PROJECT REPORT (Risk Management)Santu.docx 111111111111

8/9/2019 PROJECT REPORT (Risk Management)Santu.docx 111111111111

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PROJECT REPORT

On

“Risk Management in Banking Sector”

FOR

THE PARTIAL FULFILLMET OF THE A!AR" OF THE "E#REE OF

“MASTER OF BUSIESS A"MISTRATIO”

FROM ##S IP UI$ERSIT%

"ELHI

BATCH& '()*+),

SUBMITTE" B%& SUBMITTE" TO&

Sant- Sin.a Pro/ S.ik.a B.ar01a2

ARM% ISTITUTE OF MAA#EMET 3 TECHOLO#%4ARM% ISTITUTE OF MAA#EMET 3 TECHOLO#%4

#REATER OI"A 5UP6 7 '()*(8#REATER OI"A 5UP6 7 '()*(8

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S-9er:isor Certi/icate

This is to certify that Santu Sinha a student of Master of Business Administration, Batch –MBA-

10, Army Institute Management & Technology, Greater oida, has successfully com!leted his

!ro"ect under my su!er#ision$

%uring this !eriod, he or'ed on the !ro"ect titled “Risk Management in Banking Sector” in

!artial fulfillment for the aard of the degree of Master of Business Administration of GGSI(

)ni#ersity, %elhi$

To the *est of my 'noledge the !ro"ect or' done *y the candidate has not *een su*mitted to

any uni#ersity for aard of any degree$ +is !erformance and conduct has *een good$

Pro/ S.ik.a B.ar01a2

"ate& AIMT+#r; OI"A

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BAC#ROU" OF THE !OR

Risk Management is the a!!lication of !roacti#e strategy to !lan, lead, organi.e, and control the

ide #ariety of ris's that are rushed into the fa*ric of an organi.ation>s daily and long-term functioning$

8i'e it or not, ris' has a say in the achie#ement of our goals and in the o#erall success of an

organi.ation$ (resent !a!er is to ma'e an attem!t to identify the ris's faced *y the *an'ing industry and

the !rocess of ris' management$ This !a!er also e/amined the different techni;ues ado!ted *y *an'ingindustry for ris' management$ To achie#e the o*"ecti#es of the study data has *een collected from

secondary sources i$e$, from Boo's, "ournals and online !u*lications, identified #arious ris's faced *y the

*an's, de#elo!ed the !rocess of ris' management and analy.ed different ris' management techni;ues$

inally it can *e concluded that the *an's should ta'e ris' more consciously, antici!ates ad#erse changes

and hedges accordingly, it *ecomes a source of com!etiti#e ad#antage, and efficient management of the

*an'ing industry$

?=@


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3is' is an inherent !art of a Ban'Es *usiness, and effecti#e 3is' management is critical to achie#ing

financial soundness and !rofita*ility$ It is identified as one of the core com!etencies for the ne/t

millennium$ The 3is' management in#ol#es im!lementation of *est !ractices so as to o!timi.e ca!ital

utili.ation and ma/imi.e shareholder #alue$


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O=2ecti:es&

• To understand the ma"or ris's faced *y a *an' and 'no the #arious ris' management tools

ado!ted *y it$

• To understand the !osition of ris' e/!osure and the strategies used *y a *an' from its financial

accounts$

Sco9e o/ t.e st-0&

• Im!ortance of ris' management

•


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inancial ris' in a *an'ing organi.ation is !ossi*ility that the outcome of an action or e#ent could *ring

u! ad#erse im!acts$ Such outcomes could either result in a direct loss of earnings ca!ital or may result in

im!osition of constraints on *an'Es a*ility to meet its *usiness o*"ecti#es$

3egardless of the so!histication of the measures, *an's often distinguish*eteen e/!ected and une/!ected

losses$ =/!ected losses are those that the *an' 'nos ith reasona*le certainty ill occur Ce$g., the

e/!ected default rate of cor!orate loan !ortfolio or credit card !ortfolioD and are ty!ically reser#ed for in

some manner$ )ne/!ected losses are those associated ith unforeseen e#ents Ce$g$ losses e/!erienced *y

*an's in the aftermath of nuclear tests, 8osses due to a sudden don turn in economy or falling interest

ratesD$ Ban's rely on their ca!ital as a *uffer to a*sor* such losses$

3is's are usually defined *y the ad#erse im!act on !rofita*ility of se#eral distinct sources of uncertainty$


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3is' Management is a disci!line at the core of e#ery financial institution and encom!asses all the

acti#ities that affect its ris' !rofile$ It in#ol#es identification, measurement, monitoring and controlling

ris's to ensure that

aD The indi#iduals ho ta'e or manage ris's clearly understand it$

*D The organi.ationEs 3is' e/!osure is ithin the limits esta*lished *y Board of %irectors$

cD 3is' ta'ing %ecisions are in line ith the *usiness strategy and o*"ecti#es set *y B%$

dD The e/!ected !ayoffs com!ensate for the ris's ta'en

eD 3is' ta'ing decisions are e/!licit and clear$

fD Sufficient ca!ital as a *uffer is a#aila*le to ta'e ris'

The acce!tance and management of financial ris' is inherent to the *usiness of *an'ing and *an'sE roles

as financial intermediaries$ 3is' management as commonly !ercei#ed does not mean minimi.ing ris'F

rather the goal of ris' management is to o!timi.e ris'-reard trade -off$ otithstanding the fact that

*an's are in the *usiness of ta'ing ris', it should *e recogni.ed that an institution need not engage in

*usiness in a manner that unnecessarily im!oses ris' u!on it nor it should a*sor* ris' that can *e

transferred to other !artici!ants$ 3ather it should acce!t those ris's that are uni;uely !art of the array of

*an'Es ser#ices$

In e#ery financial institution, ris' management acti#ities *roadly ta'e !lace simultaneously at folloing

different hierarchy le#els$

aDStrategic le#el It encom!asses ris' management functions !erformed *y senior management and B%$

or instance definition of ris's, ascertaining institutions ris' a!!etite, formulating strategy and !olicies for managing ris's and esta*lish ade;uate systems and controls to ensure that o#erall ris' remain ithin

acce!ta*le le#el and the reard com!ensate for the ris' ta'en$

*DMacro 8e#el It encom!asses ris' management ithin a *usiness area or across *usiness lines$

Generally the ris' management acti#ities !erformed *y middle management or units de#oted to ris'

re#ies fall into this category$

cDMicro 8e#el It in#ol#es Jn-the-lineE ris' management here ris's are

actually created$ This is the ris' management acti#ities !erformed *y

indi#iduals ho ta'e ris' on organi.ationEs *ehalf such as front office and loan origination functions$ The

ris' management in those areas is confined to o!erational !rocedures and guidelines set *y management$

Risk Management /rame1ork

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A ris' management frameor' encom!asses the sco!e of ris's to *e managed, the !rocesssystems and

!rocedures to manage ris' and the roles and res!onsi*ilities of indi#iduals in#ol#ed in ris' management$

The frameor' should *e com!rehensi#e enough to ca!ture all ris's a *an' is e/!osed to and ha#e

fle/i*ility to accommodate any change in *usiness acti#ities$ An effecti#e ris' management frameor'

includes

aD :learly defined ris' management !olicies and !rocedures co#ering ris'

identification, acce!tance, measurement, monitoring, re!orting and control$

*D A ell constituted organi.ational structure defining clearly roles and

res!onsi*ilities of indi#iduals in#ol#ed in ris' ta'ing as ell as managing it$

Ban's, in addition to ris' management functions for #arious ris' categories may institute a setu! that

su!er#ises o#erall ris' management at the *an'$

Such a setu! could *e in the form of a se!arate de!artment or *an'Es 3is'

Management :ommittee C3M:D could !erform such functionK$ The structure

should *e such that ensures effecti#e monitoring and control o#er ris's

*eing ta'en$ The indi#iduals res!onsi*le for re#ie function C3is' re#ie,

internal audit, com!liance etcD should *e inde!endent from ris' ta'ing units

and re!ort directly to *oard or senior management ho are also not in#ol#ed

in ris' ta'ing$

cD There should *e an effecti#e management information system that ensures flo of information from

o!erational le#el to to! management and a system to address any e/ce!tions o*ser#ed$ There should *e an

e/!licit !rocedure regarding measures to *e ta'en to address such de#iations$

dDThe frameor' should ha#e a mechanism to ensure an ongoing re#ie of systems, !olicies and

!rocedures for ris' management and !rocedure to ado!t changes$

Integration o/ Risk Management

3is's must not *e #ieed and assessed in isolation, not only *ecause a single transaction might ha#e a

num*er of ris's *ut also one ty!e of ris' can trigger other ris's$ Since interaction of #arious ris's could

result in diminution or increase in ris', the ris' management !rocess should recogni.e and reflect ris'

interactions in all *usiness acti#ities as a!!ro!riate$


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)ntil and unless ris's are not assessed and measured it ill not *e !ossi*le to control ris's$ urther a true

assessment of ris' gi#es management a clear #ie of institutionEs standing and hel!s in deciding future

action !lan$ To ade;uately ca!ture institutions ris' e/!osure, ris' measurement should re!resent aggregate

e/!osure of institution *oth ris' ty!e and *usiness line and encom!ass short run as ell as long run

im!act on institution$ To the ma/imum !ossi*le e/tent institutions should esta*lish systems models that

;uantify their ris' !rofile, hoe#er, in some ris' categories such as o!erational ris', ;uantification is ;uite

difficult and com!le/$


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Trac' the ris' management efforts and manage accordingly$

MAA#I# CRE"IT RIS

:redit ris' arises from the !otential that an o*ligor is either unilling to !erform on an o*ligation or its

a*ility to !erform such o*ligation is im!aired resulting in economic loss to the *an'$

• In a *an'Es !ortfolio, losses stem from outright default due to ina*ility or unillingness of a

customer or counter !arty to meet commitments in relation to lending, trading, settlement and

other financial transactions$ Alternati#ely losses may result from reduction in !ortfolio #alue due

to actual or !ercei#ed deterioration in credit ;uality$ :redit ris' emanates from a *an'Es dealing

ith indi#iduals, cor!orate, financial institutions or a so#ereign$ or most *an's, loans are the

largest and most o*#ious source of credit ris'F hoe#er, credit ris' could stem from acti#ities *oth

on and off *alance sheet$

• In addition to direct accounting loss, credit ris' should *e #ieed in the conte/t of economic

e/!osures$ This encom!asses o!!ortunity costs, transaction costs and e/!enses associated ith a

non-!erforming asset o#er and a*o#e the accounting loss$

• :redit ris' can *e further su*-categori.ed on the *asis of reasons of default$ or instance the

default could *e due to country in hich there is e/!osure or !ro*lems in settlement of a

transaction$• :redit ris' not necessarily occurs in isolation$ The same source that endangers credit ris' for the

institution may also e/!ose it to other ris'$ or instance a *ad !ortfolio may attract li;uidity

!ro*lem$

Limit setting

An im!ortant element of credit ris' management is to esta*lish e/!osure limits for single o*ligors and

grou! of connected o*ligors$ The si.e of the limits should *e *ased on the credit strength of the o*ligor,

genuine re;uirement of credit, economic conditions and

the institutionEs ris' tolerance$

:redit limits should *e re#ieed regularly at least annually or more fre;uently if o*ligorEs credit ;uality

deteriorates$

Cre0it A0ministration;

ngoing administration of the credit !ortfolio is an essential !art of the credit !rocess$ :redit

administration function is *asically a *ac' office acti#ity that su!!ort and control e/tension and

maintenance of credit$ A ty!ical credit administration unit !erforms folloing functions

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• "oc-mentation;It is the res!onsi*ility of credit administration to ensure com!leteness of

documentation Cloan agreements, guarantees, transfer of title of collaterals etcD in accordance ith

a!!ro#ed terms and conditions$

• Cre0it "is=-rsement$ The credit administration function should ensure that the loan a!!lication

has !ro!er a!!ro#al *efore entering facility limits into com!uter systems$ %is*ursement should *e

effected only after com!letion of co#enants, and recei!t of collateral holdings$ In case of

e/ce!tions necessary a!!ro#al should *e o*tained from com!etent authorities$

• Cre0it monitoring$ After the loan is a!!ro#ed and dra don alloed, the loan should *e

continuously atched o#er$ These include 'ee!ing trac' of *orroersE com!liance ith credit

terms, identifying early signs of irregularity, conducting !eriodic #aluation of collateral and

monitoring timely re!ayments$

• Loan Re9ament;The o*ligors should *e communicated ahead of time as and hen the

!rinci!almar'u! installment *ecomes due$ Any e/ce!tions such as non-!ayment or late !ayment

should *e tagged and communicated to the management$ (ro!er records and u!dates should also

*e made after recei!t$

•Maintenance o/ Cre0it Fi


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Interna< Risk Rating$

:redit ris' rating is summary indicator of a *an'Es indi#idual credit e/!osure$ An internal rating system

categori.es all credits into #arious classes on the *asis of underlying credit ;uality$ A ell-structured

credit rating frameor' is an im!ortant tool for monitoring and controlling ris' inherent in indi#idual

credits as ell as in credit !ortfolios of a *an' or a *usiness line$ The im!ortance of internal credit rating

frameor' *ecomes more eminent due to the fact that historically ma"or losses to *an's stemmed from

default in loan !ortfolios$ An internal rating frameor' ould facilitate *an's in a num*er of ays such

as

• :redit selection

• Amount of e/!osure• Tenure and !rice of facility

• re;uency or intensity of monitoring

• Analysis of migration of deteriorating credits and more accurate

• com!utation of future loan loss !ro#ision

• %eciding the le#el of A!!ro#ing authority of loan$

The credit ris' e/!osure in#ol#es *oth the !ro*a*ility of %efault C(%D and loss in the e#ent of default or

loss gi#en default C8G%D$

The former is s!ecific to *orroer hile the later corres!onds to the facility$ The !roduct of (% and 8G%

is the e/!ected loss$

Ratings re:ie1

The ris' re#ie functions of the *an' or *usiness lines also conduct !eriodical re#ie of ratings at the

time of ris' re#ie of credit !ortfolio$ 3is' ratings should *e assigned at the ince!tion of lending, and

u!dated at least annually$

Cre0it Risk Monitoring 3 Contro<

:redit ris' monitoring refers to incessant monitoring of indi#idual credits inclusi#e of ff-Balance sheet

e/!osures to o*ligors as ell as o#erall credit !ortfolio of the *an'$ Ban's need to enunciate a system that

ena*les them to monitor ;uality of the credit !ortfolio on day-to-day *asis and ta'e remedial measures as

and hen any deterioration occurs$ Such a system ould ena*le a *an' to ascertain hether loans are

*eing ser#iced as !er facility terms, the ade;uacy of !ro#isions, the o#erall ris' !rofile is ithin limits

esta*lished *y management and com!liance of regulatory limits$ =sta*lishing an efficient and effecti#e

credit monitoring system ould hel! senior management to monitor the o#erall ;uality of the total credit

!ortfolio and its trends$ :onse;uently the management could fine tune or reassess its credit strategy

!olicy accordingly *efore encountering any ma"or set*ac'$ The *an's credit !olicy should e/!licitly

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!ro#ide !rocedural guideline relating to credit ris' monitoring$ At the minimum it should lay don

!rocedure relating to

• The roles and res!onsi*ilities of indi#iduals res!onsi*le for credit ris'

• monitoring

• The assessment !rocedures and analysis techni;ues Cfor indi#idual

•loans & o#erall !ortfolioD

• The fre;uency of monitoring

• The !eriodic e/amination of collaterals and loan co#enants

• The fre;uency of site #isits

• The identification of any deterioration in any loan

:redit ris' is most sim!ly defined as the !otential that a *an' *orroer or counter!art ill fail to meet its

o*ligations in accordance ith agreed terms$ The goal of credit ris' management is to ma/imi.e a *an'Es

ris'-ad"usted rate of return *y maintaining credit ris' e/!osure ithin acce!ta*le !arameters$ Ban's need

to manage the credit ris' inherent in the entire !ortfolio as ell as the ris' in indi#idual credits or

transactions$ Ban's should also consider the relationshi!s *eteen credit ris' and other ris's$ Theeffecti#e management of credit ris' is a critical com!onent of a com!rehensi#e a!!roach to ris'

management and essential to the long-term success of any *an'ing organi.ation$

This !a!er is *eing issued *y the Basel :ommittee on Ban'ing Su!er#ision to address ho common data

and !rocesses related to loans may *e used for assessing credit ris', accounting for loan im!airment and

determining regulatory ca!ital re;uirements$ The guidance su!ersedes Sound !ractices for loan accounting

and disclosure, !u*lished *y the :ommittee in Nuly 1444, and is structured around ten !rinci!les that fall

ithin to *road categories

S-9er:isor e9ectations concerning so-n0 cre0it risk assessment an0 :a


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2$ A *an's credit ris' assessment !rocess for loans should !ro#ide the *an' ith the necessary tools, !rocedures and o*ser#a*le data to use for assessing credit ris', accounting for im!airment of loansand for determining regulatory ca!ital re;uirements$

S-9er:isor e:a


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management and assetlia*ility management should *e integrated to a#oid stee! costs associated ith

ha#ing to ra!idly reconfigure the asset lia*ility !rofile from ma/imum !rofita*ility to increased li;uidity$

*$ "i:ersi/ication an0 Sta=i


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throughout in the organi.ation$ It is im!ortant that the Board and senior

managementA8: re#ie these !olicies at least annually and hen there are any material changes in the

institutionEs current and !ros!ecti#e li;uidity ris'

!rofile$ Such changes could stem from internal circumstances Ce$g$ changes in *usiness focusD or e/ternal

circumstances Ce$g$ changes in economic conditionsD$

3e#ies !ro#ide the o!!ortunity to fine tune the institutionEs li;uidity !olicies in light of the institutionEs

li;uidity management e/!erience and de#elo!ment of its *usiness$ Any significant or fre;uent e/ce!tion

to the !olicy is an im!ortant *arometer to gauge its effecti#eness and any !otential im!act on *an's

li;uidity ris' !rofile$

Institutions should esta*lish a!!ro!riate !rocedures and !rocesses to

im!lement their li;uidity !olicies$ The !rocedural manual should e/!licitly narrate the necessary

o!erational ste!s and !rocesses to e/ecute the rele#ant li;uidity ris' controls$ The manual should *e

!eriodically re#ieed and u!dated to ta'e into account ne acti#ities, changes in ris' managementa!!roaches and systems$

ALCO>In:estment Committee

The res!onsi*ility for managing the o#erall li;uidity of the *an' should *e delegated to a s!ecific,

identified grou! ithin the *an'$ This might *e in the form of an Asset 8ia*ility :ommittee CA8:D

com!rised of senior management, the treasury function or the ris' management de!artment$ +oe#er,

usually the li;uidity ris' management is !erformed *y an A8:$ Ideally, the A8: should com!rise of

senior management from each 'ey area of the institution that assumes andor manages li;uidity ris'$ It is

im!ortant that these mem*ers ha#e clear authority o#er the units res!onsi*le for e/ecuting li;uidity-related transactions so that A8: directi#es reach these line units unim!eded$ The A8: should meet

monthly, if not on a more fre;uent *asis$ Generally res!onsi*ilities of A8: include de#elo!ing and

maintaining a!!ro!riate ris'

management !olicies and !rocedures, MIS re!orting, limits, and o#ersight !rograms$ A8: usually

delegates day-to-day o!erating res!onsi*ilities to the *an's treasury de!artment$ +oe#er, A8: should

esta*lish s!ecific !rocedures and limits go#erning treasury o!erations *efore ma'ing such delegation$

To ensure that A8: can control the li;uidity ris' arising from ne !roducts and future *usiness

acti#ities, the committee mem*ers should interact regularly ith the *an's ris' managers and strategic !lanners$

LiD-i0it Ratios an0 Limits

Ban's may use a #ariety of ratios to ;uantify li;uidity$ These ratios can also *e used to create limits for

li;uidity management$ +oe#er, such ratios ould *e meaningless unless used regularly and inter!reted

ta'ing into account ;ualitati#e factors$ 3atios should alays *e used in con"unction ith more ;ualitati#e

information a*out *orroing ca!acity, such as the li'elihood of increased re;uests for early ithdraals,

decreases in credit lines, decreases in transaction si.e, or shortening of term funds a#aila*le to the *an'$

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To the e/tent that any asset-lia*ility management decisions are *ased on financial ratios, a *an's asset-

lia*ility managers should understand ho a ratio is constructed,

the range of alternati#e information that can *e !laced in the numerator or denominator, and the sco!e of

conclusions that can *e dran from ratios$

Because ratio com!onents as calculated *y *an's are sometimes inconsistent, ratio-*ased com!arisons of

institutions or e#en com!arisons of !eriods at a single institution can *e misleading$

i$ Cas. F


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Senior management and the *oard, or a committee thereof, should recei#e re!orts on the le#el and trend of

the *an's li;uidity ris' at least ;uarterly$ A recent trend in li;uidity monitoring is incremental re!orting,

hich monitors li;uidity through a series of *asic li;uidity re!orts during sta*le funding !eriods *ut

ratchets u! *oth the fre;uency and detail included in the re!orts !roduced during !eriods of li;uidity

stress$ rom these re!orts, senior management and the *oard should learn ho much li;uidity ris' the

*an' is assuming, hether management is com!lying ith ris' limits, and hether managementEs

strategies are consistent ith the *oards e/!ressed ris' tolerance$ The so!histication or detail of there!orts should *e commensurate ith the com!le/ity of the *an'$

MAA#I# OPERATIOAL RIS

!erational ris' is the ris' of loss resulting from inade;uate or failed

internal !rocesses, !eo!le and system or from e/ternal e#ents$ !erational ris' is associated ith human

error, system failures and inade;uate !rocedures and controls$ It is the ris' of loss arising from the

!otential that inade;uate information systemF technology failures, *reaches in internal controls, fraud,

unforeseen catastro!hes, or other o!erational !ro*lems may result in une/!ected losses or re!utation !ro*lems$ !erational ris' e/ists in all !roducts

and *usiness acti#ities$

!erational ris' e#ent ty!es that ha#e the !otential to result in su*stantial losses includes Internal fraud,

=/ternal fraud, em!loyment !ractices and or'!lace safety, clients, !roducts and *usiness !ractices,

*usiness disru!tion and system failures, damage to !hysical assets, and finally e/ecution, deli#ery and

!rocess management$

The o*"ecti#e of o!erational ris' management is the same as for credit, mar'et and li;uidity ris's

that is to find out the e/tent of the financial institutionEs o!erational ris' e/!osureF to understand hat

dri#es it, to allocate ca!ital against it and identify trends internally and e/ternally that ould hel!

!redicting it$ The management of s!ecific o!erational ris's is not a ne !racticeF it has alays *een

im!ortant for *an's to try to !re#ent fraud, maintain the integrity of internal controls, and reduce errors in

transactions !rocessing, and so on$ +oe#er, hat is relati#ely ne is the #ie of o!erational ris'

management as a com!rehensi#e !ractice com!ara*le to the management of credit and mar'et ris's in

!rinci!les$ ailure to understand and manage o!erational ris', hich is !resent in #irtually

all *an'ing transactions and acti#ities, may greatly increase the li'elihood that some ris's ill go

unrecogni.ed and uncontrolled$

O9erationa< Risk Management Princi9


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roles and res!onsi*ilities for all as!ects of o!erational ris' managementmonitoring and a!!ro!riate tools

that su!!ort the identification, assessment, control and re!orting of 'ey ris's$

cD Board and e/ecuti#e management should recogni.e, understand and ha#e defined all categories of

o!erational ris' a!!lica*le to the institution$ urthermore, they should ensure that their o!erational ris'

management frameor' ade;uately co#ers all of these categories of o!erational ris', including those that

do not readily lend themsel#es to measurement$

dD !erational ris' !olicies and !rocedures that clearly define the ay in hich all as!ects of o!erational

ris' are managed should *e documented and communicated$ These o!erational ris' management !olicies

and !rocedures should *e aligned to the o#erall *usiness strategy and should su!!ort the continuous

im!ro#ement of ris' management$

eD All *usiness and su!!ort functions should *e an integral !art of the o#erall o!erational ris' management

frameor' in order to ena*le the institution to manage effecti#ely the 'ey o!erational ris's facing the

institution$

fD 8ine management should esta*lish !rocesses for the identification, assessment, mitigation, monitoring

and re!orting of o!erational ris's that are a!!ro!riate to the needs of the institution, easy to im!lement,

o!erate consistently o#er time and su!!ort an organi.ational #ie of o!erational ris's and material

failures$

O9erationa< Risk F-nction

1 A se!arate function inde!endent of internal audit should *e esta*lished for effecti#e management of

o!erational ris's in the *an'$ Such a functional set u! ould assist management to understand andeffecti#ely manage o!erational ris'$ The function ould assess, monitor and re!ort o!erational ris's as a

hole and ensure that the management of o!erational ris' in the *an' is carried out as !er strategy and

!olicy$

To accom!lish the tas' the function ould hel! esta*lish !olicies and standards and coordinate #arious

ris' management acti#ities$ Besides, it should also !ro#ide guidance relating to #arious ris' management

tools, monitors and handle incidents and !re!are re!orts for management and B%$

Risk Assessment an0 -anti/ication

Ban's should identify and assess the o!erational ris' inherent in all material !roducts, acti#ities,

!rocesses and systems and its #ulnera*ility to these ris's$

Ban's should also ensure that *efore ne !roducts, acti#ities, !rocesses and systems are introduced or

underta'en, the o!erational ris' inherent in them is su*"ect to ade;uate assessment !rocedures ;


23/71

Risk Management an0 Mitigation o/ Risks

Management need to e#aluate the ade;uacy of countermeasures, *oth in terms of their effecti#eness in

reducing the !ro*a*ility of a gi#en o!erational ris', and of their effecti#eness in reducing the im!act

should it occur$


24/71

underta'en$

!erational ris' metrics or ?ey 3is' IndicatorsH C?3IsD should *e esta*lished for o!erational ris's to

ensure the escalation of significant ris' issues to a!!ro!riate management le#els$ ?3Is are most easily

esta*lished during the ris' assessment !hase$ 3egular re#ies should *e carried out *y internal audit, or

other ;ualified !arties, to analy.e the control en#ironment and test the effecti#eness of im!lemented

controls, there*y ensuring *usiness o!erations are conducted in a controlled manner$

Risk Re9orting

Management should ensure that information is recei#ed *y the a!!ro!riate !eo!le, on a timely *asis, in a

form and format that ill aid in the monitoring and control of the *usiness$ The re!orting !rocess should

include information such as

• The critical o!erational ris's facing, or !otentially facing, the institutionF

• 3is' e#ents and issues together ith intended remedial actionsF

• The effecti#eness of actions ta'enF

• %etails of !lans formulated to address any e/!osures here a!!ro!riateF

• Areas of stress here crystalli.ation of o!erational ris's is imminentF and

• The status of ste!s ta'en to address o!erational ris'$

Esta=


25/71

Em9


26/71

Fig;) Base II Ca9ita< Accor0

First Pi


27/71

The standardi.ed a!!roach is conce!tually the same as the !resent Accord, *ut is more ris' sensiti#e$ The

*an' allocates a ris'-eight to each of its assets and off-*alance-sheet !ositions and !roduces a sum of

ris'-eighted asset #alues$ Indi#idual ris' eights currently de!end on the *road category of *orroer

Ci$e$ so#ereigns, *an's or cor!orateD$ )nder the ne Accord, the ris' eights are to *e refined *y

reference to a rating !ro#ided *y an e/ternal credit assessment institution that meets strict standards$

T.e Interna< Ratings Base0 A99roac. 5IRB6

)nder the I3B a!!roach, distinct analytical frameor's ill *e !ro#ided for different ty!es of loan

e/!osures$ The frameor' allos for *oth a foundation method in hich a *an' estimate the !ro*a*ility

of default associated ith each *orroer, and the su!er#isors ill su!!ly the other in!uts and an ad#anced

I3B a!!roach, in hich a *an' ill *e !ermitted to su!!ly other necessary in!uts as ell$ )nder *oth the

foundation and ad#anced I3B a!!roaches, the range of ris' eights ill *e far more di#erse than those in

the standardi.ed a!!roach, resulting in greater ris' sensiti#ity$

'; O9erationa< Risk&

Basel II Accord set a ca!ital re;uirement for o!erational ris'$ It defines o!erational ris' as Lthe ris' of

direct or indirect loss resulting from inade;uate or failed internal !rocesses, !eo!le and systems or from

e/ternal e#entsL$ Ban's ill *e a*le to choose *eteen three ays of calculating the ca!ital charge for

o!erational ris' – the Basic Indicator A!!roach, the Standardi.ed A!!roach and the ad#anced

measurement A!!roaches$

T.e Secon0 Pi


28/71

CHALLE#ES FOR I"IA BAI# S%STEM

U"ER BASEL II

A feature, somehat uni;ue to the Indian financial system is the di#ersity of its com!osition$


29/71

LITERATURE RE$IE!

3is' Management and 3is' *ased Su!er#ision in Ban's has *een the su*"ect of study of many Agencies

and 3esearchers and Academicians$ There is a treasure of literature a#aila*le on the su*"ect$

A careful selection of rele#ant material as a formida*le tas' *efore the 3esearcher$ =fforts ha#e *een

made to scan the literature highly rele#ant to the :onte/t$

The main sources of literature ha#e *een the


30/71

and regulatory en#ironment$ The *oo' dealt a ide area of regulatory as!ects of Ban'ing in the )nited

States, regulation of international Ban'ing, international Ban' ser#ices and international monetary

e/change$ The or' attem!ted in de!th analysis of all as!ects of Ban' 3egulation and Su!er#ision$

Money 8aundering has *een of serious concern orldide$ Its ris' has ide ramifications$ Money

8aundering has lead to the fall of Ban's li'e B::I in the !ast$ In this conte/t the *oo' on Anti-Money

8aundering International (ractice and (olicies *y Nohn Broome

(u*lished *y S1eet an0 Ma1e


31/71

ha#e some dangerous side effects$ The increased ca!ital re;uirements as decided *y the Basel :ommittee

on Ban'ing Su!er#ision in Se!tem*er 010 ill affect the amount of on funds ould affect the

!rofita*ility of the Ban's$ The conse;uences of such increased ca!ital re;uirements ould incenti#ise the

Ban's to transfer certain o!erations that are hea#ily ta/ed in terms of ca!ital re;uirements to shado

Ban'ing to a#oid the sco!e of regulation$ The ris's of such a !ractice might affect the financial sta*ility$


32/71

In#estors$ The articles discusses at length the re#ision of Ban' :a!ital 3e;uirements and Accounting

(rocedures, re#ising the role of :redit 3ating Agencies, the su!er#ision and regulation of +edge unds,

:ommodity unds and (ri#ate =;uity unds$ :om!le/ issues of %eri#ati#es 3egulation, Mortgage

Securiti.ation etc$ +a#e also *een discussed and the author came out ith suggested methods to address

these difficult issues$

The 8S= 3e!ort of the 8ondon School of =conomics and (olitical Sciences C57D is a #ery im!ortantdocument in analy.ingthe role of finance in the *uild-u! to the recent crisis$ The ta/ *ail – *ail-outs ha#e

*een critici.ed and the gradual increase in the e;uity financing ould shift the res!onsi*ility of any crisis

toards the shareholders$

As !er Peter Boone an0 Simon Jo.nson, the glo*al financial system is facing gra#e ris's due to the

*ail-out !olicy of the


33/71

3is's ha#e also increased on account of the on-line electronic *an'ing, !ro#ision of *ill !resentation and

!ayment ser#ices etc$ The ma"or ris's faced *y financial institutions are of course credit ris', interest rate

ris', foreign e/change ris' and li;uidity ris'$

:redit ris' management re;uires that Ban's de#elo! loan assessment !olicies and administration of loan

!ortfolio, fi/ing !rudential !er *orroer, !er grou! limits etc$ The tendency for e/cessi#e de!endence on

collateral should also *e loo'ed into$ The other ea'nesses in :redit 3is' Management are inade;uateris' !ricing, a*sence of loan re#ie mechanism and !ost sanction sur#eillance$ Interest rate ris' arises due

to changes in interest rates significantly im!acting the net interest income, mismatches *eteen the time

hen interest rates on asset and lia*ility are reset etc$ Management of interest rate ris' in#ol#es em!loying

methods li'e alue-at-3is' Ca3D, a standard a!!roach to assess !otential loss that could crystalli.e on

trading !ortfolio due to #ariations in mar'et interest rates and !rices$ oreign =/change ris' is due to

running o!en !ositions$ The ris' of o!en !ositions of late has increased due to ide #ariations in

e/change ris's$ The Board of %irectors should la don strict intra-day and o#ernight !ositions to ensure

that the oreign =/change ris' is under control$

:hief 3is' fficer, A


34/71


35/71

day$ Similarly non-com!liance of the 3BI directions also attract fine u! to 3s$9 la'hs and additional fine

of 3s$10,000- !er day$ This has !ro#ed to *e a #ery effecti#e 3is' Management Tool in the hands of the

Ban's$The 3e!ort of the Ban'ing :ommission 142 – 3BI Mum*ai$ The :ommission made se#eral

recommendations for ma'ing the Indian Ban'ing system healthier$ The commission o*ser#ed that the

system of controls and su!er#isory o#ersight ere la/ and underlined the need for closure su!er#ision of

Ban's to a#oid Ban' failures$ +oe#er most of the recommendations of the :ommission lost their

rele#ance in #ie of the !riorities of the Go#ernment hich is more concerned ith its !oliticalcom!ulsions$ The nationalisation of Ban's and the tight controlon the Ban's of the Go#t$ 8eft little sco!e

for im!lementation of the recommendations of the :ommission$ If only the recommendations hich are

meant to restore tighter regulatory measures, strengthening of the internal control systems and

!rofessionali.ation of the Ban' Boards ere !ro!erly a!!reciated and im!lementation, Indian Ban's

ould not ha#e ended in the mess of erosion of ca!ital, mounting *urden of non-!erforming assets$etc$ A

ell 'non study analy.ing the !erformance of :ommercial Ban's in India as conducted *y ashist

C1441D$

A:tar ris.na $as.ist (u*lic Sector Ban's in India 7 H4;;P-=


36/71

Main Recommen0ations&

1$ !erational fle/i*ility and functional autonomy

$ (re-em!tion of lenda*le resources to *e sto!!ed *y !rogressi#ely reducing the S83 and :33

5$ (hasing out of directed :redit (rogrammes

7$ %eregulation of interest rates

9$ :a!ital Ade;uacy re;uirements to *e gradually ste!!ed u!

$ Stricter Income 3ecognition norms

2$ (ro#isioning re;uirements tightened

6$ Structural rganisation

• Three to four 8arge Ban's Cincluding State Ban' of IndiaD hich could *ecome international in

character

• =ight to ten national *an's ith a netor' of *ranches throughout the country engaged in

Juni#ersalE *an'ing

• 8ocal Ban's hose o!erations ould *e generally confined to a s!ecific regionE

• 3ural Ban's including 3egional 3ural Ban's confined to rural areas

4D 8e#el !laying field for (u*lic Sector and (ri#ate Sector Ban's

10D o further nationalisation

11D =ntry of (ri#ate Sector Ban's recommended

1D Ban's re;uired to ta'e effecti#e ste!s to im!ro#e o!erational efficiency through com!uterisation,

*etter internal control systems etc$

RESEARCH METHO"OLO#%

Page | 36


37/71

"escri9ti:e Researc.&

The research conducted is !rimarily descri!ti#e in nature$ 3e#ie of all a#aila*le secondary data as

done, in order to gain insight into the 3is' Management in Ban's$ This design as chosen s!ecifically *ecause it ena*les one to gain thorough insight into LhyL, LhoL and LhenL something occurs$ The goal

is to learn hat is going on here and to in#estigate social !henomena ithout e/!licit e/ce!tions and is

an attem!t to unearth a theory from the data itself rather than from a a !re-dis!osed hy!othesis$

In order to achie#e the o*"ecti#es of the study a literature sur#ey as underta'en to understand the

conce!t of ris' management and #arious com!onents associated ith ris' management ,the analysis and

results ere *ased !urely on data collected from secondary sources$

The research or' done in#ol#ed the folloing ste!s

• %ata !ertaining to the issue as collected e/tensi#ely through maga.ines, articles, *oo's and

!rimarily the internet$

• %ata as e/amined to gain an understanding of the to!ic and form a *asis of the introduction$

• The #arious articles and !re#ious research re!orts on the to!ic ere e/amined as a !art of the

literature re#ie$ This hel!ed in understanding #arious #ie!oints that had *een formed earlier a*out the su*"ect under consideration$ It also ena*led find a direction for the research and

effecti#ely carry it out further$• Also a rationale for conducting the study as de#elo!ed in order to su!!ort the further im!ortance

of carrying out the research or'$

• Based on the results and the outcome of the o#erall study, !lausi*le conclusions ere dran and

recommendations ere gi#en into the matter under consideration$

LIMITATIOS

Page | 37


38/71

Though sam!le data as a#aila*le on the su*"ect, *ut u!dated data as less and finding accurate facts and

figures as slightly tough$ It is rele#antly ne field of study and not a lot of *eha#ioral has *een done in

this conte/t$ Therefore there is-

• no com!arati#e study in the !ro"ect$

• only secondary data is a#aila*le for the research, there is no !rimary data used in the !ro"ect ,

hich is again a constraint for the research done time constraint$

"ATA AAL%SIS

Page | 38


39/71

CAR

8.57%

4.51%

13.08%

8.55%

2.86%

11.41%

0.00%

2.00%4.00%

6.00%

8.00%

10.00%

12.00%

14.00%

Tier 1 Tier 2 Total Tier 1 Tier 2 Total

FY 10 FY 09

); Ca9ita< A0eD-ac&

CAR – :a!ital Ade;uacy ratio The ratio of ca!ital to ris' eighted assets

I ear '()(&

Tier 16$92O

Tier 7$91O

Total15$06O

I ear '((&

Tier 16$99O

Tier $6O

Total 11$77O

ig :a!ital Ade;uacy ratio

The Ban'Es total :a!ital Ade;uacy 3atio C:A3D as at March 51, 010 stood at 15$1O as against the

regulatory minimum of 4$0O$ Tier-I :A3 as 6$O$

%uring 004-10, the Ban' raised 3s$710 crores of su*ordinated de*t ;ualifying as 8oer Tier II ca!ital,

3s$1,069 crores of )!!er Tier II ca!ital Cincluding )S 100 million in foreign currencyD and 3s$00

crores of !er!etual de*t ;ualifying as +y*rid Tier I ca!ital$

:A3 TierIThe Tier I ca!ital has increased to 3s$5921 lacs from 3s 917441 lacs$

:A3 Tier IIThe Tier II ca!ital has increased to 3s$555444 lacs from 3s 12021 lacs$

Page | 39


40/71

'; BREA UP OF LIABILITIESOF H"FC BA in '()(

Cin 3s$ 8acsD

:a!ital 51454

3eser#es and Sur!lus 1152

%e!osits ,64,247

Borroings 61954

ther 8ia*ilities and (ro#isions 156415

Total

41,59,

1

In the gi#en !ie chart e can see that %e!osits has got the ma/imum share C27OD total, it means that

+%: Ban' has this much of de!osits hich is the main source of their funds and others ha#e got #ery

small !ro!ortions of total lia*ilities as shon *y the ta*le a*o#e$

*;BREA UP OF ASSETS OF H"FC BA in '()(

Page | 40


41/71

Cin 3s$ 8acsD

:ash and *alances ith 3eser#e Ban' of India 9,16,76

Balances ith Ban's and Money at :all and Short notice 5,421,70

In#estments

50,97,

60

Ad#ances

7,477,2

6

i/ed Assets 4,2

ther Assets

5,09,7

6

Total

41,59,

1

In the gi#en !ie chart e can see that loans and ad#ances has got the ma/imum share C91$79OD total ,it

means that +%: Ban' de!loys ma/imum amount of money in !ro#iding loans and so has to earn its

!rofit mainly through this means, and then comes et in#estment C55$9OD$

@; Risk 1eig.te0 assets&

Page | 41


42/71

ig 5 3is' eighted assets

The assets are assigned ris' eights de!ending on the ris' e/!osure a !articular asset has$ Then the *oo'

#alue of assets is multi!lied ith the ris' eights to get ris' eighted assets$ The higher is its #alue,

higher is the ris' in#ol#ed$

,; CASH I HA" A" BA BALACE

Page | 42


43/71

:ash in hand

27,9

1

Balances ith 3eser#e Ban' of India 775942

Balances ith Ban's In India

1,95,

6

Balances ith Ban's outside India 7524

Money at call and short notice in India

140,0

0

Money at call and short notice outside India

1,49,5

5

Total 419566

These *alance sheet items ma'e an im!ortant !art of ris' eighted assets$ There is no ris' ith cash in

hand and *alance ith 3BI, so they are assigned .ero as their ris' eights hereas others get a #ery small

!ercentage as their ris' eights

8; I$ESTMETS &

CIn 3s lacsDPage | 43


44/71

Go#ernment securities

,977,

ther a!!ro#ed securities 6

Shares 96,51

%e*entures and Bonds 2,564,69Su*sidiary Noint entures 1,9

)nits, :ertificate of %e!osits and thers 974,4

Total

50,97,9

6

The a*o#e !ie chart shos the !ro!ortions of total in#estments in different instruments$ All the

instruments ha#e different ris' e/!osures and they again ma'e an im!ortant !art of ris' eighted assets$

Among these, Go#ernment securities are the most secure, hich also ma'e the highest !ro!ortion of total

in#estments, and shares are the most ris'y$

; A"$ACES

Page | 44


45/71

CIn lacsD

Secured *y tangi*le assets

5,679,7

7

:o#ered *y Ban'Go#ernment Guarantees 9,5

)nsecured15,92,46

Total

7,477,2

6

Most of the ad#ances gi#en are secured *y tangi*le assets$ But the li;uidity of those assets is again in

;uestion$ Almost 50O of ad#ances are unsecured, so accordingly the ris' management strategies and the

!ro#isions ha#e to *e made$

Page | 45


46/71

15518

20289

0

5000

10000

15000

20000

25000

in lacs

FY 09 FY 10

15518 20289

net NPAs

3537145487

0

10000

20000

30000

40000

50000

in lacs

FY 09 FY 10

35371 45487

Provisions for NPAs

?; PAs 7 O PERFORMI# ASSETS&

ET PAs

@ 04 3s$19916 lacs

@ 10 3s$064 lacs

ig 7 et (As

PRO$ISIOS FOR PAs

@ 04 3s59521 lacs

@ 10 3S$79762 lacs

ig 9 !ro#ision for (As

O PERFORMI# ASSETS CATE#OR% I '()(

Su*-standard 125,2

%ou*tful 109,06

Page | 46


47/71

Provisions for NPAs FY 10

17372

10508

17607Sub stanar

!oubt"ul

#oss

8oss 12,02

As at March 51 797,62

Ad#ances are classified as !erforming and non-!erforming *ased on the 3eser#e Ban' of India guidelines$

Interest on non-!erforming ad#ances is transferred to an interest sus!ense account and notrecogni.ed in

the (rofit and 8oss Account until recei#ed$

In res!ect of restructured standard and su*-standard assets, !ro#ision is made for interest com!onent

s!ecified hile restructuring the assets, *ased on the 3eser#e Ban' of India guidelines$ The su*standard

assets hich are su*"ect to restructuring are eligi*le to *e u!graded to the standard category only after a

minimum !eriod of one year after the date hen the first !ayment of interest or !rinci!al, hiche#er is

earlier, falls due, su*"ect to satisfactory !erformance during the said

!eriod$ nce the asset is u!graded, the amount of !ro#ision made earlier, net of the amount !ro#ided for

the sacrifice in the interest amount in !resent #alue terms, as aforesaid, is re#ersed$

; EKPOSURE TO SESITI$E SECTORS

Page | 47


48/71

483453

732012

159421156448

0

100000

200000

300000

400000500000

600000

700000

800000

in lacs

FY 09 FY 10 FY 09 FY 10

Real estate Capital maret

e!pos"re to sensitive sectors

Cin 3s$ lacsD

@ 04 765795

@ 10 2501

@ 04 19471

@ 10 19776

ig e/!osure to sensiti#e sectors

=/!osure to real estate in the *an' has increased tremendously in 010 hereas e/!osure to ca!ital

mar'et remains almost the same$

)(; "EBT TO EUIT%&

Page | 48


49/71

The ratio in year 010 is 11$07$The de*t 3S$2111555 lacs com!rising of de!osits of 3s$64247 lacs and

*orroings of 3s$ 61954 lacs$ urther the e;uity of the *an' amounting to 3s$75519 lacs included

ca!ital as 51454 lacs and reser#es and sur!lus as 3s$1152 lacs$

)); UIC ASSETS TO CURRET LIABILITIES

T.e ratio in ear '()( is (;88

It is one of the im!ortant measures of the li;uidity ris'$ The Uuic' assets of the *an' ere 3s$419566 lacs

in 010$ Uuic' Assets include cash and *alance ith 3BI as 3s$91676 lacs and money at call and short

notice as 3S$542170 lacs$ :urrent lia*ilities amounts to 3s$ 156415 lacs$

)'; LIUI" ASSETS TO A"$ACES& T.e ratio /or t.e ear is );,( The ad#ances in the *an' is

3s 747726 lacs in year 010$ 8i;uid assets include cash and *alances ith 3BI as 3s$ 91676 lacs and

*alances ith *an's and money at call and short notice as 3s$542170 lacs$

FI"I#S 3 COCLUSIOS

Page | 49


50/71

I%IGS

); Ca9ita< A0eD-ac&

The Ban'Es total :a!ital Ade;uacy 3atio C:A3D as at March 51, 010 is 15$1O as against the regulatoryminimum of 4$0O$ Tier-I :A3 as 6$O$

'; BREA UP OF LIABILITIESOF H"FC BA

A/ter ana


51/71

=/!osure to real estate in the *an' has increased tremendously in 010 hereas e/!osure to ca!ital

mar'et remains almost the same

?; "EBT TO EUIT%

The ratio in year 010 is 11$07$

; UIC ASSETS TO CURRET LIABILITIES

The Uuic' assets of the *an' ere 3s$419566 lacs in 010$

Uuic' Assets include cash and *alance ith 3BI$

)(; LIUI" ASSETS TO A"$ACES

T.e ratio /or t.e ear is );,(;

8i;uid assets include cash and *alances ith 3BI$

COCLUSIOS

Page | 51


52/71

3is' can *e defined as any uncertainty a*out a future e#ent that threatens the organi.ationEs a*ility to

accom!lish its mission$ o *usiness e/ists ithout ris's or has .ero ris' orientation$ 3is' management

cannot *e eliminated *ut ena*les the organi.ations to *ring it to managea*le !ro!ortions$ 3is'

management is *asically a fi#e ste! !rocess, in#ol#ing CiDa#oidance CiiD8oss control CiiiD Se!aration

Ci#D:om*ination and C#D Transfer$

The increasing amount of com!etiti#e and regulatory !ressures has com!elled #arious organi.ations to an

enter!rise ris' management frameor'$ Ban's are e/!osed to different ty!es of ris's$ 3is' management

frameor' can *e treated as a mirror of efficient cor!orate go#ernance of a financial institution$

Glo*ali.ation and significant com!etition *eteen foreign and domestic *an's, sur#i#al and o!timi.ing

returns are #ery crucial for *an's$ There are of course a fe fundamental !illars that necessitate a ell

defined ris' management frameor' in any *an', hich are cor!orate culture, different !rocedures and

the technology as!ect$ Along ith the efficient ris' management !ractices, the other im!ortant factor for

success is selecting the efficient customer and !ro#iding inno#ati#e and #alue added financial !roducts

and ser#ices to them$ 3is' limitation is a !art of ris' management$ The *an' should first find hat amount

of ris' it can a*sor* in order to limit its ris' e/!osure$ The ris' management !rocess must *e e#ol#ed

ithin the organi.ation$ The *asic frameor' of ris' management consists of the elements such as interest

rate ris', credit ris', li;uidity ris', e/change rate ris'$

=ffecti#e ris' management strategies can *e im!lemented *y integrating effecti#e *an'-le#el

management, o!erational su!er#ision and mar'et disci!line$ The first !illar of Basel II is designed to hel!

co#er ris's ithin the financial institutions ,the second !illar intends to ensure the !resence of sound

!rocesses at each *an', the third !illar attem!ts to *oost mar'et disci!line through enhanced disclosure *y

*an's$

BIBLIO#RAPH%

Page | 52


53/71

REFERECES

BOOS&

I:AI Nournal – 3is' management in *an's

alue re!orting and Glo*al com!arati#e ad#antageCBan'ing and inanceD- +%: Ban'

O9erationa< ece


54/71

Ba


55/71

Pro/it an0 Loss Acco-nt

For t.e ear en0e0 Marc. *)4 '()@

Rs; in (((

%ear En0e0 @ear =ndedSc.e0-


56/71

Basic 8;,8 9$69

%iluted 88;? 9$94

(rinci!al Accounting (olicies and otes formingintegral !art of the financial statements 12 & 16

Page | 56


57/71

APPE"IK+*

CASH FLO! STATEMET

Cas. F


58/71

Cas. /


59/71

Cas. F


60/71

SCHE"ULES TO THE ACCOUTS

As at Marc. *)4 '()@

Rs; in (((

As at As at

*)+Mar+)@ 51-Mar-15SCHE"ULE ) + CAPITAL

A-t.orise0 Ca9ita<99,00,00,000 C51 March, 017 99,00,00,000D =;uity Shares of3s$ 10- each ,4,((4((( 9,900,000

Iss-e04 S-=scri=e0 an0 Pai0+-9 Ca9ita<79,22,75,2 C51 March, 017 7,95,67,104D =;uity Shares of3s$ 10- each @4,4@** 7,95,671

Tota< @4,4@** 7,95,671

SCHE"ULE ' + RESER$ES A"SURPLUS

I; Stat-tor Reser:e

!ening Balance ''4?4') 19,145,954

Additions on amalgamation + ,161,705

Additions during the year 4*)4,' 9,1,574

Tota< *(4*,4(@* ,462,41

II; #enera< Reser:e

!ening Balance 4*8(4,'* 9,119,967

Additions during the year '4@?4() ,77,454

Tota< )(4*(4''@ 2,50,95

III; Ba


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Tota< '4,)4)( 49,910

$I

I; In:estment Reser:e Acco-nt

!ening Balance '84',( 717,600

Additions during the year **4*(( 12,04

%eductions during the year 5@?4'((6 C199,7D

Tota< '8)4*,( 2,90

+%: Ban' 8imited Annual 3e!ort 015-17

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A; In:estments in In0ia in

CiD Go#ernment securities ,)(4@4'?? 91,99,64

CiiD ther a!!ro#ed securities @4' 1,900CiiiD Shares )4(*,4'? 542,557Ci#D %e*entures and Bonds ))4*'4)@ 14,76,717

C#D Su*sidiaries Noint entures )4,,(4) 1,990,441

C#iD

)nits, :ertificate of %e!osits andthers 8)4)'(488? 79,16,7

Tota< ,?,48(@4))) 966,125,510



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In0ia

II$ Ad#ances utside India

CiD %ue from Ban's + -

CiiD %ue from thers

aDBills (urchased and

discounted @,@4@)' 74,760

*D Syndicated 8oans + -

cD thers )4*'4?8) 2,67,57

Tota< A0:ances O-tsi0e

In0ia )4?@4'* 6,555,607

(Advances are net of provisions) Tota< A0:ances )4',?4*(,4* 466,650,725



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Tota< @4,@84'* 7,15,09



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II$ther items for hich the Ban' iscontingently lia*le @4@??4@, 10,266,612

Tota< @4(4,),4(@@7,094,61,66

9


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XI$ Insurance )48)(48(' 1,562,95XII$ ther =/!enditureK )'484??@ 15,977,95

Tota< ,48@@4?' 99,56,096

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PROJECT REPORT (Risk Management)Santu.docx 111111111111