Presentation of my project on "CREDIT APPRAISAL SYSTEM FOR SME SECTOR IN UCO BANK"

1. “CREDIT APPRAISAL
SYSTEM FOR SME
SECTOR”
BY – RISHAV SARKAR

2. Banking
Industry in India
a) STRENGTHS
1. Greater securities of
Funds
2. Banking network
3. Large Customer Base
4. Low Cost of Capital
b) WEAKNESS
1.Basel Committee
2. Powerful Unions
3. Priority Sector Lending
4. High Non-Performing
Assets
c) OPPORTUNITIES
1. Universal Banking
2. Differential Interest
Rates
3. High Household Savings
4. Untapped Foreign
Markets
5. Internet Banking
d) THREATS
1. NBFCs, Capital Markets
and Mutual funds
2. Changes in the
Government Policy
3. Inflation
4. Recession
Facts :
Regulatory Board – RBI
Largest market share –
State Bank of India
Booming Sector – Retail
Banking

3. RBI
Development
Financial
institutions
IFCI SIDBI NABARD IRBI NHB EXIM Bank ICICI IDBI
Banks
Commercial
Banks
private Sector
Banks
Nationalized
Banks
SBI Groups
Public Sector
Banks
Foreign BanksIndian Banks
Land
Development
Banks
Cooperative
Banks
Rural Banks
CLASSIFICATION OF BANKING INDUSTRY IN INDIA

4. CREDIT
APPRAISAL
Character
(integrity/
willingness)
Capacity
(ability/
financial
soundness)
Collateral
(backing/
fall back/
security)
Capital
(strength/funds
availability)
Conditions
(environment/
framework)“an investigation/assessment
done by the banks before
providing any Loans &
advances/project finance &
also checks the commercial,
financial & technical
viability of the project
proposed its funding pattern
& further checks the primary
& collateral security cover
available for recovery of
such funds”
5C’s

5. Receipt of application from applicant
Receipt of documents
(Balance sheet, KYC papers, Different govt. registration no.)
Pre-sanction visit by bank officers
Check for RBI defaulters list, willful defaulters list, CIBIL
data, ECGC,
Title clearance reports of the properties to be obtained
Valuation reports of properties to be obtained from
empanelled valuer
Preparation of financial data
Proposal preparation
Assessment of proposal
Sanction/approval of proposal by appropriate sanctioning
authority
Documentations, agreements, mortgages
Disbursement of Loan
Post sanction activities such as receiving stock statements, review of
accounts, renew of accounts, etc. (On regular basis)
CREDIT
APPRAISAL
PROCESS

6. Company Profile
Industry Banking, Financial services
Founded 6 January 1943
Headquarters Kolkata, West Bengal, India
Area served Worldwide
Key people Arun Kaul(Chairman and Managing Director)
Products Consumer banking, corporate banking, finance and
insurance, investment banking, mortgage loans, private banking,
wealth management

7. SME PRODUCTS OFFERED BY UCO
Laghu
Udyami
Credit Card
Artisan
Credit Card
Prime
Minister
Employment
Generation
Programme
(PMEGP)
Swarozgar
Credit Card
Scheme
UCO Mahila
Pragati
Dhara
Scheme for
financing
Handloom
Weavers
Group
(HWG)
Scheme for
providing
finance to
the Rice
Shellers
UCO
Commercial
Vehicle
UCO Trader
UCO Udyog
Mitra
UCO Doctor

8. OBJECTIVE OF
THE STUDY
To study the basic fundamentals of banking industry.
To study entire loan system for SME sector in India
To study credit appraisal methods.
To understand the commercial, financial and technical
viability of the proposed proposal and its funding pattern.
To know on what criteria the bank appraise the loan to the
business.
To understand the different financial tools required for
credit appraisal
“statements
describing what the
project is trying to
achieve & the effect
or change that the
project is supposed
to cause.”

9. RESEARCH
METHODOLOGY
PROBLEM
STATEMENT
• To study the
Credit
Appraisal
System in
SME sector
at UCO Bank.
• To
understand
on what
criteria, the
bank
approves a
loan
RESEARCH
DESIGN
• The research
is analytical
in nature
DATA
COLLECTION
• Secondary
Data
SAMPLE
• Case study
SAMPLING
METHOD
• Convenient
Sampling
SAMPLE SIZE
• Case Studies
(2)
“procedure for
collecting data
to be analyzed”

10. FINANCIAL TOOLS
ON WHICH DATA
ANALYSIS IS
CONDUCTED
CAPITAL
BUDGETING
TECHNIQUES
Internal
rate of
return.
Profitability
index
Net
present
value
Average
rate of
return
Payback
period
method
RATIO
ANALYSIS
Net profit
ratio
Operating
profit ratio
Gross
profit ratio
Debt
equity
ratio
Proprietary
ratio
Quick ratio Current
ratio
WORKING
CAPITAL
ANALYSIS.
Working
Capital
Assessment.
RISK
ANALYSIS
Promoters
risk
Operational
risk
Market risk
OTHER
PARAMETERS
Sales
Net
Operating
Cash Flow
TOL / TNW
Net Profit
margin
“techniques
used to
decipher
information”

11. FINDINGS
CASE STUDY – 1
The financial tools shows a positive sign on
the financial position of the company and the
company is expected to continue the same in
the future. Hence it is suggested to accept the
Proposal
CASE STUDY – 2
The overall projected performance and
financial position of the unit are satisfactory
and the project can be accepted

12. SUGGESTIONS AND
RECOMMENDATIONS
ADOPTING 4C APPROACH
IMPROVING RATING MECHANISMS
IMPROVING PERSONNEL SKILLS
DEVELOPING RELATIONSHIPS
DATA AUTHENTICATION
CUSTOMIZING PRODUCTS INNOVATING DELIVERY PLATFORMS
REVISING CREDIT POLICY PERIODICALLY
MODERATE RATE OF INTEREST
SPECIAL MEASURES FOR AGRICULTURAL SECTOR

13. CONCLUSIONS
Usually, it is seen that credit appraisal is basically
done on the basis of fundamental soundness. But,
after different types of case studies, it can be
concluded that credit appraisal system is not only
looking for financial wealth. Other strong parameters
also play an important role in analyzing credit
worthiness of the firm/company.
In all, the viability of the project from every aspect is
analyzed, as well as type of business, industry,
promoters, past records, experience, projected data
and estimates, goals, long term plans also plays
crucial role in increasing chances of getting project
approved for loan.
Credit Appraisal should be
based upon
 Financial performance
 Business performance
 Industry outlook
 Quality of management
 Conduct of account