Performance Appraisal of Working Capital Funding Products and Risk Management Practices in Private Banking Sector-A Case Study of Kotak Mahindra Bank

Abstract

Working capital is the fund invested in current assets required for meeting day to day expenses includes trade credit, bank credit, factoring and commercial paper. Of these, the present paper deals with only bank credit which represents the most important source for financing of current assets. From time to time, Reserve Bank of India has been issuing guidelines and directives to the banks to strengthen the procedure and norms for working capital financing. The present study has been designed to study the customers ’as well as the bankers ’perspective on working capital funding products offered by the Kotak Mahindra Bank along with the analysis of risk management practices adopted by the bank and reasons thereof to know the most preferred option of working capital funding and its management. To accomplish the objectives, the study has been broadly based on the primary data/information collected through direct communication with the customers, employees, senior managers etc. The required data/information was collected from randomly selected 60 customers and 20 bank employees-bankers ’representatives. The study highlighted that about 75 percent customers were found to be more or less satisfied with the service delivery mechanism of the bank. The bank needs to improve further to satisfy the remaining 25 percent of its customers who showed their dissatisfaction in terms of delay in task as well as lengthy procedure followed at the end of the bank. The study further showed working capital as the major determining factor in devising strategies with preferred method-portfolio review for effective screening in making funds available to the customer. The policies pertaining to the working capital funding were mostly found to be reviewed as per the need and contingencies. Risk analysis has major role to play while funding to develop a cushion for the organization and the appraisal clearly brought out the preferred practices in terms of risk focused and suitable method adhering to the needs of the organization. Credit assessment of the borrower forms a major part of the whole process involved and it is essential that such an assessment is carried out without any biasness and discrepancy. The credit appraisal mechanism at KMBL was exhaustive and effective in appraising customer's applicant for credit. The organization should also strive to provide training to staff with regard to upgraded policies stated by RBI.