CHAPTER 1 Introduction of Co-operative Bank




Meaning of Bank: -

Bank is one type of Organization, which is related with monetary activity. They collect money from one class of economy and give to the other class of economy. It means they collect deposit from people and give them to the needy people as advances. In funny language you can say, “Banking means my mind and other peoples money” In short Bank perform the function of Exchange of money. Types of Banking Institution: In India, there are two part of Banking: 1 2 Organized Department: Unorganized Department: First part is latest which include Indian Joint Stock Company, Foreign Exchange Bank, Co-operative Banks, Land Mortgage Banks, Postal Savings Bank, SBI and RBI. On the other hand, Second part include shrafi Firm, Shrof, etc. Today organized money market is about more then 60%


Meaning of Co-operative Bank: -

A co-operative is an autonomous association of persons united voluntarily to meet their common economic, social and cultural needs and aspirations through jointly – owned and democratically controlled enterprise.


Co-operatives are based on the values of self-responsibility, democracy, equality and solidarity. In the tradition of their founders, co-operative members believe in the ethical values of honesty, openness, social responsibility and carrying for others. Unlike commercial banks, which are occupied in the helping, the industrial and commercial sectors of the economy, the co-operative Banks on the other hand provide credit and other associated facilities to the rural and agricultural sectors. In World, Co-operative activity was stated in December 1844 in Britan. Social development is the sole aim of co-operative activity. Co-operative societies came in to begin when the co-operative societies Act-1904, was enacted. A co-operative society is the society of voluntary and organized group of individuals. The movement was started with the aim of providing farmer funds with low rate of interest. So that, exploitation by the village money lenders in hindered. Under the Banking Regulation Act of 1904, co-operative banks have been brought under the control of Reserve Bank Of India (RBI). In India, co-operative activity was started in 1889.the noble ideals like unity, similarity, honesty, loyalty and mutual co-operation etc. are the base of Cooperative activity. In India, co-operative society Act was enacted in 1904. In 1909,Jambusar Urban co-operative Bank was first established under this act. Then in 1925, new co-operative society Act was come. Before then there was seven cooperative Banks in the Gujarat.


The activity of urban co-operative Banking was to extraordinary developed in the latter half 20th century. There is two reason of this. Banking regulation Act 1949 was apply to the co-operative Bank in 1966. At that time there was only 400 Urban co-operative Bank in the whole country. Then in 1969, nationalization of 14 large business banks was become in the country. Today in our country, there are about 1400 urban co-operative Bank providing service in area of villages and cities.


Principal of Co-operative Bank: -

The basic principles of co-operation are as follows: 1 Voluntary and open Membership: ––

Co-operatives Banks are voluntary organizations, open to all persons able to use their services and willing to accept the responsibilities of membership, without gender, social, racial, political or religious discrimination. 2 Democratic Member Control: ––

Co-operative Banks are democratic organizations controlled by their members, who actively participate in setting their policies and making decision, men and women serving as elected. Member representatives are accountable to the membership. In primary co-operatives members have equal voting right (one member, one vote) and co-operative at other levels are organized in a democratic manner. 3 Member Economic Participation: ––

Members Contribute equitably to and democratically control the capital of their co-operative. At least part of the capital is usually the common properly of the co-operative. Members usually receive limited compensation, if any, (4)

on capital subscribed as condition of membership. Members allocated surpluses for any of the following purposes: developing their co-operative, possibly by setting up reserves, part of which at least would be indivisible, benefiting members in proportions to their transactions with the cooperative, and supporting other activities approved by the membership. 4 Autonomy and Independence: ––

Co-operatives Banks are autonomous, self-help organizations controlled by their members. If they either into agreements with other organizations, includes governments to raise capital from external sources, they do so in terms that ensure democratic control by their members and maintain their co-operative autonomy. 5 Education, Training and Information: ––

Co-operatives Banks provide Education and Training for their members, elected representatives, managers and employees so that they can contribute e4ffectively to the development of their Co-operatives. They inform the general public–– particularly young people and opinion leaders–– about the nature and benefit of Co-operation. 6 Co-operation among Co-operatives: ––

Co-operatives Banks serve their members most effectively and strengthen the Co-operative movement by working together through local, national, regional and international structures. 7 Concern for community: ––

Co-operative work for the sustainable development of their communities through policies approved by their members.



Three tire Structure of Co-operative Bank in India: -

(1) Primary Co-operative credit society: Primary credit society is at the bottom of three-tier structure of co-operative Banks. The society normally associates farmers. So only few people living within the area of society are admitted as members, here individual of a precise area meet together stimulated by sentiment, feeling, emotion of co-operation. Every member has to pay his share in a share capital. (2) District Co-operative Bank: This bank is a link joining state co-operative bank with the primary credit society. The Bank amasses deposits from rural area from the farmers and supplies opportunity for secure investment of the money of primary credit society. (3) State Co-operative Bank: These bank especially co-ordinates the activities of district central cooperative banks and give them required direction. State co-operative bank is a chain between co-operative activity and country’s money market. State Co-operative Bank Centralized Co-operative Bank Primary Co-operative Mandali Agriculture Mandali Non Agriculture Mandali



Co-operative Flag: -

The international co-operative alliance has in 1925 adopted the beautiful seven-colored pattern of the rainbow horizontal strips as its international flag, the flag of co-operation, progress and peace. The flag has seven colors. They are violet, indigo, blue, green, yellow, orange and red. Rainbow is regarded as an auspicious omen, Farmers see the rainbow and start ploughing their fields, They read in it the message about rains to come, It is thus a symbol of hope a harbinger peace. Men see co-operation in its multi-colored patterned, each color blending with the other to make one harmonious. Whole an ultimately all-pervading harmony – unity in diversity. The seven hues of the rainbow when blended together reunite to present pure unstained white effulgence. Thus it stands for purity truth and righteousness. It symbolizes the aims and ideals of the co-operative movement like the rainbow co-operation brings hope to the depressed achieves harmony among diverse interest and offers the promise of an ultimate and universe peace. Co-operative by their own efforts inspired by a sense of fraternity, equity and love of the past and creates a new economic system, a system in which capital plays the role of servant instead of master, the object of production is organized self-help instead of profit and human dignity is given the pride of place for achieving a more equitable and efficient economy better social adjustment and a more balanced system of democracy. (7)

CHAPTER 2 Introduction of Sarvodaya Sahkari Bank Ltd.

1.1 1.2 1.3 1.4




Brief History of the Sarvodaya Sahakari Bank Ltd.: -

The Sarvodaya Sahakari Bank Ltd. established by Mr.Vitthalbhai P. Amin, President of Gujarat Urban Co-Operative banks federation of that time. Mr.Ashabhai Patel, President of Surat District Co-Operative Sangh, was the President of inauguration. Mr.Arunbhai Jariwala, the President of Federation of Art Wearing Industries, was the special guest and blessing given by rev. Narmadnandji Maharaj. Bank is registered according to the rules of the co-operative groups as note no. SE/5071 dated 2nd February, 1982 and it is approved by the license no.SD/GJ/298 dated 3rd may, 1982 from the bank of India. The bank was founded on 8th may, 1982 with the authorized capital of Rs.25,00,000 and the paid capital of Rs.4.14 Lacs. In the beginning there were 803 members. The bank was started at 10, Sadhana Society, Varachha Road, Surat, the house of the President of the bank of that time Mr.Prabubhai Makanjibhai Bhakta. The main intention of bank was to help financially to economically poor classes of the society, small merchants, small industries and labourers for their advancement. Moreover, it was also the reason of the bank to encourage the small savers to have the habit of to saving of money. In the begging, The bank was given a limited working area of ward no.15 of S.M.C., Varachha Road from there difficult to make progress in the banking area in such a small work field. Although, by checking the chart of the bank history progress everyone is impressed by the slow yet steady of the bank. For the purpose of expanding the service area of the bank, the bank has started its office at their own building with facility of centrally A.C. named “SHREENIDHI” near Varachha Road Subway on 15th April, 1991. So that (9)

bank has got the customers of Varachha Road as well as A.K.Road, Sumul Dairy Road, Vastadevdi Road and Station Area. By taking into consideration the requirements of electronic banking system, the directors of the bank had started to think about the computerization of the bank in 1991. In the year 1992-93 with the help of directors of the bank and their knowledge, staff members and their great efforts it became first computerized bank of Surat. The bank had started its first branch at Centre Point Building, Kadiwala School, Ring Road on 27th March, 1997 and on the same year on 3rd December it had started second branch at Ved Road. After that the bank was continued it’s progress and strted its third branch on 29th August, 1999 at Puna Kumbhariya Road, Magob and fourth on 23rd November, 1999 at Sargam Shopping Centre, Parle Point. The ATM facility is available at Main Branch, Ring Road Branch and Parle Point Branch. The VAT machine and Tele Banking facility is available at all the branch. By taking into consideration the requirement of customers the bank has started the facility of Safe Deposit Walt. The bank has started single window concept at all branch so that customers can make any transaction at any counter ie. deposit cash, withdraw cash, clearing. Cheque, transfer, etc. The bank has given facility of DMAT (Dematerialization) account and it collect the light bill of the GEB. In the continuous progress of the bank Mr.Praffulchandra Ambalal Shah, President and Director of the Bank from last 18 years, Mr.Vipinbhai Shah, Adviser and other staff members gives their valuable support.



List of Board of Directors: Name Position President Managing Director Vice-President Director Director Director Director Director Director Director Director Director Director Director Advisor

1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15.

Mr. Maheshchandra R. Lakhwala Mr. Madhusudan N. Katargamwala Dr. Bharatbhai N. Shah Mr. Prafulchandra A. Shah Mr. Vallabhabhai H. Patel Dr. Kanaiyalal G. Mavani Mr. Chadrakant N. Trivedi Mr. Jayntilal M. Fudanwala Smt. Dr. Jayaben B. Bhakta Mr. Yogendra J. Parikh Mr. Rameshchandra J. Reshamwala Mr. Kanubhai H. Shah Mr. Rajendrabhai M. Chokhawala Mr. Mahendrabhai R. Kajiwala Mr. Vipinbhai N. Shah


(1) (2) (3) (4) (5)

Branches of Sarvodaya Sahakari Bank Ltd.: Head Office “SHRENIDHI” Khandbazar Varachha Road. Ring Road (Ktodara) Branch Center point Building, Ring Road. Ved Road Branch Ramji chambers, Ramji Nagar, Ved Road. Puna Kumbhariya Road Branch N.J. complex, Magob, Punakumbhariya Road. Athwalines Branch M/25, Sargam Shoping Center, Parle point.



Social and Academic Activities of Bank: -

Bank gives donation to various institutes like school, colleges, hospital, trust, etc. the Bank complete their social responsibility by providing better service and helping them. The following table represents the name of some party donated by the Sarvodaya Bank. Donation given by Bank in the Year 2001-02 Sr. No. 1 2 3 4 5 Name of the Party Amount Shree Ambikaniketan Medical Trust, Surat. Rs.8,50,000/( Total Donation Rs.11,00,000/-) National Institute for Women and child Rs.10,000/development Shree Malchand Satlaniwala Seva Trust Sadhana Vidhyabhavan Girikunj Charitable Trust Total (Table 1) Rs.50,000/Rs.15,000/Rs.15,000/Rs.9,40,000/-


CHAPTER 3 Theoretical Background of Loan

3.1 3.2 3.3 3.4 3.5





Meaning of Loan: -

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 words “when a banker makes a advance 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.” 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 shot-term, medium-term or long-term. Loans and advances are classified in to secured and unsecured. • Secured Loan or Advance: Secured loan or advance means a “Loan or Advance made on the security of assets. The market value of which is not at any time less than the amount of such loan or advance.” • Unsecured Loan or Advance: An unsecured loan or advances means a “Loan or advance not so secured. A partly covered loan or advance is partly covered by the security of assets, the market value of such securities being less than the amount that has been lend or outstanding at any time.”



Loan Procedure: -

Generally various banks adopt following procedure for loan. Submit the Application Appraisal of Loan Documentation Convene to loan applicant To Issue Draft or Pay order 1. Submit the Application: First of all the loan borrower should submit application to the particular bank. The borrower is required to fill out a common application form, which seeks comprehensive information about proprietor’s and loan borrower’s back ground and his business network and as well as his cost of project and economic consideration. 2. Appraisal of Loan: The bank follows good appraisal system for effective lending and to make easy repay in future way. The main task of the lending bank is to make sure that the income generated from the loan is sufficient to repay the loan installments according to the terms and conditions of amortization. The risk involved in term lending is much more than the risk in short-term lending


because the loans are given to new undertaking, or for the modernization and expansion of existing undertaking and for loan period. Before sanctioning any loan a banker should assure himself that the borrowing concern shall be able to earn sufficient income to pay the loan installments. The methods of analysis and standard to be adopted for an appraisal of loan are more similar to investment decision than to short-term lending. The appraisal of loan included projection of future trends of output, sales estimated of costs, returns and flow of funds. It is extremely difficult to have a clever cut formula for the appraisal of term loan since many factors have to be considered such as the type of borrowing bank and its activities, the markets potential, its management, and financial position. The amount of loan and the period of its repayment. Another important factor is whether to give weight age to profitability or to its broad economic significance in the development of the economy. A term loan may be appraised by considering four different aspects of the proposal. They are: a. Technical feasibility b. Economic feasibility c. Managerial competence d. Financial feasibility 3. Documentation: After completing the step of submit the application and appraisal system of loan. Then loan applicant should collect the document for borrowing loan, every documents and requirement are needed according to the co-operative bank rate. If the loan applicant wants to borrow loan of huge amount, so at a


time strong documents are presented by loan applicant against bank like evident of shareholders, original and photocopy of property’s documents, photocopy last three years income tax returns file, etc. if loan applicants has no any recommendation from share holder so firstly the bank becoming share holders of his bank by issuing share to them, so above types of documents are used to borrow loan and advances from the bank. 4. Convene to Loan Application: After collecting the necessary documents, an officer of the recipient bank review it to ascertain whether it is complete for processing, when the application is considered complete. Then the co-operative bank held meeting of his loan applicant and sanctioned the particular loan. Generally this meeting is convened on Monday and Thursdays in every week. Otherwise expected it in other contingent situation and gives date, day and time for delaying particular meeting. 5. To Issue Draft or Pay order: At the last stage is that, after convening of loan applicant and sanctioning loan, borrower should pay its stamp duty, margin and one installment of loan, then in the stamp document or stamp procedure. Then bank gives to them pay order or draft. If the any loan borrowers want to purchase machinery or vehicle from out of city so he need quotation of that particular company, and finally bank made draft of company’s name otherwise if the quotation of city area so at a time the co-operative bank made pay order of company’s name. Them it gives to company through loan applicant. Thus above procedure is followed by the loan applicant, who wants to borrow loan from banks and satisfied his goal or objectives.



Types of Loan: -

Generally bank grant loans for different period like shorts, medium and long and for different purpose. Broadly, the loans granted by banks are classified follows Bank Loans

Short-term Loans

Medium & Longterm loan

Composite Loans

Consumption Loans


Short-term Loans: -

Short-term loans are granted to meet the working capital needs of the borrowers. These loans are granted against the securities of tangible assets mainly the movable assets like goods and commodities, share debenture, etc. (2) Term Loans: -

Medium and long-term loans are usually called term loans. These loans are granted for more than a year and are meant for purchase of capital assets for the establishment of new units and for expansion or diversification of an existing unit. Such loans constitute a part of the project finance which industrial enterprises are required to raise from different sources. These loans are usually secured by the tangible assets like land, building, plant and machinery, etc.



Composite Loans: -

When a loan is granted both for buying capital assets and for working capital purpose, it is called a composite loan. Such loans are usually granted to small borrowers, such as artisans, farmers, small industries, etc. (4) Consumption Loans: -

Though normally banks provide loans for productive purpose 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 core monies etc. of the needy persons such loans are called consumption loans.


Benefit of Loan: -

1. To develop Business: For developing of business large capital is needed to take new technology adopt so as time machinery loan and other term loans are used to expand business activity. 2. Financial discipline on the borrower: As the time repayment of the loan or its installment is fixed in advance, this system ensured a grater degree of self-discipline on the borrower as compared to the cash credit system. 3. Periodic review of local Account: Whenever any loan is granted or its renewal is sanctioned the banker get an opportunity of automatically reviewing the loan account.


4. Profitability: The system is comparatively simple; interest accrues to bank on the entire amount lent to customer.


Drawback of Loan: -

1. 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 requirement to provide for any contingency. 2. Abuse of funds: Banks have not control over the use of funds borrowed by the customers. However, banks insist on hypothecation of the assets purchased with loan amount. 3. Indistinct period: Though the loans are for fixed period but in practice roll over, i.e. they are renewed frequently. 4. Complexity for document: Loan documentation is more comprehensive as compared to each credit system.


Various Loan Schemes of Sarvodaya Sahakari Bank Ltd.: -

1) Gold Loan: The bank gives gold loan to customers or people on pledge of ornament of gold. First decide the value of ornament by the help of goldsmith of bank.


And bank grant the 40 to 50% loan on valuation of ornament of gold. Generally this loan is given for two years and after two years customer will have to return this loan with 15% interest. There are on any rebut provide by bank on gold loan.

2) Personal loan: Personal loan advances granted to salaried employees against personal security called as personal loan.  Purpose of Personal loan:  For social activities  For House repairing and  For Medical Expenses For personal loan bank provide up to Rs.20000 and on which borrower (party) has to pay interest at 15%. If party (borrower) return personal loan with interest in 30 to 36 month. Bank provide 2% rebate on it to borrower. A properly filled application form and documents are to be submitted by the borrower.  Proof of residence light bill  Proof of income or salary  Letter of dedication of installment from the salary  Proof of property – income tax bill  Signature of bank director for introduction  Photograph of the applications as well as the guarantors are required


3) Hypothecation Loan: These types of loan given for stock, machinery, vehicle and furniture. (a). Against Plant & Machinery: Bank provides the hypothecation loan to buy new machinery for business development and also grant loan against old machinery. Bank grant loan up to 75% face value of bill of new machinery but bank does not pay this amount to borrower, bank make payment directly to supplier after getting necessary margin from borrower. Bank also grant loan for old machinery up to 50% of valuation for the professions purpose. (b). Against Stock: Bank provide hypothecation loan for short-term period to buy raw material for trade business. (c). Against Vehicle & Furniture: Bank grant hypothecation loan to purchase vehicle, T.V., refrigerator, furniture, domestic tools etc. Bank makes payment to directly to dealer. To take hypothecation loan borrower has to submit same necessary document like:  Proof of residence  Photograph of applicants as well as the guarantors  Only filled application form with fully detail  Copy of driving license  Quotation of Vehicle, T.V., freeze, furniture  Permanent account no. Of borrower



Fixed Deposit Loan: -

A banker may give advance to the depositor on the security at “Fixed Deposit” receipt. Bank grant 50 to 80% face value of loan fixed deposit receipt. This type of loan bank generally grants against NSC/KVP, government security, share, and LIC policy. In this facility, bank charge 1% more than the fixed deposit rate from the borrower. In the case of third party bank also charge 13%, which is ever higher, or 3%more than the fixed deposit rate. There is no any rebate on fixed deposit loan.


Cash credit / Over draft: -

Cash credit: This type of loan provide to creditable customer by the bank in the form at certain limit against stock, property personal guarantee, stock and book debts for business purpose. Bank charge 15% interest from borrower against cash credit. The customer as per his fungible or security can take a loan up to that specified limit. The customer can withdraw money from his account, which is called cash credit account. Overdraft: Overdraft means customer can withdraw more amount than the amount credited in his account. This type of advances given to the creditable customer for the purpose of business and good stock purchases for a small period of time. Overdraft is only given to current account holder against fixed deposit receipts, NSC, KVP, share certificates, LIC policy,


government security and against assets. Bank may charges on such advances at the rate 15% interest.


Property mortgage loan: -

The bank provides property mortgage loan for the development or expansion of the business. On such advance bank may charges at the rate of 15% interest. This loan allowed only for 60 month. For property mortgage loan borrower has to submitted the necessary documents such as,       Signature of bank directors for introduction Photograph of borrower and guarantors Proof of residence Project report License of business Profit and loss account, capital account, provisional balance sheet of borrower from 31-3-2001  Last two years income tax return papers of borrowers and guarantors


Swarojgar Loan: -

Swa means him self and rojgar means employment. Swarojgar loans given to self-employed persons for expansion to their business. Various selfemployed people like engineers, doctors, C.A., shopkeepers, taxi drivers, rickshaw driver can get such loan to start their profession, practice and to purchase equipment etc. On such loan bank charge at rate 15% interest and there is no any rebate on such loan. The bank grant loan up to 60% to 70% at the total amount required for starting a new business. Borrowers can be


allowed 30 months on this loan after it borrower will has to repay loan amount with interest. The following criteria required for taking loan from the bank.  Signature of director for introduction  Minimum 2 sureties are compulsory with their background  Borrowers background


Cash Purchase Cum Credit Sales: -

This loan is given in the form of cash credit. The cash purchase cum credit sale arrangement by which banker allows his customer to borrow money up to a certain limit against their bond of credit by one or more sureties or against security. The bank charge on such advance at the rate of 14% (for up to 45 days), 16% (for 46 to 90 days), and 24% (for above 90 days) respectively. If there is any default in collection or payment interest should be charged @ 24% for the period of default.


Textile Upgradation Fund Scheme: -

Indian government has issued textile Upgradation fund scheme from 1-41999 for textile industry. Under this project government has distributed subsidy of Rs.250 million. This type of the loan is given for purchase new or secondary textile machinery, bank grant loan up to 80% face value of bill of textile machinery. In this scheme borrows get subsidy decided by the government. On such loan bank may charge at the rate of 15% interests and bank also provide 2% rebate, if borrower repay loan amount timely with interest.


Housing Loan: -


This loan provide for construction, additions, alteration, repair of the house etc. in the form of long-term period. Bank charge @ 14% for up to Rs.200000 and 14.5% for above Rs.200000 duration of repayment up to 60 months and for the duration of repayment above 60 month bank charge 15% for up to Rs.200000 and 15.5% for above Rs.200000 respectively. If borrower repay loan amount with interest, get 2% rebate by bank. The following criteria require for housing loan:  Background of borrowers  Minimum two sureties are compulsory with their background  Recommendation of board of directors


CHAPTER 4 Limitations of the Studies

If there are advantages of study then obviously there are limitation of that study also. So, some limitations of this study are:  Time period for the study is limited as we have got two months for this project, but if we got more time than analysis can be much broad.  Analyses of only two banks are done rather than more banks.  Study is limited to local area of Surat.


CHAPTER 5 Comparative Study

7.1 7.2 7.3 7.4 7.5 7.6

















Study of loan Sanctioned by Sarvodaya Bank & Varachha
Particular Gold Loan Personal Loan Hypothecation Loan Fixed Deposit Loan NSC/KVP Loan Cash Credit Loan Self Employed Loan (Table 2) Sarvodaya Bank 0.02% 0.76% 26.49% 6.97% 0.71% 20.43% 0.10% Varachha Bank 6.10% 1.30% 19.97% 3.08% 0.77% 30.17% 1.11%

Bank in 2001-02: Sr. No. 1 2 3 4 5 6 7

Loan Sanctioned in 2001-02
35.00% 30.00% 30.17% 20.43% 6.97% 6.10% 19.97% 1.30% 3.08% 0.71% 0.10% Varachha Bank


25.00% 20.00% 15.00% 10.00% 0.76% 5.00% 0.00% 0.02%


Sarvodaya Bank

Name of Banks
Gold Loan NSC/KVP Loan Personal Loan Cash Credit Loan Hypothecation Loan Self Employed Loan Fixed Deposit Loan

(Graph 1)





Study of loan Sanctioned by Sarvodaya Bank & Varachha
Particular Gold Loan Personal Loan Hypothecation Loan Fixed Deposit Loan NSC/KVP Loan Cash Credit Loan Self Employed Loan (Table 3) Sarvodaya Bank 0.04% 0.47% 17.95% 8.59% 0.99% 23.10% 0.09% Varachha Bank 5.35% 0.90% 16.30% 3.47% 0.85% 35.15% 0.86%

Bank in 2002-03: Sr. No. 1 2 3 4 5 6 7

Loan San ction in 2002-03 ed
40.00% 35.15% 17.95% 23.10% 8.59% 5.35% 16.30% 0.90% 3.47% 0.99% 0.85% 0.04% 0.47% Sarvodaya Bank 0.09% Varachha Bank


35.00% 30.00% 25.00% 20.00% 15.00% 10.00% 5.00% 0.00%

Nam of Ban e ks
Gold Loan NSC/KVP Loan Personal Loan Cash Credit Loan Hypothecation Loan Self Employed Loan Fixed Deposit Loan

(Graph 2)



Sr. No 1 2 3 4 5 6 7

Comparative Study of Interest Rate on loan of Sarvodaya
Particular Sarvodaya Bank Rate 15% 15% 15% FD+1% 11.5% 15% 15% Rebate Nil 2% 2% Nil Nil Nil Nil Varachha Bank Rebate Nil 1% 1% Nil Nil Nil 2% Net 13% 13% 13% FD+2% 13% 14% 13%

Bank & Varachha Bank: -

Gold Loan Personal Loan H.P. Loan Fixed Deposit Loan NSC/KVP Loan Cash Credit Loan Selfemployed Loan

Net Rate 15% 13% 13% 14% 13% 14% FD+1% FD+2% 11.5% 13% 15% 14% 15% 15%

(Table 4)

Net In terest rate
Percentage 20% 15% 10% 5% 0% Sarvodaya Bank Nam of Ban e ks Gold Loan NSC/K VP Loan Personal Loan Cash Credit Loan H.P. Loan Selfem ployed Loan Varachha Bank
15% 13% 13% 11.50% 15% 15% 13% 13% 13% 13% 14% 13%

(Graph 3)



Comparative Study of loan Amount of Sarvodaya Bank &
Particular Gold Loan Hypothecation Loan Fixed Deposit Loan NSC/KVP Loan Self Employed Loan Sarvodaya Bank Varachha Bank 50% of Valuation 50% of Valuation 75 % of Quotation 70% of Quotation 80% of Face Value 85% of Face Value 70% of Face Value 85% of Face Value 70% of Requirement 80% of Requirement (Table 5)

Varachha Bank: Sr. No 1 2 3 4 5

Loan am ount 100% Percentage 80% 60% 40% 20% 0% Sarvodaya Bank Varachha Bank Nam of Banks e Gold Loan NSC/KVP Loan Hypothecation Loan Self Employed Loan
(Graph 4)
50% 75% 80% 70% 70% 50% 70%

85% 85%


Fixed Deposit Loan



Comparative study of Time period of Loan of Sarvodaya
(Figure shows Months)

Bank & Varachha Bank: Sr. No. 1 2 3 4 5 6 7 Particular Gold Loan Personal Loan Hypothecation Loan Fixed Deposit Loan NSC/KVP Loan Cash Credit Loan Self Employed Loan (Table 6) Sarvodaya Bank 24 35 60 Up to Maturity Up to maturity 12 30 Varachha Bank 24 24 24 Up to maturity Up to maturity 12 30

Tim Period e 70 60 Months 50 40 30 20 10 0 Sarvodaya Bank Na e of Ba m nks Gold Loan Personal Loan H.P. Loan Cash Credit Loan Selfem ployed Loan Varachha Bank
24 12 35 30 24 24 24 12 30 60

(Graph 5)


Sr. No 1 2 3 4

Comparative Study of Recovery, Overdue and doubtful debt
Particular Sarvodaya Bank Recovery 94% 97% 98% 96% Overdue 5.8% 2.9% 2% 3.7% Debt 0.2% 0.1% -0.3% Varachha Bank Recovery 78% 91% 92% 87% Overdue 10.5% 3% 6% 6.5% Debt 11.5% 6% 2% 6.5%

of loan of Sarvodaya Bank & Varachha Bank: -

Short-term Medium-term Long-term Total Loan

(Table 7)
(Graph 6) (Graph 7)
98% 96% 94%97% 78% 91%92% 87%

Overdue & Debt Recovery

Percentage Percentage

120% 14.00% 100% 10.00%

12.00% 8.00% 80% 6.00% 4.00% 60% 2.00% 0.00% 40%
20% 0%




Sarvodaya Bank

Varachha Bank

Overdue of Banks Debt Name rm e dium rm -te Short-term Short-te Medium-term MLong-term -te T otal Loan Long rm Tota Loan l



CHAPTER 6 Findings


By the comparative study of loan schemes, I found various differences in the loan schemes of both banks. The findings in different schemes are as follow: 1. Gold Loan: By comparison of gold loan of both bank, I found that interest rate on gold loan of Sarvodaya bank is 2% high as compare to Varachha bank. There is no any rebate on gold loan of both banks. The amount of gold loan given by Sarvodaya bank is 50% of valuation of gold where amount given by Varachha bank is also 50% of valuation of gold. So the amount of gold loan given by Sarvodaya bank & Varachha bank is equal. Also, the time period of gold loan of both banks are equal which is 24 months. 2. Personal Loan: Comparative study of personal loan of both banks gives clear difference between interest rate, rebate, amount of loan, time period, etc. the interest rate on personal loan of Sarvodaya bank is 1% high than Varachha bank. But the rebate provided on personal loan is 1% more than Varachha bank. So, if customers repay the loan timely, than there is no difference between interest rates of both banks. The amount of personal loan given by Sarvodaya Bank is 20,000 and given by Varachha bank is 30,000. so amount of personal loan given by Varachha bank is high than Sarvodaya bank. Time period of personal loan in Sarvodaya bank is 11 months more than Varachha bank. 3. Hypothecation Loan: The hypothecation loan is divided in to two parts i.e., Machinery hypothecation and Vehicles hypothecation. The interest rate on machinery hypothecation of both banks is equal but interest rate on vehicle hypothecation of Sarvodaya bank is 1% higher than Varachha bank. The


rebate on machinery hypothecation of both bank are equal and rebate on Vehicle hypothecation of Sarvodaya bank is 1% more than Varachha bank. The amount of hypothecation loan of Sarvodaya bank is 75% of quotation. Where the mount of Varachha bank is 65% to 75% of quotation. Time period of hypothecation loan of Sarvodaya bank is 60 months, which is 36 months more than Varachha bank. 4. Fixed Deposited Loan: Interest rate on fixed deposit loan of Sarvodaya bank is FD rate +1% and interest rate of Varachha bank on FD loan is FD rate +2%. So interest rate of Varachha bank is 1% more than Sarvodaya bank. The amount of fixed deposit loan given by Sarvodaya bank is 50% to 80% of face value and amount of loan given by Varachha bank is 85% of face value. There is no rebate on FD loan of both banks. 5. NSC/KVP Loan: By comparative study of NSC/KVP loan, it is clear that interest rate of Sarvodaya bank is 11.50% and interest rate of Varachha bank is 13.00%. So interest rate of Varachha bank is 1.5% more than Sarvodaya Bank. The amount of NSC/KVP loan provided by Sarvodaya bank is 70% of NSC/KVP. Where amount provided by Varachha bank is 85% of NSC/KVP. 6. Cash Credit Loan: By comparative study of cash credit loan, I found that interest rate on cash credit loan of Sarvodaya bank is 15% and interest rate of Varachha bank is 14%. So, interest rate of Varachha bank is 1% less than Sarvodaya bank. There is no any rebate on cash credit loan of both banks. Time period on cash credit loan of Sarvodaya bank is 1 year and after 1 year, the borrower


has to renew the cash credit loan and the time period of Varachha bank is also same as Sarvodaya bank. 7. Self employed Loan: By comparative study of self employed loan, I found that interest rate on self employed loan of both banks are equal but Varachha bank give 2% rebate and Sarvodaya bank do not give any rebate on self employed loan Sarvodaya bank gives 70% amount of required amount and Varachha bank gives 80% amount of required amount. Time period of self-employed loan in both banks are equal, which is 30 months. 8. Finding in Recovery, Overdue and doubtful debt of loan of Both Bank: By the comparative study of recovery, Overdue and Doubtful debt, I found that recovery of total loan of Sarvodaya bank is 86.98% and recovery of total loan of Varachha bank is 96.22%. So recovery of Varachha bank is 9.24% more than Sarvodaya bank. The overdue and doubtful of Sarvodaya bank is 3.36% and 6.32% more than Varachha bank respectively. Finally, it is clear that, except the fixed Deposit loan and NSC/KVP loan, interest rate on all loan scheme of Sarvodaya bank is higher than the Varachha bank.


CHAPTER 7 Suggestions


There are some suggestions to Sarvodaya bank. There suggestions are as follows:  Interest rate on Gold loan of Sarvodaya bank is higher than Varachha bank. So Sarvodaya bank should reduce interest rate on gold loan or it should provide some more facilities on that loan.  Bank should reduce interest rate and increase the amount of personal loan to attract borrowers.  Interest rate, rebate and amount of hypothecation loan of both banks are generally same. The bank should reduce time period of hypothecation of loan because it is too high than Varachha bank.  Bank should increase the amount of NSC/KVP loan because it is less than amount of NSC/KVP loan of Varachha bank.  Bank should reduce the interest rate and increase the amount of selfemployed loan to attract the borrowers.  The banks should have to concentrate on increase the recovery of loan to reduce the amount of overdue and doubtful debt because recovery of total loan of Sarvodaya bank is less than the Varachha bank.


CHAPTER 8 Bibliography


Name of book Banking Law & Transaction

Author T.J. Rana, J.B. Shah & Other

Publisher B.S. Shah

Banking Theory & Practice Banking Theory & Practice

P.K. Shriwastav Gordon & Natrajan

Himalaya Himalaya

Annual Report of Sarvodaya Bank (Year 2001-02 & 2002-03) Annual Report of Varachha Bank (Year 2001-02 & 2002-03)


CHAPTER 9 Annexure


1. Share Capital 1.Authorised capital 5,00,000 (each share price is Rs.100/-. 2.Paid-Up Capital 2. Reserve Fund And Other Reserves 1.Reserve Fund 2.Co-Ordination Advertise Fund 3.Loan Bonus Fund 4.Donationfund 5.Doubtful Debt und 6.Dividend Equivilisation Fund 7.Building Fund 8.Development Fund 9.Building Depreciation Fund 10.Income tax Reserve Fund 11.Investment Depreciation Fund 12.Bank Silver Jubilee Fund 13.Share holder Gift And Other Fund 14. 15 % Credit Equivilisa-tion Fund 15.Investment Fluctuation Fund 3.Main/ Secondary Partnership Fund 4.Funds



1,64,51,935=65 43,60,47,313=72 5,00,00,000=00 45,79,36,960=00 ------------------(86,05,33,985=29)

5,00,00,000=00 1. Balance on Hand 2. Bank Balance 3. Short Term & Call Deposit 4. Investments 2,70,80,900=00 5.Main/Secondary Partnership funds 6. Loans (1)Short Term Loan, 3,34,90,099=00 Cash Credit,O.D. & Bills 8,00,000=00 Of Exchange (a)Government Loans ------------------- NSC/KVP 3,80,000=00 RBI/Bond/LIC/UTI 5,81,00,000=00 (b)Other Investment Gyro Loans 24,00,000=00 Fixed Term Loan Bills Discount 1,40,00,000=00 (c)Unsecured 3,00,000=00 (d)Cash Credit (e)CPCS Limit 58,80,701=00 (f)Roll Over Excise Duty 11,00,000=00 (g)Consortium Advance (h)Bill Purchase 2,05,00,000=00 Date Over Amount Guessing Debt And 7,00,000=00 Doubtful Debt 17,00,000=00 (2)Medium Term Loan (a)Government Loans 6,15,000=00 NSC/KVP RBI/Bond/LIC/UTI 25,00,000=00 (b)Other Investment Joint Stock Company’s ------------------- Share H.P. Loan Fixed Loan

20,04,558=11 8,79,750=00 21,74,488=76 1,86,76,591=09 ------------------46,30,668=80 11,26,70,503=10 8,60,86,609=00 ------------------15,00,00,000=00 2,00,000=00 2,41,95,856=93 50,00,554=75

65,56,251=40 1,63,99,056=60 8,56,809=20 15,44,50,666=00 5,52,09,474=88


1.Fixed Deposits 2.Cash Certificate a.Six Yearly b.Ten Yearly c.Dasabadi Certificate 3.Golden Monthly Income Plan 4.Saliyana Matured Deposits 5.Sarvodaya Shreenidhi Parivar Yogna 6.Sarvodaya Vikas Patra (S.V.P.) 7.Pletinum Certificate 8.Azadi Suvarna Jayanti Certificate 9.Auto Renewal Deposit 10.Flexi Deposit 11.Compound Interest Scheme 12.Saving Deposit (a)Cheque System Savings (b)Savings (c)N.R.I. Savings Deposit 13.Current Deposit 14.Lokar Key System 5.Liabilities 1.Reserve Bank Of India (RBI) 2.Gujarat State CoOperative Bank Ltd. (Sidbi Refinance) 3.The Surat District Co - Operative Bank Limited. 6.Bills For Collection 7.Branches Adjustments 8.Unpaid Interest

55,12,19,399=30 29,000=00 1,35,14,704=00 11,35,400=00 3,47,01,600=00 12,66,028=00 2,14,17,940=00 23,16,61,324=50 4,78,53,023=00 5,44,07,785=16 1,24,95,377=00 6,21,29,363=00 62,79,024=00 17,75,43,231=16

Gold Loan Gyro Loan TUFS Loan Housing Loan Unsecured Loan (c)Self Surety Swarojgar Loan (d)Gyro Of Industrial Shade Date Over Amount Guessing Debt And Doubtful Debt (3)Long Term Loan (a)Government Loans NSC/KVP RBI/Bond/LIC/UTI (b)Other Investment Gyro Loan F.D.,O.D. Housing Loan (c)Self Surety Date Over Amount Guessing Debt And Doubtful Debt

1,78,839=00 4,07,04,764=45 16,47,56,274=50 34,19,527=00 81,74,371=55 40,55,342=25 8,01,930=00 4,70,01,923=10 5,36,73,172=23

------------------------------------25,22,938=00 15,35,318=50 2,05,78,719=10 7,85,369=00 15,23,537=00 2,41,32,016=00 2,81,85,346=28 49,19,131=63 ------------------2,54,08,871=00 1,63,75,859=58

7.Interest Accure on 1,42,33,547=53 Deposits and Invest4,85,353=50 ment 8.Interest Accure on 16,55,39,434=40 Loans 21,72,313=30 9.Bills Receivable 10.Branches Adjustment ------------------- 11.Building (After Depreciation) 1,90,43,600=00 12.Safe, Furniture & Fixtures (Furniture,Dead Stock, 50,802=00 Computers & Machinery) (After Depreciation) 13.Other Preliminary 49,19,131=63 Expenses 1.T.D.S. On Deposit ------------------- Interest 2.Library 2,53,00,455=28 3.Stationary Stock,com-

8,18,965=00 13,038=50 6,06,082=10


Reserve 9.Outstanding Interest 10.Other Liabilities 1.Sundry Debtors 2.Miscellaneous 3.Dividend 4.Unpaid Tax 5.Other Liabilities 11.Profit & Loss Profit Of Year 2001-2002 Less:- Distribution Add :- Profit Of Year 2002-03 12.Unexpected Liabilities 1.Given Surety 2.Other


4,88,727=50 1,18,16,673=05 11,47,587=35 2,00,487=00 18,13,684=00 1,24,98,866=63 1,24,98,447=60 419=03 1,43,59,891=69

puter, Stationary & Stock 4.Stamp On Document 5.volt For Deposit 6.Clearing House 7.Prepaid Expenses 8.Festival Advance (Staff) 9.Income Tax 10.Clearing Difference 11.Clearing Adjustment 12.Building Renovation 13.Building Deposit 14.Advance Income Tax

18,885=00 ------------------2,78,604=00 4,54,654=00 5,54,000=00 15,17,494=00 ------------------6,34,809=53 ------------------------------------10,00,000=00

14,80,000=00 ------------------1,92,58,87,951=28 1,92,58,87,951=28


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