PROJECT REPORT ON “CREDIT PORTFOLIO OF PUNJAB NATIONAL BANK” SUBMITTED TO RANI DURGAVATI VISHWAVIDYALAYA JABALPUR (M.P.) In partial fulfillment of the Requirements for the award of Degree of Master of Business Administration SUBMITTED BY: RAJKUMAR PATEL MBA III SEM 1
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PROJECT REPORT
ON
“CREDIT PORTFOLIO OF PUNJAB NATIONAL BANK”
SUBMITTED TO
RANI DURGAVATI VISHWAVIDYALAYA
JABALPUR (M.P.)
In partial fulfillment of the Requirements for the award of
Degree of Master of Business Administration
SUBMITTED BY:
RAJKUMAR PATEL
MBA III SEM
GYAN GANGA INSTITUTE OF TECHNOLOGY AND SCIENCESJABALPUR
1
2010
GYAN GANGA INSTITUTE OF TECHNOLOGY AND SCIENCES
JABALPUR
FORWARD LETTER
I hereby forward the project entitled a project report on “CREDIT
PORTFOLIO” submitted by RAJKUMAR PATEL, student of MBA III
semester, in the partial fulfillment of the requirement for the award of the
degree of Master of Business Administration of ‘Rani Durgavati
Vishwavidyalaya, Jabalpur.
DR.ANIL KUMAR DHAGAT
DIRECTOR
MBA DEPARTMENT
2
CERTIFICATE
3
DECLARATION
I hereby declare that the project report titled “CREDIT PORTFOLIO
OF PUNJAB NATIONAL BANK” is my own work and has been carried out
under the guidance of Mr. PREM SHANKER MISHRA (Manager), All care
has been taken to keep this report error free and I sincerely regret for any
unintended discrepancies that might have crept into this report. I shall be highly
obliged if errors (if any) are brought to my attention.
Thank You.
RAJKUMAR PATEL
MBA III SEM
GGITS, JABALPUR.
4
ACKNOWLEDGEMENT
I express my sincere gratitude to all persons who have been associated with this project report and helped us with it and made it worthwhile experience.
Firstly, I extend my thanks to various people who have shared their opinions and experiences through which I received the required information crucial for our report.
Finally, I express my thanks to Dr. Anil Kumar Dhagat Director of M.B.A Department and all my faculty members who gave me the opportunity to learn practical approach of my specialization .They guided me to prepare the report correctly.
RAJKUMAR PATEL
MBA III SEM
GGITS
5
TABLE OF CONTENT
1.INTRODUTION:
HISTORY OF PNB
PRODUCTS AND SERVICES
AWARDS AND DISTINCTIONS
PNB OVERSEAS OFFICES
2.PROFILE OF PNB
3. PNB (2009)
4. VISION AND MISSION
5. PORTFOLIO MANAGEMENT
6. CREDIT PORTFOLIO MANAGEMENT
METHODS OF CREDIT PORTFOLIO MANAGEMENT
CREDIT PORTFOLIO METHODOLOGY
MODELS OF CREDIT PORTFOLIO MANAGEMENT6
7. CONTENT OF CREDIT PORTFOLIO MANAGEMENT
8. LOANS AND SCHEMS PROVIDED BY PNB
CONCLUSION
REFERENCES & BIBLIOGRAPHY
7
Executive Summary
In the growing global competition, the productivity of any
business concern depends upon the behavioral aspect of consumers.
This topic deals with the customer’s perception towards other Credit
Portfolio Management at Jabalpur. This project report contains 5
different chapters. The report begins with the introduction to
company, its area of operation, its organization structure, its
achievements, etc.
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Introduction
Portfolio management
Market-to-market transfer of assets asset purchases asset swaps credit
derivatives Pr (loss) optimisation of loss distribution credit portfolio loss Line
of business product and delivery optimization techniques were initiated by the
banking industry’s desire to avoid a repeat of its late ‘80s and early ‘90s default
experience. The heavy credit losses during this period, driven by a poorly
controlled rush to build market share at the expense of asset quality and
portfolio diversification, threatened the solvency of even well capitalised
institutions. The need to better understand portfolio credit risks was reinforced
by the publication of the Bank for International Settlements’ (BIS) capita
adequacy guidelines in 1988 These guidelines, whilst specifyin minimum
regulatory capita requirements, were inadequate t provide an accurate measure
of the risk/reward characteristics of a credit portfolio. Banks therefore started to
develop more sophisticated credit risk management techniques that recognised
both the credit risk of individual exposures and the degree to which these risks
were diversified. Banks leading the development of credit risk management
techniques quickly discovered that credit pricing was highly inefficient.
Typically pricing within a loan portfolio would be almost flat across the credit
risk spectrum, generating huge skews in customer profitability. Initial efforts
focused on mitigating these skews by calculating riskadjusted profitability (eg
risk adjusted return on [risk-adjusted] capital) by sub-portfolio and then using
these measures to create riskadjusted loan pricing tools. Leading banks thus
started to rationalize pricing in both loan and bond portfolios, and moving
under-performing assets off their balance sheets. Consequently banks that had 9
not developed risk-adjusted performance measures started to suffer from
negative selection, often accepting significantly underpriced assets from more
sophisticated institutions. In parallel to developing aggregate risk-adjusted
performance measures, leading banks were also starting to quantify credit risk
at finer levels of detail.
Credit Portfolio Management
“Banks leading the development of credit risk management techniques
discovered that credit pricing was highly inefficient”
1 Credit portfolio management were developed which could differentiate
credit risk along multiple dimensions (credit grade, industry, country/region etc)
and, for large corporate exposures, on a name-by-name basis. These credit
portfolio models have positioned leading institutions to take advantage of the
increasing liquidity of the credit markets and to adopt a far more active
approach to credit portfolio management than was previously possible.
Historically, credit portfolio management had focused on the monitoring of
exposure by broad portfolio segment and, if necessary, the imposition of
exposure caps. The creation of a stand-alone credit portfolio management
function, armed with sophisticated portfolio models and with a controlling
mandate over assets held on the balance sheet, now enabled the credit portfolio
to be optimized independent of origination activity, Active credit portfolio
optimisation has enormous potenorigination Opportunities sales/product teams
Above Rs. 2 Lac - Rs. 225/- per lac or part thereof + Service Tax & Education
Cess
Documentation Charges
Rs.900/- + Service Tax & Education Cess
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'PNB FIN-BASKET' SCHEME
1. OBJECTIVE
Offers attractive benefits as part of a Package to those customers who have the
capacity and are willing to avail a minimum specified loan amount under at
least two or more specified Retail Loan Schemes.
2. SCHEME APPLICABILITY
Authorized Branches.
3. ELIGIBILITY
Individuals, including joint owners, who are willing to avail a minimum loan of
Rs.5.00 lac as a package under at least two specified Retail Loan Schemes at a
time. One of which necessarily be for HOUSING and the other may be any one
of the following purposes:
Car,
Personal or
Education.
At the same time, such individuals/ including joint owners should have
adequate capacity to regularly service such loans.
4. PURPOSE
Finance will be allowed for:
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Meeting need based requirement of purchase / construction /addition /
repair/alteration/renovation/furnishing of House/Flat. Loans are also available
for purchase of land/plot for House Building.
Loan on pari passu or second charge basis only to confirmed employees of
Central/ State Government / Public Sector Undertakings (PSUs) maximum upto
Rs. 20 lacs. The quantum of loan be decided taking into account the amount of
earlier loan availed and repaying capacity of the borrower.
Purchase of New Car.
Meeting urgent requirements of personal nature, such as marriage of children,
holiday, foreign travel, family function, medical expenses etc. However, loan
will not be granted for speculation purposes.
Education for Self or Children, including the school education of the child.
5. AMOUNT OF LOAN
For Housing: Need Based - Minimum Rs.2 lac.
Maximum Rs. 50 lacs
For Car : Need Based - Minimum Rs.2 lac.
For Personal Needs: Need Based - Minimum Rs.1 lac Maximum Rs. 2 lacs
For Education: For Studies in India - Minimum Rs.1 lac Max. Rs.5.00 lac
For Studies abroad - Minimum Rs.1 lac Max. Rs.10.00 lac
6. MARGIN
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10% except when loan is availed for Personal and or Educational needs in
which case it shall be Nil.
7. RATE OF INTEREST
Housing -
For loans repayable in/upto Rate of Interest @percent p.a.
i) Upto 5 years 7.75
ii) Above 5 & upto 10 years 8.25
Car - PTLR presently 11.50%
Personal - 13%
Education - 50 basis points below PTLR viz.11%
8. REPAYMENT
Housing - Maximum 10 years (120 months) in equal Monthly Instalments.
For Car and Personal - Maximum 4 years (48 months) in equal Monthly
Instalments.
For Education - Maximum 7 years (84 months) in equal Monthly Instalments.
Obtention of advance cheques (P.D.Cs) signed by the borrowers be ensured
towards repayment of equated monthly instalments alongwith letter of deposit.
In case of Housing and Education Loans minimum 24 advance cheques be
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obtained at a time. In case of loan of other purposes cheque for complete
repayment period be taken.
No moratorium period for repayment will be allowed and repayment to
commence immediately.
9. MODE OF DISBURSEMENT
As per extant guidelines of specific schemes viz. Housing, Car, Personal and
Education. However, No charges for issue of Demand Draft /Bankers cheques
are to be levied.
10. INSURANCE
Comprehensive Insurance Policy to be obtained where loan is allowed for
Housing and Car needs.
11. SECURITY:
Housing
Equitable/ Registered Mortgage of the House/Flat/ Plot Financed.
Obtention of pari passu or second charge over the property mortgaged in favour
of other Lender in situations where senior authorities consider requests and
allow loan only to confirmed employees of Central / State Govts. / Public
Sector Undertakings, who have raised funds for construction / acquisition of
accommodation from other sources and need supplementary finance, for an
amount of loan of maximum upto Rs. 20 lacs, which, however, should be for a
minimum of Rs. 2lacs as prescribed above.
Car
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Hypothecation of the Vehicle financed.
Equitable mortgage should be for the total amount of loan.
12. GUARANTEE
Suitable guarantee acceptable to the Bank may be obtained which may also
include guarantee from family members/other relatives.
13. UPFRONT & DOCUMENTATION CHARGES
Flat Upfront charges of Rs.2,500/- & no documentation charge.
14. PREPAYMENT PENALTY
In case any of the loan facilities allowed are adjusted within a period of three
years, borrower(s) will be required to pay a prepayment Penalty @ 2% on the
amount which had not become due for payment.
15. GENERAL
The concessional loan facility is available provided the combined availment is
Rs. 5 lacs or more.
Equitable Mortgage of the Immovable Property against which Housing loan has
been allowed will secure the combined loan for two or more purposes.
Equitable Mortgage shall not to be released till final adjustment of all the loans.
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PROFESSIONAL LOAN SCHEMES
PNB extends assistance to self-employed persons, firms and joint ventures of
such professional persons engaged in professions such as:
Medical practitioners including dentists, chartered accountants, cost
accountants, practicing company secretaries, who are not in regular
employment of any employer, accredited journalists or cameramen who are free
lancers, i.e. not employed by a particular newspaper/magazine, lawyers or
solicitors, engineers, architects, surveyors, construction contractors or
management consultants or to a person trained in any other art or craft who
holds either degree or diploma from any institution established, aided or
recognised by Government or to a person who is considered by the bank as
technically qualified or skilled in the field in which he is engaged. Loans under
this scheme may be granted for the purpose of financing purchase of equipment
used by the borrowers, business premises, construction, making alterations or
renovation of business premises/nursing homes or for working capital
requirements, in their professions.
Persons already practicing or new entrants in various professions, having
licenses issued under Central or State Legislations;
Associations of persons engaged in a single profession provided that each
member of such an association is qualified and duly licensed to practice in the
profession; and
The qualified professionals will be required to produce a certified copy of the
license for the record at the bank.
Amount of Loan42
Need based on merits within the overall permissible limits as under:
Metro/ Urban S.Urban/Rural Area
1. Medical practitioners Rs 5.00 lac Rs 10.0 lac
2. Other professionals Rs 5.00 lac Rs 5.00 lac
Margin: Nil up to Rs.25000/-. 25% Above Rs. 25000/-.
Security
Hypothecation/Mortgage of the goods purchased/created with the amount of
loan till the final adjustment of bank's loan and interest thereon.
Collateral security by way of immovable properties or acceptable third party
guarantee in case of advances above Rs. 25000/-.
Repayment
Term Loan
Loans up to Rs.50000/- 48 months
Loans beyond Rs.50000/- 60 months
Working Capital loans are renewable every year.
Disbursement
Payments will be made direct to the suppliers/ dealers. In case of construction
of the premises, the loan may be disbursed in phases after verifying the end use
in terms of the plan as also at the spot
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47
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RESEARCH METHODOLOGY
Research methodology is a methodology for collecting all sorts of information
& data pertaining to the subject in question. The objective is to examine all the
issues involved & conduct situational analysis. The methodology includes the
overall research design, sampling procedure & fieldwork done & finally the
analysis procedure. The methodology used in the study consistent of sample
survey using both primary & secondary data. The primary data has been
collected with the help of questionnaire as well as personal observation book,
magazine; journals have been referred for secondary data. The questionnaire
has been drafted & presented by the researcher himself.
Research Objective – The main objective of study this research is to
find out the credit portfolio management of Punjab national bank and to
maintain a best management to overcome these problems.
Sample Size: Sample of 50 people was taken into study, and their data was collected
Sampling Technique: To study the Project, a Simple Random Sampling technique is used.
Data Collection: Collection of data is done by
Secondary Data & through
Questionnairei.e., Primary data was collected through Questionnaire.
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Data Analysis:
After data collection, I’m able to analyze customer’s views, ideas and opinions related to Advance Product and about PNB Advance Product and from this, PNB will come to know the customer requirements.
Data Interpretation:
Interpretation of data is done by using statistical tools like Pie diagrams, Bar graphs, and also using quantitative techniques (by using these techniques) accurate information is obtained.
Classification & tabulation of data:
The data thus collected were classified according to the categories, counting sheets & the summary tables were prepared. The resultant tables were one dimensional, two dimensional.
Statistical tools used for analysis:
Out of the total respondents, the respondents who responded logically were taken into account while going into statistical details & analysis of data. The tools that have been used for analyzing data & inference drawing are mainly statistical tools like percentage, ranking, averages, etc.
As per questionnaire and market surveys I have find out different responses from different people. According to their responses I analyze the findings and draw certain remarks.
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LIMITATIONS OF STUDY
However, I shall try my best in collecting the relevant information for my research report, yet there are always some problems faced by the researcher. The prime difficulties, which I faced in collection of information, are discussed below-
Short time period: The time for carrying out the research was short because of which many facts have left unexplored.
Lack of resources: Lack of time and other resources as it was not possible to conduct survey at large level.
Small no. of respondents: Only four Retail companies have chosen, that is a small number, to represent whole of industry.
Unwillingness of respondents: While collection of the data many consumers were unwilling to fill the questionnaire. Respondents were having a feeling of wastage of time for them.
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DATA COLLECTION ANALYSIS AND INTERPRETATION
GRAPHICAL REPRESENTATION OF DATA
Q1. On which bank you depend for your regular transaction?
PNB 60 % (30)
ICICI 33 % (16)
HDFC 5% (2)
OTHER 2% (1)
TOTAL NO. OF PEOPLE
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It has been observed that approximately 60% correspondents are using the service of PNB for their daily transaction, around 33% of people are using ICICI Bank for their transaction and only 5% & 2% of people are using HDFC & other Bank service respectively in Bhubaneswar. It also shows that PNB have the highest market position in Bhubaneswar as per my sample.
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Q2. Are you aware of products & services provided by PNB?
YES 85% (43)
NO 15% (7)
Total No. of People
50
From the above data it is clear that most of the customers (around 85%) of Bhubaneswar have the idea about the product & services of PNB, the rest 15% have the idea about the product they are using. In this 15% most of the people are from typical rural area (Farmers).
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Q3. If yes are you aware of the advance products (Loan segments) of PNB?
YES 95%(48)
NO 5% (2)
TOTAL NO. OF PEOPLE
50
It is clear that most of the people have the idea about the advance product of PNB. Almost all the 95% people who have the idea about the advance product are the user of PNB product & service.
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Q4. Which bank you prefer for taking loans?
PNB 85% (42)
ICICI 10% (5)
HDFC 3% (2)
OTHER 2% (1)
TOTAL NO. OF PEOPLE 50
According to my sample size 85% of people prefer PNB for loan product, but some people prefer ICICI, HDFC or OTHER Bank for loan because they are working with that bank & it is easier for them to get loan from their bank & it easier for them to pay the interest because it is less as compare to other bank because they are the employee of that bank.
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Q.5 Which loan product of PNB you have used?
HOME LOAN 47% (23)
EDUCATIONAL LOAN 20% (10)
CAR LOAN 15% (8)
PERSONAL LOAN 10% (5)
OTHER 8% (4)
TOTAL NO. OF PEOPLE
50
From the sample size 47 % of people are using the PNB loan product. From the 50 people 47% of people took home loan from PNB. 20% of people took education loan for their children, 15% of people took car loan from PNB. Some of the customer took 2 type of loan from PNB like both car & educational loan and home & car loan. 10% of people took other loan 8%
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Q6. Do you think that the services of PNB is reliable?
(a) Yes
(b)No
According to the survey the 86% people seems that the services of
the PNB is reliabel and the rest of the 14% people seems that not
reliable.
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Q7. How long have you been taking services of Punjab National
Bank?
A)0-1 yrs
B) 1-3 yrs
C) 3 and Above
According to the survey 55% of respondents will prefer to take
the service of Punjab national bank more than 3 years, 1-3 years
prefer 30% and the 15% respondents prefer to take the service of
Punjab national bank 1year only.
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Q8. Have you taken any loan from Punjab National Bank?
A)Yes
B) No
According to the survey 75% respondents have taken the loan
from the Punjab national bank and the 25% respondents did not
take the loan.
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Q9. Do you think that the credit facilities provided by the Punjab
National Bank is upto the mark?
A)Yes
B) No
According to the survey 70% respondents thinks that the credit
facility provided by the Punjab national bank upto the mark and
the 30% respondents seems not.
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Q10. State general reasons for taking the loan from Punjab
National Bank?
A)Reliability of Services
B) Easy to access the loan
C)Less Rate of Interest
According to the survey 60% of respondents prefer to take the
loan from the Punjab National Bank for it’s reliability of services,
30% prefer easy to access and 10% respondents for its less rate of
interest.
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FINDINGS AND CONCLUSION
This article has described the underlying theory of credit portfolio
management and illustrated their value in making more effective management
decisions. With the rapidly growing marketing credit derivatives and portfolio
securitizations, the possibility of active credit portfolio management will
increase dramatically an result in a fundamental shift in the way banks both
originate and hold credit assets. In order to benefit
from these new opportunities, banks must ensure that they understand
the economic value of their portfolios and how this value can be maximized
through efficient credit portfolio management. The underlying macro-economic
risk factors can also be examined to determine whether a hedging strategy
might be possible. An extension of this application is to use the management for
‘stress-testing’ to estimate possible changes in portfolio value conditional on
extreme macro-economic scenarios. Banks must ensure that they understand the
economic value of their portfolios and how this can be maximized through
effective management’ Assessment of capital adequacy under property crash
scenario
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SUGGESTION & RECOMMENDATION
Recommendation:
Customer awareness programme is required so that more people should
attract towards advance product.
If there are any kind of hidden charges than that must disclose to
customer before giving loan to them.
PNB must take some steps so that customers can get their loan in time.
Like phone verification by customer care that one customer is got their
loan on time or not .It must be before a certain date so necessary steps
can be taken.
PNB should more concern about physical verification rather than phone
verification so it will avoid fraud or cheating.
Advance product selling agents must not give any type of wrong
information regarding advance product.
For the better service new offers would be require.
PNB customer care should more concern about the fastest settlement of
customer problems.
Before deducting or charging any monetary charge PNB must consult with
customer.
Agents should be trained, well educated & proper trained to convince the
people about different advance product.
It is the duty of the bank to disclose all the material facts regarding
advance product, like interest charged, repayment period, other types of
charges, etc.64
Special scheme should be implemented to encourage both customer and
agents.
The bank should increase the period for repayment of loan.
PNB should more focus on Retaining existing customers.
PNB must focus on Segmentation based on customer knowledge Product
offering based on customer demand.
PNB must take feedbacks of customers regarding features & services.
Suggestions given by the consumers at the time of survey:
There is more time period for repayment of education loan.
( Namrata Das )
Education loan should be providing to private college also which is not
under AICTE or any kind of University.
( Pinaki Bal )
PNB should take steps to solve customer problems immediately.
( Gopinath Mahapatra )
Agents should be trained, well educated & proper trained to convince the
people about different advance product.
(P.Anish Nath)
Loan sanction date should be according to customer convenient.
(Joytirmaya Behera)
A customer awareness programme should be taking place in rural area.
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REFERENCES & BIBLIOGRAPHY
INTERNET
www.google.com
www.pnbindia.com
www.yahoo.com
www.vikipedia.com
BOOKS
Credit Portfolio Management Author Author: Charles Smithson
Active Credit Portfolio Management Author Micheal Jaiser