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Group-3
Amit Agarwal
Hitesh Taparia
Meera Mohan
Aswin Swaminathan
Shashank Jain
Balasubrahmanyam Nukala
1
What is Corporate Banking
Defined as,
“ the wide range of banking and financial
services provided to domestic & international
operations of large local corporates and local
operations of multinational corporations”
2
What they offer?
Access to commercial banking products
Working capital facilities such as domestic
3
Method of distribution
All major banks in India like HSBC, ICICI, HDFC,
StanChart, SBI, Central Bank, Bank of Baroda,
etc offer these services
4
Banking: Retail vs Corporate
Retail Banking Corporate Banking
5
HDFC Bank – Corporate Banking
6
Major offerings from HDFC
Funded Non - funded Internet
Value added services
services services Banking
7
Funded Corporate Services
Project Finance
EXIM Finance
8
1. Working Capital Finance
Providing funds required for purchase of raw materials, stores,for payment of labor,
power charges & for financing the sales by way of sundry debtors receivables.
KEY BENEFITS:
Funded facilities, i.e. the bank provides funding and assistance to actually purchase
business assets or to meet business expenses.
Non-Funded facilities, i.e. the bank can issue letters of credit or can give a guarantee
on behalf of the customer to the suppliers, Government Departments for the
procurement of goods and services on credit.
Credit to be extended in the form of fixed loan (working capital Demand loan) and cash
credit (running account) in the ratio of 60:40 to borrowers enjoying aggregate working
capital limits of Rs.10 crore and above from the Banking system.
The working capital limits would require such security and personal/ third party
guarantees as applicable to general lending norms of the bank
9
2. Project Finance
Project finance is the financing of long-term infrastructure and industrial projects
based upon a complex financial structure where project debt and equity are used to
finance the project
The financing is typically secured by all of the project assets, including the revenue-
producing contracts
Project lenders are given a lien on all of these assets, and are able to assume
control of a project if the project company has difficulties complying with the loan
terms.
The rate of interest on such credit facilities would be determined based on the
borrower gradation and the interest rate policy of the bank from time to time.
The working capital limits require security and personal/ third party guarantees as
applicable to general lending norms of the bank and risk perception in respect of
individual borrowal account.
10
3. EXIM Finance
KEY BENEFITS:
Started
by RBI in the year 1992 with the introduction of Liberalized Exchange Rate
Management System.
Under this scheme, the recipient of inward remittances, exporters and other eligible
bodies are allowed to keep a portion of their inward remittances / export proceeds in
foreign currency with the banks in India which can later be utilized for permissible
purposes.
11
EXIM Finance contd.
Control guidelines.
Inward remittances including advance payments.
12
EXIM Finance contd.
SERVICES OFFERED TO IMPORTERS
13
Non Funded Corporate Services
Letters of credit
Bank guarantees
Collection of Documents
14
1. Letters of credit
Derived from french word “accreditation”- a power to do
something, which in turn is derivative of the Latin word
“accreditivus” -meaning trust
15
Letters of credit contd.
Parties
◦ Beneficiary
◦ Issuing bank
◦ Advisory bank
16
How LoC works?
17
2. Bank guarantees
A type of guarantee in which a bank or lending organization
promises to repay the liabilities of a debtor in the event that
he is unable to
18
Types of guarantee
Payment:
◦ To secure any claims by the seller on the buyer for
payment of the contract price by the agreed date.
Warranty obligations:
◦ To secure any claims by the buyer on the seller due
to possible defects appearing after delivery.
20
LoC vs Bank Guarantee
22
Value Added Corporate Services
Cash Management Services
Syndication Services
Money Market Desk
Issue Management Services
Tax Collection Services
RTGS
Channel Financing
Corporate Salary Accounts
FOREX Desk
23
24
• Eliminating idle cash balances
cash?
• Monitoring exposure and reducing risks
• Ensuring timely deposit of collections
manage
• Properly timing the disbursements Why
• Optimization of liquidity through an improved flow of funds
Objective
• Proper use of an entity’s cash resources
it?
• The means to keep an organisation functioning by making the best use of cash
or liquid resources of the organisation
What is
1. Cash management
Cash management services
Disbursement services
Information and control services
Services related to Electronic data
interchange (EDI)
Commercial web banking services
Sweep services
Fraud detection solutions
Global trade solutions
Investment solutions
25
Electronic payments in cash
management
Benefits:
Challenges to banks:
26
2. Syndication Services
Assists companies raise resources from the
Institutional market
27
Syndication Services contd.
Securitisation
◦ Residential Mortgaged Backed Securitisation (RMBS)
& Commercial Mortgaged Backed Securities.
◦ Asset Backed Securitisation
◦ Collateralised Debt Obligations (CDOs)
28
3. Money Market Desk
Money Market Desk services include:
Management of statutory reserves viz. Cash Reserve Ratio (CRR) and Statutory
Liquidity Ratio (SLR)
30
5. Tax Collection Services
Some Corporate banks will be authorized by the Central
Board of Direct Taxes (CBDT) as well as Reserve Bank of
India(RBI) for the collection of Direct Taxes
E.g. HDFC Bank was the first private sector bank to be
authorised for collection of direct tax, from April 01, 2001
Funds Transfer system where transfer of money takes place on “Real Time”
and on ‘Gross Basis”.
Both Remitting and Receiving bank must have Core Banking in place to enter
into RTGS transactions.
Customers can access the RTGS facility between 9AM to 4:30 PM on weekdays
and 9AM to 12 Noon on Saturday.
32
7. Channel Financing
Innovative products to extend working
capital finance .
Greater efficiencies in Receivables and Cash
Financing.
Firms can concentrate more on their core
competence area .
Suppliers and Dealers get payments promptly
33
Channel Financing – Benefits for Bank
34
8. Corporate Salary Accounts
Efficient Salary disbursals.
35
Benefits to Employees
Simple Account opening Procedures with minimum
documentation
Unparalleled Access
- Free Cash withdrawals at any ATM
- Multi City Banking, Phone Banking, Online
Banking
Personalized At-Par Cheque Book
Zero Balance Account
Free Demand Drafts
Attractive interest rates on loans
36
9. FOREX Desk
37
Internet Banking Services
38
1. Supply Chain Mgmt Services
39
2. Payment Gateway Services
• A payment gateway is an e-commerce application service provider that authorizes
payments for e-businesses, online retailers
Business to Business
• For Industries and Companies whose targets are suppliers, dealers etc who in turn reach the
masses
• Involves huge sum of monies
• Successfully implemented by portals, such as VSNL, Sifymall, Fabmart, etc.
• The entire operation takes place through a secure channel. The security features include:
Firewalls
128 - bit encryption
SET certification for digital signature
40
Payment Gateway Services cotnd.
Direct Pay Mode of Payment –
• Most banks provide both the Direct Pay and Net Banking facilities
FREE of cost to account holders
41
3. Corporate Internet Banking
• A fully secured Internet based online channel providing convenient
and secure access to banking information over the Internet
• Facilities Available-
a) Account Information –
42
Corporate Internet Banking contd.
b) Payments- Allows the client to make payments using one of the following
payment options:
Single Payment
Multiple Payments
Bulk Payments
43
Additional Services
Investment Banking Services
44
Investment Banking
Investment bankers function as intermediaries in financial transactions for corporates.
They are experienced in carrying out projects that, for most companies, take place
very rarely, but are critically important.
1. Raising capital
Assist a firm in raising funds to achieve a variety of objectives, such reduce its debt
load, expand existing operations or acquire another company.
Capital can include some combination of debt, common equity or preferred equity.
Work with the client to structure the transaction to meet specific objectives while
being attractive to investors.
45
Investment Banking contd.
2. Mergers & Acquisitions Advisory
Primarily relevant only to publicly traded firms, or firms which plan to go public in the near
future.
Specific functions include making a market in a stock, placing new offerings, and publishing
research reports.
46
FI & Capital Markets Services
1. Financial Institution Services
• Services the financial sector for the entire set of banking requirements
• Banks cater exclusively to the needs of -
Mutual Funds
Insurance Companies
Fund Accounting
Domestic Financial Institutions
Loan Syndication
Sell Down
Buyouts
47
FI & Capital Markets Services contd.
2. Capital Markets Services –
• Primary Markets
Collecting Bankers
Escrow and Paying Bankers
• Secondary Markets
48
Corporate Banking Statistics Of Major Banks
49
SBI – Corporate Banking
Corporate
Banking Retail
30% Banking Corporate
Retail Banking Banking Retail Banking
43%
Treasury 27% Retail Banking Treasury
Others 36% Others
Others
Treasury
1% Corporate Banking Corporate Banking
26%
Others
11% Treasury
26%
50
ICICI Bank – Corporate Banking
Others
Others General Retail
7% Other
4% Banking
Insurance
14% Banking Ops
Corporate 3%
8%
Banking Retail Others Others
Banking General Insurance Life Other Banking Ops
21% Treasury
20% Insurance
Retail Banking 28% Corporate Life Insurance
Other 3%
Treasury Other Banking Ops Banking General Insurance
28% Banking Ops General
38%
4% Venture Fund Mgmt Insurance Corporate Banking
Life Insurance
Venture Fund 2% Venture Fund Mgmt
Venture Fund
Mgmt Treasury Treasury
Mgmt
0% Corporate Banking Retail Banking
1%
Life
Insurance
21%
51
HDFC Bank – Corporate Banking
Treasury
15%
Treasury
Other 12%
Retail
Retail Other
Banking Ops Banking
Banking Banking
Corporate 8% 30%
51% Treasury Ops Treasury
Banking 11% Other Banking Ops
Other Banking Ops
27%
Corporate Banking Others Others
10% Corporate Banking
Retail Banking
Corporate Retail Banking
Banking
37%
52
AXIS Bank – Corporate Banking
53
YES Bank – Corporate Banking
Retail Banking
5%
Retail Banking Other Banking
7% Ops
0%
Treasury
32%
Corporate Corporate Banking Corporate
Other Banking Ops
Banking Other Banking Banking
Treasury Corporate Banking
63% Operations 48%
45% Treasury
Treasury
Other Banking Retail Banking
Retail Banking
Operations
1%
54
Some recent changes
Focus on personalized banking services
55
New Base Rate Regime
Bank Base Rate
SBI 7.5%
ICICI Bank 7.5%
AXIS Bank 7.5%
HDFC Bank 7.25%
Dhanalaxmi Bank 7%
YES Bank 7%
Bank of India 8%
IOB 8.25%
IDBI Bank 8%
Karnataka Bank 8.75%
Andhra Bank 8.25% 56
New Base Rate Regime - Implications
Banks should not lend below their base rates from July 1st
Base rates ranges from 6.75% to as high as 8.75%
The interest rate for CPs would be roughly 6.5-7.25 per cent.
The number of corporations looking to raise money through
CPs has increased three-four times post the implementation of
the Base Rate
Used to a healthy dose of short-term funding for tenures of up
to one year at below benchmark prime lending rates, bluechip
corporations are now faced with a new reality where banks
will lend only above their base rate
Hence CP offers them a suitable alternative to the erstwhile
sub-BPLR lending
57
THANKS
58