PROJECT REPORT ON

LOAN SYNDICATION IN SBI

SUBMITTED BY

KAVITA BARASKAR

T.Y.B.COM. BANKING & INSURANCE SEMESTER V

2016-17

UNDER THE GUIDANCE OF

PROF. SANTOSH GUPTA

SUBMITTED TO

UNIVERSITY OF MUMBAI

VIDYALANKAR SCHOOL OF INFORMATION TECHNOLOGY

(AFFILIATED TO UNIVERSITY OF MUMBAI)

VIDYALANKAR MARG, WADALA (E),

MUMBAI 400 037

 DECLARATION

Vidyalankar School of Information Technology

(Affiliated to University of Mumbai)

Vidyalankar Marg, Wadalba (E),

Mumbai 400 037

I Kavita Baraskar, student of T.Y.B.Com. Banking &

Insurance Semester V, Vidyalankar School of Information
Technology, hereby declare that I have completed the
project on Loan Syndication in State Bank of India in
academic year 2016-17.
The information submitted is true and original to the
best of my knowledge.

Signature of the
Student

Kavita Baraskar
 ACKNOWLEDGMENT

I hereby acknowledge all those who directly or indirectly helped me in drafting of

this project report. It would not have been possible for me to complete the task without
their help and guidance.

First of all I would like to thank the principal Dr. Rohini kelker

And the coordinator Prof. Vijay Gawde who gave me the opportunity to do this project
work. They also conveyed the important instructions from the university time to time.
Secondly, I am very much obliged of Prof. Santosh Gupta for giving guidance for
completing the project.

Last but not the least; I am thankful to the University of Mumbai for offering the
project in the syllabus. I must mention my hearty gratitude towards my family, other
faculties and friends who supported me to go ahead with the project.

INDEX

Chapter Topic Page no

no.
 EXECUTIVE SUMMARY

1. INTRODUCTION TO STUDY
1.1 Title.
1.2. Objective.
1.3. Limitations
1.4. Methods of the study
2. INTRODUCTIN TO CHALLENGES BEFORE INDIAN
BANKING SYSTEM
2.1. Banking
2.2 Introduction

2.3. classification of bank

2.4. Economic benefits of Banking
2.5. Challenge face by Indian Banking System
2.6. Challenges before Indian commercial Banks
2.7. Current position
2.8. Capital adequacy Ratio
2.9. The present scenario of Indian Banking System
2.10. Future scenario of Indian Banking system
3. REVIEW OF LITERATURE
4. ANALYSIS
5. FINDING
6 CONCLUSON
7. ANNEXURE
7.1 Questionnaire

LOAN SYNDICATION STATE BANK OF INDIA

CHAPTER 1:- INTRODUCATION OF STUDY:

OBJECTIVE OF THE STUDY:

To examine the operations, advantages and disadvantages of loan

syndication as financing options.
 To evaluate the operation, advantages and disadvantages of
project financing options.
The examination in general terms of various issues involved in loan
syndication.
The find out whether loan syndication is really a new approach to
other form of borrowing.

LIMITATIONS OF STUDY:

Limited information source.

Limitations of time.
Limitations on the part of respondents.
Limitations of cost.
Difficulty faced to enter in the bank.

METHODOLOGY OF THE STUDY:

SAMPLE SIZE: - 50 [Customers]

Primary Data: - primary data will be collected with the

help of questionnaire and individuals.
Secondary Data: - Through the sources like books,
internet.
CHAPTER 2: INTRODUCTION OF TOPIC:

2.1.Introduction to Banking:

Bank plays an important role in the economic development of nation banks

provide a number of functions. The term bank comes from the world BANCO which
means a bench. In earlier days European money lenders used to display coins of
different countries in big heaps on benches or tables for the purpose of lending or
exchanging. It receives money form of deposits and lends the money to those who
need it. The primary functions of the bank are known as banking functions and
secondary functions of bank are known as non-banking functions.
 A bank is a financial institution which deals with deposits and advances and
other related services. The term banking has undergone tremendous changes over the
years. The traditional and commercial banking activities of accepting deposits and
lending have been replaced by the concept of universal banking and now international
banking. Banks are expanding their operations, entering new markets and trading in
new assets types. The changes in financial system has created new opportunities
along with new risks.

BANKING is one of the top most career choices made by students in India banks are in-
charge of individuals or organizations money. Banks reimburse interest on the
deposited money offer loans to people for personal or business use. They also offer a
broad array of services such as giving advice related to investment and insurance,
exchange of foreign currency and acting as trustees

Bank:

A financial institution that is licensed to deal with money and its substitutes by accepting
time and demand deposits, making loans and investing in securities. The bank
generates profit from the difference in the interest rates charged and paid.

An establishment authorized by a government to accept deposits , pay interest ,

clear checks , make loans , act as an intermediary in financial in financial transactions ,
and provide other financial services to its customers .

A bank is a financial institution that accept deposits from the public and creates credit,
lending activities can be performed either directly or indirectly through capital
markets .Due to their importance in the financial system and influence on national
economic. Banks are highly regulated in most countries. most nations have
institutionalized a system is known as fractional reserve banking under which banks
hold liquid assets equal to only a portion of their current liabilities . In addition to other
regulations intended to ensure liquidity, banks are generally subject to minimum capital
requirements based on an international set of capital standards, known as the Basel
Accords.
Banking is its modern sense evolved in the 14th century in the rich cities of renaissance
Italy but in many ways was a continuation of ideas and concepts of credit and lending
that had their roots in the ancient world. In the history of banking, a number of banking
dynastiesnotably, the medicos, the Fuggers, the welders , the breeders and the
Rothschilds have played central role over money centuries the oldest existing retail
bank is banc a monta deli parched merchant bank is Bahrenberg bank .

In simple words, we can say that bank is a financial institution that undertakes the
banking activity i.e. it accepts deposits and then lends the same to earn certain profit.

A financial institution that is licensed to deal with money and its substitutes by accepting
time and demand deposits , making time loams , and investing in securities . The bank
generates profit from the difference in the interest rates charged and paid.

In simple word, Bank means the term derived from French word, Bankee which means
a table where wins and money is exchanged.

2.2.INTRODUCTION OF LOAN SYNDICATION:

Loan syndication refers to services rendered by an organization in

arranging and procuring credit from financial institutions, banks, other
lending and investment companies for financing the project or meeting the
working capital requirements. The loan syndication work involves
identification of sources where from funds would be arranged,
approaching these sources with requisite application and supporting
documents and complying with all the formalities involved in the sanction
and disbursal of loan. In loan syndication there is a leader bank who
undertakes all the duties and functions of finance. The fees charged by
merchant banker for undertaking loan syndication varies up to one percent
of the total loan amount. Syndicated loan provide borrowers with a more
complete menu of financing options.
 In effect, the syndication market completes a continuum between
traditional private bilateral bank loans a publicly traded bond market. Loan
syndications is responsible for arranging co-financing with commercial
banks and other financial institutions directly or indirectly with Export
Credit Agencies (ECAS). Loan syndication has chosen a flexible market
oriented approach. Loan syndication refers to assistance rendered by
merchant banks to get mainly team loans for projects. Such loans may be
obtained from a single financial institution or syndicate or consortium.
Merchant bankers provide help to corporate clients to raise
syndicated loans from commercial banks. Merchant banking is an
institution which covers a wide range of activities such as portfolio
management, credit syndication, and corporate advisory services. They
help clients approach financial institutions for term loans. The loan
syndications team includes dedicated professionals in Chicago, New York,
Toronto and London who are active in the bank market and have an in
depth knowledge of the current trends in loan pricing, structure and trading
activities. As the size of the individual loans increased, individual banks
found it difficult to take the single handed-regulatory authorities in the most
countries limit the size of the individual exposures. Hence the practice of
inviting other banks to participate in the loan, to form a syndicate, come
into being; thus the term syndicated loans. A loan syndicate refers to the
negotiation where borrowers and lenders sit across the table to discuss
about the terms and conditions of lending. At present large groups of
banks are forming syndicates to arrange huge amounts for corporate
borrower.

2.2.Meaning of loan syndication:-

When a group of lenders collectively extend loan to a single borrower,

using a similar terms and conditions, documentation etc. administered by
common agent, it is called a syndicated loan. The group of lenders is called
syndicate. Generally, this loan is provided to corporations and government
bodies because the amount to be lent is huge. Syndicated loans are primarily
given by the banks, but these days a variety of investors are also involved in this
loan lending institution such as mutual fund, insurance companies, pension plans
and hedge funds.

2.3. Types of loan facilities provided by banks:-

1) Term Loan It is a loan from a bank for a specific amount that has a specified
repayment schedule and a floating interest rate. Term loans almost always
mature between one to 10 years. Repayment in this system could be at once at
the end of the facility or in installments. Once a term loan is paid back by the
borrower, it cannot be re-drawn.

2) Revolving Loan In this facility the borrower decides how often 3dthey want to
withdraw and in what time intervals. Unlike a term loan, this facility allows
borrower to re-draw, re-pay or drawdown the loan during the term of its facility. If
a revolving loan made to re-finance another revolving loan and drawn by the
same borrower in the same currency which matures on the same date as the
drawing of the second revolving loan, is known as a rollover loan.
3) Evergreen facility A loan that can be extended after-preset periods. Like a
five year loan facility can be renewed and increased by further 5 years.

4) Back stop facility This loan is designed to be drawn only as the last resort for
e.g. in situations like when a corporation is on verge of liquidation. . It works as a
back-up when other funding sources have failed. There is also a swing line
facility, which gives the borrowers the same day money.

5) General facility Syndicated loan agreements could either be a term facility or

may be revolving facility or they can contain combination of both or several of
each type.

2.4. Meaning of syndication:

An association of individual formed for the purpose of conducting a

particular business or a joint venture.
Pooling of resources by financial institutions in a financing project to
spread the investment is proportionate to the degree of risk or amount of
funds that each has put up or underwritten.
A syndicate is a general term describing any group that is formed to
conduct some type of business. For Example, a syndicate may be formed
by a group of investment bankers who underwrite and distribute new
issues of securities or blocks of outstanding issues. Syndicates can be
organized as corporation or partnerships.
A syndicated loan is a large loan in which a group of banks work together
to provide funds for a borrower. These is usually one lead bank that take
 a percentage of the loan and syndicates the rest to other banks. A
syndicate loan is the opposite of bilateral loan, which only involves on
borrower and one lender.
A syndicate only works together temporarily. They are commonly used for
large loan or underwritings to reduce the risk that each individual firm must
take on.
It can also be termed as an association of people or firms formed to
engage in an enterprise or promote a common interest or an association
of people or firms authorized to undertake a duty or transact specific
business.
The cost of a syndication loan consists of interest and a number of fees-
management fees, participation fees, agency fees and underwriting fees
when the loan is underwritten by a bank or group of bank.

2.5. Why syndicate loan?

 Borrower wants to raise reality large amount of money quickly and
conveniently.

The amount exceeds the exposure limits or appetite of any one lender.

Borrower does not want to deal with a large number of lenders.

2.6. Parties to loan syndication:

1) Borrower The person or institution which is in need of a loan and initiates

the process is the borrower.
2) Arranger Generally one of the lenders (mostly a bank) who forms a
syndicate. He communicates, negotiate and lure financial institutions to
join the syndicate. Also suggests the borrower which facility it requires and
help it in negotiating the terms of the facility.
3) Co-arranger The first or initial group of lenders are called co-arrangers.
They find more institutes to join the syndicate.
4) Agent He is the one who looks after the dayto- day working and
administration of the loan facility. He acts as an agent of the lenders not
borrowers. He acts as a mediator between syndicate and borrower. His
duties are to set the loan agreement and for which it gets paid by the
borrower. Agent has to ensure that the borrower has complied with every
condition mentioned in the loan agreement and borrower is required to
give all notices to the agent. The borrower and syndicate are required to
make all payments (under the loan agreement) to the Agent. He then
transfers that money back to the opposite parties.
5) Security Trustee- To secure the syndicate loan, a lender from the
syndicate is usually appointed as a Security Trustee to look after the
security on trust for the benefit of the lenders. Its duties are far more
extensive than that of an agent.
6) Co- lenders- The co-lenders would normally constitute a group of banks or
other financial institutions who have contributed a percentage share
towards the syndicated loan. Once these institutions have given their
share of loan, and the syndicated loan agreement is signed; they usually
take a more passive role in the project, relying on the competence of the
Agent to further their interests.
7) Decision making panel-Usually the duty of making decisions in granted to
a group of lenders in a syndicate to minimize the effort of consulting each
and every lender. This group could be made of the lenders who hold
maximum commitment i.e. who has given biggest loan in the syndicate.

The choice of sources of fund depends upon

i) Nature of the project.

ii) Estimation of the cost of the project.

There are three types of sources of money

1) Short term finance When the funds are needed for 1 year. It can be made
2) Medium term finance When funds are needed for 1-5 years. These funds
are for buying new assets, working capital or expansion of the business.
These are granted by commercial banks and all India Financial
Institutions.
3) Long term finance- When funds are required for more than 5 years.
 Preparation of Loan application- Arranger should make sure that the
client company has complied with all the necessary formalities. If there
are more than one creditors, the application will be filed with one
development finance institution and the company or the arranger will
deal with only one institution termed as lead institution . The project
will be appraised and sanctioned under single window concept
method of dispensing of credit.
Syndicated Loan Agreement: The loan agreement in which the detailed
terms and conditions of the facility is made available to the borrower.
The agents have to follow up the sanction of the loan amount by the
lender. The Appraising Institute (who appraises the project) takes the
matter to its board of directors or its office may put the proposal with
full appraisal note before the sanctioning authority for according
necessary sanction. Then the financial institution informs the applicant
borrower of such sanction along with the detailed terms and conditional
and arrangements of other lenders. The sanction letter mainly covers
amount of loan, interest, commitment, charge security for the loan
conversion option, repayment of loan etc.

Different kinds of Fees for loans:

1) Arrangement fee- Fee paid to the bank for arranging syndication,

which includes structuring, syndicating and negotiating the
documentation.
2) Underwriting fee- Underwriting fees is money collected by
underwriters for performing underwriting services.
3) Participation fee- Fee paid to the bank for joining the Syndicate
process and is paid according to the commitment of the loan given by
the bank.
Annual fees
1) Commitment fee- it is charged on undrawn element of either a term
loan or revolving loan to compensate bank for the contingent liability. It
usually half of the margin. Sometimes, it is also according to the level
of utilization of the loan.
2) Facility fee It is charged on commercial paper standby or back-
stop facilities. It is not like commitment fee and is payable in full
30amount regardless of the utilization.
3) Management fee- Fee paid to the lead manager or arranger.
4) Agent fee- The fee paid to the agent for its services. Details of
these fees are usually put in separate side letters to ensure
confidentiality. The Loan Agreement should refer to the Fee Letters and
when such fees are payable to ensure that any non-payment by the
borrower carries the remedies of default set out in the Loan
Agreement.

2.9. Process involved in loan syndication:

The borrower decides about the size and currency of the loan he
desires to borrowers and approaches the bank for arranging the
financing on the basis of business, purpose of the loan etc.
For a name acceptable in the market, in general several banks or
group of banks will come forward with offers indicating broad terms on
which they are willing to arrange the loan.
The loan get finalized by both the borrowers and the lenders on and
the lenders on an information memorandum giving financial details and
 other details of the borrower the lead manager would participate in the
loan from lenders based on the information memorandum.
The entire fees would be showed by the participating bank (base on
their participation) and lead manager.
The lead manager are liable to finance the balance amount.
The next step in finalization of the loan agreement by borrowers and
lender is done after the participants are known and the loan is
published through a financial press.

2.10. Parties involved in the process of loan syndication:

The lead bank and participating banks are the main parties
involved in loan syndication. In large loan amounts, sometimes there
are four parties involved, other than the borrower, in the syndication
process. These are arranger/lead manager bank, underwriting bank,
participating banks and the facility manager agent.
1. Arranger/lead manager: - The lead manager is the prime bank
which is involved in the process of negotiating a syndicated loan with
the borrower. Negotiating with the clients, decoding the terms and
conditions of the loan, disbursing the loan, etc. are all function of Lead
bank. The lead bank is the most important party in a syndicated loan
transaction.
2. Underwriting Bank: - Syndication is process of arranging loans,
success of which is not guaranteed. The arranger bank may
underwrite to supply the entire reminder (unsubscribed) portion of the
desired loan and in such a case arranger itself plays the role of
underwriting bank. Alternatively a different bank may underwrite
(guarantee) the loan or portion (percentage of the loan). This bank
would be called the underwriting bank. It may be noted that all the
syndicated loans may not have this underwriting arrangement.
3. Participating Banks: - These are the banks that participate in the
syndication by lending a portion of the total amount required. These
banks charge participation fees. These banks carry mostly the normal
credit risk i.e. risk of default by the borrower. As like any normal loan.
These bank may also be led into passive approval and complacency
risk.
4. Facility manager/agent: - Facility manager takes care of the
administrative arrangements over the term of the loan (e.g.
Disbursement, repayment and compliance). It acts for and on behalf of
the banks. In many cases the arranging/underwriting bank itself may
undertake this role. In larger syndications co-arranger and co-
manager may be used.
2.11. Features of loan syndication:

Two or more banks (the syndicate of lenders) contract with a

borrower to provide credit on common terms and conditions governed
by a common a document.
Multi-bank transaction, each bank acting severally.
Although common documentation, a bank has ultimately, the
individual right to take legal action against borrower.
Interest usually accrues at a variable or floating rate and is reset
periodically, at agreed intervals, usually at borrowers choice.
Usually of medium term maturity, 3-10 years Bank participate on
common terms and conditions, but not necessarily in equal amounts.
Loan can be provided in multiple currencies in a single syndicated
loan on demand of the borrower.
As for the borrower, syndicated loans provide large amounts of loans
with longer term and easy operation management (only need to
contract with the agent bank.)
Fewer restriction on the use of proceeds (compared with government
loan and export credit.)
Easier management (compared with loans borrowed separately from
different banks.)
Syndication loan is more suitable as compared to a simple loan from
single or multiple banks.
The borrowed does not have to deal with large number of lenders.
It has permitted the issuers to achieve more market-oriented and
cost-effective financing.
Loan syndications are a cost effective method for participating
institutions to diversify their banking books and to exploit any funding
advantages relative to agent banks.

2.12. Advantages/Benefits of loan syndication:

 1) Advantages to the Borrower:-
The borrower has to deal with single bank. There is single contact
point and single set of documents.
It helps him to access large amount of funds.
It enables access to wife range of banks, thereby, improving network
of the borrower.
It enables obtaining loan with greater speed and reasonable certainty.
This method is simpler than raising capital through other means (by
way of issue of bonds or equity).
2) Advantages to the Lead bank:-
It provides an additional viable source of income. The lead bank gets
arrangement fees without committing the entire loan amount.
It enhances banks reputation.
It enhances banks relationship with the client.
3) Advantages to the Participating banks:-
It helps the participating banks in diversification of risks as the
exposure norms are prescribed by the Central Banking Authority.
It gives access to lending opportunities with low cost.
The Participating banks get returns by way of participating fees and
interest.
The loan can be transferred to the other lender/investor by the
existing participator, thereby, improving liquidity positions.

2.13. Reasons/purpose for loan syndication:

A loan is an assumption of Risk. For a certain class of loan, with

certain rules, the bank might believe that it is likely that 5% of all
borrowers, may go bankrupt. If the banks cost of funds is a
hypothetical 5%, the bank needs to charge more than 10% interest on
the loan to make a profit. In general, banks and the financial markets
used risk-based pricing, charging an interest rate depending on the risk
of the loan product in general or the risk of specific borrower.
 The problem with larger businesses loans, however, is that
there are fewer of them. So, if the bank has the only large business
loan and if that business happens to be one of that defaults, then the
bank loses all its money. For this reason, it is in the best interest of all
banks to split, or syndicate their large loans with each other, so each
get a representative sample in their loan portfolios.
A second often criticized reason for syndicating loans is that it
avoids large or surprising losses and instead usually provides small
and more predictable losses are favored by many management teams
because of the general perception that companies with smoother or
steadier earnings are awarded a higher stock price relative to their
earnings. If the bank could still get a representative sample by not a
syndicating. This same dynamic plays out in the investment banking
and insurance fields, where syndication also takes place.
To avoid that the borrower has to deal with all syndicate banks
individually, one of the syndicate banks usually acts as an agent for all
syndicate members and acts as the focal point between them and the
borrower.

2.14. Needs for loan syndication:

Loan syndication has become one of the popular ways of financing

huge loans. Loan syndications can be useful tool for banks to maintain
a balanced portfolio of loan assets among a variety of industries. If
one loan is too large, it may overweight the banks portfolio. Therefore
banks may pursue a syndications may incur a large expense to the
borrower. While the syndication fee is usually financed, the burden of
repaying the loan and syndication fee is shouldered ultimately by the
borrower.
The need for loan syndication arises on account of following
reasons:-
1. Loan Syndication is suitable when the loan amount had exceeded
the risk appetite of a single lender.
2. It is useful when the borrower wants to raise large amounts of loan
quickly and conveniently.
3. It is suitable when the lenders risk involved is huge and when he
wants to share the risk of default by the borrower with other lenders.
4. It also enables the borrower to get loan through one agreement
instead of multiple agreements with multiple lenders.

2.15. The syndication loan market:

 The syndication loan market, a hybrid of the commercial banking and investment
banking worlds, is globally one of the largest and most flexible source of capital.
Syndicated loans have become an important corporate financing technique, particularly
for large firms and increasing for midsized firms. The syndicated loan market has
advantages for junior and senior lenders. It provides an opportunity to senior banks to
earn fees from their expertise in risk organization and manage their balance sheet
exposures. Todays syndicated loan market benefits banks also, in times of adversity
they can sell portions of the syndicated credits into a relatively liquid secondary market
and actively manage the risk their loan portfolios. The development of the secondary
market for syndicated loans has led to the creation of a new asset class with greater
return per unit of risk that many other fixed income assets and low correlations with
most other classes of assets. The syndicated loans market has grown rapidly years,
driven primarily by an increase in corporate takeovers, private equity transactions and
infrastructure deals. Strong liquidity means there is plenty of cash to invest and banks
are willing lenders. The leveraged loan market remains small compared with the
investment grade market and bankers said the investors and their attitudes were
markedly different. The volumes in the Indian offshore syndicated loan market have
grown enough in the past few years.
 How the market works:

Major corporate clients will automatically consider a syndicated loan for sums
above a few hundred million euros. It is an efficient way of raising funds quickly and on
the best terms. For borrowers the advantage is that they can raise larger amounts and
expand their group of bankers whilst at the same time only having to sign a single
contract. For lenders, syndication allows a diversification of the lending portfolio form
both a geographical and sectorial point of view.

By taking full advantage of the syndicated loan market, some banks have
managed to make headway in increasing their returns and still offering the borrowers
some of the finest terms and conditions ever seen. Features of the syndicated loan
market such as transaction size, availability, speed of reaction and flexibility ensure that
it continues to be one of the primary sources for issuers looking to raise capital from the
markets. It will examine the needs of both borrowers and lenders involved in the
origination, structuring, distribution and management of syndicated loans and link the
process of executing a successful deal to the optimal design of a syndications unit.
Banks have benefited from this broadening of the syndicated loan market in several
ways. They are a cost-effective method for participating institution to diversify and
exploit any funding advantages relative to agent banks.

Loan syndication involve a large amount of coordination and negotiation.

Typically, loan syndication involve a lead financial institution or syndicated agent, which
organizes and administers the transaction including repayments, fees, reporting and
compliance and loan monitoring.

2.17. Stages in loan syndication:

 1) Pre-mandate stage: - This is the initiated by the prospective
borrower. It may liaise with a single bank or it may invite competitors
bids from a number of banks. The borrower has to mandate the lead
bank and underwriting bank, if desired. Once the lead bank is selected
and mandated by the borrower, the lead bank has to undertake the
appraisal process. The lead banks needs to identify the needs of the
borrower, design and appropriate loan structure, and develop a
persuasive credit proposal.
2) Placing the loan: - At this stage the lead bank can start to sell the
loan in the marketplace i.e. to prospective participating banks. This
means that the lead bank, needs to prepare an information
memorandum, prepare a term sheet, prepare legal documentation,
approach selected banks invite participation. To conclude this stage
the lead bank must achieve Closing of the syndication, including
signing. If need be, Underwriting bank has to sign the balance portion
of the loan.
3) Disbursement: - Loan is disbursed in phases as agreed in the loan
contract. Loan is disbursed in no-lien account i.e. bank account
created exclusively to disburse loan. This account and its withdrawals
are monitored by banks. This is to ensure that the loan is used only for
the purpose defined in the loan agreement and that the funds are not
diverted to any other purpose.
4) Post-closure stage: - this is monitoring and follow-up phase.
Monitoring of repayment schedules is very important as the syndicated
loan is huge in amount; hence, to avoid credit risk, regular follow-up
with the client is essential. It is many times done through an escrow
account in which the returns earned by the borrower are deposited by
him and the repayment is done from it at regular intervals as decided
by the borrower and lender bank.

2.18. Documentation:
Important provision of Loan syndication agreement:-
1. The loan agreement specifies the interest, commitment fees and
management fees that the borrower should pay to the lender.
2. Document pertaining to borrowers financial position, over run
finance agreement, got approvals received (for e.g.:- relating to tax,
reduction at sources) trying up of other financial requirements (if
required), certificates from lawyers, and other internal and external
approval that would be required.
3. The primary or the secondary security against which the loan is
taken will have to be decided.
Documentation For syndication Loan
1) MANDATE LETTER: - The borrower appoints the arranger via
mandate letter (sometimes also called a commitment letter). The
content of the Mandate Letter varies according to whether the is
mandated to use its best efforts to arrange the required facility or if
the arranger is agreeing to underwrite the required facility. The
provisions commonly covered in a Mandate Letter include:-
An agreement to underwrite or use best efforts to arrange.
Titles of the arrangers, commitment amounts, exclusively provisions.
Condition to lenders obligations.
Syndication issues (including preparation of an information
memorandum, presentations to potential lenders, clear market
provisions, market flex provisions, and syndication strategy.
Costs cover and indemnity clauses.
2) TERM SHEET: - The Mandate Letter will usually be signed with a
Term Sheet attached to it. The Term Sheet is used to set out the terms
of the proposed financing prior to full documentation. It sets out the
parties involved their expected roles and many key commercial terms
(for e.g. the type of facilities, the facility amounts, the pricing, the term
of the loan and the covenant package that will be put in place).
3. INFORMATION MEMORANDUM: - Typically prepared by both the
Arranger and the borrower and sent out by the Arranger to potential
syndicate members. It contains a commercial description of the
borrowers business, management and accounts as well as the details
of the proposed loan facilities being given.
 It is not a public document and all potential lenders that wish to
see it usually sign a confidentiality undertaking.
4. SYNDICATED LOAN AGREEMENT: - The Loan Agreement sets
out the detailed terms and conditions on which the facility is made
available to the borrower.
5. FEE LETTERS: - In addition to paying interest on the Loan and any
related bank expenses, the borrower must pay fees to those banks in
the syndicate who have performed additional work or taken on greater
responsibility in the loan process, primarily the Arranger, the Agent and
the security Trustee. The Loan Agreement should refer to the Fee
Letters and when such fee are payable to ensure that any non-
payment by the borrower carries the remedies of default set out in the
Loan Agreement.

INTRODUCTION

STATE BANK OF INDIA:

State Bank of India (SBI) 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 2014-
15, it had assets of 20.480 trillion (US$300 billion) and more than
14,000 branches, including 191 foreign offices spread across 36
countries, making it the largest banking and financial services
company in India by assets. The company is ranked 232nd on the
Fortune Global 500 list of the world's biggest corporations as of 2016.
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 in 1955. Government of
India owned the Imperial Bank of 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.
History:

The roots of the State Bank of India lie in the first decade of the 19th
century, when the Bank of Calcutta, later renamed the Bank of Bengal,
was established on 2 June 1806. The Bank of Bengal was one of three
Presidency banks, the other two being the Bank of Bombay
(incorporated on 15 April 1840) and the Bank of Madras (incorporated
on 1 July 1843). All three Presidency banks were incorporated as joint
stock companies and were the result of royal charters. These three
banks received the exclusive right to issue paper currency till 1861
when, with the Paper Currency Act, the right was taken over by the
Government of India. The Presidency banks amalgamated on 27
January 1921, and the re-organized banking entity took as its name
Imperial Bank of India. The Imperial Bank of India remained a joint
stock company but without Government participation.
Pursuant to the provisions of the State Bank of India Act of 1955, the
Reserve Bank of India, which is India's central bank, acquired a
controlling interest in the Imperial Bank of India. On 1 July 1955, the
imperial Bank of India became the State Bank of India. In 2008, the
Government of India acquired the Reserve Bank of India's stake in SBI
so as to remove any conflict of interest because the RBI is the
country's banking regulatory authority.
 In 1959, the government passed the State Bank of India
(Subsidiary Banks) Act. This made SBI subsidiaries of eight that had
belonged to princely states prior to their nationalization and operational
take-over between September 1959 and October 1960, which made
eight state banks associates of SBI. This acquisition was in tune with
the first Five Year Plan, which prioritized the development of rural
India. The government integrated these banks into the State Bank of
India system to expand its rural outreach. In 1963 SBI merged State
Bank of Jaipur (est. 1943) and State Bank of Bikaner (est.1944).
SBI has acquired local banks in rescues. The first was the Bank of
Bihar (est. 1911), which SBI acquired in 1969, together with its 28
branches. The next year SBI acquired National Bank of Lahore (est.
1942), which had 24 branches. Five years later, in 1975, SBI acquired
Krishna ram Baldeo Bank, which had been established in 1916 in
Gwalior State, under the patronage of Maharaja Madho Rao Scandia.
The bank had been the Dukan Pichadi, a small moneylender, owned
by the Maharaja. The new bank's first manager was Jall N. Broacha, a
Parsi. In 1985, SBI acquired the Bank of Cochin in Kerala, which had
120 branches. SBI was the acquirer as its affiliate, the State Bank of
Travancore, already had an extensive network in Kerala.
The new logo of the SBI was actually the aerial view of the Kankaria
Lake in Ahmedabad, Gujarat on 1 October 1971 and was designed by
Shekhar Kamath.
There has been a proposal to merge all the associate banks
into SBI to create a "mega bank" and streamline the group's
operations.
The first step towards unification occurred on 13 August 2008 when
State Bank of Saurashtra merged with SBI, reducing the number of
associate state banks from seven to six. Then on 19 June 2009 the
SBI board approved the absorption of State Bank of Indore. SBI holds
98.3% in State Bank of Indore. (Individuals who held the shares prior
to its takeover by the government hold the balance of 1.7%)
The acquisition of State Bank of Indore added 470 branches to SBI's
existing network of branches. Also, following the acquisition, SBI's total
assets will inch very close to the 10 trillion mark (10 billion long
scale). The total assets of SBI and the State Bank of Indore stood at
9,981,190 million as of March 2009. The process of merging of State
Bank of Indore was completed by April 2010, and the SBI Indore
branches started functioning as SBI branches on 26 August 2010.
On 7 October 2013, Arundhati Bhattacharya became the first woman to
be appointed Chairperson of the bank.

The evolution of State Bank of India can be traced back to the

first decade of the 19th century. It began with the establishment of the
Bank of Calcutta in Calcutta, on 2 June 1806. The bank ware designed
as the Bank of Bengal, three years later, on 2 January 1809. It was the
first ever joint-stock bank of the British India, established under the
sponsorship of the Government of Bengal. Subsequently, the Bank of
Bombay (established on 15 April 1840) and the Bank of Madras
(established on 1 July 1843) followed the Bank of Bengal. These three
banks dominated the modern banking scenario in India, until when
they were amalgamated to form the Imperial Bank of India, on 27
January1921. An important turning point in the history of State Bank of
India is the launch of the first Five Year Plan of independent India, in
1951. The Plan aimed at serving the Indian economy in general and
the rural sector of the country, in particular. Until the Plan, the
commercial banks of the country, including the Imperial Bank of India,
confined their services to the urban sector. Moreover, they were not
equipped to respond to the growing needs of the economic revival
taking shape in the rural areas of the country. Therefore, in order to
serve the economy as a whole and rural sector in particular, the All
India Rural Credit Survey Committee recommended the formation of a
state-partnered and state-sponsored bank .The All India Rural Credit
Survey Committee proposed the takeover of the Imperial Bank of India,
and integrating with it, the former state-owned or state-associate
banks. Subsequently, an Act was passed in the Parliament of India in
May 1955. As a result, the State Bank of India (SBI) was established
on 1July 1955. This resulted in making the State Bank of India more
powerful, because as much as a quarter of the resources of the Indian
banking system were controlled directly by the State. Later on, the
State Bank of India (Subsidiary Banks) Act was passed in 1959. The
Act enabled the State Bank of India to make the eight former State-
associated banks as its subsidiaries .The State Bank of India emerged
as a pacesetter, with its operations carried out by the 480 offices
comprising branches, sub offices and three Local Head Offices,
inherited from the Imperial Bank .Instead of serving as mere
repositories of the communitys savings and lending to creditworthy
parties the State Bank of India catered to the needs of the customers,
by banking purposefully. The bank served the heterogeneous financial
needs of the planned economic development. The roots of the State
Bank of India rest in the first decade of 19th century, when the Bank of
Calcutta, later renamed the Bank of Bengal, was established on 2 June
1806. The Bank of Bengal and two other Presidency banks, namely,
the Bank of Bombay (incorporated on 15 April 1840) and the Bank of
Madras (incorporated on 1 July 1843). All three Presidency banks were
incorporated as joint stock companies, and were the result of the royal
charters. These three banks received the exclusive right to issue paper
currency in 1861 with the Paper Currency Act, a right they retained
until the formation of the Reserve Bank of India. The Presidency banks
amalgamated on 27 January 1921, and there organized banking entity
took as its name Imperial Bank of India. The Imperial Bank of India
continued to remain a joint stock company.
Pursuant to the provisions of the State Bank of India Act (1955), the
Reserve Bank of India, which is Indias central bank, acquired a
controlling interest in the Imperial Bank of India. On 30 April 1955the
Imperial Bank of India became the State Bank of India.

Recent awards and recognitions:

SBI was ranked as the top bank in India based on tier 1 capital by
The Banker magazine in a 2014 ranking.
SBI was ranked 298th in the Fortune Global 500 rankings of the
world's biggest corporations for the year 2012.
SBI was named the 29th most reputed company in the world
according to Forbes 2009 rankings
SBI was 50th Most Trusted brand in India as per the Brand Trust
Report 2013, an annual study conducted by Trust Research Advisory,
a brand analytics company and subsequently, in the Brand Trust
Report 2014, SBI finished as India's 19th Most Trusted Brand in India.

The latest news of loan syndication in SBI:

Private sector lender Axis Bank has maintained its position of being the
Largest bond syndicator in the domestic debt capital market with a
market share of 15.54%. For the half year ended June 30, the Bank
has syndicated loan of Rds. 25,556.8 core in about 151 deals. The,
bank has managed to maintain its top position for the last 8-9 years.
Axis Bank, the bank with the next largest loan syndicator among
banks is slandered chartered, which ranked fourth in the list with RS
11,053.8 cores worth of loans in 33deaks followed by ICICI Bank which
has syndicated about RS. 9,830.9 core in 87 deals with a market share
of 5.97%. YES Bank is the seventh largest syndicator with a market
share of 5.56%. HDFC Bank is 12th largest with a market share of
3.72% syndicating about RS. 6,131.9 core bonds during the half year.
State Bank of India (SBI) is ranked 20th with a share of 1.53%
syndicating loan of about RS. 2,521.6 core in 29 deals.
A Senior SBI official said, We go for private placements as we
have a huge appetite. We sometime subscribe something like RS.
2,000 core or RS. 4,000 core worth of bond placements, which do not
then have to come to the market. The other reason why our numbers
look small because bond syndication are undertaken by the merchant
banking division, SBI capital market.

CHAPTER 3 : REVIEW OF LITERATURE :

Pooja Shinde
To verify if a delegated monitor can certify its ability to perform its
assigned tasks, we test whether syndicated loans in which a larger
share of the facility is retained by the arranger have lower interest
rates. For a large sample of syndicated loans in over 80 countries we
find that this certification effect exists and is greater for facilities
characterized by greater due diligence and monitoring efforts. Further,
for listed companies the announcement effect of the new loan on the
stock price is an increasing function of the portions of the loan retained
by the arranger.

Rohan Range
There has been a considerable expansion of the volume of
syndicated loans in emerging markets in the recent years. We provide
the first analysis of the determinants of the decision of banks to
syndicate a loan on a sample of loan facilities from 50 emerging
countries. We show the significant role of loan characteristics and of
financial development, banking regulation, and legal institutions, in the
decision to syndicate a loan. We support the efforts of authorities to
increase banking competition and efficiency, and to implement binding
banking regulation on capital requirement to promote the expansion of
syndicated loans.

David shah
This paper analyzes the market for syndicated loans, a hybrid of
private and public debt which has grown at well over a 20% rate
annually over that past decade. We identify empirically the factors that
influence a bank or non-banks decision to syndicate a loan and the
determinates of the proportion of the loan sold in the event of
syndication. The evidence reveals a loan is more likely to be
syndicated as information about the borrower becomes more
transparent, as the syndicates managing agent becomes more
reputable, and as the loans maturity increases. The syndication
market involves element of both commercial banking and investment
 banking. The focus of this paper is on the market for syndicated loans
which is quite large and growing rapidly.

CHAPTER 4:- ANALYSIS

1) Are you aware of the syndication loan facilities provided by the bank?
 Figure 4.1 pie chart question no.1

PERC Respon
ENTA ses
GE
Yes 83.30 45
%
no 16.70 9
%

2) To whom are they more beneficial?

 Figure 4.2 pie chart Question no. 2

3) Do you think the formalities involved in the process are?

 Figure 4.3 pie chart question no 3

4) What according to you is the demand for syndication loan?

 Figure 4.4 pie chart Question no 4

5) For what purpose would you like to take this loan?

Figure 4.5 pie chart Question no. 5

6) Do you like loan syndication process in our bank?

 Figure 4.6 pie chart Question no. 6

7) Do you face any problem regarding service providing of loan

syndication?
 Figure 4.7 pie chart Question no. 7

8) Which bank is providing better loan syndication?

 Figure 4.8 pie chart Question no. 8

9) Is SBI bank good for loan syndication?

 Figure 4.9 pie chart Question no.9

CHAPTER 5:- FINDING

 1) Are you aware of the syndicate loan facilities provided by the bank?

In the above diagram, the customers are mostly aware of the loan syndication
facilities and the percentage of aware of customers is 83.3% and the not aware the
facilities is 16.7%.

2) To whom are they more beneficial?

In the above diagram the customers are more beneficial in financial

institution and the percentage of financial institution is 59.3% and the public percentage
is 40.7%.

3) Do you think the formalities involved in the process are ?

In the above diagram the formalities are more involve in process of

complex and the percentage of simple is 40.7% and complex of percentage is 59.3%.

4) What according to you is the demand for syndication loan?

In the above diagram the demand of loan syndication is more increasing.

The percentage of demand increasing is 62.3% and the decreasing is 37.7%.

5) For what purpose would you like to take this loan?

In the above diagram the more companies are not take this loan and the
percentage of take this loan decreasing is 9.20% and the not take this loan companies
is increasing percentage is 90.74%.

6) Do you like loan syndication process in our bank?

 In the above diagram the more companies are like the process of loan
syndication. the companies like this process of percentage is 61.7% and the does not
like this process of percentage is 38.9%.

7) Do you face any problem regarding service providing of loan syndication?

In the above diagram the more companies are not face problem in loan
syndication service. The percentage of problem face by companies are 46.2% and the
not problem face by companies are 53.8%.

8) Which bank is providing better loan syndication service?

In the above diagram companies are provided better loan syndication

service in commercial banks. the percentage of better service provided of commercial
bank are 63% and the investment banks are 37%.

9) Is SBI bank good for loan syndication?

In the above diagram the SBI bank is good for loan syndication. The
percentage of this bank good is 72.2% and the not good for bank is 27.8%.
 ANNEXURE:

1) Are you aware of the syndicate loan facilities provided by the bank?

a) Yes
b) No

2) To whom are they more beneficial?

a) Financial Institution
b) Public

3) Do you think the formalities involved in the process are?

a) Simple
b) Complex

4) What according to you is the demand for syndication loan?

a) Increasing
b) Decreasing

5) For what purpose would you like to take this loan?

6) Do you like loan syndication process in our bank?

a) Yes
 b) No

7) Do you face any problem regarding service providing of loan syndication?

a) Yes
b) No

8) Which bank is providing better loan syndication service?

a) Commercial bank
b) Investment bank

9) Is SBI bank goof for loan syndication?

a) yes
b) no