You are on page 1of 58



This project report is entitled to credit facilities in banks

with special reference to “state bank of India”, Main branch
Shimoga. This has been brought out to know the bank
performance about the credit facilities provided by the bank. This
project is also prepared to know the customer’s opinion about the
service provided by the bank.


The following are the important objectives that we

contemplate in this study: -

1. To make study of credit facilities provided by the bank

2. To make a brief study of the customer’s service provided by
the bank
3. Effective utilization of services by the customer
4. To study the establishment, growth and progress of the
5. To study the problems connected with the credit facility
provided by the bank
6. To know the opinion of customers about the credit facilities
provided by the bank.
7. To make the general opinion of the customers about the

8. To suggest solution by studying the problems relating to the


The state bank of India, Main branch which is located in

Shroff complex, Sir. MV road, Shimoga is selected for the study.
Customers are selected and their information about the opinion
towards bank’s functioning is collected. The projected report
aimed at giving analysis on credit facilities in general and
analysis of bank’s services from customer’s point of view.


The data is collected for the preparation of this project

report includes: -

1. Primary data
2. Secondary data.

The primary data is collected from bank’s manager and

staff. They were personally interviewed to collect the information
and the primary information also collected from annual report
published by the bank.

The secondary data has been collected through selected

books and survey. The survey was conducted, questionnaire was
prepared and passed to the selected customers, which reveals
the customers idea about the bank.


Following are the benefits of the study: -

1. The study makes us to know the growth and performance of
the bank
2. From the study we can get a clear idea about the credit
facilities provided by the bank
3. The report is helpful in knowing about the customers wants
about the bank’s services
4. It increases our own knowledge regarding bank operations
and activities


The following are the limitations of the study

1. Less number of respondents conducted due to time

2. We can not contact all types of customers
3. Some customers will not give correct opinion.




Banking or the business of banking is as old as the

civilization itself. According to some authorities, the word “Bank”
or “Banking” is derived from the Italian word ‘BANCO’, and the
French word ‘BANQUE’ which means a ‘BENCH’ used by the
money – charges and money –lenders in ancient and medieval
times to transact their activities ie., money changing and money
lending by displaying coins of different countries and of different
denomination in big hips on the benches, for the purpose of
changing and lending money.

But, according to some other authorities the term ‘BANK’ is

derived from Germen word ‘BANCK’ which means a joint stock
fund or common fund raised from the large number of members
of the public. They are of that opinion that the early bankers
raised funds from the public for the purpose of giving loans. The
term bank is generally associated with an institution dealing in
hips of money raised from the public.


On account of the numerous activities performed by a
modern bank, the various definitions attempted so for have
thrown some light on characteristics of the bank.

Some of the definitions are as follows: -

According to Banking Regulation Act 1949, define the term

Banking company as any company which transact the business of
banking in India and the term ‘ BANKING’ as accepting for the
purpose of lending or investments of deposits of money from the
public, and repayable on the demand or otherwise and withdrawn
by cheques, drafts or order or otherwise.

Sir, John Paget says “No persons or body corporate or

otherwise can be a banker who does not take deposit accounts,
issue and pay cheques and collect cheques of crossed and
uncrossed for his customer and finally banking should be his
main business.


European banking has a very old history, dating from the

days of Greece and Rome, where these ancient bankers were
performing various functions known to modern Banking. The
Babylonians are know to have used their temples as banks and
the priests acted as the financial agents until the public
confidence was destroyed by spreatd of disbelief in religion. The
jews who had kept their possessions in a more or less liquid stat
because they were not all owed to hold lands carried on early

European banking. The Jews are said to have introduced Bills of
Exchange in Europe, very likely from the more advanced East of
that date, which were soon discovered to be the most convenient
method of transmitting money from one country to another.


Banking is also of very ancient origin in India. It is stated by

authoritative writers that as early as the vedic period, records of
taking and giving of credits are to be found. All throughout the
period of Indian history, money-lenders who were called either
bankers or seths, or shorffs, are recorded to have existed, and
are stated to have carried on a roaring business in money-lending
and banking. The great Hindu lawgiver, Manoo, who is said to
have flourished about the second or third century A D also
devotes a section of his work to the question of deposits and
pledges. By the 12th century, the Jain bankers are recorded in
history to have flourished and the famous Dilwara and Mount
Abu, is Said to have been build by the two join bankers some
where between 1197 and 1247 A D.

The banking system in India and the outcome of innovation

considerably influenced by historical growth and past transaction.
The evolution and expansion of banking system consists of well –
defined places of banking developed in India. Originally, India has
Indigenous banking system. The impact of west resulted in the
modernization of the banking system in India, as joint stock
ventures, the development of joint stock banking was helped

through statutes. Culminated in social control and nationalization
of banks which were considered very big.

The need for a ventral bank in India as felt as early as in

1873, hen Warren Hastings had recommended the establishment
of general band of Bengal. In 1921, the imperial bank of India as
setup by amalgamating three presidency banks. Though primarily
a commercial bank, it performed certain central banking
functions, such as acting as a banker of government, the issue of
notes, however continued to be the direct responsibility of the
central Government.

In 1926, the Royal Commission of India currency and

finance suggested the establishment of Reserve Bank of India to
act as a central bank. In January 1927, a bill giving effect to his
recommendation as introduced in the legislative assembly. The
issue assumed importance again in 133 with the publication of
the white pages on Indian constitutional reforms.
Again with the recommendation of the central banking
enquiry committee a fresh bill called Reserve Bank f India bill as
introduced on 8th September 1933, the bill as duly passed and
become an act on 6th March 1934 called as Reserve Bank of India
Act. The bank was formally inaugurated on 1st April 1935.


The functions of commercial banks are numerous. They can

be broadly divided into to categories. They are: -

1. Primary Functions

2. Secondary Functions


1. Receiving of deposits: -
Deposits constitute the main source of funds for commercial
banks. Commercial banks deposits from the public on various
accounts. The main types of accounts are: -
a. Current accounts
b. Savings bank accounts
c. Fixed deposit accounts
d. Recurring deposit accounts.

2. Lending of funds: -

a. Short term advances: -

These are the advances made by modern banker for a

period of not exceeding 6 months.

Following are the different categories of short term loans: -

i. over draft facility

ii. Cash credit
iii. Other short term loans

b. Medium term advances: -

Under this facility, banker will provide a loan like,

hypothecated loan. Under this loan is given against raw material
and goods. The other types of loans are consumer loans or

installment credit i.e., loans against movable assets like vehicles
refrigerators, TV sets and other home appliances.

c. Long term advances: -

Usually banker prefers to go for short and medium term

loans and he will not encourage for long term advances. But, due
to change in the policy of the banker in the recent decades he
will also provide long term advances like home loans, loans for
reconstruction, loan for addition and alteration. These loans will
be for a period of more than 3 year.

d. Investment of funds on securities: -

Investment of funds on securities is one of important

functions of commercial banks. They invest a considerable
amount of their funds in government and industries securities.

e. Creation of money: -

Commercial banks would not have becomes so prominent,

as they are today, if they merely borrow and lend money. They
do something more than this that is, they manufacture or create

Secondary Functions: -

Apart from performing the main functions of accepting

deposits and granting advances, a banker performs a number of
secondary functions or services. These functions can be divided
into two classes. They are: -

1. Agency services
2. Miscellaneous or general utility services.

Agency Services: -

The services rendered by a banker as agents of his

customer i.e., for and on behalf of his customer are called agency

a. Collection and making payment of money on behalf of a

b. Acting as trustee, Executor, Administrator of customer
c. Serving as correspondents are representative of a
d. Purchase and sale of securities on behalf of customer etc.

Miscellaneous or general utility services: -

A service rendered by a banker not only to his customer,

but also to the general public is called general utility services.

• Safe custody valuable

• Dealing in foreign exchange business
• Issuing of letters of credit, circular notes and travelers
• Collection of statistics and data etc.,




In Accordance With The recommendation of the All India

Rual Credit committee, to extend banking in rural areas to
provide credit facilities like Agricultural loans, Housing loans,
Mortgage loan scheme etc. and create banking habit among rural
population and to mobilize the small resources to augment
industrial production. For this the survey urged the need for
nationalization of Imperial bank of India and changed it into the
State Bank of India and the state bank of India came into
existence on 1st July 1955 under a separate Act called State Bank
of India Act 1955. the state bank of India took over the assets
and liabilities of the imperial Bank of India.


After the constitution of SBI under the State Bank of India

Act 1955, the shares of the Imperial Banks were transferred to
the Reserve Bank of India and the shareholders were given
compensation. They were given the option of taking up the
shares of the State Bank of India in lieu of the compensation, on
the rate of Rs. 3.50 per share of the paid up value of Rs. 100.

No persons were allowed to register as shareholders of the

state bank of India in excess of 200 shares. Whether individually
or jointly. However the RBI, a corporation, Insurance company,
Local authority, Co-operative society, Trustee of charitable
institutions etc. were exempted from the restriction.

Being a nationalized institution, it is naturally under the

control of the government and Reserve bank of India. The State
bank of India requires that the Reserve Bank of India always hold
not less than 55% of the share capital of State bank of India.
Share holding pattern At 31st March 2001

The Reserve bank of India holds 59.73% of the stock

holding followed by NRI/ RII/ OCB 18.31%, Financial institutions
including Insurance Companies 11.6%, Domestic company’s /
Trusts 6.24% and others including resident individuals at 2.84%.

The state bank of India Act provided for an authorized

capital of Rs. 20 crores and issued capital of Rs. 5.6 crores with
equity shares of Rs. 100 each.

During 1990-91 its authorized capital was raised to Rs. 1000
crores at present, the authorized capital of the bank is
100,00,000 shares of Rs. 10 each.


The functions of State bank of India are classified into two

categories they are: -

1. Commercial banking functions

2. Central banking function


Following are the commercial banking functions of SBI:

a. Receiving of deposits
b. Granting of loans and advances
c. Investment in securities
d. Collecting and paying of cheques for customer
e. Acting as the trustee, executors and Agent of the customer


Following are the central banking functions of SBI: -

a. Acting as a banker to the state government
b. It acts as a banker to the central government

c. It serves as a bankers bank


The Management of SBI is in the hands of the central board

of director who supervises the activities of central and local
officers and the branches. This central office consists of 20
members they are: -
1. A chairman and wise chairman appointed by the central
government by the central government in consultation with
Reserve Bank of India.
2. Two Managing Directors appointed by the Central Board of
Directors with the approval of central government.
3. Six directors appointed or selected or collected by the
private shareholder other than the RBI.
4. Eight Directors nominated or appointed by the central
government in consultation with RBI.
5. One Director nominated by the central government.
6. One director nominated by the RBI
The Central office of the State Bank of India is located in
Bombay and the Bank has local head offices in Bombay,
Kolkata, Chennai, Kanpur, Ahmedabad and Hyderabad.

The state bank of India is the largest commercial bank of

the country and ranked among the 100 tops most banks in the

The bank has seven associated banks attached to it, they

are: -
1. State bank of Bikaner and Jaipur

2. State bank of Hyderabad
3. State bank of Indore
4. State bank of Mysore
5. State bank of Patiala
6. State bank of Saurastra
7. State bank of Travancore


1. Premier Indian financial services group with global

perspective, world- class standards of efficiency and
professionalism and core institutional values.
2. Retain its position in the country as a pioneer in
development banking
3. Maximize share holders value through high – sustained
earning per share
4. An institution with a culture of mutual care and
commitment, a satisfying and exciting work environment
and continuous learning opportunities.


To retain the bank’s position as the premier Indian financial

services group, with the world class standards and significant
global business, committed to excellence in customer, share
holder and employee satisfaction, and to play a leading role in
the expanding and versifying financial services sector, while
continuing emphasis on its development banking role.

The State Bank of India has made remarkable progress in
different direction. It has climbed new peaks and has set for itself
bolder and more challengers, goals and policies to be followed all
along the line.

In the recent years, the SBI has reached the peak if its glory
as a largest bank in India. A high point in bank’s performance
during the year was the launch of the India Millennium Deposit
(IMD) programme, which was a resounding success. With
overwhelming response from investors, the bank mobilized USD
5.5 billion (Rs. 25,711 crore). By boosting India’s foreign
exchange reserves, the programme helped to meet the challenge
of rising oil prices, provide strong support to the rupee. Another
milestone was reached with bank’s successful foray into
insurance. It is a joint venture with SBI holding 74% and balance
26% Cardiff S.A., the Joint venture partner. The bank will market
the products and provide active support in product development,
risk management and IT areas. SBI life launched its first product
“SANJEEVAN” on 15th June 2001.

The bank’s efforts to establish a world class credit

information bureau in India culminated in the successful setting
up of the Credit Information Bureau (India) Ltd., with a joint
ventures. The bureau will handle with positive and negative
credit information in commercial and consumer market

To realize the synergies inherent in the strategy, the bank

focusing on cross-selling products like credit card, housing loan,
consumer loan, and gold banking products. In the highly

competitive housing loan market it has registered an annualized
growth rate of 46% i.e., a growth of Rs. 1,543 crore during the
year under review. In personal finance, it covers a broad
spectrum including Auto, computer, personal and education
loans. The bank has growing at a fast pace and the personal
financing portfolio registered an impressive growth of 30% during

On the monetary front, there was adequate liquidity in the

economy during 2004-05 with year – on- year growth in broad
money (M3) at 16.2% as against 14.6% in 2003-2004. the
growth was boosted by inflows amounting to Rs. 25,711 crore
(USD 5.5 billion) on account of the India Millennium deposits.
Growth in aggregate deposits of all scheduled commercial banks
at 17.8% in 2004-05 was higher than 13.9% in the previous year.
The growth in credit at 16.8% in 2004-05 was lower than 18.2%
in 2003-04, reflecting sluggishness in the real sector
environment. The strong growth in food credit during the year
supported large scale food procurement operations of the

In keeping with its objective of providing sufficient credit of

growth consistent with price stability, RBI announced a number of
measures like reduction in bank rate, cut in CRR, reduction in
report and cut in savings bank deposits rate.



The bank posted a Net Profit of Rs. 1,604.25 crore for the
year 2004-05 as compared to Rs. 2051.55 crore in 2003-04. the
reduction was due to the IMD issue expenses and VRS related
expenses charged off during 2004-05 , as aforesaid, which
depressed the profit by Rs. 640.98 crore (net of tax). Further,
write back of excess provision for investment depreciation (net
of tax) contributed only to the extent of Rs. 84.75 crore to the
Net profit of 2004-05, as against Rs. 322.40 crore in 2003-04.
The net profit, after adjusting for the above factors as
applicable in both the years, would be Rs. 2,160.48 crores in
2004-05 as against Rs. 1729.15 crores in 2003-04, i.e., a growth
of 24.94%.


The net interest income of the bank registered a healthy

growth of 19.04% from Rs. 6,928.35 crore in 2003-04 to Rs.
8,247.79 crore in 2004-05. this net interest margin went up from
3.16% in 2003-04 to 3.18% in 2004-05.


Non interest income grew by 12.57% from Rs. 3,569.32

crores in 2003-04 to Rs. 4,017.82 crores in 2004-05. the growth
was contributed mainly by profit on sale of securities (trading in
securities), which record recorded on increase of Rs. 207.76
crores over the previous year.

During the year, the bank earned an income of Rs. 77.05
crores by way of dividends from associate banks / subsidiaries /
companies and joint venture in India and abroad.

Operating expenses, including the one – time IMD issue

expenses and VRS related expenses charged off, registered an
increase 31.83% in 2003-04, operating expenses of 2004-05
compared to the operating expenses of 2003-04 showed an
increase of 9.14%.


Major amounts of provisions made in 2004-05 were as

under: -
a. Rs. 1,452.53 crores for non performing assets.
b. Rs. 971 crores towards income tax
c. Rs. 37.95 crores towards standard assets.

The total assets of the bank increased by 20.7% from Rs.

2,61505 crores as at the end of March 2004 to Rs. 3,15,644
crores at the end of March 2005. During the period, its loan
portfolio and investments by 33.7% from Rs. 91,879 crores to Rs.
1,22,876 crores. A major portion of the investment was in the
domestic market in Government and other approved securities
advances were move 20%.


The bank’s aggregate liabilities (excluding capital and
reserves) rose by 21.2% from Rs. 2,49358 crores as at 31st march
2004 to Rs. 3,02,183 crores as at 31 st march 2005. the increase
in liabilities was mainly contributed by increase in deposits.

Treasury operation in the bank has emerged as a major

source of income. During the year, the bank set up a treasury
investment committee (TIC) and empowered investment
committee of the bank and TIC with delegation of financial

During the year, the bank recorded a total turnover of Rs.

187, 570 crores in forex business and the bank introduced a new
scheme for extension of credit / non-credit facilities to Indian joint
ventures and wholly owned subsidiaries abroad. The global link
services (GLS), set up in 1997 to provide international
correspondent banking services to the bank’s branches as well as
to other banks, also provides collection services for cheques,
travellers cheques and export bills denominated in GBP, USD,
Euro and 11 national currency units of the Euro land.


For the year (Crores) 2004- 2003-2004 Percentage

Total Income 30,021 25,770 16.5
Total Expenditure 28,417 23,719 19.5

Net profit 1,604.2 2,051.5 _21.8
END OF THE YEAR March March 2004 Percentage
Paid up cap & Reserve 31,416 12,147 10.8
Deposits 242,828 196,821 23.4
Advances 1,13,590 98,102 15.8
No. of domestic branch 9,026 8,998 0.3
No. of Foreign branch 52 52 0



Interest earned 13 26003,37,00
Other Income 14 4017,81,56
TOTAL 30021,18,56
Interest expended 15 17755,58,16

Operating expenses 16 8298,82,45
Provision & contingencies 2362,53,05
TOTAL 2862,53,05
Net profit for the year 1604,24,90
Profit brought forward 33,55
TOTAL 1604,58,55
Transfer to statutory 1193,72,19
Transfer to other reserves 120,53,64
Transfer to proposed 263,14,94
Transfer to tax on dividend 26,84,13
Balance carried over B/S 33,55
TOTAL 1604,58,45



Capital 01 526,29,89
Reserves & surplus 02 12935,24,14
Deposits 03 24288,38,00
Borrowings 04 10722,02,52
Other liabilities & 05 48632,26,50
TOTAL 315644,21,05
Cash & Balance with RBI 06 18495,86,87
Balance with Banks & 07 42213,31,68
money at call & short

Investments 08 122876,49,28
Advances 09 1125,90,27,08
Fixed assets 10 2593,30,18
Other assets 11 15874,95,96
TOTAL 315644,21,05
Contingent Liabilities 12 83668,98,25
Bills for collection 8080,32,19




The rural survey committee recommended for the

establishment of a bank to provide banking service to the rural
areas and it was named as State Bank of India.

The State Bank of India Main Branch, Shimoga was

established in the year 1978. Since from 1978 the bank has been
showing an improvement in its services. The main object of the
bank is to provide agricultural loans in the rural and urban areas,
to improve or to give more effect for the above object the bank
has opened a separate 4 branch and named as Agricultural
department. This branch was opened in the year 1983.

Now a day’s computer has become one of the major
components of information technology. Information technology
and the computer influences every aspects of human life it has a
tremendous application in almost all the field of human activities.

The need for computerization in the banking industries has

been raised due to the following reasons.
a. Global competition
b. Customer demand and service
c. Control and communication
d. Competitive environment
e. Value of work
f. Cost of operation
g. Changing value and system

To meet the above reasons and make sure to provide better

customer services. The state bank of India, Main branch Shimoga
has computerized all its working system at 10th may 1999.

The computerization of the state bank of India, Main branch

Shimoga is “Senior Management Grade Scale IV” and the bank
also opened SBI division in 1996 and it has graded as “Middle
Management Grade Scale III ” and it has been working as
development branch division.

The state bank of India, Main branch Shimoga has also have
a link branches to provide a better customers services following
are the link branches.

1. SBI Vinobanagara Branch

2. SBI Shankaraghatta Branch
3. SBI Punnayasthala Branch.

The state bank of India, Main branch Shimoga with its

normal working and services it also providing some communities

Following are the service, which was provided during the

year 2000-2001. By the state bank of India, Main branch

A. on 25-6-2000: -Deafness relief surgery camp

B. on 15-8-2000: - Sports day celebration
C. on 15-9-2000: - Supply of furniture’s to Government
Primary Schools
D. on 26-1-2001: - Republic day celebration at Mahatma
Gandhi Higher Primary School Shimoga



“Credit is that form f confidence reposed in a person which

enables him to obtain form anther the Temporary use of a think
of value it may be accorded on the security of real estates,
personal property or mere character and so is classified in three
names from the kind of security taken”


The Reserve Bank of India has adopted the following

classification according to the purposes of credit

1 Agricultural purpose: -

A. Short term credit: -

a. For purchase of seeds, manure and fodder
b. Payment of rent, wages, revenue and other charges
c. Irrigation of crops, hire charges of pumps and farm
d. Other current farm expenses

B. Medium Term Credit:

i. Purchase f livestock
ii. Banding and other land improvements
iii. Repairs of wells and other irrigation services
iv. Repairs of wells and other irrigation services
v. laying of orchards etc,
C. long Term Credit:

i. Purchase of reclamation of land

ii. Construction of new wells and development of new
irrigation sources
iii. Purchase of new equipments and other capital
expenditure on agriculture

2. Non – form Business Purposes: -

a. Short Term
i. Repairs of production equipment, transport
equipment and furniture
ii. Current expenditure in non farm business
b. long term :

i. Purchase, construction, addition and repair of
building for non –farm business
ii. Purchase of farm equipment, transport equipment
and furniture
iii. Other capital expenditure on non – farm business

3. Family expenditure: -

Short Term
i. Purchase of domestic utensils, clothing’s etc.
ii. Medical Education and other family expenses

Long term:
i. Purchase, construction and repair of residential houses
ii. Expenses relating to death and marriage and other
ceremonies and litigation expenses
4. Other purposes: -

i. These includes purchase of building and ornaments, shares and

debentures of companies
ii. Deposits with financial institutions
iii. Unspecified purposes and Payment of old debts


Lending of funds constitutes the main business of

commercial banks following are the varies credit facilities
provided by the bank:
a. Cash Credit
b. Over draft
c. Demand loans

d. Term loans
e. Bills discounting


Following is the procedure followed by the bank

1. Requirements:

There will be a separate officer for different purposes of

loan to look after the legal obligation which should be fulfilled in
granting of loans. So, the different customers are received by the
banker as per the requirements of customers these officers are
categorized on the requirement basis they are: -
a. Persona
b. SIB and C & I
c. Agree Division

2. Application form:

There will be a separate application forms for different

loans the application will be issued on the basis of customer’s
requirements the application form will contain the following
information about: -

a. Details of the customer

b. Quotation
c. Estimations
d. Required document

If the customer fails to fulfill the above required documents,
his application will be rejected by the bank before presenting to
higher authority.

3. Security:

After fulfilling the application form the customer have t give

security for the loan amount Some of the loans are sanctioned
without and securities like ‘Prime Minister Rojgar Yojana”.

4. Final Authority:

After Completing the above procedures the application form

ill be presented to higher authority for the final approval. The
final authority to sanction the loan is in the hands of Chief
Manager of the bank.

5. Opening of account:

After the approval of the CM of the bank, the sanctioned

amount is credited to the customer account.

6. Interest:

The interest will be charged by the bank only on the amount

utilized by the customer not on the sanctioned amount.

7. Recovery of loans:

The bank ill recover the loan amount on the installment
basis. If the customer fails to repay the loan amount with in the
prescribed time period, the bank can sell the security pledged by
the customer to recover the loan amount

Cash Credit

A cash credit is a financial arrangement under which a

borrower is allowed an advanced account up to a specified limit
called the cash credit limit. As it is a separate account by itself, it
does not require the existence or the opening of a current
account In the case of a cash credit, the borrower need not
withdraw the whole amount at once in one lump sum. He can
withdraw the amount in installments as and when he needs
Further, he can put back i.e., deposit) into his account any
surplus amount, a running account from which money can be
deposited by the borrower frequently however, the debit balance
in a cash credit account in any day should not exceed the cash
credit limit. A cash credit is, usually, a more permanent financial
A cash credit is, usually, granted against the security of
goods i.e., the agricultural or industrial products like rice, cotton,
cotton textiles etc., in which the borrowing concerning deals
Sometimes it is given against a guarantee, i.e., a bond of credit
signed by one or more sureties. But it is very rarely given against
the personal security of the borrower. In cash credit interest is
charged quarterly or half yearly on the daily debit balances for
the actual period of utilization.

The popularity of cash credit increased due to the following to

1. In the case of cash credit, the borrower is required to pay

interest, no on the amount of cash credit sanctioned, but
only on the amount actually utilized by him, for actual
period of utilization.
2. It is a permanent financial arrangement. Even though it is
popular, it is disadvantageous to banker, because while he
can charge interest only on the amount actually withdrawn
by the borrower, he is required to keep at the disposal of
the borrower the entire amount of cash credit sanctioned.

Table showing 3 years data of CASH CREDIT provided by the


Year Amount
2003-2004 739321
2004-2005 970177
2005-2006 905227


An overdraft is a financial arrangement, under which a

current account holder is permitted by the bank to overdraw his
account, i.e., to draw more than the amount standing to his
credit, up to an agreed limit. So, an overdraft implies the
existence of a current account. By nature, an overdraft is a
temporary financial accommodation to be made use of by the
customer occasionally. But, in actual practice, it is made use of
by the customer regularly and is granted for an agreed period.

After the expiry of the agreed period, the customer is expected to
settle the debit balance in his account.

An overdraft is granted either against collateral securities or

against the personal security of the borrower. In case of an
overdraft, interest is charged quarterly or half yearly, and is
calculated on the daily debit balances for the actual arrangement
is very advantageous to the borrower, as interest is charged only
on the amount actually drawn by him. But, it is disadvantageous
to the banker because while he can charge interest only on the
amount actually overdrawn by the customer, he is required to
keep at the disposal of the borrower the full amount of the
overdraft sanctioned. Therefore, to protect the interest of the
banker, generally, there is a provision for charging commitment
charge on the unutilized portion of the credit limit. Today, no
commitment charge is charged on overdraft. Further, there is
also another clause known as minimum interest clause included
in the overdraft arrangement. Under the minimum interest
clause, the customer is required to pay interest at the agreed
rate on the amount actually overdrawn or on a portion of the
amount of overdraft sanctioned, which ever is higher. Periodically
banker will revise this overdraft limit subject to the relationship
existing with current account holder.

Table showing data of overdraft provided by the bank

Year Amount
2003-2004 33.610
2004-2005 50.175
2005-2006 70.231


A Demand loan is a financial arrangement under which an

advance is granted by a bank to a borrower on a demand i.e., the
borrower on a demand i.e., the borrower ill demand a back to
sanction loan by pledging any assets or document like gold etc.,
when a loan is sanctioned to a borrower, the entire amount of
loan is debited to the Demand loan account of the borrower, and
is paid to the borrower at once in a lump sum either in cash or by

transfer to the credit of his current account, if any some times,
the amounts are paid to the borrower in installment

Following are the Demand loans provided by the bank:

1. Gold loan:

Gold loan is a loan under which an advance is granted by a

bank against pledging of gold loan is sanctioned for the personal
purpose and for the agricultural purpose. The margin amount of
loan is 25% on the value of gold pledged by the borrower. On the
value of gold pledged by the borrower and the repayment period
of loan is 36 months.
2. Time Deposit:

The demand loan is also sanctioned against the borrowers

time deposit account. The margin amount of loan is 25% on the
amount of time deposit account. The repayment of loan is
allowed for a maximum period of 3 years.

3. Government securities:

The bank also sanctions a demand loan against the

Government Securities of the customer. The maximum amount of
loan against Government Securities is 25% on the face value of
such securities. The borrower should repay the sanctioned loan
amount with in a period f 3 years

If the borrower fails to repay the demand loan with in a

prescribed period, the bank has the statutory right to sell the

pledged things of the customer for the recovery of the loan
amount after issuing a notice to the borrower.

Table showing 3 years data of “DEMAND LOAN ” provided by the


Year Amount
2003-2004 119.9699
2004-2005 166.324
2005-2006 194.231


A Term loans is a financial arrangement under which an

advance is granted by a bank to a borrower on a separate
account called the loan account. When a loan is sanctioned to a
borrower, the entire amount of loan is debited to the loan
account of the borrower, and is paid to the borrower at once in a
lump sum either in cash or by transfer to the credit of his current
account, if any. Sometimes, the amounts are paid to the
borrowers in a installments, as and when they need funds. Just as

the disbursement of the loan is made is one lump sum, the
re[payment of the loan is generally made in one lump sum.
Repayment of the loan in installments is also permitted.

A loan is a financial arrangement under which an advance is

granted by a bank to a borrower on a separate account called the
term loan account. When a loan is debited to the loan account of
the borrower, the entire amount of loan is debited to the loan is
sanctioned to a borrower, and is paid to the borrower at once in a
lump sum either in cash or by transfer to the credit of his current
account, if any. Sometimes, the amounts are paid to the
borrowers in installments, as and hen they need funds just as the
disbursement f the loan is made in one lump sum, the repayment
of the loan is made in one lump sum. Repayment of the loan in
installments is also permitted.

A loan is, generally, granted for a short period of one year

or less than one year. Some times, a loan may granted for a
period of more than one- year say 3 year, 7 year etc. such a loan
is called a “term loan”. If the loan is given for a period ranging
from more than one year to five or seven years, it is called a
medium-term loan, and if it is given for still longer period, it is
called a long term loan.

A term loan is granted either against collateral securities or

against the personal security of the borrower. In the case of term
loan, interest is charged on the whole amount of the loan
sanction, irrespective of the amount actually withdrawn by the

borrower, at quarterly or half yearly intervals. A banker prefers to
make an advance in the form of a term loan for to reasons: -

a. He can collect interest on the entire amount of the loan

b. A term loan involves very little accounting work



Constraints, Purchase of new/old house/flat, repairs,

renovates or alters an existing house/flat, purchase of land.


Individuals over 21 years of age with a steady source of

Loan Amount:

48 times of net monthly income for below 45 years of age

and 36 times for net monthly income-above 45 years of age.
Margin: 15%- 30% Interest: 11%

Repayment: 15 years above 45 years of age,20 years up to 45

years of age.


To purchase new/old vehicle (not more than 3 years old)


Permanents employee, professional self –employed persons.


24 times net monthly income Max-Rs.8 Lakhs for new car and

Rs.5 Lakhs for hold car.

12 times net monthly income or 90% of cost of the vehicle

whichever is less for scooter.
Margin: 10% - 30%


Maximum 60/84 months for old/ new vehicle.


Purpose: To meet tuition fee for higher education

Eligibility: Securing admission for higher education

(pass marks for SC & ST)

Loan: Maximum of 5 lakhs for technical education in India.

Maximum of 10 Lakhs for technical education in abroad. 6 times
of monthly income or maximum of 1 lakhs for college/school
education in India.
Margin: 10% Interest: 12%-14%
Repayment: 5- 7 years after commencement of repayment.

Purpose: General purpose loan for individuals

Eligibility: Permanent Govt. Employees, Reputed PSU,s Self

Employed Engineers, Doctors, Architects, Chartered Accountants,
MBA’s and Pensioners of PSU’s and PSB’s.

Loan: Maximum of 2.5 Lakhs

Margin: Nil Interest: 4% above SBMTLR

Repayment: Maximum of 48 months.

Table showing 3 years data of “TERM LOAN ” provided by the Bank.

Year Amount
2003-2004 808.232
2004-2005 1068.243
2005-2006 1191.142


Discounting of bill is an arrangement under which a bank

takes a bill of exchange naturing with in a short period of 60 days
or 90 days from an approved customer and pays him or credits
his current account immediately the present value of the bill i.e.,
the face value of the bill minus the discount charges. Then, on
the due date of the bill, the bank receives the face value of the

bill from the acceptor of the bill. In case the bill is dishonored by
the acceptor, the bank recovers the amount from the customer
who has discounted the bill. This type of accommodation is
generally, granted up to an agreed limits.
The interest for this financial accommodation is called the
discount, and is charged on the face value of the bill for the
unexpired period of the bill i.e., from the date on which the bill is
discounted to the date on which the bill matures.

Table showing 3 years data of “BILLS DISCOUNTING ” provided by

the Bank.

Year Amount
2003-2004 808.232
2004-2005 1068.243
2005-2006 1191.142



For the purpose of conducting the survey, questionnaires

are prepared and distributed to the selected customers to
receive their opinions regarding various aspects of the bank. For
the purpose of survey 50 respondents are contacted who have
regular contact with the bank.

The customers are selected on the basis of sex, occupation,
annual income and so on. 50 respondents are taken as 100 and
made percentage on the basis.

The data collected during the survey, is analyzed by using

statistical tools like averaging, percentages, graphs etc.


1. Table showing distribution of respondents on the

basis of their age group.
Age Male Female Total Percentag
Below 20 06 03 09 18%
20-40 11 02 13 26%
40-60 18 03 21 42%
60 & above 05 02 07 14%

In the above table, response obtained from the respondents

of age group of below 20 and above 60 is not so effective. The
opinion of the age group between 20-40 is considerable and the
opinion of the age group between 40-60 years have good
2. Table showing distribution of respondents on the
basis of their Occupation.


Business 13 26%
Employee 15 30%
Profession 10 20%
Student 02 04%
Others 10 20%
Total 50 100%

Out of 50 respondents, the last category respondents
include a various occupations. The response from employee and
business is good, where as the profession and others have given
considerable suggestion.

3. Table showing classification of respondents on the

basis of their annual Income.


Upto 10,000 03 06%
10,000-50,000 24 48%
50,000- 100,000 17 34%
Above 100,000 06 12%
Total 50 100%

The above table shows, respondents contacted

income up to Rs. 10,000 and above Rs. 100, 000 shows

negligible, the opinion of income group people 10,000- 50,000 is
considerable and effective respectively.

4. Table showing different types of deposits account of

S/B ACCOUNT 12 24%
TOTAL 50 100%

From the above table, it is clear that the bank accepts term
deposits more than other type of deposits. After, current account
occupies the major part and then the S/B account.

5. Table showing General opinion of respondents
towards the rate of interest on deposits.


Attractive 14 28%
Satisfactory 20 40%
Not-Satisfactory 16 32%
Total 50 100%

The above table shows that 40% of the respondents have

given their opinion that; the interest offered by the bank on
deposits in satisfactory. 32% of the respondents have given not
satisfactory suggestion. And 28% of the respondents have
optioned that the rate of interest on deposits is ‘Attractive’

6. The Table showing different types of loans borrowed
by the respondents.

Types of Loans Number of Percentage

Cash Credit 09 18%
Overdraft 11 22%
House loan 6 12%
Vehicle loan 2 4%
Education loan 1 2%
Personal loan 5 10%
Loan against gold 2 4%
Mortgage loan 3 6%
Not –applicable 8 16%
Total 50 100%

According to the survey, majority of respondents have

taken. Overdraft, cash credit, house loan and personal loan. 2

persons have taken vehicle loan and 1 person education loan, 3
respondents have taken loan against gold and 3 persons
mortgage loan. & 8 respondents have not taken any loan from
the bank.

7. Table showing general opinion of the responds

towards the rate of interest on loans.
Opinion Number of Percentage
High 12 24%
Low 10 20%
Not Applicable 8 16%
Reasonable 20 40%
Total 50 100%

The above table shows that the majority of respondents

have opinion that the rate of interest charged on loan is
reasonable & 12 persons say high & 10 respondents opinion that
the rate is low.

8. Table showing general opinion of the respondents
towards the loan procedure.

Opinion Number of Percentage

Simple 7 14%
Not so difficult 14 24%
Difficult 23 46%
Not applicable 8 16%
Total 50 100%

Majority of the respondents opinioned that the procedure

followed by bank is difficult and 14 persons responded that is not
so difficult and 7 persons responded that it is simple.

9. The Table showing the opinion of the respondents
towards the service of the bank.
Opinion Number of Percentage
Excellent 7 14%
Good 19 38%
Satisfactory 20 40%
Not satisfactory 4 8%
50 100%

The above table shows that 7 respondents have given the

opinion that the service provided by the bank is excellent, 20
persons have responded that the service given by the bank is
satisfactory and 19 persons responded that it is good. 4
respondents have given not satisfactory response. Therefore, it is
also advisable for the bank to give importance to the not
satisfactory respondents.

10. Table showing the opinion of respondents regarding
new schemes or improvement of loans.


Yes 28 56%
No 22 44%
Total 50 100%

The above table shows that the majority of respondents

prefer new schemes or improvement of existing loans. Therefore,
it is advisable for the bank to take necessary steps.



With the rapid growth of economy due to liberalization, the

banking sector is acquiring greater importance and has to play a
greater role in sustaining the economic growth. Due to large
foreign investment inflow, the amount of money, which which the
banks have to handle, will grow at a grate pace, with the present
banking system no able to cope with. Consumer satisfaction and
to keep in track with the global competition.


With the study of report and survey conducted, the

customers of bank are facing a number of problems and they are
as follows

1. Rate of interest on deposits:

The bank should take necessary steps to increase the rate

of interests offered on deposits.

2. Simplification of loan procedure:

Only the educated and business knowledgeable persons
understand the procedure of sanctioning the loan. It creates
problems to a common man. Hence, it should be simplified.

3. Interest on loans:

The interest charged on the loans is comparatively high. As

for as possible the bank should reduce the rate of interest on
loans to attract the customers.

4. Locker Facility

The commission charged on locker facility provided to the

customer is comparatively high. So, the rate of the commission
should be minimized.

5. New schemes or improvement of loans:

Banker has to try, to introduce new scheme of loans and

advances and also to improve the existing loans regarding its
period of repayment, rate of interest etc…

6. Use of mechanical Devices:

To use the mechanical devices like computers, the bank’s

staff has to go through complicated system. So that the software
should be simplified by using recent out comes to carry the soft
ware should be simplified by using recent out comes to carry the
work easily and efficiently.


The study was under taken with an objective to analyze

credit facilities in bank’s and to know how the state bank of India
main branch Shimoga, satisfies its credit needs of its customers.
The study also made about how best the customers utilized the
schemes of the bank.

Suggestions have been given for improving the loans and

advances and on the various facility and functions provided by
the bank.

Therefore, it can be concluded that the bank has fulfilled its

objectives for which it has been established.



2.Introduction to banking system-B.S.Raman

3.Money and Banking-Shankaran

4.Magazines-Indion today




1. Name:

2. Address:

3. Sex: Male [ ] Female [ ]

4. Age: Below20 [ ] 20-40 [ ]

40-60 [ ] 60&abow [ ]

5. Occupation: Business [ ] Employee [ ]

Profession [ ] Student [ ]

Others [ ]

6. Annual Income:
Up to Rs. 10,000 [ ]
10,000 – 50,000 [ ]
50,000-1,00,000 [ ]
Above 1,00,000 [ ]

7. Do you have any account with BANK

YES [ ] NO [ ]

8. If yes, nature of deposit:

S/B Account [ ] Current A/C [ ]

Term Deposit [ ]

9. Interest payable on your deposit by BANK is:

Attractive [ ] Satisfactory [ ]

Not-Satisfactory [ ]

10. Have you taken loan from the BANK

YES [ ] NO [ ]

11. If yes which type of loan

Cash Credit [ ] Overdraft [ ]

Vehicles loan [ ] Education [ ]

House loan [ ] Personal loan [ ]

Agriculture loan [ ] Mortgage loan [ ]

Loan against gold [ ]

12. Interest charged on your loan is:

High [ ] Reasonable [ ] Low [ ]

13. Procedure followed by the bank in sanctioning of loans:

Simple [ ] Not so difficult [ ]

Difficult [ ]

14. How did you come to know about the loan

Advertisement [ ] Friends [ ]

Relatives [ ] Others [ ]

15. Do you prepare any new scheme or improvement of loans:

YES [ ] NO [ ]

16. What is your opinion about the service provided by the bank:

Excellent [ ] Good [ ]

Satisfactory [ ] Not Satisfactory [ ]

Place: Signature