Executive summary

The last decade has seen many positive developments in the Indian banking sector. The
policy makers, which comprise the Reserve Bank Of India (RBI). Ministry of finance and
related government and financial sector regulatory entities, have made several notable
efforts to improve regulations in the sector. The sector now compares favourably with
banking sectors in the region of metries like growth, profitability and non performing
assets (NPAs). A few banks have established an outstanding track record of innovations,
growth and value creation. This is reflected in their market valuation. However improved
regulations, innovations growth and value creation in the sector remain limited to a small
part of it. The cost of banking intermedation in India is higher and bank penetration is far
lower than in other markets. Indians banking industry must strengthen itself significantly
if it has to support the modern and vibrant economy which Indian aspires to be. While the
onces for this change lies mainly with bank management can enabling policy and
regulatory framework will also be critical to their success.
The study involves the different types of services offered b banks for corporate.

The

essence of banking business is the function of accepting deposits from public with the
facility of withdrawal of money by cheque. Besides from the usual services, banks now
have started giving additional services right from working capital needs to investment
banking.Working capital is the core area of banking industry today.
This project contains both primary and secondary data

1.INTRODUCTON

Corporate banking represents the wide range of banking and financial services provided
to domestic and international operations of large local corporate and local operations of
multinational corporations. Services include access to commercial banking products,
including working capital facilities such as domestic and international trade operations
and funding channel financing in foreign and overdrafts as well as domestic and
international payments, INR term loans (including external commercial borrowings in
foreign currency), letters of guarantee etc
Corporate banking services are an integral part of the corporate investment, Banking and
markets (CIBM)

structure, which focuses on offering a full range of services to

multinational, large domestic corporate and institutional clients. The investments banking
and markets division brings together the advisory and financing, equity securities, asset
management, treasury and capital markets, and private equity activities of the group to
the complete the CIBM structure and provide a complete range of financial products to
the clients.
Clients are serviced by sector based clients services teams that combine the relationship
managers, product specialists and industry specialists to develop customized financial
solutions. These form the relationship team along with the Investments banking and
advisory division. Each team supports the clients worldwide operations, ensuring a full
understanding of the companys business and financial needs.

1.1OBJECTIVES

To understand the conceptual framework of corporate banking

To understand the several areas under corporate banking.

To learn about the lending procedure of the banks to the corporate.

To find out the various products and services offered by banks.

To understand the future growth prospectus in corporate banking

1.2Research Methodology:

1. Primary data collected through Questionnaire filled by both bank and corporate.

2. Secondary data collected from books and websites.

2. PROFILE OF FEDERAL BANK

Though initially it was known as the Travancore Federal Bank, it gradually transformed
into a full-fledged bank under the able leadership of its Founder, Mr. K P Hormis. The
name Federal Bank Limited was officially announced in the year 1947 with its
headquarters nestled on the banks on the river Periyar..

2.1Vision:
Become the dominant numero uno bank in Kerala and a leading player in target
markets.
Be the trusted partner of choice for target (SME, Retail, NRI) customers.
Be a customer-centric organization setting the benchmarks for service.
Offer innovative yet simple products supported by the state-of-the art technology.
Have a dynamic and energized workforce with a strong sense of belonging.
Deliver top tier financial performance and superior value to stakeholders.
Be a role model for corporate governance and social responsibility

2.2Mission
Devote balanced attention to the interests and expectations of stakeholders, and in
particular:
Shareholders: Achieve a consistent annual post-tax return of at least 20% on net worth.
Employees: Develop in every employee a high degree of pride and loyalty in serving the
Bank.
Customers: Meet and even exceed expectations of target customers by delivering
appropriate products and services, employing, as far as feasible, the single-window and
24-hour-seven-day-week concepts, leveraging strengthened branch infrastructure, ATMs,
and other alternative distribution channels, cross-selling a range of products and services
to meet customer needs varying over time, and ensuring the highest standards of service
at all times.
Develop, adopt, and review a well-conceived business plan for achieving realistic targets
of growth, profitability, and market share over the medium term.
Operate within a well-defined, diversified, risk profile and adopt prudent riskmanagement norms and processes and effective control practices.
Employ and leverage appropriate modern information technology to: enhance the quality,
speed, and accuracy of product/service delivery; provide anytime-anywhere banking
facility; strengthen management information and control systems and processes; improve
productivity; and reduce costs.
Increase awareness of the "Federal Bank" brand among targeted customer groups through
cost-effective marketing.

Adopt a robust corporate governance code emphasizing a high degree of professionalism

of the Board and the management, and accountability and disclosure to shareholders.
Decentralize decision making with accountability for decisions made, and assign
cascading profit responsibilities to middle and junior management.Develop a conducive
and transparent work environment that fosters staff commitment, competence, initiative,
innovation, teamwork and service-orientation.
Future:
We are the fourth largest bank in India in terms of capital base and can easily boast of a
Capital Adequacy Ratio of 17.23 %, one of the highest in the industry. This along with
the existence in a highly regulated environment has helped the bank to tide over the
recession with minimum impact to its financial stability.
In fact we have been expanding organically over the past few months. We believe in
extending our reach to our customers by making our services available to all, 24x7. We
have Branches and ATMs across India in addition to the Representative Office at Abu
Dhabi that serves as a nerve centre for the NRI customers in UAE.
We are transforming ourselves, keeping our principles in tact, into an organisation that
offers service beyond par.Being in the service industry we are conscious of our
surroundings and what happens in the society.
Our Large Corporate team offers customized structured products to meet the specialized
requirements of corporates, institutions and business clients. Each member of our
Corporate Finance team brings with him a wealth of transaction experience across
transaction varieties and sectors to cater to you better. We have emerged as one of the
leading private sector banks in the country, in providing a gamut of products for industry,
trade and infrastructure sectors. We serve a wide range of customers across varying
industries, segments and regions.

2.3Products and Services

Term Loans
We can structure credit solutions to meet your specific short-term or long term funding
requirements. We provide structured term financing solutions for infrastructure, project
funding, real estate and other corporate purposes. The loans are provided at competitive
rates and are structured to enhance your profitability by scheduling the repayment to
match the cash flow available to repay the debt.
Corporate Loans
For a variety of business related purposes to corporates
Working capital finance
We offer working capital finance by way of cash credit, overdraft or working capital
loans suitably structured to your needs and your risk profile as a part of consortium or as
a sole banker. These products are designed to ease the liquidity position of the client.

Bill Finance
Trade finance by discounting bills
Export\ import finance
Pre and post shipment finance, forward covers, buyers credit and finance in foreign
currency.
Letter of Credit
We provide for opening inland and import letter of credit facility to facilitate procurement
of inventory and capital goods.
Bank Guarantees
We offer to issue various types of guarantees - performance, financial, bid bond etc. Our
guarantees are well accepted by government agencies, Capital Market Agencies and all
major corporate

10

2.4 Various facets of banking.

Adopt best industry practices.

Develop, adopt, and review a well-conceived business plan for achieving realistic
targets of growth, profitability, and market share over the medium term.

Operate within a well-defined, diversified, risk profile and adopt prudent riskmanagement norms and processes and effective control practices.

Employ and leverage appropriate modern information technology to: enhance the
quality, speed, and accuracy of product/service delivery; provide anytimeanywhere banking facility; strengthen management information and control
systems and processes; improve productivity; and reduce costs.

Increase awareness of the "Federal Bank" brand among targeted customer groups
through cost-effective marketing.

Adopt a robust corporate governance code emphasizing a high degree of

professionalism of the Board and the management, and accountability and
disclosure to shareholders.

Decentralise decision making with accountability for decisions made, and assign
cascading profit responsibilities to middle and junior management.

Develop a conducive and transparent work environment that fosters staff

commitment, competence, initiative, innovation, teamwork and serviceorientation.

11

3.1 Corporate Banking operations:

The bank mostly lend against appropriate tangible securities such as deposits, shares,
debentures, proprety,guarantees, supported by tangible securities, life policies, goods,
gold or other precious metal. The bank may also lend against intangible securities such as
unsupported guarantees or assignment of sums due to the borrower by the third parties. It
is essential that the bank follows the proper procedures in order to obtain good title when
taking a security. There is a difference between possession and ownership. The various
forms of documents used for obtaining different types of securities are also important.
Inadequate documentation may well cause the losses to the bank and is particularly time
for the Trade Financing documentation and the securities agreement relating to goods.
Documents are primary evidence. If any laccina is found in documentation, this will
jeopondize the interest of the bank and may even adversely affect the right of recovery of
the documents executed properly and correctly. Further, the documents should be
stamped, wherever required.
The bank must also follow proper procedures to realise securities otherwise losses may
be incurred. The corporate operations divisions are normally responsible for maintaining
securities otherwise losses may be incurred. The corporate operations divisions are
normally responsible for maintaining securities documentation and updating the
customers mandates with fresh account documentation account statements, financial
statements and relationship reviews. Handling and treatment of delinquent accounts is
also an important area of operations. Grading of bad and doubtful debts for an effective
delinquency policy is essential to avoid unnecessary financial losses.

12

3.2CHANGING FACTS OF CORPORATE BANKING

STRATEGY:
As a result of the advent of the internet banks and other financial instutions are rethinking
their corporate banking strategy. The internet opens a new channel for delivering services
to corporate clients and helps these institutions remove cumbersane and expensive paper
process. It is significantly cheaper and much more flexible.
With the internet, large multinational companies that always used EDI(Electronic Data
Interchange) can save more money by eliminating the old systems, expensive private
networks and expand reach to include more business on the supply chain. Small to
medium size companies, too, can conduct business to business transactions. The internet
simply provides a two way electronic linkage that never existed before. So, banks can
now offer trusted solutions to their corporate customers via the low cost delievery
channel.
i.e, The INTERNET. And corporations will enjoy the ability to manage cash held by their
strategic banking partners in real time. Via a secure, efficient, web-enabled
communication system. The expected shift in volume from paper- based transactions to
electronic ones would determine the path of future technology investments in banks and
orient it towards electronic payment delivery systems.
This shifts is also driven by BANKS perceptation that electronic transactions
contribute higher

13

3.3IMPORTANCE OF FEE-BASED SERVICES

Deregulation and new technology have eroded banks comparative advantages and
made it easier for non-bank competitors to enter into hitherto exclusive banks domains.
In response, banks have shifted their sales mix toward non-interest income by selling
non-bank fee-based financial services by charging explicit fees for services.

According to another study titled Fee-Based Financial Services Markets: New

Opportunities and Threats In the Internet Age by Killen Associates again, the market for
retail and commercial fee-based financial services will exceed that for interest-based
services by 2005, reaching nearly a staggering $500 billion by 2004 globally. Banks
want such services to be their primary profit source for certain reasons. This revenue is
more stable over time, assures a steady income and more importantly, leads to a strong
relationship with the corporate client.

14

3.4THE ACCOUNT RELATIONSHIP MANAGEMENT:

MEANING:
The

account

relationship

managers

are

those

who

negotiate

with

the targeted corporate customers with the terms acceptable to the banks and Account
Relationship Management Acceptance Criteria" or the so called "Credit Guidelines." It
should be internally placed and distributed to every credit manager/officer. These
guidelines set the minimum acceptance standards, in simple words, the guidelines are
aimed to let the account relationship managers/officers know exactly what they should be
selling, to whom, at what price and under which conditions (securities and other terms).

DECISION MAKING:
Making a sound decision to extend credit to a corporate customer is a complex process.
This is because corporate customers are normally engaged in a wide range of activities
and are affected by a host of external and internal factors that have direct impact on their
ability to meet financial obligations. The credit decision making should, therefore, be
directed by an internal lending policy that takes into account such factors and aims to
protect the bank's assets, preserve its reputation and optimize the relationship
profitability. Based on the credit guidelines, the account relationship executive will have
to submit a credit proposal evaluating the whole relationship. The Credit Evaluation
process must be done systematically and within acceptable standards to maintain a high
15

quality credit portfolio. The preparation of the credit proposal must be guided by
common sense and sensible judgement.
The amount of details the proposal should contain naturally depends on several elements,
namely the size and strength of the customer, the size of the bank's current and proposed
exposure, the socio political environment, the economy, the industry and the bank's
position in relation to other.

CREDIT EVALUATION:
The bank must place a system of credit evaluation which is based on assessment of
historical,

current

and

projected

elements

stated

hereunder:

a. FINANCIAL ANALYSIS:
Sales, Profitability, Performance, Funds Flow, working Capital Management, liquidity,
balance sheet conditions...etc

b. OPERATING ANALYSIS (OPERATING RISKS)

Owners, Management, Company, Industry, Markets. In summary, the credit proposal
(review) must highlight the Financial Risks and Operating Risks. It should state the
magnitude and likelihood of such risks i.e. "What if" scenarios, and how will they be
managed? Most global banks maintain their credit evaluating standards in an internal
"Instruction Manual" containing the bank's management instructions regarding each and
every aspect of the credit extension or review process. It sets the management standard of
credit evaluation to eliminate risks and prevent the decline in profit margins on credit
facilities.

16

3.5 CORPORATE SERVICES PROVIDED BY INDIAN

BANKS

MEANING:
Corporations, the world over are jettisoning antiquated cash management practices and
opting to put in place sophisticated cash management structures to garner the associated
economic benefits and due to reasons of expediency.

Conversely, banks have taken note of the enormous revenue potential in the fee-based
services segment to prop up their sagging bottom lines. While appreciating the initiatives
taken by the Administrative Staff College of India in organizing the Workshop.
The some of the relevant issues, which the banks need to address are as follows.
OBJECTIVE OF CASH MANAGEMENT:
The fundamental objective of cash management is optimization of liquidity through an
improved flow of funds. In todays highly competitive environment, where time is
considered as money, deployment of staff to render basic routine tasks does not make
economic sense. As a sequel, cash management today is not what it used to be.
Electronic banking, which began as a passive desktop access to bank balances, is
emerging into complex processes of liquidity management through numerous techniques.
Almost all of the corporations in advanced countries are now planning to use the services
of banks to help them collect payments on monthly bills they issue to consumers and
other types of cash management services.

17

IMPORTANCE OF CASH MANAGEMENT FOR A CORPORATE ENTITY:

Good cash management is a conscious process of knowing when, where, and how a
companys cash needs will occur; knowing what the best sources for meeting additional
cash needs; and being prepared to meet these needs when they occur by keeping good
relationships with bankers and other creditors. Scientific cash management results in
significant savings in time, decrease in interest costs, less paper work and greater
accounting accuracy. Proper cash management creates more control over time and
funds; provides timely access to information; enables easy employee related payments;
supports electronic payments; produces faster electronic reconciliation; allows for
detection of bookkeeping errors; reduces the number of cheques issued and earns interest
income or reduces interest expense.
Corporations with subsidiaries worldwide, can pool everything internationally so that
the company can offset the debts with the surplus monies from various subsidiaries. The
end result will transform treasury function as a profit-centre by optimizing cash and put
it to good use.
Creative and pro-active cash management solutions can contribute dramatically to a
companys profitability and to its competitive edge.

The ultimate purpose of proper

management of liquidity, needless to emphasize, is to improve the overall productivity of

funds.

18

3.6TYPES OF CASH MANAGEMENT SERVICES:

The menu of cash management services offered by banks abroad is indeed diverse and
tempting. The services broadly fall under collection services, Disbursement services,
Information and control services, services related to Electronic data interchange (EDI),
Commercial web banking services, Sweep services, Fraud detection solutions, Global
trade solutions and Investment solutions.

Collection Services accelerate receipt of

payments from sales and quickly turn them into usable cash in accounts.
Disbursement Services make efficient payments by reducing or eliminating idle balances
in companys accounts. Information and Control Services receive the data and provide
the management capability needed to monitor company cash picture, control costs,
reconcile

and

audit

bank

accounts,

and

reduce

exposure

to

fraud.

Financial Electronic Data Interchange (EDI) is a computerized exchange of payments

between

companys

business

and

its

customers

and

vendors.

Commercial Web Banking Services give a wide range of services from any Internet
connection, which can help streamline banking process quickly and efficiently. Sweep
Services maintain liquidity and increase earnings without having to actively monitor
accounts

and

move

money

in

and

out

of

them

Information reporting solutions assist companies, which need to receive account data
that is timely, precise, and easy to access and interested in initiating online transactions.
Investment solutions help to minimize excess balances and maximize return on

19

CASH MANAGEMENT SERVICES - INDIAN SCENARIO:

It is apposite to review the Indian scenario in this regard. As we are well aware, banks
desire for funds has lost under the onslaught of the current slowdown. Despite the offer
of very soft terms corporates are refusing to borrow, while bank deposits have been
ballooning. Compelled to service the burgeoning liabilities, but unable to lend hastily and
allow their non-performing assets (NPAs) to grow, bankers are forced to compete for the
handful of safe bets among their borrowers. Banks chose to use the opportunity to
refocus their activities, seeking clearly defined identities in terms of services and
customer segments. Most of them concentrated on cleaning up their books by peeling
down their NPAs. All of them attempted freezing of costs, improving operational
efficiencies, and boosting productivity.The strategy of the banks, which performed well,
is to use fee-based services to maintain earnings growth.

With interest rates falling, non-interest income was, unsurprisingly, the fastest-growing
component of the banks total income. Fee-based activities will complement though not
substitute the core business of lending .It is gratifying to note that a number of banks in
India are offering wide-ranging cash management services to their corporate clients.

All the three categories of banks viz., nationalized banks, private banks, and foreign
banks

operating in India are active

in the cash management

segment.

SBI, PNB, ICICI Bank, GTB, HDFC Bank, Centurion Bank and Vysya Bank, are some
of the active Indian banks in this segment.

20

Citi Bank, Standard Chartered Bank, ABN Amro Bank, BNP, ANZ Grindlays and HSBC
are the foreign banks operating in India, which are prominent among the cash
management services providers. Currently, the turnover of cash management services in
Indian market is estimated over Rs.25, 000 crore per month.

State Bank of India alone is estimated to handle over Rs.12,000 crore per month through
its product called SBI-FAST. Indian banks are offering services like Electronic funds
transfer services, provision of cash related MIS reports, cash pooling services, collection
services, debit transfer services, guaranteed credit arrangements, sweep products, tax
payment services, receivables and payables management. Foreign banks operating in
India are offering regional and global treasury management services, liquidity
management services, card services, electronic banking services, e-commerce solutions,
account management services, collection management services, cash delivery
management services and investment solutions.

The cash management services offered to Indian corporate are comparable to what their
counterparts are getting in advanced countries. Banks realized that if they do not offer the
services required by corporate customers it would result in a net loss of clientele, returns
and goodwill.

Banks in India need to continuously monitor international trends in

innovations taking place in providing cash management services and swiftly offer similar
services to their corporate clients.

21

RESERVE BANKS INITIATIVE IN CASH MANAGEMENT

The Reserve Bank of India has been taking a number of initiatives, which will facilitate
the active involvement of commercial banks in the sophisticated cash management
segment. One of the pre-requisites to ensure faster and reliable mobility of funds in a
country is to have an efficient payment system.
Considering the importance of a robust payment system to the economy, the RBI has
taken numerous measures since mid Eighties to strengthen the payments mechanism in
the country.

Introduction of computerized settlement of clearing transactions, use of Magnetic Ink

Character Recognition (MICR) technology, provision of inter-city clearing facilities and
high value clearing facilities, Electronic Clearing Service Scheme (ECSS), Electronic
Funds Transfer (EFT) scheme, Delivery vs. Payment (DvP) for Government securities
transactions, setting up of Indian Financial Network (INFINET) are some of the
significant initiatives which highlight the seriousness with which the Reserve Bank has
taken up the reforms in Payment systems. Introduction of a Centralized Funds
Management System (CFMS), Securities Services System (SSS), Real Time Gross
Settlement System (RTGS) and Structured Financial Messaging System (SFMS) are the
top priority items on the agenda to transform the existing systems into a state-of-the-art
payment infrastructure in India by the Reserve Bank. The current vision envisaged for the
payment systems reforms is one, which contemplates linking up of at least all important
bank branches with the domestic payment systems network thereby facilitates cross
boarder connectivity. With the help of the systems already put in place in India and which
are coming into being, both banks and corporates can exercise effective control over the
cash management.

22

SOURCING CASH MANAGEMENT SERVICES

It is normally the client-bank relationship, which is a main consideration in choosing a
bank for cash management. Pricing, obviously, is a very dominant factor .Making a
choice between the

local banks and the more highly priced foreign banks usually

depends on how cost savings are presented by the banks. Multinational corporates with
complex treasury operations admire their respective banks expertise and ability to offer
creative

solutions

Flexibility, reliability, security and stability have been cited as vital parameters for any
electronic banking system. The systems should be tailored to provide pertinent reports
and the ability to upgrade easily in future.
The technology should allow real-time cash
partners. It should integrate easily

management with strategic banking

with legal framework in place. It should lower

operating costs and resolve disputes quickly by providing secure and legally enforceable
audit trails. It should be capable of reducing risk of fraud in electronic funds transfers
and other treasury activities. It should also be able to use a low-cost public network
infrastructure like Internet, which eliminates the need for dedicated leased lines.
CHANGING

CASH

MANAGEMENT

PROCESSES

AND

E-BANKING:

INNOVATIONS:
The enlightened participants in this Workshop are aware that the cash management
techniques have been undergoing a metamorphosis as a result of the extensive
technological advancements. Positioning finance as a valuable part of a business
organization means re-engineering of business processes.

23

Electronic Bill Presentment and Payment (EBPP) is now widely accepted in Western
countries. It replaces the slow and costly process of preparing and mailing paper bills and
receiving cheques as payment. Corporations look to electronic bill presentment and
payment as an opportunity to expand marketing and sales efforts, enhance customer care
and increase efficiency, while reducing costs. As technologies evolve with amazing
speed, the IT choices facing treasurers are becoming more intricate simultaneously
increasing their expectations too. Today, a multinational company has tall demands from
its banker. When the treasurer sits at his desk, he expects that his computer has to
automatically update his files with real-time information on the companys account
balances. Without moving, he wants to maneuver funds between accounts to capture
more interest from pooled accounts, he demands to lag his payments to mak his cash
work to the fullest and he desires to get an up-to-date report on the progress of his
collections.

As the Internet explodes into life, companies want to be among the first to use the
Internet to market their products, receive orders, deal with suppliers and settle
transactions Corporates visualize technology as a tool to cut their costs and improve
efficiency.

24

CORPORATE CASH MANAGEMENT TO BENEFIT FROM ELECTRONIC

PAYMENTS:

The new electronic payment products and services offer the corporate clients an
improved bottom line by helping manage cash requirements. It helps corporate to make
the best use of their funds and provides an effective means of managing their financial
requirements
Several of the trends in cash flow forecasting favor the use of electronic payment
products like RTGS, Electronic Funds Transfer (EFT) and card payments.
Improved technology and systems integration makes it more attractive to use electronic
payment products because these methods of payment can be incorporated into firm-wide
computing systems.
The new forecasting techniques also suggest use of electronic payments, because they
offer disaggregated revenue and spending data that can easily be categorized and studied.
Electronic payments and cards provide control over incoming funds, and allow
companies to limit access to these funds to authorized parties. In addition, limiting
corporate purchases to electronic payments makes it easier for firms to monitor cash
outflows and prevent unauthorized expenditures, because these payments are easier to
document and provide an audit trail.

From the perspective of a Corporate, the electronic payment systems ensure speed and
security of the transaction processing chain, from verification and authorization to
clearing and settlement. Also it gives a great deal of freedom from more costly labor,
materials, and accounting services that are required in paper-based processing, better
management of cash flow, inventory, and financial planning due to swift bank payments.
25

CHALLENGES TO COMPANIES IN AVAILING

TECHNOLOGY-ORIENTED CASH MANAGEMENT
SERVICES FROM BANKS:
a. Electronic Communication with a Bank:
The first challenge facing a treasury is how to communicate electronically with a bank,
although this is often dictated by cost limitations, security concerns and the infrastructure
peculiarities of different countries. It is likely that the company itself may be lacking the
necessary expertise to choose an appropriate form of communication where the company
needs bankers advice.

b. Economic Considerations:
Costs associated with the new services do pose a challenge to small and medium
companies. A host-to-host connection is a sophisticated, direct, two-way link between the
banks and the customers computers, which is expensive to set-up and maintain.
However, it is highly automated and allows the corporate to use more of the banks
services. Small companies, unfortunately, may not be able to afford host-to-host
connection. Concerns associated with high costs may be effectively addressed once the
Internets security apprehensions have been resolved.

c. Decisions Regarding Sourcing of Software:

The three sources of software applications for on-line banking and on-line cash
management in particular are Large banks prefer to build applications in-house owing to
their belief that it provides them with competitive advantage Bought from independent
software vendors:
26

3.7LIMITATIONS OF THE SERVICES:

All said and done, the Internet as it operates today has its limitations as a medium for
banking and finance. For this reason, the conventional means of delivering electronic
banking services will be maintained in parallel with on-line systems at least in the
medium term.

We all agree that the technology is only as good as its underlying

services. There is no such thing as one-size-fits-all when it comes to electronic banking

products. No one product can provide an absolute solution to all the customers.
An electronic banking product is a means of delivering banking services to the customer
and is only as good as all the operations and processes that underpin those services.

1. Provision of CMS by Banks - Challenges and Issues:

The conventional formal line between treasury and control and between cash and
accounting strategies is fading. Now, bankers and controllers are working together
closely in seeking solutions in the complex cash management function.
In todays world, the key differentiator between a successful bank and other bank is the
stress each lays on technology. As such, let me turn your attention to the numerous
challenges bankers need to address squarely, while gearing up to provide cash
management services in a technology dominated environment.

27

2. Provision of Customized Services:

One important ingredient of a treasury system is customization. Banks ability to
customize a treasury system is critical. The user interface is very personal and users
want

to

be

comfortable

with

the

look

and

feel

of

the

Deployment, configuration and database options need to be flexible.

system.
New system

should be capable of easily getting synchronized with enterprise resource planning (ERP)
and other corporate systems.

3. Need to Comprehend the Clients Line of Activity:

Bankers need to really understand the accounting and control side of its client business.
The bankers should see themselves as strategic partners in companys growth and need to
spend a lot of time learning about the concerned industry. W They have to use that
knowledge to propose solutions that never would have occurred to the client
4. Provision of Other Advisory Services to Clients:
Companies would like to see banks solve certain other related problems.
For instance, a company may like someone to tell it exactly what is wrong with their
MIS department. Changing systems is a major initiative with far-reaching implications to
the companies so banker cannot afford to make a mistake. As the technology changes
almost monthly, companies do expect bankers to tell them what to do and where to spend
their money. Bankers cannot build a standard solution always, because the customers do
not pose standard problems

28

5. Shift to Web-enabled Services:

Web-enablement may be fashionable, but what treasurers really want is the functionality
in products that help them perform optimally. After all, the web is only a delivery
channel. Most corporate electronic banking systems currently used are based on old
technology architecture.

6. Special Consideration to Small and Medium Companies:

When the corporate scene in India is dominated by a multitude of small and medium
companies, a legitimate question that arises is, are the high-tech banking cash
management services just for the large companies or do they have any immediate
practical value for smaller companies also?

Although technology and size may not go together banks have to cost-justify the cash
management services companies use. No doubt, banks did invest a lot in the technologybased services. But with the advent of the Internet and other tools, banks should strive to
make accessible cash management services to middle and small companies without
totally phasing out their existing hardware.

29

7. Need to Work as a Team:

When banks develop cash management solutions, they have to necessarily work directly
with corporate financial controllers and their staff. When outsourcing is involved, with
something as complex as payables or receivables the corporate teams get bigger and more
varied. Besides financial controllers, banks have to work with systems people and
sometimes marketing people.

8. Need to Work with Technology Vendors:

A growing number of non-bank vendors also offer payment-related services to corporate
clients in Western countries.

Banks bring the strong relationships with customers that

they have built over time. No single player can do it alone in the future because there are
so many dimensions to technology and different industries need different solutions.
Alliances will have to be forged, so that vendors with different technological pieces will
work together to provide integrated solutions.

30

3.8WORKING CAPITAL FINANCE

MEANING:
Working Capital facility is provided to the industry to finance day-to-day production &
sales. For production; funds are generally required for purchase of raw materials, stores,
fuel, for payment of labor, power charges, for storing finished goods till they are sold out
& for financing the sales by way of sundry debtors / receivables.

Cash Credit facility is granted to the customers to bridge working capital gap. The Bank
also provides short term loan facility for a period of up to 1 year for the purpose of
bridging temporary cash flow mismatches arising due to various reasons like nonrealization of receivables in time, routine capex etc. The finance extended under this
category would be for meeting the funds requirements for day to day operations of the
units i.e., to meet recurring expenses such as acquisition of raw material, the various
expenses connected with products, conversion of raw materials into finished products,
marketing and administrative expenses, etc.. The working capital limits would be
considered only after the project nearing completion and after ensuring full tie-up of the
term loan requirements of the borrower. These limits would be either in the form of fixed
loans or running accounts and / or bill financing facility.

31

SECURITY:

The credit facilities shall be secured by inventories and debtors as may be required
quantum and duration of the credit and risk perception.

KEY BENEFITS:

Funded facilities, i.e. the bank provides funding and assistance to actually purchase
business assets or to meet business expenses. Non-Funded facilities, i.e. the bank can
issue letters of credit or can give a guarantee on behalf of the customer to the suppliers,
Government Departments for the procurement of goods and services on credit. It is
Available in both Indian as well as Foreign currency.
LIMITATIONS OF WORKING CAPITAL FINANCE:

The working capital limits would require such security and personal/ third party
guarantees as applicable to general lending norms of the bank and risk perception in
respect of individual borrowal account.

Eligible Working Capital Limits would be assessed by adopting various methods such as
Projected Turnover Method, Permissible Bank Finance Method, Cash Budget Method
and Net Owned Funds Method, depending upon the type of borrower, the aggregate
working capital facility enjoyed from the banking system, the scale of operation, nature
of activity/enterprise and the duration/ length of the production cycle, etc.
32

RBI GUIDELINES ON LOAN FOR WORKING CAPITAL PURPOSE:

In tune with the Reserve Bank of India guidelines on Loan System for delivery of bank
Credit for working capital purposes to larger borrowers, the same would be extended in
the form of fixed loan (working capital Demand loan) and cash credit (running account)
in the ratio of 60:40 in respect of borrowers enjoying aggregate working capital limits of
Rs.10 crore and above from the Banking system.

The working capital demand loan facility shall be for a minimum fixed term of 7 days
subject to roll over at the option of the borrower concerned

SHORT

TERM

CORPORATE

FINANCE

METHODS

OF

LENDING:

Like many other activities of the banks, method and quantum of short-term finance that
can be granted to a corporate was mandated by the Reserve Bank of India till 1994.
This control was exercised on the lines suggested by the recommendations of a study
group headed by Shri Prakash Tandon. The study group headed by Shri Prakash Tandon,
the then Chairman of Punjab National Bank, was constituted by the RBI in July 1974
with eminent personalities drawn from leading banks, financial institutions and a wide
cross-section of the Industry with a view to study the entire gamut of Bank's finance for
working capital and suggest ways for optimum utilization of Bank credit. This was the
first elaborate attempt by the central bank to organize the Bank credit. The report of this
group is widely known as Tandon Committee report.

Most banks in India even today

continue to look at the needs of the corporates in the light of methodology recommended
33

by the Group. As per the recommendations of Tandon Committee, the corporates should
be discouraged from accumulating too much of stocks of current assets and should move
towards very lean inventories and receivable levels. The committee even suggested the
maximum levels of Raw Material, Stock-in-process and Finished Goods which a
corporate

operating

in

an

industry

should

be

allowed

to

accumulate.

These levels were termed as inventory and receivable norms. Depending on the size of
credit required, the funding of these current assets (working capital needs) of the
corporates could be met by one of the following methods:

FIRST METHOD OF LENDING:

Banks can work out the working capital gap, i.e. total current assets less current liabilities
other than bank borrowings (called Maximum Permissible Bank Finance or MPBF) and
finance a maximum of 75 per cent of the gap; the balance to come out of long-term funds,
i.e., owned funds and term borrowings. This approach was considered suitable only for
very small borrowers i.e. where the requirements of credit were less than Rs.10 lacs

SECOND METHOD OF LENDING:

Under this method, it was thought that the borrower should provide for a minimum of
25% of total current assets out of long-term funds i.e., owned funds plus term
borrowings. A certain level of credit for purchases and other current liabilities will be
available to fund the build up of current assets and the bank will provide the balance
(MPBF). Consequently, total current liabilities inclusive of bank borrowings could not
exceed 75% of current assets. RBI stipulated that the working capital needs of all
borrowers enjoying fund based credit facilities of more than Rs.10 lacs should be
appraised (calculated) under this method.
34

THIRD METHOD OF LENDING:

Under this method, the borrower's contribution from long term funds will be to the
extent of the entire CORE CURRENT ASSETS, which has been defined by the Study
Group as representing the absolute minimum level of raw materials, process stock,
finished goods and stores which are in the pipeline to ensure continuity of production and
a minimum of 25% of the balance current assets should be financed out of the long term
funds plus term borrowings. (This method was not accepted for implementation and
hence is of only academic interest)

35

3.9EXIM BANK
Export-Import Bank of India is the premier export finance institution of the country, set
up in 1982 under the Export-Import Bank of India Act 1981. Government of India
launched the institution with a mandate, not just to enhance exports from India, but to
integrate the countrys foreign trade and investment with the overall economic growth.
Since its inception, Exim Bank of India has been both a catalyst and a key player in the
promotion of cross border trade and investment. Commencing operations as a purveyor
of export credit, like other Export Credit Agencies in the world, Exim Bank of India has,
over the period, evolved into an institution that plays a major role in partnering Indian
industries, particularly the Small and Medium Enterprises, in their globalisation efforts,
through a wide range of products and services offered at all stages of the business cycle,
starting from import of technology and export product development to export production,
export marketing, pre-shipment and post-shipment and overseas investment.

EXIM FINANCE KEY BENEFITS:

Efficient service to our importer/exporter clients.
Connectivity with the Customs Department to facilitate payment of custom duty and
receipt of duty draw back by the importer/exporter clients through the electronic media.
Under this system of Electronic Data Interchange (EDI), Custom Authorities process the
shipping bills and also effect on line payment of duty drawback for exporters.
Further, they undertake processing of Bill of Entry and deposit of custom duty for
imports.

36

EXCHANGE EARNERS FOREIGN CURRENCY (EEFC) DEPOSITS SCHEME:

The Exchange Earners Foreign Currency (EEFC) Deposits Scheme was started by RBI in
the year 1992 with the introduction of Liberalized Exchange Rate Management System.
Under this scheme, the recipient of inward remittances, exporters and other eligible
bodies are allowed to keep a portion of their inward remittances / export proceeds in
foreign currency with the banks in India which can later be utilizedfor permissible
purposes.
SERVICES OFFERED TO EXPORTERS:
Pre-shipment finance in foreign currency and Indian rupees.Post-shipment finance in
foreign currency and Indian rupees. Handling export bills on collection basis.Outward
remittances for purposes as permitted under Exchange Control guidelines. Inward
remittances including advance payments. Quoting of competitive rates for transactions.
Maintenance

of

Exchange

Earners

Foreign

Currency

(EEFC)

accounts.

Assistance in obtaining credit reports on overseas parties Forfeiting for medium term
export receivables.

SERVICES OFFERED TO IMPORTERS:

Establishment of Import Letters of Credit covering import into India and handling of bills
under Letter of Credit. Handling of import bills on collection basis. Remittance of
advance payment against imports. Offering utilization of PCFC ( pre-shipment credit in
foreign currency) for imports.

37

3.10 PROJECT FINANCE

MEANING:
Project finance is the financing of long-term infrastructure and industrial projects based
upon a complex financial structure where project debt and equity are used to finance the
project. Usually, a project financing scheme involves a number of equity investors,
known as sponsors, as well as a syndicate of banks which provide loans to the operation.
The loans are most commonly non-recourse loans, which are secured by the project itself
and paid entirely from its cash flow, rather than from the general assets or
creditworthiness of the project sponsors, a decision in part supported by financial
modeling. The financing is typically secured by all of the project assets, including the
revenue-producing

contracts.

Project lenders are given a lien on all of these assets, and are able to assume control of a
project if the project company has difficulties complying with the loan terms.

SELECTION OF A PROJECT BY BANK:

The proposals for project finance would be considered by the bank on a selective basis in
view of the larger outlay of funds an longer duration of credit which may have an adverse
impact on bank's Asset-Liability Management system and strain on its liquidity. Usually
such projects would be operationalised through consortium arrangement along with the
Term Lending Financial Institutions and other public/ private sector Banks. The project
would be appraised by the Lead Bank of the consortium and all other banks would accept
the appraisal made by the lead bank. Before extending finance for Projects, the economic
feasibility and financial viability of the project in relation to the macro economic
38

conditions prevailing at the time of conceptualization of the project and also the likely
scenario that may prevail during the normal life span of the project should be established.
The project should be able to withstand reasonable levels of variation in crucial
parameters which should be established by sensitivity analysis of the cash flows.

The means of finance for the project along with provisions to meet contingencies such as
cost/ time overrun should be established. The entire source of funds for the project from
sources other than that by the promoters shall be fully tied-up before sanction/
disbursement of the limits.

Wherever the project is one of unusually longer duration such as infrastructure

development, the involvement of agencies such as Financial Institutions and ways of
reducing the blockage of bank's fund that are sourced mainly out of short term lending
institutions, take-out financing, securitization, Inter-Bank participation Certificates, etc.
would be resorted to.

The disbursements under project Finance would be made strictly in tune with the
sanction terms, only after ensuring the end use of funds already disbursed by the
consortium, meeting the required margin at each stage of project implementation and
certification by the competent consultants/ specialists as per the procedure in vogue from
time to time and as decided by the consortium.

39

RATE OF INTEREST:

The rate of interest on such credit facilities would be determined based on the borrower
gradation and the interest rate policy of the bank from time to time.

SECURITY:
The credit facilities shall be secured by tangible assets and collaterals as may be required
based on the nature of project, quantum and duration of the credit, anticipated return on
investment and risk perception.

40

STATE BANK OF INDIA

CORPORATE BANKING OF STATE BANK OF INDIA

INTRODUCTION:
State Bank of India (SBI) is the largest bank in India. It is also, measured by the number
of branch offices and employees, the largest bank in the world. Established in 1806 as
Bank of Bengal, it remains the oldest commercial bank in the Indian Subcontinent. It
provides a range of banking products through its vast network in India and overseas,
including products aimed at NRIs. With an asset base of $126 billion and its reach, it is a
regional banking behemoth. The Government of India nationalized SBI in 1955 with the
Reserve Bank of India having a 60% stake. SBI has laid emphasis on reducing the huge
manpower through Golden handshake schemes and computerizing its operations.

41

BOARD OF DIRECTORS
List of Directors on the Central Board of State Bank of India (As on 4th August
2011)

Sr.

Name

Designation

No.

Under Section of SBI

Act 1955

Shri Pratip Chaudhuri

Chairman

19 (a)

Shri Hemant G. Contractor

Managing Director

19 (b)

Shri Diwakar Gupta

Managing Director

19 (b)

Shri A. Krishna Kumar

Managing Director

19 (b)

Shri Dileep C. Choksi

Director

19 (c)

Shri S. Venkatachalam

Director

19 (c)

Shri D. Sundaram

Director

19 (c)

Shri Parthasarathy Iyengar

Director

19 (c)

Shri G. D. Nadaf

Officer Employee Director

19 (cb)

10

Dr. Rajiv Kumar

Director

19 (d)

TRANSFORMATION JOURNEY IN STATE BANK OF INDIA

42

The State Bank of India, the countrys oldest Bank and a premier in terms of balance
sheet size, number of branches, market capitalization and profits is today going through a
momentous phase of Change and Transformation the two hundred year old Public
sector behemoth is today stirring out of its Public Sector legacy and moving with an
ability to give the Private and Foreign Banks a run for their money.

The bank is entering into many new businesses with strategic tie ups Pension Funds,
General Insurance, Custodial Services, Private Equity, Mobile Banking, Point of Sale
Merchant Acquisition, Advisory Services, structured products etc each one of these
initiatives having a huge potential for growth.

The Bank is forging ahead with cutting edge technology and innovative new banking
models, to expand its Rural Banking base, looking at the vast untapped potential in the
hinterland and proposes to cover 100,000 villages in the next two years.

It is also focusing at the top end of the market, on whole sale banking capabilities to
provide Indias growing mid / large Corporate with a complete array of products and
services. It is consolidating its global treasury operations and entering into structured
products and derivative instruments. Today, the Bank is the largest provider of
infrastructure debt and the largest arranger of external commercial borrowings in the
country. It is the only Indian bank to feature in the Fortune 500 list.
The Bank is changing outdated front and back end processes to modern customer friendly
processes to help improve the total customer experience. With about 8500 of its own
10000 branches and another 5100 branches of its Associate Banks already networked,
43

today it offers the largest banking network to the Indian customer. The Bank is also in the
process of providing complete payment solution to its clientele with its over 21000
ATMs, and other electronic channels such as Internet banking, debit cards, mobile
banking, etc.
With four national level Apex Training Colleges and 54 learning Centers spread all over
the country the Bank is continuously engaged in skill enhancement of its employees.
Some of the training programs are attended by bankers from banks in other countries.
The bank is also looking at opportunities to grow in size in India as well as
internationally. It presently has 82 foreign offices in 32 countries across the globe. It has
also 7 Subsidiaries in India SBI Capital Markets, SBICAP Securities, SBI DFHI, SBI
Factors, SBI Life and SBI Cards - forming a formidable group in the Indian Banking
scenario. It is in the process of raising capital for its growth and also consolidating its
various holdings.
Throughout all this change, the Bank is also attempting to change old mindsets, attitudes
and take all employees together on this exciting road to Transformation. In a recently
concluded mass internal communication programme termed Parivartan the Bank rolled
out over 3300 two day workshops across the country and covered over 130,000
employees in a period of 100 days using about 400 Trainers, to drive home the message
of Change and inclusiveness. The workshops fired the imagination of the employees with
some other banks in India as well as other Public Sector Organizations seeking to emulate
the programme.

EVOLUTION OF SBI

44

The origin of the State Bank of India goes back to the first decade of the nineteenth
century with the establishment of the Bank of Calcutta in Calcutta on 2 June 1806. Three
years later the bank received its charter and was re-designed as the Bank of Bengal (2
January 1809). A unique institution, it was the first joint-stock bank of British India
sponsored by the Government of Bengal. The Bank of Bombay (15 April 1840) and the
Bank of Madras (1 July 1843) followed the Bank of Bengal. These three banks remained
at the apex of modern banking in India till their amalgamation as the Imperial Bank of
India on 27 January 1921.
Primarily Anglo-Indian creations, the three presidency banks came into existence either
as a result of the compulsions of imperial finance or by the felt needs of local European
commerce and were not imposed from outside in an arbitrary manner to modernise
India's economy. Their evolution was, however, shaped by ideas culled from similar
developments in Europe and England, and was influenced by changes occurring in the
structure of both the local trading environment and those in the relations of the Indian
economy to the economy of Europe and the global economic framework.

CORPORATE BANKING
SBI is a one shop providing financial products / services of a wide range for large,
medium and small customers both domestic and international.
45

The SBIs powerful corporate banking formation deploys multiple channels to deliver
integrated solutions for all financial challenges faced by the corporate universe. The
Corporate Banking Group and the National Banking Group are the primary delivery
channels for corporate banking products.
The Corporate Banking Group consists of dedicated Strategic Business Units that cater
exclusively to specific client groups or specialize in particular product clusters. Foremost
among these specialized groups are the Corporate Accounts Group (CAG), focusing on
the prime corporate and institutional clients of the countrys biggest business centers. The
others are the Project Finance unit and the Leasing unit.
The National Banking Group also delivers the entire spectrum of corporate banking
products to other corporate clients, on a nationwide platform.

CORPORATE ACCOUNTS GROUP (CAG)

CAG - A perfect strategic fit
Market leader image

46

 Focussed attention
Flexible & Customer - friendly credit policies
Structured Products - Fund based & fee based
Timely, comprehensive and assured delivery
Competitive pricing
Highly skilled credit expertise

CAG - SBI's Proactive response to emerging market needs

CAG is Strategic Business Unit of SBI, set up exclusively to cater to the specialised
banking needs of top corporate clients of the country. It was the direct outcome of SBI's
structural reorganization in the light of Deregulation, Globalization & Liberalization of
the Banking Industry. Created in the year 1995, CAG's'' mission is to:
Focus on top corporate clients
Establish itself as the most professional outfit of its kind in the country
Render world class and cost effective financial services
Evolve new products on a sustained basis-customized to the changing needs of the
corporate
Stay ahead of competitors
CAG - A Symbol of excellence

47

 Quality Relationship Banking Exclusive, highly skilled Relationship teams of

dynamic and motivated personnel, each attending to a select group of top Corporate
providing a one-stop-shop for financial services presently at Mumbai, New Delhi,
Calcutta, Chennai and Ahmedabad.
Delivered Credit process
Only two stage credit process consisting of appraisal and assessment by the Relationship
team and sanction by the Credit Committee/Central Board, leading to quickest response
time in the industry.
Offer of wider and sophisticated products Apart from a variety of core credit products
including structured finance and multi-purpose short term corporate loan, CAG offers an
array of customer specific products like Cash Management Product, Treasury & Forex
products and Merchant Banking products in association with SBI Capital Markets Ltd.,
SBI Gilts Ltd. and other subsidiaries of SBI.
CAG - One point contact Account Management Teams will aid you in securing any
product from any of our various associates and subsidiaries as listed below
For leasing requirements through our Leasing SBU
Large Scale Project Finance through PF SBU
Capital Market Requirements through SBICAPS
CORE CREDIT PRODUCTS

PurposeType

of Loan

Pricing

48

Rupee

Working Capital Cash Credit facility

Based on credit risk rating of the

Loans

Company designed on the lines of

internationally accepted models,
ranging from our Prime Lending
Rate(PLR) upwards.
Project & Capex Medium Term Loans 5-7 Same as above - Medium Term
loans

years

or

longer

in Lending Rate (MTLR)upwards.

exceptional cases
Export Credits

Packing

Credit, RBI Defined LIBOR linked and

Postshipment , Forfaiting
Foreign

Projects

& External

Market Determined

Commercial LIBOR linked

Currency Work. Cap

Borrowings(ECBs) which

Loans

include Syndicated loans,

Stand-alone
loans,Buyers'Credit

and

Seller's Credit, Bilateral

loans

in

all

major

currencies.

OTHER STRUCTURED PRODUCTS

49

Purpose
Short Term Corporate Loans

Pricing

For Shoring up Net Working Capital, Based on the Credit

Ongoing

capital

expenditure, risk

rating

Repayment of high cost debt, R&D Linked to our PLR

expenditure, implementation of VRS

Securitised

loans-

in Upfronting of assured cash flow Based on risk rating

association with SBICAP

emanating from future receivables viz.

rentals,

Royalties,

debtors,

Lease

rentals etc.
Channel

Financing-

in Financing of downstream marketing Based on the Credit

association with other SBI channels

risk rating - Linked to

branches

our PLR

Fee Based Products - like For import of goods including capital Large value business Letter

of

Guarantees,
Payment

Credits(LCs), goods participation in international negotiable.

Defferred bids, performance guarantees etc.

Guarantees(DPGs)

and Letter of Comfort

TRADE FINANCES

Issuance and advising of Domestic and Foreign Letters of Credit.

50

Confirmation of Export Letter of Credit.

Issuance of Guarantees on behalf of Domestic Customers

In favour of Domestic Beneficiaries and

Foreign Beneficiaries.

Issuance of guarantees on behalf of foreign correspondent banks to beneficiary in

India.

Deferred Payment Guarantees.

Domestic and Foreign Bills discounting.

SWIFT Interface.

(e-Trade SBI) Front-end interface (Internet Based) at the customer place.

To issue Letter of Credit and handle related bill transactions

To issue Bank Guarantee

To send advice on Letters of Credit received from others

To lodge Export Collection Bills

To enquire status of Trade Finance transactions

For negotiation of bills and track negotiated bills

For Advance against Export Bills on Collection

For Lodge of Bills where Full Advance Payment has been received

51

Delivery Platforms at all 6 CAG branches having specialization to provide Trade

Finance Services, adhering to Six Sigma principles.

While SBI is the most widely accepted Indian Bank across the world with

correspondent relationship extending to a spectrum of international banks numbering 876

at present our LCs, Guarantees and DPGs are issued at the most competitive rates.

SBI is the only Indian Bank whose guarantee is accepted by most of the Export

Credit Agencies globally without seeking confirmation.

SBI's Clean & Documentary Collections are made at most competitive rates

through our Global Link Services.

We also provide trade related information to Indian corporates, their overseas

partners/buyers through our foreign offices.

PRODUCTS AND SERVICES

52

SBI OFFERS:Working capital financing

Assistance extended both as Fund based and Non-Fund based facilities to

Corporates , Partnership firms , Proprietary concerns

Working Capital finance extended to all segments of industries and services sector
such as IT

Term Loans
To support capital expenditures for setting up new ventures as also for expansion,
renovation etc.
Lease Finance
An exclusive unit providing one s shopping to Corporates
A dedicated set up specialised in financing of infrastructure and other large projects
Exclusive set up for handling large ticket leases.
SBI's Prime Lending Rates (PLR) are among the lowest
Presently Bank has two PLR's
SBAR for loans payable on demand and upto one year
SBMTLR for loans payable beyond one year

Robo Silicon Private Limited

53

Corporate Overview
Robo Silicon Private Limited commenced operations in the year 2001 and is
headquartered in Hyderabad, Andhra Pradesh, India.
Robo Silicon, for the first time in India, introduced manufactured sand. It not only is
the perfect substitute to the precious and fast depleting natural resource - river sand, but is
also a viable, cost-effective and eco-friendly product. In a very short span, RoboSand has
earned the respect and patronage of leading Industry, real estate and construction giants in
the country. Having weathered initial resistance a fate common to every innovative idea
in a change-resisting environment, RoboSand has quickly found acceptance and is
today preferred by all quality-conscious construction industry leaders. The pillars of faith
stand firmly on RoboSand because it protects the environment, promotes ethical and
legal construction activities and also eliminates the many disadvantages of using river
sand for purposes of construction. Additionally, using RoboSand in concrete and
masonry results in the substantial saving of cement, thus slashing construction costs
considerably.

Robo Silicon began operations in 2001 by setting up a crushing plant and quarry in
Hyderabad to supply manufactured sand to the construction industry. Robo was the first
54

in the country to introduce the concept of manufactured sand. Extensive marketing efforts
coupled with the consistent supply made Robosand a generic name for manufactured
sand in the construction industry. At the time of acquisition, Robo Silicon had 5 quarries.
With IVFA, Robo has been rapidly expanding across India to locations such as Vizag,
Delhi, Bengaluru, Jamnagar, Pune, Mangalore and Davanagere and is currently the
largest organized player in the stone aggregates industry in India. Robo Silicon has
successfully attracted high quality talent and built a deep management team. It is in the
process of injecting state-of-the-art mining technologies & processes, which will meet
global standards for safety and environment protection.
Robo Silicon now has a range of construction materials that are collectively referred to
asRoboAggregates - fine and coarse aggregates that confirm to IS 383 specifications.
Aggregates are a component of composite materials such as concrete and asphalt
concrete. It is a proven fact that fine and coarse aggregates play a key role when
combined with cement in concrete and asphalt (bitumen) for road works. Aggregates are
also used as base material under foundations, roads, and railroads. To put it differently,
aggregates are used as a stable foundation or road/rail base with predictable, uniform
properties (e.g. to help prevent differential settling under the road or building), or as a
vital extender that binds with more expensive cement.
Identifying a need for Brick and Plaster work, Robo Silicon is proud to
introduce RoboPlast- a blend of specific fine aggregates in 0-2mm. RoboPlast provides
complete masonry solutions at site and improves workability. It is a ready-to-use product
that eliminates the sieving process at site thereby saving you precious time.

Investor Profile

55

India Value Fund

India Value Fund ('IVF') is a premier private equity investment fund. It has in excess of
US $ 1 Billion (Rupees 40 billion) under management committed by high quality Indian
and international institutional investors and family offices. IVF makes available financial
and intellectual capital to growing middle-market companies in India.
IVF has invested in promising companies, partnered progress, and has seen successful
exits. In each prudently selected investment, IVF developed resilient partnerships with
management teams based on mutual respect, integrity, and transparency. This, along with
an ability to deliver appropriate support in building businesses has created great value for
all stakeholders.
IVF investments include a diverse range of industries such as healthcare, retailing,
outsourced services, media & entertainment and precision engineering.
Manufactured Sand - A Perspective

Evolution of Fine Aggregate Industry in India

The attempts to produce crushed or manufactured sand in India could be traced to early
50's primarily in major dam works. The focus was on using different size reduction
techniques with available resources like rod mills, roller -crushers, and cone crushers.
The absence of research in the reputed Civil Engineering Institutions about manufactured
sand aided a lot of unscrupulous quarry operators to perpetuate the myth that quarry dust
can be used in production of concrete either by complete or partial replacement of river
sand.
Early sources of fine & coarse aggregates (20mm and 10mm):
56

The river sand, pebbles and gravel sourced from river beds were used as fine and
coarse aggregates.
The insufficient quantities and inconsistent quality forced the construction industry to
explore the possibility of sizing down the locally available rock formations using the
crushers to produce coarse aggregates of 20mm and 10mm.
The type of machinery used was single stage crushers and later upgraded to two stage
crushers.
The waste product generated in the process is quarry dust which was being given free
in the early days is being offered today as a replacement for river sand.

Emergence of Manufactured Sand

The progress in the building material research and identification of role of particle shape
and gradation of fine aggregates triggered the use of manufactured sand in the production
of concrete. The complexity of construction and use of high strength concrete in large
number of buildings is the prime mover along with the scarcity of river sand in many
cities.
Technical Perspective
The use of manufactured sand as a replacement for river sand is increasing with the ban
on sand mining implemented by different states. The other factors are the general decline
in the availability of river sand and pressure from active environmental groups to protect
the nature.

57

Urban growth:
The phenomenal rise in the construction activity in the last decade has contributed to the
wide gap between the supply and demand of river sand. A lot of damage has been caused
to the eco-systems by carrying out dredging operations on the sand beds leading to the
depletion of ground water levels in the country.
Role of fine aggregates in concrete:
It is accepted fact that sand plays a very important role in the production of concrete. The
features of workability, strength and durability are directly dependent on the properties of
the sand used in the making of concrete.
Concept of manufactured sand:
According to industry reports there is a major shift in the mindset of the Construction
Industry towards exploring substitutes for river sand. Across the World there is growing
support for the increased use of manufactured sand used in the production of concrete.
The properties of particle shape, consistent gradation and zero impurities are the reason
for the preference by structural consultants and concrete technologists. The imperative
need for clean sand, eliminating the constraints of river sand like availability, price
fluctuation etc, have made manufactured sand the perfect substitute for river sand.
Manufacturing process and its standards:
The sand is manufactured in a three stage crushing process. The raw material is either
granite or basalt rock. The VSI which is also referred as sand making machine is in the
Tertiary Stage. The process adopted is similar to the river sand generation by nature. The
VSI applies the principle of rock on rock collision at a high velocity shaping the sand
particles.

58

The plant works on the principle of continuous feed in closed circuit and adopts the
technique synonymous and comparable to nature's production of river sand. The complete
manufacturing process takes minutes when compared to the nature which happens over
millions of years.
The product is produced to IS 383 standards.
Process
Our quarrying process typically begins with drilling and blasting the rock into smaller
pieces. Bore holes are drilled in the blast site and filled with explosives. The blast breaks
up the rock into smaller pieces that are loaded and hauled to the plant.
The plant consists of three circuits namely Primary circuit, Secondary circuit and Tertiary
circuit wherein a three-stage crushing takes place. A 500 mm down size granite rock that
is brought from the quarry via operations which involve (deleted involves) drilling,
blasting, segregation, secondary breaking and transportation to the plant, is fed into to the
Primary Circuit consisting of one Jaw Crusher that sizes down this granite rock to
produce 150mm down size aggregate. This 150 mm down size rock is fed into the
Secondary Circuit consisting of one Cone Crusher to produce a 40 mm down size
aggregate which in turn is fed into the Tertiary Circuit consisting one Vertical Shaft
Impactor that produces Sand and Aggregate of the required Gradation & Shape.
The installed capacity of the plant is 200 TPH (Tons/Hr.) of RoboSand and Robo shaped
Aggregate of 20 mm & 10 mm size.

Plant & Machinery

59

The river sand, pebbles and gravel sourced from river beds were used as fine and coarse
aggregates.
The plant works on the principle of continuous feed in closed circuit
River sand is produced by flowing of stones in big floods from mountains to streams to
big rivers by the collusion of rock-on-rock thereby forming a mechanism of impactclearage-attrition-abrasion by which huge deposits are created
The Vertical Shaft Impactor applies a similar principle of rock-on-rock collusion for
crushing
The Barmac Rock-on-Rock Impactor uses a feild proven rock lined rotor that acts as
velocity stone hurling a continuous rock stream into a tightly packed rock lined crushing
chamber

60

The rotor continuously discharges energized stone particles into a highly turbulent
particle cloud contained within the crushing chamber where reduction occurs primarily
by Rock-on-Rock impact, attrition and abrasion

Thus the process is very synonymous to natures process of creating san

Quality Testing

The Sieve Analysis tests are conducted on RoboSand 20mm and 10mm everyday on
samples collected from conveyor belts, stock piles and loaded trucks

The following equipment is required and is available at all our plants

Sieves of different sizes

61

Sieve Shaker

Oven

Sampling Cones

All our sales officers are alos trained to carry out these tests at customer locations
The Vertical Shaft Impactor applies a similar principle of rock-on-rock collusion for
crushing

The sand is classified into four zones as per IS 383 norms

Plant Locations

62

QUESTIONAIRE FOR THE BANKS (FEDERAL BANK)

63

INTERVIEWER: MR- JOSE

1.What are the different products and services offered under corporate buying by
your banks?
Ans:
FUND BASED

NON FUND BASED

1.TERM LOAN

1. LETTER OF CREDIT

2.WORKNG CAPITAL

2. BANK GUARANTEE

2.What is the fees/nterest charged by the bank for the services offered by the bank?
Ans:
FEES

INTEREST

1.PROCESSNG FEES

1.CUSTOMER RATING

2.LEGAL FEES
3.ADMINISTRATIVE FEES

3.List the customers that the bank caters to?

Ans:

64

1.TATA GROUP
2.BOMBAY STOCK EXCHANGE
3.CIAL COCHIN NTERNATIONAL AIRPORT LIMITED

4.Who is the biggest client of the bank?

Ans:AIR INDIA AND RELIANCE.

5.How many employers are working in this department?

Ans:
NUMBER

OF TOTAL

NUMBER

OF TOTAL

NUMBER

EMPLOYEES

MALES

FEMALES

60

45

15

OF

6.What is the academic background of the staff from the corporate banking
department?
Ans:

65

DESIGNATION OF THE EMPLOYEES

ACADEMIC BACKGROUND

MIDDLE LEVEL MANAGERSS

B.TECH+MBA OR CA OR ICWA

Changes in the rate of interest / fiscal policy monetary policy.

Competition from other bank.
Asset liability mismatch.

7.Who is the corporate banking department head?

Ans:DGM(DEPUTY GENERAL MANAGER) BRANCH HEAD.

8. What is the heirecy of the corporate banking department?

Ans:

66

EXECUTIVE DIRECTOR (VERTICAL HEAD i.e MCG)

GENERAL MANAGER( REGIONAL HEAD)

DEPUTY GENERAL MANAGER HEAD (BRANCH MANAGER)

ASSISTANT GENERAL MANAGER

ASSISTANT MANAGER DEPUTY GENERAL MANAGER HEAD (BRANCH

MANAGER)

9.Since when is the bank providing these corporate banking services?

Ans: For the last 32years

10.what are the problems faced by the bank?

Ans: Nonperforming assets

QUESTIONAIRE FOR BANKS (SBI)

67

1.What are the different products and services offered under corporate buying by
your banks?
Ans
FUND BASED

NON FUND BASED

1.TERM LOAN

1.LETTER OF CREDIT

2.CORPORATE LOAN

2.BANK GUARNTEE

3.CASH CREDIT

3.TREASURY PRODUCTS

4.WORKING

CAPITAL

DEMAND 4.CASH MANAGEMENT SYSTEMS

LOANS
5.BILL FINANCE

5.TAXATION PAYMENTS/ FRANKNG

OF STAMPS

2. What is the fee/ interest charged by the bank for the services offered by the bank?
Ans:
CORPORATE

BANKING

SERVICES FEE

RATES

AND

INTEREST
68

OFFERED

CHARGED

1.ADVANCES (LONG TERM)

BPLR p.a

2.ADVANCES (SHORT TERM)

STL RATES APPLICABLE TIME TO

TIME

L/C

COMMISION IN THE RANGE OF 1%p.a

BG

COMMISION IN THE RANGE OF 1%p.a

69

3.List the customers that bank caters?

Ans:
RELIANCE INDUSTRIES

VVF NDUSTRIES LTD

AIR NDIA

JBF NDUSTRIES LMITED

JET ARLNES LIMITED

31 INFOTECH LIMITED

BOMBAY DYEING
TATA TELECOM
RELIANCE COMMUNICATION

TOTAL 140 CLIENTS

70

4.Who is the biggest client of the bank?

Ans: AIR INDIA AND RELIANCE.

5.How many employers are working in this department?

Ans:
NUMBER

OF TOTAL

NUMBER

OF TOTAL

NUMBER

EMPLOYEES

MALES

FEMALES

60

45

15

OF

6.What is the academic background of the staff from the corporate banking
department?
Ans:
DESIGNATION OF THE EMPLOYEES

ACADEMIC BACKGROUND

MIDDLE LEVEL MANAGERSS

B.TECH+MBA OR CA OR ICWA

71

7.Who is the corporate banking department head?

Ans:DGM(DEPUTY GENERAL MANAGER) BRANCH HEAD.

8.What is the heirecy of the corporate banking department?

Ans:
EXECUTIVE DIRECTOR (GROUP HEAD)
EXECUTIVE DIRECTOR (VERTICAL HEAD i.e MCG)
GENERAL MANAGER( REGIONAL HEAD)
DEPUTY GENERAL MANAGER HEAD (BRANCH MANAGER)
ASSISTANT GENERAL MANAGER
MANAGER
ASSISTANT MANAGER

72

VERTICLE HEAD

1.MID CORPORATE
2.LARGE CORPORATE GROUP
3.INFRASTRUCTURE GROUP

9.Since when is the bank providing these corporate banking services?

Ans:For the last 32years

10.what are the problems faced by the bank?

Ans: Non performing assets
Changes in the rate of interest / fiscal policy monetary policy.
Competition from other bank.
Asset liability mismatch.

73

QUESTIONAIRE

FOR

THE

CORPORATES

(ROBO

SILICION)

1.List the bank from when the company avails corporate banking services?
Ans:
NAME OF THE BANKS

SERVICES AVAILED

SBI

LOANS

ICICI

BRIDGE FINANCE

INDIAN OVERSEAS BANK

ISSUE OF DEBT FUNDS

CITI BANK

FOREX TRANSACTIONS

2. What are the fees/interest charged by the bank for the services provided by them?

74

Ans:
CORPORATE BANKING SERVICES

FEES INTEREST CHARGED

FUND BASED
1.RUPEE

PLR-100bps.

2.FOREIGN CURRENCY
3.EXPORT

RBI NORMS NEGOTIATED ON CASE

TO CASE BANS IS

4.OTHER

55%CONCESSION

TO

NORMAL

SERVICES CHARGES
5.LETTER

OF

CREDIT/BANK

GUARANTEE

3.What are the measure taken to control the bank charge/commission borne by the
company?
Ans: Minimum usage of LC route large volume of transation timely retirement of
obligations.
75

4.What are the negotiations tactics used by the company to obtain maximum
utilisation of bank facilities?.

Ans: We offer volume business which works as a sweeter to the banks.

5. List the benefits given by the banks?

Ans:
FUND BENEFITS

NON-FUNDED BENEFITS
LC AND BG AT 55% CONCESSION

6. Which bank do you wish to deal with?

Ans: 1.Nationalised banks :2. Private sector banks:76

Reason if so =

7. Which department decides on the bank with which the dealings have to be done?
Ans: Finance department in consultation with the board of directors

8. How frequently do you visit your concered relationship manager?

Ans ;Almost every day or on the time of the calls.

9.What are the problems faced with respect to the services provided by the bank?
Ans: Lack of transparency and rigidity in the services

10. Suggestions/Recommendations for the bank?

Ans: No suggestions.

QUESTIONAIRE FOR THE CORPORATES (HP PANVEL INDUSTRIES)

1. List the bank from when the company avails corporate banking services?
Ans:

77

NAME OF THE BANKS

SERVICES AVAILED

UNION BANK

DAY

TO

DAY

CORPORATE

TRANSACTIONS
IDBI BANK

INDUSTRY FINANCING

SOUTH INDIAN BANK

AUTOMATED PAYMENTS

EXIM BANK

LC AND BG

2. What are the fees/ interest charged by the bank for the services provided by
them?
Ans:
CORPORATE BANKING SERVICES

FEE/INTEREST CHARGED

1.BANK GURANTEE

45%

CONCESSION

TO

NORMAL

SERVICES CHARGE
78

2.EXPORT

5%

3.OTHERS

5-20%

4.RUPEE

AS PRE RBI REFERANCE RATE

3. What are the measure taken to control the bank charges/commission borne by the
company?
Ans: Huge transactions and regular retirement obligations.

4. What are the negotiations tactics used by the company to obtain maximum utilizationof
bank facilities?

79

Ans:We provide large numbers of investors in the correspondent banks so as to get the
good benefit from the banks.

5. Lisit the benefits given by the banks?

Ans:
FUND BASED BENEFITS

NON FUNDED BENEFITS

1.WORKING CAPITAL FINANCING

LETTER OF CREDIT

2.TERM LOAN

BANK GUARANTEE

6. Which bank you wish to deal with?

Ans:

Nationalized banks

As they are operated and regulated by the government and the rate of interest is low as
compared to private banks.

7. Which department decides on the bank with which the dealing have to done?
Ans: The finance department decides with the consultation

of the deputy general

manager.
80

8. How frequently do you visit to the concerned relationship manager?

Ans:We visit in bank on the official call basis.

9. What are the problems faced with respect to the services provided by the bank?
Ans: Too much formalities and lack of flexibility

10. Suggestion/Recommendation to the banks?

Ans:No suggestions.

(APPENDICES)
QUESTIONAIRE FOR THE BANKS

What are the different products and services offered under corporate buying by your
banks?
Ans:What is the fees/interest charged by the bank for the services offered by the bank?

81

Ans:List the customers that the bank caters to :Ans:Who is the biggest client of the bank?
Ans:How many employers are working in this department?
Ans:-

What is the academic background of the staff from the corporate banking department?
Ans:Who is the corporate banking department head?
Ans:What is the hierarchy of the corporate banking department?
Ans:Since when is the bank providing these corporate banking services?
Ans:What are the problems faced by the bank?
Ans:-

82

QUESTIONAIRES FOR THE CORPORATES

List the bank from when the company avails corporate banking services?
Ans:What are the fees/interest charged by the bank for the services provided by them?
Ans:What are the measures taken to control the bank charges/commission borne by the
company?

83

Ans:What are the negotiation tactics used by the company to obtain maximum utilization of
bank facilities?
Ans:List the benefits given by the bank?
Ans:-

Which bank do you wish to deal with?

Ans:Which department decides on the bank with which the dealings have to be done?
Ans:How frequently do you visit your concerned relationship manager?
Ans:What are the problems faced with respect to the services provided by the bank?
Ans:-

10.Sugeetions/Recommendations for the bank

Ans:-

84

INTERPRETATION OF DATA AND ANALYSIS

Corporate banking dealings are very customised taking to consideration the customers
volume of business requirements.Each corporates is given concessions keeping in mind
the healthy relationship that they maintain and the period since when they deal are
dealing with the bank.
As far as the corporate are concerned they preffer dealings with a consortium of banks
taking advantages the benefits provided by all the banks. The corporates convince the
banks by provide a huge volume of the business for the concession given by them.
85

While getting the questionaire filled it was noticed that the banks were very skeptical
about revelaing the details regarding the fees or the interest charged by them to the
corporate.
Overall the corporate banking charges are applied on a case an case basic keeping into
consideration the RBI regulations.

RECOMMENDATIONS & SUGGESTIONS

If we look at it from the corporate angle then the banks need to speed up their procedures
and thus enabling fast functioning of the work.It is seen that the corporates feel that the
private banks are rigid in their system and dont make concessions consedering the
urgency of the situation.
According to the banks they need the companies to have credit worthinessand clean chit
on stheir financial records. Hence it is suggested that the company maintain their
86

financial performance according to the rules and regulations. The corporates also need to
pay off their obligations on time which would help them to create a good impression on
the banks and make it easy for them for future borrowings.

CONCLUSION

Corporate banking focuses on offering a full range of services to multinationals, large

domestic corporate and institutional clients.
Corporate banking reflects banks strength in providing an corporates clients in India, a
wide away of commercial, transactional and electronic banking product developments
and a well- interegated approach to realtionship management.

87

Corporate banking services are an integral part of the corporate, investment banking and
markets (CIBM) structure,which focuses on offering a full range of services to
multinational, large domestic corporate and institutional clients. It can be concluded that
the banks help corporate in financial needs thus enabling them to run smoothly &
effectively

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