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Introduction of Co-operative



1.1 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

In short Bank perform the function of Exchange of money.

Types of Banking Institution: -

In India, there are two part of Banking: -
1 Organized Department: -
2 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%

1.2 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 Co-
operative 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 co-
operative 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.

1.3 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,

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 co-
operative, 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.

1.4 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
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
(3) State Co-operative Bank: -
These bank especially co-ordinates the activities of district central co-
operative banks and give them required direction. State co-operative bank is
a chain between co-operative activity and countrys money market.

State Co-operative Bank

Centralized Co-operative Bank

Primary Co-operative Mandali

Agriculture Non Agriculture

Mandali Mandali

1.5 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.


Introduction of Sarvodaya
Sahkari Bank Ltd.



2.1 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

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 its 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.

2.2 List of Board of Directors: -

Name Position
1. Mr. Maheshchandra R. Lakhwala President
2. Mr. Madhusudan N. Katargamwala Managing Director
3. Dr. Bharatbhai N. Shah Vice-President
4. Mr. Prafulchandra A. Shah Director
5. Mr. Vallabhabhai H. Patel Director
6. Dr. Kanaiyalal G. Mavani Director
7. Mr. Chadrakant N. Trivedi Director
8. Mr. Jayntilal M. Fudanwala Director
9. Smt. Dr. Jayaben B. Bhakta Director
10. Mr. Yogendra J. Parikh Director
11. Mr. Rameshchandra J. Reshamwala Director
12. Mr. Kanubhai H. Shah Director
13. Mr. Rajendrabhai M. Chokhawala Director
14. Mr. Mahendrabhai R. Kajiwala Director
15. Mr. Vipinbhai N. Shah Advisor

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

2.4 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. Name of the Party Amount

1 Shree Ambikaniketan Medical Trust, Surat. Rs.8,50,000/-
( Total Donation Rs.11,00,000/-)
2 National Institute for Women and child Rs.10,000/-
3 Shree Malchand Satlaniwala Seva Trust Rs.50,000/-
4 Sadhana Vidhyabhavan Rs.15,000/-
5 Girikunj Charitable Trust Rs.15,000/-
Total Rs.9,40,000/-
(Table 1)


Theoretical Background of



3.1 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.

3.2 Loan Procedure: -
Generally various banks adopt following procedure for loan.

Submit the Application

Appraisal of Loan


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 proprietors and loan borrowers
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 propertys 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 companys name otherwise if the
quotation of city area so at a time the co-operative bank made pay order of
companys 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.

3.3 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

Bank Loans

Short-term Medium Composite Cons-

Loans & Long- Loans umption
term loan Loans

(1) 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.

(3) 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.

3.4 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.

3.5 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

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

3.6 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


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

4) 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.

5) 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.

6) 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

7) Swarojgar Loan: -
Swa means him self and rojgar means employment. Swarojgar loans given
to self-employed persons for expansion to their business. Various self-
employed 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

8) 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.

9) Textile Upgradation Fund Scheme: -

Indian government has issued textile Upgradation fund scheme from 1-4-
1999 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

10) 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


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.


Comparative Study



7.1 Study of loan Sanctioned by Sarvodaya Bank & Varachha
Bank in 2001-02: -
Sr. No. Particular Sarvodaya Varachha
Bank Bank
1 Gold Loan 0.02% 6.10%
2 Personal Loan 0.76% 1.30%
3 Hypothecation Loan 26.49% 19.97%
4 Fixed Deposit Loan 6.97% 3.08%
5 NSC/KVP Loan 0.71% 0.77%
6 Cash Credit Loan 20.43% 30.17%
7 Self Employed Loan 0.10% 1.11%
(Table 2)

Loan Sanctioned in 2001-02













Sarvodaya Bank Varachha Bank

Name of Banks

Gold Loan Personal Loan Hypothecation Loan Fixed Deposit Loan

NSC/KVP Loan Cash Credit Loan Self Employed Loan

(Graph 1)

7.2 Study of loan Sanctioned by Sarvodaya Bank & Varachha
Bank in 2002-03: -
Sr. No. Particular Sarvodaya Varachha
Bank Bank
1 Gold Loan 0.04% 5.35%
2 Personal Loan 0.47% 0.90%
3 Hypothecation Loan 17.95% 16.30%
4 Fixed Deposit Loan 8.59% 3.47%
5 NSC/KVP Loan 0.99% 0.85%
6 Cash Credit Loan 23.10% 35.15%
7 Self Employed Loan 0.09% 0.86%
(Table 3)

Loan Sanctioned in 2002-03




25.00% 16.30%









Sarvodaya Bank Varachha Bank

Name of Banks

Gold Loan Personal Loan Hypothecation Loan Fixed Deposit Loan

NSC/KVP Loan Cash Credit Loan Self Employed Loan

(Graph 2)

7.3 Comparative Study of Interest Rate on loan of Sarvodaya
Bank & Varachha Bank: -
Sr. Particular Sarvodaya Bank Varachha Bank
Rate Rebate Net Rate Rebate Net
1 Gold Loan 15% Nil 15% 13% Nil 13%
2 Personal Loan 15% 2% 13% 14% 1% 13%
3 H.P. Loan 15% 2% 13% 14% 1% 13%
4 Fixed Deposit Loan FD+1% Nil FD+1% FD+2% Nil FD+2%
5 NSC/KVP Loan 11.5% Nil 11.5% 13% Nil 13%
6 Cash Credit Loan 15% Nil 15% 14% Nil 14%
7 Selfemployed Loan 15% Nil 15% 15% 2% 13%
(Table 4)

Net Interest rate


15% 15% 15%

15% 13% 13%
13% 13% 13% 13% 13%



Sarvodaya Bank Varachha Bank
Name of Banks

Gold Loan Personal Loan H.P. Loan

NSC/K VP Loan Cash Credit Loan Selfemployed Loan

(Graph 3)

7.4 Comparative Study of loan Amount of Sarvodaya Bank &
Varachha Bank: -
Sr. No Particular Sarvodaya Bank Varachha Bank
1 Gold Loan 50% of Valuation 50% of Valuation
2 Hypothecation Loan 75 % of Quotation 70% of Quotation
3 Fixed Deposit Loan 80% of Face Value 85% of Face Value
4 NSC/KVP Loan 70% of Face Value 85% of Face Value
5 Self Employed Loan 70% of Requirement 80% of Requirement
(Table 5)

Loan amount

85% 85%
80% 80%

80% 70% 70% 70%

60% 50% 50%



Sarvodaya Bank Varachha Bank
Name of Banks

Gold Loan Hypothecation Loan Fixed Deposit Loan

NSC/KVP Loan Self Employed Loan
(Graph 4)

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

Time Period


40 35
30 30
30 24 24 24 24
20 12 12
Sarvodaya Bank Varachha Bank
Name of Banks

Gold Loan Personal Loan H.P. Loan Cash Credit Loan Selfemployed Loan

(Graph 5)

7.6 Comparative Study of Recovery, Overdue and doubtful debt
of loan of Sarvodaya Bank & Varachha Bank: -
Sr. Particular Sarvodaya Bank Varachha Bank
Recovery Overdue Debt Recovery Overdue Debt
1 Short-term 94% 5.8% 0.2% 78% 10.5% 11.5%
2 Medium-term 97% 2.9% 0.1% 91% 3% 6%
3 Long-term 98% 2% -- 92% 6% 2%
4 Total Loan 96% 3.7% 0.3% 87% 6.5% 6.5%
(Table 7)

Overdue & Debt

Recovery (Graph 6)
(Graph 7)

12.00% 94%97%
98% 96%
10.00% 91%92%





Sarvodaya Bank Varachha Bank
Name of Banks Debt

Short-term Short-term
Medium-term MLong-term
T otal Loan Long-term Total Loan



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.



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 self-
employed 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



Name of book Author Publisher

Banking Law & Transaction T.J. Rana, B.S. Shah

J.B. Shah & Other

Banking Theory & Practice P.K. Shriwastav Himalaya

Banking Theory & Practice Gordon & Natrajan Himalaya

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

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




Liabilities Rs. Assets Rs.

1. Share Capital 5,00,00,000=00 1. Balance on Hand 1,64,51,935=65
1.Authorised 2. Bank Balance 43,60,47,313=72
capital 5,00,000 3. Short Term & Call 5,00,00,000=00
(each share price is Deposit
Rs.100/-. 4. Investments 45,79,36,960=00
2.Paid-Up Capital 2,70,80,900=00 5.Main/Secondary -------------------
2. Reserve Fund Partnership funds
And Other Re- 6. Loans (86,05,33,985=29)
serves (1)Short Term Loan,
1.Reserve Fund 3,34,90,099=00 Cash Credit,O.D. & Bills
2.Co-Ordination 8,00,000=00 Of Exchange
Advertise Fund (a)Government Loans
3.Loan Bonus Fund ------------------- NSC/KVP 20,04,558=11
4.Donationfund 3,80,000=00 RBI/Bond/LIC/UTI 8,79,750=00
5.Doubtful Debt 5,81,00,000=00 (b)Other Investment
und Gyro Loans 21,74,488=76
6.Dividend Equivili- 24,00,000=00 Fixed Term Loan 1,86,76,591=09
sation Fund Bills Discount -------------------
7.Building Fund 1,40,00,000=00 (c)Unsecured 46,30,668=80
8.Development 3,00,000=00 (d)Cash Credit 11,26,70,503=10
Fund (e)CPCS Limit 8,60,86,609=00
9.Building Depre- 58,80,701=00 (f)Roll Over Excise -------------------
ciation Fund Duty
10.Income tax 11,00,000=00 (g)Consortium Advance 15,00,00,000=00
Reserve Fund (h)Bill Purchase 2,00,000=00
11.Investment 2,05,00,000=00 Date Over Amount 2,41,95,856=93
Depreciation Fund Guessing Debt And 50,00,554=75
12.Bank Silver 7,00,000=00 Doubtful Debt
Jubilee Fund
13.Share holder Gift 17,00,000=00 (2)Medium Term Loan
And Other Fund (a)Government Loans
14. 15 % Credit 6,15,000=00 NSC/KVP 65,56,251=40
Equivilisa-tion Fund RBI/Bond/LIC/UTI 1,63,99,056=60
15.Investment 25,00,000=00 (b)Other Investment
Fluctuation Fund Joint Stock Companys 8,56,809=20
3.Main/ Secondary ------------------- Share
Partnership Fund H.P. Loan 15,44,50,666=00
4.Funds Fixed Loan 5,52,09,474=88

1.Fixed Deposits 55,12,19,399=30 Gold Loan 1,78,839=00
2.Cash Certificate Gyro Loan 4,07,04,764=45
a.Six Yearly 29,000=00 TUFS Loan 16,47,56,274=50
b.Ten Yearly 1,35,14,704=00 Housing Loan 34,19,527=00
c.Dasabadi 11,35,400=00 Unsecured Loan 81,74,371=55
Certificate (c)Self Surety 40,55,342=25
3.Golden Monthly 3,47,01,600=00 Swarojgar Loan 8,01,930=00
Income Plan (d)Gyro Of Industrial
4.Saliyana Matured 12,66,028=00 Shade
Deposits Date Over Amount 4,70,01,923=10
5.Sarvodaya Shree- 2,14,17,940=00 Guessing Debt And Dou- 5,36,73,172=23
nidhi Parivar Yogna btful Debt
6.Sarvodaya Vikas 23,16,61,324=50 (3)Long Term Loan
Patra (S.V.P.) (a)Government Loans
7.Pletinum Certifi- 4,78,53,023=00 NSC/KVP -------------------
cate RBI/Bond/LIC/UTI -------------------
8.Azadi Suvarna 5,44,07,785=16 (b)Other Investment
Jayanti Certificate Gyro Loan 25,22,938=00
9.Auto Renewal 1,24,95,377=00 F.D.,O.D. 15,35,318=50
Deposit Housing Loan 2,05,78,719=10
10.Flexi Deposit 6,21,29,363=00 (c)Self Surety
11.Compound 62,79,024=00 Date Over Amount 7,85,369=00
Interest Scheme Guessing Debt And Dou- 15,23,537=00
12.Saving Deposit btful Debt
(a)Cheque 17,75,43,231=16
System Savings 7.Interest Accure on 2,41,32,016=00
(b)Savings 1,42,33,547=53 Deposits and Invest-
(c)N.R.I. Savings 4,85,353=50 ment
Deposit 8.Interest Accure on 2,81,85,346=28
13.Current Deposit 16,55,39,434=40 Loans
14.Lokar Key Sys- 21,72,313=30 9.Bills Receivable 49,19,131=63
tem 10.Branches Adjust- -------------------
5.Liabilities ment
1.Reserve Bank Of ------------------- 11.Building (After De- 2,54,08,871=00
India (RBI) preciation)
2.Gujarat State Co- 1,90,43,600=00 12.Safe, Furniture & 1,63,75,859=58
Operative Bank Ltd. Fixtures
(Sidbi Refinance) (Furniture,Dead Stock,
3.The Surat District 50,802=00 Computers & Machinery)
Co - Operative Bank (After Depreciation)
Limited. 13.Other Preliminary
6.Bills For Collec- 49,19,131=63 Expenses
tion 1.T.D.S. On Deposit 8,18,965=00
7.Branches Adjust- ------------------- Interest
ments 2.Library 13,038=50
8.Unpaid Interest 2,53,00,455=28 3.Stationary Stock,com- 6,06,082=10

Reserve puter, Stationary & Stock
9.Outstanding 27,91,15,944=70 4.Stamp On Document 18,885=00
Interest 5.volt For Deposit -------------------
10.Other Liabi- 6.Clearing House 2,78,604=00
lities 7.Prepaid Expenses 4,54,654=00
1.Sundry Debtors 4,88,727=50 8.Festival Advance 5,54,000=00
2.Miscellaneous 1,18,16,673=05 (Staff)
3.Dividend 11,47,587=35 9.Income Tax 15,17,494=00
4.Unpaid Tax 2,00,487=00 10.Clearing Difference -------------------
5.Other Liabilities 18,13,684=00 11.Clearing Adjustment 6,34,809=53
11.Profit & Loss 12.Building Renovation -------------------
Profit Of Year 1,24,98,866=63 13.Building Deposit -------------------
2001-2002 14.Advance Income Tax 10,00,000=00
Less:- Distribution 1,24,98,447=60
Add :- Profit Of 1,43,59,891=69
Year 2002-03
1.Given Surety 14,80,000=00
2.Other -------------------

1,92,58,87,951=28 1,92,58,87,951=28