Credit Management Introduction

Credit management Introduction
Credit is the trust which allows one party to provide resources to another party where that
second party does not reimburse the first party immediately (thereby generating a debt) but
instead arranges either to repay or return those resources (or other material of equal value) at
a later data. The resources provided may be financial (e.g. Granting a loan), or they may
consists of goods or services (e.g. consumer credit). Credit encompasses any form of differed
payment also known as a borrower.
Credit does not necessarily required money. The credit concept can be
applied in batter economics as well, based on direct exchanges of goods and services
(Ingham 2004 p.12-19).
However, in modern societies credit is usually denominated by a unit of account. Unlike
money, credit itself cannot act as a unit of account. Movements of financial capital or
normally dependent on either credit or equity transfers. Credit is in turn dependent on the
reputation or credit worthiness of the entity which takes responsibility for the funds .Credit is
also traded in financial market in the credit insurance.
A credit default swap represents the price at which two parties are exchange this risk the
protection seller takes the rest of default of the credit in return for payment , commonly
denoted in basis points (on the basis point is 1/100 of a percent) of the notional amount to be
referenced, while the protection buyer pay this premium and in the case of default of
underlying (a loans, bonds or other receivables ), delivers receivable to the protection seller
and receives from the seller the par amount (that is, made whole).
The cost of credit is the additional amount, over and above the amount borrowed , that the
borrower has to pay. It included interest, arrangement fee any other charges. Some cost
are mandatory, required by the lender as an integral part of the credit agreement. Other cost,
such as those credit insurance, may be optional. The chooses whether or not they are
included as part of agreement.
Interest and other charges are presented in a variety of different ways, but under many
legislative regimes lender are required to quote all mandatory charges in the form of an
annual percentage rate (APR).
The goal of the APR calculation is a promote truth is lending, to give potential borrower a
clear measure of the true cost of borrowing and to allow a comparison to be made between
competing products. project work. Accordingly the project was undertaken at SUCO Bank.
Banking in India organized in the first decade of 18 th century with the general bank of India
coming into existence in 1786; this was followed by bank of Hindustan. Both these banks are
now defunct. The oldest bank in existence in India is the state bank of India being established as
The bank of Calcutta in Calcutta in June 1806. Couple of decades later, foreign banks like
HSBC and Credit Lyonnais started their Calcutta operations in the 1850s. At that point of time,
Calcutta was the most active took roots there and prospered. The first fully Indian owned bank
was the Allahabad Bank set up in 1865.
By the 1900s, the market expanded with the establishment of banks like Punjab National
Bank, in 1895 in Lahore; Bank of India in 1906, in Mumbai both of which were founded under
private ownership, Indian banking sector was formerly regulated by Reserve Bank of India from
1935. After Indias independence in 1947, the Reserve bank was Nationalized and gave broader
powers.
Current Scenario
Currently, overall banking in India is considered as fairly mature in term of supply,
product range and reach-even through reach in rural India still remains a challenge for the private
sector and foreign banks. Even in terms of quality of assets and capital adequacy, Indian banks
are considered to have clean, strong and transparent balance sheet as compared to other banks in
comparable economics in its region. Reserve Bank of India is an autonomous body, with
minimal pressure from the government. The stated policy of the Bank on the Indian rupees is to
manage volatility-without any stated exchange rate and this has mostly been true.
Earlier the RPD Union Bank of India Branch was Extension Branch, With effect on 8th
January 1998 it was became independent Brach. The independent branch was a 10 years old.
Recently the Union Bank of India had changed its logo. The bank unveiled its new blue and red
logo on 1st September, 2008. The rebranding initiative has been undertaken with one objective in
mind: to maximize customer convenience and satisfaction.
Due to adoption of technology, transactions through electronic mode moved up from 6%
to 13.6% of the total transaction of the bank in the last 6 months and are expected to touch 25%
by March 2009. This expected to significantly bring down the transaction costs.
Bank formally opened its first full fledged overseas branch at Honk Kong on 1 st August,
2008. The inauguration was made by Honble Minister of State for Finance, Mr. Pawan Kumar
Bansal.
STATEMENT OF PROBLEM:
The comprehensive statement of problem can be thus stated as A STUDY ON CREDIT
MANAGAMENT IN SUCO BANK PVT LTD Bellary city.
To have a good and deep understanding of the following issues in the relation to the
credit management in a co-operative bank.
The credit appraisal techniques followed by the bank before sanctioning loan.
The reporting system in place to get a prompt feedback on the performance of the
borrower with specific references to identifications of probability of default and to
suggest measures to reduce default.
Objective of study:
1) Understand the concept of Credit Management and Credit Rating Tools followed by
SUCO Bank
2) Understand how the bank will manage the Credit to reduce the NPAs
3) Understand the Pre and Post Credit Management Process.

4) Understand the credit management of various sectors like Agriculture, SME and Service
Sector.
5) How the bank will fix the rate of Interest to the borrower.
Methodology:
The required information for the project is taken for both the Sources i.e.
i)
Primary Data
ii)
Secondary Data
1. Primary Data:
The primary data was obtained from the direct interaction with Branch Manager
of SUCO BANK
2.Secondary Data:
Official web site of SUCO Bank and other Web sites.
Annual reports and relevant text books on the subject matter
LIMITAIONS OF THE STUDY:

1)
2)
3)
4)
5)
6)
7)
The time confined is limited.

The study is confined only to Bellary city.
The information is collected only by SUCO Bank.
Less information is available by secondary sources.
Study is only on credit management of the bank.
Brief information is collected by the bank.
Study is followed the procedures of the bank.
on Credit Management in case of Suco Bank in Bellary

Credit Management subject is a key subject which plays an important role in deciding
the overall performance of the bank. Therefore, the subject of Credit Management was chosen
for the project work. Accordingly the project was undertaken at SUCO BANK IN BELLARY

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Credit management Introduction

3) Understand the Pre and Post Credit Management Process.

Official web site of SUCO Bank and other Web sites.

Annual reports and relevant text books on the subject matter

LIMITAIONS OF THE STUDY:

The time confined is limited.

on Credit Management in case of Suco Bank in Bellary

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