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    Document Reference 

    Early NPA System
    Prepared By
    Document Published Date
    7th Augusut’15
    Version Submitted
    Version 1.0
    Version valid from
    7th Augusut’15

    The Life blood of Banks

    The Bank is having more than 22 million loan accounts in segment of :
    • Agriculture
    • Retail
    • Corporate
    The Bank desires to Develop a Solution for generation of early warning signals for loan accounts. The solution should proactively identify accounts that exhibit signs of concern and help manage them. The solution should also be capable of identifying stressed signals well in advance.

    Bank is the CFO for all these organisations.

    Role of a CFO

    • Preserving and protecting the vital assets of the organization by minimizing risk and getting the books right
    • ensure compliance with financial regulations
    • close the books correctly
    • communicate value and risk issues to investors and boards.
    • Operate an efficient and effective finance organization providing a variety of services to the business such as financial planning and analysis, treasury, tax, and other finance operations.
    • Strategy planning and help influence the future direction of the company. They are vital in providing financial leadership and aligning business and finance strategy to grow the business.
    • Stimulate and drive the timely execution of finance function in the enterprise such as
      • improved enterprise cost reduction
      • Procurement
      • pricing execution
      • pprocess improvements and innovations that add value to the company.

    Process of lending

    The banks follow a defined process before extending loan to customers :

    1. Retail Loans :
      1. Identification of loan account holder
      2. Interview of the individual
      3. Generation of Score Sheet as per defined parameters
      4. Sanction of loan
    2. Corporate Loans :
      1. The companies provide Proposal alongwith CMA data to the bank
      2. Appraisal of proposal and CMA data
      3. Sanction of loan
    3. Project Loans :
      1. The companies provide detailed Project Plans to the bank
      2. Appraisal of Project Plans
      3. Sanction of loan

    Approval to A/c opening

    Approval to A/c opening is a MANUAL process which opens the issues of :

    1. No method to track that what was agreed is Sanction
    2. Chances of missing of certain agreed Term Sheet items

    Retail Loans approval

    The banks calculate the score sheet based on the following questions :

    Retail Loans post sanction

    The banks never ever goes back to the Score Sheet

    Early NPA System :
    1. Review the Score Sheet on defined periodicity
    2. Take corrective actions

    Corporate Loans

    Approval Process :
    1. The companies provide Proposal alongwith CMA data to the bank
    2. Appraisal of proposal and CMA data
    3. Sanction of loan
    CMA Data :
    1. Past performance
    2. Future Projection

    These projections are based on planning and strategies devised by the management of the company based on which the Sanction was done.

    CMA data needs to be tracked as per CMMI L5 methodology for Early NPA identification.

    Global External World

    Corporates have gone Global while our banks are not working on the loan documentation only.

    These global Corporates have global businesses and subsidiaries, does cross selling take multiple loans from global banks worldwide. PSB primarily are not networked globally and unable to catch the complete tree, This unable to connect globally, ends up in giving loans to these houses based on local documentation.

    Things go fine for 6-10 years covering the term of two-three CMD and more the one govt. and then laundering starts. Also business and market scenario contributes. we do not know what will be the global market scenario of telecom, reality 10 years down the line. Indian banks has already given more than 75k crs in telecom sector. If Airtel business overseas fails, India will suffer. It is here corporates play and become willful defaulter.

    Can any bank stop giving loans to Tatas, no way. But if Corus fails Tata Nano will get impacted. This link banks are unable to catch, a chain and NPA grows.

    How do you predict the behavior of Mukesh Ambani son 10 years later. He can make a loan bad after 12 years as most if them are long term debt. The present board constitution will also cease to exist.

    CMA Data Analysis :Early NPA monitoring Parameters

    1. Sales area will covers the analysis of the following :
      • Funnel Analysis
      • Sales team productivity analysis
    2. Manufacturing And delivery team analysis
      • Productivity
      • Cycle Time
      • QC Effectiveness
      • Defect Density
    3. Debtor and Creditor Analysis :
      • Debtor and Creditor balance and bills confirmations
      • Bill by bill analysis
      • NPA parameters fixed for them which will help Bank know how many Bad Debts being accounted for as Performing Assets by the company.
      • BR Cycle analysis for both debtor and creditor
    1. Stock Analysis :
      • Stock Analysis
      • Stock Holding across the chain to identify where the dumping has been done
      • For inventory, obsolete, spoiled, recalled or unsalable items should be deducted.
      • Recall of sold products.
    2. Cash Analysis :
      • Cash Collection Plan Analysis
      • Cash Outflow Plan Analysis
      • Cash Flow Analysis
      • Fund Flow Analysis
    3. Income and Expenditure Analysis :
      • Companies performance comparison and identification of GAPS with submitted CMA data
      • Cross companies comparison of same nature and size funded by the bank
      • Industry performance to Company Performance

    Ratio Analysis to CMA data :

    (1) Operating Profit
    (2) Net Profit
    (3) LOB Wise Profit
    (4) Project Wise Profit
    (5) Item Wise Profit
    (6) Cash Accruals
    (7) Net Worth
    (8) Total Current Liabilities
    (9)Total Funded Debt
    (10) Other Current Liabilities
    (11) Total long term sources
    (12) Total Current Assets (TCA)
    (13)Fixed Assets (Net Block)
    (14) Total Tangible Assets
    (15) Interest
    (16) PBT/Sales %
    (17) Net Sales / Total Tangible Assets
    (18) Return on Assets (PBT / TTA) %
    (19) Operating Costs / Sales %
    (20) Bank Finance / Current Assets (%)
    (21) Inventory and Receivable / Net Sales (days)
    (22) Working Capital Gap
    (23) Bank Finance to TCA (%)
    (24) Sundry TCA (%)
    (25) Other CL (excluding Sundry Creditors) to TCA (%)
    (26) Inventories to Net Sales(days)
    (27) Receivables to Gross Sales (days)
    (28) Sundry Purchases (days)
    (29) Current Ratio

    HR Analysis :

    1. Manpower Details
      • Designation wise
      • Roles and Responsibility
      • Salary Structure
      • Skill Set
    2. KRA definition in numerical terms
    3. KRA achievement input on periodical basis
    4. Analysis
    5. Succession Plans
    6. Attrition Rate Analysis
    1. Comparisons :
      • Companies performance comparison and identification of GAPS with submitted CMA data
      • Cross companies comparison of same nature and size funded by the bank
    2. Industry performance to Company Performance
      • Steady decline in industrial growth rate.
      • Increase in adverse industry regulations, such as a ban on exports
      • Inability to control increasing costs and rising input prices.
      • Threat of business shift to emerging markets.
    3. Customer Analysis :
      • Customer Feedback
      • Social Media Reporting

    Project Management Early NPA monitoring Parameters

    A project is a unique venture comprised of interrelated activities with a definite beginning and end. It is conducted by people, from different organizations, to meet established goals within parameters of cost, schedule, resources, and quality

    Project success means delivering the end product :

    on time,
    within budget,
    according to the client’s specifications,
    at a quality level that meets or exceeds expectations.

    Project management methodology provides project team members with a systematic way to plan and manage their projects.

    However, each project environment is unique, as such, the methodology is always intended to be flexible and it should be continuously evaluated, improved and enhanced.

    Project Management Methodology :

    A disciplined project management process is important to any project.  Project managers are expected to deliver results, on time (if not sooner) and on budget.  Solid project planning reduces the risks associated with any project.

    Project Management helps to :

    Control scope creep and manage change;
    Deliver project results on time and on budget;
    Focus the project team on the solution;
    Obtain project buy-in from disparate groups;
    Define the critical path to optimally complete your project;
    Provide a process for estimating project resources, time, and costs;
    Communicate project progress, risks, and changes;
    Surface and explore project assumptions;
    Prepare for unexpected project issues; and
    Document, transfer, and apply lessons learned from your projects.

    Project Management & Lifecycle Framework

    Cost to Build
    ↓ Reduce cost through control
    Time to Completion
    ↓ Reduce cycle time for better ROI
    ↓ Increase predictability of quality
    ↓ Reduce risk of delays and failure
    Best Practices
    ↓ Use of standards

    Project Management Keys to Success

    ✔ Follow proven implementation methodology
    ✔ Manage project to assure defined goals and benefits
    ✔ Early development of project standards
    ✔ Project planning and management
    ✔ Regular status meetings and reporting
    ✔ Keep Steering Committee engaged
    ✔ Effective Issues Management and Escalation
    ✔ Proactively identify and manage risks

    Project Management Stages

    • Define and organize the project :
      • Establish project organization
      • Requirements analysis document
      • Overall top level framework
    • Plan the project
      • Project roles & responsibilities matrix
      • Project tasks & deliverables matrix
      • Risk management plan
    • Track and manage the project
      • Project status & review process
      • Project communication mechanism
      • Project change control mechanism

    Project Planning and Monitoring

    Project Planning

    Project Planning takes care of :

    ⨠ Issue Management

    ⨠ Scope Management

    ⨠ Testing Processes

    ⨠ Quality Assurance

    ⨠ Risk Management

    Project Monitoring : complete governance is executed :

    ⨠ Weekly Project Status

    ⨠ Steering Committee Meeting

    Issue Management : An issue is defined as any point impacting the solution delivery that requires cross-group formal involvement and an policy or business rule decision. Managing issues is an essential responsibility of project management and is fundamental to the success of project implementation. Issues will be documented and tracked using the Issue management form.

    Three key elements determine how issues will be handled during the resolution process:

    Priority (High, Medium and Low) is defined as the impact to the project cost or schedule should the issue go unresolved.

    Criticality (High, Medium and Low) indicates the time sensitivity of getting a resolution; high criticality issues must be resolved within 48 hours or less.

    Level (Team, Project and Steering Committee) defines the highest level of management that will need to be engaged to facilitate a resolution.

    Scope Management : During the course of the project, requests for additional process or system functionality will occur. Changes may have an impact on scope and thus may effect project duration, resources required and project costs. A formal scope management process will be used to document change requests, to present them for formal written approval, and to manage the requests. All requests are documented and tracked on a change request form.

    Risk Management : In complex projects, a degree of uncertainty exists that creates both risks and opportunities. Capturing the opportunities and mitigating the risks are the primary goals of the project management team. Our project management methodology is proactive in identifying potential risks and ensuring the appropriate mitigating actions are taken before the cost, schedule and quality of deliverables are impacted. Risk is identified as anything that threatens the achievement of project objectives.

    Project Quality Assurance

    Testing : The testing is to be planned to ensure the system meets the business requirements as documented and configured during the definition stage. This testing includes functionality of the system; related processes; integration with other systems; system security based upon identified business roles and responsibilities; the technical production environment; and the testing of other tools or systems to be used in conjunction with the system.

    The test process should include all types of testing such as

    Unit Testing

    Integration Testing

    Performance Testing

    User Acceptance Testing

    Technical Infrastructure Testing

    Quality Assurance : The QA plan defines the processes and procedures that will be used to ensure that system developed meets its requirements and is of the highest quality possible within project constraints. Quality assurance incorporates a rigorous understanding of software quality and its implications for the various phases of systems development. System qualities are to be planned, built and delivered as per the project requirements:

    Project Planning : Risk Management

    Risk Management :
    • Management will respond to the analyzed risks and plan methods to control risks through:
      • Reduction or protection
      • Contingencies to respond to risks that occur
      • Monitoring of actual risks
      • Execution of plans
    • Mitigation strategies are defined for each risk. Project Management is responsible for monitoring each risk, continually reassessing the probability it will occur.
    • As risks are realized, Project Management is tasked with monitoring and executing the prescribed mitigating actions.

    Project Monitoring : Risk Analysis

    Risk Management :
    • Analysis identifies potential problem areas, estimates chance of loss, and evaluates consequences.
    • Project risks are classified into seven categories and summarized in the Risk Management Plan:
      • Leadership
      • Business
      • Project
      • Resource
      • Technology
      • Change Leadership
      • Training and Documentation
    • Risks are evaluated for probability of occurrence (Likely, Moderate or Unlikely), impact to the project, and risk level (High, Medium or Low).

    Project Monitoring

    Weekly Project Status : Status will be tracked against WBS task level on a weekly basis, through update of the project work plan and preparation of team and project-level status reports. Weekly project review meetings are held with the management team to review progress-to-date, resolve cross-team issues and address project procedural and policy decisions as they may be required.

    Steering Committee : Steering Committee meetings will be held monthly and at critical points as needed during the project to facilitate resolution of major issues. The Steering Committee will conduct end of phase reviews and acknowledge readiness to proceed to the next phase of work.

    Project Planning Maturity in Companies :

    Project Planning Maturity in Companies :

    Because : CMMi L5 companies deliver on time with in defined budget and with good quality with a confidence level of


    Project Success Statistics

    As per various surveys although there is an improvement in project success rates over the years, still there is vast scope of improvement.

    Why success rate is only 39% ?

    The poor success rate of project delivery proves that :
    • Projects are not being done by CMMi L5 companies
    • CMMI L5 companies are :
      • Companies are making false/untrue Project Plans
      • Project Plans are not prepared or are not linked to L5 requirements
      • Company do not work as per L5 requirements

    Reasons given by Project Managers for their failure to meet 95% Confidence Level in delivery :

    • Poor Project Scheduling
      • An ill-planned project sets itself up for problems and delays right from the start. An effective project plan details every aspect of implementation, from staffing and budget to key processes and deadlines.
    • Lack of Cooperation
      • Project team members who are unable to collaborate effectively through cooperative efforts can experience delays, especially when it comes to deadlines. If one team member misses a deadline, it sets up a scenario in which subsequent deadlines are also behind schedule.
    • Changing cost Structure
      • If you get into a project and find that you underestimated budgetary needs or see that the price of materials and supplies have increased during the course of the project, it can cause delays. You may be faced with cutting the parameters of the project to meet your original budget or coming up with additional financing to accommodate changes.
    • Client Changes
      • Requested changes from a client or customer during the course of a project can throw timing off track. For example, if a customer decides to alter the scope of a project by making additions or deletions or otherwise changing parameters, your project plan and timeline will have to be reworked. To avoid this potential scenario, require customers to sign off on a detailed contractual description of the project prior to its start. Build in protections for yourself, such as price increases and monetary time delay penalties to accommodate client changes.
    • Outside Influences
      • Projects can be delayed due to outside influences beyond your control. For example, inclement weather can delay a construction project, while a slow supply shipment can delay a retailer’s planned roll- out of a new product



    Scope Management
    To freeze the scope and Manage the changes in Scope
    Schedule Management
    To identify the activities to be completed and estimate the time for completion and manage any change
    Cost Management
    To estimate the budget required to complete the project and to manage any change
    Communication Management
    To define effective communication plan to keep all stakeholders informed
    Resource Management
    To identify the resources required and in result prepare an effective staffing schedule
    Quality Management
    To define, maintain and improve processes for achieving agreed upon quality
    Risk Management
    To identify risks and formulate mitigation plans to achieve success. So that contingencies for cost, time can be planned
    Procurement Management
    To plan the procurements which are required as per project needs To plan the procurements which are required as per project needs

    Therefore :

    Reasons given don’t corroborate with their CMMi Maturity level

    Success Rate of 39% V/s Confidence level of 95%

    Reaffirms the statements

    • CMMI L5 companies are :
      • Companies are making false/untrue Project Plans
      • Project Plans are not prepared or are not linked to L5 requirements
      • Company do not work as per L5 requirements
    The Projects suffering leads to NPA for banks …..

    Solution for banks :

    ProManSys : EPM which validates the Project Data as per CMMi L5 requirements for Early NPA Monitoring System

    • CMMI L5 companies are :
      • Companies are making false/untrue Project Plans
      • Project Plans are not prepared or are not linked to L5 requirements
      • Company do not work as per L5 requirements
    The Projects suffering leads to NPA for banks …..

    How it helps :

    Enterprise Project Monitoring System is a exhaustive Project Monitoring system which will facilitate the customer to validate the vendor’s Project Schedules and timelines, quantitatively.

    It uses comprehensive CMMI Level 5 approach to quantitatively manage the project. The EPMS is developed based on practical experience gained from performing concurrent, multi-baseline system development in both commercial development and in government contracting roles.

    Metrics information is collected from the vendor and is reviewed regularly by customer.

    Root causal analysis procedures, combined with system monitoring tools used in fault identification and diagnosis are used to address and prevent future occurrences of problems encountered during development and in the operational environment.

    Project Initiation

    Project Charter
    EPM will capture all the information mentioned in the Project Charter of the vendor such as

    Project Sponsor

    Project Purpose or Justification

    Project Scope

    Project Objectives and Success Criteria

    Assumptions and Constraints

    High-level Schedule and Budget

    Stakeholder list

    Project Manager Name

    Stakeholder list
    All information related to all the stakeholders of the project will be captured
    EPM will also provide for capturing the following data, which is maintained by CMMi L5 Vendors :

    Vendor Organization Goals

    Project Goals

    Estimation Techniques

    Matrices used by the Vendor Organization

    Process Performance Baselines of the Vendor Organization

    Process Performance Model of the Vendor Organization

    This data will be later on used in the Project execution and Monitoring and Controlling Phase

    Project Planning :

    Capture Project Plan and subsidiary Plans i.e.

    Communication management plan

    Cost management plan

    Process improvement plan

    Procurement management plan

    Project scope management plan

    Quality management plan

    Risk management plan

    Schedule management plan

    Staffing management plan

    And also the outputs of the planning i.e.

    Scope Baseline


    WBS Dictionary

    EPM will also provide for capturing the outputs of planning process i.e.

    Scope Baseline


    Activity List

    Milestone List

    Project Schedule(Schedule Baseline)

    Activity Resource Requirements

    Activity Duration Estimates

    Budget(Cost Baseline)

    Risk Register

    It will also help in validating the baselines, statistically, provided by the vendors.

    Project Executing & Monitoring

    EPM will take inputs from the vendors during the execution phase. This data will be used to produce status reports which will show the health of the project in terms of Cost, Schedule and Time.

    If the project is not moving in right direction the client can ask for the measures which the vendor will take to correct.

    These actions can then be validated , statistically, using “What if Analyses” and other techniques.

    Project Closure :

    EPM will take inputs from the vendors during the closing phase. This data on Project success and lessons learnt during the Project Execution, will help the client organization is selection process for future projects.

    Lessons learnt will help the client organization in avoiding the mistakes made during the execution of past projects.

    Ensure :

    Ensure and monitor that the company delivers the project with 95% confidence :

    on time,

    within budget,

    according to the client’s specifications,

    at a quality level that meets or exceeds expectations.

    Reporting and Alerting

    Empower users

    Power View

    Highly visual design experience

    Rich metadata-driven interactivity

    Presentation-ready at all times

    Increase Proactive Intelligence

    End User Alerting

    Defined from within operational or ad-hoc reports

    Intuitive Alert rules

    Self-managed Alerts

    XLS/Word 2007/2010

    Increase efficiency

    Enabled as Shared Service

    Built-in scale-out for RS Service Apps

    Cross-farm reporting

    Integrated backup & recovery, ULS logging, PowerShell etc.