Abhi Projct (3)

8/3/2019 Abhi Projct (3)

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A

SUMMER INTERNSHIP PROJECT REPORT

ON

LOANS AND ADVANCES

BY

Mr .ABHIJIT PATIL

UNDER THE GUIDANCE OF

Mr. LAXMAN RENAPURE

SUBMITED TO

UNIVERSITY OF MUMBAI

In partial fulfillment of the requirements for the award of the degree of

Master Of Management Studies (MMS) FINANCE

Through

MANDAR EDUCATION SOCIETIES

RAJARAM SHINDE COLLEGE OF MBA

PEDHAMBE, CHIPLUN

2011-2012


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A

SUMMER INTERNSHIP PROJECT REPORT

ON

LOANS AND ADVANCES

BY

Mr .ABHIJIT PATIL

UNDER THE GUIDANCE OF

Mr. LAXMAN RENAPURE

SUBMITED TO

UNIVERSITY OF MUMBAI

In partial fulfillment of the requirements for the award of the degree of

Master Of Management Studies (MMS) FINANCE

Through

MANDAR EDUCATION SOCIETIES

RAJARAM SHINDE COLLEGE OF MBA

PEDHAMBE, CHIPLUN

2011-2012


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DECLARATION

I ABHIJIT PATIL OF THE RAJARAM SHINDE COLLEGE OF

M.B.A, HEREBY DECLERE THAT I HAVE COMPLITED THE PROJECT

ENTITLED LOANS ANDADVANCES IN PARTIAL FULFILLMENT OF

THE REQUIREMENT FOR THE SECOND YEAR OF THE MASTER OF

BUSINESS ADMINISTRATION (MBA/MMS) COURSE FOR THE

ACADEMIC YEAR 2010-2011.

I FURTHER DECLARE THAT INFORMATION SUBMITED BY ME IS

TRUE AND ORIGINAL TO THE BEST OF MY KNOWLEDGE.

DATED:

ABHIJT PATIL


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ACKNOWLEDGEMENT

I take this opportunity to sincerely thanks and express my gratitude to my

project guide Mr. Laxman Renapure for guiding me throughout my entire

project.

The experience and the knowledge acquired over the interactions with the

guide have been invaluable to say the least and will help me a great deal in

my future education and career.

My project was complete in a very supportive and interactive environmentand has been great learning experiences. Last but not the least i would like

to thanks friends for all the support they have provide me.

Abhijit R. Patil

INDEX


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Sr. no. Chapter Name Page no.

1 Bank profile

Introduction, Management,

6

2 Research Methodology

objective the Project Balance-Sheet, Profit

and Loss A\c, Risk Management

12

3 Theoretical background

Meaning of Loans and Advances:

Various Loan Scheme List of Common

Documentation Procedure Of Loan Sanctioning

20

4 Data Analysis & Interpretation 44

5 Findings and Suggestion 51

6 Conclusion 54

7 Bibliography 56


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CHAPTER I

BANK PROFILE


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INTRODUCTION OF ORGANISATION:

Inspired by the clarion call for self reliance given by National leaders

in the pre-independence era, a group of patriotic, eminent personalities fromvarious walks of life came together to launch a crusade for economic

independence. On the then scenario of industrialist owned banks catering to

the needs of the rich and realizing the limitations of co-operative societies

and co-operative banks, it was decided to establish a commercial bank with

the avowed objective of meeting the needs of the low and middle income

segment of the society engaged in trade and commerce. Motivated by the

driving force of Shri. Babgonda Bhujgonda Patil, a distinguished Advocate

of Sangli and Shri. Gangaram Siddhappa Chougule, a renowned merchantof Kolhapur, THE RATNAKAR BANK LTD., was born on 6

th, august

1943. Ratnakar means an ocean, a treasure house of jewels.

In a short span of just 16 years, The Reserve Bank of India conferred the

status of SCHEDULE BANK on THE RATNAKAR BANK LTD., in 1959.

The Bank, by its conscious decision of serving, basically, Kolhapur and

Sangli districts, has in the past preferred to grow into an institution of

immense internal strength in preference to size. Now, in keeping with the

present day challenges the bank has embarked on a modernization and

expansion programme with the objective of consolidation its strengths by

achieving recognition for its development in size, as well.


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MANAGEMENT:

The Board of Directors comprises of progressive agriculturists,

reputed traders, merchants, professionals like Chartered Accountants,Business Management etc. The Board of the bank is headed by Chairman

Shri. Subhash G. Kutte. The counsel emanating from the rich and varied

fields of exposure is reinforced by Shri Vishwavir Ahuja as Managing

Director and Chief Executive Officer, a dynamic professional banker of

clear vision, who enjoys facing new challenges and has a constant sharp

focus on qualitative business growth.

BOARD OF DIRECTORS:

Name

1 Mr. S. G. Kutte Chairman

2 Mr. Vishwavir Ahuja M.D. & C.E.O.

3 Mr. B. D. Arwade Director

4 Mr. S. N. Minache Director

5 Mr. R. S. Naik Director6 Mr. K. J. Patil Director

7 Mr. G. V. Godbole Director

8 Mr. Narayan Ramachandran Director

9 Mr. Murli Radhakrishnan Additional Director

10 Mr. T. B. Satyanarayan Additional Director


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Chairman

Mr. S. G. Kutte

M.D. & C.E.O.

Mr. Vishwavir Ahuja

Director Director Director

Mr. N. Ramachandran Mr. K. J. Patil Mr. S. N. Minache


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ADMINISTRATIVE SET UP:

With the inevitable focus on customer satisfaction through prompt

service and decision conveyance, the bank has adopted a two tier system.However to meet business challenges in Mumbai, a Zonal Office has

recently been set. The chain of command is kept to the minimum, with

customer interests in mind.

BUSINESS:

The Bank is honoured by the patronage and confidence reposed in it

by over 4,00,000 clients. The Working Funds of the Bank (as on31.03.2011) are around Rs. 4854 Crores (Deposits Rs.2042 Crores plus

Advances Rs. 1920 Crores plus Investment Rs. 892 Crores). This business

has been secured through 100 branches spread over Maharashtra,

Karnataka, Goa, Gujarat, Delhi and Silvassa (U.T.). All the branches are

providing core banking services.

SERVICES:

The Bank offers a wide range of deposits schemes custom made to

meet the requirements of all patterns of savings, surplus funds available for

differing time spans. Competitive rates are offered with special incentives to

senior citizens and for deposits over Rs. 15 lakhs and Rs. 1 Crore for certain

maturity periods. Safe Deposits Locker facilities can be availed from 37

branches. Same day credit remittances are routinely arranged.

The Bank has launched a variety of loan schemes such as Sanjivani

Mortgage Loan Scheme, I.P.O. Financing, Ratna-Trade, Super Secured

Loans, Personal Loans, Educational Loans, Ratnakar Kisan Credit Cards

etc. designed to meet expectations of financial assistance from the entire

cross section of society.


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The Bank provides financial assistance to all types of commercially

viable enterprises, be it for agriculture, dairy, industry, professionals like

doctors, lawyers, chartered accountants, traders (wholesale and retail) small

borrowers etc. Wherever eligible, refinance is availed from IDBI, SIDBIand NABARD. This provides source for further financing by the Bank.

In its efforts to be an institution offering comprehensive financial

services the bank has extended its activities into all spheres of financial

intermediation. The major areas are given below.


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FUTURE PLANS: BRANCH EXPANSION:

The Bank has plan to open 45 more branches.

ATM:

The Bank has installed ATM at its various branches. These ATMs

are under National Financial Switch. As in the past, the Bank would

enhance the spectrum of services in keeping pace with the changing

environment and market expectations. There are about 704 strong

contingent of dedicated employees who are eager to fulfill the motto of

THE RATNAKAR BANK LTD., which is:-

HELPFUL TO NEEDFUL


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CHAPTER II

RESEARCH METHODOLOGY


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SCOPE OF THE STUDY:

The Ratnakar Bank is large established bank in commercial sector isa part of vast network of branches situated all over Maharashtra and outside

of Maharashtra. At present the Bank concentrates on business loans apart

from loans like a Ratnakar Professional, Sanjivani Mortgage etc. Hence, are

the scope of study includes various types of loans, loan procedures and

requirement conduction for eligibility and are same. The study also covers

advances of business from 2004-05 to 2008-09.

OBJECTIVES OF THE STUDY:

Enlist the utility of granting loans and advances by commercial banks. Differentiate borrowing rates from lending rates. Enumerate the ways of lending money. Distinguish between long-term and short-term loans. Point out the nature of security provided for loans. Outline the procedure for grant of cash credit, overdraft and discounting of

bills of exchange.


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RESEARCH METHODOLOGY:

COLLECTION OF DATA:

Data collection for the project will done by both primary and

secondary data collection.

Primary data collection:

From discussion with assistant manager of credit department oforganization.

From the questions asked to credit department staff (clerk). By talking with the organisations other department staff.

Secondary data collection:

Organizations report (credit policy report) and portfolio statement. Organization website. From the annual report and magazine, journals published by company.

Data which is collected by primary and secondary sources will be

used to analysis overall process of lending loans and advances and to

understand position of loans and advances of organization.


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LIMITATIONS OF STUDY:

It was difficult to have discussion with the concerned credit officers becauseof their busy schedule.

Some information is very important for bank and customer. Thats why theycan not give information about such thing because of security.

Time is one of the most important factors limiting the study. There are various departments such as accounts department, legal

department, risk management department, credit department, special

mention accounts department, inspection departments, personnel

department. It is not possible to study each and every section in short spanof time. This project is related only with credit department.


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Risk management:

The Bank has adopted committee approach to Risk Management.

Risk Management Organization Structure of the Bank is as follows.

Board of Directors

Risk Management Committee (Boards subcommittee)

Chief Risk officer

Assets

Liability

Management

committee

Operational

Risk

Management

committee

Investment &

Credit Risk

Management

committee


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BALANCE SHEET(Rs. in 000s)

Particulars 31-3-2010 31-3-2009 31-3-2008

CAPITAL & LIABILITIES

Capital 104,72,01 104,72,01 104,72,01

Reserve & Surplus 248,26,14 236,52,04 218,28,89Deposits 1585,03,67 1307,04,77 1101,07,18

Borrowings 3,83,09 11,83 31,26

Other Liabilities & Provisions 143,90,40 60,83,14 50,24,06

TOTAL 2085,75,31 1709,23,79 1474,63,40

ASSETS

Cash and Balance with Reserve

Bank of India

180,31,78 93,37,39 129,46,02

Balance with Bank and Money at

Call and Short Notice

175,76,17 367,04,57 353,71,99

Investments 507,21,76 406,77,34 361,31,91

Advances 1170,44,37 801,11,40 585,79,42

Fixed Assets 21,71,96 18,39,14 16,40,99

Other Assets 30,29,27 22,53,95 27,93,07

TOTAL 2085,75,31 1709,23,79 1474,63,40

Contingent liabilities 86,98,64 60,49,95 36,55,46

Bills of collections 3,74,30 5,05,14 8,49,87

Significant Accounting Policies

Notes To Accounts


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PROFIT AND LOSS ACCOUNT

(Rs. in 000s)

Particulers 31-3-2010 31-3-2009 31-3-2008

INCOME

Interest Earned 144,16,58 137,87,19 107,27,88

Other Income 13,21,99 15,66,03 8,72,75

TOTAL 157,38,57 153,53,22 116,00,63

EXPENDITURE

Interest expended 85,24,71 74,43,78 52,37,865

Operating expenses 38,70,37 33,25,33 29,75,09

Provisions and Contingencies 14,32,69 15,31,56 16,86,65

TOTAL 138,27,77 123,00,67 98,99,60

PROFIT/LOSS

Net Profit 19,10,80 30,52,55 17,01,03

Profit Brought forward 33,58 58,17 49,42

TOTAL 19,44,38 31,10,71 17,50,45

APPROPRIATIONS

Transfer to statutory reserve 4,80,00 7,75,00 4,50,00

Transfer to Capital Reserve 61,12 5,26,97 46,40

Transfer to Other Reserve 6,00,00 5,50,00 6,00,00

Proposed Dividend 6,28.32 10,47,20 5,09,32

Tax on Dividend 1,04,36 1,77,97 86,56

Balance carried over to balance sheet 22,06 33,58 58,17

Transfer to Investment Reserve 48,52 -

TOTAL 19,44,38 31,10,72 17,50,45

Earnings Per Share (EPS) (Rs.) 1.82 2.91 1.68

Notes To Account


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Performance of decade:

Particulars 2005-06 2006-07 2007-08 2008-09 2009-10

Capital 2847.97 11656.01 10472.01 10472.01 10472.01

Reserve & surplus 2571.13 8267.81 21828.89 23652.04 24826.14

Owned fund 5419.10 19923.82 32300.90 34124.05 35298.15

C.R.A.R. 10.77% 34.34% 49.15% 44.87% 36.01%

Deposits 87417.74 87639.02 110107.18 130704.77 158503.67

Advances

(net)

49083.48 53051.75 58579.42 80111.40 117044.37

Investment

(net)

27664.13 31583.38 36131.91 40448.31 50721.76

Gross NPA 3928.94 3805.22 3708.90 1727.69 2763.87

Net NPA 1279.04 1020.22 580.93 545.20 1153.45

Gross NPA to grossadvances

7.59% 6.81% 6.01% 2.13% 2.33%

Net NPA to net advance 2.61% 1.92% 0.99% 0.68% 0.97%

Net profit 59.08 301.19 1701.03 3052.55 1910.80

Dividend rate - - 5.00% 10.00% 6.00%

Per employee business 250.92 254.41 310.09 373.13 391.40

No. of employees 544 553 544 565 704

E.P.S.Rs 1.98 8.09 16.85 2.91 1.82

Book value per share Rs. 181.45 246.92 319.93 32.47 33.59

Return on asset 0.07% 0.31% 1.31% 1.96% 1.05%


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CHAPTER III

THEORETICAL BACKGROUND


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Meaning of Loans and Advances:

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 tothe borrower. Thus. from the view point of borrower, it is borrowing and

from the view point of 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 agreed rate and intervals ofpayment. Advance on

the other hand, is a credit facility granted by the bank. Banks grant

advances largely for short-term purposes, suchas 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. However, like loans, advances

are also to be repaid. Thus a credit facility- repayable in instalments

over a period is termed as loan while a credit facility repayable within

one year may be known as advances. However, in the present lesson

these two terms are used interchangeably.


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Utility of Loans and Advances:

Loans and advances granted by commercial banks are highly beneficial

to individuals, firms, companies and industrial concerns. The growthand diversification of business activities are effected to a large extent

through bank financing. Loans and advances granted by banks help in

meeting short-term and long term financial needs of business enterprises.

We can discuss the role played by banks in the business world by way

of loans and advances as follows :-

(a) Loans and advances can be arranged from banks in keeping with

the flexibility in business operations. Traders, may borrow moneyfor day to day financial needs availing of the facility of cash

credit, bank overdraft and discounting of bills. The amount raised

as loan may be repaid within a short period to suit the

convenience of the borrower. Thus business may be run efficiently

with borrowed funds from banks for financing its working capital

requirements.

(b) Loans and advances are utilized for making payment of currentliabilities, wage and salaries of employees, and also the tax

liability of business.

(c) Loans and advances from banks are found to be economical for

traders and businessmen, because banks charge a reasonable rate of interest

on such loans/advances. For loans from money lenders, the rate of interest

charged is very high. The interest charged by commercial banks is regulated

by the Reserve Bank of India.

(d) Banks generally do not interfere with the use, management and

Control of the borrowed money. But it takes care to ensure that the money

lent is used only for business purposes.


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(e) Bank loans and advances are found to be convenient as far as its

repayment is concerned. This facilitates planning for future and timely

repayment of loans. Otherwise business activities would have come to ahalt.

(f) Loans and advances by banks generally carry element of secrecy

with it. Banks are duty-bound to maintain secrecy of their transactions with

the customers. This enhances peoples faith in the banking system.

Advances:

Advances means all kinds of credit facilities including cash credit,

overdraft, term loans, bill discounted/purchased, factored receivables etc.

and investments other than that in the nature of equity.

The term Loans and Advances will not include loans or advances

against-

Government securities. Life insurance policies. Fixed or other deposits. Stocks and shares. Temporary overdraft for small amounts up to Rs. 25000. Casual purchase of cheques up to Rs. 5000 at a time. Housing loan, Car advance etc. granted to an employee of the bank under

any scheme applicable generally to employees.


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Credit Sectors:

With a view to ensure socially equitable distribution credit to all

segments of the society and particularly to the preferred sector for overalleconomic development credit deployment credit deployment is classified

into Priority and Non priority Sectors.

A] Priority Sector:

based on the report submitted by Informal study Group the

description of priority sector was first formalized in 1972. These sectors

broadly include, Agriculture (direct and indirect) Small scale industries Industrial estate Exports Road and water transport operators Retail trade and small business Professional and self employed persons Education Housing Advances to weaker sections Pure consumption loans under consumption credit scheme Loans to self-help groups(SHGS)/NGOS/Micro-credit Food and agro-based processing sector Software industry Venture capital


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B] Non priority sector:

credit, which does not fall under the priority sector, is non priority

sector. Mainly, credit flow should be need-based for productive purposes

and business requirements. Banks may also deploy such credit towardsmeeting personal loans, consumer durable loans, housing loans etc.


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List of Common Documentation:

1) Certificate of incorporation.2) Memorandum and articles of association.3) Company board resolution/power of attorney.4) List of authorised signatories.5) Accepted sanctioned letter.6) Loan agreement and standard covenants.7) Demand promissory note.8) Demand promissory note delivery letter.9) Letter of waiver.10)

Letter of continuity.

11) Letter of lien and set off.12) Deed of hypothecation.13) Deed of mortgage/agreement to create mortgage.14) Pledge deed.15) Title deeds/deeds of conveyance.16) Security delivery letter.17) Certificate of registration of charge.18) Personal guarantee agreement.19) Corporate guarantee.20) Letter of comfort.21) Insurance policy-stocks/fixed assets.22) Assignment of life insurance policy.23) Endorsement time deposit receipts.


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PROCEDURE OF LOAN SANCTIONING:

Rules for advance:

Bank frame suitable rules as per its loans and advances of differenttypes. The rules with respect to purpose, type of security, margin,

maximum limit, period, term of the payment, rates of interest etc.

Prospective borrower:

The prospective borrower is evaluated with respect to three

aspects by capacity, character and capital. If the bank is satisfied with above

three aspects, it can proceed further for the consideration of the proposal.

Application form:

The bank device loan application form for advance. The application

form contains necessary details about the borrower, his assets, purpose of

the loan, viability of the projects etc., particulars like annual turnover of the

business, annual production, sales, profits are covered in the form.


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Valuation:

Valuation of the property of the prospective borrower is made, which

he is giving for securities.

Sanction for loans and advances:

After the preparation of the C.M.A. report, it is sent to Kolhapur head

office, where sanctioning authority is situated. The sanctioning authorities

analyze the C.M.A. and after discussion the loan is sanction.

Interest rates of advances:

Prime lending rate/base 8%

Housing loan upto Rs 30 lakhs 9.5%

Housing loan above Rs. 30 lakhs 11.5%

Education loan upto Rs. 4 lakhs 13%

Education loan above Rs. 4 lakhs 14%

Vehicle loan for 3 years 10.5%

Vehicle loan for 3 to 5 years 11%

Ratnatya professional scheme 11%Sanjeevani mortgage scheme 13.75%

Ratna trade scheme 12.5%

Self help group 12%

Crop loan upto Rs. 3 lakhs 8%

Crop loan above Rs. 3 lakhs 9%


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VARIOUS LOAN SCHEMES OF THE BANK:

HOUSING LOAN:

Repayment Period: Maximum 15 years

Margin : 25%

Purpose : To purchase flat or for construction of home.

Eligibility : Employees of Govt. / Semi Govt., reputed

companies / businessman, traders/professionals

and self employed persons/farmers.

Other Norms : (A) For employees of Govt. /Semi Govt. Reputed

Companies.1) Applicant must be permanent employee2) Should submitsalary certificate, undertaking letter of employer

to deduct & send the monthly installment.

3) I.T. returns copy.

4) Maximum take loan salary should be 50% after

deducting housing loan installment.

(B) For businessman or traders or professionals

. and self-employed.Income proof for last 3 years i.e. audited

balance sheet or I.T. return.

(C) For farmers.

Income proof for last 3 years.

(D) One acceptable guarantor.


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TWO WHEELER LOAN:


Margin : 25%Purpose : To purchase flat or for construction of home.

Eligibility : Employees of Govt. / Semi Govt., Reputed

Companies/Businessmen, Traders/Professionals

& Self-employed persons/farmers.

Other Norms : (A) For employees of govt. / semi govt. reputed

companies.

1)Applicant must be permanent employee

2) Should submit salary certificate, undertaking letter of employer to deduct& send the monthly installment.

3) I.T. returns copy.4) Maximum take loan salary should be 50% after


(B) For businessman or traders or professionals and

self-employed.

1. Income proof for last 3 years i.e. audited balancesheet or I.T. return.

(C) For farmers




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CONSUMER LOAN :


Margin : 25%Purpose : To purchase TV/VCR/Refrigerator/ Furniture /

Equipment etc.

Eligibility : Employees of govt. / semi govt., reputed

companies / businessmen, traders / professionals

& self-employed persons / farmers.

Other Norm : (A) For employees of govt. /semi govt. reputed

companies.1) Applicant must be permanent employee2) Should submitsalary certificate, undertaking

letter of employer to deduct & send the monthly installment.

3) I.T. returns copy.4) Maximum take loan salary should be 50% after


(B) For businessman or traders or professionals

and self-employed.

1) Income proof for last 3 years i.e. auditedbalance sheet or I.T. return.

(C) For farmers




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AGRICULTURE LOAN:

Form mechanizations & other transportations vehicle schemes.1. TractorTrailer & agriculture implements.2. Power tillers/Threshers machines.3. 4 wheelers for agriculture purpose. E.g. Jeep4. Two wheelers for agriculture purpose5. Trucks& other vehicles for agri. Goods /products transportation

purpose.

For tractortrailer & agri. implements.

1. Minimum requirements- one tractor, one trailer and implements.2. Minimum land holding -6-8 acres irrigated land (individual farmers or

group of farmers).

For all other types of vehicles considering irrigated land annual

agriculture and other income.

(1)Margin 20%(2)Period 3 to 5 years.(3)Requirements of papersa)Quotationb)8A/ 7/12 Extractsc) No dues certificate from societies / Local banks / NOC. From concerned

bank.

d)Guarantor and his worth papers.e) Information regarding annual income from agriculture and other sources.


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SUPER SECURED LOAN SCHEME:

Purpose : To meet urgent personal needs such as investmentIn NSC, PPF etc. for income tax rebate, educational

expenses, marriage, etc. personal expenses against

the security of exiting NSC/LIC policies at the PLR.

Limit : 25% of present value of NSC/LIC/IVP/KVP.

Repayment period: Maximum 5 years

Margin : 25%

Eligibility : Employees of govt. / semi govt., reputedcompanies / businessmen, traders/professionals

& self employed persons/farmers.


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RATNA TRADESCHEME:

1) Target group Individual/Proprietorship/Partnership/ Company engaged inWholesale and Retail trade, Distributors/Commission agent/C&Fagents/Professionals/Small business/Civil/Government contractors etc.

2) Facility Secured Cash Credit3) Purpose to meet working capital requirement.4) Quantum of loan maximum Rs. 10 lakhs or 50% of value of property to be

mortgaged (whichever is less)

5) Assessment of loan under turnover method. Maximum 20% of turnovera) For existing units business should be growing i.e. sales, profit should show

increasing trend over last few years. Projection should be reasonable and in

keeping with past trend/ potential.

b) For existing/new units projection should be comparable with presentperformance should be achievable. Abnormal projection should not be

accepted. Normally, 15% to 20% rise in business may be considered.

c) Own contribution in the form of networking capital should be minimum 5%of turnover or more.

6) Period of facility one year (if operations/performance is satisfactoryrenewable on annual basis).

7) Security equitable mortgage/ registered mortgage of property in name andpossession of the borrower. Property in the name of spouse may be accepted

as security by making the owner and either co-borrower/guarantor

(Agriculture land, Non N-A land should not be accepted).


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8) Margin minimum 50% of value of property.9) Guarantor one acceptable guarantor (other than co-borrower).10) Interest rate at PLR.11) Processing charges Rs.150/- per lakh or part thereof.12) Papers requirement for assessment:1. Application form2.

Declaration regarding relationship with directors/ executives of the bank.3. Financial statement of last two years (for existing units) andestimate/projection for current/next year.

4. Details of property offered as security with its valuation and title report ofapproved valuator/advocate.

5. Copy of sale tax registration (if available) and copies of sale taxreturns/assessment for last 4 quarters.

6. Copy of last income tax assessment orders/ returns filed. Of theborrower/co-borrower/guarantor.

7. Credit report of the borrower, co-borrower and guarantor.8. Confidential report from existing banker in case of take over.13) Documents to be obtained1. Form No. 51-A-Waivers letter.2. Form No. 51-Demand promissory note.3. Form No. 55- Cash credit/Overdraft agreement of immovable property.4. Continuing security letter.5. Form of acknowledgement of Debt for an advance against E.M.6. Memorandum of deposit of Title deed/registered mortgage deed.7. Original title deed in case of equitable mortgage.8. Legal opinion.9. Valuation report.


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10.Non-encumbrance certificate.11.Latest assessment and municipal tax paid receipt.12.Extract of property card with bank charge noted on it (within one month

from disbursement).13.Insurance cover for fire, riots, civil commotion and earthquake should be

taken.

14.Classification advance as per activity.15.Sanctioning authority as per power delegated.16.Monitoring/precautions.a. For existing units banking with us, it should be ensured that the

performance/ operations and future prospectus of the activity are good.

b.

For units proposed to be taken over from other banks, it should beascertained from the statement of accounts that the account is satisfactory.

Confidential report may be obtained prior to disbursement.

c. For new units, the projections should be examined to ensure that they areachievable.

d. Pre-sanction visit is essential. Report of the visit is to be appended with theapplication.

e. Disbursement may be allowed only on completion of all formalities ofmortgage.

f. Submission of post disbursement certificate within 15 days should beensured.

g. Unit should be visited at least once in a quarter and report should be kept onrecord for verification by auditors/ inspecting officers.

h. In case operations of the accounts are not found to be satisfactory/ as perprojection correcting steps be initiated immediately.

i. Branch should ensured that the party is not enjoying working capital limitelsewhere.

j. Sanctioning authority should get the sanction noted from the immediatelynext higher authority.


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FOR PROFESSIONALS/PURCHASE OF MEDICAL

APPARATUS LOANS:


Margin : 25%

Other Norm : (A) Income proof for last 3 years i.e. audited

balance sheet or I.T. return.

(B) One acceptable guarantor.

Revised scheme : Effective from 01/12/2006.

Name of scheme : Ratnatraya Professional scheme

1) Target group professional such as doctors, dentists, architects, charteredaccountants, company secretary and engineers.

2) Eligibility and assessment of limita. Minimum income Rs. 1,50,000 p.a.(Salary/profession income) as per

income tax return filed.

b. Maximum limit would be 3 times of annual income (average of last 2years).

c. Solely banking with us.3) Facility cash credit/term loan.4) Purpose to meet business/professional requirement5) Quantum of loan minimum Rs. 2,50,000. Maximum Rs. 10,00,000.6) Minimum qualification

M.B.B.S./B.D.S./B.Arch./C.A./C.S./DME/B.E./M.E./B.Tech./

M.Tech./BAMS/BHMS

7) Period of facility minimum 1 year/ Maximum 5 years.8) Repayment yearly renewal/ equated monthly instalment.9) Security 100% of loan amount by way of movable/immovable assets or

paper security such as LIC/NSC/KVP/Shares/Govt. Security/Bonds (market

value/surrender value to be considered).

10) Margin NIL.


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11) Guarantor one acceptable guarantor.12) Interest rate PLR = 11.75% (rebate not applicable)13) Processing charges Rs. 300/- per lakh or part theirof.14) Papers requirement for assessment.a. Application formb. Guarantor formc. Declaration regarding relationship with directors/executives of the bankd. Degree certificate (to be verified with original)e. Financial statement of last 2 yearsf. Worth papersg. Copy of last income tax assessment order/ return filed. Of the

borrower/guarantor.15) Documents to be obtained.a. Form No. 51-A-Waivers letter.b. Form No. 51-Demand promissory note.c. Form No. 54/53 loan/Overdraft/Cash credit agreement. Form No.66 Letter

of Guarantee On Rs. 100/- stamp paper.

d. Legal report, Valuation report.e. Personal life cover insurance equal to limit sanctioned policy is taken(no

profit) under tie up arrangement

16) Classification of advance priority sector-professional.17) Sanctioning authority Branch manager up to Rs. 5 lakhs.


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EDUCATIONAL LOAN SCHEME:

1) Name of the scheme: Educational loan scheme:2) Purpose : To provide financial support on reasonable terms

to students for pursuing higher/ professional/

technical education, in India and abroad and to

poor and ready students to take basic education.

3) Eligibility : School education including plus 2 stages.i. Course eligible: Graduation courses(B.A./ B.Com./ B.Sc etc.)a) Studies in India- Post graduation(masters & Ph.D) Professional courses(Engineering, medical, agriculture, veterinary, law,

dental, management, computer etc.)

Computer certificate courses of reputed institutes. Other courses leading to diploma/ degree etc. conducted by colleges. University approved by UGC/ Govt./ AICTE/ AIBMS/ ICMR etc. courses

offered by National institutes and other reputed private institutions.

b) Studies abroad- Graduation: for job oriented professional/ technical courses offered by

reputed universities.

4) Quantum of finance :Need base finance subject to repaying capacity of the parents/students

with margin & the following ceilings.

Studies in India: Maximum Rs.7.50 lack.

Studies abroad : Maximum Rs.15.00 lack.

5) Margin : Up to Rs.4.00 lack-nil.Above Rs.4.00 lack

Studies in India: 5%

Studies abroad : 15%


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Scholarship/assistantship to be included in margin. Margin may be

brought in on year to year basis as & when disbursement is to be made on

pro-rata basis.

6) Security : Up to Rs.4.00 lacks - no security.Above Rs.4.00 lacks -collateral security equal to

100% of amount or suitable value or co-obligation of

parents/guarantors/third party along with the assignment of future income of

the student for payment of instalments may be obtained. The documents

should be executed by both the student & parents/guardians. The security

can be in the form of land/building/government securities/public sector

bonds/units of UTI/NSC/KVP/LIC policies/gold/shares/debentures/bankdeposits on the name of student/parents/guardian or any other third party

with suitable margin.

Whenever the land/building is already mortgaged, the unencumbered

portion can be taken as security on 2nd

charge basis provided it covers the

required loan amount. In case the loan is given for the purchase of

computers the same is to be hypothecated to the bank.

7) Rate of interest : Up to Rs.4.00 lacks - PLR.Above Rs.4.00 lack - PLR +1%.

The interest to be debited monthly/quarterly/half yearly on simple

basis during moratorium period. Penal interest @2% is charged for above

Rs.4.00 lack for overdue amount and overdue period.

8) Processing charges: No processing/ upfront charges.9) Papers required for assessment:

a) Loan application mentioning purpose and name of co-debtor, parents,guardians, name of guarantor offered along with worth papers.

b) Mark list, passing certificates, merit certificate of last examination

passed.

c) Selection letter of particular course/ education from concern institution.


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d) Recent financial statements/ income statements of co-debtors/ guardian

for last 2 years.

e) Financial and other supporting documents.

f) Repayment plan of instalment and interest by the applicant along withcash flow statement.

g) Projected income statement of candidate, estimates of expenses etc.

10) Sanction/ Disbursement:The loan to be sanctioned by the head office as per delegation of

powers. The loan to be disbursed in stages as per the requirement/demand,

directly to the institutions/vendors of books/ equipments/ instalments.

11) Repayment (repayment, holiday/ moratorium):Course period+1 year or half year after getting job, whichever is

earlier. The loan to be repaid in 5-7 years after commencement of

repayment. If the student is not able to complete the course within the

scheduled time extension of the time to completion of course will be

permitted for a maximum period of 2 years. If student is not able to

complete course for reasons beyond his control the extension will be

considered as may be deemed necessary. The accrued interest during the

repayment holiday period to be added to the principal and repayment in

equated monthly instalments (EMI) fixed. 1-2% interest concession may be

provided for loans if interest is serviced during the study period.

12) Follow up:Branch to contact college/ university authorities to send the progress

report at regular intervals in respect of students who have availed loans.

13) Capability certificate:Branch can also issue capability certificate for students going abroad for

higher studies after confirmation of head office. For this, financial and other

supporting documents may be obtained from applicant (Same of foreign

universities require the students to submit a certificate from their bankers


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about solvency/ financial capability for ensure that the students going

abroad for higher studies are capable of meeting expenses till completion

studies.)

14) Other conditions:No dues certificate need not be insisted upon as a pre-condition for

considering educational loan. However branch may obtain a declaration/ an

affidavit confirming that no loans are availed from other banks. Loan

applications have to be disposed of within a period of 15 days to 1 month

but not exceeding the time norms stipulated for disposing of loan

applications under priority sector lending.

15) Documents to be taken:Form no.51 A - Waiver letter.

Form no.51 - Demand promissory note.

Form no.5 - Clean term loan agreement (With appropriate stamp)

Form no.66 - Letter of guarantee (With appropriate stamp)


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CHAPTER IV

DATA ANALYSIS & INTERPRETATION


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Total loan distributed under priority sector

(Amount in lakhs)

YEAR AGRICULTURE

AMT.

SMALL

SCALE

INDUSTRY

AMT.

OTHER

PRIORITY

SECTOR

AMT.

WEAKER

FACTOR

AMT.

TOTAL

2006-07 5982.65 7026.3 6892.83 1030 20931.78

2007-08 7614.53 7094.99 10609.54 0.3 25319.67

2008-09 6916.88 5784.01 11943.78 0 24644.67

2009-10 8979.09 9193.22 12884.26 2447.18 33503.75

2010-11 23459.70 19887.77 8365.20 10905.20 51715.88


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INTERPRETATION-

In above table, Loan disbursement of following priority sector

Agriculture, Small scale industry, Other priority sector and Weaker

factor

In Agriculture:

In Agriculture loan disbursement in year 2006-07 to 2010-2011 in

between the every year loan demand growing 30% to 292% every year.&only 2008-2009 this year government change his banking regulatory

system for agricultural sector that year 10% demand less in this year with

effect of demanding the loan and repayment of principle amount.

0

5000

10000

15000

20000

25000

2006-07 2007-08 2008-09 2009-10 2010-11

agriculture

small scale industry

other priority sector

weaker factor


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Small scale industry :

In small scale industry loan disbursement in year 2006-07 to 2010-2011

in between the every year loan demand growing 19% to 183% every

year.& only 2007-2008 this year bulk storage of raw material 8.8 % in 808observation cases and spare parts. Government change rules and

regulation. In this year 18.48% demand less as compare to last year.

Other priority sector

In Other priority sector means Educational loan , Housing loan,

Vehicle loan & other disbursement in year 2006-07 to 2010-2011 in

between these year loan demand growing 12.58% to 21.36% every

year.& only 2010-2011 last year 35.07% demand very less market down

fall in total five year observation cases.

Weaker factor

The weaker sections mainly include small and marginal farmers,

landless laborers, tenant farmers, artisans, scheduled castes and

scheduled tribes and self-help groups they are demand the loan in

priority basis in year 2008-09 they are not demanding the loan

as compare 2006-2007 to 2010-11 These primary Three year

demand for low .01% and government change in the weaker

section priority2009-10, 140% hick & next year 800% stable in

boom position


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Total loan distributed under retail loan and advance

(Amount in lakhs)

YEAR

HOUSINGLOAN

LOAN FORCONSUMER

DURABLE

AUTOLOAN

PERSONALLOAN

TOTAL

2006-

07

1793 70.62 1524.19 1024.32 4412.13

2007-

08

2265.97 283.31 1518.2 619.18 4686.66

2008-

09

2370.88 83.19 1452.15 206.8 4113.02

2009-10 3957.14 120.95 3132.84 293.95 7504.88

2010-

11

4379.15 55.82 2526.72 56.27 7017.96


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INTERPRETATION-

In above table Loan disbursement of following Housing loan, Loan

for Consumer Durable , Auto loan and Personal Loan.

HOUSING LOAN-

In Housing loan disbursement in year 2006-07 to 2010-2011 in

between the every year loan demand growing 26.37% to 144.22% every

year

LOAN FOR CONSUMER DURABLE-

In loan for consumer durable disbursement in year 2006-07 to 2010-2011

in between the not every year loan demand growing but 2007-08 to

increase the 301%. & after 2007-2008 loan decrease in every year.

0

500

1000

1500

2000

2500

3000

3500

4000

4500

5000

2006-07 2007-08 2008-09 2009-10 2010-11

housing loan

consumer loan

auto loan

personal loan


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AUTO LOAN

In auto loan disbursement in year 2006-07 to 2010-2011 in between theevery year loan demand growing 0.40% to 65.77% every year.& only

2008-2009 this year loan decrease in 4.35% demand less

PERSONAL LOAN

In Personal loan disbursement in year 2006-07 to 2010-2011 in between

the every year loan demand low in every year.


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CHAPTER-V

FINDINGS & SUGGESTIONS


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FINDINGS:

1) Bank has very carefully designed credit appraisal system for correct and

authentic appraisal of the loan proposal.

2) Bank has different rating forms according to the type and amount of loan.

A proposal is carefully rated with the help of these forms.

3) The loan approval decision of The Ratnakar Bank Ltd. is totally in the

hands of Kolhapur Head Office (administration office), Market Yard,

Kolhapur.

4) Sanjeevani Mortgage and Ratna Trade loan scheme margin is highest

i.e. 50% is not profitable to the customer.

5) Bank takes optimum of security from the borrowers.


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SUGGESTIONS:

To increase the business and reducing the risk involved in the

sanctioning the loan following measures are suggested

1) In personal loan scheme very large amount of loans to a single person

should be avoided as far as possible.

2) Bank can start giving loan to hotel business, construction and travel and

tourism business because at present these businesses are in boom.

3) The sanctioning power of the branch manager should be enhanced toincreased the overall operational efficiency.

4) The procedure of sanctioning or period of sanctioning should be fast.

5] Also bank should provide internet loan application system to customer.


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CHAPTER VI

CONCLUSION


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Banking in India is form long time back..But that time banking and todays

banking has a huge difference. Because there are many development in

banking sector. Internet banking, core banking these are new face oftodays

banking system. Only keeping money safe in the bank is not the business, abank expands their business time to time with the era of technology.

Bank has very carefully designed credit appraisal system for correct and

authentic appraisal of the loan proposal. & implementing different rating

forms according to the type and amount of loan.

And banks Mortgage and Ratna Trade loan scheme margin is highest.

Preferable for banks point of view & takes optimum of security from the

borrowers.

In this project we conclude that measures of sanctioning the loan In

personal loan scheme very large amount & a single person should be

avoided as far as possible.

Bank can start giving loan to hotel business, construction and travel

and tourism business because at present these businesses are in boom.

3) The sanctioning power of the branch manager should be enhanced to

increased the overall operational efficiency.

4) The procedure of sanctioning or period of sanctioning should be fast.

5] Also bank should provide internet loan application system to customer.


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CHAPTER VII

BIBLIOGRAPHY


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a)Reference books:1. Banking (Theory, Law and Practice) (page no.160 to 167)

Twentieth Revised edition

Prof. E. Gordan and Prof. Dr. K.Nataranjan

Himalaya Publishing House (1992)

2. Financial Management (Theory and Practice)Prof. Prasanna Chandra (7

thedition)

Tata Mcgraw Hill Publishing Co.Ltd New Delhi

3. Financial Management (Text, Problem, cases)Prof. M.Y.Khan Prof. P.K Jain (5

thedition)

Tata Mcgraw Hill Publishing Co.Ltd New Delhi

4. Credit Appraisal, Risk Analysis and Decision MakingProf. D. D. Mukherjee

5. Credit Management in Banks

Prof. K. M. Chitnis.


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b) Web sites:

1. www.theratnakarbank.com

2. www.rbi.org

3. business.mapsofindia.com

c) Others:

1. Manual of instructions of credit department.

2. Annual reports

3. Credit policy report.
http://www.theratnakarbank.com/http://www.rbi.org/http://www.rbi.org/http://www.theratnakarbank.com/


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