DENA BANK INVITES EXPRESSION OF INTEREST
FOR PROVIDING CONSULTANCY ON RISK MANAGEMENT
The Expression of Interest document is presented in following pages for
interested parties to download.
Responses to Invitation for Expression of Interest should be submitted in
duplicate in sealed envelopes addressed to General Manager (IT & IRM) at
Dena Bank Head Office, Dena Corporate Centre, C-10, G Block, Bandra Kurla
Complex, Bandra East, Mumbai 400 051 before 4.00 PM on 3 rd January 2006.
Offers received after the specified date and time will not be entertained.
The Bank will issue Request for Proposal at a later date only to parties
shortlisted after evaluation of Expression of Interest.
The Bank reserves its right to reject any or all of the responses to Invitation
for Expression of Interest received without assigning any reasons.
Information Technology &
23rd December 2006
Consultancy Services for an Integrated Risk Management Framework
Request for Expression of Interest [EoI]
0.000 Information on the Bank:
0.001 Dena Bank, founded in May 1938 is now a leading listed bank and is a
Government of India enterprise. The Bank had 1122 branches as at 31 st
March 2006 (1122 as at 30th June 2006) including 98 satellite offices
spread over 21 states and 3 Union Territories. Of these, 518 branches
were located in Gujarat, 249 in Maharashtra and 74 in Chhattisgarh. The
Bank had presence in almost all major cities / towns elsewhere. Of the
1122 branches, 491 (including 98 satellite offices) were located in rural
areas, 191 in semi-urban, 236 in urban and 204 in Metro areas. The Bank
does not have any branch outside the country. The Bank has 37 authorized
dealer branches to undertake forex related business. The Bank has also
set up 5 Asset Recovery Branches to focus on recovery efforts in large
NPA accounts. The Bank has set up over 50 FINMARTS for marketing of
its retail products and services.
0.002 The Bank has a large bouquet of products and services to offer its
customers. Apart from traditional asset & liability products and ancillary
services like Safe Deposit Vaults, the Bank also has a number of Retail
Banking schemes for housing loans, consumer durables, educational
loans, mortgage loans etc. The Bank also offers its services in the form of
Credit cards, ATM cum Debit cards, Kisan Credit Cards, Dena Laghu
Udyami Credit Card, Dena General Credit Card etc. The Bank also had a
special deposit scheme Dena Alpa Bachat Katha aimed at financial
inclusion. The Bank has been active in corporate credit, agricultural credit,
SME & SSI loans, retail credit and export credit. The loan book of the bank
is well diversified covering a wide of sectors / industries of the economy.
The Bank also offers non fund business like Letters of Credit, Guarantees
etc. The Bank also distributes third party products like insurance (both life
and non-life) and mutual funds. The Bank had entered into a number of tie-
ups for this purpose.
0.003 The balance sheet size of the Bank as at 31st March 2006 was Rs
26545.33 crores (Rs 24028.59 as at 31st March 2005). The assets of the
Bank included a loan book of Rs 14231.24 crores (Rs 11308.59 crores in
previous year) and investments books of Rs 8570.67 crores (Rs 9696.95
crores in previous year) (figures are on net basis). The fixed assets of the
Bank stood at Rs 460.53 crores as against Rs 293.27 crores in previous
year. The Bank has posted operating profits in all years since its inception.
0.004 Organisationally, the Bank has a three tier structure with Corporate Office
at Mumbai, 18 Regional Offices and 1122 branches. The Regional Offices
play the role of first level of control structure. In view of the large number of
branches in Gujarat, the Bank has opened a general Manager’s Office in
Gujarat to control and coordinate branches in the state.
0.005 All branches of the Bank are computerized (partial / fully computerized, on
stand alone basis) covering 98.3% of its business. The Bank has so far net
worked 955 of its branches through its intranet facility, dial-up modem lines
0.006 In keeping with the universal trend of introducing ATMs as the most popular
and convenient mode of delivery channels, a total of 240 ATMs have been
installed all over the country as at 31st March 2006 and more ATMs are
being added regularly. As of 31st March, 2006 the installation base of 240
ATMs covered 110 centres including 42 at offsite locations. Since then 15
more ATMs are in the process of installation in April 2006.
0.007 The Bank is a member of VISA, thus facilitating the Bank’s cardholders to
access their accounts from more than 1,00,000 Merchant Establishments
(MEs) and VISA ATMs, all over India and more than 13 million MEs and
890,000 ATMs, internationally. In all 312 branches covering more than 100
centres have been technologically enabled to issue ATM / Debit cards.
Apart from any VISA enabled & POS terminals, these cards can be used at
any of the Corporation Bank ATMs, SBI ATMs as well as ATMs belonging
to CASHTREE / CASHNET group of Banks. The Bank has recently joined
National Financial Switch initiated ATM sharing arrangement. The Bank
has a number of value added services over the ATMs like, Mobile Pre-paid
Top-up. Any Branch Banking & Multi-City Cheque Facility has been
introduced at 138 branches across 50 centres.
0.008 In order to meet the emerging challenges in the banking arena,
implementation of Basel II accord and risk management as well as
customer focus in mind, the Bank has embarked upon a very important and
strategic endeavor of conceptualizing and implementing a state of the art
‘Core Banking Solution’ (CBS). Apart from the basic core Banking solution
the Bank is also proposing to implement a boutique of third party
applications which will change the way we Bank, keeping in mind the
customer need. A host of third party applications are also slated for
implementation as part of core banking that includes Risk Management
(from M/S SAS), ALM (from M/S Oracle Corporation), Integrated Treasury
Management (Credence Solution) etc. The Bank is adopting a complete
end to end Outsourcing model with a 10 year contract period and has
planned to rollout 850 branches under CBS environment in the next two
1.001 Dena Bank [hereinafter called “The Bank” or “Bank”] intends to have
consultancy services for developing and implementing an enterprise wide
integrated Risk Management Framework covering Credit, Market &
Operational Risks to comply with Basel II norms & RBI guidelines and for
benchmarking the proposed framework, systems & procedures etc against
international best practices in Banking and implementing across Bank-wide
1.002 The Bank invites reputed consultants satisfying the prescribed eligibility
criteria to indicate their interest in providing their services.
1.003 Consultants having required capabilities and ability to deliver the Bank’s
requirements alone need to apply.
2.000 Scope of Work:
2.100 Diagnostic Study & Gap Analysis:
2.101 To conduct a Diagnostic Study and Gap Analysis followed by formulating
and implementing Credit, Market & Operational Risk Management
Frameworks and also a Framework for enterprise wide integrated risk
management to comply with Basel II norms & RBI Guidelines and
benchmarked against the international best practices and achieving the
Review of Policies, Processes and Organization Structure pertaining to
credit, market & operational risk management;
Adopting Simplified Standardized Approach for Credit, Duration cum
Maturity Approach for Market Risk & Basic Indicator Approach for
Operational Risk Capital computation by March 2008 and suggesting ways
of optimizing capital requirements;
Recommending a MIS Framework, which will enable the Senior
management to take decisions based on the risk taken in terms of Credit,
Market & Operational risks involved;
Introduction of Comprehensive RAROC approach and transfer pricing
Framework for preparing the bank for Risk based Supervision by Reserve
Bank of India including comprehensive risk profiling of the Bank, tools for
aggregation of risk assessment on enterprise basis and strengthening the
risk based internal audit process;
Introduction of Internal Capital Adequacy Assessment Process for Credit,
Market and Operational Risks separately; and
Road map & Framework for Economic Capital computation from the
Regulatory Capital computation.
2.200 Credit Risk Management:
Review of Policies, processes and Organization Structure pertaining to
Credit Risk Management;
Adopting Simplified Standardized Approach for Credit Risk Capital
computation by March 2008 and suggesting ways of optimizing capital
Road map for credit risk to migrate from standardized to Advanced Internal
Ratings based Approach through Foundation Internal Ratings based
Approach in a time-bound manner;
Rating Migration Analysis including the data base needs, model building
etc and calculation of segment wise Probability of Default, Exposure at
Default and Loss Given Default parameters;
Extension of the present Credit Rating Model of the bank to cover all
exposures of Rs 2 lakh and above;
Formulation of industry wise credit rating models at least for industries
with major exposures and separate scoring models for the major
segments like Retail & SME ;
Identification of core areas of risk origination from credit risk perspective
covering on and off balance sheet exposures;
Framework for Risk based Pricing, Risk based delegation of credit approval
authority, Risk based credit review process etc;
2.300 Market Risk Management:
Framework for Cost to Close Analysis for efficient Funds / Liquidity
Framework for introduction of VaR analysis, Back-testing etc to cover
State Government Securities, non-SLR portfolio including Equities & Forex
Exposures and integration VaR as part of decision making process in
Framework for Stress Testing and Sensitivity Analysis in Investments
Portfolio including Forex Operations;
Framework for introducing Hedging for market risk by way of derivatives
Revisiting the Bank’s existing Credit Rating Model for non-SLR
Framework for establishing a separate Market Risk Management unit and
strengthening of Mid-Office/s; and
Framework for migrating to VaR based Approach of capital allocation for
2.400 Operational Risk Management:
Framework for Improvements in Identification of core areas of operational
risk origination, Assessing, Controlling, Monitoring and Mitigation of
Identification of core areas of risk origination from an operational risk
Road map for operational risk to migrate from Basic Indicator Approach to
Advanced Measurement Approach through Standardized Approach in a
time-bound manner; and
Framework for the data base needs, model building etc for capture,
collation and analysis of data on Potential and Actual Loss Events to
facilitate migration to Advanced Measurement Approach.
3.000 Eligibility Criteria:
3.001 The eligibility criteria for the consultants to participate in the bid process are
The Consultant should have experience in developing & implementing
credit, market, operational risk management frameworks and Integrated
Risk Management system in at least one Bank in India [Private/Public] of
comparable size (i.e. with a branch net work of around 1000 branches and
a business-mix of at least Rs 40,000 crore) or at least in 2-3 international
financial institutions / Banks, preferably abroad.
The Consultant should involve international experts in the consultancy
process and modeling.
The Consultant should have a sizeable team [at least 100 experts with
domain knowledge in various aspects of risk management / financial
The Consultant should have knowledge of the latest developments in the
industry in managing credit, market & operational risk including Basel II
norms, Regulatory guidelines applicable to banks operating in India and
international best practices.
The Consultant should be of international repute, and should have
sufficient expertise in related areas like process re-engineering, internal
audit including risk based internal audit, and quantitative modeling in
The Consultant should have ready-to-deploy tools/framework for
benchmarking against international best practices and exhaustive coverage
of Basel II requirements. The Bank is procuring the requisite software (as
detailed elsewhere) through a separate selection process and out of scope
of this EoI. Software vendors who would like to provide consultancy
services may be eligible consultancy subject to their fulfilling the eligibility
criteria as stated in this document and as per the CVC guidelines.
The Consultant should have complete understanding of Basel II and RBI
The Consultant should have the capacity to execute the project through out
the implementation cycle.
The Consultant should be a profit-making firm for the last two years, and
should’ve an annual turnover of minimum Rs 25 crores in each of the last
two years (i.e. financial years 2004-05 and 2005-06 or calendar years 2004
and 2006 as per the published accounts of the consultant).
The Consultant should enclose documentary proof of all the above criteria
along with their technical proposal. Proposals of Consultants, which do not
comply with the above, will be rejected without assigning any reasons for
the same. Bank reserves the right to amend the criteria without information
to the consultants and at any stage of selection.
The Deliverables from the Scope of consultancy as defined hereinabove will cover
the following, among others:
A detailed report on the findings from Diagnostic Study and a Gap
Analysis Report from a credit & operational risk perspective that should
cover the existing governance structure, policies, procedures, and
systems. The Gap Analysis report for migration to increasingly more
risk sensitive approaches for credit, market and operational risk for
capital allocation should be separate and should address the issues
separately, in detail.
Hand-on assistance to the Bank in addressing the gaps by designing
new processes & policies, wherever needed.
Assistance to the Bank in re-organizing the Risk Management
Department at Corporate level and requisite structure at the level of
Controlling Offices; creation of a separate cadre of Risk Managers; and
provide necessary training to Risk related personnel and trainers of the
Assist the Bank in achieving Basel II norms compliance under Pillar I, II
and III in accordance with the date lines that are / may be set by
Reserve Bank of India including migration to increasingly more risk
sensitive approaches for Credit, Market and Operational Risk factors
for capital allocation.
Delivery of standard templates for data collection and mapping, and
training the team from Bank on the usage and applicability of such
templates to aid migration to increasingly more risk sensitive
approaches for Credit, Market and Operational Risk factors for capital
allocation. Consultant should help the Bank in designing data collection
templates for estimation of Probability of Default [PD], Loss given
Default [LGD] and Exposure at Default [EAD], Operational Risk VaR
Assistance to the Bank in designing scoring models [PD] for Basel II
specified asset classes.
Assistance to the Bank in conducting a Risk & Control Self Assessment
[RCSA], which should include identifying risk categories, risk owners,
controls, control ownerships, and prioritizing risks based on judgment.
Assistance to the Bank to develop a frame work of Key Risk Indicators
[KRI] that includes identification, documentation and application of
Assistance to the Bank in designing report templates and devise a
methodology for comparing the KRIs with Loss-event data and
recalibrating the thresholds kept, wherever necessary.
Design for a Loss-event Database framework to capture loss events,
possible loss events and near-miss events with field level description.
All MIS related templates to address Pillar II & III requirements for
reporting to Senior Management / Board / Reserve Bank of India.
Separate road maps for the transition from standardized approach to
advanced approaches in credit risk and standardized approach to
advanced measurement approach in operational risk. Consultant
should also prepare a road map for the transition from regulatory
capital to economic capital.
Consultant should develop functional and technical specification
document for a CRM solution for Capital computation, based on the
framework and strategy implemented.
Assist the Bank in designing a comprehensive MIS framework to help
the management in taking pro-active steps to minimize risks by
individual business lines.
Consultant should develop functional and technical specification
document for an ORM solution for Capital computation, based on the
framework and strategy implemented.
Consultant should develop the functional and technical specification
documents for Credit, Market & Operational Risk Management
solutions for Capital computation, based on the framework and strategy
4.002 The above deliverables are only indicative and not exhaustive. For
completeness, the above list of deliverables should be taken together with
the Scope of the Consultancy as defined at Para 2.000 hereinabove along
with sub paras thereunder.
4.003 The information furnished herein is only indicative and must be considered
only as advance information to assist the prospective bidders to decide
whether or not to apply for pre-qualification.
4.002 The time frame for providing the solutions shall be mutually decided
between the Bank and successful bidder.
5.000 Criteria for Shortlisting:
5.001 Detailed Request For Proposal (RFP) will be issued as the next step, only
to the short-listed parties. The Bank intends to shortlist the interested
parties based the responses to this Expression of Interest and on the
a) Meeting the eligibility criteria,
b) Experience in consulting on risk management,
c) Previous engagements of similar nature,
d) Understanding of Basel and RBI Guidelines.
5.002 The Bank reserves its right to accept or reject any or all of the responses to
this Expression of Interest without assigning any reason at its discretion.