INDUSTRY PROFILE

Banking sector in India:

The banking industry in India started in 1786 In 1969, 14 of the major private sector banks were nationalized. A number of reform measures were initiated in early 1990s. There are currently 27 public sector banks in India.

COMPANY PROFILE
Canara Bank was founded by Shri Ammembal Subba Rao Pai, in July 1906, at Mangalore.

Vision: To emerge as a Best Practices Bank by pursuing global benchmarks in profitability, operational efficiency, asset quality, risk management and expanding the global reach.
Mission: To provide quality banking services with enhanced customer orientation, higher value creation for stakeholders and to continue as a responsive corporate social citizen by effectively blending commercial pursuits with social bank.

MCKINSEYS 7S FRAME WORK

Strategy
incentives, conveyance facility, staff welfare facilities, and job security. expansion of branches and diversification on in its products. different loan schemes at different rate of interests to attract different types of customers.

Structure
functional. 3 tier Organization structure. Head Office, Circle Office and Branches.. Levels of Organization STRATEGIC LEVEL : BOD`s Chairman and MD MANAGEMENT LEVEL :Branch managers, Divisional managers. Assistant General Managers. OPERATIONAL LEVEL :office staffs, support staffs

System
Accounting systems. functions - accepting the deposits, lending loans. send a monthly report & prepare quarterly balance sheet and submit it to the circle office. The CO in turn will consolidate the balance sheet of branches . HO consolidate the balance sheet of circle office and prepares the balance sheet of the bank.

Style
collective decision making policy. Leadership Style: Participative or democratic. adopts both top down and bottom up approach. The BoD guides the bank in day to day functioning and in framing the policies.

Staff

Skill
Canara Bank offers both on the job as well as off the job training for its employees. has established a Staff Training College (STC) to train its employees

Shared values
catering to the needs of people encouraging people of small means. It was the first bank in India to give education loan. frame schemes for women. committed to serve the customers. maintain a cordial relation with its customers.

SWOT Analysis
Strength Weakness Opportunity Threat

RESEARCH METHODOLOGY
Statement of the problem Credit risk continues to be the leading source of problems . Banks should identify, measure, monitor and control credit risk.

Objectives of the study To study credit risk & credit risk models used by canara bank in assessing credit risk of large corporate accounts. To assess borrowers Credit quality in respect of Industry, business, Management and financial Risk.

METHODOLOGY Analytical Research Methodology. Sources of data secondary data

LIMITATIONS OF THE STUDY The study is mainly based on Secondary data. Analysis only RAM Model for Large corporate Accounts due to time constraint. Time is the main constraint for this study so only one case is analyzed for credit rating.

CREDIT RISK MEASUREMENT

Risk is an integral part of the Banking business. Credit Risk :inability or unwillingness of the customer or counterparty to meet commitments in relation to lending, trading hedging, settlement and other financial transactions. credit risk is a sum total of various factors. Industry risk Business risk Management risk Financial risk RISK ASSESSMENT MODEL (RAM) software based credit decision support system. integral part of CRISILs credit management advisory service for banks, financial institutions and large size corporate. RAM in Canara Bank was incorporated in the year 2000.

Determining Final Risk Grade of the Borrower

The scores under various risk factors are added up to get the overall risk score of a company by assigning appropriate weightages The overall risk score is then map into a Risk Gradation scale to determine the Risk Grade of the company. Each and every Risk Grade has a Grade Description and degree of safety with respect to Debt servicing capacity, which ultimately decides the credit worthiness of borrower.

RISK WEIGHTAGES FOR DIFFERENT MODELS

Risk Gradation Scale

Risk Score 7.00-8.00 6.00-7.00 Risk Grade I II Grade Description Degree of safety w.r.t Debt serving capacity LR1 LR2 Very high Reasonably high

5.25-6.00
4.50-5.25 3.75-4.50 3.00-3.75 2.00-3.00

III
IV V VI VII

LR3
LR3 NR MR HR1

good
satisfactory adequate Inadequate poor

1.00-2.00

VIII

HR2

Very poor

FINDINGS

Risk assessment score

Risk Industry Risk Business Risk Financial Risk Management Risk Total Score Overall Grade Existing Score 0.39 1.94 2.63 1.01 5.96 III Proposed score 0.38 1.85 0.94 1.92 5.11 IV

Grade description Degree of safety w.r.t debt serving capacity

LR3 Good

NR Satisfactory

SUGGESTION
Since the Overall Rating and Financial Condition of this particular company are favourable the Bank can consider the financial needs of the company. Apart from the RAM models the bank must also go for some other models. Risk Rating should be undertaken at Branch Level.