CHAPTER- I

INTRODUCTION OF LOAN ACTIVITIES

INTRODUCTION:

Any amount borrowed or lent is called loan. If money is borrowed it is debt of business
ands if loan is given, it is receivable for the business.
Loan is a method of lending under which bank gives credit to a borrower for a fixed
period and for a specific purpose. Loan are promises for future payment, they have to be repaid
in periods beyond a year and are, therefore long term liabilities.
In other wards "when a banker makes an advances in a lump sum which can not be paid
wholly or partly and which the customer has permission to withdraw subsequently, it is called a
loan."
Profit is the pivot on which the entire business activity roates. Banking is essentially a
business dealing with money and credit. Like every other business activity. Banks are profit
oriented. A bank invests its funds in many ways to earn income. The bulk of its income is
derived from loans and advances.
Banks make loans and advances to traders, businessman and industrialist against the
security of some assets or on the basis of the personal security of the borrower. In either case, the
banks run the risk of default in repayment. Therefore, banks have to follow a cautions policy and
sound lending principles in the matter of lending. Banks in India have to consider the national
interest along with their own interest while determining the lending policy.
Many a time a borrower needs funds for fixed assets or non-respective type of activities
and thus seeks money from the bank that is withdrawn in one lump sum. The loan amount is
normally repaid in installments. Loan may be short-term, medium-term or long-term

pg. 1
pg. 2
NEED FOR THE STUDY

pg. 3
OBJECTIVES OF THE STUDY
The main objective is to know there is any change is possible in current or present banks
lending procedure of loan activities". The following are the objectives undertaken for the present
study titled loan activities are:

 To study different types of loans given by the bank.

 To study the procedure of loans and advances of the bank.
 The norms and conditions for sanctioning the loans are studied.
 To show total advances of the bank.
 The procedures for giving the loans and advances have been studied.

pg. 4
METHODOLOGY OF THE STUDY

The analysis of the project was based on the available information. Any information
about the topic is called the Data. The Data was gathered from various sources i.e., Primary and
Secondary sources.

Types of Data:
 Primary Data
 Secondary Data

Primary Data:
Any information that is collected a fresh and for the first time is called Primary Data. The
Primary Data happen to be original in characters. The information is gathered from concerned
employees. The employees and manager of the financial department have provided the
information needed for the study.

Secondary Data:
Information which has already been collected by somebody else (or) some other agency with
definite purpose and which has already been processed is called Secondary Data. The Secondary
Data for the study have been gathered from the “Rural credit in India”, loan and advances books,
manuals of the DCCB ltd and web sites.

pg. 5
LIMITATIONS OF THE STUDY

Every study is conducted under certain limitations. In this study the limitations
are:

 The study relates only to financial data and other areas are not taken in to consideration.
 The study is carried out only for a period of 2 months. It was not possible to get cent
percent correct information.
 The present study covers only for a period of five years. So the analysis will be made on
this basis.
 The research was made according to the information Available from related departments
and through annual report published.

pg. 6
FRAMEWORK OF THE STUDY:

pg. 7
 CHAPTER – II

BANKING SECTOR IN INDIA:

The banking sector reforms undertaken in India from 1992 onwards were basically
aimed at ensuring the safety and soundness of financial institutions and at the same time at
making the banking system strong, efficient, functionally diverse and competitive. The reforms
included measures for arresting the decline in productivity, efficiency and profitability of the
banking sector. Furthermore, it was reorganized that the Indian banking system should be in time
with international standards of capital adequacy, prudential regulations, and accounting and
disclosure standards. Financial soundness and consistent supervisory practices, as evident in our
level of compliance with the Basel committee’s core principles for effective banking supervision
have made our banking system resilient to global shocks.

India has not faced any major economic/financial crises, though in 1990-91, there was
some pressure on the external sector with the current account deficit and external debt servicing
reaching large proportions. However, due to prudent macroeconomic policies, it was possible to
return the country to a sustainable growth path. As well as the long history of regulation and
supervision, Indian banks have limited exposure to sensitive sectors such as real estate, equity,
etc, strict control over off-balance sheet activities, larger holdings of government bonds(which
helps limit credit risk), relativity well-diversified credit portfolios, statuary restrictions on
connected lending, adequate control over currency and maturity mismatches, etc, which has
insulted them from the adverse impact of financial crises and contagion. Banks in India have
played a significant role in the development of the Indian economy.

However, with the structural reforms initiated in the real economy from the early 1990s,
it was imperative that a vibrant and competitive financial system should be put in place to sustain
the ongoing process of reforms in the real sector. The financial sector reforms have provided the
necessary platform for the banking sector to operate on the basis of operational flexibility and
functional autonomy, there by enhancing efficiency, productivity and profitability. The reforms
also brought about structural changes in the financial sector and succeeded in easing external
constraints on its operation, introducing transparency in reporting procedures, restructuring and
recapitalizing banks and enhancing the competitive element in the market through the entry of

pg. 8
new banks. The ongoing revolution in information and communication technology has, however,
largely bypassed the Indian banking system given the low initial level go automation. The
competitive environment created by the financial sector reforms has nonetheless compelled the
banks to gradually adopt modern technology, albeit to a limited extent, to maintain their market
share. Banks continue to be the major financial intermediaries with a share of 64% of total
financial assets. However non-banking financial companies and development finance institutions
are also emerging as alternative sources of funding. In India foreign banks account for only
around 8% of the total assets of the banking system. Similarly conditions for accessing overseas
capital markets by domestic corporate have been stringent, in terms of size, maturity, price, etc.
The impact of the entry of foreign banks on domestic banks is likely to depend on various factors
such as the structure, strength and competitiveness of the domestic banks, the share of foreign
banks, and the regulatory/supervisory framework. While the entry of the foreign banks could
definitely improve the competitive environment, they are not likely to weaken domestic banks.
With better technology and expertise in offering special specialized banking products such as
derivatives, advisory services, trade finance, etc, the entry of foreign banks can enhance healthy
competition and has a appositive spillover effect on domestic banks. The domestic banks would
be under peer pressure to improve operational efficiency. It needs, however, to be recognized
that the banking system in India is quite competitive with the presence of public, private and
foreign banks. Thus the major forces for change in the Indian context have been the following.

- Consistent and strong regulatory and supervisory framework

- Structural reforms in the real and financial sectors
- Commitment to adopt and refine regulatory and supervisory standards on a par with
international best practices; and
- Competition from foreign banks and new-generation private sector banks.

The Indian banking sector is completely under the control of Reserve bank of India (RBI).

The central bank of the country is the Reserve bank of India (RBI).It was established in April
1935 with a share capital of Rs.5 crores on the basis of the recommendations of the Hilton young
commission. The share capital was divided into shares of Rs.100 each fully paid which was
entirely owned by the private shareholders in the beginning. Reserve bank of India was
nationalized in the year 1949.The general superintendence and direction of bank is entrusted to
pg. 9
central board of directors of 20 members, the Governor and four Deputy Governors, one
government official from the ministry of finance, 10 nominated directors from the government to
give representation to important elements in the economic life of the country, and four
nominated directors from the central government to represent the four local boards with the head
quarters of Mumbai, Kolkata, Chennai and New Delhi. The reserve bank of India Act; 1934 was
commenced on April 1, 1935.The Act, 1934(II of 1934) provides the statuary basis of the
functioning of the bank.

The Bank was constituted for the need of the following:

 To regulate the issues of bank notes

 To maintain reserves with a view to securing monetary stability and
 To operate the credit and currency system of the country to its advantage.

HISTORY OF INDIAN BANKING:

A bank is a financial institution that provides banking and other financial services. By the
term bank is generally understood an institution that holds a Banking Licenses. Banking Licenses
are granted by financial supervision authorities and provide rights to conduct the most
fundamental banking services such as accepting deposits and making loans. There are also
financial institutions that provide certain banking services without meeting the legal definition of
a bank, a so-called Non-Bank. Banks are a subset of the financial services industry.

The word bank is derived from the Italian banca, which is derived from German and
means bench. The term bankrupt and “broke” are similarly derived from banca rotta, which
refers to an out of business bank, having it bench physically broken. Moneylenders in Northern
Italy originally did business in open areas, or big open rooms, wit each lender working from his
own bench or table.

Typically, a bank generates profits from transaction fees on financial services or the
interest spread on resources it holds in trust for clients while paying them interest on the asset.
Development of banking industry in India followed below stated steps. Banking in India has its
origin as early as the Vedic Period. It is believed that the transaction from money lending to

pg. 10
banking must have occurred even before Manu, the great Hindu Jurist, who has devoted a section
of his work to deposits and advances and laid down rules relating to rates of interest.

Banking in India has an early origin where the indigenous bankers played a very
important role in lending money and financing foreign trade and commerce. During the days of
east India Company, was the turn of the agency houses to carry on the banking business. The
General bank of India was first Joint stock Bank to be established in the year 1786. The others
which followed were the Bank of Hindustan and Bengal Bank.

In the first half of the 19 th century the East India Company established three banks; the
bank of Bengal in 1809, the bank of Bombay in 1840 and the Bank of Madras in 1843. These
three banks are also known as presidency banks were amalgamated in 1920 and a new bank, the
Imperial bank of India was established in 1921. With the passing of the state bank of India Act in
1955 the undertaking of the Imperial bank of India was taken b the newly constituted state bank
of India.

The Reserve Bank of India which is the central bank was created in 1935 by passing
Reserve Bank of India Act, in 1934 which was followed up with the Banking regulations in
1949.These Acts bestowed Reserve Bank of India (RBI) with wide ranging powers for licensing,
supervision and control of banks. Considering the proliferation of week banks, RBI compulsory
merged many of them with stronger banks in 1969.

The three decades after nationalization saw a phenomenal expansion in the Geographical
coverage and financial spread of the financial system in the country. As certain rigidities and
weaknesses were found to have developed in the system, during the late eighties of the
government of India felt that these had to be addressed to enable the financial system to play its
role in ushering in a more efficient and competitive economy. Accordingly a high level
committee was asset up on 14th August 1991 to examine all aspects relating to the structure,
organization, functions and procedures of the financial system. Based on the recommendations of
the committee (Chairman: Shri M.Narasimham), a comprehensive reform of the banking system
was introduced in 1992-93. The objective of the reform measures was to ensure that the balance
sheets of banks reflected their actual financial health. One of the important measures related to
income recognition, asset classification and provisioning of banks, on the basis of objective
criteria was laid down by the Reserve Bank.
pg. 11
The introduction of capital adequacy norms in line with international standards has been another
important measure of the reforms process.

1. Comprises balance of expired loans, compensation and other bonds such as National
Rural Development Bonds and capital Investment bonds. Annuity certificates are
excluded.
2. These represent mainly non-negotiable non-interest bearing securities issued to
International Financial Institutions like International Monetary Fund, International Bank
for Reconstruction and development and Asian development Bank.
3. At Book value.
4. Comprises accruals under small savings scheme, provident funds, Special deposits on
Non-Government

In the post-nationalization era, no new private sector banks were allowed to be set up.
However, in 1993, in recognition of the need to introduce greater competition which could
lead to higher productivity and efficiency of the banking system, new private sector banks
were allowed to be set up in the Indian Banking system. These new banks had to satisfy
among others, the following minimum requirements.

It should be registered as a public related company;

The minimum paid-up capital should be Rs100 crore;

The shares should be listed on the stock exchange;

The headquarters of the bank should be preferably located in a centre which does not have
the headquarters of any other bank; and

The bank will be subject to prudential norms in respect of banking operations, accounting
and other policies as laid down by the RBI. It will have to achieve capital adequacy of eight
per cent from the very beginning.

A High level committee, under the Chairmanship of Shri M.Narasimham, was constituted
by the government of India in December 1997 to review the record of implementation of
financial system reforms recommended by the CFS in 1991 and chart the reforms necessary
in the years ahead to make the banking system stronger and better equipped to complete
pg. 12
effectively in international economic environment. The committee has submitted its report to
the government in April 1998.Some of the recommendations of the committee, on prudential
accounting norms, particularly in the areas of capital Adequacy Ratio, classification of
government guaranteed advances, provisioning requirements on standard advances and more
disclosures in the Balance Sheets of Banks have been accepted and implements. The other
recommendations are under consideration.

The banking industry in India is in a midst of transformation, thanks to the economic

liberalization of the country, which has changed business environment in the country. During
the pre-liberalization period, the industry was merely focusing on deposit mobilization and
branch expansion. But with liberalization, it found many of its advances under the non-
performing assets (NPA) list. More importantly, the sector has become very competitive with
the entry of many foreign and private sector banks. The face of banking is changing rapidly.
There is no doubt that banking sector reforms have improved the profitability, productivity
and efficiency of banks, but in the days ahead banks will have to prepare themselves to face
new challenges.

Indian Banking Sector:

Organized banking was active in India since the establishment of the General Bank of
India in 1786.After Independence, the Reserve Bank of India (RBI) was established as the
central bank and in 1955, the Imperial Bank of India, the biggest bank at the time, was taken
over by the government to form state-owned state bank of India (SBI). RBI had undertaken
an exercise to merge week banks to strong banks and the total number of banks thus reduced
from 566 in 1951 to 85 in 1969. With the objective of reaching out to masses and meeting the
credit needs of all sections of people, the government nationalized 14 large banks in 1969
followed by another 6 Banks in 1980. This period saw enormous growth in the number of
branches and the bank’s branch network became wide enough to reach the weakest sections
of the society in a vast country like India. Sib’s network of 9033 domestic branches and 48
overseas offices is considered to be one of the largest for any bank in the World.

The economic reforms unleashed by the government in early nineties included banking
sector too, to a significant extent. Entry of new private sector banks was permitted under
specific guidelines issued by RBI. A number of liberalization and de-regulation measures
pg. 13
 aimed at consolidation, efficiency, productivity, asset quality, capital adequacy and
profitability have been introduced by the RBI to bring Indian banks in line with International
best practices. With a view to giving the state owned banks operational flexibility and
functional autonomy, partial privatization has been authorized as a first step, enabling them
to dilute the stake of the government to 51 percent. The government further proposed, in the
union budget of the financial year 2000-01, to reduce its holding in nationalized banks to a
minimum of 33 per cent on a case by case basis.

The Banking system can broadly classified as organized and unorganized banking
system. The unorganized banking system comprises of moneylenders, indigenous bankers,
lending pawnbrokers, landlords, traders, etc. Whereas the organized banking system
comprise of Scheduled Banks and Non-Scheduled Banks that are permitted by RBI to
undertake banking business.

Indian Banking: Key Developments

 1969 government acquires ownership in major banks.

 Almost all operations are in manual mode.
 Some banks had unit record machines of IBM for IBR & pay roll 1970 – 1980
unprecedented expansion in geographical coverage, staff, business& transaction volumes
and directed lending to agriculture, SSI & SB sector.
 Manual systems struggle to handle exponential rise in transactional volumes—
 Outsourcing of data processing to service bureau begins.
 Back office systems only in multi national banks offices 1981 – 1990 Regulator(read
RBI) led IT introduction in banks .
 Product level automation on stand alone PCs at branches (ALPMs)
 In- house EDP infrastructure with UNIX boxes, batch processing in COBOL for MIS
 Main frames in corporate office.
 1991 – 1995 Expansion slows down.
 Banking sector reforms resulting in progressive de-regulation of banking, introduction of
prudential banking norms entry of new private sector banks.
 Total branch automation (TBA) in Govt. owned and old private banks begins.

pg. 14
  New private banks are setup with CBS/TBA form the start.
 1996 – 2000 New delivery channels like ATM, phone banking and internet banking and
convenience of any branch banking and auto sweep products introduced by new private
and MNC banks.
 Retail banking in focus, proliferation of credit cards.
 Govt. owned banks feel the heat and attempt to respond using intermediary technology,
TBA implementation surges ahead under fiat from Central Vigilance Commission
(CVC), Y2K threat consumes last two years.
 2000 -2003 Alternate delivery channels find wide consumer acceptance.
 IT Bill passed lending legal validity to electronic transactions.
 Govt. owned banks and old private banks start implementing CBSs, but initial attempts
face problems.
 Banks enter insurance launch debit cards.

Current scenario in Banking:

The banking industry in India is in a midst of transformation, thanks to the economic

liberalization of the country, which has changed business environment in the country. During the
pre-liberalization period, the industry was merely focusing on deposit mobilization and branch
expansion. But with liberalization, it found many of its advances under the non-performing
assets list. More importantly, the sector has become very competitive with the entry of many
foreign and private sector banks. The face of banking is changing rapidly. There is no doubt that
banking sector have improved the profitability, productivity and efficiency of banks, but in the
days ahead banks will have to prepare themselves to face new challenges.

For the first quarter ended June 2004, the banking sector recorded a bottom line growth
of 18% to Rs 4852crores. Higher net interest income and lower provisioning were the main
reasons for the profit growth during the quarter. However, the above results achieved despite
higher operating expenses and a lower rise in non-interest income. Among banks, public sector
banks out performed private sector banks by registering a 20% rise in net profit compared to an
11% growth reported by private sector banks. This was mainly due to a higher rise in other
income (OI) and a lower increase in operating expenses by public sector banks compared to a fall
in OI and higher operating expenses by private sector banks. However, at the net interest level,
pg. 15
private sector banks outperformed public sector banks by registering a growth of 36% compared
to a 14% rise reported by public sector banks.

The net interest income of the overall banking sector during the quarter rose 17% to Rs
11962.53crores.mainly due to low cost of funds. The interest earned rose 4% to Rs
29747.88crores, contributed mainly by interest income from core operations (i.e., lending). The
interest expenses decreased by 4% to RS 17785.35crores. The interest spread of most banks
witnessed an increase over the corresponding previous quarter, as the decline of yield on lending
was lower than the cost of funds. In the falling interest rate scenario, the rate on deposits for most
banks fell faster than advances. Thus, interest expenses came down faster to protect profit.

The sound economic growth, soft interest rate regime, upward migration of incomes and
wider distribution to cover a larger proportion of the population are expected to increase the
demand for retail loans in a significant manner. The retail credit as a percentage of GDP in India
is only around 5% as compared to levels of 30% - 50% in other Asian economies and, therefore
offer significant growth opportunities. Also, favorable demographic profile like 69% of the
population estimated to be under 35 years and an increase in upper middle/high income house
holds are to be the main drivers for retail credit. In the medium term, stronger demand for credit
from the corporate sector is also expected consequent to the resurgence of this sector. Earlier,
banks were seeing lower credit off take from corporate because of weak business sentiments and
lower credit requirement due to improved operational efficiency. Also, most banks are
aggressively augmenting their fee incomes and have embarked upon cross selling of products.
They are also focusing on fuller utilization of their IT investments such as ATMs by entering
into sharing arrangement with other banks to earn extra OI. Many banks are hopeful of effecting
significant NPA recoveries due to the securitization act.

The banking sector is poised to grow in line with the growth of the economy.
However, they are concerns that directed focus on lending to agriculture and SSI sector may
increase NPAs of banks. Further, volatility and a sharp fall in g-sec prices may lead to trading
losses or even depreciation provision for some banks, going forward.

pg. 16
Types of Banks:

1. Scheduled Banks:

Scheduled commercial banks are those that come under the purview of the second
schedule of Reserve bank of India (RBI) act, 1934. The banks that are included under this
schedule are those that satisfy the criteria laid down vide section 42(6 of the act).

The bank is dealing in banking in India only.

The paid up capital and total funds of the bank should not be less than five lakh rupees.

It should convince RBI that its activities would not be against the interest of investors.

The Bank must be:

State co-operative bank, or

A company according to the definition of the companies act 1956, or

An institution notified by the central government, or

A corporation or a company incorporated by or under any law in force in any place outside India.

Thus,

I. Indian commercial banks.

II. Foreign commercial banks, and
III. State cooperative banks fulfilling the above condition are considered as scheduled banks.

Moreover under the RBI act section 42, the central government has declared the following banks
as scheduled banks:

1) State bank of India and its seven subsidiary banks.

2) Twenty nationalized banks, and
3) Urban banks.

In June 1990 there were 149 scheduled banks which included:

I. Public sector banks

pg. 17
 II. Private sector banks,
III. Foreign exchange banks and
IV. State cooperative banks

A bank which wants to register its name as scheduled bank has apply to the central government.
On receiving such application, The central government orders RBI to investigate the bank’s
accounts. If RBI gives favorable reports .the central government sanctions its proposal, and the
bank is listed under schedule annexure II and is considered as a scheduled bank.

Some cooperative banks come under the category of scheduled commercial banks though not all
cooperative banks.

Public Sector Banks:

Public sector banks are those in which the government of India or the RBI is a majority
share holder. These banks include the State Bank of India (SBI) and its subsidiaries, other
nationalized banks, and Regional Rural banks (RRBs). Over 70% of the aggregate branches in
India are those of the public sector banks.

Some of the leading banks in this segment include:

I. Allahabad bank,
II. Canara bank,
III. Bank of Maharastra,
IV. Central bank of India,
V. Indian overseas bank,
VI. State bank of India,
VII. State bank of Patiala,
VIII. State bank of Bikaneer and Jaipur,
IX. State bank of Travancore,
X. Bank of Baroda,
XI. Bank of India,
XII. Oriental bank of commerce,
XIII. UCO bank,
XIV. Union bank of India,
pg. 18
XV. Dena bank and
XVI. Corporation bank.

Private sector banks:

Private Banks are essentially of two types:

1. Old banks and

2. New banks

The old private sector banks comprise those, which were operating before Banking
Nationalization act was passed in 1969. On account of their small size, and regional operations,
those banks are not nationalized. These banks faces intensive rivalry from the new private sector
banks and the foreign banks. The banks that are included in this segment include:

I. Bank of Madura Ltd. (Now a part of ICICI bank),

II. Bharat Overseas Bank Ltd,
III. Bank of Rajasthan,
IV. Karnataka bank Ltd,
V. Lord Krishna Bank Ltd,
VI. The Catholic Syrian Bank Ltd,
VII. The Dhanalakshmi Bank Ltd,
VIII. The Federal bank Ltd,
IX. The Jammu & Kashmir Bank Ltd,
X. The Karur Vysya Bank Ltd,
XI. The Lakshmi Vilas bank Ltd,
XII. The Nedugadi Bank Ltd,
XIII. Vysya Bank.

The new private sector banks were established when the banking regulation act was amended
in1993. Financial institutions promoted several of these banks. After the initial licenses, the RBI
has granted no more licenses. These banks are gearing up to face the foreign banks by focusing
on service and technology. Currently, these banks are on expansion spree, spreading into semi-
urban areas and satellite towns. The leading banks in this segment include:

pg. 19
 I. Bank of Punjab Ltd,
II. Centurion Bank Ltd,
III. Global Trust Bank Ltd,
IV. HDFC Bank Ltd,
V. ICICI banking corporation Ltd,
VI. IDBI Bank ltd,
VII. Indusind Bank Ltd,
VIII. UTI bank Ltd.

Co-Operative Banks:

Co-Operative banks act as substitutes for money lenders, and offer timely and adequate
short-term and long-term institutional credit at reasonable rates of interest. Co-Operative are
relatively similar in terms of function to the other banks except for the following:

They are organized and managed on the principal of co-operation, self-help, and mutual help.
They operate under the rule of “one member, one vote”.

Operate on “no profit, no loss” basis.

Co-Operative bank conducts all the main banking functions of deposit mobilization, supply of
credit and provision of remittance facilities. Co-Operative banks offer limited banking products
and are functionally specialists in agriculture-related products, and even in providing housing
loans of late. Urban Co-operative banks offer working capital loans and term loans as well.

Co-operative banks primarily operate in the agriculture and rural sector. However, UCBs, SCBs,
and CCBs function in semi urban, urban and metropolitan areas too

Co-operative banks are probably the first government sponsored, government-supported, and
government-subsidized financial agency in India. They get financial and other aid from the
Reserve Bank of India, NABARD, Central Government and state governments. They are the
“most favored” banking sector with risk of nationalization. Co-operative banks normally
concentrate on “high revenue” niche retail segments.

pg. 20
Development Banks

Development banks are primarily intended to encourage industrial development by

providing adequate flow of funds to industrial projects. In other words, these institutions
undertake the responsibility of aiding all-round development in the country’s economy by
promoting new industrial projects, and providing financial assistance for the expansion,
diversification ,and up gradation of the exiting units. Development banks may be classified as
All India development banks and regional development banks. While All India development
banks include Industrial Development Bank of India and Industrial Finance Corporation of India,
examples of Regional development banks include State Financial Corporation and State
Industrial Development Corporation.

Non-Scheduled Banks

The banks, which are not included in the second schedule of RBI Act, 1934, are known
as non-scheduled banks. Such banks total share capital is less than five lakh. These banks are not
governed according to the RBI Act and they receive no benefits from the RBI. These banks have
no place in the list of recognized banks of the RBI. These banks are not much trusted by the
people and they do not get handsome deposits. Since 1951 the numbers of such banks have been
gradually decreasing. In 1979 there were only five non-scheduled banks.

Generally now days we found many cooperative banks which are belongs to the non-schedule
co-operative banks. Following are the types of non-schedule banks they are work like the
schedule banks but here difference in its status and it not having the status of the schedule banks.

 Deposit Banks
 Cooperative Banks
 Central Banks
 Exchange Banks
 Investment or Industrial Banks
 Land Development Banks
 Savings Banks

pg. 21
(a)Deposit Banks

Generally, banks which provide short-term loans to business and industrial units and
which mobilize savings of people as deposits are called deposit banks. Deposit banks accept
deposits from people, and provide short-term advances. They provide overdraft and cash credit
facilities to merchants. To meet the long-term requirement of industrial units is not possible for
these banks. They accept three types of deposits-saving bank deposits, fixed deposits and current
account deposits. They accept these deposits which are payable on demand or on short notice,
and provide funds to trading and commercial units for short durations.

b) Co-operative banks:

Cooperative banks meet the short term financial needs of farmers. Agriculturists, petty
farmers and artisans organize themselves on cooperative principles and form operative societies
and banks. Cooperative banks raise funds through various means, besides receiving all kinds of
deposits to make them available as lend able funds to its members. In India developed
cooperative banks supply finance for agriculture and non-agriculture activities.

c) Central Banks:

A central bank is a institution which controls and regulates the entire banking structure
of country. It is also strives to maintain monetary stability of the country. Central bank is also
known as the apex bank of a country. Since it functions in the best interest of the country and
making profits is unknown to it, it is entrusted the right it issue currency notes. No other bank is
allowed this right. It operates in close cooperation with the government of implementing
economic policies, there by promoting economic development.

d) Exchange Banks:

There is a difference in financing of foreign trade and financing of internal trade.

Generally a person carrying on international trade requires foreign currencies to meet his
obligation. It is here that exchange banks play the role of financing the dealer for setting
transactions involved in foreign trade, there are specialized banks for exchange business. In
India, there is an Export-Import Bank (EXIM).

pg. 22
e) investment or Industrial Banks:

Investment banks provide long-term credit to industries. They raise their funds by
way of share capital, debentures, and long-term deposits from the public. They also raise funds
by issue of bonds for business operations and government agencies. Usually they underwrite
fresh issue of shares and debentures of companies. Such banks also buy the entire issue of new
securities of public limited companies and try to get them subscribed at a higher price by the
public.

f) Land Development Banks:

Land development banks were earlier known as land mortgage banks. In India,
there is limited number of such banks. There are special institutions providing long-term loans to
agricultures culture and formers. They provide loans on security of land and other immovable
properties. They supply long-term funds for periods exceeding six (6) years. Agricultures and
farmers need such funds for marketing permanent improvements to land and for buying farming
machinery and equipment.

g) Saving Banks:

Saving banks are specialized institutions, words such banks pool the small savings of
middle and lower income sections of society. They are the banks in the true sense of the term and
their main aim is to promote and collect of the public. Not only the depositors given interest, but
also there are allowed to withdraw in times of need. The numbers of withdrawal are, however,
restricted. Separate savings banks are organized in various nations. The government can also run
a savings bank. In India the postal department runs the postal saving bank all over the country. It
is very popular in rural area where no branches of established commercial bank operate. In urban
areas, commercial bank handles savings business which encourages general public to save
something from their earnings.

Private foreign banks in India:

Foreign banks in India always brought an explanation about the prompt services to
customers. After the set up foreign banks in India, the banking sector in India become also
competitive and accurate.

pg. 23
A new rule announced by the Reserve Bank of India for the Foreign banks in India in this budget
has put up great hopes among foreign banks which allow them to grow unfettered. Now Foreign
banks in India are permitted to set up local subsidiaries. The policy conveys that foreign banks in
India may not acquire Indian ones (except for weak banks identifies by the RBI, on its terms) and
their Indian subsidiaries will not be able to open branches freely. Please see the list of foreign
banks in India till date:

List of foreign banks in India:

 Abu Dhabi commercial bank

 ANZ Grind lays bank
 Bank of America
 Bank of Ceylon
 BNP
 Citi Bank
 China Trust Commercial bank
 HSBC
 Standard Chartered Bank
 Taib Bank
 Bank of Nova Scotia
 ABN- AMRO Bank
 Deutsche Bank
 JP Morgan chase bank
 Switzerlands_UBS

By the end of 2011, the list of foreign banks in India is going to become more quantitative as
numbers of foreign banks are still waiting with baggage to start business in India.

Few more names are going to be added in the list of foreign banks in India. This is as as
aftermath of the sudden interest shown by Reserve bank of India paving roadmap for foreign
banks in India greater freedom in India. Among them is the world’s largest private bank by
Euro Money Magazine, Switzerland’s UBS.

pg. 24
The following are the list of foreign banks going to setup business in India

 Royal Bank of Scotland

 US-based GE Capital
 Credit Suisse group
 Industrial and commercial bank of China

Merrill Lynch is having a joint venture in Indian investment banking space – DSP Merrill
Lynch. Goldman Sachs holds stakes in Kotak Mahindra arms.

GE Capital is also having a wide presence in consumer finance through GE Capital India. GDP
is seen growing at a robust pace of around 7% over the next few years, throwing up opportunities
for the banking sector to profit from.

The credit of banks has risen by over 25% in 2008 – 09 and the growth momentum is expected to
continue over the next four to five years.

pg. 25
 ORGANIZATION PROFILE OF ANDHRA PRADESH CO-OPERATIVE
CENTRAL BANK LTD (APCOB), HYDERABAD.

INTRODUCTION:

The Andhra Pradesh State Cooperative Bank Limited (APCOB) was formed by the
amalgamation of the Andhra State Cooperative Bank Ltd., Vijayawada and the Hyderabad
Cooperative Apex Bank Limited, Hyderabad under the Andhra Pradesh State Cooperative Bank
(Formation Act 1963)(Act 12 of 1963).  Later, under Single Window Credit Delivery System,
the Andhra Pradesh Cooperative Central Agricultural Development Bank Limited, Hyderabad
merged with the Andhra Pradesh State Cooperative Bank Limited i.e.  30.4.1994. APCOB is also
a leading Scheduled Bank in the State with class audit classification and it is also Government
partnered bank.

The Andhra Pradesh State Cooperative Bank Limited (APCOB) is a Scheduled State Cooprative
Bank for the State of Andhra Pradesh.The Bank is committed to agricultural and rural
development through the Cooperatives. The cooperative credit system in Andhra Pradesh with
the APCOB at its apex level is a federal system consisting of a family of 22 affiliated District
Cooperative Central Banks (DCCBs), which in turn, have 557 Branches and 2748 Primary
Agricultural Cooperative Societies (PACS) through which, developmental agricultural credit is
provided, to serve a sizeable chunk of the total membership of the PACS of around 1.5 crores.

The APCOB and affiliate credit structure in Andhra Pradesh showcase a unique experiment of
Single Window Credit Delivery System, as a first of its kind in the country under which, both
investment and production credit for agriculture is provided at the grass root level through a
single agency. The PACS at village level has been modelled as a one stop shop for the farmer for
availing of varied short, medium and long term loans both under production and investment
credit, input requirements, produce storage facilities, essential commodities, banking and other
rural

pg. 26
APCOB has also a network of 26 branches in the twin cities of Hyderabad and Secunderabad and
one Head Office Main Branch as also a Branch each at Tirupathi and Vijayawada meeting the
exclusive needs of the urban clientele.

In tune with it's main focus, the APCOB, through the DCCBs and PACS, provides re-finance
support for agricultural production credit for seasonal agricultural opertions (crop loans),
investment credit for investments in agriculture for Minor Irrigation, Farm Mechanisation, Land
Development, Horticulture, Dairy, Poultry, Fisheries and other diversified investments and allied
activities. In times of natural calamities, the Bank provides credit stabilisation arrangements by
way of conversion, rephasement, postponement and reschedulement of agricultural loans. Credit
to the weavers Sector through Primary Handloom and Silk Weavers Credit Societies, as also
financing to the Apex Weavers Society is another important portfolio through which rural
development is fostered. Loans to Employees Credit Societies is also extended to provide timely
financial support to employees of various organisations mainly through the DCCBs. This apart,
the Bank finances Industrial Cooperatives and agro-processing industries in the cooperative fold
like Sugar Factories, Spinning Mills, Milk Unions and Dairy Federation

As a part of it's commitment towards rural development, the Bank provides assistance for
programmes under Swarna Jayanthi Gram Swayamrozgar Yojana (SGSY earlier known as
IRDP), Non Farm Sector finance for self employment programmes in the rural and semi-urban
areas, micro-credit through Self Help Groups, Youth Associations and Women's Groups.

The Bank extends financial support to Apex Cooperative Federations like MARKFED, APCO,
FEDCON etc. It has also been providing direct finance to small and medium industries and agro-
based units.

The Bank offers a host of facilities to its urban clientele. These include, Banking facilities under
attractive deposit schemes, safe deposit lockers, Clean & Secured Overdrafts, Consumer Durable
Loans, Vehicle Loans, Gold Loans, Housing Loans, Real Estate Mortgage Loans and a host of
other services

pg. 27
VARIOUS STAGES OF APCOB STRUCTURE:

APCOB Computer Department is headed by General Manager [IT]

supported by Dy General Manager [IT], Two Asst General Manager [IT] and 8 System
Administrators and One staff Assistant.   The Computer Department will monitor, support the
Centralised Data Base of APCOB on Core Banking Solution (CBS) & monitor the
implementation of DCCB and PACS Computerisation. Present status of implementation of
Computerization at various stages of Cooperative Credit Structure in the State is as follows: 

1. APCOB (State Level):

 APCOB has computerized all its operations on a ‘CORE BANKING SOLUTION’ (CBS)
by bringing all the Branch Network Connected thro’ WAN, covering all modules like
deposits, loans, clearing, lockers, depreciation, investments, stationery, audit reports,
ALM and NPA’s etc. during the year 2002-03.
 The core banking solution facilitates Centralised operations like centralised
Administration, centralised clearing, centralised day begin and day end, centralised
interest application and centralised/consolidated financial reports along with the facility
of ATM’s, Inter Branch Transactions (IBT) and Any Branch Banking (ABB) operations.
 The Banking Application Software was implemented in all the 26 Branches (including
two outstation branches at Vijayawada and Tirupathi) and Head Office branch and
working under WAN.
 In order to be competitive and afford better customer services, ATMs were installed,
taking the advantage of ‘Centralised Banking Solution’. One “Drive up ATM” was
installed at Head Office initially and the network was expanded to various locations in
twin cities and also to Vijayawada and Tirupathi to provide better facilities to Customers.
Process for expansion of ATM network is going on and ATM switch software was
installed and so far 13 ATMs were installed. ATMs at new premises of Tarnaka and
Champapet branches will be installed shortly.

pg. 28
2. DCCBs (District Level)

 The Andhra Pradesh State Cooperative Bank Limited (APCOB), being the leader of the
Cooperative Credit Structure in the State of Andhra Pradesh, has taken a decision to
implement “Core Banking Solution” (CBS) on behalf of the 22 District Cooperative
Central Banks (DCCBs) with their 557 branches at different locations in the respective
districts in the State, with a centralized data centre at Hyderabad, using the state of art,
cutting edge, leading technology for their core banking activities, to achieve speedy
service to its clientele enabling APCOB-DCCBs in effective monitoring and management
of the banking services and operations.
 As per the decision of State Level Steering Committee constituted on DCCB
computerization, process of selection of data entry agency was commenced in 1 set of
seven DCC Banks. Other works relating to decision on data centre, networking aspects
etc are also under process.
 The implementing agency has also completed the field study in some selected DCC
Banks and submitted the ‘System Requirement Study’ and Gap analysis reports.
 Data Entry templates were also finalised and 7 DCCBs under Phase I the data entry
agency was also finalised. Training to the selected data entry agency and also for the core
team members of concerned 7 DCCBs regarding data entry screens, preparedness,
troubleshooting etc was also given.
 Finalisation of hardware for end users at DCCB has been completed and DCC Banks
under phase I will be advised to commence action for procurement of hardware for the
project at DCCB level

3.PACS (Village Level)

The Government of Andhra Pradesh vide GO.Ms.No.458, dt.20.11.2008 approved for

“Transformation of PACS   through IT enabled Financial inclusion” with the entire investment
free of cost of the project and on revenue sharing model with Primary Agriculture Cooperative
Societies (PACS) by M/s. Cooption Technologies Ltd., Hyderabad under” Sahakara Pragathi
Project”

pg. 29
DISTRICT CO-OPERATIVE CENTRAL BANK NETWORK:

In Andhrapradesh there are total 23 District co-operative central banks are

located. They are:

1. ADILABAD DCCB

2. ANANTAPUR DCCB

3. CUDDAPAH DCCB

4. CHITTOOR DCCB

5. GUNTUR DCCB

6. KRISHNA DCCB

7. KHAMMAM DCCB

8. KARIMNAGAR DCCB

9. KURNOOL DCCB

10. MAHABUBNAGAR DCCB

11. MEDAK DCCB

12. NALGONDA DCCB

13. NIZAMABAD DCCB

14. PRAKASAM DCCB

15. EAST GODAVARI DCCB

16. WEST GODAVARI DCCB

pg. 30
17. WARANGAL DCCB

18. RANGAREDDY DCCB

19. NELLORE DCCB

20. PRAKASAM DCCB

21. VISAKHAPATNAM DCCB

22. VIZIANAGARAM DCCB

23. SRIKAKULAM DCCB

pg. 31
 COMPANY PROFILE

DISTRICT CO-OPERATIVE CENTRAL BANK LTD (VIZIANAGARAM)

COMPANY PROFILE:

The vizianagaram district co-operative central bank was established in the year 1916,
February 9. First it was established in madras as named as co-operative union and later it was
changed as Vizagapatam.

After that co-operative union and Vizagapatam both are combined to form vizianagaram co-
operative banking union. It was established in the year 1916, november16.on that day onwards
the banking functions will be started. In the year 1928, Nov the bank was renamed as “The
vizianagaram District co-operative central bank”.

In Nov1928, VZM DCCB spreads their entire functions from Vishakhapatnam district
Payakrapeta to Ganjam district in Orissa state. Orissa state was formed in the year 1936, April
1.Ganjam district is moved in to Orissa state. Again vzm DCCB change their functional activities
from VSP district Payakrapeta to Ichapuram.

The Vzm DCCB main function to provide agriculture loans to every farmer. It is very difficult
task to give loans to farmer.later, srikakulam DCCB was formed in the year 1931 dec31.

Later the state Andhra Pradesh government announced that every district contains one DCCB &
that orders will be issued. On issue of that orders, the total 27 DCCBs converted in to 22
DCCBS.In the year 1981, Nov 11 VSP DCCB was formed.

In the year 1984 july1 the VZM DCCB was follows in the huge losses. On 31-3-2004 every one
says that the bank will be closed but unfortunately the bank again got profits and the working
capital is 1,58,17,973 crores.After that the bank profits, the state government will be released
38.95 crores to vzm DCCB.BR ACT 1949 Sec11 is one of the reason the bank economy is
getting the losses.

The late Prime Minister Pandit Jawaharlal Nehru says that,

“Co-operatives are stepping for politics”

pg. 32
VISION AND MISSION OF DCCB BANK LTD.

VISION: RURAL PROSPERITY

The Cooperative banks in India started functioning almost 100 years ago. These
banks were conceived as substitutes for money lenders, to provide timely and adequate short-
term and long-term institutional credit at reasonable rates of interest. We are moving ahead with
a vision “RURAL PROSPERITY” and dedication to serve the rural masses, the deprived and
denied, retail and agriculture sectors through improved processes to uplift and for the
development of the rural community.

We feel that the exponential growth of Cooperative Banks in India is attributed mainly to their
much better local reach, personal interaction with customers, their ability to catch the nerve of
the local people/clients with a effort to create a new type of institution based on the principles of
co-operative organization and management, suitable for problems peculiar to local conditions

MISSION

“To cater to the Agricultural and non-agricultural credit needs of the farmers of the district
for sustainable development of rural economy and also to render banking services to the rural as
well as urban community.”

FUNCTIONS OF DISRICT CO-OPERATIVE CENTRAL BANK:

1. To mobilize the savings of the members & non members.

2. To supply the credit requirements of primaries &individuals.

3. To raise funds from RBI, Government & other financial institutions.

4. To act as a balancing centre

5. To supervise & inspect the working of societies.

6. To develop banking habits & banking facilities in rural areas.

7. To undertake usual banking operations like acceptance of deposits.

pg. 33
8. To finance short term loans or seasonal agricultural operations, purchase of agricultural
implements, marketing of crops, processing of agricultural produce, industrial purpose,
consumption purpose etc…

9.To extend medium-term loans for sinking of or repairs of wells, purchase of machinery for
irrigation, purchase of cattle, minor improvements to lands and other purposes.

DCCB BRANCHES IN VIZIANAGARAM

There are total 14 DCCB branches are located in vizianagaram district.

1. Bobbili

2. Salur

3. Seethanagram

4. V.T.Agraharam

5. Gantyada

6. Garividi

7. S.Kota

8. Gajapathinagaram

9. Parvathipuram

10. Kothavalasa

11. Therlam

12. Poosapatirega

13 Nellimarla

14Cheepurapalli

pg. 34
No of Primary Agricultural Co-operative’s (PACS) In VZM DCCB

There are total 15 DCCB branches are located in vzm district. Each branch contains
some number of PACS’:

DCCB BRANCHES IN VZM No of PACS

Bobbili 6
Salur 14
Seethanagram 11
V.T.Agraharam 4
Gantyada 4
Garividi 5
S.Kota 4
Kothavalasa 3
Parvathipuram 12
Gajapathinagaram 6
Therlam 7
Poosapatirega 6
Nellimarla 7
Cheepurapalli 6
Total no of PACS 95

ORGANIZATION STRUCTURE OF THE BANK:-

General Manager (CEO)

pg. 35
 Deputy General Manager

Assistant General Managers

Managers

Assistant managers

Staff assistants

Messengers

Special category assistants

SERVICES OF DCCB:

The loan portfolio of DCCB covers Crop Loans, Medium Term Loans and Long Term
Loans for Agricultural purposes. Substantial support is being extended to the Government-
sponsored District Rural Development Agency projects through IRDP Loans and also to
pg. 36
Cooperative Sugar Factories, Spinning Mills, Weavers Societies, Employees Cooperative Credit
SocietiesandotherSocieties.

DCCB is also extending finance to many Apex Cooperative institutions in the State like APCO,
MARKFED,GCCetc
DCCB provides all types of banking facilities to its customers through attractive deposit schemes
as also various types of loans for its urban clientele through its own branch network.

GRUHALAKSHMI DEPOSIT:
This is a cumulative term deposit scheme under which money multiplies faster to a yield
targeted amount for the customer as per the deposit period convenient to him.

CASH CERTIFICATE:
This is a cumulative deposit scheme under which interest is accumulated to the principal
deposit amount and lumpsum paid at the end of the investment period. Customers can encash
sizeable amounts by investing small amounts initially. Ideally suited to customers saving for a
targetted purpose for the future.

RECURRING DEPOSIT:
Under this scheme, the customer can save small amount in monthly instalments for a
fixed term to get back a lumpsum. Interest is accumulated on the principal over the saving period
at attractive rates of interest.

OTHER SPECIAL DEPOSIT SCHEME:

The Bank is offering a host of other special deposit schemes to suit the savings needs of
its customers like APCOB Special Deposit Scheme-500 (10.00%) and 10.50% for Senior
Citizens and Special Tax Saver Deposit Scheme (7.75%).

pg. 37
LOAN SCHEMES:

The Bank offers the following attractive loan schemes to individuals who are its customers.

 CLEAN OVERDRAFT:
Overdrafts on Current Accounts are provided to the customer’s up to five times
their net salary against a simple surety of employees/employers undertaking.

 SECURED OVERDRAFT:
Secured overdrafts on current accounts are provided to customers against the

Security of National Saving Certificates, Kisan Vikas Patras, as also against the security

Of urban immovable property.

 GOLD LOANS:

Customers can avail of Gold Loans against pledge of gold ornaments at all branches

Of the Bank.

 CONSUMER DURABLE LOANS:

The Bank provides loans for purchase of consumer durables to its customers for

buying of items like TV, Refrigerator, Air Conditioners and a host of other consumer

Durables.

 EDUCATION LOANS:

Under the Vidya Vikas Vardhini Scheme, the Bank is providing loans to

Students/parents of students for pursuing professional courses like Engineering, medicine

pg. 38
 Computer Education and other courses including technical courses/job oriented courses.

The loan is repayable at attractive rate of interest and easy repayment period

 TRADERS FINANCE:

Loans are provided to wholesale/retail traders and businessmen engaged in trade

Activity for running their business on furnishing of collateral security and on pledge of

Stocks.This facility is extended in the nature of cash credit limit for facilitating continues

Operation based on the day-to-day business needs.

 HOUSING FINANCE:

The Bank offers attractive Housing Loan Scheme both for construction or purchase

of a new house/flat as also for purposes of reapirs and extension to existing house.

Comfortable repayment period for the loan is provided. REAL ESTATE MORTGAGE

LOAN Loan facility is provided against mortgage of fixed assets/property for purchase of

house, house construction, house repairs, business, higher studies, and health care, at

attractive rates of interest and comfortable repayment period.

OTHER SERVICES:-

 FUND TRANSFER AND DEMAND DRAFTS:

The Bank arranges transmission of funds of it' s customers to locations at every nook

And corner of the country by it's various transfer mechanism as also issuance of Demand
pg. 39
 Drafts at low commission rates.

 COLLECTION OF CHEQUES AND BILLS:

The Bank undertakes the collection of local and outstation cheques and bills for a
nominal fee.

 SAFE DEPOSIT LOCKERS:

Safe Deposit Lockers are available at all branches of the Bank of various sizes
to suit the needs of different customers. An exclusive safe deposit vault with more than
1000 lockers is provided at the centrally located Narayanaguda Branch of the Bank.

EMPLOYEES POSITION IN VZM DCCB AS ON 31-1-2011:

S.no Designation No of employees

1. General Manager (CEO) 1
2. Deputy General Manager 1
3. Assistant General Managers 3
4. Managers 18
5. Assistant managers 25
6. Staff assistants 18
7. Messengers 25
8. Special category assistants 44
Total 136
AWARDS & ACHIEVEMENTS:

 Best Performance Awardee among State Co-operative Banks for 1998-99.

 Second Best Performance Award Winner among the State Co-operative Banks for 1999-
2000.
 Most profitable State Co-operative Bank award for the year 2001-2002 and special award
winner for the year 2001-2003.
 First in the country in the distribution of Co-operative Kisan Credit Cards achieving a
target of 90% of borrowing members.

pg. 40
  State Level Best performance Award for Kharif 2005 lendings instituted by Govt. of AP
was awarded to the Bank on 15.1.2006.

CHAPTER- III

THEORITICAL FRAME WORK: LOAN ACTIVITIES

INTRODUCTION OF LOANS AND ADVANCES;

Any amount borrowed or lent is called loan. If money is borrowed it is debt of business
ands if loan is given, it is receivable for the business.

pg. 41
 Loan is a method of lending under which bank gives credit to a borrower for a fixed
period and for a specific purpose. Loan are promises for future payment, they have to be repaid
in periods beyond a year and are, therefore long term liabilities.

In other wards "when a banker makes an advances in a lump sum which can not be paid
wholly or partly and which the customer has permission to withdraw subsequently, it is called a
loan."

Profit is the pivot on which the entire business activity roates. Banking is
essentially a business dealing with money and credit. Like every other business activity. Banks
are profit oriented. A bank invests its funds in many ways to earn income. The bulk of its income
is derived from loans and advances.

Banks make loans and advances to traders, businessman and industrialist against the
security of some assets or on the basis of the personal security of the borrower. In either case, the
banks run the risk of default in repayment. Therefore, banks have to follow a cautions policy and
sound lending principles in the matter of lending. Banks in India have to consider the national
interest along with their own interest while determining the lending policy.

Many a time a borrower needs funds for fixed assets or non-respective type of activities
and thus seeks money from the bank that is withdrawn in one lump sum. The loan amount is
normally repaid in installments. Loan may be short-term, medium-term or long-term.

 Principles of sound lending:-

Traditionally, banks have been following three principles of lending viz.

safety, liquidity and profitability. Banks in India have shouldered additional

responsibility of fulfilling social obligations. Hence, the bank observes both the

traditional and certain other principles

Safety: -

pg. 42
 A bank leads what it receives from the public as deposits. The success of the bank
depends upon the confidence of the depositing public. Confidence Could be infused in the
depositors by investing the money in safe and sound Securities.

Safety depends upon

(1) The security offered by the borrower, and

(2) The repaying capacity and willingness of the debtor to repay the loan with interest.

So the banker should ensure that the security offered is adequate and readily releasable and the
borrower is a person of integrity good character and reputation.

Liquidity: -

Liquidity refers to the ability of assets to convert into cash without loss Within short time.
The liabilities of a bank are repayable on demand or at Short notice. To meet the demand of the
depositors in time, the banks should Keep its funds in liquid state. Money locked up in long term
loans such as Land, building, plants, machinery, etc., can not be received back in time and so
less liquid.

Profitability: -

Like all other commercial institutions banks are run for profit. Even government owned
banks are no exception to this. Banks earn profit to pay interest to depositors, declared dividends
to shareholders, meet establishment charges and other expenses, provide for reserve and for bad
and doubtful debts, depreciation, maintenance and improvements of property owned by the bank
and sufficient resources to meet contingent loss. So profit is an essential consideration.

Security: -

Customers may offer different kinds of securities viz., land, building, machinery, goods and
raw materials to get advances. The securities of the customers are insurance and bankers can fall

pg. 43
back upon than in times of necessity. Securities which could be marketed easily, quickly and
without less should be preferred.

Purpose of the loans: -

Before sanctioning loans a banker should enquire about the purpose for which it is
needed. Loans for undesirable activities such as speculation and hoarding should be discouraged.
Banks readily allow borrowings for productive purposes. It is also equally important on the part
of banks to insure that a loan is utilised for the proposed for which it is granted so that repayment
will be prompt.

Proposed of the loan has assumed a special significance in the present day concept of
banking it is equally important to insure that the loan is utilised for the proposed for which it is a
granted.

Sources of Repayment: -

Before giving financial accommodation, a banker should consider the source from which
repayment is promised.

Diversification of risk: -

The security conciseness of a banker and the integrity of the borrower are not adequate
factors to keep the bankers on safe side, what is more important is the diversification of risk. So
that a bank should follow wise-policy for 'do not lay all the eggs in the same basket.' The bank
must advance moderate sums to a large number of customers spread over a wide area and
belonging to different industries.

Receipt concept of sound lending: -

A sound credit is one where timely repayment is assumed. This largely depends on the
earning power of the business units and the repaying capacity of the borrower. So great emphasis
is laid on the productivity of the loan. Since the banks have shouldered an additional
responsibility of keeping the tempo of development of the economy they should consider the
productivity of loan as the chief criterion for advancing loan.

pg. 44
Types or Forms of advances: -

Bank offers different types of borrowing facilities to their customers. The credit facilities
may be broadly classified into four types.

1> Loans,

2> Cash Credit System,

3> Overdraft,

4> Bills Purchased and Discounted.

These can be discussing in brief as follows.

1. LOANS:-

In case of loans, the banker advances a lump sum for a certain period at an agreed rate of
interest. The entire amount is paid on an occasion either in cash or by credit in his current
account, which he can draw at any time. The interest is charged for the full amount sanctioned
whether he withdraws the money from his account or not. The loan may be repaid in installments
or at the expiry of a certain period. The loan may be made with or without security. A loan once
repaid in full or in part cannot be withdraw again by the customer. In case a borrower wants
further loan, he has to arrange for a fresh loan.

Loan may be a demand loan or a term loan. Demand loan is payable on demand. It is for
a short period and usually granted to meet working capital needs of the borrower. Term loans
may be medium term or long term loan. Medium term loans are granted for a period ranging
from one year to five years for the purchased of vehicles, tractors, tools and equipment's. Long
term loans are granted for capital expenditure such as purchase of land, construction of factory
building, purchase of new machinery and modernization of plants etc.,

Advantages of Loan System: -

 Financial discipline on the Borrower :-

pg. 45
 As the time of repayment of the loan or its instalments is fixed in advances, this
system ensures a greater degree of self-discipline on the borrower as compared to the
cash credit system.

 Periodic Review of Local Account: -

Whenever any loan is granted or its renewal is sanctioned the banker gets an
opportunity of automatically reviewing the loan account. Unsatisfactory loan accounts
may be discontinued at the discretion of the banker.

 Profitability:-
The system is comparatively simple. Interest accrues to the bank on the entire amount
lent to a customer

Drawbacks/ Limitations: -

 Inflexibility: -Every time a loan is required, it is to be negotiated with the banker. To

avoid it, borrowers may borrow in excess of their exact requirements to provide for any
contingency.
 Banks have not control over the use of funds borrowed by the customer. However, banks
insist on hypothecation of the assets/ vehicle purchased with loan amount.
 Though the loans are for fixed periods, but in practice they roll over, i.e., they are
renewed frequently.
 Loan documentation is more comprehensive as compared to each credit system

TYPES OF LOANS: -

pg. 46
 Banks grant loans for different periods- shorts, medium and long, for different propose.
Broadly, the loans granted by banks are classified follows:-

BANK LOANS

Short Medium & Bridge Consumption

Term Loans Long Terms Composite Loans

Loans Loans

Short term loans: -

Short-term loans are granted to meet the working capital needs of the borrowers.
These loans are granted against the security of tangible assets mainly the movable asset like
goods and commodity shares, debentures etc. Since April 1995 RBI has made it mandatory for
the banks to grant a portion of bank credit to big customers in the form of loans, which may be
for various maturities. The reserve bank has also permitted the banks to roll over such loans, i.e.
to extend the loan for another period at the expiry of the tenor of the first loan.

Term loans: -

Term loans are given for medical and loan periods, and loans are used for acquiring
fixed assets or for modernization and expansion of existing units. They may also be used for
working capital requirements. An important feature of term loans is the felt that they are
repayable in yearly or half-yearly installments over a period of time. Payment is to be made
according to a specified schedule, extending up to 15 years, which imposes a sort of financial
discipline on the borrowing concern. The amortization gradually starts 2 to 3 years after the

pg. 47
sanction of the loan. Together with the normal interest, a commitment charge of one per cent per
annum is also levied on the utilized portion of loan. The basic point in term lending is that the
borrower should utilize the amount in such a way as to repay the loan as well as the interest
accruing thereon from the anticipated income earned by the use of that loan itself. This is the
reason why before allowing a term credit, the banker evaluates the technical and economics
viability of the project for which the loan is sought and also the repaying capacity of the
borrowing concern.

Bridge loans: -

Bridge loans are essentially short-term loans, which are granted to industrial
undertaking to meet their urgent and essential needs during the period when formalities for
availing of the term loans sanctioned by financial institutions are being fulfilled or necessary
steps are being taken to raise the capital market. These loans are granted by financial institutions
themselves and are automatically repaid out of amount of the term loans or the funds raised in
the capital market.

In April 1995 RBI banned bridge loans granted by banks and bank permitted the
banks to sanction bridge loans/ interim finance against commitment mad by a financial
institution faces temporary liquidity constraint subject to the following conditions:

1. The prior consent of the other bank / financial institution which has sanctioned a term loan
must be obtained.
2. The term lending bank / financial institution must give commitment to permit the amount of
the term to the bank concerned.
3. The period of such bridge loans should not exceed four months.
4. No extension of time for repayment of bridge loan will be allowed.
5. To ensure that bridge loan sanctioned is utilized for the purpose for which the term loans has
been sanctioned.

Composite loans:-

pg. 48
 When a loan is granted both for buying capital assets and for working capital
purposes, it is called a composite loan. Such loans are usually granted to small borrowers, such
as artisans, farmers, small industries etc

Consumption loan:

Though normally banks provide loans for productive purposes only, but as an
exception loans are also granted on a limited scale to meet the medical needs or the educational
expenses or expenses relating to marriages and other social ceremonies etc. of the needy persons.
Such loans are called consumption loans.

 Classification of loans and advances: secured and unsecured:

The loans granted by banks are broadly classified into two categories:

- Secured loans.
- Unsecured loans.
According to section 5(a) of banking regulation act, 1949, a secured loan or
advances means a loan or advances made on the security of assets, the market value0 of which is
not at any time less than the amount of such loan or advances, and unsecured loan or advances
means a loan or advances not so secured. Thus the distinguishing of the secured loan or advances
are as follows:

1. The loan must be made on the security of tangible assets, like goods and commodities, land
and buildings, gold and silver, corporate and government securities etc. A charge on any such
assets offered as security must be created in favor of the banker.
2. The market value of such security must not be less than the amount of the loan at any time
till the loan is repaid. If the farmer falls below the latter because of decline in the market
prices, the loan is considering as partly secured.

The distinction between secured and unsecured loans is made on the basis of legal title or
charge created in favour of the lender. Under the traditional principles of lending, the borrowing
capacity of the person is judged on the basis of the tangible assets in the possession of the
pg. 49
borrower, i.e. the larger is the creditworthiness of a borrower, if larger is the value of his
tangible assets. However, it should not be understood that unsecured loans, also called clean
loans and advances, are granted to persons without observing the abovementioned criterion of
creditworthiness. In fact, unsecured loans are also granted to persons of sufficient means,
possessing tangible assets and with sound financial position, but no charge or right is created on
any such assets of the borrower in favour of the banker.

In case of secured advances, the legal status of the banker is that of a secured creditor; he
gets the first and absolute right to recover his dues out of the sale proceeds of the assets over
which a charge is created in favour of the banker.

2. CASH CREDIT SYSTEM: -

Cash credit is one of the most important methods of lending in India. Under this method,
the banker fixes a limit for a customer, called the cash credit limit. The limit is generally
specified after taking into account the important features of the borrowing concern, for example,
production, sales, inventory, past credit limits etc. The customer is allowed to withdraw money
from cash credit account according to his requirements. Similarly he may deposit money in the
account as and when surplus funds are available with him. The cash credit account is, thus, an
active and running account to which deposits and withdraws may be effected frequently. But the
customer has to provide tangible assets as security for the amount borrowed from the banker.
The interest is charged on the actual amount utilised by the customer and it is calculated only for
the period of actual utilisation only.

Advantages of Cash Credit System: -

 Flexibility: -
The borrower need not keep their surplus funds idle with themselves. They can recycle
the funds quite efficiently and can minimise interest charges by depositing all cash accruals in
the bank account and thus keeping the drawls at the minimum level. The system thus ensures
lesser cost of funds to the borrowers and better turnover of mind for the banks.

 Operative convenience: -

pg. 50
 Banks have to maintain one account for all the transactions of a customer. The repetitive
documentation can be avoid

Weakness of the system: -

 Fixation of Credit limits: -

The cash credit limits are prescribed once in a year. Hence it gives rise to the practice of
fixing large limits than is required for most part of the year. The borrowers misutilise the
unutilised gap in times of credit restraint.

 Bank's inability to verify the end use of funds: -

Under this system the stress in on security aspect. Hence there is no conscious effort on
the part of banks to verify the end use of funds. Funds are diverted, without banker's knowledge,
to unapproved purposes.

 Lack of proper management of funds: -

Under this system the level of advances in a bank is determined not by how much the
banker can lend at a particular time but by the borrower's decision to borrow at that time. The
system therefore does not encourage proper management of the funds by banks.

These weaknesses of the cash credit system were highlighted by a number of committees
appointed for this purpose in India. Guidelines have been issued by the Reserve Bank for
reforming the cash credit system on the basis of recommendations of the Tandon Committee
and Chore Committee.

3. OVERDRAFTS: -

Overdraft is an arrangement between a banker and his customer by which the latter is
allowed to withdraw over and above his credit balance in the current account upto an agreed
limit. This is only a temporary accommodation usually granted against securities. The borrower
is permitted to draw and repay any number of times, provided the total amount overdrawn does
not exceed the agreed limit. The interest is charged only for the whole amount sanctioned.

pg. 51
 A cash credit differs from an overdraft in one respect. Businessman in doing regular
business whereas overdraft is made occasionally and for short duration uses a cash credit for
long term.

Temporary Overdraft: -

Banks, sometimes, grant unsecured overdraft for small amount to customers having
current account with them. Such customers may be government employees with fixed income or
traders. Temporary overdrafts are permitted only where reliable source of funds is available to a
borrower for repayment.

4. BILLS DISCOUNTED AND PURCHASED: -

Banks grant advances to their customers by discounting bill of exchange or

promote. The amount, after deducting the interest from the amount of the instrument, is created
in the account of the customer. In this form of lending, the banker receives the interest in
advance. Discounting of bill constitutes a clean advance and banks rely on the credit worthiness
of the parties to the bill.

Banks, sometimes, purchase the bills instead of discounting them. The bankers purchase bills,
which are accompanied by documents of title to goods such as bills of landing or railway receipt.
In such cases, the banker grants loans in the form of overdraft or cash credit against the security
of the bills. The term 'Bills Purchased' seems to imply that the bank becomes the purchaser/
owner of such bills. But in almost all cases the bank holds the bill only as a security for the
advances.

Advantages of Discounting of Bills: -

1. Safety of bank funds: -

A banker is primarily concerned with the safety of the funds he lends. Through the
banker does not get charge over any tangible assets in case of discounting of bills, legal
instrument bearing signatures of two parties considered good for the amount of the bill. The
banker can enforce his claim much more easily in the case of bills. If the acceptor of the bill
fails to make payment on its due date, the drawer has the remedy to claim the whole amount

pg. 52
from his customer, the drawer of the bill. In case the bill is dishonored, the banker debts amount
to his customers account and send him intimation. Thus, the banker is fully confidence of
recovering his money on the due date. To be on the safer side a banker should discount bills of
exchange offered by parties of standing and good reputation.

2. Certainty of payment: -

A bill of exchange is considered and ideal self-liquidating assets because it originates

from an actual commercial transaction and the debtor meets the obligation to pay by disposing
of the goods acquired from the creditor within a short period of time. As the Bill of Exchange
matures within a 'short period of time' the banker recovers his money on the due date with
certainty. The bills are therefore, called 'semi-liquid' assets. As the banker known in advance the
dates on which the discounted bills will mature, he can invest his funds in such a way that the
same are profitably utilised to the maximum extent, without unnecessarily maintaining large
cash balances. Thus, a banker is able to maximise his profit without taking any undue risk.

3. Facility of Refinance: -

When a banker is in need of funds, he can secure accommodation from the central bank
of country on the basis of eligible securities including the bills is counted. The bills can also be
rediscounted with the central bank or any other bank/ financial institution and thus the need for
cash balances can be met more easily and quickly.

4. Stability in the value of the bill: -

The value of the bills as a security does not fluctuate while the value of all-tangible goods
and securities is liable to fluctuations. The amount payable on account of a bill is fixed and the
acceptor or the drawer is liable to pay the same in full. As the bill is a legally enforceable
instrument, neither of these parties can subsequently dispute the validity of the banker's claim.
These parties may be summarily sued for the payment of the amount of the bill.

5. Profitability: -

While discounting the bills the banker deducts interest from the amount of the bill. In
case of other types of loan and advances, interest is payable by the debtor quarterly or half-

pg. 53
yearly. Thus, the yield from discounting of bills is a title higher, if the rate of interest or discount
remains the same as in the case of other loans, for example, if a bill of exchange for Rs. 1,000/-
payable after 3 months is discounted @ 6 per cent per annum, the banker pays Rs. 985 (Rs.
1,000-Rs. 15). The actual yield thus comes to 6.38 per cent per annum.

PROCEDURE OF LOANS: -

1. Bank's for all types of loan's necessary application from are printed. In this borrower or
customer is required to fill out the loan application form printed by the bank. Which seeks
comprehensive information about the loans. Specially the loan application form concerns all
the detail is the borrower.

2. All the loan application form fully fill up forms and other related papers are accepted in
branch office of the bank.
3. In branch office all the application firms are scrutinize and to know if it is completed or not
by loan department officer. If the application is not completed then asked to borrower to give
necessary information about the loans and other relevant.

4. In branch level, "flash report" or "office" report can be prepared and for its sanction purpose
manger recommendation letter is written and after that the loan file or office report and
managers recommendation letters are presented in administration's office.

5. In administration office it will be presented in "Loan committee" of The SUTEX Co-

operative bank meet every Tuesday and four times in a month. In "Loan Committee" it can
be rescrutinize or recheck and it will be presented in "Board meeting" for its sanction
purpose.

6. After that to call party and take share application form's money, Document's charges, and
after that to sign and stamp can be done to the loan application

7. After that if it is essential, lawyer's help and valuare's report can be taken.
pg. 54
8. After stamp and sign, it can be return to branch from where it comes. All the paper's and files
are given to branch office.

9. In branch office, payment of loan can be done who is sanctioned. In administrative office and
take entry in computer to open its account and field all the detail related with the loans.

10. After all, how many months' loans can be accepted and when the installment of loan is
started related with it a letter can be given to party or borrower.
Various loans Schemes:-

The bank providing various loan are as follows:-

► Vehicle Loan,
► Machinery Loan,
► Education Loan,
► Consumer Loan,
► Staff Loan,
► Clean Loan,
► Finance for Profession Person,
► Housing Loan,
► Fixed Deposit Loan,
► NSC/ KVP Loan,
► Purchased Bill Discounting Limit
These can be describing as follows: -

1. Vehicle Loan: -

The vehicle loan is provided to customer by purchased a two-wheeler vehicle or

four wheeler vehicles. This loan is providing to individual, partner ship, and proprietorship
private limited company. The bank provides a loan before all papers clear with a 24 hours

pg. 55
sanction a loan. 75% of an original price of vehicle to provide customer and the maximum period
of loan is 60 months. The bank for its security to collected by customer property documents.

Limit:

Maximum limit in Rs. 75% of an original price of vehicle.

Rate of interest:-

Upto 2,00,000/- 12.00%

Between 2,00,000/- to 4,00,000/- 12.50%

Above 4,00,000/ 13.00%

Margin: -

For two wheeler 20%

For three wheeler 30%

For two wheeler 15%

Security:-

The bank for its security to collected by customer property documents.

Requirements for vehicle loans:-

 All basic documents,

 Evident of shareholder,
 Invoice of purchasing vehicle etc.
2 Machinery Loan: -

This loan provides to purchase Machinery. New Machinery purchase and hand old
machinery valuation loan. The machinery loan provides to partnership firm, proprietorship firm
etc.

pg. 56
 Bank provides different machinery loans according to business requirements and
different margins.

Limit: -

1. New Machinery : - 80% of quotation

2. Old Machinery :- (1) 70% of valuation of valuare committee member's valuation

who is Textile Machinery Degree Holder.

(2) 70 % of other approved machinery.

In machinery loan bank accepts pre and post inspection. In present maximum advances
or loans amount is Rs. 425 crore.

Rate of interest:-

Particular Int.
Rate
Machinery Loan

(Factory Type, CC and Working Capital)

Upto 5,00,000/- 12.50%

Between 5,00,000/- to 15,00,000/- 13.00%

Above 15,00,000/- 13.50%

Margin: -

When dept equity ratio is 2:1 then 20%on loan amount.

Stamp: -
pg. 57
 It is necessary to stamp at 0.20% of hypothecation loan amount. In this mostly upto Rs. 1,
00,000/- stamp is involves.

Time period:-

-72 to 73 installment

Bank grants mostly 6 years installment in this loan. In this 6 months Moratorium Periods
are included.

Security:-

-3lacks then 1 surety

-Above 3lacks 2 surety

The bank for its security to collected by customer property documents

Documents required for loans: -

i> Income proof (with other income),

ii> Quotation of machinery,
iii> One surety upto Rs.3,00,000/- and two surety beyond
Rs. 3, 00,000/-,

iv> Factory proof,

v> Electric Bills,
vi> Registered Certificate,
vii> C.S.T./G.S.T./S.S.I. number/ senvate Registration Certificate,
viii> If having old machinery then its receipt of bill,
ix> Additional Security if having more amount.
Most of advances or loans of bank are in machinery. In which mostly in Textile
Machinery's. It is biggest risk of bank liquidity position.

All the loan application of machinery is sanction by 'Loan Committee'. In this applicant
does not presence. In present bank adopts Technology Upgradation Fund (T.U.F.) Scheme.

In machinery loan the bank prepares the following documents: -

pg. 58
 i> Loan Paper,
ii> Surety Letter,
iii> Promissory Note,
iv> Declaration,
v> Equitable Mortgage if necessary,
vi> If does not have member then Share Application Form,
3 Education Loan: -

Education loan is a better facility to student of higher study in India or Foreign. The bank
provided a loan according to student parent's income. The rate of loan is different in India and
Foreign. This loan is providing after standard 12 th. This facility is good facility to student who
wants to study more.

Now a day's bank gives education loan for higher study. In this bank gives loan as
follows: -

Limit: -

 For study in India, maximum Rs. 8,00,000/- is given,

 Out of India (foreign) study, maximum Rs. 10,00,000/- (including air ticket) is given.
Rate of interest:-

(A) In India: -

Up to Rs. 2, 00,000/- 7%

Between Rs. 2,00,000/- 10%

(B) For Foreign: to Rs. 5,00,000/- -

After 12th Standard 10%

course

Upto Rs. 5, 00,000/- 10%

Between Rs. 5, 00,000/- to Rs. 10, 00,000/- 12%

pg. 59
 After 12th Standard course 12%

Margin: -

In this scheme bank take 10% as margin and 5% loans amount taken.

Security:-

In this bank take as securities are as follows:-

(i) Property of applicant,

(ii) Government Security,
(iii) Its fixed deposit,
L.I.C. policy etc.

If more than Rs. 5,00,000/- given as a loan then take one property mortgage and 25% of
loans amounts LIC policy is assign to bank.

Requirements for education loans:-

In this the following documents are required: -

 Application form printed by the bank,

 Bio-data of applicant,
 Marksheet of last exam,
 Copy of admission form of institution where they want to study and detail of its expenses, if
they want to study in foreign then copy of I-20.

4 Consumer Loan: -

This loan is providing to purchase daily used items in house. Banks this types of loans
involves different types of instruments like daily use of house is Television, Refrigerator, Gas,
Telephone, Computer, Furniture, Video, Washing Machine, Truck, Auto Rickshaw, Tempo, Car,
Scooter etc. The bank providing a loan according to price. Banks margin for all these are as
follows: -

Limit:-
pg. 60
 i> 80% of the quotation of Television, Refrigerator, Gas, Telephone, Computer,
Furniture, Video, Washing Machine etc.
ii> 85% of the quotation of Truck, Auto Rickshaw, Tempo, Car, Scooter etc.
Rate of Interest:-

Particular Int. Rate

Consumer Loan 12.50%

Security:
For this types of loan bank takes security for scooter loans Rs. 500/- and for car loan Rs.
5000/-. It gives to customer after receiving R.T.O. book, insurance policy and bills receipts.

Time period:- 50 installment

Margin:-

30% of loan amount

Documents Required for the Loan:-

 Income Proof,
 Proof of place where vehicles are park,
 One surety who have properties,
 Quotation,
 All the documents or details if previously any types of loans are taken,
Other necessary information.If applicant purchase any instruments within the 6 months then
bank grants above margin. Only 'Loan Committee' has right of acceptance of loan. Then after for
final selection purpose it presented in the board meeting. When bank wants any additional
securities in that case ask for customer after some time for it.
For these purpose the following documents prepared by the bank:

i> Promissory Notes (with Revenue Stamp),

ii> Loan Paper,
iii> Surety Paper,

pg. 61
 iv> Undertaking (if have),
v> If board member is not then nominal member/ share application form
For this types of loans bank gives share of 2.5% of loans amount (excluding case of
consumer loan).

5 Staff Loan: -

This loan provided only bank staff. The loan is provided low rate of interest and loan
margin is also favor of staff. This loan is provided related to employee salary. This loan is more
benefit to staff. This loan is only provided staff to self-use.

Rate of Interest:-

Particular Int. Rate

Staff loan 6.00%

Margin:-

-For officer clerk 25,000/-

-for sub-staff 20,000/-

-Manager 30,000/-

Documents Required for the Loan:-

All basic documents

 Income Proof,
 Proof of place where vehicles are park,
 One surety who have properties,
 Quotation,
 All the documents or details if previously any types of loans are taken,
 Other necessary information.
pg. 62
6 clean loan: -

Personal individual loan is called Clean Loan. The rate of interest is @ 14.00% per
annum. This loan providing only individual person, to use personal work.

Limit:-

The loan gets maximum Rs. 45,000/-.

Rate of Interest:-

Particular Int. Rate

Clean loan 14.00%

Time Period:-

-50 installments

Documents Required for the Loan:-

 Income Proof,
 Proof of place where vehicles are park,
 One surety who have properties,
 Quotation,
 All the documents or details if previously any types of loans are taken,
 Other necessary information.
7 NSC (National Saving Certificate) Loan: -

Reserve Bank of India suggested to co-operative bank that bank take 25% margin
on National Saving Certificate and does not take interest on margin. In this way upto 75% of
loans granted by the bank.

For this applicant gives application in proper form and with this copy of N.S.C., income
proof and residence proof given in the banks. Bank grants 75% of NSCs face value.

pg. 63
Limit:-

75% of N.S.C./ K.V.P. Face value

Rate of Interest:-

Particular Int. Rate

N.S.C./K.V.P. LOAN 9.50%

Stamp:-50.00 Rs.

Margin:- 25% on investment

Security:- All the basic documents of N.S.C./K.V.P.

Time Period:--36 installments

Documents Required for the Loan:-

i> Loan Agreement,

ii> Promissory Notes,
In this scheme at branch level, branch manager have power to accept upto Rs.
25,000/- loans. After its acceptance bank takes its Leyan Mark in NSC through applicant
in post office and give loans after receiving original certificate and receipts and if more
than Rs. 25,000/- than power of acceptance or sanction of it is in the hand of
administrative office, manager credit and CEO (Chief Executive Officer) and after its
acceptance it gives return to branch office and after this it presented in board for its
acceptance.

In this scheme interest Rate is at 9.5%.

In this bank gives maximum 36 installments facility to customer.

8 Limits on Stock: -

pg. 64
 For requirements of working capital in business bank gives cash credit facilities.
For cash credit facilities the following documents are required: -

Limit:-

Rate of Interest:-

Particular Int. Rate

Documents Required for the Loan:-

i> Banks have different types of form for limit on stock. In this three years income
proof, proof of place where good are stored, if registration is related to business then
G.S.T./C.S.T./S.S.I. number/ Senvet Registration Certificate, last stock statement of
the firm etc.
ii> Generally banks gives 70% of loan on stock to their customers or applicants and take
30% as margin. Bank takes additional security if it's required or necessary.
iii> All the limits on stock accepted in "Loan Committee". It is generally a year only. It
is receivable in one year.
In stock on limit the following documents are prepared: -

i> Hypothecation deed of stock/ with Machinery Security Letter,

ii> Promissory Notes,
iii> Letter of continuing Security,
iv> Surety Letter,
v> Contract of C.C. Account,
vi> Declation.
Before giving loan bank first take inspection of stock.

In this types of loan applicant have to give stock statement in 1 st to 5th date in the
month. On the basis of it bank increase or decrease in its drawing power. Limit was
fixed, but drawing power is changing one or changeable.
pg. 65
9 SURETY LOAN: -

Surety loan is included in unsecured advances. According to rules & regulation any
banks having demand and time liabilities of less than Rs. 50 Crore than upto Rs. 25,000/- more
than 50 crore then upto Rs. 50,000/- are given as a self guarantee. According to this, ' The
SUTEX Co-operative Bank Ltd.' grants upto Rs. 45,000/- as a self-guarantee.

Objective of these types of loans:-

For business purpose,

i> For house repairing,

ii> For social work,
iii> For furniture etc.,
Limit:-

According to rules & regulation any banks have demand and time liabilities of less than Rs.
50 Crore than up to Rs. 25,000/- more than 50 crore then upto Rs. 50,000/- are given as a self
guarantee. According to this, ' The SUTEX Co-operative Bank Ltd.' grants up to Rs. 45,000/- as
a self-guarantee.

For all these bank grants up to Rs. 45,000/- as loans.

Rate of Interest:-

Particular Int. Rate

Surety loan

Stamp:-

Up to Rs. 45,000/- loans the following documents charges take by the bank.

i> Promissory Note (with Revenue Stamp) Rs. 1.00

pg. 66
ii> Loan Paper Rs. 110.00

iii> Surety Paper Rs. 60.00

iv> Undertaking (if having) Rs. 50.00

Documents Required for the Loan:-

i> Last two years income proof,

ii> Residence proof,
iii> All the details of taking previously any types of loan in the bank,
iv> Business's /Service's proof,
v> Copy of surety's city survey & tax receipts etc,
vi> Acceptance proof of objects for which loans are demanded.
iv> If board member is not than nominal member/ Share Application
Form.

Bank's all self-guarantee unsecured loans or advances do not increase 33*1/3% on

total DTL

8. Housing loan:-

Housing loan provide to a purchase a house, flats, shop, office or building. The loan
providing individual, partnership, proprietorship, private ltd. co. to customer etc.

Limit:-

-Less than 50 crore then 5 lacks

-Above 50 crore then 10 lacks

Rate of Interest:-

Particular Int. Rate

pg. 67
 Housing loan:-

For Staff member:-

As per rules 6.00%

For general public:-

Upto Rs 3,00,000/- 12.25%

Above Rs 3,00,000/- 14.00%

Margin:-

The margin of loan is 50% of valuation

Security:-

All original documents to present bank and after bank providing loan

Time Period:-

The period of loan is more than 10 years. and 25% of installment.

Documents Required for the Loan:-

i> Last two years income proof,

ii> Residence proof,
iii> All the details of taking previously any types of loan in the bank,
iv> Business's /Service's proof,
v> Copy of surety's city survey & tax receipts etc,
vi> Acceptance proof of objects for which loans are demanded.
v> If board member is not than nominal member/ Share Application Form.

9.) FFP (Finance for Professional Person) Loan: -

pg. 68
 FFP Loan is Finance for Professional Person. A person with the professional degree
and engaged in that professional independently. For example, Doctor, Architects, Chartered
Accountants etc. this loan providing an individual, firm/ limited company. For the purpose a
professional be eligible for the finance for purchased land, building, furniture, vehicle,
professional equipment's for the purposes of professional. In this scheme no penalty for
premature repayment of the loan. In this scheme no other charges than the interest charges.

Rate of Interest:-

Particular Int. Rate

F.F.P. Loan 12.25%

Margin:-The margin is 15% on cost price.

Security:--Degree papers of applicant.

Time Period:-

The maximum period is normally 72 months, but depending on the project longer period
can be considered.

Documents Required for the Loan:-

 All basic documents of loan.

 Last two years income proof,
 Residence proof,
 All the details of taking previously any types of loan in the bank,
 Business's /Service's proof,
 Copy of surety's city survey & tax receipts etc,
 Acceptance proof of objects for which loans are demanded.
 If board member is not than nominal member/ Share Application Form

pg. 69
 Year loans Total

short Medium Long Individuals Cash

Term Term Term & Credits
institutions

2005 - 06 43.94 - 3.15 26.09 17.96 47.54

2006 - 07 54.68 0.02 2.41 0.31 0.06 57.48

2007 - 08 41.16 - 1.58 0.37 0.16 43.27

2008 - 09 55.94 0.53 1.40 0.92 0.07 58.86

2009 - 10 111.85 - 7.26 6.85 1.85 127.81

Table 4.1:
Total loans issued during the years 2005 – 10 under various categories

Rs in Crores

pg. 70
120

100

80

loans short Term

loans Medium Term
60 loans Long Term
loans Individuals &
institutions
loans Cash Credits
40

20

0
2005 - 06 2006 - 07 2007 - 08 2008 - 09 2009 - 10

pg. 71
Table 4.2:
Issue of Total Loans

Rs in Crores

Year Total Loans Percentage of growth

2005 – 06 47.54 -

2006 – 07 57.48 20.93

2007 – 08 43.27 -24.72

2008 – 09 58.86 36.23

2009 - 10 127.81 117.00

pg. 72
140

120

100

80

60
Total Loans
Percentage of growth
40

20

0
2005 – 06 2006 – 07 2007 – 08 2008 – 09 2009 - 10

-20

-40

pg. 73
Table 4.3:

Total Loans

Rs in Crores

Year Total Claim Percentage of Growth

2005 – 06 165.01 -

2006 – 07 185.00 0.121

2007 – 08 182.92 -0.011

2008 - 09 196.59 0.074

2009 - 10 245.38 0.248

pg. 74
140

120

100

80

60

Total Loans
40 Percentage of growth

20

0
2005 – 06 2006 – 07 2007 – 08 2008 – 09 2009 - 10

-20

-40

pg. 75
Table 4.4:
Loans Under Short Term Category

Rs in Crores

Year Total Claim Percentage of Growth

2005 – 06 109.46 -

2006 – 07 132.00 20.59

2007 – 08 130.00 -1.51

2008 – 09 149.50 15

2009 - 10 197.90 32.37

pg. 76
140

120

100

80

60
Total Loans
Percentage of growth
40

20

0
2005 – 06 2006 – 07 2007 – 08 2008 – 09 2009 - 10

-20

-40

pg. 77
Table 4.5:
loans under Medium term Category

Rs in Crores

Year Total Claim Percentage of Growth

2005 – 06 20.16 -

2006 – 07 19.30 -4.26

2007 – 08 18.66 -3.31

2008 – 09 18.53 -0.69

2009 - 10 17.83 -3.77

pg. 78
140

120

100

80

60
Total Loans
Percentage of growth
40

20

0
2005 – 06 2006 – 07 2007 – 08 2008 – 09 2009 - 10

-20

-40

pg. 79
Table 4.6:
Loans under Long Term Category

Rs in Crores

Year Total Claim Percentage of Growth

2005 – 06 29.55 -

2006 – 07 30 1.52

2007 – 08 30.84 2.8

2008 – 09 24.80 -19.58

2009 - 10 18.15 -26.81

pg. 80
140

120

100

80

60
Total Loans
Percentage of growth
40

20

0
2005 – 06 2006 – 07 2007 – 08 2008 – 09 2009 - 10

-20

-40

pg. 81
Table 4.7:
Loans under Individuals & Institutions Category

Rs in Crores

Year Total Claim Percentage of Growth

2005 – 06 2.58 -

2006 – 07 1.72 -0.33

2007 – 08 1.32 -0.23

2008 – 09 1.64 0.24

2009 - 10 7.63 3.65

pg. 82
140

120

100

80

60
Total Loans
Percentage of growth
40

20

0
2005 – 06 2006 – 07 2007 – 08 2008 – 09 2009 - 10

-20

-40

pg. 83
Table 4.8:
Loans under Cash Credits Category

Rs in Crores

Year Total Claim Percentage of Growth

2005 – 06 3.26 -

2006 – 07 1.98
- 0.392
2007 – 08 2.10 0.606

2008 – 09 2.12 .0095

2009 - 10 3.87 .825

pg. 84
140

120

100

80

60
Total Loans
Percentage of growth
40

20

0
2005 – 06 2006 – 07 2007 – 08 2008 – 09 2009 - 10

-20

-40

pg. 85
Table 4.9:
Statement showing branch-wise details of Kariff & Rabi dismounts 2006-07:-

(Rs in lakhs)

Name of the Khariff 2006-07 Rabi 2006-07 Total (2006-07)

branch
Target Achievement Target Achievement Target Achievement

Bobbili 300.00 102.16 100.00 177.71 400.00 279.87

S.kota 350.00 152.18 100.00 215.61 450.00 367.79
Cheepurapalli 100.00 139.16 50.00 121.59 150.00 260.75
Parvatipuram 550.00 465.63 300.00 453.76 850.00 919.39
Gajapatinagaram 200.00 125.69 100.00 124.81 300.00 250.50
Salur 400.00 245.17 150.00 243.81 550.00 488.98
Baljipeta 100.00 50.89 50.00 63.05 150.00 113.94
Therlam 200.00 139.85 150.00 163.99 350.00 303.84
Garividi 200.00 143.89 50.00 91.86 250.00 235.75
V.T. Agraharam 150.00 89.00 50.00 125.23 200.00 214.23
Kothavalasa 100.00 66.23 50.00 86.17 150.00 152.40
Gantyada 150.00 93.23 100.00 111.30 250.00 204.53
Nellimarala 250.00 156.16 100.00 238.49 350.00 394.65
Seethanagaram 300.00 216.30 100.00 316.72 400.00 533.02
Poosapati rega 150.00 79.54 50.00 84.85 200.00 164.39

Total 3500.00 2265.08 1500.00 2618.95 5000.00 4884.03

pg. 86
Table 4.10:

Statement showing branch-wise details of Kariff & Rabi dismounts 2007-08:-

(Rs in lakhs)

Name of the Khariff 2007-08 Rabi 2007-08 Total (2007-08)

branch Target Achievement Target Achievement Target Achievement

Bobbili 200.00 144.68 300.00 54.40 500.00 199.08

S.kota 200.00 149.38 300.00 12.22 500.00 161.60
Cheepurapalli 100.00 199.19 150.00 2.17 250.00 201.36
Parvatipuram 600.00 828.12 500.00 113.82 1100.00 941.94
Gajapatinagaram 150.00 139.69 200.00 350.00 139.69
Salur 250.00 260.39 300.00 550.00 260.39
Therlam 200.00 268.23 200.00 61.62 400.00 329.85
Garividi 150.00 194.48 150.00 300.00 194.48
V.T. Agraharam 200.00 149.40 200.00 18.62 400.00 168.02
Kothavalasa 50.00 48.86 150.00 200.00 48.86
Gantyada 100.00 74.82 100.00 19.29 200.00 94.11
Nellimarala 250.00 275.89 300.00 35.10 550.00 310.99
Seethanagaram 250.00 272.58 300.00 140.10 550.00 412.68
Poosapati rega 100.00 125.43 150.00 9.40 250.00 134.83

Total 2800.00 3131.14 3300.00 471.74 6100.00 3602.88

pg. 87
Table 4.10:

Statement showing branch-wise details of Kariff & Rabi dismounts 2008-09:-

(Rs in lakhs)

Name of the Khariff 2008-09 Rabi 2008-09 Total (2008-09)

branch Target Achievement Target Achievement Target Achievement

Bobbili 50.00 21.87 100.00 447.51 150.00 469.38

S.kota 200.00 149.38 300.00 12.22 500.00 161.60
Cheepurapalli 100.00 199.19 150.00 2.17 250.00 201.36
Parvatipuram 600.00 828.12 500.00 113.82 1100.00 941.94
Gajapatinagaram 150.00 139.69 200.00 350.00 139.69
Salur 250.00 260.39 300.00 550.00 260.39
Therlam 200.00 268.23 200.00 61.62 400.00 329.85
Garividi 150.00 194.48 150.00 300.00 194.48
V.T. Agraharam 200.00 149.40 200.00 18.62 400.00 168.02
Kothavalasa 50.00 48.86 150.00 200.00 48.86
Gantyada 100.00 74.82 100.00 19.29 200.00 94.11
Nellimarala 250.00 275.89 300.00 35.10 550.00 310.99
Seethanagaram 250.00 272.58 300.00 140.10 550.00 412.68
Poosapati rega 100.00 125.43 150.00 9.40 250.00 134.83

Total 2800.00 3131.14 3300.00 471.74 6100.00 3602.88

pg. 88