A

SUMMER TRAINING PROJECT REPORT

ON

“A STUDY ON RISK MANAGEMENT IN

BANKING WITH SPECIAL
REFERENCE TO UBI, AMARPATAN”
SUBMITTED TO

AWADHESH PRATAP SINGH UNIVERSITY, REWA (M.P.)

FOR THE AWARD OF

MASTER OF BUSINESS ADMINISTRATION
MBA (SEMESTER-III)

BY

MS. DURGA WATI PATEL

UNDER GUIDANCE OF
PROF. K. P. TRIPATHI

VINDHYA INSTITUTE OF MANAGEMENT & RESEARCH,

SATNA (M.P.)
2014- 2015
 VINDHYA INSTITUTE OF MANAGEMENT &
RESEARCH
SATNA (M.P.)

GUIDE’S CERTIFICATE
This is to certify that MS. DURGA WATI PATEL has satisfactorily

completed the Summer Training Project work on “A Study on Risk

Management in Banking with special reference to Union Bank of India,

Amarpatan” under my guidance for the partial fulfillment of MBA (Semester-

III) submitted to Awadhesh Pratap Singh University, Rewa during the

academic year 2014-2015.

To best of my knowledge and belief the matter presented by her is

original work and not copied from any source. Also this report has not been

submitted earlier for the award of any Degree of Awadhesh Pratap Singh

University, Rewa.

Place: Satna PROF. K. P. TRIPATHI

Date: / 01 / 2015 (Project Guide)
 VINDHYA INSTITUTE OF MANAGEMENT &
RESEARCH
SATNA (M.P.)

DECLARATION

I undersigned, hereby declare that this Summer Training Project Report

entitled “A Study on Risk Management in Banking with special reference to

Union Bank of India, Amarpatan” prescribed by AWADHESH PRATAP SINGH

UNIVERSITY, REWA during the academic year 2014-2015 under the guidance of

PROF. K. P. TRIPATHI is my original work.

The matter presented in this report has not been copied from any source.

I understand that any such copying is liable to be punishable in any way the

university authorities deem to be fit. Also this report has not been submitted

earlier for the award of any Degree or Diploma of Awadhesh Pratap Singh

University, Rewa or any other University.

This work humbly submitted to Awadhesh Pratap Singh University for

the partial fulfillment of Master of Business Administration (Sem-III).

PLACE: SATNA MS. DURGA WATI

PATEL
DATE: / 01 / 2015

4
 VINDHYA INSTITUTE OF MANAGEMENT &
RESEARCH
SATNA (M.P.)

ACKNOWLEDGEMENT

Whenever we are standing on most difficult step of the dream of our life,
we often remind about The Great God for His blessings & kind help and he
always helps us in tracking off the problems by some means in our lifetime. I
feel great pleasure to present this project entitled ““A Study on Risk
Management in Banking with special reference to Union Bank of India,
Amarpatan”.
I am grateful to those people who help me a lot in preparation of this
project report. It is their support and blessings, which has brought me to write
this project report. I have a deep sense of gratitude in my heart for them.
I would give sincere thanks to our faculty members Prof. Sankalp
Shukla, Prof. R.P.Singh, Prof. Prashant Mishra, Prof. Neeraj Saxena, Dr. Fahim
Siddiqui, Prof. Priti Dwivedi, Prof. Neelam Bajpai, Prof. Pooja Pandey who is
been & will be source of inspiration to us.
I am very thankful to my project guide Prof. K.P.Tripathi for his whole-
hearted support and affectionate encouragement without which my successful
project would not have been possible.
Finally, I am very grateful to Mighty God and inspiring parents whose
loving & caring support contributed a major share in completion of my task.

5
 Ms. Durga Wati Patel

TABLE OF CONTENTS

S.N. Contents Page No.

1 Introduction of Project 6-11

2 Company Profile 12-15

3 Review of Literature 16-18

4 Objectives 19-20

5 Research Methodology 21-25

6 Data Analysis & Interpretation 26-32

7 Findings & Suggestions 33-34

8 Limitations 35-36

9 Conclusion 37-38

10 References 39-40

Annexure
11 41-45
Questionnaire

6
 CHAPTER-I

INTRODUCTION OF PROJECT

7
INTRODUCTION:

Risk management underscores the fact that the survival of an organization depends
heavily on its capabilities to anticipate and prepare for the change rather than just waiting
for the change and react to it. The objective of risk management is not to prohibit or
prevent risk taking activity, but to ensure that the risks are consciously taken with full
knowledge, purpose and clear understanding so that it can be measured and mitigated. It
also prevents an institution from suffering unacceptable loss causing an institution to
suffer or materially damage its competitive position. Functions of risk management
should actually be bank specific dictated by the size and quality of balance sheet,
complexity of functions, technical/ professional manpower and the status of MIS in place
in that bank.

INTRODUCTION

Risk: the meaning of ‘Risk’ as per Webster’s comprehensive dictionary is “a chance of

encountering harm or loss, hazard, danger” or “to expose to a chance of injury or loss”.
Thus, something that has potential to cause harm or loss to one or more planned
objectives is called Risk.
The word risk is derived from an Italian word “Risicare” which means “To Dare”. It is an
expression of danger of an adverse deviation in the actual result from any expected result.
Banks for International Settlement (BIS) has defined it as- “Risk is the threat that an
event or action will adversely affect an organization’s ability to achieve its objectives and
successfully execute its strategies.”
What Is Risk Management?

Risk Management is the process of identifying, analyzing and responding to risk factors
throughout the life of a project and in the best interests of its objectives. Proper risk
management implies control of possible future events and is proactive rather than
reactive. For example:

8
An activity in a network requires that a new technology be developed. The schedule
indicates six months for this activity, but the technical employees think that nine months
is closer to the truth. If the project manager is proactive, the project team will develop a
contingency plan right now. They will develop solutions to the problem of time before the
project due date. However, if the project manager is reactive, then the team will do
nothing until the problem actually occurs. The project will approach its six month
deadline, many tasks will still be uncompleted and the project manager will react rapidly
to the crisis, causing the team to lose valuable time.

Risk Management Systems

Risk Management Systems are designed to do more than just identify the risk. The system
must also quantify the risk and predict the impact on the project. The outcome is therefore
a risk that is either acceptable or unacceptable. The acceptance or non-acceptance of a
risk is usually dependent on the project manager's tolerance level for risk.

If risk management is set up as a continuous, disciplined process of problem identification

and resolution, then the system will easily supplement other systems. This includes;
organization, planning and budgeting, and cost control. Surprises will be diminished
because emphasis will now be on proactive rather than reactive management.

Risk Management...A Continuous Process

It begins with an idea which comes from:

Once the Project Team identifies all of the possible risks that might jeopardize the success
of the project, they must choose those which are the most likely to occur. They would
base their judgment upon past experience regarding the likelihood of occurrence, gut feel,
lessons learned, historical data, etc.

Early in the project there is more at risk then as the project moves towards its close. Risk
management should therefore be done early on in the life cycle of the project as well as
on an on-going basis.

The significance is that opportunity and risk generally remain relatively high during
project planning (beginning of the project life cycle) but because of the relatively low
level of investment to this point, the amount at stake remains low. In contrast, during
project execution, risk progressively falls to lower levels as remaining unknowns are
translated into knowns. At the same time, the amount at stake steadily rises as the
necessary resources are progressively invested to complete the project.

The critical point is that Risk Management is a continuous process and as such must not
only be done at the very beginning of the project, but continuously throughout the life of
the project. For example, if a project's total duration was estimated at 3 months, a risk

9
assessment should be done at least at the end of month 1 and month 2. At each stage of
the project's life, new risks will be identified, quantified and managed.

Risk Response

Risk Response generally includes:

 Avoidance...eliminating a specific threat, usually by eliminating the cause.

 Mitigation...reducing the expected monetary value of a risk event by reducing the
probability of occurrence.

 Acceptance...accepting the consequences of the risk. This is often accomplished

by developing a contingency plan to execute should the risk event occur.

In developing Contingency Plans, the Project Team engages in a problem solving process.
The end result will be a plan that can be put in place on a moment's notice.

What a Project Team would want to achieve is an ability to deal with blockages and
barriers to their successful completion of the project on time and/or on budget.
Contingency plans will help to ensure that they can quickly deal with most problems as
they arise. Once developed, they can just pull out the contingency plan and put it into
place.

Why do Risk Management?

The purpose of risk management is to:

 Identify possible risks.

 Reduce or allocate risks.
 Provide a rational basis for better decision making in regards to all risks.

 Plan.

Assessing and managing risks is the best weapon you have against project catastrophes.
By evaluating your plan for potential problems and developing strategies to address them,
you'll improve your chances of a successful, if not perfect, project.

Additionally, continuous risk management will:

 Ensure that high priority risks are aggressively managed and that all risks are cost-
effectively managed throughout the project.

 Provide management at all levels with the information required to make informed
decisions on issues critical to project success.
If you don't actively attack risks, they will actively attack you!!

10
How to do Risk Management

First we need to look at the various sources of risks. There are many sources and this list
is not meant to be inclusive, but rather, a guide for the initial brainstorming of all risks.
By referencing this list, it helps the team determine all possible sources of risk.

Various sources of risk include:

 Project Management
 Top management not recognizing this activity as a project
 Too many projects going on at one time
 Impossible schedule commitments
 No functional input into the planning phase
 No one person responsible for the total project
 Poor control of design changes
 Problems with team members.
 Poor control of customer changes
 Poor understanding of the project manager's job
 Wrong person assigned as project manager
 No integrated planning and control
 Organization's resources are overcommitted
 Unrealistic planning and scheduling
 No project cost accounting ability
 Conflicting project priorities
 Poorly organized project office

 External
 Unpredictable
 Unforeseen regulatory requirements
 Natural disasters
 Vandalism, sabotage or unpredicted side effects
 Predictable
 Market or operational risk
 Social
 Environmental
 Inflation
 Currency rate fluctuations
 Media
 Technical
 Technology changes
 Risks stemming from design process
 Legal
 Violating trade marks and licenses
 Sued for breach of contract

11
  Labour or workplace problem
 Litigation due to tort law

 Legislation

Analysis The Risk Process

The Risk Analysis Process is essentially a quality problem solving process. Quality and
assessment tools are used to determine and prioritize risks for assessment and resolution.

The risk analysis process is as follows:

1. Identify the Risk

 This step is brainstorming. Reviewing the lists of possible risk sources as
well as the project team's experiences and knowledge, all potential risks
are identified.
 Using an assessment instrument, risks are then categorized and prioritized.
The number of risks identified usually exceeds the time capacity of the
project team to analyze and develop contingencies. The process of
prioritization helps them to manage those risks that have both a high
impact and a high probability of occurrence.

2. Assess the Risk

 Traditional problem solving often moves from problem identification to
problem solution. However, before trying to determine how best to
manage risks, the project team must identify the root causes of the
identified risks.
 The project team asks questions including:
 What would cause this risk?
 How will this risk impact the project?

3. Develop Responses to the Risk

 Now the project team is ready to begin the process of assessing possible
remedies to manage the risk or possibly, prevent the risk from occurring.
Questions the team will ask include:
 What can be done to reduce the likelihood of this risk?
 What can be done to manage the risk, should it occur?

12
4. Develop a Contingency Plan or Preventative Measures for the Risk
 The project team will convert into tasks, those ideas that were identified to
reduce or eliminate risk likelihood.

 Those tasks identified to manage the risk, should it occur, are developed
into short contingency plans that can be put aside. Should the risk occur,
they can be brought forward and quickly put into action, thereby reducing
the need to manage the risk by crisis.

CHAPTER-II

COMPANY PROFILE

13
Union Bank of India was established on 11th November 1919 with its headquarters in the
city of Bombay now known as Mumbai.

The Head Office building of the Bank in Mumbai was inaugurated by Mahatma Gandhi,
the Father of the nation in the year 1921, and he said on the occasion:

"We should have the ability to carry on a big bank, to manage efficiently crore of rupees
in the course of our national activities. Though we have not many banks amongst us, it
does not follow that we are not capable of efficiently managing crore and tens of crore of
rupees."

His prescient words anticipated the growth of the bank that has taken place in the decades

14
that followed. The Bank now operates through over 4000+ branches across the country.
The Bank's core values of prudent management without ignoring opportunities is
reflected in the fact that the Bank has shown uninterrupted profit during all 93 years of its
operations.

Union Bank has been playing a very proactive role in the economic growth of India and it
extends credit for the requirements of different sectors of economy. Industries, exports,
trading, agriculture, infrastructure and the individual segments are sectors in which the
bank has deployed credit to spur economic growth and to earn from a well diversified
portfolio of assets.

Resources are mobilized through Current, Savings and Term Deposits and through
refinance and borrowings from abroad. The Bank has a large clientele base of over 49
million.

On the technology front the Bank has taken early initiatives and 100% of its branches are
computerized. The Bank has also introduced Core Banking Solution with connectivity
between branches. 100% of the business of the Bank is under Core Banking Solution
making it a leader among its peers in infusion of technology. Many innovative products
are developed using the technology platform to offer an array of choices to customers,
adding speed and convenience to transactions. Technology will also enable the Bank to
derive substantial cost reduction while creating the requisite capacity to handle the ever
increasing volume of business in a competitive environment that offers immense
opportunities.

At the end of March 2014 the Bank achieved total business level of Rs. 5,32,007 crore
(Rupees five lakh thirty two thousand seven crore).

Behind all these achievements is a dedicated team of staff, which is truly cosmopolitan in
its composition. Many generations of members of staff have contributed in building up
the strong edifice of the Bank. The present team of over 31,000 members of staff
distinguishes itself with its customer centricity, willingness to learn and adherence to
values enabling us to be recognized as a caring organization where people enjoy their
work and relationship with customers.

AWARDS AND COMMENDATIONS

15
Union Bank of India has been the proud recipient of many awards and commendations. It
is an honor to be appreciated for the work we do in serving the customer and society.
 Union Bank of India bags the Express Uptime Champion Award 2014 for its
Network Operations.
 Union Bank of India won 6 IBA (Indian Bank Association) Technology Awards
under following categories
1. Winner
 Best Payment Initiatives
2. Runner up
 Best Technology Bank of the year
 Best Risk Management & Security
 Best use of Mobility Technology
 Best Internet Bank
 Best Use of Technology in Training and Learning Initiative

 Union Bank of India bags Financial Inclusion Technology Initiative award in the
Global Conference on Financial Inclusion & Payment Systems
 Union Bank bags First prize under RBI Rajbhasha Shield and Second prize under
Bilingual House Journal Competition from Reserve Bank of India
 Our bank bags IDRBT IT Excellance Awards 2012-13 under following
categories
1. IT Excellance Award for "Best IT Team"
2. Special Award for "Technology for FI"
3. Special Award for "Managing IT Risk"

 The Dale Carnegie Leadership Award was conferred on Union Bank of India on
28th October 2010 by Dale Carnegie Training for the Bank's transformation
initiatives undertaken through project Nav Nirman.
 Our Bank has been the winner of Association of Business Communicators of India
(ABCI) Gold Award for marketing and Brand Communications, 2010. The award
is in recognition of the transformation process undertaken by the Bank.
 Our Bank was ranked as the 275th most valuable global banking brand for
calendar year 2009, up from 351st rank in 2008.
 The ranking is carried by Brand Finance Plc, an independent intangible asset
valuation and brand strategy global firm

16
 The brand value rating for Union Bank is A+ (A means strong) compared to BB
(BB means Average) in previous year
 Bank's brand value increased by 148% during the calendar year 2009.
 The Asian Banker ranked Union Bank of India the 7th Strongest Bank in Asia-
Pacific Region in 2009. The Bank was ranked at No. 3 amongst banks in India.
 Our Bank has participated in the prestigious Banking Technology Awards 2009
conducted by IBA-TFCI award and bagged the Best User of Business Intelligence
award.
 Union Bank of India was awarded the prestigious Skoch Challenger Award 2009
for excellence in capacity building through innovative concept of 'Village
Knowledge Centre' as part of financial inclusion initiatives

CHAPTER-III

REVIEW OF LITERATURE
17
REVIEW OF LITERATURE:

Risk Management and Risk based Supervision in Banks has been the subject of study of
many Agencies and Researchers and Academicians. There is a treasure of literature
available on the subject.
A careful selection of relevant material was a formidable task before the Researcher.
Efforts have been made to scan the literature highly relevant to the Context.
The main sources of literature have been the Website of the Reserve Bank of India, the
website of the Basle Committee on Banking Supervision and the websites of several
major Banks both in India and abroad. The publications of Academicians engaged in the
Risk Management and Central Banking Supervision sphere also throws valuable insights
in to the area. The occasional Research papers published by Reserve Bank, the speeches
of the Governor and the Deputy Governors of the Reserve Bank of India, the Publications
of the Reserve Bank of India, the Indian Banks Association have proved quite relevant to
the study.

Hannan and Hanweck (28) felt that the insolvency for Banks become true when current
losses exhaust capital completely. It also occurs when the return on assets (ROA) is less
than the negative capital-asset ratio.

18
Daniele Nouy (29) elaborates the Basel Core Principles for effective Banking
Supervision, its innovativeness, content and the challenges of quality implementation.
Core Principles are a set of supervisory guidelines aimed at providing a general
framework for effective Banking supervision in all countries. They are innovative in the
way that they were developed by a mixed drafting group and they were comprehensive in
coverage, providing a checklist of the principal features of a well designed supervisory
system. The core Principles specify preconditions for effective banking supervision
characteristics of an effective supervisory body, need for credit risk management and
elaborates on Principle 22 dealing with supervisory powers. Dearth of skilled human
resources, poor financial strength of supervisor and consequent inability to retain talented
staff, inadequate autonomy and the need for greater understanding of modern risk
management techniques are identified as the main difficulties in quality implementation.
The critical elements of infrastructure, legal framework that supports sound banking
supervision and a credit culture that supports lending practices are the essence of a strong
banking system. Widespread failures have occurred during a period of increased
vulnerability that can be traced back to some regime change induced by policy or by
external conditions.

Patrick Honohan (30) explains the use of budgetary funds to help restructure a large
failed Bank/Banking system and the various consequences associated with it. The article
discusses how instruments can best be designed to restore Bank capital, liquidity and
incentives. It considers how recapitalisation can be modelled to ensure right incentives
for new operators/managers to operate in a prudent manner ensuring good subsequent
performance It discusses how Government’s budget and the interest of the tax payer can
be protected and suggest that monetary policy should respond to the recapitalisation
rather determine its design.
The author proposes the following four distinct policy tools to achieve four distinct goals-
injecting assets, adjusting capital claims on the Banks, rebalancing the govt’s own debt
management and managing monetary policy instruments to maintain stability. The author
also assessed the effect of bank recapitalization for budget and debt management and
implications for monetary policy and macro-economic environment in his article.

Jacques de Larosiere, former Managing Director of the International Monetary

Fund(31) discusses the implications of the new Prudential Framework. He explains at
length how the new Regulatory code could have some dangerous side effects. The
increased capital requirements as decided by the Basel Committee on Banking
Supervision in September 2010 will affect the amount of own funds would affect the
profitability of the Banks. The consequences of such increased capital requirements
would incentivise the Banks to transfer certain operations that are heavily taxed in terms
of capital requirements to shadow Banking to avoid the scope of regulation. The risks of
such a practice might affect the financial stability. While the Central Banking authorities
might contemplate registration and supervision of such shadow banking entities like the
hedge funds and other pools, such a course might be more cumbersome than expected.

19
The new regulation would result in the Banks to reduce activities with rather poor
margins. For example they may reduce exposure to small and medium enterprises or
increase credit costs or concentrate on more profitable but higher risk activities. He is
also critical of the proposal of Basel to introduce an absolute leverage ratio that might
push Banks to concentrate their assets in riskier operations. The author feels that the
banking model which favours financial stability and economic growth might become the
victim of the new prudential framework, and force Banks to search for assets with
maximum returns despite the attendant risks.

William Allen of Cass Business School, City University London(32) strongly criticises
the Basel Committee on Banking Supervision announcement increasing the capital
requirements as part of Basel III. The aims of increasing the capital are two-fold. Firstly
the objective is to increase the amount of liquid assets held by Banks and reduce their
reliance on short term funding. It also aims at limiting the extent to which Banks can
achieve maturity transformation. This focus on liability management, as per him will
prove counter-productive, as has been proved historically by the recent financial crisis.
As a strategy to meet the new Capital Accord Banks will be forced to amass large
amounts of liquid assets, in addition to the amounts they will need to repay special
facilities provided by the Governments and Central Banks. The liquidity coverage ratio
envisaged in the Accord also will require Banks to hold 100% liquid asset coverage
against liquidity commitments, and this will seriously impair the profitability of the
Banks.

CHAPTER-IV

OBJECTIVES OF THE STUDY

20
 OBJECTIVES OF THE STUDY

The objectives of the study are:-

 To study and analyze different aspects of risk assessment

 To identify keys for effective risk management

21
CHAPTER-V

22
 RESEARCH METHODOLOGY

RESEARCH METHODOLOGY

RESEARCH
Research is a process in which the researcher wishes to find out the end result for
a given problem and thus the solution helps in future course of action. The research has
been defined as “A careful investigation or enquiry especially through search for new fact
in any branch of knowledge”.

RESEARCH METHODOLOGY

The procedure using, which researchers go about their work of describing,

explaining and predicting phenomena, is called Methodology. Methods compromise the

23
procedures used for generating, collecting, and evaluating data. Methods are the ways of
obtaining information useful for assessing explanation.
A. RESEARCH DESIGN

A research design is an arrangement of conditions for connections and analysis of

data in a manner that aims to combine relevance to the research purpose with
economy in procedure. Research design is a plan that specifies the sources and types
of information relevant to the research problem. It is a strategy specifying which
approach will be used for gathering and analyzing the data. In fact, it is the
conceptual structure with which research is conducted; it constitutes the blue print
for the collection, measurement and analysis of data. The plan is an outline to
research scheme on which the researcher id to work. The structure of the research is
a more specific outline or the scheme. The strategy shows how the research will be
carried out, specifying the method to be used in collecting data.
TYPES OF RESEARCH DESIGN
Research design is mainly of three types: -
1. Exploratory research
2. Descriptive research
3. Experimental research

Descriptive research
The type of research used in this project is descriptive in nature. Descriptive research is
essentially a fact finding related largely to the present, abstracting generations by cross
sectional study of the current situation .The descriptive methods are extensively used in
the physical and natural science, for instance when physics measures, biology classifies,
zoology dissects and geology studies the rock. But its use in social science is more
common, as in socio economic surveys and job and activity analysis

DESCRIPTIVE RESEARCH AIMS

 To portray the characteristics of a particular individual situation or group (with or
without specific initial hypothesis about the nature of this characteristics).

 To determine the frequency with which something occurs or with which it is

24
 associated with something else ( usually , but not always ,with a specific initial
hypothesis).
The descriptive method has certain limitation; one is that the research may make
description itself an end itself. Research is essentially creative and demands the discovery
of facts on order to lead a solution of the problem. A second limitation is associated
whether the statistical techniques dominate. The desire to over emphasis central
tendencies and to fact in terms of Average, Correlation, Means and dispersion may not
always be either welcome. This limitation arises because statistics which is partly a
descriptive tool of analysis can aid but not always explain causal relation.

DESIGN OF DESCRIPTIVE STUDIES:

Descriptive studies aim at portraying accurately the characteristics of a particular
group or solution. One may undertake descriptive study about the work in the factory,
health and welfare. A descriptive study may be concerned with the right to strike, capital
punishment, prohibition etc:
A descriptive study involves the following steps:
1. Formulating the objectives of the study.
2. Defining the population and selecting the sample.
3. Designing the method of data collection.
4. Analysis of the data.
5. Conclusion and recommendation for further improvement in the practices.

SAMPLING DESIGN
Sampling is used to collect primary data when the source of data is far too many to be
exhausting handled. Sampling is the integral part of data collection process. The
way of selecting a sample is known as sample design. It is the definite plan for
obtaining a sample from a given population. It may as well lay down the number of
items to be included in the sample i.e. the size of the sample.
Sample design is determined before data are collected.

Sources of data collection:

The data was collected using both primary sources and the secondary sources.

25
 1. Primary sources: The researcher collected the primary data by means of structured
questionnaire along with personal interviews, since a few open ended questions
require clarification.

Questionnaire and Interview:

The data is collected from managers, supervisors with the help of questionnaire generated
for this purpose. The questionnaire consists of single parts.
The questionnaires have been thoroughly discussed with the respondent to clarify doubts,
if any, regarding what has been asked. It had taken the researcher nearly six weeks to
complete the survey work. The respondents have been required to give their answer by
putting tick mark across the multiple choice questions and in open ended questions the
respondents were asked to express their views in their own words. Almost all the
respondents have been contracted and interviewed personally at the time of filling up the
questionnaire. Then their replies have been received and further clarification and
supplementary information considered to be necessary have been secured.

2. Secondary Data:
The researcher has also collected the secondary data by means of the documentary
sources such as:
 Company records
 Registers files booklets
 Magazine
 Journals
 Booklets

26
CHAPTER-VI

27
 DATA ANALYSIS & INTERPRETATION

DATA ANALYSIS & INTERPRETATION:

ORGANISTIONAL STRUCTURE

1. Do you have an assigned Credit risk, Market risk and Operational risk manager in your bank?
CREDT RISK MARKET RISK OPERATIONAL RISK
YES 10 9 9
NO 1 1

28
2. To whom does the Risk manager report?
CREDT MARKET OPERATIONAL
RISK RISK RISK
CHIEF EXECUTIVE OFFICER 4 6 6
CHIEF FINANCIAL OFFICER
ASSETS AND LIABLITY 2 1 1
MANAGER
CREDIT RISK OFFICER 4 2 2
OTHER SPECIFY

3. What is the assigned manager’s time dedicated to this activity?

CREDT RISK MARKET RISK OPERATIONAL RISK
0-20% 2 4 2
20-50% 2 1 2
>50% 6 5 6

29
4. How many people work in these departments?

CREDT RISK MARKET RISK OPERATIONAL RISK

1-3 2 4 1
3-5 6 4 5
5- 10 1 1 1
> 10 1 1 3

5. Do you have a Risk Committee?

CREDT RISK MARKET RISK OPERATIONAL RISK

YES 6 5 6
NO 4 5 4

30
OBSERVATIONS
 Almost all of the participating banks have a risk management departemnt.
 Most of the industry’s risk managers’ report to the Chief Executive Officer, Asset
and liability manager and Chief Risk Officer accounting for the balance in equal
proportions.
 Slightly more attention is paid to credit and operational risk than to Market risk, as
40 % of the banks operating do not have risk committee.

INTERPRETATION

 Despite the relatively small size of banks, they are generally well aware of the risk
management function, and for this purpose, risk managers spend over half their
time performing these functions.

REPORTING ABILITY

1. Are you producing reporting for

CREDT MARKET RISK OPERATIONAL
RISK RISK

31
 REGULATORY PURPOSE 3 4 4
MONITORING 7 8 8
DECISION MAKING 7 4 4
PURPOSE

2. Does external reporting drive your internal reporting?

CREDT RISK MARKET RISK OPERATIONAL
RISK
VERY SIGNIFICANTLY 4 5 4
SIGNIFICANTLY 5 4 5
NOT AT ALL SIGNIFICANTLY 1 1 1

3. Does external reporting affect your decision making process?

CREDT RISK MARKET RISK OPERATIONAL RISK
VERY SIGNIFICANTLY 3 3 3
SIGNIFICANTLY 6 5 6
NOT AT ALL 1 2 1
SIGNIFICANTLY

32
4. How frequent is your internal reporting?
CREDT RISK MARKET RISK OPERATIONAL RISK

Daily 1 1
Weekly 1 1
Monthly 8 8 7
Annually 1 1 1

5. Will you produce specific internal reporting for Credit, Market and Operational Risk?
CREDT RISK MARKET RISK OPERATIONAL RISK

YES 10 10 10
NO

33
OBSERVATIONS

 All risk reporting is compiled largely for monitoring and Decision making
purposes than Regulatory purpose.
 All the Banks produce internal report.
 Most of the Banks produce Internal Report monthly.
 Most of the banks said External reporting affect their decision making process.

INTERPRETATION

 Reporting for all risk still needs to be developed.

34
 CHAPTER-VII
FINDINGS & SUGGESTIONS

35
 FINDINGS AND SUGGESTIONS

 Credit risk is generally well contained, but there are still problems associated with
loan classification, loan loss provisioning, and the absence of consolidated
accounts.

 Market risk and Operational risk are clear challenge, as they are relatively new to
the areas that were not well developed under the original Basel Capital Accord.

 The new regulations will allow banks to introduce substantial improvements in

their overall risk management capabilities, improving risk based performance
measurement, capital allocation as portfolio management techniques.

 Future complexity is expected because banks diversify their operations. It is

expected that banks will diversify their operations to generate additional income
sources, particularly fee-based income i.e. non interest income, to improve
returns.

SUGGESTIONS

 The Banks need regular engagement for sustained support. A qualified long-term
advisor would be preferable.

 Training and additional assistance to make it easier for the banking system to
comply with new guidelines on market and operational risk.

 Data Privacy and security needs more attention

36
CHAPTER-VIII
LIMITATIONS

37
 LIMITATIONS

 The respondents have replied to the queries recalling from their memory.
Therefore recall bias and personal bias are possible.
 Since the data was collected using a schedule, the interviewer’s inability to
understand and record the responses correctly is possible.
 The respondents were unable or unwilling to give a complete and accurate
response to certain questions.

38
CHAPTER-IX

39
CONCLUSION

Risk Management is the process of identifying, analyzing and responding to risk factors
throughout the life of a project and in the best interests of its objectives. Proper risk
management implies control of possible future events and is proactive rather than
reactive. For example:

An activity in a network requires that a new technology be developed. The schedule

indicates six months for this activity, but the technical employees think that nine months
is closer to the truth. If the project manager is proactive, the project team will develop a
contingency plan right now. They will develop solutions to the problem of time before the
project due date. However, if the project manager is reactive, then the team will do
nothing until the problem actually occurs. The project will approach its six month
deadline, many tasks will still be uncompleted and the project manager will react rapidly
to the crisis, causing the team to lose valuable time.

Risk Management Systems are designed to do more than just identify the risk. The system
must also quantify the risk and predict the impact on the project. The outcome is therefore
a risk that is either acceptable or unacceptable. The acceptance or non-acceptance of a
risk is usually dependent on the project manager's tolerance level for risk.

If risk management is set up as a continuous, disciplined process of problem identification

and resolution, then the system will easily supplement other systems. This includes;
organization, planning and budgeting, and cost control. Surprises will be diminished
because emphasis will now be on proactive rather than reactive management.

40
CHAPTER-X
REFERENCES

41
 REFERENCES

BOOKS

 C.R. Kothari, Research Methodology

 Hand Book on Risk management

ARTICALS

 Risk Management in Banks. -- R S Raghavan Chartered Accountant.

 Risk Management Guidelines for Commercial Banks & DFIs.

WEB SITES

 www.rbi.org
 www.google.com
 www.yahoo.com

42
CHAPTER-XI
ANNEXURE

43
 QUESTIONNAIRE/ANNEXURE

I am DURGA PATEL studying 4 th semester MBA in A.P.S. University, Rewa. I am

working on a project titled “RISK MANAGEMENT IN BANKING SECTOR”. In this
regard I request you to spend your valuable time in filling this questionnaire (Tick the
appropriate box). This information will be used only for academic purpose and will be
kept confidential.

INSTITUTIONAL INFORMATION
1. Name of your bank:

2. Please indicate the name of the Name:

contact person for this
questionnaire and his/her position Position:
in the Bank.
3. To which of the following types of o Public sector
banks does your bank belong?
o Private sector

o Foreign Bank

4. Where is your parent/head office

located?
Tick the appropriate box

ORGANISTIONAL STRUCTURE

1. Do you have an assigned Credit risk, Market risk and Operational risk manager in your
bank?

44
 CREDT RISK MARKET RISK OPERATIONAL
RISK
YES
NO

2. To whom does the Risk manager report?

CREDT RISK MARKET RISK OPERATIONAL
RISK
CHIEF
EXECUTIVE
OFFICER
CHIEF
FINANCIAL
OFFICER
ASSETS AND
LIABLITY
MANAGER
CREDIT RISK
OFFICER
OTHER SPECIFY

3. What is the assigned manager’s time dedicated to this activity?

CREDT RISK MARKET RISK OPERATIONAL
RISK
0-20%
20-50%
>50%

4. How many people work in these departments?

CREDT RISK MARKET RISK OPERATIONAL
RISK
1–3
3–5

45
5- 10
> 10

46
5. Do you have a Risk Committee?
CREDT RISK MARKET RISK OPERATIONAL
RISK
YES
NO

REPORTING ABILITY

1. Are you producing reporting for

CREDT RISK MARKET RISK OPERATIONAL
RISK
REGULATORY
PURPOSE
MONITORING
DECISION
MAKING
PURPOSE

2. Does external reporting drive your internal reporting?

CREDT RISK MARKET RISK OPERATIONAL
RISK
VERY
SIGNIFICANTLY
SIGNIFICANTLY
NOT AT ALL
SIGNIFICANTLY

47
3. Does external reporting affect your decision making process?
CREDT RISK MARKET RISK OPERATIONAL
RISK
VERY
SIGNIFICANTLY
SIGNIFICANTLY
NOT AT ALL
SIGNIFICANTLY

4. How frequent is your internal reporting?

CREDT RISK MARKET RISK OPERATIONAL
RISK
Daily
Weekly
Monthly
Annually

5. Will you produce specific internal reporting for Credit, Market and Operational Risk?
CREDT RISK MARKET RISK OPERATIONAL
RISK
YES
NO

48