CHAPTER – 1

INTRODUCTION
 • INTRODUCTION

One of the primary functions of the commercial bank is lending. Through lending
commercial banks meet their objective of making profits. The deposits collected from the
public cannot be kept idle. It has to be utilized in order to derive benefits out of it. The bank
collects deposits with the objective of lending and makes profit out of the interest received
and paid. Their main aim is to deal in money and provide for those who need it. The banker
performs the job of lending within the framework of statutes governing the banking business,
the government policy and guidelines issued by the authorities of the country (RBI in India).
Its likely that people have been practicing lending and borrowing for as long
as there has been a concept of ownership. The history of loans can be documented atleast
several thousand years back. Forms of lending were evident in ancient Greek and Roman
times and monetary loans were even mentioned in religious books. The modern loans started
much later than these ancient times. Therefore lending has its origin in much older times.

In 1949, the BANKING REGULATION ACT defines banking as

“ACCEPTING FOR THE PURPOSE OF LENDING OR INVESTMENT, OF DEPOSITS
OF MONEY FROM THE PUBLIC, REPAYABLE ON DEMAND.”
The core function of commercial banks is granting of credit. Although
banks offer a wide spectrum of financial services, lending has traditionally been their main
function. Banks profess experience, expertise and flexibility in lending which gives them a
clear competitive advantage over other financial institutions. Lending of funds to
businessmen, traders and industrial enterprises is one of the most important activity of a
commercial bank.

The term “LOAN” refers to the amount borrowed by one person from
another. The amount is in the nature of loan and refers to the sum paid to the borrower. Thus,
from the point of view of the borrower it is ‘borrowing’ and for the bank it is ‘lending’. Loan
may be regarded as ‘credit’ granted where the money is disbursed and its recovery is made on
a later date. It is a debt for the borrower. While granting loans, credit is given for a definite
purpose and for a predetermined period. Interest is charged on the loan at an agreed rate and
intervals of payments.
‘ADVANCE’ is a ‘credit facility’ granted by the bank. Banks grant advances for short term
purposes, such as purchase of goods traded in and meeting other short term trading liabilities.
There is a sense of debt in loan whereas an advance is a facility being availed of by the
borrower. Like loans, advances are also repaid. In the present lesson these two terms are used
interchangeably.
 1.2 NEED AND IMPORTANCE OF THE STUDY

In the era of growing importance of financial status, there is an increased

importance for various financial institutions which provide such loans.

Everyone needs money at every stage of their life. Sometimes it so happens

that they have keen desire to purchase their favourite stuff but they are incapable to purchase
due to shortage of money.

Here lies a question that a person who does not have a good amount of money
at particular time has no right to see dreams? Is he not authorized to fulfill his desires on
time? Should he stop dreaming? No, because there is solution for these queries. Loans are
available for these purposes only.

Loans are provided to people for such critical circumstances which may occur
at any time. In anyone's life a situation may come when all of sudden you require cash. A
moment when you do not want to borrow cash from your relatives.

There may occur any kind of emergency when you need huge amount of
money. There are various types of loans like home loans, personal loans, student loan,
business loan etc. You can take any type of loan you need. For each and every kind of need,
loans are available.
 1.3 OBJECTIVES OF THE STUDY

The study has been undertaken with the following objectives.

• To understand banks loans and advances in detail at syndicate bank.

• To find out the sources of borrowings and mobilization of loans.

• To know the terms and conditions laid down by the banks for sanction of loans.

• To analyze loan and advances giving aspect of SYNDICATE BANK.

 1.4 SCOPE OF THE STUDY

The study is undertaken at SYNDICATE BANK. The scope is limited to the

extent of details study of various lending schemes at SYNDICATE BANK. Disbursement
analysis is done in case of important lending schemes for the past 5 years.

• The study is mainly concentrated on the lending practices pattern and influence in the
organization’s performance.

• To know more about the loans and advances which help us to explore future
prospects.
 1.5 RESEARCH METHODOLOGY

The data collection method include only secondary data.

SOURCES:

• The data was collected from personal observation of records.

• The pamphlets provided by the bank.
• The brochures and annual records provided by the bank.
• Various books relating to loans, advances and other related topics.
• Official website of the company
• Internet

1.6 DATA ANALYSIS TECHNIQUES AND TOOLS

The techniques or tools used for data analysis of the study are-
 Bar graphs
 Tables
 1.6 LIMITATIONS OF THE STUDY

• The study is limited to the loans and advances schemes under SYNDICATE BANK.

• Due to the limited period of study it may not be detailed.

• Getting valid data was a problem due to the sensitivity of the data provided.

• Time was one of the constraints during the study. The period of study is of 5 yrs.

• The study is limited to one branch of SYNDICATE bank.

 CHAPTER -2
REVIEW OF LITERATURE
LITERATURE SURVEY

This article is about the 2016 decision to demonetize 500- and 1000-rupee banknotes. It is
not to be confused with The High Demonetization Bank Notes (Demonetization) Act, 1978.

On 8 November 2016, the Government of India announced the demonetization of

all ₹500 (US$7.40) and ₹1,000 (US$15) banknotes of the Mahatma Gandhi Series.[2] The
government claimed that the action would curtail the shadow economy and crack down on
the use of illicit and counterfeit cash to fund illegal activity and terrorism.[3][4]The sudden
nature of the announcement—and the prolonged cash shortages in the weeks that followed—
created significant disruption throughout the economy, threatening economic output.[5][6] The
move was heavily criticized as poorly planned and unfair, and was met with protests,
litigation, and strikes.

Prime Minister of India Narendra Modi announced the demonetization in an unscheduled live
televised address at 20:00 Indian Standard Time (IST) on 8 November. In the announcement,
Modi declared that use of all ₹500 and ₹1000 banknotes of the Mahatma Gandhi
Series would be invalid past midnight, and announced the issuance of new ₹500
and ₹2000 banknotes of the Mahatma Gandhi New Series in exchange for the old banknotes.

The BSE SENSEX and NIFTY 50 stock indices fell over 6 percent on the very next day after
the announcement.[9]In the days following the demonetization, the country faced severe cash
shortages with severe detrimental effects across the economy. People seeking to exchange
their bank notes had to stand in lengthy queues, and several deaths were linked to the
inconveniences caused due to the rush to exchange cash.

Initially, the move received support from several bankers as well as from some international
commentators. It was heavily criticized by members of the opposition parties, leading to
debates in both houses of parliament and triggering organized protests against
the government in several places across India. The move is considered to have reduced the
country's GDP and industrial production. As the cash shortages grew in the weeks following
the move, the demonetization was heavily criticized by prominent economists and by world
media

Background

The Indian government had demonetized bank notes on two prior occasions—once in 1946
and then again in 1978—and in both cases, the goal was to combat tax evasion by "black
money" held outside the formal economic system. In 1946, the pre-independence government
hoped demonetization would penalize Indian businesses that were concealing the fortunes
amassed supplying the Allies in World War II. In 1978, the Janata Party coalition government
demonetized banknotes of 1000, 5000 and 10,000 rupees, again in the hopes of
curbing counterfeit money and black money.

In 2012, the Central Board of Direct Taxes had recommended against demonetization, saying
in a report that " demonetization may not be a solution for tackling black money or economy,
which is largely held in the form of benami properties, bullion and jewellery." According to
data from income tax probes, black money holders kept only 6% or less of their wealth as
cash, suggesting that targeting this cash would not be a successful strategy.

On 28 October 2016 the total banknotes in circulation in India was ₹17.77

trillion (US$260 billion). In terms of value, the annual report of Reserve Bank of India (RBI)
of 31 March 2016 stated that total bank notes in circulation valued to ₹16.42
trillion (US$240 billion) of which nearly 86% (around ₹14.18 trillion (US$210 billion)) were
₹500 and ₹1,000 banknotes. In terms of volume, the report stated that 24% (around 22.03
billion) of the total 90266 million banknotes were in circulation.

In the past, the Bharatiya Janata Party (BJP) had opposed demonetization. BJP
spokesperson Meenakshi Lekhi had said in 2014 that "The aam aurats and the aadmis
(general population), those who are illiterate and have no access to banking facilities, will be
the ones to be hit by such diversionary measures."

In June, the Government of India had devised the Income Declaration Scheme, that lasted till
30 September 2016, providing an opportunity to citizens holding black money and
undeclared assets to avoid litigation and come clean by declaring their assets, paying the tax
on them and a penalty of 45% thereafter.

Procedure
The plan to demonetize the ₹500 and ₹1000 bank notes began six to ten months prior, and
was kept highly confidential with only about ten people aware of it completely. The logistical
processes and preparations for printing the new ₹500 and ₹2000 bank notes began in early-
May. The cabinet was informed about the demonetization on 8 November 2016 in a meeting
called by the Prime Minister of India Narendra Modi which was followed by Modi's public
announcement about the demonetization in a televised address.

Televised address

On 8 November 2016, Prime Minister of India Narendra Modi announced the demonetization
in an unscheduled live televised address to the nation at 20:15 IST.[7][8] In the announcement,
Modi declared circulation of all ₹500 and ₹1,000 banknotes of the Mahatma Gandhi Series as
invalid effective from the midnight of the same day, and announced the issuance of new ₹500
and ₹2,000 banknotes of the Mahatma Gandhi New Series in exchange for the old banknotes.

After Modi's announcement, the Governor of the Reserve Bank of India, Urjit Patel, and
Economic Affairs secretary, Shaktikanta Das explained in a press conference that one
purpose of the action was to fight terrorism funded by counterfeit notes. While the supply of
notes of all denominations had increased by 40 percent between 2011 and 2016, the ₹500 and
₹1,000 banknotes increased by 76 percent and 109 percent, respectively, owing to forgery.
They said that forged cash was used to fund terrorist activities against India and that the
demonetization had a counter-terrorism purpose.

Patel also informed that the decision had been made about six months ago, and the printing of
new banknotes of denomination ₹500 and ₹2,000 had already started. However, only the top
members of the government, security agencies and the central bank were aware of the move.
But media had reported in October 2016 about the introduction of ₹2,000 denomination well
before the official announcement by RBI. This statement has led to much debate, because the
Reserve Bank governor six months before the announcement was Raghuram Rajan, while the
new banknotes have the signature of the newly appointed governor, Urjit Patel.

Government ordinance

The Specified Bank Notes (Cessation of Liabilities) Ordinance, 2016 was issued by the
Government of India on 28 December 2016 ceasing the liability of the government for the
banned bank notes, and also imposing a fine upto ₹10,000 or five times the amount of the
face value of the bank notes, whichever is higher, for people transacting with them after 8
November 2016; or holding more than ten of them after 30 December 2016. The ordinance
also provided for the exchange of the bank notes after December 30 for non-resident citizens
and others on a case by case basis.

However, Petrol, CNG and gas stations, government hospitals, railway and airline booking
counters, state-government recognised dairies and ration stores, and crematoriums were
allowed to accept the banned ₹500 and ₹1,000 bank notes until December 2, 2017.

Exchange of old notes

People gathered at ATM of Axis Bank in Mehsana, Gujarat to withdraw cash following
deposit of demonetized currency notes in bank on 15 November 2016.

The Reserve Bank of India stipulated a window of fifty days until 30 December 2016 to
deposit the demonetized banknotes as credit in bank accounts. The banknotes could also be
exchanged over the counter of bank branches upto a limit that varied over the days:

• Initially, the limit was fixed at ₹4,000 per person from 8 to 13 November.

• This limit was increased to ₹4,500 per person from 14 to 17 November.

• The limit was reduced to ₹2,000 per person from 18 November.

All exchange of banknotes was abruptly stopped from 25 November 2016.

International airports were also instructed to facilitate an exchange of notes amounting to a

total value of ₹5,000 for foreign tourists and out-bound passengers.

Facts and figures

Up to 97% of the demonetized bank notes have been deposited into banks which have
received a total of ₹14.97 trillion ($220 billion) as of December 30 out of the ₹15.4 trillion
that was demonetized. This is against the government's initial estimate that ₹3 trillion would
not return to the banking system.

Of the ₹15.4 trillion demonetized in the form of ₹500 and ₹1000 bank notes of the Mahatma
Gandhi Series, ₹9.2 trillion in the form of ₹500 and ₹2000 bank notes of the Mahatma
Gandhi New Series has been recirculated as of 10 January 2017, two months after the
demonetization [45]

Currency demonetized on 8 Nov '16

Currency issued as of 18 Nov '16
Currency issued as of 28 Nov '16
Currency issued as of 7 Dec '16
Currency issued as of 21 Dec '16
Currency issued as of 10 Jan '17

Withdrawal limits

Cash withdrawals from bank accounts were restricted to ₹10,000 per day and ₹20,000 per
week per account from 10 to 13 November. This limit was increased to ₹24,000 per week
from 14 November 2016.

A daily limit on withdrawals from ATMs was also imposed varying from ₹2,000 per day till
14 November, and ₹2,500 per day till 31 December. This limit was increased to ₹4,500 per
day from January 1, and again to ₹10,000 from January 16, 2017. Limits placed vide the
circulars cited above on cash withdrawals from Current accounts/ Cash credit accounts/
Overdraft accounts stand withdrawn with immediate effect. The limits on Savings Bank
accounts will continue for the present and are under consideration for withdrawal in the near
future. Limits vide the circulars cited above placed on cash withdrawals from ATMs stand
withdrawn from February 01, 2017. However, banks may, at their discretion, have their own
operating limits as was the case before November 8, 2016, subject to 2 (ii) above.

Exceptions

Under the revised guidelines issued on 17 November 2016, families were allowed to
withdraw ₹250,000 for wedding expenses from one account provided it was KYC compliant.
The rules were also changed for farmers who are permitted to withdraw ₹25,000 per week
from their accounts against crop loans.

Prior leakage of information

A fortnight before the official announcement, a news report in the Hindi daily Dainik
Jagran quoting RBI sources mentioned about the coming release of new 2000 rupee note
alongside withdrawal of 500 and 1000 rupee notes. Similar news came in The
Hindu Business Line on 21 October 2016 which also mentions about coming 2000 rupee note
and about possible withdrawal of 500 and 1000 rupee notes.

A businessman reportedly admitted in an interview that he had received prior warning of the
impending demonetization from a source in the government, and that he had sufficient time
to convert most of his money into smaller denominations.
The chairman of the State Bank of India had also openly spoken in April 2016 about the
possibility of demonetization of ₹500 and ₹1000 notes.

A BJP MLA from Rajasthan, Bhawani Singh Rajawat, claimed in a video that
'Ambani and Adani' were informed about the demonetization, and made arrangements.
However, he later said that it was an off-the-record conversation, and officially denied the
comments.

Allegations and claims

The Communist Party of India (Marxist) (CPM) alleged that the BJP unit in West Bengal had
advance knowledge about the impending announcement, and deposited money just before the
announcement. Aam Aadmi Party leader Arvind Kejriwal also claimed that there had been
some leakage regarding the move. Kejriwal questioned how Sanjeev Kamboj, a BJP leader
in Punjab, posted about the ₹2000 notes days before the official announcement, and alleged
that a sudden spike in bank deposits between July and September 2016 was also due to
information leakage. The Congress party demanded a probe into this huge jump in bank
deposits before the demonetization.

Nitish Kumar, Arvind Kejriwal and Rahul Gandhi alleged that the BJP made large purchases
of land in Bihar ahead of the demonetization because they had prior information.

More than 30 politicians belonging to the BJP were arrested and investigated for having
unaccounted money in the new 2000 rupee denomination.

April fool’s joke

Seven months before the announcement, the Gujarati newspaper Akila published an article
that "announced" the demonetization of 500 and 1000 rupee notes. The editor of the
newspaper claimed that it was only an April fools day prank. The article contained many
details that matched the actual announcement in November, including the creation of new
₹2000 notes. The coincidence received wide coverage, and was called "mystical" and
"uncanny."

Reactions

Support

The decision met with mixed initial reactions. Several bankers like Arundhati
Bhattacharya (Chairperson of State Bank of India) and Chanda Kochhar (MD & CEO
of SYNDICATE Bank) appreciated the move in the sense that it would help curb black
money. Businessmen Anand Mahindra (Mahindra Group), Sajjan Jindal (JSW Group), Kunal
Bahl (Snapdeal and FreeCharge) also supported the move adding that it would also accelerate
e-commerce. Infosys founder N. R. Narayana Murthy praised the move.

Finance Minister Arun Jaitley said that demonetization would clean the complete economic
system, increase the size of economy and revenue base. He mentioned the demonetization
along with the upcoming Goods and Services Tax (GST) as "an attempt to change the
spending habit and lifestyle."

The Indian National Congress spokesperson Randeep Surjewala welcomed the move but
remained sceptical on the consequences that would follow.[81] Chief Minister of Bihar Nitish
Kumar supported the move. The demonetization also got support from Chief Minister of
Andhra Pradesh Nara Chandrababu Naidu. Former Chief Election Commissioner of India S.
Y. Quraishi said demonetization could lead to long term electoral reforms.[88] Indian social
activist Anna Hazare hailed demonetization as a revolutionary step.[89][90][91] The President of
India Pranab Mukherjee welcomed the demonetization move by calling it bold step. The
opinion of the masses varied both ways on micro-blogs and social media sites like Twitter.

By and large, international response was positive which saw the move as a bold crackdown
on corruption. International Monetary Fund (IMF) issued a statement supporting Modi's
efforts to fight corruption by the demonetization policy.

Chinese state media Global Times praised the move and termed it as "fierce fight against
black money and corruption."[98] Former Prime Minister of Finland and Vice-President of
European Commission Jyrki Katainen welcomed the demonetization move stressing that
bringing transparency will strengthen Indian economy. BBC's South Asia
Correspondent Justin Rowlatt in his article praised the move for its secrecy and success and
elaborated on reason behind demonetization. Tim Worstall termed the demonetization as
welcome macroeconomic effect in his article in Forbes magazine. Swedish Minister of
Enterprise Mikael Damberg supported the move by calling it bold decision.

Singapore-based paper The Independent published a laudatory article on the move titled
"Modi does a Lee Kuan Yew to stamp out corruption in India." Lee Kuan Yew was the
Singaporean Prime Minister and is considered the architect of modern Singapore. "From
making up his mind to rolling it out, a new Lee Kuan Yew is born in India. It will be reflected
in the legacy of this Prime Minister," the article said.

Criticism
The Indian Supreme Court while hearing one among a slew of cases filed against the sudden
demonetization decision in various courts, observed that it "appears to be carpet bombing and
not surgical strike" which government repeatedly claims it to be.

Nobel laureate Indian economist Amartya Sen, severely criticised the demonetization move
calling it a "despotic action" among other things.

Former Senior Vice-President and Chief Economist of the World Bank, Kaushik Basu, called
it a 'major mistake' and said that the 'damage' is likely to be much greater than any possible
benefits.

Pronab Sen, former Chief Statistician and Planning Commission of India member, called it a
"hollow move" since it did not really address any of the purported goals of tackling black
money or fake currency.

Prabhat Patnaik, a former professor of economics at the Jawaharlal Nehru University,

Delhi called the move 'witless' and 'anti-people'. He criticised the simple way in which black
money was assumed as "a hoard of cash", saying that it would have little effect in eliminating
"black activities" while "causing much hardship to common people."

Noted economist and journalist, T. N. Ninan wrote in the Business Standard that
demonetization 'looks like a bad idea, badly executed on the basis of some half-baked
notions'. Deepak Parekh (Chairman of HDFC) had initially appreciated the decision to ban
the Rs. 500 and Rs. 1000 notes, but later said that the move had derailed the economy, and
expressed skepticism about its outcome. Industrialist Rajiv Bajaj criticized the
demonetization, saying that not just the execution, but the concept of demonetization was
wrong in itself.

Chief Ministers of several Indian states like Mamata Banerjee,[118] Arvind

Kejriwal and Pinarayi Vijayan have criticized and led major protests against the decision in
their states and in parliament. Initially, the move to demonetize and try to hinder black money
was appreciated, but the manner in which it was carried out by causing hardships to common
people was criticized. A Public Interest Litigation (PIL) was filed in Madras High Court by
M Seeni Ahamed, General Secretary of the Indian National League, to scrap the decision.
The High Court dismissed the PIL stating that it could not interfere in monetary policies of
the government.[122] Similar PILs were also filed in the Supreme Court of India.[123] Supreme
Court of India is yet to decide on the matter. It is listed for hearing on 2 December 2016.
Several government ministers had declared before the demonetization that they were holding
large amounts of cash, including Arun Jaitley, who had more than 65 lakh rupees in cash.
This led to speculation about whether and when the ministers had deposited the cash they
held.

Steve Forbes described the move as 'Sickening And Immoral'. He stated that "What India has
done is commit a massive theft of people's property without even the pretense of due process-
-a shocking move for a democratically elected government." Nobel laureate Paul
Krugman said that it is difficult to see gains from demonetization, while there may be
significant costs to it.

The demonetization also came in for sharp criticism from media outside India, with the New
York Times saying that the demonetization was "atrociously planned" and that it did not
appear to have combatted black money, while an article in The Guardian stated that "Modi
has brought havoc to India".The Harvard Business Review called it "a case study in poor
policy and even poorer execution" The frequent change in the narrative on objectives of the
demonetization to its visible impact on the poorest of the poor made other critiques calling
government's narrative as spins in view of the "pointless suffering on India's poorest."

Opposition

A Congress-led opposition which includes 13 political parties, opposed the current

government on the demonetization issue in the Winter Session of the Indian Parliament on 16
November 2016. The Chief Minister of West Bengal Mamata Banerjee also met the
President Pranab Mukherjee to oppose the demonetization.[134][135][136][137][138][139] The debate
on demonetization is known to be initiated by Indian National Congress[140] and Anand
Sharma in the Rajya Sabha on 16 November 2016, while Banerjee is known to be the first to
oppose the current government on the demonetization.

On 16 November 2016, Banerjee led a rainbow delegation comprising political parties

of Trinamool Congress, Aam Aadmi Party, BJP ally Shiv Sena, Patidar Anamat Andolan
Samiti (of Hardik Patel) and National Conference to Rashtrapati Bhawan to protest against
the decision to withdraw the ₹500 and ₹1000 banknotes. A memorandum was submitted to
the President of India Pranab Mukherjee demanding rollback of the decision.[144] Outside the
Parliament in a rally the same day, Saugata Roy, a member of parliament from the
opposition Trinamool Congress Party, commented, "People are in utter distress, especially
the informal sector is totally disrupted. Poor people, daily wage earners, they're all facing
difficulty."

In the demonetization debate on the first day of the winter session of Parliament at the Rajya
Sabha, Pramod Tiwari from the Indian National Congress compared Narendra
Modi to Benito Mussolini, Adolf Hitler and Muammar Gaddafi.[145] Prem Chand Gupta, a
member of the Rashtriya Janata Dal, questioned a statement of Modi from the unscheduled
TV broadcast on 8 November, "If it was planned 10 months ago, how did RBI Governor Urjit
Patel sign on new note?". Praful Patel, a member of the Nationalist Congress Party, stated
that "the government was not even prepared to recalibrate the ATMs while announcing the
move. People's suffering are unimaginable. Nobody is questioning the government's
intention, but you are unprepared to execute the move". Later, the former Chief Minister of
Uttar Pradesh Mayawati Prabhu Das stated the situation to "a financial emergency", by
saying "It looks as if Bharat has shut down." Also, Sitaram Yechury from Communist Party
of India, questioned the government on the demonetization move by stating "only 6% of
black money in India is in cash to drive his point that demonetization won't curb illicit
wealth."

On 17 November 2016, in a rally against demonetization of ₹500 and ₹1000 notes, led by
the Chief Minister of Delhi Arvind Kejriwal and his West Bengal counterpart Mamata
Banerjee at Azadpur Mandi, the biggest vegetable and fruits wholesale hub in the national
capital; Kejriwal demanded the withdrawal of demonetization in 3 days. Banerjee also stated
"I give the government 3 day ultimatum, fix things or withdraw the demonetization
scheme".[147]

In the demonetization debate on the second and third day of the Winter Session of
Parliament, on 17 and 18 November 2016, the opposition and the government clashed over
the demonetization issue, bringing the house to continuous halts.

On 24 November 2016, in the demonetization debate, the former prime minister of

India Manmohan Singh said "this scheme will hurt small industries, the farming sector. The
GDP can decline by about 3 per cent due to this move", while he also questioned "I would
like to ask the Prime Minister examples of countries where people have deposited their
money in the banks and not allowed to withdraw their own money." and later also said "It is
no good that on each day banks bring out new notifications. It doesn't reflect properly on
Prime Minister's Office, Finance Minister and the Reserve Bank of India. Cooperative
banking system has been prevented from handling cash". Singh at last termed the
demonetization move as an "organized loot, legalized plunder of the common people".

Strikes

As the demonetization was opposed in both houses of the parliament, it triggered

organised nationwide strikes across India. Opposition parties like Indian National
Congress, Bahujan Samaj Party, Trinamool Congress, DMK, JD(U), AIADMK, Nationalist
Congress Party, Left, Rashtriya Janata Dal and the Samajwadi Party decided to observe
‘Akrosh Diwas’ as, a protest campaign day on November 28 and launch protests in front of
banks, demanding that money be returned to people. In the state of Bihar, 15 trains were
blocked and stranded, while the states of West Bengal, Maharashtra and Uttar Pradesh saw
protest marches and rallies led by opposition parties. In the state of Kerala, shops and
business establishments were shut, with school and colleges closed throughout the state,
while movements of private vehicles were also disrupted in Northern Kerala.

The Congress party has decided to launch a nationwide movement to expose the "biggest
scam" of independent India, said spokesperson leader Randeep Surjewala on 31 December
2016. The first phase would take place from January 1–10, second phase from January 11–20
and third phase from January 20–30.

Positive effects

Human trafficking

Nobel laureate Kailash Satyarthi and others working to fight human trafficking said that the
note ban had led to a huge fall in sex trafficking. Satyarthi said the demonetization would be
effective in combating exploitation of children as well as corruption and would be a great
obstacle to traffickers. However, 2 months later he expressed his disappointment on Rs 2000
notes being pushed into human trafficking in absence of other concrete steps.

Radical groups

The Demonetization has badly hit Maoist and Naxalites as well. The surrender rate has
reached its highest since the demonetization is announced. It is said that the money these
organizations have collected over the years have left with no value and it has caused them to
reach to this decision.

The move also reportedly crippled Communist guerrilla groups (Naxalites) financing through
money laundering. On 10 November the police arrested a petrol pump owner at Ranchi when
he reportedly tried to deposit ₹2.5 billion, belonging to a person affiliated with the
banned Communist Party of India (Maoist). According to Chhattisgarh Police demonetization
has affected the Naxalite activities. It is reported that insurgents have stashed more than
₹70 billion in the Bastar region.

While Manohar Parrikar claimed that the move has also helped in reducing the incidents of
stone-pelting in the Kashmir valley, his claim has been disputed.

Hawala

Mumbai Police reported a setback to Hawala operations. Hawala dealers in Kerala were also
affected. The Jammu and Kashmir Police reported the effect of demonetization on hawala
transactions of separatists.

Railways

As of November 2016, Indian Railways did not have the option to make payment with cards
at the counters. After the demonetization move, the government announced to make card
payment options available at railway counters in the country. The railways placed an order
for 10,000 card reader machines in January 2017.

Negative effects

Cash shortage
Queue at an ATM for ₹100 banknotes in Howrah, on 8 November 2016, 22:23 (IST)

The scarcity of cash due to demonetization led to chaos, and most people holding old
banknotes faced difficulties exchanging them due to endless lines outside banks and ATMs
across India, which became a daily routine for millions of people waiting to deposit or
exchange the ₹500 and ₹1000 banknotes since 9 November. ATMs were running out of cash
after a few hours of being functional, and around half the ATMs in the country were non-
functional. Sporadic violence was reported in New Delhi, but there were no reports of any
grievous injury, people attacked bank premises and ATMs, and a ration shop was looted
in Madhya Pradesh after the shop owner refused to accept ₹500 banknotes.
The CMD of Punjab National Bank said that panic after demonetization started fading on 19
November 2016. As of 18 December 2016, there were still long queues at banks and ATMs.
Three months after the withdrawal of banknotes, a quarter of the ATMs were still short of
cash.

Deaths

Several people were reported to have died from standing in queues for hours to exchange
their old banknotes. Deaths were also attributed to lack of medical help due to refusal of old
banknotes by hospitals. As of 15 November 2016, the attributed death toll was 25. and 33
deaths as of 18 November. In an interview, Chief Minister of Delhi Arvind Kejriwal lashed
out at a BBC reporter who asked him to justify his 19 November claim that 55 deaths were
linked to demonetization. By the end of the year, opposition leaders claimed that over 100
people had died due to demonetization.

Stock market crash

As a combined effect of demonetization and US presidential election, the stock market

indices dropped to an around six-month low in the week following the announcement. The
day after the demonetization announcement, BSE SENSEX crashed nearly 1,689 points
and NIFTY 50 plunged by over 541 points.[9] By the end of the intraday trading section on 15
November 2016, the BSE SENSEX index was lower by 565 points and the NIFTY 50 index
was below 8100 intraday.

Transportation halts

After the demonetization was announced, about 800,000 truck drivers were affected with
scarcity of cash, with around 400,000 trucks stranded at major highways across India were
reported. While major highway toll junctions on the Gujarat and Delhi-Mumbai highways
also saw long queues as toll plaza operators refused the old banknotes.

Nitin Gadkari, the Minister of Transport, subsequently announced a suspension of toll

collections on all national highways across India until midnight of 11 November, later
extended until 14 November and again until midnight of 18 November, and yet again till 2
December.

Agriculture

Transactions in the Indian agriculture sector are heavily dependent on cash and were
adversely affected by the demonetization of ₹500 and ₹1,000 banknotes. Due to scarcity of
the new banknotes, many farmers have insufficient cash to purchase seeds, fertilisers and
pesticides needed for the plantation of rabi crops usually sown around mid-
November. Farmers and their unions conducted protest rallies
in Gujarat, Amritsar and Muzaffarnagar against the demonetization as well as against
restrictions imposed by the Reserve Bank of India on district cooperative central banks which
were ordered not to accept or exchange the demonetized banknotes.

Dumping of agricultural produce

The demonetization led to unavailability of cash to pay for food products. The reduction in
demand that arose in turn led to a crash in the prices of crops. Farmers were unable to recover
even the costs of transportation from their fields to the market from the low prices
offered. The prices dropped as low as 50 paise per kilo for tomatoes and onions. This forced
the farmers across the country to dump their products in desperation. Some farmers resorted
to burying unsold vegetables. Agricultural produce such as vegetables, food grains,
sugarcane, milk and eggs were dumped on roads. Some farmers dumped their produce in
protest against the government.

Banking

A State Bank of India branch remained open at night, and a long queue of people waited
outside the ATM to withdraw money

In the first four days after the announcement of the step, about ₹3 trillion (US$45 billion) in
the form of old ₹500 and ₹1,000 banknotes had been deposited in the banking system and
about ₹500 billion (US$7.4 billion) had been dispensed via withdrawals from bank accounts,
ATMs as well as exchanges over the bank counters. Within these four days, the banking
system has handled about 180 million transactions. The State Bank of India reported to have
received more than ₹300 billion (US$4.5 billion) in bank deposit in first two days after
demonetization. A spike in the usage of debit card and credit card post demonetization was
also reported.

Between November 10 and November 27, banks reported exchange and deposits of
demonetized banknotes worth ₹8.45 trillion (US$130 billion) (exchange of ₹339.48
billion (US$5.0 billion) and deposits of ₹8.11 trillion (US$120 billion)). During this period,
an amount of ₹2.16 lakh crore (US$32 billion) had been withdrawn by people from their
accounts.

In Malda, a district believed to be a transit-point for fake Indian currencies, a large sum of
cash deposits in dormant accounts were also reported. According to The Economic Times,
more than 80 percent of fake currency in India originates from Malda district in West Bengal.

Business

By the second week after demonetization of ₹500 and ₹1,000 banknotes, cigarette sales
across India witnessed a fall of 30–40%,[239] while E-commerce companies saw up to a 30%
decline in cash on delivery (COD) orders.[240][241] Several e-commerce companies hailed the
demonetization decision as an impetus to an increase in digital payments. They believe that it
would lead to a decline in COD returns which is expected to cut down their costs.

The demand for point of sales (POS) or card swipe machines has increased. E-payment
options like PayTM and Instamojo Payment Gateway, PayUMoney has also seen a
rise. According to data of Pine Labs, the demand for its POS machines doubled after the
decision. Further it states that the debit card transactions rose by 108% and credit card
transactions by 60% on 9 November 2016.

Forecast of GDP growth rate

Global analysts cut their forecasts of India's GDP growth rate due to demonetization. India's
GDP in 2016 is estimated to be US$2.25 trillion, hence, each 1 per cent reduction in growth
rate represents a shortfall of US$22.5 billion (Rs. 1.54 lakh crores) for the Indian
economy. According to Societe Generale, India's quarterly GDP growth rates would drop
below 7% for an entire year at a stretch for the first time since June 2011.

Goldman Sachs
Ambit Capital
Emkay Global
ICRA
Fitch Ratings
Morgan Stanley
HSBC
World Bank
ADB
• Before demonetization

• After demonetization

Drop in industrial output

There was a reduction in industrial output as industries were hit by the cash crisis.
The Purchasing Managers' Index (PMI) fell to 46.7 in November from 54.5 in October,
recording its sharpest reduction in three years. A reading above 50 indicates growth and a
reading below shows contraction. This indicates a slowdown in both, manufacturing and
services industries. The PMI report showed also showed that the reduction in inflation in
November was due to shortage in money supply.

The growth in eight core sectors such as cement, steel and refinery products, which constitute
38% of the Index of Industrial Production (IIP), was only to 4.9 percent in November as
compared with 6.6 percent in October.

Income tax raids and cash seizures

The Finance Ministry instructed all revenue intelligence agencies to join the crackdown on
forex traders, hawala operators and jewellers besides tracking movement of demonetized
currency notes.[257] It was reported that the Prime Minister's Office (PMO) and the Prime
Minister Modi himself were directly coordinating the raids conducted by the Income Tax,
Enforcement Directorate (ED) and other agencies. As of 23 December, PMO received around
700 calls giving information about black money and it directly forwarded the information to
various law enforcement agencies for further action.

Income Tax departments raided various illegal tax-evasive businesses in Delhi, Mumbai,
Chandigarh, Ludhiana and other cities that traded with demonetized
currency. The Enforcement Directorate issued several FEMA notices to forex and gold
traders. Large sum of cash in defunct notes were seized in different parts of the
country. In Chhattisgarh liquid cash worth of ₹4.4 million (US$65,000) was seized.

As of December 28, official sources said that the Income Tax department detected over
₹4,172 crore of un-disclosed income and seized new notes worth ₹105 crore as part of its
country-wide operations. The department carried out a total of 983 search, survey and
enquiry operations under the provisions of the Income Tax Act and has issued 5,027 notices
to various entities on charges of tax evasion and hawala-like dealings. The department also
seized cash and jewellery worth over ₹549 crore out of which the new currency seized
(majority of them ₹2000 notes) is valued at about ₹105 crore. The department also referred a
total of 477 cases to other agencies like the CBI and the Enforcement Directorate (ED) to
probe other financial crimes like money laundering, disproportionate assets and corruption.

Seizures of ₹2000 notes[edit]

Huge amounts of cash in the form of new notes were seized all over the country after the
demonetization.[269][270] As of December 2016, over 4 crore in new banknotes of ₹2000 were
seized from four persons in Bangalore,[271][272][273] ₹33 lakh in ₹2000 notes were recovered
from Manish Sharma, an expelled BJP leader in West Bengal,[274][275] and ₹1.5 crore was
seized in Goa. 900 notes of the new ₹2000 notes were seized from a BJP leader in Tamil
Nadu. Around ₹10 crore in new notes were seized in Chennai.

As of 10 December, ₹242 crore in new notes had been seized. It was noted in the media that
while people were dying in queues to obtain a few thousand rupees in cash, persons with the
right connections were able to amass crores of rupees in new notes, thus rendering the
demonetization exercise futile.

It was announced by the government that the seized notes will be brought into the
mainstream as soon as possible to ease out the cash problem. Earlier, agencies kept all seized
material, including cash seizures, in their strong rooms as evidence till the case was
adjudicated by the courts. The seized money was then deposited into the Consolidated Fund
of India. Sometimes, income tax cases took years to resolve, still all seized material was kept
in safe lockers of the tax department.

Job losses

There was a loss of jobs due to demonetization, particularly in the unorganized and informal
sector and in small enterprises.

Evasion attempts

A jewellery store in a shopping mall with a notice "We accept ₹500 and ₹1000 notes", even
after they were no longer valid banknotes.
Gold purchases

In Gujarat, Delhi and many other major cities, sales of gold increased on 9 November, with
an increased 20 to 30% premium surging the price as much as ₹45,000 (US$670) from the
ruling price of ₹31,900 (US$470) per 10 grams (0.35 oz).

Income Tax officials raided multiple branches of Axis Bank and found bank officials
involved in money laundering acts, exchanging old notes for gold.

Donations in temples

In India, the cash deposited into hundis, or cash collection boxes in temples and gurudwaras
are exempted from inquiry by the tax department. This exemption is sometimes misused to
launder money. After the note ban, there was a spike in donations in the form of the
demonetized notes in temples. Authorities of Sri Jalakanteswarar temple
at Vellore discovered cash worth ₹4.4 million (US$65,000) from the temple hundi in the
form of defunct notes.

Multiple bank transactions

There have been reports of people circumventing the restrictions imposed on exchange
transactions by conducting multiple transactions at different bank branches and also sending
hired people, employees and followers in groups to exchange large amounts of banned
currency at banks. In response, the government announced that it would start marking
customers with indelible ink. This was in addition to other measures proposed to ensure that
the exchange transactions are carried out only once by each person.

Railway bookings

As soon as the demonetization was announced, it was observed by the Indian

Railways authorities that a large number of people started booking tickets particularly
in classes 1A and 2A for the longest distance possible, to get rid of unaccounted cash. A
senior official said, "On November 13, 42.7 million passengers were nationally booked
across all classes. Of these, only 1,209 were 1A and 16,999 for 2A. It is a sharp dip from the
number of passengers booked on November 9, when 27,237 passengers had booked tickets in
1A and 69,950 in 2A."
The Railways Ministry and the Railway Board responded swiftly and decided that
cancellation and refund of tickets of value ₹10,000 and above will not be allowed by any
means involving cash. The payment can only be through cheque/electronic payment. Tickets
above ₹10,000 can be refunded by filing ticket deposit receipt only on surrendering the
original ticket. A copy of the PAN card must be submitted for any cash transaction above
₹50,000. The railway claimed that since the Railway Board on 10 November imposed a
number of restrictions to book and cancel tickets, the number of people booking 1A and 2A
tickets came down.

Municipal and local tax payments

As the use of the demonetized notes had been allowed by the government for the payment of
municipal and local body taxes, it led to people using the demonetized ₹500 and ₹1,000 notes
to pay large amounts of outstanding and advance taxes. As a result, revenue collections of the
local civic bodies jumped. The Greater Hyderabad Municipal Corporation reported collecting
about ₹1.6 billion (US$24 million) in cash payments of outstanding and advance taxes,
within 4 days.

The tax collection by local bodies have surged over 260% and more than 15000 crore mare
after 14 days of demonetization. The total indirect tax collection rose to 14.2% only in the
month of December according to Finance Minister Arun Jaitley.

Backdated accounting

The Enforcement Directorate raided several forex establishments making back dated
entries. Money laundering using backdated accounting was carried out by co-operative
banks, jewellers, sellers of iPhones, and several other businesses.
SURVEY 1 :

REFUND ANTICIPATION LOANS

Refund anticipation loans are quick and are often costly. They run between

67% and 74% annual percentage rate. Lenders don’t tell you that a lower percentage assumes

the loan is for the entire year rather than two weeks it typically takes to get a refund. People

are increasingly relying on short term advances.

With high percentage rates processing fee and high service deductions

many of these refund anticipation loans take a significant bite out of the refunds. People often

see cash advancement as a way to get fast money.

In 2012, nearly 60 % of all refund anticipation loans 7 million went to

households that were eligible to the earned income tax credit. Geared towards easing the tax

burden faced by low income Americans. The survey found that 80 % recipients earned a

yearly income of $ 7500 or less.

To combat deceptive loans the government produced the refund anticipation

loans to fully disclose fee associated with them.

SURVEY-2

Title: Increased Loan Demand

Source: www.federalreserve.gov

Federal Reserve Board, (U.S.A) senior loan officer conducted a survey on increasing

demand for loans. The survey found that about 25% of banks reported increase demand for

commercial and industrial loans from large and middle market firms. About 10% reported

stronger loan demand from small business.

The credit quality of potential business borrowers also improved. More than half of

domestic banks said the credit quality of large and middle market loan applicant had

improved while 35% said the credit quality of potential small business borrowers had

improved.

Through the first seven months of fiscal year, 7(a) loan program was introduced and

was soon up by 53% when compared with the same period a year ago. In the fiscal year, more

than $13 billion 7(a) loans had been approved and it is also expected that program could hit

the authorized limit of $17.5 billion before the end of fiscal year. Therefore as a result it was

found that here was an increasing demand for loans.

SURVEY 3:

GLOBAL ECONOMIC FREEDOM ADVANCES

Washington November 30, 1990 the heritage foundation and the wall street

jounal report in their annual index of economic freedom. Of the 161 countries rated, 57

granted their citizens more economic growth and are prosperous those with less economic

freedom.

The 2000 index shows that scores for three regions north American and Europe,

latin America and the carribean and the north America and middle east improved. Scores for

the remaining two regions – asia pacific and sub Saharan Africa.

Despite these gains 2000 index reports that reports the most of the worlds

economies remain unfree. Ratings are based on analysis of 50 different economic variables,

grouped into 10 broad categories banking, capital flows and foreign investment, monetary

policy, fiscal burden of govt, trade policy , wages and prices, govt intervention in the

economy, property rights, black market activity.

SURVEY-4:

Title: Ease of Loan Standards due to increase in Demand.

Source: www.google.com

Banks in the U.S. saw increased demand from businesses and consumers for
lending and in turn made those loans more readily available, according to a Federal Reserve
report.

“Domestic banks, on balance, reported having eased their lending standards on many types of
business and consumer loans and having experienced increases in loan demand, on average,
over the past three months,” the Fed said today in its quarterly survey of senior loan officers.

The survey shows banks loosening the reins of credit for many categories of lending,
including commercial real estate, commercial and industrial loans for firms of all sizes, credit
cards, auto loans and other consumer loans. An exception was declining demand for
mortgages.

The report supports forecasts for stronger economic growth among Fed policy makers, who
last week trimmed their monthly bond purchases to $65 billion from $75 billion. They see
growth picking up this year to 2.8 percent to 3.2 percent, according to their most recent
forecasts released in December.

“If we start seeing meaningful credit growth, it would only be a matter of time before that’s
reflected in improved economic momentum,” said Millan Mulraine, deputy head of U.S.
research and strategy at TD Securities in New York. “The missing piece of this recovery has
been a sustained pickup in credit.”

Banks also reported an improved outlook for 2014, today’s survey showed. About 20 percent
to 40 percent of banks said they expect delinquencies on most types of business loans to
decline this year. About 40 percent expect mortgage delinquencies and write offs to fall, and
15 percent to 20 percent expect credit-card loans and other consumer loans to improve.

Auto Loans

The majority of banks said auto loans to borrowers with low credit scores would be an
exception, and that delinquencies and charge-offs would increase. The Fed said large banks
eased standards on mortgages, while small banks tightened them. The share of banks easing
and tightening was described as “modest.” Demand for mortgages was weaker, according to
the survey, which was conducted from Dec. 30 to Jan. 14.

The mortgage market is closely watched by the Fed, which has sought through low interest-
rate policies to spur borrowing, especially for houses and automobiles that many consumers
finance with loans.

In a special set of questions, the Fed asked banks about the environment for high-risk, high-
yield leveraged loans. The central bank has sought to curb froth in the leveraged-loan market
by issuing supervisory guidance to discourage banks from making reckless loans.

Other Sources

Banks reported they had tightened standards on leveraged loans and that some loans had been
“curtailed or significantly altered” by the Fed’s efforts to rein in the market. “A majority of
them believed that affected borrowers would be able to turn to other sources of funding,” the
survey said.

The total value of loans at U.S. banks climbed 2.2 percent during the past year to $7.39
trillion as of Jan. 22, according to a Fed report last week. Lending to businesses has been
particularly strong, with commercial and industrial loans climbing to $1.62 trillion, a 7.5
percent increase from a year earlier.

The latest round of bond purchases begun in September 2012 helped drive down the yield on
the 10-year Treasury note to as low as 1.63 percent last year.

As Fed officials moved toward winding down the program, yields climbed to as high as 3.03
percent in December. The benchmark note fell 0.06 percentage point to 2.58 percent at 1:51
p.m. in New York.

The KBW Bank Index, which tracks the performance of 24 financial institutions, was down
2.6 percent at 2:58 p.m. in New York, compared with a 2.2 percent decline in the broader
Standard & Poor’s 500 Index. The bank index is up 20 percent over the past year. The Fed’s
survey of loan officers is based on responses from 75 domestic banks and 21 U.S. branches
and agencies of foreign banks. The Fed doesn’t identify the banks.
SURVEY-5:

Title: Statistics on the level of outstanding debt of Scottish Agriculture

Source: www.scotland.gov.uk

This publication contains results from the 2013 Survey of Bank Advances to Scottish
Agriculture, covering levels of outstanding debt and the distribution of this debt by recipient
type.

This Statistical Publication provides data tables along with brief commentary and
graphics on the latest annual changes and trends since 1980. It also contains related
information from other data sources.

These statistics are used by government and stakeholders to monitor the outstanding
debt of Scottish farmers and to inform related debate and policies.

The government also uses these results to construct an estimate of the total interest
payable by Scottish agriculture as part of the annual Total Income From Farming estimate
which is required in order to meet Statistical Regulations of the European Commission

The origin of priority sector prescriptions for financial institutions in India can be
traced to the credit policy for the year 1967-68 wherein it was emphasized that financial
institutions should increase their involvement in the financing of priority sectors. Description
of priority sector was formalized in 1972. Reserve Bank prescribed a modified return for
reporting priority sector advances.
Meaning of Loans and Advances:

LOANS: when a bank makes an advance in lump-sum against some security it is called a
loan. Here, a specified amount is sanctioned by the bank to the customers. The loan amount
so sanctioned is paid to the borrower either in cash or by credit to his account. A certain
amount of interest has to be paid by the borrower for the loan that has to be borrowed. A loan
can be repaid in lump-sum or in installments.

ADVANCE: An advance payment, or simply an advance, is the part of a contractually due

sum that is paid or received in advance for goods or services, while the balance included in
the invoice will only follow the delivery. It is called a prepaid expense in accrual accounting
for the entity issuing the advance.

Important Components of Loans and Advances:

Some of the important components of loans and advances are:

• Deposits or Down payment

• Installments &

• Interest

GENERAL PRINCIPLES OF SOUND LENDING:

1. SAFETY :

Safety first should be the guiding principle to be followed in granting loans and

advances. Since banks deal with money of their customers. They have to ensure the safety of

the funds lent. Safety means the borrower must be in a position to repay what is due to him.

The former depends upon his tangible assets and the success of his business if he is

successful in his efforts. He earns profits and can repay the loan properly. Otherwise the loan

is recovered out of the sales proceeds of the borrower. The bank takes care of the business of

which the loan has to be given.

2. LIQUDITY :

It is the ability of the banker to convert the loan into cash. Without much loss in

its value. Money granted for long period are less liquid than for short period of time.

3. PROFITABILITY :

A banker cannot run the institution without profits. It is essential to meet the daily expenses

of the bank to pay the interest on deposits. The rate of interest charged in the past where

primarily depended on directives issued by the reserve bank. Now banks are free to determine

their own rate if interest on advances above 2 lakhs.

4. SECURITY :

No banker sees the horoscope of the customer while giving him the loan or an advance. He

calculates his lending risk and lends the loan.

5. PURPOSE OF THE LOAN:

Repayment of the loans is mainly done on the purpose for which it is needed. Loans are

provided with the productive purposes which would enhance the earning capacity of the

borrower. Loans are not given for speculative purposes.

PRECAUTIONS TO BE TAKEN BY A BANKER:

A banker must take the following precautions while granting loans and advances to the
borrowers:
Precautions to be taken before sanctioning a Loan;
• The banker must try to know the background of the applicants, i.e., his experience, honesty,
character, etc.

• The applicant for a loan must be properly introduced to the banker.

• The future profits should also be checked up by the banker to determine the borrower’s loan
repaying capacity within a stipulated period.

• In case the banker is not satisfied they can ask the applicant to furnish a guarantee from a
reliable party well-known to the bank.

Precautions to be taken after sanctioning a Loan:

• The banker must ensure that borrower pays the installments regularly.

• The banker must obtain the documents like a demand promissory note, an agreement
of hypothecation, a letter of guarantee and a letter of loan.

• The banker must ensure that the loan is properly utilized.

Factors affecting lending decisions:

There are three important factors affecting the lending decisions of lenders

• Financial Condition of Borrowers: Lender wants to know about borrowers financial

state before they give borrowers a loan. They want to confirm whether the borrower
have cash in hand so that they can make a down payment.

• Ability To Repay The Loan: Lenders think whether they can earn enough money now
and in the future to make payments. They want to know whether the borrowers have
any debts and lenders always look for borrowers with neat and clean credit.
 • Credit History: Lenders want to know about borrowers past payment habits. If the
lenders find in borrower’s credit report that they have never been regular in their
payments before, they are not convinced to sanction borrower the loan.

LOANS:

A loan is a kind of advance made with or without security. In case of a loan the bank makes a
lump sum payment to the borrower or credits his deposit account with the money advanced. It
is given for a fixed period at an agreed rate of interest. Repayments may be made in
installment or at the expiry of a certain period. The customer has to pay interest on the total
amounts advanced whether he withdraws the money from his account or not.

Advantages of loan:

• Observance of the financial discipline by the borrower: In loan system, the time and
amount of repayment of installment is fixed in advance.

• Periodic review of loan account: The banker gets an opportunity to review the loan
account as and when a loan is granted or renewed.

• Simple and profitable: the banker charges interest on the total amount sanctioned as a
loan to the borrower irrespective of the withdrawals by the borrower. Thus, there is no
loss of interest to the banker. Moreover the operation of the system is comparatively
simple.

Limitations:
• Inflexibility: The system is inflexible in the sense that every time a loan is required
the banker has to negotiate with the borrower.

• More formalities: sanctioning of the loan requires more documentation as compared

to a cash-credit system.

• Frequent renewals: Though the loan is sanctioned only for a fixed period but in
practice they are continuously renewed period after period.

• Over use of funds: banks have no control over the use of funds.
 Types of Loans

• Short term loans

• Medium and long term loans

• Bridge loans

• Composite loans

• Consumption loans

1. SHORT TERM LOANS :

These are granted to meet the working capital needs of the borrower. These loans are granted

against the tangible assets mainly the movable assets like goods, commodities, shares and

debentures.

2. MEDIUM AND LONG TERM LOANS:

These are granted for more than a year. These are meant for the purchase of capital assets and

for expansion and diversification of an existing unit. They provide such loans with financial

industrial corporation of India. These loans are usually secured from tangible assets like land.

3. BRIDGE LOANS :

Bridge loans are essentially short term loans which are granted to industrial undertakings to

meet their urgent and essential needs during the period when formalities when for availing of

the term loans sanctioned by financial institutions are being fulfilled or necessary steps are

being taken to raise the funds from the capital market. These loans are granted by banks or by

financial institutions themselves and are automatically repaid out of amount of the term loan

or the funds raised in the capital market.

4. COMPOSITE LOANS:

When a loan is granted both for buying and capital assets and for working capital process. It

is called a composite loan. It is granted to farmers, small industries.

5. CONSUMPTION LOANS:

To meet the medical needs and the educational expenses or any such exceptional purposes

such consumption loans are provided. The needy persons are provided such loans to meet

expenses of marriage expenses, consumption of durable goods, etc

ADVANCES:

An advance payment, or simply advance, is a part of a contractually due sum that is

paid or received in advance for goods or services, while the balance included in the invoice
will follow only the delivery. It is called a prepaid expense in accrual accounting for the
entity issuing the advance. Advanced payments are recorded as assets in the balance sheet.
Over and above deposit taking function, there are two most important functions of
commercial banks. These are lending and investment. Banks, based on deposit resources,
lend money to diverse areas and people as well as invest their funds for many purposes.
Advancing money to various types of borrowers including traders, industrialists and other
people. Banks, therefore , classify their advances into various categories having their own
features. These features are as follows:

• Cash Credit

• Overdraft

• Discounting Of Bill Of Exchange

• Hire Purchase Advances

The terms and advances, the rights and privileges of the borrower and the

borrower and banker differ in each case. In India the category of loans, cash credit and
advances accounts for the bulk of bank credit. Purchase and discounting of bills is not as

popular a means of bank credit of India.

CASH CREDIT :

Cash credit is the main method of lending by banks in India and accounts for about 70 % of
total bank credit. Under this system, a customer is permitted to borrow money upto a
particular limit against the securities. A separate account is opened for this purpose. The
borrower can withdraw money from the account as and when he needs.

Advantages of Cash Credit System:

• There is the flexibility of funds. And can minimize the interest charges by depositing
all the cash accruals in the bank account.
• There is the operative convenience by maintaining one account for all the
transactions.

Limitations of The Cash Credit:

• The fixation of credit limits.

• Bank’s inability to verify the end use of funds.

• Lack of proper management of funds.

Collection of Credit Information:

• Credit Information Bureau

• Borrower
• Bazaar Reports
• Exchange of Credit Information among Banks
• Balance Sheet and the Profit and Loss account.
OVERDRAFT:

The customer is allowed to overdraw the amount over a specified limit. It is sanctioned in

current account itself. Interest is charged on the amount actually utilized.

Advantages of Bank Overdraft:

• This advance can be sanctioned without any security.

• The money of this advance can be withdrawn partial amount.

• The interest is charged on the amount is already withdrawn.

Limitations:
• It is a very short term loan. So a borrower has a very little time to repay the advance.

DISCOUNTING OF BILLS:

The banker lends the money under a bill of exchange or a promissory note. The

holder can discount the bill with the banker if he is in urgent need of money.

HIRE PURCHASE:-

Hire purchase is a type of instalment credit under which the hire purchaser, called the
hirer, agrees to take the goods on hire at a stated rental, which is inclusive of the repayment
of principal as well as interest, with the option to purchase. Under this transaction, the hire
purchaser acquires the property(goods) immediately on signing the hire purchase agreement
but the ownership or title of the same is transferred only when the last installment is paid.

FACTORS LIMITING THE LEVEL OF BANKS ADVANCES

• The size and maturity wise pattern of deposits

• Credit control by reserve bank

• Seasonal variations in bank

• Demand for credit

• Consortium advances
CLASSIFICATION OF ADVANCES

• Secured advances
• Unsecured advances

SECURED ADVANCES :

This means an advance made on the security of assets. The market value of which
is not anytime less than the amount of loan or advance.
The loan must be granted against some tangible securities such as goods and commodities.
The market value of the security should be greater than the amount of the loan till the loan is
repaid. If the former falls below the latter because of decline in the market prices the loan is
considered as partly secured.

UNSECURED ADVANCES :

It means loan or an advance that is not secured. These loans are granted without any tangible

securities. These are otherwise called as clean advances. It is granted to the customers on the

basis of their personal security. These are the advances against the personal security of the

borrower, discounting of bills, advances against guarantees come under this type of advances.

TYPES OF LOANS & ADVANCES:

Loans and Advances are classified into two categories. They are as follows;

• Short Term Loans

• Term Loans

• SHORT TERM LOANS:-

Short term loans are granted by banks to meet working capital

needs of business. The working capital needs refer to financial needs for such purpose
as purchase of raw material, payment of wages, electricity bill, taxes, etc, such loans
are granted by banks to its borrowers to be repaid within a short period of time not
exceeding 15 months.
 Short term loans are normally granted against the security of tangible assets like
goods in stock, shares, debentures, etc. the rate of interest charged on short term loans
ranges from 12% to 18% per annum.

• TERM LOANS:-

Medium term loans and long term loan are generally known as “term
loans”. These loans are granted for more than 15 months. In case of medium term
loan, the period ranges from 15 months to less than 5 years. Medium term loans
are generally granted for heavy repairs, renovation, etc., such loans are sanctioned
against the security of immovable assets.

TYPES OF SECURITIES OFFERED TO A BANKER:

Banks advance money against securities. The different types of securities which may be
offered to a banker are as follows:
• Immovable properties, such as

• Land and building

• Movable properties, such as

• Goods;

• Documents of title to the goods;

• Stock exchange securities;

• Life Insurance policies;

• Fixed deposit receipts; and

• Book debts.

The banker should be very careful while accepting securities as security to the advances
granted because sometimes securities have some inherent defects and are not easily
marketable. Therefore a bank should advance money against securities possessing certain
qualities.

QUALITIES OF A GOOD SECURITY:

A good security must possess the following qualities:

• The security must be free from prior charges.

• The security offered should be easily marketable without loss in the value.

• The securities should be easily storable.

• A good security must possess the quality of durability.

• The security must be capable of earning income.

• The security should be free from heavy cost of handling, and

• The securities should be free from disabilities.

TERMS AND CONDITIONS LAID BY BANKS FOR SANCTION OF LOANS

Bank operations involve sanctioning of loans and advances to customers for variety of
purposes.These loans may be business loans for short or long term commitments and
consumer finance forpurchase of durables, property and vehicles. Other types of loans
provided by banks are micro creditfor small borrowers and contingent obligations that are off
balance sheet transactions. The loan sanctioning process commences when the bank receives
a loan proposal from the customer. The loan requirement may be for equipment purchase or
for working capital finance requirements. If it is for equipment purchase the amount will be
paid directly to the supplier. If it is a working capital requirement, an operational bank
account in the name of the customer will be opened and permission will be granted to draw
the amount as and when required. The loan proposal will be evaluated using an internal
rating system or the credit rating offered by external rating agencies. After the loan sanction
the bank needs to follow up and monitor the loan accounts. The loan sanctioned may become
a default or a bad loan if the outstanding payments (either interest or instalment of the
principle amount) are overdue by 90 days. Thus credit life cycle involves four stages, credit
opportunity, credit assessment, credit management and credit
implication. Credit worthiness of the borrowers will influence loan commitment by the bank.
The pre requisites for the loan sanctioned depends on the credit worthiness of the borrower.
The requirement of credit worthiness varies depending on type of credit and quantum of loan
offered to borrowers. Besides personal credit worthiness the bankability of the proposal is to
be evaluated in terms of projected cash flows, projected investment and past performance of
the borrower. Risk exposure for banks is computed considering three factors. The criteria are
the default percentage, exposure value for the bank and the estimated recovery rate.

Loss on default = D x E x (1-R)

Where D is default percentage, E is exposure value and R is recovery rate.

Example of a credit evaluation process is given below.Credit Risk Evaluation Information

Requirement by Banks

Details of Applicants

• Name of the entity

• Registered office address
• Name of the contact person
• Address of factory / establishment
• Address for correspondence
• Office contract details
• Date of incorporation
• Date business commenced
• Date of formation
• Account number
• Date of account opening
• Branch of applicant account
• Whether existing borrowing customer
• Line of business
• Nature of product / service offered
• Type of constitution of the business
• Existing activity of the business entity
• Proposed activity of the business entity
• Name of parent company if any

Purpose of Loan Purpose of Loan

• Expected source of funds

• Business owner
• Expected account turnover
• Return on investment
• Sale proceeds
• Details of Director
• Details of the Board
• Principal shareholders of the company
and their address
• Exposure of the borrowing entity with
other bank groups
• Credit facility availed
• Credit facility applied
– Type of facility
– Amount
– Purpose
– Tenor
– Primary security
– Collateral security
– Currency of security

Details of Assets Information on each type of Assets

• Land
• Tools
• Electrical
• Machinery
• Other assets
• Purpose of asset
• Imported / Indigenous
• Supplier
• Total cost
• Promoters contribution
• Loan required

Business Information Existing Credit Facility Details

• Details of collateral
• Details of customers of business
• Currencies in which business is
conducted
• Number of employees
• Types of facility
• Limits (value)
• Outstanding as on the previous
accounting date
• Names of banks presently working with
• Security lodged
• Rate of interest
• Repayment terms

Past Performance (Two years) Future Estimate (Current year and next year)

• Net Sales
• Net profit
• Capital (net worth)
• Total debt
• Imports
• Exports
• Net Sales
• Net profit
• Capital (net worth)
• Total debt
• Imports
• Exports

CHAPTER-III
 INDUSTRY PROFILE
&
COMPANY PROFILE

Introduction
As per the Reserve Bank of India (RBI), India’s banking sector is sufficiently capitalized and
well-regulated. The financial and economic conditions in the country are far superior to any
other country in the world. Credit, market and liquidity risk studies suggest that Indian banks
are generally resilient and have withstood the global downturn well.
Indian banking industry is expected to witness better growth prospects in 2015 as a sense of
optimism stems from the Government’s measures towards revitalizing the industrial growth
in the country. In addition, RBI’s new measures may go a long way in helping the
restructuring of the domestic banking industry.

A bank is a financial institution that accepts deposits and channels those deposits into
lending activities. Banks primarily provide financial services to customers while enriching
investors. Government restrictions on financial activities by banks vary over time and
location. Banks are important players in financial markets and offer services such as
investment funds and loans. In some countries such as Germany, banks have historically
owned major stakes in industrial corporations while in other countries such as the United
States banks are prohibited from owning non-financial companies. In Japan, banks are
usually the nexus of a cross-share holding entity known as the keiretsu. In France,
bancassurance is prevalent, as most banks offer insurance services (and now real estate
services) to their clients.

Introduction

India’s banking sector is constantly growing. Since the turn of the century, there has been a
noticeable upsurge in transactions through ATMs, and also internet and mobile banking.
Following the passing of the Banking Laws (Amendment) Bill by the Indian Parliament in
2012, the landscape of the banking industry began to change. The bill allows the Reserve
Bank of India (RBI) to make final guidelines on issuing new licenses, which could lead to a
bigger number of banks in the country. Some banks have already received licences from the
government, and the RBI's new norms will provide incentives to banks to spot bad loans and
take requisite action to keep rogue borrowers in check.
Over the next decade, the banking sector is projected to create up to two million new jobs,
driven by the efforts of the RBI and the Government of India to integrate financial services
into rural areas. Also, the traditional way of operations will slowly give way to modern
technology.

History

Origin of the word

The name bank derives from the Italian word banco "desk/bench", used during the
Renaissance by Jewish Florentine bankers, who used to make their transactions above a desk
covered by a green tablecloth. However, there are traces of banking activity even in ancient
times, which indicates that the word 'bank' might not necessarily come from the word 'banco'.

In fact, the word traces its origins back to the Ancient Roman Empire, where moneylenders
would set up their stalls in the middle of enclosed courtyards called macella on a long bench
called a bancu, from which the words banco and bank are derived. As a moneychanger, the
merchant at the bancu did not so much invest money as merely convert the foreign currency
into the only legal tender in Rome—that of the Imperial Mint.

The earliest evidence of money-changing activity is depicted on a silver drachm coin from
ancient Hellenic colony Trapezus on the Black Sea, modern Trabzon, c. 350–325 BC,
presented in the British Museum in London. The coin shows a banker's table (trapeza) laden
with coins, a pun on the name of the city.

In fact, even today in Modern Greek the word Trapeza (Τράπεζα) means both a table and a
bank.

Market Size
The Indian banking system consists of 26 public sector banks, 25 private sector banks, 43
foreign banks, 56 regional rural banks, 1,589 urban cooperative banks and 93,550 rural
cooperative banks, in addition to cooperative credit institutions. Public-sector banks control
nearly 80 percent of the market, thereby leaving comparatively much smaller shares for its
private peers.
As of November 11, 2015, 192.1 million accounts had been opened under Pradhan Mantri
Jan Dhan Yojna (PMJDY) and 165.1 million RuPay debit cards were issued. These new
accounts have mustered deposits worth Rs 26,819 crore (US$ 4 billion).
Standard & Poor’s estimates that credit growth in India’s banking sector would improve to
12-13 per cent in FY16 from less than 10 per cent in the second half of CY14.
Investments/developments
In the past few months, there have been many investments and developments in the Indian
banking sector
• Global rating agency Moody's has upgraded its outlook for the Indian banking system
to stable from negative based on its assessment of five drivers including improvement
in operating environment and stable asset risk and capital scenario.
• Lok Capital, a private equity investor backed by US-based non-profit organisation
Rockefeller Foundation, plans to invest up to US$ 15 million in two proposed small
finance banks in India over the next one year.

• The Reserve Bank of India (RBI) has granted in-principle licences to 10 applicants to
open small finance banks, which will help expanding access to financial services in
rural and semi-urban areas.

• IDFC Bank has become the latest new bank to start operations with 23 branches,
including 15 branches in rural areas of Madhya Pradesh.

• The RBI has given in-principle approval to 11 applicants to establish payment banks.
These banks can accept deposits and remittances, but are not allowed to extend any
loans.

• The Bank of Tokyo-Mitsubishi (BTMU), a Japanese financial services group, aims to

double its branch count in India to 10 over the next three years and also target a 10 per
cent credit growth during FY16.

• State Bank of India has tied up with e-commerce portal Snapdeal and payment
gateway Paypal to finance MSME businesses.

• The United Economic Forum (UEF), an organisation that works to improve socio-
economic status of the minority community in India, has signed a memorandum of
understanding (MoU) with Indian Overseas Bank (IOB) for financing entrepreneurs
from backward communities to set up businesses in Tamil Nadu

• The RBI has allowed third-party white label automated teller machines (ATM) to
accept international cards, including international prepaid cards, and said white label
ATMs can now tie up with any commercial bank for cash supply.

• The RBI has allowed Indian alternative investment funds (AIFs), to invest abroad, in
order to increase the investment opportunities for these funds.

• In order to boost the infrastructure sector and the banks financing long gestation
projects, the RBI has extended its flexible refinancing and repayment option for long-
term infrastructure projects to existing ones where the total exposure of lenders is
more than Rs 500 crore (US$ 75.1 million).
 • RBI governor Mr Raghuram Rajan and European Central Bank President Mr Mario
Draghi have signed an MoU on cooperation in central banking. “The memorandum of
understanding provides a framework for regular exchange of information, policy
dialogue and technical cooperation between the two institutions. Technical
cooperation may take the form of joint seminars and workshops in areas of mutual
interest in the field of central banking,” RBI said on its website.

• RBL Bank informed that it would be the anchor investor in Trifecta Capital’s Venture
Debt Fund, the first alternative investment fund (AIF) in India with a commitment of
Rs 50 crore (US$ 7.51 million). This move provides RBL Bank the opportunity to
support the emerging venture debt market in India.

• Bandhan Financial Services raised Rs 1,600 crore (US$ 240.2 million) from two
international institutional investors to help convert its microfinance business into a
full service bank. Bandhan, one of the two entities to get a banking licence along with
IDFC, launched its banking operations in August 2015.

Government Initiatives
The government and the regulator have undertaken several measures to strengthen the Indian
banking sector.
• The Government of India is looking to set up a special fund, as a part of National
Investment and Infrastructure Fund (NIIF), to deal with stressed assets of banks. The
special fund will potentially take over assets which are viable but don’t have
additional fresh equity from promoters coming in to complete the project.

• The Reserve Bank of India (RBI) plans to soon come out with guidelines, such as
common risk-based know-your-customer (KYC) norms, to reinforce protection for
consumers, especially since a large number of Indians have now been financially
included post the government’s massive drive to open a bank account for each
household.

• To provide relief to the state electricity distribution companies, Government of India

has proposed to their lenders that 75 per cent of their loans be converted to state
government bonds in two phases by March 2017. This will help several banks,
especially public sector banks, to offload credit to state electricity distribution
companies from their loan book, thereby improving their asset quality.
 • The Reserve Bank of India (RBI), the Department of Industrial Policy & Promotion
(DIPP) and the Finance Ministry are planning to raise the Foreign Direct Investment
(FDI) limit in private banks sector to 100 per cent from 74 per cent.

• Government of India aims to extend insurance, pension and credit facilities to those
excluded from these benefits under the Pradhan Mantri Jan Dhan Yojana (PMJDY).<

• The Government of India announced a capital infusion of Rs 6,990 crore (US$ 1.05
billion) in nine state run banks, including State Bank of India (SBI) and Punjab
National Bank (PNB). However, the new efficiency parameters would include return
on assets and return on equity. According to the finance ministry, “This year, the
Government of India has adopted new criteria in which the banks which are more
efficient would only be rewarded with extra capital for their equity so that they can
further strengthen their position."

• To facilitate an easy access to finance by Micro and Small Enterprises (MSEs), the
Government/RBI has launched Credit Guarantee Fund Scheme to provide guarantee
cover for collateral free credit facilities extended to MSEs upto Rs 1 Crore (US$ 0.15
million). Moreover, Micro Units Development & Refinance Agency (MUDRA) Ltd.
was also established to refinance all Micro-finance Institutions (MFIs), which are in
the business of lending to micro / small business entities engaged in manufacturing,
trading and services activities upto Rs 10 lakh (US$ 0.015 million).

• The central government has come out with draft proposals to encourage electronic
transactions, including income tax benefits for payments made through debit or credit
cards.

• The Union cabinet has approved the establishment of the US$ 100 billion New
Development Bank (NDB) envisaged by the five-member BRICS group as well as the
BRICS “contingent reserve arrangement” (CRA).

• The government has plans to set up a fund that will provide surety to banks against
loans given to students for higher education.

Road Ahead
The Indian economy is on the brink of a major transformation, with several policy initiatives
set to be implemented shortly. Positive business sentiments, improved consumer confidence
and more controlled inflation are likely to prop-up the country’s the economic growth.
Enhanced spending on infrastructure, speedy implementation of projects and continuation of
reforms are expected to provide further impetus to growth. All these factors suggest that
India’s banking sector is also poised for robust growth as the rapidly growing business would
turn to banks for their credit needs. Also, the advancements in technology have brought the
mobile and internet banking services to the fore. The banking sector is laying greater
emphasis on providing improved services to their clients and also upgrading their technology
infrastructure, in order to enhance the customer’s overall experience as well as give banks a
competitive edge.
Many banks, including HDFC, SYNDICATE and AXIS are exploring the option to launch
contact-less credit and debit cards in the market shortly. The cards, which use near field
communication (NFC) mechanism, will allow customers to transact without having to insert
or swipe.
Indian banking sector credit growth has grown at a healthy pace
• Credit off-take has been surging ahead over the past decade, aided by strong economic
growth, rising disposable incomes, increasing consumerism and easier access to credit
• Total credit extended went up to US$ 1,089 billion by FY15
• Credit to non-food industries increased 9.75 per cent to US$ 1,073.4 billion in FY15, from
the previous financial year
• Demand has grown for both corporate and retail loans

Reserve Bank of India (RBI) in its fifth bi-monthly monetary policy review has maintained
status status quo in key policy interest rate. The key policy interest rates were kept unchanged
on the basis of an assessment of the current and evolving macroeconomic situation in the
country. The Key policy interest rates are Repo rate under the liquidity adjustment facility
(LAF): unchanged at 6.75 per cent. Reverse repo rate under the LAF: unchanged at 5.75 per
cent Marginal standing facility (MSF) rate and the Bank Rate has unchanged at 7.75 per cent.
Cash Reserve Ratio (CRR) of scheduled banks: Unchanged at 4.0 per cent of net demand and
time liability (NDTL). Continuation of liquidity under overnight repos at 0.25 per cent of
bank-wise NDTL at the LAF repo rate. Continuation of liquidity under 14-day term repos as
as well as longer term repos of up to 0.75 per cent of NDTL of the banking system through
actions.
 COMPANY PROFILE

HISTORY

Syndicate Bank was established in 1925 in Udupi, the abode of Lord Krishna in coastal
Karnataka with a capital of Rs.8000/- by three visionaries - Sri Upendra Ananth Pai, a
businessman, Sri Vaman Kudva, an engineer and Dr.T M A Pai, a physician - who shared a
strong commitment to social welfare. Their objective was primarily to extend financial
assistance to the local weavers who were crippled by a crisis in the handloom industry
through mobilising small savings from the community. The bank collected as low as 2 annas
daily at the doorsteps of the depositors through its Agents under its Pigmy Deposit Scheme
started in 1928. This scheme is the Bank's brand equity today and the Bank collects around
Rs. 2 crore per day under the scheme.
The progress of Syndicate Bank has been synonymous with the phase of progressive banking
in India. Spanning over 80 years of pioneering expertise, the Bank has created for itself a
solid customer base comprising customers of two or three generations. Being firmly rooted in
rural India and understanding the grassroot realities, the Bank's perception had vision of
future India. It has been propagating innovations in Banking and also has been receptive to
new ideas, without however getting uprooted from its distinctive socio-economic and cultural
ethos. Its philosophy of growth by mutual sustenance of both the Bank and the people has
paid rich dividends. The Bank has been operating as a catalyst of development across the
country with particular reference to the common man at the individual level and in rural/semi
urban centres at the area level.
The Bank is well equipped to meet the challenges of the 21st century in the areas of
information technology, knowledge and competition. A comprehensive IT plan is being put
in place and the skills and knowledge of the Bank's personnel are being upgraded through a
variety of training programmes to promote customer delight in every sphere of its activity.
The Bank has launched an ambitious technology plan called Centralised Banking Solution
(CBS) whereby 500 of our strategic branches with their ATMs are being networked
nationwide over a 4 year period. The Bank is pioneer among Public Sector Banks on
launching CBS. Our bank has already achieved CBS implementation among all its branches.
Thus, the bank is 100% CBS enabled.

Pigmy Deposit Scheme - Bank's Brand Equity

• Launched in 1928 by Dr.T.M.A.Pai, one of the Founders to encourage the habit of

thrift and small savings. Pigmy Scheme symbolises the description of the Bank as "a
small man's big Bank" even today.

• Bank collects as low as Rs.5 daily for 72 months at the doorsteps of 10.36 lac
depositors through its more than 4000 Pigmy agents.

• Pigmy deposits of the Bank crossed Rs.1800 crore.

MEMORABLE MILESTONES IN A 82-YEAR JOURNEY Growing Far And Wide

2006 Bank signs MOU with M/s.CMC Ltd., for making Syndicate Institute of Bank
Management (SIBM) a center of excellence of global standards and provide quality
management education.
2006 500th Branch of SyndicateBank in Karnataka opened at Navnagar, Bagalkot.
2006 2000th Branch of SyndicateBank opened at Tondiarpet, Chennai on 23.03.2006.
2006 Inauguration of SyndBank Services Limited, the 1st BPO outfit of a Nationalised
Bank, a wholly owned subsidiary of SyndicateBank & 525th CBS Branch by Hon'ble
Union Minister of Finance, Sri P Chidambaram on 24.03.2006 at Bangalore.
2006 2006th Branch of SyndicateBank opened at Gangtok, Sikkim on 27.03.2006
2006 First Branch opened in Arunachal Pradesh at Ita Nagar on 16th October 2006

2006 Branches opened for the first time in 19 additional districts

2007 First Branch opened in Nagaland at Dimapur on 17.03.2007

2007 First Branch opened in Mizoram in Aizawl on 29.03.2007

2011 Branches opened for the first time in 13 additional districts

2011 First Branch opened in Tripura at Agarthala on 11.01.2011

2012 Branch network expanded to all States and UTs except Manipur & Daman Diu

2010 Branches opened for the first time in 6 new districts.

2012- i.The Bank opened 3 new Regional Offices at Moradabad, Jaipur and
2010 Guwahati for better administrative cover over branches in the respective
jurisdictions. The Regional Office at Gauwahati is also expected to help the
Bank to play a more active role in the development of the North Eastern
parts of the country.
ii. The Bank opened 50 branches on a single day (11.03.2010).
2010- The Bank opened 135 branches under the Financial Inclusion programme
2011 of the Govt. of India

2014-
Priority Sector Advances as at March 2014 were ` 52016 crore accounting for 43.19%
of the Bank’s adjusted net credit as against the mandatory level of 40 %. 27.97 Lakh
borrowers assisted under priority sector. Bank has adopted 13,820 Service Area /
Operational Area Villages for extending timely. Credit to meet all genuine credit
 needs. Credit to the extent of ` 21292 crore was disbursed to priority sector activities
under Annual Action Plan in these villages. The agricultural credit disbursed during
the financial year 2013-14 was ` 13317 crore.

2015- Action Plan for development of UT of Lakshadweep through credit

deployment has been prepared.

3.2 Management Team:

Chairman & Managing Director

Sri Arun Shrivastava

Managing Director & CEO

Sri Arun Shrivastava has assumed charge as Managing Director & CEO of Syndicate Bank
on 15.05.2015. Prior to joining the Bank, Sri Arun Shrivastava was Executive Director of
Bank of India, looking after Finance, Strategy & Planning, Large Corporate & Mid Corporate
Business, Corporate Debt Restructuring, Project Finance & Syndication, Credit Monitoring &
Asset Recovery, Publicity & Public Relations portfolios of Bank. Was also overseeing the
Foreign Subsidiaries – BOI Indonesia & Botswana and Joint Venture – India Zambia Bank.
He holds Masters Degree in Science. In addition he is also a Certified Associate of Indian
Institute of Bankers and AIBM. He started his career as Direct Recruit Officer in Bank of
Baroda in 1979. He has been a professional Banker for over 36 years of varied experience
including his posting as Managing Director of Bank’s Subsidiary in Kenya and also as
Director on the Board of Bank’s subsidiary in Uganda and Tanzania. During his tenure, Bank
of Baroda Kenya Ltd was awarded ‘Most Efficient Bank” and the “Best Bank” in Kenya.
Prior to his elevation as Executive Director, Bank of India during August 2013, he was
General Manager, Wholesale Banking at Baroda Corporate Centre, Bank of Baroda, Mumbai.
He has a vast & rich experience in all facets of Banking..
Shri T K Srivastava
Executive Director
Shri T K Srivastava has assumed charge as Executive Director of SyndicateBank on 1st
September 2013. Prior to joining the Bank, Shri. Srivastava was General Manager, Union
Bank of India.
Shri Srivastava holds Master in Management Studies and Commerce. In addition, he is also a
Certified Associate of Indian Institute of Bankers. Shri Srivastava has been a Professional
Banker for over 37 years of varied experience.

Shri R S Pandey
Executive Director
Shri H. Pradeep Rao
Government Director
Shri Rudra Narayan Kar
RBI Director
Shri Sankaran Bhaskar Iyer
Workmen Director
Shri Sanjay Anant Manjrekar
Officer Director
Shri Rudra Narayan Kar has been nominated as RBI Nominee Director on the Board of our
Bank by the Government of India w.e.f. 23.02.2015.
Shri Rudra Narayan Kar is currently working as Regional Director of Kolkata Office of
Reserve Bank of India which covers State of West Bengal & Sikkim. Earlier he has worked
as Chief General Manager-in-Charge of Foreign Exchange Department of the Bank looking
after administration of FEMA and policy formulation in the areas of Capital Account
Management and Foreign Exchange Market. As Chief General Manager in the Department of
External Investments and Operations he was involved with the deployment of foreign
exchange reserves of the country.
Dr. C R Naseer Ahamed
Part-Time Non-official Director
Shri Atul Ashok Galande
Shareholder's Director

Our Bank offers a number of varied products under Deposits, Advances to suit the needs of
all types of customers. Details of products are available in each category under this head. We
offer other services for our customers like Cash Management Services and Gift Cheques.

We also have various delivery channels like ATM, Internet Banking, SMS Banking offering
specialised products and services at our branches which have been 100% brought
under Centralised Banking Solution.
Rate Of Interest, Charges & Fees at a glance

• Please click here to know Rates of Interest on Deposits, Loans and Fees at a Glance

Rate Of Interest - Deposits

• Please click here to know Domestic Deposit Interest Rates (latest)

• "Your Deposits are Insured with DICGC" Please click here to know more
about Deposit Insurance

• Please take a print of Account Opening Form - Common for all types of
Domestic Deposit accounts

• Non-resident (External) Rupee Accounts (NRE A/cs.) - For Interest Rates

Click NRE A/c

• Foreign Currency Non-resident Accounts (FCNR(B) A/cs) -- For Interest

Rates Click FCNR (B)

Penalty for premature closure of deposits

• For premature withdrawal of term deposits, the interest will be paid at the rate
applicable to the period for which the deposit remained with the Bank or at contracted
rate whichever is lower, less penalty, as under :

================================================

• Before completion of 15 days : No interest payable

• After completion of 15 days, : 1%

upto and including one year

• After completion of 1 year : 0.5%

================================================

he Syndicate Bank has promoted "Syndicate Bank Services Limited" as a wholly owned
subsidiary to undertake BPO activities. The subsidiary, incorporated as a government
company commenced its operations in March,2006. This initiative of the Bank heralds a new
beginning in the Indian Banking industry by carving out the first BPO outfit of a Nationalized
Bank.

This BPO Company is undertaking/authorized to undertake the following activities:

 • Back Office functions relating to Debit Cards, Credit Card, ATMs, Bancassurance
Business and new products of the banks.

• Follow-up of overdue accounts under retail loans by sending Notices/SMS messages

and tele-calling the customers to maintain a healthy retail credit portfolio of Banks

• Pre-shipment hardware testing for the newly procured computer Hardware items like
PCs, Servers, ATMs, UPS, Routers, Switches, Modems and other peripherals such as
printers, (all types), scanners, digital cameras, etc., for Banks and Financial
Institutions

• Facilitating customers to file their Income Tax Returns

• Back Office functions relating to Government Business Transactions & Interest /

Dividend Warrants issuance/ payments

• Managing BCTT, Service Tax collection and Bonds Issue

• Undertaking Credit Rating of Bank's borrowers

• Providing guidance and maintenance of records for PF, Pension and Gratuity Trusts.

• Syndicate Cash Management Services

Welcome to the world of complete peace of mind offered by Syndicate Bank.

•
What is more, all these will be at your disposal if you choose to use our services now!
Incidentally, all these from the first Public Sector Bank that launched Centralised
Banking Solutions[CBS] to elevate you from a Branch customer to a Bank customer.

Treasury management
While on one hand, your business plans dictate reaching deep into the country's semi
urban and rural markets, you suddenly find that you need a Cash Management
Services

3.3 MOTIVATION PHILOSOPHY IN SYNDICATE BANK

SYNDICATE BANK recognizes that employees are the most important resource of
any organization. In the modern world, the human factor alone can provide a competitive
edge to any organization. As one author remarks – “Some of the best assets walk into and
outside the organization everyday”.

All HRD efforts are based on the fundamental concept that “Human-beings infinite
potential for growth and development that can be converted into performance by investment
of time and effort by management at all levels”. In SYNDICATE BANK “Human
Resource Management is identified as a key area providing the cutting edge to the
organization in its endeavor towards competitive excellence. The HRD philosophy of the
organization is based on “continuous efforts to enhance the knowledge develop skills and
reorient attitude of employees to keep pace with the changing environment”. An attempt is
made to align HD programmes with the basic business strategy.
3.4 TRAINING OBJECTIVES OF SYNDICATE BANK :
Objectives crystallize the fundamental principles enunciated in the mission and policy
statement. To operational the policy mission and statement, the following are the objectives
of SYNDICATE BANK of different training programmes.
1. To ensure that adequate time and efforts are invested at all levels of management
towards people management.
2. To in still in all employees a feeling of pride and belong with an intention to increase
organizational loyalty.
3. To design specific programmes with special focus on equipping the employees to
meet the emerging challenges and opportunities.
4. To help employees improve their core competency that has direct impact on their
performance and productivity.
5. To inculcate in the employee, the need for observing sound organization principles in
order to ensure healthy organization practices.

A study of the fundamental mission and philosophy of SYNDICATE BANK brings

out to our notice the fundamental assumptions behind all HRD attempts at
S YNDICATE BANK
• A high level of confidence in capacity and integrity of all employees.
• Recognition by the management of need for the integration of the objectives of the
organization and the needs of the individual employees.
• The need to recognize the fact that HRD attempts must be incorporated into the basic
business policies and practices.
• The conscious attempt to make every individual feel that he is a part of a team, which
has a specific objective.
• The need to ensure that training is a proactive process, which must be designed taking
into consideration future changes in the environment, the business, and the
competition and customer expectations.
• The need to constantly update job specific skills among employees to make them
more efficient and effective in discharging their duties.
• To aim at attitudinal changes required making the employee more conscious of his
role as a representative of the organization.
• To provide avenues for the growth and development of the individual through
actualization of inherent potentialities.
 CHAPTER – 4
DATA ANALYSIS
AND
INTERPRETATION

4. DATA ANALYSIS AND INTERPRETATION

The main function of SYNDICATE BANK is to accept the deposits from the
public for the purpose of lending. The bank has to manage the loans disbursements in a better
way to earn income so that they can repay to the depositors. Therefore, the bank has to take
the necessary steps to increase the loan disbursement and manage them effectively. In this
context analysis is done regarding the bank’s loan disbursement in order to know whether the
bank is performing well or not.
 In this study the data analysis is done for few types of loans offered by
SYNDICATE BANK for a period of five years 2013-2014,2014-2015,2015-2016,2016-
2017,2017-2018. For the better understanding of the data graphical representation has been
used. For this purpose different charts are used.

THE LOANS ANALYSED ARE:

• Housing loan (residents)

• NRI housing loan

• Education loan

• Vehicle loan

• Mortgage loan

• Fast credit loan

• Loans against gold ornaments

• Loan to pensioner's

ANALYSIS IS DONE ON THE FOLLOWING CRITERIA:

• Table showing outstanding Housing Loan (residents) for the years 2013-2018

YEARS AMOUNT(in crores)

2013-14 4638.3
2014-15 9992
2015-16 12648.8
 2016-17 18675.5
2017-18 19964.8

AMOUNT

2017-18

2016-17

2015-16
AMOUNT

2014-15

2013-14

0 5000 10000 15000 20000 25000

Analysis :

The maximum amount was sanctioned in the year 2017-18,there is a gradual increase in the
sanctioning from 2013-14 to 2017-18.

INTERPRETATION : The reason for increase in loan is due to public demand, decrease in
land value, inflation, increase in competitive life among people, increase in salary due to that
public are willing to have a better standard of life.

 Table showing outstanding amount of NRI HOUSING LOAN for the years 2013-
2018

YEARS AMOUNT (in crores)

2013-14 123.5
2014-15 259.6
2015-16 208.5
 2016-17 206.5
2017-18 202.5

AMOUNT (in crores)

2017-18

2016-17

2015-16
AMOUNT (in crores)

2014-15

2013-14

0 50 100 150 200 250 300

ANALYSIS :

The maximum amount was sanctioned in the year 2014-15 and the minimum amount was
sanctioned in the year 2013-14. There is a gradual decrease in sanctioning from 2014-15 to
2017-18.

INTERPRETATION :

The reason for decrease in NRI housing loan is that off recently the NRI’s are showing less
interest in buying houses as their parents are residing here and they have existing property
and most of the NRI’s would like to settle abroad.

• Table showing outstanding Educational Loan for the years 2013-2018.

YEARS AMOUNT
2013-14 1453.7
2014-15 2704.4
2015-16 5234
 2016-17 12449.5
2017-18 16625.3

AMOUNT
2017-18

2016-17

2015-16
AMOUNT

2014-15

2013-14

0 5000 10000 15000 20000

ANALYSIS :

The maximum amount was sanctioned in 2017-18 and the minimum amount was sanctioned
in 2013-14. There is a gradual increase in the loans sanctioned from 2013-14 to 2017-18.

INTERPRETATION :

The reason for gradual increase in sanctions is that many of the students are opting for
studying abroad, to acquire a better job and earnings, they would like to lead a better life.

 Table showing outstanding vehicle loans for the years 2013-2018

YEARS AMOUNT
2013-14 543
2014-15 972.3
 2015-16 1427
2016-17 2635.2
2017-18 3504.7

AMOUNT
2017-18

2016-17

2015-16
AMOUNT

2014-15

2013-14

0 1000 2000 3000 4000

ANALYSIS :

The maximum amount was sanctioned in 2017-18 and the minimum amount was sanctioned
in 2013-14. There is a gradual increase in the sanctioning of loans from 2013-14 to 2017-18.

INTERPRETATION :

The reason for gradual increase in sanctions is due to launching of different new models in
the market, people are getting attracted to them, and the loans are easily available at
affordable rates. Vehicles are becoming a necessity in today’s life.

• Table showing outstanding Mortgage Loan for the years 2013-2018

YEARS AMOUNT
2013-14 170.2
 2014-15 857
2015-16 2194.2
2016-17 1205
2017-18 525.4

AMOUNT
2017-18

2016-17

2015-16
AMOUNT

2014-15

2013-14

0 500 1000 1500 2000 2500

ANALYSIS :

The maximum amount was sanctioned in 2015-16 and the minimum amount was
sanctioned in 2013-14. There is an increasing trend from 2013-14 to 2014-15 and from 2014-
15 loan sanctioned was decreasing gradually.

INTERPRETATION :

The reason for gradual increase in sanctions is due to need of finances for business
purpose, for buying consumer durables, marriage and better livelihood.

• AMOUNT SANCTIONED FOR FAST CREDIT LOANS

YEARS AMOUNT
 2013-14 1523.4
2014-15 1802.1
2015-16 3893.7
2016-17 4256.8
2017-18 4995.3

AMOUNT
2017-18

2016-17

2015-16
AMOUNT

2014-15

2013-14

0 1000 2000 3000 4000 5000 6000

ANALYSIS :

The maximum amount was sanctioned in 2017-18 and the minimum amount
sanctioned was in 2014-15. There is a gradual increase in sanctions from 2014-15 to 2017-18.

INTERPRETATION :

The reason for gradual increase in sanctions is due to easy transactions, increase
in business and the people can purchase their willing commodity easily through credit
facilities given by the bank.
 Table showing outstanding amount sanctioned for loans against gold ornaments
for the years 2013-2018

YEARS AMOUNT
2013-14 226.8
2014-15 200
 2015-16 493.2
2016-17 510.7
2017-18 656.3

AMOUNT
2017-18

2016-17

2015-16
AMOUNT

2014-15

2013-14

0 100 200 300 400 500 600 700

ANALYSIS :

The maximum amount was sanctioned in 2017-18 and the minimum amount was
sanctioned in 2014-15. There is a gradual increasing trend from 2014-15 to 2017-18.

INTERPRETATION:

The reason for gradual increase in sanctions is due to marriage purpose, increase
of gold value for investments. Business, highly liquid asset and security and status purpose.

• Table showing outstanding amount sanctioned for loan to pensioners for the years
2013-2018

YEARS AMOUNT

2013-14 125.7
 2014-15 137.5

2015-16 217.1

2016-17 112.3

2017-18 91.8

AMOUNT

2017-18

2016-17

2015-16 AMOUNT

2014-15

2013-14

0 50 100 150 200 250

ANALYSIS :

The maximum amount sanctioned was in the year 2014-15 and the minimum amount
was in 2017-18. There is a gradual increase from 2013-14 to 2014-15. There is a decreasing
trend from 2015-16 to 2017-18.

INTERPRETATION :

The reason for gradual increase in sanctions is due to livelihood, marriage and
retired citizens depend only on their pension. The decrease in sanctions lately has been due to
investment in other sources.
ANALYSIS IS DONE ON TOTAL ADVANCES :

• Table showing total advances from the year 2013-2018

 Year Amount( in Crores)
2013-14 1562
2014-15 2030
2015-16 2215
2016-17 2786
2017-18 3539

Graph representing Cash Credit Overdraft (C.C.OD) for the years 2013-2018

Amount( in Crores)
2017-18

2016-17

2015-16
Amount( in Crores)

2014-15

2013-14

0 1000 2000 3000 4000

ANALYSIS:

The maximum amount was sanctioned in 2017-18 and the minimum amount
sanctioned was in 2013-14. There is a gradual increase every year from 2013-14 to
2017-18.

INTERPRETATION:
The amount is increasing as there is a great demand for this category of loan as this is the
loan amount on the fixed deposit and the repayment of the amount depends on the maturity
period. The C.C.OD can be also renewed therefore this is an extra benefit to the customer as
the customer can withdraw amount according to their requirements whenever they needs.
 CHAPTER – 5
FINDINGS
SUGGESTIONS
CONCLUSIONS
BIBILIOGRAPHY
 FINDINGS

• The bank should have a through over view on certain categories of loans so as to

avoid the fluctuations and declining of the amount.

• The bank is disbursing major percentage of their funds under such loans.

• The bank has to stress more on securities, guarantees and documentation before

lending loans.

• The study is mainly concentrated on the lending practices pattern and influence in
the organization’s performance.
 SUGGESTIONS

• Enough awareness should be created among the customers about the advantages of all

loans in general and new schemes in particular by the bank.

• The bank has to take good care to maintain the current position for the schemes like

Housing loans and Educational loans.

• From the analysis it is absorbed that most of the customers preferring these loans are

from SYNDICATE BANK.

• The bank is disbursing major percentage of their funds under such loans.

• The bank has to take some steps to increase the number of personal loans because

they are major source of regular interest for longer period to the bank.

• The bank has to concentrate more on loan recovery.

• They should maintain a record of all sanctions.

• The bank has to stress more on securities, guarantees and documentation before

lending loans.

• The bank should try to decrease certain percentage of interest rate to attract

customers.

• The bank should have a through over view on certain categories of loans so as to

avoid the fluctuations and declining of the amount.

• The renewal facility should be provided for all the categories.

• The bank should create enough awareness among its customers so as to increase their

outstanding amount.

Public and priority sectors should be focused more by providing additional facilities
 CONCLUSION

1. HOUSING LOANS :
Resident housing loans shows an increasing trend in terms of loan amount
sanctioned from 2010-11 to 2014-15. the main reason for this trend is due to increasing
public demand for these loans and also decrease in the land value. On the contrary there is a
decreasing trend in terms of NRI housing loan as they are showing less interest in buying
houses because of existing properties and also aspirations to settle abroad. Therefore, housing
loans in the near future are likely to increase further.

2. EDUCATIONAL LOANS :
Over the past five financial years, there is an increasing trend in terms of
educational loans sanctioned for further studies in India and abroad. This is due the fact that
many of the Indian students are opting for higher studies in other foreign countries in order to
get better jobs and hence a better life. The growth in educational loans is gradual and is
increasing at an increasing rate because of its high demand in youth. This scenario continues
to increase at a high rate.

3. VEHICLE LOAN :
In case of car loans, we observe that there is an increase in terms of sanctions.
This increase in the past five years is due to the desire for people for a better standard of
living as vehicles these days are becoming a necessity and is no more a luxury. There is also
a high possibility of increase in the amount of sanctions under these loans as various new
models of vehicles are available in the market at affordable prices. The automobile
companies are also tying up with the banks at the time of sale to provide easy vehicle loans
along with affordable installments and low interest rates to the customers.

4. MORTGAGE LOANS :
There is an increasing trend in sanctions for mortgage loans from 2008 to 2013 in
India. But off recently in the past two years there is a decline in the amount sanctioned. The
reason for gradual increase in trend is due to need of finances for business and personal
purposes, buying consumer durables, etc.
5. TERM LOANS :
There is a continuous decreasing trend in the amount of loans sanctioned
under the term loan from 2010-11 to 2014-15. As this scheme is applicable only to the
teachers, it is very restricted. The loans sanctioned are likely to decrease further more as the
people are depending on other types of loans.

6. FAST CREDIT LOANS :

There is an increase trend in terms of sanctions from 2008 to 2013. the
increase has been gradual and at an increasing rate. This is due to the increasing business
transactions, easy availability of fast credit loans to customers for quick and easy payment.
The credit facilities provided by bank are increasing in magnitude and are likely to further
increase at a rapid rate.

7. LOAN AGAINST GOLD ORNAMENTS :

There is an increasing trend in terms of sanctions over the past five financial
years. There is a steep rise in these loans in 2012-13. This is due to the increase in gold value
at a rapid rate. Gold is a highly liquid asset and provides high security and is also a very
valuable investment. The growth in these loans is likely to be increased over the coming
years.

8. BUSINESS LOAN :
There is an increasing trend in terms of sanctions in business loans during the
past five years. The scheme is an incentive to all the business houses. They can even repay it
on a long term basis. Most of the business houses are opting for this loan as it is easily
available.

9. LOAN TO PENSIONERS :
There is an increasing trend in terms of sanctions over the past five years. But
in the last two financial years these loans have decreased. This is because of the fact that
other avenues for investment are more preferred by the pensioners. The gradual increase in
sanctions was due to the fact that the retired citizens only depended on their pension.
 BIBLIOGRAPHY

BOOKS :

• BANKING THEORY AND PRACTICE : DR. P.K SRIVASTAVA

• BANKING AND FINANCIAL SYSTEMS: G.SATYANARAYANA

• ANNUAL REPORTS OF SYNDICATE BANK

WEBSITES :

• www.syndicatebank.com

• www.google.com

• www.rbi.org.in