PROJECT REPORT ON CREDIT APPRAISAL IN BANK OF BARODA

SUBMITTED IN PARTIAL FULFILMENT OF THE REQUIREMENT OF MASTER OF MANAGEMENT STUDIES

BY DEVENDRA RANCHHOD TANK ROLL NO: 2011235 MMS-II (SEM III) YEAR 2011-2013

LALA LAJPATRAI INSTITUTE OF MANAGEMENT MAHALAXMI, MUMBAI - 400034

PROJECT REPORT ON CREDIT APPRAISAL IN BANK OF BARODA

SUBMITTED IN PARTIAL FULFILMENT OF THE REQUIREMENT OF MASTER OF MANAGEMENT STUDIES BY DEVENDRA RANCHHOD TANK ROLL NO: 2011235 MMS-II (SEM III) YEAR 2011-2013

LALA LAJPATRAI INSTITUTE OF MANAGEMENT MAHALAXMI, MUMBAI - 400034

SUMMER INTERNSHIP PROJECT

BANK OF BARODA
SUBMITTED BY
DEVENDRA RANCHHOD TANK ROLL NO: 2011235 MMS-II (SEM III) YEAR 2011-2013

COLOURED XEROX OF THE INTERNSHIP CERTIFICATE GIVEN BY THE COMPANY

Certificate This is to certify that the project work titled Credit Appraisal is a summer internship work carried out by Mr.Devendra Ranchhod Tank. The project was completed for Bank of Baroda, under the guidance of Mr. Deepak Kumar and Mr. Mainak Banerjee. I further certify that the said work has not been submitted in the part or in full, to any other University.

Date: 14th September 2012

_______________ Prof. Arati Kale Project Guide

_____________ Dr V.B. Angadi Director, Lala Lajpatrai Institute of Management

DECLARATION
I, Mr. Devendra Ranchhod Tank, student of Lala Lajpatrai Institute of Management of MMS II (Semester III) hereby declare that I have completed the summer internship project on Credit Appraisal with Bank of Baroda in the Academic year 2011-2013. The information submitted is true & original to the best of my knowledge.

__________________

ACKNOWLEDGEMENT
I would like to thank Bank of Baroda and Lala Lajpat Rai Institute of Management for giving me an opportunity to learn and pursue my Summer Internship and understand about SME Banking. I would like to thank and express my sincere gratitude to Mr. J.G.Ramteke (AGM, SME Banking) and my project guide Mr. Deepak Kumar (Officer (Credit), SME Banking) and Mr. Mainak Banerjee (Manager (Credit), SME Banking) for giving me an opportunity to learn. Their constant encouragement, valuable insights and attention to detail, had made this exercise, a great learning experience. Without his guidance and support this project could not have been a success. It was a great experience to be a part of a nationalized bank for two months. I am also thankful to M.C. Shetty (Senior Manager-SME Banking) who contributed their valuable time and gave valuable insights during the development of the project in the field of MSMED. I am also thankful to Dr.V.B.Angadi (Director, Lala Lajpat Rai Institute of Management) and my institution, for giving me an opportunity to undergo this learning experience and feel the lively atmosphere of the corporate world i.e. in Bank of Baroda. Special thanks to Prof. Arati Kale (Project Guide, Lala Lajpat Rai Institute of Management) for helping me to understand this project better and supporting me with their expertise on the same to make my project worth for my own benefit and also for the overall benefit of the objective of the summer project. Last but not the least; I take pride in thanking my family, siblings and friends for their much valued support.

EXECUTIVE SUMMARY
Banking sector play a very crucial role in development of an economy. They provide financial assistance to different kind of projects to entrepreneurs for establishment of new ventures, to existing firms for expansion, diversification and modernization; thus encouraging industrial development. Advances Department covers a wide spectrum of activities to give loans to different sectors ranging from manufacturing to trade to services. Bank of Baroda (BoB) is the highest profit-making public sector undertaking (PSU) bank in India and the second largest PSU bank in terms of number of total business in India. It is the country's first largest public sector lender in terms of annual profit. The Project in the advance dept has helped me understand the procedure followed by a bank when it extends working capital financing and term loan to a party. The detailed analysis is carried out by the bank in the form of a proposal that is assessing the parties financial position and its capacity to repay the debt which it has asked from the bank. The banks need to appraise or evaluate the corporate before lending them any credit. This process is called the credit appraisal. The Credit Appraisal is a holistic exercise which starts from the time a prospective borrower walks into the branch and culminates in credit delivery and monitoring with the objective of ensuring and maintaining the quality of lending and managing credit risk. The process of Credit Appraisal is multidimensional and includes- Management Appraisal, Technical Appraisal, Commercial Appraisal, Financial Appraisal and Economic Appraisal. The Credit Policy of Bank of Baroda has undergone changes to cope with the environmental changes, tap the available opportunities, achieve their commercial

objective, fulfill social obligations and adhere to mandatory directed lending norms. The credit policy consists of both fund based credit exposure and non fund based credit exposure. The credit policy is studied under Coverage, Clientele, Marketing. The bank has over the years designed and adopted the Best Practices Code. This in effect represents the banks philosophy towards effective Corporate Governance.

The objective of doing the summer internship is to understand the importance of SME in development of Indian economy and to study the various facilities which are provided to the SMEs by banks and the Government. After analysis few conclusions included that bank follows same norms for ratios irrespective of industry into consideration which can be misleading sometimes. High debt-equity ratio is one of the major problems for SMEs in seeking finance from banks and other financial institutions. Recommendations included that the banks and the financial institution like SIDBI should have tie-up with the NGOs to try and reach the SMEs in the remote interior areas. There should be SME exchange which will help SMEs in getting more finance from banks by improving their debt-equity ratio.

TABLE OF CONTENT Particulars Indian Economy Banking in India Objective of the Report Introduction to Bank of Baroda RBI definition of SME MSMED Act 2006 Overview of MSME ACT in India SME lending policy SME Financing Organization Structure of SME SME Product Profile MSME Credit Proposal Processing SME credit Proposal Assessment Credit Proposal Appraisal SME Credit Rating Pricing of Credit proposal Findings and Observation Conclusion Recommendation Abbreviations Annexure Bibliography Page No. 1 3 5 6 24 25 28 37 40 53 55 77 80 101 102 110 111 115 116