Current Scenario of Bank Finance

CURRENT SCENARIO OF BANK FINANCE.
Presentation by CA.WALTER DSOUZA.
TYPES OF BANKS
PUBLIC SECTOR BANKS

PRIVATE SECTOR BANKS FOREIGN BANKS RURAL REGIONAL BANKS CO-OPERATIVE BANKS
WALTER & ASSOCIATES
PROGRESS OF COMMERCIAL BANKING AT A GLANCE

1969 No. Of Commercial Banks. No. Of Regional Rural Banks. 89 2000 297 (196) 2003 294 (196) 2006 222 (133)
Deposits (Rs./Crores)
Advances (Rs./Crores) Credit Deposit Ratio
4,646
3,599 77.50
8,51,593
4,54,069 53.30
13,11,761
7,46,432 56.90
21,09,049
15,07,077 71.50
No. of Commercial Banks as on Mar 2007 has further reduced to 183.

WALTER & ASSOCIATES
CLASSIFICATION OF OUTSTANDING LOANS BASED ON SIZE

Credit Limit No. Of Accounts Amount Outstanding (Rs. /Crores)
Up to Rs. 25 Lacs
Between Rs. 25 Lacs & Rs. 1 Crore
8,50,52,809 (99.55%)
2,70,768 (0.32%)
5,89,483 (38.94%)
99,936 (6.60%)
Between Rs. 1 Crore & Rs. 10 Crore

Between Rs. 10 Crore & Rs. 25 Crore Above Rs. 25 Crore Total
93,335 (0.11%)
10,944 (0.01%) 7,525 (0.01%) 8,54,35,381
2,21,287 (14.62%)
1,32,635 (8.76%) 4,70,501 (31.08%) 15,13,842
WALTER & ASSOCIATES
CREDIT OF SCHEDULED COMMERCIAL BANKS ACCORDING TO POPULATION

Population Group No. Of Accounts. Amount Outstanding (Rs./Crores) Rural Semi Urban Urban Metropolitan Total 2,85,76,751 (33.4%) 2,12,82,079 (24.9%) 1,27,76,733 (15.0%) 2,27,99,818 (26.7%) 8,54,35,381 1,26,079 (8.3%) 1,51,445 (10.0%) 2,45,777 (16.2%) 9,90,541 (65.4%) 15,13,842
WALTER & ASSOCIATES
BREAK UP OF ADVANCES AS ON 31 MARCH 2006

Banks SBI & Its Associates. Nationalized Banks. No. Of Accounts. 1,88,79,658 (22.1%) 3,17,13,638 (37.1%) Amount Outstanding (Rs./Crores) 3,49,943 (23.1%) 7,25,130 (47.9%)
Foreign Banks.
Regional Rural Banks.
97,15,237 (11.4%)
1,33,93,759 (15.7%)
99,185 (6.6%)
36,644 (2.4%)
Other Commercial Banks.

Total
1,17,33,089 (13.7%)
8,54,35,381
3,02,940 (20.0%)
15,13,842
WALTER & ASSOCIATES
NON PERFORMING ASSETS OF SCHEDULED COMMERCIAL BANKS

Year Advances (Rs./Crores) 5,58,679 6,80,869 7,76,508 9,02,026 11,71,210 Npas (Rs./Crores) 63,963 70,954 70,314 64,897 57,545 Percentage
2001 2002 2003 2004 2005
11.4% 10.4% 9.1% 7.2% 4.9%
2006
15,50,449
51,885
3.3%
WALTER & ASSOCIATES
COMPARITIVE STUDY OF TWO GIANTS

Rs. In Crores
SBI
Years No. Of Offices No. Of Employees Deposits Advances 2004-05 9,185 2,05,515 3,67,048 2,02,374 2005-06 9,241 1,98,774 3,80,046 2,61,642 2006-07 NA NA 4,35,521 3,37,336 2004-05 515 18,029 99,819 91,405
ICICI
2005-06 563 25,479 1,65,083 1,46,163 2006-07 NA NA 2,30,510 1,95,866
Cost Of Funds
Net Npa Ratio
4.90
2.65
4.74
1.87
NA
NA
3.02
1.65
4.01
0.72
NA
NA
WALTER & ASSOCIATES
BENCHMARK PRIME LENDING RATE (BPLR)

The BPLR ranges from 12% to 16.5%. Some of the indicative BPLRs are as under: State Bank of India Punjab National Bank 12.75% 13.00% ICICI Bank HDFC Bank 15.75% 15.00%
Canara Bank
Bank of India Bank of Baroda Union Bank of India
13.25%
13.25% 13.25% 13.25%
Axis Bank
Citi Bank Standard Chartered Kotak Bank
15.00%
13.50% 13.00% 16.50%
WALTER & ASSOCIATES
CLASSIFICATION OF INDUSTRY
INVESTMENT IN PLANT & MACHINERY
MICRO
SMALL MEDIUM LARGE
Up to Rs. 25 Lacs Between Rs. 25 500 Lacs Between Rs. 500 -1000 Lacs Above Rs. 1000 Lacs
WALTER & ASSOCIATES
SOURCES OF FINANCE
A basic principle is that short-term financial needs should be met from short-term sources, medium term financial needs from medium term sources & long term financial needs from long-term sources. Moreover a proper balance between loan funds & own funds has to be maintained.
WALTER & ASSOCIATES
CLASSIFICATION OF SOURCES OF FINANCE

LONG TERM
Share Capital Reserves and Surplus including retained earnings Long Term loans from FIs and Banks (Rupee and Forex) Deferred payments Unsecured loans from promoters and sister concerns Public deposits Asset Securitization Lease financing Venture Capital Financing International Financing including GDR, ADR, FCCB etc.
WALTER & ASSOCIATES
CLASSIFICATION OF SOURCES OF FINANCE.

SHORT TERM Bank Overdrafts Trade Credit Short Term Loans Bridge loans Factoring Bills of Exchange Hire purchase
WALTER & ASSOCIATES
CONVENTIONAL PRODUCTS
Cash-credit/Overdraft Bills Discounting Bank Guarantees Letters Of Credit Rupee Term Loan Foreign Currency Term Loan Hire Purchase/Lease Finance
WALTER & ASSOCIATES
NON-CONVENTIONAL PRODUCTS
Bridge Loans/Short Term Loans Commercial Paper Factoring Securitization Of Future Receivable Invoice Financing Channel Financing Cash Management Products External Commercial Borrowings FCNRB Loans Venture Capital Finance International Finance (ADR,GDR,FCCB)
WALTER & ASSOCIATES
FACTORING
ASSIGNMENT OF RECEIVABLES
READY SOURCES OF SHORT TERM FUNDS

OUTSIDE REGULAR BANK LIMITS OFF BALANCE SHEET FINANCING DEBT ADMINISTRATION CREDIT PROTECTION
WALTER & ASSOCIATES
SECURITISATION OF FUTURE RECEIVABLES

DISCOUNTING OF CERTAIN OR NEAR CERTAIN CASH FLOWS CREDIT RISKS BACKED BY COLLATERALISATION OF CASH AND RECEIVABLES WITH / WITHOUT RECOURSE FINANCING
BALANCE SHEET MANAGEMENT
WALTER & ASSOCIATES
INVOICE FINANCING
FINANCING OF RECEIVABLES UNSECURED FINANCE MINIMUM DOCUMENTATION PAYMENT CONFIRMATION FROM CUSTOMER WITHOUT ANY COMMITMENT ON USANCE PERIOD
WALTER & ASSOCIATES
CHANNEL FINANCING
AVAILABLE TO DISTRIBUTORS / DEALERS FINANCING OF PURCHASE BILLS COMBINED WITH CASH MANAGEMENT SERVICES BACKED BY POST DATED CHEQUES OF THE DISTRIBUTOR / DEALERS
UNSECURED FINANCE HENCE BACKED BY COLLATERALS
WALTER & ASSOCIATES
CASH MANAGEMENT PRODUCTS

EFFICIENT MANAGEMENT OF FUNDS
IMMEDIATE CREDIT FOR CHEQUE COLLECTIONS

AT PAR ISSUE / COLLECTION OF CHEQUES
NO INTEREST COSTS EXCEPT SERVICE CHARGES

IMPROVES CASHFLOWS IDEAL FOR CORPORATES HAVING MULTILOCATIONAL SALES
WALTER & ASSOCIATES
EXTERNAL COMMERCIAL BORROWINGS

ECB can be raised from International Banks, International Capital Market, Multilateral financial Institutions, foreign collaborators & equity holders etc. ECB upto USD 20 mn should have minimum average maturity of 3 years & above USD 20 mn upto USD 500 mn an average maturity of 5 years. All in cost not to exceed 150 basis point over 6 months LIBOR for maturity of 3-5 years and 250 basis points for maturity over 5 years. ECB not permitted for real estate, working capital, general corporate purpose, repayment of existing rupee loans etc. ECB above USD 500mn & some other categories of borrowers need to use the approval route.
WALTER & ASSOCIATES
FCNRB B LOANS
FOREIGN CURRENCY LOANS IN USD, POUND STERLING, EURO OR JAPANYESE YEN REPAYMENT OF LOAN AND INTEREST TO BE MADE IN THE CURRENCY OF THE LOAN TO BE CARVED OUT OF WORKING CAPITAL LIMITS AVAILABILITY OF FUNDS AT LOWER COSTS
WALTER & ASSOCIATES
LETTERS OF CREDIT
INSTRUMENT USED FOR CREDIT ENHANCEMENT OF THE BUYER TYPES OF LETTERS OF CREDIT - SIGHT LCs - USANCE LCs - STAND BY LCs SAFEGUARDS BUYERS & SELLERS POSITION
WALTER & ASSOCIATES
CRITICAL FINANCIAL PARAMETERS

Parameter Current Ratio TOL/TNW (Total Outside Liabilities / Tangible Net Worth) Debt/ Equity Ratio Acceptable Level Above 1.20:1 Not more than 3:1 1.50:1 to 2:1 sometime 3:1 depends on the nature of the project. In excess of 5% Minimum 15% Minimum 1.75 to 2.00
WALTER & ASSOCIATES
PAT/Net Sales (%) Return on capital employed (ROCE) Gross Average DSCR
THANK YOU
WALTER & ASSOCIATES

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CURRENT SCENARIO OF BANK FINANCE.

Presentation by CA.WALTER DSOUZA.

PUBLIC SECTOR BANKS

WALTER & ASSOCIATES

PROGRESS OF COMMERCIAL BANKING AT A GLANCE

No. of Commercial Banks as on Mar 2007 has further reduced to 183.

CLASSIFICATION OF OUTSTANDING LOANS BASED ON SIZE

Between Rs. 1 Crore & Rs. 10 Crore

CREDIT OF SCHEDULED COMMERCIAL BANKS ACCORDING TO POPULATION

WALTER & ASSOCIATES

BREAK UP OF ADVANCES AS ON 31 MARCH 2006

Other Commercial Banks.

NON PERFORMING ASSETS OF SCHEDULED COMMERCIAL BANKS

2001 2002 2003 2004 2005

11.4% 10.4% 9.1% 7.2% 4.9%

COMPARITIVE STUDY OF TWO GIANTS

WALTER & ASSOCIATES

BENCHMARK PRIME LENDING RATE (BPLR)

WALTER & ASSOCIATES

WALTER & ASSOCIATES

CLASSIFICATION OF SOURCES OF FINANCE

WALTER & ASSOCIATES

CLASSIFICATION OF SOURCES OF FINANCE.

WALTER & ASSOCIATES

READY SOURCES OF SHORT TERM FUNDS

SECURITISATION OF FUTURE RECEIVABLES

BALANCE SHEET MANAGEMENT

WALTER & ASSOCIATES

WALTER & ASSOCIATES

UNSECURED FINANCE HENCE BACKED BY COLLATERALS

WALTER & ASSOCIATES

CASH MANAGEMENT PRODUCTS

IMMEDIATE CREDIT FOR CHEQUE COLLECTIONS

NO INTEREST COSTS EXCEPT SERVICE CHARGES

EXTERNAL COMMERCIAL BORROWINGS

WALTER & ASSOCIATES

WALTER & ASSOCIATES

CRITICAL FINANCIAL PARAMETERS

WALTER & ASSOCIATES

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