mumbai)
o Vijay jyot Seats Pvt. Ltd. (Mumbai)
o Lalit Engineers (Pune)
o Almonard Pvt. Ltd. (Pune)
Present Proposal
Purpose of Loan Working capital limit
Limits Proposed CC limit of Rs. 50.00 lacs.
Rate of Interest & BPLR-2.25% i.e. 12.50% (BPLR at present is 14.75%)
Validity of Limits 12 months only subject to review every year.
Primary: Hypothecation of current assets of the firm.
Collateral:
A) Equitable mortgage of following properties:
Security Details 1. Factory premise of Suchi Wires situated at 72-76, Mundhwa, Industrial
Estate, Pune, Maharastra. Property belongs to Mr. Rajendra V. Patel
(proprietor) & approximate market value of the property is Rs. 45.00
lacs.
2. Residential property situated at Mundhwa, Industrial Estate, Pune. The
property belongs to Mr. Rajendra V. Patel (proprietor) & approximate
market value of the property is Rs. 15.00 lacs.
B) Hypothecation of fixed assets of the firm.

Guarantee:
Personal guarantee of:
1. Mr. Rajendra Vallabhbhai Patel (Proprietor)
2. Mr. Kalpesh Patel (Brother-in-law of the proprietor)
The unit of the firm was jointly visited by Mr. N Ramachandran (AVP-SME), Mr.
Visit to the location Sachin gupta (Deputy Manager-SME) & Mr. Sameep Buch (Manager-Axis Sales)
of Firm on 12.10.2011.
Overall conduct of the business was found regular. The visit was satisfactory.
Processing Fees 1.00% of sanctioned CC limit, plus applicable taxes (non-refundable).
Login Fees Rs. 5000/- plus applicable taxes, to be taken upfront (Non - refundable)
Whether the names of the borrower or any of the promoters/directors appear(s)
in:
Defaulter List RBI defaulters List: No (The firm name and proprietor’s name are not featuring in
RBI defaulters list latest available of 31.12.2010)
ECGC defaulter List: No
CIBIL: Satisfactory
Credit Scoring
Credit Score
(Enclose Credit Score
Parameters
Scoring Sheet) (ABS 31/03/2009)
Financial 28.00
Business & Management 42.78

Industry 11.14
Overall 81.92
Rating SME 2

Performance details
Particulars 31.03.2009 31.03.2010 31.03.2011 31.03.2012 31.03.2013
Audited Audited Audited Estimated Projected
Sales 119.73 204.49 431.02 568.57 625.43
Other Income 1.06 1.69 3.39 4.08 4.9
Total Income 120.79 206.18 434.41 572.65 630.33
PBDIT 3.91 5.16 11.13 21.04 22.80
Depreciation 0.52 1.23 1.31 1.18 1.06
Interest 0.11 0.22 1.27 5.47 5.48
PBT 3.28 3.71 8.55 14.39 16.26
PAT 3.28 3.71 8.55 14.39 16.26
PBT Margin % 2.72 1.80 1.97 2.51 2.58
Cash Accruals 3.8 4.94 9.86 15.57 17.32
TNW(Unadjusted) 20.63 26.27 34.08 46.96 61.72
Unsecured Loans from friends
16.50 19.90 76.03 68.53 66.53
& relatives
TNW (Adjusted) 37.13 46.17 110.11 115.49 128.25
TOL(Adjusted) 26.89 27.98 64.05 80.95 83.95
TOL(Unadjusted) 43.39 47.88 140.08 149.48 150.48
TOL/TNW(Unadjusted) 2.10 1.82 4.11 3.18 2.44
TOL/TNW(Adjusted) 0.72 0.61 0.58 0.70 0.65
Debtors 22.08 33.74 74.13 94.76 104.24
- Less than 6 months 22.08 33.74 74.13 94.76 104.24
- More than 6 months 0.00 0.00 0.00 0.00 0.00
Debtors holding (in days) 67.31 60.22 62.78 60.83 60.83
Current Ratio 1.40 1.44 1.77 1.66 1.76
Current Asset 37.76 43.57 113.59 134.55 147.88
Current Liabilities 26.89 30.36 64.05 80.95 83.95

Analysis:-
a) The market reputation of promoter is satisfactory.
b) Firm has achieved sales of Rs. 204.49 lacs in FY. 2009-10 and Rs. 431.02 lacs in FY.
2010-11, this is more than double of the last year. Firm has submitted estimated sales of
Rs. 568.57 lacs for FY 2011-12, against which firm has achieved sales turnover of Rs.
235.70 lacs till 31st October 2011, which is 41.45 % of estimated sales.
c) Profitability of the firm is also showing increasing trend y-o-y bases. Firm has achieved
PBT of Rs. 3.71 lacs in FY 2009-10 & Rs. 8.55 lacs in FY 2010-11. Profitability has also
risen in line with increase in sales of previous financial year. PBDIT of the firm is also on
increasing trend, which can be considered as satisfactory.
d) Net worth of the firm is increasing y-o-y bases, with plough back of the profit in the
business. Unadjusted gearing of the firm is on higher side for FY 2010-11 mainly due to
higher side of creditors at particular point in March 2011. In March 2011, proprietor
submitted that purchase of raw material was at better price & the suppliers also allowed
credit period. Hence, the creditor base was on higher side.
e) Debtor‟s level of the firm is average 60 days for all the past 3 years. Proprietor has
submitted that average payment duration is 60 days maintained in the business. Debtors
maintain regularity in payment, which can be considered as acceptable.
f) The Current Ratio of the firm has been on higher side, above the benchmark level of 1.33 for all
the past 3 years. Current ratio for FY 2009-10 was 1.44 & for FY 2010-11 was at 1.77. Estimated
ratio is 1.66 for FY 2011-12. Although, it has been maintained above the benchmark level, which
can be considered as acceptable.

CHAPTER- VII
7.1 CUSTOMER SURVEY DETAILS
The following are the response which I got from the questionnaire (Total Number of respondent
is 100). Most of respondents are salaried person:-
1. Are you Aware that Axis Bank offers the following types of Loans?
Personal Loans Yes No
Car Loans Yes No
Loan against Property

(Both Commercial & Residential) Yes No
Loan Against Demat Shares Yes No
Loans for Buying /Constructing House Yes No
Loan for Buying Plot for

House Construction Yes No
Lease Rental Discounting Yes No
Credit Cards Yes No
Lease Rental Credit

Cards, 79 Personal Loan,
Discounting, 0 90
Loan for Buying
Plot, 56
Car Loans, 84
Loan
Against
Loans for Buying/ Property,
Construction 76
House, 72 Loan Against
Demat Shares,
0
Fig.: 1.13 CUSTOMER OFFERING/ PREFERRING VARIOUS RETAIL LOAN PRODUCTS

Inference
a. Most of the customer knew about the personal loan, car loans. Loan for buying plot, loan for
buying/ construction house, loan against property & credit cards.
b. Customer does not know about Lease Rental Discounting and Loan against Demat Shares.
c. As, Retail Assets is very new concept for Axis Bank and hence, Rental Discounting and loan
against Demat shares require aggressive promotions and other product require attractive
promotion.
2. Would you like to avail any of these Loan products from us?
Yes No
Fig. 1.14: CUSTOMER WILL AVAIL LOAN
Inference:-
a. 73% of consumers want to avail the any one above mention loans.
b. 27% of consumers don’t want to avail any loans in present scenario.
c. This might be an upcoming converted area in future.
3. If availing than mention the product? _______________________________________
Inference:-
Consumers are focusing mainly on Housing Finance or towards Personal Loan and some groups are
consuming Credit Cards also. They are consuming Personal Loans/ Housing Finance or planning to
consume in future.

4. How you rate the Loan product/ services of Axis Bank? ( 5 Being the Best)
1 2 3 4 5
Very Bad
(1) RATING
1% Bad (2)
0% 3%
Best (5)
18%
Average (3)
34%
Good (4)
44%
Fig. 2.5: SERVICE RATING OF AXIS BANK
Inference:-
a. 1% rate the service of Axis Bank at very bad, 3% of them give bad response, 34% of them given
rating 3, 44% at 4 and remaining 18% gave it rating 5.
b. 3 & 4 rating shows customer are satisfied to some extent.
c. Rating 5 shows they are very much satisfied to the services and information given to them.
d. Rating 1 & 2 shows that they are dissatisfied with the Axis Bank.
e. They are mainly dissatisfied because they got the sanction letter very early but time taken for
disbursement mainly in housing finance.
f. They also told that they did not got a proper information about the complications too. This
might happen mainly due to miscommunication in messages.
5. Why you would like to choose Axis Bank for the Loan?
Existing Relationship Brand Name
Competitive Interest Rates Other (Please Specify)
Inference:-
The customers are/ might consume/ consuming the above mention loan products only because of
Existing relationship. The customers which are consuming the loan product but they are not the existing

customer mainly because of Competitive interest rate or the policies of axis Bank regarding its Retail
assets product.
6. If Existing, Please provide the detail : -

A.
B.
C.
D.
Inference:-
The customers having saving account/ salary account. They are using the Debit cards/ credit cards/ both
of them.
7. Would you like to start any other relationships with the Axis Bank?
Yes No
8. If Yes , Please provide the details :-

A.
B.
C.
Inference:-
These are those segments of customer which do not have any relationship with Bank. Also, those who
want to extend their relationship with the Bank. The existing customers are interested in investment
plan offered by the Bank where as the customer which don’t have any relationship with Bank they either
want to start their relationship with the medium of loans (personal/ housing) or through saving account.
9. Would you like to refer any of your friends / relatives for availing any type of loan?
Yes No
10. Can you provide the Details :-
NAME CONTACT NO. RELATIONSHIP TYPE OF LOAN AMOUNTS (Rs.)
Inference:-
Most of the customers are not interested in giving the references. Out of 100 respondents, only 5
customers have given references and that of Personal/ Housing loans.

7.2 FINDINGS & CONCLUSION

Credit appraisal is a process of appraising the credit worthiness of loan applicants. The fund of
depositors‟ i.e. general public are mobilized by means of such advances/ investments. Thus it is
extremely important for Bank to assess the risk associated with credit, thereby ensure the
security for fund deposited by the depositors. Therefore my analysis and findings regarding
lending procedure of Axis Bank ltd. are as follows:-
1. Finance management is the backbone of any organizations and hence yields a number of
job options ranging from strategic financial planning to sales.
2. Credit is the core activity of the banks & important source of their earnings which go to
pay interest to depositors, salaries to employees & dividend to shareholders
3. Customer appreciates the services of Bank in Retail Banking.
4. Axis Bank loan policy contains various norms for sanction of different types of loans.
These all norms do not apply to each & every case. Axis Bank norms for providing loans
are flexible & it may differ from case to case.
5. Axis Bank RAC has its own internal sales channel called Sales & Securities Ltd., which
is a wholly owned subsidiary of Axis Bank.
6. With the growth in Indian Economy especially in its service sectors, the demand for
banking service especially retail banking, mortgages & investment services has become
strong.
7. In case of Retail lending, Bank strictly follow its circular and fulfill all requirement of
necessary documents required for different types of loan so that Bank do not suffer any
type of loss.
8. Personal Loan and Housing Finance is demanded loan products as comparison to other
loan products.
9. Bank is very much particular about CIBIL report of borrowers in case of each type of
lending.
10. Axis Bank RAC follows a properly structured loan disbursement procedure, with the
entire department effectively contributed.
11. Growth areas identified by the Bank are in the areas of Residential Mortgages and Passenger
Car Loans.

12. Axis Bank RAC maintains a relatively negligible size of NPA‟s due to adoption and
implementation of effective credit appraisal tools and makes a thorough study of the
financial profile of the customers before selling any loan product, which helps in
reducing the NPA‟s and ultimately write offs.
13. Axis Bank also contributes some portion of its advances towards Priority Sector
Advances and also lending to agriculture sector.
14. The Appraisal process depends solely upon the personal judgment carried out by the
Credit Manager.
15. In case of working capital financing Bank follow lengthy norms to check the feasibility,
profitability, safety and security of the funding such as:-
a. Firstly personal appraisal of promoter is done by the Bank to ensure that
promoters are experienced in the line of business and capable to implement and
run the project efficiently.
b. Detail study about the technical aspect is done to find the technical soundness of
the project such as proper scrutiny of financial report is done, valuation of
property by government approved value is done and view regarding each and
every area of project is done under technical analysis.
c. Limitation of sanction of amount according to delegation of power.
d. It is basis of credit risk level, a collateral security to be given by borrower is
determined.
e. Credit rating or credit scoring is done of various parameters such as personal,
management, financial, etc. to determine the credit worthiness of customer.
16. Usually, it is seen that credit appraisal is basically done on the basis of fundamental
soundness. But, after different types of case studies, our conclusion was such that credit
appraisal system is not only looking for financial wealth. Other strong parameters also
play an important role in analyzing credit worthiness of the firm/company.
17. Credit & Risk go Hand-in-Hand.
All this shows that Axis Bank has sound credit appraisal system as well as lending procedures.

7.3 RECOMMENDATION
a. The current appraisal process for loan is good, so there is no need to change the process.
b. Customers‟ complaint about delayed in disbursement of housing loan. In Housing loan,
sometime disbursement exceeds commitment days, it hampers the firm reputation as it is
not able to avail its service according to its mission and vision, therefore it should rectify
as soon as possible and amount should disburse in appropriate period of time.
c. As Axis Bank is a new player into the Retail Loan Industry, it should try to promote its
Loan Products through aggressive promotional activities to increase its sales and gain a
major share in the market.
d. As rivals Banks are reducing their lending base rate, Axis should move towards that
direction also. Recently HDFC Bank reduces the Lending Base rate by 20 base points.
e. The loan processing time should be reduced to 4-5 days.
f. Document required for processing the loan should be reduced.
g. The Bank should concentrate more on its advertisement to increase the awareness among
the people.
h. Axis Bank should promote their other type of loans such as Loan against Property, Loan
against Shares & Securities, Lease Rental Discounting, Commercial Vehicle, etc. through
promotional activities and for that Bank can use its wide spread ATM‟s Centers as a tool
of promotional places.
i. Recently, RBI declared that Short-Term lending is not done by the Public-Sector Banks;
this is going to benefits the Private-Sector Banks. So, Axis should utilize this opportunity.

7.4 BIBLOGRAPHY
Web-Sites:
 www.axisbank.com
 www.google.com
 www.rbi.org.in
 www.indianbankassociation.com
 www.bankersindia.com
 www.wikipedia.com
 www.moneycontrol.com
 www.india-infoline.com
Books:
 “Credit and Banking” - K. C. Nanda
 “Fundamental of Modern Banking” – N. C. Majumdar
E-Newspaper:
 Times of India (TOI)
 Economics Time (ET)
Journals:
 The Indian Bankers – Volume VI No. 12 December 2011

ANNEXURE I
Customer Surveyed Form
For Retail Loans
Name of Customer Mr/Ms :- ____________________________________________
Profession :- ____________________________________________
Mobile No. :- ____________________________________________
E-mail :- ____________________________________________
---------------------------------------------------------------------------------------------------------------
QUESTIONNAIRE
1. Are you Aware that Axis Bank offers the following types of Loans?
Personal Loans Yes No
Car Loans Yes No
Loan against Property

(Both Commercial & Residential) Yes No
Loan Against Demat Shares Yes No
Loans for Buying /Constructing House Yes No
Loan for Buying Plot for

House Construction Yes No
Lease Rental Discounting Yes No
Credit Cards Yes No
2. Would you like to avail any of these Loan products from us?
Yes No
3. If availing than mention the product? _______________________________________

4. How you rate the Loan product of Axis Bank? ( 5 Being the Best)
1 2 3 4 5
5. Why you would like to choose Axis Bank for the Loan?
Existing Relationship Brand Name
Competitive Interest Rates Other (Please Specify)
6. If Existing, Please provide the detail : -

A.
B.
C.
D.
7. Would you like to start any other relationships with the Axis Bank?
Yes No
8. If Yes , Please provide the details :-

A.
B.
C.
9. Would you like to refer any of your friends / relatives for availing any type of loan?
Yes No
10. Can you provide the Details :-
NAME CONTACT NO. RELATIONSHIP TYPE OF LOAN AMOUNTS (Rs.)
11. Any other Feedback / Suggestion about the Loan Products (Please Mention):-
1.
2.
3.
Thank You for your Valuable time which you have given to us. We are sending you an ‘Invitation' to
visit the Bank.

ANNEXURE II
Tier wise Citi‟s for Home Loan
Tier I Tier II Tier III
AHMEDABAD CHANDIGARH MEHSANA GUWAHATI
BANGLORE-
KOLKATA RAJKOT JAMSHEDPUR
SAHAKARNAGAR
CHENNAI-
SURAT UDAIPUR BHOPAL
PALLAVARAM
DELHI- NCR All centers VADODARA HUBLI GOA
HYDERABAD –
MYSORE MANGLORE AURGANGABAD
GACHIBOWLI
MUMBAI, GOREGAON,
COIMBATORE CALICUT KOLHAPUR
THANE & VASHI
PUNE KOCHI MADURAI NASHIK
CHANDIGARH PONDICHERY SILIGURI
BHUBANESHWAR TRIVANDRUM RAIPUR
KOLKATA TRICHY TIRUNELVELI
PATNA DEHRADUN
RANCHI JAIPUR
INDORE JALANDHAR
JODHPUR
LUDHIANA
LUCKNOW
PATIALA
NAGPUR
VIJYAWADA
VISHAKAPATNAM
DURGAPUR
All Branches which are not linked to the ASC’s will be Tier 4 and all Tier 3 norms will be applicable for
Tier 4 Branches.

ANNEXURE III




ANNEXURE IV

What is KYC?
KYC is an acronym for “Know your Customer”, a term used for customer identification process.
The Reserve Bank of India introduced KYC guidelines for all banks in 2002. In 2004, RBI
directed that all banks ensure that they are fully compliant with the KYC provisions before
December 31, 2005. The purpose was to prevent money laundering, terrorist financing and theft.
The detailed list of the documents that the bank can ask is given below:-
Features Documents
Accounts of Individuals
- Legal name and any (i) Passport
other names used (ii) PAN card
(iii) Voter's Identity Card
(iv) Driving licence
(v) Identity card (subject to the bank's satisfaction)
(vi) Letter from a recognized public authority or public
servant verifying the identity and residence of the customer
to the satisfaction of bank
- Correct permanent (i) Telephone bill
address (ii) Bank account statement
(iii) Letter from any recognized public authority
(iv) Electricity bill
(v) Ration card
(vi) Letter from employer (subject to satisfaction of the
bank)
(any one document which provides customer information to
the satisfaction of the bank will suffice)
Accounts of Companies
- Name of the company (i) Certificate of incorporation and Memorandum & Articles
- Principal place of of Association
business (ii) Resolution of the Board of Directors to open an account
- Mailing address of the and identification of those who have authority to operate the
company account
- Telephone / Fax (iii) Power of Attorney granted to its managers, officers or
Number employees to transact business on its behalf
(iv) Copy of PAN allotment letter
(v) Copy of the telephone bill
Accounts of Partnership Firms
- Legal name (i) Registration certificate, if registered
- Address (ii) Partnership deed
- Names of all partners (iii) Power of Attorney granted to a partner or an employee
and their addresses of the firm to transact business on its behalf
- Telephone numbers of (iv) Any officially valid document identifying the partners
the firm and partners and the persons holding the Power of Attorney and their
addresses

(v) Telephone bill in the name of firm / partners

Accounts of Trusts & Foundations
- Names of trustees, (i) Certificate of registration, if registered
settlers, beneficiaries (ii) Power of Attorney granted to transact business on its
and signatories behalf
- Names and addresses (iii) Any officially valid document to identify the trustees,
of the settlors, beneficiaries and those holding Power of Attorney,
founder, the managers founders / managers / directors and their addresses
/ directors and the (iv) Resolution of the managing body of the foundation /
association
beneficiaries
(v) Telephone bill
- Telephone / fax
numbers
Accounts of Proprietorship Concerns
- Proof of the name, * Registration certificate (in the case of a registered
address and activity of concern)
the concern * Certificate / licence issued by the Municipal authorities
under Shop & Establishment Act,
* Sales and income tax returns
* CST / VAT certificate
* Certificate / registration document issued by Sales Tax /
Service Tax / Professional Tax authorities
* Registration / licensing document issued in the name of the
proprietary concern by the Central Government or State
Government Authority / Department.
* IEC (Importer Exporter Code) issued to the proprietary
concern by the office of DGFT as an identity document for
opening of bank account.
* Licence issued by the Registering authority like
Certificate of Practice issued by Institute of Chartered
Accountants of India, Institute of Cost Accountants of India,
Institute of Company Secretaries of India, Indian Medical
Council, Food and Drug Control Authorities, etc.
Any two of the above documents would suffice. These
documents should be in the name of the proprietary concern.

ANNEXURE V
Standards for Financial Norms:
The key ratios of the business of the borrowers, such as, Current ratio, Debt equity ratio, TOL/
TNW, Interest Coverage ratio, Security Coverage ratio, etc. the standard financial norms for
considering credit proposal are given below.
Sr.
Key Ratios Bench Mark (Minimum requirements)
no.
i. 1.33 (without inclusion of annual maturity term liabilities as current
liabilities)
ii. 1.17 (with inclusion of annual maturity term liabilities as current
1. Current Ratio
liabilities)
iii. 1.00 (including annual maturating term liabilities in exceptional
cases like sugar industry)
Debt-equity i. 2:1 for medium and large scale industries
2.
Ratio* ii. 4:1 for infrastructure projects.
i. 3:1 for all borrowers with exception to the following sectors
3. TOL/TNW ii. 5:1 for infrastructure projects
iii. 9:1 for contractors (including guarantees- NFB)
1.5- 2.0 average; any year shall not be lower than 1.25 during the
4. DSCR
repayment period
Interest
5. 1.5 times
Coverage ratio
Security i. 1.25 times of advances value for WC limits
6.
Coverage Ratio ii. 1.20 for term loans
7. FACR 1.20 times
*Debt-equity ratio- Normally promoter’s contribution should be brought front end. However, in big
projects involving a construction period of more than a year or where a part of such funds are expected
to be funded through internal generation or proposed public/ private offering off equity, bringing the
promoters’ contribution up-front may not be feasible. In such circumstances it should be ensured that at
the minimum ‘the pro rate level of promoters’ contribution is infused before releasing the loan.

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INDUS SCHOOL OF BUSINESS

“SYNOPSIS- APPRAISAL & DISBURSEMENT PROCEDURE OF

AXIS BANK LTD., PUNE MAIN BRANCH

UNDER THE GUIDANCE OF:

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Area of the Project : Axis Bank Ltd.,

Telephone Number : 020-66295139

VP & Branch Head : Mr. Vikas Bhagwat

Head of the Operation Department

Designation : Senior Manager & Operation Head

Telephone Number : 1800-103-5577

Mobile Number : +91-8806900372

Email Address : Aditi.Shrivastava@axisbank.com

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Again, I sincerely thank all of them.

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OBJECTIVES OF THE STUDY

 To study procedure adopted in evaluating credit proposal of working capital by using

SCOPE OF THE STUDY

SOURCES OF PRIMARY AND SECONDARY DATA

NEED OF THE STUDY

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b. Development in Banking Systems

LIMITATIONS OF THE STUDY

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1.1 Banking System in India 20

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Credit Appraisal in the Market

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Credit evaluation in using a Credit Scoring model

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Working capital Assessment

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HISTORY OF BANKING IN INDIA

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6. 1971: Creation of credit guarantee corporation.

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Reserve Bank of India (Controlling Authority)

Development Financial institutions Banks

IFCI IDBI ICICI NABARD NHB IRBI EXIM Bank SIDBI

Commercial Regional Rural Land Development Co-operative

Public Sector Banks Private Sector Banks

AXIS BANK LTD

An overview of Recent Trend in Banking Industry in India (2011-12)

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Fig. 1.2: PERFORMANCE OF PUBLIC, PRIVATE AND FOREIGN BANKS

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Fig 1.4: ROA & CAR OF PUBLIC AND PRIVATE BANKS

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2.2 INTRODUCTION TO AXIS BANK LTD.

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Axis Bank Ltd

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SUUTI- Shareholding 23.53%

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Smt. Rama Bijapurkar Director