Vikram Sahu

A
Project Report
On
“Impact of Demonetisation on Loan Rates in India”
Submitted by:
Guided by:
Bikram K. Sahu
Prof. Jainish Bhagat
T.Y. B.B.A. Finance
Roll No. 156
In the partial Fulfilment of the Requirement
For the Degree of
BACHLOR OF BUSINESS ADMINISTRATION (B.B.A)
Submitted to:
Shri Shambhubhai V. Patel College

Of Computer Science & Business Management.
Affiliated to VNSGU, Surat
Academic Year 2016-17
DECLARATION
I hereby declare that the project work entitled “Impact of
Demonetisation on Loan Rates in India” submitted to the S.V Patel

College of C.S & B.M, Surat, is a record of an original work done by me
under the guidance of Professor Jainish Bhagat and this project work is
submitted in the partial fulfilment of the requirements for the award of the
degree of Bachelor of Business Administration. The results embodied in this
thesis have not been submitted to any other University or Institute for the
award of any degree.
Signature of the student:

Date:
Place:
Table of Contents
S.R Topic Page No.

No.
1. Introduction 1
2. Research Methodology 7
3. Data Analysis & Interpretation 10
 Nationalised Banks 11
 Private Banks 13
 T-test on Loan rates 16
4. Conclusion 29
5. Bibliography 31
6. Annexure 33
IMPACT OF DEMONETIZATION ON LOAN RATES IN INDIA
CHAPTER: - 1
INTRODUCTION
SHRI SHAMBHUBHAI V PATEL COLLEGE OF COMPUTER SCIENCE & Page | 1

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Demonetization:-
‘Demonetization is the act of stripping a currency unit of its status as legal tender. It occurs
whenever there is a change of national currency: The current form or forms of money is pulled from
circulation and retired, often to be replaced with new notes or coins.
Bank
A bank is a financial institution licensed to receive deposits and make loans. Banks may also provide
financial services such as wealth management, currency exchange and safe deposits boxes.
Types of Bank

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Commercial Bank: -
A commercial bank is a financial institution that provides various financial service, such as accepting
deposits and issuing loans. Commercial bank customers can take advantage of a range of investment
products that commercial banks offer like savings accounts and certificates of deposit.
Regional Banks: -
A regional bank is a depository institution, i.e. a bank, savings and loan, or credit union, which is
larger than a community bank, which operates below the state level, but smaller than a money centre
bank, which operates either nationally or internationally. A bank that operates in a limited area of the
country, rather than nationwide or internationally.
Cooperative Banks: -
A bank that holds deposits, makes loans and provides other financial services to cooperatives and
member-owned organizations. Also known as Banks for Cooperatives. A cooperative savings
institution, chartered and regulated by a state or the federal government, that receives deposits in
exchange for shares of ownership and invests its funds chiefly in loans secured by first mortgages on
homes. Also called building and loan association, cooperative bank; British, building society.
Scheduled Banks: -
Scheduled Banks in India constitute those banks which have been included in the Second Schedule of
Reserve Bank of India (RBI) Act, 1934.
Non- Scheduled Banks: -
Those banks which not comes in Scheduled banks
Indian Banks: -
Indian Bank refers to hose banks which is situated in India & providing banking service to the
peoples
Foreign Banks: -
Those Banks which is situated in foreign and providing banking services

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Public Sector Banks: -
Public Sector Banks (PSBs) are banks where a majority stake (i.e. more than 50%) is held by a
government. The shares of these banks are listed on stock exchanges. There are a total of 27 PSBs in
India
Private Sector Banks: -
The private-sector banks in India represent part of the Indian banking sector that is made up of both
private and public sector banks. The "private-sector banks" are banks where greater parts of state or
equity are held by the private shareholders and not by government.
Types of loans

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Types of Loan
1. Secured Loan
2. Unsecured Loan
Secured Loan
A secured loan, is a loan in which the borrower pledges some asset (e.g. a car or property) as
collateral for the loan, which then becomes a secured debt owed to the creditor who gives the loan.
Types of Secured Loan

A. Housing Loan
A sum of money borrowed from a financial institution or bank to purchase a house.
B. Auto Loan
An auto loan is basically a loan that you take out in order to purchase a vehicle.
C. Equity line of Credit
A loan in which the lender agrees to lend a maximum amount within an agreed period.
D. Equity Loan
A home equity loan is a type of loan in which the borrower uses the equity of his or her home
as collateral.
E. Small Medium Business Loan
SME finance is the funding of small and medium-sized enterprises, and represents a major
function of the general business finance market – in which capital for different types of firms are
supplied, acquired, and costed or priced.
Unsecured Loan
An unsecured loan is a loan that is issued and supported only by the borrower's
creditworthiness, rather than by any type of collateral. An unsecured loan is one that is obtained
without the use of property as collateral for the loan, and it is also called a signature loan or a
personal loan.
Types of Secured Loan

A. P2P Lending
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Peer-to-peer lending, sometimes abbreviated P2P lending, is the practice of lending money to
individuals or businesses through online services that match lenders with borrowers.
B. Pay day Lending
A payday loan is a type of short-term borrowing where an individual borrows a small amount
at a very high rate of interest. The borrower typically writes a post-dated personal check in the amount
they wish to borrow plus a fee in exchange for cash.
C. Credit Card
Credit Card Debt' A type of unsecured liability which is incurred through a short-term
revolving loan facility. While, technically, all purchases made by credit card create a debt to the user,
these debts typically do not incur interest until the grace period has expired.
D. Personal Loan
Personal Loan is an unsecured loan to meet your current financial needs such as financing a
wedding, a vacation, medical emergencies and many more.

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CHAPTER: - 2
Research
methodology

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Title: -
Impact of demonetization on loan rate in India – a survey
Objectives: -
 To know the effect of demonetization on loan rate.

 To investigate the expectations of customers after demonetisation.
Research design: -
There are three basic types of research design
 Exploratory research
 Descriptive research
 Causal research
Here exploratory research design will be used.
Types of data: -
Primary Data & secondary data will be used to know the impact on loan rates.
Sources of data: -
Questionnaire will be used to gather primary data and various websites will be used to get the
secondary data i.e. loan rates etc.
Sample Size:-
100 respondents
Sampling Method: -
Simple Random Sampling method will be employed.
A simple random sample is a subset of a statistical population in which each member of the
subset has an equal probability of being chosen.
Data collection tools: -
Structured Questionnaire.

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Tools used for data analysis: -
T- Test and graphical presentation.
Duration:-
Time duration for study is for 2 Months.

Limitation:-
 High cost require to research

 Inadequate knowledge to do research
 Lower time duration to do research
Importance:-
 Helps to get maximum efficiency and reliability.

 Helps to give direction.
 Helps in decision making.

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CHAPTER: - 3
Data analysis
&
Interpretation

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There is two basic types of bank

1. Nationalized banks
2. Private banks
Nationalized banks
1. Bank of India:
BOI has over 4500 branches and makes a profit of 400 million USD.
Base Before After Demonetisation

Demonetisation (Crore)
(Crore)
Gross Non-Performing Assets 49879.13 52261.94
Net Non-Performing Assets 27996.40 27467.03
Net Profit / Loss 2012.90 -6204.46
Earnings Per Share 30 -76
2. Bank of Baroda:
BOB is the fourth largest bank in India when it comes to managing assets. According to market
cap the bank is undervalued/priced. The bank has over 4200 branches and has a net profit of 840
million USD. The assets managed by this bank are valued at 73 billion USD.
Bank of Baroda is another large PSU banking company in India with a market capitalization
of about INR 38601.08 crore. The bank is estimated to have over 5193 branches and 38,737 employees.
With a significant presence in about 25 countries, the Bank of Baroda balances out NRI services with
rural and agricultural finance. The bank is one of the major banking operators in India’s rural sectors.
Base Before After Demonetisation

Demonetisation (Crore)
(Crore)

Net Profit / Loss 3398.44 -5395.54
Earnings Per Share 15.83 -23.89

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3. Canara Bank
Canara Bank is another PSU that has made its mark in the Indian banking sector with a market
capitalization of about INR 18630.10 crore. Nationalised in 1976, the bank has a network of about
3600 branches spread across the country. With 7599 ATMs, the bank is among the first PSUs in the
country to emphasise on e-banking and online services. Apart from commercial banking, Canara Bank
has also become a strong provider of corporate banking services in India.
The bank has about 3200 branches with over 4000 ATM’s. The bank employees about 44,000
people. Assets managed by the bank are valued at 61 billion USD.
Base Before Demonetisation After

(Crore) Demonetisation
(Crore)
Net Profit / Loss 2702.62 -2812.82
4. Central Bank of India

Among the Nationalised Banks, Central Bank of India can be truly described as an All India
Bank, due to distribution of its large network in all 29 States as also in 6 out of 7 Union Territories in
India. Central Bank of India holds a very prominent place among the Public Sector Banks on account
of its network of 4730 Branches, 1 Extension counters, along with 10 Satellite Offices (as on February
2017) at various centres throughout the length and breadth of the country
Base Before Demonetisation After Demonetisation

(Crore) (Crore)
Gross Non-Performing Assets 11873 22721
Net Non-Performing Assets 6807 13242

Net Profit / Loss 606.45 -1117.67

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5. Industrial Development Bank of India

The bank has about 1150 branches with about 2000 ATM’s. The bank employees about 15000
people. It manages assets worth 42 billion USD.
Base Before Demonetisation After Demonetisation

(Crore) (Crore)
Net Profit / Loss 873.39 -3664.80
Private Banks
1. ICICI Bank
ICICI Bank is the third largest entity in the Indian banking space, with a market capitalization
of INR 184,547.26 crore.ICICI Bank has a customer base of over 2.5 million and boasts of an extensive
network of 4050 branches across the country. With 12,475 ATMs and assets worth USD 99 billion,
the bank is currently celebrating 60 years of existence. ICICI was formed as a World Bank initiative
in 1955.The bank is headquartered in Vadodara, Gujarat and has an international presence in 19
countries. The bank’s employee strength was estimated at over 72,000 last year when it overtook
HDFC Bank in terms of people employed.
Base Before After

Demonetisation Demonetisation
(Crore) (Crore)
Net Profit / Loss 11175.35 9726.29
Earnings Per Share 19.32 16.75

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2. Yes Bank
Yes Bank was incorporated in the year 2004 by Mr. Rana Kapoor and Mr. Ashok Kapoor, and
currently has a market capitalisation of about INR 35,169.20 crore. With a strong network of about
over 630 branches in 375 cities, and with over 1150 ATMs spread across the country, Yes Bank is
among the fastest growing banks of India. The bank employs about 12000 employees and has high
ambitions for the years to come.
Base Before After

(Crore) (Crore)
Gross Non-Performing Assets
313.40 748.98
Net Non-Performing Assets
0.00 284.47
Net Profit / Loss
2005.36 2539.45
Earnings Per Share
49.00 60.62
3. Axis Bank
Axis bank comes 7th in the list and 3rd in the list of private sector bank. The bank has 2225
branches, 12000+ ATM’s, 40200 employees. The bank manages assets worth 54 billion USD. The
bank’s net profit is 1.5 billion USD.
Before After
Base Demonetisation Demonetisation
(Crore) (Crore)
Net Profit / Loss 7357.82 8223.66
Earnings Per Share 31.18 34.59

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4. Kotak Mahindra Bank

The bank has over 323 branches and a customer account base of over 2.7 million. Spread all
over India, not just in the metros but in Tier II cities and rural India as well, it is redefining the reach
and power of banking. Presently it is engaged in commercial banking, stock broking, mutual funds,
life insurance and investment banking. It caters to the financial needs of individuals and corporates.
The bank has an international presence through its subsidiaries with offices in London, New York,
Dubai, Mauritius, San Francisco and Singapore that specialize in providing services to overseas
investors seeking to invest into India.
Base Before After

(Crore) (Crore)
1237.23 2838.11
609.08 1261.96
Net Profit / Loss
1865.98 2089.78
Earnings Per Share
24.20 11.42
5. City Union Bank

City Union Bank Ltd was incorporated as a limited company on October 31, 1904 with the name, The
Kumbakonam Bank Ltd. In January 30, 1930, the first Branch of the Bank was opened at Mannargudi
in Tamil Nadu. Thereafter, branches were opened at Nagapattinam, Sannanallur, Ayyampet,
Tirukattupalli, Tiruvarur, Manapparai, Mayoral and Prayer within a span of twenty five years.
Base Before After

(Crore) (Crore)
335.82 511.98
232.79 323.15
Net Profit / Loss
384.13 444.69
Earnings Per Share
6.82 7.44

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T-TEST OF LOAN RATES BEFORE DEMONETISATION & AFTER

DEMONETISATION
H0: There is no significance difference between after and before demonetisation in loan rate
H1: There is significance difference between after and before demonetisation in loan rate
Weeks Interest Rates
14 8.25%
13 8.25%
12 7.75%
11 7.75%
10 7.75%
9 7.75%
8 7.00%
7 7.00%
6 7.00%
5 7.00%
4 7.00%
3 7.00%
2 7.00%
1 7.00%
0 Demonetisation
1 7.00%
2 7.00%
3 7.00%
4 6.75%
5 6.75%
6 6.75%
7 6.75%
8 6.75%
9 6.75%
10 6.75%
11 6.25%
12 6.25%
13 6.25%
14 6.25%

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T-cal 0.000105867
T-tab @5% 2.05
In the above case there is T-cal is lower than T-tab.

So, H0 is not rejected.
T-cal<T-tab
H0 is not rejected
I.e. there is no significance difference between before and after demonetisation loan rates in India.

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Gender Response
1.Male 72
2.Female 28
Total 100
Survey is undertaken in Surat city

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All respondents are aware about demonetisation
From above data we can understand that 96% peoples have been taken loan from banks.

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Particulars Percentage
Peoples who had taken loan 96%
Peoples who had not taken loan 4%
Total 100%
Respondents have been taken loans from multiple banks.
Name of Banks Percentage of peoples taken

loans
State Bank of India 38%
HDFC 34%
ICICI 10%
Bank of India 18%

Kotak Mahindra Bank 14%
Bank of Baroda 13%

Panjab National Bank 11%
Union Bank 6%
Others 5%

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Respondents have been taken different types of loans.
Types of loan Percentage

Home Loan 42%
Business Loan 8%
Gold Loan 3%
Vehicle Loan 50%
Education Loan 24%
Others 1%

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According to 97% of People, They think demonetisation affected loan rates and others 3%
are think that demonetisation does not affected to loan rates.
Particular Percentage
(Demonetisation affect to loan rates)
Yes 97%
No 3%
Total 100%

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Rates are Increased 9%
Rates are Stable 16%
Rates are decreased 75%
Total 100%

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Rates will Increased 17%
Rates will Stable 18%
Rates will decreased 65%
Total 100%

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Particular Percentage
Problem faced by person 90%
Problem does not faced by person 10%
Total 100%

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Maximum respondents’ experience in taking loan is average i.e. 68%
Experience Percentage
Very Bad 3%
Bad 3%
Average 68%
Good 25%
Very Good 1%
Total 100%

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89% Peoples will recommend others to take loan and remaining others are will not
recommend.

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Name of Banks Percentage of peoples taken loans

State Bank of India 23.7%
HDFC 37.6%
ICICI 9.7%
Bank of India 9.7%
Kotak Mahindra Bank 3.0%
Bank of Baroda 7.5%
Panjab National Bank 3.0%
Union Bank 3.0%
Others 3.0%
Total 100%
Maximum respondents’ are recommend others to take loan from HDFC than after State Bank
of India.

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CHAPTER: - 4
Conclusion

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 Here in this research impact of demonetisation on loan rates is studied.
 In this research this has been compared some particulars like Profit & Loss, Non-performing
assets and Earning per Share and there has been analysed that after demonetisation
nationalized banks has incurred loss and other private banks performed well manner.
 It means that the nationalised banks are more affected by demonetisation than the Private
Banks.
 To know the effect of demonetisation on loan rates calculated T-test.
 Cause of that test it has been analysed about the T-Cal and T-tab.
 In that test it resulted that that T-Cal < T-tab it means H0 is accepted.
 Its result shows that there is very minor changes are occurred in loan rates.
 It shows that there is no effect or stable.

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Bibliography

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 http://www.moneycontrol.com/
 https://www.rbi.org.in/Scripts/WSSViewDetail.aspx?TYPE=Section&PARAM1=4
 https://www.thebalance.com/types-of-banks-315214
 https://www.debt.org/credit/loans/
 www.investopedia.com/terms/d/demonetization.asp

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Annexure

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Fluctuation In Loan Rates

Weeks Before Demonetisation After Demonetisation
interest rates interest rates
1 7.00% 7.00%
2 7.00% 7.00%
3 7.00% 7.00%
4 7.00% 6.75%
5 7.00% 6.75%
6 7.00% 6.75%
7 7.00% 6.75%
8 7.75% 6.75%
9 7.75% 6.75%
10 7.75% 6.75%
11 7.75% 6.25%
12 7.75% 6.25%
13 8.25% 6.25%
14 8.25% 6.25%

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Vikram Sahu

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A

“Impact of Demonetisation on Loan Rates in India”

In the partial Fulfilment of the Requirement

For the Degree of

BACHLOR OF BUSINESS ADMINISTRATION (B.B.A)

Shri Shambhubhai V. Patel College

Demonetisation on Loan Rates in India” submitted to the S.V Patel

Signature of the student:

S.R Topic Page No.

3. Data Analysis & Interpretation 10

SHRI SHAMBHUBHAI V PATEL COLLEGE OF COMPUTER SCIENCE & Page | 1

SHRI SHAMBHUBHAI V PATEL COLLEGE OF COMPUTER SCIENCE & Page | 2

Non- Scheduled Banks: -

Those banks which not comes in Scheduled banks

Those Banks which is situated in foreign and providing banking services

SHRI SHAMBHUBHAI V PATEL COLLEGE OF COMPUTER SCIENCE & Page | 3

Private Sector Banks: -

SHRI SHAMBHUBHAI V PATEL COLLEGE OF COMPUTER SCIENCE & Page | 4

Types of Secured Loan

A sum of money borrowed from a financial institution or bank to purchase a house.

C. Equity line of Credit

E. Small Medium Business Loan

Types of Secured Loan

B. Pay day Lending

SHRI SHAMBHUBHAI V PATEL COLLEGE OF COMPUTER SCIENCE & Page | 6

SHRI SHAMBHUBHAI V PATEL COLLEGE OF COMPUTER SCIENCE & Page | 7

 To know the effect of demonetization on loan rate.

There are three basic types of research design

Simple Random Sampling method will be employed.

Data collection tools: -

SHRI SHAMBHUBHAI V PATEL COLLEGE OF COMPUTER SCIENCE & Page | 8

Tools used for data analysis: -

T- Test and graphical presentation.

Time duration for study is for 2 Months.

 High cost require to research

 Helps to get maximum efficiency and reliability.

SHRI SHAMBHUBHAI V PATEL COLLEGE OF COMPUTER SCIENCE & Page | 9

SHRI SHAMBHUBHAI V PATEL COLLEGE OF COMPUTER SCIENCE & Page | 10

There is two basic types of bank

Base Before After Demonetisation

Earnings Per Share 30 -76

Base Before After Demonetisation

Net Non-Performing Assets 8069.49 19046.46

Earnings Per Share 15.83 -23.89

SHRI SHAMBHUBHAI V PATEL COLLEGE OF COMPUTER SCIENCE & Page | 11

Base Before Demonetisation After

Net Profit / Loss 2702.62 -2812.82

Earnings Per Share 58.59 -53.61

4. Central Bank of India

Base Before Demonetisation After Demonetisation

Gross Non-Performing Assets 11873 22721

Net Non-Performing Assets 6807 13242

SHRI SHAMBHUBHAI V PATEL COLLEGE OF COMPUTER SCIENCE & Page | 12

5. Industrial Development Bank of India

Base Before Demonetisation After Demonetisation

Net Non-Performing Assets 5992.52 14643.39

Net Profit / Loss 873.39 -3664.80

Earnings Per Share 5.45 -21.77

Base Before After

Net Non-Performing Assets 6255.53 12963.08

Net Profit / Loss 11175.35 9726.29

Earnings Per Share 19.32 16.75