Professional Documents
Culture Documents
INTRODUCTION
INTRODUCTION
This project report deals with the analysis of unsecured loan (personal
loan) at SBH bank, Latur. The analysis includes the main emphasis on the
share of personal loan in the total unsecured loan of the SBH bank as well as
it comprises with the defaulters of the personal loan. The data collected for
the years of 2009, 2010, &2011.The project also focuses on the reasons for
the rejection of the loan proposal of the customers & the reasons for the
defaulter of the loan. The case study about rejection of loan proposals &
defaulter of loan gives practical point of view. The project includes the
requirements of documents for the loan proposal & eligibility criteria for the
same.
Personal loan
Credit card
Experience has shown us that worst loans are often made in the
best of times. Compensation through trading gains is not going to support
the banks forever. Large scale efforts are needed to upgrade skills in credit
risks measuring, controlling and monitoring as also revamp operating
procedures. Credit evaluation may have shift from cash flow based analysis
to borrower account behavior. Corporate lending is already undergoing
changes.
In Indian context, there has been a close relationship between
industry and political parties; industry being the major source of funding for
elections. In such a scenario consern or favour for industry or particular
industrial groups gets appropriately addressed by the political executive
while designing or framing policies.
BANKS/
POLITICAL PARTY
REGULATOR
INDUSTRY
CHAPTER -2
PROFILE OF
STATE BANK OF
HYDERABAD
State Bank of Hyderabad (SBH) is an associate bank of State Bank of India (SBI), and is one
of the scheduled banks in India. The Bank's Head Office is situated at Gunfoundry Area, in
Hyderabad, India. SBH has over 1,200 branches and about 12,800 employees. Assets are in
excess of Rupees 767 billion. It is now the largest Associate Bank of State Bank of India.
The bank has performed well in the past decades, winning several awards for its banking
practices.[1] Shri Pratip Choudhary is the current Chairman and Sri. M Bhagavantha Rao is the
current Managing Director
The bank originated as the central bank of the erstwhile Nizam state under the name, Hyderabad
State Bank. It was established on 8 August 1941 under the Hyderabad State Bank Act, 1941,
during the reign of the last Nizam of Hyderabad, Mir Osman Ali Khan. The bank managed the
Osmania Sicca, the currency of Hyderabad state, which covered the present-day Telangana
region of Andhra Pradesh, Hyderabad-Karnataka of Karnataka and Marathwada of Maharashtra.
(At the time a number of the princely states had their own currencies.) The bank also carried out
commercial banking. The Bank opened its first branch at Gunfoundry, Hyderabad on 5 April
1942. After Partition, on September 17, 1948 the Indian Army conducted Operation Polo, a
police action that annexed Hyderabad to India.
In 1953, the bank absorbed, by merger, the Mercantile Bank of Hyderabad, which Raja
Pannalal Pitti had founded in 1935. (Other accounts give year of founding as 1946 and that of
merger as 1952). In the same year, the Bank started conducting government and Treasury
business as agent for the Reserve Bank of India.
In 1956 the Reserve Bank of India took over the bank as its first subsidiary and renamed it State
Bank of Hyderabad. The Subsidiary Banks Act was passed in 1959, so on 1 October 1959 it and
the other banks of the princely states became subsidiaries of SBI.
Deposits
Loans
Investment/Insurance
Cards
Online Services
Wealth Management
Money Transfer
Bank Accounts
SBHs wide product range includes loans for purchase and construction
of aresidential unit, purchase of land, home improvement loans, non
residential premieses loans for professionals and loan against
property,while its flexible repayment options include step up
repayment facility (SURF) and flexible loan installment plan (FLIP).
SBH also provide wide range of services for his customers. Other
than this SBH provides various other services for its priority
customers for more conveniences and satisfaction.
CHART OF DEPARTMENTS
STATE BANK OF
HYDRABAAD
RETAIL
BANKING
1. Retail Banking:-
CORPORATE
BANKING
RURAL
BANKING
A. Small and medium enterprises:SBH Bank believes in the franchise model for the small
enterprises segment and has significantly enhanced its franchise this
segment. As matter of strategy, the bank has focused on customer
convenience in transaction banking services, as well as working capital
loans to suppliers or dealers of large corporations, and clusters of small
enterprises that have a homogeneous profile.
CHAPTER - 3
REVIEW OF
LITERATURE
3.1
3.2
DEFINITIONS
1] Loan that establishes consumer credit that is granted for personal use;
usually unsecured and based on the borrowers integrity and ability to pay
called personal loan.
2] A personal loan is an unsecured loan, meaning the borrower does not put
up any collateral or security to guarantee the repayment of the loan. For this
reason personal loans tend to carry high interest rates. If a borrower owns a
home, a lower interest rate alternative is a home equity loan. However, this
option requires that the borrower put up his or her home or other real estate
property as collateral.
3] An amount given to an individual to use for personal benefit that must be
paid off at a specified time is called as personal loan.
4] Unsecured loans are sometimes called signature loans because the
bank has nothing nut your signature they cant take possession of your
house, car, or other belongings. However, they can report you to the credit
reporting companies and ding up your credit.
5] Loan extended only on the basis of the borrowers financial position,
creditworthiness, credit history, and general reputation. The borrower signs a
promissory note but does not pledge any specific asset(s) as collateral. It is
also called character, good faith loan, or signature loan.
3.2
3.4
CREDIT RATING/SCORING
the value of asset.) As a result even though there may be some salvage or
recovery value, its continuance as bankable asset is not warranted.
ENVIRONMENTAL
PERSONAL
FACTOR
Inflation
NATURE OF
IMPACT ON
IMPACT
LOAN
There is an impact of inflation on
growth Rate of personal loan because
demand will decrease.
Competitor
Regulatory
Defaulter
bank.
Political
Social culture
So if your salary is 15000 and SBH has deducted the entire amount,
now it has the right to decide when the rest of amount is payable and in that
mode you are a defaulter.
2. Communication is a one-way
street here:-
3. Right to choose jurisdiction:If you go to court against SBH, as per the terms and conditions,
you can only approach a court in Mumbai. SBH however reserves
the right to file a suit against you anywhere in the country. Were
not sure how far this clause itself would stand in court since it
infrings on the right of an individual to legal recourse.
SBH bank has the right to publish the name of a borrower who is
in default, in any newspaper they choose or show it on television
or publish it on the internet. This is again a right you give them
when you take the personal loan. How would you like to open
Times of India on Sunday morning and find your name published
in it as the defaulter of a personal loan this clause also gives
them the right to share you information with virtually anyone, if
youre in default of repaying your personal loan.
SBH bank has the absolute discretion to amend or supplement
any of the loan terms at any time and will endeavor to give prior
notice of fifteen days by email or put-up on the website as the
case may be for such changes whenever feasible and such
amended terms and conditions will there upon apply to and be
binding on the borrower. Further, the loan terms shall also be
subject to the changes based on guidelines/directions issued by
the RBI to banks from time to time.
CHAPTER 4
OBJECTIVES AND
SCOPE
1.
2.
3.
4.
5.
6.
The scope of the project remains purely on the study of personal loan
of STATE BANK OF HYDRABAAD with a view to know the assessment of the loan,
how customer can assess the loan what are the interest rate, procedure can be
known from this study. It also analyzes the defaulter in personal loan of SBH bank so
that bank can take the precaution while the granting the loan.
CHAPTER - 5
PROCEDURE OF
LOAN
PROCEDURE OF LOAN
SECTION 1
A loan without security- a personal loan is indeed issued without any security. And you do not
have to go to an agent in the vast disorganized sector to get one. Several banks and companies
would offer you this loan. The most striking feature of this type of loan is that the financer asks
no questions i.e. he is not interested in knowing what you intend to use the loan for. For your
point of you, it is convenient option compared to borrowing money from friends and relatives.
Personal loan issued in the range of Rs.15000 to Rs.10lakhs for a maximum period of 60 months,
include the categories of loans for educational purpose and holidays. Apart from these two
categories, these loan are typically taken to tide over an emergency when cash is urgently
required from a creditor who will not worry about securing his asset in the manner that a car
financer would.
Therefore the financer if doing perhaps a more check on your capability to repay than he might
even in the case of financing a home loan, for instance. Since financer perceive higher risk in this
category many follows a list of approved categories of borrowers. Interest rate is higher. All
other rates including service charges, post payment penalty are higher as well.
However, a personal loan may be a better choice than borrowing on your credit card, if you want
to keep your credit limit available for impulse purchases or an actual emergency requiring instant
purchasing power. Often borrowing money on your credit card carries a higher rate of interest
than a personal loan.
SECTION 2
After receiving the document from the customer the bank will decide how
much loan will have to be approved to the customer based on the following
calculation.
APPROVED
Limited companies
OPEN MARKET
Small companies
1. If the customer belongs to the ELITE group then the Loan amount will
be approve him by applying the multiplier to his salary
Salary x 18 = Loan amount
2. If the customer belongs to the approved list category the loan amount
will be approve him can be calculate asSalary x 12 = Loan amount
3. If the customer belongs to the open market list category the loan
amount will be approve him can be calculate asSalary x 10 = Loan amount
If the customer is self-employed
If the customer is self-employed then loan amount will approve him can be
calculate asNet Profit x 1.1 obligation = Loan amount
(Obligations= daily expenses + previous loan amount)
Repayment
In this type if the customer has already taken the loan from the bank and he
filed for new file for loan then the loan amount can be calculated as follows:-
SECTION 3
As after verifying all the document of the customer by the bank through the
bank verifying agencies according the criteria mention the loan amount is
disbursed.
Criteria
Age
Net salary
Salaried
Self-employed
25yr 58yr
25yr 65yr
Net annual income Rs- Net profit after tax-
Eligibility
96000 p.a.
Employees of public ltd
MBAs,
Architects,
C.A..s,
in
companies or MNC
current 1 Year
job/profession
Years in current residence 1 Year
Manufacturers
3 Years
1 years
DOCUMENT
SALARIED
SELFEMPLOYE
D
Yes
Yes
Yes
-
Yes
income/certified financials
Proof of turnover(latest sales/ service tax
Yes
return)
Proof of continuity in current job(form 16/
Yes
Yes
issued by bank)
Proof of identity
Proof of residence
Proof of office utility bill/ municipal tax
Yes
Yes
-
Yes
Yes
Yes
receipt
Proof of qualification of highest degree
Yes
Yes
Services charges for the SBH personal loan:1. Loan processing charges:This is 2.5% of the loan amount. So for a personal loan of Rs. 50,000
youll pay Rs. 1,250.
2. Organizational charges:This is 1% of the loan amount. So if an amount of Rs. 50,000 youll pay
Rs. 500. This is to be paid along with the first repayment installment.
3. Cheque swap charges:If you need to change the post-dated cheques issued to SBH bank,
towards repayment of the personal loan, SBH will charge you Rs. 500.
4. Cheque bounce charges:When a cheque is issued by you to SBH, bounces, you pay a penalty of
Rs. 450.
5. Charges for late payment:If youre late in paying the installment due on the SBH personal loans,
youll be charged 24% p.a on amount outstanding from date of default.
6. Interest rate can change:SBH bank can change their interest rate on the personal loan, using its
discretion or virtually change the interest rate anything they want in
the terms and conditions.
7. Changing mode of repayment:If you wish to change the mode of repayment of the SBH personal loan,
this needs to be done with the permission of SBH bank. Stopping
payments on post-dated cheques or otherwise cancelling or revoking
mandates would be considered combined with a criminal intent
according to the SBH terms and conditions.
CHAPTER 6
RESEARCH
METHODOLOGY
Research methodology is an important tool in any research work. It acts as guideline and road in
completion of research. It is scientific search for data and information on as particular topic
research is search for knowledge.
Looking to the criticality of the subject and the inputs required for conducting research and for
arriving at logical conclusions, the following methodology or system was followed.
1) Primary Data.
2) Secondary Data.
1) Primary data: -
The information is gathered from the discussion with the employees/staff and from the
web site of the company.
2) Secondary data:The secondary data collected by
The sources of secondary data were
i.e. balance sheets and profit & loss accounts were obtained
CHAPTER -7
DATA ANALYSIS
AND
INTERPRETATION
From the balance sheet of the SBH bank we can observe that the
contribution of personal loan to the total unsecured loan of the SBH bank in
the years 2008, 2009, 2010 with the help of bar diagram:30
25
20
Others
15
Personal loan
10
5
0
2008
2009
2010
Figures in corer
From the above diagram we can see that the personal loan
contributes about 61.5% to the total unsecured loan of the bank in the
year of 2008 and the contribution of personal loan is about 63.3% of
total unsecured loan of the bank in the year of 2009 while in the year
2010 it is 67.3%.
From the above figure, the loan disbursement of unsecured loan
in latur branch was increases near about 5% in the year of 2009 as
compare to 2008 but for the year of 2010 this is 22%. This is because
banks more emphasis on the unsecured loan (retail loan) particularly
personal loan, which has high risk and high return.
Now we will see the Defaulter of the personal loan for the year of
2008, 2009, and 2010 can be seeing as bellow:-
8
6
4
2
0
Category 1
Category 2
Category 3
Figures in corer
From the above figure, we can see that for the year of 2008 the
defaulters are low as compare to 2009 & 2010 but it was gradually increases
with gradual increase in loan disbursements for the year 2009 & it is
suddenly increases high for the year 2010 with sudden increase in the loan
amount for 2010.
Now we will see that the defaulter case in personal loan i.e. NPA. For
the year 2008 the NPA of SBH bank in personal loan is stood 44% & for the
year 2009 is stood 46% while in the year 2010 it stood 53%.
Analysis:From the above figure, we can see that for the year of 2010 the
defaulters are high as compared to the year of 2008 & 2009 that means the
defaulters are increases highly for the year of 2010. From the above charts
we can see that the defaulters for the year 2010 are increasing because of
following reasons:
Now we will see some of the common reason because of bank may reject the
loan application of the customer:If the person has criminal Record.
If the person taken the loan from some other bank and he is defaulter of
that bank.
If the person age is above 65 year.
If the person income is not sufficient to repay the loan amount.
The reason for default can be well explained and understood with the help of
few cases.
CASE-1
Customer Name
Type of Loan
-Personal Loan
Amount
-Rs 4,00,000
Rate of Interest
-20%
Here the Mr. Ganesh Kumar who had a small retail department
outlet as his business. His average annual income was rupees three lack. He
pays the income tax every year. He had been in this business from last
twenty years so he has great goodwill to his name.
for bulk buying in the malls & big bazaar which would provide them good
offers & discounts. As a result of this business hit badly & could not sustain.
Analysis:The client & bank should have taken the assurance of the future
growth with this change & also the inflationary situation.
CASE-2
Customer Name
- Mr Tushar Jadhav
Type of Loan
-Personal Loan
Amount
Rate of Interest
-Rs 5,00,000
-18%
Reason for default:The party had taken a personal loan for the purchase of
new car. The party had no contacts with the bank. The bank investigates the
matter and found that he was untraceable & had a criminal record. They also
found that the person who taken the loan has sold his car to other person
and he was not the residence of the city.
Analysis:The basic problem here was that the bank had insufficient
information about the borrower i.e. his past record, contacts etc. the
scrutinizers did not gave due importance to the availability of such
information and granted the loan without some concrete base. Overall we
say an improper scrutiny of the proposal.
CASE-3
Customer Name
Type of Loan
Amount
Rate of Interest
Here Mr. Manoj Patel who was the owner of India Cement and
Pipe Private Limited Company. His annual income was rupees ten lack and
accordingly he pays the income tax every year. The party had the big & well
established business of cement pipes since last twenty years.
Reason for default:The party had taken a loan for the purchase of capital assets
like moldings machine, tools etc. After few days due to the major accident of
his car he was under the ventilator & finally died. As a result the bank could
not recover the dues.
Analysis:The basic problem here is that the bank should have taken
the nominee of borrower for the loan. Due to such insufficient documentation
the case was in default.
CASE-4
Customer Name
Type of Loan
Amount
Rate of Interest
Reason for defaulter:The party had taken a loan for his personal use. After
few days the person had lost his new job. Thus bank interest was not repaid
in time. The bank extended the time period for repayment, but the payment
still stands due. As a result there was no scope of recovery and thus case
stands under the list of defaulter.
CASE-5
Customer Name
Type of Loan
Amount
Rate of Interest
Reason for default:As the party has the agriculture as his business, had taken a
personal loan for purchase of tractor for further development of his farm. But
due to insufficient raining his business was badly affected and he was
continuously unable to pay interest for 1 year.
Analysis:The basic problem here was that the bank had taken the
risks while granting the loan, as his income is not that much to give him that
much amount of loan.
The reason for the rejection of loan file of a customer by the bank
can be understood by the following case studies:CASE-1
Customer Name
Type of Loan
-Personal Loan
a.
b.
c.
d.
PAN card
Salary slip
Light bill
Bank pass book
1. He has taken the home loan from the SBH bank loan in Baroda and he
is the defaulter because his 7 cheques were bounced continuously in
home loan of SBH bank.
2. He has lost the job.
Due to above reasons his file for the loan was rejected.
CASE-2
Customer Name
Type of Loan
-Personal Loan
As per document required for the personal loan following documents are
submitted by him.
a.
b.
c.
d.
e.
f.
PAN card
Light bill
Phone bill
IT return
Income statement
Bank pass book statement
CASE-3
Customer Name
Type of Loan
-Personal Loan
As per document required for the personal loan following documents are
submitted by him.
a.
b.
c.
d.
Income statement
Bank pass book statement for last year.
IT return.
PAN card.
Under such reasons his file for the loan was rejected by the bank.
CASE-4
Customer Name
Type of Loan
-Personal Loan
a.
b.
c.
d.
PAN card
Salary slip
Light bill
Bank pass book
Due to above reasons his file for the loan was rejected.
CASE-5
Customer Name
Type of Loan
-Personal Loan
As per document required for the personal loan following documents are
submitted by him.
a.
b.
c.
d.
Income statement
Bank pass book statement for last year.
IT return.
PAN card.
CHAPTER 8
OBSERVATIONS
AND FINDINGS
SUMMARY OF FINDINGS:-
From the above case studies of defaulters the following causes are
extracted:-
1.
2.
3.
4.
Some parties does not the job assurance & also about their stability.
Some of the parties do have the criminal record.
Some of the future contingencies & uncertainties are not considered.
Some of the parties do not have the capacity or capability to repay the
loan & also the EMI in time.
From the above case studies of rejections the following causes are
extracted:1. The party has the bad past record still applying for the loan.
2. Any suspended officer of the company applying for the loan.
3. The party had submitted insufficient documents to the bank &
expecting from the bank to sanction the loan.
4. The parties are defaulter of any other bank or institution.
5. The party does not have any deposits or banking transactions with any
other banks.
CHAPTER-9
CONCLUSIONS
After carrying out the case study and after speaking to some of
the customers who are the borrower of the personal loan from the SBH bank
we could conclude on following two parameters:-
history of the borrowers due to rush of completing year or month end target,
lack of checking future business prospects while sanctioning unsecured loans
(personal loans).
Overall Conclusion:After carrying out the detail study and the information collected
from the SBH bank the following conclusion were inferred.
CHAPTER-10
RECOMMENDATI
ONS AND
SUGGESTION
After doing the analysis and study of the personal loan of the STATE
BANK OF HYDRABAAD, I would like to suggest and recommend the
following points:-
BIBLIOGRAPHY
BIBLIOGRAPHY
Website Referred :-
www.bankofhyderabad.com
1. www.rbi.com
2. www.timesofindia.com
3. www.google.com