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danti

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									Title “An analytical study of Risk Rating for SME in UTI Bank”

-Raghavendra K Danti
MBA05002031 Duration – 2 months Place – UTI Bank, Deshpande Nagar, Hubli

About the Company
• UTI Bank is one of the leading private sector bank with diversified products for its customers. It has achieved 53%growth in last year. It is the subsidiary of the group called UTI [Unit Trust of India].

Highlights for the year - 2005
1. PAT up 44.98% to RS. 485.08 crores 2. Net Interest Income up 47.46% to Rs. 1078.23 crores 3. Fee and other Income Up 33.54% to Rs. 512.94 crores 4. Deposit up 26.49% to Rs. 40113.53 crores 5. Demand Deposits up 33.12% to rs. 16035.52 crores 6. Advances up 43.01% to Rs. 22314.23 crores

Contd…
7. Retail Assets up 55.12% to Rs. 6489.93 crores 8. Network of branches and extension counters increased from 339 to 450 9. Total number of ATMs went up from 1599 to 1891 10. Net NPA ratio as percentage of net customer assets down to 0.75% from 1.07% 11. EPS [basic] increased from Rs. 14.32 to Rs. 17.45 12. Proposed dividend up from 28% to 35% 13. Capital adequacy ratio stood at 11.08% as against the minimum regulatory norm of 9%

Rationale behind choosing the topic
• I selected this topic because, lending process is the backbone of every banking institution. The success of the lending department depends on the proportion of the default it has. To avoid the chances of default from the customer, banks will do RISK RATING for the applicant. This topic provides clear insight of the risk rating process. It was the opportunity for me as finance student to learn those practical things.

Objectives
•

• •
•

•

Understanding the need of the Credit Risk Rating while sanctioning the loan. Different methods available for Risk Rating. Parameters for Credit Risk Management (Operational, Financial and Management risks). Level of freedom given for the credit officer to fix the applicable interest rate. Changes can be made in the risk rating process.

Methodology
There is no formal design of questionnaire used in this study. The other primary data collected are
• Data regarding the Credit risk and also the concerned information. • Organization Structure • Product and service details.

Secondary Data
• Websites – Various sites like www. sharekhan.com www.indiainfoline.com www.utibank.com www.investopedia.com www.en.wikepedia.com, and Newspapers and Magazines such as Economic Times, Business Today, Business World.

Analysis

Savings Deposit

SAVING DEPOSIT(in cr)
UT I 26% 3% 11% 29% 31% ICICI HDFC OBC SBI

Current Deposit
CURRENT DEPOSIT(in cr)
3% 3% 32% 34%

UTI ICICI HDFC OBC
28%

SBI

Total Deposit
TOTAL DEPOSITES(IN CR)

20% 4%

13%

UTI ICICI HDFC OBC SBI

17%

46%

Total Lending
LENDING (IN CR)

38%

32%

UT I ICICI HDFC OBC

5%

6%

19%

SBI

Findings
• Effective in controlling proportion of NPA. • Branch level freedom to distribute the loan • Close competitor is SBI from public sector. • No loan sanctioning below Rs.15 lakhs for SME.

Recommendations
• UTI Bank should think of having separate schemes for giving the financial assistance to the industries which are classified under negative industries. • UTI Bank should give the time to customers to close the transactions with their existing Banks or Financial Institutions, which can give the customers the float of completing the formalities with the existing Banks or Financial Institutions without getting affected their reputation and the relation with those Banks or Financial Institutions

Contd…..
• UTI Bank should have the schemes to entertain the demand for financial assistance from the businesses which are in need of small amount of loan facilities. • UTI Bank has to take necessary steps to attract the customers like its competitor SBI. UTI Bank can try the schemes like giving the financial assistance without taking any collateral security, but it should be made only after strictly verifying the financial viability of the applicant. It may take more time period as compared to the other loan documentation. But, definitely customer will wait for documentation process to complete for comparative more time, because he will be getting credit facility without any collateral security.

Thank you


								
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