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Industry profile

Banking Industry has revolutionized the transaction and financial

service system worldwide. Through the development in the

technology banking services availed to the customers at all times,even after the normal banking hours, on a 24*7 bases. Banking

Industry services is nothing but the access of most of the banking

related services (such as verification of account details, going

with the transaction, etc.) In today’s world, progress of online

services is available to all customers of concerned bank and can

be accessed at any point of time and from anywhere provided the

place is equipped with the internet facility. Now-a –days, almost

all the banks all over the world, especially the multinational ones,provide their customer with Online Banking facility.

Definition

Under English common law, a banker is defined as a person who

carries on the business of banking which is specified as:

• Conducting current accounts for his customers

• Paying cheques drawn on him, and collecting cheques for

his customers

Economic function:

The economic functions of banks include:

1. Issue of money, in the form of banknotes and current

accounts subject to cheque or payment at the customer’s

order. These claims on banks can act as money because

they are negotiable and /or repayable on demand, and

hence valued at par and effectively transferable by mere



delivery in the case of banknotes, or by drawing a cheque,

delivering it to the payee to the bank or cash.

2. Netting and settlements of payments – banks act both as

collection agent and paying agents for customer’s andparticipate in inter-bank clearing and settlement systems to

collect, present, be presented with, and pay payment

instrument.

3. Credit intermediation-banks borrow and lend back-to-back

on their own account as middlemen.

4. Credit quality improvement –banks lend money to ordinary

commercial and personal borrowers (ordinary credit

quality), but are high quality borrowers. The improvement

comes from diversification of the bank’s assets and the

bank’s own capital which provides a buffer to absorb losses

without defaulting on its own obligation.

Banking channels:

Banks offer many different channels to access their bankingand other services;

• A branch, banking centre of financial centre is a retail

location where a bank or financial institution offers a

wide array of face-to-face services to its customers.

• ATM is computerized telecommunications device that

provides a financial institution’s customers a method of

financial transactions in a public space without the needfor a human clerk or bank teller. Most banks now have

more ATMs branches, and ATMs are providing a wider

range of services to a wider range of services to a wider

range of users. For example in Hong Kong, most ATMs

enable anyone to deposit cash to any customers of the



bank’s account by feeding in the notes and entering the

account number to be credited.

• Mail is a part of the postal system which itself is a

system wherein written documents typically enclosed inenvelopes, and also small packages containing other

matter, are delivered to destination around the world.

This can be used to deposit cheques and to send orders

to the bank to pay money to third parties. Banks also

normally use mail to deliver periodic account statements

to customers.

• Telephone banking is a service provided by a financial

institution which allows its customers to performtransactions over the telephone. This normally includes

bill payments for bills from major billers (e.g. for

electricity).

• Online banking is a term used for performing

transaction, payments etc.Over the Internet through a

bank, credit union or building society’s secure Website.

Types of banks:

Banks activities can be divided as follows:

1. Retail banking, dealing directly with individuals and small

businesses;

2. Business banking, providing services to mid –market

business; corporate banking, directly at large businessentities;

3. Private banking, providing wealth management services to

High Net worth Individual and families, and;



4. Investement banking, relating to activities on the financial

markets. Most banks are profit-making, private enterprises.

However, some are owned by government, or are non profits.

Challenges within the banking industry:

While banks struggle to keep up with the changes in the

regulatory environment, regulators struggle to manage their

workload and effectively regulate their banks. The impact of this

change is that banks are receiving less hands-on assessment by

the regulators, less time spent with each institution, and the

potential for more problems slipping through the cracks,

potentially resulting in an overall increase in bank failures across

the United States.

The changing economic environment has a significant impact

on banks and thrifts as they struggle to effectively manage their

interest rate spread in the face of low rates on loans, rate

competition for deposits and the general market changes,

industry trends and economic fluctuations.

The management of the bank’s asset portfolios also remains

a challenge in today’s economic environment. Loans are a bank’s

primary asset category and when loan quality becomes suspect,

the foundation of a bank is shaken to the core.

Profitability of banking industry:

A bank generates a profit from the differential between thelevel of interest it pays for deposits and other sources of funds,

and the level of interest it charges in its lending activities. This

difference is referred to as the spread between the cost of the

fund the loan interest rate. Historically, profitability from lending

activities as been cyclical and defendant on the needs and



strengths of loans customers. In recent history, investors have

demanded a more stable revenue stream and banks have

therefore placed more emphasis on transaction fees, primarily

loan fees but also including services charges on an array of

deposits activities and ancillary services (international banking,foreign exchange, insurance, investments, wire transfer,

etc.).Lending activities, however, still provide the bulk of a

commercial bank’s income.

Banking in India:

Banking in India originated in the first decade of 18 th century.

The first banks were The General Bank of India, which started in

1786, and Bank of Hindustan, both of which are now defunct. The

oldest bank in existence in India is the State Bank of India, which

are originated the “The Bank of Bengal” in Calcutta in June 1806.

This was one of the three presidency banks, the other to being

the Bank of Bombay and Bank of Madras. They merged in 1925 to

from the Imperial Bank of India, which, upon India’s

independence, became the State Bank of India. For many years

presidency banks acted as quasi-central banks, as did their

Successors. The Reserve Bank of India formally took on the

responsibility of regulating the Indian banking sector from 1935.

After India’s independence in 1947, the Reserve Bank was

nationalized and given border powers.

Post- independence:

The Government of India initiated measures to play an active

role in the economic Life of the nation, and Industrial Policy

Resolution adopted by the Government In 1948 envisaged a

mixed economy. This resulted into greater involvement of the



state in different segments of the economy including banking and

finance. The major steps to regulate banking included:

• In 1948, the Reserve Bank of India, India’s central banking

authority, was nationalized, and it became an institutionowned by the Government of India.

• In 1949, the Banking Regulation Act was enacted which

empowered the Reserve Bank of India (RBI) “to regulate,

control, and inspect the banks in India”.

• The Banking Regulation Act also provided that no new bank

or branch of an existing bank may be opened without a

license from the RBI, and no two banks could have commondirectors.

Nationalizations:

In February 1950, it was decided that all banking companies

would be inspected in turn, irrespective of their size and standing

and that such inspections would be a regular features of the

Reserve Bank’s supervisory activities. However, despite these

provisions, control and regulations, banks in India except the SBI,continued to be owned and operated by private persons. This

changed with the nationalization of major banks in India on 19 th

July, 1969.

The GOI issued an ordinance and nationalized 14 largest

commercial banks with effect from the midnight of July 19, 1969.

1. In the context of the wider role assigned to banks following

the nationalization, a reorientation of the system of bank

inspection was called for. The objectives were the evaluation

of the overall performance of each bank in different aspects.

2. The Central Government in consultation with the Reserve

Bank constituted the first Board of Directors for each of the

nationalized banks on July 18, 1970.



3. After nationalization, the branch licensing policy underwent

a major transformation. The Reserve Bank had proposed that

application for new offices would be considered after

assessing the business potential of the particular locality and

whether the area was adequately banked.

Liberalization:

In the early 1990s the then Narasimha Rao Government

embarked on a policy of Liberalization and gave licenses to a

small number of private banks, which came to be known as New

Generation tech-savvy banks, which included banks such as

Global Trust Bank (the first of such new generation banks to set

up )which later Amalgamated with oriental Bank of Commerce

,UTI Bank, ICICI Bank, HDFC Bank. This move, along with the rapid

growth in the economy of India, kick started. Te banking sector in

India, which has seen rapid growth with strong contribution from

all the three sectors of banks, namely, Government banks, private

banks and foreign banks.

Current situation:

Currently, banking in India is generally fairly mature in terms

of supply, product Range and reach-even though reach in rural

India still remains a challenge for the Private sector and foreign

banks. In terms of quality of assets and capital adequacy, Indian

banks are considered to have clean, strong and transparent

balance sheet Relative to other banks in comparable economiesin its region. The Reserve Bank of India is an autonomous body,

with minimal pressure from the Government. The Stated policy of

the Bank on the Indian Rupee is to manage volatility but without

any fixed exchange rate- and this has mostly been true.



2. COMPANY PROFILE

a) Background and inspection of the company:

Corporation Bank of India, founded in 1906 at the temple

town of Udupi, Karnataka is one of the leading public sector banks

of India. In 1961, the Bank of Citizen was merged with it and in

1980 the Bank Crop was nationalized. The Corporation Bank India

came out with its Initial Public Offer (IPO) in October 1997 and it is

the first to publish the results under US GAAP among public sector



banks. In 2004, the Bank Crop became the member of Cash net

and shared ATM network managed by Euro net.

Nationalized in 1980, Corporation Bank was the forerunner

when it came to evolving and adapting to the financial sectorreforms. In 1997, it became the second public Sector Bank in the

country to enter capital market, the IPO of which was over-

subscribed by 13 times. The bank has many “firsts” to its credit-

Cash Management Services, Gold Banking, m-Commerce,

“Online” approvals for Educational Loans. 100% CBS Compliance

and more recently, its pioneering efforts to take the technology to

the rural masses in remotest villages through low-cost branchless

banking – Business Correspondent model. All of which symbolized

Bank’s commitment to customer it provide convenience banking.

At Corporation Bank, what motivates the employees is the

passion to excel in banking by maintaining hugest standards of

service to their customer, backed by innovation products and

services which make them one of the leading Public Sector Banks

in the country, catering to a wide range of customers- from

individuals to corporate clients.

b) Nature of the business carried:

Corporation Bank is an organization established in 1906

based on the traditional Indian values of services to community

and regarded as one of the well-run Bank in the comity of Public

Sector Bank in the country. The Bank has a unique history of 97

years of successful Banking and it stood the test of time by

growing steadily offering vast varied and versatile services with a

personal touch. Today, its good customer services ,pre-eminent

track record in House Keeping, adherence to prudential



Accounting norms, consistent profitability and adoption of modern

technology for betterment of customer service have earned the

Bank place of pride in the Banking Community. The Bank has

been richly endowed with a relatively young, dynamic and

efficient manpower, which the key factor of the Bank’s success.Excellence in performance and uniqueness in customer service

Form the central core of the Bank’s organizational culture.

C) Vision, Mission and Quality Policy:

Vision:

To excel in banking by maintaining highest standards of service to our customers, backed by innovative products and

services which makes us one of the leading public Sector Banks in

the country, catering to a wide range of customers-from

individuals to corporate clients.

Mission:

Better quality in every service.

Tell people what kind of service they can expect.

Make sure people know what to do if something goes

wrong.

To become a provider of World-Class financial services.

To meet customer expectation through Innovation and Technological Initiatives.

To emerge as a role model with distinct cultural identity,

ethical values and good corporate Governance.



To enhance Shareholders’ Wealth by sustained, profitable

and financially sound growth with prudent risk

management systems.

To fulfill national and social obligation as a responsibleCorporate Citizen.

To create an environment intellectually satisfying and

professionally rewarding to the employees.

Quality Policy:

1. Policy for grievance redressal: This policy document aims atminimizing instances of customer complaints and grievances

through proper service delivery and review mechanism and

to prompt redressal of customer complaints and grievances.

2. Internal Machinery to handle customer complaints/

grievances: the Board would be responsible for the issues

such as, the treatment of death of a depositor for operations

of his account, the product approval process, the annual

survey of depositor satisfaction and the tri-enniel audit of such services.

3. Resolution for grievances: Branch Manager is responsible for

the resolution of complaints / grievances in respect of

customer’s service by the branch.

4. Interaction with customers: The bank recognizes the

customer’s expectation / requirement/ grievances can be

better appreciated through personal interaction withcustomers by bank’s staff.

5. Sensitizing operating staff on handling complaints: Bank is

dealing with people and hence difference of opinion and

areas of friction can arise. With an open mind and a smile on



the face, the Bank staff should be able to win the customers

confidence.

d) Product & Services Profile:

The important services provided by the bank can be

classified as: Personal Services, Investor Services, Corporate

Services and NRI Services etc.

Personal Services:

Corp New Gen –Students’ SB account:

Only students who have completed 10 years of age and are

pursuing regular courses can open these accounts. Existing

regular SB accounts of students already opened with the Bank

can also be converted to this new account. At the time of opening

the account, the student has to furnish a copy of student ID card

issued by the school/college.

Corp Pragathi Account:

The account can be opened with an initial deposit of Rs. 10/-

and will provide the account holder the basic banking facilities. No

penalty will be levied even if the balance in the account drops

below Rs.10/-.

Corp Compassion-Savings Bank:

Open an SB Account with corp Bank. The Bank will donate Rs.

10 to the underprivileged for every SB account opened with Bank

for a period of 100 days starting from 1st July to 8th October, 2008.



Term Deposits:

Kshemanidhi Cash Certificate – KCC:

KCC can be opened for a period ranging from 6 months to

10 years. It is Money multiplier deposit where the deposit amount

grows rapidly as interest is compound quarterly.

Money Flex:

The scheme allows you to withdraw your money whenever you

please. The deposit can be made for a period ranging from 6 to

120 months.

Fixed Deposits:

It is the return deposit scheme and interest can be paid at

regular made for periods ranging from 15 days to 10 years.

Interval viz. monthly, half yearly or yearly.

Corporate Services:

Cash management:

Every organization has receivables to collect from itsdealers/depots/ customers. Every revenue collected by the

organization gets paid in one Form the other. A collection and

payment service (CAPS) provides customized solution to

corporate needs in liquidity management.

Corp Any Time Premium:

Corporation Bank has introduced the Corp Any Time Premium

facility to pay LIC premium through its ATM network spreadthroughout the country for its customers, in a tie-up with Life

Insurance Corporation of India, its strategic partner.

Corp – e- cheque:



Corporation Bank launches Corp-e-cheque, facilitating

remittance of funds to pre-approved beneficiaries across banks

within 48 hours.

SME Liquid Plus Scheme:It is introduced to meet the liquidity mis-matched and expenses

incurred on account of Research and Development, Product

Development, Marketing and Branding, Executing unexpected

bulk orders, Stocking the seasonally available raw materials etc.

E-Payment of Direct Taxes:

Features and procedures:

1. Corp net user involves NSDL Home Page.

http://tin.nsdl.com through his Browser.

2. Corp net user clicks on the “pay –Tax Online” link in Home

Page of NSDL.

3. User is displayed option to select one of the types of challan

among challan 280,281,282 and 283. User selects one of them and clicks “submit”.

4. User is displayed detail challan screen to enter all challan

details except amount.

5. User fills in the required challan details including the bank

selection (Corporation Bank) and click on “Proceed”.

6. All details entered by the user are displayed for hisconfirmation (submit to the Bank, Edit) after verification of

details the server.

Investor Services:

http://tin.nsdl.com/

http://tin.nsdl.com/



Corporation Bank has set up an Investor Services

Department as its Corporate Office at Mangalore. For any

assistance regarding dematerialization of shares , share transfer,

transmission, change of address, non-receipt of dividend

duplicate / missing share certificate and other matters.

M/s Karvy Computer share Private Limited, is the share

Transfer Agent of the Bank , to whom communication regarding

change of addresses ,change in Bank Mandate, transfer of shares,

Mandate for ECS etc. could be addressed.

The Bank has entered into an agreement with National

Securities Depository Limited (NSDL) and Central Depository

Services (India) Limited (CDSL) as an Issuer company fordematerialization of bank’s shares. Corporation Bank’s shares are

listed on Bombay Stock Exchange Ltd and the National Stock

Exchange Ltd. (NSE) and are permitted for trading on stock

exchanges in India.

The Bank Constituted a committee of the board named as

“Investors Grievances committee” to specifically look in to the

redressal of investor grievances. The Committee is chaired by Dr.

C. R.Kamath, Non –Executive Director, elected by the

shareholders.

NRI Services:

Corporation Bank offers the entire range of personalized NRI

services with a touch of professional expertise laced with an

innovative approach and the services are specifically designed tosuit the special needs of Non- residents. High level of customer’s

satisfaction is ensured through computerized operations of over

240 branches including extension counters and inter-connectivity

between major centers through satellite based communication



system. An elaborate network of branches in NRI belts like Kerala,

Goa, Dakshina Kannada, Gujarat, Mumbai, New Delhi etc.

Hi Tech Services:

a. Corp net-Internet Banking :

Corporation Bank, a leading Public Sector Bank in the

country lunches Internet Banking for the corporate customer

of its Collection and Payment Services [CAPS] i.e., Cash

Management Services . The Net Banking Facility was

launched by Shri Keshub Mahindra, Chairman, Mahindra and

Mahindra ltd. At an impressive function held in Mumbai on 1st

January, 2001. In the niche area of Collection And Payment

Services , Corporation Bank has leadership presence in the

country and A customer, can shop at Internet , do Tele

Shopping and purchase at over 3000 merchant

establishment across categories and interface which include

airlines, retailers etc. On completion of the purchase, the

customer will receive an SMS to which he reply to authorize

the payment. The customer will also receive a confirmatorySMS after the payment. Caters exclusively to the Cash

Management requirements of the corporate. The Bank,

within its network, has ten specialized CAPS Branches which

are fully automated and currently service over 900

companies.

b. Mobile Pay:

Corporation Bank has became the first nationalized Bank incountry to lunch “SMS based- “Pay by Mobile Service”, in

association with Pay Mate India Pvt Ltd.All the Corp Banks

customers who have been issued Corp Bank ATM cards and

Corp Convenience Debit cards can use this “Pay by Mobile

Services”. To start up with the facility, the customer has to



register at any of the Corp bank ATMs of the Bank. The user –

friendly menu at the ATM will guide the customer to fill in the

details along with the mobile number of the customer. On

successful registration, the customer will receive a 4 digit PIN

though an SMS on his mobile. The PIN number received will beused to authenticate all the future transaction.

A customer, now, can stop at Internet, do Tele Shopping and

purchase at over 3000 merchant establishments across

categories and interface which include airlines, restaurants,

retailers etc. On completion of the purchase, the customer will

receive an SMS to which he has to reply to authorize the

payment. The customer will also receive a confirmatory SMS

after the payment.

c. SMS Banking Facility:

Corporation Bank is pleased to inform the introduction of SMS

Banking facility for our customers. With the introduction of this

facility you can now access your bank account and carry out a

variety of banking transaction through your mobile. PUSH

based SMS services shall enable the Bank to send information

to the customer’s mobile on the occurrence of certain

transaction in the account .PU LL based SMS services allow the

customers to request for various information relating to their

account besides giving instruction for certain facilities.

d. Term Finance:

The Bank extends term Loans capital investments being madeby the clients on account of expansion of existing enterprise or

for establishment of a new enterprise .Term loans are also

extended to clients for implementation purposes, to meet non-

recurring expenditure for investments in personal segment

such as housing , vehicle purchases, etc.



e) Area of Operation:

The corporation bank operates in the whole of India.

Presently, the Bank has a network of 1002 Branches, 15

Extension Counters and 19 Currency chests covering 24 statesand 2 union territories of the country. The Bank has 1000

online interconnected ATMs spread across the country. The

Bank has its presence in 98 centers out of 100 top centers in

the country. It has a specialized Branch Network of 157

Branches, which are designed to cater exclusively to the

banking needs of different segments like Personal segment,

Trade and Commercial Segment, Small Scale Industry, Large

and Medium Industrial Units, Non –Resident Indians, HousingSector and Export and Import Segment.

f) Ownership Pattern:

Category and Holdings %Foreign Holdings11.14Govt./ Financial Institutions28.78Corporate Bodies (not covered above)0.47Directors and their Relatives57.17Other including Indian Public

2.44



g) Competitors Information:

All the companies in the banking industry are the competitors

of Corporation Bank. The following banks can be considered as

the main competitors:

State Bank of India:

The Bank has a network of 66 offices/ branches in 29

countries spanning all time zones. The SBI’s international

presence is supplemented by a group of Overseas and NRIbranches in India and correspondent links with over 522 leading

banks of the world.SBI ‘s offshore joint ventures and subsidiaries

enhance is global stature. The Bank is changing outdated front

and back end processes to modern customer friendly processes to

help improve the total customer experience.

ICICI Bank:

ICICI was formed 1955 at the initiative of the World Bank, the

Government of India and representative of Indian industry. The

principal objective was to create a development financial

institution for providing medium- term and long-term project

financing to Indian business. The Bank has a network of about

1,308 branches and 3,950 ATMs in India and presence in 18

countries, ICICI Bank offers a wide range of banking products in

the areas of investments banking, life and non –life insurance,venture capital and asset management.

AXIS Bank:

AXIS Bank was the first of the new private banks to have

begun operations in 1994, after the Government of India allowed



new private banks to be established. The Bank’s Registered Office

is Ahmadabad and its Central Office is located at Mumbai.

Presently, the Bank has a very wide network of more than 701

branche offices and Extension Counters. The Bank has a network

of over 2854 ATMs providing 24 hours a day banking convenienceto its customers. Those are one of the largest ATM network in the

country.

HDFC Bank:

The Housing Development Finance Corporation Limited

(HDFC) was incorporated in August 1994, with its registered office

in Mumbai, India. The Bank’s target market ranges from large,

blue-chip manufacturing companies in the Indian corporate tosmall and midsized corporate and agri-based business

es. The products of the bank are backed by world class services

delivered to the customers through the growing branch network,

as well as through alternative delivery channels like ATMs, phone

banking, net Banking and mobile Banking.

Syndicate Bank:

Syndicate Bank was established in 1925 in Udupi. Its

philosophy of growth by mutual sustenance of both the Bank and

the people has paid rich dividends. The bank is well equipped to

meet the challenges of the 21st century in the areas of information

technology, knowledge and competition. The Bank has launched

an ambitious technology plan called Centralized Banking Solution

(CBS) whereby 500 of our strategic branches with their ATMs are

networked nationwide over a 4 years period. Branch network

expanded to all states and UTs except Manipur and Daman Diu.

Vijaya Bank:



Vijaya Bank has network of 1053 branches,47 Extension

Counters and 296 ATMs.[As at 13.06.2008] It has entered several

new areas such as credit card, merchant banking , hire purchase

and leasing and electronic remittance services. 747- Branches /

offices are under RTGs and 746n- Branches/offices are underNEFT.Vijaya Bank is one among the few banks in the country to

take up principal membership of VISA International and Master

Card International. The driving force behind Vijaya Bank’s every

initiative has been its 11528 strong Dedicated workforce.

ABN AMRO:

With assets over US $504 billion and an AA credit rating, ABN

AMRO Bank ranks among the top 10 banks in the world in sizeand strength. Our international network companies 3,568

branches and offices in over 320 cities and 76 countries and

territories, with over 100,000 highly qualified staff.

HSBC Bank:

HSBC Bank is the largest bank in Hong Kong and second

largest group in the world after. Before moving its headquarter to

London in 1990, it was headquartered in Hong Kong. HSBC Indiais having branches in Ahmadabad, Bangalore , Chennai,

Coimbatore, Gurgon , Hyderabad ,Jaipur ,Kochi, Kolkata ,Ludhiana

, Mumbai ,New Delhi ,Noida, Pune , Thane ,Trivandrum and of

ATMs , integrated call centre and also HSBC e-banking .

h) Infrastructural Facilities:

The Bank has a network of 1001 Branches, 15 Extension

counters and 19 Currency Chests covering 24 state and 2 union

territories of the country. The Bank has 1000 online

interconnected ATMs spread across the country. It is a fast

expanding national bank with over 1800 service outlets across

the nation in 23 state and 2 union territories. Corporation Bank is



present in almost all centers in the country. They have a large

presence in major metros in India.

• Delhi over 150 outlets

• Mumbai over 140 outlets

• Bangalore over 50 outlets

• Hyderabad over 40 outlets

All the currency chests of the bank were provided with

sophisticated currency note sorting machines, which will

help the bank in efficient cash management. The core

Banking Solution [CBS] has been implemented in morethan 87% of the business of the Bank.

Wide Area Network (WAN) connecting all the

computerized branches Being a prerequisite for Core

Banking to be operational, the project is scheduled To run

parallel to the core Banking project. WAN is used for mail

messaging, transmission of swift messages, straight

through processing of RTGs transaction, accessing e-

Circular etc. A ll the functional units of the Bank are linked

through E-Mail network. The Bank has migrated the

mailing solution from the present MS Exchange 2003 and

centralizing the exchange servers at two locations viz.

Mangalore and Bangalore.

i) Achievements and Awards:

One of the Best 200 companies world over outside the

US having a turnover under a billion US$- Forbes Global,

Hongkong, issue dated 27th October, 2003.

India’s Best Public Sector Bank-Business Today –KPMG

Survey dated 7th December, 2003.



India’s Strongest and Asia’s Second Strongest – The Asian

Banker, Singapore dated 15th December, 2003.

India’s Best Public Sector Bank-Outlook Money, 15th

March, 2004.

One among the Best 200/100 companies in

Asia/Pacific and Europe having turnover under a

billion US$ -Forbes, Global, Hong Kong dated 1st

November, 2004.

One among India’s Best Public Sector Banks –

Business Today, 26th February, 2006.

Gem and jewellaryExports Promotion Council Award

successively for 5 years from 1981 to 1985.

Shiromani Award 1992 for Banking from Union

Minister for Commerce.

Best Bank Award for Excellence in Banking

Technology from Institute for Development and

Research in Banking Technology (IDRBT), Hyderabad

(2001).

Best Bank Award for Innovative Usage and

Application on INFINITE (Indian Financial Network)

from Institute for Development and Research in

Banking Technology (IDRBT), Hyderabad.

Best Bank Award for Delivery Channels from Institute

for Development and Research in Banking

Technology (IDRBT), Hyderabad (2003).

Bank has been rated NO. 1 in Mid-size Banks

category in India’s Best Banks’ 2009 Ranking survey

conducted by Business world and Price Waterhouse

cooper.



During 2008, the Bank received the “Gold Trophy” of

the SCOPE Meritorious Award for Best Managed

Bank /Financial Institution /Insurance Company.

These awards were instituted for the time by

Standing Conference of Public Enterprise, toencourage, recognize and reward the excellence

achieved.

The Bank was also awarded the SKOCH Challenger

Award 2008 for customer Relationship Management.

The Business today- KPMG study has ranked our

bank as Best Bank in quality of assets category.

The Bank has bagged the Runner-up award for Best

Online and Multichannel Banking Term in the Banking

Technology Award 2008 instituted by Indian Bank’s

Association [IBA] and Trade Fairs and Conference

International[TFCI].

Major Recognition:

One of the Best 200 companies world over outside the US

having a turnover under a billion US$-Forbes Global, Hong

Kong, issue dated27th October, 2003.

Indian’s Best Public Sector Bank. Business Today- KPMG

Survey dated 7th December, 2003.

India’s strongest and Asia’s Second Strongest. The Asian

Banker, Singapore dated 15th December 2003.

India’s Best Public Sector Bank –outlook Money, 15th

March 2004.



One among the Best 200/100 companies in Asia /Pacific

and Europe having turnover under a billion US$ -Forbes

Global, Hong Kong dated 1st November 2004.

One among Indian’s Best Public Sector Banks Business Today 26th February 2006.



j) Work Flow Model

Customer

Account Opening

Operations

Transaction

Account Closing

Savings A/C

Current A/C

Lockers

Demand

ATM/Debit

Cash

Internet

Collections

Forex

Other

Branches

Other

Banks

Customer

Satisfaction

Document Control, Record control, Security Management,

KPI Monitoring, Internal Audit, Mgt Review



k) Future growth and prospectus:

During the last couple years, global growth has been

above the forecast in almost every region stimulated by strong

monetary and fiscal measures. The domestic economic outlook is

also bright with the real GDP growth rate surpassing 8% in the

current year. Industrial performance also improved considerably.

Through the inflation rate is high it is showing the signs peaking

out.

RBI has suitable changed the country’s regulation

framework from tome to time to support Indian financialinstitution to withstand competitive pressures placed on them by

increasing globalization. Government’s stake in some PSB is

reduced and as a consequence public equity in these PSBs is

enlarged. This led to greater responsibility on the bank

management since the level of accountability has increased.

Pressures of performance and profitability will keep them on their

time as the public shareholders expect good performance along

with good returns on their equity.

The Corporation Bank has already implemented

internationally followed prudential accounting norms for

classification of assets, income recognition and loan loss

provisioning. The scope of disclosure and transparency has also

been raised in accordance with international practices. It has

complied with almost all the Core Principles of Effective Banking

Supervision of the Basel Committee. All the ensure a bright future

to the bank.



4. MICKINSEY’S 7’S FREMEWORK

Introduction:

The 7-s model is better known as McKenzie’s 7s. This is

because the two person who developed this model, Tom Peterand Robert waterman, have been consultants at McKenzie’s &co

at that time they published their 7s model in their article

“structure is not organization”(1982) and in their books “the Art

of Japanese Management”(1981) and “In search of

Excellence”(1982).

They developed the 7s model to help manager address the

difficulty of organizational changes. The model show that

organizational immune system and the many interconnectedvariable involved make change complex, and that an effective

changes must address many of these issue simultaneously.

According to McKinsey a company strategy is only one of the

seven elements of in the successful Business practices. There are

7s elements in this framework such as structure, skill, style,

strategy, staff and shared value.

The first three elements Strategies, System and Structures areconsidered as the hardware of the business. The next four

elements Style, Staff, Skill and Shared values are called as the

software of successes. Those seven elements are distinguished in

so called hard S’s and soft S’s. The hard elements are feasible

and easy to identify. They can be found in strategy statements,



corporate plans, organizational charts and other documentations.

The soft elements are related to the administrative and

operational aspects of the firms.

Elements of McKinsey’s 7’s models

1. Structure

It prescribes the formal relationship that should exist among

various positions and activities. It is the duty of the top

management to design the organization structure of an

organization. It is one of the critical tasks. The designing of the super structure involves issues like division of

organization tasks and allocation of responsibilities between

various departments. The hierarchy of superior –subordinate

relationship is defined by the organization charts which are

formal documents that indicate the chain of command and



the titles that have been assigned to the managers and other

personnel’s.

The Board of Directors occupies the top most position

followed by the chairman who is next in the hierarchy. In thenext level of organizational structure there are DGM and

General Manager. The board comprises of 12 directors out of

which, 9 are non-executive and among themselves 7 are

independent directors.

2. Skill

Skills refer to the fact that employees have the skills neededto carry out the company’s strategies. Skillful employees are

the assets of the organization. Skills of the employees may be

improved by giving necessary training to them. The Bank

believes that skillful employees contribute to the success of

the Bank.

In keeping with organizational growth during the fiscal

year, 809 members

Of staff were promoted to the higher cadre. Competencies of

workforce improve the competitiveness of the organization.

Bank has trained 8,153 employees to improve skills and

behavioral aspects.

3. Style:

It is one of the seven levers which the top management can

use to bring about change in the organization. According to

MC Kinsey’s Framework, Becomes evident through the

patterns of action taken by the members of the top

management team over a period of time.



Corporation Bank follows a top to down style of

management. It also works in a participative style. The

decisions are taken by the top management

Concerning matters related to the organization. The decisionsrelating to departmental heads. Employees are free to give

any ideas, suggestions etc, for the betterment of the

organization.

4. Strategy

Strategy means action a company plans in response to or in

anticipation of challenges in the external environment.Corporation bank has planned to offer different debit card

variants to cater to the niche segments. Also, the bank

proposed to diversify its prepaid card portfolio to meet varied

needs of its customers. In the Endeavour to offer unparallel

convenience to its customers, the bank shall continue to

launch innovative products and services.

5. System

System means formal and informal procedures that govern

everyday activities. The Bank has well defined control system

in all critical areas of operation i.e. corporate credit, Forex ,

treasury, etc, which are documented and reviewed from time

to time. The bank has also a full-fledged internal audit and

inspection mechanism through which all branches are

complaints, Income leakages etc. the bank has initiated the

systems like core banking point of service (pos) terminals, net

banking, SMS banking, mobile payment facility etc for the

convenience of the customers.



6) Staff

Staff means that the organization has hired able people,

trained them well and assigned them to the right jobs. Staffs are

human resources working in an organization. They areresponsible for carrying out various activities of the organization

effectively and efficiently. Business growth and branch network

expansion necessitated fresh recruitment to the extent of 1205

employees during the year. The total staff strength stood at

13,143 on 31st march 2010 compared to 12465 in the previous

year. Business per Employee of the Bank was higher at Rs. 12.56

crore compared to Rs. 10.24 crore in June 09. The Net profit per

employee of the Bank was higher at Rs. 10.76 lakhs compared to

Rs. 8.96 lakhs in June 09.

7) Shared Values

Shared values refer to the guiding concepts, values and

aspirations that unite an organization in some common purpose.

They guide employees of any organization towards valued

behavior.

The corporation Bank goes for the following values

Customer Satisfaction

Quick and better Service

Loyal to the Customers

Honest in work

5. SWOT ANALYSIS



Strengths:

The Bank has implemented Core Banking Solution [CBS] at

branches and 192 branches/ units were brought under CBS during

the current financial year, thus taking the total number of branches/ units under CBS at 558, covering 87% of business, thus

covering 1005 of Bank’s overall Business.

With a view to take banking services to remotest locations,

the Bank has in pioneering efforts by launching a branchless

banking project. Under this, the Bank uses modern, yet cost

effective ICT technologies and services of business

correspondents. The people can conduct simple transaction

related to savings and loans without visiting the bank branch. There are 105 such locations functioning spread over 5 southern

states.

All the computerized branches including ECs and ATMs Centers

are subjected to Information Systems Audit once in 12 month.

Audit of branches migrated to core banking are take up at Core

Centre Bangalore and at IT Division, Head Office, Mangalore.

During the year 2005-06, Information Systems Auditor 303

branches were entrusted to outsourced firms of chartered

accountants.

The Bank has a well qualified and experienced team of Law

Officers at the Head Office and Zonal offices, which handles

matters pertaining to drafting and approval of agreement and

memorandum of understanding on behalf of Bank ,preparation of

various user manuals, scrutiny of title to immovable properties

taken as security, legality involved in the invocation of bankguarantee and various claims and complaints against the Bank

and drafting of pleading before courts. The personnel of the Legal

Services Division also participate in seminars, meetings organized

by the RBI, IBA and others, discussing varied legal matters

affecting the banking sector.



Honesty, integrity and efficiency among the staff are the

foundation of any organization for its all-round developments.

Every organization works on the philosophy of mutual trust and

confidence, more so a banking organization. In an organizational

set up the roles and responsibilities of each functional division arewell defined and documented for better clarity and effectiveness.

The Vigilance machinery plays the role of a watchdog so as to

ensure that the laid down systems and procedures are not

tampered with for any personal gain or benefits. The bank

believes in the principles of natural justice and punishing the

guilty.

Wherever instances of serious violation in the systems and

procedures are reported, an investigation is ordered and punitive

action is taken. To avoid such action, as a pro-active measure, the

Vigilance Department conducts preventive visits and reports on

the deviations observed. It also suggests how such violation can

be avoided with the collective effort of all.

Weaknesses:

The absence of certain strength may be viewed as weaknesses.

The weaknesses of Corporation Bank are:

The Bank has a centralized operation as a public sector

bank. The branches do not have all the authorities. The branches

are to be depend the Zonal office’s approval for certain deal like

heavy amount of loan etc.

As do not have all the authorities, for certain transaction ithas to depend the zonal offices for approval. This process will

take a long time as compared to the new generation banks.

With the second dose of nationalization, the GOI controlled

around 91% of the banking business of India. The Corporation



Bank, as a public sector bank, has to work according to the rules

and regulations of the Government.

Opportunities:

Merger and acquisition may pave consolidation among Indian

Banks to position them to become universal banks and enlarge its

size in line with International Standards. Growth in economy

demands more credit which in turn increased the operational

income of banks. Integration to global markets expands the

position of overseas banking.

Threats:

The Indian economy has shown sustained growth over the last

few years with GDP growing at 8.5% in fiscal 2004, 4% in fiscal

2003 and 5.8% in fiscal 2002. During the 2004-05, industrial and

agricultural production in India has been variable. Any slowdown

in the Indian economy or volatility in global commodity prices, in

particular oil and steel prices could adversely affect the bank’s

borrowers and contractual counter parties. Any slowdown in retail

loan segments because of slowdown in growth of sectors like

Housing and automobiles may have adverse impact on

performance.

As an emerging market, the Indian system face risks of

nature, not typically faced in developed countries. A vagary of

monsoon often affects the agriculture sector in India.

Banks in India are subjects to detailed supervision and

regulation by Regulation Authority viz. Reserve Bank of India. In

addition, banks are subject generally to changes in law as well as

to change in regulation and Governments policies and accounting

principles.



Effectiveness of Recovery Management, Asset Liability

Management and Risk Management may have its own impact on

performance.

Intensive competition, particularly from private sector playersand foreign banks are likely to increase further as a result further

de regulation and autonomy to public Sector Banks in the

financial sector.

Analysis of Financial statement:

Summary of latest annual reports:

The Bank has put in place a well articulated framework of

3Ps (people, process, products) to identify and execute new

initiatives to accelerate business growth on sound and

sustainable lines. This framework is also designed to improve

customer engagement at all customer touch points. Innovation is

actively encouraged. People initiatives include new programmes

through counselors etc. process initiatives include centralization

of back office function, separation of credit marketing and

approved process and feed forward MIS to Branches. New

products like Branchless Banking are introduced to implement

financial inclusion strategies. The Bank is actively chalking out

strategies to take the Bank to higher growth trajectory.



Corporation Bank net profit rises 14.04% in the September 2011 quarter



Corporation Bank net profit rises 14.04% in the September 2011 quarter

Capital Market / 14:26 , Oct 31, 2011

Operating income rises 44.51% to Rs. 3090.74 crore

Net profit of Corporation Bank rose 14.04% to Rs. 401.11 crore in the quarter ended September 2011 as against

Rs. 351.73 crore during the previous quarter ended September 2010. Total operating income rose 44.51% to

Rs. 3090.74 crore in the quarter ended September 2011 as against Rs. 2138.72 crore during the previous

quarter ended September 2010

.

Particular

sQuarter Ended

Sep. 2011 Sep. 2010 % Var.

Sales 3090.74 2138.72 45

OPM % 79.07 78.23 1

PBDT 495.38 475.85 4PBT 495.38 475.85 4

NP 401.11 351.73 14



Net Interest Income and Margin

Net interest income for the fourth quarter of 2011 increased $0.7 million, or 0.9 percent,

compared to the same period in 2010. Average earning assets increased by $932.8 million, or

8.8 percent, compared to the fourth quarter of 2010. This increase was due to a $540.4 million,

or 10.0 percent, increase in average total securities, including trading securities and a $269.3

million, or 5.8 percent, increase in average loans. Net interest margin decreased 21 basis points

to 2.91 percent for the three months ended December 31, 2011 compared to the same quarter

in 2010.

Non interest Income and Expense

Noninterest income increased $3.0 million, or 3.2 percent, for the three months ended

December 31, 2011 compared to the same period in 2010. This increase is primarily

attributed to increased trust and securities processing income of $4.8 million, or 10.3

percent, for the three months ended December 31, 2011 compared to the same period

in 2010. The increase in trust and securities processing income was primarily due to a

$1.2 million, or 8.6 percent, increase in advisory fee income from the Scout Funds; a

$0.7 million, or 4.1 percent, increase in fund administration and custody services; and a

$2.7 million, or 50.0 percent, increase in fees related to institutional and personal

investment management services. Service charges on deposits increased $1.3 million,

or 7.3 percent, compared to the fourth quarter of 2010. These increases are offset by



decreased trading and investment banking income of $1.5 million, or 17.0 percent, and

decreased bankcard fees of $1.4 million, or 9.5 percent, compared to the three months

ended December 31, 2010.

Noninterest expense increased $3.7 million, or 2.7 percent, for the three months endedDecember 31, 2011 compared to the same period in 2010. This increase is driven by

higher salary and benefits expense of $1.7 million, or 2.3 percent, and higher other

expenses of $3.6 million, or 63.4 percent. Of the increase in salary and benefits

expense, approximately $0.6 million, or 36.0 percent, is related to salary and benefits

from acquisitions. These increases were offset by decreases in bankcard expense of

$1.3 million, or 27.6 percent, regulatory fees of $1.3 million, or 38.0 percent, and

equipment expense of $1.1 million, or 9.7 percent, compared to the three months ended

December 31, 2010.

“Our fee businesses continued to be a primary driver of our strong fourth quarter results

and year over year earnings growth. “Our acquisitions have performed well and

contributed strongly to our growth in fee income,” said Peter de Silva, President and

Chief Operating Officer. “For the full year, noninterest income increased $54.0 million,

or 15.0 percent, as compared to the same period in 2010. Due to uncertainties in

Europe, flows slowed considerably in our flagship international product causing the

Scout Funds to experience net outflows of $2.0 million for the quarter. For the full year,the Scout Funds enjoyed over $1 billion in net flows reflecting our strong long-term

product performance and distribution capabilities. We closed out the year-end corporate

benefits open enrollment season with strong growth in FSA and HSA accounts and

balances. We ended the year with almost 2.5 million FSA and HSA accounts and nearly

$300 million in deposits. We are pleased with the growth of our various fee businesses

and are looking for our fee businesses to be a key driver of growth again in 2012.”

Balance Sheet of Corporation Bank



Learning experience:

The training in the head office provided an opportunity to study

the various functions of the head office. I also studied the

functions of the limitations of the Corporation Bank. It also

provided an opportunity to study the various Departments as:

Financial management and accounts

Marketing

Branch expansion and support services

Research and Development

Human Resources and Development

I also got to know about the committees of the bank as under:

1. Management Committee

2. Audit Committee

3. Departmental Committee



4. Investor Grievance Committee

5. Information Technology Committee

6. Risk Management Committee

7. Committee to monitor large value frauds

8. Share Transfer Committee

9. Customer Service Committee

Further I studied the various services offered by the bank like

Personal Services, Investor services, Corporate Services, NRIServices, and Hi-Tech Services etc.During the course of the study.

Finally I gained the knowledge regarding the practical

functioning of the banking system.



General Introduction

PART-B

General IntroductionStatement of the problem:

CREDIT RISK MANAGEMENT

The project study on Credit Risk Management” in corporation

bank with special reference to bank credit risk management tools

including:

1. Credit Risk& Rating Migration

2. Stress testing

Objectives of the study:

Chapter -1



• To analyze cause for credit risk in the bank

• To study the credit risk management in respect to

commercial field of bank

• To study the measure taken by the commercial limited to

contain the problem of credit risk management

• To study the effects of credit risk on financial health of

bank

• To study the banking functions, operations and services

etc

• To study the overall risk of lending

• To determine how credit risk management techniques

ease in credit risk strategy and with regard to controlling

of risk.

Scope of the study:

The study has been done in CORPORATION bank, Head office,Mangalore, to understand analysis and interpret working and

functional act of the bank, and also a detailed study on Credit

Risk Management has been done.

• The study includes the interaction of bank system with its

customer

• The introduction, establishment, service and brief history

of the bank

• The basis understanding of the subject with detail study

about the credit risk management

• Analyze credit risk and cause and effects for the bank



Methodology

The success of any project and the conclusions depends on

the data collected. And collected data should be analyzed during

the course of study. The study depends on 2 kinds of data, they

are

1. Primary data

2. Secondary data

Primary data:

Primary data collection was obtained from Corporation bank,

head office Mangalore by directly communicating and discussing

with project gain Mr. Mohan Bhat. The topic of Credit Risk

Management was conducted through a detail study relating to

Credit Risk Rating and Stress testing.

Secondary data:

Secondary data is collected through various magazines,

textbook, manuals, related to the subject. And also from the

annual report of the bank. This study gives more emphasis on

secondary data.

Limitations of the study

Credit risk management involves sensitive issue relating to

bank which makes availability of all information with respect to

this field is difficult. Because of limited resources and

confidentiality of the documents the study of Credit Risk



Management has been limited to theory. And it is very difficult to

state exact reasons for variations of figures from year to year.



Theoretical Concepts of Credit Risk

Mgt.

Credit Risk Management The goal or credit risk management is to maximize a bank’s risk

adjusted return by maintaining credit risk exposure within

acceptable parameters. Banks need to manage the credit risk

inherent in the entire portfolio as well as the risk in the individual

Chapter- 11



credits or transactions. The effective management of credit is a

critical component of a comprehensive approach to risk

management and essential to the long-term success of any bank.

The Basel Committee on banking Supervisor, after obtainingcomments from central banks, supervisors, banking association

and host of interested parties issued in September 2000

comprehensive guidelines on sound principal for Management of

credit Risk. The guideline specifically the following areas;

• Establishing an appropriate credit risk environment

• Operating under a sound credit granting process

• Maintaining an appropriate credit administration,

measurement and monitoring process; and

• Ensuring adequate control over credit risk

Banks must operate within a sound and well-defined criteria for

new credits as well as the expansion of existing credits. Credits

should be extended within the target markets and lending

strategy of the institution. Before allowing a credit facility, the

bank must make an assessment of risk profile of the customer/

transaction. This may include:

Credit assessment of the borrower’s industry, and

macro economic factors.

The purpose of credit and source of repayment.

The track record/ repayment history of borrower.

Assess/evaluate the repayment capacity of the

borrower

The proposed terms and conditions and covenants

Adequacy and enforceability of collaterals



Approval from appropriate authority

industry profil1

Documents