Report on SEY Bank

Submitted to:
Prof. Manohar Singh
Course-In-Charge
Financial Instruments and Markets
Submitted by:
Alok Kumar
Ankur Vashishtha
Rahul Srivastava
RaviKiran S
Rohin Agrawal

(P301413CMG293)
(P301413CMG389)
(P301413CMG337)
(P301413CMG343)
(P301413CMG347)

NIIT University, Neemrana

1

Objective and Approach

The objective of the project is to learn various regulatory norms for a new
bank based on the RBI Master Circular. The attempt made is by the way of
designing a pseudo bank, which is a virtual bank, and its related annual
financial reports. In this reference the first and biggest assumption we have
taken is considering a seed capital (Total Asset Side / Total Liability Side)
of Rs. 1,000 millions.
Further, several assumptions have been taken to align the banks financial
standings within the frames of the RBI norms. Such assumptions have been
stated whenever they are taken. The report covers the strategic financial
heads and the respective values.

Table of Contents
Management Discussion Analysis

Some major regulatory developments ......................................................................................... 6

Financial Results
Circular Schedules & Reasoning

7
8

Risk Anticipation and Mitigation Strategies ............................................................................... 10

Going Ahead Roadmap

11

SEY Bank Introduction

SEY BANK, INDIA

Country

India

Industry

Banking

NSE/BSE Listing

NSE Code i110919

Sardar Patel Centre, 9-16 floor, worli,

Regd.& corporate office

Mumbai 400018
Tel:-+91(22) 1669 9990
420, Niti-Nyay Complex,

Northern Regional Corporate Office

Chanakyapuri, New Delhi 110021

Tel:-+91(11) 1656 9990
4

Website

www.seybankindia.com

SEY Bank is the pseudo bank which began its operation with start of April, 2013. The bank
received a wonderful response from public through its services in General and Commercial
Banking. SEY Bank is a private bank and has a branch network of over 50 branches across
30 cities with 99 ATMs and two mega state of art operating centres at Mumbai and Noida.
The excellence in IT infrastructure, payment solutions and Human Resourcing has gained it
recognition as one of the fastest growing bank by prestigious Global Advisory firms.
SEY Bank mainly operates in

Treasury,

Corporate/wholesale Banking,

Retail Banking and

Other Banking Operations.

The portfolio contains numerous banking and financial solutions. The risk management and
financial solutions have proven to be beneficial for various large Corporate, MNC, and
public sector companies.
The companys corporate finance services include advisory and credit linked products for
the infrastructure sector clients; structured and project finance solutions for noninfrastructure clients; and specialized advisory services on financial restructuring.
The retail banking services provided are such as wealth management and global Indian
banking services; and retail products comprising savings and current accounts, fixed
deposits, and retail loans.
Sey Bank is steadily building corporate and institutional banking, financial markets,
investment banking, corporate finance, business (Small &Medium Enterprises) and
transaction banking, international banking, retail banking and wealth management
business lines across the country. The Banks constant endeavour is to provide a delightful
banking experience expressed with simplicity, empathy, and totality.
Bank has been able to create multiple robust relationships and teams are oriented with
core values of client servicing. These are facilitated through SEY Banks Leadership
delivering the best in financial needs market.
5

The Management Team Consists of

CEO
Mr. RaviKiran S
CFO
Mr. Yogesh Sethi
Full Time Directors
Mr. Rohin Agrawal, Business Group
Mr. Alok Kumar, ALM
Independent Directors
Mr. Rahul Srivastava, Appointed by RBI
Mr. Ankur Bashishtha,

Management Discussion Analysis

Global economic growth remained subdued due to recessionary trends in EU and

Japan, while US withdrew its QE.

The GDP in India grew by 4.6% during FY2014. Growth was moderate due to
slowdown in industrial and service sector.

Inflation measured by WPI increased from 4.8% in FY2013 to 5.7% in FY2014.

RBI while focusing on elevated inflation levels, reduced MSF from 10.25% to 8.75%
during September 2013. At the same time the repo rate increased to 8.0% on
January 2014.

Some major regulatory developments

General provisions restructured after June 01, 2013 increased to 5%

Risk weights for individual housing loans upto Rs. 7.5 million is 50.0% with standard
asset provisioning of 0.4%.

Total number of branched opened in the Tier 1 centres during a year cannot
exceed the total number of branches opened in Tier 2 to Tier 6 centres in a year.

Also, at least 25.0% of total new branches opened in a year should be unbanked
rural Tier 5 and Tier 6 centres.

RBI issued draft on CCCB- Counter cyclical capital buffer would range from 0% to
2.5% of RWA of the bank.

Banks have to carry out stress test for credit risk and market risk.
6

Incremental provisioning and capital requirements for exposure to unhedged

foreign currency over and above standard asset provisioning.

Key Performance Indices

Particular

Value

CASA
CAR
ROE
SLR
Priority Sector Lending
Net Interest Margin
Cost to Income
Yield on Advances
Cost of Borrowing
CRR

22.03%
17.15%
22.72%
30.23%
41.00%
4.88%
77.03%
11.76%
7.42%
5.81%

Financial Results
Balance Sheet
Liabilities

2014
(mn)

Assets

Share Capital
Capital 1

51.76

Reserves and
surplus 2
Deposits 3
Borrowings 4
Other liabilities
and provisions 5
Total

13.57

Cash and Balances

with RBI 6
Balances with
banks and money
at call and short
notice 7
Investments 8

680.56
195.52
58.59

Advances 9
Fixed assets 10
Other assets 11

1,000.00

Total

2014
(mn)
41.66
12.38

375.64
510.32
2.69
57.31
1,000.00

Profit and Loss Statement

Particulars
I.
INCOME
Interest earned 13
Other income 14
Total

2014 ('mn)
91.56
15.79
107.35
7

II.
EXPENDITURE
Interest Expenses 15
Operating expenses 16
Provisions and contingencies 17
Total

66.64
16.05
9.82
92.51

III.
PROFIT
Net profit for the year
Profit brought forward
TOTAL

14.84
14.84

BASEL II CAR Calculation

Tier I Capital

2014
(mn)
51.76

Paid-up equity capital

statutory reserves
Capital reserves
Balance in profit and loss account
Share premium account
Innovative perpetual debt instruments

1.52
0.02
12.03
-

Disclosed Reserves
General Reserves
Total Tier I Capital

65.32

Tier II Capital
Revaluation Reserves
(Discounted at 55%)
General Provisions and Loss Reserves
(1.25% of RWA or actual -lower)
Hybrid Debt Capital Instruments

2014 ('mn)

27.52
100%

Subordinated Debt
(Cannot be more than 50% of tier I capital)
Innovative Perpetual Debt Instruments
Total Tier II Capital
Particulars

27.52
32.66
7.07
62.11
2014 ('mn)

Cash and balances with Reserve Bank of India 6

Balances with banks and money at call and
8

41.66
12.38

Weight RWA SEY

Bank
0%
20%
2.48

short notice 7
Investments 8
Advances 9
Fixed assets 10
Other assets 11
Total

375.64
510.32
2.69
57.31
1,000.00

100%
100%
100%

510.32
2.69
57.31

205.74
0.86
94.62
0.16
74.26

0%
125%
100%
100%
100%

1.07
94.62
0.16
74.26

95.99

100%

95.99
742.91

Investments in India in
Government securities
Shares
Debentures and bonds
Subsidiaries / joint ventures
Others (units, CDs / CPs, PTCs, security
receipts and NABARD deposits)
Off Balance sheet Items
Total RWA
Particular

2014
(mn)
65.32
62.11
127.44
742.91
17.15%

Tier 1 Capital
Tier 2 Capital
Tier 1 and 2 Capital
RWA
CAR

Circular Schedules & Reasoning

Sl No

Parameter

RBI Guideline

Paid up
capital
requirement
for new bank
Limit on BG

Min paid up
voting equity
capital shall be
` 5.00 billion
Max of 10% of
paid up
capital+
reserve +
deposits
Min 40% of
Total advances

Loans and
advances to
priority
sector
Unsecured
guarantees

Max 15% of
Total

Bank
maintained
value for
FY2014
` 51.6
million

Since our initial

assumption is TA is `
1000.0 million

9.38%

Inline with the RBI

41%

Inline with the RBI

31.76%

Justification/Comment

Not inline, since the

majority of advances

5
6
7
8

and
unsecured
advances
SLR
requirement
CAR as per
BASEL II

outstanding
advances

CRR
Requirement
Board of
Directors

Min 4% of NDTL

Reserves

10

Base Rate

11

BASEL II
Norms

are in rural segment.

Min of 22% of
NDTL
Min of 9%

Full time
directors age
limit max 70
years and
Number of
independent
directors
should be at
least 50%
Bank should
create a
reserve fund
not less than
25% of profit
before
dividend
declared.
As per the
calculations
mentioned by
RBI
Subordinated
debts should
not be more
than 50% of
Tier I capital

30.23%

Majority kept in G-Sec

17.15%

Risk weights for

Operation and Market
risk not considered
Inline with the RBI

4%
Below 30
years

Inline with the RBI

12.74%

We are not maintained

this guideline,
assumption

At 10% as Int
charged=
11.74%; Int
given=
7.607%
42.13%

Will improve in future.

Inline with the RBI

Risk Anticipation and Mitigation Strategies

New Entrant into the market; would overcome this shortcoming through aggressive
marketing.

Possibility of losses in the future: Plans established to prevent the same from
happening; plans flexible to entertain the same.

Branch network building would determine the growth: If branch growth does not
work out as anticipated, projected financials can drop to a great extent.
10

NPAs: Rural penetration means greater chances of NPAs as well; Securities will be
ensured to mitigate the same.

12%

Corporate Finance
SMEs

18%

14%

Mortgages

15%

Commercial

12%

Automotive

8% 13%

Personal

8%

Housing

Loan Book Split

Infrastructure Finance

Going Ahead Roadmap

Loan Book after 5 years

Rural Penetration will provide greater deposits as the SB a/c from rural markets
are in general terms greater than Urban Areas.

A greater emphasis will move towards housing, personal and commercial vehicle
loans as these will be in greater demand in the rural areas

Infrastructure finance, currently the bread and butter should move to a lesser
percentage as the risks associated with the same are very high with respect to
options that would be available.

Mortgages would also play a major role even in the future as risk to return ratios
are higher.

11