A STUDY ON CREDIT RISK MANAGEMENT AT CANARA BANK

DONE FOR

Project report submitted in partial fulfilment of the requirement of PONDICHERRY UNIVERSITY for the award of the degree of MASTER OF BUSINESS ADMINISTRATION

Submitted By BHASWANI DANA (Reg. No. 11397020) Under The Guidance Of Dr.B.CHARUMATHI Associate Professor, Department Of Management Studies, Pondicherry University.

DEPARTMENT OF MANAGEMENT STUDIES SCHOOL OF MANAGEMENT PONDICHERRY UNIVERSITY PONDICHERRY-605014 MARCH-APRIL 2013

DEPARTMENT OF MANAGEMENT STUDIES SCHOOL OF MANAGEMENT PONDICHERRY UNIVERSITY PONDICHERRY-605014

CERTIFICATE This is to certify that this project entitled A STUDY ON CREDIT RISK MANAGEMENT AT CANARA BANK is submitted by BHASWANI DANA, MBA II year to the DEPARTMENT OF MANAGEMENT STUDIES, SCHOOL OF MANAGEMENT, PONDICHERRY UNIVERSITY in partial fulfilment of the degree requirement for the award of the degree MASTER OF BUSINESS ADMINISTRATION and is certified to be an original and bonafide work.

Dr.T.NAMBIRAJAN Professor & Head Of The Department Department Of Management Studies, Pondicherry University.

Dr.B.CHARUMATHI
Associate Professor Department Of Management studies Pondicherry University.

Place: Pondicherry Date:

DECLARATION

I hereby declare that this project report entitled A STUDY ON CREDIT RISK MANAGEMENT AT CANARA BANK in CANARA BANK, NIDADAVOLE,ANDHRA PRADESH submitted in the partial in partial fulfilment of the degree requirement for the award of the degree MASTER OF BUSINESS ADMINISTRATION (MBA) Of DEPARTMENT OF MANAGEMENT STUDIES, SCHOOL OF MANAGEMENT, PONDICHERRY UNIVERSITY, PUDUCHERRY-605014 is based on second data found by me in various departments, websites, annual reports & Collected by me under the guidance of Mr.ANIL KUMAR, Sr Manager, CANARA BANK, NIDADAVOLE,ANDHRA PRADESH.

Date:

BHASWANI DANA MBA (II YEAR) Pondicherry University

ACKNOWLEDGEMENT

Its a great privilege that I have done project in such a well-organized & diversified organization. I am very grateful to all those who helped and supported me in completing the project. First of all I would like to thank Mr. ANIL KUMAR, (Sr Manager,) for giving me an opportunity to work as winter trainee in CANARA BANK, NIDADAVOLE, ANDHRA PRADESH & also I would like to thank to all the staff members for their cooperation & help given by them. Their experiences & feedback kept me on track and helped me produce much better results.

I am also thankful to our Head of the Department Dr.T.NAMBIRAJAN, and my Project guide Dr.Charumathi who guided me and helped me a lot in completing the project.

I would also like to thank to all college staff and my friends for helping me directly or indirectly in project.

BHASWANI DANA

EXECUTIVE SUMMARY

Credit risk is defined as the possibility of losses associated with diminution in the credit of quality of borrowers or counter parties. In a banks portfolio, losses stem from outright default due to inability or unwillingness of a customer or counter party to meet commitments in relation to lending, trading, settlement and other financial transactions.

As credit risk is one of the challenging tasks to banks I have selected this topic for my study in order to know the various types of risk and the types of strategies the banks use to mitigate the risk.

As part of its vision of using technology to provide affordable banking services to the vast rural population of India, Canara bank has extend the performance and cost benefits of enterprises Linux to its customers. With a modernized branch infrastructure, Canara bank hopes to serve customers in a timely and efficient manner, reinforcing its image of being a customer savvy bank

TABLE OF CONTENTS

CHAPTER

DESCRIPTION ACKNOWLEDGEMENT EXECUTIVE SUMMARY LIST OF TABLES LIST OF CHARTS

INTRODUCTION
1.1Introduction To The Topic 1.2 Need For The Study 1.3 Statement Of The Problem 1.4 Objectives Of The Study 1.5 Research Methodology 1.6 Limitations Of The Study 1.7 Chapterization

PROFILE OF INDIAN BANKING INSUSTRY & HDFC BANK

2.1 Introduction 2.2 Historical Background 2.3 General Banking Scenario 2.4 Structure of Indian Banking Industry 2.5 Profile of HDFC bank 2.5.1 Promoter 2.5.2 Business Focus 2.5.3 Capital Structure 2.5.4 Times Bank Amalgamation 2.5.5 Distribution Network 2.5.6 Management 2.5.7 Technology 2.5.8 Business Focus 2.5.9Rating 2.5.10 Product Scope 2.5.11 Products & Services at a glance 2.5.12 Merger 2.5.13 Quality Policy 3

PAGE NO. 4 5 8 9 10 11 12 12 12 12 13 13 14 15 15 16 17 21 21 21 22 22 22 23 23 24 24 25 25 30 32 33 34 34 34

EXPOSURE NORMS
3.1 Introduction 3.2Guidelines 3.2.1 Credit Exposures to Individual / Group

4 5

Borrowers 3.2.2 Credit Exposure to Industry or Certain Sectors 3.2.3 Banks' Exposure to Capital Market 3.2.4 Financing of equities and investments in shares 3.2.5. Risk Management and Internal Control System 3.2.6 Valuation and Disclosure 3.2.7 Cross holding of capital among banks / financial institutions 3.2.8 Margin Requirements 3.2.9 Limits on exposure to unsecured guarantees and unsecured advances 3.2.10 'Safety Net' Schemes for Public Issues of Shares, Debentures, etc 3.2.11 The definition of infrastructure lending and the list of the items included under infrastructure sector DATA ANALYSIS & INTER PRETATION SUMMARY OF FINDINGS AND SUGGESTIONS 5.1 General findings 5.2 Specific findings 5.3 Suggestions and recommendations REFERENCES

41 45 50 57 58 58 59 60 61 61 63 96 97 97 98 99

LIST OF TABLES

TABLE NO. 1.1 2.1 3.1 4.1 4.2 4.3 4.4 4.5 4.6 4.7 4.8 4.9 4.10 4.11 4.12 4.13 4.14 4.15 4.16 4.17 4.18 4.19

TITLE Sample Size For Each Sector And Parameter Category Wise Banks In India CCF for market related off-balance sheet items Bank Wise Credit Exposure To Capital Market Sector (Rs In Lakhs) (2007 - 2011) ANOVA performed YEAR WISE to capital market sector ANOVA performed BANK WISE to capital market sector Trend Analysis For Exposure To Capital Market Sector of old private banks (2007 is base year) Trend Analysis For Exposure To Capital Market Sector of new private banks (2007 is base year) Comparative Analysis For Exposure To Capital Market Sector of old private banks (previous year is base year) Comparative Analysis For Exposure To Capital Market Sector of new private banks (previous year is base year) Bank Wise Credit Exposure To Real Estate Sector (Rs In Lakhs) (2007 2011) ANOVA performed YEAR WISE to REAL ESTATE sector ANOVA performed BANK WISE to REAL ESTATE sector Trend Analysis For Exposure To Real Estate Sector of old private banks (2007 is base year) Trend Analysis For Exposure To Real Estate Sector of new private banks (2007 is base year) Comparative Analysis For Exposure To Real Estate Sector of old private banks (previous year is base year) Comparative Analysis For Exposure To Real Estate Sector of new private banks (previous year is base year) Bank Wise DIRECT Credit Exposure To Real Estate Sector (Rs In Lakhs) (2007 - 2011) Trend Analysis For DIRECT Exposure To Real Estate Sector of old private banks (2007 is base year) Trend Analysis For DIRECT Exposure To Real Estate Sector of new private banks (2007 is base year) Comparative Analysis For DIRECT Exposure To Real Estate Sector of old private banks (previous year is base year) Comparative Analysis For DIRECT Exposure To Real Estate Sector of new private banks (previous year is base year)

PAGE NO. 14 19 38 64 65 65 66 67 68 69 70 71 71 72 73 74 75 76 77 78 79 80

4.20 4.21 4.22 4.23 4.24 4.25 4.26 4.27 4.28 4.29 4.30 4.31 4.32 4.33 4.34 4.35 4.36

Bank Wise INDIRECT Credit Exposure To Real Estate Sector (Rs In Lakhs) (2007 - 2011) Trend Analysis For INDIRECT Exposure To Real Estate Sector of old private banks (2007 is base year) Trend Analysis For INDIRECT Exposure To Real Estate Sector of new private banks (2007 is base year) Comparative Analysis For INDIRECT Exposure To Real Estate Sector of old private banks (previous year is base year) Comparative Analysis For INDIRECT Exposure To Real Estate Sector of new private banks (previous year is base year) Risk Category Wise Country Exposure-2011 Risk Category Wise Country Exposure-2010 Risk Category Wise Country Exposure-2009 Risk Category Wise Country Exposure-2008 Risk Category Wise Country Exposure-2007 Bank wise High risk country exposure Backward trend analysis to Bank wise High risk country exposure considering 2011 as base year Bank wise Very High risk country exposure Backward trend analysis to Bank wise Very High risk country exposure considering 2011 as base year Bank wise restricted risk country exposure Backward trend analysis to Bank wise restricted risk country exposure considering 2011 as base year List of Private Banks Which Are Compiled And Not Complied Exposure Norms

81 82 83 84 85 86 87 88 89 90 91 91 92 93 94 94 95

LIST OF CHARTS
PAGE N O. 21 66 67 68 69 72 73 74 75 77 78 79 80 82 83 84 85 92 93 94

CHART NO. 2.1 4.1 4.2 4.3 4.4 4.5 4.6 4.7 4.8 4.9 4.10 4.11 4.12 4.13 4.14 4.15 4.16 4.17 4.18 4.19

TITTLE Structure Of Indian Banking Industry Trend Analysis For Exposure To Capital Market Sector of old private banks (2007 is base year) Trend Analysis For Exposure To Capital Market Sector of new private banks (2007 is base year) Comparative Analysis For Exposure To Capital Market Sector of old private banks (previous year is base year) Comparative Analysis For Exposure To Capital Market Sector of new private banks (previous year is base year) Trend Analysis For Exposure To Real Estate Sector of old private banks (2007 is base year) Trend Analysis For Exposure To Real Estate Sector of new private banks (2007 is base year) Comparative Analysis For Exposure To Real Estate Sector of old private banks (previous year is base year) Comparative Analysis For Exposure To Real Estate Sector of new private banks (previous year is base year) Trend Analysis For DIRECT Exposure To Real Estate Sector of old private banks (2007 is base year) Trend Analysis For DIRECT Exposure To Real Estate Sector of new private banks (2007 is base year) Comparative Analysis For DIRECT Exposure To Real Estate Sector of old private banks (previous year is base year) Comparative Analysis For DIRECT Exposure To Real Estate Sector of new private banks (previous year is base year) Trend Analysis For INDIRECT Exposure To Real Estate Sector of old private banks (2007 is base year) Trend Analysis For INDIRECT Exposure To Real Estate Sector of new private banks (2007 is base year) Comparative Analysis For INDIRECT Exposure To Real Estate Sector of old private banks (previous year is base year) Comparative Analysis For INDIRECT Exposure To Real Estate Sector of new private banks (previous year is base year) Backward trend analysis to Bank wise High risk country Exposure considering 2011 as base year Backward trend analysis to Bank wise Very High risk country exposure considering 2011 as base year Backward trend analysis to Bank wise restricted risk country exposure considering 2011 as base year