A PROJECT REPORT ON “CREDIT APPRAISAL”

OF CREDIT PROPOSALS

AT J&K BANK, CORPORATE HEADQUARTERS (SRINAGAR)

IN THE FULFILMENT OF THE REQUIREMENT FOR THE MASTERS

DEGREE IN Business Administration

Guided and supervised by Faculty GuideMohammad Shahid Drabu Ms. Aprajita Das Gupta Manager Foreign ExchangeJ&K Bank.

Department, Foreign Exchange, J&K Bank

Submitted byWASEEM RAJAMBA – 2009-11A3010909106

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AMITY GLOBAL BUSINESS SCHOOL

NOIDA SECTOR # 44, 201301

CERTIFICATE

It is Certified that the project report entitled “Credit

Appraisal” is authentic work carried out by Waseem Raja in

partial fulfilment of the award of Masters Degree in Masters

in Business Administration

He has completed this project report within the stipulated time

period as prescribed by the University.

The data mentioned in the report was obtained during the

unfeigned work done and was collected by me. Any other data

or information in this report, which has been collected or

borrowed from outside agency, has been duly acknowledged.

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CONTENTS

SECTION A: TERM LOANS AND ADVANCES & STATUTORY PROHIBITIONS:

a. Introduction: Term Loansb. Maturity profilec. Standards of margind. Statutory And Other Restrictions

SECTION B: TERMS USED IN CREDIT GRANTING DECISIONS

a. Securitiesb. Banking facilitiesc. Capital Structured. Banking arrangementse. Ratio analysisf. Financial statementsg. Credit risk rating framework

h. Subjective parameters configurationSECTION C: LIVE PROJECT APPRAISAL OF ARYAN POWER PROJECT LTD

a. General Information about the proposalb. Borrower Informationc. Capital Structure & Shareholding Patternd. Board of Directorse. Financials of APPLf. Brief about the promoter company g. Present Proposal of the Companyh. Means of Finance & cost of Projecti. Internal Ratingj. Industry & Swot Analysisk. Risk Analysis & Mitigationl. Sensitivity analysism.Recommendation

SECTION D: ANNEXURE

BIBLIOGRAPHY

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ACKNOWLEDGEMENT

First of all I must thank Almighty Allah who is behind my every success in

life and without his blessings this project would not have been completed.

I passionately give my sincere thanks to the organization of J & K Bank for

providing me this grateful opportunity for doing this project.

I would like to express my profound gratitude to my supervisors Mohammad

Shahid Drabu ( Manager Foreign Exchange J&K Bank) for their precious assistance, guidance, untiring advice and encouragement.

I sincerely thank all the members of the Foreign Exchange department for

their generous help in my project. I am also thankful to all staff members

for making me feel part of the organization and made me to work with all

my sincerity and potential.

I am grateful and gratified to the respected AMITY GLOBAL BUSINESS

SCHOOL branch of Amity University, for grooming me into a true line of

work.

Before concluding i doubt if we could have completed this project work,

but with the grace of Allah.

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INTERNSHIP PROGRAMME

The internship programme is part of the mandatory course

completion required for the Masters programme in Business

Administration at Amity Global Business School branch of AMITY

UNIVERSITY. Students are required to undertake Summer

(practical) training of 8 weeks in any company at the end of the

second semester. This provides students with the opportunities

to apply financial concepts and techniques, which they learn in

the classroom and the remaining semesters becomes more

goals oriented and meaningful.

As part of the internship programme I have had the opportunity

and pleasure to intern at J&K BANK Corporate headquarters, M

A Road, Srinagar and study the live project appraisal of Aryan

Power Project Ltd.

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EXECUTIVE SUMMARY

The economic development of any country depends on the extent to

which its financial system efficiently and effectively mobilizes and

allocates resources. There are a number of banks and financial institutions

that perform this function. Financial institutions provide medium- and

long-term financial assistance and act as catalytic agents in promoting

balanced development of the country. They are engaged in promotion and

development of industry, agriculture, and other key sectors. They also

provide development services that can help in the accelerated growth of

an economy. The industrial growth intern depends upon the success of

new projects. The success of the new projects depends largely upon the

quality of the project appraisal.

The main objective of the study is to understand the actual procedures

and steps involved in project appraisal. The report carriers in depths study

of financing appraisal with relevance to project financing.

The whole part of this study discusses what project appraisal is, various

steps involved in project appraisal, the procedure adopt by banks /

financial institutions in project appraisal.

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COMPANY PROFILE

Jammu & Kashmir Bank

History:

Traditional moneylenders till 1920-30 performed entire banking in the state of

Jammu & Kashmir at exorbitant interest rates. At the same time some banks

functioned but at a very limited scale, such as Punjab National Bank, Grindlays

Bank and Imperial bank of India. The role of these banks was reduced to the

acceptance of deposits, as they could not grant loans and advances to the

people of the state owing to the statutory limitations. Under this scenario banks

could not ameliorate the financial and social position of people of the State. To

overcome this critical situation the then Maharaja of State conceived an idea of

setting up of a State Bank in the state. After prolonged exercises and

deliberations the assignment for establishment of “The Jammu & Kashmir Bank

Limited” was given to the late Sir Sorabji N Pochkhanwala, the then Managing

Director of the Central Bank of India. Mr. S. N.Pochkhanwala formulated a

scheme on 24.09.1930, suggesting establishment of a Semi State Bank with

participation in capital by State and public under the control of State

Government. Thus the Bank was formally incorporated on 1st of October 1938

and commenced business from 4th of July 1939 at its Registered Office,

Residency Road, Srinagar, Kashmir

In its formative years, the bank had to encounter several serious problems, particularly around the

time of independence, when out of its total of 10 branches two branches of Muzafarabad and Mirpur

fell to the other side of line of control (Now Pak Administered Kashmir) along with cash and other

assets in 1947. However, State Govt. came to its rescue with the assistance of Rs. 6.00 lacks to meet

the claims. The Bank steadfastly overcame its difficulties and kept growing. Following the extension

of Central Laws to the State of Jammu & Kashmir, the Bank was defined as a Govt. Company as per

the provisions of Indian Companies Act 1956. The Bank had its first full time Chairman in 1971,

following the social control measures in banks. The year 1971 was a turning point for the Bank on

conferment of scheduled bank status and witnessed remarkable progress in all the vital fields of

operations. Reserve Bank of India declared the Bank as “A” class bank in 1976. In recognition of

dominant role and exalted performance, RBI entrusted the Bank as its agent for performing the

general banking business of the Central Government, especially in maintaining currency chest and

collection of taxes

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The Bank has been forerunner in responding to the need for technology up gradation in meeting its

commitment to the customer to offer the best of service and wide range of products. From a small

Beginning the Bank has grown to become a giant with a wide network of 577 branches/offices spread

over the length and breadth of India. A significant contributing factor for this fast growth is the solid

founding principles, which are dedicated to the cause of transforming the bank not only as a financial

heart but also as a social heart of the community. The Bank is investing in a big way in information

technology. Nearly 510 branches have been either partly or fully computerized covering 98% of the

total business of the bank. The bank has already installed around 175 ATMs at vital locations of the

country. The ATMs are interconnected and thus provide the customer convenient and 24-hour

banking facilities. Bank has also commissioned anywhere banking facilities at more than 103

branches throughout the country. The bank has already made available E-mail facilities at all of its

computerized branches and also Tele-banking facilities at most of these branches. The bank has also

launched Internet, SMS and mobile banking facilities.

Presently the bank is the fastest growing bank in the India offering world class banking

products/services to the masses. Today bank has a status of value driven Organization and is always

working towards building trust with Shareholders, Employees, Customers, Borrowers, Regulators and

other diverse Stakeholders, for which it has adopted a strategy directed to developing a sound

foundation of relationship and trust aimed at achieving excellence, which of course, comes from the

womb of good Corporate Governance. Good Governance is a source of competitive advantage and a

critical input for achieving excellence in all pursuits. It also ensures that bank is managed by an

independent and highly qualified Board following best globally accepted practices, transparent

disclosures and empowerment of shareholders, besides also ensuring that shareholders aspirations and

societal expectations are met.

J&K Bank is going from strength to strength as it sees tremendous revenue growth opportunities in all

businesses. The Bank will continue to invest to increase revenue, and Enhance shareholder value

through whichever means is most appropriate, including organic development, acquisitions, joint

ventures and partnerships. The Bank has a powerful set of brands that people trust and has proven

products and services, an integrated distribution network that delivers, and financial strength.

In recognition of its excellent customer service, fair business practices, overall operational efficiency,

overall performance, etc the bank has been felicitated by the following awards during the last few

years:

- Asian Banking Awards – 2004

- Excellence Award – Institute of Economic Studies

Jamnalal Baja Uchit Vyavahar Puraskar 2002– Council for Fair Business Practices dated 26th

March 2003.

- Ranked 87th among India’s Top 500 Companies by world’s renowned rating agency – “ DUN

& BRADSTREET”

- Asian Banking Award 2004 for the Customer Convenience programme.

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New Identity

The new identity for J&K Bank is a visual representation of the Bank’s philosophy and business

strategy. The three coloured squares represent the regions of Jammu, Kashmir and Ladakh. The

counter-form created by the interaction of the squares is a falcon with outstretched wings – a symbol

of power and empowerment. The synergy between the three regions propels the bank towards new

horizons. Green signifies growth and renewal, blue conveys stability and unity, and red represents

energy and power.

Unique Characteristics of the Bank

• Sole banker and lender of last resort to the Government of J & K.

• Plan and non -plan funds, taxes and non-tax revenues routed through the bank.

• Salaries of Government officials disbursed by the Bank.

• Only private sector bank designated as agent of RBI for banking.

• Carries out banking business of the Central Government.

• Collects taxes pertaining to Central Board of Direct Taxes in J & K.

Infrastructure: Global Standards

The fastest growing bank with 577 branches across the country

98% of the business computerized

Anywhere Banking, Tele-Banking and SWIFT facilities available

Internet Banking, SMS and Mobile Banking provided

ATMs connected globally to all MasterCard networked ATMs

Mobile ATM Service available – first of its kind in Northern India

J&K Bank Global Access Debit Cards: Cirrus and Maestro enabled

Electronic Fund Transfer (EFT) System

Corporate Headquarter:

The Corporate Headquarter, registered office of the Bank is located at Srinagar and is headed by

Chairman and Chief Executive officer (CEO), who is appointed by the J&K Government for a period

of 3 to 5 years. Generally, the Chairman is selected among reputed Economists, Bankers or/and the

Administrators of the State. The Chairman is guided by the Board of Directors of the Bank.

Future Trends

J&K Bank has traversed a long way from the day one with the solitary aim of ‘social benefit’ and

substantial progress has already been made towards this end.

Computerization and up gradation of technologies, rationalization of area wise branch structure,

staffing, development of human resources and strengthening of corporate management studies are

issues which Bank will address and implement in the coming years. At the same time the emphasis

will shift to greater self-regulation through adherence to prudential norms, corporate governance and

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strengthening of internal supervision and audit system as per guidelines of RBI. Further shift will be

on re-orientation and retraining of staff in tune with the changes in the operating environment; the

need to widen the scope and range of products and services and above all an improvement in the

delivery system and customer service levels. However, it will remain Bank’s endeavour to reduce the

non-performing loans both in percentage as well as in absolute terms

VISION

“To catalyse economic transformation and capitalise on growth.”

Our vision is to engender and catalyse economic transformation of Jammu and

Kashmir and capitalise from the growth induced financial prosperity thus

engineered. The Bank aspires to make Jammu and Kashmir the most prosperous

state in the country, by helping create a new financial architecture for the J&K

economy, at the center of which will be the J&K Bank.

MISSION

Our mission is two-fold: To provide the people of J&K international quality

financial service and solutions and to be a super-specialist bank in the rest of

the country. The two together will make us the most profitable Bank in the

country.

The Jammu and Kashmir Bank Limited

Type PUBLIC LIMITED

Founded 1938

Headquarters M.A.ROAD SRINAGAR, J&K,

No. Of locations 577 branches/offices

Industry Banking

Employees 7267

Website http://www.jkbank.net

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