CHAPTER 1.

INTRODUCTION OF THE STUDY

1
 Introduction
At Au Finance I was working with the Credit department, which caters specifically to providing
loans to individuals meeting the necessary requirements.

As a part of my project I had to study policies and credit analysis process of Vehicle loan.

The report is divided into 3 parts. A brief abstract of the entire work done is stated below.

DETAILING ABOUT THE

PRODUCTS OFFERED BY AU
FINANCE. DESCRIPTION OF
THE CREDIT ANALYSIS OF
THE VEHICLE LOAN.

TO FIND OUT
FINANCIAL POSITION
OF THE COMPANY.

ANALYSIS OF THE
EXISTING CUSTOMER BASE
OF AU FINANCE .

2
Statement of problem:
In the current scenario where it is seen that big financial institutions have been bankrupted just
because of credit default so Credit Appraisal has become an important aspect in the financial
institutions and is gaining prime importance. It is the incident of credit defaults that has given rise to
the financial crisis of 2008-09. But in India the credit default is comparatively less that other
countries such as US. One of the reasons leading to this may be good appraisal techniques used by
financial institutions in India. Eventually the importance of this project is mainly to understand the
credit appraisal techniques used by the financial institutions with special reference to AU
FINANCIERS INDIA PVT. LTD

Project objective:

 To study the process of credit appraisal and documents required for Vehicle loan
 To know the satisfaction level and loyalty of customers (who have taken loan for vehicle) of
AUFIPL
 To find out financial position of the company (AUFIPL)

Research Methodology

Research type:

The research conducted for Phase I and II is an exploratory research. It includes:

 Analysis of historical records.
 Analysis of documents.

The research conducted for Phase III was descriptive research.

Sampling:

3
 Sampling Size: 50

Sampling Method: convenient sampling (Non Probability sampling)

Sampling unit: Businessman-woman, professionals, salaried class and farmers who had
taken loan from Au Finance

Research location: Jaipur

Research tools:

 Pie charts
 Line diagrams
 Tables
 Percentages

Source of data:
 Primary Research. Through questionnaires, online surveys and telephonic interviews.
 Secondary data: through annual report, internet and websites.
 Internal policies and guidelines of company.

Scientific Utility of the Study:

In my project primary data is collected with the help of survey and analysis is made with the help of
primary data. By using the primary data collected by me AUFIPL come to know about its customer
satisfaction level and can change its rules & regulations according to them.

This study also helped me as I have not done any study at this level before, so by this study I came to
know about different Financial Institutions other than banks, I came to know about the credit
appraisal procedure of AUFIPL, various loan schemes of AUFIPL etc. by meeting the different
high level officials of AUFIPL & different customers of AUFIPL I think I have also improved my
confidence, communication skills etc.

Limitation of the study:

4
Although the project aims data making in depth study of credit appraisal process at AUFIPL but
there are some practical limitation regarding the methodology followed & the overall procedure
these can be summed up under the following points:

1. Time constraint
2. No direct access to company data
3. Lack of interest shown by some officials of AUFIPL
4. Questionnaire is filled according to the response given by the customers, it may contain
some biased information
5. Sample size is not quite enough to reach to any precise conclusion.

Review of Literature
A study done by Kenny Sikand Student of FMS-IRM in the year 2011 with Axis Bank, Jaipur is to
be reviewed and the research process and methodology will be understood to apply the same with
AUFIPL.

5
 Chapter 2
Profile of the Organization

6
 PROFILE OF COMPANY

Industry Type:

AU FINANCIERS is a NBFC (Non-Banking Financial Company). A non-banking financial

company (NBFC) is a company registered under the companies Act,1956 and is engaged in the
business of loans and advances, acquisitions of shares/stock/bonds/debentures/securities issued by
the government or local authority or other securities of like marketable nature, leasing, hire
purchase, insurance business, chit business, but does not include any institution whose principal
business is that of agriculture activity, industrial activity, sale/purchase/construction of immovable
property.

The types of NBFCs registered with the RBI are:-

 Equipment leasing company: - is any financial institution whose principal business is

that of leasing equipments or financing of such an activity.
 Hire-purchase Company: - is any financial intermediary whose principal business
relates to hire purchase transactions or financing of such transactions.
 Loan company: - means any financial institution whose principal business is that of
providing finance, whether by making loans or advances or otherwise for any activity other
than its own (excluding any equipment leasing or hire-purchase finance activity).
 Investment Company: - is any financial intermediary whose principal business is that of
buying and selling of securities.

Now, these NBFCs have been reclassified into three categories:-

7
 Asset finance Companies (AFC)

AFC are financial institutions whose principal business is of financing physical assets such as
automobiles, tractors, construction equipments material handling equipments and other
machines. E.g.: Bajaj Auto Finance corp., Fullerton India etc

 Investment Companies (IC)

ICs generally are involved in the business of shares, stocks, bonds, debentures issued by
government or local authority that are marketable in nature. E.g.: Stock Broking Companies,
Gilt firms

 Loan Companies (LC)

LCs is loan giving companies which operate in the business of providing loans. These can be
housing loans, gold loans etc E.g.: Mannapuram Gold Finance,

NBFCs are different from Banks

 NBFCs cannot accept demand deposits (Demand deposits are funds deposited in an
institution, that are payable immediately on demand e.g.: Savings account, Current account
etc)
 A NBFC cannot issue cheques, to their customers and is not a part of the payment and
settlement system
 Deposit insurance facility of Deposit Insurance Credit Guarantee Corporation (DICGC) is
not available for NBFC depositors
 They cannot offer interest rates higher than the ceiling rate prescribed by RBI from time to
time.
 They cannot offer gifts/incentives or any other additional benefit to the depositors.
 They should have minimum investment grade credit rating, from the credit rating agencies

8
 Company Overview

History:

AU Financiers (India) Private Limited, registered with Reserve Bank of India as a Non Banking
Finance Company (NBFC) and this company was promoted by Mr. Sanjay Agarwal in the year
1996. Originally the Company was incorporated as ‘L.N. Finco Gems Private Limited’ but in 2005
Company has changed its named into ‘AU Financiers (India) Pvt. Ltd’. The objective was to align
the Company name with business line of the Company.

AU Financiers is a fast growing financing company with our roots in Rajasthan, and branches spread
in Maharashtra and Gujarat and planning to increase our presence to pan India. Company facilitates
access too easy, affordable financing options for small road transport operators and fleet owners.
Company extensive network in semi-urban and rural areas of Rajasthan,
Maharashtra and Gujarat has brought the benefit of growth to people outside the usual scope of
organized finance and allowed us to propagate the motto of inclusive growth.

Its biggest area of operation is commercial vehicle financing where we serve the requirements of
various categories of the market right from three wheelers to multi-axle trucks. From first time
buyers of new vehicles to refinancing of running vehicles, our extensive product portfolio allows us
to cater to a broad cross section of the market.

It also engaged in small secured business loan products for personal and business needs. Our
excellent track record of high quality lead generation, high collection ratio and low delinquencies
has attracted the attention of high quality stakeholders and today, besides the promoters, our
principal investor is Motilal Oswal Private Equity Advisors Private Limited. The support of our
investors and our enhanced management bandwidth has given us the impetus to forge ahead in new
geographies and expand our product portfolio.

Milestones:

 In just first few years from inception, we disbursed, 150 crores in vehicle loans, SME loans,
etc.

9
  Exhibiting fabulous unlimited potential and quick growth prospects, we entered into the
channel business with a strategic relationship with HDFC bank.
 This was an immensely crucial year for the company as Motilal Oswal Private Equity
Advisors Pvt. Ltd. Infused Rs. 20 Crores worth of equity and strategic acumen on board with
a strong product support and constant process development, we expanded our base to Gujarat
 Established a relationship with IDBI, Central Bank of India and State Bank of Patiala.
 Recorded an all time high PAT of Rs. 5.2 crores and AUM of Rs 244.17 crores. The
international Finance corporation, (a member of the world Bank Group) Motilal Oswal
Private Equity Advisors Pvt. Ltd. and other promoters infused a whopping Rs. 60 Crores of
shares Capital into the company.
 Recorded a PAT of Rs. 11.85 crores and AUM of Rs. 485.58 crores.
 RBI classified the company as the only “Systematically Important Asset Finance Company”
in Rajasthan
 Our exceptional long term facilities was were rated ‘A-‘by CARE.
 Based on high performance and consistent growth, CRISIL has upgraded its rating to BBB+/
Positive

BOARD OF DIRECTORS:

• Mr. Sanjay Agarwal, Promoter & Managing Director

• Mr. Uttam Tibrewal, Executive Director
• Mr. Krishan Kant Rathi (Director)
• Mr. Vishal Kumar Gupta (Investor Director)

10
 Board of
Directors

Managin Executiv
g e
Director
Collecti
Director
Admin,
Risk & Busine
on & HR & IT
Credit Chief ss
Legal Manag
Head Head
Financial
er
Heads
Officer Admin,
Zonal Manag HR & IT Cluster
Head er Team Head
Collecti Operation,
Accounts & Branch
Manag on &
Finance Head Manag
er Legal
Team Operations,
er
FI & Accounts & Team
Credit Finance Leader
Team Manager
Executi
Operations,
Accounts & ve
Finance Team

NUMBER OF PEOPLE

The number of employers is increasing year by year at fastest speed, like in 2006-07
the no. of employees was 155 but in 2012 it is 2000.

11
 No. of employees
2000
1800
1600
1400
1200
1000
800
600
400
200
0
2006-07 2007-08 2008-09 2009-10 2010-11 2011- May
2012

No. of employees

(Source: www.aufin.in) (Figure no. 01)

NUMBER OF CUSTOMERS

Year Total No. of Customers

2004-05 2376
2005-06 6182
2006-07 12335
20007-08 20239
2008-09 26723
2009-10 41995
2010-11 77358
2011-12(May) 110000

(Source: www.aufin.in) (Table no. 01)

12
 Target Customers

(Source: Primary Data) (Figure no. 02)

DEPARTMENTS

 Marketing Department.
 Accounts Department.
 Collection Department.
 Credit Departments.
 Human Resources Departments.
 IT Department.
 Insurance Department.

13
 BRAND

AU means gold which is precious and worthy across all cultures and times. It symbolizes in service,
wealth and happiness. Financiers mean those who finance. As the name of the company suggests, we
are the company who finance thorough imperil service to create happiness in the lives our precious
and worthy customers. We have launched the new logo of our company which is having manifolds.

Firstly, it is symbolic to Swastik, the most prominent auspicious symbol of the present era. Swastik
symbolizes auspiciousness, well being and let good prevail.

Secondly, it is made up with 4 F’s which means- Fast, Fair, Flexible & Friend.

Thirdly, the color associated with it has deep meaning. Blue color is considered to be a corporate
color which symbolizes calmness, peace, confidence, intelligence, stability, unity, trust, loyalty,
wisdom, faith, tranquility and sincerity.

Red color which a very emotionally intense color is associated with energy, strength, courage,
power, determination as well as passion, desire, and love.

STRENGTHS

 Relationship based origination model:

We meet every borrower in person before disbursing a loan. The company works on the concept of
‘touch and feel’ which helps to understand background, profile & needs of the customers which are
overlooked by the organized sector. Company provides easy finance with hassle (difficulty) free
documentation, speedy and transparent process.

14
  Centralized & Independent credit verification:

It highly focused on credit quality of the borrowers. Each file has to go through layered filtration
process of the company including credit verification at different levels and final approval from head
office. Company assesses the synergy & viability between product, customer profile and product’s
proposed use.

 Robust collection process:

Company has in house collection team with expert legal advisors who on regular basis follows up
with delinquent accounts. Company has layered process which includes telecalling, personal visit,
legal actions, repossession of vehicles etc.

The company has a policy of releasing of REPO vehicles which boosts customers confidence is us.
The company’s collection efficiency is very strong and has on of the lowest delinquency ratios of in
the industry.

 Grass root penetration:

Many analysts believe that the rural economy will grow strongly in the coming years. There is strong
focus by the Government of strengthen the rural economy. AU Financiers could be a significant
beneficiary of this trend. As it diversifies its loan products and offers other forms of secured
financing it could augur very well for growth prospects of the Company.

 High vintage of team:

AU has a strong, highly motivated and enthusiastic team with rich experience and knowledge of on-
the-ground business. The core team has worked with each other for the past several years. The team
has been able to establish strong relationships in the marketplace, as well as with various
authorities/establishments.

15
 Investor Relation

IFC is a dynamic organization, constantly focusing in creating opportunity to the people to escape
poverty and to improve their lives. To achieve this Purpose, IFC offers development-impact
solutions though firm-level interventions direct investments, advisory services, and the IFC Asset
Management Company; standard-setting; and business enabling environment work. IFC is the
financially and legally independent private sector arm of the World Bank Group.

It also coordinates with the other institutions of the World Bank Group for its activities. IFC’s
operations are carried out by its departments, most of which are organized by world region or global
industry/sector. IFC has over 3,400 staff, of which 51% work in field offices and 49% at
headquarters in Washington, D.C.

IFC continues to develop new financial tools that enable companies to manage risk and broaden their
access to foreign and domestic capital markets. IFC has launched a broad and targeted set of
initiatives to help private enterprises cope with the global financial and economic crisis.

IFC investment in AU financiers will expand borrowing to low-income and underserved customers.
Alliance of IFC with AU financiers will enables us to mutually attain the purpose by strengthening
the business model of AU Financiers.

SOCIAL RESPONSIBILITY

The company continues to contribute to the economic well being of the communities it interacts with
and enhances their social well being. The company during the year continued to involve itself in
social welfare activities by contributing to recognized charitable institution, which specifically

16
benefits the economically disadvantaged and socially weaker sections of the society. The Company
has regularly contributed to the “Akshay Patra Foundation”.

Akshay Patra Foundation runs “Nutritious food for children in schools” a well known mid-day meal
program targeted towards school going children from the under privileged sections of society. In the
current year the company donated a Mahindra Vehicle to Akshay Patra foundation”

Company is frontrunner in state of Rajasthan in phasing down old Diesel and Petrol 3 wheelers with
new upgraded LPG/CNG based 3 wheelers. Thereby, Company is supporting Govt. of India vision
of save energy and environment friendly vehicles on road for better future of our next generation.
Company’s 99% of lending is concentrated to vehicle financing and Company’s is focused on
financing of vehicles with greater fuel efficiency, lower emission of pollutants and new technology
including CNG/LPG. Company’s is looking forward to do “concentrated financing” of vehicles
which shall lead to:

1. Saving of fuel with better fuel efficiency with new technology vehicles.
2. Improvement by way of reduction in remission of polluting gases by funding of EURO
certification vehicles.

3. Funding of vehicles run on LPG / CNG with little or no atmospheric pollution. Company has been
financing following vehicles which leads to lower emission of pollutants and Higher fuel efficiency
and with sophisticated technology.

Company also promoting education by reimbursing the cost of education of children of our
employees who belong to economically weaker section of the society.

17
Chapter – 3
Analysis

18
 PHASE I: AU FINANCE MAIN PRODUCTS

VEHICLE FINANCE
SMALL & MEDIUM ENTERPRISES LOAN
LOAN AGAINST PROPERTY

Vehicle Financing:-

Commercial vehicle loans will continue to remain the mainstay for the Company. Company
primarily offer our services for financing various types of heavy commercial vehicle, light
commercial vehicle, multi-utility offer our services for financing various types of heavy commercial
vehicle, light commercial vehicle, multi-utility vehicle, cars, three wheeler loading, three wheeler
passenger, tractor etc. of different reputed brands like Mahindra & Mahindra, Tata Motors, Piaggio
vehicles, Force Motors, Maruti, Chevrolet, Toyota, etc.

Features:

• Touch & Feel Policy

• Takeover/ Top-up Loans
• Simple documentation
• Quick credit decision
• Speedy approval & Disbursement
• Loan approval on NIP also i.e. Non Income Proof
• Wide repayment options such as Cash/FPDC/RPDC/ECS• Variable guarantor facility i.e. guarantor
can be Existing Customer/Family, Member/Govt. Employee/Any transporter etc.

19
Loan against property
AU FINANCIERs supports your pressing need for capital and offers loans against property. Whether
it is an investment in new property or a crucial input for your business, we understand your
requirements and raise you a loan against your property as collateral.

Shubharambh (meaning-an auspicious start), by AU Financiers is a one of its kind product that
provides loans against your properties registered with the Gram Panchayat. Its features are:

1. Personalized verification and assessment

2. Fast processing
3. Business establishment support
4. Easy and flexible installment repayment

Small & Medium Enterprises Loan

An ability to nurture and support small entrepreneurs is our forte, and for substantiating our words
we provide financial solutions in the form of small secured loans to small businesses and other
income generation activities. The typical tenure of these loans is three to five years. Its features are:

1. Loans starting from as low as Rs.50,000

2. Flexibility to choose and EMI based loan
3. Least processing time in the industry
4. Complete guidance and hand-holding for the customer
5. Transparent services

20
 PHASE I: CREDIT ANALYSIS OF THE VEHICLE LOAN

Credit Process - Flow Chart

Field Investigation
CaseSourcing
Case Sourcing Personal Discussion
(Sales Team) (Field Officer – Credit)
(SalesTeam)
(Sales Team)

CIBIL Check
Credit Assessment Track Validation
(Tele Verification)

File Processing
Credit Decisioning Delivery Order
(At HO by CPU)
(Delegated Authority) (At Hub Location)

Disbursement
Audit
Storage
(At HO)
(External Auditor)

Audit Closure
Audit Compliance Certificate

21
Credit Approval Process

The Credit approval process starts from the receipt of customer’s request/ enquiry through sources
and the processing of same, which culminates in the Approval of a Loan by the appropriate
authority. The process ends with the Communication of an approval of loan to the customer through
an offer/sanction letter

Case Sourcing:

All sales team are responsible for this job. Company believes that it will help us in transparency with
customer and will enable better understanding of customer’s requirement. It is responsibility of
Credit team to verify the source of case during the field visit or tele verification

CIBIL Check

Once the concerned sales executive satisfy with the customer and feels that overall requirement is
within company norms and customer profile is matching with required product, will collect the
required document i.e. address Proof/ID proof and will check the Credit History from Credit
bureau ,as per below given policy.

1. Three Wheeler: No CIBIL Check is required either for applicant or co applicant/ guarantor.
2. All Other Products:
a. Applicant: CIBIL report is mandatory and will be checked at branch level, at the
time of recommendation.
b. Co-Applicant / Guarantor: CIBIL report will be pulled by Credit team only as per below
given parameter
(i)If Co applicant / Guarantor is husband / Father / Son or beneficiary of the vehicle,
CIBIL report will be checked OR
(ii.) If funding is based on Co-Applicant / Guarantor then CIBIL report will be checked.
Other then above two conditions, CIBIL is not required for Co-Applicant / Guarantor

22
Status of CIBIL Report:

No Match: If the CIBIL reports fetch “No match found”, executive will verify the detail through
which has fetched the report and detail found ok, then case may be considered for next level/process.

Good Match: If the CIBIL reports fetch credit History with good track record i.e. NO Delay (0
DPD), case will be considered for next Level / Process

Bad Match: If the CIBIL reports fetch credit history with delay payment/written off/settled /
overdue it needs to be approved by appropriate authority as per matrix. Any bad history need to be
approved by RCM based on facts and finding of credit and sales team. All such deviation must be
justified at the time of approval.

Field Investigation

Once the application qualified above parameter, concerned sale executive will login the file for FI
through telephonically or by email to concerned FI Coordinator/FI executive whichever is
applicable. The FI executive will conduct the investigation as per policy and submit his report to
Credit Manager / BM, in approved format and will also communicate the status of FI to concerned
sales executive to enable them to forward the case recommendation for approval.

Different Status of FI and their interpretation:

i. Positive: Customer is worth for recommendation for loan and does not have any drawback as per
initial verification. During the investigation no wrong /negative activity observed.

ii. Negative: Customer has some negative feedback from market or nature of business
activity/profile does not match with company policy &profile. Any customer will not classify as
“Negative” due to lack of experience only.
Any customer who is involved in business activity which is excluded (Annexure III) in
company policy will be classified as “Negative”.

iii. Refer :If the CPV/FI executive is not able to take decision, due to any reason, it report may be
classified as “Refer” All cases which has been classified as “Refer” , the concerned credit

23
officer/manager needs to clear the concern after discussion with concerned CPV/FI executive and if
required may be visit the case before final recommendation.

Credit Assessment Memo:

Once the case satisfy all above parameter, concerned sales executive will prepare the CAM based on
the information and document available. The report should capture complete detail about applicant,
co applicant and guarantor (if available). Please note that this report is main document on which the

Credit decision will be taken; hence it become important that executive should not hide any fact in
fear of losing the case. It is always advisable that they should capture all the negative points/concern
and give their recommendation with mitigate that why they want to do this case. It will help in
assessing the proper risk involved in the deal. Please note that CAM must be signed by the sale
executive and will be considered that all information provided in the CAM is correct and verified by
the concern sales executive. After completing the recommendation the concern executive/branch will
forward the same with CIBIL (if applicable) to respective Credit Manager for approval.

Credit Assessment

Once the proposal received by respective Credit Manger he will assess the proposal as per below
parameters

CAM review: The Credit Manger will review the credit assessment memo and will understand the
customer profile and requirement, scheme offered by executive.

CIBIL Verification: He/She will verify and assess the CIBIL report (if applicable).

Discussion with Field Investigation: Credit Manger will call the verification executive and will
take a view regarding profile of applicant’s any negative points observed during the verification.
This is required because some time the concerned executive will not be able to communicate
properly in writing.

24
Tele verification: Concerned Credit executive will call all the applicant’s and understand the
requirement of customer, product required, experience and existing income source. After verifying
all the above fact he/she will underwrite the case as per underwriting norms depending on the
vehicle segment.

Product & Profile Match: This is the most crucial part of the assessment. During assessment
everybody should check whether the required product matches customer requirement /living
standard. For example if a customer residing in slum or lower middle class area and asking for high
end vehicle, it shows that there is some third party involvement. All such mismatch should be
checked properly at every stage of approval.

Area Coverage: Branches should operate in the territory as allocated to them and shall not source
business from areas pertaining to other branches.

Approval Validity: All approval will be valid for 30 Days, in case of and delay beyond this period,
need fresh approval from concerned authority.

25
Delivery Order (At Hub Location)

File Dispactch to HO

Files Received by Sales Co-ordination team at

HO.

Verification of Payment detail & Marking

Document details on file forwarding memo

File Checking by NDC maker as per Operation

Policy

Final Checking by NDC Checker for Critical

things & Classification

If Pendency found in file after NDC

File Hand over to sales Co-ordination team for

pendency updation in Web Jaguar.

Follow up with branch for pendency

completion

Complete file hand over to CPU

26
 Agreement Franking of Complete
Files

Complete File Marked as Disbursed

in System

Agreement Signing of Disbursed

Files

Disbursed File sent to feeding

Team for syster Entry, PDC, PDD
& Scanning

Files sent for External Audit

Disbursed Audited Files sent to

stroage

UNDERWRITING NORMS FOR COMMERCIAL VEHICLE

S.no Parameter Standard Policy Condition Risk & Mitigate
1. Age Minimum 18 years at the I. If Age of Applicant Risk: Applicant’s
beginning of contract to is less than 18 whose age is less than
maximum Year 18 year, cannot sign
65 years at the end of the loan agreement as per law.
Tenure Agreement will be
invalid.

Mitigate : We should
not fund

II. If applicant’s age Risk: Customer of this

is between 18 to age group will have
21 year and profile is less maturity, Liability
FTU/FTB towards family will be
lesser and chances of
diversion from current
business in any ups &
down will be high.

Mitigate: Father or
any senior family
member should be
taken as co‐applicant.
It will also establish

27
 that parents also
agreed for this Loan,
and they will support
applicant in any
unfavorable
circumstances. If
above condition is not
possible, case can be
done subject to
satisfaction of credit
team based on other
parameter

III. If applicant’s age No Risk related to Age

is above 21 year
for all profile
(FTU/FTB/
Transporter)

2. Residence Owned Residence In the name of I. If House Owner is No Risk related to

self or any family member
(Father/Mother/Wife/Son/Parental) is available.
Applicant and proof stability
Stability on Same
Address :No
minimum Limit
II. If House Owner is No Risk related to
Applicant’s family stability
member, ownership
proof and
relationship proof is
available Stability
on Same
Address :No
minimum Limit
III. If house owner is Risk: It is possible
Applicant’s family that house owner is
member, ownership not family member
proof is available but of Applicant, wrong
no relationship proof information has
is available. been provided.
Stability on Same
Address should be Mitigate: We can
Minimum 6 month. consider as owned

28
 house if CPV / TVR
supports that hose is
owned by
applicant’s family
member. Applicant
should have KYC of
the same address.
IV. If House owner Risk: It is possible
is Applicant or that customer is
family member, but residing in
no document is rented/temporary
available for house and trying to
ownership proof or do fraud.
relationship proof

Stability on Same Address Facts: This condition

should be minimum 1 year may be possible where
and 3 year in same City. customer is residing in
slum area / migrated from
other city but living since
so many years. Or it can
be possible in old
Agreement Franking of ancestral property
Complete Files
Mitigate :Document like
Old Ration Card / DL /
Complete File Marked as Voter ID card / OLD LIC
Disbursed in System policy / Old Gas
Connection Pass book of
the same address ,should
be collected and CPV
Agreement Signing of
should verifies that
Disbursed Files
customer is living in
owned House.
If above condition is not
Disbursed File sent to Feeding possible, Customer will
Team for System Entry, PDC, be considered as rented
and PDD & Scanning Profile, and will be
funded accordingly

Files sent for External 29

Audit
 Rented Profile : Customer’s permanent Risk : Chances of fake
Permanent address address proof address proof /
proof must be not available / FI not information is high
collected and FI has possible Mitigate : Existing
to be conducted Co‐ Stability: 1 year on same Customer should be taken
borrower/ Guarantor address and 3 year in same as co‐applicant /
should have owned city. (To be verified by Guarantor
house document or CPV report)
3. Experience FTU – NIL Applicant is having Risk : Information
FTB – 12 Month as experience in driving but provided by applicant is
Driver , DL to be valid DL is not available. wrong to avail higher
collected LTV
Transporter - Mitigate: Experience
Minimum 12 month Customer is having should be verified from
ownership in same of ownership of less than 12 CPV and TVR. Number
higher segment of month of person whose vehicle
vehicle was taken on rent should
be documented
Mitigate: Such applicant
can be considered as
transporter subject to
satisfaction of Credit
Manager based on other
parameter.

4 Telephone Mobile connection is Number must be

compulsory. verified during TVR
5 Track As Applicable according to Track available but Risk : Customer
Record Profile repayment is not good intention may not
(IF repayment can be be good or
verified through CIBIL, customer may be
Track is not required) overleveraged
Special Condition :
1. If average delay is Mitigate: Credit
more than 60 days and Team Should assess
Peak delay is more than the reason for
90 Days, RCM default and should
approval is required. mention in
2. IF average delay is recommendation on
more than 90 Days, what strength we
Credit Head Approval are doing this case.
is required
6. Identity As per KYC Policy Customer does not Risk: Chances of
Proof have any ID proof as fraud will be high,
per KYC policy. identity will not be
established.

30
 Mitigate: All such
case has to be
specifically
approved by
Credit / Ops head
with reason.
7 Ownership As per KCY Policy Customer does not Risk: Chances of
/ Address have proper address fraud will be high,
Proof proof as per KYC policy identity will not be
established.
Mitigate: All such
case has to be
specifically
approved by
Credit /
Ops head with
reason.

8. RC Copies FTU – NA Customer is having Risk: Vehicle detail

FTB – NA Transporter – vehicle but not in his given by customer
At least 50% of fleet own name, taken on wrong, customer has
vehicles. agreement given this information
to avail higher LTV.

Mitigate: RC,
purchase agreement
and latest insurance
copy to be collected. If
no document is
available, customer
will be considered as
FTB.
9. Co‐ Co‐Borrower / Guarantor Co‐borrower / Risk: Co‐borrower /
Borrower should have vehicle of Guarantor do not guarantor may not be
/ same or higher segment. have vehicle or able to support
Guarantor experience in customer in vehicle
transportation line. operation.

Mitigate :Guarantor
with other business
activity can be
considered if he is
financial sound, subject
to credit approval
(Table no. 02)

31
Borrower Profile:

The Credit Policy for commercial vehicle caters the following segment of customers.

 First Time User (FTU) : Customer who do not have any commercial vehicle or do not
having any experience in the same segment directly of indirectly will be classified as FTU

 First Time Buyer (FTB): Customer who have experience in managing the vehicle as driver
or who had vehicle in past but do not have any documentary evidence as vehicle ownership
will be classified as FTB. This profile will be a typically a driver who intends to by a vehicle
for his own. DL of same segment will be the mandatory document for this profile.

 Transporter: These are the customers who have at least one commercial vehicle in same or
higher segment and minimum ownership period of 12 month.

 Captive Users: These customers are not engaged in transportation business, they require
commercial vehicles to support their business. They may or may not own a commercial
vehicle. They differ from FTU in the sense, that while FTU will earn from the direct usage of
vehicle, the Captive user is not earning primarily from the vehicle.

32
 Underwriting Norms – Personal Car / Personal Use Vehicle

1. Target Segment/Customer: Individual / Firms /Company/Trust who wants to buy car for their
personal or official use. Based on the document availability and nature of available document, the
segment can be classified into following two categories. However it has been assumed that any
customer, who wants to buy a car for personal use, is having sufficient income to repay the EMI
after meeting out his/her family expenses.

2. Borrower Profile
a. Non Income Proof Customer: These are the segment, where customer do not have any
banking habit or do not have any proof to established his her business or in other terms their income
cannot be verified through any document. It can be assessed only based on personal discussion and
by verifying his business or living standard. It can be again reclassified in following two category:

I. Agri Base Funding: These are typically farmers, who depend on agricultural income and
living in joint family/independently. In case of joint family (Father/Mother/ Real brother), income of
other family can be clubbed /considered.

Document Required: Agri Land document in own name, in case parental property relationship
proof will be required.

II. Self Employed (Business): These are typically small business men, who do not have any
income proof. For example Shopkeeper / small trader / agents / property dealer / Private teacher
/employee getting salary in cash etc.

Document Required: Any proof which established the existence of business like RST/SCT copy /
Copy of purchase Bill/ Utility Bill in the name of Shop / Salary Certificate on letter head /

33
Photograph of Business premises supported by CPV report or any other relevant document as per
operation policy
(All such proof will help us in classifying the asset in PSL/Agri)

b. Income Proof Customer: These are the profile where income can be accessed through
various documents like banking / ITR / Salary Slip / Form 16 /Balance sheet etc.

Documented Required: Latest 3 Month Salary Slip / 6 Month banking / Last 2 year ITR or Balance
Sheet. Documented gross income should be at least equivalent to yearly repayment amount. For
example: Salaried Customer who’s proposed EMI is 10000/- per month, in such case gross salary
should be minimum of 10000/- per month. In case customer is providing banking, in such case
average monthly bank balance should be at least equivalent to the monthly EMI. However the
assessed income (assessed by AU employee) should be at least 2 times of the EMI amount. All such
assessment will not require any supporting document, it has to be justified during recommendation /
credit underwriting and supported by CPV report. Credit team has to see whether customer is
capable to pay EMI after considering his all fixed expenses.

c. Repayment Based: Any customer who have the repayment history of personal car / MUV
or any four wheelers for more than 12 month will be considered as Income Based customer. Track
record or repayment proof of EMI for at least 12 month will be mandatory document; no additional
income document will be required.

PHASE II: Financial Position of the company

Comparative Analysis & Interpretation

 Comparative Analysis:
(See Appendix)
Particulars 31st March 31st March Increase/Decrease/Rs. Increase/Decrease
2010 2011 Percentage
Total Current 10,415.43 23,448.29 13,032.86 125.13
Assets
Total Current 824.12 2165.65 1341.53 162.78
Liabilities
Total Assets 10835.00 24443.08 13,608.08 125.59
Cash and 3,7745.05 2845.12 (899.93) (24.03)

34
other bank
balances
Loans & 4,000.03 15,144.80 11,144.76 278.62
Advances
Total Capital 10,010.88 22,277.43 12,266.55 122.53
Employed

Secured Loans
st st
Particulars 31 March 31 March Increase/Decrease/Rs Increase/Decrease
2010 2011 Percentage
Term Loan 4740.06 6337.53 1597.47 33.70
Cash Credit 1267.03 4468.67 3201.64 252.69
Total 6007.09 10,806.21 4799.12 79.89

Particulars 31st March 31st March Increase/Decrease/ Increase/Decrease

2010 2011 Rs Percentage
Operating 1,132.56 2301.71 1619.15 103.23
Exp.
Total 101.47 240.67 139.20 137.18
Provision/
write offs
Total Expenditure = Operating Expenses + Total Provision/Write offs
Total 1234.03 2542.38 1308.35 106.02
Expenditure
Total Income 2,284.46 5426.99 3,142.53 137.6
PAT 565.53 129.12 727.59 128.66
Net Profit 596.07 1338.93 742.86 124.63
(Table no. 03)

Interpretation:

 The comparative analysis reveals that during 2011 there has been an increase in current asset
of Rs. 13,032.86 Lacks i.e. 125.13% and in the current liabilities have increased by Rs.
1,341.53 Lacks i.e. 162.78% so the current financial position has increased.

 The liquid Asset that is cash in hand, cash in bank shows a decrease in 2011 over 2010 this
will not improve the liquidity position of the concern.

35
  The other assets loans & advances have increase by Rs. 11,144.76 Lacks it’s show that
company business improved, and long term liabilities increase in form of secured loan then it
show that company have good relationship with the banks in India.

 The overall financial position of the company is satisfactory.

 The comparative analysis reveals that there has been increase in Operating Expenses
103.23% and total expenditure increased by Rs. 106.02%

 The total income of the bank has increased by 137.6% and the company earns the profit of
Rs. 1338.93/- Lacks which is 124.63% more than the previous year.

Ratio Analysis

Profitability Ratio:

The primary objective of business undertaking is to earn profit is the words of Lord Keynes: “profit
is the engine that drives the Business enterprise”. Profit is not only needed for its existence but also
for its expansion and diversification. The investors want an adequate return on their investment;
workers want higher wages, creditor want high security for their interest and loan soon.

Following are the important overall profitability ratios, which relevant to the business concerns are:

 Return on Assets
 Return on Capital Employed
 Return on Equity Capital

36
1. Return on Assets:

It states the relationship between net profit and total asset.

Return on Asset = Net Profit*100/Total Asset

Year Net Profit Total Asset Percentage

2009 294.74 2894.71 10.18
2010 596.07 10835.00 5.50
2011 1338.93 24,443.08 5.48
(Table no 04)

Relation of Net Profit and Total Asset by Diagram:

(Figure no.03)
Interpretation

37
The Return on asset of AU Financier’s (India) Pvt. Ltd is not satisfactory. The Assets are not utilized
properly.

2. Return on Capital Employed:

It is widely used to measure the overall profitability and the efficiency of the business

Return on Capital Employed = Net Profit*100/Total capital employed

Year Net Profit Capital Employed Percentage

2009 294.74 2,613.11 11.28
2010 596.07 10,010.88 5.95
2011 1,338.93 22,277.43 6.01

(Table no. 05)

Relation of Net Profit & Capital employed by diagram

25000

20000

15000
Capital Employed
Net Profit
10000

5000

0
1 2 3

(Figure no. 04)

38
3. Return on Equity Capital

The equity share holders are the real owner of the company. They assume high risk in the
company.

Return on Equity Capital = Net Profit*100/Equity capital

Year Net Profit Equity Capital Percentage

2009 294.74 1000.02 29.47
2010 596.07 1,000.02 59.61
2011 1,338.93 1393.29 96.10

(Table no. 06)

Relation of Net Profit & Equity Capital Diagram

3000

2500

2000

1500 Equity Capital

Net Profit
1000

500

0
1 2 3

(Figure no. 05)

Interpretation

39
The company has taken funds in the form of loans and advances irrespective of issuing equity capital
and hence, the cash has been paid in the form of interest which has increased manifold times from
the last year.

Liquidity Ratio:

1. Current Ratio

Current ratio = current assets/current liabilities

Current Ratio for 2010: 10,415.43/824.12 = 12.64

Current Ratio for 2011: 23,448.29/2165.65 = 10.83

Interpretation:

The company has sufficient and excess funds available with it to repay its debt (in case) in both the
financial years 2010 and 2011. This implies that company has excess of cash in the form of advances
and cash and bank balances.

40
 PHASE III: ANALYSIS OF LOANS TAKEN BY CONSUMERS
AND FINDINGS THEREOF

Result of Market Research:

A market research of approximately 50 people at random was conducted to understand the

Satisfaction level of the consumer. The survey was conducted with the help of some 50
questionnaires distributed. Following are the descriptive statistics that was inferred from the market
survey.
(See Appendix: - Questionnaire)

CHARACTERISTICS OF POPULATION

Every population either small or large has some unique characteristics of its own and there are
various factors that affect the population and make it behave in a certain manner. There might be
variations within the group however; their behavior if compared to that of any other population
group will vary substantially or at least to certain extent. The sample size of the population selected
for the market survey is of 50. The questionnaire used for the market survey is included in the
appendices of the project report (Appendix). The following is the list of charts prepared to analyze
the sample population.

41
 AGE SEGMENTATION OF THE LOANS TAKEN

Age Respondent
18-28 14
28-38 21
38-50 15
>50 0
Total 50
(Table no. 07)

Respondent

22.5

17.5

12.5
Axis Title
7.5

2.5

18-28 28-38 38-50 >50

Respondent 14 21 15 0

(Figure no. 06)

Interpretation:
The sample population was divided into four different age groups to better understand their
behavior. The survey results show that majority of the auto loans were taken by the age group of 28 -
38.

42
SAMPLE POPULATION SEGREGATED AS PER THEIR ANNUAL INCOME

Income Respondent Percentage

< 1 Lakh 2 4%
1-2 Lakh 30 60%
2-5 Lakh 14 28%
> 5 Lakh 4 8%
Total 50 100%
(Table no. 08)

Respondent
< 1 Lakh 1-2 Lakh 2-5 Lakh > 5 Lakh
4%
8%

28%

60%

(Figure no. 07)

Interpretation:
Second classification of respondent is based on the basis of their annual income. This classification
is done to know that mostly which income level people have more demand for loan. In Auto Loan on
an average the annual earnings of 60%% 1 - 2 lakh and the smallest percentage is 4% is less than 1
lakh.

43
 SAMPLE POPULATION SEGREGATED AS PER THEIR OCCUPATION

Occupation Respondent Percentage

Business Man 21 42%
Government Emp 1 2%
Private Employee 27 54%
Farmer 1 2%
Total 50 100%

(Table no. 09)

Respondent
Farmer
2%

Business Man
42%
Private Employee
54%

Government
Emp
2%

(Figure no. 09)

Interpretation:
The third important consideration which helps to identify Occupation of the respondent the
occupation comprises of Government Employee, private employee, businessman and farmers.

44
 SOURCES TO GET TO KNOW ABOUT AU

Source to knew about Au Respondent

Newspaper 0
Advertisement 0
Friends & Relatives 33
Others 13
Total 50
(Table no. 10)

40
35
30
25
20 37

15
10 13
5
0 0
0
Newspaper Advertisment Friends & Relatives Others

Respondent

(Figure no. 10)

Interpretation:
This question is asked in order to know the effectiveness of the advertisement strategy adopted by
Au finance. The result found by the survey shows that most of the customer knew about the various
loan schemes through their friends & relatives who had taken loan from Au Finance.

45
 Recommend this company to your friends and relatives

Recommend this company to your friends and relatives Respondent Percentage

Yes 38 76%
No 12 24%
Total 50 100%
(Table no. 11)

Respondent

24%

Yes
No

76%

(Figure no. 11)

Interpretation:

As the graph depicts that 76% of people would recommend the company to their friends and
relatives. This shows the satisfaction level of the customers with AU financiers. And the 24% people
will not recommend because of the high interest rates and penalty charges not because of the
services.

46
 WILL YOU PREFER AU ONCE AGAIN IN FUTURE??

Will you prefer Au once again in Future Respondent Percentage

Yes 35 70%
No 15 30%
Total 50 100%
(Table no. 12)

Respondent

30%
Yes
No

70%

(Figure no. 12)

Interpretation:

As the graph depicts that 70% of people would prefer the company once again. This shows the
loyalty level of the customers with AU financiers. And the 30% people will not prefer because of the
high interest rates and penalty charges not because of the services.

Satisfied with the rate of interest

47
 Interest Justifiable Respondent Percentage
Yes 38 76%
No 12 24%
Total 50 100%
(Table no. 13)

Respondent

24%

Yes
No

76%

(Figure no. 13)

Interpretation:

The findings suggest that 76% customers are satisfied with the rate of interest charging by AUFIPL
and only 24% are unsatisfied. But the company should review its interest rates from time to time in
order to be competitive in the market and to improve customer satisfaction continually.

SATISFACTION LEVEL

48
 Satisfaction Level Respondent Percentage
Very Satisfied 8 6%
Satisfied 30 60%
Somewhat satisfied 9 18%
Dissatisfied 3 6%
Total 50 100%
(Table no. 14)

Respondent

6%
18% 16%
Very Satisfied
Satisfied
Somewhat satisfied
Dissatisfied

60%

(Figure no. 14)

Interpretation:
As per the survey, a majority of the people were satisfied of the facilities provided by AUFIPL.
However, a certain segment of the population was not at all satisfied with the services provided by
AUFIPL. Dissatisfaction depends largely on other factors for example, bad customer relationship,
and many such factors which are discussed in detail in the latter part of the report under the heading
suggestions which have been originally the complaints of dissatisfied customers.

49
 Chapter – IV
Findings, Conclusion, Suggestion

50
 FINDINGS

1. The company has taken funds in the form of loans and advances irrespective of issuing
equity capital and hence, the cash has been paid in the form of interest which has increased
manifold times from the last year.

2. It is found during survey that company is not investing money in advertising and promotion
activities. All the customers got to know about Au through their friends and relatives

51
 SUGGESTIONS

FACTOR FIRST:
 Some extra benefits can be introduced for the existing customers.
Advantages:
 It will reduce switching of customers
 It will attract new customers.
Suggestion: Since Au Financiers doesn’t provide two wheeler loans; it is recommended that
company should provide it so that it can capture more market.

FACTOR SECOND:

 More emphasis should be laid on advertising of the products.

Advantages:
 It will increase the awareness among the customers.
Suggestion: Au Financiers needs aggressive marketing and business strategy to compete
with other NBFC. It is suggested that company should formulate competitive policies and
apply push strategy.

FACTOR THIRD:

 Focus on reducing the interest rates.

Advantages:
If the customers are getting more benefits on comparatively lesser rate of interest, they would
surely prefer the company.

52
 CONCLUSION

AU Financiers (India) Pvt. Ltd. is growing company with roots in Rajasthan, Maharashtra & Gujarat.
The financial profile of the company is good because company has good relationship with banks like
HDFC, IDBI, SBI, DCB, AXIS, BOI ANDHRA, PNB CBI, INDIAN, SIDBI, INDUSIND, &
SBOP. The number of people and customers is increasing very fast and the number of the branches
across the state is increasing very fast. Also the net worth of the company showing that company is
on good track.

Company is totally depended upon fund because company’s business is providing loans to
customers. Fund is the oxygen for the company because if company don’t have fund then it can’t
disburse loans to its customers.

The biggest USP of the company I found was it provide loan or it sanction loan at very less
documentation. Good coordination between organization and customers, which reveals the
importance of fair and clear business.

53
Chapter – V
Bibliography

54
 BIBLIOGRAPHY

BOOKS

1. “C.R. KOTHARI”-Research Methodology

(Second Revised Edition)

Websites:

1. www.aufin.com
2. www.wikipedia.com

OTHER SOURCES:

1. Au finance annual report

2. Magazines

55
Chapter – VI
Appendix

56
 LIST OF APPENDICES

QUESTIONNAIRE

Au financiers India Pvt. Ltd

Customer satisfaction measurement in the Au financiers India Pvt. Ltd

1. Name
2. AU Number
3. Vehicle
4. Finance Amount
5. Contact No.

6. Age of the Respondent?

(i) 18-28
(ii) 28-38
(iii) 38-50
(iv) More than 50

7. Annual Income of the Respondent?

(i) Below 1 Lakh
(ii) 1-2 Lakh
(iii) 2-5 Lakh
(iv) 5 Lakh and above

8. Occupation of Respondent
(i) Government Employees
(ii) Private Employees
(iii) Businessman

57
 (iv) Farmer

9. How do you come to know about Au?

(i) Newspaper
(ii) Advertisement
(iii) Friends or relatives
(iv) Other (Specify _______________________________)

10. Have you borrowed loan from any other sources also?
(i) Yes (What are the things you like in Au?)
(ii) No (Why you preferred Au as compare to any other NBFC?)

_____________________________________________________________________
_____________________________________________________________________

11. For the Past how many times you have taken loan from this company?
(i) 1
(ii) 2
(iii) 3
(iv) More than 3

12. Do you feel that the procedure to apply loan with the Au was difficult?
(i) Yes
(ii) No, it was easy

If yes, then how? _____________________________________________________

13. Would you recommend this company to your friends, relatives and associates?
(i) Yes
(ii) No

If No, then why? ______________________________________________________

58
14. Do you think that company takes unnecessary charges?
(i) Yes
(ii) No

If Yes then what?

________________________________________________________________________

15. Are the interest rates justifiable according to today’s inflationary scenario?
(i) Yes
(ii) No

16. Will you prefer Au once again in future?

(i) Yes
(ii) No
If No, then why?
________________________________________________________________________

17. For the past how much time you have taken loan from this company?

18. How much time the Au took to sanction your loan? (From the time of application)

19. How satisfied are you with the services provided by the Au?
(i) Very satisfied
(ii) Satisfied
(iii) Somewhat satisfied
(iv) Dissatisfied

59
20. What are your suggestions for the betterment of the services provided by Au?
________________________________________________

_________________________________________________

60