Project 4 Sem

8/12/2019 Project 4 Sem

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SUMMER TRAINING REPORT SUBMITTED TOWARDS THE

PARTIAL FULFILLMENT OF POST GRADUATE DEGREE IN

INTERNATIONAL BUSINESS

WORKING CAPITALMANAGEMENT

OnKotak Mahindra Group

INDUSTRY GUIDE FACULTY GUIDE

AMITY INTERNATIONAL BUSINESS SCHOOL,

NOIDAAMITY UNIVERSITY UTTAR

PRADESH


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TABLE OF CONTENTS

Chapter No S!"#e$t Pa%e No

Ch No.1 Executie !u""ar#$$$$$$$. %

Ch No.& Re'earch Methodo(o)#$$$$$$ *

&.1 Pri"ar# O+,ectie-'$$$$.

&.& /#pothe'i'$$$$$$$$

&.0 Re'earch e'i)n$$$$$$

&.2 !a"p(e e'i)n$$$$$$..

&.3 !cope o4 the !tud#$$$$$.

&.% Li"itation'$$$$$$$$.

Ch No.0 Critica( Reie5 o4 Literature$$$.. 6

Ch No.2 Co"pan# Pro4i(e $$$$$$$$. 17

Ch No.3 Indu'tr# Pro4i(e$$$$$$.. &1

Ch No.% !WOT Ana(#'i'$$$$$$$. 23

Ch No.* ata$$$$$$$$$$$$$.. 2% *.1 Co((ection$$$$$$$$$

*.& Pri"ar# ata$$$$$$$$

*.0 !econdar# ata$.$$$$$..

Ch No.7 Workin) Capita(8 Oera(( 9ie5$$$ 30

Ch No.6 :indin)' ; Ana(#'i'$$$$$$$. 1


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CH NO&' E(ECUTIVE SUMMARY

The Indian Li4e In'urance Co"pan# ha' 'een a re"arka+(e 'hi4t 'ince the ti"e o4

e'ta+(i'h"ent o4 the 4ir't co"pan#> Orienta( Li4e In'urance Co"pan# in 17&0. At the

ti"e o4 Independence and therea4ter> there 5ere "ore than & ine'tor a5arene'' and dier'it# o4 product' and the extent o4 u'e o4

ri'k "ana)e"ent techniue'. :urther co"pari'on reea(' that the attitude o4 re)u(atorto5ard' ine'tor protection and the )oernance o4 "utua( 4und' are at par 5ith )(o+a(

'tandard'. The paper then ana(#'i' the 4uture expectation' 4ro" the "utua( 4und indu'tr#

in ter"' o4 increa'ed ine'tor a5arene''> product dier'it# and i"proe"ent in

penetration and di'tri+ution. In the end I reco""end certain 'tep' that !E=I and AMC'

'hou(d take in order to +ui(d ine'tor con4idence and tru't.


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CH NO )' RESEARCH METHODOLOGY

Pr*+ar O"#e$t*-e./0

The =a'ic o+,ectie o4 ca'h "ana)e"ent i' t5o 4o(dD

To "eet the ca'h di'+ur'e"ent need' -pa#"ent 'chedu(e

To "ini"i?e 4und' co""itted to ca'h +a(ance'.

The'e are con4(ictin) and "utua((# contradictor# and the ta'k o4 ca'h "ana)e"ent i'

to reconci(e the".

Hpothe/*/'

1. Cu'to"er' hae +a'i' o4 pre4erence in 'e(ection o4 the 4ina( Kotak Mahindra O(d

Mutua( Li4e In'urance

&. The choice o4 the Kotak Mahindra O(d Mutua( Li4e In'urance "i)ht hae an

e44ect either o4 the per'ona( pre4erence or the countr# o4 ori)in

0. The 4ina( deci'ion i' +a'ed on prior experience

Sa+p1e S*2e'

The 'i?e o4 the 'a"p(e 5a' around *< peop(e con'iderin) the ti"e con'traint.

Re/ear$h De/*%3'

Data Co11e$t*o3'ata ha' +een co((ected throu)h +oth pri"ar# and 'econdar# approach.

Data So!r$e/

The re'earch ino(ed )atherin) !econdar# data a' 5e(( a' Pri"ar# data. :or the purpo'e

t5o t#pe' o4 'ure# 5a' conducted +# "e to co((ect the data 8

Cu'to"er 'ure# and

Con'u"er 'ure#

Pr*+ar Data

Con'u"er 'ure# 5a' done to kno5 their purcha'in) +ehaiour +ecau'e the# are the one

5ho con'titute the "arket and are the tar)et o4 the +u'ine'' . In In'urance Indu'tr# unti((

and un(e'' 5e hae the kno5(ed)e o4 the con'u"er +ehaiour and 4actor 5hich


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in4(uence the" to +u# a paticu(ar +rand >co"panie' cannot 4ocu' upon the tar)et "arket.

/ence a con'u"er 'ure# 5a' done to kno5 their 5ant'> purcha'in) po5er> and +u#in)

ha+it' in order to 'e)"ent the "arket > and +a'ed on thi' con'u"er pro4i(e 5a'

identi4ied.

Se$o34ar Data

!econdar# data re)ardin) 'a(e' 4i)ure'> pro"otiona( expen'e' and other re(ated expen'e'

5a' co((ected 4ro" the co"pan#F' o5n record to ana(#'e the i"pact on 'a(e' due to the

runnin) 'che"e' and "ake co't +ene4it ana(#'i'.

S$ope o5 the St!4

=oth pri"ar# and !econdar# data ha' +een +e u'ed 4or the 'tud#. Pri"ar# data 5a'

co((ected throu)h direct interaction 5ith the co"pan#F' 4inance and account'

depart"ent. I4 needed 'chedu(eue'tionnaire' 5ou(d +e dei'ed to )et the in4or"ation

on a(( the re(eant area' o4 the 'tud# 'uch a' receia+(e "ana)e"ent> inentor#

"ana)e"ent> "ana)e"ent o4 ca'h etc.

And I co((ected the data 4ro" the 'econdar# 'ource' co"pri'in) Annua( Report' o4 the

4ir"> other ,ourna(' and peridocia('.

Apart 4ro" the conductin) thi' re'earch 5ork on the +a'i' o4 the'e in4or"ation'> ariou'

techniue' o4 4inancia( "ana)e"ent e.).> co"paratie 'tate"ent> trend ana(#'i' and ratio

ana(#'i' etc. 5ere u'ed in the pre'ent 'tud#. To pre'ent a +road ie5 'o 4ar the purpo'e

o4 the ana(#'i' and to "ake it ea'# to under'tand the pro+(e"concept o4 a 4e5 )raph'

and ta+(e' 'ha(( a('o +e pre'ented. In each chapter> the ana(#'i' ha' +een co"pared 5ith

actua( "ana)e"ent practice' o4 the co"pan# under 'tud#.

L*+*tat*o3 o5 the St!4

The pre'ent 'tud# i' (i"ited to one Co.> i.e. Kotak Mahindra Li4e In'urance Ltd.> and

coer' a period 4ro" &


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CH NO 6' CRITICAL REVIEW OF LITERATURE

WOR7ING CAPITAL 8 OVERALL VIEW

Workin) Capita( "ana)e"ent i' the "ana)e"ent o4 a''et' that are current in nature.

Current a''et'> +# accountin) de4inition are the a''et' nor"a((# conerted in to ca'h in a

period o4 one #ear. /ence 5orkin) capita( "ana)e"ent can +e con'idered a' the

"ana)e"ent o4 ca'h> "arket 'ecuritie' receia+(e> inentorie' and current (ia+i(itie'. In

4act> the "ana)e"ent o4 current a''et' i' 'i"i(ar to that o4 4ixed a''et' the 'en'e that i'

+oth in ca'e' the 4ir" ana(#'e' their e44ect on it' pro4ita+i(it# and ri'k 4actor'> hence the#

di44er on three "a,or a'pect'D

1. In "ana)in) 4ixed a''et'> ti"e i' an i"portant 4actor di'countin) and

co"poundin) a'pect' o4 ti"e p(a# an i"portant ro(e in capita( +ud)etin) and a

"inor part in the "ana)e"ent o4 current a''et'.

&. The (ar)e ho(din)' o4 current a''et'> e'pecia((# ca'h> "a# 'tren)then the 4ir"F'

(iuidit# po'ition> +ut i' +ound to reduce pro4ita+i(it# o4 the 4ir" a' idea( car

#ie(d nothin).

0. The (ee( o4 4ixed a''et' a' 5e(( a' current a''et' depend' upon the expected

'a(e'> +ut it i' on(# current a''et' that add 4(uctuation in the 'hort run to a

+u'ine''.

To under'tand 5orkin) capita( +etter 5e 'hou(d hae +a'ic kno5(ed)e a+out the ariou'

a'pect' o4 5orkin) capita(. To 'tart 5ith> there are t5o concept' o4 5orkin) capita(D

Gro'' Workin) Capita(

Net 5orkin) Capita(

Gro// Wor9*3% Cap*ta1' Gro'' 5orkin) capita(> 5hich i' a('o 'i"p(# kno5n a'

5orkin) capita(> re4er' to the 4ir"F' ine't"ent in current a''et'D Another a'pect o4 )ro''

5orkin) capita( point' out the need o4 arran)in) 4und' to 4inance the current a''et'. The

)ro'' 5orkin) capita( concept 4ocu'e' attention on t5o a'pect' o4 current a''et'

"ana)e"ent> 4ir't(# opti"u" ine't"ent in current a''et' and 'econd(# in 4inancin) the

current a''et'. The'e t5o a'pect' 5i(( he(p in re"ainin) a5a# 4ro" the t5o dan)er

point' o4 exce''ie or inadeuate ine't"ent in current a''et'. Wheneer a need o4

5orkin) capita( 4und' ari'e' due to increa'e in (ee( o4 +u'ine'' actiit# or 4or an# other

rea'on the arran)e"ent 'hou(d +e "ade uick(#> and 'i"i(ar(# i4 'o"e 'urp(u'e' are


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aai(a+(e> the# 'hou(d not +e a((o5ed to (ie idea( +ut 'hou(d +e put to 'o"e e44ectie u'e.

Net Wor9*3% Cap*ta1' The ter" net 5orkin) capita( re4er' to the di44erence +et5een the

current a''et' and current (ia+i(itie'. Net 5orkin) capita( can +e po'itie a' 5e(( a'

ne)atie. Po'itie 5orkin) capita( re4er' to the 'ituation 5here current a''et' exceed

current (ia+i(itie' and ne)atie 5orkin) capita( re4er' to the 'ituation 5here current

(ia+i(itie' exceed current a''et'. The net 5orkin) capita( he(p' in co"parin) the (iuidit#

o4 the 'a"e 4ir" oer ti"e. :or purpo'e' o4 the 5orkin) capita( "ana)e"ent> there4ore

Workin) Capita( can +e 'aid to "ea'ure the (iuidit# o4 the 4ir". In other 5ord'> the )oa(

o4 5orkin) capita( "ana)e"ent i' to "ana)e the current a''et' and (ia+i(itie' in 'uch a

5a# that a accepta+(e (ee( o4 net 5orkin) capita( i' "aintained.

I+porta3$e o5 :or9*3% $ap*ta1 +a3a%e+e3t'

Mana)e"ent o4 5orkin) capita( i' er# "uch i"portant 4or the 'ucce'' o4 the +u'ine''.

It ha' +een e"pha'i?ed that a +u'ine'' 'hou(d "aintain 'ound 5orkin) capita( po'ition

and a('o that there 'hou(d not +e an exce''ie (ee( o4 ine't"ent in the 5orkin) capita(

co"ponent'. A' pointed out +# Ra(ph Kenned# and !te5art MC Mu((er> @the

inadeuac# or "i'8"ana)e"ent o4 5orkin) capita( i' one o4 a 4e5 (eadin) cau'e' o4

+u'ine'' 4ai(ure.

Current a''et'> in 4act> account 4or a er# (ar)e portion o4 the tota( ine't"ent o4 the

4ir".

Ta"1e /ho:*3% C!rre3t a//et/ a/ per$e3ta%e o5 Tota1 a//et/

Year Per$e3ta%e

&


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It can +e i'ua(i?ed 4ro" the ta+(e that in the 4ir't #ear o4 our 'tud# i.e. &


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'i"i(ar production po(ic# in a(( re'pect' +ecau'e it depend' upon the

circu"'tance' o4 an indiidua( co"pan#.

3. F*r+;/ Cre4*t Po1*$' The credit po(ic# o4 a 4ir" a44ect' 5orkin) capita( +#

in4(uencin) the (ee( o4 +ook de+t'. The credit ter" i' 4air(# con'tant in an

indu'tr# +ut indiidua(' a('o hae their ro(e in 4ra"in) their credit po(ic#. A

(i+era( credit po(ic# 5i(( (ead to "ore a"ount +ein) co""itted to 5orkin) capita(

reuire"ent' 5herea' a 'tern credit po(ic# "a# decrea'e the a"ount o4 5orkin)

capita( reuire"ent apprecia+(# +ut the repercu''ion' o4 the t5o are not 'i"p(e.

/ence a 4ir" 'hou(d a(5a#' 4ra"e a rationa( credit po(ic# +a'ed on the credit

5orthine'' o4 the cu'to"er.

%. A-a*1a"*1*t o5 Cre4*t' The ter"' on 5hich a co"pan# i' a+(e to aai( credit

4ro" it' 'upp(ier' o4 )ood' and deice' credita('o a44ect' the 5orkin) capita(

reuire"ent. I4 a co"pan# in a po'ition to )et credit on (i+era( ter"' and in a

'hort 'pan o4 ti"e then it 5i(( +e in a po'ition to 5ork 5ith (e'' a"ount o4

5orkin) capita(. /ence the a"ount o4 5orkin) capita( needed 5i(( depend upon

the ter"' a 4ir" i' )ranted credit +# it' creditor'.

*. Gro:th a34 E


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CIRCULATION SYSTEM OF WOR7ING CAPITAL

In the +e)innin) the 4und' are o+tained +# i''uin) 'hare'> o4ten 'upp(e"ented +# (on)

ter" +orro5in)'. Much o4 the'e co((ected 4und' are u'ed in purcha'in) 4ixed a''et' and

re"ainin) 4und' are u'ed 4or da# to da# operation a' pa# 4or ra5 "ateria(> 5a)e'

oerhead expen'e'. A4ter thi' 4ini'hed )ood' are read# 4or 'a(e and +# 'e((in) the

4ini'hed )ood' either account receia+(e are created and ca'h i' receied. In thi' proce''

pro4it i' earned. Thi' account o4 pro4it i' u'ed 4or pa#in) taxe'> diidend and the +a(ance

i' p(ou)hed in the +u'ine''.

Workin) capita( i' con'idered to e44icient(# circu(ate 5hen it turn' oer uick(#. A'

circu(ation increa'e'> the ine't"ent in current a''et' 5i(( decrea'e. Current a''et'

turnoer ratio 'peak' a+out the e44icienc# o4 Kotak Mahindra in the uti(i'ation o4 current

a''et'. :a't turnoer current a''et' re'u(t' in a +etter rate on ine't"ent.

Ta"1e /ho:*3% C!rre3t A//et/ T!r3o-er Rat*o

Year Rat*o .*3 t*+e/0

&


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The ratio aera)e i' &.&2 ti"e' in the 'tud# period o4 0 #ear'. In &


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I3terpretat*o3 .Rat*o A3a1/*/0

The uti(i?ation rate o4 net 5orkin) capita( a' depicted +# 5orkin) capita(

turnoer ratio i' 4(uctuatin) durin) the period. It 'ho5' that 5orkin) capita( ha'

not +een e44ectie(# u'ed oer the period o4 #ear' except in the #ear &>= )>>? )>>@

1. CA


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Our ana(#'i' a+oe indicate' the area' o4 concern to "ana)e"ent in "akin) +e't

po''i+(e u'e o4 re'ource'. ecrea'in) e44icienc# in the u'e o4 current a''et' hint' o4 the

po''i+i(it# o4 pro+(e"' in 5orkin) capita( "ana)e"ent.

On 4urther ana(#'i'> inentor# con'titute' a "a,or proportion o4 tota( current a''et'.

A"on) it' ariou' co"ponent'> ra5 "ateria('> 'tock'> 'pared and 4ini'hed )ood' in

particu(ar need 4urther ana(#'i' a' here 'tand out to the pro+(e" area'.

Ca/h F1o: State+e3t .)>>?8>@0

So!r$e/ A+o!3t A

. *3 La$/0

App1*$at*o3 A+o!3t B

.*3 La$/0

Proceed' 4ro"

+orro5in)'

1%&.0* Lo'' 4ro" operation 173.&*

!a(e o4 a''et' &*.02 Chan)e in ca'h 3.) &>)

S!++ar o5 Ca/h F1o: A3a1/*/

a Ca'h 4ro" operation to tota( ca'h aai(a+(e

173.0116


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Ca'h and =ank

+a(ance'

1>?8>@0

So!r$e/ A+o!3t A

.*3 1a$/0

App1*$at*o3 A+o!3t B

.*3 La$/0

Increa'e in (oan 1%&.0* Increa'e in 5orkin) capita( %1.22

!a(e o4 a''et &&.62 Lo'' 4ro" operation 1&0.7*

Tota( 173.01 173.01

S!++ar o5 F!34 F1o: A3a1/*/

1. Increa'e in net 5orkin) capita( J %1.22

&. :und' 4ro" operation' to 4inance per"anent addre'' -1&0.7*

0. Ratio o4 4und 4(o5 4ro" operation' to tota( 4und' in the +u'ine'' -8 1&0.7*73.01 -%%.73

I3terpretat*o3 .F!34 F1o: State+e3t0

1. Net5orkin) capita( ha' +een increa'ed oer the #ear'> 5hich ha' increa'ed

(iuidit#


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&. Co"pan# 'hou(d take correctie action' to coert (o'' 4ro" operation to 4und'

4ro" operation.


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CH NO =' COMPANY PROFILE

CREATING BAN7ING HISTORY

E'ta+(i'hed in 1673> The Kotak Mahindra )roup ha' (on) +een one o4 India' "o't

reputed 4inancia( or)ani?ation'. In :e+ruar# & the

)roup' 4(a)'hip co"pan# 5a' )ien the (icen'e to carr# on +ankin) +u'ine'' +# the

Re'ere =ank o4 India -R=I. Thi' approa( create' +ankin) hi'tor# 'ince Kotak

Mahindra :inance Ltd. i' the 4ir't co"pan# in India to conert to a +ank.

The Co+p1ete Ba39

At Kotak Mahindra =ank> 5e addre'' the entire 'pectru" o4 4inancia( need' 4or

indiidua(' and corporate'. We hae the product'> the experience> the in4ra'tructure and

"o't i"portant(# the co""it"ent to de(ier pra)"atic> end8to8end 'o(ution' that rea((#

5ork.

A (icen'e authori?in) the +ank to carr# on +ankin) +u'ine'' ha' +een o+tained 4ro"

the Re'ere =ank o4 India in ter"' o4 !ection && i4 the =ankin) Re)u(ation Act> 1626. It

"u't +e di'tinct(# under'tood> ho5eer> that in i''uin) the (icen'e> the Re'ere =ank o4

India doe' not undertake an# re'pon'i+i(it# 4or the 4inancia( 'oundne'' o4 the +ank or the

correctne'' o4 an# o4 the 'tate"ent' "ade or opinion expre''ed in thi' connection.

The 7ota9 Mah*34ra Gro!p

Kotak Mahindra i' one o4 India' (eadin) 4inancia( con)(o"erate'> o44erin) co"p(ete

4inancia( 'o(ution' that enco"pa'' eer# 'phere o4 (i4e. :ro" co""ercia( +ankin)> to

'tock +rokin)> to "utua( 4und'> to (i4e in'urance> to ine't"ent +ankin)> the )roup cater'

to the 4inancia( need' o4 indiidua(' and corporate'.

The )roup ha' a net 5orth o4 oer R'. 0>& e"p(o#' around 17 London> u+ai> Mauritiu' and !in)apore. The Group 'erice'

around &.% "i((ion cu'to"er account'.


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O!r Stor

The Kotak Mahindra Group 5a' +orn in 1673 a' Kotak Capita( Mana)e"ent :inance

Li"ited. Thi' co"pan# 5a' pro"oted +# da# Kotak> !idne# A. A. Pinto and Kotak ;

Co"pan#. Indu'tria(i't' /ari'h Mahindra and Anand Mahindra took a 'take in 167%> and

that' 5hen the co"pan# chan)ed it' na"e to Kotak Mahindra :inance Li"ited.

!ince then it' +een a 'tead# and con4ident ,ourne# to )ro5th and 'ucce''.

167% Kotak Mahindra :inance Li"ited 'tart' the actiit# o4 =i(( i'countin)

167* Kotak Mahindra :inance Li"ited enter' the Lea'e and /ire Purcha'e "arket

166< The Auto :inance dii'ion i' 'tarted

1661The Ine't"ent =ankin) ii'ion i' 'tarted. Take' oer :ICOM> one o4 India'

(ar)e't 4inancia( retai( "arketin) net5ork'

166& Enter' the :und' !#ndication 'ector

1663

=rokera)e and i'tri+ution +u'ine''e' incorporated into a 'eparate co"pan# 8

Kotak !ecuritie'. Ine't"ent =ankin) dii'ion incorporated into a 'eparate

co"pan# 8 Kotak Mahindra Capita( Co"pan#

166%

The Auto :inance =u'ine'' i' hied o44 into a 'eparate co"pan# 8 Kotak

Mahindra Pri"e Li"ited -4or"er(# kno5n a' Kotak Mahindra Pri"u' Li"ited.

Kotak Mahindra take' a 'i)ni4icant 'take in :ord Credit Kotak Mahindra

Li"ited> 4or 4inancin) :ord ehic(e'. The (aunch o4 Matrix In4or"ation !erice'

Li"ited "ark' the Group' entr# into in4or"ation di'tri+ution.

1667Enter' the "utua( 4und "arket 5ith the (aunch o4 Kotak Mahindra A''et

Mana)e"ent Co"pan#.

&


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&


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CH NO ?' INDUSTRY PROFILE

O!r Corporate I4e3t*t

7ota9 Mah*34ra Ba39

At Kotak Mahindra =ank> 5e addre'' the entire 'pectru" o4 4inancia( need' 4or

indiidua(' and corporate'. We hae the product'> the experience> the in4ra'tructure and

"o't i"portant(# the co""it"ent to de(ier pra)"atic> end8to8end 'o(ution' that rea((#

5ork.

7ota9 Mah*34ra O14 M!t!a1 L*5e I3/!ra3$e Lt4

Kotak Mahindra O(d Mutua( Li4e In'urance i' a *%D&2 ,oint enture +et5een Kotak

Mahindra =ank Ltd. and O(d Mutua( p(c. Kotak Mahindra O(d Mutua( Li4e In'urance i'

one o4 the 4a'te't )ro5in) in'urance co"panie' in India and ha' 'ho5n re"arka+(e

)ro5th 'ince it' inception in &


20/124

HEADSTART CHILD PLANS

A 'pecia((# tai(ored> co't8e44ectie p(an> ai"' to )ie #our chi(dren the 4inancia( "ean'

to pur'ue hi' or her drea"' and (ie the".

The Headstart Advantage:

Choice o4 & p(an ariant'

o :uture Protect

o A''ure Wea(th

Maxi"i?e' 5ea(th 5hi(e proidin) protection

oint (i4e option

!ae 4or & chi(dren 5ith one p(an

Additiona( +onu' unit'

:(exi+(e Withdra5a(

Li4e i' unpredicta+(e> +ut the ear(ier #ou 'tart p(annin) 4or #our 4uture> the "ore (ike(#

are #ou and #our 4a"i(# to reap the re5ard'.

SU7HI EEVAN

It i' a (on)8ter" 'ain)' and protection p(an that keep' pace 5ith #our chan)in) need' at

eer# 'tep o4 (i4e 8 +e it 'ain) 4or #our kid'F 4uture> or #our retire"ent. Thi' p(an he(p'

#ou prepare 4or i"portant "i(e'tone' in #our (i4e. And> "o't i"portant(#> it en'ure' #our

4a"i(# i' 'ecure 5hen (i4e di'he' up har'h "i'4ortune'.

Be3e5*t/

:u(4i(( #our chi(drenF' drea"' or p(an #our retire"ent

!"a(( 'ain)' to "eet #our ar#in) need'

Re)u(ar +onu'e'

Ea'# app(icationD

o !i"p(e docu"entation

o No "edica( te't'

o /a''(eQ4ree 'i)n8up

Pre"iu" pa#"ent option'D #ear(#> ha(48#ear(# or "onth(# -throu)h EC! on(#


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7OTA7 PRIVILEGED ASSURANCE PLAN

@In thi' po(ic#> the ine't"ent ri'k in the ine't"ent port4o(io i' +orne +# the

po(ic#ho(der.B

Kotak Prii(e)ed A''urance P(an i' exc(u'ie(# cra4ted to en'ure that 5hi(e #our "one#

i' protected> it "u(tip(ie'. Concoctin) the +e't "ix o4 'tead# and 'ta+(e )ro5th 5ith

d#na"ic and 4(exi+(e "ana)e"ent o4 #our 4und'> the p(an 'trie' to )ie #ou that extra

+it o4 return> protection and 4(exi+i(it#> in a 'in)(e p(an "ade 'pecia((# 4or di'cernin)

cu'to"er' (ike #ou. The p(an o44er' #ou acce'' to t5o 4und' to proide #ou aenue 4or

)ro5th 5hi(e o44erin) #ou Capita( Guarantee.

P(ea'e note that in thi' po(ic#> the ine't"ent ri'k in the ine't"ent port4o(io i' to +e

+orne +# the po(ic#ho(der. /o5eer> Kotak Li4e In'urance o44er' #ou a capita( )uarantee

on thi' p(an to 'a4e)uard a)ain't the do5n'ide ri'k o4 4a((in) "arket'.

"Why should you invest in the Kotak Privileged Assurance Plan?"

Thi' p(an i' idea( i4 #ou 5ant

Lo5 co't 'tructure on an ine't"ent p(u' in'urance packa)e

A 'hort ine't"ent hori?on

:(exi+i(it# o4 ine't"ent a"ount'

Protection o4 #our hard earned "one#

A))re''ie )ro5th 5ith ca(cu(ated ri'k'

!"art protection 4or #our 4a"i(#

7OTA7 TERM PLAN

Kotak Ter" P(an i' a pure ri'k product that ai"' to coer #our (i4e at a no"ina( co't.

ou "a# 5ant to take thi' p(an to coer #our out'tandin) de+t' (ike a "ort)a)e> a ho"e

(oan etc. !ince thi' i' a pure ri'k coer product> there i' no "aturit# +ene4it' pa#a+(e on

'uria(. Thi' i' a non8participatin) p(an.

Who $a3 a-a*1 o5 th*/ p1a3

/OW OL O O /A9E TO =E TO A9AIL O: T/I! PLAN

Mini"u" a)e 8 17 #ear'

Maxi"u" a)e 8 %< #ear'

:OR W/AT TERM CAN I A9AIL O: T/I! PLAN

1< 8 0< #ear' 4or re)u(ar pre"iu"

3 8 0< #ear' 4or 'in)(e pre"iu"


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W/AT I! T/E MINIMM PREMIM T/AT I NEE TO PA AN AT

W/AT INTER9AL! CAN I PA T/EM

Suarter(# R'.32 or in ha(4 #ear(# or uarter(# in'ta(("ent'.

2 our Kotak Ter" P(an can +e conerted into an# other p(an o44ered +# Kotak

Li4e In'urance -except 4or another Ter" p(an proided there are at (ea't 3 #ear'

+e4ore coer cea'e'.

3 In ca'e #ou 4or)et to pa# #our pre"iu" +# the due date> #ou are entit(ed to a

)race period o4 0< da#' 4ro" the date o4 unpaid pre"iu"'.

% In ca'e o4 a 4inancia( e"er)enc#> #ou hae the option to 'urrender the po(ic#

proided #ou hae taken the 'in)(e pre"iu" pa#"ent option.

What -a1!e8a44/ $a3 o! opt 5or

ou "a# aai( o4 the 4o((o5in) non8participatin) a(ue8add' 4or a no"ina( pre"iu" at

the ti"e o4 takin) #our po(ic#> 'u+,ect to a))re)ate pre"iu" on a(( a(ue8add' -except

Critica( I((ne'' =ene4it not exceedin) 0


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Per+a3e3t D*/a"*1*t Be3e5*t'Thi' +ene4it can +e added to #our +a'ic (i4e

in'urance po(ic# to proide 4inancia( 'upport in ca'e o4 di'a+i(it# due to an

accident. The a"ount pa#a+(e under thi' +ene4it 5ou(d +e paid out a' an annuit#.

The "axi"u" per"anent di'a+i(it# +ene4it that #ou can aai( o4 i' eua( to the

+a'ic 'u" a''ured -'u+,ect to a "axi"u" o4 R'.1< (akh'.

Cr*t*$a1 I113e// Be3e5*t'Thi' +ene4it can +e added to #our +a'ic (i4e in'urance

po(ic# to proide 4inancia( 'upport in the eent o4 a "edica( e"er)enc#. On the

4ir't occurrence o4 critica( i((ne'' durin) the ter" o4 the po(ic#> #ou 5ou(d

receie a portion o4 the 'u" a''ured to reduce #our 4inancia( +urden in thi'

e"er)enc#.

What 4o o! re$e*-e o3 +at!r*t o5 the po1*$

!ince thi' i' a pure ri'k coer p(an> there are no "aturit# +ene4it'.

What happe3/ *3 the e-e3t o5 4eath o5 the 1*5e *3/!re4

In the eent o4 death durin) the ter" o4 the po(ic#> the +ene4iciar# 5ou(d receie the

'u" a''ured.

Are there a3 Ta< Be3e5*t/

!ection 7 1 decide' to +u# the Kotak Ter" P(an 4or a 'u"

a''ured o4 R'.1 'o"e +ene4it' are )uaranteed and 'o"e are aria+(e. Guaranteed

Return' are "arked U)uaranteedU in the i((u'tration. 9aria+(e return' are 'ho5n at t5o

di44erent rate' o4 a''u"ed 4uture return'. The'e a''u"ed rate' o4 return are not

)uaranteed and the# are not the upper or (o5er (i"it' o4 5hat #ou "i)ht )et +ack .The

actua( return "a# +e di44erent dependin) on a nu"+er o4 4actor' inc(udin) 4uture

ine't"ent per4or"ance.


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What 4o o! 4o 3e ina'ion> huntin)> other

dan)erou' ho++ie' or actiitie'> or hain) +een on dut# in "i(itar#> para8"i(itar#>

'ecurit# or po(ice or)ani?ation.

A44*t*o3a1 E


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'ho5n on the po(ic#> nor 'ha(( an# per'on takin) out or rene5in) or

continuin) a po(ic# accept an# re+ate> except 'uch re+ate a' "a# +e a((o5ed

in accordance 5ith the pu+(i'hed pro'pectu'e' or ta+(e' o4 the in'urer.

-& An# per'on "akin) de4au(t in co"p(#in) 5ith the proi'ion o4 thi' 'ection

'ha(( +e puni'ha+(e 5ith 4ine> 5hich "a# extend to 4ie hundred rupee'.

The product (ea4(et )ie' on(# the 'a(ient 4eature' o4 the p(an. The po(ic#

docu"ent i' the conc(u'ie docu"ent> and proide' in detai( a(( the

condition' re(atin) to the Kotak Ter" P(an.

7OTA7 PREFFERED TERM PLANThe Kotak Pre4erred Ter" P(an i' de'i)ned to proide #ou 5ith reduced pre"iu" rate'

4or a 'u" a''ured o4 R'.1< (akh' and a+oe.

Who */ e1*%*"1e 5or 7ota9 Pre5erre4 Ter+ P1a3

1 Ma(e' oer the a)e o4 17 #ear'> 5ho do not u'e to+acco in an# 4or".

& :e"a(e' oer the a)e o4 17 #ear'.

What are the a4-a3ta%e/ o5 th*/ p1a3

It i' a (o58co't in'urance p(an.

ou can choo'e +et5een a re)u(ar pre"iu" pa#"ent option or a 'in)(e pre"iu"

pa#"ent option. In ca'e #ou opt 4or the re)u(ar pre"iu" pa#"ent option> #ou

"a# pa# #our pre"iu"' either annua((#> or in ha(4 #ear(# or uarter(#

in'ta(("ent'.

our Kotak Ter" P(an can +e conerted into an# other p(an o44ered +# Kotak

Li4e In'urance -except 4or another Ter" p(an proided there are at (ea't 3 #ear'

+e4ore coer cea'e'.

In ca'e #ou 4or)et to pa# #our pre"iu" +# the due date> #ou are entit(ed to a

)race period o4 0< da#' 4ro" the date o4 unpaid pre"iu"'.

In ca'e o4 a 4inancia( e"er)enc#> #ou hae the option to 'urrender the po(ic#

proided #ou hae taken the 'in)(e pre"iu" pa#"ent option.

What -a1!e8a44/ $a3 o! opt 5or

ou "a# aai( o4 the 4o((o5in) non8participatin) a(ue8add' 4or a no"ina( pre"iu" at

the ti"e o4 takin) #our po(ic#> 'u+,ect to a))re)ate pre"iu" on a(( a(ue8add' -except

Critica( I((ne'' =ene4it not exceedin) 0


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A$$*4e3ta1 Death Be3e5*t'Thi' +ene4it proide' an additiona( a"ount -oer and

a+oe the +a'ic 'u" a''ured to the +ene4iciar# in the eent o4 the accidenta(

death o4 the (i4e in'ured. The "axi"u" coer aai(a+(e under thi' rider i' eua(

to the +a'ic 'u" a''ured -'u+,ect to a "axi"u" o4 R'.1< (akh'.

Per+a3e3t D*/a"*1*t Be3e5*t'Thi' +ene4it can +e added to #our +a'ic (i4e

in'urance po(ic# to proide 4inancia( 'upport in ca'e o4 di'a+i(it# due to an

accident. The a"ount pa#a+(e under thi' +ene4it 5ou(d +e paid out a' an annuit#.

The "axi"u" per"anent di'a+i(it# +ene4it that #ou can aai( o4 i' eua( to the

+a'ic 'u" a''ured -'u+,ect to a "axi"u" o4 R'.1< (akh'.

Permanent disability is defined as permanent and immediate inability to work or

permanent loss of use of two limbs or total and permanent loss of sight.

Cr*t*$a1 I113e// Be3e5*t'Thi' +ene4it can +e added to #our +a'ic (i4e in'urance

po(ic# to proide 4inancia( 'upport in the eent o4 a "edica( e"er)enc#. On the



e"er)enc#.

What 4o o! re$e*-e o3 +at!r*t o5 the po1*$

!ince thi' i' a pure ri'k coer p(an> there are no "aturit# +ene4it'.


In the eent o4 death durin) the ter" o4 the po(ic#> the +ene4iciar# 5ou(d receie the

'u" a''ured.


!ection 7 1 0< #ear' o(d> i' e(i)i+(e 4or the Kotak Pre4erred Ter" P(an. /e

decide' to take up thi' po(ic# 4or a 'u" a''ured o4 R'.1


27/124

/i' annua( pre"iu" 5ou(d +e R'.&> %23. In ca'e o4 Mr. !har"aF' un4ortunate death

durin) the next ten #ear'> hi' 4a"i(# 5ou(d receie R'.1 ina'ion> huntin)>

other dan)erou' ho++ie' or actiitie'> or hain) +een on dut# in "i(itar#>

para8"i(itar#> 'ecurit# or po(ice or)ani?ation.

A44*t*o3a1 E


28/124

Proh*"*t*o3 o5 Re"ate/

!ection 21 o4 the In'urance Act> 1607 'tate'D 8

-1 No per'on 'ha(( a((o5 or o44er to a((o5> either direct(# or indirect(#> a' an

induce"ent to an# per'on to take out or rene5 or continue an in'urance in

re'pect o4 an# kind o4 ri'k re(atin) to (ie' or propert# in India> an# re+ate o4

the 5ho(e or part o4 the co""i''ion pa#a+(e or an# re+ate o4 the pre"iu"






How to live for today and plan for an independent tomorrow

7OTA7 MONEY BAC7 PLAN

The Kotak Mone# =ack P(an not on(# coer' #our (i4e> it a('o a''ure' #ou a certain

percent o4 the 'u" a''ured a' ca'h pa#"ent at re)u(ar intera(' o4 eer# 3 #ear'. It i' a

'ain)' p(an 5ith the added adanta)e o4 (i4e coer and re)u(ar ca'h in4(o5. Thi' p(an i'

idea( 4or p(annin) 'pecia( "o"ent' (ike a 5eddin)> #our chi(d' education or purcha'e o4

an a''et etc. Thi' i' a participatin) p(an -5ith pro4it'.

Who $a3 a-a*1 o5 th*/ P1a3

/OW OL O O /A9E TO =E TO A9AIL O: T/I! PLAN

Mini"u" a)e8 17 #ear'

Maxi"u" a)e8 %< #ear'

:OR W/AT TERM CAN I A9AIL O: T/I! PLAN

13> &< ; &3 #ear'

W/AT I! T/E MAIMM AGE T/AT T/E PLAN CAN CO9ER O

TILL

*3 #ear'


29/124

What are the a4-a3ta%e/ o5 th*/ p1a3

1. The p(an not on(# coer' #our (i4e +ut a('o proide' #ou 5ith a 'uria( +ene4it

pa#out eer# 3 #ear'.

&. In the un4ortunate eent o4 death o4 (i4e in'ured> the +ene4iciar# 5ou(d receie

the death +ene4it. The death +ene4it keep' increa'e' +# *H o4 the 'u" a''ured

eer# #ear.

0. On "aturit#> #ou 5ou(d receie the 'u" o4 the !uria( =ene4it> =onu' addition

and Guaranteed addition.

JBo3!/ a44*t*o3 */ the a+o!3t *3 the A$$!+!1at*o3 A$$o!3t, *3 e 'u+,ect to the a))re)ate pre"iu" on a(( a(ue8add' not exceedin) 0


30/124

Ter+ Be3e5*t Pre5erre4 Ter+ Be3e5*t'In the eent o4 death durin) the ter"

o4 thi' +ene4it> the +ene4iciar# 5ou(d receie an additiona( death +ene4it a"ount>

5hich i' oer and a+oe the 'u" a''ured. The "axi"u" Ter" =ene4it #ou can

aai( o4 i' eua( to the +a'ic 'u" a''ured. Where the ter" +ene4it coer app(ied

4or i' "ore than R' 1< (akh'> +etter rate' "a# app(#> 'u+,ect to "eetin)

e(i)i+i(it# reuire"ent'.

A$$*4e3ta1 Death Be3e5*t'Thi' +ene4it proide' an additiona( a"ount -oer and

a+oe the 'u" a''ured to the +ene4iciar# in the eent accidenta( death o4 the (i4e

in'ured. The "axi"u" coer aai(a+(e under thi' +ene4it i' eua( to the +a'ic

'u" a''ured -'u+,ect to a "axi"u" o4 R'.1< (akh'.

Per+a3e3t D*/a"*1*t Be3e5*t'Thi' +ene4it can +e added to the +a'ic (i4e

in'urance p(an to proide 4inancia( 'upport in ca'e o4 per"anent di'a+i(it# due to

an accident. The a"ount pa#a+(e under thi' +ene4it 5ou(d +e paid out a' an

annuit#. The "axi"u" per"anent di'a+i(it# +ene4it that #ou can aai( o4 i'

eua( to the +a'ic 'u" a''ured -'u+,ect to a "axi"u" o4 R'.1< (akh'.

Per+a3e3t 4*/a"*1*t */ 4e5*3e4 a/ per+a3e3t a34 *++e4*ate *3a"*1*t to

:or9 or per+a3e3t 1o// o5 !/e o5 t:o 1*+"/ or tota1 a34 per+a3e3t 1o// o5

/*%ht

Cr*t*$a1 I113e// Be3e5*t'Thi' +ene4it can +e added to the +a'ic (i4e in'urance

p(an to proide 4inancia( 'upport in the eent o4 "edica( e"er)encie'. On the



e"er)enc#.

P(ea'e contact our Li4e Adi'or 4or the (i't o4 critica( i((ne''e'

L*5e G!ar4*a3 Be3e5*t'Thi' +ene4it can +e aai(ed o4> on(# in ca'e 5here the

(i4e in'ured and the propo'er are t5o di44erent indiidua('. In ca'e o4 the

un4ortunate death o4 the propo'er> thi' +ene4it keep' the po(ic# a(ie +# 5aiin)

a(( 4uture pre"iu"' on the po(ic#.

A$$*4e3ta1 D*/a"*1*t G!ar4*a3 Be3e5*t'In ca'e the propo'er i' per"anent(#

di'a+(ed a' a re'u(t o4 an accident> thi' +ene4it keep' the po(ic# a(ie +# 5aiin)


"What do you receive on maturity of this plan?"


31/124

On "aturit#> #ou 5ou(d receie the 'u" o4 the !uria( +ene4it> Guaranteed addition

and =onu' addition. The ta+(e +e(o5 i((u'trate' the 'uria( +ene4it pa# out 4or eer#

R'.1


32/124

YEARS

1&7< 12&< 1%0< 167< &00< &07 1< and 13 a' "entioned a+oe. A''u"in) that

the Accu"u(ation Account )ro5' at a rate o4 %H> the pa#out on "aturit# 5ou(d +e

R'.316

=ALANCE !M A!!RE

R'.& hi' 4a"i(# 5ou(d receie a 'u" o4 R'.73


34/124


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No c(ai" under the Kotak Accidenta( i'a+i(it# Guardian =ene4it 5ou(d +e ad"i''i+(e

in the 4o((o5in) circu"'tance'D

a. The pre"iu" pa#er 'u44er' 4ro" 'e(48in4(icted in,urie'> 'uicide> in'anit#>

i""ora(it#> co""ittin) an# +reach o4 (a5 or +ein) under the in4(uence o4 dru)'>

(iuor etc.

+. Where the pre"iu" pa#er i' en)a)ed in aiation or aeronautic' other than a' a

pa''en)er on a (icen'ed co""ercia( aircra4t operatin) on a 'chedu(ed route.

c. The pre"iu" pa#er 'u44er' in,urie' 4ro" 5ar -5hether 5ar i' dec(ared or not>

ina'ion> huntin)> "ountaineerin)> "otor racin) o4 an# kind> other dan)erou'

ho++ie' or actiitie'> or hain) +een on dut# in "i(itar#> para8"i(itar#> 'ecurit# or

po(ice or)ani?ation.












7OTA7 CHILD ADVNTAGE PLAN

The Kotak Chi(d Adanta)e P(an i' an ine't"ent p(an de'i)ned to "eet #our chi(d'

4uture 4inancia( need'. It' a p(an that )ie' #our chi(d the Ua?aadiU to rea(i?e hi' drea"'.

The p(an i' a participatin) p(an 5ith a 138da# 4ree (ook period.


/OW OL OE! T/E C/IL /A9E TO =E TO A9AIL O: T/I! PLAN


36/124


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thi' +ene4it keep' the po(ic# a(ie +# 5aiin) a(( 4uture pre"iu"' on the po(ic#.

A$$*4e3ta1 D*/a"*1*t G!ar4*a3 Be3e5*t' In ca'e the pre"iu" pa#er i'

per"anent(# di'a+(ed a' a re'u(t o4 accident> thi' +ene4it keep' the po(ic# a(ie

+# 5aiin) a(( 4uture pre"iu"' on the po(ic#.


!ection 7 1 ter" o4 13 #ear'> 'o that 5hen the chi(d i' &1

#ear' o(d> he ha' at (ea't R'.3 (akh to ine't in hi' education career etc.

Mr. Gupta +u#' the Kotak Chi(d Adanta)e P(an a(on) 5ith +oth the a(ue8add' o44ered

5ith the +a'ic p(an.

De/$r*pt*o3

Pre+*!+

7ota9 $h*14 a4-a3ta%e p1a3 pre+*!+

R'.01>73*8

L*5e %!ar4*a3 "e3e5*t pre+*!+

R'.1>&&38

A$$*4e3ta1 4*/a"*1*t %!ar4*a3 "e3e5*t pre+*!+

R'.1338

Tota1 A33!a1 Pre+*!+ Pa*4

R/66,)68

*0 What :o!14 "e the pao!t o3 +at!r*t o5 the p1a3

A''u"in) that the Accu"u(ation Account )ro5' at %Hp.a.> the "aturit# a"ount 5ou(d

+e R'.%> 02>7 7&>1


38/124

Mr.Gupta ha' taken the +ene4it o4 5aier o4 pre"iu" +# pa#in) a "ini"a( additiona(

a"ount o4 R'.1> 07

4uture pre"iu"' pa#a+(e on hi' 'onF' po(ic# 5i(( +e 5aied and the po(ic# 5i(( continue

to +e in 4orce. On "aturit# the +ene4iciar# 5ou(d )et the 'u" a''ured o4 R'.3> the

4o((o5in) 5ou(d +eco"e pa#a+(eD

I4 the po(ic# ha' +een in 4orce 4or 4ie #ear' or i4 the (i4e in'ured i' at (ea't 17

#ear' o(d> the +ene4iciar# 5i(( receie either the !u" A''ured or Accu"u(ation

Account 5hicheer i' hi)her> a' on the date o4 death.

I4 the death occur' 5ithin 4ie #ear' 4ro" co""ence"ent o4 po(ic# and i4 the

in'ured i' (e'' than 17 #ear' o(d> the death +ene4it 5ou(d +e either the tota( o4 a((

pre"iu"' paid 'o 4ar or the 'urrender a(ue at that ti"e> 5hicheer i' hi)her.

What 4o o! 4o 3e
http://www.kotaklifeinsurance.com/omkm3/branchlocator.htmhttp://www.kotaklifeinsurance.com/omkm3/branchlocator.htmmailto:[email protected]://www.kotaklifeinsurance.com/omkm3/branchlocator.htmhttp://www.kotaklifeinsurance.com/omkm3/branchlocator.htmmailto:[email protected]


39/124

i""ora(it#> co""ittin) an# +reach o4 (a5 or +ein) under the in4(uence o4 dru)'>

(iuor etc.

-& Where the pre"iu" pa#er i' en)a)ed in aiation or aeronautic' other than a' a

pa''en)er on a (icen'ed co""ercia( aircra4t operatin) on a 'chedu(ed route.

-0 The pre"iu" pa#er 'u44er' in,urie' 4ro" 5ar -5hether 5ar i' dec(ared or not>

ina'ion> huntin)> "ountaineerin)> "otor racin) o4 an# kind> other dan)erou'

ho++ie' or actiitie'> or hain) +een on dut# in "i(itar#> para8"i(itar#> 'ecurit# or

po(ice or)ani?ation.












7OTA7 ENDOWMENT PLAN

Kotak Endo5"ent P(an i' a protection p(an that coer' #our (i4e and at the 'a"e ti"e

en'ure' that #our "one# doe' not (ie id(e. It ine't' a portion o4 #our pre"iu" in

4inancia( in'tru"ent' and en'ure' a con'idera+(e )ro5th in 'ain)'. Thi' i' a

participatin) p(an -5ith pro4it'.


/o5 o(d do #ou hae to +e to aai( o4 thi'

p(an

Mini"u" a)e 8 17 #ear'

Maxi"u" a)e 8 %3 #ear'

:or 5hat ter" can i aai( o4 thi' p(an 1


40/124


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Per"anent i'a+i(it# =ene4it that #ou can aai( o4 i' eua( to the +a'ic 'u"

a''ured -'u+,ect to a "axi"u" o4 R'.1< (akh'.

Per+a3e3t 4*/a"*1*t */ 4e5*3e4 a/ a per+a3e3t a34 *++e4*ate *3a"*1*t to

:or9, the per+a3e3t 1o// o5 !/e o5 t:o 1*+"/ or a tota1 a34 per+a3e3t 1o//

o5 /*%ht

Cr*t*$a1 I113e// Be3e5*t'Thi' +ene4it can +e taken 5ith the +a'ic (i4e in'urance

po(ic# to proide 4inancia( 'upport in the eent o4 "edica( e"er)encie'. On the



e"er)enc#.

The "axi"u" Critica( I((ne'' =ene4it that #ou can aai( o4 i' eua( to ha(4 the

+a'ic 'u" a''ured 'u+,ect to "axi"u" o4 R'. &< (akh'.

L*5e G!ar4*a3 Be3e5*t'Thi' +ene4it can +e aai(ed o4> on(# in a ca'e 5here the

(i4e in'ured and the propo'er are t5o di44erent indiidua('. In ca'e o4 the

un4ortunate death o4 the propo'er> thi' +ene4it keep' the po(ic# a(ie +# 5aiin)


A$$*4e3ta1 D*/a"*1*t G!ar4*a3 Be3e5*t'In ca'e the propo'er i' per"anent(#

di'a+(ed a' a re'u(t o4 an accident> thi' +ene4it keep' the po(ic# a(ie +# 5aiin)

a(( 4uture pre"iu"' on the po(ic#. Thi' +ene4it i' aai(a+(e a('o 5here the (i4e

in'ured i' the propo'er.


In the eent o4 death o4 the (i4e in'ured durin) the ter" o4 the p(an> the +ene4iciar#

5ou(d receie the 'u" a''ured or the a"ount in the Accu"u(ation Account> 5hicheer

i' hi)her.


!ection 7 1


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43/124

)uaranteed and the# are not the upper or (o5er (i"it' o4 5hat #ou "i)ht )et +ack .The

actua( return "a# +e di44erent dependin) on a nu"+er o4 4actor' inc(udin) 4uture

ine't"ent per4or"ance.

CH NO @' SWOT ANALYSIS

STRENGTHS

Market po'ition i' 'tron)

A))re''ie 4orei)n +ank

!hareho(der' return ha' )ro5n "ore than * ti"e'

Maintain' a po'ition a' a (eadin) A'ian Ca'h Mana)e"ent proider

=rand Q Kotak =ank "odern and d#na"ic (ook appea(' to the )ro5in) "idd(e

inco"e earner'

I"proed product propo'ition

=etter )eo)raphic +a(ance'

WEA7NESS

/:C> I=I> A=N8AM=RO> Citi+ank and ICICI =ank are do"inant p(a#er'

/a' di'adanta)e due to (a't entr#

:e5er (ocation' a' co"pared to other MNC +ank'

!erice de(ier# perception i' 5eak

OPPORTUNITIES

=ranch expan'ion 4or rapid )ro5th

Increa'e 4ocu' on a(ue creation in 5ho(e +ankin)

I"proe 'hareho(der' return

=ui(d "arket 'hare in con'u"er +ankin) a' con'u"er +ankin) continue' to o44er

hi)he't potentia( 4or )ro5th

=roadenin) o4 the de"o)raphic +a'e

Tie up' 5ith "a'ter card net5ork'

Inte)rated 'a(e' and 'erice approach

Can o44er a co"p(ete corporate packa)e under propo'ed corporate re(ation'hip


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THREATS

ICICI i' pitchin) in uite a))re''ie(#

Citi+ank i' expandin) in ne5 "arket'

Co"petitie product' and o44er' 4ro" I=I and /:C Propo'ed net5orkin) o4 a(( +ranche' in next % "onth'


45/124

CH NO ' DATA COLLECTIONDATA COLLECTION

A 'e"i8'tructured kind o4 ue'tionnaire 5a' de'i)ned 5hich contain +oth open8 ended

and "u(tip(e choice ue'tion'.

The ue'tionnaire de'i)ned 5a' to proide dua( in4or"ation 'harin) t#pe> it i' 'eriou'(#

undertaken that an#one 5ho in under)oin) the proce''> 'hou(d 4ind hi' intere't or e('e he

"i)ht 'ho5 di'intere't to5ard' the pro)ra""e. Actua((#> I hae +een dre''in) "#

pro,ect a' the a5arene'' pro)ra""e. Thi' a5arene'' pro)ra""e proided a(( tho'e

4i((in) up o4 the ue'tionnaire 5ith enou)h in4or"ation a+out the 'erice' o4 the Kotak

Mahindra O(d Mutua( Li4e In'urance. Thu' the ue'tionnaire 5a' eua((# i"portant +oth

5a#' to the cu'to"er' a' 5e(( a' to the +ank to dra5 out it' pro'pect'.

The ue'tionnaire de'i)ned to kno5 the potentia( o4 the cu'to"er and he(p a' a

'ucce''4u( pro)ra""e i'itin) the o44ice' and '"a(( +u'ine'' enterpri'e' 5ithout pre8

appoint"ent a('o proided "e 5ith in4or"ation a+out that the# de"and 4ro" a ne5

+ank 5here the# 5ou(d pre4er to open an account.

:or tho'e a(read# ho(din) a re(ation'hip 5ith the Kotak Mahindra O(d Mutua( Li4e

In'urance> 'hared 5ith "e their opinion a+out the +ack and it' 'erice' a' 5e(( a'

'u))e'tion' 5ere a('o o+tained 4ro" the" o4 ho5 to attract "ore potentia(it# 4or the

+ank.

SAMPLING PLANSAMPLING PLAN

I hae +een a''i)ned to i'it the o44ice' and '"a(( +u'ine'' 4ir"' in e(hi. I 5a' 4ree to

choo'e "# area. /ence I choo'e area' near the =ank or p(ace' 5here I cou(d 4ee( )reater

pro'pect'> 'uch a p(ace' 5here '"a(( 'hoppin) "a((' or ne5 +u'ine'' 4ir"' hae co"e

out and oer the indu'tria( +e(t' 5here 'eera( o44ice' cou(d +e 4ound out.

The 'a"p(e area' I choo'e 5a' the 4o((o5in)D

Noida

Pun,a+i =a)h

La5rence Road

Gur)aon

I 5a' adi'ed not to i'it the +i))er co"panie' +ecau'e the# 5ere not our tar)et

cu'to"er'.


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FIELD WOR7 PLANFIELD WOR7 PLAN

The 4ie(d 5ork 5a' carried accordin) the 'a"p(in) p(an 4or"ed. I i'ited the o44ice' and

'"a(( +u'ine'' enterpri'e' 4ir"' under "# o5n (i"itation' and ti"e con'traint at the

4o((o5in) p(ace'.

-a Noida

-+ Pun,a+i =a)h

-c La5rence Road

-d Gur)aon

At 'o"e o4 the o44ice' appoint"ent 5ere a(read# "ade 5hi(e at "an# p(ace' I i'ited>

5ithout pre8appoint"ent'.

The "ain "otie 4or the'e i'it' 5a' to identi4# the potentia( cu'to"er' or the potentia(

"arket. A t5o85a# di'cu''ion 5a' done throu)h 5hich the cu'to"er' 5ere "ade a5are

o4 the 'erice' o4 Kotak Mahindra. The ue'tionnaire' are either direct(# 4i((ed up or

indirect(# 4i((ed up +# the peop(e throu)h thi' a' 5e(( a' the pro'pect o4 the area' a' 'uch

5ere the'e ca"pai)n' 5ere put up.


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FINANCIAL STATEMENTS

7ota9 Mah*34ra L*5e I3/!ra3$e Lt4

Pro5*t Lo// A$$o!3t 5or the ear e34e4 6&St De$, )>>?

C!rre3t Year

6&/tDe$ >?

.*3 1a9h/0

Pre-*o!/ Year

6&/tDe$ >=

.*3 1a9h/0

I3$o+e

!a(e' 1>102.&& *73.%3

Other Inco"e &3.0& &1.00&&??= >@

E


48/124

Ba1a3$e Sheet a/ at 6& De$ )>>?

A/ o3 6&/tDe$ >?

.I3 La$/0

A/ o3 6&/tDe$ >=

.I3 La$/0

So!r$e o5 F!34/

!hareho(der' 4und'

!hare capita( *02.&< 702.& 'uch a' "arketa+(e 'ecuritie' or +ank ti"e

depo'it' are a('o inc(uded in ca'h. The +a'ic characteri'tic' o4 near ca'h a''et' are that

the# can readi(# +e conerted into ca'h. Ca'h "ana)e"ent i' concerned 5ith "ana)in)

o4D

i Ca'h 4(o5' in and out o4 the 4ir"

ii Ca'h 4(o5' 5ithin the 4ir"

iii Ca'h +a(ance' he(d +# the 4ir" at a point o4 ti"e +# 4inancin) de4icit or inertin)

'urp(u' ca'h.

!a(e' )enerate ca'h 5hich ha' to +e di'+ur'ed out. The 'urp(u' ca'h ha' to +e ine'ted

5hi(e de4icit ca'h ha' to +e +orro5ed. Ca'h "ana)e"ent 'eek' to acco"p(i'h thi' c#c(e

at a "ini"u" co't. At the 'a"e ti"e it a('o 'eek' to achiee (iuidit# and contro(.

There4ore the ai" o4 Ca'h Mana)e"ent i' to "aintain adeuate contro( oer ca'h

po'ition to keep 4ir" 'u44icient(# (iuid and to u'e exce'' ca'h in 'o"e pro4ita+(e 5a#.

The Ca'h Mana)e"ent i' a('o i"portant +ecau'e it i' di44icu(t to predict ca'h 4(o5'

accurate(#. Particu(ar(# the in4(o5' and that there i' no per4ect coincidence +et5een the

in4(o5' and out4(o5' o4 the ca'h. urin) 'o"e period' ca'h out4(o5' 5i(( exceed ca'h

in4(o5' +ecau'e pa#"ent 4or taxe'> diidend' or 'ea'ona( inentor# +ui(d up etc. On the

other hand ca'h in4(o5' 5i(( +e "ore than ca'h pa#"ent +ecau'e there "a# +e (ar)e ca'h

'a(e' and "ore de+tor'F rea(i?ation at an# point o4 ti"e. Ca'h Mana)e"ent i' a('o

i"portant +ecau'e ca'h con'titute' the '"a((e't portion o4 the current a''et'> #et


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"ana)e"entF' con'idera+(e ti"e i' deoted in "ana)in) it. An o+iou' ai" o4 the 4ir"

no58a8da#' i' to "ana)e it' ca'h a44air' in 'uch a 5a# a' to keep ca'h +a(ance at a

"ini"u" (ee( and to ine't the 'urp(u' ca'h 4und' in pro4ita+(e opportunitie'. In order

to re'o(e the uncertaint# a+out ca'h 4(o5 prediction and (ack o4 '#nchroni?ation

+et5een ca'h receipt' and pa#"ent'> the 4ir" 'hou(d dee(op appropriate 'trate)ie'

re)ardin) the 4o((o5in) 4our 4acet' o4 ca'h "ana)e"ent.

& Ca/h P1a33*3%' 8 Ca'h in4(o5' and ca'h out4(o5' 'hou(d +e p(anned to pro,ect ca'h

'urp(u' or de4icit 4or each period o4 the p(annin) period. Ca'h +ud)et 'hou(d

prepared 4or thi' purpo'e.

) Ma3a%*3% the $a/h 51o:/' 8 The 4(o5 o4 ca'h 'hou(d +e proper(# "ana)ed. The ca'h

in4(o5' 'hou(d +e acce(erated 5hi(e> a' 4ar a' po''i+(e dece(eratin) the ca'h

out4(o5'.

6 Opt*+!+ $a/h 1e-e1' 8 The 4ir" 'hou(d decide a+out the appropriate (ee( o4 ca'h

+a(ance'. The co't o4 exce'' ca'h and dan)er o4 ca'h de4icienc# 'hou(d +e "atched

to deter"ine the opti"u" (ee( o4 ca'h +a(ance'.

= I3-e/t*3% /!rp1!/ $a/h' 8 The 'urp(u' ca'h +a(ance 'hou(d +e proper(# ine'ted to

earn pro4it'. The 4ir" 'hou(d decide a+out the dii'ion o4 'uch ca'h +a(ance +et5een

+ank depo'it'> "arketa+(e 'ecuritie' and inter corporate (endin).

The idea( Ca'h Mana)e"ent '#'te" 5i(( depend on the 4ir"F' product'> or)ani'ation

'tructure> co"petition> cu(ture and option' aai(a+(e. The ta'k i' co"p(ex and deci'ion

taken can e44ect i"portant area' o4 the 4ir".

F!3$t*o3/ o5 Ca/h Ma3a%e+e3t'

Ca'h Mana)e"ent 4unction' are inti"ate(#> interre(ated and intert5ined Linka)e a"on)

di44erent Ca'h Mana)e"ent 4unction' hae (ed to the adoption o4 the 4o((o5in) "ethod'

4or e44icient Ca'h Mana)e"entD

'e o4 techniue' o4 ca'h "o+i(i?ation to reduce operatin) reuire"ent o4 ca'h

Ma,or e44ort' to increa'e the preci'ion and re(ia+i(it# o4 ca'h 4oreca'tin).

Maxi"u" e44ort to de4ine and uanti4# the (iuidit# re'ere need' o4 the 4ir".

ee(op"ent o4 exp(icit a(ternatie 'ource' o4 (iuidit#

A))re''ie 'earch 4or re(atie(# "ore productie u'e' 4or 'urp(u' "one# a''et'.


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55/124

notice "a# +e the re'u(t o4 ariou' rea'on' a' D unexpected '(o5do5n in

co((ection o4 account' receia+(e> cance((ation' o4 'o"e purcha'e order'> 'harp

increa'e in co't o4 ra5 "ateria(' etc. The "ore unpredicta+(e the ca'h 4(o5'> the

(ar)er the need 4or 'uch +a(ance'. Another 4actor 5hich ha' a +earin) on the (ee(

o4 precautionar# +a(ance' i' the aai(a+i(it# o4 'hort ter" credit. Precautionar#

ca'h +a(ance' are u'ua((# he(d in the 4or" o4 "arketa+(e 'ecuritie' 'o that the#

earn a return.

6 Spe$!1at*-e +ot*-e' 8 It re4er' to the de'ire o4 a 4ir" to take adanta)e o4

opportunitie' 5hich pre'ent the"'e(e' at unexpected "oe"ent' and 5hich are

t#pica((# out'ide the nor"a( cour'e o4 +u'ine''. The 'pecu(atie "otie

repre'ent' a po'itie and a))re''ie approach. :ir"' ai" to exp(oit pro4ita+(e

opportunitie' and keep ca'h in re'ere to do 'o. The 'pecu(atie "otie he(p' to

take adanta)e o4 DIn opportunit# to purcha'e ra5 "ateria(' at a reduced price on

pa#"ent o4 i""ediate ca'h A chance to 'pecu(ate on intere't rate "oe"ent' +#

+u#in) 'ecuritie' 5hen intere't rate' are expected to dec(ine de(a# purcha'e' o4

ra5 "ateria(' on the anticipation o4 dec(ine in price' etc.

= Co+pe3/at*o3 +ot*-e' 8 et another "otie to ho(d ca'h +a(ance' i' to

co"pen'ate +ank' 4or proidin) certain 'erice' and (oan'. =ank' proide a

ariet# o4 'erice' to +u'ine'' 4ir"' > 'uch a' c(earance' o4 cheue'> 'upp(# o4

credit in4or"ation> tran'4er o4 4und'> etc. Whi(e 4or 'o"e o4 the 'erice' +ank'

char)e a co""i''ion o4 4ee 4or other' the# 'eek indirect co"pen'ation. 'ua((#

c(ient' are reuired to "aintain a "ini"u" +a(ance o4 ca'h at the +ank. !ince

thi' +a(ance can not +e uti(i'ed +# the 4ir"' 4or tran'action purpo'e'> the +ank

the"'e(e' can u'e the a"ount 4or 'erice' rendered. To +e co"pen'ated 4or

their 'erice' indirect(# in thi' 4or"> the# reuire the c(ient' to a(5a#' keep a

+ank +a(ance 'u44icient to earn a return eua( to the co't o4 'erice'. !uch

+a(ance' are co"pen'atin) +a(ance'. Co"pen'atin) +a(ance' are a('o reuired +#

'o"e (oan a)ree"ent' +et5een a +ank and it' cu'to"er.


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CASH MANAGEMENT' OBECTIVES

The =a'ic o+,ectie o4 ca'h "ana)e"ent i' t5o 4o(dD

-a To "eet the ca'h di'+ur'e"ent need' -pa#"ent 'chedu(e

-+ To "ini"i?e 4und' co""itted to ca'h +a(ance'. The'e are con4(ictin) and "utua((#

contradictor# and the ta'k o4 ca'h "ana)e"ent i' to reconci(e the".

Meet*3% the pa+e3t/ /$he4!1e' 8 A +a'ic o+,ectie o4 the ca'h "ana)e"ent i' to "eet

the pa#"ent 'chedu(e> i.e. to hae 'u44icient ca'h to "eet the ca'h di'+ur'e"ent need' o4

the 4ir". The i"portance o4 'u44icient ca'h to "eet the pa#"ent 'chedu(e can hard(# +e

oer e"pha'i?ed. The adanta)e' o4 adeuate ca'h are D -i it preent' in'o(enc# or

+ankruptc# ari'in) out o4 the ina+i(it# o4 the 4ir" to "eet it' o+(i)ation' -ii the

re(ation'hip 5ith the +ank i' not 'trained -iii it he(p' in 4o'terin) )ood re(ation' 5ith

trade creditor' and 'upp(ier' o4 ra5 "ateria('> a' pro"pt pa#"ent "a# a('o he(p their

ca'h "ana)e"ent - it (ead' to a 'tron) credit ratin) 5hich ena+(e' the 4ir" to

purcha'e )ood' on 4aora+(e ter"' and to "aintain it' (ine o4 credit 5ith +ank' and other

'ource' o4 credit -i to take adanta)e o4 4aora+(e +u'ine'' opportunitie' that "a# +e

aai(a+(e periodica((# and -i 4ina((# the 4ir" can "eet unanticipated ca'h expenditure

5ith a "ini"u" o4 'train durin) e"er)encie'> 'uch a' 'trike' > 4ire' or a ne5 "arketin)

ca"pai)n +# co"petitor'.

M*3*+*2*3% 5!34/ $o++*tte4 to $a/h "a1a3$e/' 8 The 'econd o+,ectie o4 ca'h

"ana)e"ent i' to "ini"i?e ca'h +a(ance'. In "ini"i?in) ca'h +a(ance' t5o con4(ictin)

a'pect' hae to +e reconci(ed. A hi)h (ee( o4 ca'h +a(ance 5i((> en'ure pro"pt pa#"ent

to)ether 5ith a(( the adanta)e'> +ut it a('o i"p(ie' that (ar)e 4und' 5i(( re"ain id(e

u(ti"ate(# re'u(t' (e'' to the expected. A (o5 (ee( o4 ca'h +a(ance'> on the other hand>

"a# "ean 4ai(ure to "eet the pa#"ent 'chedu(e that ai" o4 ca'h "ana)e"ent 'hou(d +e

to hae an opti"a( a"ount o4 ca'h +a(ance'


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CASH MANAGEMENT TECHNIUES PROCESSES

The 4o((o5in) are the +a'ic ca'h "ana)e"ent techniue' and proce'' 5hich are he(p4u(

in +etter ca'h "ana)e"entD

Spee4 $a/h $o11e$t*o3' In "ana)in) ca'h e44icient(# the ca'h in 4(o5 proce'' can +e

acce(erated throu)h '#'te"atic p(annin) and re4ined techniue'. The'e are t5o +road

approache' to do thi' 5hich are narrated a' underD

Pro+pt pa+e3t " $!/to+er' One 5a# to en'ure pro"pt pa#"ent +# cu'to"er i'

pro"pt +i((in) 5ith c(ear(# de4ined credit po(ic#. Another and "ore i"portant techniue

to encoura)e pro"pt pa#"ent the +# cu'to"er i' the practice o4 o44erin) trade

di'countca'h di'count.

Ear1 $o3-er/*o3 o5 pa+e3t *3to $a/h' Once the cu'to"er ha' "ake' the pa#"ent +#

5ritin) it' cheue' in 4aor o4 the 4ir"> the co((ection can +e expedited +# pro"pt

enca'h"ent o4 the cheue. It 5i(( +e reca((ed that there i' a (ack +et5een the ti"e and

cheue i' prepared and "ai(ed +# the cu'to"er and the ti"e 4und' are inc(uded in the

ca'h re'eroir o4 the 4ir".

Co3$e3trat*o3 Ba39*3%' In thi' '#'te" o4 decentra(i'ed co((ection o4 account'

receia+(e> (ar)e 4ir"' 5hich hae a (ar)e no. o4 +ranche' at di44erent p(ace'> 'e(ect 'o"e

o4 the'e 5hich are 'trate)ica((# (ocated a' co((ection center' 4or receiin) pa#"ent 4or

cu'to"er'. In'tead o4 a(( the pa#"ent' +ein) co((ected at the head o44ice o4 the 4ir"> the

cheue' 4or a certain )eo)raphica( area' are co((ected at a 'peci4ied (oca( co((ection

center'. nder thi' arran)e"ent the cu'to"er' are reuired to 'end their pa#"ent' at

(oca( co((ection center coerin) the area in 5hich the# (ie and the'e are depo'ited in the

(oca( account o4 concerned co((ection> a4ter "eetin) (oca( expen'e'> i4 an#. :und'

+e#ond a predeter"ined "ini"u" are tran'4erred dai(# to a centra( or di'+ur'in) or

concentration +ank or account. A concentration +ankin) i' one 5ith 5hich the 4ir" ha' a

"a,or account u'ua((# a di'+ur'e"ent account. /ence thi' arran)e"ent i' re4erred to a'

concentration +ankin).

Lo$98Bo< S/te+' The concentration +ankin) arran)e"ent i' in'tru"enta( in reducin)

the ti"e ino(e in "ai(in) and co((ection. =ut 5ith thi' '#'te" o4 co((ection o4 account'

receia+(e> proce''in) 4or purpo'e' o4 interna( accountin) i' ino(ed i.e. 'o"eti"e in

e(ap'e' +e4ore a cheue i' depo'ited +# the (oca( co((ection center in it' account. The


58/124

(ock8+ox '#'te" take' care o4 the'e kind o4 pro+(e"> apart 4ro" e44ectin) econo"# in

"ai(in) and c(earance ti"e'. nder thi' arran)e"ent> 4ir"' hire a po't o44ice +ox at

i"portant co((ection center'. The cu'to"er' are reuired to re"it pa#"ent' to (ock8+ox.

The (oca( +ank' o4 the 4ir"> at re'pectie p(ace'> are authori?ed to open the +ox and pick

up the re"ittance receied 4ro" the cu'to"er'. 'ua((# the authori'ed +ank pick' up the

cheue' 'eera( ti"e' a da# and depo'it' the" in the 4ir"F' account. A4ter creditin) the

account o4 the 4ir" the +ank' 'end a depo'it 2epo '(ip a(on) 5ith the (i't o4 pa#"ent'

and other enc(o'ure'> i4 an#> to the 4ir" +# 5a# o4 proo4 and record o4 the co((ection.

S1o:*3% 4*/"!r/e+e3t/' A +a'ic 'trate)# o4 ca'h "ana)e"ent i' to de(a# pa#"ent' a'

(on) a' po''i+(e 5ithout i"pairin) the credit ratin)'tandin) o4 the 4ir". In 4act> '(o5

di'+ur'e"ent repre'ent' a 'ource o4 4und' reuirin) no intere't pa#"ent'. There are

'eera( techniue' to de(a# pa#"ent o4 account' pa#a+(e na"e(# -1 aoidance o4 ear(#

pa#"ent' -& centra(i?ed di'+ur'e"ent' -0 4(oat' -2 accrua('.

A-o*4a3$e o5 ear1 pa+e3t/' One 5a# to de(a# pa#"ent' i' to aoid ear(# pa#"ent'.

Accordin) to the ter"' o4 credit> a 4ir" i' reuired to "ake a pa#"ent 5ithin a 'tipu(ated

period. It entit(e' a 4ir" to ca'h di'count'. I4 ho5eer pa#"ent' are de(a#ed +e#ond the

due date> the credit 'tandin) "a# +e ader'e(# a44ected 'o that the 4ir"' 5ou(d 4ind it

di44icu(t to 'ecure trade credit (ater. =ut i4 the 4ir" pa#' it' account' pa#a+(e +e4ore the

due date it ha' no 'pecia( adanta)e. Thu' a 4ir" 5ou(d +e 5e(( adi'ed not to "ake

pa#"ent' ear(# i.e. +e4ore the due date.

Ce3tra1*2e4 4*/"!r/e+e3t/' Another "ethod to '(o5 do5n di'+ur'e"ent' i' to hae

centra(i?ed di'+ur'e"ent'. A(( the pa#"ent' 'hou(d +e "ade +# the head o44ice 4ro" a

centra(i?ed di'+ur'e"ent account. !uch an arran)e"ent 5ou(d ena+(e a 4ir" to de(a#

pa#"ent' and con'ere ca'h 4or 'eera( rea'on'. :ir't(# it ino(e' increa'e in the tran'it

ti"e. The re"ittance' 4ro" the head o44ice to the cu'to"er' in di'tant p(ace' 5ou(d

ino(e "ore "ai(in) ti"e than a decentra(i?ed pa#"ent +# a (oca( +ranch. The 'econd

rea'on 4or reduction in operatin) ca'h reuire"ent i' that 'ince the 4ir" ha' a centra(i?ed

+ank account> a re(atie(# '"a((er tota( ca'h +a(ance 5i(( +e needed. In the ca'e o4 a

decentra(i?ed arran)e"ent> a "ini"u" ca'h +a(ance 5i(( hae to +e "aintained at each

+ranch 5hich 5i(( add to a (ar)e operatin) ca'h +a(ance. :ina((#> 'chedu(e' can +e ti)ht(#

contro((ed and di'+ur'e"ent' "ade exact(# on the ri)ht da#.

F1oat' A er# i"portant techniue o4 '(o5 di'+ur'e"ent' i' 4(oat. The ter" 4(oat re4er'

to a"ount o4 "one# tied up in the cheue that hae +een 5ritten> +ut hae #et to +e

co((ected and enca'hed. A(ternatie(#> 4(oat repre'ent' the di44erence +et5een the +ank

+a(ance and +ook +a(ance o4 ca'h o4 a 4ir". The di44erence +et5een the +a(ance a'


59/124

'ho5n in the 4ir"F' record and the actua( +ank +a(ance i' due to tran'it and proce''in)

de(a#'. There i' ti"e (a) +et5een the i''ue o4 a cheue +# the 4ir" and it' pre'entation to

it' +ank +# the cu'to"erF' +ank 4or pa#"ent. The i"p(ication i' that a(thou)h a cheue

ha' +een i''ued ca'h 5ou(d +e reuired (ater 5hen the cheue re'ented 4or enca'h"ent.

There4ore> a 4ir" can 'end re"ittance a(thou)h it doe' not hae ca'h in it' +ank at the

ti"e o4 i''uance o4 cheue. Mean5hi(e> 4und' can +e arran)ed to "ake pa#"ent' 5hen

the cheue i' pre'ented 4or co((ection a4ter a 4e5 da#'. :(oat u'ed in thi' 'en'e i' ca((ed

cheue kittin).

A$$r!a1/' :ina((#> a potentia( too( 4or 'tretchin) account' pa#a+(e i' accrua(' 5hich are

de4ined a' current (ia+i(itie' that repre'ent a 'erice or )ood' receied +# a 4ir" +ut not

#et paid 4or. :or in'tance> pa#ro((> i.e. re"uneration to e"p(o#ee'> 5ho render 'erice'

in adance and receie pa#"ent (ater. In a 5a# the# extend credit to the 4ir" 4or a period

at the end o4 5hich the# are paid> 'a#> a 5eek or "onth. The (on)er the period a4ter

5hich pa#"ent i' "ade> the )reater the a"ount o4 4ree 4inancin) and the '"a((er the

a"ount o4 ca'h +a(ance' reuired. Thu'> (e'' 4reuent pa#ro(('> i.e. "onth(# a' co"pared

to 5eek(#> are i"portant 'ource' o4 accrua('. The# can +e "anipu(ated to '(o5 do5n

di'+ur'e"ent'.

DETERMINING THEOPTIMAL LEVEL OF CASH BALANCE'

Ca'h +a(ance i' "aintained 4or the tran'action purpo'e' and additiona( a"ount "a# +e

"aintained a' a +u44er or 'a4et# 'tock.

The :inance "ana)er 'hou(d deter"ine the appropriate a"ount o4 ca'h +a(ance. !uch a

deci'ion i' in4(uenced +# trade8o44 +et5een ri'k and return. I4 the 4ir" "aintain' a '"a((

ca'h +a(ance > it' (iuidit# po'ition +eco"e' 5eek and 'u44er' 4ro" a paucit# o4 ca'h to

"ake pa#"ent'. =ut a hi)her pro4ita+i(it# can +e attained +# ine'tin) re(ea'ed 4und' in

'o"e pro4ita+(e opportunitie'. When the 4ir" run' out o4 ca'h it "a# hae to 'e(( it'

"arketa+(e 'ecuritie'> i4 aai(a+(e> or +orro5. Thi' ino(e' tran'action co't.

On the other hand i4 the 4ir" "aintain' a hi)her (ee( o4 ca'h +a(ance> it 5i(( hae a

'ound (iuidit# po'ition +ut 4ore)o the opportunitie' to earn intere't'. The potentia(

intere't (o't on ho(din) (ar)e ca'h +a(ance ino(e' opportunitie' co't to the 4ir".

Thu' the 4ir" 'hou(d "aintain an opti"u" ca'h +a(ance> neither a (ar)e nor a '"a(( ca'h

+a(ance.

To 4ind out the opti"u" ca'h +a(ance the tran'action co't and ri'k o4 too '"a(( +a(ance

'hou(d +e "atched 5ith opportunit# co't' o4 too (ar)e a +a(ance 'hou(d +e "atched 5ith

opportunit# co't o4 too (ar)e a +a(ance. :i)ure 'ho5' thi' trade8o44 )raphica((#. I4 the


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4ir" "aintain' (ar)er ca'h +a(ance' it' tran'action co't 5ou(d dec(ine> +ut the

opportunit# co't 5ou(d increa'e. At point the 'u" o4 t5o co't' i' "ini"u". Thi' i'

the point o4 opti"u" ca'h +a(ance. Receipt' and di'+ur'e"ent o4 ca'h are hard(# in

per4ect

'#nchroni?ation.

e'pite the a+'ence o4 '#nchroni?ation it i' not di44icu(t to deter"ine the opti"u" (ee(

o4 ca'h +a(ance.

I4 ca'h 4(o5' are predicta+(e it i' 'i"p(# a pro+(e" o4 "ini"i?in) the tota( co't' 8 the

tran'action co't and the opportunit# co't.

The deter"ination o4 opti"u" 5orkin) ca'h +a(ance under certaint# can thu' +e ie5ed

a' an inentor# pro+(e" in 5hich 5e +a(ance the co't o4 too (itt(e ca'h - tran'action co't

a)ain't the co't o4 too "uch ca'h- opportunit# ca'h

Ca'h 4(o5'> in practice> are not co"p(ete(# predicta+(e. At ti"e' the# "a# +e co"p(ete(#

rando". nder 'uch a 'ituation> a di44erent "ode( +a'ed on the techniue o4 contro(

theor# i' needed to 'o(e the pro+(e" o4 appropriate (ee( o4 5orkin) ca'h +a(ance.

With unpredicta+(e aria+i(it# o4 ca'h 4(o5'> 5e need in4or"ation on tran'action co't'>

opportunit# co't' and de)ree o4 aria+i(it# o4 net ca'h 4(o5' to deter"ine the appropriate

ca'h +a(ance. Gien 'uch data the "ini"u" and "axi"u" o4 ca'h +a(ance' 'hou(d +e

'et. Greater the de)ree o4 aria+i(it#> hi)her the "ini"u" ca'h +a(ance. Wheneer the

ca'h +a(ance reache' a "axi"u" (ee(> the di44erence' +et5een "axi"u" and "ini"u"

(ee(' 'hou(d +e ine'ted in "arketa+(e 'ecuritie'. When +a(ance i' 4a((' to ?ero>

"arketa+(e 'ecuritie' 'hou(d +e 'o(d and proceed 'hou(d +e tran'4erred to the 5orkin)

ca'h +a(ance'.

EVALUATION OF CASH MANAGEMENT PERFORMANCES

To a''e'' the ca'h "ana)e"ent per4or"ance thi' pha'e i' diided a' 4o((o5'D

a !i?e o4 Ca'h

+ Liuidit# and Adeuac# o4 ca'h

c Contro( o4 ca'h

A0 S*2e o5 $a/h' The uantu" o4 ca'h he(d +# KOTAK MA/INRA durin) the 'tud#

period i' pre'ented in the ta+(e. The trend percenta)e a('o ca(cu(ated and 'ho5n in

the ta+(eD


61/124

S*2e o5 $a/h "a1a3$e .R/ *3 Crore/0

Year Ca/h.I3 La$/0 Tre34

&


62/124

S*2e o5 /a1e/ .R/ *3 La$/0

ear

!a(e' Trend

&


63/124

.B0 L*!*4*t a34 A4e!a$ o5 Ca/h'

One o4 the "o't i"portant ,o+' o4 the :inance Mana)er i' to "aintain 'u44icient (iuidit#

to ena+(e the 4ir" to pa# o44 it' o+(i)ation' 5hen the# 4a(( due. To te't a 4ir"F' (iuidit#

and 'o(enc# 5e co""on(# u'e current and uick ratio'. Traditiona((# &D1 current ratio

and 1D1 uick ratio are taken a' 'ati'4actor# 'tandard' 4or the purpo'e. The 4or"er

indicate' the extent o4 the 'oundne'' o4 the current 4inancia( po'ition o4 a 4ir" and the

de)ree o4 'a4et# proided to the creditor'> the (ater 'i)ni4ie' the a+i(it# o4 a 4ir" to 'ett(e

a(( it' current o+(i)ation' on a particu(ar date.

C!rre3t rat*o a34 !*$9 rat*o

Year C!rre3t rat*o !*$9 rat*o

&


64/124

Our ana(#'i' c(ear(# 'ho5' that the co"pan# ha' er# 'ound po'ition re)ardin) (iuidit#

and 'o(enc#. :urther> a(( the ratio' 4(uctuate throu)hout the period.

.C0 Co3tro1 o5 Ca/h'

One o4 the "a,or o+,ectie' o4 ca'h "ana)e"ent 4ro" the 'tand point o4 increa'in)

return on ine't"ent i' to econo"i?e on the ca'h ho(din) 5ithout i"pairin) the oera((

(iuidit# reuire"ent' o4 the 4ir"'. Thi' i' po''i+(e +# e44ectin) ti)hter contro(' oer

ca'h 4(o5'. The 4o((o5in) ratio ha' +een app(ied to a''e'' the e44icienc# o4 ca'h contro(D

Ca'h to Current A''et' ratio

Ca'h turnoer ratio

Ca'h to current (ia+i(itie' ratio

Ca/h to C!rre3t a//et/ rat*o

Year Ca/h to CA Rat*o

&


65/124


66/124


67/124

A co"pan# 'hou(d "aintain adeuate 'tock o4 "ateria(' 4or a continuou' 'upp(# to the

4actor# 4or an uninterrupted production. It i' not po''i+(e 4or a co"pan# to procure ra5

"ateria( in'tantaneou'(# 5heneer needed. A ti"e (a) exi't' +et5een de"and and

'upp(# o4 "ateria(. A('o> there exi't' an uncertaint# in procurin) ra5 "ateria( in ti"e at

"an# occa'ion'. The procure"ent o4 "ateria(' "a# +e de(a#ed +ecau'e o4 4actor'

+e#ond co"pan#F' contro( e.). tran'port di'ruption> 'trike etc. There4ore> the 4ir" 'hou(d

keep a 'u44icient 'tock o4 ra5 "ateria( at a ti"e to hae 'trea"(ine Other 4actor' 5hich

"a# incite u' to keep 'tock o4 inentorie' i' the uantit# di'count'> expected ri'e i'

price.

The 5ork in proce'' inentor# +ui(d' up +ecau'e o4 the production c#c(e. Production

c#c(e i' the ti"e 'pan +et5een the introduction o4 ra5 "ateria( in to the production and

the e"er)ence o4 4ini'hed )ood' at the co"p(etion o4 production c#c(e. Ti(( the

production c#c(e co"p(ete'> the 'tock o4 5ork in proce'' ha' to +e "aintained.

E44icient 4ir"' con'tant(# tr# to "ake the production c#c(e '"a((er +# i"proin) their

production techniue'.

The 'tock o4 4ini'hed )ood' ha' to +e he(d +ecau'e production and 'a(e' are not

in'tantaneou'. A 4ir" can not produce i""ediate(# 5hen )ood' are de"anded +#

cu'to"er'. There4ore to 'upp(# 4ini'hed )ood' on re)u(ar +a'i'> their 'tock ha' to

"aintain 4or 'udden de"and o4 cu'to"er'> in ca'e the 4ir" 'a(e' are 'ea'ona( in nature>

'u+'tantia( 4ini'hed )ood' inentor# 'hou(d +e kept to "eet the peak de"and. :ai(ure to

'upp(# product' to cu'to"er> 5hen de"anded> 5ou(d "ean (o'' o4 the 4ir"F' 'a(e' to the

co"petitor'.

The +a'ic o+,ectie in ho(din) ra5 "ateria( inentor# i' 'eparate purcha'e and

production actiitie' and in ho(din) 4ini'hed )ood' inentor# i' to 'eparate production

and 'a(e' actiitie'. I4 ra5 "ateria( inentor# i' not he(d> purcha'e 5ou(d hae to +e

"ade re)u(ar(# at the ti"e o4 u'a)e. Thi' 5ou(d "ean production intereption' and hi)h

co't o4 orderin).

A 'u44icient(# (ar)e inentor# ha' to +e "aintained o4 4ini'hed )ood' 'o a' to "eet the

4(uctuatin) de"and'. I4 a c(o'e (ink i' "aintained +et5een the 'a(e' and the production

depart"ent then an or)ani'ation can do 5ith a '"a(( inentor# a('o. In the proce''>

inentor# i' a('o nece''ar# +ecau'e production can not +e in'tantaneou'. =ut it 'hou(d +e

'een that the 'i?e o4 production c#c(e 'hou(d +e '"a((.


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OBECTIVES OF INVENTORY MANAGEMENTIn the "odern +u'ine'' 5or(d there i' practica((# nothin) that i' done 5ithout o+,ectie.

The o+,ectie i' a('o one that 5ou(d he(p the or)ani?ation in reachin) it' )oa(' in a +etter

5a#. /ence it can +e in4erred that the i"portance )ien to "ana)e"ent o4 inentor# in

the +u'ine'' 5or(d i' not deoid o4 a concrete rea'on' +ehind it.

The t5o "ain rea'on' +ehind a(( thi' are> 4ir't(#> to "aintain a inentor# +i) enou)h that

the production and 'a(e' operation are carried on 5ithout an# hindrance and 'econd(#> to

"ini"i?e the ine't"ent in inentor#> in order to "axi"i?e the pro4it'. =oth> exce''ie

a' 5e(( a' inadeuate inentor# (ee( i' not )ood. The# are the t5o dan)er point' that a

co"pan# 'hou(d tr# to aoid and 'hou(d a(5a#' tr# to "aintain opti"u" (ee( o4

inentor#. The exce''ie ine't"ent in the inentor# ha' the 4o((o5in) dra5+ack'D

nnece''ar# tie up o4 4ir"F' 4und and (o'' o4 pro4it.

Exce''ie carr#in) co't.

The ri'k o4 (iuidit#.

The oer ine't"ent o4 4und' in inentor# eat up the preciou' 4und' 5hich cou(d hae

+een put to 'o"e pro4ita+(e u'e. The carr#in) co't incurred> can not +e i)nored> thi' i'

the co't o4 'tora)e> hand(in) in'urance> recordin) and in'pectin). The'e a(( co't'

incurred in order to hae (ar)e inentorie' i"pair the pro4ita+i(it# o4 the 4ir". Another

dan)er o4 carr#in) exce''ie inentor# i' the deterioration> o+'o(e'cence and pi(4era)e o4

ra5 "ateria('.

Maintainin) inadeuate inentor# i' a('o dan)erou'. The con'euence' o4 under

ine't"ent in inentor# are

Production ho(d up'

:ai(ure to "eet co""it"ent

I4 the inentor# o4 4ini'hed )ood' i' not adeuate than the de"and o4 cu'to"er i' peak

period' "a# +e (e4t un"et and it the under ine't"ent i' in the area o4 ra5 "ateria(' that

i' (ike(# that the production proce'' "a# +e he(d up 4reuent(#.

The ai" o4 inentor# "ana)e"ent thu' 'hou(d +e to aoid exce''ie and inadeuate

(ee( o4 inentor# and to "aintain 'u44icient inentor# 4or '"ooth production and 'a(e'

operation e44ort' 'hou(d +e "ade to p(ace an order at the ri)ht ti"e to ri)ht 'ource to

acuire ri)ht a"ount at the ri)ht price and 4or ri)ht uantit#. The a'pect' o4 a e44ectie

inentor# "ana)e"ent 'hou(d take care o4 are a'D


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En'ure continuou' 'upp(# o4 "ateria( to 4aci(itate uninterrupted production.

To "aintain 'u44icient 'tock' o4 ra5 "ateria( in the period' o4 'hort 'upp(# and

eident price ri'e.

To "aintain 'u44icient inentor# o4 4ini'hed )ood' 4or '"ooth 'a(e' operation.

Mini"i?e carr#in) co't and ti"e.

Contro( ine't"ent and keep it to the opti"u" (ee(.

=e4ore di'cu''in) the inentor# contro( techniue> here i' the di'cu''ion o4 the ariou'

ter"' 'uch a' econo"ic order uantit#> carr#in) co't etc.

& E$o3o+*$ Or4er !a3t*t' It i' the inentor# (ee( 5hich "ini"i'e' the tota(

o4 orderin) and carr#in) co't. eter"inin) econo"ic order uantit# ino(e' t5o

t#pe' o4 co't' i.e. orderin) co't and carr#in) co't.

) Or4er*3% Co/t' Thi' i' u'ed e'pecia((# in the ca'e o4 ra5 "ateria(' and i'

inc(uded in the co't incurred in acuirin) the ra5 "ateria(. It i' proportiona( to

the nu"+er o4 order' and iner'e(# proportiona( to the 'i?e o4 inentor#. Apart

4ro" the co't o4 acuired ra5 "ateria( thi' a('o inc(ude' reui'itionin)>

purcha'in) order> tran'portin) receiin)> in'pectin) and 'ortin) co't.

6 Carr*3% Co/t' Thi' i' u'ed in the ca'e o4 a(( t#pe' o4 inentorie'. there are the

co't' 5hich are incurred 4or ho(din) a )ien a"ount o4 inentor#> the# inc(ude

opportunit# co't o4 4und' ine'ted i' inentorie' in'urance> taxe'> 'tora)e co't

and the co't o4 deterioration and o+'o(e'cence. It i' direct(# proportiona( to the

'i?e o4 inentor#.

= Reor4er Po*3t/' Reorder point i' the inentor# (ee( at 5hich an order "u't +e

p(aced to rep(eni'h the inentor# and eade the ri'k o4 runnin) out o4 ra5

"ateria(. To deter"ine the reorder point under uncertaint# 5e 'hou(d kno5 the

(ead ti"e> the aera)e u'a)e> econo"ic order uantit# etc.

? Sa5et Sto$9/' It i' di44icu(t to predict u'a)e and the (ead ti"e accurate(#. The

de"and 4or "ateria( i' neer con'tant. !i"i(ar(# the actua( de(ier# ti"e "a# +e

di44erent 4ir" the nor"a( (ead ti"e. In ca'e o4 increa'ed u'a)e or de(ier#

de(a#ed> there i' +ound to +e pro+(e" o4 'tock out. !tockout can proe to +e

co't(# a44air 4or a co"pan#. There4ore in order to )uard a)ain't the 'tock out> the

co"pan# "a# keep 'o"e +u44er 'tock a' a cu'hion a)ain't expected increa'ed


70/124

andor de(a# in de(ier# .Thi' +u44er 'tock i' ca((ed a' 'a4et# 'tock.

The ariou' techniue' or approache' u'ed in the "ana)e"ent o4 inentor# +# di44erent

4ir"' to ca(cu(ate the econo"ic order uantit# are here )ien +e(o5D 8

&0 Tr*a1 a34 Error Approa$h' Thi' i' the techniue to re'o(e the econo"ic order

uantit# pro+(e". In thi' techniue 5e take the annua( reuire"ent> purcha'in)

co't per unit> orderin) co't per order and carr#in) co't per unit 4or the

co"putation o4 econo"ic order uantit#. We 'uppo'e a con'tant u'a)e and then

con'iderin) di44erent 'i?e' o4 order' and ca(cu(ate the di44erent tota( co't'. The

order corre'pondin) to the "ini"u" tota( co't ha' the econo"ic order uantit#.

)0 EO Mo4e1' Thi' i' uite an ea'# approach to ca(cu(ate the econo"ic order

uantit# than the tria( and error approach. /ere 5e 4ind the econo"ic order

uantit# 5ith the he(p o4 the 4or"u(a

ES !rt -&AO C

Where A 8X Tota( Annua( Reuire"ent

O 8X Orderin) co't order

C 8X Carr#in) co't per unit

60 Graph*$ Approa$h' /ere the econo"ic order uantit# i' 4ound out 5ith the he(p

o4 a )raph. We take the order 'i?e on hori?onta( axi' and co't incurred on the

ertica( axi'. No5 5e p(ot the )raph re)ardin) the carr#in) co't and the orderin)

co't'. No5 5ith the he(p o4 the'e t5o 5e dra5 a )raph o4 "ini"u" tota( co't.

The econo"ic order point i' the point at the (o5e't a(ue o4 the tota( "ini"u"

co't'.


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EVALUATION OF INVENTORY MANAGEMENT'In thi' 'ection o4 thi' chapter> a atte"pt ha' +een "ade to ,ud)e the e44icienc# o4

inentor# "ana)e"ent in kotak "ahindra +# exa"ine co"po'ition "oe"ent and (ee(

o4 inentor# he(d +# the 4ir".

Co+po/*t*o3 o5 I3-e3tor'

Co"po'ition o4 inentor# )enera((# depend' upon the nature o4 +u'ine''. The proportion

o4 each co"ponent in the tota( inentor# arie' 4ro" indu'tr# to indu'tr#. In order to

a''ure e44ectie contro( on the tota( ine't"ent in inentorie' it i' de'ira+(e to "aintain a

proper +a(ance in a(( the co"ponent'. The 'tructure o4 inentor# 'ho5 u' that 5hich part

o4 the inentor# i' "ore in the or)ani'ation. !uch kno5(ed)e he(p' u' in the e44icient

"ana)e"ent o4 inentor#. Ta+(e 'ho5' the co"po'ition o4 inentor# in KOTAK

MA/INRA

Co+po/*t*o3 o5 I3-e3tor'

Year Ra:

Mater*a1

Se+*

Mater*a1

F*3*/he4

Goo4/

Store/

Spare/

S$arp

Tota1

&


72/124

I3-e3tor T!r3o-er Rat*o

Year Rat*o I3 4a/

&

there4ore> the'e 'hou(d +e taken in to con'ideration 4or +etter productiit# and e44icienc#o4 operation.


73/124


74/124

To o+tain opti"u" a(ue o4 'a(e'

To contro( the co't o4 credit and keep it to the "ini"u" (ee(.

To "aintain ine't"ent in de+tor' at opti"u" (ee(.

!a(e' "axi"i?ation i' not the purpo'e o4 credit "ana)e"ent +ut an e44ectie and

e44icient credit "ana)e"ent he(p' in expandin) 'a(e' and act' a' a "arketin) too(. A

)ood and 5e(( ad"ini'tered credit "ean' pro4ita+(e credit account'.

In order to "axi"i?e the 5ea(th o4 the 4ir"> the co't ino(ed in the credit and it'

"ana)e"ent ha' to +e contro((ed 5ithin the accepta+(e (i"it'. The'e co't' can +rou)ht to

?ero (ee( +ut that 5ou(d ader'e(# a44ect the 'a(e'> there4ore the o+,ectie 'hou(d +e to

kept receia+(e to the "ini"u" (ee(. A d#na"ic credit po(ic# and it' "ana)e"ent 5i((

he(p to opti"i?e the 'a(e at a "ini"u" co't.

e+tor' ino(e 4und'> 5hich hae an opportunit# co't. There4ore the ine't"ent in

de+tor' 'hou(d +e neer +e exce''ie. Extendin) (i+era( credit pu'he' the 'a(e and re'u(t'

in hi)her pro4ita+i(it# +ut the increa'e in (ee( o4 ine't"ent in de+tor' re'u(t in

increa'ed co't. Thu' 5e are to +rin) the ine't"ent at a opti"u" (ee( +# doin) trade o44

+et5een the co't' and +ene4it'. The (ee( o4 de+tor' to a (ar)e extent depend' on externa(

4actor' 'uch an indu'tr# nor"'> (ee( o4 actiit#> 'ea'ona( ariation' etc. =ut there are (ot

o4 interna( 4actor' 5hich a44ect' the 4ir"F credit po(ic#. The'e 4actor' inc(ude credit

ter"'> 'tandard> (i"it' and co((ection procedure'. The interna( 4actor' 'hou(d +e 5e((

ad"ini'tered to opti"i'e the ine't"ent in de+tor'.

OPTIMUM CREDIT POLICY

The 5ho(e 'et o4 deci'ion aria+(e' that a44ect' the ine't"ent in receia+(e i' ter"ed a'

credit po(ic#. Genera((#> 5e can diide the credit po(ic# into t5o t#pe'

Lenient Credit Po(ic#

!trin)ent Credit Po(ic#

The 4ir"' 4o((o5in) Lenient Credit Po(ic# tend to 'e(( on credit to it' cu'to"er' er#

readi(#> 5ithout een kno5in) the credit 5orthine'' o4 the cu'to"er'. The 4ir"' 5ith

(enient credit po(ic# 5i(( hae "ore 'a(e' and hi)her pro4it'. =ut the# can a('o incur hi)h

+ad de+t' (o''e' and 4ace the pro+(e" o4 (iuidit#. The 4ir" 5hich 4o((o5' !trin)ent

Credit po(ic# are er# 'e(ectie in extendin) credit> and credit i' extended to tho'e

cu'to"er on(# 5ho'e credit 5orthine'' i' 5e(( proen. The'e 4ir"' 4o((o5 ti)ht credit

'tandard' and ter"' a' a re'u(t> "ini"i?e co't and chance' o4 +ad de+t'.

The 'trin)ent credit po(ic# neer po'e' the pro+(e" o4 (iuidit# +ut re'trict the 'a(e and


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pro4it "ar)in'.

Exten'ion o4 credit increa'e' the 'a(e o4 the 4ir". The nu"+er o4 cu'to"er' purcha'in)

the 4ir"F' )ood' and 'erice' increa'e' a' it "ake' it' credit po(ic# (i+era(. I4 the co't do

not increa'e at a )reater rate> the increa'ed reenue 5i(( increa'e the pro4it o4 the 4ir".

A' a con'euence> the "arket a(ue o4 4ir"F' 'hare 5i(( ri'e.

The extent to 5hich the 'a(e' 5i(( +e a44ected +# pur'uin) a particu(ar credit po(ic# can

not +e )au)ed 5ith accurac#. !a(e' 4oreca't 5ith re'pect to a particu(ar credit po(ic# can

+e "ade 5ith re)ard' to preai(in) econo"ic condition. /o5eer> co't +ene4it ana(#'i'

ha' to +e done in order to anticipate the accepta+i(it# o4 a credit po(ic#.

Credit exten'ion ino(e' co't> the incurred co't can +e o4 "an# t#pe' 'uch a' +ad de+t

(o''e'> production and 'e((in) co't'.> ad"ini'tratie expen'e'> ca'h di'count'>

opportunit# co't etc.

=ad de+t (o''e' are incurred 5hen a 4ir" i' una+(e to co((ect the +ook de+t'. =ad de+t

(o''e' are "ore i4 the credit po(ic# i' (enient. Thi' neer "ean' that a co"pan# 'hou(d it'

credit po(ic#> in ca'e the pro4it )enerated +# additiona( 'a(e' are "ore than

corre'pondin) co't' the 4ir" 'hou(d 'ure(# )o in 4or credit po(ic# re(axation.

The additiona( 'a(e' re'u(tin) 4ro" the re(axed credit po(ic# 5i(( increa'e the production

and 'e((in) co't'. On(# the incre"enta( production or 'e((in) co't' 'hou(d +e e'ti"ated.

!i"i(ar(#> the expen'e' incurred in the ad"ini'tration o4 credit 'hou(d +e inc(uded in the

co't' o4 extendin) credit. The co't o4 ad"ini'tration )enera((# inc(ude' the credit

'uperi'ion co't' and co((ection co't'. A)ain> the'e co't' 5i(( +e ni( i4 the credit po(ic#

'i"p(# uti(i?e the id(e capacit# o4 the credit depart"ent.

The opportunit# co't i' the co't o4 4ore)one pro4it' o4 the a"ount +(ocked a' trade credit

to cu'to"er' in order to 'u'tain or increa'e 'a(e'. A' a re'u(t o4 the 4und' tied up in credit

account' o4ten the 4ir"' hae to )o in 4or credit 4ro" +ank' in order to 'u'tain their

operation'.

In order to co((ect the trade credit' at an ear(# date> o4ten ca'h di'count' hae to +e

extended. A' a re'u(t o4 the'e ca'h di'count' 4ir"' are not in a po'ition to co((ect the

re"uneration 4or their 'a(e' in 4u((. Thi' i' e''entia((# a too( to +rin) the trade credit to a

opti"u" (ee(.


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A/pe$t/ o5 Cre4*t Po1*$'

The i"portant a'pect' o4 credit po(ic# 'hou(d +e identi4ied +e4ore e'ta+(i'hin) an

opti"u" credit po(ic#. The i"portant deci'ion aria+(e' o4 the credit po(ic# areD

Cre4*t Ter+/' Credit ter"' are the condition' or 'tipu(ation' under 5hich the

4ir" extend' credit. The ter"' and condition' can +e c(u++ed accordin) to the

period 4or 5hich the# are extended and accordin) to the a"ount o4 di'count

o44ered there+# there are t5o i"portant co"ponent' o4 trade credit na"e(# ca'h

period and ca'h di'count'. Credit ter"' can +e e44ectie(# u'ed a' a too( to +oo't

'a(e'. The "o't de'ira+(e credit ter"' 5hich increa'e' the oera(( pro4ita+i(it# o4

the 4ir"> 'hou(d +e o44ered to the cu'to"er' co't +ene4it trade o44 +et5een credit

ter"' 'hou(d +e done to choo'e the +e't one. I4 the action o4 re(axation o4 the

credit ter"' i' 4o((o5ed +# the co"petitor'. Then the 4ir" "a# hae to pa#

in'tead o4 )ainin) an#thin).

The ti"e duration 4or 5hich the credit i' extended to the cu'to"er' i' re4erred to

a' credit period. 'ua((# the credit period o4 the 4ir" i' )oerned +# the indu'tr#

nor"'> +ut 4ir"' can extend credit duration to 'ti"u(ate it' 'a(e'. I4 the 4ir"F +ad

de+t' +ui(d up> it "a# ti)hten up it' credit po(ic# a' a)ain't the indu'tr# nor"'.

Ca'h di'count' i' the o44er "ade +# the 4ir" to cu'to"er to pa# (e'' i4 the

reuired a"ount i' paid ear(ier. The ca'h di'count ter"' indicate the rate o4

di'count and the period 4or 5hich di'count ha' +een o44ered. I4 the cu'to"er doe'

not aai( thi' o44er> he i' expected to "ake the pa#"ent +# the due date.

Cre4*t Sta34ar4/' The credit 'tandard' 4o((o5ed +# the 4ir" ha' an i"pact on

'a(e' and receia+(e. The 'a(e' and receia+(e (ee(' are (ike(# to +e hi)h i4 the

credit 'tandard' o4 the 4ir" are re(atie(# (oo'e. In contra't> I4 the 4ir" ha'

re(atie(# ti)ht credit 'tandard'> the 'a(e' and receia+(e are expected to +e (o5.

The credit 'tandard' are )oerned +# ariou' a'pect' 'uch a' the to 5i((in)ne'' o4

the cu'to"er to pa#> the a+i(it# o4 the cu'to"er to pa# in the econo"ic condition'

etc.

The credit Kotak Mahindra can +e (i+era(i'ed to the extent that the pro4it' earned

+# the" re"ain "ore than the co't incurred. 'ua((# co't incurred in the ca'e o4

"akin) the credit 'tandard' "ore (i+era( are +ad de+t (oo'e'> 'e((in) and

production co't' etc. The re'u(t o4 a credit po(ic# 5ith (oo'e 'tandard' i' the

(en)thenin) o4 co((ection period.


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Co11e$t*o3 Po1*$' The need to co((ect the pa#"ent' ear(# )ae ri'e to a po(ic#

re)ardin) it> ca((ed a' the co((ection po(ic#. It ai"' at the 'peed recoer# 4ro"

'(o5 pa#er' and reduction o4 +ad de+t' (o''e'. The 4ir" ha' to er# cautiou'

5hi(e it )oe' in 4or co((ection 4ro" '(o5 pa#er'. The ariou' a'pect' 'uch a'

5i((in)ne''> capa+i(itie'> and externa( condition' 'hou(d +e taken care o4 +e4ore

#ou )o in co((ection procedure. The opti"u" co((ection po(ic# 5i(( "axi"i?e the

pro4ita+i(it# and 5i(( +e con'i'tent 5ith the o+,ectie o4 "axi"i?in) the a(ue o4

the 4ir".

CREDIT PROCEDURE

A c(ear cut )uidin) po(ic# re)ardin) the )rantin) o4 credit to indiidua( cu'to"er' and

the co((ection 4ro" indiidua( account 'hou(d +e (aid do5n. The co((ection procedure o4

the 4ir" di44er' 4ro" cu'to"er to cu'to"er. The credit ea(uation procedure +e4ore

extendin) o4 credit i' done in the 4o((o5in) 5a#'D

&0 Cre4*t I35or+at*o3 ' In extendin) credit to cu'to"er'> the 4ir" 5ou(d en'ure

that the receia+(e are co((ected in 4u(( and on due date. To en'ure thi'> the 4ir"

'hou(d hae credit in4or"ation concernin) each cu'to"er to 5ho" credit i'

)ien. Co((ection o4 credit in4or"ation ino(e' expen'e'. The co't o4 co((ectin)

in4or"ation 'hou(d there4ore +e (e'' than the potentia( pro4ita+i(it#. In addition to

the co't> the ti"e reuired to co((ect in4or"ation 'hou(d +e con'idered. Thi'

in4or"ation can +e co((ected 4ro" 4inancia(

Project 4 Sem

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