48810590 Credit Portfolio of Punjab National Bank2

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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 MANAGEMENT

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7. CONTENT OF CREDIT PORTFOLIO MANAGEMENT

8. LOANS AND SCHEMS PROVIDED BY PNB

CONCLUSION

REFERENCES & BIBLIOGRAPHY

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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 customers 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

derivativesPr (loss)optimisation ofloss distribution credit portfolio loss Line

of business product and deliveryoptimization techniques were initiated by the

banking industrys 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 recognizedboth 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 risk adjusted profitability (eg

risk adjusted return on [risk-adjusted] capital) by sub-portfolio and then using

these measures to create risk adjusted 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

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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 ofexposure 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

approval syndication/ sales asset syndication/ disposals.

Using only very basic optimization techniques a typical institution might expect

to reduce the economic capital consumed by its credit portfolio by 25%30%.

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Credit Risk Measurement Framework

Credit risk is conventionally defined using the concepts of expected loss

(EL) and unexpected loss (UL) (Because expected losses can be anticipated,

they should be regarded as a cost of doing business and not as a financial risk.

Obviously credit losses are not constant across the economic cycle, there being

substantial volatility (unexpected loss) about the level of expected loss. It is this

volatility that credit portfolio models are designed to quantify. Volatility of

portfolio losses is driven by two factors concentration and correlation (figure

3). Concentration describes the lumpiness of the credit portfolio (eg why it is

more risky to lend 10m to 10 companies than to lend 0.1m to 1,000

companies). Correlation describes the sensitivity of the portfolio to changes in

underlying macro-economic factors (eg why it is more risky to lend to very

cyclical industries such as property development). In all but the smallest credit

portfolios, correlation effects will dominate. When quantifying credit risk, two

alternative approaches can be used when valuing the portfolio:

METHODS OF CREDIT PORTFOLIO MANAGEMENT

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Loss-Based Method-

Under this approach an exposure is assumed to be held to maturity. The

exposure is therefore either repaid at par or defaults, and thus worth the

recovery value of any collateral. Using the approach credit migration has n

effect on the book value of the obligation.

NPV-based method-

Under this approach, the embedded value o an exposure is assumed to be

realizable If the obligation upgrade then it is assumed to be worth more than par,

and if it downgrades it I assumed to be worth less than par The value of theobligation can b calculated using either using market

credit spreads (where applicable or by marking-to-model using CAPM or

similar method. In general, NPV-based method are most applicable to bond

portfolios and large corporate portfolio where meaningful markets exist for

either the physical assets or credit derivatives. For the vast majority o

commercial bank exposures where such markets do not exist a more meaningful

risk profile is obtained using a loss-based method. Loss-based calculation have

the advantage of requiring less input data (margin and maturity information, for

example, is no required) and being simpler t compute. However, many

institution are starting to run both method in parallel, particularly for portfolio

where securitization is possible The different credit risk profile generated for the

same portfolio

using loss-based and NPV-base methods are shown later in this article

Credit Portfolio Methodology

Measuring Credit Risk Correlations.

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As discussed previously, to accurately model portfolio credit risk the

correlation between exposures must first be measured. This seemingly simple

statement conceals the complex string of calculation.

Concentration of portfolio correlation of borrower behavior

diversificationof credit risk credit risk size of portfolio systematic risk: driven

by correlation specific risk: driven by concentration time (years) frequency

credit losses.

Npv based method-

NPV-based methods are most applicable to bond portfolios and largecorporate portfolios where meaningful markets exist for either the physical

assets or credit derivatives that are actually necessary. Complexity arises as it is

extremely difficult to calculate credit risk correlations directly. Indeed, to

measure default correlation (as required for loss-based measures) between two

companies is impossible, as this would require repeated observations over a

given time-period during which each company would either default or survive.

Credit risk correlation could then be calculated from the number of times both

companies defaulted simultaneously. Clearly such analysis is impossible in

practice. Similar difficulties exist when trying to estimate correlation between

changes in credit rating or bond spreads. The simplest solution is to use

aggregate time series to infer credit risk correlation. Unfortunately this approach

is unsuitable except for the most basic of portfolio analysis for two main

reasons. Firstly, aggregate time series are usually available only at a very high

level, with insufficient data on underlying credit risk rating, industry and

geographic distribution of the portfolio. Secondly, using aggregate time series

produces unstable results over time. A more attractive solution to calculating

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credit risk correlation is to use a causative default model that takes more

observable financial quantities as inputs, and then transforms them into a default

probability. The most widely used model for commercial lending portfolios

being the Merton default model.

Simulation methods.

Whilst the risk of small credit portfolios can be calculated analytically,

the large number of calculations required mean that for most portfolios it is

better to employ a numerical simulation technique. Monte Carlo simulation is

the standard method, and can be thought of as a state-of-the-world generator

that generates all possible states of the economy and the resulting impact on the

value of the credit portfolio. In this way a distribution of all possible portfolio

values is built up, from which its credit risk profile can be calculated .

Credit Portfolio Models

There are a number of currently available credit portfolio models that are

distinguished by their correlation structures and choice of risk measure.

Portfolio model applications Having discussed the inner workings of credit

portfolio models we can now illustrate their uses by examining a number of

management applications.

Solvency analysis-

The most obvious application of a credit portfolio model is to calculate

economic capital. This is calculated from the tails of the credit risk distribution

by determining the probability that a reduction in portfolio value exceeds a

critical value. A loss based example of such an analysis

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is shown in figure 8 where, to achieve a Aa1/AA+ credit rating (equivalent to a

0.02% default probability), economic capital equivalent to 7.8% of total

exposure is required.

NPV-based 99.98% 99.00% down the aggregate credit risk distribution to show

the credit risk of each portfolio element allows risk concentrations and hence

diversification opportunities to be identified

. For most credit portfolios, simple optimization techniques

will substantially reduce economic capital requirements typically reductions of

30% are achievable equivalent to annual savings of 288m (assuming a capitalcharge of 18%) for a portfolio of 100bn (figure 10).

Morten model-

The Merton model assumes that a firm will default if, over a 12- month

period, the market value of assets falls below the value of callable liabilities.

This enables asset correlation to be transformed into credit risk correlation . In

figure 5 the more correlated the movements in the two companies assets the

greater the twist in the joint asset value distribution. Hence the greater the

probability that the credit quality of the two firms will rise, fall and ultimately

default together. Asset correlations have the benefit of being more prices,

balance sheet analysis etc) and their correlations have been shown to be stable

over time. The Merton model has also been successfully adapted to describe

credit risk correlations in financial institution portfolios that contain corporate

exposures. The correlation of model inputs themselves are best measured using

factor models in the same way that an equity beta is estimated. Factor models

usually produce better prospective correlation estimates than direct observation

and have the additional benefit, if macro-economic factors are chosen, of11


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enabling intuitive stress testing and scenario analysis of the credit portfolio. An

example of a macro-economic factor model is shown in. The connection of

credit risk to underlying macro economic risk factors has significant

implications for credit risk management and the future development of credit

markets. Not only could a credit portfolio manager potentially hedge credit risk

via equity or macro-economic derivatives, but professional market- makers

should ensure that credit, equity and other derivative desks are positioned to

take advantage of resulting arbitrage.

These developments are likely to be a major driver of liquidity as these

markets develop. In figure 6 a positive factor weight indicates that a positive

change in that factor produces an increase in asset value, with a corresponding

rise in credit quality and reduction in default rate. Conversely, a negative factor

weight indicates that a positive change in that factor produces a decrease in asset

value, with a corresponding fall in credit quality and increase in default rate.

Sensitivity analysis and stress testing.

Portfolio models can be use to calculate expected loss rates under

different economic scenarios and thus drive dynamic provisioning estimates or

loan loss reserving methodologies such as the SBC ACRA reserve. The

sensitivity of portfolio credit losses to changes in hour under stress-test

scenarios.

Base Case: 7.7% Economic capital AA+ (99.98%) solvency standard.

CONTENT OF CREDIT PORTFOLIO

This paper analyzes the level and cyclicality of bank capital requirement in

relation to

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(i) the model methodologies through-the-cycle and point-in-time,

(ii) four distinct downturn loss rate given default concepts, and

(iii) US corporate and mortgage loans. The major finding is that less accuratemodels may lead to a lower bank capital requirement for real estate

loans. In other words, the current capital regulations may not support the

development of credit portfolio risk measurement models as these would

lead to higher capital requirements and hence lower lending volumes.

The finding explains why risk measurement techniques in real estate

lending may be less developed than in other credit risk instruments. In

addition, various policy recommendations for prudential regulators are

made.

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COMPANY PROFILE

PROFILE OF PNB

With over 56 million satisfied customers and 5002 offices, PNB has

continued to retain its leadership position amongst the nationalized banks. The

bank enjoys strong fundamentals, large franchise value and good brand image.

Besides being ranked as one of India's top service brands, PNB has remained

fully committed to its guiding principles of sound and prudent banking. Apart

from offering banking products, the bank has also entered the credit card &

debit card business; bullion business; life and non-life insurance business; Gold

coins & asset management business, etc.

Since its humble beginning in 1895 with the distinction of being the first

Indian bank to have been started with Indian capital, PNB has achieved

significant growth in business which at the end of March 2010 amounted to Rs

435931 crore. Today, with assets of more than Rs 2,96,633 crore, PNB is ranked

as the 3rd largest bank in the country (after PNB and ICICI Bank) and has the

2nd largest network of branches (5002 offices including 5 overseas branches)

.During the FY 2009-10, with 40.85% share of CASA deposits, the bank

achieved a net profit of Rs 3905 crore. Bank has a strong capital base with

capital adequacy ratio of 14.16% as on Mar10 as per Basel II with Tier I and

Tier II capital ratio at 9.15% and 5.01% respectively. As on March10, the Bank

has the Gross and Net NPA ratio of 1.71% and 0.53% respectively. During theFY 2009-10, its ratio of Priority Sector Credit to Adjusted Net Bank Credit at

40.5% & Agriculture Credit to Adjusted Net Bank Credit at 19.7% was also

higher than the stipulated requirement of 40% & 18%.

The Bank has maintained its stake holders interest by posting an improved

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NIM of 3.57% in Mar10 (3.52% Mar09) and a Return on Assets of 1.44%

(1.39% Mar09). The Earning per Share improved to Rs 123.98 (Rs 98.03

Mar09) while the Book value per share improved to Rs 514.77 (Rs 416.74

Mar09)

Punjab National Bank continues to maintain its frontline position in the

Indian banking industry. In particular, the bank has retained its NUMBER ONE

position among the nationalized banks in terms of number of branches, Deposit,

Advances, total Business, Assets, Operating and Net profit in the year 2009-10.

The impressive operational and financial performance has been brought about

by Banks focus on customer based business with thrust on CASA deposits,

Retail, SME & Agri Advances and with more inclusive approach to banking;

better asset liability management; improved margin management, thrust on

recovery and increased efficiency in core operations of the Bank. The

performance highlights of the bank in terms of business and profit are shown

below:

Rs in Crore

Parameters Mar'08 Mar'09 Mar'10 CAGR(%)

Operating Profit 4006 5744 7326 22.29

Net Profit 2049 3091 3905 23.98

Deposit 166457 209760 249330 14.42

Advance 119502 154703 186601 16.01

Total Business 285959 364463 435931 15.09

PNB has always looked at technology as a key facilitator to provide better

customer service and ensured that its IT strategy follows the Business

strategy so as to arrive at Best Fit. The bank has made rapid strides in this

direction. All branches of the Bank are under Core Banking Solution (CBS)

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since Dec08, thus covering 100% of its business and providing Anytime

Anywhere banking facility to all customers including customers of more than

3000 rural & semi urban branches. The bank has also been offering Internet

banking services to the customers of CBS branches like booking of tickets,

payment of bills of utilities, purchase of airline tickets etc. Towards developing

a cost effective alternative channels of delivery, the bank with more than 350

ATMs has the largest ATM network amongst Nationalized Banks.

With the help of advanced technology, the Bank has been a frontrunner in

the industry so far as the initiatives for Financial Inclusion is concerned. With

its policy of inclusive growth in the Indo-Gangetic belt, the Banks mission is

Banking for Unbanked. The Bank has launched a drive for biometric smart

card based technology enabled Financial Inclusion with the help of Business

Correspondents/Business Facilitators (BC/BF) so as to reach out to the last mile

customer. The Bank has started several innovative initiatives for marginal

groups like rickshaw pullers, vegetable vendors, dairy farmers, construction

workers, etc. Under Branchless Banking model, the Bank is implementing 40projects in 16 States. The Bank launched an ambitious Project Namaskar

under which 1 lakh touch points will be established in unbanked villages by

2013 to extend the Banks outreach. Under this, 30 Kiosks have been opened

covering 119 Villages reaching 1.32 Lakh beneficiaries.

Backed by strong domestic performance, the bank is planning to realize its

global aspirations. Bank continues its selective foray in international marketswith presence in 9 countries, with branches at Kabul and Dubai, Hong Kong &

representative offices at Almaty, Dubai, Shanghai and Oslo, a wholly owned

subsidiary in UK, a joint venture with Everest Bank Ltd. Nepal and a JV

banking subsidiary DRUK PNB Bank Ltd. in Bhutan. Bank is pursuing

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upgradation of its representative offices in China & Norway and is in the

process of setting up a representative office in Sydney, Australia and taking

controlling stake in JSC Dana Bank in Kazakhastan.

Bank has been a recipient of many awards and accolades during the year:-

Gold trophy of SCOPE Meritorious Award for Excellence in Corporate

Governance 2009 by Standing Conference of Public Enterprises

As per Financial Express-Ernest & young (FE-EY) Indias Best Banks Survey,

PNB is identified as the best bank among the nationalized banks in terms of

overall ranking.

As per HT-MaRS Survey on Customer Satisfaction, PNB stood NUMBER

ONE in Delhi and Chennai in terms of customer satisfaction.

As per the Forbes Annual list of 2000 global giants, PNB tops the list of

nationalized banks with a global ranking of 695, substantial improvement over

last years placement at 946th position.

The Economic Times has ranked CEO of PNB as the 32nd Most Powerful

CEO of 2010.

YEAR 2009 for Punjab National bank!

Another simple measure to watch is net interest margin, which looks at

net interest income as a percentage of average earning assets. Track margins

over time to get a feel for the trend. PNBs Net Interest margins have been

generally stable in the 3.5 to 4 percent range. FY08 Net Interest Margin stands

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at 3.58 percent which is again one of the best records among all banks, next only

to HDFC Bank.

Punjab National Bank is Indias second-largest public sector lender, with 4668

branches and 2455 ATMs across the country. During the year 2008-09 the

number of branches increased by 163 branches. The net profit of the bank was

Rs.927 crore for the quarter ended Sept09 as against Rs.707 crore in the

corresponding period last year recording a growth of 31.1%. The bank has the

lowest prime lending rate (PLR) of 11% among all banks in the country. The

Prime lending rate is the rate of interest at which the bank lends to its best

customers.

Overseas Presence

Branches at Kabul and Hong Kong and Representative offices at Almaty,

Dubai, Shanghai and Oslo. With the opening of the Representative Office at

Oslo, PNB becomes the First Indian bank to have presence in whole

Scandinavian belt. In addition the Bank has a subsidiary (PNBIL) in UK.

Strong Capital Base

A strong capital base is the number one issue to consider before investing

in a lender. Punjab National Bank also excels on Capital Adequacy Ratio (CAR)

perhaps the only parameter where many Indian banks fall short, much like

their global counterparts. While many Indian Banks are struggling to keep their

heads above the floor-levels of 9-12%, PNBs CAR is at a very comfortable

14%. Thus there is no need for PNB to seek recapitalization by the government,

something that is plaguing many other peers.

Net Interest Income (NII):

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All firms can divide the balance sheet into assets and liabilities. For banks

the assets are commercial and personal loans, mortgages, construction loans and

securities. The liabilities are deposits from customers. The net interest income is

then the difference between the revenues on the assets and the cost of servicing

the liabilities. The performance on the net interest income front is especially

good, taking into account their low PLR. It also enabled PNB to manage margin

pressures better.Interest incomeduring quarter ended Sept09 at Rs. 5,407 crore

show a growth of 16.3%. Interest income stood at Rs.10,615 crore in the half

year ended Sept09 showing year over year growth of 20.8%.

Net Interest Margins (NIM)

Another simple measure to watch is net interest margin, which looks at net

interest income as a percentage of average earning assets. Track margins over

time to get a feel for the trend. PNBs Net Interest margins have been generally

stable in the 3.5 to 4 percent range. FY08 Net Interest Margin stands at 3.58

percent which is again one of the best records among all banks, next only to

HDFC Bank.

Return on Equity (RoE) and Return on Assets (RoA)

These metrics are the standards for gauging bank profitability. Punjab National

Banks profitability record is commendable. Net Margins have been stable

around the 12-13 percent mark. Return on Assets, the indicator of how

profitable a company is relative to its total assets is good at around the 1.2

percent mark, probably the best record after HDFC Bank. Return on Equity is at

about 19 percent, again comparable to the best in the Industry. And this has

been achieved without very high financial leverage (about 15x), which is

commendable.

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Strong Revenues

Historically many of the best-performing bank investments have been those

that have proven capable of above-average revenue growth. Punjab National

Banks FY08 growth has been good. Interest income and total income growth

stand at about 26 percent. The balance sheet has also grown strongly with

advances growing at about 24% and deposits registering a growth of about 20

percent. This again shows that Punjab National Bank had been aggressive on the

loans disbursal front.

CASA ratio:

CASA ratio is the ratio of the deposits in the form of Current Account &

Savings Account to the total deposits. The bank has a good source of low-cost

funds in its CASA deposits that amount to nearly 40% of its total portfolio.

New Initiative Loans

PNB is an outperformer in socially inclusive banking, and has kick-

started several initiatives in sectors like microfinance, self-employment loans,

kisan credit cards, rural smart cards, enabling technologies for the handicapped,

support for the economically challenged, etc.

Summing Up

On the technology front, PNB has not only completed implementation of

Core Banking Solutions (CBS) throughout its vast network, but has alsocompleted CBS in all its affiliated Regional Rural Banks (RRBs) a sector that

is normally shy of technology. With 100% CBS, the largest ATM network

among all PSBs, and Internet Banking, Punjab National Bank has implemented

truly Anytime Anywhere banking. In fact, it goes even beyond to facets of e-

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commerce like booking of tickets, payment of bills etc. With all the above said

facts, 2009-10 will be a momentous one for PNB, as it battles some of its core

challenges and handles some divestments.

VISION AND MISSION

VISION

"To be a Leading Global Bank with Pan India footprints and become a

household brand in the Indo-Gangetic Plains providing entire range of financial

products and services under one roof"

MISSION

"Banking for the unbanked"

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HISTORY OF PNB

History

1895: PNB commenced its operations in Lahore. PNB has the distinction

of being the first Indian bank to have been started solely with Indian

capital that has survived to the present. (The first entirely Indian bank, the

Oudh Commercial Bank, was established in 1881 in Faizabad, but failed

in 1958.) PNB's founders included several leaders of the Swadeshi

movement such as Dyal Singh Majithia and Lala HarKishen Lal,[2] Lala

Lalchand, Shri Kali Prosanna Roy, Shri E.C. Jessawala, Shri Prabhu

Dayal, Bakshi Jaishi Ram, and Lala Dholan Dass. Lala Lajpat Rai was

actively associated with the management of the Bank in its early years.

1904: PNB established branches in Karachi and Peshawar.

1940: PNB absorbed Bhagwan Dass Bank, a scheduled bank located in

Delhi circle.

1947: Partition of India and Pakistan at Independence. PNB lost its

premises in Lahore, but continued to operate in Pakistan.

1951: PNB acquired the 39 branches of Bharat Bank (est. 1942); Bharat

Bank became Bharat Nidhi Ltd.

1961: PNB acquired Universal Bank of India.

1963: The Government ofBurma nationalized PNB's branch in Rangoon

(Yangon).

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http://en.wikipedia.org/wiki/Lahorehttp://en.wikipedia.org/wiki/Faizabadhttp://en.wikipedia.org/wiki/Swadeshihttp://en.wikipedia.org/wiki/Dyal_Singh_Majithiahttp://en.wikipedia.org/wiki/Punjab_National_Bank#cite_note-1http://en.wikipedia.org/wiki/Lala_Lajpat_Raihttp://en.wikipedia.org/wiki/Karachihttp://en.wikipedia.org/wiki/Peshawarhttp://en.wikipedia.org/wiki/Delhihttp://en.wikipedia.org/wiki/Partition_of_Indiahttp://en.wikipedia.org/wiki/Burmahttp://en.wikipedia.org/wiki/Yangonhttp://en.wikipedia.org/wiki/Yangonhttp://en.wikipedia.org/wiki/Faizabadhttp://en.wikipedia.org/wiki/Swadeshihttp://en.wikipedia.org/wiki/Dyal_Singh_Majithiahttp://en.wikipedia.org/wiki/Punjab_National_Bank#cite_note-1http://en.wikipedia.org/wiki/Lala_Lajpat_Raihttp://en.wikipedia.org/wiki/Karachihttp://en.wikipedia.org/wiki/Peshawarhttp://en.wikipedia.org/wiki/Delhihttp://en.wikipedia.org/wiki/Partition_of_Indiahttp://en.wikipedia.org/wiki/Burmahttp://en.wikipedia.org/wiki/Yangonhttp://en.wikipedia.org/wiki/Yangonhttp://en.wikipedia.org/wiki/Lahore


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Punjab National Bank (PNB) is the second largest government-owned

commercial bank in India. Having more than 5.8 crore customer, Punjab

National Bank has one of the largest branch networks in India. The bank's assets

for financial year 2007 were about US$60 billion.

Products and Services

Savings Fund Account - Total Freedom Salary Account, PNB Prudent Sweep,

PNB Vidyarthi SF Account, PNB Mitra SF

Account Current Account - PNB Vaibhav, PNB Gaurav, PNB Smart Roamer

Fixed Deposit Schemes - Spectrum Fixed Deposit Scheme, Anupam Account,

Mahabachat Schemes, Multi Benefit Deposit

Scheme Credit Schemes - Flexible Housing Loan, Car Finanace, Personal Loan,

Credit Cards

Social Banking - Mahila Udyam Nidhi Scheme, Krishi Card, PNB Farmers

Welfare Trust

Corporate Banking - Gold Card scheme for exporters, EXIM finance

Business Sector- PNB Karigar credit card, PNB Kushal Udhami, PNB Pragati

Udhami, PNB Vikas Udhami

Apart from these, the PNB also offers locker facilities, senior citizens schemes,

PPF schemes and various E-services.

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Awards and Distinctions

Ranked among top 50 companies by the leading financial daily,

Economic Times.

Ranked as 323rd biggest bank in the world by Bankers Almanac (January

2006), London.

Earned 9th place among India's Most Trusted top 50 service brands in

Economic Times- A.C Nielson Survey.

Included in the top 1000 banks in the world according to The Banker,London.

Golden Peacock Award for Excellence in Corporate Governance - 2005

by Institute of Directors.

FICCI's Rural Development Award for Excellence in Rural Development

2005

PNB Overseas Offices

PNB has a banking subsidiary in the United Kingdom, as well as

branches in Hong Kong and Kabul. It has representative offices in Almaty,

Shanghai, and Dubai.

The bank was established in 1895 at Lahore. PNB's founders included

several leaders of the Swadeshi movement like Dyal Singh Majithia, LalaHarKishen Lal, Lala Lalchand, Kali Prosanna Roy, EC Jessawala, Prabhu

Dayal, Bakshi Jaishi Ram, and Lala Dholan Dass. Lala Lajpat Rai was actively

associated with the bankss management in its early years.

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EDUCATION LOAN - "VIDYALAKSHYAPURTI"

The Scheme aims at providing financial assistance to deserving / meritorious

students pursuing higher education in India or abroad. viz., Graduation courses

B.A., B.Com., B.Sc., etc., Post-Graduation courses, Masters & Ph.D;

Professional courses, Engineering, Medical, Agriculture, Veterinary, Law,

Dental, Management, Computer etc., Computer Certificate courses of reputed

Institutes accredited to Department of Electronics or institutes affiliated to

University; Courses like ICWA, C.A., CFA, etc., courses conducted by IIM,

IIT, IISc, XLRI, NIFT, etc., Regular Diploma/Degree courses conducted by

Colleges/Universities approved by UGC/Govt./AICTE/AIBMS/ICMR, Regular

Degree / Diploma courses like Aeronautical, Pilot training, Shippling etc.

approved by DGCA/ etc., Courses offered by National Institutes and other

reputed Private Institutes.

Students should approach the branch nearest to the place of domicile.

Interest is charged monthly on simple basis during the repayment

holiday/moratorium period & concession of 1% in rate of interest is allowed

provided the same is serviced regularly during study period.

Punjab National Bank has tied up with Kotak Mahindra Insurance to provide

life insurance cover for Student borrowers.

Eligibility

Student eligibility

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Should be an Indian National

Secured admission to Professional / Technical courses in India or abroad

through Entrance Test / Merit based Selection process..

Expenses considered for Loan

Fee payable to College / School / Hostel Examination / Library /

Laboratory fee. Purchase of books / equipments / instruments / uniforms.

Caution Deposit / Building Fund / Refundable Deposit supported by Institution

Bills / Receipts, subject to the condition that the amount does not exceed 10% of

the total tuition fee for entire course.. Travel Expenses / Passage money forstudies abroad. Purchase of computers - essential for completion of the Course.

Boarding and lodging expenses in recognized Boarding Houses / private

accommodations Any other expense required to complete the course - like

study tours, project work, thesis etc.

Quantum of Finance

Need based finance, subject to repaying capacity of the parents / students

with margin and the following ceilings :-

For studies in India: Maximum Rs.10.00 lacs.

For studies abroad: Maximum Rs.20.00 lacs.

Margin

Upto Rs.4.00 lacs: - Nil.

Above Rs.4.00 lacs: Studies in India 5%

Studies Abroad 15%

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Security

Upto Rs.4.00 lacs: Co-Obligation of Parents. No Security..

Above Rs 4.00 lacs and Upto

Rs 7.5 lacs:

Co-Obligation of Parents. 3rd party

guarantee acceptable to the Bank.

Above Rs 7.5 lacs:

Co-Obligation of Parents. Collateral

Security of suitable value along with

Assignment of future income of the student

for payment of installments.

The security can be in the form of land / building / Govt. Securities / Public

Sector Bonds / Units of UTI, NSC, KVP, LIC Policy, Gold, Shares/ Mutual

Funds/ Debentures, Bank Deposit in the name of the student parent / guardian or

any other third party with suitable Margin.

The document should be executed by both the student and the parent/guardian.

Rate of Interest

Repayable up to 3 years

Loan up to 400000

Int. 11%-BPLR .50% =10.50%

Repayable 3 years and above

Loan up to 400000

Int.- BPLR.1% +50% =10.50%

Repayment

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While applying for the loan, the borrower is required to furnish the following

information/papers:

Loan application on Bank's format.

Passport size photograph

Proof of Address(Permanent) / ID Proof.

Proof of Age.

Proof of having secured pass marks in last qualifying examination

Letter of admission in professional, technical or vocational courses.

Prospectus of the course wherein charges like Admission Fee, Examination Fee,

Hostel Charges etc. are mentioned.

Details of Assets & Liabilities of parents.

In case loan amount is above Rs.4.00 lacs

Detail of Assets & Liabilities of parents/co-obligants/ guarantors.

In case loan is to be collaterally secured by mortgage of IP, Copy of Title Deed,

Valuation Certificate and Non Encumbrance Certificate from approved Lawyer

of the Bank to be obtained at the cost of the borrower

Photocopy of Passport & Visa, in case of study abroad.

Any other document/information, depending upon the case and purpose of the

loan.

(The above CHECKLIST is only illustrative, not exhaustive. For details, pleasecontact our nearest Branch Office).

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LOAN AGAINST MORTGAGE OF IMMOVABLE

PROPERTY

Scheme seeks to provide finance against mortgage of immovable property

situated in Metro/ Urban/ Semi Urban centres. The scheme is designed to offer

instant solutions relating to business needs or for personal needs such as,

children's higher education, travel, daughter's marriage, medical emergencies,

etc. Loan is, however, not available for speculative purpose.

Purpose

For personal & business needs

Eligibility

Employees of Central/ State Govt/ Schools/ Colleges/ Public Sector

Undertakings (PSUs), Reputed Corporates and other intcome tax assesses

who are below the age of 60 years

Business Enterprises having a satisfactory track record of

o 3 years of cash profit; and

o Net profit in the immediately preceding financial year

Income Criterion

For Individuals

Minimum net monthly salary/ net annual income of Rs.10,000/

Rs.1,20,000/- for salaried and for other income tax assesses respectively

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Net annual income should be double that of total EMIs for the year

For Business Enterprises

Minimum net annual income/ profit of Rs.1,20,000/-

Net income/ profit should be 1.5 times that of total EMIs for the year

Amount of loan

Term Loan & Overdraft

Minimum Loan:- Rs. 1 Lac

Maximum Loan:- Rs.100 Lacs

Security

Non-encumbered residential house/ flat or Commercial or Industrial property (in

the shape of building/ industrial shed) - self occupied or vacant.

Rate of interest

Loan less then 3 years

Base rate 8% + 4.75% spread = 12.75%

Loan 3 years and above

Base rate 8% + 4.75% spread + .05% T.P = 13.25%

Repayment

Loan together with interest is repayable in maximum 84 equal monthly

installments or upto the age of 65 years which ever is earlier

Overdraft facility is to be renewed/ reviewed annually

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Upfront Fee (in case of Term Loan)

0.90% of the loan amount (subject to a maximum of Rs.45,000/-) + Service Tax

& Education Cess

Processing Fee (in case of General Overdraft Limit)

Upto Rs. 25,000/- - NIL

Above Rs. 25,000/- & upto Rs. 2 Lac - Rs. 270/- + Service Tax & Education

Cess

Above Rs. 2 Lac - Rs. 225/- per lac or part thereof + Service Tax & EducationCess

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:

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.

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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

10% except when loan is availed for Personal and or Educational needs in whichcase it shall be Nil.

7. RATE OF INTEREST

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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

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 tocommence immediately.

9. MODE OF DISBURSEMENT

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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 anamount of loan of maximum upto Rs. 20 lacs, which, however, should be for a

minimum of Rs. 2lacs as prescribed above.

Car

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.

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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 isRs. 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.

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.

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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 Loan

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/-.

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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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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

Questionnaire

i.e., Primary data was collected through Questionnaire.

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Data Analysis:

After data collection, Im able to analyze customers 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 statisticaldetails & 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 wasshort because of which many facts have left unexplored.

Lack of resources: Lack of time and other resources as it wasnot possible to conduct survey at large level.

Small no. of respondents: Only four Retail companies havechosen, that is a small number, to represent whole of industry.

Unwillingness of respondents: While collection of the datamany 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. OFPEOPLE

50

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 ofPNB, 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).

Q3. If yes are you aware of the advance products (Loan segments) of PNB?

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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.

Q4. Which bank you prefer for taking loans?

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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. Someof 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 its 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

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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 AuthorAuthor: Charles Smithson

Active Credit Portfolio Management Author Micheal Jaiser

61
http://www.google.com/http://www.pnbindia.com/http://www.yahoo.com/http://www.vikipedia.com/http://www.google.com/http://www.pnbindia.com/http://www.yahoo.com/http://www.vikipedia.com/


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ANNEXURE

Dear Sir/Madam,

I am a student of Gyan Ganga Institute of Technology & Science and presently

doing a market survey Credit Portfolio Of Punjab National Bank. I

request you to kindly fill the questionnaire below and I assure you that the data

generated shall be kept confidential.

1. Name of the Respondent

a.

2. Address of the Respondent

a. ..

3. Name of the Branch

a.

4. Which service do you prefer ?

a. ..

5. Which product of PNB you like the most ?

a. .

6. How do you find the service provide by PNB?

a. Very good

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b. Good

c. Satisfactory

d. Bad

7. Do you use credit card of PNB?

a. Yes

b. No

8. If yes, state the service related issues

a. .

9. If you want improvement in service of PNB, then what it will be

a. ..

Documents

48810590 Credit Portfolio of Punjab National Bank2