SYNOPSIS OF PROJECT

ON

CREDIT ANALYSIS
A Project submitted in partial fulfillment for the award of Degree Of MASTER OF BUSINESS ADMINISTRATION

Submitted to: Managing Director Sr. J.S Safri RICDT Professional College LC Code : 00899

Submitted by: Parmjeet Singh Roll No 511113351 MBA- IV SEM.

Introduction
Credit appraisal means an investigation/assessment done by the bank prior before providing any loans & advances/project finance & also checks the commercial, financial & technical viability of the project proposed its funding pattern & further checks the primary & collateral security cover available for recovery of such funds. The last year financial crises have become the main cause for recession which was started in 2006 from US and was spread across the world. The world economy has been majorly affected from the crisis. The securities in stock exchange have fallen down drastically which has become the root cause of bankruptcy of many financial institutions and individuals. The root cause of the economic and financial crisis is credit default of big companies and individuals which has badly impacted the world economy. So in the present scenario analysing ones credit worthiness has become very important for any financial institution before providing any form of credit facility so that such situation doesnt arise in near future again. Analysis of the credit worthiness of the borrowers is known as Credit Appraisal. In order to understand the credit appraisal system followed by the banks this project has been conducted. The project has analysed the credit appraisal procedure with special reference to Punjab National Bank which includes knowing about the

different credit facilities provided by the banks to its customers, how a loan proposal is being made, what are the formalities that is to be satisfied and most importantly knowing about the various credit appraisal techniques which are different for each type of credit facility. Before going further it is necessary to understand the need and basic framework of the project. Therefore this chapter provides an introduction to the topic, objective of the project, reasons for selecting the project and the basic structure and framework how the project proceeds. In order to understand the importance of the topic selected an introduction to the overview of the commercial bank , its functions, and present trends and growth in bank credit are required and it is covered in this chapter. OBJECTIVE OF THE STUDY To understand the credit appraisal system for working capital finance to SMEs To understand the rationale behind various guidelines observed by State Bank of India. The overall objective of this project is to understand the current credit appraisal system used in banks. The Credit Appraisal system has been analysed as per the different credit facilities provided by the bank. The detailed explanation about the techniques and process has been discussed in detail in the further chapters.

SCOPE OF THE STUDY Source of information collected is the information provided by the bank as well as the surveyand the observation made there on.

NEED FOR THE STUDY

Lending continues to be a primary function in banking. In the liberalized Indian economy, c l i e n t e l e h a v e a wi d e c h o i c e .

E x t e r n a l C o m me r c i a l B o r r o wi n g s a n d t h e d o me s t ic c a p i t a l markets compete with banks. In another dimension, retail lending- both personal advances and S M E a d v a n c e s - c o mp e t e s wi t h c o r p o r a t e l e n d i ng f o r f u n d s a n d f o r h u ma n r e s o ur c e s . B u t lending by nature cannot be an aggressive selling activity, disregarding the risks involved. B a n k h a s t o b e c o mp e t i t i v e wi th o u t c o mp r o mi si n g o n t h e b a s i c i n t e g r i t y o f l e n d i n g . Th e quality of the Banks credit portfolio has a direct and deep impact on the Banks profitability.

EXPECTED CONTRIBUTION OF THE STUDY This study will help in understanding the credit appraisal system at SBI & to understand how to reduce various risk parameters, which are broadly categorized into financial risk, business risk, industrial risk & management risk associated in providing any loans or advances or project finance.

BENEFICIARIES : Researcher: This report will help researcher in improving knowledge about the credit appraisal system and to have practical exposure of the credit appraisal scenario in SBI. Management student:

The project will help the management student to know the patterns of credit appraisal in SBI bank.

SBI Bank: The project will help bank in reducing the credit risk parameters and to improve its efficiencies. It will also help to reduce risk associated in providing any loans & advances or project finance in future and to overcome the loopholes.

Short write-up on the researcher and reason for taking up the project: The researcher are MBA 4th year students, studying in RICDT Professional College, Ropar (Pb) The reason for taking up the project is to know and understand the credit appraisal system in banking sector. Credit appraisal is the major focus of banking industries these days, so the project will help in understanding and analyzing the situation prevailing currently. Whenever an individual or a company uses a credit that means they are borrowing money that they promise to repay with in a pre-decided period. In order to assess the repaying capability i.e. to evaluate their credit worthiness banks use various techniques that differ with the different types of credit facilities provided by the bank. In the current scenario where it is seen that big companies and financial institutions have been bankrupted just because of credit default so Credit Appraisal has become an important aspect in the banking sector 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 banks and financial institutions in India. Eventually the importance of this project is mainly to understand the credit appraisal techniques used by the banks with special reference to State Bank of India.

FUTURE SCOPE OF THE PROJECT Nothing is perfect in this world. So, we are also no exception. Although, we have tried our best to present the information effectively, yet, there can be further enhancement in the Application. We have taken care of all the critical aspects, which need to take care of during the development of the Project. Like the things this project also has some limitations and can further be enhances by some one, because there are certain drawbacks that do not permit the system to be 100% accurate

Structure or Plan of the project The project first of all makes a study about the commercial banks- its important functions. Then it highlights on the concept of Bank Credit & its recent trends. The project then proceeds towards the lending procedure of banks and here it highlights about credit appraisal being the first step in building up of a loan proposal. Then it discusses the bank credit policy with respect to Punjab National bank where the project was undertaken. The project then proceeds with the review of literature i.e. review of some past work regarding credit appraisal by various researchers. The project then moves towards research methodology where it covers the information regarding the type of data collected and the theoretical concepts used in the project are discussed in detail. Then the project proceeds with the next chapter consisting of the analysis part which covers the analysis of various techniques used by the banks for the purpose of credit appraisal. Then the project moves to its next chapter i.e. findings where some results found out are interpreted and then moving on to the last and the final chapter i.e. the suggestions and conclusions where some steps are suggested to be implemented to increase the work efficiency and to reduce to work pressure