banks risk management

1. 20
CHAPTER: 4
ANALYSIS & DISCUSSION
4.1 Introduction
The Indian banking is the lifeline of the nation and its people. Banking has
helped in developing the vital sectors of the economy and usher in a new dawn of
progress on the Indian horizon. The Indian Banking industry, which is governed
by the Banking Regulation Act of India, 1949 can be broadly classified into two
major categories, nonscheduled banks and scheduled banks. In terms of
ownership, commercial banks can be further grouped into nationalized banks, the
State Bank of India and its group banks, regional rural banks and private sector
banks (the old/ new domestic and foreign). These banks have over 67,000
branches spread across the country. The Public Sector Banks (PSBs), which are
the base of the Banking sector in India. Unfortunately they are burdened with
excessive Non Performing assets (NPAs), massive manpower and lack of modern
technology. On the other hand the Private Sector Banks are making tremendous
progress. They are leaders in Internet banking, mobile banking, phone banking,
and ATMs account for more than 78 per cent of the total banking industry assets.
4.2 Structure of Indian Banking Industry

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4.2 A Public Sector Banks
The Public sector banks are the ones in which the government has a major
holding. They are divided into two groups i.e. Nationalized Banks and State Bank
of India and its associates. Among them, there are 19 nationalized banks and 8
State Bank of India associates. Public Sector Banks dominate 75% of deposits and
71% of advances in the banking industry. Public Sector Banks dominate
commercial banking in India.
4.2 B Private Sector Banks
Private sector banks are the banks which are controlled by the private
lenders with the approval from the RBI their interest rates are slightly costly as
compared to Public sector banks. Private sector banks came into existence to
supplement the performance of Public sector banks and serve the needs of the
economy better.
4.2 C Non –Performing Assets of Public Sector & Private Sector Banks
Overall Gross NPA ratio has risen from 3.26% as on March 31, 2013 to
3.85% as on March 31, 2014. On comparing the asset quality of PSBs vis-à-vis
private sector banks, it can be observed that PSBs have witnessed higher
deterioration in asset quality than their private sector peers. The Gross NPA ratio
for PSBs stood at 4.33% (March 2013: 3.59%) as compared to 1.82% (March
2013: 1.86%) for private sector banks as on March 31, 2014.
Table: 4.2 C
NPA of Public and Private Sector Banks
(Source: Banking Sector Performance Study)

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Risk is a major area of concern in all banks. Different risks are faced by banks
like credit risk, market risk, liquidity risk, operational risk etc. Bank uses various
tools & techniques to avoid risk. These techniques like diversification, hedge,
internal insurance, holding capital etc. This research report covers credit risk
management of two public sector & private sector banks.
Public Sector Banks:
 Canara Bank
 State Bank of India
Private Sector Banks:
 Axis Bank
 HDFC Bank
4.3 Risk Management in Canara Bank
4.3A Introduction
Founded in 1906, Canara Bank is one of the premier banks in India, with a
network of 2578 branches across the country. The bank was the first two launch
networked ATMs in India and obtain and ISO certification. Canara bank has also
achieved the distinction of being the country’s highest net profit earner among
nationalized banks for the year march 2007. The bank has already carved a niche
in providing IT-based services such as networked ATMs, anywhere banking,
Telebanking, Remote access Terminals, Internet and Mobile banking, Debit cards,
etc. Canara bank has a vision to help improve the economic condition of the
common people of India by inculcating the habit of savings in rural areas. As part
of its vision of using technology to provide affordable banking services to the vast
rural population of India, Canara bank has extend the performance and cost
benefits of enterprises Linux to its customers. With a modernized branch
infrastructure, Canara bank hopes to serve customers in a timely and efficient
manner, reinforcing its image of being a customer savvy bank.

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4.3 B Credit Risk Management
In this backdrop, it is imperative that Canara bank has credit risk
management system, which is sensitive and responsive to these factors. The
effective management of credit risk is a critical component of comprehensive risk
management and i.e. essential for the long-term success of Canara Bank
organization. Credit risk management encompasses identification,
measurement, monitoring and control of the credit risk sources. The Bank has put
in place unified risk management architecture to attain global best practices for
effective implementation of risk management initiatives in consistence with the
Basle II framework and RBI guidelines. The Board of Directors drives the Risk
Management initiatives in the Bank. The Risk Management Committee of the
Board is operational. Top Executive Committees for Credit Risk, Operational
Risk and Market Risk Management oversee and monitor the respective risk
management processes and procedures. Asset Liability Committee (ALCO) meets
periodically for effective and pro-active ALM in the Bank.
An exclusive Risk Management Wing at the Head Office is functioning as
a nodal center for overall implementation of various risk management initiatives
across the Bank. Integrated Mid Office of both Domestic and Forex Treasury are
functioning under the Risk Management Wing for effective and independent
supervision and monitoring of Market Risk in investment and forex functions.
Risk Management Sections are functioning at all the 34 Circle Offices of the
Bank as an extended arm of the Risk Management Wing at the Corporate Office.
The Bank has put in place various risk management policies, which include policy
for management of Credit Risk, Market Risk, Operational Risk, Asset Liability,
Liquidity Risk, Country Risk, Counterparty Bank Risk, Corporate Governance,
Disclosures, Collateral Management, Stress Testing, Compliance Functions,
Disaster Recovery and Business Continuity Planning, Business Lines,
Outsourcing, Group Risk, Legal Risk etc. The Bank has also framed risk

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management policies for its overseas branches. These policies are being reviewed
and fine-tuned annually.
4.3 C Building Blocks of Credit Risk Management at Canara Bank
In a bank, an effective credit risk management framework would, comprise of the
following distinct building blocks:
•Policy and Strategy
•Organizational Structure
•Operations/ System
4.3 C i Policy and Strategy
The Board of Directors shall be responsible for approving and periodically
reviewing the credit risk strategy and significant credit risk policies.
o Credit Risk Policy
1. Bank has credit risk policy document approved by the Board. The document
include risk identification, risk measurement, risk grading/ aggregation
techniques, reporting and risk control mitigation techniques, documentation, legal
issues and management of problem loans.
2. Credit risk policies defined target markets, risk acceptance criteria, credit
approval authority, and credit origination, maintenance procedures and guidelines
for portfolio management.
3. The credit risk policies approved by the Board communicated to
branches/controlling offices. All dealing officials should clearly understand the
barne's approach for credit sanction and are held accountable for complying with
established policies and procedures.
4. Senior management of a Canara bank shall be responsible for implementing the
credit risk policy approved by the Board.

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o Credit Risk Strategy
1. Each branch of Canara bank should develop, with the approval of its Board, its
own credit risk strategy or plan that establishes the objectives guiding the Canara
bank's credit-granting activities and adopt necessary policies/ procedures for
conducting such activities. This strategy should spell out clearly the
organization’s credit appetite and the acceptable level of risk -reward trade-off for
its activities.
2. The strategy would, therefore, include a statement of the Canara bank's
willingness to grant loans based on the type of economic activity, geographical
location, currency, market, maturity and anticipated profitability. This would
necessarily translate into the identification of target markets and business sectors,
preferred levels of diversification and concentration, the cost of capital in granting
credit and the cost of bad debts.
4.3 C. ii Credit Risk Management Committee (CRMC]
Each Canara bank may, depending on the size of the organization or
loan. Investment book, constitute a high level Credit Risk Management
Committee (CRMC). The Committee should be headed by the Chairman and
should comprise of heads of Credit Department, Treasury, Credit Risk
Management Department (CRMD) and the Chief Economist.
o The Functions of the Credit Risk Management Committee should be
as under:
1. Responsible for the implementation of the credit risk policy/ strategy approved
by the Board.
2. Monitor credit risk on a Canara bank wide basis and ensure compliance with
limits approved by the Board.

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3. Recommend to the Board, for its approval, clear policies on standards for
presentation of credit proposals, financial covenants, rating standards and
benchmarks,
4. Decide delegation of credit approving powers, prudential limits on large credit
exposures, standards for loan collateral, portfolio management, loan review
mechanism, risk concentrations, risk monitoring and evaluation, pricing of loans,
provisioning, regulatory/legal compliance, etc.
Concurrently, Canara bank set up Credit Risk Management Department (CRMD),
independent of the Credit Administration Department.
o The CRMD does the followings:
1. Measure, control and manage credit risk on a Canara bank -wide basis within
the limits set by the Board/ CRMC
2. Enforce compliance with the risk parameters and prudential limits set by the
Board, CRMC.
3. Lay down risk assessment system develop loan/ investment portfolio. Identify
problems, correct deficiencies and undertake loan review/audit. Large Canara
banks could consider separate set up for loan review/audit.
4. Accountable for protecting the quality of the entire loan investment portfolio.
4.3C iii Canara Bank has system of Checks and Balances in place for
extension of Credit viz.:
1. Separation of credit risk management from credit sanction
2. Multiple credit approvers making financial sanction subject to approvals at
various stages viz. credit ratings, risk approvals, credit approval grid, etc.
3. An independent audit and risk review function.

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4. The level of authority required to approve credit will increase as amounts and
transaction risks increase and as risk ratings worsen.
5. Every obligor and facility must be assigned a risk rating.
6. Mechanism to price facilities depending on the risk grading of the customer,
and to attribute accurately the associated risk weightings to the facilities.
7. Banks ensure that there are consistent standards for the origination,
documentation and maintenance for extensions of credit
8. Banks has a consistent approach towards early problem recognition, the
classification of problem exposures, and remedial action.
9. Banks maintain a diversified portfolio of risk assets; have a system to conduct
regular analysis of the portfolio and to ensure ongoing control of risk
concentrations.
10. Credit risk limits include, obligor limits and concentration limits by industry
or geography. The Boards should authorize efficient and effective credit approval
processes for operating within the approval emits.
11. Bank has systems and procedures for monitoring financial performance of
customers and for controlling outstanding within limits.
4.3C iv Existing Credit Risk Management at Canara Bank
•Follow up clients/Customers.
•Recovery systems.
•Review of loan.
•Additional securities
•Providing additional loans to make repayment of existing loans.
•Loan Review Mechanism.

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•Low and High credit risk ratings.
•Low interest rate for high credit rating companies
•High interest rate for low credit rating companies
o Following up Customers/Clients:
Bank remind borrowers to repay loan and interest according to term and
condition which he has agreed while taking loan from banks, and also ensure that
if he fails to pay the loan what is next step of banks.
o Recovery Systems:
Bank directly collect dues from customers they have separate department,
which look after all matters related to recovery of loan.
o Review of Loan:
If the amount not recovered within specified term mentioned as per the
policy of bank, bank goes for review of loan if required.
o Additional Securities:
Additional securities will be taken from the customer in two situations:
1) If existing loan extended by the bank.
2) When additional loan is given to the customer in addition to existing loan.
 Following Securities as eligible for treatment as Credit Risk Mitigates:
1) Bank Deposits
2) Gold Jewellery (Benchmarked to 99.99 purity)
3) State Govt. Securities
4) Central Govt. Securities

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5) National Saving Certificates, Vikas Patras and Kisan Vikas Patras
6) Life Insurance Policies
7) Equities (Including Convertible Bonds)
8) Mutual Fund Securities
9) Land and Building
Conclusion: - Internal-Rating based approach provides positive incentives to
Banks in improving their Credit Risk Management techniques. Banks may have
discretion and flexibility in defining the exposure classes that which corporate,
project finance, etc. The proposed standardized Basel2 to approach does not fit
the needs of smaller Banking organization engaged primarily traditional Banking.
The neither current nor proposed capital frameworks yet address what is perhaps
the most critical risk factor for the smaller banks - geographic and sect oral
concentrations of Credit Risk.
4.4 Risk Management in State Bank of India
4.4 A Introduction
State Bank of India is an Indian multinational, Public Sector banking
and financial services company. It is a government-owned corporation with its
headquarters in Mumbai, Maharashtra. As of December 2013, it had assets of
US$388 billion and 17,000 branches, including 190 foreign offices, making it the
largest banking and financial services company in India by assets. State Bank of
India is one of the Big Four banks of India, along with Bank of Baroda, Punjab
National Bank and ICICI Bank. The bank traces its ancestry to British India,
through the Imperial Bank of India, to the founding, in 1806, of the Bank of
Calcutta, making it the oldest commercial bank in the Indian Subcontinent. Bank
of Madras merged into the other two "presidency banks" in British India, Bank of
Calcutta and Bank of Bombay, to form the Imperial Bank of India, which in turn
became the State Bank of India. Government of India owned the Imperial Bank of

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India in 1955, with Reserve Bank of India (India's Central Bank) taking a 60%
stake, and renamed it the State Bank of India. In 2008, the government took over
the stake held by the Reserve Bank of India.
o Associate banks
SBI now has five associate banks, down from the eight that it originally
acquired in 1959. All use the State Bank of India logo, which is a blue circle, and
all use the "State Bank of" name, followed by the regional headquarters' name:
State Bank of Bikaner & Jaipur, State Bank of Hyderabad, State Bank of Mysore,
State Bank of Patiala, State Bank of Travancore
4.5 A i Treatment of Advances
Major Categories: - Governments, PSEs (public Sector Enterprises), Banks,
Corporate, Retail, Claims against residential property, Claims against
commercial real estate.
Two Approaches:-
1) Standardised Approach
2) Internal Ratings Based Approach (in future – to be notified by RBI later) –
not to be covered now
Standardised Approach The standardized approach is conceptually the same as
the present accord, but is more risk sensitive. The bank allocates risk to each of its
assets and off balance sheet positions and produces a sum of risk weighted asset
values. A risk weight of 100% means that an exposure is included in the
calculation of risk weighted assets value, which translates into a capital charge
equal to 9% of that value. Individual risk weight currently depends on the broad
category of borrower (i.e. sovereign, banks or corporate). Under the new accord
the risk weights are to be refined by reference rating provided by an external
credit assessment institution (such as rating agency) that meets strict demand.

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Credit Risk Calculation Approaches
Fig.4.4 A. i
Standardized Approach – Long Term
From 1.4.2012, unrated exposure more than Rs 10 crores will attract a Risk
Weight of 150%
For 2012-2013 (w.e.f 1.4.2012), unrated exposure more than Rs 50 crores will
attract a Risk Weight of 150%
Credit Risk
foundationIRB
AdvancedIRB
Standardized
Approach
Internal Rating
Based Approach
Securitization
framework

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Credit Rating by Agencies
Collaterals recognized by Basel II under Standardised Approach
.
– Quoted and investing in Basel II collateral
Table no 4.4 A .ii
Position of State Bank of India in Lending (Public Sector Banks):
BANK LENDING IN Cr
State Bank Of
India
29
Syndicate Bank 26
Canara Bank 23
Corporation
Bank
25

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Fig.4.4 A. ii
In Total Lending, State Bank of India is in first place relatively in Public
Sector Banks.
4.4 A ii Credit Risk Mitigation Techniques – Guarantees
1) Where guarantees are direct, explicit, irrevocable and unconditional banks may
take account of such credit protection in calculating capital requirements.
2) A range of guarantors are recognized. As under the 1988 Accord, a substitution
approach will be applied. Thus only guarantees issued by entities with a lower
risk weight than the counterparty will lead to reduced capital charges since the
protected portion of the counterparty exposure is assigned the risk weight of the
guarantor, whereas the uncovered portion retains the risk weight of the underlying
counterparty.
3) Detailed operational requirements for guarantees eligible for being treated as a
CRM are as under: Operational requirements for guarantees:
(i) A guarantee (counter-guarantee) must represent a direct claim on the
protection provider and must be explicitly referenced to specific exposures or a
pool of exposures, so that the extent of the cover is clearly defined and
incontrovertible. The guarantee must be irrevocable; there must be no clause in

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the contract that would allow the protection provider unilaterally to cancel the
cover or that would increase the effective cost of cover as a result of deteriorating
credit quality in the guaranteed exposure.
(ii) All exposures will be risk weighted after taking into account risk mitigation
available in the form of guarantees. When a guaranteed exposure is classified as
non-performing, the guarantee will cease to be a credit risk mitigants and no
adjustment would be permissible on account of credit risk mitigation in the form
of guarantees. The entire outstanding, net of specific provision and net of
realizable value of eligible collaterals / credit risk mitigants, will attract the
appropriate risk weight
4.4 B Introduction to Credit Policy.
Bank’s investments in accounts receivable depends on: (a) the volume of
credit sales, and (b) the collection period. There is one way in which the financial
manager can affect the volume of credit sales and collection period and
consequently, investment in accounts receivables. That is through the changes in
credit policy. The term credit policy is used to refer to the combination of three
decision variables: (1) credit standards, (2) credit terms, and (3) collection efforts,
on which the financial manager has influence.
(1) Credit Standards:
Credit Standards are criteria to decide the types of customers to whom goods
could be sold on credit. If a firm has more slow-paying customers, its investment
in accounts receivable will increase. The firm will also be exposed to higher risk
of default.
(2) Credit Terms:
Credit Terms specify duration of credit and terms of payment by customers.
Investment in accounts receivables will be high if customers are allowed extended
time period for making payments.
(3) Collection Efforts: Collection efforts determine the actual collection period.
The lower the collection period, the lower the investment in accounts receivable
and higher the collection period, the higher the investment in accounts receivable.

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4.4 Objectives:
The main objectives of Bank’s Credit Policy are:
1) A balanced growth of the credit portfolio which does not compromise safety.
2) Adoption of a forward-looking and market responsive approach for moving
into profitable new areas of lending whish emerges, within the predetermined
exposure ceilings.
3) Sound risk management practices to identify measure, monitor and control
credit risks.
4) Maximize interest yields from the credit portfolio through a judicious
management of varying spreads for loan assets based upon their size, credit rating
and tenure
5) Ensure due compliance of various regulatory norms, including CAR, Income
Recognition and Asset Classification.
6) Accomplish balanced deployment of credit across various sectors and
geographical regions.
4.4 B. II Comparison Study on Credit Recovery Management
For the year 2010:
Name Of The Banks
Loans Issued Recovered Outstanding
State Bank Of India 157933.54 91601.4 66332.09
Syndicate Bank 20646.62 11562.11 9084.5
Canara Bank 47638.62 27058.74 20579.88
Corporation Bank 14889.72 7500 6389.72
HDFC Bank 17744.51 9670.75 8073.76
ICICI Bank 60757,36 34631.70 26125.66

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For the year 2011:
Name Of The Banks Loans Issued Recovered Outstanding
State Bank Of India 202374.46 120210.43 82164.03
Syndicate Bank 26729.21 15422.75 11306.46
Canara Bank 60421.40 35044.42 25376.96
Corporation Bank 18546.36 10478.70 8067.67
HDFC Bank 25566.30 14291.56 11274.74
ICICI Bank 88991.75 52327.15 36664.60
For the year 2012:
Name Of The Banks Loans Issued Recovered Outstanding
State Bank Of India 261641.54 163264.32 98377.22
Syndicate Bank 36466.24 21879.74 14386.50
Canara Bank 79425.69 48446.67 30976.02
Corporation Bank 23962.43 13898.21 10064.22
HDFC Bank 35061.26 20125.61 14936.10
ICICI Bank 143029.89 88392.47 54637.46
For the year 2013:-
Name Of The Banks Loans Issued Recovered Outstanding
State Bank Of India 337336.49 263264.32 74072.17
Syndicate Bank 51670.44 31879.74 19790.7
Canara Bank 98505.69 68449.67 30056.02
Corporation Bank 29949.65 15898.21 14051.44
HDFC Bank 46944.78 30125.16 16819.62
ICICI Bank 164484.38 98392.47 66091.91

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Comparison Study with other Public Sector Banks
S.N
o
Name of the
Bank
Direct
Agricultu
re
Advances
Indirect
Agricultu
re
Advances
Total
Agricultu
re
Advances
Weaker
Section
Advanc
es
Total
Priority
Sector
Advanc
es
Amount Amount Amount Amount Amount
1
STATE
BANK OF
INDIA
23484 7032 30516 19883 82895
2
SYNDICATE
BANK
4406.33 1464.64 5870.94 3267.71 14626.6
2
3 CANARA
BANK
8348 3684 12032 4423 30937
4 CORPORATI
ON BANK
963.58 971.22 1934.80 665.32 9043.74
4.4 B .III Findings:
• Project findings reveal that SBI is sanctioning less Credit to agriculture, as
compared with its key competitor’s viz., Canara Bank, Corporation Bank,
Syndicate Bank
•Recovery of Credit: SBI recovery of Credit during the year 2012 is 69.6% as
compared to other Banks SBI recovery policy is very good, hence this reduces
NPA
•Total Advances: As compared total advances of SBI is increased year by year.
•State Bank of India is granting credit in all sectors in an Equated Monthly
Installments so that anybody can borrow money easily
•Project findings reveal that State Bank of India is lending more credit or
sanctioning more loans as compared to other Bank.

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4.5 Credit Risk Management in Axis Bank
4.5 A. Introduction
Axis Bank was the first of the new private banks to have begun
operations in 1994, after the Government of India allowed new private banks to
be established. The Bank was promoted jointly by the Administrator of the
specified undertaking of the Unit Trust of India (UTI-I), Life Insurance
Corporation of India (LIC) and General Insurance Corporation of India (GIC) and
other four PSU insurance companies, i.e. National Insurance Company Ltd., The
New India Assurance Company Ltd., The Oriental Insurance Company Ltd. and
United India Insurance Company Ltd. The Bank today is capitalized to the extent
of Rs. 408.84 Crores with the public holding (other than promoters and GDRs) at
53.81%. The Bank has a very wide network of more than 1095 branches. The
Bank has a network of over 4846 ATMs. This is one of the largest ATM networks
in the country. The Bank has strengths in both retail and corporate banking and is
committed to adopting the best industry practices internationally in order to
achieve excellence.
4.5 B. Credit Risk Management in Axis Bank:
The wide variety of businesses undertaken by the Axis Bank requires
it to identify, measure, control, monitor and report risks effectively. The Bank's
risk management processes are guided by well-defined policies appropriate for
various risk categories, independent risk oversight and periodic monitoring
through the sub-committees of the Board of Directors. The Board sets the overall
risk appetite and philosophy for the Bank. The Committee of Directors, the Risk
Management Committee and the Audit Committee of the Board, which are sub-
committees of the Board, review various aspects of risk arising from the
businesses of the Bank. Various Senior Management Committees, Credit Risk
Management Committee (CRMC), Asset-Liability Committee (ALCO) and
Operational Risk Management Committee (ORMC) operate within the broad
policy framework as illustrated below.

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Fig.4.5 B
Risk Management Committee
The Bank has also formulated a global risk policy for overseas operations
and a country specific risk policy for its Singapore, Hong Kong and Dubai
branches. The policies were drawn based on the risk dimensions of dynamic
economies and the Bank's risk appetite.
4.5 B.I Credit Risk Management Policy
Credit risk covers the inability of a borrower or counter-party to honor
commitments under an agreement and any such failure has an adverse impact on
the financial performance of the Bank. The Bank is exposed to credit risk through
lending and capital market activities.
The Bank's credit risk management process integrates risk management into the
business management processes, while preserving the independence and integrity
of risk assessment. The goal of credit risk management during the year has been
to maintain a healthy credit portfolio by managing risk at the portfolio level as
well as at the individual transaction level. The Board of Directors establishes the
parameters for risk appetite, which is defined quantitatively and qualitatively in
accordance with the laid-down strategic business plan. The foundation of credit
risk management rests on the internal rating system.

21. 40
4.5 B .II Credit Rating System
Internal reporting and oversight of assets is principally differentiated by the credit
ratings applied.
1) The Bank has developed rating tools specific to market segments such as large
corporate, mid-corporate, SME, financial companies and microfinance companies
to objectively assess underlying risk associated with such exposures.
2) For retail and schematic SME exposures, scorecards and borrower-scoring
templates are used for application screening. Hence, for these exposures, the
credit risk is measured and managed at the portfolio level. The Bank is also trying
to use internal database of retail loans for building up statistical behavioral
scorecards as well as for refining credit assessment at the application sourcing
level.
3) The credit rating tool uses a combination of quantitative inputs and qualitative
inputs to arrive at a 'point-in-time' view of the rating of counterparty. The
monitoring tool developed by the Bank helps in objectively assessing the credit
quality of the borrower taking into cognizance the actual behavior post-
disbursement. The output of the rating model is primarily to assess the chances of
delinquency over a one-year time horizon. Each internal rating grade corresponds
to a distinct probability of default. Model
 Credit Sanction and related processes followed at Axis Bank:
The Bank has put in place the following hierarchical committee structure for
credit sanction and review:
• Zonal Office Credit Committee (ZOCC)
• Central Office Credit Committee (COCC)
• Committee of Executives (COE)
• Senior Management Committee (SMC)
• Committee of Directors (COD)

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The guiding principles behind the credit sanction process are as under:
1. Know your Customer' is a leading principle for all activities.
2. Sound credit approval process with well laid credit-granting criteria.
3. The acceptability of credit exposure is primarily based on the sustainability and
adequacy of borrower's normal business operations and not based solely on the
availability of security.
4. Portfolio level risk analytics and reporting to ensure optimal spread of risk
across various rating classes prevent undue risk concentration across any
particular industry segments and monitor credit risk quality migration.
5. Sector specific studies are periodically undertaken to highlight risk and
opportunities in those sectors.
6. Rating linked exposure norms have been adopted by the Bank.
7. Industry-wise exposure ceilings are based on the industry performance,
prospects and the competitiveness of the sector.
8. Separate risk limits are set up for credit portfolios like advances to NBFC and
unsecured loans that require special monitoring.
9. With heightened activity in the real estate sector, the Bank has strengthened its
risk management systems to ensure that its advances are to borrowers having a
good track record and satisfying the criterion of minimum acceptable credit
rating.
10. Appropriate covenants are stipulated for risk containment and monitoring.
 Policies for Hedging and Mitigating Credit Risk
Credit Risk Mitigants (CRM) like financial collateral, non-financial
collateral and guarantees are used to mitigate credit risk exposure. Availability of
CRM either reduces effective exposure on the borrower (in case of collaterals) or
transfers the risk to the more creditworthy party (in case of guarantees). A major
part of the eligible financial collaterals is in the form of cash, the most liquid of
assets and thus free from any market and liquidity risks. The Bank has formulated
a Collateral Management Policy as required under Basel II guidelines.

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4.5 B .III Credit Risk: Use of Rating Agency under the Standardized
Approach
The Bank is using issuer ratings and short-term and long-term
instrument/bank facilities' ratings which are assigned by the accredited rating
agencies viz. CRISIL, ICRA, Fitch and CARE and published in the public domain
to assign risk-weights in terms of RBI guidelines. In respect of claims on non-
resident corporates and foreign banks, ratings assigned by international rating
agencies i.e. Standard & Poor's, Moody's and Fitch is used. For exposures with
contractual maturity of less than one year, a short-term rating is used. For cash
credit facilities and exposures with contractual maturity of more than one year,
long-term rating is used.
Issue ratings would be used if the Bank has an exposure in the rated issue
and this would include fund-based and non-fund based working capital facilities
as well as loans and investments. In case the Bank does not have exposure in a
rated issue, the Bank would use the issue rating for its comparable unrated
exposures to the same borrower, provided that the Bank's exposures are senior
and of similar or lesser maturity as compared to the rated issue.
Structured Obligation (SO) ratings are not used unless the Bank has a direct
exposure in the 'SO' rated issue. If an issuer has a long-term or short-term
exposure with an external rating that warrants a risk weight of 150%, all unrated
claims on the same counterparty, whether short-term or long-term, also receive
150% risk weight, unless the Bank uses recognized credit risk mitigation
techniques for such claims. Issuer ratings provide an opinion on the general credit
worthiness of the rated entities in relation to their senior unsecured obligations.
Therefore, issuer ratings would be used to assign risk-weight to unrated exposures
provided that the unrated exposures are senior as compared to senior unsecured
obligations of the same borrower.

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4.5 C. Credit Risk Mitigation
The Bank uses various collaterals both financial as well as non-financial,
guarantees and credit insurance as credit risk mitigants. The main financial
collaterals include bank deposits, NSC/KVP/LIP, and gold, while main
non-financial collaterals include land and building, plant and machinery,
residential and commercial mortgages. The guarantees include guarantees
given by corporate, bank and personal guarantees. This also includes loan
and advances guaranteed by Export Credit & Guarantee Corporation
Limited (ECGC), Credit Guarantee Fund Trust for Small Industries
(CGTSI), Central Government and State Government.
The Bank has in place a collateral management policy, which underlines
the eligibility requirements for credit risk mitigants (CRM) for capital
computation as per Basel II guidelines. The Bank reduces its credit exposure to
counterparty with the value of eligible financial collateral to take account of the
risk mitigating effect of the collateral. To account for the volatility in the value of
collateral, haircut is applied based on the type, issuer, maturity, rating and re-
margining/revaluation frequency of the collateral. The Bank revalues various
financial collaterals at varied frequency depending on the type of collateral. The
Bank has a valuation policy that covers processes for collateral valuation and
empanelment of valuers.
TABLE NO.4.5 C
Using CAR Model:
CAR as per BASEL II
Year Capital
(Cr)
Risk Weighted Assets (Cr) CAR (%)
2008 3013.15 23799.52 12.66
2009 4278.26 38598.25 11.08

25. 44
2010 6554.5 56643.37 11.57
2011* 11890.89 84990.65 13.99
2012 15027.64 109787.49 13.69
2013 22307.89 141169.77 15.80
*Shows the year from which BASEL II was followed before it BASEL I was
followed by the bank.
The Capital Adequacy Ratio of the Bank over the years is above than the BASEL
II requirement and hence the bank has a sound credit risk management as per the
CAR approach.
Z' Score Bankruptcy Model: Applying Z Score Bankruptcy model on Axis
Bank, we tried to find out its “Zone” of operation. We used this model
considering us as a lender and Axis Bank as a borrower and hence we have to take
decision whether to lend to Axis Bank or not i.e. assess the Axis Bank’s credit
worthiness using Z-Score Bankruptcy model.
Formula for Z' Score for non-manufacturing company is
Z' = 6.56T1 + 3.26T2 + 6.72T3 + 1.05T4
Where T1 = (Current Assets-Current Liabilities) / Total Assets
T2 = Retained Earnings / Total Assets
T3 = Earnings Before Interest and Taxes / Total Assets
T4 = Book Value of Equity / Total Liabilities.

26. 45
From Financial statements (Year 2012-2013) of Axis Bank, we calculated Ti
where i= {1, 4}.
Current Assets 179425.44
Current Liabilities 141300.22
Total Assets 180647.87
Retained Earnings 5784.69
EBIT 11874.1
Book Value of Equity 16044.61
T1 0.211
T2 0.032
T3 0.066
T4 0.089
Therefore, Z Score for a non-manufacturing firm can be given as
Z' Score 6.56T1 + 3.26T2 + 6.72T3 +
1.05T4
hence , Z' Score 2.024
Zones of Discrimination:
Z > 2.6 -“Safe” Zone
1.1 < Z < 2. 6 -“Grey” Zone
Z < 1.1 -“Distress” Zone

27. 46
As the Z’ Score for Axis Bank is 2.02 and hence the bank is in Grey Zone. The
year 2012-2013 being a year having a lot of financial stress in the economy, still
the bank has managed to be in the Grey Zone. With improve in the situation of the
financial market and economy as a whole; we can believe that bank will come in
the safe zone.
4.5 D. Conclusion:
The Axis Bank has a well-defined Credit Risk Management policies
and a well-structured organization hierarchy. It uses both the Internal Rating
Based (IRB) as well as External Rating Approach for assessing the
creditworthiness for different categories of its borrowers. The bank has also set
exposures ceilings on different categories of borrowers thereby limiting the
concentration risk. The Axis Bank also has a well-defined collateral management
policy for the credit risk management and to account for volatility in the collateral
an appropriate hair-cut is applied. From the quantitative findings we can conclude
that an ENPA of 292.2 % for the year 2012-13; the Axis Bank has a sound NPA
management. Moreover, from CAR model finding we can infer that Axis Bank
has an adequate Capital as per BASEL II norm which provides sufficient cushion
to the bank.
4.6 Credit Risk Management in HDFC Bank
4.6 A Introduction
The HDFC Bank was incorporated on August 1994 by the name of
'HDFC Bank Limited', with its registered office in Mumbai, India. HDFC Bank
commenced operations as a Scheduled Commercial Bank in January 1995. The
Housing Development Finance Corporation (HDFC) was amongst the first to
receive an 'in principle' approval from the Reserve Bank of India (RBI) to set up a
bank in the private sector, as part of the RBI's liberalization of the Indian Banking
Industry in 1994.HDFC Bank is headquartered in Mumbai. The Bank at present
has an enviable network of over 1416 branches spread over 550 cities across
India. All branches are linked on an online real–time basis. Customers in over 500

28. 47
locations are also serviced through Telephone Banking. The Bank also has a
network of about over 3382 networked ATMs across these cities. The promoter of
the company HDFC was incepted in 1977 is India's premier housing finance
company and enjoys an impeccable track record in India as well as in
international markets. HDFC has developed significant expertise in retail
mortgage loans to different market segments and also has a large corporate client
base for its housing related credit facilities. With its experience in the financial
markets, a strong market reputation, large shareholder base and unique consumer
franchise, HDFC was ideally positioned to promote a bank in the Indian
environment.
The shares are listed on the Bombay Stock Exchange Limited and the
National Stock Exchange of India Limited. The Bank's American Depository
Shares (ADS) are listed on the New York Stock Exchange (NYSE) under the
symbol 'HDB' and the Bank's Global Depository Receipts (GDRs) are listed on
Luxembourg Stock Exchange. On May 23, 2008, the amalgamation of Centurion
Bank of Punjab with HDFC Bank was formally approved by Reserve Bank of
India to complete the statutory and regulatory approval process. As per the
scheme of amalgamation, shareholders of CBoP received 1 share of HDFC Bank
for every 29 shares of CBoP. The merged entity now holds a strong deposit base
of around Rs. 1, 22,000 crore and net advances of around Rs. 89,000 crore. The
balance sheet size of the combined entity would be over Rs. 1, 63,000 crore. The
amalgamation added significant value to HDFC Bank in terms of increased
branch network, geographic reach, and customer base, and a bigger pool of skilled
manpower.
In a milestone transaction in the Indian banking industry, Times Bank
Limited (another new private sector bank promoted by Bennett, Coleman & Co. /
Times Group) was merged with HDFC Bank Ltd., effective February 26, 2000.
This was the first merger of two private banks in the New Generation Private
Sector Banks. As per the scheme of amalgamation approved by the shareholders
of both banks and the Reserve Bank of India, shareholders of Times Bank

29. 48
received 1 share of HDFC Bank for every 5.75 shares of Times Bank. HDFC
Bank offers a wide range of commercial and transactional banking services and
treasury products to wholesale and retail customers.
 The Bank has three key Business Segments
Wholesale Banking Services – The Bank's target market ranges from large, blue–
chip manufacturing companies in the Indian corporate to small & mid–sized
corporates and agri-based businesses.
Retail Banking Services – The objective of the Retail Bank is to provide its target
market customers a full range of financial products and banking services, giving
the customer a one–stop window for all his/her banking requirements.
Treasury – Within this business, the bank has three main product areas – Foreign
Exchange and Derivatives, Local Currency Money Market & Debt Securities, and
Equities. The Treasury business is responsible for managing the returns and
market risk on this investment portfolio.
HDFC Securities (HSL) and HDB Financial Services (HDBFSL) are its
subsidiaries.
4.6 B .Credit Risk Management in HDFC Bank Ltd.
Credit risk is defined as the possibility of losses associated with
diminution in the credit quality of borrowers or counterparties. In a bank’s
portfolio, losses stem from outright default due to inability or unwillingness of a
customer or counterparty to meet commitments in relation to lending, trading,
settlement and other financial transactions.
4.6 B. I Architecture
The Bank has comprehensive credit risk management architecture. The
Board of Directors of the Bank endorses the credit risk strategy and approves the
credit risk policies of the Bank. This is done taking into consideration the Bank’s
risk appetite, derived from perceived risks in the business, balanced by the

30. 49
targeted profitability level for the risks taken up. The Board oversees the credit
risk management functions of the Bank. The Risk Policy & Monitoring
Committee (RPMC), which is a committee of the Board, guides the development
of policies, procedures and systems for managing credit risk, towards
implementing the credit risk strategy of the Bank, including the periodic review of
the Bank’s portfolio composition and the status of impaired assets.
The RPMC ensures that these are adequate and appropriate to
changing business conditions, the structure and needs of the Bank and the risk
appetite of the Bank. The Bank’s Credit & Market Risk Group drives credit risk
management centrally in the Bank. It is primarily responsible for implementing
the risk strategy approved by the Board, developing procedures and systems for
managing risk, carrying out an independent assessment of credit and market risk,
approving individual credit exposures and monitoring portfolio composition and
quality. Within the Credit & Market Risk group and independent of the credit
approval process, there is a framework for review and approval of credit ratings.
With regard to the Wholesale Banking business, the Bank’s risk management
functions are centralized. In respect of the Bank’s Retail Assets business, while
the various functions relating to policy, portfolio management and analytics are
centralized, the underwriting function is distributed across various geographies
within the country. The risk management function in the Bank is clearly
demarcated and independent from the operations and business units of the Bank.
The risk management function is not assigned any business targets.
4.6 B II .Credit Process
The Bank expects to achieve its earnings objectives and to satisfy its
customers’ needs while maintaining a sound portfolio. Credit exposures are
managed through target market identification; appropriate credit approval
processes, post-disbursement monitoring and remedial management proceed.
There are two different credit management models within which the credit
process operates - the Retail Credit Model and the Wholesale Credit Model. The
Retail Credit Model is geared towards high volume, small transaction sized

31. 50
businesses wherein credit appraisals of fresh exposures are guided by statistical
models and are managed on the basis of aggregate product portfolios. The
Wholesale Credit Model on the other hand, is relevant to lower volume, larger
transaction size, customized products and relies on a judgmental process for the
origination, approval and maintenance of credit exposures. The credit models
have two alternatives for managing the credit process – Product Programs and
Credit Transactions. In Product Programs, the Bank approves maximum levels of
credit exposure to a set of customers with similar characteristics, profiles and / or
product needs, under clearly defined standard terms and conditions. Given the
high volume environment, the automated tracking and reporting mechanisms are
important to identify trends in portfolio behavior early and to initiate timely
adjustments. The approval process in such cases is based on detailed analysis and
the individual judgment of credit officials, often involving complex products or
risks, multiple facilities / structures and types of securities.
TABLE NO.4.6 B II
Credit Exposures
Exposure
distribution
Fund
Based
Dec 31,
2013
Amounts in (Rs.)
crore
Non-fund
Based
Total
Domestic 305,694.55 43 43,749.50 349,444.05
Overseas 24,795.92 3,326.34 28,122.26
* Fund based exposures comprise investments and loans & advances including
bills re-discounted.
** Non-fund based exposures comprise guarantees, acceptances, endorsements
and letters of credit.

32. 51
4.6 B III.Credit Risk: Portfolios subject to the Standardised Approach
Standardised Approach The Bank has used the Standardised Approach for the
entire credit portfolio. For exposure amounts after risk mitigation subject to the
standardized approach (including exposures under bills re-discounting
transactions, if any), the Bank’s outstanding (rated and unrated) in three major
risk buckets as well as those that are deducted, are as follows:
Table no .4.6 B III
Credit Risk Weightage under Standardized Approach
Particulars Dec 31, 2013
Below 100% risk weight
100% risk weight
More than 100% risk weight
Deducted
TOTAL
130,403.72
153,416.07
93,746.52
-aaaa
TOTAL 377,566.31
Treatment of Undrawn Exposures
As required by the regulatory norms, the Bank holds capital even for the
undrawn portion of credit facilities which are not unconditionally cancellable by
the Bank, by converting such exposures into a credit exposure equivalent based
on the applicable Credit Conversion Factor. For unconditionally cancellable credit
facilities the Bank applies a CCF of zero percent.

33. 52
4.6 B IV. Credit Rating Agencies
The Bank is using the ratings assigned by the following domestic external credit
rating agencies, approved by the RBI, for risk weighting claims on domestic
entities:
Limited (earlier known as Fitch India)
The Bank is using the ratings assigned by the following international credit rating
agencies, approved by the RBI, for risk weighting claims on overseas entities:
dard & Poor’s
4.7 A. Credit Risk Management as per RBI
•Measurement of risk through credit scoring.
•Quantifying risk through estimating loan losses.
•Risk pricing – Prime lending rate which also accounts for risk.
•Risk control through effective Loan Review Mechanism and Portfolio
Management.
4.7 A.I. RBI guidelines on Credit Exposure and Management
•Bank cannot grant loans against security of its own shares
•Prohibition on remission of debts for Urban Cooperative Banks (UCBs) without
prior approval of RBI.

34. 53
•Restrictions on loans and advances to Directors and their relatives
•Ceiling on advances to Nominal Members – With deposits up to 50 crore
(50,000/- per borrower) and 1, 00,000/- for above 50 crore.
4.7 A.II RBI guidelines on Credit Exposure and Management
1) Prohibition on Urban Cooperative Banks (UCBs) for bridge loans including
that against capital / debenture issues.
2) Loans and advances against shares, debentures
UCBs are prohibited to extend any facilities to stock brokers
Margin of 40 per cent to be maintained on all such advances
3) Restriction on advances to real estate sector
Genuine construction and not for speculative purposes.
4.8 Basel Committee Norms on Risk Management
4.8 A Introduction to Basel Committee
The Basel Committee is the primary global standard-setter for the
prudential regulation of banks and provides a forum for cooperation on banking
supervisory matters. Its mandate is to strengthen the regulation, supervision and
practices of banks worldwide with the purpose of enhancing FINANCIAL
stability. Mr. Stefan Ingves, Governor of Sveriges Riksbank, is the chairman of
the Basel Committee. He was appointed as Basel Committee chairman in July
2011 and has been reappointed until June 2017. The Committee reports to the
Group of Governors and Heads of Supervision (GHOS). The Committee seeks the
endorsement of GHOS for its major decisions and its work programme.
The Committee's Secretariat is located at the Bank for International
Settlements in Basel, Switzerland, and is staffed mainly by professional
supervisors on temporary secondment from member institutions. In addition to

35. 54
undertaking the secretarial work for the Committee and its many expert sub-
committees, it stands ready to give advice to supervisory authorities in all
countries. Mr. William Coen is the Secretary General of the Basel Committee.
4.8 B. Principles for the Assessment of Banks’ Management of Credit Risk
a) Establishing an appropriate Credit Risk Environment
Principle 1: The board of directors should have responsibility for approving and
periodically (at least annually) reviewing the credit risk strategy and significant
credit risk policies of the bank. The strategy should reflect the bank’s tolerance
for risk and the level of profitability the bank expects to achieve for incurring
various credit risks.
Principle 2: Senior management should have responsibility for implementing the
credit risk strategy approved by the board of directors and for developing policies
and procedures for identifying, measuring, monitoring and controlling credit risk.
Such policies and procedures should address credit risk in all of the bank’s
activities and at both the individual credit and portfolio levels.
Principle 3: Banks should identify and manage credit risk inherent in all products
and activities. Banks should ensure that the risks of products and activities new to
them are subject to adequate risk management procedures and controls before
being introduced or undertaken, and approved in advance by the board of
directors or its appropriate committee.
b. Operating under a sound Credit Granting Process
Principle 4: Banks must operate within sound, well-defined credit-granting
criteria. These criteria should include a clear indication of the bank’s target
market and a thorough understanding of the borrower or counterparty, as well as
the purpose and structure of the credit, and its source of repayment.
Principle 5: Banks should establish overall credit limits at the level of individual
borrowers and counterparties, and groups of connected counterparties that

36. 55
aggregate in a comparable and meaningful manner different types of exposures,
both in the banking and trading book and on and off the balance sheet.
Principle 6: Banks should have a clearly-established process in place for
approving new credits as well as the amendment, renewal and re-financing of
existing credits.
Principle 7: All extensions of credit must be made on an arm’s-length basis. In
particular, credits to related companies and individuals must be authorized on an
exception basis, monitored with particular care and other appropriate steps taken
to control or mitigate the risks of non-arm’s length lending.
c. Maintaining an appropriate Credit Administration, Measurement and
Monitoring Process
Principle 8: Banks should have in place a system for the ongoing administration
of their various credit risk-bearing portfolios.
Principle 9: Banks must have in place a system for monitoring the condition of
individual credits, including determining the adequacy of provisions and reserves.
Principle 10: Banks are encouraged to develop and utilize an internal risk rating
system in managing credit risk. The rating system should be consistent with the
nature, size and complexity of a bank’s activities.
Principle 11: Banks must have information systems and analytical techniques that
enable management to measure the credit risk inherent in all on- and off-balance
sheet activities. The management information system should provide adequate
information on the composition of the credit portfolio, including identification of
any concentrations of risk.
Principle 12: Banks must have in place a system for monitoring the overall
composition and quality of the credit portfolio.

37. 56
Principle 13: Banks should take into consideration potential future changes in
economic conditions when assessing individual credits and their credit portfolios,
and should assess their credit risk exposures under stressful conditions.
d. Ensuring adequate controls over Credit Risk
Principle 14: Banks must establish a system of independent, ongoing assessment
of the bank’s credit risk management processes and the results of such reviews
should be communicated directly to the board of directors and senior
management.
Principle 15: Banks must ensure that the credit-granting function is being
properly managed and that credit exposures are within levels consistent with
prudential standards and internal limits. Banks should establish and enforce
internal controls and other practices to ensure that exceptions to policies,
procedures and limits are reported in a timely manner to the appropriate level of
management for action.
Principle 16: Banks must have a system in place for early remedial action on
deteriorating credits, managing problem credits and similar workout situations.
e. The role of Supervisors
Principle 17: Supervisors should require that banks have an effective system in
place to identify measure, monitor and control credit risk as part of an overall
approach to risk management. Supervisors should conduct an independent
evaluation of a bank’s strategies, policies, procedures and practices related to the
granting of credit and the ongoing management of the portfolio. Supervisors
should consider setting prudential limits to restrict bank exposures to single
borrowers or groups of connected counterparties.

38. 57
CHAPTER: 5
FINDINGS OF THE STUDY
5.1 Credit Risk Management at SBI
1) Project findings reveal that SBI is sanctioning less Credit to agriculture, as
compared with its key competitor’s viz., Canara Bank, Corporation Bank,
Syndicate Bank
2) Recovery of Credit: SBI recovery of Credit during the year 2010 is 62.4%
compared to other banks SBI‘s recovery policy is very good, hence this reduces
NPA
3) Total Advances: As compared total advances of SBI is increased year by year.
4) State Bank of India is granting credit in all sectors in an Equated Monthly
Installments so that anybody can borrow money easily.
5) Project findings reveal that State Bank of India is lending more credit or
sanctioning more loans as compared to other Banks.
For Canara Bank
1. The proposed standardized Basel 2 to approach does not fit the needs of smaller
banking organization engaged primarily traditional banking.
2. The neither current nor proposed capital frameworks yet address what is
perhaps the most critical risk factor for the smaller banks - geographic and
sectoral concentrations of credit risk.
3. Internal ratting based approach provides positive incentives to banks in
improving their credit risk management techniques.
4. Banks may have discretion and flexibility in defining the exposure classes that
which corporate, project finance, etc.

39. 58
5. Unless suitably modified the adoption of the new accord in its present format
would result in significant increase in the capital charge for bank.
6. Additional cost of capital will increase to the bank and bank may go for capital
market to raise the found.
7. Bank as well documented schemes delegation powers for credit sanction.
For Axis Bank
1) There are certain principles for credit sanction:
a) Know your Customer‟ is a leading principle for all activities.
b) The acceptability of credit exposure is primarily based on the sustainability
and adequacy of borrower’s normal business operations and not based solely on
the availability of security.
2) The Bank has put in place the following hierarchical committee structure for
credit sanction and review
3) All credit exposures, once approved, are monitored and reviewed periodically
against the approved limits. Borrowers with lower credit rating are subject to
more frequent reviews
4) Customers with emerging credit problems are identified early and classified
accordingly. Remedial action is initiated promptly to minimize the potential loss
to the Bank.
For HDFC Bank
1) Bank uses various approaches & models to mitigate the risk.
2) The Bank is using the ratings assigned by the following domestic external
credit rating agencies, approved by the RBI.

40. 59
CHAPTER: 6
CONCLUSION
The project undertaken has helped a lot in gaining knowledge of the “Credit
Policy and Credit Risk Management” in Public Sector & Private Sector Banks
Credit Policy and Credit Risk Policy of the Banks has become very vital in the
smooth operation of the banking activities. Credit Policy of the Bank provides the
framework to determine (a) whether or not to extend credit to a customer and (b)
how much credit to extend. The Project work has certainly enriched the
knowledge about the effective management of “Credit Policy” and “Credit Risk
Management” in Banking Sector.
•“Credit Policy” and “Credit Risk Management” is a vast subject and it is very
difficult to cover all the aspects within a short period. However, every effort has
been made to cover most of the important aspects, which have a direct bearing on
improving the financial performance of Banking Industry
•The concerted efforts put in by the Management and Staff of all the Banks has
helped the Bank in achieving remarkable progress in almost all the important
parameters. The Banks are marching ahead in the direction of achieving the
Number-1 position in the Banking Industry.
Overall Conclusion:
Canara Bank:
Internal Rating based approach provides positive incentives to
Banks in improving their Credit Risk Management Techniques. Banks may have
discretion and flexibility in defining the exposure classes that which Corporate,
Project Finance, etc. Unless suitably modified the adoption of the new accord in
its present format would result in significant increase in the capital charge for
bank.

41. 60
State Bank of India
SBI is sanctioning less Credit to agriculture, as compared with its key
competitor’s viz., Canara Bank, Corporation Bank, Syndicate Bank, Bank of
India. Total Advances: As compared total advances of SBI is increased year by
year. State Bank of India is granting credit in all sectors in an Equated Monthly
Installments so that anybody can borrow money easily.
Axis Bank
The Axis Bank has a well-defined Credit Risk Management policies
and a well-structured organization hierarchy. It uses both the Internal Rating
Based (IRB) as well as External Rating Approach for assessing the
creditworthiness for different categories of its borrowers. Axis Bank has a sound
NPA management. Moreover, from CAR model finding we can infer that Axis
Bank has an adequate Capital as per BASEL II norm which provides sufficient
cushion to the bank.
HDFC Bank
The Risk Policy & Monitoring Committee (RPMC), which is a
committee of the Board, guides the development of policies, procedures and
systems for managing credit risk. In respect of the Bank’s Retail Assets business,
while the various functions relating to policy, portfolio management and analytics
are centralized, the underwriting function is distributed across various
geographies within the country. The Risk Management function in the Bank is
clearly demarcated and independent from the operations and business units of the
Bank.

42. 61
REFERENCES
A) Internet
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vii. www.canbankindia.com.
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